UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1999
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
For the transition period from to
--------------------- ------------------------
Commission file Number: 000-18464
---------
EMCLAIRE FINANCIAL CORP.
(Exact Name of small business issuer as specified in its charter)
PENNSYLVANIA 25-1606091
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
612 Main Street
Emlenton, PA 16373
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (724) 867-2311
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 for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
As of November 11, 1999, there were 1,395,852 shares outstanding of the issuer's
common stock, par value $1.25 per share.
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Emclaire Financial Corp.
INDEX TO QUARTERLY REPORT OF FORM 10-QSB
<TABLE>
<CAPTION>
<S> <C> <C>
Part I Financial Information Page
----
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheet, September 30, 1999 and
December 31, 1998 3
Consolidated Statement of Income
Three months ended September 30, 1999 and 1998 and
Nine months ended September 30, 1999 and 1998 4
Consolidated Statement of Changes in
Stockholders' Equity 5
Consolidated Statement of Cash Flows
Nine months ended September 30, 1999 and 1998 6
Notes to Consolidated Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 15
Part II Other Information
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Securities Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
</TABLE>
2
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EMCLAIRE FINANCIAL CORP.
CONSOLIDATED BALANCE SHEET
(Unaudited - dollars in thousands, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----------------- -----------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 5,763 $ 8,989
Time deposits with others - 100
Federal funds sold 3,275 9,700
Investment securities:
Available for sale 35,425 28,929
Held to maturity (estimated market value
of $2,798 and $3,419) 2,797 3,392
Loans 137,439 134,249
Less allowance for loan losses 1,342 1,336
----------------- -----------------
Net loans 136,097 132,913
Premises and equipment 3,426 3,625
Accrued interest and other assets 6,323 6,484
----------------- -----------------
TOTAL ASSETS $ 193,106 $ 194,132
================= =================
LIABILITIES
Deposits
Non-interest bearing demand $ 26,860 $ 24,746
Interest bearing demand 21,337 22,026
Savings 22,507 22,527
Money market 21,838 21,381
Time 76,518 79,190
----------------- -----------------
Total deposits 169,060 169,870
Obligation under capital lease - 19
Borrowed funds 2,000 2,000
Accrued interest and other liabilities 917 1,142
----------------- -----------------
TOTAL LIABILITIES 171,977 173,031
----------------- -----------------
STOCKHOLDERS' EQUITY
Preferred stock, par value $1.00, 3,000,000 shares
authorized; none issued - -
Common stock, par value $1.25 per share;
12,000,000 shares authorized, 1,395,852 shares issued and outstanding 1,745 1,745
Additional paid in capital 10,871 10,871
Retained earnings 8,901 8,192
Net unrealized gain on securities (388) 293
----------------- -----------------
TOTAL STOCKHOLDERS' EQUITY 21,129 21,101
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 193,106 $ 194,132
================= =================
</TABLE>
See accompanying notes to the consolidated financial statements.
3
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EMCLAIRE FINANCIAL CORP.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited - dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
1999 1998 1999 1998
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 2,778 $ 2,291 $ 8,198 $ 6,189
Interest bearing deposits in other banks 5 - 99 1
Federal funds sold 113 51 361 116
Investment securities:
Taxable 471 488 1,320 1,485
Exempt from federal income tax 84 48 185 144
---------------- ---------------- ---------------- ----------------
Total interest income 3,451 2,878 10,163 7,935
---------------- ---------------- ---------------- ----------------
INTEREST EXPENSE
Deposits 1,370 1,143 4,187 3,075
Borrowed funds 28 29 84 89
Lease obligation - - - 2
---------------- ---------------- ---------------- ----------------
Total interest expense 1,398 1,172 4,271 3,166
---------------- ---------------- ---------------- ----------------
NET INTEREST INCOME 2,053 1,706 5,892 4,769
Provision for loan losses 36 55 116 155
---------------- ---------------- ---------------- ----------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,017 1,651 5,776 4,614
---------------- ---------------- ---------------- ----------------
OTHER OPERATING INCOME
Service fees on deposit accounts 161 145 449 401
Other 73 56 178 139
---------------- ---------------- ---------------- ----------------
Total other operating income 234 201 627 540
---------------- ---------------- ---------------- ----------------
OTHER OPERATING EXPENSE
Salaries and employee benefits 776 603 2,209 1,805
Occupancy, furniture and equipment 229 241 712 625
Other 563 475 1,595 1,267
---------------- ---------------- ---------------- ----------------
Total other operating expense 1,568 1,319 4,516 3,697
---------------- ---------------- ---------------- ----------------
Income before income taxes 683 533 1,887 1,457
Income taxes 211 169 592 452
---------------- ---------------- ---------------- ----------------
NET INCOME $ 472 $ 364 $ 1,295 $ 1,005
================ ================ ================ ================
EARNINGS PER SHARE $ 0.34 $ 0.31 $ 0.93 $ 0.90
DIVIDENDS PER SHARE 0.14 0.12 0.42 0.36
AVERAGE SHARES OUTSTANDING 1,395,852 1,183,974 1,395,852 1,116,002
</TABLE>
See accompanying notes to the consolidated financial statements.
4
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EMCLAIRE FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited - dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Net
Additional Unrealized
Common Paid in Retained Gain
Stock Capital Earnings on Securities Total
------------- -------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1998 $ 1,745 $ 10,871 $ 8,192 $ 293 $ 21,101
Comprehensive income:
Net income 1,295 1,295
Other comprehensive income, net
Unrealized losses on securities
of $1,032 (681) (681)
---------------
Total comprehensive income 614
Dividends declared
($.42 per share) (586) (586)
-------------- -------------- --------------- -------------- ---------------
Balance September 30, 1999 $ 1,745 $ 10,871 $ 8,901 $ (388) $ 21,129
============== ============== =============== ============== ===============
</TABLE>
See accompanying notes to the consolidated financial statements.
5
<PAGE>
EMCLAIRE FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited - dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1999 1998
------------------ ------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,295 $ 1,005
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 704 498
Net amortization of investment security
discounts and premiums 98 109
Provision for loan losses 116 155
(Increase) decrease in accrued interest receivable (187) (126)
Increase in accrued interest payable (5) (136)
Other, net 1 (192)
------------------ ------------------
Net cash provided by operating activities 2,022 1,313
------------------ ------------------
INVESTING ACTIVITIES
Proceeds from maturities and repayments of
investment securities:
Available for sale 6,304 3,000
Held to maturity 568 2,596
Purchases of investment securities available for sale (13,903) (543)
Net loan (originations) repayments (3,277) (10,187)
Purchases of premises and equipment (100) (1,034)
Net proceeds from merger acquisition - 2,232
Other 150 -
------------------ ------------------
Net cash used for investing activities (10,258) (3,936)
------------------ ------------------
FINANCING ACTIVITIES
Net increase (decrease) in deposits (810) 9,620
Decrease in short-term borrowings - (200)
Payments for obligation under capital lease (19) (32)
Cash dividends paid (586) (427)
------------------ ------------------
Net cash provided by financing activities (1,415) 8,961
------------------ ------------------
Increase in cash and cash equivalents (9,651) 6,338
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 18,689 4,975
------------------ ------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,038 $ 11,313
================== ==================
</TABLE>
See accompanying notes to the consolidated financial statements.
6
<PAGE>
EMCLAIRE FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. GENERAL
The accounting and financial reporting polices of Emclaire Financial Corp. and
its wholly-owned subsidiary The Farmers National Bank of Emlenton ("Bank" or
"Farmers"), conform to generally accepted accounting principles and to general
practice within the banking industry. In the opinion of management, the
accompanying unaudited consolidated financial statements of Emclaire Financial
Corp. ("Company" or "Emclaire") contain all adjustments, consisting of only
normal and recurring adjustments, necessary for the fair presentation of the
Company's financial position, results of operations and cash flows for the
periods presented. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full year.
2. EARNINGS PER SHARE
The Company maintains a simple capital structure; therefore there are no
dilutive effects on earnings per share. As such earnings per share computations
are based on the weighted average number of shares outstanding of 1,395,852 and
1,183,974, and 1,395,852 and 1,116,002 for the three and nine month periods in
1999 and 1998, respectively.
3. COMPREHENSIVE INCOME
The components of accumulated other comprehensive income for the nine months
ended September 30, 1999, consist of the items presented under the heading Net
Unrealized Gain on Securities as presented in the Consolidated Statement of
Changes in Stockholders' Equity. For the nine months ended September 30, 1998
the net unrealized gain on securities had a beginning balance of $222,000, a net
unrealized gain of $190,000 and an ending balance of $412,000. This net
unrealized gain on securities resulted from total comprehensive net income of
$288,000, for the nine months ended September 30, 1998.
4. LOANS
Major classifications of loans are summarized as follows (in thousands):
September 30, December 31,
1999 1998
----------------- -----------------
Commercial and industrial $ 14,932 $ 14,223
Real estate mortgages
Residential 88,357 87,137
Commercial and other 19,779 18,381
Consumer 14,371 14,508
----------------- -----------------
137,439 134,249
Less allowance for loan losses 1,342 1,336
----------------- -----------------
$ 136,097 $ 132,913
================= =================
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The Bank's primary business activity is with customers located within Venango,
Clarion, Butler, Elk, Clearfield and Jefferson Counties. Commercial,
residential, personal, and agricultural loans are granted. Although the Bank has
a diversified loan portfolio at September 30, and December 31, 1998, loans
outstanding to individuals and businesses are dependent upon the local economic
conditions within the immediate trade area.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Emclaire Financial Corp. ("Emclaire" or the "Company") is the parent holding
company for the Farmers National Bank of Emlenton ("Farmers" or the "Bank"). The
following discussion and analysis is intended to provide information about the
financial condition and results of operation of the Company and should be read
in conjunction with the Consolidated Financial Statements and the related notes
thereto appearing elsewhere in this quarterly report.
Certain information presented in this report and other statements concerning
future performance, developments or events, and expectations for growth and
market forecasts constitute forward-looking statements which are subject to a
number of risks and uncertainties, including interest rate fluctuations, changes
in local or national economic conditions, and government and regulatory actions
which might cause actual results to differ materially from stated expectations
or estimates.
Comparison of the Three Months Ended September 30, 1999 and 1998
Net Income - Net income for the three months ended September 30, 1999 totaled
$471,000 or $.34 per share, as compared to $364,000 or $.31 per share recorded
during the same period in 1998. The 1999 quarterly earnings represent a 30%
increase from those reported in 1998, due to the rise in net interest income
related to the increase in the volume of net earning assets due principally to
the acquisition of Peoples Savings Bank ("Peoples Savings") in August 1998. The
increase in net interest income offset the rise in overhead associated with the
additional branch operations.
The net income reported resulted in annualized returns on average assets and
average equity of .96% and 8.82% for the quarter ended September 30, 1999, as
compared to returns of .91% and 8.81% for the same period in 1998.
Interest Income - Interest income for the three months ended September 30, 1999
increased approximately $573,000 or 20% from the same period in 1998 to $3.5
million, due to the increase in average earning assets, specifically the loan
portfolio. The average balance of the loan portfolio for the quarter ended
increased $27.5 million from the same period in 1998 to $134.2 million. The
acquisition of Peoples represented approximately $23.8 million of the total
average loan growth. The remainder of the increase is attributed largely, to the
increase in the origination of residential and commercial mortgage loans
experienced during 1999. The tax equivalent yield on the loan portfolio for the
quarter decreased 29 basis points to 8.26% from the same period in 1998, due to
the impact of generally lower interest rates. The prime interest rate was
reduced three times, totaling 75 basis points during 1998. The lower interest
rate environment affected existing variable rate loans, and reduced the rates of
return on new loan originations and refinancings. While interest rates rose
slightly during the third quarter of 1999, the recent increases in the prime
interest rate have yet to fully recapture the declines in 1998.
Average investment securities for the third quarter of 1999 were $36.8 million
resulting in a tax-equivalent yield of 6.45% for the quarter, compared to $34.5
million and 6.45% during the same period in 1998. As a result of the slowing of
loan growth during the second quarter of 1999, management began to place excess
liquidity back into the investment portfolio, purchasing $13.9
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million of securities during the second and third quarters. These purchases were
principally U. S. government agency and bank qualified tax-free municipal
securities.
As noted in reports for the first two quarters of 1999, despite the growth in
the volume of average earning assets, which increased $34.3 million for the
third quarter of 1999 as compared to 1998, the tax equivalent yield on earning
assets continues to fall. During the third quarter of 1999, the tax equivalent
yield slipped to 7.59% as compared to 7.91% during the same period in 1998, due
to the general decline in interest rates, previously discussed.
Interest expense - Interest expense increased $226,000 or 19% during the third
quarter of 1999, as compared to the same period in 1998. The average volume of
interest bearing liabilities during the quarter increased $28.3 million or 24%
during the comparative periods. Approximately $23.5 million of this increase is
attributable to the acquisition of Peoples Savings. During the comparative
quarters the overall rate paid on these liabilities fell to 3.82% from 3.98%.
This lower cost of funds is due principally to the generally lower interest rate
environment.
Despite the generally low interest rate environment, the ongoing competition for
deposit customers by traditional and non-traditional financial services
providers, continues to affect the overall cost of funds. Furthermore, any
increase in market rates of interest can raise the cost of such funds.
Net Interest Income - As a result of the increase in interest income due to the
increased volume of earning assets which more than offset the increase in
interest expense, net interest income rose $347,000 or 20% for the third quarter
of 1999, as compared to the same period in 1998. The net tax equivalent yield on
earning assets for the quarter was 4.51%, a 22 basis point decline from the
4.73% yield earned during the same period in 1998.
Provision for Loan Losses - Based upon management's ongoing assessment of the
quality of the loan portfolio, and considering the slowing of loan demand during
the quarter, the provision for loan losses for the third quarter of 1999 totaled
$36,000, as compared to $55,000 provided during the same period in 1998.
Other operating income - Other operating income increased $33,000 or 16% for the
third quarter of 1999, due principally to the impact of fees on deposit
accounts, particularly overdraft fees, related to the increase in the number of
deposit accounts. In addition, ATM convenience fees and fees generated from the
MasterMoney(TM) debit card increased due to increased customer usage. Combined,
these fees accounted for $23,000 of the total increase in other operating
income. A gain on the sale of a parcel of foreclosed real estate of $7,000 was
recorded during the third quarter of 1999.
Other Operating Expense - During the third quarter of 1999, total other
operating expenses increased $249,000 or 19% to $1.6 million from the same
period in 1998. The rise in other operating expenses is due principally to the
additional overhead associated with the branch office operations added through
the Peoples Savings acquisition, costs associated with the implementation of the
frame relay network during the fourth quarter of 1998, and the hiring of several
management employees during the third quarter of 1999.
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Due primarily to the expansion of the branch office network, salary and employee
benefit costs increased $173,000 or 29% to $776,000 for the third quarter of
1999 as compared to $603,000 during the same period in 1998. The Company
continues to use temporary employees to provide support in the data center and
in providing certain administrative functions related to human resources and
employee training. The total cost for temporary employees amounted to $50,000
during the three months ended September 30, 1999. Management intends to continue
to use temporary employees to supplement certain staff and administrative
functions. The balance of the increase in employee related costs is related to
periodic salary adjustments and scheduled employee health insurance premium
adjustments, combined with the added management personnel. During the third
quarter of 1999, the Company began to fill several existing and newly created
management positions as a result of the ongoing organization assessment. It is
expected these new employees will result in additional salaries and benefits of
approximately $260,000 annually. This staffing increase was completed during
October 1999.
Occupancy and equipment costs decreased approximately $12,000 or 5% to $229,000
during the third quarter of 1999, as compared to the same period in 1998. A
reduction in costs associated with equipment rental and equipment and software
maintenance contracts is principally responsible for this decrease. In general,
these costs are considered to be recurring, and can be expected to be subject to
periodic increases for such items as annual maintenance contract adjustments,
office rent escalation and other costs normally subject to inflationary or
pricing increases.
Other operating expense increased $88,000 or 19% during the three months ended
September 30, 1999, as compared to the same period in 1998 and totaled $563,000.
Recurring costs increased during the comparative quarter due to items such as:
increased ATM and debit card processing fees which increased $24,000 or 66% to
$60,000; Pennsylvania shares tax expense increased approximately $4,000, due to
the increased Bank capital resulting from the Peoples Savings acquisition; while
correspondent bank fees and courier costs increased approximately $15,000 due to
the expanded branch network. The remaining increase in this cost is related to
the costs of the data processing center and the costs of maintaining the frame
relay network established during the fourth quarter of 1998.
Income Taxes - The provision for income taxes of $211,000 for the three months
ended September 30, 1999, represented a $42,000 or 25% increase from the
$169,000 recorded during the same period of 1998. Income taxes as a percentage
of pre-tax earnings were approximately 30.9% for the three months ended
September 30, 1999, as compared to 31.7% during the same period in 1998. The
slight decrease in the tax rate is attributable to the affect of the increase in
tax exempt interest income from municipal securities.
Nine Months Ended September 30, 1999
- ------------------------------------
Net income for the first nine months of 1999 totaled $1.3 million an increase of
$290,000 or 29% from 1998. On a per share basis, earnings of $.93 for the first
nine months of 1999, represented a 3% increase from that reported in 1998.
Net interest income increased $1.1 million or 24% for the comparative nine month
periods due to the increase in the volume of earning assets and interest bearing
liabilities previously discussed. For the nine months ended September 30, 1999,
average earning assets increased $45.8 million
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or 34% and average interest bearing liabilities rose $39.2 million or 37%. The
net tax equivalent yield totaled 4.49% for the first nine months of 1999, as
compared to 4.85% during the same period in 1998.
As detailed during the discussion of the quarterly earnings, other income
increased due to the increase in fees related to the increase in the number of
accounts. For the nine months ended, other income increased $39,000 or 28% to
$627,000.
Employee expenses reflect the addition of the employees added from the Peoples
Savings acquisition and the impact of both temporary and newly hired employees.
Through September 30, 1999, these costs have risen $404,000 or 22% to $2.8
million. These costs are expected to increase further as the full impact of the
hiring of management personnel previously discussed is realized in the fourth
quarter of 1999.
Other operating expenses for the first nine months of 1999 totaled $1.6 million,
an increase of $328,000 or 26% from the same period in 1998. Amortization of
intangible assets related to the Peoples Savings acquisition accounted for
$91,000 of the total increase. However, this increase was partially offset by
the completion of amortization related to branch purchases made by the Bank in
1991, a reduction of $23,000. In addition, costs discussed earlier related to
telephone and data services, and ATM network costs, as well as additional
overhead costs related to the Peoples Savings offices accounted for the
increase.
For the first nine months of 1999, income taxes totaling $592,000 represented
31.4% of pretax income, as compared to $452,000 or 31.0% of pretax income in
1998.
Financial Condition
- -------------------
At September 30, 1999, the Company reported total consolidated assets of $193.1
million, a decrease of .5% from the $194.1 million reported at December 31,
1998.
Total loans increased $3.2 million or 2.4%, to $137.4 million. This increase was
realized during the third quarter as loans grew $4.8 million or 3.6%, due
principally to residential mortgage loans which increased $3.9 million or 4.6%
during the quarter. The increase in residential mortgage loans is partially
attributed to the moderate increase in interest rates during the quarter
resulting in increased loan demand as borrowers sought to refinance existing
loans or complete home purchases ahead of any possible future rate increase.
Commercial and other mortgage loans have increased $1.4 million or 7.6% since
the beginning of the year; with $905,000 of the increase occurring during the
third quarter. Commercial and other loans increased $709,000 or 5.0% since the
beginning of the year.
Stockholders' equity of $21.1 million at September 30, 1999 equaled that
reported at December 31, 1998. The Company's capital ratios continue to exceed
the minimums mandated by law and banking regulations.
On November 4, 1999, the Company announced its Board of Directors had approved a
plan to repurchase up to 5% or 69,792 shares of the Company's outstanding common
stock. These
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purchases can be made in the open market and in privately negotiated
transactions from time to time over a six-month period.
Liquidity
- ---------
Operating activities, particularly net income of $1.3 million, depreciation and
amortization of $704,000, and the provision for loan losses of $116,000,
provided cash totaling $2.0 million which was used to fund investing and
financing activities during the first nine months of 1999. During the same
period in 1998, operating activities provided $1.3 million.
As a result of purchases of approximately $13.9 million of investment securities
available for sale, and net loan originations of $3.3 million, financing
activities used approximately $10.3 million in funds during the nine months
ended September 30, 1999, as compared to $3.9 million used during the same
period in 1998. During the first nine months of 1999 investment security
repayments of $6.9 million, were used to fund the securities purchases. By
comparison, during the first nine months of 1998, net loan originations totaled
$10.2 million, which was partially funded by net investment maturities and sales
totaling $5.6 million.
Financing activities for the first nine months of 1999 used approximately $1.4
million, due principally to a net reduction in deposits of $810,000 and the
payment of regular quarterly dividends. During the same period of 1998,
financing activities provided approximately $8.9 million of funds due to a $9.6
million net increase in deposits.
Aside from liquidity available from customer deposits or through sales and
maturities of the investment portfolio, the Company has alternative sources of
funds such as a line of credit available with a correspondent bank. At September
30, 1999, a short-term revolving credit facility of $10 million was available
through the Federal Home Loan Bank.
Management is not aware of any conditions, including any regulatory
recommendations or requirements, which would adversely affect its liquidity or
its ability to meet funding needs in the ordinary course of business.
Risk Elements
- -------------
At September 30, 1999, non-performing loans, including those past due ninety
days or more, and loans on non-accrual status totaled approximately $834,000.
Of the non-performing loan total, $515,000 is considered to be impaired for
financial reporting purposes. These impaired loans consist of four commercial
loans to a single borrower, secured by real estate. The borrower continues to
operate under Chapter 11 bankruptcy protection. As part of management's ongoing
assessment of the loan portfolio, $30,000 of the allowance for loan losses at
September 30, 1999, has been allocated for these loans. During the third quarter
of 1999, the borrower provided payments totaling $9,000, which were recorded as
interest income. Management believes the Company is adequately secured by the
underlying collateral.
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The following table presents the components of non-performing loans and other
non-performing assets as of the five most recent quarters ended:
<TABLE>
<CAPTION>
1999 1998
--------------------------------------------- -----------------------------
September 30, June 30, March 31, December 31, September 30,
<S> <C> <C> <C> <C> <C>
Non-performing loans
Loans past due 90 days or more $ 95 $ 114 $ 238 $ 287 $ 204
Non-accrual loans 739 874 1,032 1,022 941
------ ------ ------ ------ -----
Total non-performing loans 834 988 1,270 1,309 1,145
Other non-performing assets
Repossessed assets - 3 - - -
Real estate acquired through
Foreclosure 22 25 56 80 337
------ ------ ------ ------ -----
Total other non-performing assets 22 28 56 80 337
------ ------ ------ ------ -----
Total non-performing assets $ 856 $1,016 $1,326 $1,389 $1,482
====== ====== ====== ====== ======
Non-performing loans as a percentage
of total loans .61% .74% .96% .98% .87%
Non-performing assets to assets .44 .53 .68 .72 .79
</TABLE>
Year 2000
- ---------
The following discussion of the implications of the Year 2000 ("Y2K") compliance
issue for the Company contains numerous forward-looking statements based on
inherently uncertain information. The cost of the project and the date on which
the Company plans to complete various aspects of the project are based on
management's best estimates, which were derived utilizing a number of
assumptions of future events including the continued availability of internal
and external resources, third party modifications and other factors.
Management continues to work toward attaining Year 2000 ("Y2K") compliance.
During the first quarter of 1999, testing, and validation of the test results
were completed on the core software applications. In addition, the Company's
independent accountants reviewed the results of the Company's testing program.
The contingency plan developed by the Company was also updated.
As part of its overall assessment and compliance program, the Company contacted
material customers and non-information technology suppliers (e.g. utilities,
telephone and security systems) regarding their Year 2000 state of readiness.
The Company is unable to test the Y2K readiness of its significant providers of
utility services and is relying on each utility company's internal testing and
representations to provide the required services that drive the Bank's data
systems.
During the second and third quarters of 1999, the Company focused on maintaining
Y2K compliance by testing any equipment or software upgrades, continuing its
customer communication program, and refining and testing its contingency plans.
These procedures will
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continue throughout the balance of the year. During the third quarter costs of
approximately $4,000 were incurred for the production of several customer Y2K
communications.
Direct costs incurred in achieving and maintaining Y2K compliance have not been
significant. However, the time devoted by employees to this project has been
significant. During the first week of August 1999, the installation and testing
of a back-up generator at the data processing center was successfully completed.
The total capitalized cost for this equipment was $32,000.
Despite the best efforts of management in addressing this issue, the vast number
of external entities that have direct and indirect business relationships with
the Company, such as customers, vendors, payment system providers and other
financial institutions makes it impossible to assure that a failure to achieve
or maintain compliance by one or more of these entities would not have a
material adverse impact on the operations of the Company.
15
<PAGE>
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
On November 4, 1999 the Company announced the Board of Directors
had approved a plan to repurchase up to 5% of the outstanding shares of
common stock. See EXHIBIT 99.1.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule (in electronic filing only)
(b) Exhibit 99.1 - Press Release
(c) Reports on Form 8-K
(None)
16
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Emclaire Financial Corp.
- ------------------------
(Registrant)
Date: November 15, 1999 By: /s/ David L. Cox
----------------- -----------------------
David L. Cox
President and CEO
Date: November 15, 1999 By: /s/ John J. Boczar
----------------- -----------------------
John J. Boczar, CPA
Treasurer
17
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 5,350
<INT-BEARING-DEPOSITS> 413
<FED-FUNDS-SOLD> 3,275
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 35,425
<INVESTMENTS-CARRYING> 2,797
<INVESTMENTS-MARKET> 2,798
<LOANS> 137,439
<ALLOWANCE> 1,342
<TOTAL-ASSETS> 193,106
<DEPOSITS> 169,060
<SHORT-TERM> 0
<LIABILITIES-OTHER> 917
<LONG-TERM> 2,000
0
0
<COMMON> 1,745
<OTHER-SE> 19,384
<TOTAL-LIABILITIES-AND-EQUITY> 193,106
<INTEREST-LOAN> 8,198
<INTEREST-INVEST> 1,505
<INTEREST-OTHER> 460
<INTEREST-TOTAL> 10,163
<INTEREST-DEPOSIT> 4,187
<INTEREST-EXPENSE> 4,271
<INTEREST-INCOME-NET> 5,892
<LOAN-LOSSES> 116
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,516
<INCOME-PRETAX> 1,887
<INCOME-PRE-EXTRAORDINARY> 1,295
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,295
<EPS-BASIC> 0.93
<EPS-DILUTED> 0.93
<YIELD-ACTUAL> 4.22
<LOANS-NON> 739
<LOANS-PAST> 95
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,336
<CHARGE-OFFS> 129
<RECOVERIES> 19
<ALLOWANCE-CLOSE> 1,342
<ALLOWANCE-DOMESTIC> 942
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 400
</TABLE>
EXHIBIT 99.1
<PAGE>
EMCLAIRE FINANCIAL CORP.
- --------------------------------------------------------------------------------
612 Main Street
Emlenton, PA 16373
Emclaire Financial Corp. Announces Stock Repurchase
For Immediate Release
Thursday, November 04, 1999
Contact: David L. Cox, President or,
John J. Boczar, Chief Financial Officer
Emclaire Financial Corp.
724/867-2311
Emlenton, PA -- Emclaire Financial Corp. (OTC Bulletin Board - "EMCF"), the
parent holding company of The Farmers National Bank of Emlenton, today announced
that it has received the necessary Board approval to initiate a repurchase plan
covering up to 5% or 69,792 shares of the Company's common stock to be purchased
in open market and privately negotiated transactions. The Company currently has
1,395,852 shares of common stock outstanding. David L. Cox, President and Chief
Executive Officer of the Company, indicated that the shares acquired in the
repurchase plan would be available for general corporate use. The repurchases
will be made from time to time over the next six months in open-market and
privately negotiated transactions, subject to the availability of stock, the
terms of the plan and other financial and market conditions.
Emclaire Financial Corp. with consolidated total assets of $193.0 million at
September 30, 1999, is the parent company of The Farmers National Bank of
Emlenton, a community commercial bank operating eleven offices in Venango,
Butler, Clarion, Clearfield, Elk and Jefferson counties, Pennsylvania.
Emclaire's common stock is quoted on the OTC Electronic Bulletin Board under the
symbol "EMCF".
