-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EIA+HJm7mXMHyt8hIg5JPzvEQUiQlsy9yLKFsLo+qPLl74BY53FxXwbIHf5/Y4n/ fDkuI1Nm45jEMQ2XBzgmUw== 0000946275-99-000628.txt : 19991117 0000946275-99-000628.hdr.sgml : 19991117 ACCESSION NUMBER: 0000946275-99-000628 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMCLAIRE FINANCIAL CORP CENTRAL INDEX KEY: 0000858800 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 251606091 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-18464 FILM NUMBER: 99756644 BUSINESS ADDRESS: STREET 1: 612 MAIN ST CITY: EMLENTON STATE: PA ZIP: 16373 BUSINESS PHONE: 7248672311 MAIL ADDRESS: STREET 1: POST OFFICE BOX D STREET 2: 612 MAIN STREET CITY: EMLENTON STATE: PA ZIP: 16373 10QSB 1 FORM 10QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999 OR TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 For the transition period from to --------------------- ------------------------ Commission file Number: 000-18464 --------- EMCLAIRE FINANCIAL CORP. (Exact Name of small business issuer as specified in its charter) PENNSYLVANIA 25-1606091 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 612 Main Street Emlenton, PA 16373 (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code: (724) 867-2311 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No As of November 11, 1999, there were 1,395,852 shares outstanding of the issuer's common stock, par value $1.25 per share. 1 Emclaire Financial Corp. INDEX TO QUARTERLY REPORT OF FORM 10-QSB
Part I Financial Information Page ---- Item 1. Consolidated Financial Statements (Unaudited) Consolidated Balance Sheet, September 30, 1999 and December 31, 1998 3 Consolidated Statement of Income Three months ended September 30, 1999 and 1998 and Nine months ended September 30, 1999 and 1998 4 Consolidated Statement of Changes in Stockholders' Equity 5 Consolidated Statement of Cash Flows Nine months ended September 30, 1999 and 1998 6 Notes to Consolidated Financial Statements 7 - 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 - 15 Part II Other Information Item 1. Legal Proceedings 16 Item 2. Changes in Securities 16 Item 3. Defaults Upon Senior Securities 16 Item 4. Submission of Matters to a Vote of Securities Holders 16 Item 5. Other Information 16 Item 6. Exhibits and Reports on Form 8-K 16 Signatures 17
2 EMCLAIRE FINANCIAL CORP. CONSOLIDATED BALANCE SHEET (Unaudited - dollars in thousands, except share data)
September 30, December 31, 1999 1998 ----------------- ----------------- ASSETS Cash and due from banks $ 5,763 $ 8,989 Time deposits with others - 100 Federal funds sold 3,275 9,700 Investment securities: Available for sale 35,425 28,929 Held to maturity (estimated market value of $2,798 and $3,419) 2,797 3,392 Loans 137,439 134,249 Less allowance for loan losses 1,342 1,336 ----------------- ----------------- Net loans 136,097 132,913 Premises and equipment 3,426 3,625 Accrued interest and other assets 6,323 6,484 ----------------- ----------------- TOTAL ASSETS $ 193,106 $ 194,132 ================= ================= LIABILITIES Deposits Non-interest bearing demand $ 26,860 $ 24,746 Interest bearing demand 21,337 22,026 Savings 22,507 22,527 Money market 21,838 21,381 Time 76,518 79,190 ----------------- ----------------- Total deposits 169,060 169,870 Obligation under capital lease - 19 Borrowed funds 2,000 2,000 Accrued interest and other liabilities 917 1,142 ----------------- ----------------- TOTAL LIABILITIES 171,977 173,031 ----------------- ----------------- STOCKHOLDERS' EQUITY Preferred stock, par value $1.00, 3,000,000 shares authorized; none issued - - Common stock, par value $1.25 per share; 12,000,000 shares authorized, 1,395,852 shares issued and outstanding 1,745 1,745 Additional paid in capital 10,871 10,871 Retained earnings 8,901 8,192 Net unrealized gain on securities (388) 293 ----------------- ----------------- TOTAL STOCKHOLDERS' EQUITY 21,129 21,101 ----------------- ----------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 193,106 $ 194,132 ================= =================
See accompanying notes to the consolidated financial statements. 3 EMCLAIRE FINANCIAL CORP. CONSOLIDATED STATEMENT OF INCOME (Unaudited - dollars in thousands, except per share data)
Three Months Ended September 30, Nine Months Ended September 30, 1999 1998 1999 1998 ---------------- ---------------- ---------------- ---------------- INTEREST INCOME Loans, including fees $ 2,778 $ 2,291 $ 8,198 $ 6,189 Interest bearing deposits in other banks 5 - 99 1 Federal funds sold 113 51 361 116 Investment securities: Taxable 471 488 1,320 1,485 Exempt from federal income tax 84 48 185 144 ---------------- ---------------- ---------------- ---------------- Total interest income 3,451 2,878 10,163 7,935 ---------------- ---------------- ---------------- ---------------- INTEREST EXPENSE Deposits 1,370 1,143 4,187 3,075 Borrowed funds 28 29 84 89 Lease obligation - - - 2 ---------------- ---------------- ---------------- ---------------- Total interest expense 1,398 1,172 4,271 3,166 ---------------- ---------------- ---------------- ---------------- NET INTEREST INCOME 2,053 1,706 5,892 4,769 Provision for loan losses 36 55 116 155 ---------------- ---------------- ---------------- ---------------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 2,017 1,651 5,776 4,614 ---------------- ---------------- ---------------- ---------------- OTHER OPERATING INCOME Service fees on deposit accounts 161 145 449 401 Other 73 56 178 139 ---------------- ---------------- ---------------- ---------------- Total other operating income 234 201 627 540 ---------------- ---------------- ---------------- ---------------- OTHER OPERATING EXPENSE Salaries and employee benefits 776 603 2,209 1,805 Occupancy, furniture and equipment 229 241 712 625 Other 563 475 1,595 1,267 ---------------- ---------------- ---------------- ---------------- Total other operating expense 1,568 1,319 4,516 3,697 ---------------- ---------------- ---------------- ---------------- Income before income taxes 683 533 1,887 1,457 Income taxes 211 169 592 452 ---------------- ---------------- ---------------- ---------------- NET INCOME $ 472 $ 364 $ 1,295 $ 1,005 ================ ================ ================ ================ EARNINGS PER SHARE $ 0.34 $ 0.31 $ 0.93 $ 0.90 DIVIDENDS PER SHARE 0.14 0.12 0.42 0.36 AVERAGE SHARES OUTSTANDING 1,395,852 1,183,974 1,395,852 1,116,002
See accompanying notes to the consolidated financial statements. 4 EMCLAIRE FINANCIAL CORP. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited - dollars in thousands, except per share data)
Net Additional Unrealized Common Paid in Retained Gain Stock Capital Earnings on Securities Total ------------- -------------- --------------- -------------- --------------- Balance December 31, 1998 $ 1,745 $ 10,871 $ 8,192 $ 293 $ 21,101 Comprehensive income: Net income 1,295 1,295 Other comprehensive income, net Unrealized losses on securities of $1,032 (681) (681) --------------- Total comprehensive income 614 Dividends declared ($.42 per share) (586) (586) -------------- -------------- --------------- -------------- --------------- Balance September 30, 1999 $ 1,745 $ 10,871 $ 8,901 $ (388) $ 21,129 ============== ============== =============== ============== ===============
See accompanying notes to the consolidated financial statements. 5 EMCLAIRE FINANCIAL CORP. CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited - dollars in thousands)
Nine Months Ended September 30, 1999 1998 ------------------ ------------------ OPERATING ACTIVITIES Net income $ 1,295 $ 1,005 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 704 498 Net amortization of investment security discounts and premiums 98 109 Provision for loan losses 116 155 (Increase) decrease in accrued interest receivable (187) (126) Increase in accrued interest payable (5) (136) Other, net 1 (192) ------------------ ------------------ Net cash provided by operating activities 2,022 1,313 ------------------ ------------------ INVESTING ACTIVITIES Proceeds from maturities and repayments of investment securities: Available for sale 6,304 3,000 Held to maturity 568 2,596 Purchases of investment securities available for sale (13,903) (543) Net loan (originations) repayments (3,277) (10,187) Purchases of premises and equipment (100) (1,034) Net proceeds from merger acquisition - 2,232 Other 150 - ------------------ ------------------ Net cash used for investing activities (10,258) (3,936) ------------------ ------------------ FINANCING ACTIVITIES Net increase (decrease) in deposits (810) 9,620 Decrease in short-term borrowings - (200) Payments for obligation under capital lease (19) (32) Cash dividends paid (586) (427) ------------------ ------------------ Net cash provided by financing activities (1,415) 8,961 ------------------ ------------------ Increase in cash and cash equivalents (9,651) 6,338 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 18,689 4,975 ------------------ ------------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,038 $ 11,313 ================== ==================
See accompanying notes to the consolidated financial statements. 6 EMCLAIRE FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. GENERAL The accounting and financial reporting polices of Emclaire Financial Corp. and its wholly-owned subsidiary The Farmers National Bank of Emlenton ("Bank" or "Farmers"), conform to generally accepted accounting principles and to general practice within the banking industry. In the opinion of management, the accompanying unaudited consolidated financial statements of Emclaire Financial Corp. ("Company" or "Emclaire") contain all adjustments, consisting of only normal and recurring adjustments, necessary for the fair presentation of the Company's financial position, results of operations and cash flows for the periods presented. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. 2. EARNINGS PER SHARE The Company maintains a simple capital structure; therefore there are no dilutive effects on earnings per share. As such earnings per share computations are based on the weighted average number of shares outstanding of 1,395,852 and 1,183,974, and 1,395,852 and 1,116,002 for the three and nine month periods in 1999 and 1998, respectively. 3. COMPREHENSIVE INCOME The components of accumulated other comprehensive income for the nine months ended September 30, 1999, consist of the items presented under the heading Net Unrealized Gain on Securities as presented in the Consolidated Statement of Changes in Stockholders' Equity. For the nine months ended September 30, 1998 the net unrealized gain on securities had a beginning balance of $222,000, a net unrealized gain of $190,000 and an ending balance of $412,000. This net unrealized gain on securities resulted from total comprehensive net income of $288,000, for the nine months ended September 30, 1998. 4. LOANS Major classifications of loans are summarized as follows (in thousands): September 30, December 31, 1999 1998 ----------------- ----------------- Commercial and industrial $ 14,932 $ 14,223 Real estate mortgages Residential 88,357 87,137 Commercial and other 19,779 18,381 Consumer 14,371 14,508 ----------------- ----------------- 137,439 134,249 Less allowance for loan losses 1,342 1,336 ----------------- ----------------- $ 136,097 $ 132,913 ================= ================= 7 The Bank's primary business activity is with customers located within Venango, Clarion, Butler, Elk, Clearfield and Jefferson Counties. Commercial, residential, personal, and agricultural loans are granted. Although the Bank has a diversified loan portfolio at September 30, and December 31, 1998, loans outstanding to individuals and businesses are dependent upon the local economic conditions within the immediate trade area. 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Emclaire Financial Corp. ("Emclaire" or the "Company") is the parent holding company for the Farmers National Bank of Emlenton ("Farmers" or the "Bank"). The following discussion and analysis is intended to provide information about the financial condition and results of operation of the Company and should be read in conjunction with the Consolidated Financial Statements and the related notes thereto appearing elsewhere in this quarterly report. Certain information presented in this report and other statements concerning future performance, developments or events, and expectations for growth and market forecasts constitute forward-looking statements which are subject to a number of risks and uncertainties, including interest rate fluctuations, changes in local or national economic conditions, and government and regulatory actions which might cause actual results to differ materially from stated expectations or estimates. Comparison of the Three Months Ended September 30, 1999 and 1998 Net Income - Net income for the three months ended September 30, 1999 totaled $471,000 or $.34 per share, as compared to $364,000 or $.31 per share recorded during the same period in 1998. The 1999 quarterly earnings represent a 30% increase from those reported in 1998, due to the rise in net interest income related to the increase in the volume of net earning assets due principally to the acquisition of Peoples Savings Bank ("Peoples Savings") in August 1998. The increase in net interest income offset the rise in overhead associated with the additional branch operations. The net income reported resulted in annualized returns on average assets and average equity of .96% and 8.82% for the quarter ended September 30, 1999, as compared to returns of .91% and 8.81% for the same period in 1998. Interest Income - Interest income for the three months ended September 30, 1999 increased approximately $573,000 or 20% from the same period in 1998 to $3.5 million, due to the increase in average earning assets, specifically the loan portfolio. The average balance of the loan portfolio for the quarter ended increased $27.5 million from the same period in 1998 to $134.2 million. The acquisition of Peoples represented approximately $23.8 million of the total average loan growth. The remainder of the increase is attributed largely, to the increase in the origination of residential and commercial mortgage loans experienced during 1999. The tax equivalent yield on the loan portfolio for the quarter decreased 29 basis points to 8.26% from the same period in 1998, due to the impact of generally lower interest rates. The prime interest rate was reduced three times, totaling 75 basis points during 1998. The lower interest rate environment affected existing variable rate loans, and reduced the rates of return on new loan originations and refinancings. While interest rates rose slightly during the third quarter of 1999, the recent increases in the prime interest rate have yet to fully recapture the declines in 1998. Average investment securities for the third quarter of 1999 were $36.8 million resulting in a tax-equivalent yield of 6.45% for the quarter, compared to $34.5 million and 6.45% during the same period in 1998. As a result of the slowing of loan growth during the second quarter of 1999, management began to place excess liquidity back into the investment portfolio, purchasing $13.9 9 million of securities during the second and third quarters. These purchases were principally U. S. government agency and bank qualified tax-free municipal securities. As noted in reports for the first two quarters of 1999, despite the growth in the volume of average earning assets, which increased $34.3 million for the third quarter of 1999 as compared to 1998, the tax equivalent yield on earning assets continues to fall. During the third quarter of 1999, the tax equivalent yield slipped to 7.59% as compared to 7.91% during the same period in 1998, due to the general decline in interest rates, previously discussed. Interest expense - Interest expense increased $226,000 or 19% during the third quarter of 1999, as compared to the same period in 1998. The average volume of interest bearing liabilities during the quarter increased $28.3 million or 24% during the comparative periods. Approximately $23.5 million of this increase is attributable to the acquisition of Peoples Savings. During the comparative quarters the overall rate paid on these liabilities fell to 3.82% from 3.98%. This lower cost of funds is due principally to the generally lower interest rate environment. Despite the generally low interest rate environment, the ongoing competition for deposit customers by traditional and non-traditional financial services providers, continues to affect the overall cost of funds. Furthermore, any increase in market rates of interest can raise the cost of such funds. Net Interest Income - As a result of the increase in interest income due to the increased volume of earning assets which more than offset the increase in interest expense, net interest income rose $347,000 or 20% for the third quarter of 1999, as compared to the same period in 1998. The net tax equivalent yield on earning assets for the quarter was 4.51%, a 22 basis point decline from the 4.73% yield earned during the same period in 1998. Provision for Loan Losses - Based upon management's ongoing assessment of the quality of the loan portfolio, and considering the slowing of loan demand during the quarter, the provision for loan losses for the third quarter of 1999 totaled $36,000, as compared to $55,000 provided during the same period in 1998. Other operating income - Other operating income increased $33,000 or 16% for the third quarter of 1999, due principally to the impact of fees on deposit accounts, particularly overdraft fees, related to the increase in the number of deposit accounts. In addition, ATM convenience fees and fees generated from the MasterMoney(TM) debit card increased due to increased customer usage. Combined, these fees accounted for $23,000 of the total increase in other operating income. A gain on the sale of a parcel of foreclosed real estate of $7,000 was recorded during the third quarter of 1999. Other Operating Expense - During the third quarter of 1999, total other operating expenses increased $249,000 or 19% to $1.6 million from the same period in 1998. The rise in other operating expenses is due principally to the additional overhead associated with the branch office operations added through the Peoples Savings acquisition, costs associated with the implementation of the frame relay network during the fourth quarter of 1998, and the hiring of several management employees during the third quarter of 1999. 10 Due primarily to the expansion of the branch office network, salary and employee benefit costs increased $173,000 or 29% to $776,000 for the third quarter of 1999 as compared to $603,000 during the same period in 1998. The Company continues to use temporary employees to provide support in the data center and in providing certain administrative functions related to human resources and employee training. The total cost for temporary employees amounted to $50,000 during the three months ended September 30, 1999. Management intends to continue to use temporary employees to supplement certain staff and administrative functions. The balance of the increase in employee related costs is related to periodic salary adjustments and scheduled employee health insurance premium adjustments, combined with the added management personnel. During the third quarter of 1999, the Company began to fill several existing and newly created management positions as a result of the ongoing organization assessment. It is expected these new employees will result in additional salaries and benefits of approximately $260,000 annually. This staffing increase was completed during October 1999. Occupancy and equipment costs decreased approximately $12,000 or 5% to $229,000 during the third quarter of 1999, as compared to the same period in 1998. A reduction in costs associated with equipment rental and equipment and software maintenance contracts is principally responsible for this decrease. In general, these costs are considered to be recurring, and can be expected to be subject to periodic increases for such items as annual maintenance contract adjustments, office rent escalation and other costs normally subject to inflationary or pricing increases. Other operating expense increased $88,000 or 19% during the three months ended September 30, 1999, as compared to the same period in 1998 and totaled $563,000. Recurring costs increased during the comparative quarter due to items such as: increased ATM and debit card processing fees which increased $24,000 or 66% to $60,000; Pennsylvania shares tax expense increased approximately $4,000, due to the increased Bank capital resulting from the Peoples Savings acquisition; while correspondent bank fees and courier costs increased approximately $15,000 due to the expanded branch network. The remaining increase in this cost is related to the costs of the data processing center and the costs of maintaining the frame relay network established during the fourth quarter of 1998. Income Taxes - The provision for income taxes of $211,000 for the three months ended September 30, 1999, represented a $42,000 or 25% increase from the $169,000 recorded during the same period of 1998. Income taxes as a percentage of pre-tax earnings were approximately 30.9% for the three months ended September 30, 1999, as compared to 31.7% during the same period in 1998. The slight decrease in the tax rate is attributable to the affect of the increase in tax exempt interest income from municipal securities. Nine Months Ended September 30, 1999 - ------------------------------------ Net income for the first nine months of 1999 totaled $1.3 million an increase of $290,000 or 29% from 1998. On a per share basis, earnings of $.93 for the first nine months of 1999, represented a 3% increase from that reported in 1998. Net interest income increased $1.1 million or 24% for the comparative nine month periods due to the increase in the volume of earning assets and interest bearing liabilities previously discussed. For the nine months ended September 30, 1999, average earning assets increased $45.8 million 11 or 34% and average interest bearing liabilities rose $39.2 million or 37%. The net tax equivalent yield totaled 4.49% for the first nine months of 1999, as compared to 4.85% during the same period in 1998. As detailed during the discussion of the quarterly earnings, other income increased due to the increase in fees related to the increase in the number of accounts. For the nine months ended, other income increased $39,000 or 28% to $627,000. Employee expenses reflect the addition of the employees added from the Peoples Savings acquisition and the impact of both temporary and newly hired employees. Through September 30, 1999, these costs have risen $404,000 or 22% to $2.8 million. These costs are expected to increase further as the full impact of the hiring of management personnel previously discussed is realized in the fourth quarter of 1999. Other operating expenses for the first nine months of 1999 totaled $1.6 million, an increase of $328,000 or 26% from the same period in 1998. Amortization of intangible assets related to the Peoples Savings acquisition accounted for $91,000 of the total increase. However, this increase was partially offset by the completion of amortization related to branch purchases made by the Bank in 1991, a reduction of $23,000. In addition, costs discussed earlier related to telephone and data services, and ATM network costs, as well as additional overhead costs related to the Peoples Savings offices accounted for the increase. For the first nine months of 1999, income taxes totaling $592,000 represented 31.4% of pretax income, as compared to $452,000 or 31.0% of pretax income in 1998. Financial Condition - ------------------- At September 30, 1999, the Company reported total consolidated assets of $193.1 million, a decrease of .5% from the $194.1 million reported at December 31, 1998. Total loans increased $3.2 million or 2.4%, to $137.4 million. This increase was realized during the third quarter as loans grew $4.8 million or 3.6%, due principally to residential mortgage loans which increased $3.9 million or 4.6% during the quarter. The increase in residential mortgage loans is partially attributed to the moderate increase in interest rates during the quarter resulting in increased loan demand as borrowers sought to refinance existing loans or complete home purchases ahead of any possible future rate increase. Commercial and other mortgage loans have increased $1.4 million or 7.6% since the beginning of the year; with $905,000 of the increase occurring during the third quarter. Commercial and other loans increased $709,000 or 5.0% since the beginning of the year. Stockholders' equity of $21.1 million at September 30, 1999 equaled that reported at December 31, 1998. The Company's capital ratios continue to exceed the minimums mandated by law and banking regulations. On November 4, 1999, the Company announced its Board of Directors had approved a plan to repurchase up to 5% or 69,792 shares of the Company's outstanding common stock. These 12 purchases can be made in the open market and in privately negotiated transactions from time to time over a six-month period. Liquidity - --------- Operating activities, particularly net income of $1.3 million, depreciation and amortization of $704,000, and the provision for loan losses of $116,000, provided cash totaling $2.0 million which was used to fund investing and financing activities during the first nine months of 1999. During the same period in 1998, operating activities provided $1.3 million. As a result of purchases of approximately $13.9 million of investment securities available for sale, and net loan originations of $3.3 million, financing activities used approximately $10.3 million in funds during the nine months ended September 30, 1999, as compared to $3.9 million used during the same period in 1998. During the first nine months of 1999 investment security repayments of $6.9 million, were used to fund the securities purchases. By comparison, during the first nine months of 1998, net loan originations totaled $10.2 million, which was partially funded by net investment maturities and sales totaling $5.6 million. Financing activities for the first nine months of 1999 used approximately $1.4 million, due principally to a net reduction in deposits of $810,000 and the payment of regular quarterly dividends. During the same period of 1998, financing activities provided approximately $8.9 million of funds due to a $9.6 million net increase in deposits. Aside from liquidity available from customer deposits or through sales and maturities of the investment portfolio, the Company has alternative sources of funds such as a line of credit available with a correspondent bank. At September 30, 1999, a short-term revolving credit facility of $10 million was available through the Federal Home Loan Bank. Management is not aware of any conditions, including any regulatory recommendations or requirements, which would adversely affect its liquidity or its ability to meet funding needs in the ordinary course of business. Risk Elements - ------------- At September 30, 1999, non-performing loans, including those past due ninety days or more, and loans on non-accrual status totaled approximately $834,000. Of the non-performing loan total, $515,000 is considered to be impaired for financial reporting purposes. These impaired loans consist of four commercial loans to a single borrower, secured by real estate. The borrower continues to operate under Chapter 11 bankruptcy protection. As part of management's ongoing assessment of the loan portfolio, $30,000 of the allowance for loan losses at September 30, 1999, has been allocated for these loans. During the third quarter of 1999, the borrower provided payments totaling $9,000, which were recorded as interest income. Management believes the Company is adequately secured by the underlying collateral. 13 The following table presents the components of non-performing loans and other non-performing assets as of the five most recent quarters ended:
1999 1998 --------------------------------------------- ----------------------------- September 30, June 30, March 31, December 31, September 30, Non-performing loans Loans past due 90 days or more $ 95 $ 114 $ 238 $ 287 $ 204 Non-accrual loans 739 874 1,032 1,022 941 ------ ------ ------ ------ ----- Total non-performing loans 834 988 1,270 1,309 1,145 Other non-performing assets Repossessed assets - 3 - - - Real estate acquired through Foreclosure 22 25 56 80 337 ------ ------ ------ ------ ----- Total other non-performing assets 22 28 56 80 337 ------ ------ ------ ------ ----- Total non-performing assets $ 856 $1,016 $1,326 $1,389 $1,482 ====== ====== ====== ====== ====== Non-performing loans as a percentage of total loans .61% .74% .96% .98% .87% Non-performing assets to assets .44 .53 .68 .72 .79
Year 2000 - --------- The following discussion of the implications of the Year 2000 ("Y2K") compliance issue for the Company contains numerous forward-looking statements based on inherently uncertain information. The cost of the project and the date on which the Company plans to complete various aspects of the project are based on management's best estimates, which were derived utilizing a number of assumptions of future events including the continued availability of internal and external resources, third party modifications and other factors. Management continues to work toward attaining Year 2000 ("Y2K") compliance. During the first quarter of 1999, testing, and validation of the test results were completed on the core software applications. In addition, the Company's independent accountants reviewed the results of the Company's testing program. The contingency plan developed by the Company was also updated. As part of its overall assessment and compliance program, the Company contacted material customers and non-information technology suppliers (e.g. utilities, telephone and security systems) regarding their Year 2000 state of readiness. The Company is unable to test the Y2K readiness of its significant providers of utility services and is relying on each utility company's internal testing and representations to provide the required services that drive the Bank's data systems. During the second and third quarters of 1999, the Company focused on maintaining Y2K compliance by testing any equipment or software upgrades, continuing its customer communication program, and refining and testing its contingency plans. These procedures will 14 continue throughout the balance of the year. During the third quarter costs of approximately $4,000 were incurred for the production of several customer Y2K communications. Direct costs incurred in achieving and maintaining Y2K compliance have not been significant. However, the time devoted by employees to this project has been significant. During the first week of August 1999, the installation and testing of a back-up generator at the data processing center was successfully completed. The total capitalized cost for this equipment was $32,000. Despite the best efforts of management in addressing this issue, the vast number of external entities that have direct and indirect business relationships with the Company, such as customers, vendors, payment system providers and other financial institutions makes it impossible to assure that a failure to achieve or maintain compliance by one or more of these entities would not have a material adverse impact on the operations of the Company. 15 PART II - OTHER INFORMATION 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 November 4, 1999 the Company announced the Board of Directors had approved a plan to repurchase up to 5% of the outstanding shares of common stock. See EXHIBIT 99.1. Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 27 - Financial Data Schedule (in electronic filing only) (b) Exhibit 99.1 - Press Release (c) Reports on Form 8-K (None) 16 SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Emclaire Financial Corp. - ------------------------ (Registrant) Date: November 15, 1999 By: /s/ David L. Cox ----------------- ----------------------- David L. Cox President and CEO Date: November 15, 1999 By: /s/ John J. Boczar ----------------- ----------------------- John J. Boczar, CPA Treasurer 17 EX-27 2 FDS
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL INFORMATION. 1000 9-MOS DEC-31-1999 SEP-30-1999 5,350 413 3,275 0 35,425 2,797 2,798 137,439 1,342 193,106 169,060 0 917 2,000 0 0 1,745 19,384 193,106 8,198 1,505 460 10,163 4,187 4,271 5,892 116 0 4,516 1,887 1,295 0 0 1,295 0.93 0.93 4.22 739 95 0 0 1,336 129 19 1,342 942 0 400
EX-99.1 3 EXHIBIT 99.1 EXHIBIT 99.1 EMCLAIRE FINANCIAL CORP. - -------------------------------------------------------------------------------- 612 Main Street Emlenton, PA 16373 Emclaire Financial Corp. Announces Stock Repurchase For Immediate Release Thursday, November 04, 1999 Contact: David L. Cox, President or, John J. Boczar, Chief Financial Officer Emclaire Financial Corp. 724/867-2311 Emlenton, PA -- Emclaire Financial Corp. (OTC Bulletin Board - "EMCF"), the parent holding company of The Farmers National Bank of Emlenton, today announced that it has received the necessary Board approval to initiate a repurchase plan covering up to 5% or 69,792 shares of the Company's common stock to be purchased in open market and privately negotiated transactions. The Company currently has 1,395,852 shares of common stock outstanding. David L. Cox, President and Chief Executive Officer of the Company, indicated that the shares acquired in the repurchase plan would be available for general corporate use. The repurchases will be made from time to time over the next six months in open-market and privately negotiated transactions, subject to the availability of stock, the terms of the plan and other financial and market conditions. Emclaire Financial Corp. with consolidated total assets of $193.0 million at September 30, 1999, is the parent company of The Farmers National Bank of Emlenton, a community commercial bank operating eleven offices in Venango, Butler, Clarion, Clearfield, Elk and Jefferson counties, Pennsylvania. Emclaire's common stock is quoted on the OTC Electronic Bulletin Board under the symbol "EMCF". -----END PRIVACY-ENHANCED MESSAGE-----