UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20552
FORM 10 - QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
For the transition period from _______________ to ________________
Commission File Number 0 - 22812
Peoples Savings Financial Corporation
_____________________________________
(Exact name of registrant as specified in its charter)
Pennsylvania 25 - 1720517
______________________________________________________________________________
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
173 Main Street, Ridgway, PA 15853
___________________________________
(Address of principal executive offices)
(814) 773 - 3195
________________
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or
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 [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date:
Class: Common Stock, par value $.10 per share
Outstanding at September 11, 1996: 442,516
PEOPLES SAVINGS FINANCIAL CORPORATION
INDEX
Page
Number
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet (Unaudited)
as of September 30, 1996 and June 30, 1996 3
Consolidated Statement of Income (Unaudited)
for the Three Months ended
September 30, 1996 and 1995 4
Consolidated Statement of Cash Flows (Unaudited)
for the Three Months ended
September 30, 1996 and 1995 5
Notes to Unaudited Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 - 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Default Upon Senior Securities 10
Item 4. Submissions of Matters to a
Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8 - K 10
SIGNATURES 11
PEOPLES SAVINGS FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEET (UNAUDITED)
September 30, June 30,
1996 1996
------------- -----------
ASSETS
Cash and due from banks $ 115,426 $ 115,026
Interest - bearing deposits with other institutions 1,461,007 627,318
Investment securities (market value of $3,969,987
and $3,648,547) 4,004,322 3,694,375
Mortgage - backed securities (market value of
$7,000,292 and $7,415,043) 7,051,534 7,466,452
Loans receivable (net of allowance for loan losses
of $233,627 and $227,171) 32,333,494 32,126,518
Accrued interest receivable 358,900 278,533
Premises and equipment 61,678 64,001
Federal Home Loan Bank stock, at cost 271,407 358,900
Other assets 175,062 121,346
-------------- --------------
TOTAL ASSETS $ 45,832,830 $ 44,852,469
============== ==============
LIABILITIES
Deposits accounts $ 35,341,230 $ 35,864,622
Advances from Federal Home Loan Bank 1,300,000 -
Accrued interest payable and other liabilities 279,254 75,766
-------------- --------------
TOTAL LIABILITIES 36,920,484 35,940,388
-------------- --------------
STOCKHOLDERS' EQUITY
Preferred stock, no par value, 1,000,000
shares authorized; none outstanding - -
Common stock, $.10 par value; 2,000,000 authorized,
452,966 issued and outstanding 45,297 45,297
Additional paid - in capital 4,235,849 4,222,897
Retained earnings - substantially restricted 5,173,265 5,205,770
Unearned shares held by Employee Stock Ownership Plan (246,297) (254,790)
Unearned shares held by Management Stock Bonus Plan (101,905) (113,230)
Treasury stock (10,450 shares, at cost) (193,863) (193,863)
-------------- --------------
TOTAL STOCKHOLDERS' EQUITY 8,912,346 8,912,081
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 45,832,830 $ 44,852,469
============== ==============
See accompanying notes to the unaudited consolidated financial statements.
3
PEOPLES SAVINGS FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Three Months Ended
September 30,
1996 1995
-------------- --------------
INTEREST INCOME
Loans $ 670,534 $ 618,607
Mortgage - backed securities 116,813 173,857
Investment securities:
Taxable 61,691 31,793
Exempt from federal income tax 9,134 17,807
Interest - bearing deposits with other institutions 9,876 8,776
-------------- --------------
Total interest income 868,048 850,840
-------------- --------------
INTEREST EXPENSE
Deposits 423,145 438,429
Other 7,959 4,828
-------------- --------------
Total interest expense 431,104 443,257
-------------- --------------
NET INTEREST INCOME 436,944 407,583
Provision for loan losses 6,000 6,000
-------------- --------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 430,944 401,583
-------------- --------------
NONINTEREST INCOME
Service charges on deposit accounts 7,172 6,251
Other income 5,374 23,300
-------------- --------------
Total noninterest income 12,546 29,551
-------------- --------------
NONINTEREST EXPENSE
Compensation and employee benefits 125,443 124,898
Occupancy and equipment 14,822 15,272
Deposit insurance premiums 255,747 21,000
Professional fees 19,260 18,350
Data processing charges 25,215 24,334
Other expenses 59,690 73,964
-------------- --------------
Total noninterest expense 500,177 277,818
-------------- --------------
Income before income taxes (56,687) 153,316
Income taxes (24,182) 52,500
-------------- --------------
NET INCOME $ (32,505) $ 100,816
============== ==============
EARNINGS PER SHARE
Primary $ (0.07) $ 0.23
Fully Diluted (0.07) $ 0.23
AVERAGE SHARES OUTSTANDING
Primary 444,827 438,245
Fully Diluted 444,949 439,359
See accompanying notes to the unaudited consolidated financial statements.
4
PEOPLES SAVINGS FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Three Months Ended
September 30,
1996 1995
-------------- --------------
OPERATING ACTIVITIES
Net income $ (32,505) $ 100,816
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 6,000 6,000
Provision for depreciation 3,129 3,045
Amortization of discounts and premiums 7,340 2,782
Decrease in accrued interest receivable 7,126 1,845
Increase (decrease) in accrued interest payable (1,183) 5,200
Increase in federal deposit insurance premiums payable 234,747 -
Amortization of ESOP and MSBP unearned compensation 32,770 30,434
Other, net (81,966) 3,354
-------------- --------------
Net cash provided by operating activities 175,458 153,476
-------------- --------------
INVESTING ACTIVITIES
Proceeds from the maturities of investment securities 190,000 180,000
Purchases of investment securities (500,000) (500,000)
Principal repayments on mortgage - backed securities 407,631 416,650
Increase in loans receivable, net (214,802) (824,096)
Purchases of premises and equipment (806) (3,170)
-------------- --------------
Net cash used for investing activities (117,977) (730,616)
-------------- --------------
FINANCING ACTIVITIES
Increase (decrease) in deposits, net (523,392) 940,725
Advances from Federal Home Loan Bank 1,300,000 500,000
-------------- --------------
Net cash provided by financing activities 776,608 1,440,725
-------------- --------------
Increase in cash and cash equivalents 834,089 863,585
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 742,344 515,337
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,576,433 $ 1,378,922
============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest on deposits and borrowings $ 432,287 $ 438,057
Income taxes 44,792 31,197
See accompanying notes to the unaudited consolidated financial statements.
5
PEOPLES SAVINGS FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements of Peoples Savings Financial Corporation
("Company") includes its wholly - owned subsidiary Peoples Savings Bank
("Savings Bank"). All significant intercompany items have been eliminated.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10 - QSB and, therefore,
do not necessarily include all information that would be included in audited
financial statements. The information furnished reflects all adjustments
which are, in the opinion of management, necessary for a fair statement of the
results of operations. All such adjustments are of a normal recurring nature.
The results of operations for the interim periods are not necessarily indicative
of the results to be expected for the full year.
NOTE 2 - STOCK-BASED COMPENSATION
Effective July 1, 1996, the Corporation adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation". This
statement encourages, but does not require, the Corporation to recognize
compensation expense for all awards of equity instruments issued after
December 31, 1995. The statement establishes a fair value based method of
accounting for stock-based compensation plans. The standard applies to all
transactions in which an entity acquires goods or services by issuing equity
instruments or by incurring liabilities in amounts based on the price of the
entity's common stock or other equity instruments. Statement No. 123 permits
companies to continue to account for such transactions under Accounting
Principles Board No. 25, "Accounting for Stock Issued to Employees", but
requires disclosure in a note to the financial statements pro forma net income
and earnings per share as if the Corporation had applied the new method of
accounting. The Corporation has elected to continue to apply the provisions
of APB Opinion No. 25 and disclose such information only in the notes to the
consolidated financial statements. The adoption of this standard has no
effect on the Corporation's financial position or results of operations.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Total assets at September 30, 1996 of $45,833,000, increased by approximately
$981,000, or 2.2%, from the $44,852,000 reported at June 30, 1996. Interest -
bearing deposits, investments, and loans receivable experienced modest growth
of approximately $834,000, $310,000, and $207,000, respectively, while
mortgage - backed securities declined by $415,000.
The increase in loans is predominantly being funded through advances from the
Federal Home Loan Bank and principal repayments of mortgage - backed
securities. Mortgage - backed securities are typically used to supplement the
loan portfolio in periods of inadequate loan demand. Currently, the Company
has outstanding commitments to fund loans of $719,000 and is relying on
temporary advances from the Federal Home Loan Bank until funds becoming
available from investment maturities and mortgage - backed securities
principal repayments.
Deposits declined by $524,000 or 1.5%. This decrease consist almost entirely
in certificates of deposits and results from management's decision to minimize
costs in the current rate environment by drawing of the bank's line of credit
with the Federal Home Loan Bank.
Equity capital remained unchanged as the SAIF special assessment resulted in a
net loss for the period which was offset by recognition of shares in the
Management Stock Bonus Plan and the Employee Stock Ownership Plan amounting to
$33,000.
Management monitors risk - based capital and leverage capital ratios in order
to assess compliance with regulatory guidelines. At September 30, 1996, the
Savings Bank exceeded the 8.00% minimum risk - based capital requirement and
the leveraged capital ratio of 3.00% of tangible assets.
RESULTS OF OPERATION
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Net interest income for 1996 experienced a slight increase compared to 1995 as
increases in gross interest income exceeded increases in gross interest
expense by approximately $29,000. The Savings Bank's loan demand coupled with
the current rate environment is resulting in an asset mix which is more
favorable to loans and is exhibited by the corresponding income generated. As
a result of the loan growth, gross interest income on loans increased $52,000
while interest on mortgage - backed securities declined as a result of both a
$2.2 million average reduction of principal coupled with a decline in yield
from 7.39% in 1995 to 6.46% in 1996. Also, interest income on taxable
investment securities rose $30,000 mainly as the average balance increased
$800,000 from 1995 to 1996. At the same time, gross interest expense
decreased primarily, as a result of a decrease in the cost of funds from 4.9%
in 1995 to 4.7% in 1996.
Management's continuing evaluation of the loan portfolio, giving consideration
to historical experience, the volume and type of lending conducted, the volume
of nonperforming assets, the local economic conditions and standard practice
within the industry, indicates the allowance for loan losses is adequate. As
a result, the provision for loan losses remained the same for 1996 and 1995.
7
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (Continued)
Noninterest income is typically made up of service fees on deposit accounts.
These service charges on deposit accounts remained relatively constant during
the two periods. Management believes its fees are competitive with similar
fees charged by other institutions in its market area. During 1995, the
Company received $13,000 in principal payments on mortgage - backed securities
which had been previously written - off due to the inability to collect
payments from the instruments trustee. These repayments are included in other
income.
Noninterest expense is primarily made up of employee compensation and
benefits, occupancy and furniture expense, data processing charges, and other
noninterest expenses. Federal deposit insurance premiums rose substantially
due to the passage of SAIF legislation which required a one - time assessment
of .675% of insurable deposits amounting to approximately $235,000. Other
noninterest expenses for 1996 remained relatively unchanged compared to 1995.
As of September 30, 1996, an income tax benefit of $24,000 was being
recognized as a result of the SAIF assessment described above.
LIQUIDITY AND CASH FLOWS
To ensure that the Savings Bank can satisfy customer credit needs for current
and future commitments and deposit withdrawal requirements, the Savings Bank
manages the liquidity position by ensuring that there are adequate short -
term funding sources available for those needs. Liquid assets consists of
cash and due from banks and investment securities maturing in one year or
less. The following table shows these liquidity sources at September 30, 1996
and June 30, 1996:
September 30, June 30,
1996 1996
--------------- --------------
(dollars in thousands)
Cash and due from banks $ 115 $ 115
Interest - bearing deposits
with other institutions 1,461 627
Investment securities maturing
in one year or less 4,328 2,151
-------------- -------------
Total liquid assets $ 5,904 $ 2,893
============== ==============
As a percent of
total assets 13.17% 6.45%
====== =====
The Savings Bank's primary sources of funds are deposits, amortization and
prepayment of loans, maturities of investment securities, and funds provided
from operations. While scheduled loan repayments are a relatively predictable
source of funds, deposit flows and loan prepayments are greatly influenced by
general interest rates, economic conditions, and competition. In addition,
the Savings Bank invests excess funds in overnight deposits which provide
liquidity to meet lending requirements.
8
LIQUIDITY AND CASH FLOWS (Continued)
The Savings Bank has other sources of liquidity if a need for additional funds
arises. Additional sources of funds include Federal Home Loan Bank ("FHLB")
of Pittsburgh advances and the ability to borrow against mortgage-backed and
other securities. At September 30, 1996, the Savings Bank had advances from
the Federal Home Loan Bank of Pittsburgh amounting to $1,300,000.
As of September 30, 1996, the Savings Bank had $719,000 in outstanding
mortgage and construction loan commitments. Management believes that it has
adequate sources to meet the actual funding requirements.
RISK ELEMENT
The table below presents information concerning nonperforming assets including
nonaccrual loans, renegotiated loans, loans 90 days or more past due, other
real estate loans, and repossessed assets. A loan is classified as nonaccrual
when, in the opinion of management, there are serious doubts about
collectibility of interest and principal. At the time the accrual of interest
is discontinued, future income is recognized only when cash is received.
Renegotiated loans are those loans which terms have been renegotiated to
provide a reduction or deferral of principal or interest as a result of the
deterioration of the borrower.
September 30, June 30,
1996 1996
-------------- --------------
(dollars in thousands)
Loans on nonaccrual basis $ 303 $ 434
Loans past due 90 days or more 16 8
Renegotiated loans - -
-------------- --------------
Total nonperforming loans 319 442
-------------- --------------
Other real estate - -
Repossessed assets - -
-------------- --------------
Total nonperforming assets $ 319 $ 442
============== ==============
Nonperforming loans as a
percent of total loans 0.98% 1.37%
===== =====
Nonperforming assets as a
percent of total assets 0.70% 0.99%
===== =====
During the three month period ended September 30, 1996, loans increased
$207,000 and nonperforming loans decreased $213,000 while the allowance for
loan losses increased $6,000 for the same period. The percentage of allowance
for loan losses to loans outstanding remained .7% during this time period.
Management believes the level of the allowance for loan losses at September
30, 1996 is sufficient; however, there can be no assurance that the current
allowance for loan losses will be adequate to absorb all future loan losses.
The relationship between the allowance for loan losses and outstanding loans
is a function of the credit quality and known risk attributed to the loan
portfolio. The on - going loan review program and credit approval process is
used to determine the adequacy of the allowance for loan losses.
9
PART II - OTHER INFORMATION
Item 1 - Legal proceedings
NONE
Item 2 - Changes in securities
NONE
Item 3 - Defaults upon senior securities
NONE
Item 4 - Submission of matters to a vote of security holders
NONE
Item 5 - Other information
NONE
Item 6 - Exhibits and reports on Form 8 - K
NONE
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Peoples Savings Financial Corporation
Date: November 8, 1996 By:
-------------------------------------------
Glenn R. Pentz, Jr.
Chief Financial Officer, Treasurer and Secretary
Principal Executive and Financial Officer)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Peoples Savings Financial Corporation
Date: November 8, 1996 By: \s\ Glenn R. Pentz, Jr.
-------------------------------------------
Glenn R. Pentz, Jr.
Chief Financial Officer, Treasurer and Secretary
(Principal Executive and Financial Officer)
11