U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to _________
Commission file number 33-88802
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PEOPLES FINANCIAL CORP., INC.
---------------------------------------------------------
(Exact name of small business issuer as specified in its
charter)
Pennsylvania 25-1469914
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Ford Street and Fourth Avenue, Ford City, PA 16226
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(Address of principal executive offices)
(412) 763-1221
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(Issuer's telephone number)
--------------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report)
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes ____ No____
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest practicable
dates: September 30, 1996
------------------
As of September 30, 1996, there were 879,807 shares of the
Registrant's common stock, $0.30 par value, outstanding.
Transitional Small Business Disclosure Format (check one):
Yes____ No____
<PAGE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
INDEX
PAGE
Accountant's Compilation Report
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
Consolidated Balance Sheets -
September 30, 1996 and December 31,1995 1
Consolidated Statements of Income -
Nine months ended September 30, 1996 and 1995 2
Consolidated Statements of Cash Flows -
Nine months ended September 30, 1996 and 1995 3
Notes to Consolidated Financial Statements 4
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 7
ITEM 2. Changes in Securities 7
ITEM 3. Defaults Upon Senior Securities 7
ITEM 4. Submission of Matters to a Vote of Security Holders 7
ITEM 5. Other Information 7
ITEM 6. Exhibits and Reports on Form 8-K 7
SIGNATURES 8
<PAGE>
ACCOUNTANT'S COMPILATION REPORT
To the Boards of Directors
Peoples Financial Corp., Inc. and Subsidiary
Ford City, Pennsylvania
We have compiled the accompanying consolidated balance sheets of
Peoples Financial Corp., Inc. and Subsidiary as of September 30,
1996 and December 31, 1995, and the related statements of income
and statements of cash flows for the nine months ended September
30, 1996 and 1995 for Peoples Financial Corp., Inc. and
Subsidiary included in the accompanying prescribed form, in
accordance with standards established by the American Institute
of Certified Public Accountants.
A compilation is limited to presenting in the form prescribed by
the Securities and Exchange Commission under Regulation S-B of
the 1934 Act, information that is the representation of
management. We have not audited or reviewed the accompanying
financial statements and, accordingly, do not express an opinion,
or any other form of assurance on them.
These financial statements (including related disclosures) are
presented in accordance with the requirements of the Securities
and Exchange Commission, which differ from generally accepted
accounting principles. Accordingly, these financial statements
are not designed for those who are not informed about such
differences.
/s/ Edwards Leap & Sauer
-------------------------
Edwards Leap & Sauer
Pittsburgh, Pennsylvania
October 31, 1996
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(see Accountant's Compilation Report)
(In thousands)
<CAPTION>
September 30
1996 December 31
(Unaudited) 1995
------------ -----------
<S> <C> <C>
ASSET
Cash and due from banks $ 8,461 $ 8,951
Federal Funds sold 325 2,275
Securities available for sale 24,434 22,585
Investment securities, at cost 28,422 32,717
Federal Home Loan Bank Stock 570 602
Loans, net 129,749 113,601
Premises and equipment, net 3,531 3,573
Other assets 3,468 2,583
----------- -----------
Total assets $ 198,960 $ 186,887
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Non-interest bearing $ 21,470 18,447
Interest bearing 144,101 138,645
----------- ----------
Total Deposits 165,571 157,092
Accrued interest and other
liabilities 7,663 6,421
----------- ----------
Total Liabilities 173,234 163,513
STOCKHOLDERS' EQUITY
Common stock, par value 365 365
Additional paid-in capital 3,749 3,749
Retained earnings 13,047 12,068
Unrealized holding gains on
securities available for sale 8,565 7,192
----------- ----------
Total stockholders' equity 25,726 23,374
----------- ----------
Total liabilities and
stockholders' equity $ 198,960 $ 186,887
=========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
Page 1
<PAGE>
<TABLE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(see Accountant's Compilation Report)
(In thousands, except for per share data)
<CAPTION>
Nine Months Ended September 30,
1996 1995
-------------- -------------
<S> <C> <C>
INTEREST INCOME
Loans $ 8,005 $ 7,498
Investment securities 2,081 2,108
Interest bearing deposits 3 2
Federal funds sold 232 272
-------------- ------------
Total interest income 10,321 9,880
INTEREST EXPENSE
Deposits 4,776 4,730
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NET INTEREST INCOME 5,545 5,150
PROVISION FOR LOAN LOSSES 25 10
-------------- -------------
NET INTEREST INCOME AFTER
PROVISIONS FOR LOAN LOSSES 5,520 5,140
NON-INTEREST INCOME
Service fees and other 618 358
Net investment gains 455 673
------------- -------------
1,073 1,031
NET-INTEREST EXPENSES
Salaries 1,622 1,528
Director's fees 117 97
Pension and other employee benefits 526 535
Occupancy expense 817 735
Other 1,549 1,764
------------ -------------
4,631 4,659
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 1,962 1,512
PROVISION FOR INCOME TAXES 389 158
------------ -------------
INCOME BEFORE MINORITY INTEREST 1,573 1,354
MINORITY INTEREST 0 163
------------ -------------
NET INCOME $ 1,573 $ 1,191
============ ==============
NET INCOME PER SHARE OF COMMON
STOCK $ 1.79 $ 1.58
============ ==============
SHARES USED IN COMPUTING NET
INCOME PER COMMON SHARE 879,807 754,492
============ ==============
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
Page 2
<PAGE>
<TABLE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(see Accountant's Compilation report)
(In thousands)
<CAPTION>
Nine Months Ended September 30,
1996 1995
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income $ 1,573 $ 1,191
Adjustments to reconcile
net cash from operating
activities:
Depreciation and amortization 440 399
Net accretion/amortization of
premiums and discounts 16 9
Gain on sale of investments (455) (673)
Provision for loan losses 25 10
Loss on sale/disposal of assets 62 0
Reinvestment stock dividends (64) (62)
Minority interest 0 163
Increase (decrease) in cash due to
changes in assets and liabilities:
Other assets (892) (767)
Accrued interest and other
liabilities 549 1,079
------------- ------------
NET CASH FROM OPERATING ACTIVITIES 1,254 1,349
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities
available for sale 981 1,243
Proceeds from maturities of
investment securities 6,300 6,061
Purchase of investment securities (1,990) (5,756)
Purchase of securities available
for sale (230) (50)
Net loans made to customers (16,232) 15
Premises and equipment expenditures (404) (292)
------------ -----------
NET CASH FROM (USED BY)
INVESTING ACTIVITIES (11,575) 1,221
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 8,488 5,810
Proceeds from issuance of common
stock 0 40
Dividends paid (607) (500)
Repayment of FHLB advances 0 (2,175)
------------ ------------
NET CASH FROM FINANCING ACTIVITIES 7,881 3,175
------------ -------------
NET CHANGE IN CASH AND CASH
EQUIVALENTS (2,440) 5,745
Cash and cash equivalents at
beginning of year 11,226 8,798
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CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 8,786 $ 14,543
============ =============
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
Page 3
<PAGE>
PEOPLES FINANCIAL CORP., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited consolidated financial statements
include Peoples Financial Corp., Inc., (the Corporation) and its
wholly owned subsidiary, PFC Bank, and have been prepared in
accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-QSB
and Article 10 of Regulation S-B. Accordingly, they do not
include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting primarily of normal recurring accruals) considered
necessary for a fair presentation have been included.
Effective, April 1, 1995, PFC Bank (formerly Peoples Bank of PA)
merged with New Bethlehem Bank. Under the terms of the merger
agreement New Bethlehem shareholders received 183.15 shares of
Peoples Financial Corp., Inc. for each share of New Bethlehem
stock held. The merger was accounted for using the purchase
method of accounting, pursuant to which the assets and
liabilities of New Bethlehem Bank were revalued to fair market
value on the date of the merger.
NOTE B - EARNINGS PER SHARE
- ----------------------------
Shares used in the earnings per share computation are the
weighted average number of shares outstanding during the periods
in question.
NOTE C - RECLASSIFICATIONS
- --------------------------
Certain previously reported items have been reclassified to
conform with the current period's classifications. These
reclassifications have no effect on net income.
Page 4
<PAGE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
For the nine months ended September 30, 1996, the Corporation's
total assets increased over December 31, 1995 by approximately
$12 million resulting primarily from an increase of over $16.1
million in loans. In addition, other assets, consisting
primarily of prepaid expenses and accrued interest receivable
increased by $885,000. These increases were offset primarily by
a reduction in investment securities.
The increase in total liabilities of approximately $9.7 million
from December 31, 1995 to September 30, 1996 is primarily
attributable to increases in deposits which increased over $8.4
million in the nine-month period ended September 30, 1996.
As of September 30, 1996, PFC Bank had a ratio of non-performing
loans to total assets of .93% as compared to a ratio of .70% as
of the end of the previous calendar year. Included in September
30, 1996, non-performing loan totals were loans totaling $1.2
million which were delinquent more than 90 days and on
non-accrual status. At September 30, 1996, the allowance for
possible loan losses was $1,244,000, which represented .96% of
total loans as compared to 1.1% at the end of the previous
calendar year. Non-performing non-accrual loans totaled 26.84%
of the allowance for possible loan losses, as compared to 40.03%
at December 31, 1995.
In management's opinion, the allowance for possible loan losses
as of September 30, 1996 is adequate to absorb any future loan
losses based on information presently known. There can be no
assurance, however, that additions to the allowance will not be
required in the future to cover losses that are presently
unforeseen.
RESULTS OF OPERATIONS
Net Income
- -----------
For the nine-month period ended September 30, 1996, the
Corporation recognized net income of $1,573,000, an increase of
$382,000 over the same period of the prior fiscal year.
The operating results of the Corporation are solely dependent
upon the net income generated by its subsidiary, PFC Bank. PFC
Bank also has the benefit of a substantially appreciated
available-for-sale investment portfolio, the strategic
liquidation of portions of which enable the Corporation to absorb
the negative effects of interest rate fluctuation and still
maintain profitable operations.
Net Interest Income
- --------------------
Interest income for the nine-month period ended September 30,
1996 was approximately $10.3 million, an increase of $441,000
from the nine-month period ended September 30, 1995. This
increase is primarily attributed to an increase in the loan
portfolio of $16.1 million. Interest expense for the nine-month
period ended September 30, 1996 was approximately $4.8 million, a
$46,000 increase over the same nine-month period ended September
30, 1995. Management attributes this increase primarily to the
increase in interest bearing deposits.
Page 5
<PAGE>
Provision for Loan Losses
- --------------------------
The provision for loan losses is based upon management's ongoing
assessment of the inherent risk of loss in the outstanding loan
portfolio. This process is based on the evaluation of individual
loans, past loss experience, current economic conditions, and
other relevant factors. While management uses the best
information available to make such evaluations, future
adjustments to the provision resulting in adjustment to the
allowance for possible loan losses may be necessary. PFC Bank
continues to monitor its loan portfolio on a regular basis and
will make additions to its allowance based on its determination
of the necessary level of the allowance. For the nine-month
period ended September 30, 1996, the Corporation provided $25,000
to the provision for loan losses as compared to $10,000 for the
same period in the previous fiscal year. Net charge-offs for the
nine-month period ended September 30, 1996 amounted to $25,000.
Non-Interest Income
- -------------------
Non-interest income for the nine-month period ended September 30,
1996 was approximately $1.1 million, an increase of $42,000 over
non-interest income for the nine-month period ended September 30,
1995.
Net investment gains were $455,000 for the nine-month period
ended September 30, 1996 as compared to $673,000 for the same
nine-month period the previous year. These net gains were
primarily the result of the liquidation of a portion of the
Corporation's available-for-sale investment portfolio.
Non-Interest Expenses
- ---------------------
Total non-interest expenses decreased by $28,000 for the
nine-month period ended September 30, 1996 when compared to the
same period in the prior year. The major components of
non-interest expenses represent normal recurring costs of
operations including compensation and employee benefits,
occupancy expense, and data processing.
Maintaining a focus on operating cost control has become
increasingly important and the Corporation has succeeded in
maintaining a relatively stable overhead burden.
Provision for Income Taxes
- ---------------------------
The Corporation incurred a provision for income taxes of $389,000
for the nine-month period ended September 30, 1996. This figure
compares to a provision of $158,000 for the same period ended
September 30, 1995. State tax liabilities are incurred both by
PFC Bank, in the form of Pennsylvania Bank Shares tax, and by the
Corporation, as a separate entity.
Page 6
<PAGE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
Not applicable
ITEM 2. Changes in Securities
Not applicable
ITEM 3. Defaults Upon Senior Securities
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable
ITEM 5. Other Information
On April 1, 1995, the Corporation completed the merger of New
Bethlehem Bank with and into Peoples Bank of PA, its wholly owned
subsidiary, forming PFC Bank. Prior to completion of the merger,
New Bethlehem Bank was a majority owned subsidiary of Peoples
Bank of PA. As part of the merger, Peoples Bank of PA acquired
the remaining minority interest in New Bethlehem Bank. Shares
of the Corporation common stock totaling 379,487 were issued to
the minority shareholders of New Bethlehem Bank.
On April 17, 1996, David P. Fennell was elected by the Board of
Directors to replace C. Edward Dunmire as president of PFC Bank
and Peoples Financial Corp., Inc. On April 17, 1996, R.B.
Robertson was appointed by the Board of Directors to replace C.
Edward Dunmire as Chief Executive Officer of PFC Bank. On April
17, 1996, Brian Henry was elected by the Board of Directors to
replace David P. Fennell as secretary of PFC Bank and Peoples
Financial Corp., Inc.
On Friday, July 19, 1996, Clarion County, Pennsylvania, including
the New Bethlehem area experienced tremendous flooding. PFC Bank
experienced substantial flood damage. One branch office was
completely submerged, while the operations center absorbed
considerable damage. The financial impact of the disaster is
not expected to have a material impact on the Corporation's
financial position.
ITEM 6. Exhibits and Reports on Form 8-K
(a) No exhibits are contained herein.
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 1996.
Page 7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Dated: November 14, 1996
----------------
PEOPLES FINANCIAL CORP., INC.
(Registrant)
/s/ David P. Fennell
- ---------------------
David P. Fennell
President
/s/ James L. Kifer
- ---------------------
James L. Kifer
Assistant Secretary
:64759
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 8,461
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 325
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 28,422
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 25,004
<LOANS> 130,993
<ALLOWANCE> 1,244
<TOTAL-ASSETS> 198,960
<DEPOSITS> 165,571
<SHORT-TERM> 0
<LIABILITIES-OTHER> 7,663
<LONG-TERM> 0
0
0
<COMMON> 365
<OTHER-SE> 25,361
<TOTAL-LIABILITIES-AND-EQUITY> 198,960
<INTEREST-LOAN> 8,005
<INTEREST-INVEST> 2,081
<INTEREST-OTHER> 235
<INTEREST-TOTAL> 10,321
<INTEREST-DEPOSIT> 4,776
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 5,545
<LOAN-LOSSES> 25
<SECURITIES-GAINS> 455
<EXPENSE-OTHER> 4,631
<INCOME-PRETAX> 1,962
<INCOME-PRE-EXTRAORDINARY> 1,962
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,573
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 1,206
<LOANS-PAST> 1,783
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,244
<CHARGE-OFFS> 63
<RECOVERIES> 38
<ALLOWANCE-CLOSE> 1,244
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
