SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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
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(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
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(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 November 8, 2000 there were 2,574,738 shares outstanding of the issuer's
class of common stock.
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PHS BANCORP, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-QSB
<TABLE>
<CAPTION>
Page
Number
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<S> <C>
Part I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet (unaudited) as of September 30, 2000
and December 31, 1999 3
Consolidated Statement of Income (unaudited) for the Three and Nine
Months ended September 30, 2000 and 1999 4
Consolidated Statement of Comprehensive Income (unaudited) for
the Three andNine Months ended September 30, 2000 and 1999 5
Consolidated Statement of Changes in Stockholders' Equity
(unaudited) for the Nine Months ended September 30, 2000 6
Consolidated Statement of Cash Flows (unaudited) for the
Nine Months ended September 30, 2000 and 1999 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 15
Part II Other Information 16
Signatures 17
</TABLE>
2
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PHS BANCORP, INC.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
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<S> <C> <C>
ASSETS
Cash and amounts due from other institutions $ 1,544,582 $ 3,533,452
Interest - bearing deposits with other institutions 4,959,301 11,416,781
Investment securities:
Available for sale 25,283,399 27,594,897
Held to maturity (market value $ 18,178,237
and $15,268,634) 18,295,415 15,539,866
Mortgage - backed securities:
Available for sale 38,885,847 37,426,028
Held to maturity (market value $ 39,478,753
and $42,263,705) 40,485,095 44,141,386
Loans (net of allowance for loan losses of $1,421,339
and $1,359,900) 128,041,519 118,745,043
Accrued interest receivable 1,667,381 1,538,163
Premises and equipment 4,636,001 4,295,194
Federal Home Loan Bank stock 2,614,800 2,614,885
Other assets 1,448,814 1,794,646
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TOTAL ASSETS $ 267,862,154 $ 268,640,341
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 196,487,809 $ 189,344,552
Advances from Federal Home Loan Bank 41,294,800 50,294,800
Other borrowings 86,702 120,039
Accrued interest payable and other liabilities 1,876,768 2,129,613
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Total liabilities 239,746,079 241,889,004
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Preferred stock, 2,000,000 shares authorized, none issued - -
Common stock, $.10 par value 8,000,000 shares authorized,
2,760,000 shares issued 276,000 276,000
Additional paid in capital 10,492,123 10,541,960
Retained earnings - substantially restricted 20,451,577 19,496,887
Accumulated other comprehensive loss (231,715) (914,110)
Unallocated ESOP shares (60,660 and 67,860 shares) (954,588) (1,066,503)
Unallocated RSP shares (18,949 and 27,330 shares) (217,911) (314,295)
Treasury stock, at cost (173,262 and 124,000 shares) (1,699,411) (1,268,602)
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Total stockholders' equity 28,116,075 26,751,337
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 267,862,154 $ 268,640,341
=================== ===================
See accompanying notes to the unaudited consolidated financial statements.
3
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PHS BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans $ 2,614,672 $ 2,319,708 $ 7,542,159 $ 6,554,016
Investment securities:
Taxable 501,373 462,353 1,527,526 1,389,154
Exempt from federal income tax 253,697 252,983 795,831 725,803
Mortgage - backed securities 1,396,696 1,390,815 4,273,816 4,145,345
Interest - bearing deposits with other institutions 29,839 21,900 115,591 121,628
-------------- -------------- ------------- ------------
Total interest income 4,796,277 4,447,759 14,254,923 12,935,946
-------------- -------------- ------------- ------------
INTEREST EXPENSE
Deposits 2,045,914 1,739,094 5,912,298 5,191,963
Advances from Federal Home Loan Bank 593,012 583,662 1,847,444 1,552,821
Other borrowings 1,125 1,663 3,785 53,879
-------------- -------------- ------------- ------------
Total interest expense 2,640,051 2,324,419 7,763,527 6,798,663
-------------- -------------- ------------- ------------
Net interest income 2,156,226 2,123,340 6,491,396 6,137,283
PROVISION FOR LOAN LOSSES 150,000 120,000 405,000 305,000
-------------- -------------- ------------- ------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 2,006,226 2,003,340 6,086,396 5,832,283
-------------- -------------- ------------- ------------
NONINTEREST INCOME
Service charges on deposit accounts 142,263 124,689 393,763 329,670
Investment securities gains, net 7,315 - 7,315 -
Rental income, net 22,717 22,135 64,649 66,574
Other income 87,688 86,020 173,422 153,663
-------------- -------------- ------------- ------------
Total noninterest income 259,983 232,844 639,149 549,907
-------------- -------------- ------------- ------------
NONINTEREST EXPENSE
Compensation and employee benefits 835,301 830,557 2,446,257 2,476,848
Occupancy and equipment costs 302,223 281,834 873,926 851,759
Deposit insurance premium 9,880 26,328 29,287 79,261
Data processing costs 78,194 66,194 235,296 214,043
Other expenses 303,487 314,740 923,292 949,436
-------------- -------------- ------------- ------------
Total noninterest expense 1,529,085 1,519,653 4,508,058 4,571,347
-------------- -------------- ------------- ------------
Income before income taxes 737,124 716,531 2,217,487 1,810,843
Income taxes 166,500 190,500 558,624 479,002
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NET INCOME $ 570,624 $ 526,031 $ 1,658,863 $ 1,331,841
============== ============== ============= ============
Earnings Per Share
Basic $ $0.23 $0.20 $ $0.66 $0.50
Diluted $ $0.23 $ $0.20 $ $0.66 $ $0.50
Weighted average number of shares outstanding
Basic 2,516,971 2,621,054 2,524,691 2,661,134
Diluted 2,516,971 2,621,054 2,524,691 2,661,134
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
4
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<TABLE>
<CAPTION>
PHS BANCORP, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
2000 1999 2000 1999
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Income $570,624 $ 526,031 $1,658,863 $1,331,841
Other comprehensive
Income:
Unrealized
gains (losses)
on available
for sale securities $605,768 $(486,141) $1,045,015 $(2,255,534)
Less: Reclassification
adjustment
for gain included in
net income (7,315) - (7,315) -
------------------ ----------------------- ------------------------ -------------------------
Other comprehensive income
(loss) before tax 598,453 (486,141) 1,037,700 (2,255,534)
Income tax expense (benefit)
related to other
comprehensive income 205,961 (165,289) 355,305 (766,881)
-------- ----------- ---------- ----------
Other comprehensive income
(loss), net of tax 392,492 (320,852) 682,395 (1,488,653)
-------- ----------- ---------- ----------
Comprehensive income (loss) $963,116 $ 205,179 $2,341,258 $ (156,812)
======== =========== ========== ==========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
5
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<TABLE>
<CAPTION>
PHS BANCORP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (UNAUDITED)
Accumulated Unallo- Total
Additional Other Unallocated cated Stock Compre-
Common Paid in Retained Comprehensive ESOP RSP Treasury holders' hensive
Stock Capital Earnings Income (Loss) Shares Shares Stock Equity Income
-------- ------------ ----------- ------------ ----------- ----------------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1999 $276,000 $10,541,960 $19,496,887 $(914,110) $(1,066,503) $(314,295)$(1,268,602) 26,751,337
Net Income 1,658,863 1,658,863 $1,658,863
Other comprehensive
income:
Unrealized gain on
available for sale
securities, net of
tax of $351,537 682,395 682,395 682,395
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Comprehensive
income $2,341,258
==========
Cash dividends
paid (704,173) (704,173)
Treasury stock
purchased, at cost (430,809) (430,809)
ESOP shares
earned (49,837) 111,915 62,078
RSP shares
earned 96,384 96,384
-------- ----------- ----------- ---------- ----------- --------- ----------- -----------
Balance,
September 30, 2000 $276,000 $10,492,123 $20,451,577 $(231,715) $(954,588) $(217,911)$(1,699,411)$28,116,075
======== =========== =========== ========== =========== ========= =========== ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
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PHS BANCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended Sept. 30,
2000 1999
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<S> <C> <C>
OPERATING ACTIVITIES
Net income $1,658,863 $1,331,841
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 405,000 305,000
Depreciation, amortization and accretion 433,150 385,701
Amortization of discounts, premiums and
loan origination fees 778,939 567,905
Investment securities gains, net (7,315) -
Decrease in loans held for sale - (21,278)
Increase in accrued interest receivable (129,218) (149,054)
Increase in accrued interest payable 27,913 68,164
Amortization of ESOP unearned compensation 62,078 79,130
Amortization of RSP unearned compensation 96,384 96,384
Other, net (575,481) (99,269)
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Net cash provided by operating activities 2,750,313 2,564,524
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INVESTING ACTIVITIES
Investment and mortgage-backed securities available for sale:
Proceeds from sales 1,337,950 -
Proceeds from maturities and principal repayments 8,397,580 6,624,194
Purchases (7,779,468) (19,309,977)
Investment and mortgage-backed securities held to maturity:
Proceeds from maturities and principal repayments 3,837,113 31,943,408
Purchases (2,963,389) (26,634,757)
Increase in loans receivable, net (10,444,853) (18,052,561)
Proceeds from sale of repossessed assets 217,423 245,064
Purchase of premises and equipment, net (773,957) (303,234)
Purchase of Federal Home Loan Bank Stock - (800,085)
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Net cash used for investing activities (8,171,601) (26,287,948)
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FINANCING ACTIVITIES
Net increase in deposits 7,143,257 4,623,675
Advances from Federal Home Loan Bank 6,000,000 16,000,000
Repayment of short term Advances from Federal Home Loan Bank (15,000,000) -
Repayment of other borrowings (33,337) (1,256,737)
Common stock acquired by RSP - (506,502)
Cash dividends paid (704,173) (576,870)
Treasury stock purchased (430,809) (908,405)
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Net cash provided by (used for) financing activities (3,025,062) 17,375,161
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Decrease in cash and cash equivalents (8,446,350) (6,348,263)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 14,950,233 11,468,820
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $6,503,883 $5,120,557
============== =================
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
7
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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 it's wholly-owned subsidiary, Peoples Home Savings Bank (the "Bank") and
the Bank's wholly-owned subsidiary, HOMECO (the "Subsidiary"). All significant
intercompany balances and transactions have been eliminated. The Company's
business is conducted principally through the Bank.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with instructions to Form 10-QSB 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 future period. The unaudited consolidated financial statements should be
read in conjunction with Form 10-K for the year ended December 31, 1999.
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."
8
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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, year 2000 issues, and general economic
conditions. The Company undertakes 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 September 30, 2000 decreased $0.8 million or 0.3% to $267.9
million from $268.6 million at December 31, 1999. Decreases in cash and interest
bearing deposits of $ 8.4 million and securities of $1.8 million were partially
offset by increases in loans of $9.3 million.
Loans receivable at September 30, 2000, of $128.0 million represented an
increase of $9.3 million or 7.8% from $118.7 million at December 31, 1999. The
growth in the loan portfolio was primarily attributable to increases in
municipal loans of $3.5 million, first mortgage loans of $3.0 million and
automobile loans of $2.3 million.
Investment and mortgage-backed securities decreased $1.8 million to $122.9
million at September 30, 2000, from $124.7 million at December 31, 1999. This
decrease was the result of purchases of $10.7 million , maturities of $5.4
million, sales of $1.3 million, and principal repayments of $6.9 million.
Total deposits after interest credited at September 30, 2000 were $196.5
million, an increase of $7.2 million or 3.8% from $189.3 million at December 31,
1999.
Advances from the Federal Home Loan Bank of Pittsburgh decreased $9.0 million to
$41.3 million at September 30, 2000 from $50.3 million at December 31, 1999.
This decrease was the result of the repayment of $6.0 million in short term
advances which were used for year 2000 liquidity purposes at year end along with
the repayment of an additional $3.0 million in short term advances.
Stockholders' equity increased $1,365,000. This increase was due to net income
of $1,659,000 and decreases in accumulated other comprehensive losses and
unallocated ESOP and RSP shares of $682,000, 112,000 and $96,000 respectively.
These increases to stockholders' equity were partially offset by a decrease in
additional paid in capital of $50,000 relating to the allocation of ESOP shares
along with an increase in treasury stock of $431,000 and cash dividends paid of
$704,000.
The decrease in other comprehensive accumulated loss resulted from the
fluctuation in market value of the Company's investment in securities and
mortgage-backed securities available for sale ("the available for sale
portfolio"). Because of interest rate volatility, accumulated other
comprehensive loss and shareholders' equity could materially fluctuate for each
interim period and year-end period. The decrease in market value of the
available for sale portfolio is considered temporary in nature and will not
affect the Company's net income unless the securities are sold. The Company
currently plans to hold these securities until maturity or until the market
values of these
9
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securities increase. Accordingly, the Company does not expect,
though there is no assurance, that its investment in these securities will
affect net income in future periods.
10
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Results of Operations
Comparison of Operating Results for the Three Months Ended September 30, 2000
and 1999.
General.
Net income for the three months ended September 30, 2000 increased by $45,000 to
$571,000, from $526,000 for the three months ended September 30, 1999. This
increase was primarily due to an increases in net interest income of $33,000 and
non-interest income of $27,000 coupled with a decrease in income tax provisions
of $24,000. These increases to net income were partially offset by increases in
loan loss provisions and non-interest expense of $30,000 and $9,000,
respectively.
Net Interest Income.
Reported net interest income increased $33,000 or 1.6% for the three months
ended September 30, 2000. Net interest income on a tax equivalent basis
increased by $42,000 or 1.9% in a period when both average interest earning
assets and average interest-bearing liabilities increased (increased $10.8
million and $9.9 million, respectively). The Company's net interest rate spread
decreased 12 basis points (with 100 basis points being equal to 1%) to 3.14% for
the three months ended September 30, 2000. The increase in average earning
assets of $10.8 million was primarily due to a $13.7 million increase in average
loans, partially offset by a $2.8 million decrease in average securities.
Interest Income.
Interest income on a tax equivalent basis totaled $4.9 million for the three
months ended September 30, 2000, an increase of $360,000 or 7.9% over the total
of $4.6 million for the three months ended September 30, 1999. This increase was
due to an increase in the Company's average interest-earning assets of $10.8
million for the three months ended September 30, 2000 along with a 25 basis
point increase in the yield earned. Interest earned on loans increased $295,000
or 12.7%, in 2000. The increase was due to a $13.7 million increase in the
average balance of loans along with a six basis point increase in the yield
earned. Interest earned on investment and mortgage-backed securities (including
securities held for sale) increased $65,000 or 2.8%, in 2000. The increase was
due to a 34 basis point increase in the yield earned, partially offset by a $2.8
million decrease in average investment and mortgage-backed securities.
Interest Expense.
Interest expense increased $318,000 to $2.6 million for the three months ended
September 30, 2000. The increase in interest expense was due to a $9.9 million
increase in the average balance of interest-bearing liabilities primarily due to
increased deposits of $ 10.5 million partially offset by decreased borrowings of
$ 0.6 million coupled with a 37 basis point increase in the average cost of
interest-bearing liabilities to 4.44%.
11
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Provision for Losses on Loans.
The provision for loan losses increased by $30,000 to $150,000 for the three
months ended September 30, 2000, from $120,000 for the three months ended
September 30, 1999. See "Risk Elements". Management continually evaluates the
adequacy of the allowance for loan losses, which encompasses the overall risk
characteristics of the various portfolio segments, past experience with losses,
the impact of economic conditions on borrowers and other relevant factors which
may come to the attention of management. Although the Company maintains its
allowance for loan losses at a level that it considers adequate to provide for
the inherent risk of loss in its loan portfolio, there can be no assurance that
future losses will not exceed estimated amounts or that additional provisions
for losses will not be required in future periods.
Non-interest Income.
Total non-interest income increased $27,000 to $260,000 for the three months
ended September 30, 2000, from $233,000 for the three months ended September 30,
1999. This increase was primarily due to increased service charges on deposit
accounts of $17,000, primarily due to an increase in the number of transaction
accounts along with net securities gains of $7,000.
Non-interest Expense.
Non-interest expense increased $9,000 to $1,529,000 for the three months ended
September 30, 2000, from $1,520,000 for the three months ended September 30,
1999. Income Tax Expense.
Income tax expense decreased $24,000 to $167,000 for the three months ended
September 30, 2000, from $191,000 for the three months ended September 30, 1999
as a result of an increase in tax exempt interest on municipal loans.
Comparison of Operating Results for the Nine Months Ended September 30, 2000 and
1999.
General.
Net income for the nine months ended September 30, 2000 increased by $327,000 to
$1,659,000, from $1,332,000 for the nine months ended September 30, 1999. This
increase was primarily due to increases in net interest income of $354,000 and
non-interest income of $89,000 coupled with a decrease in non-interest expense
of $63,000. These increases to net income were partially offset by increases in
loan loss and income tax provisions of $100,000 and $80,000, respectively.
Net Interest Income.
Reported net interest income increased $354,000 or 5.8% for the nine months
ended September 30, 2000. Net interest income on a tax equivalent basis
increased by $391,000 or 6.0% in a period when both average interest earning
assets and average interest-bearing liabilities increased (increased $14.6
million and $15.6 million, respectively). The Company's net interest rate spread
increased 2 basis points to 3.19% for the nine months ended September 30, 2000.
The increase in average earning assets of $14.6 million was primarily due to a
$16.5 million increase in average loans, partially offset by a $1.9 million
decrease in average securities.
12
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Interest Income.
Interest income on a tax equivalent basis totaled $14.7 million for the nine
months ended September 30, 2000, an increase of $1,356,000 or 10.2% over the
total of $13.3 million for the nine months ended September 30, 1999. This
increase was mainly due to an increase in the Company's average interest-earning
assets of $14.6 million for the nine months ended September 30, 2000. Interest
earned on loans increased $988,000 or 15.1%, in 2000. The increase was due to a
$16.5 million increase in the average balance of loans, partially offset by a 1
basis point decrease in the yield earned. Interest earned on investment and
mortgage-backed securities (including securities held for sale) increased
$368,000 or 5.4%, in 2000. The increase was due to a 45 basis point increase in
the yield earned, partially offset by a $1.9 million decrease in average
investment and mortgage-backed securities.
Interest Expense.
Interest expense increased $965,000 to $7.8 million for the nine months ended
September 30, 2000. The increase in interest expense was due to a $15.6 million
increase in the average balance of interest-bearing liabilities primarily due to
increased deposits of $ 10.6 million and increased borrowings of $ 5.0 million
pursuant to the Bank's leverage strategy coupled with a 27 basis point increase
in the average cost of interest-bearing liabilities to 4.34%.
Provision for Losses on Loans.
The provision for loan losses increased by $100,000 to $405,000 for the nine
months ended September 30, 2000, from $305,000 for the nine months ended
September 30, 1999. See "Risk Elements". Management continually evaluates the
adequacy of the allowance for loan losses, which encompasses the overall risk
characteristics of the various portfolio segments, past experience with losses,
the impact of economic conditions on borrowers and other relevant factors which
may come to the attention of management. Although the Company maintains its
allowance for loan losses at a level that it considers adequate to provide for
the inherent risk of loss in its loan portfolio, there can be no assurance that
future losses will not exceed estimated amounts or that additional provisions
for losses will not be required in future periods.
Non-interest Income.
Total non-interest income increased $89,000 to $639,000 for the nine months
ended September 30, 2000, from $550,000 for the nine months ended September 30,
1999. This increase was primarily due to increased service charges on deposit
accounts of $64,000, due to increases in fees which commenced in the third
quarter of 1999 coupled with an increase in the number of transaction accounts.
Non-interest Expense.
Non-interest expense decreased $63,000 to $4,508,000 for the nine months ended
September 30, 2000, from $4,571,000 for the nine months ended September 30,
1999. This decrease was primarily due to decreases in compensation and employee
benefits of $31,000 as a result of the Company modifying it's benefit programs
and deposit insurance premiums of $50,000 for the nine months ended September
30, 2000, due to the Federal Deposit Insurance Corporation's assessment rate
change in January 2000.
Income Tax Expense.
Income tax expense increased $80,000 to $559,000 for the nine months ended
September 30, 2000, from $479,000 for the nine months ended September 30, 1999
as a result of an increase in tax exempt interest on municipal loans.
13
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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 Company has other sources of liquidity if a need for additional funds
arises, such as FHLB of Pittsburgh advances. At September 30, 2000 the Bank had
borrowed $41.3 million of it's $133.3 million maximum borrowing capacity with a
remaining borrowing capacity of approximately $92.0 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.
At September 30, 2000, the Bank's Tier I risk-based and total risk-based capital
ratios were 21.2% and 22.3%, 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 10.2% at
September 30, 2000. Current regulations require a leveraged ratio 5% to be
considered well capitalized.
New Branch Location
The Bank has purchased property located in Center Township, Beaver County,
Pennsylvania for the purpose of construction of a new branch office. The Bank
has obtained all necessary regulatory approvals related to the new branch and
expects the branch to open during 2001. The new location should provide growth
opportunities, however there are risks associated with the opening of a new
branch such as increased personnel, occupancy and equipment expenses.
14
<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 September 30, 2000 and December 31, 1999. 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.
September 30, December 31,
2000 1999
---- ----
(Dollars in Thousands)
Loans on nonaccrual basis $470 $424
---- ----
Loans past due 90 days or more 96 73
---- ----
Total non-performing loans 566 497
---- ----
Real estate owned 0 0
---- ----
Total non-performing assets $566 $497
==== ====
Total non-performing loans to
total loans 0.44% 0.42%
==== ====
Total non-performing loans to
total assets 0.21% 0.19%
==== ====
Total non-performing assets to
total loans 0.21% 0.19%
==== ====
The allowance for loan losses was 251.1% of total non-performing assets at
September 30, 2000 and 273.4% at December 31, 1999.
15
<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.
(a) The following exhibits are filed as part of this report.
3.1 Articles of Incorporation of PHS Bancorp, Inc. *
3.2 Bylaws 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 *
27.0 Financial Data Schedule (electronic filing only)
99.0 Review Report of S.R. Snodgrass , A.C.
(b) Reports on Form 8 - K.
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.
16
<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: November 13, 2000
PHS Bancorp, Inc.
-----------------
By: /s/James P. Wetzel, Jr.
--------------------------------
James P. Wetzel, Jr.
President and Chief Executive Officer
By: /s/Richard E. Canonge
--------------------------------
Richard E. Canonge
Chief Financial Officer and Treasurer
(Principal Accounting Officer)
17
