SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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SEC File Number 000-23230
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PHS Bancorp, Inc.
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(Exact Name of registrant as specified in its charter)
PENNSYLVANIA 23-2744266
- ------------ ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
744 Shenango Road
P.O. Box 1568
Beaver Falls, Pennsylvania 15010
(724) 846 - 7300
--------------------------------
(Address, including zip code, and
telephone number, including area
code of Principal Executive Offices)
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 requirement for the past 90 days. Yes [X] No [ ]
As of April 20, 1998 there were 2,760,000 shares outstanding of the issuer's
class of common stock.
<PAGE>
PHS BANCORP, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
Page
Number
------
Part I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet (unaudited) as of March 31, 1999
and December 31, 1998 3
Consolidated Statement of Income (unaudited) for the Three
Months ended March 31, 1999 and 1998 4
Consolidated Statement of Changes in Stockholders' Equity
(unaudited) for the Three Months ended March 31, 1999 5
Consolidated Statement of Cash Flows (unaudited) for the
Three Months ended March 31, 1999 and 1998 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 14
Part II Other Information 15
Signatures 16
<PAGE>
PHS BANCORP, INC.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------------ -------------------
<S> <C> <C>
ASSETS
Cash and amounts due from other institutions $ 2,579,307 $ 2,136,601
Interest - bearing deposits with other institutions 3,537,110 9,332,219
Investment securities:
Available for sale 25,518,471 25,197,294
Held to maturity (market value $ 24,203,408
and $18,581,867) 24,030,609 18,145,662
Mortgage - backed securities:
Available for sale 34,723,333 32,877,841
Held to maturity (market value $ 49,777,757
and $48,767,611) 49,873,456 48,287,244
Loans (net of allowance for loan losses of $1,289,173
and $1,287,496) 102,233,008 99,913,716
Accrued interest receivable 1,635,375 1,516,677
Premises and equipment 4,383,858 4,501,659
Federal Home Loan Bank stock 1,844,800 1,544,800
Other assets 964,798 798,957
------------------ -------------------
TOTAL ASSETS $ 251,324,125 $ 244,252,670
================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 183,438,144 $ 181,112,564
Advances from Federal Home Loan Bank 35,894,800 30,894,800
Other borrowings 1,363,190 1,387,618
Accrued interest payable and other liabilities 1,951,097 1,673,579
------------------ -------------------
Total liabilities 222,647,231 215,068,561
------------------ -------------------
Preferred stock, 2,000,000 shares authorized, none issued - -
Common stock, $.10 par value 10,000,000 shares authorized,
2,760,000 shares issued 276,000 276,000
Additional paid in capital 10,581,803 10,588,940
Retained earnings - substantially restricted 18,575,238 18,489,177
Accumulated Other Comprehensive Income 832,950 1,088,415
Unallocated ESOP shares (75,060 and 77,460 shares) -1,178,418 -1,215,723
Unallocated RSP shares (38,505 and 3,713 shares) -410,679 -42,700
------------------ -------------------
Total stockholders' equity 28,676,894 29,184,109
------------------ -------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 251,324,125 $ 244,252,670
================== ===================
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
3
<PAGE>
PHS BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
---------------- ---------------
<S> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans $ 2,062,438 $ 2,083,285
Investment securities:
Taxable 458,833 261,132
Exempt from federal income tax 233,453 265,231
Mortgage - backed securities 1,364,007 1,247,205
Interest - bearing deposits with other institutions 59,784 69,311
---------------- ---------------
Total interest income 4,178,515 3,926,164
---------------- ---------------
INTEREST EXPENSE
Deposits 1,708,467 1,821,064
Advances from Federal Home Loan Bank 461,028 212,691
Other borrowings 25,812 25,199
---------------- ---------------
Total interest expense 2,195,307 2,058,954
---------------- ---------------
Net interest income 1,983,208 1,867,210
PROVISION FOR LOAN LOSSES 95,000 90,000
---------------- ---------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,888,208 1,777,210
---------------- ---------------
NONINTEREST INCOME
Service charges on deposit accounts 98,663 102,472
Investment securities gains, net - 116,858
Gain on sale of loans, net - 832
Rental income, net 22,305 22,135
Other income 36,745 42,077
---------------- ---------------
Total noninterest income 157,713 284,374
---------------- ---------------
NONINTEREST EXPENSE
Compensation and employee benefits 821,603 812,208
Occupancy and equipment costs 297,375 247,015
Deposit insurance premium 26,573 26,904
Data processing costs 14,296 38,624
Other expenses 370,671 370,595
---------------- ---------------
Total noninterest expense 1,530,518 1,495,346
---------------- ---------------
Income before income taxes 515,403 566,238
Income taxes 129,747 130,000
---------------- ---------------
NET INCOME $ 385,656 $ 436,238
================ ===============
Earnings Per Share
Basic $ $0.15 $0.16
Diluted $ $0.15 $ N/A
Weighted average number of shares outstanding
Basic 2,648,697 2,684,050
Diluted 2,655,168 N/A
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
4
<PAGE>
PHS BANCORP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
Additional Other Unallocated Unallocated Total Compre-
Common Paid in Retained Comprehensive Shares Held Shares Held Stockholders' hensive
Stock Capital Earnings Income by ESOP by RSP Equity Income
-------- ----------- ----------- ------------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 $276,000 $10,588,940 $18,489,177 $1,088,415 -$1,215,723 -$42,700 $29,184,109
Net Income 385,656 $385,656 385,656
Other comprehensive income:
Unrealized gain on
available for sale
securities -255,465 -$255,465 -255,465
-----------
Comprehensive income $130,191
===========
Cash dividends paid -193,200 -$193,200
ESOP shares earned -7,137 37,305 $30,168
Common stock acquired by RSP -106,395 -400,107 -$506,502
RSP shares earned 32,128 32,128
-------- ----------- ----------- ------------- ------------ ----------- ------------
Balance, March 31, 1999 $276,000 $10,581,803 $18,575,238 $832,950 -$1,178,418 -$410,679 $28,676,894
======== =========== =========== ============= ============ =========== ============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
5
<PAGE>
PHS BANCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31,
1999 1998
----------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $385,656 $436,238
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 95,000 90,000
Depreciation, amortization and accretion 129,179 111,605
Amortization of discounts, premiums and
loan origination fees 147,826 275,864
Gains on sale of investment securities, net - -116,858
Gains on sale of loans, net - -832
Increase in loans held for sale -21,934 -92,066
Increase in accrued interest receivable -118,698 -228,747
Increase in accrued interest payable 86,057 63,615
Amortization of ESOP unearned compensation 30,168 44,954
Amortization of RSP unearned compensation 32,128 -
Other, net 85,134 67,008
----------------- ----------------
Net cash provided by operating activities 850,516 650,781
----------------- ----------------
INVESTING ACTIVITIES
Investment and mortgage-backed securities available for sale:
Proceeds from sales - 2,259,493
Proceeds from maturities and principal repayments 3,897,001 2,408,862
Purchases -6,445,406 -5,032,270
Investment and mortgage-backed securities held to maturity:
Proceeds from maturities and principal repayments 9,504,596 2,048,638
Purchases -16,943,823 -6,093,749
(Decrease) increase in loans receivable, net -2,561,749 725,473
Proceeds from sale of repossessed assets 56,390 91,907
Purchase of premises and equipment, net -11,378 -79,080
Purchase of Federal Home Loan Bank Stock -300,000 -
----------------- ----------------
Net cash used for investing activities -12,804,369 -3,670,726
----------------- ----------------
FINANCING ACTIVITIES
Net increase in deposits 2,325,580 244,696
Advances from Federal Home Loan Bank 5,000,000 5,000,000
Proceeds from other borrowings - 295,111
Repayment of other borrowings -24,428 -
Common stock acquired by ESOP - -305,062
Common stock acquired by RSP -506,502 -
Cash dividends paid -193,200 -165,600
----------------- ----------------
Net cash provided by financing activities 6,601,450 5,069,145
----------------- ----------------
Increase (decrease) in cash and cash equivalents -5,352,403 2,049,200
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 11,468,820 5,696,236
----------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $6,116,417 $7,745,436
================= ================
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
6
<PAGE>
PHS Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements of PHS Bancorp, Inc. (the "Company)
include the accounts of Peoples Home Savings Bank (the "Bank") and its
wholly-owned subsidiary, HOMECO (the "Subsidiary"). All significant intercompany
balances and transactions have been eliminated.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with instructions to Form 10-Q and, therefore, do not necessarily
include all information which would be included in audited financial statements.
The information furnished reflects all normal recurring adjustments which are,
in the opinion of management, necessary for the fair statement of the results of
the period. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full year or any
other period. The unaudited consolidated financial statements should be read in
conjunction with the audited financial statements and the notes thereto for the
year ended December 31, 1998.
NOTE 2 - EARNINGS PER SHARE
The Company provides dual presentation of basic and diluted earnings per share.
Basic earnings per share utilizes net income as reported as the numerator, and
the actual average shares outstanding as the denominator. Diluted earnings per
share includes any dilutive effects of options, warrants, and convertible
securities.
Shares outstanding do not include ESOP shares that were purchased and
unallocated in accordance with SOP 93-6, "Employers' Accounting for Stock
Ownership Plans."
7
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The Private Securities Litigation Act of 1995 contains safe harbor provisions
regarding forward-looking statements. When used in this discussion, the words
"believes", "anticipates", "contemplates", "expects", and similar expressions
are intended to identify forward-looking statements. Such statements are subject
to certain risks and uncertainties which could cause actual results to differ
materially from those projected. Those risks and uncertainties include changes
in interest rates, risks associated with the effect of opening a new branch, the
ability to control costs and expenses, and general economic conditions. The Bank
and the Company undertake no obligation to publicly release the results of any
revisions to those forward looking statements which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Financial Condition
Total assets at March 31, 1999 increased $7.0 million or 2.9% from December 31,
1998. Increases in investment and mortgage-backed securities of $9.6 million and
loans receivable of $2.3 million were partially offset by a decrease in
interest-bearing deposits of $5.8 million.
Loans receivable at March 31, 1999, of $102.2 million represented an increase of
2.3% from $99.9 million at December 31, 1998. The growth in the loan portfolio
was primarily attributable to increases in mortgage and consumer loans.
Investment and mortgage-backed securities increased $9.6 million to $134.1
million at March 31, 1999, from $124.5 million at December 31, 1998. This
increase was the result of purchases of $23.3 million which were funded by
maturities of $8.1 million, principal repayments of $5.3 million and increased
Federal Home Loan Bank advances and deposits of $5.0 million and $2.3 million
respectively. The purchases funded by fixed rate borrowings were part of the
Bank's leverage strategy.
Total deposits after interest credited at March 31, 1999 were $183.4 million, an
increase of $2.3 million or 1.3% from $181.1 million at December 31, 1998.
Advances from the Federal Home Loan Bank of Pittsburgh increased $5.0 million to
$35.9 million at March 31, 1999 from $30.9 million at December 31, 1998. This
increase was the result of additional borrowings to fund securities purchases,
as discussed above.
Stockholders' equity decreased $507,000 for the three month period ended March
31, 1999. This decrease was due to an increase in unallocated RSP shares of
$368,000, a decrease in net unrealized gain on securities of $255,000 and cash
dividends paid of $193,000. These decreases to stockholders' equity were
partially offset by net income of $386,000.
8
<PAGE>
Results of Operations
Comparison of Operating Results for the Three Months Ended March 31, 1999 and
March 31, 1998.
General.
Net income for the three months ended March 31, 1999 decreased by $50,000 to
$386,000, from $436,000 for the three months ended March 31, 1998. This decrease
was primarily due to a decrease in non-interest income of $126,000 and increases
in non-interest expense of $35,000 and loan loss provisions of $5,000. These
decreases to net income were partially offset by an increase in net interest
income of $116,000.
Net Interest Income.
Reported net interest income increased $116,000 or 6.2% for the three months
ended March 31, 1999. Net interest income on a tax equivalent basis increased by
$100,000 or 5.0% in a period when both average interest earning assets and
average interest-bearing liabilities increased (increased $25.6 million and
$25.5 million, respectively). The Bank's net interest rate spread decreased 16
basis points (with 100 basis points being equal to 1%) to 3.14% for the three
months ended March 31, 1999. The increase in average earning assets of $25.6
million was primarily due to a $24.0 million increase in average investment and
mortgage-backed securities along with a $1.6 million increase in average loans.
Interest Income.
Interest income on a tax equivalent basis totaled $4.3 million for the three
months ended March 31, 1999, an increase of $236,000 or 5.8% over the total of
$4.1 million for the three months ended March 31, 1998. This increase was mainly
due to an increase in the Bank's average interest-earning assets of $25.6
million for the three months ended March 31, 1999. Interest earned on loans
decreased $21,000 or 1.0%, in 1999. The decrease was due to a 21 basis point
decrease in the yield earned partially offset by a $1.6 million increase in the
average balance of loans. Interest earned on investment and mortgage-backed
securities (including securities held for sale) increased $257,000 or 13.0%, in
1999. The increase was due to a $24.0 million increase in the average balance of
investment and mortgage-backed securities partially offset by a 47 basis point
decrease in the yield earned.
Interest Expense.
Interest expense increased $136,000 to $2.2 million for the three months ended
March 31, 1999. The increase in interest expense was due to a $25.5 million
increase in the average balance of interest-bearing liabilities due to increased
borrowings pursuant to the Bank's leverage strategy partially offset by a 26
basis point decrease in the average cost of interest-bearing liabilities.
Provision for Losses on Loans.
The provision for loan losses increased by $5,000 to $95,000 for the three
months ended March 31, 1999, from $90,000 for the three months ended March 31,
1998. While management believes that the allowance for loan losses is
sufficient, there can be no assurance that regulators, in reviewing the Bank's
loan portfolio, will not request the Bank to significantly increase its
allowance for loan losses, or that a deteriorating real estate market will cause
the Bank to significantly increase its allowance for loans losses, therefore
negatively effecting the Bank's financial condition and earnings.
9
<PAGE>
Non-interest Income.
Non-interest income decreased $126,000 to $158,000 for the three months ended
March 31, 1999, from $284,000 for the three months ended March 31, 1998. This
decrease was primarily due to gains on the sale of securities of $117,000 for
the three months ended March 31, 1998. There were no securities gains for the
three months ended March 31, 1999.
Non-interest Expense.
Non-interest expense increased $36,000 to $1,531,000 for the three months ended
March 31, 1999, from $1,495,000 for the three months ended March 31, 1998. This
increase was primarily due to increases in occupancy and equipment costs of
$50,000 for the three months ended March 31, 1999. The increase in occupancy and
equipment costs were primarily the result of the in-house computer system which
the Bank converted to during the first quarter of 1998.
Liquidity and Capital Requirements
Liquidity refers to the Company's ability to generate sufficient cash to meet
the funding needs of current loan demand, savings deposit withdrawals, and to
pay operating expenses. The Company has historically maintained a level of
liquid assets in excess of regulatory requirements. Maintaining a high level of
liquid assets tends to decrease earnings, as liquid assets tend to have a lower
yield than other assets with longer terms (e.g. loans). The Company adjusts
liquidity as appropriate to meet its asset/liability objectives.
The Company's primary sources of funds are deposits, amortization and prepayment
of loans and mortgage-backed securities, maturities of investment securities and
funds provided from operations. While scheduled loan and mortgage-backed
securities repayments are a relatively predictable source of funds, deposit
flows and loan and mortgage-backed securities prepayments are greatly influenced
by interest rates, economic conditions and competition. In addition, the Company
invests excess funds in overnight deposits, which provide liquidity to meet
lending requirements
The primary activity of the Company is originating loans and purchasing
investment and mortgage-backed securities. During the three month periods ended
March 31, 1999, and 1998, the Company originated loans in the amounts of $13.7
and $9.8 million, respectively. The Company also purchases investment and
mortgage-backed securities to invest excess liquidity and to supplement local
loan demand. During the three month periods ended March 31, 1999, and 1998, the
Company purchased investment and mortgage-backed securities in the amounts of
$23.4 and $11.1 million, respectively.
The Company has other sources of liquidity if a need for additional funds
arises, such as FHLB of Pittsburgh advances. At March 31, 1999 the Bank had
borrowed $35.9 million of it's $133.8 million maximum borrowing capacity with a
remaining borrowing capacity of approximately $97.9 million. Additional sources
of liquidity can be found in the Company's balance sheet, such as investment
securities and unencumbered mortgage-backed securities that are readily
marketable. Management believes that the Company has adequate resources to fund
all of its commitments.
The Bank may not declare or pay a cash dividend on any of its stock if the
effect thereof would cause the Bank's regulatory capital to be reduced below (1)
the amount required for the liquidation account established in connection with
the Bank's mutual holding company reorganization and stock issuance, or (2) the
regulatory capital requirements imposed by the Pennsylvania Department of
Banking (the "Department") and the Federal Deposit Insurance Corporation
("FDIC").
10
<PAGE>
Regulatory Capital Requirements. As a condition of deposit insurance, current
FDIC regulations require that the Bank calculate and maintain a minimum
regulatory capital level on a quarterly basis and satisfy such requirement at
the calculation date and throughout the ensuing quarter.
At March 31, 1999, the Bank's Tier I risk-based and total risk-based capital
ratios were 24.8% and 25.9%, respectively. Current regulations require Tier I
risk-based capital of 6% and total risk - based capital of 10% risk-based assets
to be considered well capitalized. The Bank's leverage ratio was 11.1% at March
31, 1999. Current regulations require a leveraged ratio 5% to be considered well
capitalized.
Impact of Inflation and Changing Prices
The Company's financial statements and related data presented herein have been
prepared in accordance with generally accepted accounting principles, which
require the measurement of financial position and operating results in terms of
historical dollars, without considering changes in the relative purchasing power
of money over time due to inflation. Unlike industrial companies, virtually all
of the assets and liabilities of a financial institution are monetary in nature.
As a result, interest rates have a more significant impact on a financial
institution's performance than the effects of general levels of inflation.
Interest rates do not necessarily move in the same direction or with the same
magnitude as the prices of goods and services.
Inflation can have a more direct impact on categories of non-interest expenses
such as salaries and wages, supplies and employee benefit costs. These expenses
normally fluctuate more in line with changes in the general price level and are
very closely monitored by management for both the effects of inflation and
increases related to such items as staffing levels, usage of supplies and
occupancy costs.
Year 2000 Compliance
The following discussion of the implications of the year 2000 problem for the
Bank, contains numerous forward looking statements based on inherently uncertain
information. The cost of the project and the date on which the Bank plans to
complete the internal year 2000 modifications are based on management's best
estimates, which are derived utilizing a number of assumptions of future events
including the availability of internal and external resources, third party
modifications and other factors. However, there can be no guarantee that these
statements will be achieved and actual results could differ. Moreover, although
management believes it will be able to make the necessary modifications in
advance, there can be no guarantee that failure to modify the systems would not
have a material adverse effect on the Bank or the Company.
During fiscal 1998, the Company adopted a Year 2000 Compliance Plan (the "Plan")
and established a Year 2000 Compliance Committee (the "Committee"). The
objectives of the Plan and the Committee are to prepare the Company for the new
millennium. As recommended by the Federal Financial Institutions Examination
Council, the Plan encompasses the following phases: Awareness, Assessment,
Renovation, Validation and Implementation. These phases will enable the Company
to identify risks, develop an action plan, perform adequate testing and complete
certification that its processing systems will be Year 2000 ready. Execution of
the plan is currently on schedule. The Company is currently in Phase 5,
Implementation, (which is to certify that systems are Year 2000 ready, along
with assurances that any new systems are compliant on a going forward basis.)
Prioritization of the most critical applications has been addressed, along with
contract and service agreements.
11
<PAGE>
The primary operating software for the Company is obtained and maintained by an
external provider of software (the "External Provider"). The Company has
maintained ongoing contact with this vendor so that modification of the software
is a top priority and has been completed. The Company has contacted all other
material vendors and suppliers regarding their Year 2000 readiness. Each of
these third parties has delivered written assurance to the Company that they
expect to be Year 2000 compliant prior to the Year 2000. No contracts, written
assurances, or oral assurances with the Bank's External Provider, material
vendors, and suppliers include any type of remedy or penalty for breach of
contract in the event that any of these parties are not year 2000 compliant. The
Company has contacted material customers and non-information technology
suppliers (i.e., utility systems, telephone systems and security systems)
regarding their Year 2000 state of readiness. The only critical vendors that
have not confirmed that they are Year 2000 compliant are the utility companies
and some of our correspondent banks. The Company is unable to test the Year 2000
readiness of its significant suppliers of utilities and is relying on the
utility companies' internal testing and representations to provide the required
services that drive the Bank's data systems. The implementation phase is
targeted for completion by June 30, 1999.
As a practical matter, individual mortgage loan, consumer loan and small
commercial loan customers were not contacted regarding their Year 2000
readiness. It was deemed to be beyond the scope of our testing parameters to
contact these borrowers. Further, most of these are individuals with adequate
collateral for their loans.
The Company expects to incur internal staffing costs as well as consulting and
other expenses related to testing and enhancements to prepare the systems for
the Year 2000. The Company does not anticipate that the related costs will be
material in any single year. In total, the Company estimates that it's cost for
compliance will amount to approximately $155,000 over the two year period from
1998 - 1999. A significant portion of these costs are not likely to be
incremental costs to the Company, but rather the redeployment of existing
resources. As of March 31, 1999 the Company estimates that approximately $95,000
of these costs have been incurred. No assurance can be given that the Year 2000
Compliance Plan will be completed successfully by the Year 2000, in which event
the Company could incur significant costs. The Company has completed testing of
the software provided by the External provider and material third party
providers. During the course of this testing, no material problems or exceptions
were encountered, however, if the External Provider or a material third party
provider is unable to resolve the potential problem in time, the Company would
likely experience significant data processing delays, mistakes or failures.
These delays, mistakes or failures could have a significant adverse impact on
the financial statements of the Company.
The Bank is currently developing contingency plans to address the Year 2000
issues of the Bank which could negatively affect the Bank or necessitate
transacting business manually. Among other things, failure of utility companies
to provide necessary service, failure of the primary software and other third
party providers is addressed in the plan. The Bank will attempt to monitor these
uncertainties by continuing to request updates on all critical providers
throughout the remainder of 1999. If the Bank identifies any concern related to
any critical application, the contingency plans will be implemented immediately
to assure continued service to the Bank's customers.
Despite the best efforts of management to address this issue, the vast number of
external entities that have direct and indirect business relationships with the
Bank, such as customers, vendors, payment
12
<PAGE>
system providers and other financial institutions, makes it impossible to assure
that a failure to achieve compliance by one of these entities would not have a
material impact on the operations of the Bank.
Quantitative and Qualitative Disclosures About Market Risk
Quantitative and qualitative disclosures about market risk are presented at
December 31, 1998 in the Company's 1998 Annual Report. See "Market Risk
Analysis". Management believes there have been no material changes in the Bank's
market risk since the data presented in its Annual Report to stockholders for
the year ended December 31, 1998.
13
<PAGE>
Risk Elements
Nonperforming Assets
The following schedule presents information concerning nonperforming assets
including nonaccrual loans, loans 90 days or more past due, and other real
estate owned at March 31, 1999 and December 31, 1998. A loan is classified as
nonaccrual when, in the opinion of management, there are serious doubts about
collectibility of interest and principal. At the time the accrual of interest is
discontinued, future income is recognized only when cash is received.
March 31, December 31,
1999 1998
---- ----
(Dollars in Thousands)
Loans on nonaccrual basis $339 $392
Loans past due 90 days or more 98 135
--- ---
Total non-performing loans 437 527
--- ---
Real estate owned 0 0
--- ---
Total non-performing assets $437 $527
==== ====
Total non-performing loans to
total loans 0.43% 0.52%
==== ====
Total non-performing loans to
total assets 0.17% 0.22%
==== ====
Total non-performing assets to
total assets 0.17% 0.22%
==== ====
Combined non-performing loans and other non-performing assets at March 31, 1999,
represented 0.43% of total loans which was down from 0.52% at year-end 1998. The
allowance for loan losses was 294.8% of total non-performing assets at March 31,
1999 and 244.6% at December 31, 1998.
14
<PAGE>
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in rights of the Company's Security holders.
None.
Item 3. Defaults by the Company on its senior securities.
None.
Item 4. Results of Votes of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8 - K.
<TABLE>
<CAPTION>
<S> <C>
(a) The following exhibits are filed as part of this report.
2.0 Agreement and Plan of Reorganization *
3.1 Articles of Incorporation of PHS Bancorp, Inc. *
3.2 Bylaws of PHS Bancorp, Inc. *
4.0 Stock Certificate of PHS Bancorp, Inc. *
10.1 Amended employment agreement between Peoples Home Savings Bank and James P.
Wetzel, Jr. *
10.2 1998 Restricted Stock Plan *
10.3 1998 Stock Option Plan *
11.0 Statement regarding computation of earnings per share (see Note 2 to the Notes to
Unaudited Consolidated Financial Statements in the Form 10-Q)
20.1 Dividend Reinvestment Plan
27.0 Financial Data Schedule (in electronic filing only)
(b) Reports on Form 8 - K.
</TABLE>
None.
- ---------------------------
* Incorporated by reference to Registrant's Quarterly Report on Form 10-Q for
the Quarter Ended September 30, 1998 and filed with the Securities and
Exchange Commission on November 13, 1998.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 3, 1999
PHS Bancorp, Inc.
- -----------------
(Registrant)
By:
-------------------------------------
James P. Wetzel, Jr.
President and Chief Executive Officer
By:
-------------------------------------
Richard E. Canonge
Chief Financial Officer and Treasurer
16
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL INFORMATION.
</LEGEND>
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