FORM 10-QSB
UNITED STATES 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 Quarterly Period ended March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ____________.
Commission File Number 0-22223
PEOPLES-SIDNEY FINANCIAL CORPORATION
------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 31-1499862
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
101 E. Court Street, Sidney, Ohio 45365
---------------------------------------
(Address of principal executive offices)
(937) 492-6129
--------------
(Issuer's telephone number)
Check whether the small business issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12
months (or for such shorter period that the small business issuer was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [ X ] No [ ]
As of May 1, 1998, the latest practicable date, 1,785,375 shares of the issuer's
common shares, $.01 par value, were issued and outstanding.
<PAGE>
PEOPLES-SIDNEY FINANCIAL CORPORATION
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets.......................................
Consolidated Statements of Income ................................
Condensed Consolidated Statements of Changes in Shareholders'
Equity..........................................................
Consolidated Statements of Cash Flows ............................
Notes to Consolidated Financial Statements .......................
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...................
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.................................................
Item 2. Changes in Securities and Use of Proceeds.........................
Item 3. Defaults Upon Senior Securities...................................
Item 4. Submission of Matters to a Vote of Security Holders...............
Item 5. Other Information.................................................
Item 6. Exhibits and Reports on Form 8-K..................................
SIGNATURES .....................................................................
<PAGE>
<TABLE>
<CAPTION>
PEOPLES-SIDNEY FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
Item 1. Financial Statements
March 31, June 30,
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
Cash and amounts due from depository institutions ......... $ 692,243 $ 297,722
Interest-bearing deposits in other banks .................. 1,381,509 1,498,104
Overnight deposits ........................................ 1,500,000 1,000,000
------------- -------------
Total cash and cash equivalents ...................... 3,573,752 2,795,826
Time deposits with other financial institutions ........... 2,000,000 5,000,000
Securities available for sale ............................. 4,016,020 2,012,802
Securities held to maturity (Estimated fair value of
$1,996,795 at June 30, 1997) ............................ -- 1,999,375
Loans receivable, net ..................................... 93,180,732 88,924,339
Accrued interest receivable ............................... 793,678 735,462
Premises and equipment, net ............................... 892,658 755,286
Federal Home Loan Bank stock available for sale ........... 804,600 762,500
Other assets .............................................. 260,901 156,772
------------- -------------
Total assets ......................................... $ 105,522,341 $ 103,142,362
============= =============
LIABILITIES
Deposits .................................................. $ 78,613,404 $ 77,045,430
Accrued expense and other liabilities ..................... 362,637 385,219
------------- -------------
Total liabilities .................................... 78,976,041 77,430,649
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 500,000 shares authorized,
none issued and outstanding
Common stock, $.01 par value, 3,500,000 shares authorized,
1,785,375 shares issued and outstanding ................. 17,854 17,854
Additional paid-in capital ................................ 17,291,603 17,234,087
Retained earnings ......................................... 10,470,928 9,776,982
Unearned employee stock ownership plan shares ............. (1,245,520) (1,326,280)
Unrealized gain on securities available for sale .......... 11,435 9,070
------------- -------------
Total shareholder's equity ........................... 26,546,300 25,711,713
------------- -------------
Total liabilities and shareholders' equity ........... $ 105,522,341 $ 103,142,362
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income
Loans, including fees ........ $ 1,882,434 $ 1,722,638 $ 5,585,430 $ 5,031,133
Securities ................... 61,030 28,828 187,318 92,000
Interest-bearing deposits and
overnight deposits ......... 65,887 25,199 236,602 71,557
Dividends on Federal Home
Loan Bank stock ............ 14,131 11,920 42,253 35,598
----------- ----------- ----------- -----------
Total interest income .... 2,023,482 1,788,585 6,051,603 5,230,288
Interest expense
Deposits ..................... 984,109 1,017,264 2,977,100 2,981,100
Other borrowings ............. -- 26,446 -- 60,665
----------- ----------- ----------- -----------
Total interest expense ... 984,109 1,043,710 2,977,100 3,041,765
----------- ----------- ----------- -----------
Net interest income ............... 1,039,373 744,875 3,074,503 2,188,523
Provision for loan losses ......... (9,383) 55,621 26,377 97,397
----------- ----------- ----------- -----------
Net interest income after
provision for loan losses ....... 1,048,756 689,254 3,048,126 2,091,126
Noninterest income
Service fees and other charges 15,369 16,544 46,490 46,963
Noninterest expense
Compensation and benefits .... 257,870 186,058 725,670 553,045
Occupancy and equipment ...... 38,504 33,986 120,175 101,649
Computer processing expense .. 43,168 41,475 117,096 113,088
FDIC deposit insurance
premiums ................... 11,935 2,449 36,766 546,540
State franchise taxes ........ 67,259 35,100 137,420 98,552
Other ........................ 129,231 88,878 392,675 265,362
----------- ----------- ----------- -----------
Total noninterest expense 547,967 387,946 1,529,802 1,678,236
----------- ----------- ----------- -----------
Income before income taxes ........ 516,158 317,852 1,564,814 459,853
Provision for income taxes ........ 183,700 108,070 556,846 156,350
----------- ----------- ----------- -----------
Net income ........................ $ 332,458 $ 209,782 $ 1,007,968 $ 303,503
=========== =========== =========== ===========
Earnings per common share ......... $ .20 $ -- $ .61 $ --
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUTY
(Unaudited)
Nine Months
Ended March 31,
1998 1997
------------ ------------
<S> <C> <C>
Balance, beginning of period ............................. $ 25,711,713 $ 9,212,537
Net income for period .................................... 1,007,968 303,503
Cash dividends of $.19 per share ......................... (314,022) --
Commitment to release 8,076 employee stock ownership plan
shares at fair value ................................... 138,276 --
Change in unrealized gain on securities available for sale 2,365 --
------------ ------------
Balance, end of period ................................... $ 26,546,300 $ 9,516,040
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
PEOPLES FEDERAL SAVINGS LOAN ASSOCIATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
March 31,
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income ................................................ $ 1,007,968 $ 303,503
Adjustments to reconcile net income to net cash from
operating activities
Depreciation .......................................... 37,687 40,004
Provision for loan losses ............................. 26,377 97,397
FHLB stock dividends .................................. (42,100) (35,500)
Compensation expense on ESOP shares ................... 138,276 --
Change in
Accrued interest receivable and other assets ..... (163,463) (264,304)
Accrued expense and other liabilities ............ (23,801) (17,158)
Deferred loan fees ............................... 23,310 (6,441)
----------- -----------
Net cash from operating activities ........... 1,004,254 117,501
Cash flows from investing activities
Purchases of securities available for sale ................ (1,999,141) --
Maturities of securities held to maturity ................. 2,000,000 600,000
Purchases of time deposits in other financial institutions (3,000,000) --
Maturities of time deposits in other financial institutions 6,000,000 1,100,000
Net increase in loans ..................................... (4,306,080) (8,120,332)
Premises and equipment expenditures ....................... (175,059) (8,926)
Proceeds from sale of real estate owned ................... -- 42,652
----------- -----------
Net cash from investing activities .................... (1,480,280) (6,386,606)
Cash flows from financing activities
Net increase in deposits .................................. 1,567,974 4,065,365
Net change in short-term borrowings ....................... -- 2,500,000
Cash dividends paid ....................................... (314,022) --
----------- -----------
Net cash from financing activities .................... 1,253,952 6,565,365
----------- -----------
Net change in cash and cash equivalents ........................ 777,926 296,260
Cash and cash equivalents at beginning of period ............... 2,795,826 2,720,809
----------- -----------
Cash and cash equivalents at end of period ..................... $ 3,573,752 $ 3,017,069
=========== ===========
Supplemental disclosures of cash flow information
Cash paid during the period for
Interest .............................................. $ 2,982,098 $ 3,085,140
Income taxes .......................................... 546,000 100,000
Noncash transactions
Transfer from loans to real estate owned .............. -- 42,652
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
PEOPLES-SIDNEY FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These interim financial statements are prepared without audit and reflect all
adjustments which, in the opinion of management, are necessary to present fairly
the financial position of Peoples-Sidney Financial Corporation (the
"Corporation") at March 31, 1998 and its results of operations and cash flows
for the periods presented. All such adjustments are normal and recurring in
nature. The accompanying consolidated financial statements have been prepared in
accordance with the instructions of Form 10-QSB and, therefore, do not purport
to contain all the necessary financial disclosures required by generally
accepted accounting principles that might otherwise be necessary in the
circumstances, and should be read in conjunction with the consolidated financial
statements and notes thereto of the Corporation for the fiscal year ended June
30, 1997, included in its 1997 Annual Report. Reference is made to the
accounting policies of the Corporation described in the notes to consolidated
financial statements contained in its 1997 Annual Report. The Corporation has
consistently followed these policies in preparing this Form 10-QSB.
The accompanying consolidated financial statements include accounts of the
Corporation and its wholly-owned subsidiary, Peoples Federal Savings and Loan
Association (the "Association"), a federal stock savings and loan association.
All significant intercompany transactions and balances have been eliminated.
The Corporation's and Association's revenues, operating income and assets are
primarily from the financial institution industry. The Association is engaged
primarily in the business of making residential real estate loans and accepting
deposits. Its operations are conducted solely through its main office located in
Sidney, Ohio. The Association's market area consists of Shelby and surrounding
counties.
To prepare financial statements in conformity with generally accepted accounting
principles, management makes estimates and assumptions based on available
information. These estimates and assumptions affect the amounts reported in the
financial statements and disclosures provided, and future results could differ.
The collectibility of loans, fair values of financial instruments and status of
contingencies are particularly subject to change.
The provision for income taxes is based on the effective tax rate expected to be
applicable for the entire year. Income tax expense is the sum of the
current-year income tax due or refundable and the change in deferred tax assets
and liabilities. Deferred tax assets and liabilities are expected future tax
consequences of temporary differences between the carrying amounts and tax basis
of assets and liabilities, computed using enacted tax rates. A valuation
allowance, if needed, reduces deferred tax assets to the amount expected to be
realized.
Earnings per common share is computed under the provisions of SFAS No. 128,
"Earnings Per Share," which was adopted retroactively by the Corporation on
December 31, 1997. SFAS No. 128 requires dual presentation of basic and diluted
earnings per share ("EPS") for entities with complex capital structures. Basic
EPS includes no dilution and is computed by dividing income available to common
<PAGE>
PEOPLES-SIDNEY FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
shareholders by the weighted-average common shares outstanding for the period.
Diluted EPS reflects potential dilution of securities that could share in
earnings such as stock options, warrants or other common stock equivalents.
Adoption of SFAS No. 128 did not change the earnings per share amounts
previously reported as the Corporation currently has no common stock
equivalents.
Earnings per common share is computed by dividing net income by the weighted
average number of shares outstanding during the year. As more fully discussed in
Note 2, the Association converted from a mutual to a stock form of ownership
with the concurrent formation of a holding company effective April 25, 1997. The
weighted average number of shares outstanding for the three- and nine-month
periods ended March 31, 1998 were 1,658,803 and 1,656,198. Unreleased ESOP
shares are not considered to be outstanding shares for determining weighted
average number of shares used in the earnings per common share calculation. No
earnings per common share is shown for the three- and nine-month periods ended
March 31, 1997, as before April 25, 1997, the Association was a mutual company.
The financial information for the three and nine months ended March 31, 1997,
reflects the Association before the conversion.
SFAS No. 129, "Disclosures of Information about Capital Structure," became
effective for the Corporation as of December 31, 1997. SFAS No. 129 consolidated
existing accounting guidance relating to disclosure about a company's capital
structure. SFAS No. 129 did not affect the Corporation's disclosures.
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No.
130, "Reporting Comprehensive Income." SFAS 130 establishes standards for
reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. SFAS No. 130 requires all items required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. It does not require a specific format for that financial
statement, but requires an enterprise display an amount representing total
comprehensive income for the period in that financial statement.
SFAS No. 130 requires an enterprise (a) classify items of other comprehensive
income by their nature in a financial statement and (b) display the accumulated
balance of other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of a statement of financial
position. SFAS No. 130 is effective for fiscal years beginning after December
15, 1997. Reclassification of financial statements for earlier periods provided
for comparative purposes is required.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This Standard significantly changes the way
public business enterprises report information about operating segments in
annual financial statements, and requires those enterprises report selected
information about reportable segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. SFAS No. 131 uses a
"management approach" to disclose financial and descriptive information about an
<PAGE>
PEOPLES-SIDNEY FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
enterprise's reportable operating segments which is based on reporting
information the way management organizes the segments within the enterprise for
making operating decisions and assessing performance. For many enterprises, the
management approach will likely result in more segments being reported. In
addition, the Standard requires significantly more information be disclosed for
each reportable segment than is presently being reported in annual financial
statements. The Standard also requires selected information be reported in
interim financial statements. SFAS No. 131 is effective for financial statements
for periods beginning after December 15, 1997.
NOTE 2 - CONSUMMATION OF THE CONVERSION TO A STOCK SAVINGS AND LOAN ASSOCIATION
WITH THE CONCURRENT FORMATION OF A HOLDING COMPANY
On November 8, 1996, the Board of Directors of the Association unanimously
adopted a Plan of Conversion to convert from a federally-chartered mutual
savings and loan association to a federally-chartered stock savings and loan
association with the concurrent formation of a holding company, Peoples-Sidney
Financial Corporation. The conversion was consummated on April 25, 1997, by
amending the Association's charter and selling the holding company's common
stock in an amount equal to the market value of the Association after giving
effect to the conversion. Common shares of the Corporation were offered in
accordance with the plan of conversion. A total of 1,785,375 common shares of
the Corporation were sold at $10.00 per share and net proceeds from the sale
were $17,217,944 after deducting the costs of conversion.
The Corporation retained 50% of the net proceeds from the sale of common shares.
The remainder of the net proceeds were invested in capital stock issued by the
Association to the Corporation as a result of the conversion.
At the time of conversion, the Association established a liquidation account in
an amount equal to its regulatory capital as of the latest practicable date
prior to the conversion. In the event of a complete liquidation, each eligible
depositor will be entitled to receive a distribution from the liquidation
account in an amount proportionate to the current adjusted qualifying balances
for accounts then held.
Under Office of Thrift Supervision (OTS) regulations, limitations have been
imposed on all "capital distributions" by savings institutions, including cash
dividends. The regulation establishes a three-tiered system of restrictions,
with greatest flexibility afforded to thrifts that are both well-capitalized and
given favorable qualitative examination ratings by the OTS.
<PAGE>
PEOPLES-SIDNEY FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 - SECURITIES
The amortized cost and estimated fair values of securities are summarized as
follows:
<TABLE>
<CAPTION>
March 31, 1998
---------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Securities available for sale
U.S. Government agencies $ 3,998,694 $ 23,896 $ 6,570 $ 4,016,020
============== ========== =========== ===============
<CAPTION>
June 30, 1997
---------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Securities available for sale
U.S. Government agencies $ 1,999,060 $ 13,742 $ -- $ 2,012,802
============== ========== =========== ===============
Securities held to maturity
U.S. Government agencies $ 1,999,375 $ -- $ 2,580 $ 1,996,795
============== ========== =========== ===============
</TABLE>
Amortized cost and estimated fair values of securities at March 31, 1998, by
contractual maturity, are shown below. Actual maturities could differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
----------- -----------
<S> <C> <C>
Securities available for sale
Due after one year through five years $ 3,998,694 $ 4,016,020
=========== ===========
</TABLE>
No securities were sold during the three- or nine-month periods ended March 31,
1998 and 1997. No securities were pledged as collateral at March 31, 1998 or
June 30, 1997.
<PAGE>
PEOPLES-SIDNEY FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - LOANS RECEIVABLE
Loans receivable are summarized as follows:
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
------------ ------------
<S> <C> <C>
Mortgage loans:
1-4 family residential ................. $ 79,200,095 $ 75,808,323
Multi-family residential ............... 667,169 219,153
Commercial real estate ................. 6,541,061 5,842,476
Real estate construction and development 5,566,362 6,551,430
Land ................................... 1,882,485 1,446,838
------------ ------------
Total mortgage loans ............... 93,857,172 89,868,220
Consumer and other loans .................... 2,179,678 2,314,263
------------ ------------
Total loans receivable ............. 96,036,850 92,182,483
Less:
Allowance for loan losses .............. (410,548) (397,159)
Loans in process ....................... (2,264,070) (2,702,795)
Deferred loan fees ..................... (181,500) (158,190)
------------ ------------
$ 93,180,732 $ 88,924,339
============ ============
</TABLE>
Activity in the allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------ ------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance at beginning of period $ 418,075 $ 340,475 $ 397,159 $ 307,308
Provision for losses ......... (9,383) 55,621 26,377 97,397
Charge-offs .................. -- (3,229) (15,036) (15,160)
Recoveries ................... 1,856 703 2,048 4,025
--------- --------- --------- ---------
Balance at end of period ..... $ 410,548 $ 393,570 $ 410,548 $ 393,570
========= ========= ========= =========
</TABLE>
As of and for the three and nine months ended March 31, 1998 and 1997, no loans
were considered impaired within the scope of SFAS No. 114.
<PAGE>
PEOPLES-SIDNEY FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5 - OTHER BORROWINGS
At March 31, 1998, the Association had a cash management line of credit enabling
it to borrow up to $5,100,000 from the Federal Home Loan Bank (FHLB) of
Cincinnati. The line of credit must be renewed on an annual basis. There were no
borrowings outstanding on this line of credit at March 31, 1998 or June 30,
1997. As a member of the Federal Home Loan Bank system, the Association has the
ability to obtain additional borrowings up to a maximum total of approximately
$16,092,000, including the line of credit. Advances under the borrowing
agreements are collateralized by a blanket pledge of the Association's
residential mortgage loan portfolio and Federal Home Loan Bank stock.
NOTE 6 - COMMITMENTS, CONTINGENCIES AND FINANCIAL INSTRUMENTS WITH
OFF-BALANCE-SHEET RISK
Various contingent liabilities are not reflected in the financial statements,
including claims and legal actions arising in the ordinary course of business.
In the opinion of management, after consultation with legal counsel, ultimate
disposition of these matters is not expected to have a material effect on the
Corporation's financial condition or results of operations.
Some financial instruments are used in the normal course of business to meet
financing needs of customers and reduce exposure to interest rate changes. These
financial instruments include commitments to extend credit, standby letters of
credit and financial guarantees. These involve, to varying degrees, more credit
risk than the amount reported in the financial statements.
Exposure to credit loss if the other party does not perform is represented by
contractual amount for commitments to extend credit, standby letters of credit
and financial guarantees written. The same credit policies are used for
commitments and conditional obligations as are used for loans. The amount of
collateral obtained, if deemed necessary, on extension of credit is based on
management's credit evaluation and generally consists of residential or
commercial real estate.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the commitment.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many commitments are expected to expire
without being used, total commitments do not necessarily represent future cash
requirements.
As of March 31, 1998 and June 30, 1997, the Corporation had commitments to make
fixed-rate commercial and residential real estate mortgage loans at current
market rates totaling $338,000 and $156,000, and variable-rate commercial and
residential real estate mortgage loans at current market rates totaling
$1,183,500 and $876,000. Loan commitments are generally for 30 days. The
interest rates on fixed-rate commitments ranged from 7.50% to 8.25% at March 31,
1998 and were 8.25% at June 30, 1997. The interest rates on variable-rate
commitments ranged from 7.00% to 7.75% at March 31, 1998, and 7.25% to 8.50% at
June 30, 1997. The Corporation also had unused lines of credit totaling $565,000
and $622,000 at March 31, 1998 and June 30, 1997.
<PAGE>
PEOPLES-SIDNEY FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6 - COMMITMENTS, CONTINGENCIES AND FINANCIAL INSTRUMENTS WITH
OFF-BALANCE-SHEET RISK (Continued)
At March 31, 1998 and June 30, 1997, compensating balances of $437,000 and
$298,000 were required as deposits with various correspondent banks. These
balances do not earn interest.
The Association entered into employment agreements with certain officers of the
Corporation and Association. The agreements provide for terms of one to three
years, and an annual salary and performance review by the Board of Directors, as
well as inclusion of the employee in any formally-established employee benefit,
bonus, pension and profit-sharing plans for which management personnel are
eligible. The agreements provide for extensions for a period of one year on each
annual anniversary date, subject to review and approval of the extension by
disinterested members of the Board of Directors of the Association. The
employment agreements also provide for vacation and sick leave.
NOTE 7 - EMPLOYEE STOCK OWNERSHIP PLAN
The Corporation offers an employee stock ownership plan ("ESOP") for the benefit
of substantially all employees of the Corporation and Association. During July
1997, the ESOP received a favorable determination letter from the Internal
Revenue Service on the qualified status of the ESOP under applicable provisions
of the Internal Revenue Code.
The ESOP borrowed funds from the Corporation in order to acquire common shares
of the Corporation. The loan is secured by shares purchased with loan proceeds
and will be repaid by ESOP with funds from the Association's discretionary
contributions to the ESOP and earnings on ESOP assets. All dividends on
unallocated shares received by the ESOP are used to pay debt service. Shares
purchased with loan proceeds are held in a suspense account for allocation among
participants as the loan is repaid. As payments are made and shares are released
from the suspense account, such shares will be validly issued, fully paid and
nonassessable.
The Corporation accounts for the ESOP in accordance with Statement of Position
("SOP") 93-6. Accordingly, shares pledged as collateral are reported as unearned
ESOP shares in the Consolidated Balance Sheets. As shares are released from
collateral, the Corporation reports compensation expense equal to the current
market price of the shares and the shares become outstanding for
earnings-per-share computations. Dividends on allocated ESOP shares are recorded
as a reduction of retained earnings; dividends on unallocated ESOP shares are
recorded as a reduction of debt and accrued interest. ESOP compensation expense
was $53,850 and $138,276 for the three and nine months ended March 31, 1998.
<PAGE>
PEOPLES-SIDNEY FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 7 - EMPLOYEE STOCK OWNERSHIP PLAN (Continued)
The ESOP shares as of March 31, 1998 and June 30, 1997 were as follows:
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
---------- ----------
<S> <C> <C>
Allocated shares ................................. 8,204 8,204
Shares committed to be released for allocation ... 10,074 1,998
Unreleased shares ................................ 124,552 132,628
---------- ----------
Total ESOP shares ............................ 142,830 142,830
========== ==========
Fair value of unreleased shares .................. $2,241,936 $1,865,081
========== ==========
</TABLE>
<PAGE>
PEOPLES-SIDNEY FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Introduction
In the following pages, management presents an analysis of the financial
condition of Peoples-Sidney Financial Corporation (the "Corporation") as of
March 31, 1998, compared to June 30, 1997, and results of operations for the
three and nine months ended March 31, 1998, compared with the same periods in
1997. This discussion is designed to provide a more comprehensive review of
operating results and financial position than could be obtained from an
examination of the financial statements alone. This analysis should be read in
conjunction with the interim financial statements and related footnotes included
herein.
In addition to the historical information contained herein, the following
discussion contains forward-looking statements involving risks and
uncertainties. Economic circumstances, the Corporation's operations and actual
results could differ significantly from those discussed in the forward-looking
statements. Some factors that could cause or contribute to such differences are
discussed herein, but also include changes in the economy and interest rates in
the nation and the Association's general market area.
On November 8, 1996, the Board of Directors of the Peoples Federal Savings and
Loan (the "Association") unanimously adopted a Plan of Conversion to convert
from a federally-chartered mutual savings and loan association to a
federally-chartered stock savings and loan association with the concurrent
formation of a holding company, Peoples-Sidney Financial Corporation. The
conversion was consummated on April 25, 1997, by amending the Association's
charter and selling the holding company's common stock in an amount equal to the
market value of the Association, after giving effect to the conversion. A total
of 1,785,375 common shares of the Corporation were sold at $10.00 per share and
net proceeds from the sale were $17,217,944 after deducting the costs of
conversion.
The Corporation retained 50% of the net proceeds from the sale of common shares.
The remainder of the net proceeds were invested in the capital stock issued by
the Association to the Corporation as a result of the conversion.
The Corporation is a thrift holding company, primarily engaged in the business
of attracting savings deposits from the general public and investing such funds
in permanent mortgage loans secured by one- to four-family residential real
estate located in Shelby, Logan, Auglaize, Miami, Darke and Champaign Counties,
Ohio. The Corporation also originates, to a lesser extent, loans for the
construction of one- to four-family residential real estate loans secured by
multi-family residential real estate (over four units) and nonresidential real
estate and consumer loans, and invests in U.S. government obligations,
interest-bearing deposits in other financial institutions and other investments
permitted by applicable law.
<PAGE>
PEOPLES-SIDNEY FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
Total assets at March 31, 1998 were $105.5 million compared to $103.1 million at
June 30, 1997, an increase of $2.4 million, or 2.3%. The increase in total
assets was primarily due to increase in loans. The Corporation was able to
reinvest proceeds from maturities of time deposits in other financial
institutions in higher yielding loans. Additional funding for loan growth was
provided by increased deposits.
Loans receivable increased $4.3 million from $88.9 million at June 30, 1997, to
$93.2 million at March 31, 1998. The Corporation experienced increases in all
mortgage loan categories except for real estate construction and development.
The largest increase was in one- to four-family residential real estate loans
which increased $3.4 million. These increases are reflective of a strong local
economy coupled with attractive loan rates and products compared to local
competition. The Corporation's consumer loan portfolio decreased $135,000
between June 30, 1997 and March 31, 1998. Consumer loans remain a small portion
of the entire loan portfolio and represented only 2.3% and 2.5% of gross loans
at March 31, 1998 and June 30, 1997.
A $3.0 million decrease in time deposits with other financial institutions was
the result of redirection of funds provided from the maturities of such
investments, in addition to increased deposits, to provide for loan growth. The
excess of such funds which were not used to fund loan growth, were invested in
overnight deposits to provide liquidity for future loan growth. Overnight funds
increased $500,000 from $1.0 million at June 30, 1997 to $1.5 million at March
31, 1998. Total securities remained relatively unchanged as funds provided by
maturities of securities classified as held to maturity were reinvested in
securities classified as available for sale.
Total deposits increased $1.6 million from $77.0 million at June 30, 1997 to
$78.6 million at March 31, 1998. The Corporation experienced increases in
savings accounts and certificates of deposit which increased $412,000 and $1.7
million, respectively. Offsetting such increases was a $558,000 decrease in
negotiable order of withdrawal ("NOW") accounts. Management believes the shift
of funds between savings and NOW accounts is the result of normal patterns of
consumer use of funds. Certificate of deposit growth has been due to normal
operating procedures as the Corporation has not used any special promotions to
attract increased volume. Almost all certificates of deposit mature in less than
five years with the majority maturing in the next two years.
As an additional source of liquidity, the Association maintains a $5.1 million
cash management line of credit with the Federal Home Loan Bank ("FHLB") of
Cincinnati. There were no advances outstanding at March 31, 1998 or June 30,
1997. Advances are variable rate and can be prepaid at any time without penalty.
Advances may be obtained from the FHLB to fund future loan growth and liquidity
as needed.
<PAGE>
PEOPLES-SIDNEY FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Operating results of the Corporation are affected by general economic
conditions, monetary and fiscal policies of federal agencies and regulatory
policies of agencies that regulate financial institutions. The Corporation's
cost of funds is influenced by interest rates on competing investments and
general market rates of interest. Lending activities are influenced by demand
for real estate loans and other types of loans, which in turn is affected by
interest rates at which such loans are made, general economic conditions and
availability of funds for lending activities.
The Corporation's net income primarily depends on its net interest income, which
is the difference between interest income earned on interest-earning assets,
such as loans and securities, and interest expense incurred on interest-bearing
liabilities, such as deposits and other borrowings. The level of net interest
income is dependent on the interest rate environment and volume and composition
of interest-earning assets and interest-bearing liabilities. Net income is also
affected by provisions for loan losses, service charges, gains on the sale of
assets and other income, noninterest expense and income taxes.
The Corporation earned net income of $332,000 and $1,008,000 for the three and
nine months ended March 31, 1998 compared to net income of $210,000 and $304,000
for the three and nine months ended March 31, 1997. The increase in income for
the three months ended March 31, 1998, was due to an increase in net interest
income partly offset by increased noninterest expense. The increase in net
income for the nine months ended March 31, 1998 was due to an increase in net
interest income combined with a decrease in FDIC deposit insurance premiums
which resulted from the special deposit insurance assessment recognized as
expense in the nine months ended March 31, 1997. The special assessment is more
fully discussed below.
Net interest income totaled $1,039,000 and $3,075,000 for the three and nine
months ended March 31, 1998 compared to $745,000 and $2,189,000 for the three
and nine months ended March 31, 1997, representing increases of $294,000, or
39.5%, and $886,000, or 40.5%, respectively. The change in net interest income
is attributable to higher average balances of interest earning assets being
funded with the proceeds from the mutual to stock conversion.
Interest and fees on loans totaled $1,882,000 and $5,585,000 for the three and
nine months ended March 31, 1998 compared to $1,723,000 and $5,031,000 for the
three and nine months ended March 31, 1997, representing increases of $159,000,
or 9.3%, and $554,000, or 11.0%, respectively. The increase in interest income
was due to higher average loans receivable, related primarily to the origination
of new one- to four-family first mortgages.
Interest earned on securities increased $32,000 and $95,000 for the three and
nine months ended March 31, 1998, as compared to the same periods in 1997. The
increase was a result of higher average balances of securities.
Interest on interest-bearing demand and overnight deposits increased $41,000 and
$165,000 for the three and nine months ended March 31, 1998, as compared to the
same periods in 1997. The increase was the result of higher average balances of
interest-bearing demand and overnight funds.
<PAGE>
PEOPLES-SIDNEY FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Dividends on FHLB stock increased slightly for the three and nine months ended
March 31, 1998, compared to the three and nine months ended March 31, 1997,
primarily due to an increase in the number of shares of FHLB stock owned.
Interest paid on deposits totaled $984,000 and $2,977,000 for the three and nine
months ended March 31, 1998 compared to $1,017,000 and $2,981,000 for the three
and nine months ended March 31, 1997. Interest expense decreased by $33,000 for
the comparable three month periods due to a temporary increase in the average
balance of deposit accounts because of the stock subscription deposits during
the three months ended March 31, 1997. However, interest expense has decreased
only slightly for the nine month comparable periods as the interest rates paid
on various types of deposit accounts have remained fairly stable and the
Corporation has not experienced any significant change in the overall average
balance or composition of its deposit portfolio.
Interest on borrowings totaled $26,000 and $61,000 for the three and nine months
ended March 31, 1997. The Corporation borrowed funds from the FHLB for the first
time during fiscal 1997. The borrowings were used as a source of short-term
liquidity to provide funding for loan demand before conversion. There were no
borrowings during the three and nine months ended March 31, 1998.
The Corporation maintains an allowance for loan losses in an amount that, in
management's judgment, is adequate to absorb reasonably foreseeable losses
inherent in the loan portfolio. While management utilizes its best judgment and
information available, ultimate adequacy of the allowance is dependent on a
variety of factors, including performance of the loan portfolio, the economy,
changes in real estate values and interest rates and the view of regulatory
authorities toward loan classifications. The provision for loan losses is
determined by management as the amount to be added to the allowance for loan
losses after net charge-offs have been deducted to bring the allowance to a
level considered adequate to absorb potential losses in the loan portfolio. The
amount of the provision is based on management's monthly review of the loan
portfolio and consideration of such factors as historical loss experience,
general prevailing economic conditions, changes in size and composition of the
loan portfolio and specific borrower considerations, including ability of the
borrower to repay the loan and the estimated value of the underlying collateral.
The provision for loan losses totaled $(9,000) and $26,000 for the three and
nine months ended March 31, 1998 compared to $56,000 and $97,000 for the three
and nine months ended March 31, 1997, representing decreases of $65,000, or
116.9%, and $71,000 or 72.9%, respectively. The reduction in the provision is
reflective of the fact that the Corporation has seen a reduction in problem
loans coupled with the fact that has not experienced significant charge-offs in
any period presented. Charge-offs experienced by the Corporation have primarily
related to consumer and other non-real estate loans. As indicated previously,
such loans make up an insignificant portion of the Corporation's total loan
portfolio. The Corporation's low historical charge-off history is the product of
a variety of factors, including the Corporation's underwriting guidelines, which
generally require a loan-to-value or projected completed value ratio of 90% for
purchase or construction of one- to four-family residential properties and 75%
for commercial real estate and land loans, established income information and
<PAGE>
PEOPLES-SIDNEY FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
defined ratios of debt to income. Notwithstanding the historical charge-off
history, as well as a low volume of non-performing loans, management believes it
is prudent to continue to increase the allowance for loan losses as total loans
increase. Accordingly, management anticipates it will continue its provisions to
the allowance for loan losses as loan growth continues. The allowance for loan
losses totaled $411,000, or .43% of gross loans receivable at March 31, 1998,
compared with $394,000, or .44% of gross loans receivable at March 31, 1997.
Noninterest income includes service fees and other miscellaneous income. For the
three and nine months ended March 31, 1998, noninterest income totaled $15,000
and $46,000 compared to $17,000 and $47,000 for the three and nine months ended
March 31, 1997.
Noninterest expense totaled $548,000 and $1,530,000, for the three and nine
months ended March 31, 1998 compared to $388,000 and $1,678,000 for same periods
in 1997. Increases in compensation and benefits, state franchise taxes and other
expenses were the primary reasons for the increase in the comparable three month
periods. These increases were more than offset by a decrease federal deposit
insurance premiums for the comparable nine month periods. The increase in
compensation and benefits was the result of normal, annual merit increases, the
addition of new employees and the Corporation's establishment of an employee
stock ownership plan. The employee stock ownership plan represented 75.0% of the
increase for the three months ended March 31, 1998 and 80.1% of the increase for
the nine months ended March 31,1998. State franchise taxes increased due to the
change in corporate structure during fiscal 1997 and the resulting tax impact of
higher capital levels at the Association and earnings at the Corporation. The
three months ended March 31, 1998 was the first period impacted by the capital
raised in the conversion. The increase in other expense was attributable to
increases in director fees, professional service fees and printing costs related
to the Corporation's first annual report. These increases were largely due to
the mutual to stock conversion. FDIC deposit insurance expense during the three
and nine months ended March 31, 1998 was $12,000 and $37,000, compared to $2,000
and $547,000 for the three and nine months ended March 31, 1997. Included in the
prior nine-month period was a special deposit insurance assessment of $456,000
resulting from legislation passed and enacted into law on September 30, 1996, to
recapitalize the Savings Association Insurance Fund ("SAIF"). The SAIF was below
the level required by law because a significant portion of assessments paid into
the SAIF by thrifts, like the Association, were used to pay the cost of prior
thrift failures. The legislation called for a one-time assessment of $0.657 for
each $100 in deposits held as of March 31, 1995. Because of the recapitalization
of the SAIF, the disparity between the bank and thrift insurance assessments was
reduced. Thrifts had been paying assessments of $0.23 per $100 of deposits,
which, for most thrifts, was reduced to $0.064 per $100 in deposits in January
1997 and will be reduced to $0.024 per $100 in deposits by no later than January
2000.
The volatility of income tax expense is primarily attributable to the change in
net income before income taxes. The provision for income taxes totaled $184,000
and $557,000, representing an effective tax rate of 35.6%, for the three and
nine months ended March 31, 1998 compared to $108,000 and $156,000, representing
an effective tax rate of 34.0%, for the three and nine months ended March 31,
1997.
<PAGE>
PEOPLES-SIDNEY FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Prior to the enactment of legislation discussed below, thrifts which met certain
tests relating to the composition of assets had been permitted to establish
reserves for bad debts and make annual additions thereto which could, within
specified formula limits, be taken as a deduction in computing taxable income
for federal income tax purposes. The amount of bad debt reserve deduction for
"nonqualifying loans" was computed under the experience method. The amount of
the bad debt reserve deduction for "qualifying real property loans" could be
computed under either the experience or the percentage of taxable income method,
based on an annual election.
In August 1996, legislation was enacted repealing the reserve method of
accounting used by many thrifts to calculate their bad debt reserve for federal
income tax purposes. Therefore, small thrifts, such as the Association, must
recapture that portion of the reserve exceeding the amount that could have been
taken under the experience method for tax years beginning after December 31,
1987. The legislation also requires thrifts to account for bad debts for federal
income tax purposes on the same basis as commercial banks for tax years
beginning after December 31, 1995. The recapture will occur over a six-year
period, commencement of which will be delayed until the first taxable year
beginning after December 31, 1997, provided the institution meets certain
residential lending requirements. At March 31, 1998, the Association had
approximately $581,000 in bad debt reserves subject to recapture for federal
income tax purposes. The deferred tax liability related to the recapture has
been previously established so there will be no effect on future net income.
Liquidity and Capital Resources
The Corporation's liquidity, primarily represented by cash equivalents, is a
result of operating, investing and financing activities. These activities are
summarized below for the nine months ended March 31, 1998 and 1997.
<TABLE>
<CAPTION>
Nine Months
Ended March 31,
1998 1997
(Dollars in thousands)
<S> <C> <C>
Net income ........................................... $ 1,008 $ 304
Adjustments to reconcile net income to net cash from
operating activities ............................... (4) (186)
------- -------
Net cash from operating activities ................... 1,004 118
Net cash from investing activities ................... (1,480) (6,387)
Net cash from financing activities ................... 1,254 6,565
------- -------
Net change in cash and cash equivalents .............. 778 296
Cash and cash equivalents at beginning of period ..... 2,796 2,721
------- -------
Cash and cash equivalents at end of period ........... $ 3,574 $ 3,017
======= =======
</TABLE>
<PAGE>
PEOPLES-SIDNEY FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Corporation's principal sources of funds are deposits, loan repayments,
maturities of securities and other funds provided by operations. The Association
also has the ability to borrow from the FHLB. While scheduled loan repayments
and maturing investments are relatively predictable, deposit flows and early
loan prepayments are more influenced by interest rates, general economic
conditions and competition. The Association maintains investments in liquid
assets based on management's assessment of (1) need for funds, (2) expected
deposit flows, (3) yields available on short-term liquid assets and (4)
objectives of the asset/liability management program.
OTS regulations presently require the Association to maintain an average daily
balance of investments in United States Treasury, federal agency obligations and
other investments in an amount equal to 4% of the sum of the Association's
average daily balance of net withdrawable deposit accounts and borrowings
payable in one year or less. The liquidity requirement, which may be changed
from time to time by the OTS to reflect changing economic conditions, is
intended to provide a source of relatively liquid funds on which the Association
may rely, if necessary, to fund deposit withdrawals or other short-term funding
needs. At March 31, 1998, the Association's regulatory liquidity was 11.2%. At
such date, the Corporation had commitments to originate fixed-rate commercial
and residential real estate loans totaling $338,000, and variable-rate
commercial and residential real estate mortgage loans totaling $1,184,000. Loan
commitments are generally for 30 days. The Corporation considers its liquidity
and capital reserves sufficient to meet its outstanding short- and long-term
needs. See Note 6 of the Notes to Consolidated Financial Statements.
The Association is subject to various regulatory capital requirements
administered by federal regulatory agencies. Failure to meet minimum capital
requirements can initiate certain mandatory actions that, if undertaken, could
have a direct material affect on the Association's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Association must meet specific capital guidelines involving
quantitative measures of the Association's assets, liabilities and certain
off-balance-sheet items as calculated under regulatory accounting practices. The
Association's capital amounts and classifications are also subject to
qualitative judgments by regulators about the Association's components, risk
weightings and other factors. At March 31, 1998 and June 30, 1997, management
believes the Association complies with all regulatory capital requirements.
Based on the Association's computed regulatory capital ratios, the Association
is considered well capitalized under the Federal Deposit Insurance Act at March
31, 1998 and June 30, 1997. Management is not aware of any matters subsequent to
March 31, 1998 that would cause the Association's capital category to change.
<PAGE>
PEOPLES-SIDNEY FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
At March 31, 1998 and June 30, 1997, the Association's actual capital levels (in
thousands) and minimum required levels were:
<TABLE>
<CAPTION>
Minimum
Required To Be
Minimum Required Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Regulations
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
March 31, 1998
Total capital (to risk
weighted assets) $ 18,453 27.4% $ 5,383 8.0% $ 6,728 10.0%
Tier 1 (core) capital to
risk-weighted assets) 18,045 26.8 2,691 4.0 4,037 6.0
Tier 1 (core) capital to
adjusted total assets) 18,045 17.1 4,220 4.0 5,275 5.0
Tangible capital (to
adjusted total assets) 18,045 17.1 1,583 1.5 N/A
June 30, 1997
Total capital (to risk
weighted assets) $ 17,481 26.9% $ 5,208 8.0% $ 6,510 10.0%
Tier 1 (core) capital to
risk-weighted assets) 17,088 26.3 2,604 4.0 3,906 6.0
Tier 1 (core) capital to
adjusted total 17,088 16.6 3,094 3.0 5,156 5.0
Tangible capital (to
adjusted total assets) 17,088 16.6 1,547 1.5 N/A
</TABLE>
In addition to certain federal income tax considerations, the Office of Thrift
Supervision (OTS) regulations impose limitations on payment of dividends and
other capital distributions by savings associations. Under OTS regulations
applicable to converted savings associations, the Association is not permitted
to pay a cash dividend on its common shares if its regulatory capital would, as
a result of payment of such dividends, be reduced below the amount required for
the Liquidation Account, or below applicable regulatory capital requirements
prescribed by the OTS.
OTS regulations applicable to all savings and loan associations provide that a
savings association which, immediately prior to and on a pro forma basis after
giving effect to a proposed capital distribution (including a dividend), has
total capital (as defined by OTS regulations) equal to or greater than the
amount of its capital requirements is generally permitted without OTS approval
(but subsequent to 30 days prior notice to the OTS) to make capital
distributions, including dividends, during a calendar year in an amount not to
exceed the greater of (1) 100% of its net earnings to date during the calendar
<PAGE>
PEOPLES-SIDNEY FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
year, plus an amount equal to one-half that which its total capital to assets
ratio exceeded its required capital to assets ratio at the beginning of the
calendar year, or (2) 75% of its net earnings for the most recent four-quarter
period. Savings associations with total capital more than the capital
requirements that have been notified by the OTS that they are in need of more
than normal supervision will be subject to restrictions on dividends. A savings
association failing to meet current minimum capital requirements is prohibited
from making any capital distributions without the prior approval of the OTS.
The Association currently meets all capital requirements and, unless the OTS
determines that the Association is an institution requiring more than normal
supervision, the Association may pay dividends in accordance with the foregoing
provisions of OTS regulations.
In December 1997, the Association acquired real estate in Anna, Ohio, and
announced plans to construct a new, full-service branch banking office. The
total projected cost of construction is expected to be $805,000. As of March 31,
1998, the Association has paid $109,000 in costs related to such construction.
Year 2000 Issue
Many computer programs use only two digits to identify a year in the date field
and were apparently designed and developed without considering the impact of the
upcoming change in the century. Such programs could erroneously read entries for
the Year 2000 as the Year 1900. This could result in major systems failures and
miscalculations. Rapid and accurate data processing is essential to the
operations of financial institutions, such as the Corporation. The Corporation
has formed a Year 2000 committee to assess the extent to which it and its
outside vendors may be adversely affected by Year 2000 problems. Management has
determined that most programs are or will be capable of identifying the turn of
the century. The issue is closely monitored by management and full compliance is
expected by the end of 1998. While the Corporation does not anticipate that any
Year 2000 computer problems or expenses required to correct such problems will
materially affect its financial condition and results of operations, no
assurance can be given in this regard.
<PAGE>
PEOPLES-SIDNEY FINANCIAL CORPORATION
PART II - OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
On October 10, 1997, the Annual Meeting of the Shareholders of the
Corporation was held. The following members of the Board of Directors
of the Corporation were reelected by the votes set forth below for
terms expiring in 2000:
Harry N. Faulkner FOR: 1,340,264 WITHHELD: 22,153
John W. Sargeant FOR: 1,350,187 WITHHELD: 13,230
One other matter submitted to the Shareholders, for which the
following votes were cast:
Ratification of the selection of Crowe, Chizek and Company LLP as the
auditors of the Corporation for the fiscal year ending June 30, 1998.
FOR: 1,305,180 AGAINST: 12,000 ABSTAIN: 3,230
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit No. 27: Financial Data Schedule
(b) Form 8-K was filed on January 28, 1998. Under Item 5, Other
Matters, the Corporation reported the issuance of a press
release to announce its operating results for the quarter ended
December 31, 1997 and the declaration of a $.07 per share cash
dividend payable on February 6, 1998 to shareholders of record
on January 23, 1998.
<PAGE>
PEOPLES-SIDNEY FINANCIAL CORPORATION
SIGNATURES
- --------------------------------------------------------------------------------
Pursuant to the requirement of the Securities Exchange Act of 1934, the small
business issuer has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 8, 1998 /s/ Douglas Stewart
-------------------
Douglas Stewart
President
Date: May 8, 1998 /s/ Debra Geuy
--------------
Debra Geuy
Chief Financial Officer
<PAGE>
- --------------------------------------------------------------------------------
PEOPLES-SIDNEY FINANCIAL CORPORATION
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FILES AS
PART OF THE QUARTERLY REPORT ON FORM 10-qAND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 692
<INT-BEARING-DEPOSITS> 3,382
<FED-FUNDS-SOLD> 1,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,016
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 93,181
<ALLOWANCE> 411
<TOTAL-ASSETS> 105,522
<DEPOSITS> 78,613
<SHORT-TERM> 0
<LIABILITIES-OTHER> 363
<LONG-TERM> 0
0
0
<COMMON> 18
<OTHER-SE> 26,528
<TOTAL-LIABILITIES-AND-EQUITY> 105,522
<INTEREST-LOAN> 5,585
<INTEREST-INVEST> 187
<INTEREST-OTHER> 279
<INTEREST-TOTAL> 6,052
<INTEREST-DEPOSIT> 2,977
<INTEREST-EXPENSE> 2,977
<INTEREST-INCOME-NET> 3,075
<LOAN-LOSSES> 26
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,530
<INCOME-PRETAX> 1,565
<INCOME-PRE-EXTRAORDINARY> 1,008
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,008
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
<YIELD-ACTUAL> 3.99
<LOANS-NON> 759
<LOANS-PAST> 397
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 397
<CHARGE-OFFS> 15
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 411
<ALLOWANCE-DOMESTIC> 411
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
