<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 1998
[ ] 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.
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(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 Identification No.
incorporation or organization)
Ford Street and Fourth Avenue, Ford City, Pa 16226
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(Address of principal executive offices)
(724) 763-1221
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(Issuer's telephone number)
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(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 [X], 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: November 1, 1998
------------------
As of November 1, 1998, there were 884,347 shares of the Registrant's
common stock, $0.30 par value, outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
INDEX PAGE
PART I. FINANCIAL STATEMENTS
ITEM 1. Consolidated Balance Sheets -
September 30, 1998 (unaudited) and December 31, 1997........... 1
Consolidated Statements of Income -
Nine months ended September 30, 1998 and 1997 (unaudited)...... 2
Consolidated Statement of Cash Flows -
Nine months ended September 30, 1998 and 1997 (unaudited)...... 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.............................................. 13
ITEM 2. Changes in Securities.......................................... 13
ITEM 3. Defaults Upon Senior Securities................................ 13
ITEM 4. Submission of Matters to a Vote of Security Holders............ 13
ITEM 5. Other Information.............................................. 13
ITEM 6. Exhibits and Reports on Form 8-K............................... 13
SIGNATURES .............................................................. 15
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30,
1998 December 31,
ASSET (Unaudited) 1997
- ----- ---------- ------------
<S> <C> <C>
Cash and due from banks $ 12,083,837 $ 7,003,534
Federal funds sold 9,325,000 4,075,000
Available-for-sale securities 34,250,098 38,069,171
Held-to-maturity securities 30,721,359 32,378,224
Federal Home Loan Bank stock, at cost 841,500 740,200
Loans receivable, net 167,622,310 152,395,769
Premises and equipment, net 3,353,447 3,459,173
Other assets 2,133,553 2,149,627
------------ ------------
Total Assets $260,331,104 $240,270,698
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Non-interest bearing $ 24,113,331 $ 23,343,039
Interest bearing 185,472,967 167,229,668
------------- ------------
Total deposits 209,586,298 190,572,707
Accrued interest and other liabilities 12,070,014 12,285,041
------------ -----------
Total Liabilities 221,656,312 202,857,748
STOCKHOLDERS' EQUITY
Common stock, par value 265,304 264,650
Surplus 4,015,348 3,932,656
Retained earnings 18,773,032 15,298,374
Net unrealized holding gains on
securities available for sale 15,621,108 17,917,270
------------ -----------
Total stockholders' equity 38,674,792 37,412,950
------------ -----------
Total Liabilities and
Stockholders Equity $260,331,104 $240,270,698
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 1
<PAGE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
Nine Months Ended September 30,
Interest Income 1998 1997
--------- ---------
<S> <C> <C>
Loans $ 10,306,325 $ 9,076,717
Investment securities 2,213,122 2,066,355
Interest-bearing deposits 255,022 1,218
Federal funds sold 108,937 339,791
------------ -----------
Total interest income 12,883,406 11,484,081
Interest Expense
Deposits 6,242,735 5,504,783
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Net Interest Income 6,640,671 5,979,298
Provision for Loan Losses 140,000 50,000
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Net Interest Income after Provision for Loan Losses 6,500,671 5,929,298
Other Income
Service fees 446,664 475,611
Net investment gains 3,000,379 486,060
Other 32,464 229,170
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3,479,507 1,190,841
Other Expenses
Salaries 1,508,097 1,498,568
Pension and other employee benefits 654,989 536,453
Occupancy expense 803,698 769,353
Legal and professional 120,602 168,120
Regulatory fees 44,613 40,837
Data processing 129,249 128,245
Other 1,166,244 1,252,609
------------ ----------
4,427,492 4,394,185
Income Before Income Taxes 5,552,686 2,725,954
Provision for Income Taxes 1,407,014 677,390
------------ ----------
Net Income $ 4,145,672 $2,048,564
============ ==========
Net Income per Share of Common Stock $ 4.70 $ 2.33
============ ==========
Net Income per Share of Common Stock
(fully diluted) $ 4.70 $ 2.33
============ ==========
Weighted Average Shares Used in Computing
Net Income per Share of Common Stock 882,879 880,022
============ ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
Page 2
<PAGE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
Nine Months Ended September 30,
1998 1997
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 4,145,672 $ 2,048,564
Adjustments to reconcile net cash from
operating activities:
Depreciation and amortization 648,481 441,103
Net accretion/amortization of
premiums and discounts (8,922) (12,840)
Gain on sale of investments (3,000,379) (411,306)
Provision for loan losses 140,000 50,000
Loss on sale/disposal of assets 3,612 27,484
Reinvestment of stock dividends (36,670) (55,973)
Increase (decrease) in cash due to changes in
assets and liabilities:
Other assets 243,426 533,777
Accrued interest and other liabilities 736,297 343,178
------------- ------------
Net Cash From Operating Activities 2,871,517 2,963,987
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities available
for sale 3,330,194 629,760
Proceeds from maturities of securities held
to maturity 10,030,262 7,300,911
Purchase of securities held to maturity (8,328,139) (13,455,781)
Purchase of securities available-for-sale (199,942) 0
Net purchases of FHLB Stock (101,300) (170,700)
Net loans made to customers (15,393,142) (11,158,580)
Purchases of Premises and equipment (320,664) (293,242)
------------- ------------
Net Cash Used By Investing Activities (10,982,731) (17,147,632)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 19,029,184 14,666,542
Proceeds from issuance of Common Stock 83,346 83,309
Dividends paid (671,014) (642,393)
------------- -------------
Net Cash From Financing Activities 18,441,516 14,107,458
------------- -------------
Net Change in Cash and Cash Equivalents 10,330,302 (76,187)
Cash and Cash Equivalents at Beginning of Period 11,078,535 16,269,707
------------ -------------
Cash and Cash Equivalents at End of Period $21,408,837 $ 16,193,520
============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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 (the 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.
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
total assets, total liabilities, stockholders' equity, and net income.
<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, 1998, the Corporation's total assets
increased over December 31, 1997 by nearly $20.1 million resulting primarily
from increases of approximately $15.2 million in net loans and $10.3 million in
liquid assets such as cash and due from banks and federal funds sold, offset by
a decrease in investments of $5.4 million.
The increase in total liabilities of approximately $18.8 million from December
31, 1997 to September 30, 1998 is primarily attributable to an increase in
deposits of $19.0 million in the nine-month period ended September 30, 1998.
As of September 30, 1998, PFC Bank, the Corporation's wholly owned subsidiary,
had a ratio of non-performing loans to total assets of 0.21% as compared to a
ratio of 0.40% as of the end of December 31, 1997. Included in the third
quarter, non-performing loan totals were loans totaling $535,000 that were
delinquent more than 90 days and held on non-accrual status. At September 30,
1998, the allowance for possible loan losses was $1,179,000, which represented
0.70% of net loans as compared to 0.81% at the end of the previous calendar
year. Non-performing loans totaled 15.95% of the allowance for possible loan
losses, as compared to 17.37% at December 31, 1997.
In management's opinion, the allowance for possible loan losses at September 30,
1998 is adequate to absorb future loan losses based on information presently
known. Management cannot assure, 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, 1998, the Corporation recognized
net income of $4,146,000, an increase of $2,097,000 over the same period of the
prior year. Much of this increase is attributable to capital gains taken from
the sale of available-for-sale securities. However, operating income before
capital gains and taxes increased by $312,000, or 13.9%
The operating results of the Corporation are largely dependent upon the net
income generated by its subsidiary, PFC Bank. PFC Bank also has the benefit of a
substantially appreciated available-forsale 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.
<PAGE>
Net Interest Income
Interest income for the nine-month period ended September 30, 1998 was $12.9
million, an increase of $1,399,000 from the nine-month period ended September
30, 1997. This increase is attributed to a $1,230,000 increase in interest on
the loan portfolio. Interest expense for the nine-month period ended September
30, 1998 was approximately $6.2 million, a $738,000 increase over the same
nine-month period ended September 30, 1997. Management attributes this increase
primarily to the $18.2 million increase in interest bearing deposits since
December 31, 1997.
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. Management's risk
assessment 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 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, 1998, PFC Bank recorded $140,000
to the provision for loan losses as compared to $50,000 for the same period in
the previous year. Net charge-offs for the nine-month period ended September 30,
1998 amounted to $210,000 as compared to $65,000 for the nine-month period ended
September 30, 1997. This increase was attributed to a single loan charge-off of
$151,000 arising from a successor letter of credit, derived from a letter of
credit originally issued in 1985 by past management.
Other Income
Other income for the nine-month period ended September 30, 1998 was
approximately $3.5 million, an increase of nearly $2.3 million over the
nine-month period ended September 30, 1997. This increase is primarily
attributable to capital gains from the sale of available-for-sale securities of
$3.0 million for the nine-month period ended September 30, 1998 as compared with
capital gains of $486,000 for the same period of 1997. These net gains were
primarily the result of the liquidation of a portion of PFC Bank's stock
portfolio. The gains were offset by a decrease of $226,000, directly
attributable to flood insurance proceeds of $206,000 received during the
nine-month period ended September 30, 1997.
Other Expenses
Total other expenses decreased by $33,000 for the nine-month period ended
September 30, 1998 when compared to the same period in the prior year. This
decrease was the result of decreases in miscellaneous expenses such as Other
Real Estate expenses ($55,000), advertising expenses ($29,000), printing
expenses ($31,000) and other various expenses ($46,000) partially offset by
increases in pension expense of $115,000 and occupancy expense of $34,000.
Maintaining a focus on operating cost control has become increasingly important
and the Corporation has succeeded in maintaining a relatively stable overhead
burden.
<PAGE>
Provision for Income Taxes
The Corporation incurred a provision for income taxes of $1,407,000 for the
nine-month period ended September 30, 1998, as compared to $677,000 for the same
period ended September 30, 1997. 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>
Regulatory Activity
In recent years, Pennsylvania enacted a law to permit state chartered banking
institutions to sell insurance. This follows a U.S. Supreme Court decision in
favor of nationwide insurance sales by banks. The decision also bars states from
blocking insurance sales by national banks in towns with populations of no more
than 5,000. PFC Bank does not currently have plans to enter the insurance field
but continue to review this option.
Congress is currently considering legislative reforms to modernize the financial
services industry, including repealing the Glass Steagall Act, which prohibits
commercial banks from engaging in the securities industry. Consequently, equity
underwriting activities of banks may increase in the near future. However, the
Corporation does not currently anticipate entering into these activities.
Management estimates that changes in PFC Bank's FDIC assessment rate, resulting
from the enactment of the Deposit Insurance Funds Act of 1996, will adversely
impact the results of operations net of income taxes. Prior to this enactment,
PFC Bank was not required to pay any FDIC assessment. Although the Bank is in
the minimum assessment bracket, income will be impacted in the amount of $23,200
for the year ended December 31, 1998. The act also provides regulatory relief to
the financial services industry relative to environmental risks, frequency of
examinations, and simplification of forms and disclosures.
From time to time, various types of federal and state legislation have been
proposed that could result in additional regulation of, and restrictions on, the
business of the Corporation and of PFC Bank. Management cannot predict whether
such legislation will be adopted or, if adopted, how such legislation would
affect the business of the Corporation and PFC Bank. As a consequence of the
extensive regulation of commercial banking activities in the United States, the
Corporation's and PFC Bank's business is particularly susceptible to federal
legislation and regulations that may increase the costs of doing business.
Except as specifically described above, Management believes that the affect of
the provisions of the aforementioned legislation on liquidity, capital
resources, and results of operation of the Corporation will be immaterial.
Management is not aware of any other current specific recommendations by
regulatory authorities or proposed legislation, which, if they were implemented,
would have a material adverse effect upon liquidity, capital resources, or
results of operation, although the general cost of compliance with the numerous
and multiple federal and state laws and regulations does have, and in the future
may have, a negative impact on the Corporation's results of operations.
Further, the business of the Corporation is also affected by the state of the
financial services industry in general. As a result of legal and industry
changes, Management expects the industry will continue to experience an increase
in consolidations and mergers as the financial services industry strives for
greater cost efficiencies and market share. Management also expects increased
diversification of financial products and services offered by the Bank and its
competitors. Management believes that such consolidations and mergers, and
diversification of products and services may enhance PFC Bank's competitive
position as a community bank.
<PAGE>
PEOPLE'S FINANCIAL CORPORATION
Forward-Looking Statements
From time to time, the Corporation may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, technological developments, new products, research and development
activities and similar matters. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Corporation notes that a variety of
factors could cause the Corporation's actual results and experience to differ
materially from the anticipated results or other expectations expressed in the
Corporation's forward-looking statements. The risks and uncertainties that may
affect the operations, performance, development and results of the Corporation's
business include the following: general economic conditions, including their
impact on capital expenditures; business conditions in the banking industry; the
regulatory environment; rapidly changing technology and evolving banking
industry standards; competitive factors, including increased competition with
community, regional and national financial institutions; new service and product
offerings by competitors and price pressures; the inability of the Corporation
to accurately estimate the cost of systems preparation for Year 2000 compliance;
and similar items.
Year 2000 Issues
The following section contains forward-looking statements which involve risks
and uncertainties. The actual impact on the Corporation of the Year 2000 issue
could materially differ from that which is anticipated in the forward-looking
statements as a result of certain factors identified below.
The "Year 2000 Problem" (Y2K) arose because many existing computer programs use
only the last two digits to refer to a year. Therefore, these computer programs
do not properly recognize a year that begins with "20" instead of the familiar
"19". If not corrected, many computer applications could fail or create
erroneous results by or at the year 2000. This could cause entire system
failures, miscalculations, and disruptions of normal business operations
including, among other things, a temporary inability to process transactions,
send statements, or engage in similar day to day business activities. The extent
of the potential impact of the Year 2000 Problem is not yet known, and if not
timely corrected, it could affect the global economy.
The Bank is subject to the regulation and oversight of various banking
regulators, whose oversight includes the provision of specific timetables,
programs and guidance regarding Year 2000 issues. Regulatory examination of the
Bank's Year 2000 programs are conducted periodically and reports are submitted
by the Bank to the banking regulators on request. In addition, reports are
currently submitted on a monthly basis to the Corporation's Board of Directors.
<PAGE>
Corporation's State of Readiness
The Board of Directors is committed to ensuring that the Corporation's daily
operations suffer little or no impact from the century date change. The
Corporation has applied due diligence throughout the Y2K process, following the
guidelines contained in the series of Federal Financial Institutions
Examinations Council's Interagency Guidelines. The guidelines identify the
following phases: awareness, assessment, renovation or remediation, testing or
validation and implementation.
Based on an ongoing assessment, the Corporation has determined that it will be
required to modify or replace portions of its software so that its computer
systems will properly use dates beyond December 31, 1999. The Corporation
presently believes that as a result of modifications to existing software and
hardware and conversions to new software, the Year 2000 Problem can be
mitigated. However, if such modifications and conversions are not made, or are
not completed on a timely basis, the Year 2000 could have a material adverse
impact on the operations of the Corporation.
Management has initiated an enterprise-wide program to prepare the Corporation's
computer systems and applications for the Year 2000. The Corporation has
developed a comprehensive inventory of all mainframe and PC based applications,
third-party relationships, environmental systems, proprietary programs and
non-computer related systems (such as postage meters and fax machines). This
assessment identified 60 systems, processes or proprietary programs, which could
be impacted by the century date change. As of September 30, 1998, the
Corporation has remedied 58 or 97% of the programs. In November 1997, the
Corporation began converting its computer systems to be Year 2000 ready. As of
September 30, 1998, approximately 93% of the Corporation's systems were Year
2000 ready, with all systems expected to be ready/compliant by March 31, 1999.
The Corporation has acquired its mission-critical system which supports the
Corporation's core business processes from a highly regarded third-party vendor.
Thus, even though the Corporation does not have direct control over the
renovation process, it is monitoring the progress of its third-party vendors to
assess the status of their Y2K readiness efforts. The Corporation tested these
systems in May 1998 and plans a second test in May 1999. However, because most
computer systems are, by their very nature, interdependent, it is possible that
noncompliant third-party computers could impact the Corporation's computer
systems. The Corporation could be adversely affected by the Y2K problem if it or
unrelated parties fail to successfully address the problem. The Corporation has
taken steps to communicate with the unrelated parties with whom it deals to
coordinate Year 2000 compliance. Additionally, the Corporation is dependent on
external suppliers, such as, wire transfer systems, telephone systems, electric
companies, and other utility companies for continuation of service. The
Corporation is also assessing the impact, if any, the century date change may
have on its credit risk.
<PAGE>
The Corporation has initiated communications with all of its significant
vendors, suppliers and large commercial customers to determine the extent to
which the Corporation is vulnerable to those third parties' failure to remedy
their own Year 2000 Problems. In the event that any of the Corporation's
significant vendors, suppliers and large commercial customers do not
successfully achieve Year 2000 compliance in a timely manner, the Corporation's
business or operations could be adversely affected. For significant vendors, the
Corporation will validate that they are Year 2000 compliant by March 31, 1999,
or make plans to switch to a new vendor or system that is compliant. For
insignificant vendors, the Corporation will not necessarily validate that they
are Year 2000 compliant. However, for any insignificant vendor who responds that
they will not be compliant by March 31, 1999, the Corporation will seek a new
vendor or system that is compliant.
The Year 2000 Issue also affects certain of the Bank's customers, particularly
in the areas of access to funds and additional expenditures to achieve
compliance. The Bank has engaged in a program of contacting its commercial
customers regarding the customers' awareness of the Year 2000 Issue. The
Corporation cannot guarantee that the inability of loan customers to adequately
correct the Year 2000 Issue will not have an adverse effect on the Corporation.
For large commercial loan customers, the Bank will take appropriate action based
upon their level of readiness for Year 2000. Nevertheless, the Company does not
believe that the cost of addressing the Y2K issues will be a material event or
uncertainty that would cause reported financial information not to be
necessarily indicative of future operating results or financial conditions, nor
does it believe that the costs or the consequences of incomplete or untimely
resolution of its Year 2000 issues represent a known material event or
uncertainty that is reasonably likely to affect its future financial results, or
cause its reported financial information not to be necessarily indicative of
future operating results or future financial condition.
Costs of Year 2000
The Corporation will use both internal and external resources to reprogram, or
replace, and test its software and hardware for Year 2000 modifications.
Concurrent with the Year 2000 project, the Corporation will also be converting
all its major date processing systems, both hardware and software, to current
technology. The Corporation plans to complete both the Year 2000 and systems
conversion projects within 6 months or no later than March 31, 1999, for all
critical systems.
As of September 30, 1998, $27,500 has been expended as Year 2000 costs.
Management expects to spend a total of $110,000 for the entire project. Of the
total projects' cost, approximately $61,000 is attributable to the purchase of
new software which will be capitalized. The remaining $21,500 will be expensed
as incurred over the next 15 months. The estimated Year 2000 project costs
include the costs and time associated with the impact of third-parties' Year
2000 issues, and are based on presently available information. The total cost of
the project is being funded through operating cash flows. The Corporation
continues to evaluate appropriate courses of corrective action, including
replacement of certain systems whose associated costs would be recorded as
assets and amortized. Accordingly, the Corporation does not expect the amount
required to be expensed over the next 15 months to have a material effect on the
financial position or results of operations. However, if compliance is not
achieved in a timely manner by the Corporation or any of its significant related
third-parties, be it a supplier of services or customer, the Y2K issue could
possibly have a material effect on the Corporation's operations and financial
position.
<PAGE>
The cost of the projects and the date on which the Corporation plans to complete
both Year 2000 modifications and systems conversions are based on management's
best estimates, which were derived utilizing numerous assumptions of future
events including the continued availability of certain resources, third-party
modification plans and other factors. However, there can be no guarantee that
these estimates will be achieved and actual results could differ materially from
those plans. Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in this area, the ability to locate and correct all relevant computer codes, and
similar uncertainties.
Risks of Year 2000
At present, management believes it's progress in remedying the Corporation's
systems, programs and applications and installing Y2K compliant upgrades is on
target. The Y2K computer problem creates risk for the Corporation from
unforeseen problems in its own computer systems and from third-party vendors who
provide the majority of mainframe and PC based computer applications. Failure of
third-party systems relative to the Y2K issue could have a material impact on
the Corporation's ability to conduct business.
Contingency Plans
The Corporation is in the process of working up contingency plans and assessing
the potential adverse risks to the Corporation. The Corporation's contingency
plans involve the use of manual labor to compensate for the loss of certain
automated computer systems and inconveniences caused by disruption in command
systems.
A business resumption contingency plan was developed for mission-critical and
required mainfram and PC based applications, third-party relationships,
proprietary programs and non-computer related systems. This contingency plan
identifies scheduled completion dates, test dates and "trigger" dates. A trigger
date is the date the Corporation would implement the contingency plan. The plan
was ratified by the Board of Directors on October 21, 1998.
<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
There was no submission of matters brought to a vote of security holders in
the second quarter of 1998.
ITEM 5. Other Information
Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3(i) Registrant's Articles of Incorporation.
(Incorporated by reference in Registrant's January 27, 1995,
filing of Form S-4).
3(ii)Registrant's By-Laws.
(Incorporated by reference in Registrant's January 27, 1995,
filing of Form S-4).
10(i)Agreement between R.B. Robertson and Bank.
(Incorporated by Reference in the Registrant's September 30, 1997
filing of Form 10-QSB).
10(ii) Settlement Agreement.
(Incorporated by Reference in the Registrant's December 31, 1996
filing of Form 10-KSB).
<PAGE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
PART II. OTHER INFORMATION (cont.)
ITEM 6. Exhibits and Reports on Form 8-K (cont.)
10(iii) General Release
(Incorporated by Reference in the Registrant's
December 31, 1996 filing of Form 10-KSB).
11 Statement re: Computation of Earnings Per Share.
(included herein at Part I, Item 1, Page 2 of this Form 10-QSB).
27 Financial Data Schedule
(b) Reports on Form 8-K
The registrant filed the following current reports on Form 8-K during
the quarter ended September 30, 1998:
No 8-K reports filed in the quarter ended September 30, 1998.
<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 6, 1998
PEOPLES FINANCIAL CORP., INC.
(Registrant)
/s/ R. B. Robertson
- ----------------------------------------
R.B. Robertson
President & Chief Executive Officer
/s/ James L. Kifer
- ----------------------------------------
James L. Kifer
Executive Vice President & Asst. Secretary
<PAGE>
EXHIBIT INDEX
PAGE NO.
IN MANUALLY
SIGNED
EXHIBIT NO. ORIGINAL
- ----------- -------------
3(i) Registrant's Articles of Incorporation
(incorporated by reference to Exhibit 4.1
to Registrant's Registration Statement No.
33-88802 on Form S-4, filed January 27, 1995).
3(ii)Registrant's By-Laws (incorporated by
reference to Exhibit 4.2 to Registrant's
Registration Statement No. 33-88802 on Form S-4,
filed January 27, 1995).
10(i)Settlement Agreement and Release, dated December
30, 1996, among C. Edward Dunmire, the Registrant,
and Peoples Bank of PA (incorporated by Reference
to Exhibit 10(I) to Registrant's Annual Report on
Form 10-KSB, filed March 28, 1997).
10(ii) General Release of David Fennell (incorporated
by reference to Exhibit 10(ii) to the Registrant's
Annual Report on Form 10-KSB, filed March 28,
1997).
11 Statement re: Computation of Earnings Per Share.
(included herein at Part 2 I, Item 1 of this Form 10-QSB).
27 Financial Data Schedule 14
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,289
<INT-BEARING-DEPOSITS> 7,795
<FED-FUNDS-SOLD> 9,325
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 34,250
<INVESTMENTS-CARRYING> 31,563
<INVESTMENTS-MARKET> 32,633
<LOANS> 168,801
<ALLOWANCE> 1,179
<TOTAL-ASSETS> 260,331
<DEPOSITS> 209,586
<SHORT-TERM> 0
<LIABILITIES-OTHER> 12,070
<LONG-TERM> 0
<COMMON> 265
0
0
<OTHER-SE> 38,410
<TOTAL-LIABILITIES-AND-EQUITY> 260,331
<INTEREST-LOAN> 10,306
<INTEREST-INVEST> 2,577
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 12,883
<INTEREST-DEPOSIT> 6,243
<INTEREST-EXPENSE> 6,243
<INTEREST-INCOME-NET> 6,640
<LOAN-LOSSES> 140
<SECURITIES-GAINS> 3,000
<EXPENSE-OTHER> 4,427
<INCOME-PRETAX> 5,553
<INCOME-PRE-EXTRAORDINARY> 5,553
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,146
<EPS-PRIMARY> 4.70
<EPS-DILUTED> 4.70
<YIELD-ACTUAL> 7.91
<LOANS-NON> 188
<LOANS-PAST> 347
<LOANS-TROUBLED> 136
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,249
<CHARGE-OFFS> 235
<RECOVERIES> 25
<ALLOWANCE-CLOSE> 1,179
<ALLOWANCE-DOMESTIC> 1,179
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
