<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
------------------
( ) TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the transition period from to
----------- ----------
Commission File No. 1-13826
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THREE RIVERS FINANCIAL CORPORATION
----------------------------------
(Exact name of registrant as specified in its charter)
Delaware 38-3235452
-------- ----------
(State or other jurisdiction of (IRS Employer ID No)
Incorporation or organization)
123 Portage Avenue, Three Rivers, Michigan 49093
------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
(616) 279-5117
--------------
Registrant's telephone number, including area code
N/A
---
Former name, address, and fiscal year, if changed since last report
Check whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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
------ ------
Indicate the number of shares outstanding of each of the registrant's
classes of common equity as of the latest practicable date:
859,625 shares of Common Stock, Par Value $.01 per share, as of May 1,
1996
Transitional Small Business Disclosure Format (check one):
Yes ; No X
------ ------
<PAGE> 2
THREE RIVERS FINANCIAL CORPORATION
THREE RIVERS, MICHIGAN
FORM 10Q
INDEX
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements of Three Rivers Financial
Corporation (Unaudited)
Condensed Consolidated Balance Sheets as of
September 30, 1996 and June 30, 1996 1
Condensed Consolidated Statements of Income for the
three months ended September 30, 1996 and 1995 2
Condensed Consolidated Statements of Changes in
Shareholders' Equity 3
Consolidated Statements of Cash Flows for the three
months ended September 30, 1996 and 1995 4
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION 14
SIGNATURES 15
<PAGE> 3
THREE RIVERS FINANCIAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30 and June 30, 1996
<TABLE>
<CAPTION>
______________________________________________________________________________________________________________________
September 30 June 30,
1996 1996
------------ --------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from other financial institutions $481,619 $2,613,637
Interest-earning deposits with other financial institutions 2,459,750 1,497,984
----------- -----------
Cash and cash equivalents 2,941,369 4,111,621
Interest-earning time deposits with other financial institutions 3,470,980 3,867,980
Securities available-for-sale 630,376 630,631
Securities held to maturity (fair value: $19,307,610 at
September 30, 1996, and $18,875,837 at June 30, 1996) 19,602,817 19,267,832
Loans receivable, net of allowance for loan losses of
$456,185 at September 30, 1996, and $440,835 at June 30, 1996) 57,014,722 56,042,608
Loans held for sale 158,000 -
Accrued interest receivable 522,693 554,937
Premises and equipment, net 1,470,651 1,484,805
Intangible assets 54,131 56,268
Foreclosed real estate 435,304 440,304
Investment in low-income housing partnership 493,189 499,880
Other assets 574,452 194,471
----------- -----------
Total assets $87,368,684 $87,151,337
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Demand deposits $3,005,403 $2,442,447
Savings and NOW deposits 20,631,293 21,086,566
Other time deposits 39,370,835 40,195,407
----------- -----------
Total deposits 63,007,531 63,724,420
Borrowed funds 9,844,287 9,210,609
Advances from borrowers for taxes and insurance 425,027 422,832
Deferred gain on sale of foreclosed real estate 66,864 66,864
Deferred income tax 99,770 -
Due to low-income housing partnership 461,740 461,740
Accrued expenses and other liabilities 812,153 479,274
----------- -----------
74,717,372 74,365,739
Equity
Preferred stock, par value $.01; 500,000 shares authorized;
none issued and outstanding - -
Common stock, par value $.01; 2,000,000 shares authorized;
859,625 shares issued and 851,240 outstanding at
September 30, 1996 and at June 30, 1996 8,596 8,596
Additional paid-in-capital 7,984,602 7,979,421
Retained earnings, substantially restricted 5,714,221 5,870,983
Unearned Employee Stock Ownership Plan shares (630,396) (630,396)
Unearned Recognition and Retention Plan shares (314,166) (331,461)
Treasury stock, at cost (8,385 shares) (111,545) (111,545)
----------- -----------
Total shareholders' equity 12,651,312 12,785,598
----------- -----------
Total liabilities and shareholders' equity $87,368,684 $87,151,337
=========== ===========
______________________________________________________________________________________________________________________
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
1
<PAGE> 4
THREE RIVERS FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
______________________________________________________________________________________________
1996 1995
<S> <C> <C>
Interest income
Loans Receivable
First mortgage loans $1,020,205 $961,077
Consumer and other loans 239,897 237,429
Securities 85,936 48,511
Mortgage-backed and related securities 233,632 125,982
Other interest-earning assets 79,284 143,672
---------- ----------
Total interest income 1,658,954 1,516,671
Interest expense
Deposits 690,706 741,704
Borrowed funds 131,479 65,602
---------- ----------
Total interest expense 822,185 807,306
---------- ----------
NET INTEREST INCOME 836,770 709,365
Provision for loan losses 15,000 15,000
---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 821,770 694,365
Noninterest income
Net gain on sale of loans 7,665 21,374
Net loss on foreclosed real estate 0 (100)
Net loss on sale of fixed assets (1,003) 0
Other 97,985 96,140
---------- ----------
104,648 117,414
Noninterest expense
Compensation and benefits 312,509 252,464
Occupancy and equipment 102,980 97,494
SAIF deposit insurance premium 448,436 35,990
Other 205,271 218,100
---------- ----------
1,069,197 604,048
INCOME BEFORE FEDERAL INCOME TAXES (142,780) 207,731
Federal income tax expense (benefit) (50,490) 71,906
---------- ----------
NET INCOME (LOSS) ($92,290) $135,825
---------- ----------
Earnings (loss) per share ($0.12) $0.10
______________________________________________________________________________________________
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
2
<PAGE> 5
THREE RIVERS FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Three months ended September 30, 1995
(Unaudited)
______________________________________________________________________________
<TABLE>
<S> <C>
Balance at June 30, 1996 $12,785,598
Net loss (92,290)
Effect of shares committed to be released by 5,181
ESOP, at market value
Cash dividends declared on common stock @ $.075 per share (64,472)
Amortization of 1300 RRP shares 17,295
Balance at September 30, 1996 $12,651,312
</TABLE>
______________________________________________________________________________
The accompanying notes are an integral part of these consolidated financial
statements
3
<PAGE> 6
THREE RIVERS FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
__________________________________________________________________________________________________________
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ($92,290) $135,825
Adjustments to reconcile net income to
net cash provided from operating activities
Amortization/ (accretion) of
Intangible Assets 2,137 11,772
Net deferred loan origination fees (27,919) (45,066)
Premiums and discounts on securities (7,162) 5,535
Provision for loan losses 15,000 15,000
RRP expense 17,295 -
ESOP expense 5,181 988
Net loss on sale of foreclosed real estate
and fixed assets 1,003 100
Loans originated for sale (513,735) (608,667)
Proceeds from sale of loans held for sale 363,400 865,191
Net gain on sales of loans held for sale (7,665) (21,374)
Depreciation of premises and equipment 47,821 48,007
Change in
Accrued interest receivable 32,244 (1,487)
Other assets (379,981) 265,869
Accrued expenses and other liabilities 432,649 6,593
--------- ---------
Total adjustments to reconcile net income to (19,732) 542,461
--------- ---------
Net cash provided by (used in) operating
activities (112,022) 678,286
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease (increase) in interest-earning time
deposits with other financial institutions $397,000 ($895,000)
Net decrease (increase) in loans (954,195) 557,589
Premises and equipment expenditures (42,470) (14,218)
Proceeds from sale of fixed assets 7,800 -
Purchases of securities available-for-sale (65) -
Purchases of securities held to maturity (901,631) (5,074,456)
Proceeds from sales of securities available-for-sale 320
Paydowns on securities held to maturity 573,808 123,585
Proceeds from sale of foreclosed real estate - 11,000
Income from investment in low-income housing partnership 6,691 -
--------- ---------
Net cash used in investing activities (912,742) (5,291,500)
__________________________________________________________________________________________________________
</TABLE>
(Continued)
4
<PAGE> 7
THREE RIVERS FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
__________________________________________________________________________________________________________
1996 1995
---------- ----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock, net of
conversion costs - $7,285,569
Cash dividends paid (64,472) -
Net decrease in deposits (716,889) (690,702)
Net change in advances from borrowers for taxes
and insurance 2,195 31,836
Proceeds from borrowed funds 3,250,000 2,500,000
Repayments of borrowed funds (2,616,322) (1,134,371)
---------- ----------
Net cash provided by (used in) financing activities (145,488) 7,992,332
---------- ----------
Net change in cash and cash equivalents (1,170,252) 3,379,118
Cash and cash equivalents at beginning of period 4,111,621 3,822,260
---------- ----------
Cash and cash equivalents at end of period $2,941,369 $7,201,378
========== ==========
Supplemental disclosures of cash flow information
Cash paid for
Interest on deposits, advances and other
borrowings $813,099 $792,936
Income taxes 65,000 15,000
__________________________________________________________________________________________________________
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE> 8
THREE RIVERS FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three months ended September 30, 1996
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements were
prepared in accordance with instructions for Form 10-QSB and, therefore,
do not include all disclosures required by generally accepted accounting
principals for complete presentation of financial statements. The
unaudited information for the three months ended September 30, 1996 and
1995 includes the consolidated results of operations of Three Rivers
Financial, Inc (the "Company") and its wholly-owned subsidiary First
Savings Bank, FSB (the "Bank"). In the opinion of management, the
information reflects all adjustments (consisting only of normal recurring
adjustments) which were necessary for a fair presentation of the results
of operations for such periods but should not be considered an indication
of results for a full year.
NOTE 2 - SECURITIES
The company classifies securities into held-to-maturity and available for
sale categories. Held-to-maturity securities are those which the Company
has the positive intent and ability to hold to maturity and are reported
at amortized cost. Available-for-sale securities are those the Company
may decide to sell if needed for liquidity, asset-liability management or
other reasons. Available-for-sale securities are reported at fair value,
with unrealized gains and losses, if applicable, included as a separate
component of equity, net of tax.
The Company's portfolios on securities held-to-maturity and available-
for-sale consist of securities acquired to meet the Company's regulatory
liquidity requirement and anticipated near term cash funding requirements.
Securities in these portfolios are U.S. Government and federal agency
securities, securities issued by states and political subdivisions and
corporate securities. The mortgage backed and related securities
portfolio consist of issues from FHLMC, GNMA, FNMA and other
collateralized mortgage obligations with contractual maturities ranging
from one to 25 years. The remaining securities held to maturity are
primarily due in one to five years. Approximately 94% of the combined
securities portfolio consists of fixed rate instruments while the
remainder consists of floating rate instruments. The net unrealized
depreciation on these portfolios is due to the higher interest rate
environment at the time these securities were purchased. As the duration
of these instruments shortens, the fair value will increase. Therefore,
management considers these losses temporary in nature at September 30,
1996.
_______________________________________________________________________________
Continued
6
<PAGE> 9
THREE RIVERS FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three months ended September 30, 1996
(Unaudited)
NOTE 3 - DEPOSITS AND LOANS
The company is principally engaged in the business of accepting deposits
from the general public through a variety of deposit programs and
investing those funds by originating loans secured by one-to-four family
residential properties located in its market area, loans secured by
multi-family residential and commercial properties, construction loans,
second mortgage loans on single-family residences, home equity lines of
credit and consumer loans, both secured and unsecured, including loans
secured by savings accounts. The Company sells most long-term fixed
rate mortgage loans to the secondary market. At September 30, 1996, the
Company had total assets of $87.4 million, deposits of $63.0 million,
and net loans receivable of $57.2 million (including loans held for
sale).
NOTE 4 - BORROWINGS
Borrowings at September 30, 1996 consisted of advances from the Federal
Home Loan Bank (FHLB) of Indianapolis, bearing rates from 5.19% to
6.00%. The loans are collateralized by the Company's single family
whole loans, U. S. Government and Agency securities and mortgage backed
securities. Adjustable rate advances included $2 million indexed to the
3 month LIBOR rate which adjusts quarterly. The Company also maintains
a $500,000 line of credit with the FHLB which adjusts daily to the
FHLB's posted rate for these borrowings. The line of credit did not
have a balance at September 30, 1996. The remaining balance of $7.8
million of advances are fixed rate, fixed term, with maturities from 4
months to 4 years.
NOTE 5 - EARNINGS PER COMMON SHARE
Earnings per common share for the three months ended September 30, 1996
were computed by dividing net income by the weighted average number of
share of common stock outstanding net of ESOP and Treasury Stock Shares.
The weighted average number of shares outstanding for the three months
ended September 30, 1996 was 789,060.
_______________________________________________________________________________
7
<PAGE> 10
THREE RIVERS FINANCIAL CORPORATION
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
Three Months ended September 30, 1996
(Unaudited)
NOTE 6 - REGULATORY CAPITAL REQUIREMENTS
Pursuant to FIRREA, savings institutions must meet three separate minimum
capital-to-asset requirements. The following table summarizes, as of
September 30, 1996, the capital requirements for the Bank under FIRREA
and the Bank's actual capital ratios. As of September 30, 1996, the Bank
substantially exceeded all current regulatory capital requirements.
<TABLE>
<CAPTION>
Regulatory
Capital Requirement Actual Capital
Amount Percent Amount Percent
(Dollars in thousands)
<S> <C> <C> <C> <C>
Risk-based capital $3,557 8.00% $10,744 24.16%
Core capital 2,609 3.00% 10,290 11.83%
Tangible capital 1,305 1.50% 10,290 11.83%
</TABLE>
________________________________________________________________________________
(Continued)
8
<PAGE> 11
THREE RIVERS FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Three Rivers Financial Corporation (the "Company") was incorporated under the
laws of the State of Delaware for the purpose of becoming the savings and loan
holding company of First Savings Bank, a Federal Savings Bank (the "Bank") in
connection with the Bank's conversion from a federally chartered mutual saving
bank to a federally chartered stock savings bank (the "Conversion"). On August
23, 1995 the Conversion was completed and the Bank became a wholly-owned
subsidiary of the Company. The following discussion compares the financial
condition of the Company at September 30, 1996 to June 30, 1996 and the results
of operations for the three month period ended September 30, 1996 with the same
period ended September 30, 1995. This discussion should be read in conjunction
with the financial statements and footnotes included herein.
FINANCIAL CONDITION
September 30, 1996 compared to June 30, 1996.
The Bank's total assets remained at a constant level for the period ended
September 30, 1996 with a slight increase of .25% from $87.2 million at June
30, 1996 to $87.4 million at September 30, 1996.
Cash and cash equivalents decreased $1.2 million or 29.3% from $4.1 million at
June 30, 1996 to $2.9 million at September 30, 1996. This is due primarily to
an increase in the loans receivable of $972,000 or 2.00% from $56 million to
$57.0 million.
Interest-earning time deposits with other financial institutions decreased
$397,000 or 10.3% from $3.9 million at June 30, 1996 to $3.5 million at
September 30, 1996. Securities increased $335,000 or 1.7%, from $19.9 million
at June 30, 1996 to $20.2 million at September 30, 1996. Total securities held
September 30, 1996 included $630,000 in securities available for sale and $19.6
million in securities held-to-maturity. The securities available for sale
consisted of equity securities for which there is no stated maturity or
interest rate. The securities held-to-maturity consisted of U.S. Government
and federal agency securities, mortgage-backed and related securities and other
collateralized obligations. In order to obtain a higher yield, management
increased the Bank's portfolio of mortgage-backed securities using funds from
the maturities of deposits with other financial institutions.
________________________________________________________________________________
(Continued)
9
<PAGE> 12
THREE RIVERS FINANCIAL CORPORATION
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Total borrowed funds increased $634,000 to $9.8 million at September 30,1996.
Borrowed funds consist of advances from the Federal Home Loan Bank ("FHLB")
with both fixed and variable interest rates and stated maturities ranging
through 2001. The FHLB has designed various borrowing programs to assist
financial institutions in managing liquidity needs and interest rate risk.
Total deposits decreased $717,000 to $63 million for the period ended September
30, 1996. The largest decrease by deposit category was in time deposits.
Management believes that customers are seeking higher yielding investment
alternatives due to the low interest rate environment.
Total shareholders' equity of the Company decreased $134,000, primarily as a
result of the BIF/SAIF-Regulatory Burden Relief Package as signed by President
Clinton on September 30, 1996. This package included a one-time special
assessment of 65.7 basis points based on March 31, 1995 deposit balances to
capitalize the SAIF. The result was a pre-tax charge to income in the amount
of $411,000.
RESULTS OF OPERATIONS
Net loss for the three months ended September 30, 1996 was $92,000 compared to
net income of $136,000 for the three months ended September 30, 1995, a
decrease of 167.9%. This was primarily due to the special pre-tax assessment
of $411,000, as well as an increase in the cost of funds of $15,000, or 1.84%.
These were partially offset by an increase in interest income of $142,000, or
9.4%.
Net interest income before the provision for loan losses increased $128,000 to
$837,000 for the three months ended September 30, 1996 from $709,000 at
September 30, 1995.
Provision for loan losses remained constant for the three months ended
September 30, 1996 compared to the same period ended September 30, 1995.
Non-interest income decreased $13,000 to $104,000 from $117,000 for the three
months ended September 30, 1996 compared to the same period ended September 30,
1995. This was due to a decrease in fixed rate loans sold in the secondary
market. With the increase in long term fixed rates, the demand for long term
fixed rate loans has decreased, while the demand for adjustable rate rate loans
has increased. The Company sells most long-term fixed rate mortgage loans in
the secondary market to manage interest rate risk.
________________________________________________________________________________
(Continued)
10
<PAGE> 13
THREE RIVERS FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Non-interest expense increased by $465,000 to $1,069,000 for the three months
ended September 30, 1996 compared to $604,000 for the corresponding period in
1995. The majority of the increase was reflected in the SAIF deposit insurance
premium which was the one-time charge for the recapitalization of SAIF. (Refer
to Paragraph #3 under Financial Condition and Results of Operation).
Compensation and benefits increased by $60,000 to $312,000 for the period ended
September 30, 1996 compared to $252,000 for the corresponding period in 1995.
Included in the compensation and benefits expense was an increase in the
Employee Stock Ownership Plan (ESOP) of $16,000 to $22,000 from $6,000. When
the Company converted, an Employee Stock Ownership Plan (ESOP) was established
for the benefit of substantially all employees. To fund the Plan, the ESOP
borrowed $687,700 from the Company for the purpose of purchasing 68,770 shares
of stock at $10 per share. The loan is secured by the shares of the Company's
common stock purchased with the loan proceeds and will be repaid by the ESOP
with funds from the Bank's discretionary contributions to the ESOP and earnings
on ESOP assets. As the Bank periodically makes contributions to the ESOP to
repay the loan, shares will be released from a suspense account and allocated
among participants. According to the provisions of the ESOP Loan, as of June
30, 1996, principal payments had been made against the loan in the amount of
$57,300. The increase in ESOP expense was due to a full quarter charged to
income for the period ended September 30, 1996 compared to a one month expense
for the corresponding period ended September 30, 1995. Also included in
compensation and benefits expense was $17,000 for the Management Recognition
and Retention Plan (the "Plan") as approved by the stockholders effective,
April 17, 1996. The purpose of the Plan is to retain directors and executive
officers in key positions by providing such persons with a proprietary interest
in the Holding Company as partial compensation for their contributions to the
Holding Company and to the Bank and their Affiliaties and as an incentive to
make such contributions and to promote the Holding Company's and the Bank's
growth and profitability in the future.
Retirement expense increased by $15,000 to $16,000 for the three months ended
September 30, 1996 compared to $1,000 for the corresponding period ended
September 30, 1995. The reduced expense for the period ended in 1995 was due
to the Company changing retirement plans which resulted in an overpayment in
the new plan. Thus the expense for the three months ended September 30, 1995
was substantially lower as a result of the one time transfer of plan assets.
________________________________________________________________________________
(Continued)
11
<PAGE> 14
THREE RIVERS FINANCIAL CORPORATION
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Due to the pre-tax loss of $143,000 for the period ended September 30, 1996 as
compared to income of $208,000 for the same period ended September 30, 1995,
income tax expense decreased by $122,000 to a $50,000 tax credit for the
period.
NON-PERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through a provision for loan
losses based on management's quarterly asset classification review and
evaluation of the risk inherent in its loan portfolio and changes in the nature
and volume of its loan activity. Such evaluation considers, among other
matters, the estimated value of the underlying collateral, economic conditions,
cash flow analysis, historical loan loss experience, discussions held with
delinquent borrowers and other factors that warrant recognition in providing
for an adequate allowance for loan losses. As a result of this review process,
management recorded a provision for loan losses in the amount of $15,000 for
the three month period ended September 30, 1996 which was consistent with the
amount for the period ended September 30, 1995. While management believes the
current allowance for loan losses is adequate, management anticipates growth in
the loan portfolio and will therefore, continue to make additional provisions
to the allowance for loan losses.
ASSET QUALITY
Total non-performing assets decreased $88,000 at September 30, 1996 to $515,000
as compared to $603,000 at June 30, 1996. The ratio of non-performing assets
to total assets at September 30, 1996 was .59% compared to .69% at June 30,
1996. Included in non performing assets at September 30, 1996 were consumer
loans in the amount of $18,000 non-performing mortgages of $62,000, and
foreclosed real estate of $435,000.
OTS regulations require that the Bank periodically review and classify assets
pursuant to the classification of assets policy set forth in its regulations.
Based on management's review of its assets as of March 31 1996, $506,000 of
assets were classified as substandard, $-0- as doubtful, $-0- as loss, and
$70,400 as special mention. Management of the Bank reviews assets on a monthly
basis, and at the end of each quarter prepares the asset classification listing
in conformity with the OTS regulations.
LIQUIDITY AND CAPITAL RESOURCES
The Bank's primary sources of funds are deposits, borrowings from the FHLB and
interest payments on loans. While scheduled repayments of loans are a
predictable source of funds, deposit flows and mortgage prepayments are greatly
influenced by general interest rates, economic conditions and competition. The
Bank has managed this fluctuation in its sources of funds through borrowings
from the FHLB.
________________________________________________________________________________
(Continued)
12
<PAGE> 15
A standard measure of liquidity for thrift institutions is the ratio of cash
and eligible investments to a certain percentage of net withdrawable savings
and borrowings due within one year. Currently, the OTS encourages savings
institutions to maintain a liquidity ratio of 5%, of which 1% must be comprised
of short-term investments. As of September 30 1996, the Bank's liquidity ratio
was 11.24%.
REGULATORY DEVELOPMENTS
Several new accounting standards have been issued by the Financial Accounting
Standards Board that will apply for the Company's consolidated financial
statements beginning with the year ending June 30, 1997. Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets To Be Disposed Of," requires a
review of long-term assets for impairment of recorded value and resulting
write-downs if the value is impaired. SFAS No 122, "Accounting for Mortgage
Servicing Rights," requires recognition of an asset when servicing rights are
retained on in-house originated loans that are sold. SFAS No 123, "Accounting
for Stock-Based Compensation," encourages, but does not require, entities to
use a "fair value based method" to account for stock-based compensation plans.
If fair value accounting is not adopted, entities must disclose the pro forma
effect on net income and on earnings per share had the accounting been adopted.
SFAS No 125, "Accounting for Transfer and Servicing of Financial Assets and
Extinguishment of Liabililties," provides accounting and reporting standards
for transfers and servicing of financial assets and extinguishments of
liabilities and requires a consistent application of a financial-components
approach that focuses on control. Under that approach, after a transfer of
financial assets, an entity recognizes the financial and servicing assets it
controls and the liabilities it has incurred, and derecognizes liabilities when
extinguished. SFAS No. 125 also supersedes SFAS No. 122, and requires that
servicing assets and liabilities be subsequently measured by amortization in
proportion to and over the period of estimated net servicing income or loss,
and requires assessment for asset impairment or increased obligation based on
their fair values. SFAS No. 125 applies to transfers and extinguishments
occurring after December 31, 1996, and early or retroactive application is not
permitted.
These statements are not expected to have a material effect on the Company's
consolidated financial position or results of operation.
_______________________________________________________________________________
13
<PAGE> 16
PART II
ITEM 1 - LEGAL PROCEEDINGS
None
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 - OTHER INFORMATION
On August 13, 1996, the Company declared a cash dividend of $.075 per
share which was payable on October 1, 1996 to stockholders of record on
September 10, 1996.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
________________________________________________________________________________
14
<PAGE> 17
Three Rivers Financial Corporation
Three Rivers, Michigan
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.
Three Rivers Financial Corporation
Date: November 13, 1996 /s/ G. Richard Gatton
--------------------------------------
G. Richard Gatton
President and Chief Executive Officer
Date: November 13, 1996 /s/ Martha Romig
--------------------------------------
Martha Romig
Senior Vice-President, Treasurer and
Chief Financial Officer
______________________________________________________________________________
15
<PAGE> 18
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) SCHEDULE
10-Q DATED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 481,619
<INT-BEARING-DEPOSITS> 2,459,750
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 630,376
<INVESTMENTS-CARRYING> 19,602,817
<INVESTMENTS-MARKET> 19,307,610
<LOANS> 57,014,722
<ALLOWANCE> 456,185
<TOTAL-ASSETS> 87,368,684
<DEPOSITS> 63,007,531
<SHORT-TERM> 425,027
<LIABILITIES-OTHER> 812,153
<LONG-TERM> 9,844,287
0
0
<COMMON> 8,596
<OTHER-SE> 12,642,716
<TOTAL-LIABILITIES-AND-EQUITY> 87,368,684
<INTEREST-LOAN> 1,260,102
<INTEREST-INVEST> 319,568
<INTEREST-OTHER> 79,284
<INTEREST-TOTAL> 1,658,954
<INTEREST-DEPOSIT> 690,706
<INTEREST-EXPENSE> 822,185
<INTEREST-INCOME-NET> 836,770
<LOAN-LOSSES> 15,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 205,271
<INCOME-PRETAX> (142,780)
<INCOME-PRE-EXTRAORDINARY> (142,780)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (92,290)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> 0
<YIELD-ACTUAL> 8.12
<LOANS-NON> 80,076
<LOANS-PAST> 0
<LOANS-TROUBLED> 548,339
<LOANS-PROBLEM> 70,400
<ALLOWANCE-OPEN> 440,835
<CHARGE-OFFS> 0
<RECOVERIES> 350
<ALLOWANCE-CLOSE> 456,185
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 456,185
</TABLE>
