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 June 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 __________
SEC File Number 000-23230
-------------------------
PHS Bancorp, Inc.
-----------------
(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 August 2, 2000 there were 2,603,738 shares outstanding of the issuer's
class of common stock.
<PAGE>
PHS BANCORP, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-QSB
Page
Number
------
Part I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet (unaudited) as of June 30, 2000
and December 31, 1999 3
Consolidated Statement of Income (unaudited) for the Three and Six
Months ended June 30, 2000 and 1999 4
Consolidated Statement of Changes in Stockholders' Equity
(unaudited) for the Six Months ended June 30, 2000 5
Consolidated Statement of Cash Flows (unaudited) for the
Six Months ended June 30, 2000 and 1999 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
2
<PAGE>
PHS BANCORP, INC.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------------ ------------------
<S> <C> <C>
ASSETS
Cash and amounts due from other institutions $ 1,642,153 $ 3,533,452
Interest - bearing deposits with other institutions 5,117,260 11,416,781
Investment securities:
Available for sale 26,897,173 27,594,897
Held to maturity (market value $ 18,108,597
and $15,268,634) 18,369,391 15,539,866
Mortgage - backed securities:
Available for sale 39,720,953 37,426,028
Held to maturity (market value $ 40,206,512
and $42,263,705) 41,708,423 44,141,386
Loans (net of allowance for loan losses of $1,429,391
and $1,359,900) 127,339,546 118,745,043
Accrued interest receivable 1,634,663 1,538,163
Premises and equipment 4,152,218 4,295,194
Federal Home Loan Bank stock 2,614,800 2,614,885
Other assets 1,630,963 1,794,646
------------------ ------------------
TOTAL ASSETS $ 270,827,543 $ 268,640,341
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 196,545,728 $ 189,344,552
Advances from Federal Home Loan Bank 44,294,800 50,294,800
Other borrowings 97,951 120,039
Accrued interest payable and other liabilities 2,347,430 2,129,613
------------------ ------------------
Total liabilities 243,285,909 241,889,004
------------------ ------------------
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 10,505,895 10,541,960
Retained earnings - substantially restricted 20,115,289 19,496,887
Accumulated other comprehensive loss (624,207) (914,110)
Unallocated ESOP shares (63,060 and 67,860 shares) (991,893) (1,066,503)
Unallocated RSP shares (21,742 and 27,330 shares) (250,039) (314,295)
Treasury stock, at cost (151,262 and 124,000 shares) (1,489,411) (1,268,602)
------------------ ------------------
Total stockholders' equity 27,541,634 26,751,337
------------------ ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 270,827,543 $ 268,640,341
================== ==================
</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 June 30, Six Months Ended June 30,
2000 1999 2000 1999
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans $ 2,534,808 $ 2,171,870 $ 4,927,487 $ 4,234,308
Investment securities:
Taxable 513,254 467,968 1,026,153 926,801
Exempt from federal income tax 276,076 239,367 542,134 472,820
Mortgage - backed securities 1,434,144 1,390,523 2,877,120 2,754,530
Interest - bearing deposits with other institutions 39,742 39,944 85,752 99,728
-------------- -------------- -------------- -------------
Total interest income 4,798,024 4,309,672 9,458,646 8,488,187
-------------- -------------- -------------- -------------
INTEREST EXPENSE
Deposits 1,978,612 1,744,402 3,866,384 3,452,869
Advances from Federal Home Loan Bank 627,669 508,131 1,254,432 969,159
Other borrowings 1,262 26,404 2,660 52,216
-------------- -------------- -------------- -------------
Total interest expense 2,607,543 2,278,937 5,123,476 4,474,244
-------------- -------------- -------------- -------------
Net interest income 2,190,481 2,030,735 4,335,170 4,013,943
PROVISION FOR LOAN LOSSES 140,000 90,000 255,000 185,000
-------------- -------------- -------------- -------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 2,050,481 1,940,735 4,080,170 3,828,943
-------------- -------------- -------------- -------------
NONINTEREST INCOME
Service charges on deposit accounts 131,822 106,318 251,500 204,981
Investment securities gains, net - - - -
Rental income, net 22,716 22,134 41,932 44,439
Other income 43,558 30,898 85,734 67,643
-------------- -------------- -------------- -------------
Total noninterest income 198,096 159,350 379,166 317,063
-------------- -------------- -------------- -------------
NONINTEREST EXPENSE
Compensation and employee benefits 802,278 824,688 1,610,956 1,646,291
Occupancy and equipment costs 285,623 272,550 571,703 569,925
Deposit insurance premium 9,709 26,360 19,407 52,933
Data processing costs 78,128 63,700 157,102 147,849
Other expenses 315,324 333,878 619,805 634,696
-------------- -------------- -------------- -------------
Total noninterest expense 1,491,062 1,521,176 2,978,973 3,051,694
-------------- -------------- -------------- -------------
Income before income taxes 757,515 578,909 1,480,363 1,094,312
Income taxes 200,024 158,755 392,124 288,502
-------------- -------------- -------------- -------------
NET INCOME $ 557,491 $ 420,154 $ 1,088,239 $ 805,810
============== ============== ============== =============
Earnings Per Share
Basic $ $0.22 $0.16 $ $0.43 $0.30
Diluted $ $0.22 $ $0.16 $ $0.43 $ $0.30
Weighted average number of shares outstanding
Basic 2,522,978 2,678,207 2,530,553 2,681,173
Diluted 2,522,978 2,678,207 2,530,553 2,681,173
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
PHS BANCORP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (UNAUDITED)
Accumulated
Additional Other Unallocated Unallocated Total Compre-
Common Paid in Retained Comprehensive ESOP RSP Treasury Stockholders' hensive
Stock Capital Earnings Income (Loss) Shares Shares Stock Equity Income
--------- ------------ ------------ ------------- ------------- ------------ ------------- ------------- ----------
<S> <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 1,088,239 1,088,239 $1,088,239
Other
comprehensive
income:
Unrealized
gain on
available
for sale
securities,
net of
tax of
$149,343 289,903 289,903 289,903
-----------
Compre-
hensive
income $1,378,142
===========
Cash
dividends
paid (469,837) (469,837)
Treasury
stock
purchased,
at cost (220,809) (220,809)
ESOP shares
earned (36,065) 74,610 38,545
RSP shares
earned 64,256 64,256
--------- ------------ ------------ ------------- ------------- ------------ ------------- -------------
Balance,
June 30,
2000 $276,000 $10,505,895 $20,115,289 ($624,207) ($991,893) ($250,039) ($1,489,411) $27,541,634
========= ============ ============ ============= ============= ============ ============= =============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
5
<PAGE>
PHS BANCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six months ended June 30,
2000 1999
-------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,088,239 $ 805,810
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 255,000 185,000
Depreciation, amortization and accretion 277,038 257,482
Amortization of discounts, premiums and
loan origination fees 500,995 322,262
Decrease in loans held for sale - (21,934)
Increase in accrued interest receivable (96,500) (5,218)
Increase (decrease) in accrued interest payable 212,310 (1,574)
Amortization of ESOP unearned compensation 38,545 54,624
Amortization of RSP unearned compensation 64,256 64,256
Other, net (199,071) 185,287
------------ ------------
Net cash provided by operating activities 2,140,812 1,845,995
------------ ------------
INVESTING ACTIVITIES
Investment and mortgage-backed securities available for sale:
Proceeds from maturities and principal repayments 6,678,978 5,315,716
Purchases (7,779,468) (13,309,977)
Investment and mortgage-backed securities held to maturity:
Proceeds from maturities and principal repayments 2,549,873 26,393,029
Purchases (2,963,389) (25,376,117)
Increase in loans receivable, net (9,347,057) (11,093,493)
Proceeds from sale of repossessed assets 175,051 140,376
Purchase of premises and equipment, net (134,062) (254,342)
Purchase of Federal Home Loan Bank Stock - (400,000)
------------ ------------
Net cash used for investing activities (10,820,074) (18,584,808)
------------ ------------
FINANCING ACTIVITIES
Net increase in deposits 7,201,176 3,495,449
Advances from Federal Home Loan Bank - 8,000,000
Repayment of short term Advances from Federal Home Loan Bank (6,000,000) -
Repayment of other borrowings (22,088) (1,246,025)
Common stock acquired by RSP - (506,502)
Cash dividends paid (469,837) (386,400)
Treasury stock purchased (220,809) (259,375)
------------ ------------
Net cash provided by financing activities 488,442 9,097,147
------------ ------------
Decrease in cash and cash equivalents (8,190,820) (7,641,666)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 14,950,233 11,468,820
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,759,413 $ 3,827,154
============ ============
</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 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."
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, 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 June 30, 2000 increased $2.2 million or 0.8% to $270.8 million
from $268.6 million at December 31, 1999. Increases in loans receivable of $8.6
million and investment and mortgage-backed securities of $2.0 million were
partially offset by a decrease in cash and interest-bearing deposits with other
institutions of $8.2 million.
Loans receivable at June 30, 2000, of $127.3 million represented an increase of
$8.6 million or 7.2% from $118.7 million at December 31, 1999. The growth in the
loan portfolio was primarily attributable to increases in municipal loans of
$3.8 million, automobile loans of $3.1 million and first mortgage loans of $1.3
million.
Investment and mortgage-backed securities increased $2.0 million to $126.7
million at June 30, 2000, from $124.7 million at December 31, 1999. This
increase was the result of purchases of $10.7 million , maturities of $4.9
million, and principal repayments of $4.4 million.
Total deposits after interest credited at June 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 $6.0 million to
$44.3 million at June 30, 2000 from $50.3 million at December 31, 1999. This
decrease was the result of the repayment of short term advances which were used
for year 2000 liquidity purposes at year end.
Stockholders' equity increased $791,000. This increase was due to net income of
$1,088,000 and decreases in accumulated other comprehensive losses and
unallocated ESOP and RSP shares of $290,000, 75,000 and $64,000 respectively.
These increases to stockholders' equity were partially offset by a decrease in
additional paid in capital of $36,000 along with an increase in treasury stock
of $221,000 and cash dividends paid of $470,000.
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
8
<PAGE>
securities until maturity or until the market values of these 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.
9
<PAGE>
Results of Operations
Comparison of Operating Results for the Three Months Ended June 30, 2000 and
June 30, 1999.
General.
Net income for the three months ended June 30, 2000 increased by $137,000 to
$557,000, from $420,000 for the three months ended June 30, 1999. This increase
was primarily due to an increases in net interest income of $159,000 and
non-interest income of $39,000 coupled with a decrease in non-interest expense
of $30,000. These increases to net income were partially offset by increases in
loan loss and income tax provisions of $50,000 and $41,000, respectively.
Net Interest Income.
Reported net interest income increased $159,000 or 7.8% for the three months
ended June 30, 2000. Net interest income on a tax equivalent basis increased by
$170,000 or 7.9% in a period when both average interest earning assets and
average interest-bearing liabilities increased (increased $14.9 million and
$16.4 million, respectively). The Company's net interest rate spread increased 9
basis points (with 100 basis points being equal to 1%) to 3.21% for the three
months ended June 30, 2000. The increase in average earning assets of $14.9
million was primarily due to a $18.0 million increase in average loans,
partially offset by a $3.1 million decrease in average securities.
Interest Income.
Interest income on a tax equivalent basis totaled $4.9 million for the three
months ended June 30, 2000, an increase of $496,000 or 11.2% over the total of
$4.4 million for the three months ended June 30, 1999. This increase was mainly
due to an increase in the Company's average interest-earning assets of $14.9
million for the three months ended June 30, 2000. Interest earned on loans
increased $362,000 or 16.7%, in 2000. The increase was due to a $18.0 million
increase in the average balance of loans while the yield earned remained
constant. Interest earned on investment and mortgage-backed securities
(including securities held for sale) increased $134,000 or 5.9%, in 2000. The
increase was due to a 48 basis point increase in the yield earned, partially
offset by a $3.1 million decrease in average investment and mortgage-backed
securities.
Interest Expense.
Interest expense increased $326,000 to $2.6 million for the three months ended
June 30, 2000. The increase in interest expense was due to a $16.4 million
increase in the average balance of interest-bearing liabilities primarily due to
increased deposits of $ 10.5 million and increased borrowings of $ 5.9 million
pursuant to the Company's leverage strategy coupled with a 26 basis point
increase in the average cost of interest-bearing liabilities to 4.33%.
10
<PAGE>
Provision for Losses on Loans.
The provision for loan losses increased by $50,000 to $140,000 for the three
months ended June 30, 2000, from $90,000 for the three months ended June 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 $39,000 to $198,000 for the three months
ended June 30, 2000, from $159,000 for the three months ended June 30, 1999.
This increase was primarily due to increased service charges on deposit accounts
of $26,000, 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 $30,000 to $1,491,000 for the three months ended
June 30, 2000, from $1,521,000 for the three months ended June 30, 1999. This
decrease was primarily due to decreases in compensation and employee benefits of
$23,000, primarily due to a decrease in ESOP expense due to a lower average
market value of the Company's stock along with deposit insurance premiums of
$17,000 for the three months ended June 30, 2000, due to the Federal Deposit
Insurance Corporation's assessment rate change in January 2000. These decreases
to non-interest expense were partially offset by increased occupancy and
equipment costs of $ 13,000
Income Tax Expense.
Income tax expense increased $41,000 to $200,000 for the three months ended June
30, 2000, from $159,000 for the three months ended June 30, 1999.
Comparison of Operating Results for the Six Months Ended June 30, 2000 and June
30, 1999.
General.
Net income for the six months ended June 30, 2000 increased by $282,000 to
$1,088,000, from $806,000 for the six months ended June 30, 1999. This increase
was primarily due to an increases in net interest income of $321,000 and
non-interest income of $62,000 coupled with a decrease in non-interest expense
of $73,000. These increases to net income were partially offset by increases in
loan loss and income tax provisions of $70,000 and $103,000, respectively.
Net Interest Income.
Reported net interest income increased $321,000 or 7.8% for the six months ended
June 30, 2000. Net interest income on a tax equivalent basis increased by
$170,000 or 8.0% in a period when both average interest earning assets and
average interest-bearing liabilities increased (increased $16.5 million and
$18.4 million, respectively). The Company's net interest rate spread increased 8
basis points (with 100 basis points being equal to 1%) to 3.21% for the six
months ended June 30, 2000. The increase in average earning assets of $16.5
million was primarily due to a $17.9 million increase in average loans,
partially offset by a $1.4 million decrease in average securities.
11
<PAGE>
Interest Income.
Interest income on a tax equivalent basis totaled $9.7 million for the six
months ended June 30, 2000, an increase of $996,000 or 11.4% over the total of
$8.7 million for the six months ended June 30, 1999. This increase was mainly
due to an increase in the Company's average interest-earning assets of $16.5
million for the six months ended June 30, 2000. Interest earned on loans
increased $693,000 or 16.4%, in 2000. The increase was due to a $17.9 million
increase in the average balance of loans, partially offset by a 6 basis point
decrease in the yield earned. Interest earned on investment and mortgage-backed
securities (including securities held for sale) increased $134,000 or 5.9%, in
2000. The increase was due to a 51 basis point increase in the yield earned,
partially offset by a $1.4 million decrease in average investment and
mortgage-backed securities.
Interest Expense.
Interest expense increased $647,000 to $5.1 million for the six months ended
June 30, 2000. The increase in interest expense was due to a $18.4 million
increase in the average balance of interest-bearing liabilities primarily due to
increased deposits of $ 10.6 million and increased borrowings of $ 7.8 million
pursuant to the Bank's leverage strategy coupled with a 23 basis point increase
in the average cost of interest-bearing liabilities to 4.29%.
Provision for Losses on Loans.
The provision for loan losses increased by $70,000 to $255,000 for the six
months ended June 30, 2000, from $185,000 for the six months ended June 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 $62,000 to $198,000 for the six months ended
June 30, 2000, from $317,000 for the six months ended June 30, 1999. This
increase was primarily due to increased service charges on deposit accounts of
$47,000, 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 $73,000 to $2,979,000 for the six months ended
June 30, 2000, from $3,052,000 for the six months ended June 30, 1999. This
decrease was primarily due to decreases in compensation and employee benefits of
$35,000 and deposit insurance premiums of $34,000 for the six months ended June
30, 2000, due to the Federal Deposit Insurance Corporation's assessment rate
change in January 2000.
Income Tax Expense.
Income tax expense increased $103,000 to $392,000 for the six months ended June
30, 2000, from $289,000 for the six months ended June 30, 1999.
12
<PAGE>
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 June 30, 2000 the Bank had
borrowed $44.3 million of it's $135.7 million maximum borrowing capacity with a
remaining borrowing capacity of approximately $91.4 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 June 30, 2000, the Bank's Tier I risk-based and total risk-based capital
ratios were 20.9% and 22.0%, 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 10.0% at June
30, 2000. Current regulations require a leveraged ratio 5% to be considered well
capitalized.
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 June 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.
June 30, December 31,
-------- ------------
2000 1999
---- ----
(Dollars in Thousands)
Loans on nonaccrual basis $390 $424
Loans past due 90 days or more 85 73
--- ---
Total non-performing loans 475 497
--- ---
Real estate owned 0 0
--- ---
Total non-performing assets $475 $497
=== ===
Total non-performing loans to total loans 0.37% 0.42%
==== ====
Total non-performing loans to toal assets 0.18% 0.19%
==== ====
Total non-performing assets to total assets 0.18% 0.19%
==== ====
The allowance for loan losses was 314.1% of total non-performing assets at June
30, 2000 and 273.4% at December 31, 1999.
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.
On April 27, 2000, the Company held its annual meeting of stockholders
and the following items were presented:
Election of Directors John C. Kelly, Earl F. Klear, and John M. Rowse
for terms of three years ending in 2003. Mr. Kelly received 2,397,569
votes in favor and 14,575 votes were withheld. Mr. Klear received
2,395,443 votes in favor and 38,669 votes were withheld. Mr. Rowse
received 2,397,468 votes in favor and 36,644 votes were withheld.
Ratification of the appointment of S.R. Snodgrass, A.C. as the
Company's auditors for the 2000 fiscal year with 2,408,978 votes for,
25,106 votes against, and 27 abstentions.
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.
** Incorporated by reference to Registrant's Quarterly Report on Form 10-Q for
the Quarter Ended June 30, 1999 and filed with the Securities and Exchange
Commission on July 23, 1999.
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: August 3, 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)
16
