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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 0-16772
PEOPLES BANCORP INC.
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(Exact name of Registrant as specified in its charter)
Ohio 31-0987416
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
138 Putnam Street, P. O. Box 738, Marietta, Ohio 45750
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (740) 373-3155
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Securities registered pursuant
to Section 12(b) of the Act: None
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Securities registered pursuant to
Section 12(g) of the Act: Common Shares, No Par Value (5,7333,617
outstanding at March 4, 1999)
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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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
Based upon the closing price of the Common Shares of the Registrant on The
NASDAQ National Market as of March 4, 1999, the aggregate market value of
the Common Shares of the Registrant held by nonaffiliates on that date was
$123,520,116. For this purpose, certain executive officers and directors
are considered affiliates.
Documents Incorporated by Reference:
1) Portions of Registrant's Annual Report to Shareholders for the
fiscal year ended December 31, 1998, are incorporated by reference
into Parts I and II of this Annual Report on Form 10-K.
2) Portions of Registrant's definitive Proxy Statement relating to the
Annual Meeting to be held April 15, 1999, are incorporated by
reference into Part III of this Annual Report on Form 10-K.
Exhibit Index Appears on Pages 21 through 24
PART I
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ITEM 1. BUSINESS.
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Introduction
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Peoples Bancorp Inc. ("Peoples Delaware") was incorporated under the laws of
the State of Delaware on April 1, 1980. Effective April 6, 1993, Peoples
Delaware was merged into Peoples Bancorp Inc., an Ohio corporation (the
"Company"), for the purpose of changing the Company's state of incorporation
from Delaware to Ohio. The Company's principal business is to act as a
multi-bank holding company. Its wholly-owned subsidiaries are The Peoples
Banking and Trust Company ("Peoples Bank"), The First National Bank of
Southeastern Ohio ("First National Bank"), Peoples Bank FSB and The Northwest
Territory Life Insurance Company, an Arizona corporation ("Northwest
Territory").
The Company's subsidiaries provide an array of financial products and
services to their customers, including traditional banking products such as
deposit accounts, lending products, credit and debit cards, corporate and
personal trust services, and safe deposit rental facilities. The Company's
insurance agency subsidiaries also offer investment and insurance products.
The Company's banking subsidiaries provide services through ordinary walk-in
offices, automated teller machines, and automobile drive-in facilities,
banking by phone, and also provide limited cash management services through
computer banking.
The Company's subsidiaries operate 34 sales offices in the states of Ohio,
West Virginia, and Kentucky. At December 31, 1998, the Company had total
assets of $880.3 million, total loans of $567.9 million, total deposits of
$714.2 million, and total shareholders' equity of $86.0 million. For the
year ended December 31, 1998, the Company's return on average assets was
1.20% and return on average stockholders' equity was 12.21%.
At December 31, 1998, the Company and its subsidiaries had 362 full-time
equivalent employees (including 27 full-time equivalent employees at the
parent company level). The principal executive office of the Company is
located at 138 Putnam Street, Marietta, Ohio 45750, and its telephone
number is (740) 374-6136.
Over the past several years, the Company has experienced significant growth
in assets and shareholders' equity, primarily through acquisitions as well
as banking center purchases. For the five-year period ended December 31,
1998, the Company's assets grew at a 12.1% compound annual growth rate,
while stockholders' equity grew at a compound annual growth rate of 13.5%.
The Company has also had a history of consistent earnings growth, as net
income per share grew at a compound rate of 9.9% for the five-year period
ended December 31, 1998. Over that same period, the Company's annual return
on average assets and equity were 1.23% and 13.24%, respectively.
The Company routinely explores opportunities for additional growth and
expansion of its core financial service businesses, including the acquisition
of companies engaged in similar activities. Management also focuses on
internal growth as a method for reaching performance goals and reviews key
performance indicators on a regular basis to measure the Company's success.
There can be no assurance, however, that the Company will be able to grow,
or if it does, that any such growth or expansions will result in an increase
in the Company's earnings, dividends, book value, or market value of its
common stock.
The Peoples Banking and Trust Company
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General
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Peoples Bank, a full-service commercial bank, was chartered as an Ohio
banking corporation under its present name in Marietta, Ohio, in 1902. It
provides the following products to its customers: checking accounts; NOW and
Super NOW accounts; money market deposit accounts; savings accounts; time
certificates of deposit; commercial, installment, and commercial and
residential real estate mortgage loans; credit and debit cards; lease
financing; corporate and personal trust services; and safe deposit rental
facilities. Peoples Bank also sells travelers checks, money orders and
cashier's checks. Peoples Bank provides services through ordinary walk-in
offices, automated teller machines ("ATMs"), automobile drive-in facilities
called "Motor Banks," and banking by phone, and provides limited cash
management services through computer banking.
With offices located in Ohio and West Virginia, Peoples Bank serves
principally Washington, Athens, Meigs, Fairfield, and Gallia Counties in
Ohio and Wood, Wetzel, and Mason Counties in West Virginia, together with
portions of Hocking, Perry, Lawrence, Licking, and Vinton Counties in Ohio
and Tyler, Pleasants, and Jackson Counties in West Virginia. At December
31, 1998, Peoples Bank had assets of $694.0 million, deposits of $582.3
million, net loans of $455.7 million and 279 full-time equivalent employees.
Also at December 31, 1998, the Investment and Trust Division of Peoples Bank
held approximately $535 million of assets (market value) in trust and
custodial accounts apart from the assets of the Bank.
Recent Acquisitions and Additions
- ---------------------------------
Effective at the close of business on June 26, 1998, Peoples Bank completed
the purchase of four full-service banking offices located in the communities
of Point Pleasant (two offices), New Martinsville, and Steelton, West
Virginia, from an unaffiliated financial institution. In the transaction,
Peoples Bank assumed approximately $121.0 million in deposits and purchased
$8.3 million in loans. The Point Pleasant offices, located in Mason County,
and the New Martinsville office, located in Wetzel County, currently operate
full-service banking offices and Motor Banks while the Steelton office, also
located in Wetzel County, operates a full-service banking office, Motor Bank,
and an ATM.
On August 17, 1998, a new banking facility was opened at 2107 Pike Street in
Parkersburg, West Virginia. The facility, located in the South Gate Shopping
Center, is a full-service office with an attached Motor Bank, and offers
loan, insurance, investment, and trust services along with traditional
deposit products.
In addition, Peoples Bank will operate a new ATM on leased property in
Nelsonville, Ohio. The lease expires four years from the ATM's delivery
date, which is expected to be in late March, 1999.
Banking Facilities
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Peoples Bank provides services to its customers through the various banking
facilities and ATMs throughout Ohio. In Marietta, Peoples Bank has four
facilities and ATMs: its principal banking office and ATM in downtown
Marietta; a full-service office, Motor Bank and ATM located at the Frontier
Shopping Center and at Second and Scammel Streets; and a full-service office
and ATM located inside a grocery store at Pike and Acme Streets. In Belpre,
Peoples Bank operates a full-service office, two Motor Banks and an ATM.
Other offices in Washington County include full-service offices with Motor
Banks located in Lowell and Reno. Peoples Bank provides services to its
Athens County customers through a full-service office and ATM located at One
North Court Street in downtown Athens, Ohio; a full-service office, Motor
Bank and ATM located at the Athens Mall on East State Street and at the HDL
Center on West Union Street in Athens; three ATMs located on the campus of
Ohio University, also in Athens; and a full service office with a Motor Bank
in Nelsonville, Ohio. In Meigs County, a full-service office and separate
Motor Bank are located in downtown Pomeroy, together with an ATM located
outside a local convenience store; and full-service offices located at
Middleport, and Rutland, Ohio. A full-service office and Motor Bank in
Gallipolis, Ohio, serve customers in neighboring Gallia County. A full-
service office in Baltimore, Ohio, complements a loan production office in
Granville, Ohio, both serving parts of Licking and Fairfield Counties.
Future Sales Offices
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In January 1999, Peoples Bank announced its intention to open three sales
offices in Wal-Mart stores located in the communities of New Martinsville,
Vienna, and Parkersburg, West Virginia. These sales offices will be located
in the front of each Wal-Mart store near the customer service area and will
offer new deposit accounts, loans, insurance products, investment services,
Internet access, ATM access, and more. Peoples Bank anticipates opening its
New Martinsville Wal-Mart sales office on April 1, 1999. The Vienna Wal-Mart
and Parkersburg (south) Wal-Mart sales offices are scheduled to open in the
third quarter and late fourth quarter of 1999, respectively, coinciding with
the grand opening of each store.
The First National Bank of Southeastern Ohio
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General
- -------
First National Bank is a national banking association chartered in 1900. It
provides banking services and products that are substantially the same as
those of Peoples Bank. First National Bank's market area is comprised of
Caldwell, Chesterhill, McConnelsville and the surrounding area in Noble and
Morgan Counties, Ohio. At December 31, 1998, it had assets of $87.8 million,
deposits of $65.4 million, net loans of $58.0 million and 27 full-time
equivalent employees.
First National Bank also owns two insurance agency subsidiaries, Northwest
Territory Life Insurance Agency, Inc. and Northwest Territory Property and
Casualty Insurance Agency, Inc. (the "Agencies"). The Agencies were created
in compliance with federal regulations allowing insurance powers to national
banks in communities with populations of 5,000 people or less. On December
22, 1995, each Agency received a Certificate of Qualification (license) to
operate the Agency from the Ohio Department of Insurance, thereby allowing
the Agencies to engage in the insurance agency business, subject to the
regulations of the Ohio Department of Insurance and the Comptroller of the
Currency. These were the first insurance agencies in Ohio associated with a
financial institution to receive licenses to conduct a broad-based insurance
business. In August 1998, these agencies were licensed by Ohio-based
Motorists Mutual Insurance Company, MICO Insurance Company and Motorists
Life Insurance Company ("Motorists"). The Agencies offer a complete line of
life and property and casualty products through Motorists. At December 31,
1998, the Agencies had 8 full-time employees.
In addition, a full line of investment products are offered at the Company
through Marketing One Securities, Inc., a unaffiliated registered broker
dealer, member NASD and SIPC. The Company has 16 registered representatives
and one registered principal.
Banking Facilities
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First National Bank operates a full-service office and Motor Bank at one
location at 415 Main Street, Caldwell, Ohio. It also operates a full-
service office and Motor Bank on Marion Street in Chesterhill, Ohio, as well
as a full-service office on Kennebec Street, McConnelsville, Ohio.
The Agencies' principal office is located within the First National Bank
office at 415 Main Street in Caldwell, Ohio. The Agencies also use office
space within the various offices of Peoples Bank and First National Bank as
necessary to serve their customers.
Peoples Bank FSB
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General
- -------
On January 1, 1997, the Company acquired Russell Federal Savings Bank
("Russell Federal"), and continued its operation as a federal savings bank.
Russell Federal was originally chartered as a mutual association in 1914,
but later converted to a stock corporation on October 6, 1994.
On December 12, 1997, the Company acquired Gateway Bancorp, Inc. ("Gateway")
and its subsidiary, Catlettsburg Federal Savings Bank ("Catlettsburg
Federal"). Catlettsburg Federal was originally chartered as a mutual savings
and loan association in 1935, and converted to a federally-chartered stock
savings bank in 1994 with Gateway as its sole shareholder.
On January 1, 1998, Russell Federal became a subsidiary of Gateway to begin
the process of aligning the Company's business units in northeast Kentucky.
Effective January 1, 1999, the Company merged Russell Federal and
Catlettsburg Federal to form a single thrift and renamed it "Peoples Bank
FSB". In addition, the Company dissolved Gateway. These actions were
designed to align the Company's Kentucky operations and optimize its focus
on sales and service in its markets. At January 1, 1999, Peoples Bank FSB
had total assets of $97.5 million, deposits of $66.8 million, net loans of
$44.7 million and 20 full-time equivalent employees.
Peoples Bank FSB's principal products include savings accounts, time
certificates of deposit and commercial and residential real estate loans.
Peoples Bank FSB's primary market area consists of Catlettsburg, Ashland,
Grayson, Russell and the contiguous areas of Greenup, Carter, and Boyd
Counties in Kentucky.
Recent Additions
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In 1998, Peoples Bank FSB expanded its products and services to include
non-interest bearing transaction accounts; NOW and Super NOW accounts;
commercial and consumer loans; debit cards; and ATM services. It also
completed the renovation of a new walk-in office and attached Motor Bank
located in Boyd County at 1410 Eagle Drive in Ashland, Kentucky in March,
1998. Peoples Bank FSB added its first ATM as part of the renovation.
Banking Facilities
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In addition to the Ashland office, Peoples Bank FSB serves the financial
needs of customers through a walk-in office located at 2717 Louisa Street in
Catlettsburg, Kentucky. Peoples Bank FSB also has a full-service, walk-in
office and adjacent Motor Bank at 380 South Carol Malone Boulevard in
Grayson, Kentucky and a full-service, walk-in office and Motor Bank on Ferry
Street in Russell, Kentucky.
The Northwest Territory Life Insurance Company
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Northwest Territory was organized under Arizona law in 1983 and was issued a
Certificate of Authority to act as a reinsurance company by the State of
Arizona on February 8, 1984. Northwest Territory reinsures credit life and
disability insurance issued to customers of banking subsidiaries of the
Company by the issuing insurance company. At fiscal year end November 30,
1998, Northwest Territory had total assets of $1.5 million and had gross
premium income of $208,000 in 1998, $218,000 in 1997 and $201,000 in 1996.
Northwest Territory reinsures risks (currently not exceeding $15,000 per
insured on a present value basis) within limits established by governmental
regulations and management policy. Northwest Territory has no employees.
Customers and Markets
- ---------------------
The Company's service area has a diverse economic structure. Principal
industries in the area include metals, plastics and petrochemical
manufacturing; oil, gas and coal production; and related support industries.
In addition, tourism, education and other service-related industries are
important and growing industries. Consequently, the Company is not dependent
upon any one industry segment for its business opportunities.
Each of the Company's banking subsidiaries originates various types of loans,
including commercial and commercial real estate loans, residential real
estate loans, home equity lines of credit, real estate construction loans,
and consumer loans (including loans to individuals, credit card loans, and
indirect loans). In general, the Company retains most of its originated
loans and, therefore, secondary market activity has been minimal. The loans
of each of the Company's subsidiaries are spread over a broad range of
industrial classifications. The Company believes that its subsidiaries have
no significant concentrations of loans to borrowers engaged in the same or
similar industries and its subsidiaries have no loans to foreign entities.
The lending market areas served by the Company's subsidiaries are primarily
concentrated in southeastern Ohio and neighboring areas of Kentucky and West
Virginia. In addition, a loan production office in central Ohio provides
opportunities to serve customers in that economic region.
Commercial Loans
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At December 31, 1998, the Company's subsidiaries had outstanding
approximately $212.5 million in commercial loans (including commercial,
financial and agricultural loans), representing approximately 37.4% of the
total aggregate loan portfolio as of that date.
Legal Lending Limit. At December 31, 1998, none of the Company's
subsidiaries had extended credit to any one borrower in excess of its
respective legal lending limit (approximately $10.4 million, $1.2 million
and 1.1 million for Peoples Bank, First National and Peoples Bank FSB,
respectively) at the time the loan was closed.
Lending Practices. Commercial lending entails significant additional risks
as compared with consumer lending (i.e., single-family residential mortgage
lending, installment lending, credit card loans and indirect lending). In
addition, the payment experience on commercial loans typically depends on
adequate cash flow of a business and thus may be subject to a greater extent,
to adverse conditions in the general economy or in a specific industry.
Loan terms include amortization schedules commensurate with the purpose of
each loan, the source of repayment and the risk involved. Approval is
required from each respective banking subsidiary's Board of Directors for
loans to borrowers whose aggregate total debt, including the principal
amount of the proposed loan, exceeds $2 million, $275,000 and $1 million for
Peoples Bank, First National and Peoples Bank FSB, respectively. However,
the Company's Loan Committee approval is required for loans by Peoples Bank
FSB to borrowers whose aggregate total debt exceeds $300,000. The primary
analysis technique used in determining whether to grant a commercial loan is
the review of a schedule of cash flows to evaluate whether anticipated
future cash flows will be adequate to service both interest and principal
due. In addition, collateral is reviewed to determine its value in relation
to the loan.
Peoples Bank periodically evaluates all new commercial loans greater in
amount than $250,000 and on an annual basis, all loans greater in amount
than $500,000. First National and Peoples Bank FSB periodically evaluate
all commercial loans greater in amount than $100,000. If deterioration has
occurred, the lender subsidiary takes effective and prompt action designed
to assure repayment of the loan. Upon detection of the reduced ability of a
borrower to meet cash flow obligations, the loan is considered an impaired
loan and reviewed for possible downgrading or placement on non-accrual
status.
Consumer Loans
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At December 31, 1998, the Company's subsidiaries had outstanding consumer
loans (including indirect loans and credit cards) in an aggregate amount of
approximately $111.5 million (approximately 19.6% of the aggregate total
loan portfolio).
Lending Practices. Consumer loans generally involve more risk as to
collectibility than mortgage loans because of the type and nature of the
collateral and, in certain instances, the absence of collateral. As a
result, consumer lending collections are dependent upon the borrower's
continued financial stability, and thus are more likely to be adversely
affected by employment loss, personal bankruptcy, or adverse economic
conditions. Credit approval for consumer loans requires demonstration of
sufficiency of income to repay principal and interest due, stability of
employment, a positive credit record and sufficient collateral for secured
loans. It is the policy of each of the Company's subsidiaries to review its
consumer loan portfolio monthly and to charge off loans that do not meet
that subsidiary's standards and to adhere strictly to all laws and
regulations governing consumer lending. A qualified compliance officer is
responsible for monitoring the Company's performance in this area and for
advising and updating loan personnel.
The Company's subsidiaries make credit life insurance and health and
accident insurance available to all qualified buyers, thus reducing their
risk of loss when a borrower's income is terminated or interrupted. Each
subsidiary also offers its customers credit card access through the consumer
lending department of Peoples Bank.
Real Estate Loans
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At December 31, 1998, there were approximately $243.9 million ($213.3
million, $20.3 million, and $10.3 million, respectively) in residential real
estate, home equity lines of credit and construction mortgages outstanding,
representing 43.0% of total loans outstanding.
Lending Practices. The Company's subsidiaries require that the residential
real estate loan amount be no more than 90% of the purchase price or the
appraisal value of the real estate securing the loan, unless private mortgage
insurance is obtained by the borrower with respect to the percentage
exceeding such 90%. On occasion, the subsidiaries may lend up to 100% of
the appraised value of the real estate. The risk conditions of these loans
are considered during underwriting for the purposes of establishing an
interest rate compatible with the risks inherent in such home equity loans.
Loans made for each subsidiary's portfolio in this lending category are
generally one to five year adjustable rate, fully amortized mortgages. The
subsidiaries also generate fixed rate real estate loans and generally retain
these loans. All real estate loans are secured by first mortgages with
evidence of title in favor of the subsidiary in the form of an attorney's
opinion of the title or a title insurance policy. The subsidiaries also
require proof of hazard insurance with the subsidiary named as the mortgagee
and as the loss payee. Licensed appraisals are required in the case of
loans in excess of $250,000 for Peoples Banks and $75,000 for First National
and Peoples Bank FSB.
Home Equity Loans. Home equity lines of credit are generally made as second
mortgages by the Company's subsidiaries. The maximum amount of a home
equity line of credit is generally limited to 80% of the appraised value of
the property less the balance of the first mortgage. The Company's
subsidiaries will lend up to 100% of the appraised value to the property at
higher interest rates which are considered compatible with the additional
risk assumed in these types of equilines. The home equity lines of credit
are written with ten-year terms but are subject to review upon request for
renewal. For the past two years, the Company's subsidiaries have generally
charged a fixed rate on their home equity loans for the first five years.
At the end of the five-year period, the equiline reverts to a variable
interest rate product.
Construction Loans. Construction financing is generally considered to
involve a higher degree of risk of loss than long-term financing on improved,
occupied real estate. Risk of loss on a construction loan is dependent
largely upon the accuracy of the initial estimate of the property's value at
completion of construction and the estimated cost (including interest) of
construction. If the estimate of construction cost proves to be inaccurate,
the subsidiary making the loan may be required to advance funds beyond the
amount originally committed to permit completion of the project.
Competition
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The banking subsidiaries of the Company experience significant competition
in attracting depositors and borrowers. Competition in lending activities
comes principally from other commercial banks, savings associations,
insurance companies, governmental agencies, credit unions, brokerage firms
and pension funds. The primary factors in competing for loans are interest
rate and overall lending services. Competition for deposits comes from
other commercial banks, savings associations, money market funds and credit
unions as well as from insurance companies and brokerage firms. The primary
factors in competing for deposits are interest rates paid on deposits,
account liquidity, convenience of office location and overall financial
condition. The Company believes that its size provides flexibility, which
enables the Company to offer an array of banking products and services. The
Company's financial condition also contributes to a favorable competitive
position in the markets it serves.
Northwest Territory operates in the highly competitive industry of credit
life and disability insurance. The principal methods of competition in the
credit life and disability insurance industry are the availability of
coverages and premium rates. The Company believes Northwest Territory has a
competitive advantage due to the fact that the business of Northwest
Territory is limited to the accepting of life and disability reinsurance
ceded in part to Northwest Territory from the credit life and disability
insurance purchased by loan customers of primarily Peoples Bank and First
National Bank.
The Agencies operate in the extremely competitive life insurance and property
and casualty insurance industries, due mostly to the large number of
companies and agents located within the Company's markets. The Agencies
provide several insurance product options to consumers including traditional
life insurance as well as property and casualty insurance products. The
Agencies' future competitive advantage will be based on their ability to
provide products to consumers efficiently with sensitivity to customer
service and cost price issues.
The Company primarily focuses on non-major metropolitan markets in which to
provide products and services. Management believes the Company has developed
a niche and certain level of expertise in serving these communities.
The Company historically has operated under a "needs-based" selling approach
that management believes has proven successful in serving the financial
needs of many customers. Management anticipates that in future periods, the
Company will increase its investment in sales training and education to
assist in the development of the Company's associates and their
identification of customer service opportunities.
It is not the Company's strategy to compete solely on the basis of interest
rate. Management believes that a focus on customer relationships and
incentives that promote customers' continued use of the Company's financial
products and services will lead to enhanced revenue opportunities.
Management believes the integration of traditional financial products with
the recent entry into insurance product offerings will lead to enhanced
revenues through complementary product offerings that satisfy customer demands
for high quality, "one-stop shopping".
Supervision and Regulation
- --------------------------
The following is a summary of certain statutes and regulations affecting the
Company and its subsidiaries and is qualified in its entirety by reference
to such statutes and regulations:
General
- -------
Bank Holding Company. The Company is a bank holding company under the Bank
Holding Company Act of 1956, which restricts the activities of the Company
and the acquisition by the Company of voting stock or assets of any bank,
savings association or other company. The Company is also subject to the
reporting requirements of, and examination and regulation by, the Federal
Reserve Board. The Company's subsidiary banks are subject to restrictions
imposed by the Federal Reserve Act on transactions with affiliates, including
any loans or extensions of credit to the Company or its subsidiaries,
investments in the stock or other securities thereof and the taking of such
stock or securities as collateral for loans to any borrower; the issuance of
guarantees, acceptances or letters of credit on behalf of the Company and its
subsidiaries; purchases or sales of securities or other assets; and the
payment of money or furnishing of services to the Company and other
subsidiaries. The Company is prohibited from acquiring direct or indirect
control of more than 5% of any class of voting stock or substantially all of
the assets of any bank holding company without the prior approval of the
Federal Reserve Board. The Company and its subsidiaries are prohibited from
engaging in certain tying arrangements in connection with extensions of
credit and/or the provision of other property or services to a customer by
the Company or its subsidiaries. In addition, any savings association
acquired by the Company must conform its activities to those permissible for
a bank holding company under the Bank Holding Company Act.
Savings and Loan Holding Company. The Company is also a savings and loan
holding company due to its ownership of Peoples Bank FSB. However, since
the Company is a bank holding company regulated by the Federal Reserve Board,
it is not subject to any separate regulation as a savings and loan holding
company. Transactions between a savings association subsidiary of a savings
and loan holding company and an affiliate thereof are subject to the same
restrictions imposed by the Federal Reserve Act on subsidiary banks of a bank
holding company.
Congress is considering legislation to eliminate the federal savings and
loan charter and the separate federal regulations of savings associations.
Pursuant to this legislation, Congress may eliminate the Office of Thrift
Supervision (the "OTS") and Peoples Bank FSB may be regulated under federal
law as a bank or be required to change its charter. Such change in
regulation or charter would likely change the range of activities in which
Peoples Bank FSB may engage and would probably subject Peoples Bank FSB to
more regulation by the Federal Deposit Insurance Corporation ("FDIC"). At
this time, the Company cannot predict when or whether Congress may actually
pass legislation regarding the Company's and Peoples Bank FSB's regulatory
requirements or charter. Although such legislation, if enacted, may change
the activities in which Peoples Bank FSB may engage, it is not anticipated
that the current activities of either the Company or Peoples Bank FSB will
be materially affected by those activity limits.
Banking Subsidiaries. Peoples Bank is an Ohio state-chartered bank
supervised and regulated by the Ohio Division of Financial Institutions and
the FDIC. First National Bank is a national bank, supervised and regulated
by the Comptroller of the Currency. Peoples Bank FSB is a federally-
chartered savings bank subject to regulation, supervision, and examination
by the OTS and as a member of the Federal Home Loan Bank ("FHLB") of
Cincinnati subject to limited regulation by the Federal Reserve Board.
Insurance Subsidiaries. Northwest Territory is chartered by the State of
Arizona and is subject to regulation, supervision and examination by the
Arizona Department of Insurance. The powers of regulation and supervision
of the Arizona Department of Insurance relate generally to such matters as
minimum capitalization, the grant and revocation of certificates of
authority to transact business, the nature of and limitations on investments,
the maintenance of reserves, the form and content of required financial
statements, reporting requirements and other matters pertaining to life and
disability insurance companies. The Agencies are incorporated in the State
of Ohio and licensed by the Ohio Department of Insurance, which regulates,
supervises and has authority to examine the Agencies.
Federal Deposit Insurance Corporation
- -------------------------------------
The FDIC insures the deposits of Peoples Bank, First National Bank, and
Peoples Bank FSB and those entities are subject to the applicable provisions
of the Federal Deposit Insurance Act. A subsidiary of a bank holding company
or savings and loan holding company can be liable to reimburse the FDIC if
the FDIC incurs or anticipates a loss because of a default of another FDIC-
insured subsidiary of the bank holding company or savings and loan holding
company or in connection with FDIC assistance provided to the subsidiary in
danger of default. In addition, the holding company of any insured financial
institution that submits a capital plan under the federal banking agencies'
regulations on prompt corrective action is required to guarantee a portion of
the institution's capital shortfall.
The FDIC is authorized to establish separate annual assessment rates for
deposit insurance for members of the Bank Insurance Fund ("BIF") and of the
Savings Association Insurance Fund ("SAIF"). Peoples Bank and First National
Bank are BIF members. Peoples Bank FSB is a SAIF member. Insurance
premiums for BIF and SAIF members are determined during each semi-annual
assessment period based upon the members' respective categorization as (1)
well capitalized, (2) adequately capitalized or (3) under capitalized. An
institution is also assigned by the FDIC to one of these supervisory
subgroups within each capital group. The supervisory subgroup to which an
institution is assigned is based on a supervisory evaluation provided to the
FDIC be the institution's primary federal regulator and information which
the FDIC determines to be relevant to the institution's financial condition
and the risk posed to the deposit insurance funds (which may include, if
applicable, information provided by the institution's state supervisor).
An institution's assessment rate depends on the capital category and
supervisory category to which it is assigned.
Office of Thrift Supervision
- ----------------------------
Peoples Bank FSB must file periodic reports with the OTS concerning its
activities and financial condition. Examinations are conducted periodically
by the OTS to determine whether Peoples Bank FSB is in compliance with
various regulatory requirements and is operating in a safe and sound manner.
The enforcement authority of the OTS includes, among other things, the
ability to assess civil money penalties, to issue cease-and-desist or removal
orders and to initiate injunctive actions. In general, these enforcement
actions may be initiated for violations of laws and regulations and unsafe or
unsound practices. Other actions or inactions may provide the basis for
enforcement action, including misleading or untimely reports filed with the
OTS. Except under specific circumstances, public disclosure of final
enforcement actions by the OTS is required.
Federal Home Loan Bank
- ----------------------
The FHLBs provide credit to their members in the form of advances. As a
member of the FHLB of Cincinnati, Peoples Bank FSB must maintain an
investment in the capital stock of that FHLB in an amount equal to the
greater of 1.0% of the aggregate outstanding principal amount of its
respective residential mortgage loans, home purchase contracts and similar
obligations at the beginning of each year, or 5% of its advances from the
FHLB. Peoples Bank FSB is in compliance with this requirement with an
investment in stock of the FHLB of Cincinnati of $1.4 million at December
31, 1998. In addition, Peoples Bank and First National Bank also hold an
investment in FHLB of Cincinnati stock of $6.7 million and $0.6 million,
respectively, at December 31, 1998.
Capital Requirements
- --------------------
Federal Reserve Board. The Federal Reserve Board has adopted risk-based
capital guidelines for bank holding companies and for state member banks.
The risk-based capital guidelines include both a definition of capital and a
framework for calculating weighted-risk assets by assigning assets and
off-balance sheet items to broad risk categories. The minimum ratio of
total capital to weighted-risk assets (including off-balance sheet items,
such as standby letters of credit) is 8%. At least 4% must be comprised of
common stockholders' equity (including retained earnings but excluding
treasury stock), qualifying noncumulative perpetual preferred stock, a
limited amount of qualifying cumulative perpetual preferred stock, and
minority interests in equity accounts of consolidated subsidiaries, less
goodwill and certain other intangible assets ("Tier 1 capital"). The
remainder ("Tier 2 capital") may consist of mandatory convertible debt
securities, a limited amount of subordinated debt, other preferred stock and
a limited amount of allowance for loan and lease losses. The Federal Reserve
Board also imposes a minimum leverage ratio (Tier 1 capital to total assets)
of 3% for bank holding companies and state member banks that meet specified
conditions, including no operational, financial or supervisory deficiencies,
and having the highest regulatory rating. The minimum leverage ratio is 4%
to 5% for other bank holding companies and state member banks based on their
particular circumstances and risk profiles and those experiencing or
anticipating significant growth.
Office of the Comptroller of Currency. National bank subsidiaries, such as
First National Bank, are subject to similar capital requirements adopted by
the Comptroller of the Currency.
Office of Thrift Supervision. The OTS has established capital standards,
including a tangible capital requirement, a leverage ratio (or core capital)
requirement and a risk-based capital requirement applicable to savings
associations such as Peoples Bank FSB. The framework provided by the OTS to
define capital and calculate risk-weighted assets is much the same as the
framework provided by the Federal Reserve Board for bank holding companies
and for state member banks. These capital requirements must be generally as
stringent as the comparable capital requirements for national banks. The
capital regulations require tangible capital of at least 1.5% of adjusted
total assets (as defined by regulation). Tangible capital is defined in OTS
regulations as core capital minus any intangible assets. The capital
standards also require core capital of at least 3% of adjusted total assets.
Core capital generally consists of tangible capital plus certain intangible
assets, including a limited amount of purchased credit card relationships.
The OTS risk-based requirement requires saving associations to have total
capital of at least 8% of risk-weighted assets. Total capital consists of
core capital and supplementary capital. Supplementary capital consists of
certain permanent and maturing capital instruments that do not qualify as
core capital and general valuation loan and lease loss allowances up to a
maximum of 1.25% of risk-weighted assets. Supplementary capital may be used
to satisfy the risk-based requirement only to the extent of core capital.
The OTS is also authorized to require a savings association to maintain an
additional amount of total capital to account for concentration of credit
risk and the risk of non-traditional activities.
The OTS has adopted an interest rate risk component to the risk-based capital
requirement, though the implementation of that component has been delayed.
Pursuant to that requirement, a savings association would have to measure
the effect of an immediate 200 basis point change in interest rates on the
value of its portfolio, as determined under the methodology established by
the OTS. If the measured interest rate risk is above the level deemed normal
under the regulation, the association will be required to deduct one-half of
that excess exposure from its total capital when determining its level of
risk-based capital. In general, an association with less than $300 million
in assets and a risk-based capital ratio of greater than 12% will not be
subject to the interest rate risk component. (Peoples Bank FSB currently
qualifies for such exemption.) Pending implementation of the interest rate
risk component, the OTS has the authority to impose a higher individualized
capital requirement on any savings association it deems to have excess
interest rate risk. The OTS also may adjust the risk-based capital
requirement on an individual basis for any association to take into account
risks due to concentrations of credit and nontraditional activities.
Compliance. The Company and its subsidiaries currently satisfy all capital
requirements. Failure to meet applicable capital guidelines could subject a
banking institution to a variety of enforcement remedies available to federal
and state regulatory authorities, including the termination of deposit
insurance by the FDIC. Federal regulations require prompt corrective action
to resolve capital deficient banks and savings associations. Under these
regulations, institutions which become undercapitalized become subject to
mandatory regulatory scrutiny and limitations, which increase as capital
continues to decrease. Such institutions are also required to file capital
plans with their primary federal regulator, and their holding companies must
guarantee the capital shortfall up to 5% of the assets of the capital
deficient institution at the time it becomes undercapitalized. As of
December 31, 1998, the most recent notification from the banking regulatory
agencies categorized the Company and each of its banking subsidiaries as well
capitalized under the regulatory framework for prompt corrective action.
The Company's ability to obtain funds for the payment of dividends and for
other cash requirements largely depends on the amount of dividends declared
by its subsidiary banks and other subsidiaries. However, the Federal Reserve
Board expects the Company to serve as a source of strength to its subsidiary
banks. The Federal Reserve Board may require the Company to retain capital
for further investment in its subsidiaries, rather than for dividends for
shareholders. Peoples Bank, First National Bank, and Peoples Bank FSB may
not pay dividends to the Company if, after paying such dividends, they would
fail to meet the required minimum levels under the risk-based capital
guidelines and the minimum leverage ratio requirements. Peoples Bank and
First National Bank must have the approval of their respective regulatory
authorities if a dividend in any year would cause the total dividends for
that year to exceed the sum of the current year's net earnings and the
retained earnings for the preceding two years, less required transfers to
surplus. Peoples Bank FSB may make capital distributions during any
calendar year equal to the greater of 100% of net income for the year-to-date
plus 50% of the amount by which the lesser of its tangible, core or risk-
based capital exceeds its capital requirement for such capital component, as
measured at the beginning of the calendar year, or 75% of its net income for
the most recent four-quarter period. If the current minimum capital
requirements following a proposed capital distribution are not met, Peoples
Bank FSB must obtain prior approval from the OTS. Payment of dividends by a
banking subsidiary may be restricted at any time at the discretion of the
appropriate regulator if it deems the payment to constitute an unsafe and/or
unsound banking practice or necessary to maintain adequate capital. These
provisions could limit the Company's ability to pay dividends on its
outstanding common shares.
Federal and State Laws
- ----------------------
Various requirements and restrictions under the laws of the United States
and the States of Ohio, West Virginia and Kentucky affect the operations of
Peoples Bank, First National Bank and Peoples Bank FSB. Included are
requirements to maintain reserves against deposits, restrictions on the
nature and amount of loans made and the interest charged thereon,
restrictions relating to investments and other activities, limitations on
credit exposure to correspondent banks, limitations on activities based on
capital and surplus, limitations on payment of dividends, and limitations on
branching. Since June 1997, pursuant to federal legislation, First National
Bank and Peoples Bank have been authorized to branch across state lines.
Peoples Bank, as an Ohio chartered banking corporation, has done so in West
Virginia, operating branches in that State under West Virginia consumer
banking law. Peoples Bank FSB has had unlimited branching authority across
state lines for some time but has not chosen, as yet, to do so.
The Company's financial institution subsidiaries are subject to regulatory
oversight under various consumer protection and fair lending laws. These
laws govern, among other things, truth-in-lending disclosure, equal credit
opportunity, fair credit reporting and community reinvestment. Failure to
abide by federal laws and regulations governing community reinvestment could
limit the ability of a financial institution to open a new branch or engage
in a merger transaction. Community reinvestment regulations evaluate how
well and to what extent an institution lends and invests in its designated
service area, with particular emphasis on low-to-moderate income communities
and borrowers in such areas. First National has received a "satisfactory"
examination rating under those regulations while Peoples Bank has received
an "outstanding" examination rating. Peoples Bank FSB has not received a
rating since its creation in January; however, Catlettsburg Federal and
Russell Federal both had "satisfactory" ratings prior to merging.
Prior to the enactment of the Small Business Jobs Protection Act (the "1996
Act") which was signed into law on August 21, 1996, earnings appropriated to
bad debt reserves and deducted for federal income tax purposes could not be
used by Peoples Bank FSB to pay cash dividends to the Company without the
payment of federal income taxes by the Company at the then current income
tax rate on the amount deemed distributed, which would include the amount of
any federal income taxes attributable to the distribution. The Company does
not contemplate any distribution by Peoples Bank FSB in a manner which would
create the above-mentioned federal tax liabilities.
Monetary Policy and Economic Conditions
- ---------------------------------------
The business of commercial banks and savings associations is affected not
only by general economic conditions, but also by the policies of various
governmental regulatory agencies, including the Federal Reserve Board. The
Federal Reserve Board regulates money and credit conditions and interest
rates in order to influence general economic conditions primarily through
open market operations in U.S. Government securities, changes in the discount
rate on bank borrowings, and changes in the reserve requirements against bank
and savings association deposits. These policies and regulations
significantly affect the overall growth and distribution of bank and savings
association loans, investments and deposits, and the interest rates charged
on loans, as well as the interest rates paid on deposits and accounts.
The monetary policies of the Federal Reserve Board have had a significant
effect on the operating results of commercial banks and savings associations
in the past and are expected to continue to have significant effects in the
future. In view of the changing conditions in the economy and the money
markets and the activities of monetary and fiscal authorities, the Company
can make no definitive predictions as to future changes in interest rates,
credit availability or deposit levels.
Statistical Financial Information Regarding the Company
- -------------------------------------------------------
The following listing of statistical financial information, which is included
in the Company's Annual Report to Shareholders for the fiscal year ended
December 31, 1998, (the "Company's 1998 Annual Report") and incorporated
herein by reference, provides comparative data for the Company over the past
three and five years, as appropriate. These tables should be read in
conjunction with "Management's Discussion and Analysis" and the Consolidated
Financial Statements of the Company and its subsidiaries found at pages 38
through 58 and 12 through 33, respectively, of the Company's 1998 Annual
Report.
Average Balances and Analysis of Net Interest Income:
Please refer to page 34 of the Company's 1998 Annual Report.
Rate Volume Analysis:
Please refer to page 35 of the Company's 1998 Annual Report.
Loan Maturities:
Please refer to page 35 of the Company's 1998 Annual Report.
Average Deposits:
Please refer to page 34 of the Company's 1998 Annual Report.
Maturities Schedule of Large Certificates of Deposit:
Please refer to page 35 of the Company's 1998 Annual Report.
Loan Portfolio Analysis:
Please refer to pages 36 and 37 of the Company's 1998 Annual Report.
Securities Analysis:
Please refer to pages 19 and 20 and page 51 and 52 of the Company's 1998
Annual Report.
Return Ratios:
Please refer to page 9 of the Company's 1998 Annual Report.
Effect of Environmental Regulation
- ----------------------------------
Compliance with federal, state and local provisions regulating the discharge
of materials into the environment, or otherwise relating to the protection
of the environment, has not had a material effect upon the capital
expenditures, earnings or competitive position of the Company and its
subsidiaries. The Company believes that the nature of the operations of its
subsidiaries has little, if any, environmental impact. The Company,
therefore, anticipates no material capital expenditures for environmental
control facilities for its current fiscal year or for the foreseeable future.
The Company's subsidiaries may be required to make capital expenditures for
environmental control facilities related to properties they acquire in the
future through foreclosure proceedings; however, the amount of such capital
expenditures, if any, is not currently determinable.
ITEM 2. PROPERTIES
===================
Peoples Bancorp Inc.
- --------------------
The Company's principal office is located at 138 Putnam Street, Marietta,
Ohio. This location is also the principal location for the Company's
largest subsidiary, Peoples Bank.
The Peoples Banking and Trust Company
- -------------------------------------
The principal office of Peoples Bank is located in Washington County at 138
Putnam Street, Marietta, Ohio. This location consists of a five-story
building and another smaller building attached by interior corridors. In
1993, Peoples Bank completed construction of a five-story addition to the
primary facility in downtown Marietta that was originally constructed in
1924. Peoples Bank also owns several nearby vacant lots for parking.
Other Washington County offices operated by Peoples Bank include property
owned at Second and Scammel Streets in downtown Marietta on which an
additional Motor Bank exists, and leases property in the Frontier Shopping
Center near downtown Marietta on which a full-service branch is located.
In addition, Peoples Bank leases another full-service branch located inside
a supermarket in Washington Center near downtown Marietta. In Belpre,
Peoples Bank owns a full-service branch at 1902 Washington Boulevard and a
nearby Motor Bank. Peoples Bank also owns a full-service branch in Lowell,
Ohio, and a Motor Bank in Reno, Ohio.
In Athens County, Peoples Bank owns a two-story building on the Public
Square in Nelsonville, Ohio, along with a nearby Motor Bank. Peoples Bank
owns an office consisting of a two-story structure at One North Court Street,
Athens, Ohio. Also in Athens, Peoples Bank owns a full-service office on
real property it leases in the Athens Mall on East State Street and leases a
full-service office located in the HDL Center on West Union Street. The
leases for the East State Street and the West Union Street offices expire
in June, 2002 and March, 2008, respectively. Peoples Bank also leases a
full-service office in The Plains, Ohio, which lease expires in June, 2001.
In Meigs County, Peoples Bank owns full-service offices in Middleport and
Rutland along with a full service office and Motor Bank in Pomeroy, Ohio.
In nearby Gallia County, Peoples Bank also owns a full-service office,
currently under renovation, and Motor Bank in Gallipolis, Ohio.
In Fairfield County, the Company owns a recently renovated full-service
office located in Baltimore, Ohio. In adjacent Licking County, Peoples Bank
leases a loan production office in the Newark-Granville area, which lease
expires in September, 2000.
In Mason County, West Virginia, Peoples Bank owns a two-story, full-service
office and nearby Motor Bank located on Main Street in Point Pleasant and
leases a two-story, full-service office and nearby Motor Bank on Jackson
Avenue also in Point Pleasant. The Jackson Avenue office lease expires
September, 2000.
In Wood County, Peoples Bank leases a two-story, full-service office located
in the South Gate Shopping Center in Parkersburg, West Virginia, which lease
expires in April, 2004.
In Wetzel County, Peoples Bank owns a two-story full-service office located
on Main Street in New Martinsville, West Virginia, along with a full-service
office located in the nearby community of Steelton in New Martinsville, West
Virginia.
The First National Bank of Southeastern Ohio
- --------------------------------------------
First National Bank owns a three-story office building located in Noble
County at 415 Main Street in Caldwell, Ohio. The Agencies headquarters are
also located in the Caldwell office on Main Street. In Morgan County, First
National Bank owns a one-story located on Marion Street in Chesterhill, Ohio,
together with a two-story structure located on Kennebec Street in
McConnelsville, Ohio.
Peoples Bank FSB
- ----------------
Peoples Bank FSB owns a two-story building located in Boyd County on Louisa
Street in Catlettsburg, Kentucky. An additional one-story building was
renovated and opened on Eagle Drive in Ashland, Kentucky in March, 1998. In
Carter County, Peoples Bank FSB owns a single-story building located on Carol
Malone Boulevard in Grayson, Kentucky. In Greenup County, Peoples Bank FSB
also owns a two-story office building with adjoining land and parking lot at
404 Ferry Street as well as adjacent property located at 408 Ferry Street in
Russell, Kentucky.
Other Properties
- ----------------
All other properties occupied by the Company and its subsidiaries are owned
by the Company or its subsidiaries, including a two-story building at 223
Second Street in Marietta, Ohio. This location is used as general office
space for certain operating units within the Company. The Company and its
subsidiaries own other real property which, when considered in the aggregate,
is not material to their operations.
Property Condition
- ------------------
Management believes all of the properties described above are in satisfactory
condition for their intended use.
ITEM 3. LEGAL PROCEEDINGS.
===========================
There are no pending legal proceedings to which the Company or any of its
subsidiaries is a party or to which any of their property is subject other
than ordinary routine litigation to which the Company's subsidiaries are
parties incidental to their respective banking businesses. The Company
considers none of such proceedings to be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
=============================================================
Not applicable.
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
======================================================================
Please refer to pages 10 and 11 of the Company's 1998 Annual Report, which
are incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
=================================
The table of Selected Financial Data on page 9 of the Company's 1998 Annual
Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
========================================================================
Please refer to pages 38 through 58 of the Company's 1998 Annual Report,
which are incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
=====================================================================
Please refer to pages 51 through 53 of the Company's 1998 Annual Report,
which is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
=====================================================
The Consolidated Financial Statements of Peoples Bancorp Inc. and it
subsidiaries, included on pages 12 through 32 of the Company's 1998 Annual
Report, and the Report of Ernst & Young LLP included therein at page 33 are
incorporated herein by reference. Following is an index to the financial
statements included in the Company's 1998 Annual Report:
1998
Annual
Report
Pages
Peoples Bancorp Inc. and Subsidiaries: ------
Report of Independent Auditors (Ernst & Young LLP) 33
Consolidated Balance Sheets as of December 31, 1998 and 1997 12
Consolidated Statements of Income for each of the three years
ended December 31, 1998 13
Consolidated Statements of Stockholders' Equity for each of the
three years ended December 31, 1998 14
Consolidated Statements of Cash Flows for each of the three years
ended December 31, 1998 15
Notes to the Consolidated Financial Statements 16-32
Peoples Bancorp Inc.: (Parent Company Only Financial
Statements are included in Note 16 of the Notes to the
Consolidated Financial Statements) 30-31
Quarterly Financial Data on page 32 of the Company's 1998 Annual Report are
also incorporated herein be reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
=========================================================================
No response required.
PART III
---------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
=============================================================
Directors and Executive Officers of the Company include those persons
identified under "Election of Directors" on pages 5 through 8 of the
Company's definitive Proxy Statement relating to the Company's Annual
Meeting of Shareholders to be held April 15, 1999, which section is
expressly incorporated by reference. Other Executive Officers are David B.
Baker (52), Vice President; John (Jack) W. Conlon (53), Chief Financial
Officer; Larry E. Holdren (51), Vice President; Carol A. Schneeberger (42),
Vice President/Operations; Jeffrey D. Welch (44), Treasurer; and Mark F.
Bradley (29), Controller.
Mr. Baker became Vice President in February, 1999. In January, 1998, Mr.
Baker was named President of Peoples Bank's Investment and Business Division
and he is also President of the Investment and Trust Division of Peoples
Bank, a position he has held since 1991. Mr. Baker has held various
positions in the Investment and Trust Division for Peoples Bank since 1974.
Mr. Conlon has been Chief Financial Officer of the Company since April, 1991.
He has also been Chief Financial Officer and Treasurer of Peoples Bank for
more than five years.
Mr. Holdren became Vice President in February, 1999. He has been President
of the Retail and Banking Division for Peoples Bank since January, 1998.
Prior thereto, he was Executive Vice President of Human Resources for Peoples
Bank since 1987.
Ms. Schneeberger became Vice President/Operations of the Company in October,
1988. Prior thereto, she was Auditor of the Company from August, 1987 to
October, 1988, and Auditor of Peoples Bank from January, 1986 to October,
1988. She was Assistant Auditor of Peoples Bank from January, 1979 to
January, 1986.
Mr. Welch has been Treasurer of the Company since 1985. Mr. Welch also
serves as a Vice President of Peoples Bank's Investment and Trust Division.
Mr. Bradley became Controller of the Company in January, 1997. Prior
thereto, he was Manager of Accounting and External Reporting for the Company
from February, 1995 to January, 1997. He has been Controller for Peoples
Bank since March, 1997. He was Manager of Accounting and External Reporting
for Peoples Bank from February, 1995 to January, 1997. Prior to February
1995, Mr. Bradley served as a staff accountant of the Company beginning in
1991.
There was no disclosure required under Item 405 of Regulation S-K for the
year ended December 31, 1998.
ITEM 11. EXECUTIVE COMPENSATION.
=================================
See "Compensation of Executive Officers and Directors" on pages 11 through 15
of the Company's definitive Proxy Statement relating to the Company's Annual
Meeting of Shareholders to be held April 15, 1999, which is incorporated by
reference.
Neither the report on executive compensation nor the performance graph
included in the Company's definitive Proxy Statement relating to the
Company's Annual Meeting of Shareholders to be held on April 15, 1999, shall
be deemed to be incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
=========================================================================
See "Security Ownership of Certain Beneficial Owners and Management" on
pages 2 through 4 of the Company's definitive Proxy Statement relating to
the Company's Annual Meeting of Shareholders to be held April 15, 1999, which
section is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
=========================================================
See "Transactions Involving Management" on page 8 of the Company's definitive
Proxy Statement relating to the Company's Annual Meeting of Shareholders to
be held April 15, 1999, which section is incorporated by reference.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
===========================================================================
(a) (1) Financial Statements
--------------------
For a list of all financial statements included in this Annual
Report on Form 10-K, see "Index to Financial Statements" at Page 20.
(a) (2) Financial Statement Schedules
-----------------------------
All schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are inapplicable
and, therefore, have been omitted.
(a) (3) Exhibits
--------
Exhibits filed with this Annual Report on Form 10-K are attached
hereto. For a list of such exhibits, see "Exhibit Index" beginning
at page 21. The following table provides information concerning
executive compensation plans and arrangements required to be filed
as exhibits to this Annual Report on Form 10-K.
Executive Compensation Plans and Arrangements
---------------------------------------------
Exhibit
Number Description Location
------- ----------- --------
10(a) Deferred Compensation Incorporated herein
Agreement dated November 16, by reference to
1976 between Robert E. Evans Exhibit 6(g) to
and The Peoples Banking and Registration Statement
Trust Company, as amended No. 2-68524 on Form
March 13, 1979. S-14 of Peoples
Delaware, the Company's
predecessor.
10(b) Peoples Bancorp Inc. Incorporated herein by
Retirement Savings Plan. reference to Exhibit
(Amended and Restated 10(b) of the Company's
Effective January 1, 1996). Annual Report on Form
10-K for fiscal year
ended December 31, 1995
(File No. 0-16772)
("the 1995 Form 10-K").
10(c)(1) Peoples Bancorp Inc. Deferred Incorporated herein by
Compensation Plan for Directors reference to Exhibit
of Peoples Bancorp Inc. and 10(a) of the Company's
Subsidiaries (Amended and Registration Statement
Restated Effective January 2, on Form S-8 filed
1998.) December 31, 1997
(Registration No.
333-43629)
10(c)(2) Amendment No. 1 to Peoples Incorporated herein by
Bancorp Inc. Deferred reference to Exhibit
Compensation Plan for Directors 10(b) of the Company's
of Peoples Bancorp Inc. and Post-Effective
Subsidiaries effective January Amendment No. 1
2, 1998. to Form S-8 filed
September 4, 1998
(Registration No.
333-43629)
10(d) Peoples Bancorp Inc. Incorporated herein by
Retirement Plan and Trust. reference to Exhibit
(Amended and Restated 10(d) of the Company's
Effective January 1, 1989.) 1995 Form 10-K.
10(e) Summary of the Performance Incorporated herein by
Compensation Plan of Peoples reference to Exhibit
Bancorp Inc. effective for 10(f) of the Company's
calendar year beginning Annual Report on Form
January 1, 1997. 10-K for fiscal year
ended December 31, 1996
(File No. 0-16772).
10(f) Peoples Bancorp Inc. Amended Incorporated herein by
and Restated 1993 Stock Option refrence to Exhibit 4
Plan. of the Company's
Registration Statement
on Form S-8 filed
August 25, 1993
(Registration Statement
No. 33-67878).
10(g) Form of Stock Option Agreement Incorporated herein by
used in connection with grant reference to Exhibit
of non-qualified stock options 10(g) of the Company's
under Peoples Bancorp Inc. 1995 Form 10-K.
Amended and Restated 1993
Stock Option Plan.
10(h) Form of Stock Option Agreement Incorporated herein by
dated May 20, 1993, used in reference to Exhibit
connection with grant of 10(h) of the Company's
incentive stock options under 1995 Form 10-K.
Peoples Bancorp Inc. Amended
and Restated 1993 Stock Option
Plan.
10(i) Form of Stock Option Agreement Incorporated herein by
dated November 10, 1994, used reference to Exhibit
in connection with grant of 10(i) of the Company's
incentive stock options under 1995 Form 10-K.
Peoples Bancorp Inc. Amended and
Restated 1993 Stock Option Plan.
10(j) Peoples Bancorp Inc. 1995 Stock Incorporated herein by
Option Plan. reference to Exhibit 4
of the Company's Form
S-8 filed May 24, 1995
(Registration Statement
No. 33-59569).
10(k) Form of Stock Option Agreement Incorporated herein by
used in connection with grant reference to Exhibit
of non-qualified stock options 10(k) of the Company's
to non-employee directors of 1995 Form 10-K.
the Company under Peoples Bancorp
Inc. 1995 Stock Option Plan.
10(l) Form of Stock Option Agreement Incorporated herein by
used in connection with grant reference to Exhibit
of non-qualified stock options 10(l) of the Company's
to non-employee directors of 1995 Form 10-K.
the Company's subsidiaries under
Peoples Bancorp Inc. 1995 Stock
Option Plan.
10(m) Form of Stock Option Agreement *
dated used in connection with
grant of incentive stock options
under Peoples Bancorp Inc. 1995
Stock Option Plan.
10(n) Peoples Bancorp Inc. 1998 Stock Incorporated herein by
Option Plan. reference to Exhibit
10 of the Company's
Form S-8 filed
September 4, 1998
(Registration Statement
No. 333-62935).
10(o) Form of Stock Option Agreement *
used in connection with grant
of non-qualified stock options
to non-employee directors of
the Company under Peoples
Bancorp Inc. 1998 Stock Option
Plan.
10(p) Form of Stock Option Agreement *
used in connection with grant
of non-qualified stock options
to consultants/advisors of the
Company under Peoples Bancorp
Inc. 1998 Stock Option Plan.
(b) Reports on Form 8-K
-------------------
There were no current reports on Form 8-K filed during the
fiscal quarter ended December 31, 1998.
(c) Exhibits
--------
Exhibits filed with Annual Report on Form 10-K are attached
hereto. For a list of such exhibits, see "Exhibit Index"
beginning at page 21.
(d) Financial Statement Schedules
-----------------------------
None.
* Filed herewith
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PEOPLES BANCORP INC.
Date: March 25, 1999 By: /s/ ROBERT E. EVANS
Robert E. Evans, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signatures Title Date
- ---------- ----- ----
/s/ ROBERT E. EVANS President and Chief Executive March 25, 1999
Robert E. Evans Officer and Director
/s/ GEORGE W. BROUGHTON Director March 25, 1999
George W. Broughton
Director March 25, 1999
- ---------------------
Frank L. Christy
/s/ WILFORD D. DIMIT Director March 25, 1999
Wilford D. Dimit
Director March 25, 1999
- ---------------------
Barton S. Holl
/s/ REX E. MAIDEN Director March 25, 1999
Rex E. Maiden
/s/ NORMAN J. MURRAY Director March 25, 1999
Norman J. Murray
/s/ PAUL T. THEISEN Director March 25, 1999
Paul T. Theisen
/S/ THOMAS C. VADAKIN Director March 25, 1999
Thomas C. Vadakin
/S/ JOSEPH H. WESEL Chairman of the Board and Director March 25, 1999
Joseph H. Wesel
/s/ JOHN W. CONLON Chief Financial Officer March 25, 1999
John W. Conlon (Principal Accounting Officer)
/s/ MARK F. BRADLEY Controller March 25, 1999
Mark F. Bradley
PEOPLES BANCORP INC.
INDEX TO FINANCIAL STATEMENTS
1998
Annual
Report
Financial Statements: Pages
- --------------------- ------
Peoples Bancorp Inc. and Subsidiaries:
Report of Independent Auditors (Ernst & Young LLP) 33
Consolidated Balance Sheets as of December 31, 1998 and 1997 12
Consolidated Statements of Income for each of the three years
ended December 31, 1998 13
Consolidated Statements of Stockholders' Equity for each of the
three years ended December 31, 1998 14
Consolidated Statements of Cash Flows for each of the three years
ended December 31, 1998 15
Notes to the Consolidated Financial Statements 16-32
Peoples Bancorp Inc.: (Parent Company Only Financial Statements
are included in Note 16 of the Notes to the Consolidated
Financial Statements) 30-31
EXHIBIT INDEX
PEOPLES BANCORP INC. ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 1998
Exhibit
Number Description Exhibit Location
- ------- ----------- ----------------
2(a) Office Purchase and Assumption Agreement Incorporated herein
between The Peoples Banking and Trust by reference to
Company and Community Trust Bank of West Exhibit 2 to the
Virginia, NA dated January 26, 1998; and Company's Quarterly
Letter Agreement between The Peoples Report on Form 10-Q
Banking and Trust Company and Community filed August 14, 1998
Trust Bank of West Virginia, NA dated (File No. 0-16772).
June 4, 1998.
2(b) Agreement of Merger, dated October 13, *
1998, between Russell Federal Savings
Bank and Catlettsburg Federal Savings
Bank.
3(a)(1) Amended Articles of Incorporation of Incorporatd herein by
Peoples Bancorp Inc. (as filed with the reference to Exhibit
Ohio Secretary of State on May 3, 1993) 3(a) to the Company's
Registration Statement
on Form 8-B filed July
20, 1993 (File No.
0-16772).
3(a)(2) Certificate of Amendment to the Amended Incorporated herein by
Articles of Peoples Bancorp Inc. (as reference to Exhibit
filed with the Ohio Secretary of State 3(a)(2) to the
on April 22, 1994) Company's Annual
Report on Form 10-K
for fiscal year ended
December 31, 1997
(File No. 0-16772)
(the "1997 Form 10-K).
3(a)(3) Certificate of Amendment to the Amended Incorporated herein by
Articles of Peoples Bancorp Inc. (as reference to Exhibit
filed with the Ohio Secretary of State 3(a)(3) to the Company's
on April 9, 1996) 1997 Form 10-K.
3(a)(4) Amended Articles of Incorporation of Incorporated herein by
Peoples Bancorp Inc. (reflecting reference to Exhibit
amendments through April 9, 1996) 3(a)(4) to the Company's
[For SEC reporting compliance purposes Company's 1997 Form
only -- not filed with Ohio Secretary 10-K.
of State]
3(b) Regulations of Peoples Bancorp Inc. Incorporated herein by
reference to Exhibit
3(b) to the Company's
Registration Statement
on Form 8-B filed July
20, 1993 (File No.
0-16772).
4(a) Pledge Agreement, dated March 18, 1997, Incorporated herein by
between Peoples Bancorp Inc. and reference to Exhibit 4
Fountain Square Commercial Funding Corp. of the Company's
Registration Statement
on Form S-4 (File No.
333-37261) effective
October 2, 1997.
4(b) Master Note Agreement, dated May 11, *
1998, between Peoples Bancorp Inc. and
The Fifth Third Bank.
10(a) Deferred Compensation Agreement dated Incorporated herein by
November 16, 1976 between Robert E. Evans reference to Exhibit
and The Peoples Banking and Trust 6(g) to the Company's
Company, as amended March 13, 1979. Registration Statement
No. 2-68524 on Form
S-14 of Peoples
Delaware, the
Company's predecessor.
10(b) Peoples Bancorp Inc. Retirement Savings Incorporated herein by
Plan. (Amended and Restated Effective reference to Exhibit
January 1, 1996.) 10(b) of the Company's
Annual Report on Form
10-K for fiscal year
ended December 31,
1995 (File No.
0-16772).
10(c)(1) Peoples Bancorp Inc. Deferred Incorporated herein by
Compensation Plan for Directors of reference to Exhibit
Peoples Bancorp Inc. and Subsidiaries 10(a) of the Company's
(Amended and Restated Effective January Registration Statement
2, 1998.) on Form S-8 filed
December 31, 1997
(Registration No.
333-43629)
10(c)(2) Amendment No. 1 to Peoples Bancorp Inc. Incorporated herein by
Deferred Compensation Plan for Directors referene to Exhibit
of Peoples Bancorp Inc. and Subsidiaries 10(b) of the Company's
effective January 2, 1998. Post-Effective
Amendment No. 1 to
Form S-8 filed
September 4, 1998
(Registration No.
333-43629)
10(d) Peoples Bancorp Inc. Retirement Plan Incorporated herein by
and Trust. (Amended and Restated reference to Exhibit
Effective January 1, 1989.) 10(d) of the Company's
Annual Report on Form
10-K for fiscal year
ended December 31,
1995 (File No.
0-16772).
10(e) Summary of the Performance Compensation Incorporated herein by
Plan for Peoples Bancorp Inc. effective reference to Exhibit
for calendar year beginning January 1, 10(f) of the Company's
1997. Annual Report on Form
10-K for fiscal year
ended December 31,
1996 (File No.
0-16772).
10(f) Peoples Bancorp Inc. Amended and Incorporated herein by
Restated 1993 Stock Option Plan. reference to Exhibit 4
of the Company's
Registration Statement
on Form S-8 filed
August 25, 1993
(Registration Statement
No. 33-67878).
10(g) Form of Stock Option Agreement used in Incorporated herein by
connection with grant of non-qualified reference to Exhibit
stock options under Peoples Bancorp Inc. 10(g) of the Company's
Amended and Restated 1993 Stock Option Annual Report on Form
Plan. 10-K for fiscal year
ended December 31, 1995
(File No. 0-16772).
10(h) Form of Stock Option Agreement dated Incorporated herein by
May 20, 1993, used in connection with reference to Exhibit
grant of incentive stock options under 10(h) of the Company's
Peoples Bancorp Inc. Amended and Annual Report on Form
Restated 1993 Stock Option Plan. 10-K for fiscal year
ended December 31, 1995
(File No. 0-16772)
10(i) Form of Stock Option Agreement dated Incorporated herein by
November 10, 1994, used in connection reference to Exhibits
with grant of incentive stock options 10(i) of the Company's
under Peoples Bancorp Inc. Amended and Annual Report on Form
Restated 1993 Stock Option Plan. 10-K for fiscal year
ended December 31, 1995
(File No. 0-16772).
10(j) Peoples Bancorp Inc. 1995 Stock Option Incorporated herein by
Plan. reference to Exhibit
4 of the Company's
Form S-8 filed May 24,
1995 (Registration
Statement No.
33-59569).
10(k) Form of Stock Option Agreement used in Incorporated herein by
connection with grant of non-qualified reference to Exhibit
stock options to non-employee directors 10(k) of the Company's
of the Company under Peoples Bancorp Inc. Annual Report on Form
1995 Stock Option Plan. 10-K for fiscal year
ended December 31,
1995 (File No.
0-16772).
10(l) Form of Stock Option Agreement used in Incorporated herein by
connection with grant of non-qualified reference to Exhibit
stock options to non-employee directors 10(l) of the Company's
of the Company's subsidiaries under Annual Report on Form
Peoples Bancorp Inc. 1995 Stock Option 10-K for fiscal year
Plan. ended December 31,
1995 (File No.
0-16772).
10(m) Form of Stock Option Agreement dated *
used in connection with grant of
incentive stock options under Peoples
Bancorp Inc. 1995 Stock Option Plan.
10(n) Peoples Bancorp Inc. 1998 Stock Option Incorporated herein by
Plan. reference to Exhibit
10 of the Company's
Form S-8 filed
September 4, 1998
(Registration
Statement No.
333-62935).
10(o) Form of Stock Option Agreement used in *
connection with grant of non-qualified
stock options to non-employee directors
of the Company under Peoples Bancorp
Inc. 1998 Stock Option Plan.
10(p) Form of Stock Option Agreement used in *
connection with grant of non-qualified
stock options to consultants/advisors
of the Company under Peoples Bancorp
Inc. 1998 Stock Option Plan.
11 Computation of Earnings Per Share. *
12 Statements of Computation of Ratios. *
13 Peoples Bancorp Inc. Annual Report to Pages 59 through 119.
Shareholders for the fiscal year ended
December 31, 1998 (not deemed filed
except for portions thereof which are
specifically incorporated by reference
into this Annual Report on Form 10-K).
21 Subsidiaries of Peoples Bancorp Inc. *
23 Consent of Independent Auditors - *
Ernst & Young LLP.
27 Financial Data Schedule. *
* Filed herewith