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 March 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
For the transition period from to
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Commission File Number 0-22812
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Peoples Savings Financial Corporation
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(Exact name of registrant as specified in its charter)
Pennsylvania 25-1720517
- ------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
173 Main Street, Ridgway, PA 15853
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(Address of principal executive offices)
(814) 773-3195
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(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 April 22, 1998: 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 March 31, 1998 and June 30, 1997 3
Consolidated Statement of Income (Unaudited)
for the Nine Months ended March 31, 1998 and 1997 4
Consolidated Statement of Income (Unaudited)
for the Three Months ended March 31, 1998 and 1997 5
Consolidated Statement of Cash Flows (Unaudited)
for the Nine Months ended March 31, 1998 and 1997 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Default Upon Senior Securities 13
Item 4. Submissions of Matters to a Vote of Security Holder 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
PEOPLES SAVINGS FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEET (UNAUDITED)
March 31, June 30,
1998 1997
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ASSETS
Cash and due from banks $ 118,432 $ 116,612
Interest-bearing deposits with other
institutions 4,319,080 2,904,240
Investment securities (market value of $2,080,564
and $2,811,553) 2,075,323 2,824,595
Mortgage-backed securities (market value of
$5,365,238 and $6,104,940) 5,327,833 6,123,442
Loans receivable (net of allowance for loan
losses of $263,792 and $250,865) 32,449,684 31,947,791
Accrued interest receivable 222,972 290,147
Premises and equipment 56,544 60,407
Federal Home Loan Bank stock, at cost 361,100 361,100
Other assets 148,639 206,248
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TOTAL ASSETS $45,079,607 $44,834,582
=========== ===========
LIABILITIES
Deposits accounts $35,626,133 $34,975,539
Advances from Federal Home Loan Bank - 500,000
Accrued interest payable and other liabilities 140,105 174,869
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TOTAL LIABILITIES 35,766,238 35,650,408
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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 45,297 45,297
Additional paid-in capital 4,326,019 4,275,914
Retained earnings-substantially restricted 5,349,256 5,338,997
Unearned shares held by Employee Stock Ownership Plan (179,385) (214,241)
Unearned shares held by Management Stock Bonus Plan (33,955) (67,930)
Treasury stock (10,450 shares, at cost) (193,863) (193,863)
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TOTAL STOCKHOLDERS' EQUITY 9,313,369 9,184,174
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $45,079,607 $44,834,582
=========== ===========
See accompanying notes to the unaudited consolidated financial statements.
3
PEOPLES SAVINGS FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Nine Months Ended March 31,
1998 1997
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INTEREST INCOME
Loans $ 2,015,737 $ 1,994,670
Mortgage-backed securities 287,165 349,367
Investment securities:
Taxable 145,685 190,333
Exempt from federal income tax 16,151 21,203
Interest-bearing deposits with other
institutions 88,923 37,344
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Total interest income 2,553,661 2,592,917
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INTEREST EXPENSE
Deposits 1,255,907 1,230,489
Other 7,267 45,325
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Total interest expense 1,263,174 1,275,814
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NET INTEREST INCOME 1,290,487 1,317,103
Provision for loan losses 26,750 18,000
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NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 1,263,737 1,299,103
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NONINTEREST INCOME
Service charges on deposit accounts 16,912 23,097
Other income 13,049 11,755
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Total noninterest income 29,961 34,852
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NONINTEREST EXPENSE
Compensation and employee benefits 368,182 368,896
Occupancy and equipment 40,282 37,369
Deposit insurance premiums 12,000 260,830
Professional fees 89,062 61,560
Data processing charges 79,680 77,664
Other expenses 204,224 193,586
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Total noninterest expense 793,430 999,905
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Income before income taxes 500,268 334,050
Income taxes 174,366 122,897
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NET INCOME $ 325,902 $ 211,153
============= =============
EARNINGS PER SHARE
Basic $ 0.77 $ 0.50
Diluted 0.74 0.48
See accompanying notes to the unaudited consolidated financial statements.
4
PEOPLES SAVINGS FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Three Months Ended March 31,
1998 1997
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INTEREST INCOME
Loans $ 680,983 $ 653,436
Mortgage-backed securities 91,204 107,018
Investment securities:
Taxable 47,356 65,035
Exempt from federal income tax 5,315 5,316
Interest-bearing deposits with other
institutions 33,913 14,781
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Total interest income 858,771 845,586
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INTEREST EXPENSE
Deposits 418,185 396,061
Other - 19,335
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Total interest expense 418,185 415,396
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NET INTEREST INCOME 440,586 430,190
Provision for loan losses 8,750 6,000
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NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 431,836 424,190
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NONINTEREST INCOME
Service charges on deposit accounts 5,171 7,163
Other income 3,780 3,691
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Total noninterest income 8,951 10,854
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NONINTEREST EXPENSE
Compensation and employee benefits 113,823 120,970
Occupancy and equipment 14,643 11,130
Deposit insurance premiums 827 (15,917)
Professional fees 49,912 21,050
Data processing charges 27,175 26,762
Other expenses 68,608 69,082
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Total noninterest expense 274,988 233,077
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Income before income taxes 165,799 201,967
Income taxes 57,966 117,000
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NET INCOME $ 107,833 $ 84,967
============= =============
EARNINGS PER SHARE
Basic $ 0.25 $ 0.20
Diluted 0.24 0.19
See accompanying notes to the unaudited consolidated financial statements.
5
PEOPLES SAVINGS FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Nine Months Ended March 31,
1998 1997
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OPERATING ACTIVITIES
Net income $ 325,902 $ 211,153
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 26,750 18,000
Provision for depreciation 5,165 9,461
Amortization of discounts and premiums 7,277 14,086
Decrease (increase) in accrued interest
receivable 61,175 (8,221)
Increase (decrease) in accrued interest payable 21,425 (2,637)
Amortization of ESOP and MSBP unearned
compensation 111,342 115,825
Other, net (26,845) (139,284)
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Net cash provided by operating activities 549,031 218,383
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INVESTING ACTIVITIES
Proceeds from the maturities of investment
securities 2,520,486 370,000
Purchases of investment securities (1,769,744) (752,200)
Principal repayments on mortgage-backed
securities 782,509 1,034,676
Increase in loans receivable, net (524,290) 458,611
Increase in Federal Home Loan Bank stock - (2,200)
Purchases of premises and equipment (4,915) (880)
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Net cash provided by
investing activities 1,004,046 1,108,007
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FINANCING ACTIVITIES
Increase (decrease) in deposits, net 650,594 (1,015,309)
Proceeds from advance from FHLB - 500,000
Repayment of advance from FHLB (500,000) -
Cash dividends (287,011) (84,030)
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Net cash used for
financing activities (136,417) (599,339)
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Increase in cash and cash equivalents 1,416,660 727,051
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,020,852 742,344
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,437,512 $ 1,469,395
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest on deposits and borrowings $ 1,284,599 $ 1,278,451
Income taxes 100,667 170,822
See accompanying notes to the unaudited consolidated financial statements.
6
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 Bank ("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.
These statements should be read in conjunction with the consolidated
statements as of and for the year ended June 30, 1997 and related notes which
are included on the Form 10-KSB (file no. 0-22812)
NOTE 2 - EARNINGS PER SHARE
- ---------------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128, "Earnings Per Share." This statement
redefines the standards for computing earnings per share (EPS) previously
found in Accounting Principles Board opinion No. 15, Earnings Per Share.
Statement 128 establishes new standards for computing and presenting EPS and
requires dual presentation of "basic" and "diluted" EPS on the face of income
statement for all entities with complex capital structures. Under Statement
128, basic EPS is to be computed based upon income available to common
shareholders and the weighted average number of common shares outstanding for
the period. Diluted EPS is to reflect the potential dilution that could occur
if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the Company. Statement 128 also requires the
restatement of all prior-period EPS data presented.
The following table sets forth the computation of basic and diluted earnings
per share. There were no convertible securities which would effect the
numerator in calculating basic and diluted earnings per share; therefore, net
income as presented on the Consolidated Statement of Income (Unaudited) will
be used as the numerator. The following tables set forth a reconciliation of
the denominator of the basic and diluted earnings per share computation.
Nine Months Ended March 31,
1998 1997
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Denominator
Denominator for basic earnings per
share - weighted-average shares 422,600 418,276
Employee stock options 17,652 17,413
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Denominator for diluted earnings per
share - adjusted weighted-average
average assumed conversions 440,252 435,690
============= =============
Three Months Ended March 31,
1998 1997
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Denominator
Denominator for basic earnings per
share - weighted-average shares 424,190 419,652
Employee stock options 17,694 16,898
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Denominator for diluted earnings per
share - adjusted weighted-average
average assumed conversions 441,884 436,550
============= =============
NOTE 3 - OTHER MATTERS
On April 7, 1998, the Board of Directors of the Company approved, and the
Company then signed, a merger agreement pursuant to which the Company will be
merged into Emclaire Financial Corporation. The merger is subject to the
receipt of approval of the stockholders of the Company and Emclaire and the
receipt of regulatory approval. Because provisions of the Company's Articles
of Incorporation impose restrictions on the ability of the Company to engage
in the merger, the Articles must also be amended in order for the merger to
proceed. The approval of the amendment of the Articles requires the
affirmative vote of 80% of the issued and outstanding shares.
The agreement provides that the merger consideration of $26.00 per share shall
be paid either in stock of Emclaire or in cash. Shareholders of the company
will have the right to express a preference for cash or stock, but the overall
consideration payable, including amounts paid on account of outstanding
options, shall be 55% in stock and 45% in cash. The merger will be accounted
for as a purchase. Assuming the receipt of all required approvals, the merger
is expected to be consummated during the third quarter of calendar 1998.
NOTE 4 - PENDING ACCOUNTING PRONOUNCEMENTS
In July 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income."
Statement No. 130 is effective for fiscal years beginning after
December 15, 1997. This statement establishes standards for reporting
and presentation of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general purpose financial
statements. It requires that all items that are required to be recognized
under accounting standards as components of comprehensive income be reported
in a financial statement that is presented with the same prominence as
other financial statements. Statement No. 130 requires that companies
(i) classify items of other comprehensive income by their nature in a
financial statement and (ii) display the accumulated balance of other
comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of the statement of financial
condition. Reclassification of financial statements for earlier periods
provided for comprehensive purposes is required.
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
-------------------
Total assets at March 31, 1998 of $45,080,000, increased by approximately
$245,000, or .55%, from the $44,835,000 reported at June 30, 1997. There were
increases in interest bearing deposits of $1,415,000 and loans of $502,000,
while declines occurred in mortgage-backed securities of $796,000 and
investment securities of $749,000.
Interest-bearing deposits increased from $2,904,000 at June 30, 1997 to
$4,319,000 at March 31, 1998 primarily due to an increase in deposits of
$651,000, the maturity of investment securities near the period end, and the
repayment of mortgage-backed securities.
Investment securities declined $749,000, or 26.5% from $2,825,000 at June 30,
1997 to $2,075,000 at March 31, 1998. This decline was primarily due to
maturities of $2,025,000 of U.S. Government Agency securities while management
opted to replace only $1,275,000 of such securities with similar maturities
and yields. These funds were used to repay an advance from the Federal Home
Loan Bank for $500,000.
Mortgage-backed securities decreased from $6,123,000 at June 30, 1997 to
$5,328,000 at March 31, 1998. Principal repayments on mortgage-backed
securities amounted to $783,000 and are typically reinvested in like
securities or used to supplement loan demand in periods of loan growth, as
well as meet operating expenses. Currently, the Company has relatively
significant commitments to fund loans, therefore all of the mortgage-backed
securities repayments have been used to fund loan products.
Loans increased to $32,450,000 at March 31, 1998 from $31,948,000 at June 30,
1997 as the Company continued to experience moderate growth primarily in 1 to
4 family mortgages. The economy in the area has remained stable for several
years and the Company competitively prices its products to meet the demands of
its market. Management anticipates maintaining continued growth in the loan
portfolio in the foreseeable future.
Deposits increased by $651,000 or 1.86% from $34,976,000 at June 30, 1997 to
$35,626,000 at March 31, 1998. This resulted primarily from an increase in
time deposit accounts of $1,258,000 as 18 month time deposits grew by
$1,606,000. Offsetting this somewhat were smaller decreases in other deposit
type accounts which reflects the impact of promotional campaigns extended by
competitors within the Company's market areas.
Equity capital increased by $129,000 from $9,184,000 at June 30, 1997 to
$9,313,000 at March 31, 1998 as a result of net income of $326,000 and
recognition of shares in the Management Stock Bonus Plan and the Employee
Stock Ownership Plan amounting to $119,000. Cash dividends declared of
approximately $308,000 lessened the impact of these other events. Future
dividend policies will be determined by the Board of Directors in light of the
earnings and financial condition of the Company, including applicable
governmental regulations and policies.
On April 7, 1998, the Board of Directors of the Company approved, and the
Company then signed, a merger agreement pursuant to which the Company will be
merged into Emclaire Financial Corporation. The merger is subject to the
receipt of approval of the stockholders of the Company and Emclaire and the
receipt of regulatory approval.
Management monitors risk-based capital and leverage capital ratios in order to
assess compliance with regulatory guidelines. At March 31, 1998, the Company
and the Bank exceeded the 8.00% minimum risk-based capital requirement and the
leveraged capital ratio of 3.00% of tangible assets.
8
RESULTS OF OPERATION
--------------------
COMPARISON OF THE NINE MONTHS ENDED MARCH 31, 1998 AND 1997
- -----------------------------------------------------------
Net income for the nine months ended March 31, 1998 increased by $115,000 or
54.3% to $326,000 from $211,000 compared to the same period in 1997. The
increase was primarily made up of a decrease in FDIC insurance of $249,000
offset by a decline in net interest income of $27,000 and an increase in
income tax expense of $51,000.
Net interest income for the nine months ended March 31, 1998 declined $27,000
or 2.0% to $1,290,000 as compared to $1,317,000 for the same period ended
1997. This decline is primarily attributed to a decrease in the volume and
rate on earnings assets coupled with an increase in the rate on interest
bearing liabilities.
There was a decrease in interest income resulting primarily from a decrease in
earnings on mortgage-backed securities of $62,000 or 17.8% and investment
securities of $50,000 or 23.5%. The decrease in interest income was primarily
due to a decrease in the average principal balances of mortgage-backed
securities of $1,183,000 or 17.2% and investment securities of $2,025,000 or
46.4%. The overall decrease in interest income was offset partially by an
increase in interest income on interest-bearing deposits with other banks of
$52,000 and loans of $21,000. These increases were attributed to an increase
in the average principal balances of interest-bearing deposits of $1,335,000
or 132.5% and loans of $229,000 or .7%. Furthermore, the yield on investment
securities decreased 42 basis points from 6.17% for 1997 to 5.75% for 1998 due
to the maturity of higher yielding securities. The total yield on
interest-earning assets decreased slightly from 7.74% for the 1997 compared to
7.71% for 1998.
At the same time, gross interest expense decline by $13,000 from $1,276,000
for the nine months ended March 31, 1997 compared to $1,263,000 for the same
period ended 1998. Interest expense on deposits remained relatively constant,
only increasing $25,000 or 2.1%. Although there were swings within the
deposit mix during the period, primarily from savings to NOW accounts, the
overall average principal balances only decreased $96,000. This decline in
the interest-bearing base was more than offset by a competitive certificate of
deposit rate environment which produced an increase in the yield of 15 basis
points. In addition, interest on FHLB advances declined by $38,000 due to the
repayment of those advances during the period.
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.
Total loans increased by $514,000 during the nine months ended March 31, 1998.
As a result, the provision for loan losses increased by $9,000 to $27,000 for
1998 compared to $18,000 for 1997.
Noninterest income is typically made up of service fees on deposit accounts
and other fee income. These service charges on deposit accounts and other fee
income remained relatively constant during the period. Management believes
its fees are competitive with similar fees charged by other institutions in
its market area.
Total noninterest expense decreased $237,000 to $763,000 for the nine months
ended March 31, 1998 as compared to $1,000,000 for the same period ended 1997.
This decline over the prior year emanates from a one-time charge of
approximately $235,000 to recapitalize the SAIF as required by federal law.
Also, the Company incurred an increase in professional fees of $28,000 or
44.7% for merger related activities. Noninterest expense is primarily made up
of employee compensation and benefits, occupancy and furniture expense, data
processing charges, and other noninterest expenses. Absent this SAIF charge,
in total, noninterest expenses for 1998 remained relatively unchanged compared
to 1997. This is the result of management's efforts to minimize increases in
overhead to maintain overall profitability.
There was a increase in income tax expense of $51,000 or 41.9% from $123,000
for the nine months ended March 31, 1997 to $174,000 for the same period ended
1998. This fluctuation is the result of an increase in pretax income of
$166,000. The income tax expense in 1997 was lower than normally would be
reflected due to the timing of the recognition of SAIF assessment, as well as
other expenses during the period.
9
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
- ------------------------------------------------------------
Net income for the three months ended March 31, 1998 increased $23,000 or
26.9% to $108,000 from $85,000 for the same period ended 1997.
Net interest income for the three months ended March 31, 1998 experienced an
increase of $10,000 or 2.4% compared to the same period ended 1997. As noted
above, changes within the Bank's asset mix have resulted in a 1.6% decrease in
gross interest income. Contributing to the increase in net interest income
were increases in interest income on loans of $28,000 and interest-bearing
deposits with other institutions of $19,000 coupled with a decrease in of
$19,000 in other interest expense. Theses were offset partially by decreases
in interest on investment and mortgage-backed securities of $18,000 and
$16,000, respectively, and an increase in interest on deposits of $28,000.
These fluctuations have been discussed in greater detail above.
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 increased by $3,000 to $9,000 for 1998
compared to $6,000 for 1997.
Noninterest income is typically made up of service fees on deposit accounts.
These service charges on deposit accounts remained relatively constant during
the period. Management believes its fees are competitive with similar fees
charged by other institutions in its market area.
Noninterest expense increased $42,000 or 18.0% from $233,000 for the three
months ended March 31, 1997 to $275,000 for the same period ended 1998. This
was primarily due to a decrease in deposit insurance premiums resulting from
the reduced SAIF rates and the recognition of a SAIF refund of $15,000 coupled
with an increase in professional fees of $29,000 for merger related expenses.
All other noninterest type accounts, as described above, remained relatively
constant.
There was a decrease in income tax expense of $59,000 for 1998 due in part to
a decline in pretax income of $36,000.
10
LIQUIDITY AND CASH FLOWS
- ------------------------
To ensure that the Bank can satisfy customer credit needs for current and
future commitments and deposit withdrawal requirements, the 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 March 31, 1998 and June 30,
1997:
March 31, June 30,
1998 1997
-------- --------
(dollars in thousands)
Cash and due from banks $ 118 $ 117
Interest-bearing deposits with other institutions 4,319 2,904
Investment securities maturing in one year or less 135 2,825
-------- --------
Total liquid assets $ 4,572 $ 5,846
======== ========
As a percent of total assets 10.1% 13.0%
The 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 Bank invests excess funds in overnight deposits which provide liquidity to
meet lending requirements.
The 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.
As of March 31, 1998, the Bank had $2.4 million in outstanding mortgage and
construction loan commitments. Management believes that it has adequate
sources to meet the actual funding requirements.
11
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.
March 31, June 30,
1998 1997
-------- --------
(dollars in thousands)
Loans on nonaccrual basis $ 712 $ 846
Loans past due 90 days or more 5 -
Renegotiated loans - -
-------- -------
Total nonperforming loans 717 846
-------- -------
Other real estate 29 29
Repossessed assets - -
-------- -------
Total nonperforming assets $ 746 $ 875
======= =======
Nonperforming loans as a percent of total loans 2.3% 2.6%
======= =======
Nonperforming assets as a percent of total assets 1.7% 2.0%
======= =======
During the nine month period ended March 31, 1998, loans increased $514,000
and nonperforming loans decreased $110,000 while the allowance for loan losses
increased $9,000 for the same period. The percentage of the allowance for
loan losses to loans outstanding increased .1% to .8% during this time period.
There was a decrease in loans on a nonaccrual basis which consists primarily
of one to four family residential mortgages. The collateral requirements on
such loans reduce the risk of potential losses to an acceptable level in
management's opinion.
Management believes the level of the allowance for loan losses at March 31,
1998 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.
Other real estate owned remained constant over the nine month period. In
management's opinion, collateral exists with sufficient value to generate the
proceeds necessary to reduce the risk of potential loss on these properties to
an acceptable level.
YEAR 2000
- ---------
A great deal of information has been disseminated about the global computer
crash that may occur in the year 2000. Many computer programs that can only
distinguish the final two digits of the year entered ( common programming
practice in earlier years) are expected to read entries for the year 2000 as
the year 1900 and compute payment, interest, or delinquency based on the wrong
date or are expected to unable the compute payment, interest, or delinquency.
Rapid and accurate data processing is essential to our operations. Data
processing is also essential to most other financial institutions and many
other companies. As a result of the merger with Emclaire Financial Corp.
(Emclaire"), the Company will convert its information processing system to
that of Emclaire, which is Year 2000 compliant.
All of our material data processing that is currently affected by this problem
is provided by a third party service bureau. However, as a result of the
pending merger, all of our data processing functions will be assumed by
Emclaire's data processing department.
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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
(a) Exhibits
The exhibits listed below are filed herewith or incorporated
herein by reference.
27 Financial Data Schedule (electronic filing only)
99 Press Release Concerning Letter of Intent dated March 20,
1998
(b) Reports on Form 8-K
5 Other Matters - Letter of Intent to be acquired by Emclaire
Financial Corp.
7 Financial Statements Pro Forma
Financial Information and Exhibits
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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: May 12, 1997 By:
-----------------------------------------
Glenn R. Pentz, Jr.
Chief Financial Officer, Treasurer and
Secretary
(Principal Executive and Financial Officer)
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