<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 March 31, 1997
--------------
( ) 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
-------
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:
831,925 shares of Common Stock, Par Value $.01 per share as of May 7, 1997
Transitional Small Business Disclosure Format (check one): Yes ; No X
--- ---
<PAGE> 2
THREE RIVERS FINANCIAL CORPORATION
THREE RIVERS, MICHIGAN
FORM 10Q
INDEX
<TABLE>
<S><C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements of Three Rivers Financial Corporation (Unaudited)
Condensed Consolidated Balance Sheets as of March 31, 1997
and June 30, 1996 1
Condensed Consolidated Statements of Income for the three and nine
months ended March 31, 1997 and 1996 2
Condensed Consolidated Statement of Changes in Shareholders' Equity 3
Consolidated Statements of Cash Flows for the nine months ended
March 31, 1997 and 1996 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
</TABLE>
<PAGE> 3
THREE RIVERS FINANCIAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 1997 and June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
(Unaudited)
ASSETS
<S> <C> <C>
Cash and due from other financial institutions $ 2,041,848 $ 2,613,637
Interest-earning deposits with other financial institutions 3,018,130 1,497,984
----------- -----------
Cash and cash equivalents 5,059,978 4,111,621
Interest-earning time deposits with other financial institutions 3,173,980 3,867,980
Securities available for sale 929,064 630,631
Securities held to maturity (fair value: $18,019,661 at
March 31, 1997, and $18,875,837 at June 30, 1996) 18,219,642 19,267,832
Loans receivable, net of allowance for loan losses of
$485,924 at March 31, 1997, and $440,835 at June 30, 1996 60,032,587 56,042,608
Loans held for sale 94,000 -
Accrued interest receivable 530,817 554,937
Premises and equipment, net 1,415,121 1,484,805
Intangible assets 49,858 56,268
Foreclosed real estate 455,549 440,304
Investment in low-income housing partnership 479,808 499,880
Other assets 724,113 194,471
----------- -----------
Total assets $91,164,517 $87,151,337
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Demand deposits $2,383,824 $2,442,447
Savings and NOW deposits 19,368,207 21,086,566
Other time deposits 38,244,863 40,195,407
----------- -----------
Total deposits 59,996,894 63,724,420
Borrowed funds 17,344,287 9,210,609
Advances from borrowers for taxes and insurance 243,385 422,832
Deferred gain on sale of foreclosed real estate 26,315 66,864
Due to low-income housing partnership 433,382 461,740
Accrued expenses and other liabilities 580,055 479,274
----------- -----------
Total liabilities 78,624,318 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; 823,540 outstanding at March 31, 1997,
and 851,240 outstanding at June 30, 1996 8,319 8,596
Additional paid-in-capital 7,611,146 7,979,421
Retained earnings, substantially restricted 5,942,251 5,870,983
Unearned Employee Stock Ownership Plan shares (630,396) (630,396)
Unearned Recognition and Retention Plan shares (279,576) (331,461)
Treasury stock, at cost (8,385 shares) (111,545) (111,545)
----------- -----------
Total shareholders' equity 12,540,199 12,785,598
----------- -----------
Total liabilities and shareholders' equity $91,164,517 $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 and nine months ended March 31, 1997 and 1996
s ended March 31, 1997 and 1996
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine months Ended
March March
Interest income 1997 1996 1997 1996
Loans receivable ---- ---- ---- ----
<S> <C> <C> <C> <C>
First mortgage loans $1,024,494 $ 975,345 $3,064,264 $2,930,006
Consumer and other loans 250,714 220,438 737,868 684,728
Securities 62,471 66,925 280,199 185,074
Mortgage-backed and related securities 226,466 169,942 697,541 456,869
Other interest-earning assets 97,083 133,267 244,338 416,947
------------ ---------- ---------- ----------
Total interest income 1,661,228 1,565,917 5,024,210 4,673,624
Interest expense
Deposits 635,190 716,204 1,994,918 2,172,738
Borrowed funds 228,614 100,210 529,565 242,748
------------ ---------- ---------- ----------
Total interest expense 863,804 816,414 2,524,483 2,415,486
------------ ---------- ---------- ----------
Net interest income 797,424 749,503 2,499,727 2,258,138
Provision for loan losses 15,000 15,000 45,000 50,000
------------ ---------- ---------- ----------
Net interest income after provision for loan losses 782,424 734,503 2,454,727 2,208,138
Noninterest income
Net gain on sale of loans 8,747 15,268 33,590 61,846
Net gain on foreclosed real estate 0 0 16,717 12,819
Net loss on sale of fixed assets 0 0 (1,003) 0
Other 117,665 98,084 330,726 294,405
------------ ---------- ---------- ----------
Total noninterest income 126,412 113,352 380,030 369,070
Noninterest expense
Compensation and benefits 321,902 248,365 956,267 715,994
Occupancy and equipment 114,229 100,136 329,035 296,842
SAIF deposit insurance premium 10,128 37,703 487,017 109,976
Other 191,480 239,890 617,556 741,029
------------ ---------- ---------- ----------
Total noninterest expense 637,739 626,094 2,389,875 1,863,841
------------ ---------- ---------- ----------
Income before federal income taxes 271,097 221,761 444,882 713,367
Federal income tax expense 90,700 79,928 154,410 252,484
------------ ---------- ---------- ----------
Net income $ 180,397 $ 141,833 $ 290,472 $ 460,883
============ ========== ========== ==========
Earnings per share $0.23 $0.16 $0.37 $0.47
============ ========== ========== ==========
</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
Nine months ended March 31, 1997
(Unaudited)
________________________________________________________________________________
<TABLE>
<S> <C>
Balance at June 30, 1996 $12,785,598
Net income 290,472
Effect of shares committed to be released by ESOP, at market value 18,986
Cash dividends - $.255 per common share (219,205)
Amortization of 3,900 RRP shares 51,885
Repurchase of 27,700 common shares of stock (average price $13.99) (387,537)
Balance at March 31, 1997 $12,540,199
</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
Nine months ended March 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income 290,472 $ 460,883
Adjustments to reconcile net income to
net cash provided from operating activities
Amortization/ (accretion) of
Intangible Assets 6,410 32,507
Net deferred loan origination fees (44,041) 8,831
Deferred gain on sale of foreclosed
real estate (40,549) (12,918)
Premiums and discounts on securities (22,520) 1,984
Provision for loan losses 45,000 50,000
RRP expense 51,885
ESOP expense 18,986 32,469
Change in unearned discounts on loans (1,762) (1,029)
Net loss (gain) on sale of foreclosed real estate
and fixed assets (4,733) 81
Loans originated for sale (1,871,759) (2,431,322)
Proceeds from sale of loans held for sale 1,811,349 2,555,919
Net gain on sales of loans held for sale (33,590) (61,846)
Depreciation of premises and equipment 149,155 144,176
Change in
Accrued interest receivable 24,120 (65,594)
Other assets (529,642) 204,887
Accrued expenses and other liabilities 100,780 112,704
----------- ----------
Total adjustments to reconcile net income to (340,911) 570,849
Net cash provided by ( used in) operating ----------- ----------
activities (50,439) 1,031,732
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease (increase) in interest-earning time
deposits with other financial institutions $ 694,000 $ (1,093,000)
Net decrease (increase) in loans (4,041,184) 1,312,940
Purchase of loans - (2,571,006)
Premises and equipment expenditures (88,274) (96,769)
Proceeds from sale of fixed assets 7,800 474
Net sales (purchases) of securities available for sale (298,433) 499,790
Purchases of securities held to maturity (1,746,392) (8,464,838)
Paydowns on securities held to maturity 2,817,102 1,341,432
Proceeds from sale of foreclosed real estate 42,500 11,000
Net change in investment in low-income housing partnership (8,286) -
----------- ------------
Net cash (used in) investing activities (2,621,167) (9,059,977)
</TABLE>
________________________________________________________________________________
(Continued)
4
<PAGE> 7
THREE RIVERS FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended March 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
CASH FLOWS FROM FINANCING ACTIVITIES
<S> <C> <C>
Proceeds from sale of common stock, net of
conversion costs $ - $ 7,285,569
Repurchase of stock (387,537) -
Cash dividends paid (219,205) (128,945)
Net decrease in deposits (3,727,526) (52,808)
Net change in advances from borrowers for taxes
and insurance (179,447) (223,771)
Proceeds from borrowed funds 14,250,000 5,500,000
Repayments of borrowed funds (6,116,322) (1,134,372)
--------------- ------------
Net cash provided by financing activities 3,619,963 11,245,673
--------------- ------------
Net change in cash and cash equivalents 948,357 3,217,428
Cash and cash equivalents at beginning of period 4,111,621 3,822,260
--------------- ------------
Cash and cash equivalents at end of period 5,059,978 $ 7,039,688
=============== ============
Supplemental disclosures of cash flow information
Cash paid for
Interest on deposits, advances and other
borrowings $ 2,546,451 $ 2,402,273
Income taxes 262,000 152,000
Transfers from loans to real estate acquired
through foreclosure 62,034 67,710
</TABLE>
________________________________________________________________________________
The accompanying notes are an integral part of these consolidated financial
statements
5
<PAGE> 8
THREE RIVERS FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nine months ended March 31, 1997
(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 nine months ended March 31, 1997, and 1996 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 or any other period.
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 of 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 93% 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 March 31, 1997.
_____________________________________________________________________________
(Continued)
6
<PAGE> 9
THREE RIVERS FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nine months ended March 31, 1997
(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 March 31, 1997, the Company had total assets of $91.2
million, deposits of $60.0 million, and net loans receivable of $60.1
million (including loans held for sale).
NOTE 4 - BORROWINGS
Borrowings at March 31, 1997 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 federal agency securities and mortgage-backed securities.
Adjustable rate advances included $8.2 million indexed to the 3 month LIBOR
rate which adjust quarterly. The remaining balance of $9.1 million of
advances are fixed rate, fixed term, with maturities from one month to four
years. 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 March 31, 1997.
NOTE 5 - EARNINGS PER COMMON SHARE
Earnings per common share for the three months ended March 31, 1997 were
computed by dividing net income by the weighted average number of shares of
common stock outstanding net of ESOP and Treasury Stock Shares. The
weighted average number of shares outstanding for the three months ended
March 31, 1997 was 777,353. The reduction in the number of shares
outstanding for the quarter is a result of the corporation's repurchasing
27,700 shares.
____________________________________________________________________________
(Continued)
7
<PAGE> 10
THREE RIVERS FINANCIAL CORPORATION
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
Nine months ended March 31, 1997
(Unaudited)
Note 6 - REGULATORY CAPITAL REQUIREMENTS
Savings institutions must meet three separate minimum capital-to-asset
requirements. The following table summarizes, as of March 31, 1997, the
capital requirements for the Bank and the Bank's actual capital ratios. As
of March 31, 1997, the Bank substantially exceeded all current regulatory
capital requirements.
<TABLE>
<CAPTION>
Regulatory
Capital Requirement Actual Capital
---------------------- ------------------
(Dollars in thousands)
Amount Percent Amount Percent
---------- ---------- --------- -------
<S> <C> <C> <C> <C>
Risk-based capital $3,847 8.00% $11,065 22.81%
Core capital 2,724 3.00% 10,581 11.65%
Tangible capital 1,362 1.50% 10,581 11.65%
</TABLE>
______________________________________________________________________________
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 savings
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 March 31, 1997 to June 30, 1996 and the results of
operations for the three-month period ended March 31, 1997 and the nine-month
period ended March 31, 1997, with the same periods ended March 31, 1996. This
discussion should be read in conjunction with the financial statements and
footnotes included herein.
FINANCIAL CONDITION
March 31, 1997 compared to June 30, 1996.
The Company's total assets increased $4.0 million from $87.2 million at June
30, 1996 to $91.2 at March 31, 1997. The increase was due primarily to
increases in cash and cash equivalents, loans receivable and other assets.
Such increases were partially offset by decreases in interest-earning-time
deposits with other financial institutions along with a decrease in securities
available for sale and held to maturity.
Loans receivable increased $4.1 million or 7.32% from $56.0 million at June 30,
1996 to $60.1 million at March 31, 1997. This includes $94,000 in loans held
for sale.
Other assets increased $530,000 or 273.2% from $194,000 at June 30, 1996 to
$724,000 at March 31, 1997. The majority of this increase was due to the
purchase of annuities in order to replace benefits lost for two executive
officers resulting from changes in the pension plan for the plan year beginning
December 1, 1994. Also a deferred compensation plan was purchased for a
director.
Cash and cash equivalents increased $1.0 million or 24.4% from $4.1 million at
June 30, 1996 to $5.1 million at March 31, 1997. This increase in cash was the
result of the increase in Advances from the Federal Home Loan Bank (FHLB).
Interest-earning time deposits with other financial institutions decreased
$700,000 or 17.9% from $3.9 million to $3.2 million at March 31, 1997.
Securities decreased $750,000 or 4.0% from $19.9 million at June 30, 1996 to
$19.1 million at March 31, 1997. Total securities held at March 31, 1997
included $929,000 in securities available for sale and $18.2 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
Company's portfolio of mortgage-backed securities using funds from the
maturities of time deposits with other financial institutions.
________________________________________________________________________________
(Continued)
9
<PAGE> 12
THREE RIVERS FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Total borrowed funds increased $8.1 million or 88.0% from $9.2 million at June
30, 1996 to $17.3 million at March 31, 1997. This increase was the result of an
increase in loan demand along with a decrease in total deposits. 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 $3.7 million to $60.0 million for the nine-month period
ended March 31, 1997. The largest decrease by deposit categories was in time
deposits and statement savings accounts. Management believes that customers are
seeking higher yielding investment alternatives due to the low interest rate
environment.
RESULTS OF OPERATIONS
Net income for the three months ended March 31, 1997 was $180,000 compared to
$142,000 for the three months ended March 31, 1996, an increase of $38,000 or
26.8%. Increases in interest income of $95,000, or 6.l%, partially offset by
increases in interest expense of $48,000, or 5.9% primarily account for the
increase in net income.
Net income for the nine months ended March 31, 1997 was $290,000 compared to
$461,000 for the nine months ended March 31, 1996, a decrease of $171,000 or
37.1%. This was primarily a result of the BIF/SAIF Regulatory Burden Relief
Package signed by President Clinton on September 30, 1996. The impact of this
legislation on the Company's noninterest expense was approximately $411,000
pretax for the nine-month period ended March 31, 1997.
In addition to the BIF/SAIF special assessment, net income for the nine months
ended March 31, 1997 as compared to the same period in 1996 was impacted by an
increase of $240,000, or 33.5% in compensation and benefits primarily related to
additional stock-incentive and benefit plans resulting from the conversion in
August, 1995. Increases in interest expense of $109,000, or 4.5% in 1997 as
compared to 1996 further contributed to the decline in net income. This
increase in interest expense primarily related to additional FHLB borrowings in
1997. These increased expenses were partially offset by increases of
approximately $350,000 or 7.5%, in interest income.
The provision for loan losses decreased $5,000 to $45,000 for the nine-month
period ended March 31, 1997 as compared to $50,000 for the nine-month period
ended March 31, 1996. The decision to decrease the loan loss provision was
based on management's review of its assets that were classified as of March 31,
1997.
_______________________________________________________________________________
(Continued)
10
<PAGE> 13
THREE RIVERS FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Compensation and benefits increased $74,000 to $322,000 from $248,000 for the
three-month period ended March 31, 1997 and $240,000 to $956,000 from $716,000
for the nine-month period ended March 31, 1997 as compared to the corresponding
periods in 1996. Included in the compensation and benefits expense was an
increase in the Employee Stock Ownership Plan (ESOP) expense of $20,000 for the
nine-month period ended March 31, 1997. In connection with the conversion of
the Bank, an Employee Stock Ownership Plan (ESOP) was established for the
benefit of substantially all employees. To fund the ESOP, 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 loans 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 nine months charged to
income for the period ended March 31, 1997 compared to seven months expense for
the corresponding period ended March 31, 1996. Also included in compensation
and benefits expense was $17,000 for the three-month period ended March 31,
1997 and $52,000 for the nine-month period ended March 31, 1997, 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 officers in key positions by providing such persons with a
proprietary interest in the Holding Company as partial compensation for their
contributions to the Company and to the Bank and their Affiliates and as an
incentive to make such contributions and to promote the Company's and the
Bank's growth and profitability in the future.
Retirement expense increased by $4,000 to $16,000 for the three months ended
March 31,1997, compared to $12,000 for the corresponding period ended March 31,
1996. For the nine-month period ended March 31, 1997, retirement expense
increased $38,000 to $48,000 from $10,000 for the corresponding period ended
March 31, 1996. The reduced expense for the period ended in 1996 was due to
the Company changing retirement plans which resulted in an overpayment in the
new plan. Thus the expense for the three and nine-month periods ended March
31, 1996 was substantially lower as a result of the one-time transfer of plan
assets.
Other expense decreased $49,000 from $240,000 to $191,000 for the three-month
period ended March 31, 1997. For the nine-month period ended March 31, 1997,
other expense decreased $123,000 from $741,000 to $618,000. These decreases
were a result of negotiations of a new contract with Fiserv, the corporation
that handles data processing for the Company, the completion of the
amortization of a premium on core deposits, and an overall reduction in other
operating expenses.
Income tax expense is higher for the nine-month period ended March 31, 1997
due to higher taxable income for the period.
_______________________________________________________________________________
(Continued)
11
<PAGE> 14
THREE RIVERS FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 March 31, 1997 and $45,000 for the nine-month
period ended March 31, 1997. 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. No assurance can be given that amounts allocated to
the allowance for loan losses will be adequate to cover actual losses that may
occur.
Total non-performing assets decreased $61,000 at March 31, 1997 to $542,000 as
compared to $603,000 at June 30, 1996. The ratio of non-performing assets to
total assets at March 31, 1997 was .59%, compared to .69% at June 30, 1996.
Included in non-performing assets at March 31, 1997 were consumer loans in the
amount of $79,000, non-performing mortgages of $8,000, and foreclosed real
estate of $455,000.
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, 1997, $467,000 of
assets were classified as substandard, $-0- as doubtful, $-0- as loss, and
$19,000 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 source of funds through borrowings
from the FHLB.
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,
_______________________________________________________________________________
(Continued)
12
<PAGE> 15
THREE RIVERS FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
the OTS encourages savings institutions to maintain a liquidity ratio of 5%, of
which 1% must be comprised of short-term investments. As of March 31, 1997,
the Bank's liquidity ratio was 13.75% with total liquid assets of $9,904,000:
9.91% in cash and short term investments, and 3.84% in qualifying long term
investments.
ACCOUNTING 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 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 Liabilities," provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishment 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 extinguishment 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
Not applicable
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 - OTHER INFORMATION
On February 19, 1997, the Company declared a cash dividend of $.09 per
share which was payable on April 1, 1997, to stockholders of record
on March 14, 1997.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27-1 Financial Data Schedule for the nine months ending March 31,
1997
27-2 Financial Data Schedule for the six months ending December
31, 1996 - revised
(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: May 13, 1997 /s/ G. Richard Gatton
-----------------------------
G. Richard Gatton
President and Chief Executive Officer
Date: May 13, 1997 /s/ Martha Romig
-----------------------------
Martha Romig
Senior Vice-President, Treasurer and
Chief Financial Officer
______________________________________________________________________________
15
<PAGE> 18
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
27-1 Financial Data Schedule for the nine months ending
March 31, 1997
27-2 Financial Data Schedule for the six months ending
December 31, 1996 - revised
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SCHEDULE 10Q
DATED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 2,041,848
<INT-BEARING-DEPOSITS> 3,018,130
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 929,064
<INVESTMENTS-CARRYING> 18,219,642
<INVESTMENTS-MARKET> 18,019,661
<LOANS> 60,032,587
<ALLOWANCE> 485,924
<TOTAL-ASSETS> 91,164,517
<DEPOSITS> 59,996,894
<SHORT-TERM> 243,385
<LIABILITIES-OTHER> 580,055
<LONG-TERM> 17,344,287
0
0
<COMMON> 8,319
<OTHER-SE> 12,531,880
<TOTAL-LIABILITIES-AND-EQUITY> 91,164,517
<INTEREST-LOAN> 3,802,132
<INTEREST-INVEST> 280,199
<INTEREST-OTHER> 244,338
<INTEREST-TOTAL> 5,024,210
<INTEREST-DEPOSIT> 1,994,918
<INTEREST-EXPENSE> 2,524,483
<INTEREST-INCOME-NET> 2,499,727
<LOAN-LOSSES> 45,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 617,556
<INCOME-PRETAX> 444,882
<INCOME-PRE-EXTRAORDINARY> 444,882
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 290,472
<EPS-PRIMARY> .37
<EPS-DILUTED> 0
<YIELD-ACTUAL> 8.07
<LOANS-NON> 81,988
<LOANS-PAST> 0
<LOANS-TROUBLED> 566,314
<LOANS-PROBLEM> 8,774
<ALLOWANCE-OPEN> 440,835
<CHARGE-OFFS> 651
<RECOVERIES> 740
<ALLOWANCE-CLOSE> 485,924
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 485,924
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SCHEDULE 10Q
DATED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,956,963
<INT-BEARING-DEPOSITS> 1,197,857
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 778,993
<INVESTMENTS-CARRYING> 19,471,793
<INVESTMENTS-MARKET> 19,421,335
<LOANS> 58,923,548
<ALLOWANCE> 471,556
<TOTAL-ASSETS> 89,270,688
<DEPOSITS> 60,372,254
<SHORT-TERM> 162,743
<LIABILITIES-OTHER> 574,034
<LONG-TERM> 14,844,287
0
0
<COMMON> 8,596
<OTHER-SE> 12,791,150
<TOTAL-LIABILITIES-AND-EQUITY> 89,270,688
<INTEREST-LOAN> 2,526,924
<INTEREST-INVEST> 217,728
<INTEREST-OTHER> 147,255
<INTEREST-TOTAL> 3,362,982
<INTEREST-DEPOSIT> 1,359,728
<INTEREST-EXPENSE> 1,660,679
<INTEREST-INCOME-NET> 1,702,303
<LOAN-LOSSES> 30,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 426,076
<INCOME-PRETAX> 173,785
<INCOME-PRE-EXTRAORDINARY> 173,785
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 110,075
<EPS-PRIMARY> .14
<EPS-DILUTED> 0
<YIELD-ACTUAL> 8.12
<LOANS-NON> 192,163
<LOANS-PAST> 0
<LOANS-TROUBLED> 507,435
<LOANS-PROBLEM> 19,417
<ALLOWANCE-OPEN> 440,835
<CHARGE-OFFS> 0
<RECOVERIES> 721
<ALLOWANCE-CLOSE> 471,556
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 471,556
</TABLE>
