<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, 1999
( ) 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:
702,734 shares of Common Stock, Par Value $.01 per share as of November
5, 1999
Transitional Small Business Disclosure Format (check one): Yes ; No X
-- ---
<PAGE> 2
THREE RIVERS FINANCIAL CORPORATION
THREE RIVERS, MICHIGAN
FORM 10-QSB
INDEX
<TABLE>
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited)
September 30, 1999 and June 30, 1999 1
Consolidated Statements of Income (Unaudited)
Three months ended September 30, 1999 and 1998 2
Condensed Consolidated Statement of Changes in Shareholders'
Equity (Unaudited)
Three months ended September 30, 1999 4
Consolidated Statements of Cash Flows (Unaudited)
Three months ended September 30, 1999 and 1998 5
Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 12
PART II. OTHER INFORMATION
Items 1-6 16
Signatures 17
</TABLE>
<PAGE> 3
THREE RIVERS FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
September 30, 1999 and June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, June 30,
1999 1999
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Cash and due from other financial institutions $ 3,386,049 $ 3,439,860
Interest-earning deposits with other financial institutions 2,168,679 4,526,169
--------------------- -------------------
Cash and cash equivalents 5,554,728 7,966,029
Interest-earning time deposits in other financial institutions 4,254,960 4,154,960
Securities available for sale 2,005,943 1,771,920
Securities held to maturity (fair value: $12,775,512 at
September 30, 1999 and $12,239,450 at June 30, 1999) 12,757,389 12,240,083
Loans receivable, net of allowance for loan losses of
$535,090 at September 30, 1999 and $519,687 at June 30, 1999 69,490,220 68,705,967
Federal Home Loan Bank Stock 1,162,200 1,162,200
Accrued interest receivable 430,236 481,286
Premises and equipment, net 2,663,275 2,739,937
Investment in low-income housing partnership 361,257 373,754
Other assets 819,206 809,395
--------------------- -------------------
Total assets $ 99,499,414 $ 100,405,531
===================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Demand deposits $ 3,024,116 $ 4,025,494
Savings and NOW deposits 23,732,154 24,045,015
Time deposits 37,920,661 39,089,857
--------------------- -------------------
Total deposits 64,676,931 67,160,366
Federal Home Loan Bank advances 22,582,205 20,656,961
Advance payments by borrowers for taxes and insurance 396,200 463,129
Due to low-income housing partnership 253,058 253,058
Accrued expenses and other liabilities 693,335 1,082,957
--------------------- -------------------
Total liabilities 88,601,729 89,616,471
Shareholders' equity
Preferred stock, par value $0.01; 500,000 shares authorized;
none outstanding
Common stock, par value $0.01; 2,000,000 shares authorized;
702,734 shares issued and outstanding at
September 30, 1999 and June 30, 1999 respectively 7,027 7,027
Additional paid-in-capital 5,569,461 5,563,848
Retained earnings 5,930,002 5,851,942
Accumulated other comprehensive income, net of tax of
$1,074 at September 30, 1999 and ($433) at June 30, 1999 2,086 (860)
--------------------- -------------------
11,508,576 11,421,957
Unearned Employee Stock Ownership Plan shares (421,538) (421,538)
Unearned Recognition and Retention Plan shares (189,353) (211,359)
--------------------- -------------------
Total shareholders' equity 10,897,685 10,789,060
--------------------- -------------------
Total liabilities and shareholders' equity $ 99,499,414 $ 100,405,531
===================== ===================
</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, 1999 and 1998
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Interest income
Loans Receivable $ 1,497,958 $ 1,368,685
Securities 216,730 232,440
Other interest and dividend income 139,571 222,842
------------------ ------------------
Total interest income 1,854,259 1,823,967
Interest expense
Deposits 677,326 696,669
Borrowed funds 302,277 312,972
------------------ ------------------
Total interest expense 979,603 1,009,641
------------------ ------------------
NET INTEREST INCOME 874,656 814,326
Provision for loan losses 15,000 15,000
------------------ ------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 859,656 799,326
Noninterest income
Loan servicing 36,065 28,081
Net gains on sales of loans 13,590 35,712
Service charges on deposit accounts 72,542 65,382
Other income 37,492 44,621
------------------ ------------------
159,689 173,796
------------------ ------------------
Noninterest expense
Compensation and benefits 414,563 394,019
Occupancy and equipment 162,604 148,253
SAIF deposit insurance premium 9,458 9,325
Advertising and promotion 30,348 33,286
Data processing 58,581 61,376
Professional fees 49,925 25,233
Printing, postage, stationery, and supplies 23,905 27,880
Other 81,773 97,516
------------------ ------------------
831,157 796,888
INCOME BEFORE INCOME TAXES 188,188 176,234
Federal income tax expense 36,609 32,700
------------------ ------------------
NET INCOME $ 151,579 $ 143,534
------------------ ------------------
</TABLE>
- --------------------------------------------------------------------------------
(Continued)
2.
<PAGE> 5
THREE RIVERS FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (continued)
Three months ended September 30, 1999 and 1998
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Other comprehensive income
Net change in unrealized gains on securities
available for sale 4,463 4,255
Tax effects (1,517) (1,447)
---------------- ----------------
Total other comprehensive income 2,946 2,808
---------------- ----------------
Comprehensive income $154,525 $146,342
================ ================
Basis earnings per share $0.24 $0.18
================ ================
Diluted earnings per share $0.24 $0.18
================ ================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
3.
<PAGE> 6
THREE RIVERS FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Three months ended September 30, 1999
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Balance at June 30, 1999 $10,789,060
Net income 151,579
Effect of shares committed to be released by ESOP, 5,612
at market value
Cash dividends declared on common stock @ $0.115 per share (73,518)
Amortization of 1,633 RRP shares 22,006
Net change in unrealized gains on securities
available for sale, net of taxes 2,946
-----------
Balance at September 30, 1999 $10,897,685
-----------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
4.
<PAGE> 7
THREE RIVERS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended September 30, 1999 and 1998
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 151,579 $ 143,534
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation of premises and equipment 84,449 75,777
Net accretion of securities (4,034) (14,838)
Provision for loan losses 15,000 15,000
RRP expense 22,006 21,393
ESOP expense 5,612 12,568
Loans originated for sale (780,138) (2,095,115)
Proceeds from sale of loans held for sale 793,728 2,130,827
Net realized gains on sales of loans (13,590) (35,712)
Change in
Accrued interest receivable and other assets 41,239 89,650
Accrued expenses and other liabilities (391,139) (224,212)
------------------ ------------------
Net cash provided by (used in) operating activities (75,288) 118,872
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in interest-earning time
deposits with other financial institutions (100,000) (188,980)
Net increase in loans (799,253) (704,188)
Net purchases of premises and equipment (7,787) (64,194)
Securities available for sale:
Purchases (492,345) -
Paydowns 256,430 8,219
Securities held to maturity
Purchases (1,412,699) (1,316,243)
Calls and maturities - 1,500,000
Paydowns 905,782 988,157
Net investment in low-income housing partnership 12,497 12,497
------------------ ------------------
Net cash provided by (used in) investing activities (1,637,375) 235,268
</TABLE>
- --------------------------------------------------------------------------------
(Continued)
5.
<PAGE> 8
THREE RIVERS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended September 30, 1999 and 1998
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
CASH FLOWS FROM FINANCING ACTIVITIES
<S> <C> <C>
Net change in deposits $ (2,483,435) $ 2,762,813
Net change in advances from borrowers for taxes
and insurance (66,929) (127,848)
Proceeds from FHLB advances 2,000,000 -
Repayments of FHLB advances (74,756) (1,586,776)
Cash dividends paid (73,518) (83,830)
Purchase of common stock - (82,800)
----------------- ------------------
Net cash provided by (used in) financing activities (698,638) 881,559
----------------- ------------------
Net change in cash and cash equivalents (2,411,301) 1,235,699
Cash and cash equivalents at beginning of period 7,966,029 12,281,077
----------------- ------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,554,728 $ 13,516,776
================= ==================
Supplemental disclosures of cash flow information
Cash paid for
Interest $ 957,146 $ 993,152
Income taxes 0 79,375
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
6.
<PAGE> 9
THREE RIVERS FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Three months ended September 30, 1999
NOTE 1 - BASIS OF PRESENTATION
Nature of Operations: The consolidated financial statements include the accounts
of Three Rivers Financial Corporation ("the Company"), First Savings Bank ("the
Bank") and Alpha Financial, Inc ("Alpha"). The Company is a savings and loan
holding company located in Three Rivers, Michigan and owns all of the
outstanding stock of the Bank. Alpha is a wholly-owned subsidiary of the Bank.
The Company was organized in April 1995 for the purpose of owning all of the
outstanding stock of the Bank.
The Bank grants residential and commercial real estate and consumer loans,
accepts deposits and engages in mortgage banking activities. Substantially all
loans are secured by specific items of collateral including residences, business
assets and consumer assets. The Bank services its customers, which are primarily
located in southwestern Michigan and the central portion of northern Indiana,
through its main office in Three Rivers and five other offices located in its
market area. The primary business of Alpha is to own and receive the dividend
income from stock holdings in MMLIC Life Insurance Company.
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 principles for complete presentation of financial statements. In the
opinion of management, the consolidated financial statements contain all
adjustments necessary to present fairly the consolidated balance sheets of Three
Rivers Financial Corporation and its subsidiary First Savings Bank as of
September 30, 1999 and June 30, 1999, and the consolidated statements of income
for the three months ended September 30, 1999 and 1998 and the consolidated
statements of cash flows for the three months ended September, 30, 1999 and
1998. All significant intercompany transactions and balances are eliminated in
consolidation. The income reported for the three months ended September 30, 1999
is not necessarily indicative of the results that may be expected for the full
year.
(Continued)
7.
<PAGE> 10
THREE RIVERS FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Three months ended September 30, 1999
NOTE 2- BORROWINGS
Borrowings at September 30, 1999 consisted of advances from the Federal Home
Loan Bank (FHLB) of Indianapolis, bearing rates from 4.53% to 5.71% at September
30, 1999. The borrowings are collateralized by the Company's single family whole
loans, U. S. Government, federal agency and mortgage-backed securities under a
blanket collateral agreement with the FHLB. Fixed rate advances include $2.3
million with maturities ranging from seven months to three years. Adjustable
rate advances consist of $6.5 million with maturities ranging from nine months
to four years. The adjustable rate advances are based on a rate indexed to the 3
month LIBOR rate which adjusts quarterly. The remaining $13.8 million of putable
advances consist of maturities ranging from ten months to 9.5 years. For the
putable advances, the FHLB has the option to convert to an adjustable rate of
three-month LIBOR flat, adjusted quarterly.
NOTE 3 - EARNINGS PER COMMON SHARE
Earnings per common share is computed under the provisions of Statement of
Financial Accounts Standards (SFAS) No. 128, Earnings Per Share. Unallocated
ESOP shares and unearned recognition and retention plan shares are excluded from
the weighted average number of shares outstanding used in the computation of
earnings per share. Basic earnings per share is based on net income divided by
the weighted average number of shares outstanding during the period. Diluted
earnings per share shows the dilutive effect of additional common stock
equivalents.
A reconciliation of the numerators and denominators of basic and dilutive
earnings per common share for the periods ended September 30, 1999 and 1998 is
presented below. All share and per share amounts have been retroactively
adjusted for the October 28, 1998 stock dividend.
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1999 1998
---- ----
BASIC EARNINGS PER SHARE
<S> <C> <C>
Net income available to common shareholders $151,579 $143,534
-------- --------
Weighted average common shares outstanding 639,788 792,888
-------- --------
Basic earnings per share $ 0.24 $ 0.18
-------- --------
</TABLE>
(Continued)
8.
<PAGE> 11
THREE RIVERS FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATE FINANCIAL STATEMENTS
Three months ended September 30, 1999
NOTE 3 - EARNINGS PER COMMON SHARE (Continued)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1999 1998
---- ----
DILUTED EARNINGS PER SHARE
<S> <C> <C>
Net income available to common shareholders $151,579 $143,534
-------- --------
Weighted average common shares outstanding 639,788 792,888
Add: Dilutive effects of assumed exercises
Stock options 14 14,212
Weighted average common and dilutive potential
common shares outstanding 639,802 807,100
-------- --------
Diluted earnings per share $ 0.24 $ 0.18
-------- --------
</TABLE>
Unvested recognition and retention plan shares were antidilutive for the three
months ended September 30, 1999 and 1998.
NOTE 4 - STOCK OPTIONS
The Company's Board of Directors has adopted a stock option plan. Under the
terms of this plan, options for up to 94,558 shares of the Company's common
stock may be granted to key management employees and directors of the Company
and its subsidiaries. The exercise price of the options is determined at the
time of grant by an administrative committee appointed by the Board of
Directors.
SFAS No.123, which became effective for 1997, requires disclosures for companies
that do not adopt its fair value accounting method for stock-based employee
compensation. Accordingly, the following proforma information presents net
income and earnings per common share had the fair value been used to measure
compensation cost for stock option plans. No compensation cost has been
recognized for the stock options. No stock options were granted during the three
months ended September 30, 1999 and 1998.
(Continued)
9.
<PAGE> 12
THREE RIVERS FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Three months ended September 30, 1999
<TABLE>
<CAPTION>
NOTE 4 - STOCK OPTIONS (Continued) Three Months Ended
September 30,
1999 1998
---- ----
<S> <C> <C>
Net income as reported $ 151,579 $ 143,534
Proforma net income 141,023 135,394
Basic earnings per common share as reported $ 0.24 $ 0.18
Diluted earnings per share as reported 0.24 0.18
Proforma basic earnings per common share 0.22 0.17
Proforma dilutive earnings per common share 0.22 0.17
</TABLE>
In future years, the proforma effect of not applying this standard is expected
to increase as additional options are granted.
The stock option plan is used to retain and reward directors and key employees
and provide them with an additional equity interest. Options are issued for ten
year periods with a five year vesting period. Information about option grants
follows:
<TABLE>
<CAPTION>
Weighted Weighted
Number of Average Average
Outstanding Exercise Exercise Fair Value
Options Price Price of Grants
------- ----- ----- ---------
<S> <C> <C> <C> <C>
Balance at June 30, 1997 64,350 $ 12.05 $ 12.05
Granted 4,400 14.89 14.89 $ 2.56
------
Balance at June 30, 1998 68,750 12.05-14.89 12.23
Granted 21,780 14.09 14.09 2.22
Forfeited (3,575) 12.05 12.05
------
Balance at June 30, 1999 and
September 30, 1999 86,955 12.05-14.89 12.70
------
</TABLE>
The weighted average remaining contractual life of options outstanding at
September 30, 1999 was approximately 7.28 years. Stock options exercisable at
September 30, 1999 and 1998 totaled 37,345 and 24,310 at a weighted average
exercise price of $12.12 and $12.05. All share and per share amounts have been
retroactively adjusted for the October 28, 1998 stock dividend.
(Continued)
10.
<PAGE> 13
THREE RIVERS FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Three months ended September 30, 1999
NOTE 5 - REGULATORY CAPITAL REQUIREMENTS
Savings institutions must meet three separate minimum capital-to-asset
requirements. The following table summarizes, as of September 30, 1999, the
capital requirements for the Bank and the Bank's actual capital ratios. As of
September 30, 1999, 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 $ 4,256 8.00% $10,545 19.82%
Core capital $ 2,981 3.00% $10,012 10.08%
Tangible capital $ 1,490 1.50% $10,012 10.08%
</TABLE>
11.
<PAGE> 14
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 September 30, 1999 to June 30, 1999 and the results
of operations for the three-month period ended September 30, 1999 with the same
period ended September 30, 1998. This discussion should be read in conjunction
with the financial statements and footnotes included herein.
FINANCIAL CONDITION
September 30, 1999 compared to June 30, 1999
The Company's total assets decreased $900,000 from $100.4 million at June 30,
1999 to $99.5 million at September 30, 1999. The overall decrease was due
primarily to decreases in cash and cash equivalents, accrued interest
receivable, premises and equipment and in investment in low-income housing
partnership. These decreases were offset by increases in interest-earning
deposits with other financial institutions, investment securities and loans
receivable.
Cash and cash equivalents decreased $2.4 million or 30.00% from $8.0 million at
June 30, 1999 to $5.6 million at September 30, 1999. This was due primarily to
an increase in loan demand and the purchase of investment securities.
Interest-earning time deposits with other financial institutions increased
$100,000 or 2.38% from $4.2 million at June 30, 1999 to $4.3 million at
September 30, 1999.
Loans receivable increased $800,000 or 1.15% from $68.7 million at June 30, 1999
to $69.5 million at September 30, 1999 due to the higher level of demand for
loans in the Company's market area. These increases were funded by excess cash.
Securities increased $800,000 or 5.71% from $14.0 million at June 30, 1999 to
$14.8 million at September 30, 1999. Securities consist of U.S. Government and
federal agency securities, mortgage-backed and related securities and other
collateralized obligations.
Total liabilities decreased $1.0 million from $89.6 million at June 30, 1999 to
$88.6 million at September 30, 1999 due primarily to decreases in deposits,
accrued interest and other liabilities, which were partially offset by increases
in FHLB advances.
(Continued)
12.
<PAGE> 15
Total borrowed funds increased $1.9 million or 9.18% from $20.7 million at June
30, 1999 to $22.6 million at September 30, 1999. This increase was the result of
increased loan demand along with decreases in total deposits. Borrowed funds
consist of FHLB advances with both fixed and variable interest rates and stated
maturities ranging through 2009.
Total deposits decreased $2.5 million to $64.7 million for the three-month
period ended September 30, 1999. This decrease was in all deposit categories.
Management believes the balances have decreased as customers seek higher
yielding investment alternatives due to the low interest rate environment.
Shareholders' equity increased $100,000 to $10.9 million for the three-month
period ended September 30, 1999 from $10.8 million for the period ended June 30,
1999. This is due primarily to the net income for the quarter partially offset
by dividends paid.
RESULTS OF OPERATIONS
Net income for the three months ended September 30, 1999 was $152,000 compared
to $144,000 for the three months ended September 30, 1998, an increase of $8,000
or 5.56%. Interest income increased $30,000 or 1.64% for the period ended
September 30, 1999 compared to the three-month period ended September 30, 1998
primarily due to increases in mortgage balances. Other interest and dividend
income decreased $83,000 due to the decrease in cash and cash equivalents for
the three-month period ended September 30, 1999 as compared to the same period
ended September 30, 1998. Interest expense decreased $30,000 to $980,000 for the
three months period ended September 30, 1999 as compared to the same period
ended September 30, 1998 primarily due to decreases in deposit balances.
Non-interest income decreased $14,000 from $174,000 to $160,000 for the
three-month period ended September 30, 1999. Increases in loan servicing and
service charges on deposit accounts were offset by decreases in gains on sales
of loans and other income.
Non-interest expense increased $34,000 or 4.27% from $797,000 to $831,000 for
the three months period ended September 30, 1999. Increases in compensation and
benefits, occupancy and equipment, and professional fees were offset by
decreases in advertising, data processing, printing, and other expenses. The
substantial increase in professional fees was due to expenses incurred in the
pending merger with Peoples Federal of Auburn, Indiana. See Item #5, Other
Information.
(Continued)
13.
<PAGE> 16
NON-PERFORMING ASSETS AND ALLOWANCE FOR LOANS
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, 1999. 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 the amounts allocated to the allowance
for loan losses will be adequate to cover actual losses that may occur.
Total non-performing assets decreased $208,000 at September 30, 1999 to $416,000
compared to $624,000 at June 30, 1999. The ratio of non-performing assets to
total assets at September 30, 1999 was 0.42% compared to 0.62% at June 30, 1999.
Included in non-performing assets at September 30, 1999 were consumer loans in
the amount of $38,000 and non-performing mortgages of $378,000.
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 September 30, 1999, $295,000 of
assets were classified as substandard, $-0- as doubtful, $-0- as loss, and
$61,000 as special mention. At the time of the quarterly review, an asset
classification listing is prepared, in conformity with the OTS regulations, and
a detailed report is presented to the Board.
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.
(Continued)
14.
<PAGE> 17
Under OTS regulations, a savings association is required to maintain an average
daily balance of liquid assets (including cash, certain time deposits and
savings accounts, bankers's acceptances, certain government obligations, and
certain other investments) in each calendar quarter of not less than 4% of
either (1) its liquidity base (consisting of certain net withdrawable accounts
plus short-term borrowings) as of the end of the preceding calendar quarter, or
(2) the average daily balance of its liquidity base during the preceding
quarter. This liquidity requirement may be changed from time to time by the OTS
to any amount between 4.0% and 10.0% depending upon certain factors, including
economic conditions and savings flows of all savings associations. For the
quarter ended September 30, 1999, the Bank maintained a liquidity ratio of
21.31%. The Bank anticipates that it will have sufficient funds available to
meet current commitments.
YEAR 2000
The Company has completed its assessment of Year 2000 issues, developed a plan,
and arranged for the resources to complete the necessary remediation and
testing. As part of its efforts to ensure compliance with the Year 2000, the
Company converted to a new processing system in May of 1999. At that time
certain computer hardware was also replaced.
The Company has and will continue to utilize both internal and external
resources to test hardware and software for Year 2000 compliance. The Company
has completed changes and testing of critical systems to ensure Year 2000
compliance. Testing of non-critical applications will continue throughout 1999
and will be completed prior to any impact on operating systems. The total costs
of the Year 2000 project are estimated at $350,000. The Company will incur
remediation and testing costs through the year 2000, but does not anticipate
that material incremental costs will be incurred in any single period.
The Company has initiated formal communications with all of its critical vendors
and service providers to determine the extent to which the Company is vulnerable
to any failure of those third parties to remedy their own Year 2000 issues.
However, there can be no guarantee that systems of other companies on which the
Company's systems rely will be remedied in a timely manner or that there will be
no adverse effect on the Company's systems. Critical companies include power
companies and telephone systems. Therefore, the Company could possibly be
negatively impacted to the extent that other entities not affiliated with the
Company are unsuccessful in properly addressing this issue.
The costs of the project and the date on which the Company plans to complete the
Year 2000 modifications are based upon management's best estimates. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated. 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.
15.
<PAGE> 18
PART II
ITEM 1 - LEGAL PROCEEDINGS
None
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
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 August 18, 1999, the Company declared a cash dividend of $0.115 per
share which was payable on October 1, 1999, to stockholders of record
on September 10, 1999.
On September 21, 1999, Peoples Bancorp, headquartered in Auburn,
Indiana, and the Registrant jointly announced that they have signed a
definitive agreement providing for the merger of the Registrant with
and into Peoples Bancorp. Under the terms of the agreement, each
shareholder of the Registrant would receive in a tax-free exchange 1.08
shares of Peoples Bancorp common stock for each share of the
Registrant's common stock owned by such shareholder. The proposed
merger is subject to the approval of the shareholders of Peoples
Bancorp and of the Registrant, and of the Office of Thrift Supervision,
receipt of fairness opinions, and other customary conditions. The
parties contemplate that the merger will become effective during the
first quarter of 2000.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) Reports on Form 8-k
None
- --------------------------------------------------------------------------------
16.
<PAGE> 19
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 9, 1999 /s/ G. Richard Gatton
-------------------------------------------
G. Richard Gatton
President and Chief Executive Officer
Date: November 9, 1999 /s/ Martha Romig
-------------------------------------------
Martha Romig
Senior Vice-President, Treasurer and
Chief Financial Officer
- --------------------------------------------------------------------------------
17.
<PAGE> 20
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
EX 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SCHEDULE
10QSB DATED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,386,049
<INT-BEARING-DEPOSITS> 2,168,679
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,005,943
<INVESTMENTS-CARRYING> 12,757,389
<INVESTMENTS-MARKET> 12,775,512
<LOANS> 69,490,220
<ALLOWANCE> 535,090
<TOTAL-ASSETS> 99,499,414
<DEPOSITS> 64,676,931
<SHORT-TERM> 396,200
<LIABILITIES-OTHER> 693,335
<LONG-TERM> 22,582,205
0
0
<COMMON> 7,027
<OTHER-SE> 10,890,658
<TOTAL-LIABILITIES-AND-EQUITY> 99,499,414
<INTEREST-LOAN> 1,497,958
<INTEREST-INVEST> 216,730
<INTEREST-OTHER> 139,571
<INTEREST-TOTAL> 1,854,259
<INTEREST-DEPOSIT> 677,326
<INTEREST-EXPENSE> 979,603
<INTEREST-INCOME-NET> 874,656
<LOAN-LOSSES> 15,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 81,773
<INCOME-PRETAX> 188,188
<INCOME-PRE-EXTRAORDINARY> 188,188
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 151,579
<EPS-BASIC> 0.24
<EPS-DILUTED> 0.24
<YIELD-ACTUAL> 8.08
<LOANS-NON> 283,320
<LOANS-PAST> 133,068
<LOANS-TROUBLED> 335,695
<LOANS-PROBLEM> 61,217
<ALLOWANCE-OPEN> 519,687
<CHARGE-OFFS> 1,552
<RECOVERIES> 1,955
<ALLOWANCE-CLOSE> 535,090
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 535,090
</TABLE>
