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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 June 30, 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 August 11, 2003, the latest practicable date, 2,521,620 shares
of the registrant's common stock, no par value, were issued and
outstanding.
1 of 22
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 14
PART II - OTHER INFORMATION 21
SIGNATURES 22
2
PEOPLES COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
June 30, September 30,
ASSETS 2003 2002
Cash and due from banks $ 9,333 $ 4,460
Interest-bearing deposits in other financial institutions 38,569 22,177
------ ------
Cash and cash equivalents 47,902 26,637
Investment securities designated as available for sale - at market 2,128 1,231
Mortgage-backed securities designated as available for sale - at market 20,338 18,763
Loans receivable - net 516,118 504,012
Office premises and equipment - at depreciated cost 11,981 10,973
Real estate acquired through foreclosure 1,527 97
Federal Home Loan Bank stock - at cost 10,219 9,907
Accrued interest receivable on loans 2,045 2,264
Accrued interest receivable on mortgage-backed securities and
other investments 51 77
Prepaid expenses and other assets 610 621
Goodwill, net of accumulated amortization 4,875 4,875
Prepaid federal income taxes 1,547 -
Deferred federal income taxes 2,731 2,175
------- -------
Total assets $622,072 $581,632
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $405,428 $369,080
Advances from the Federal Home Loan Bank 152,500 152,500
Other borrowed money 1,400 450
Guaranteed preferred beneficial interests in junior subordinated debentures 12,500 12,500
Advances by borrowers for taxes and insurance 37 189
Accrued interest payable 821 843
Accrued federal income taxes - 151
Other liabilities 3,476 2,929
------- -------
Total liabilities 576,162 538,642
Stockholders' equity
Common stock - 15,000,000 shares of $.01 par value authorized;
2,521,620 and 2,512,615 shares issued, as of June 30, 2003 and
September 30, 2002, respectively 25 25
Additional paid-in capital 24,236 23,931
Retained earnings - restricted 22,175 19,447
Shares acquired by stock benefit plan (333) (476)
Accumulated comprehensive income (loss), unrealized gains (losses) on
securities designated as available for sale, net of related tax effects (193) 63
------ ------
Total stockholders' equity 45,910 42,990
------ ------
Total liabilities and stockholders' equity $622,072 $581,632
======= =======
3
Peoples Community Bancorp, Inc.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share data)
Nine months ended Three months ended
June 30, June 30,
2003 2002 2003 2002
Interest income
Loans $26,450 $23,686 $8,679 $8,508
Mortgage-backed securities 1,166 228 467 12
Investment securities 21 14 5 5
Interest-bearing deposits and other 475 378 141 142
------ ------ ----- -----
Total interest income 28,112 24,306 9,292 8,667
Interest expense
Deposits 8,702 7,446 2,787 2,490
Borrowings 5,350 3,906 1,816 1,308
------ ------ ----- -----
Total interest expense 14,052 11,352 4,603 3,798
------ ------ ----- -----
Net interest income 14,060 12,954 4,689 4,869
Provision for losses on loans 3,298 3,769 1,188 1,300
------ ------ ----- -----
Net interest income after provision
for losses on loans 10,762 9,185 3,501 3,569
Other income
Gain on sale of securities 493 - 493 -
Gain on sale of branch premises and deposits - 1,820 - 200
Other operating 436 265 151 91
------ ------ ----- -----
Total other income 929 2,085 644 291
General, administrative and other expense
Employee compensation and benefits 3,874 2,583 1,417 952
Occupancy and equipment 1,269 1,210 411 511
Franchise taxes 384 370 168 128
Data processing 387 270 148 101
Other operating 1,641 1,442 537 606
Amortization and other charges related to goodwill - 1,342 - 114
------ ------ ----- -----
Total general, administrative and other expense 7,555 7,217 2,681 2,412
------ ------ ----- -----
Earnings before income taxes 4,136 4,053 1,464 1,448
Federal income taxes
Current 1,831 2,374 498 530
Deferred (423) (536) - -
------ ------ ----- -----
Total federal income taxes 1,408 1,838 498 530
------ ------ ----- -----
NET EARNINGS $ 2,728 $ 2,215 $ 966 $ 918
===== ===== === ===
EARNINGS PER SHARE
Basic $1.10 $.91 $.39 $.38
===== ===== === ===
Diluted $1.09 $.90 $.38 $.37
===== ===== === ===
4
Peoples Community Bancorp, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
For the nine months For the three months
ended June 30, ended June 30,
2003 2002 2003 2002
Net earnings $2,728 $2,215 $ 966 $918
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) on securities during
the period, net of taxes (benefits) of $36, $39, $32
and $(1) for the respective periods 69 76 63 (2)
Reclassification adjustment for realized gains including in
earnings, net of taxes of $168 for each of the 2003 periods (325) - (325) -
----- ----- --- ---
Comprehensive income $2,472 $2,291 $ 704 $916
===== ===== === ===
Accumulated comprehensive income (loss) $ (193) $ 58 $(193) $ 58
=== == === ==
5
Peoples Community Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended June 30,
(In thousands)
2003 2002
Cash flows provided by (used in) operating activities:
Net earnings for the period $ 2,728 $ 2,215
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Amortization of premiums and discounts on investment and
mortgage-backed securities, net 990 264
Amortization of deferred loan origination fees (1,122) (497)
Amortization expense of stock benefit plan 346 541
Compensation expense related to vested stock options 102 -
Amortization and other charges related to goodwill - 1,342
Depreciation and amortization - net 578 769
Provision for losses on loans 3,298 3,769
Federal Home Loan Bank stock dividends (312) (313)
Investment securities dividends (29) -
Gain on sale of securities (493) -
Gain on sale of branch premises and deposits - (1,820)
Increase (decrease) in cash, net of acquisition of Kenwood Bancorp,
due to changes in:
Accrued interest receivable on loans 219 (217)
Accrued interest receivable on mortgage-backed securities 26 (79)
Prepaid expenses and other assets 11 (5,622)
Accrued interest payable (22) 117
Other liabilities 547 216
Federal income taxes
Current (1,698) 3,728
Deferred (423) (536)
------- ------
Net cash provided by operating activities 4,746 3,877
Cash flows provided by (used in) investing activities:
Purchases of investment securities (1,000) -
Proceeds from sale of investment securities designated as
available for sale 28 -
Purchase of mortgage-backed securities (93,345) (20,264)
Principal repayments on mortgage-backed securities 22,627 815
Proceeds from sale of mortgage-backed securities designated as
available for sale 68,361 -
Proceeds from sale of loan participations 113 6,460
Principal repayments on loans 194,735 106,245
Loan disbursements (210,560) (197,562)
Purchase of office premises and equipment (1,586) (1,778)
Proceeds from sale of branch premises and deposits - 3,218
Purchase of Federal Home Loan Bank stock - (970)
Cash received in acquisition of Kenwood Bancorp - net - 2,042
------- ------
Net cash used in investing activities (20,627) (101,794)
------- ------
Net cash used in operating and investing activities
(balance carried forward) (15,881) (97,917)
------- ------
6
Peoples Community Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the nine months ended June 30,
(In thousands)
2003 2002
Net cash used in operating and investing activities
(balance brought forward) $(15,881) $ (97,917)
Cash flows provided by (used in) financing activities:
Net increase in deposit accounts 36,348 56,494
Proceeds from Federal Home Loan Bank advances and other borrowings 59,950 77,250
Repayment of Federal Home Loan Bank advances (59,000) (45,817)
Proceeds from issuance of junior subordinated debentures - 12,500
Advances by borrowers for taxes and insurance (152) (364)
------ -------
Net cash provided by financing activities 37,146 100,063
------ -------
Net increase in cash and cash equivalents 21,265 2,146
Cash and cash equivalents at beginning of period 26,637 14,595
------ -------
Cash and cash equivalents at end of period $ 47,902 $ 16,741
====== ======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Federal income taxes $ 3,530 $ 4,447
====== ======
Interest on deposits and borrowings $ 14,074 $ 11,122
====== ======
Supplemental disclosure of noncash investing activities:
Unrealized gains (losses) on securities designated as available
for sale, net of related tax effects $ (256) $ 76
====== ======
Transfers from loans to real estate acquired through foreclosure $ 2,863 $ 523
====== ======
Loans disbursed to facilitate sale of real estate acquired through
foreclosure $ 1,592 $ 135
====== ======
Fair value of assets received in acquisition of Kenwood Bancorp $ - $ 56,550
====== ======
7
Peoples Community Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the nine and three month periods ended June 30, 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 nine- and three-
month periods ended June 30, 2003 are not necessarily indicative of
the results which may be expected for the entire fiscal year.
2. Business Combination
--------------------
On April 26, 2002, 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.
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 prior to September
30, 2003.
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.
8
Peoples Community Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the nine and three month periods ended June 30, 2003 and 2002
4. Earnings Per Share
------------------
Basic earnings per share is based upon the weighted-average shares
outstanding during the period, less 33,320 and 52,360 unallocated ESOP
shares as of June 30, 2003 and 2002, respectively. Diluted earnings
per share is computed by 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 nine months ended For the three months ended
June 30, June 30,
2003 2002 2003 2002
Weighted-average common shares
outstanding (basic) 2,469,942 2,443,894 2,474,983 2,448,825
Dilutive effect of assumed exercise
of stock options 39,831 26,128 42,169 30,360
Weighted-average common shares --------- --------- --------- ---------
outstanding (diluted) 2,509,773 2,470,022 2,517,152 2,479,185
========= ========= ========= =========
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.
9
Peoples Community Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the nine and three month periods ended June 30, 2003 and 2002
5. Effects of Recent Accounting Pronouncements (continued)
-------------------------------------------------------
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."
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.
10
Peoples Community Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the nine and three month periods ended June 30, 2003 and 2002
5. Effects of Recent Accounting Pronouncements (continued)
-------------------------------------------------------
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 Company has financial letters of credit which
require the Company to make payment if the customer's financial
condition deteriorates, as defined in the agreements. FIN 45 requires
the Company 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
Company issues or modifies subsequent to December 31, 2002.
The Company 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 June 30, 2003 is $874,000 and they expire through fiscal 2006.
Amounts due under these letters of credit would be reduced by any
proceeds that the Company would be able to obtain in liquidating the
collateral for the loans, which varies depending on the customer.
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.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities" which clarifies
certain implementation issues raised by constituents and amends SFAS
No. 133, "Accounting for Derivative Instruments and Hedging
Activities," to include the conclusions reached by the FASB on certain
FASB Staff Implementation Issues that, while inconsistent with
Statement 133's conclusions, were considered by the Board to be
preferable; amends SFAS No. 133's discussion of financial guarantee
contracts and the application of the shortcut method to an interest-
rate swap agreement that includes an embedded option and amends other
pronouncements.
The guidance in Statement 149 is effective for new contracts entered
into or modified after June 30, 2003 and for hedging relationships
designated after that date, except for the following:
* guidance incorporated from FASB Staff Implementation Issues that
was effective for periods beginning prior to June 15, 2003 should
continue to be applied according to the effective dates in those
issues
* guidance relating to forward purchase and sale agreements
involving when-issued securities should be applied to both existing
contracts and new contracts entered into after June 30, 2003.
Management does not expect SFAS No. 149 to have a material effect on
the Company's financial position or results of operations.
11
Peoples Community Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the nine and three month periods ended June 30, 2003 and 2002
5. Effects of Recent Accounting Pronouncements (continued)
-------------------------------------------------------
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity," which changes the classification in the statement of
financial position of certain common financial instruments from either
equity or mezzanine presentation to liabilities and requires an issuer
of those financial statements to recognize changes in fair value or
redemption amount, as applicable, in earnings. SFAS No. 150 requires
an issuer to classify certain financial instruments as liabilities,
including mandatorily redeemable preferred and common stocks.
SFAS No. 150 is effective for financial instruments entered into or
modified after May 31, 2003 and, with one exception, is effective at
the beginning of the first interim period beginning after June 15,
2003 (July 1, 2003 as to the Company). The effect of adopting SFAS
No. 150 must be recognized as a cumulative effect of an accounting
change as of the beginning of the period of adoption. Restatement of
prior periods is not permitted. Management is continuing to evaluate
the effect of the provisions of SFAS No. 150 on the Company's
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 2003 totaled 26,391 at an exercise price
equal to fair value of $23.22. In fiscal 2002, the Company granted
25,728 options at an exercise price equal to fair value of $20.25, and
94,861 options at an exercise price equal to fair value of $14.00 in
fiscal 2001. 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 Company 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 Company 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 nine month
period ended June 30, 2003 amounted to $102,000. The Corporation
recorded no expense in the nine months ended June 30, 2003.
12
Peoples Community Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the nine and three month periods ended June 30, 2003 and 2002
6. Stock Option Plan (continued)
-----------------------------
The fair value of the option grants are estimated on the date of grant
using the modified Black-Scholes options-pricing model with the
following assumptions used for grants in fiscal 2003: no dividend
yield; expected volatility of 21.4%; a risk-free interest rate of
3.58% and an expected life of ten years for all grants.
A summary of the status of the Plan is presented below:
Nine months ended Year ended
June 30, 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 26,391 23.22 25,728 20.25 94,861 14.00
Exercised - - - - - -
Forfeited (1,724) 17.99 (260) 14.00 - -
------- ----- ------- ----- ------ -----
Outstanding at end of period 144,996 $16.74 120,329 $15.34 94,861 $14.00
======= ===== ======= ===== ====== =====
Options exercisable at period-end 42,620 $14.72 18,924 $14.00 - $ -
======= ===== ======= ===== ====== =====
Weighted-average fair value of
options granted during the period $ 9.41 $ 6.19 $ 5.70
==== ==== ====
The following information applies to options outstanding at June 30, 2003:
Number outstanding 144,996
Range of exercise prices $14.00 - $23.22
Weighted-average exercise price $16.74
Weighted-average remaining contractual life 8.53 years
13
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
June 30, 2003
- --------------------------------------------------------------------
At June 30, 2003, the Company's assets totaled $622.1 million, an
increase of $40.4 million, or 7.0%, compared to September 30, 2002.
The increase in assets was comprised primarily of an increase of $21.3
million in cash and cash equivalents and an increase of $12.1 million
in loans receivable, primarily funded by a $36.3 million increase in
deposits.
Cash and cash equivalents increased by $21.3 million from September
30, 2002 levels, to a total of $47.9 million at June 30, 2003.
Management redeployed excess liquidity to purchase mortgage-backed
securities during July 2003. Mortgage-backed securities totaled $20.3
million at June 30, 2003, an increase of $1.6 million, or 8.4%,
compared to September 30, 2002. The purchase of $93.3 million in
mortgage-backed securities during the period was partially offset by
$91.0 million in principal repayments and sales.
Loans receivable totaled $516.1 million at June 30, 2003, an increase
of $12.1 million, or 2.4%, over September 30, 2002 levels. Loan
originations totaling $210.6 million during the nine-month period
ended June 30, 2003 were substantially offset by principal repayments
of $194.7 million. Loan originations were comprised of $94.2 million
of loans secured by one- to four-family residential real estate, $52.9
million of loans secured by multi-family real estate, $40.1 million of
loans secured by commercial real estate and land and $23.4 million in
commercial lines of credit and other loans.
The allowance for loan losses totaled $8.8 million at June 30, 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, $3.3 million was added to the allowance through
the provision for losses on loans during the nine months ended June
30, 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 $4.7 million and $7.5 million at June 30,
2003 and September 30, 2002, respectively. The $2.8 million decrease
in nonperforming loans resulted primarily from the restructure in
October 2002 of a $3.2 million multi-family real estate loan. Such
loan was two payments in arrears at June 30, 2003. Nonperforming loans
at June 30, 2003 consisted of approximately $4.3 million of one- to
four-family residential loans, $106,000 in multi-family residential
loans, and $269,000 in loans secured by commercial real estate and land.
As of the date of this report, it is management's belief that the
nonperforming loans are adequately reserved and no material unreserved
losses are presently anticipated on these nonperforming loans.
14
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
June 30, 2003 (continued)
- --------------------------------------------------------------------
In spite of the decrease in non-performing loans, the Bank's
internally classified loans increased by $2.6 million, or 22.9%, to a
total of $14.2 million at June 30, 2003, compared to September 30,
2002. The increase was due primarily to the classification of
approximately $1.7 million of construction loans to a financially
troubled builder and $700,000 secured by single-family residences.
The allowance for loan losses represented 1.68% and 1.37% of total
loans at June 30, 2003 and September 30, 2002, respectively. The
allowance for loan losses represented 189.4% and 102.2% of
nonperforming loans as of June 30, 2003 and September 30, 2002,
respectively. Although management believes that its allowance for
loan losses at June 30, 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 $405.4 million at June 30, 2003, an increase of $36.3
million, or 9.8%, over September 30, 2002 levels. The increase in
deposits was primarily attributable to management's efforts to
maintain deposit growth through marketing strategies and competitive
rates.
Advances from the Federal Home Loan Bank and other borrowings totaled
$153.9 million at June 30, 2003, an increase of $950,000, or 0.6%,
compared to September 30, 2002 totals. Proceeds obtained from the
advances and other borrowings were generally used to fund loan
originations.
Stockholders' equity totaled $45.9 million, or 7.4% of total assets,
at June 30, 2003, an increase of $2.9 million, or 6.8%, over September
30, 2002 levels. The increase resulted primarily from net earnings of
$2.7 million and the expense amortization effects of the stock benefit
and option plans totaling $448,000, which were partially offset by a
$256,000 decrease in unrealized gains on available for sale
securities.
The Bank is required to meet minimum capital standards promulgated by
the Office of Thrift Supervision ("OTS"). At June 30, 2003, the
Bank's regulatory capital exceeded each of the minimum capital
requirements.
Comparison of Operating Results for the Three-Month Periods Ended June
30, 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, contributed to the increases in the level of
income and expense during the three month period ended June 30, 2003
compared to the three month period ended June 30, 2002. In accordance
with the purchase method of accounting, the consolidated statement of
earnings for the period ended June 30, 2002 was not restated for the
acquisition.
Net earnings amounted to $966,000 for the three months ended June 30,
2003, an increase of $48,000, or 5.2%, compared to the $918,000 of net
earnings reported for the same period in 2002. The increase in
earnings resulted primarily from an increase of $353,000 in other
income, a $112,000 decrease in the provision for losses on loans and a
$32,000 decrease in the provision for federal income taxes, which were
partially offset by a $180,000 decrease in net interest income and a
$269,000 increase in general, administrative and other expense.
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 June
30, 2003 and 2002 (continued)
- ----------------------------------------------------------------------
Net Interest Income
- -------------------
Interest income on loans increased by $171,000, or 2.0%, during the
three-month period ended June 30, 2003, compared to the 2002 period,
due primarily to a $54.8 million, or 11.7%, increase in the average
portfolio balance outstanding, which was partially offset by a 63
basis point decrease in the weighted-average yield, to 6.63% 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
$454,000, or 285.5%, due primarily to a $56.9 million, or 182.3%,
increase in the average balance of the related assets, coupled with a
74 basis point increase in the weighted-average yield, to 2.78% 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 $297,000, or 11.9%, due
primarily to an increase of approximately $112.6 million, or 40.4%, in
the average balance of deposits outstanding, partially offset by a 72
basis point decrease in the weighted-average cost of deposits, to
2.85% for the 2003 period. Interest expense on borrowings increased
by $508,000, or 38.8%, due primarily to a 111 basis point increase in
the average cost of borrowings, to 3.87% for the 2003 period,
partially offset by a $1.8 million, or 1.0%, decrease in the average
balance of borrowings outstanding. 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 decreased by $180,000, or 3.7%, to a
total of $4.7 million for the three months ended June 30, 2003,
compared to the same quarter in 2002. The interest rate spread
decreased to 2.90% for the three months ended June 30, 2003, from
3.69% for the 2002 period, while the net interest margin decreased to
3.07% for the three months ended June 30, 2003, compared to 3.90% 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 $1.2 million and $1.3 million for the three-month periods
ended June 30, 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.
16
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 June
30, 2003 and 2002 (continued)
- ----------------------------------------------------------------------
Other Income
- ------------
Other income totaled $644,000 for the three months ended June 30,
2003, an increase of $353,000, or 121.3%, compared to $291,000
recorded for the three months ended June 30, 2002. The increase was
due to a $493,000 gain on sale of securities recorded during the
quarter ended June 30, 2003, and a $60,000, or 65.9%, increase in
other income, partially offset by the effects of a $200,000 gain on
sale of branch offices recorded during the quarter ended June 30,
2002. 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 $2.7 million for the
three months ended June 30, 2003, an increase of $269,000, or 11.2%,
compared to the same quarter in 2002. This increase resulted
primarily from an increase of $465,000, or 48.8%, in employee
compensation and benefits, a $47,000, or 46.5%, increase in data
processing and an increase of $40,000, or 31.3%, in franchise taxes,
partially offset by a decrease of $114,000 in amortization of
goodwill, a decrease of $100,000, or 19.6%, in occupancy and
equipment, and a $69,000, or 11.4%, decrease in other operating
expense.
Generally, as previously noted, the level of general, administrative
and other expenses increased due to the effects of the Kenwood
acquisition and overall growth from year to year. The increase in
employee compensation and benefits was due primarily to an increase in
staffing levels, in connection with the Bank's continued growth, costs
associated with benefit plans, and normal merit increases. The
increase in data processing reflects continued growth in loan and
deposit accounts. 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 $498,000 for the three
months ended June 30, 2003, a decrease of $32,000, or 6.0%, compared
to the $530,000 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, offset by an
increase in pre-tax earnings of $16,000, or 1.1%. The Company's
effective tax rates were 34.0% and 36.6% for the three-month periods
ended June 30, 2003 and 2002, respectively.
Comparison of Operating Results for the Nine-Month Periods Ended June
30, 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 nine month period ended
June 30, 2003 compared to the nine month period ended June 30, 2002.
In accordance with the purchase method of accounting, the consolidated
statement of earnings for the nine-month period ended June 30, 2002
was not restated for the acquisition.
17
Peoples Community Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Nine-Month Periods Ended June
30, 2003 and 2002 (continued)
- ---------------------------------------------------------------------
General (continued)
- -------------------
Net earnings amounted to $2.7 million for the nine months ended June
30, 2003, an increase of $513,000, or 23.2%, compared to the $2.2
million of net earnings reported for the same period in 2002. The
increase in earnings resulted primarily from a $1.1 million increase
in net interest income, a $471,000 decrease in the provision for
losses on loans and a $430,000 decrease in the provision for federal
income taxes, partially offset by a $1.2 million decrease in other
income and a $338,000 increase in general, administrative and other
expense.
Net Interest Income
- -------------------
Interest income on loans increased by $2.8 million, or 11.7%, during
the nine-month period ended June 30, 2003, compared to the 2002
period, due primarily to a $40.5 million, or 9.5%, increase in the
average portfolio balance outstanding, which was coupled with a 15
basis point increase in the weighted-average yield, to 7.52% for the
2003 period. The increase in the average balance was due to the
continued strong loan origination volume, while the increase in yield
reflected the continuing change in the composition of the loan
portfolio to higher yielding and relatively higher risk assets.
Interest income on investment and mortgage-backed securities and
interest-bearing deposits and other increased by $1.0 million, or
168.1%, due primarily to a $49.7 million, or 190.8%, increase in the
average balance of the related assets, partially offset by a 25 basis
point decrease in the weighted-average yield, to 2.93% 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 $1.3 million, or 16.9%, due
primarily to an increase of approximately $97.8 million, or 38.9%, in
the average balance of deposits outstanding, partially offset by a 63
basis point decrease in the weighted-average cost of deposits, to
3.33% for the 2003 period. Interest expense on borrowings increased
by $1.4 million, or 37.0%, due primarily to a 126 basis point increase
in the average cost of borrowings, to 4.32% for the 2003 period,
partially offset by a $5.2 million, or 3.0%, decrease in the average
balance of borrowings outstanding. Management converted existing
short-term adjustable-rate advances at 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 $1.1 million, or 8.5%, to a
total of $14.1 million for the nine months ended June 30, 2003,
compared to the same period in 2002. The interest rate spread
decreased to 3.24% for the nine months ended June 30, 2003, from 3.54%
for the 2002 period, while the net interest margin decreased to 3.44%
for the nine months ended June 30, 2003, compared to 3.80% 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 $3.3 million for the nine-month period ended June 30, 2003, a
decrease of $471,000, or 12.5%, compared to the same period in 2002.
The provision recorded during the current nine-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
18
Peoples Community Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Nine-Month Periods Ended June
30, 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 $929,000 for the nine months ended June 30, 2003,
a decrease of $1.2 million, or 55.4%, compared to the $2.1 million
recorded for the nine months ended June 30, 2002. The decrease was
due to the effects of a $1.8 million gain on sale of branch offices
recorded during the period ended June 30, 2002, partially offset by a
$493,000 gain on sale of securities and a $171,000, or 64.5%, increase
in other income during the nine months ended June 30, 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 $7.6 million for the
nine months ended June 30, 2003, an increase of $338,000, or 4.7%,
compared to the same period in 2002. This increase resulted primarily
from an increase of $1.3 million, or 50.0%, in employee compensation
and benefits, a $59,000, or 4.9%, increase in occupancy and equipment,
an increase of $117,000, or 43.3%, in data processing and an increase
of $199,000, or 13.8%, in other operating expense, partially offset by
a decrease of $1.3 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 and overall growth from year to year. Additionally, the
increase in employee compensation and benefits was due primarily to an
increase in costs associated with benefits plans, staffing levels, in
connection with the Bank's continued growth, 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 $1.4 million for the
nine months ended June 30, 2003, a decrease of $430,000, or 23.4%,
compared to the $1.8 million provision recorded in the 2002 nine-month
period. This decrease was primarily due to the effects of
nondeductible goodwill amortization included in the 2002 nine-month
period, partially offset by an increase of $83,000, or 2.0%, in pre-
tax earnings. The Company's effective tax rates were 34.0% and 45.3%
for the nine-month periods ended June 30, 2003 and 2002, respectively.
19
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) Our management evaluated, with the participation of our
Chief Executive Officer and Chief Financial Officer, the effectiveness
of our disclosure controls and procedures (as defined under Rules 13a-
15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of
the end of the period covered by this report. Based on such
evaluation, our Chief Executive Officer and Chief Financial Officer
have concluded that our disclosure controls and procedures are
designed to ensure that information required to be disclosed by us in
the reports that we file or submit under the Securities and Exchange
Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and regulations and are
operating in an effective manner.
(b) No change in our internal control over financial reporting
(as defined in Rules 13a-15(f) and 15d-15(f) under the Securities
Exchange Act of 1934) occurred during the most recent fiscal quarter
that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
20
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
---------------------------------------------------
Not applicable
ITEM 5. Other Information
-----------------
On July 25, 2003, Peoples Community Bank consummated
the previously announced sale of Kenwood Savings Bank and
approximately $10.0 million in deposits and loans to Fort
Washington Trust Company, a wholly owned subsidiary of The
Western Southern Life Insurance Company. The remaining
$62.1 million of Kenwood Savings Bank's assets and
liabilities were transferred to Peoples Community Bank. The
two former Kenwood Savings Bank branch offices in the
Kenwood and Northgate areas are now operating as full
service offices of Peoples Community Bank.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
Reports on Form 8-K: None
Exhibits:
31.1 Written statement of Chief Executive
Officer furnished
pursuant to Section 302 of the
Sarbanes-Oxley Act of
2002, 18 U.S.C. Section 1350
31.2 Written statement of Chief Financial
Officer furnished
pursuant to Section 302 of the
Sarbanes-Oxley Act of
2002, 18 U.S.C. Section 1350
32.1 Written statement of Chief Executive
Officer furnished
pursuant to Section 906 of the
Sarbanes-Oxley Act of
2002, 18 U.S.C. Section 1350
32.2 Written statement of Chief Financial
Officer furnished
pursuant to Section 906 of the
Sarbanes-Oxley Act of
2002, 18 U.S.C. Section 1350
21
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: August 12, 2003 By: /s/Jerry D. Williams
--------------- ----------------------------
Jerry D. Williams
President
Date: August 12, 2003 By: /s/Teresa A. O'Quinn
--------------- ----------------------------
Teresa A. O'Quinn
Chief Financial Officer
22