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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, 2005
___________________
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, 2005, the latest practicable date, 3,900,700 shares of the
registrant's common stock, $.01 par value, were issued and outstanding.
Page 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 11
PART II - OTHER INFORMATION 21
SIGNATURES 22
2
Peoples Community Bancorp, Inc.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
March 31, September 30,
ASSETS 2005 2004
(Unaudited)
Cash and due from banks $ 14,909 $ 10,807
Interest-bearing deposits in other financial institutions 2,530 3,623
------- -------
Cash and cash equivalents 17,439 14,430
Investment securities designated as available for sale - at market 1,074 1,069
Mortgage-backed securities designated as available for sale - at market 202,874 228,085
Loans receivable - net of allowance for loan losses of $11.9 million and $11.0 million 636,164 599,466
Office premises and equipment - at depreciated cost 21,071 17,816
Real estate acquired through foreclosure 828 301
Federal Home Loan Bank stock - at cost 11,079 10,841
Accrued interest receivable on loans 3,502 2,721
Accrued interest receivable on mortgage-backed securities and
other investments 793 878
Prepaid expenses and other assets 3,674 1,206
Goodwill 6,089 6,089
Prepaid federal income taxes 1,062 2,114
Deferred federal income taxes 4,536 4,105
------- -------
Total assets $910,185 $889,121
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $512,170 $472,436
Advances from the Federal Home Loan Bank 306,000 324,500
Guaranteed preferred beneficial interests in junior subordinated debentures 12,887 12,887
Accrued interest payable 781 228
Other liabilities 3,229 3,295
------- -------
Total liabilities 835,067 813,346
Commitments and contingent liabilities - -
Stockholders' equity
Common stock - 15,000,000 shares of $.01 par value authorized;
3,900,700 and 3,898,910 shares issued at March 31, 2005 and September 30,
2004, respectively 39 39
Additional paid-in capital 51,997 51,901
Retained earnings - restricted 25,250 24,891
Shares acquired by stock benefit plan (1,581) (723)
Accumulated comprehensive loss, unrealized losses on
securities designated as available for sale, net of related tax effects (587) (333)
------- -------
Total stockholders' equity 75,118 75,775
------- -------
Total liabilities and stockholders' equity $910,185 $889,121
======= =======
See notes to consolidated financial statements.
3
Peoples Community Bancorp, Inc.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands, except share data)
Six months ended Three months ended
March 31, March 31,
2005 2004 2005 2004
Interest income
Loans $19,418 $17,010 $10,013 $8,486
Mortgage-backed securities 2,379 2,625 1,151 1,411
Investment securities 23 25 11 18
Interest-bearing deposits and other 290 245 149 117
------ ------ ------ ------
Total interest income 22,110 19,905 11,324 10,032
Interest expense
Deposits 6,653 5,645 3,478 2,827
Borrowings 4,945 4,082 2,561 2,088
------ ------ ------ ------
Total interest expense 11,598 9,727 6,039 4,915
------ ------ ------ ------
Net interest income 10,512 10,178 5,285 5,117
Provision for losses on loans 1,800 1,800 900 900
------ ------ ------ ------
Net interest income after provision
for losses on loans 8,712 8,378 4,385 4,217
Other income
Gain on sale of loans 50 40 26 30
Gain on sale of mortgage-backed securities 724 - - -
Equity in earnings of unconsolidated subsidiary 47 - 47 -
Gain on sale of real estate 9 206 9 -
Other operating 480 350 255 171
------ ------ ------ ------
Total other income 1,310 596 337 201
General, administrative and other expense
Employee compensation and benefits 4,069 3,664 2,065 1,843
Occupancy and equipment 1,299 998 641 526
Franchise taxes 348 352 180 180
Data processing 510 499 207 251
Other operating 1,488 1,191 738 614
------ ------ ------ ------
Total general, administrative and other expense 7,714 6,704 3,831 3,414
------ ------ ------ ------
Earnings before income taxes 2,308 2,270 891 1,004
Federal income taxes
Current 1,079 605 332 341
Deferred (300) 167 (35) -
------ ------ ------ ------
Total federal income taxes 779 772 297 341
------ ------ ------ ------
NET EARNINGS $1,529 $1,498 $ 594 $ 663
====== ====== ====== ======
EARNINGS PER SHARE
Basic $.40 $.60 $.15 $.27
=== === === ===
Diluted $.39 $.59 $.15 $.26
=== === === ===
DIVIDENDS PER SHARE $.30 $N/A $.15 $N/A
=== === === ===
See notes to consolidated financial statements.
4
Peoples Community Bancorp, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
For the six months For the three months
ended March 31, ended March 31,
2005 2004 2005 2004
Net earnings $1,529 $1,498 $ 594 $ 663
Reclassification adjustment for realized gains included in
earnings, net of taxes of $246 for the 2005 period (478) - - -
----- ----- ----- -----
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) on securities during
the period, net of taxes (benefits) of $115, $372, $(40)
and $261 for the respective periods 224 723 (77) 506
----- ----- ----- -----
Comprehensive income $1,275 $2,221 $ 517 $1,169
===== ===== ===== =====
Accumulated comprehensive income(loss) $ (587) $ 34 $ (587) $ 34
===== ===== ===== =====
See notes to consolidated financial statements.
5
Peoples Community Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the six months ended March 31,
(In thousands)
2005 2004
Cash flows provided by (used in) operating activities:
Net earnings for the period $ 1,529 $ 1,498
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 798 394
Amortization of deferred loan origination fees (1,141) (811)
Amortization expense of stock benefit plan 104 96
Compensation expense related to vested stock options 93 94
Depreciation and amortization - net 973 456
Provision for losses on loans 1,800 1,800
Federal Home Loan Bank stock dividends (238) (205)
Investment securities dividends (22) (27)
Gain on sale of mortgage-backed securities (724) -
Gain on sale of real estate (9) (206)
Gain on sale of loans (50) (40)
Proceeds from sale of loans in the secondary market 3,495 3,161
Loans originated for sale in the secondary market (3,445) (3,416)
Increase (decrease) in cash, due to changes in:
Accrued interest receivable on loans (781) (26)
Accrued interest receivable on mortgage-backed securities 85 (372)
Prepaid expenses and other assets 56 (52)
Accrued interest payable 553 (493)
Other liabilities (121) 699
Federal income taxes
Current 1,052 (288)
Deferred (300) 167
------- -------
Net cash provided by operating activities 3,707 2,429
Cash flows provided by (used in) investing activities:
Purchase of investment in subsidiary (2,524) -
Purchase of mortgage-backed securities (43,806) (100,973)
Principal repayments on mortgage-backed securities 31,249 15,117
Proceeds from sale of mortgage-backed securities designated as
available for sale 37,326 -
Principal repayments on loans 89,395 94,222
Loan disbursements (127,900) (117,549)
Purchase of office premises and equipment (3,772) (3,405)
Proceeds from sale of real estate acquired through foreclosure 229 473
------- -------
Net cash used in investing activities (19,803) (112,115)
------- -------
Net cash used in operating and investing activities
(balance carried forward) (16,096) (109,686)
See notes to consolidated financial statements.
6
Peoples Community Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the six months ended March 31,
(Unaudited)
(In thousands)
2005 2004
Net cash used in operating and investing activities $(16,096) $(109,686)
(balance brought forward)
Cash flows provided by (used in) financing activities:
Net increase in deposit accounts 39,734 5,244
Proceeds from Federal Home Loan Bank advances and other borrowings 100,000 124,000
Repayment of Federal Home Loan Bank advances and other borrowings (118,500) (18,000)
Proceeds from exercise of stock options 3 -
Shares acquired by ESOP (962) -
Dividends paid on common shares (1,170) -
-------- --------
Net cash provided by financing activities 19,105 111,244
-------- --------
Net increase in cash and cash equivalents 3,009 1,558
Cash and cash equivalents at beginning of period 14,430 10,023
-------- --------
Cash and cash equivalents at end of period $ 17,439 $ 11,581
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Federal income taxes $ 200 $ 1,000
======== ========
Interest on deposits and borrowings $ 11,045 $ 10,220
======== ========
Supplemental disclosure of noncash investing activities:
Unrealized (losses) gains on securities designated as available
for sale, net of related tax effects $ (254) $ 723
======== ========
Transfers from loans to real estate acquired through foreclosure $ 1,679 $ 232
======== ========
Loans disbursed to facilitate sale of real estate acquired through foreclosure $ 987 $ 339
======== ========
Loans disbursed to facilitate sale of real estate $ - $ 490
======== ========
See notes to consolidated financial statements.
7
Peoples Community Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the six and three month periods ended March 31, 2005 and 2004
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 condition, 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. (" the Company") included in the Annual Report
on Form 10-K for the year ended September 30, 2004. 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, 2005 are not necessarily indicative of the results which may be
expected for the entire fiscal year. The consolidated statement of
financial condition of the Company as of September 30, 2004 has been
derived from the audited statement of financial condition of the
Company as of that date.
2. Business Combinations
---------------------
On May 4, 2005 the Company entered into a definitive agreement and
plan of merger whereby the Company will acquire PFS Bancorp, Inc
("PFS"), the parent company of Peoples Federal Savings Bank ("Peoples
Federal"). Peoples Federal operates three offices in the Southeast
Indiana communities of Aurora, Rising Sun, and Vevay, offering a wide
range of bank products and services. Under the terms of the agreement,
the Company will pay $23.00 in cash for each of the outstanding common
shares of PFS, resulting in aggregate merger consideration of
approximately $33.8 million. The merger is expected to be consummated
in our first fiscal quarter of 2006, pending approval by PFS
shareholders, receipt of regulatory approvals and other customary
conditions of closing. This transaction will be accounted for using
the purchase method of accounting.
On January 14, 2005 the Company completed its previously announced
stock purchase agreement with various stockholders of Columbia
Bancorp, Inc., Cincinnati, Ohio, a closely held bank holding company,
and acquired 69,925 shares held by these stockholders for an aggregate
purchase price of $2.5 million. These shares represent approximately
38% of Columbia's presently issued and outstanding common stock. As a
result, the Company became a bank holding company subject to the
requirements of the Bank Holding Company Act of 1956 and is no longer
a savings and loan holding company subject to the requirements of the
Home Owners' Loan Act. The Company does not anticipate any
significant changes to its operations as a result of this transaction.
The investment in Columbia is recorded as an unconsolidated subsidiary
using the equity method of accounting.
On December 17, 2004 the Company entered into a definitive agreement
and plan of merger whereby the Company will acquire American State
Corporation, the parent company of American State Bank ("American").
American operates three offices in the Southeast Indiana communities
of Lawrenceburg, Aurora and Bright, offering a wide range of bank
products and services.. Under the terms of the agreement, Peoples will
pay $4.79 in cash for each of the 1,469,062 outstanding common shares
of American. Based upon the outcome of certain specific events, common
shareholders may receive up to an additional $.82 per share.
American's outstanding preferred stock will be redeemed for cash at
par value, totaling $700,000. This merger is expected to be
consummated in the third fiscal quarter of 2005 pending regulatory
approval and other customary conditions of closing. This transaction
will be accounted for using the purchase method of accounting.
3. Employee Stock Ownership Plan
-----------------------------
In March 2005, the Company purchased 40,000 shares of Peoples
Community Bancorp, Inc. stock for its Employee Stock Ownership Plan at
a weighted average price of $24.05 per share utilizing borrowings from
Peoples Community Bancorp, Inc. totaling $962,000.
8
Peoples Community Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the six and three month periods ended March 31, 2005 and 2004
4. Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include the
accounts of the Company and Peoples Community Bank ("the Bank"), its
wholly-owned subsidiary. All significant intercompany items have been
eliminated. In December 2003, FASB issued a revision to FIN 46 to
clarify certain provisions that affected the accounting for trust
preferred securities. As a result of the provisions in FIN 46,
Peoples Bancorp Capital Trust I was deconsolidated as of June 30,
2004, with the Company accounting for its investment in Peoples
Community Bancorp Capital Trust I as assets, its subordinated
debentures as debt, and the interest paid thereon as interest expense.
The Company had always classified the trust preferred securities as
debt, but eliminated its common stock investment.
5. Earnings Per Share
------------------
Basic earnings per share is based upon the weighted-average shares
outstanding during the period, less 70,975 and 19,040 unallocated ESOP
shares as of March 31, 2005 and 2004, 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 six months ended For the three months ended
March 31, March 31,
2005 2004 2005 2004
Weighted-average common shares
outstanding (basic) 3,858,704 2,495,960 3,857,871 2,498,340
Dilutive effect of assumed exercise
of stock options 40,638 36,639 41,068 34,778
--------- --------- --------- ----------
Weighted-average common shares
outstanding (diluted) 3,899,342 2,532,599 3,898,939 2,533,118
========= ========= ========= =========
Options to purchase 26,391 shares of common stock at a weighted-
average exercise price of $23.22 were outstanding at March 31, 2004,
but were excluded from the computation of diluted earnings per share
for the six and three month periods because the exercise price was
greater than the average market price of the common shares.
6. Effects of Recent Accounting Pronouncements
-------------------------------------------
There were no recent accounting pronouncements or developments through
March 31, 2005 that would have a material effect on the Company's
consolidated financial statements.
7. 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.
Through March 31, 2005, the Company had granted options for 167,398
shares, net of forfeitures, under the Plan. 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.
It is the Company's policy to recognize expense related to the vesting
of its stock options in accordance with the provisions of SFAS No.
123. Total expense recognized related to options for the six month
periods ended March 31, 2005 and 2004 amounted to $93,000 and $94,000,
respectively.
9
Peoples Community Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the six and three month periods ended March 31, 2005 and 2004
7. 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 2004 and 2003:
dividend yield of 2.5% for 2004 and no dividend yield for 2003;
expected volatility of 26.6% and 21.4%, respectively; a risk-free
interest rate of 4.6% and 3.6%, respectively, and an expected life of
ten years for all grants.
A summary of the status of the Plan for the six months ended March 31,
2005 and for the fiscal years ended September 30, 2004 and 2003, is
presented below:
Six months ended Year ended
March 31, September 30,
2005 2004 2003
Weighted- Weighted- Weighted-
average average average
exercise exercise exercise
Shares price Shares price Shares price
Outstanding at beginning of period 170,336 $17.76 144,528 $16.75 120,329 $15.34
Granted - - 26,969 23.20 26,391 23.22
Exercised (208) 14.00 - - (468) 14.00
Forfeited (3,406) 20.61 (1,161) 18.60 (1,724) 17.99
------- ----- ------- ----- ------- -----
Outstanding at end of period 166,722 $17.70 170,336 $17.76 144,528 $16.75
======= ===== ======= ===== ======= =====
Options exercisable at period-end 74,305 $15.47 70,839 $15.53 42,152 $14.73
======= ===== ======= ===== ======= =====
Weighted-average fair value of
options granted during the period $ N/A $ 4.50 $ 9.41
===== ===== =====
The weighted-average fair value of options granted during the 2004
period is lower than those in previous periods due to the current
payment of dividends on the stock and the present value of these
future dividend payments over the life of the option. In calculating
the fair value of the options, the present value of these dividends
reduces the final fair value of the options.
The following information applies to options outstanding at March 31, 2005:
Number outstanding 92,209
Exercise price $14.00
Weighted-average exercise price $14.00
Weighted-average remaining contractual life 6.25 years
Options exercisable at period end 59,302
Number outstanding 74,513
Range of exercise prices $20.25 - $23.22
Weighted-average exercise price $22.29
Weighted-average remaining contractual life 8.29 years
Options exercisable at period end 15,003
Total number outstanding 166,722
Weighted-average exercise price (all outstanding shares) $17.70
Weighted-average remaining contractual life 7.16 years
Options exercisable at period end 74,305
10
Peoples Community Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
- -------
The Company'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 average balances of the associated assets
and liabilities. The Company'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.
The Company'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.
Critical Accounting Policies
- ----------------------------
The "Management's Discussion and Analysis of Financial Condition and
Results of Operations," as well as disclosures found elsewhere in this
quarterly report, are based upon the Company's consolidated financial
statements, which are prepared in accordance with US GAAP. The
preparation of these financial statements requires management to make
estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. Several factors are considered in
determining whether or not a policy is critical in the preparation of
financial statements. These factors include, among other things,
whether the estimates are significant to the financial statements, the
nature of the estimates, the ability to readily validate the estimates
with other information, including third parties or available prices,
and sensitivity of the estimates to changes in economic conditions and
whether alternative accounting methods may be utilized under US GAAP.
Material estimates that are particularly susceptible to significant
change in the near term relate to the determination of the allowance
for loan losses and goodwill impairment. Actual results could differ
from those estimates.
Allowance for Loan Losses. The procedures for assessing the adequacy
of the allowance for loan losses reflect management's evaluation of
credit risk after consideration of all information available. In
developing this assessment, management must rely on estimates and
exercise judgment regarding matters where the ultimate outcome is
unknown, such as economic factors, developments affecting companies in
specific industries and issues with respect to individual borrowers.
Depending on changes in circumstances, future assessments of credit
risk may yield materially different results, which may require an
increase or a decrease in the allowance for loan losses.
The allowance is regularly reviewed by management to determine whether
the amount is considered adequate to absorb probable losses. This
evaluation includes loss estimates on certain individually reviewed
loans, statistical loss estimates for loan pools that are based on
historical loss experience, and general loss estimates that are based
upon the size, quality, and concentration characteristics of the
various loan portfolios, adverse situations that may affect a
borrower's ability to repay, and current economic and industry
conditions. Also considered as part of that judgment is a review of
the Bank's trends in delinquencies and loan losses, as well as trends
in delinquencies and losses for the region and nationally, and
economic factors.
11
Peoples Community Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Critical Accounting Policies (continued)
- ----------------------------
Goodwill. The Company has developed procedures to test goodwill for
impairment on an annual basis using September 30 financial data. The
evaluation of possible impairment is outsourced to a third party.
This evaluation is based on the analysis set forth below.
The test involves assigning tangible assets and liabilities,
identified intangible assets and goodwill of the Bank (which is the
Company's reporting unit as defined under SFAS No. 142) and comparing
the fair value of this reporting unit to its carrying value including
goodwill. The value is determined assuming a freely negotiated
transaction between a willing buyer and a willing seller, neither
being under any compulsion to buy or sell and both having reasonable
knowledge of relevant facts. The third party selected by management
utilizes the following common approaches to valuing business
combination transactions involving financial institutions to derive
the fair value of the reporting unit: (1) the comparable transactions
approach which is specifically based on earnings, book value, assets
and deposit premium multiples received in recent sales of comparable
bank franchises; and (2) the discounted cash flow ("DCF") approach.
The application of the valuation techniques takes into account the
reporting unit's operating history, the current market environment and
future prospects. As of the most recent evaluation, the only
reporting unit carrying goodwill is the Bank.
If the fair value of a reporting unit exceeds its carrying amount,
goodwill of the reporting unit is considered not impaired and no
second step is required. If the fair value does not exceed the
carrying amount, a second test is required to measure the amount of
goodwill impairment. The second test of the overall goodwill
impairment compares the implied fair value of the reporting unit
goodwill with the carrying amount of the goodwill. The impairment
loss shall equal the excess of carrying value over fair value.
After each testing period, the third party compiles a summary of the
test that is then provided to the audit committee for review.
Discussion of Financial Condition Changes from September 30, 2004 to
March 31, 2005
- --------------------------------------------------------------------
At March 31, 2005, the Company's assets totaled $910.2 million, an
increase of $21.1 million, or 2.4%, compared to September 30, 2004.
The increase in assets was comprised primarily of a $36.7 million, or
6.1% increase in loans receivable, which was partially offset by a
$25.2 million or 11.1% decrease in mortgage-backed securities during
the period. Proceeds from the sale and repayments of mortgage-backed
securities totaling $68.6 million were utilized to fund loan
originations and to repay advances from the Federal Home Loan Bank.
Deposits increased by $39.7 million, or 8.4%, while advances from the
Federal Home Loan Bank decreased by $18.5 million, or 5.7%
Cash and cash equivalents increased by $3.0 million or 20.9% over
September 30, 2004 levels, to a total of $17.4 million at March 31,
2005. Mortgage-backed securities totaled $202.9 million at March 31,
2005, a decrease of $25.2 million, or 11.1%, compared to September 30,
2004. Sales of $37.3 million and repayments totaling $31.2 million
were partially offset by purchases of $43.8 million in mortgage-backed
securities during the period. The sales of mortgage-backed securities
during the period were predicated on favorable market conditions.
Loans receivable totaled $636.2 million at March 31, 2005, an increase
of $36.7 million, or 6.1%, over the September 30, 2004 levels. Loan
disbursements totaling $127.9 million during the six-month period ended
March 31, 2005 were partially offset by principal repayments of $89.4
million and sales of loans in the secondary market totaling $3.5 million.
The Company's volume of loan disbursements increased by $10.4 million, or
8.8%,
12
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, 2004 to
March 31, 2005 (continued)
- --------------------------------------------------------------------
compared to the loan origination volume in the six month period ended
March 31, 2004, due primarily to the current interest rate
environment and increased draws on construction loans. Loan
disbursements were comprised of $36.3 million of loans secured by one-
to-four-family residential real estate including $8.1 million in
construction loan draws, $20.5 million of loans secured by multi-
family real estate, including $2.6 million in construction loan draws,
$46.7 million of loans secured by commercial real estate and land,
including $10.5 million in construction loan draws and $24.4 million
in commercial lines of credit and other loans.
The allowance for loan losses totaled $11.9 million at March 31, 2005,
compared to $11.0 million at September 30, 2004. Due primarily to a
continuing change in the composition and the relative credit risk of
the loan portfolio, as well as an increase in internally classified
loans, $1.8 million was added to the allowance through the provision
for losses on loans during the six months ended March 31, 2005, while
approximately $936,000 of loans were charged-off during the same
period. The charged-off loans were comprised of $118,000 in loans
secured by one-to-four-family residential real estate, and $818,000 in
loans secured by multi-family residential real estate. The $818,000
charge-off on the multi-family residential real estate property
resulted from a new appraisal obtained on a property which was
subsequently acquired through foreclosure during the period.
Over the past three fiscal years, the Bank has placed an increasing
emphasis on multi-family residential loans, nonresidential real estate
and land loans, construction loans, unsecured commercial loans and to
a lesser degree, consumer loans. Nonresidential real estate lending
and unsecured commercial lending are generally considered to involve a
higher degree of risk than residential real estate lending due to the
relatively larger loan amounts and the effect of general economic
conditions on the successful operation of the related business and/or
income-producing properties. The Bank has endeavored to reduce such
risk by evaluating the credit history and the past performance of the
borrower, the quality of the borrowers' management, the debt service
ratio, the quality and characteristics of the income stream generated
by the business or the property and appraisals supporting the
property's valuation, as applicable.
Nonaccruing loans totaled $4.8 million and $6.0 million at March 31,
2005 and September 30, 2004, respectively or .8% and 1.2%,
respectively, of net loans at such dates. Nonaccruing loans at March
31, 2005 consisted of approximately $2.4 million of one-to-four-family
residential loans, $2.0 million in multi-family residential loans,
$250,000 in loans secured by commercial real estate and land and
$148,000 in commercial and consumer loans.
The Bank's classified loans increased by $7.6 million, or 59.4%, to a
total of $20.5 million at March 31, 2005, compared to $12.9 million at
September 30, 2004. Loans classified as special mention decreased by
$1.6 million to a total of $2.7 million at March 31, 2005, loans
classified as substandard increased by $8.9 million to a total of
$16.6 million at March 31,2005, while loans classified as loss
increased by $371,000 to a total of $1.2 million at March 31, 2005.
Classified one-to-four family and multi-family residential real estate
loans increased by $4.5 million primarily due to cash flow
difficulties with borrowers on non-owner occupied properties.
Classified non-residential real estate and land loans increased by
$2.5 million during the period primarily due to financial problems of
a builder and developer of existing properties for re-sale. This
borrower has obtained additional financial stability through a
partnership with another investor and has restructured a portion of
the borrowings with the Company. Classified commercial and other
loans increased $629,000 due primarily to borrowers experiencing
business cash flow difficulties. As of the date of this report, it is
management's belief that the nonaccruing and classified loans are
adequately reserved and no material unreserved losses are presently
anticipated on these loans.
The allowance for loan losses represented 1.62% and 1.64% of total
loans at March 31, 2005 and September 30, 2004, respectively. The
allowance for loan losses represented 247.2% and 182.9% of
nonperforming loans as of March 31, 2005 and September 30, 2004,
respectively. Although management believes that the allowance for
loan losses at March 31, 2005 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.
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, 2004 to
March 31, 2005 (continued)
- --------------------------------------------------------------------
Deposits totaled $512.2 million at March 31, 2005, an increase of
$39.7 million, or 8.4%, over September 30, 2004 levels. The increase
in deposits was due primarily to management's continuing focus on
deposit growth through marketing and pricing strategies and the
addition of one new branch location during the period.
Advances from the Federal Home Loan Bank and other borrowings totaled
$306.0 million at March 31, 2005, a decrease of $18.5 million, or
5.7%, compared to September 30, 2004 totals. Proceeds from the sales
and repayments of mortgage-backed securities, as discussed earlier,
were partially utilized to pay down advances during the period.
Stockholders' equity totaled $75.1 million, or 8.3% of total assets,
at March 31, 2005, a decrease of $657,000, or .9%, from September 30,
2004 levels. The decline resulted primarily from dividends paid of
$1.2 million, the purchase of shares for the Company's Employee Stock
Ownership Plan totaling $962,000 and a $254,000 decrease attributable
to the change in unrealized losses on available for sale securities,
which were partially offset by net earnings of $1.5 million and the
expense amortization effects of the stock benefit and option plans
totaling $197,000. The Bank is required to meet minimum capital
standards promulgated by the Office of Thrift Supervision ("OTS"). At
March 31, 2005, the Bank's regulatory capital exceeded each of the
minimum capital requirements.
Comparison of Operating Results for the Three-Month Periods Ended
March 31, 2005 and 2004
- -----------------------------------------------------------------
General
- -------
Net earnings amounted to $594,000 for the three months ended March 31,
2005, a decrease of $69,000, or 10.4%, compared to the $663,000 of net
earnings reported for the same period in 2004. The decrease in
earnings resulted primarily from a $417,000 or 12.2% increase in
general administrative and other expenses, which was partially offset
by a $168,000 or 3.3% increase in net interest income, a $136,000 or
67.7% increase in other income and a $44,000 or 12.9% decrease in
federal income taxes.
Net Interest Income
- -------------------
Interest income on loans increased by $1.5 million, or 18.0% during
the three-month period ended March 31, 2005, compared to the 2004
period, due primarily to a $57.2 million, or 9.9%, increase in the
average portfolio balance outstanding, coupled with a 44 basis point
increase in the weighted-average yield, to 6.32% for the 2005 period.
The increase in the average balance was due primarily to the Company's
strong loan origination volume during the quarter. The increase in
yield reflects a moderate upward shift in market rates and the
corresponding impact on adjustable-rate loans as well as new
originations in higher yielding loan products.
Interest income on mortgage-backed securities decreased by $260,000,
or 18.4% during the 2005 quarter compared to the same period in 2004,
due primarily to a $19.5 million, or 9.2%, decrease in the average
balance outstanding, coupled with a 27 basis point decrease in the
weighted-average yield, to 2.38% in the 2005 period. The decrease in
the average balance outstanding was due primarily to a higher level of
principal repayments period to period and the sales of mortgage-backed
securities in the first fiscal quarter of 2005 due to favorable market
conditions. However. management also purchased $22.4 million of
adjustable-rate mortgage-backed securities during the three months
ended March 31, 2005, in an effort to manage liquidity and interest
rate risk, as well as to provide interest income with minimal credit
risk, due to the direct or implicit guaranty of government-sponsored
agencies.
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, 2005 and 2004 (continued)
- -----------------------------------------------------------------
Net Interest Income (continued)
- -------------------
Interest income on investment securities and interest-bearing deposits
and other increased by $25,000, or 18.5%, due primarily to a 39 basis
point increase in the weighted-average yield, coupled with an increase
of approximately $1.0 million, or 6.4%, in the average balance
outstanding for the 2005 period. The increase in the weighted-average
yield was due to an increase in interest rates available on these
types of investments period to period.
Interest expense on deposits increased by $651,000, or 23.0%, due
primarily to a 32 basis point increase in the weighted-average cost of
deposits, to 2.86% and an increase of $42.4 million or 9.5%, in the
average balance of deposits outstanding period to period. These
increases are the result of management's marketing efforts and pricing
strategies implemented to be competitive and to promote deposit
growth. Interest expense on borrowings increased by $473,000, or
22.7%, due primarily to an 82 basis point increase in the average cost
of borrowings, to 3.32% for the 2005 period, which was partially
offset by a $25.2 million, or 7.6%, decrease in the average balance of
borrowings outstanding period to period. Proceeds from deposit growth
and mortgage-backed securities sales and repayments were partially
utilized to repay borrowings. The increase in the average cost of
borrowings was due primarily to the increase in the interest rate
environment and its effect on the Company's overnight advances during
the 2005 period.
As a result of the foregoing changes in interest income and interest
expense, net interest income increased by $168,000, or 3.3%, to a
total of $5.3 million for the three months ended March 31, 2005,
compared to the same period in 2004. The interest rate spread
decreased to 2.33% for the three months ended March 31, 2005, from
2.45% for the comparable 2004 period, while the net interest margin
decreased to 2.50% for the three months ended March 31, 2005, compared
to 2.54% for the same period in 2004.
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 $900,000 for each of the three-month periods ended March 31,
2005 and 2004. The provision recorded during the three-month period
ended March 31, 2005 was predicated primarily upon the change in the
Bank's loan portfolio mix taking into account the increase in loans
secured by nonresidential real estate and land, unsecured commercial
lines of credit and consumer loans as well as an increase in both the
overall loan portfolio and the level of the Bank's classified assets
period to period. Such types of lending are generally considered to
involve a higher degree of risk than one- to four-family residential
lending. 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 the loan portfolio 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, 2005 and 2004 (continued)
- -----------------------------------------------------------------
Other Income
- ------------
Other income totaled $337,000 for the three months ended March 31,
2005, an increase of $136,000, or 67.7%, compared to the $201,000
recorded for the same period in 2004. The increase was primarily due
to $47,000 in income from the Company's equity investment in Columbia
Bancorp, Inc., an $84,000 or 49.1% increase in other operating income
and a $9,000 gain recorded on the sale of real estate acquired through
foreclosure. The increase in other operating income resulted
primarily from increases in fees related to the growth of loans and
deposit transactions from period to period.
General, Administrative and Other Expense
- -----------------------------------------
General, administrative and other expense totaled $3.8 million for the
three months ended March 31, 2005, an increase of $417,000, or 12.2%,
compared to the same period in 2004. This increase resulted primarily
from an increase of $222,000, or 12.0%, in employee compensation and
benefits, an increase of $115,000, or 21.9%, in occupancy and
equipment, and an increase of $124,000, or 20.2% in other operating
expense, which were partially offset by a $44,000 or 17.5% decrease in
data processing expense.
The increase in employee compensation and benefits was due primarily
to an increase in staffing levels to support the overall growth and
branch structure of the Bank, normal merit increases, and an increase
in health insurance costs and other employee benefits. The number of
employees has increased from 130 to 144, or 10.8% from March 31, 2004
to March 31, 2005. The increase in occupancy and equipment expense
primarily reflects costs associated with software and technology
upgrades and increased depreciation and maintenance costs associated
with the Company's new branch offices. The increase in other operating
expense was due primarily to an increase in costs related to
maintaining real estate acquired through foreclosure, increased costs
for maintaining compliance with section 404 of the Sarbanes Oxley Act
and other operating costs associated with the Company's overall growth
year to year. The decrease in data processing expense reflects lower
base costs associated with changing to a new core processor, which was
partially offset by an increase in transaction volume and services
offered quarter to quarter.
Federal Income Taxes
- --------------------
The provision for federal income taxes totaled $297,000 for the three
months ended March 31, 2005, a decrease of $44,000, or 12.9%, compared
to the $341,000 provision recorded in the same period in 2004. This
decrease was primarily due to a decrease in pre-tax earnings of
$113,000, or 11.3%. The Company's effective tax rate was 33.3% and
34.0% for the three-month periods ended March 31, 2005 and 2004,
respectively.
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, 2005 and 2004
- ---------------------------------------------------------------------
General
- -------
Net earnings amounted to $1.5 million for the six months ended March
31, 2005, an increase of $31,000, or 2.1%, compared to net earnings
reported for the same period in 2004. The increase in earnings
resulted primarily from a $714,000 or 119.8% increase in other income
and a $334,000 or 3.3% increase in net interest income, which was
partially offset by a $1.1 million or 15.1% increase in general
administrative and other expenses.
Net Interest Income
- -------------------
Interest income on loans increased by $2.4 million, or 14.2% during
the six-month period ended March 31, 2005, compared to the 2004
period, due primarily to a $52.8 million, or 9.2%, increase in the
average portfolio balance outstanding, coupled with a 27 basis point
increase in the weighted-average yield, to 6.22% for the 2005 period.
The increase in the average balance was due primarily to the Company's
steady loan origination volume. The increase in yield reflects a
moderate upward shift in market rates and the corresponding impact on
adjustable-rate loans as well as new originations in higher yielding
loan products.
Interest income on mortgage-backed securities decreased by $246,000,
or 9.4% during the six-month period, due primarily to a 27 basis point
decrease in the weighted-average yield, to 2.41% in the 2005 period,
which was partially offset by a $1.7 million, or .9%, increase in the
average balance outstanding. Management purchased $43.8 million of
adjustable-rate mortgage-backed securities during the six months ended
March 31, 2005, in an effort to manage liquidity and interest rate
risk, as well as to provide interest income with minimal credit risk,
due to the direct or implicit guaranty of government-sponsored
agencies. Additionally, management sold $37.3 million of adjustable-
rate mortgage-backed securities during the period to take advantage of
fluctuations in the securities market.
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, 2005 and 2004 (continued)
- ---------------------------------------------------------------------
Net Interest Income (continued)
- -------------------
Interest income on investment securities and interest-bearing deposits
and other increased by $43,000, or 15.9%, due primarily to a 36 basis
point increase in the weighted-average yield, coupled with an increase
of approximately $833,000, or 5.2%, in the average balance outstanding
for the fiscal 2005 period. The increase in the weighted-average
yield was due to an increase in interest rates available on these
types of investments period to period.
Interest expense on deposits increased by $1.0 million, or 17.9%, due
primarily to a 23 basis point increase in the weighted-average cost of
deposits, to 2.78% and an increase of $34.7 million or 7.8%, in the
average balance of deposits outstanding period to period. These
increases are the result of management's marketing efforts and pricing
strategies implemented to be competitive and promote deposit growth.
Interest expense on borrowings increased by $863,000, or 21.1%, due
primarily to a 57 basis point increase in the average cost of
borrowings, to 3.20% for the 2005 period, which was partially offset
by a $1.4 million, or .5%, decrease in the average balance of
borrowings outstanding period to period. Proceeds from deposit growth
and mortgage-backed security sales and repayments were partially
utilized to repay borrowings. The increase in the average cost of
borrowings was due primarily to the increase in the interest rate
environment and its effect on the Company's overnight advances during
the fiscal 2005 period.
As a result of the foregoing changes in interest income and interest
expense, net interest income increased by $334,000, or 3.3%, to a
total of $10.5 million for the six months ended March 31, 2005,
compared to the same period in 2004. The interest rate spread
decreased to 2.32% for the six months ended March 31, 2005, from 2.50%
for the comparable 2004 period, while the net interest margin
decreased to 2.51% for the six months ended March 31, 2005, compared
to 2.60% for the same period in 2004.
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 $1.8 million for each of the six-month periods ended March
31, 2005 and 2004. The provision recorded during the six-month period
ended March 31, 2005 was predicated primarily upon the change in the
Bank's loan portfolio mix taking into account the increase in loans
secured by nonresidential real estate and land, unsecured commercial
lines of credit and consumer loans as well as an increase in both the
overall loan portfolio and the level of the Bank's classified assets
period to period. Such types of lending are generally considered to
involve a higher degree of risk than one- to four-family residential
lending. 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 the loan portfolio in the future.
18
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, 2005 and 2004 (continued)
- ---------------------------------------------------------------------
Other Income
- ------------
Other income totaled $1.3 million for the six months ended March 31,
2005, an increase of $714,000, or 119.8%, compared to the $596,000
recorded for the same period in 2004. The increase was primarily due
to gains recorded on sales of mortgage-backed securities totaling
$724,000 in the current period, a $130,000 or 37.1% increase in other
operating income, a $10,000 or 25.0% increase in gains on sales of
loans in the secondary market and income from the Company's equity
investment in Columbia Bancorp, Inc., totaling $47,000 for the period,
which were partially offset by the absence of a $206,000 gain on sale
of real estate recorded in the same period in 2004. The gain on sale
of mortgage-backed securities in the 2005 period resulted from the
sale of $37.3 million of adjustable rate mortgage-backed securities,
while the increase in other operating income resulted primarily from
increases in fees related to the growth of loans and deposit
transactions from period to period.
General, Administrative and Other Expense
- -----------------------------------------
General, administrative and other expense totaled $7.7 million for the
six months ended March 31, 2005, an increase of $1.0 million, or
15.1%, compared to the same period in 2004. This increase resulted
primarily from an increase of $405,000, or 11.1%, in employee
compensation and benefits, an increase of $301,000, or 30.2%, in
occupancy and equipment, and an increase of $297,000, or 24.9% in
other operating expense and an $11,000 or 2.2% increase in data
processing expense.
The increase in employee compensation and benefits was due primarily
to an increase in staffing levels to support the overall growth and
branch structure of the Bank, normal merit increases, and an increase
in health insurance costs and other employee benefits. The number of
employees has increased from 130 to 144, or 10.8% from March 31, 2004
to March 31, 2005. The increase in occupancy and equipment expense
primarily reflects costs associated with software and technology
upgrades, including the purchase of a new asset and liability
management product and increased depreciation and maintenance costs
associated with the Company's new branch offices. The increase in
other operating expense was due primarily to an increase in costs
related to maintaining real estate acquired through foreclosure,
increased costs for maintaining compliance with section 404 of the
Sarbanes Oxley Act and other operating costs associated with the
Company's overall growth year to year. The increase in data
processing expense is due to additional costs associated with the
conversion to a new core processor and providing internet banking to
the Company's customers, which were partially offset by reduced base
costs of the core processing in the current period.
Federal Income Taxes
- --------------------
The provision for federal income taxes totaled $779,000 for the six
months ended March 31, 2005, an increase of $7,000, or .9%, compared
to the $772,000 provision recorded in the same period in 2004. This
increase was primarily due to a increase in pre-tax earnings of
$38,000, or 1.7%. The Company's effective tax rate was 33.8% and
34.0% for the six-month periods ended March 31, 2005 and 2004,
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
- --------------------------
Certain statements contained herein are not based on historical facts
and are "forward-looking statements" within the meaning of Section 21
A of the Securities Exchange Act of 1934, as amended. Forward-looking
statements, which are based on various assumptions (some of which are
beyond our control), may be identified by reference to a future
period or periods, or by the use of forward-looking terminology, such
as "may," "will," "believe," "expect," "estimate," "anticipate,"
"continue" or similar terms or variation's on those terms or the
negative of those terms. Forward-looking statements are subject to
various factors which could cause actual results to differ materially
from these estimates. These factors include, but are not limited to,
changes in general economic conditions, interest rates, deposit
flows, loan demand, competition, legislation or regulation and
accounting principles, policies or guidelines, as well as other
economic, competitive, governmental, regulatory and technological
factors affecting our operations. In addition, acquisitions may
result in large one-time charges to income, may not produce revenue
enhancements or cost savings at levels or within time frames
originally anticipated and may result in unforeseen integration
difficulties. We do not undertake, and specifically disclaim any
obligation, to publicly release the result of any revisions which may
be made to any forward-looking statements to reflect the occurrence
of events or circumstances after the date of such 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, 2004.
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. Unregistered Sales of Equity Securities and Use of Proceeds
-----------------------------------------------------------
Number of ESOP
shares purchased Shares yet to
Number of ESOP Average price as part of publicly be purchased by
Period shares purchased paid per share announced plan ESOP under plan
- --------------------------------------------------------------------------------------------
March 1, 2005-
March 31, 2005 40,000 $24.05 40,000 N/A
On June 1, 2004 and March 1, 2005, Peoples Community
Bancorp, Inc. announced its intention to purchase 40,000
shares of its common stock on the open market to fund its
employee stock ownership plan. The total purchase amounted
to $962,000 and all shares approved for purchase have been
acquired as of March 31, 2005.
ITEM 3. Defaults Upon Senior Securities
-------------------------------
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On February 16, 2005, the Company held its Annual Meeting of
Shareholders. Two matters were submitted to the
shareholder's for a vote. The shareholders elected three
directors to terms expiring in 2008 by the following votes:
FOR WITHHELD
--- --------
Donald L. Hawke 3,376,135 68,207
James R. Vandergrift 3,378,625 65,717
Thomas J. Noe 3,392,895 51,447
The shareholders also ratified the selection of BKD, LLP as
the Company's auditors for the 2005 fiscal year by the
following vote:
For: 3,434,835 Against: 950 Abstain: 8,557
21
Peoples Community Bancorp, Inc.
PART II(Continued)
ITEM 5. Other Information
-----------------
Not applicable
ITEM 6. Exhibits
--------
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
22
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 13, 2005 By: /s/Jerry D. Williams
---------------------------
Jerry D. Williams
President
Date: May 13, 2005 By: /s/Teresa A. O'Quinn
---------------------------
Teresa A. O'Quinn
Chief Financial Officer