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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
________________
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 No. 000-29949
---------
PEOPLES COMMUNITY BANCORP, INC.
______________________________________________________________________________
(Exact name of registrant as specified in its charter)
Maryland 31-1686242
_______________________________ ______________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6100 West Chester Road, West Chester, Ohio 45069
______________________________________________________________________________
(Address of principal executive office)
Registrant's telephone number, including area code: (513) 870-3530
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90
days.
Yes [X] No [ ]
Indicate by checkmark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes No X
---- -----
As of May 12, 2003, the latest practicable date, 2,512,615 shares of
the registrant's common stock, no par value, were issued and
outstanding.
Page 1 of 23
Peoples Community Bancorp, Inc.
INDEX
Page
------
PART I - FINANCIAL INFORMATION
Consolidated Statements of Financial Condition 3
Consolidated Statements of Earnings 4
Consolidated Statements of Comprehensive Income 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 13
PART II - OTHER INFORMATION 20
SIGNATURES 21
CERTIFICATIONS 22
2
PEOPLES COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
March 31, September 30,
ASSETS 2003 2002
Cash and due from banks $ 12,358 $ 4,460
Interest-bearing deposits in other financial institutions 2,914 22,177
------ ------
Cash and cash equivalents 15,272 26,637
Investment securities designated as available for sale - at market 2,196 1,231
Mortgage-backed securities designated as available for sale - at market 72,681 18,763
Loans receivable - net 508,644 504,012
Office premises and equipment - at depreciated cost 11,522 10,973
Real estate acquired through foreclosure 42 97
Federal Home Loan Bank stock - at cost 10,118 9,907
Accrued interest receivable on loans 2,028 2,264
Accrued interest receivable on mortgage-backed securities 314 77
Prepaid expenses and other assets 721 621
Goodwill, net of accumulated amortization 4,875 4,875
Prepaid federal income taxes 45 -
Deferred federal income taxes 2,595 2,175
------- -------
Total assets $631,053 $581,632
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $400,199 $369,080
Advances from the Federal Home Loan Bank 168,500 152,500
Other borrowed money 925 450
Guaranteed preferred beneficial interests in junior subordinated debentures 12,500 12,500
Advances by borrowers for taxes and insurance 85 189
Accrued interest payable 940 843
Accrued federal income taxes - 151
Other liabilities 2,980 2,929
------- -------
Total liabilities 586,129 538,642
Stockholders' equity
Common stock - 15,000,000 shares of $.01 par value authorized;
2,512,615 shares issued 25 25
Additional paid-in capital 24,002 23,931
Retained earnings - restricted 21,209 19,447
Shares acquired by stock benefit plan (381) (476)
Accumulated comprehensive income, unrealized gains on
securities designated as available for sale, net of related tax effects 69 63
------ ------
Total stockholders' equity 44,924 42,990
------ ------
Total liabilities and stockholders' equity $631,053 $581,632
======= =======
3
Peoples Community Bancorp, Inc.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share data)
Six months ended Three months ended
March 31, March 31,
2003 2002 2003 2002
Interest income
Loans $17,771 $15,178 $8,717 $7,743
Mortgage-backed securities 699 216 422 123
Investment securities 16 9 6 5
Interest-bearing deposits and other 334 236 132 102
------ ------ ----- -----
Total interest income 18,820 15,639 9,277 7,973
Interest expense
Deposits 5,915 4,956 2,844 2,308
Borrowings 3,534 2,598 1,772 1,154
----- ----- ----- -----
Total interest expense 9,449 7,554 4,616 3,462
----- ----- ----- -----
Net interest income 9,371 8,085 4,661 4,511
Provision for losses on loans 2,110 2,469 1,059 1,412
----- ----- ----- -----
Net interest income after provision
for losses on loans 7,261 5,616 3,602 3,099
Other income
Gain on sale of branch premises and deposits - 1,620 - 1,531
Other operating 285 174 133 97
---- ----- ----- -----
Total other income 285 1,794 133 1,628
General, administrative and other expense
Employee compensation and benefits 2,457 1,631 1,320 837
Occupancy and equipment 858 699 417 417
Franchise taxes 216 242 98 130
Data processing 239 169 127 88
Other operating 1,104 836 567 488
Amortization and other charges related to goodwill - 1,228 - 1,114
----- ----- ----- -----
Total general, administrative and other expense 4,874 4,805 2,529 3,074
----- ----- ----- -----
Earnings before income taxes 2,672 2,605 1,206 1,653
Federal income taxes
Current 1,333 1,844 720 963
Deferred (423) (536) (320) (22)
----- ----- --- ---
Total federal income taxes 910 1,308 410 941
----- ----- --- ---
NET EARNINGS $1,762 $1,297 $ 796 $ 712
===== ===== === ===
EARNINGS PER SHARE
Basic $.72 $.53 $.32 $.29
=== === === ===
Diluted $.71 $.53 $.32 $.29
=== === === ===
4
Peoples Community Bancorp, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
For the six months For the three months
ended March 31, ended March 31,
2003 2002 2003 2002
Net earnings $1,762 $1,297 $796 $712
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) on securities during
the period, net of taxes (benefits) of $3, $40, $(62)
and $(22) for the respective periods 6 78 (120) (43)
----- ----- --- ---
Comprehensive income $1,768 $1,375 $676 $669
===== ===== === ===
Accumulated comprehensive income $ 69 $ 60 $ 69 $ 60
===== ===== === ===
5
Peoples Community Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended March 31,
(In thousands)
2003 2002
Cash flows provided by (used in) by operating activities:
Net earnings for the period $ 1,762 $ 1,297
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Amortization of premiums on investment and
mortgage-backed securities, net 610 -
Amortization of deferred loan origination fees (742) (231)
Amortization expense of stock benefit plan 95 494
Compensation expense related to vested stock options 71 -
Amortization and other charges related to goodwill - 1,228
Depreciation and amortization - net 393 418
Provision for losses on loans 2,110 2,469
Federal Home Loan Bank stock dividends (211) (200)
Investment securities dividends (19) -
Gain on sale of branch premises and deposits - (1,620)
Increase (decrease) in cash, due to changes in:
Accrued interest receivable on loans 236 (183)
Accrued interest receivable on mortgage-backed securities (237) (41)
Prepaid expenses and other assets (100) 124
Accrued interest payable 97 403
Other liabilities (53) (298)
Federal income taxes
Current (196) (557)
Deferred (423) (536)
----- -----
Net cash provided by operating activities 3,393 2,767
Cash flows provided by (used in) investing activities:
Purchase of investment securities (1,000) -
Purchase of mortgage-backed securities (65,746) (10,000)
Principal repayments on mortgage-backed securities 11,281 245
Principal repayments on loans 122,096 76,292
Loan disbursements (128,154) (142,266)
Proceeds from sale of loan participations 113 5,335
Purchase of office premises and equipment (942) (1,529)
Proceeds from sale of branch premises and deposits - 2,724
Purchase of Federal Home Loan Bank stock - (761)
------ ------
Net cash used in investing activities (62,352) (69,960)
Cash flows provided by (used in) financing activities:
Net increase in deposit accounts 31,119 21,673
Proceeds from Federal Home Loan Bank advances and other
borrowings 25,475 56,800
Repayment of Federal Home Loan Bank advances (9,000) (21,800)
Proceeds from issuance of junior subordinated debentures - 12,500
------ ------
Net cash provided by financing activities 47,594 69,173
------ ------
Net increase (decrease) in cash and cash equivalents (11,365) 1,980
Cash and cash equivalents at beginning of period 26,637 14,595
------ ------
Cash and cash equivalents at end of period $ 15,272 $ 16,575
====== ======
6
Peoples Community Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the six months ended March 31,
(In thousands)
2003 2002
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Federal income taxes $1,530 $2,447
===== =====
Interest on deposits and borrowings $9,352 $7,151
===== =====
Supplemental disclosure of noncash investing activities:
Unrealized gains on securities designated as available
for sale, net of related tax effects $ 6 $ 78
==== =====
Transfers from loans to real estate acquired through foreclosure $ 89 $ 33
==== =====
Loans disbursed to facilitate sale of real estate acquired
through foreclosure $ 193 $ 50
==== =====
7
Peoples Community Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the six and three month periods ended March 31, 2003 and 2002
1. Basis of Presentation
The accompanying unaudited consolidated financial statements were
prepared in accordance with instructions for Form 10-Q and, therefore,
do not include information or footnotes necessary for a complete
presentation of consolidated financial position, results of operations
and cash flows in conformity with accounting principles generally
accepted in the United States of America. Accordingly, these
financial statements should be read in conjunction with the
consolidated financial statements and notes thereto of Peoples
Community Bancorp, Inc. ("Peoples Bancorp" or the "Company") included
in the Annual Report on Form 10-K for the year ended September 30,
2002. However, in the opinion of management, all adjustments
(consisting of only normal recurring accruals), which are necessary
for a fair presentation of the consolidated financial statements, have
been included. The results of operations for the six- and three-month
periods ended March 31, 2003 are not necessarily indicative of the
results which may be expected for the entire fiscal year.
2. Business Combination
On April 26, 2002, Peoples Community Bancorp, Inc. (the "Company")
completed its acquisition of Kenwood Bancorp, Inc. ("Kenwood") for
consideration of $25.22 per outstanding share, totaling $7.9 million
in cash. Kenwood was liquidated into Peoples Community Bank and
Kenwood's wholly-owned banking subsidiary, Kenwood Savings Bank,
became a wholly-owned subsidiary of Peoples Community Bank. The
Corporation acquired $56.6 million in total assets and recorded
approximately $3.4 million in goodwill as a result of the transaction.
Future references to "Peoples" or the "Bank" include both Peoples and
Kenwood Savings Bank.
3. Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries, the Bank
and Peoples Bancorp Capital Trust I. All significant intercompany
items have been eliminated.
4. Earnings Per Share
Basic earnings per share is based upon the weighted-average shares
outstanding during the period, less 38,080 and 57,120 unallocated ESOP
shares as of March 31, 2003 and 2002, respectively. Diluted earnings
per share is computed taking into consideration common shares
outstanding and dilutive potential common shares to be issued under
the Company's stock option plan. The computations were as follows:
For the six months ended For the three months ended
March 31, March 31,
2003 2002 2003 2002
Weighted-average common shares
outstanding (basic) 2,453,825 2,441,429 2,469,828 2,443,836
Dilutive effect of assumed exercise
of stock options 38,140 24,031 38,105 26,859
--------- --------- --------- ---------
Weighted-average common shares
outstanding (diluted) 2,491,965 2,465,460 2,507,933 2,470,695
========= ========= ========= =========
8
Peoples Community Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the six and three month periods ended March 31, 2003 and 2002
5. Effects of Recent Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 142
"Goodwill and Intangible Assets," which prescribes accounting for all
purchased goodwill and intangible assets. Pursuant to SFAS No. 142,
acquired goodwill is not amortized, but is tested for impairment at
the reporting unit level annually and whenever an impairment indicator
arises.
An acquired intangible asset, other than goodwill, should be amortized
over its useful economic life. The useful life of an intangible asset
is indefinite if it extends beyond the foreseeable horizon. If an
asset's life is indefinite, the asset should not be amortized until
the life is determined to be finite. Intangible assets being
amortized should be tested for impairment in accordance with SFAS No.
121. Intangible assets not being amortized should be tested for
impairment annually and whenever there are indicators of impairment,
by comparing the asset's fair value to its carrying amount.
SFAS No. 142 is effective for fiscal years beginning after December
15, 2001. Management adopted SFAS No. 142 effective October 1, 2002,
as required. Adoption of SFAS No. 142 eliminated annual goodwill
amortization expense of approximately $460,000.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 carries
over the recognition and measurement provisions in SFAS No. 121.
Accordingly, an entity must recognize an impairment loss if the
carrying value of a long-lived asset or asset group (a) is not
recoverable and (b) exceeds its fair value. Similar to SFAS No. 121,
SFAS No. 144 requires an entity to test an asset or asset group for
impairment whenever events or changes in circumstances indicate that
its carrying amount may not be recoverable. SFAS No. 144 differs from
SFAS No. 121 in that it provides guidance on estimating future cash
flows to test recoverability. An entity may use either a probability-
weighted approach or best-estimate approach in developing estimates of
cash flows to test recoverability. SFAS No. 144 is effective for
financial statements issued for fiscal years beginning after December
15, 2001 and interim periods within those fiscal years. Management
adopted SFAS No. 144 effective October 1, 2002, without material
effect on the Company's financial condition or results of operations.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 provides
financial accounting and reporting guidance for costs associated with
exit or disposal activities, including one-time termination benefits,
contract termination costs other than for a capital lease, and costs
to consolidate facilities or relocate employees. SFAS No. 146 is
effective for exit or disposal activities initiated after December 31,
2002. Management adopted SFAS No. 146 effective January 1, 2003,
without material effect on the Company's financial condition or
results of operations.
In October 2002, the FASB issued SFAS No. 147, "Accounting for Certain
Financial Institutions: An Amendment of FASB Statements No. 72 and
144 and FASB Interpretation No. 9," which removes acquisitions of
financial institutions from the scope of SFAS No. 72, "Accounting for
Certain Acquisitions of Banking and Thrift Institutions," except for
transactions between mutual enterprises. Accordingly, the excess of
the fair value of liabilities assumed over the fair value of tangible
and intangible assets acquired in a business combination should be
recognized and accounted for as goodwill in accordance with SFAS No.
141, "Business Combinations," and SFAS No. 142, "Goodwill and Other
Intangible Assets."
9
Peoples Community Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the six and three month periods ended March 31, 2003 and 2002
5. Effects of Recent Accounting Pronouncements (continued)
SFAS No. 147 also requires that the acquisition of a less-than-whole
financial institution, such as a branch, be accounted for as a
business combination if the transferred assets and activities
constitute a business. Otherwise, the acquisition should be accounted
for as the acquisition of net assets.
SFAS No. 147 also amends the scope of SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets," to include long-term
customer relationship assets of financial institutions (including
mutual enterprises) such as depositor- and borrower-relationship
intangible assets and credit cardholder intangible assets.
The provisions of SFAS No. 147 related to unidentifiable intangible
assets and the acquisition of a less-than-whole financial institution
are effective for acquisitions for which the date of acquisition is on
or after October 1, 2002. The provisions related to impairment of
long-term customer relationship assets are effective October 1, 2002.
Transition provisions for previously recognized unidentifiable
intangible assets are effective on October 1, 2002, with earlier
application permitted.
Management adopted SFAS No. 147 on October 1, 2002, without material
effect on the Company's financial condition or results of operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-
Based Compensation - Transition and Disclosure." SFAS No. 148 amends
SFAS No. 123, "Accounting for Stock-Based Compensation," to provide
alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the method
used on reported results. SFAS No. 148 is effective for fiscal years
beginning after December 15, 2002. The interim disclosure provisions
are effective for financial reports containing financial statements
for interim periods beginning after December 15, 2002. Management
elected to record expense related to stock options beginning in fiscal
2002 and, as a result, SFAS No. 148 is not expected to have a material
effect on the Company's financial position or results of operations.
In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN
45"), "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others."
FIN 45 requires a guarantor entity, at the inception of a guarantee
covered by the measurement provisions of the interpretation, to record
a liability for the fair value of the obligation undertaken in issuing
the guarantee. The Corporation has financial letters of credit which
require the Corporation to make payment if the customer's financial
condition deteriorates, as defined in the agreements. FIN 45 requires
the Corporation to record an initial liability, generally equal to the
fees received for these letters of credit when guaranteeing
obligations. FIN 45 applies prospectively to letters of credit the
Corporation issues or modifies subsequent to December 31, 2002.
The Corporation defines the initial fair value of these letters of
credit as the fee received from the customer. The maximum potential
undiscounted amount of future payments of these letters of credit as
of March 31, 2003 are $539,000 and they expire through fiscal 2006.
Amounts due under these letters of credit would be reduced by any
proceeds that the Corporation would be able to obtain in liquidating
the collateral for the loans, which varies depending on the customer.
10
Peoples Community Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the six and three month periods ended March 31, 2003 and 2002
5. Effects of Recent Accounting Pronouncements (continued)
In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN
46"), "Consolidation of Variable Interest Entities." FIN 46 requires a
variable interest entity to be consolidated by a company if that
company is subject to a majority of the risk of loss from the variable
interest entity's activities or entitled to receive a majority of the
entity's residual returns, or both. FIN 46 also requires disclosures
about variable interest entities that a company is not required to
consolidate, but in which it has a significant variable interest. The
consolidation requirements of FIN 46 apply immediately to variable
interest entities created after January 31, 2003. The consolidation
requirements apply to existing entities in the first fiscal year or
interim period beginning after June 15, 2003. Certain of the
disclosure requirements apply in all financial statements issued after
January 31, 2003, regardless of when the variable interest entity was
established. The Company adopted the provisions of FIN 46 effective
January 31, 2003, without material effect on its financial statements.
6. Stock Option Plan
During fiscal 2001 the Board of Directors adopted the Peoples
Community Bancorp, Inc. Stock Option and Incentive Plan (the "Plan")
that provides for the issuance of 197,773 shares of authorized but
unissued shares of common stock at fair value at the date of grant.
Options granted in fiscal 2002 totaled 25,728 at an exercise price
equal to fair value of $20.25. In fiscal 2001, the Corporation
granted 94,861 options at an exercise price equal to fair value of
$14.00. The Plan provides that one-fifth of the options granted
become exercisable on each of the first five anniversaries of the date
of grant. The remaining shares in the Plan may be granted to
employees based on management's discretion.
The Corporation accounts for the Plan in accordance with SFAS No. 123,
"Accounting for Stock-Based Compensation," which contains a fair value-
based method for valuing stock-based compensation that entities may
use, which measures compensation cost at the grant date based on the
fair value of the award. Compensation is then recognized over the
service period, which is usually the vesting period. Alternatively,
SFAS No. 123 permits entities to continue to account for stock options
and similar equity instruments under Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees."
Entities that continue to account for stock options using APB Opinion
No. 25 are required to make pro forma disclosures of net earnings and
earnings per share, as if the fair value-based method of accounting
defined in SFAS No. 123 had been applied.
During fiscal 2002, the Corporation elected to recognize expense
related to the vesting of its stock options in accordance with the
provisions of SFAS No. 123. Total expense related to options for the
six month period ended March 31, 2003 amounted to $71,000. The
Corporation recorded no expense in the six months ended March 31,
2002.
11
Peoples Community Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the six and three month periods ended March 31, 2003 and 2002
6. Stock Option Plan (continued)
A summary of the status of the Plan is presented below:
Six months ended Year ended
March 31, September 30,
2003 2002 2001
Weighted- Weighted- Weighted-
average average average
exercise exercise exercise
Shares price Shares price Shares price
Outstanding at beginning of period 120,329 $15.34 94,861 $14.00 - $ -
Granted - - 25,728 20.25 94,861 14.00
Exercised - - - - - -
Forfeited - - (260) 14.00 - -
------- ----- ------- ----- ------ -----
Outstanding at end of period 120,329 $15.34 120,329 $15.34 94,861 $14.00
======= ===== ======= ===== ====== =====
Options exercisable at period-end 18,924 $14.00 18,924 $14.00 - $ -
======= ===== ======= ===== ====== =====
Weighted-average fair value of
options granted during the period N/A $ 6.19 $ 5.70
=== ==== ====
The following information applies to options outstanding at March 31, 2003:
Number outstanding 120,329
Range of exercise prices $14.00 - $20.25
Weighted-average exercise price $15.34
Weighted-average remaining contractual life 8.5 years
12
Peoples Community Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Peoples Bancorp's profitability depends primarily on net interest
income, which is the difference between interest and dividend income
on interest-earning assets, principally loans, mortgage-backed
securities, investment securities and interest-earning deposits in
other financial institutions, and interest expense, principally on
interest-bearing deposits and borrowings from the Federal Home Loan
Bank of Cincinnati. Net interest income is dependent upon the level
of interest rates and the extent to which such rates are changing.
Peoples Bancorp's profitability also depends, to a lesser extent, on
the level of other income, the provision for losses on loans, general,
administrative and other expenses and federal income taxes.
Peoples Bancorp's operations and profitability are subject to changes
in interest rates, applicable statutes and regulations and general
economic conditions, as well as other factors beyond management's
control.
DISCUSSION OF FINANCIAL CONDITION CHANGES FROM SEPTEMBER 30, 2002 TO
MARCH 31, 2003
At March 31, 2003, the Company's assets totaled $631.1 million, an
increase of $49.4 million, or 8.5%, compared to September 30, 2002.
The increase in assets was comprised primarily of an increase of $53.9
million in mortgage-backed securities, partially funded by a $31.1
million increase in deposits and a $16.5 million increase in advances
from the Federal Home Loan Bank and other borrowings.
Cash and cash equivalents decreased by $11.4 million from September
30, 2002 levels, to a total of $15.3 million at March 31, 2003.
Mortgage-backed securities totaled $72.7 million at March 31, 2003, an
increase of $53.9 million, or 287.4%, compared to September 30, 2002.
The purchase of $65.7 million in mortgage-backed securities during the
period was partially offset by $11.3 million in principal repayments.
Loans receivable totaled $508.6 million at March 31, 2003, an increase
of $4.6 million, or 0.9%, over September 30, 2002 levels. Loan
originations totaling $128.2 million during the six-month period ended
March 31, 2003 were substantially offset by principal repayments of
$122.1 million. Loan originations were comprised of $50.3 million of
loans secured by one- to four-family residential real estate, $36.4
million of loans secured by multi-family real estate, $27.6 million of
loans secured by commercial real estate and land and $13.9 million in
commercial lines of credit and other loans.
The allowance for loan losses totaled $9.1 million at March 31, 2003,
compared to $7.7 million at September 30, 2002. Due primarily to a
continuing change in the composition and the relative credit risk of
the loan portfolio, $2.1 million was added through the provision for
losses on loans during the six months ended March 31, 2003. The
Company has continued to change its loan portfolio mix, from a
preponderance of one- to four-family residential loans to an
increasing amount of loans secured by multi-family and commercial real
estate, construction loans, as well as commercial lines of credit and
unsecured loans. Although such loans typically carry higher interest
rates and may have shorter terms than one- to four-family loans, such
loans also generally have a relatively higher degree of credit risk.
Nonperforming loans totaled $6.7 million and $7.5 million at March 31,
2003 and September 30, 2002, respectively. The $800,000 decrease in
nonperforming loans resulted primarily from the restructure of a $3.2
million multi-family real estate loan, which is currently performing
in accordance with the restructured terms, partially offset by the
addition of a $2.2 million commercial real estate loan. The remaining
$4.5 million of nonperforming loans at March 31, 2003 consisted
primarily of approximately $2.7 million of construction loans to a
financially troubled builder and $1.5 million of one-to-four family
residential loans. It is management's belief that the nonperforming
loans are adequately reserved and no material unreserved losses are
presently anticipated on these nonperforming loans.
13
Peoples Community Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
DISCUSSION OF FINANCIAL CONDITION CHANGES FROM SEPTEMBER 30, 2002 TO
MARCH 31, 2003 (continued)
In spite of the decrease in non-performing loans, the Bank's
internally classified loans increased by $5.5 million, or 44.2%, to a
total of $18.1 million at March 31, 2003, compared to September 30,
2002. The increase was due primarily to the classification of loans
totaling $3.0 million secured by single-family residences and a $2.2
million loan secured by commercial real estate.
The allowance for loan losses represented 1.74% and 1.37% of total
loans at March 31, 2003 and September 30, 2002, respectively. The
allowance for loan losses represented 134.8% and 102.2% of
nonperforming loans as of March 31, 2003 and September 30, 2002,
respectively. Although management believes that its allowance for
loan losses at March 31, 2003 was appropriate based upon the available
facts and circumstances, there can be no assurance that additions to
such allowance will not be necessary in future periods, which would
adversely affect the Company's results of operations.
Deposits totaled $400.2 million at March 31, 2003, an increase of
$31.1 million, or 8.4%, over September 30, 2002 levels. The increase
in deposits was primarily attributable to management's efforts to
maintain deposit growth through marketing strategies. Proceeds from
deposit growth were generally used to fund the aforementioned
purchases of mortgage-backed securities.
Advances from the Federal Home Loan Bank and other borrowings totaled
$169.4 million at March 31, 2003, an increase of $16.5 million, or
10.8%, compared to September 30, 2002 totals. Proceeds obtained from
the advances and other borrowings were generally used to purchase
mortgage-backed securities and investment securities.
Stockholders' equity totaled $44.9 million at March 31, 2003, an
increase of $1.9 million, or 4.5%, over September 30, 2002 levels.
The increase resulted primarily from net earnings of $1.8 million, and
amortization effects of the stock benefit plan totaling $95,000 during
the period.
The Bank is required to meet minimum capital standards promulgated by
the Office of Thrift Supervision ("OTS"). At March 31, 2003, the
Bank's regulatory capital was well in excess of the minimum capital
requirements.
COMPARISON OF OPERATING RESULTS FOR THE THREE-MONTH PERIODS ENDED
MARCH 31, 2003 AND 2002
GENERAL
The inclusion of the accounts of Kenwood, which the Company acquired
in April 2002, in a transaction accounted for using the purchase
method of accounting, significantly contributed to the increases in
the level of income and expense during the three month period ended
March 31, 2003 compared to the three month period ended March 31,
2002. In accordance with the purchase method of accounting, the
consolidated statement of earnings for the period ended March 31, 2002
was not restated for the acquisition.
Net earnings amounted to $796,000 for the three months ended March 31,
2003, an increase of $84,000, or 11.8%, compared to the $712,000 of
net earnings reported for the same period in 2002. The increase in
earnings resulted primarily from a $150,000 increase in net interest
income, a $545,000 decrease in general, administrative and other
expense, a $353,000 decrease in provision for losses on loans, and a
$531,000 decrease in the provision for federal income taxes, partially
offset by a decrease of $1.5 million in other income.
14
Peoples Community Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF OPERATING RESULTS FOR THE THREE-MONTH PERIODS ENDED
MARCH 31, 2003 AND 2002 (continued)
NET INTEREST INCOME
Interest income on loans increased by $974,000, or 12.6%, during the
three-month period ended March 31, 2003, compared to the 2002 period,
due primarily to a $93.3 million, or 22.3%, increase in the average
portfolio balance outstanding, which was partially offset by a 58
basis point decrease in the weighted-average yield, to 6.83% for the
2003 period. The increase in the average balance was due to the
acquisition of Kenwood and the continued strong loan origination
volume, while the decrease in yield reflected a general decrease in
market rates and the corresponding downward repricing of adjustable
rate loans, as well as the lower pricing of new loans relative to
loans in the portfolio. Interest income on investment and mortgage-
backed securities and interest-bearing deposits and other increased by
$330,000, or 143.5%, due primarily to a $65.3 million, or 267.7%,
increase in the average balance of the related assets, partially
offset by a 127 basis point decrease in the weighted-average yield, to
2.50% in the 2003 period. The increase in the average balance of such
assets was primarily due to the investment of excess funds from
deposit growth.
Interest expense on deposits increased by $536,000, or 23.2%, due
primarily to an increase of approximately $145.9 million, or 61.4%, in
the average balance of deposits outstanding, which included the
addition of $48.4 million in deposits from the acquisition of Kenwood,
partially offset by a 92 basis point decrease in the weighted-average
cost of deposits, to 2.96% for the 2003 period. Interest expense on
borrowings increased by $618,000, or 53.6%, due primarily to an $11.6
million, or 6.75%, increase in the average balance of borrowings
outstanding, coupled with a 117 basis point increase in the average
cost of borrowings, to 3.83% for the 2003 period. The increase in
the average cost resulted from management converting existing short-
term adjustable-rate advances from the Federal Home Loan Bank to fixed-
rate long-term advances to provide a more favorable interest rate risk
position.
As a result of the foregoing changes in interest income and interest
expense, net interest income increased by $150,000, or 3.3%, to a
total of $4.7 million for the three months ended March 31, 2003,
compared to the same quarter in 2002. The interest rate spread
decreased to 2.98% for the three months ended March 31, 2003, from
3.83% for the 2002 period, while the net interest margin decreased to
3.10% for the three months ended March 31, 2003, compared to 4.08% for
the same period in 2002.
PROVISION FOR LOSSES ON LOANS
A provision for losses on loans is charged to earnings to bring the
total allowance for loan losses to a level considered appropriate by
management based on historical loss experience, the volume and type of
lending conducted by the Bank, the status of past due principal and
interest payments, general economic conditions, particularly as such
conditions relate to the Bank's market area, and other factors related
to the collectibility of the Bank's loan portfolio. After considering
the above factors, management recorded a provision for losses on loans
totaling $1.1 million and $1.4 million for the three-month periods
ended March 31, 2003 and 2002, respectively. The Company has
continued to change its loan portfolio mix, from a preponderance of
one- to four-family residential loans, to an increasing amount of
loans secured by multi-family and commercial real estate, construction
loans and unsecured loans. Although such loans typically carry higher
interest rates and may have shorter terms than one- to four-family
loans, such loans also generally have a relatively higher degree of
credit risk. While management presently believes the Company's
allowance for loan losses is sufficient to absorb inherent losses in
the portfolio, there can be no assurance that the allowance will be
sufficient to cover losses on nonperforming assets in the future.
15
Peoples Community Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF OPERATING RESULTS FOR THE THREE-MONTH PERIODS ENDED
MARCH 31, 2003 AND 2002 (continued)
OTHER INCOME
Other income totaled $133,000 for the three months ended March 31,
2003, a decrease of $1.5 million, or 91.8%, compared to the $1.6
million recorded for the three months ended March 31, 2002. The
decrease was due to the effects of a $1.5 million gain on sale of
branch offices recorded during the quarter ended March 31, 2002,
partially offset by a $36,000, or 37.1%, increase in other income
during the three months ended March 31, 2003. The increase in other
operating income resulted primarily from the inclusion of Kenwood
Savings' operations and increases in fees related to loan and deposit
transactions year to year.
GENERAL, ADMINISTRATIVE AND OTHER EXPENSE
General, administrative and other expense totaled $2.5 million for the
three months ended March 31, 2003, a decrease of $545,000, or 17.7%,
compared to the same quarter in 2002. This decrease resulted
primarily from a decrease of $1.1 million in amortization of goodwill,
partially offset by an increase of $483,000, or 57.7%, in employee
compensation and benefits, a $39,000, or 44.3%, increase in data
processing and an increase of $79,000, or 16.2%, in other operating
expense.
The decrease in goodwill amortization reflects the Company's adoption
of SFAS No. 142 effective October 1, 2002. Pursuant to SFAS No. 142,
goodwill is no longer amortized, but is subject to a periodic
impairment evaluation. Generally, as previously noted, the level of
general, administrative and other expenses increased due to the
effects of the Kenwood acquisition. The increase in employee
compensation and benefits was due primarily to an increase in costs
associated with benefit plans, staffing levels and normal merit
increases. The increase in data processing reflects continued growth
in loan and deposit accounts. The increase in other operating expense
relates primarily to an increase in advertising costs, professional
fees and pro-rata increases in costs associated with the Company's
overall growth year to year.
FEDERAL INCOME TAXES
The provision for federal income taxes totaled $410,000 for the three
months ended March 31, 2003, a decrease of $531,000, or 56.4%,
compared to the $941,000 provision recorded in the 2002 quarter. This
decrease was primarily due to the effects of nondeductible goodwill
amortization included in the 2002 three-month period, coupled with the
decrease in pre-tax earnings of $447,000, or 27.0%. The Company's
effective tax rates were 34.0% and 56.9% for the three-month periods
ended March 31, 2003 and 2002, respectively.
COMPARISON OF OPERATING RESULTS FOR THE SIX-MONTH PERIODS ENDED
MARCH 31, 2003 AND 2002
GENERAL
The inclusion of the accounts of Kenwood, which the Company acquired
in April 2002, in a transaction accounted for using the purchase
method of accounting, significantly contributed to the increases in
the level of income and expense during the six month period ended
March 31, 2003 compared to the six month period ended March 31, 2002.
In accordance with the purchase method of accounting, the consolidated
statement of earnings for the six-month period ended March 31, 2002
was not restated for the acquisition.
16
Peoples Community Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF OPERATING RESULTS FOR THE SIX-MONTH PERIODS ENDED
MARCH 31, 2003 AND 2002 (continued)
GENERAL (continued)
Net earnings amounted to $1.8 million for the six months ended March
31, 2003, an increase of $465,000, or 35.9%, compared to the $1.3
million of net earnings reported for the same period in 2002. The
increase in earnings resulted primarily from a $1.3 million increase
in net interest income, a $359,000 decrease in the provision for
losses on loans and a $398,000 decrease in the provision for federal
income taxes, partially offset by a $1.5 million decrease in other
income and a $69,000 increase in general, administrative and other
expense.
NET INTEREST INCOME
Interest income on loans increased by $2.6 million, or 17.1%, during
the six-month period ended March 31, 2003, compared to the 2002
period, due primarily to a $102.4 million, or 25.1%, increase in the
average portfolio balance outstanding, which was partially offset by a
48 basis point decrease in the weighted-average yield, to 6.96% for
the 2003 period. The increase in the average balance was due to the
acquisition of Kenwood and the continued strong loan origination
volume, while the decrease in yield reflected a general decrease in
market rates and the corresponding downward repricing of adjustable
rate loans, as well as the lower pricing of new loans relative to
loans in the portfolio. Interest income on investment and mortgage-
backed securities and interest-bearing deposits and other increased by
$588,000, or 127.5%, due primarily to a $58.3 million, or 254.9%,
increase in the average balance of the related assets, partially
offset by a 145 basis point decrease in the weighted-average yield, to
2.59% in the 2003 period. The increase in the average balance of such
assets was primarily due to the investment of excess funds from
deposit growth and advances from the Federal Home Loan Bank.
Interest expense on deposits increased by $959,000, or 19.4%, due
primarily to an increase of approximately $143.2 million, or 60.6%, in
the average balance of deposits outstanding, which included the
addition of $48.4 million in deposits from the acquisition of Kenwood,
partially offset by a 108 basis point decrease in the weighted-average
cost of deposits, to 3.12% for the 2003 period. Interest expense on
borrowings increased by $936,000, or 36.0%, due primarily to a $17.0
million, or 10.6%, increase in the average balance of borrowings
outstanding, coupled with a 74 basis point increase in the average
cost of borrowings, to 3.97% for the 2003 period. Management
converted existing short-term adjustable-rate advances at Federal Home
Loan Bank to fixed-rate long-term advances to provide a more favorable
interest rate risk position.
As a result of the foregoing changes in interest income and interest
expense, net interest income increased by $1.3 million, or 15.9%, to a
total of $9.4 million for the six months ended March 31, 2003,
compared to the same period in 2002. The interest rate spread
decreased to 2.97% for the six months ended March 31, 2003, from 3.46%
for the 2002 period, while the net interest margin decreased to 3.17%
for the six months ended March 31, 2003, compared to 3.75% for the
same period in 2002.
PROVISION FOR LOSSES ON LOANS
A provision for losses on loans is charged to earnings to bring the
total allowance for loan losses to a level considered appropriate by
management based on historical loss experience, the volume and type of
lending conducted by the Bank, the status of past due principal and
interest payments, general economic conditions, particularly as such
conditions relate to the Bank's market area, and other factors related
to the collectibility of the Bank's loan portfolio. After considering
the above factors, management recorded a provision for losses on loans
totaling $2.1 million for the six-month period ended March 31, 2003, a
decrease of $359,000, or 14.5%, compared to the same period in 2002.
The provision recorded during the current six-month period was due
primarily to the increase in classified assets and the continuing
change in the composition and the relative credit risk of the loan
portfolio. The Company has continued to change its loan portfolio mix,
from a preponderance of one- to four-family residential loans, to an
17
Peoples Community Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF OPERATING RESULTS FOR THE SIX-MONTH PERIODS ENDED
MARCH 31, 2003 AND 2002 (continued)
PROVISION FOR LOSSES ON LOANS (continued)
increasing amount of loans secured by multi-family and commercial real
estate, construction loans and unsecured loans. Although such loans
typically carry higher interest rates and may have shorter terms than
one- to four-family loans, such loans also generally have a relatively
higher degree of credit risk. While management presently believes the
Company's allowance for loan losses is sufficient to absorb inherent
losses in the portfolio, there can be no assurance that the allowance
will be sufficient to cover losses on nonperforming assets in the
future.
OTHER INCOME
Other income totaled $285,000 for the six months ended March 31, 2003,
a decrease of $1.5 million, or 84.1%, compared to the $1.8 million
recorded for the six months ended March 31, 2002. The decrease was
due to the effects of a $1.6 million gain on sales of branch offices
recorded during the period ended March 31, 2002, partially offset by a
$111,000, or 63.8%, increase in other income during the six months
ended March 31, 2003. The increase in other operating income resulted
primarily from the inclusion of Kenwood Savings' operations and
increases in fees related to loan and deposit transactions year to
year.
GENERAL, ADMINISTRATIVE AND OTHER EXPENSE
General, administrative and other expense totaled $4.9 million for the
six months ended March 31, 2003, an increase of $69,000, or 1.4%,
compared to the same period in 2002. This increase resulted primarily
from an increase of $826,000, or 50.6%, in employee compensation and
benefits, a $159,000, or 22.7%, increase in occupancy and equipment,
an increase of $70,000, or 41.4%, in data processing and an increase
of $268,000, or 32.1%, in other operating expense, partially offset by
a decrease of $1.2 million in amortization of goodwill.
Generally, as previously noted, the level of general, administrative
and other expenses increased due to the effects of the Kenwood
acquisition. Additionally, the increase in employee compensation and
benefits was due primarily to an increase in costs associated with
benefits plans, staffing levels and normal merit increases. The
increase in occupancy and equipment expense primarily reflects
increased depreciation and maintenance costs associated with the
Company's office additions and improvements. The increase in data
processing reflects costs associated with the growth in loans and
deposit accounts. The increase in other operating expense relates
primarily to an increase in advertising costs, professional fees and
pro-rata increases in costs associated with the Company's overall
growth year to year. The decrease in goodwill amortization reflects
the Company's adoption of SFAS No. 142 effective October 1, 2002.
Pursuant to SFAS No. 142, goodwill is no longer amortized, but is
subject to a periodic impairment evaluation.
FEDERAL INCOME TAXES
The provision for federal income taxes totaled $910,000 for the six
months ended March 31, 2003, a decrease of $398,000, or 30.4%,
compared to the $1.3 million provision recorded in the 2002 six-month
period. This decrease was primarily due to the effects of
nondeductible goodwill amortization included in the 2002 six-month
period. The Company's effective tax rates were 34.1% and 50.2% for the
six-month periods ended March 31, 2003 and 2002, respectively.
18
Peoples Community Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related financial data presented herein
have been prepared in accordance with instructions to Form 10-Q, which
require the measurement of financial position and operating results in
terms of historical dollars, without considering changes in relative
purchasing power over time due to inflation.
Unlike most industrial companies, virtually all of the Bank's assets
and liabilities are monetary in nature. As a result, interest rates
generally have a more significant impact on a financial institution's
performance than does the effect of inflation.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of
management as well as assumptions made by and information currently
available to management. In addition, in those and other portions of
this document, the words "anticipate," "believe," "estimate,"
"except," "intend," "should" and similar expressions, or the negative
thereof, as they relate to the Company or the Company's management,
are intended to identify forward-looking statements. Such statements
reflect the current views of the Company with respect to future
looking events and are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties
materialize or should underlying assumptions prove incorrect, actual
results may vary from those described herein as anticipated, believed,
estimated, expected or intended. The Company does not intend to
update these forward-looking statements.
ITEM 3: Quantitative and Qualitative Disclosures About Market Risk
There has been no material change in the Company's market risk since
the Form 10-K filed with the Securities and Exchange Commission for
the fiscal year ended September 30, 2002.
ITEM 4: Controls and Procedures
(a) The Chief Executive Officer and Chief Financial Officer have
evaluated the effectiveness of the Company's disclosure controls and
procedures (as defined under Rules 13a-14 and 15d-14 of the Securities
Exchange Act of 1934, as amended) as of a date within ninety days of
the filing date of this quarterly report on Form 10-Q. Based upon
that evaluation, the Chief Executive Officer and Chief Financial
Officer have concluded that the Company's disclosure controls and
procedures are effective.
(b) There were no significant changes in the Company's internal
controls or in any factors that could significantly affect these
controls subsequent to the date of the Chief Executive Officer and the
Chief Financial Officer's evaluation.
19
Peoples Community Bancorp, Inc.
PART II
ITEM 1. Legal Proceedings
Not applicable
ITEM 2. Changes in Securities and Use of Proceeds
Not applicable
ITEM 3. Defaults Upon Senior Securities
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
On February 26, 2003, the Company held its Annual Meeting of
Shareholders. Two matters were submitted to the
shareholders for a vote. The shareholders elected three
directors to terms expiring in 2006 by the following votes:
For Withheld
--------- --------
Jerry D. Williams 1,732,037 41,039
John L. Buchanan 1,765,746 7,330
Nicholas N. Nelson 1,765,746 7,330
The shareholders also ratified the selection of Grant
Thornton LLP as the Company's auditors for the 2003 fiscal
year by the following votes:
For: 1,764,022 Against: 8,337 Abstain: 717
ITEM 5. Other Information
On April 7, 2003, Peoples Community Bank announced the
signing of a definitive agreement to acquire the Deer Park
and Landen Branch Offices of Ameriana Bancorp. Under the
terms of the agreement, Peoples will acquire the deposits
and certain loans associated with the two branches. The
transaction will involve approximately $63.1 million in
deposits, $30.9 million in loans, $25.2 million in cash and
$567,000 in fixed assets. The purchase price is the greater
of $6.5 million or 6.91% of the aggregate book value of the
deposit liabilities and the loans. In addition, Peoples
will assume responsibility for certain leases relating to
the branches, including the lease for the Landen branch
office. The transaction, subject to regulatory approval,
is expected to be completed in the third calendar quarter of
2003.
ITEM 6. Exhibits and Reports on Form 8-K
Reports on Form 8-K: None
Exhibits:
10.1 Change in Control Severance Agreement
among Peoples Community Bancorp, Inc.,
Peoples Community Bank and Jerry L. Boate
99.1 Certification of Chief Executive Officer
99.2 Certification of Chief Financial Officer
20
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.
Date: May 14, 2003 By: /s/Jerry D. Williams
------------------- -------------------------
Jerry D. Williams
President
Date: May 14, 2003 By: /s/Teresa A. O'Quinn
------------------- -------------------------
Teresa A. O'Quinn
Chief Financial Officer
21
CERTIFICATION
I, Jerry D. Williams, Chief Executive Officer of Peoples
Community Bancorp, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Peoples
Community Bancorp, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 14, 2003 /s/Jerry D. Williams
-------------------------
Jerry D. Williams
Chief Executive Officer
22
CERTIFICATION
I, Teresa A. O'Quinn, Chief Financial Officer of Peoples
Community Bancorp, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-K of Peoples
Community Bancorp, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 14, 2003 /s/Teresa A. O'Quinn
--------------------------
Teresa A. O'Quinn
Chief Financial Officer
23