UNITED STATES
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 Quarter Ended: September 30, 2002
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______________ to __________
Commission File Number: 000-18464
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EMCLAIRE FINANCIAL CORP.
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(Exact name of small business issuer as specified in its charter)
Pennsylvania 25-1606091
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
612 Main Street, Emlenton, PA 16373
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(Address of principal executive offices)
(724) 867-2311
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by the court. Yes No
------ ------
APPLICABLE ONLY TO CORPORATE ISSUERS
Number of shares of issuer's common stock outstanding as of October 31, 2002:
Common Stock, $1.25 par value 1,332,835
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(Class) (Outstanding)
------------------------------------
Transitional Small Business Disclosure Format (Check one): _ Yes X No
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EMCLAIRE FINANCIAL CORP.
INDEX TO QUARTERLY REPORT ON FORM 10-QSB
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
September 30, 2002 (Unaudited) and December 31, 2001......................................................1
Consolidated Income Statements for the three and nine
months ended September 30, 2002 and 2001 (Unaudited)......................................................2
Consolidated Statement of Changes in Stockholders'
Equity for the nine months ended September 30, 2002 (Unaudited)...........................................3
Consolidated Statements of Cash Flows for the nine
months ended September 30, 2002 and 2001 (Unaudited)......................................................4
Notes to Consolidated Financial Statements................................................................5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations..........................................................9
Item 3. Controls and Procedures..................................................................................17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings........................................................................................18
Item 2. Changes in Securities....................................................................................18
Item 3. Defaults Upon Senior Securities..........................................................................18
Item 4. Submission of Matters to a Vote of Security Holders......................................................18
Item 5. Other Information........................................................................................18
Item 6. Exhibits and Reports on Form 8-K.........................................................................18
Signatures...............................................................................................19
Controls and Procedures Certifications...................................................................20
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Emclaire Financial Corp. and Subsidiary
Consolidated Balance Sheets
As of September 30, 2002 (Unaudited) and December 31, 2001
(Dollar amounts in thousands, except share data)
September 30, December 31,
2002 2001
(unaudited)
--------------------
Assets
--------
Cash and due from banks $7,790 $7,127
Interest-earning deposits in banks 148 620
Federal funds sold - 1,410
--------------------
Cash and cash equivalents 7,938 9,157
Securities available for sale 48,572 38,695
Securities held to maturity; fair value of $29 and
$61 30 60
Loans receivable, net of allowance for loan losses
of $1,493 and $1,464 167,517 160,540
Federal bank stocks, at cost 1,338 1,261
Bank-owned life insurance 4,000 -
Accrued interest receivable 1,294 1,251
Premises and equipment 3,476 3,388
Intangible assets 1,628 1,737
Prepaid expenses and other assets 717 628
--------------------
Total assets $236,510 $216,717
====================
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Deposits $203,711 $189,470
Borrowed funds 8,761 5,000
Accrued interest payable 460 480
Accrued expenses and other liabilities 834 656
--------------------
Total liabilities 213,766 195,606
--------------------
Stockholders' Equity:
Preferred stock, $1.00 par value,
3,000,000 shares authorized;
none issued - -
Common stock, $1.25 par value, 12,000,000
shares authorized;
1,395,852 shares issued and 1,332,835 shares
outstanding 1,745 1,745
Additional paid-in capital 10,871 10,871
Treasury stock, at cost; 63,017 shares (971) (971)
Retained earnings 9,928 9,094
Accumulated other comprehensive income 1,171 372
--------------------
Total stockholders' equity 22,744 21,111
--------------------
Total liabilities and stockholders' equity $236,510 $216,717
====================
See accompanying notes to consolidated financial statements.
1
Emclaire Financial Corp. and Subsidiary
Consolidated Income Statements
For the three and nine months ended September 30, 2002 and 2001 (Unaudited)
(Dollar amounts in thousands, except share data)
Three months ended Nine months ended
September 30, September 30,
----------------------------------------
2002 2001 2002 2001
----------------------------------------
Interest and dividend income:
Loans receivable $3,099 $3,172 $9,346 $9,496
Securities:
Taxable 371 311 1,122 904
Exempt from federal income tax 146 92 424 267
Federal bank stocks 13 21 41 61
Deposits with banks and federal funds sold 24 65 55 236
----------------------------------------
Total interest income 3,653 3,661 10,988 10,964
----------------------------------------
Interest expense:
Deposits 1,243 1,494 3,704 4,626
Borrowed funds 59 - 176 32
----------------------------------------
Total interest expense 1,302 1,494 3,880 4,658
----------------------------------------
Net interest income 2,351 2,167 7,108 6,306
Provision for loan losses 90 36 291 118
----------------------------------------
Net interest income after provision for loan losses 2,261 2,131 6,817 6,188
----------------------------------------
Noninterest income:
Service fees 243 237 704 697
Gain on sale of loans held for sale 39 - 39 -
Other 75 106 252 296
----------------------------------------
Total noninterest income 357 343 995 993
----------------------------------------
Noninterest expense:
Compensation and employee benefits 986 946 2,985 2,809
Premises and equipment, net 274 261 862 811
Intangible amortization expense 12 69 109 207
Other 501 491 1,599 1,491
----------------------------------------
Total noninterest expense 1,773 1,767 5,555 5,318
----------------------------------------
Net income before provision for income taxes 845 707 2,257 1,863
Provision for income taxes 264 216 663 560
----------------------------------------
Net income $581 $491 $1,594 $1,303
========================================
Net income per share $0.44 $0.37 $1.20 $0.98
Dividends per share $0.19 $0.17 $0.57 $0.51
Weighted average common shares outstanding 1,332,835 1,332,835 1,332,835 1,332,835
See accompanying notes to consolidated financial statements.
2
Emclaire Financial Corp. and Subsidiary
Consolidated Statement of Changes in Stockholders' Equity
For the nine months ended September 30, 2002 (Unaudited)
(Dollar amounts in thousands)
Accumulated
Additional Other Total
Common Paid-in Treasury Retained Comprehensive Stockholders'
Stock Capital Stock Earnings Income (Loss) Equity
------------------------ ---------- -------- -------------- -------------
Balance at December 31, 2001 $1,745 $10,871 $(971) $9,094 $372 $21,111
Comprehensive income:
Net income - - - 1,594 - 1,594
Change in net unrealized gain on
securities available for sale, net of
taxes of $411 - - - - 799 799
-------------
Comprehensive income 2,393
-------------
Dividends paid - - - (760) - (760)
---------- ------------- ---------- ---------- -------------- -------------
Balance at September 30, 2002 $1,745 $10,871 $(971) $9,928 $1,171 $22,744
========== ============= ========== ========== ============== =============
Accumulated
Additional Other Total
Common Paid-in Treasury Retained Comprehensive Stockholders'
Stock Capital Stock Earnings Income (Loss) Equity
------------------------ ---------- -------------
Balance at December 31, 2001 $1,745 $10,871 $(971) $9,094 $372 $21,111
Comprehensive income:
Net income - - - 1,594 - 1,594
Change in net unrealized gain on
securities available for sale, net of
taxes of $411 - - - - 799 799
-------------
Comprehensive income 2,393
-------------
Dividends paid - - - (760) - (760)
---------- ------------- ---------- ---------- -------------- -------------
Balance at September 30, 2002 $1,745 $10,871 $(971) $9,928 $1,171 $22,744
========== ============= ========== ========== ============== =============
3
See accompanying notes to consolidated financial statements.
Emclaire Financial Corp. and Subsidiary
Consolidated Statements of Cash Flows
For the nine months ended September 30, 2002 and 2001 (Unaudited)
(Dollar amounts in thousands)
For the nine months ended
September 30,
2002 2001
Operating activities:
Net income $ 1,594 $ 1,303
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization for premises and equipment 355 452
Provision for loan losses 291 118
Amortization of premiums and accretion of discounts, net 173 7
Gain on sale of loans held for sale (39) -
Amortization of intangible assets 109 207
Decrease (increase) in accrued interest receivable (43) 20
Decrease (increase) in prepaid expenses and other assets (89) (34)
Increase (decrease) in accrued interest payable (20) 2
Increase (decrease) in accrued expenses and other liabilities 178 168
Originations of loans held for sale (1,259) -
Proceeds from sale of loans held for sale 1,298 -
Other (417) (400)
----------- -------------
Net cash provided by operating activities 2,131 1,843
----------- -------------
Lending and Investing Activities:
Loan originations, net of principal collections (7,367) (8,211)
Purchases of securities available for sale (28,960) (7,464)
Purchases of Federal bank stocks (77) (22)
Purchase of Bank-owned life insurance (4,000) -
Repayments, maturities and calls of securities available for sale 20,225 7,193
Principal repayments of securities held to maturity 30 146
Purchases of premises and equipment (443) (286)
----------- -------------
Net cash used in lending and investing activities (20,592) (8,644)
----------- -------------
Deposit and Financing Activities:
Net increase in deposits 14,241 12,997
Net increase (decrease) in borrowed funds 3,761 (2,000)
Dividends paid on common stock (760) (679)
----------- -------------
Net cash provided by deposit and financing activities 17,242 10,318
----------- -------------
Net increase in cash equivalents (1,219) 3,517
Cash equivalents at beginning of period 9,157 8,510
----------- -------------
Cash equivalents at end of period $ 7,938 $ 12,027
=========== =============
Supplemental information:
Interest paid $ 3,900 $ 4,656
Income taxes paid 545 699
See accompanying notes to consolidated financial statements.
4
Emclaire Financial Corp. and Subsidiary
Notes to Consolidated Financial Statements
1. Business and Basis of Presentation
Emclaire Financial Corp. (the Corporation) is a Pennsylvania
corporation and bank holding company that provides a full range of
retail and commercial financial products and services to customers in
western Pennsylvania through its wholly owned subsidiary bank, the
Farmers National Bank of Emlenton (the Bank), a national banking
association. The consolidated financial statements contained herein
include the accounts of the Corporation and the Bank, which operate as
one operating segment. All inter-company amounts have been eliminated.
The accompanying unaudited consolidated financial statements for the
interim periods include all adjustments, consisting of normal recurring
accruals, which are necessary, in the opinion of management, to fairly
reflect the Corporation's financial position and results of operations.
Additionally, these consolidated financial statements for the interim
periods have been prepared in accordance with instructions for the
Securities and Exchange Commission's Form 10-QSB and therefore do not
include all information or footnotes necessary for a complete
presentation of financial condition, results of operations and cash
flows in conformity with accounting principles generally accepted in
the United States of America. For further information, refer to the
audited consolidated financial statements and footnotes thereto for the
year ended December 31, 2001, as contained in the Corporation's 2001
Annual Report to Stockholders.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts in the consolidated financial statements and accompanying
notes. Actual results could differ from those estimates. Material
estimates that are particularly susceptible to significant change in
the near term relate to the determination of the allowance for loan
losses and deferred tax assets. The results of operations for interim
quarterly or year to date periods are not necessarily indicative of the
results that may be expected for the entire year or any other period.
Certain amounts previously reported may have been reclassified to
conform to the current year's financial statement presentation.
2. Net Income Per Share
The Corporation maintains a simple capital structure with no common
stock equivalents. Earnings per share computations are based on the
weighted average number of common shares outstanding for the respective
reporting periods.
3. Comprehensive Income
Total comprehensive income was comprised of the following for the three
and nine-month periods ended September 30:
Three Months Ended Nine months Ended
September 30, September 30,
In thousands 2002 2001 2002 2001
Net income $ 581 $ 491 $1,594 $ 1,303
Change in net unrealized gain on securities available
for sale, net of taxes 355 281 799 490
Comprehensive income $ 936 $ 772 $2,393 $ 1,793
5
4. Securities
The following table summarizes the Corporation's securities as of the
respective dates:
(In thousands) Amortized Unrealized Unrealized Fair
cost gains losses value
--------------------------------------------------------------------------------------------------
Available for sale:
------------------------------------------
September 30, 2002:
U.S. Government securities $17,485 $392 $(5) $17,872
Municipal securities 15,416 529 (23) 15,922
Corporate securities 12,927 392 (15) 13,304
Equity securities 971 503 - 1,474
--------------------------------------------------------
$46,799 $1,816 $(43) $48,572
========================================================
December 31, 2001:
U.S. Government securities $12,978 $441 $(14) $13,405
Municipal securities 11,919 24 (176) 11,767
Corporate securities 12,264 157 (115) 12,306
Equity securities 971 246 - 1,217
--------------------------------------------------------
$38,132 $868 $(305) $38,695
========================================================
Held to maturity:
------------------------------------------
September 30, 2002:
Mortgage-backed securities $30 $- $(1) $29
--------------------------------------------------------
$30 $- $(1) $29
========================================================
December 31, 2001:
Mortgage-backed securities $60 $1 $- $61
--------------------------------------------------------
$60 $1 $- $61
========================================================
5. Loans Receivable
The Corporation's loans receivable as of the respective dates are
summarized as follows:
---------------------------------------------------------------------------
September 30 December 31,
(In thousands) 2002 2001
---------------------------------------------------------------------------
Mortgage loans:
Residential first mortgage $84,707 $84,974
Home equity 18,978 15,445
Commercial real estate 31,112 26,470
--------------- ----------------
134,797 126,889
Other loans:
Consumer 13,222 16,141
Commercial business 20,991 18,974
--------------- ----------------
34,213 35,115
--------------- ----------------
Total gross loans 169,010 162,004
Less allowance for loan losses 1,493 1,464
--------------- ----------------
$167,517 $160,540
==================================
6
6. Deposits
The Corporation's deposits as of the respective dates are summarized as follows:
(Dollar amounts in thousands) September 30, 2002 December 31, 2001
-------------------------------------------------------------------
Weighted Weighted
average average
Type of accounts rate Amount % rate Amount %
----------------------------------------------------------------------------------------------------------
Noninterest-bearing deposits - $33,338 16.4% - $29,237 15.4%
Interest-bearing demand deposits 1.12% 70,888 34.8% 1.32% 69,665 36.8%
Time deposits 4.08% 99,485 48.8% 4.83% 90,568 47.8%
---------------------- ------------------
2.38% $203,711 100.0% 2.79% $189,470 100.0%
====================== ==================
7. Goodwill
On January 1, 2002, the Corporation adopted the Financial Accounting
Standards Board (FASB) Statement of Financial Accounting Standards
(SFAS) No. 142, "Goodwill and Other Intangible Assets." This statement
changed the accounting for goodwill from an amortization method to an
impairment-only approach. Thus amortization of goodwill, including
goodwill recorded in past business combinations, ceased upon adoption
of this statement. However, this statement did not amend SFAS No. 72,
"Accounting for Certain Acquisitions of Banking or Thrift
Institutions," which required recognition and amortization of
unidentified intangible assets relating to the acquisitions of certain
financial institutions or branches thereof.
In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
Financial Institutions," which amends and reconsiders certain
provisions of SFAS No. 72. This statement addresses the financial
accounting and reporting for the acquisition of all or part of a
financial institution. The statement provides that unidentified
intangible assets associated with branch acquisitions, considered a
business combination under the provisions of SFAS No. 141, "Business
Combinations," should be reclassified as goodwill and accounted for
under the provisions of SFAS No. 142. This statement is effective on
October 1, 2002, with earlier application permitted.
In September 2002, the Corporation adopted SFAS No. 147. At September
30, 2002, the Corporation had $484,000 in SFAS No. 72 unidentified
intangible assets that were reclassified to goodwill. In connection
with the adoption of SFAS No. 147, the Corporation reversed
amortization expense of $24,000 that was recognized during 2002. This
previously recognized amortization expense was reversed in the third
quarter of 2002.
7
Had SFAS No. 142 and SFAS No. 147 been in effect for all periods presented,
previously reported net income and net income per share would have been as
follows:
Three Months Ended Nine months Ended
September 30, September 30,
In thousands, except per share data 2002 2001 2002 2001
Net income:
Reported net income $ 581 $ 491 $ 1,594 $ 1,303
Add back goodwill amortization - 32 - 97
-------- -------- --------- --------
Adjusted net income $ 581 $ 523 $ 1,594 $ 1,400
======== ======== ========= ========
Net income per share:
Reported net income per share $ 0.44 $ 0.37 $ 1.20 $ 0.98
Add back goodwill amortization - 0.02 - 0.07
-------- -------- --------- --------
Adjusted net income per share $ 0.44 $ 0.39 $ 1.20 $ 1.05
======== ======== ========= ========
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This section discusses the consolidated financial condition and results of
operations of Emclaire Financial Corp. (the Corporation) and its wholly owned
subsidiary bank, the Farmers National Bank of Emlenton (the Bank), for the three
and nine-month periods ended September 30, 2002 and should be read in
conjunction with the accompanying consolidated financial statements and notes
presented on pages 1 through 8.
Discussions of certain matters in this Report on Form 10-QSB may constitute
forward-looking statements within the meaning of the Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), and as such, may involve
risks and uncertainties. Forward-looking statements, which are based on certain
assumptions and describe future plans, strategies, and expectations, are
generally identifiable by the use of words or phrases such as "believe", "plan",
"expect", "intend", "anticipate", "estimate", "project", "forecast", "may
increase", "may fluctuate", "may improve" and similar expressions of future or
conditional verbs such as "will", "should", "would", and "could". These
forward-looking statements relate to, among other things, expectations of the
business environment in which the Corporation operates, projections of future
performance, potential future credit experience, perceived opportunities in the
market, and statements regarding the Corporation's mission and vision. The
Corporation's actual results, performance, and achievements may differ
materially from the results, performance, and achievements expressed or implied
in such forward-looking statements due to a wide range of factors. These factors
include, but are not limited to, changes in interest rates, general economic
conditions, the demand for the Corporation's products and services, accounting
principles or guidelines, legislative and regulatory changes, monetary and
fiscal policies of the US Government, US Treasury, and Federal Reserve, real
estate markets, competition in the financial services industry, attracting and
retaining key personnel, performance of new employees, regulatory actions,
changes in and utilization of new technologies, and other risks detailed in the
Corporation's reports filed with the Securities and Exchange Commission (SEC)
from time to time, including the Annual Report on Form 10-KSB for the fiscal
year ended December 31, 2001. These factors should be considered in evaluating
the forward-looking statements, and undue reliance should not be placed on such
statements. The Corporation does not undertake, and specifically disclaims any
obligation, to update any forward-looking statements to reflect occurrences or
unanticipated events or circumstances after the date of such statements.
CHANGES IN FINANCIAL CONDITION
General. The Corporation's total assets increased $19.8 million or 9.1% to
$236.5 million at September 30, 2002 from $216.7 million at December 31, 2001.
This net increase was primarily the result of increases in securities and loans
receivable of $9.9 million and $7.0 million, respectively, as well as the
funding of Bank-owned life insurances premiums totaling $4.0 million, partially
offset by a decrease in cash and cash equivalents of $1.2 million. The increase
in total assets reflects a corresponding increase in total liabilities and total
stockholders' equity of $18.2 million or 9.3% and $1.6 million or 7.7%,
respectively. The increase in total liabilities was primarily the result of an
increase in deposits and borrowed funds of $14.2 million and $3.8million,
respectively. This increase in deposits and borrowings funded the Corporation's
asset growth for the period. The increase in stockholders' equity was primarily
the result of increases in retained earnings and accumulated other comprehensive
income of $834,000 and $799,000, respectively.
Cash and cash equivalents. Cash and cash equivalents decreased $1.2 million or
13.3% to $7.9 million at September 30, 2002 from $9.2 million at December 31,
2001. The net decrease between September 30, 2002 and December 31, 2001 can be
attributed primarily to the increase in the Corporation's securities and loan
portfolios during the period.
Securities. The Corporation's securities portfolio increased $9.9 million or
25.5% to $48.6 million at September 30, 2002 from $38.7 million at December 31,
2001. This net increase was primarily the result of security purchases of $29.0
million, during the nine months ended September 30, 2002. Partially offsetting
the increase in the portfolio resulting from purchases were security maturities
and calls of $20.2 million, during the period.
9
Security purchases were comprised of U.S. government agency, tax-free municipal
and corporate securities of $11.0 million, $4.2 million and $13.8 million,
respectively. Security maturities and calls were comprised of U.S. government
agency, tax-free municipal and corporate securities of $6.5 million, $700,000
and $13.3 million, respectively. Corporate securities that were purchased and
that matured during the period included primarily short-term commercial paper
utilized to manage interest-earned on funds maintained for liquidity purposes.
At September 30, 2002, the Corporation maintained $3.0 million in commercial
paper that is scheduled to mature within two months.
Loans receivable. Net loans receivable increased $7.0 million or 4.4% to $167.5
million at September 30, 2002 from $160.5 million at December 31, 2001. This
increase was comprised of an increase in mortgage loans of $7.9 million or 6.2%,
partially offset by a decrease in other loans of $902,000 or 2.6% during the
nine months ended September 30, 2002. This overall increase in loans receivable
can be attributed primarily to higher customer demand for loans in the current
lower interest rate environment as well as the introduction of new consumer
mortgage loan products.
During the second quarter of 2002, management identified and designated $1.3
million of residential mortgage loans for sale in the secondary market. These
loans were originated for sale and met certain interest rate and term parameters
established by management in connection with managing the Corporation's asset
and liability mix and interest rate risk. The loans were originated during the
first half of 2002 and the sale of these loans occurred in July 2002.
Non-performing assets. Non-performing assets include non-accrual loans and real
estate acquired through foreclosure. Non-performing assets amounted to $1.6
million or 0.66% and $1.3 million or 0.57% of total assets at September 30, 2002
and December 31, 2001, respectively.
Bank-owned life insurance (BOLI). On September 30, 2002, the Corporation
purchased $4.0 million in BOLI premiums to fund single premium life insurance
policies on twenty officers and employees of the Bank. In addition to providing
life insurance coverage whereby the Bank as well as the officers and employees
receive life insurance benefits, the appreciation of the cash surrender value of
the BOLI will serve to offset and finance existing and future employee benefit
costs. The BOLI premium paid will preliminarily yield approximately 5.40% in
tax-free non-cash appreciation on an annual basis.
Deposits. Total deposits increased $14.2 million or 7.5% to $203.7 million at
September 30, 2002 from $189.5 million at December 31, 2001. This increase was
comprised of increases in noninterest bearing, interest bearing and time
deposits of $4.1 million, $1.2 million, and $8.9 million, respectively. The
general increase in deposits during the period can be attributed primarily to:
(1) an overall movement of funds in the marketplace by customers from mutual
fund and stock investments into FDIC insured bank deposits as a result of recent
national economic instability, and (2) the Corporation's development and
promotion of new depository products including money market accounts and special
certificate of deposit programs, among other initiatives.
Borrowed funds. Borrowed funds increased $3.8 million to $8.8 million at
September 30, 2002 from $5.0 million at December 31, 2002. This increase in
borrowed funds is comprised of overnight advances from the Federal Home Loan
Bank of Pittsburgh (FHLB) used to fund municipal securities purchased during
late September 2002. These overnight advances will be replaced by a $5.0 million
FHLB term advance committed to be funded on October 31, 2002. The Corporation is
utilizing these funds to support $5.0 million in municipal securities purchased
during September and October 2002.
Stockholders' equity. Stockholders' equity increased $1.6 million or 7.7% to
$22.7 million at September 30, 2002 from $21.1 million at December 31, 2001.
This increase was principally the result of an increase in retained earnings of
$834,000, comprised of net income of $1.6 million offset by dividends paid of
$760,000, and an increase in accumulated other comprehensive income of $799,000.
10
RESULTS OF OPERATIONS
Comparison of Results for the Three-Month Periods Ended September 30, 2002
and 2001
General. The Corporation reported net income of $581,000 and $491,000 for the
three months ended September 30, 2002 and 2001, respectively. The $90,000 or
18.3% increase in net income for the three months ended September 30, 2002, as
compared to the three months ended September 30, 2001, was attributable to an
increase in net interest income and noninterest income of $184,000 and $14,000
respectively, partially offset by increases in the provision for loan losses,
noninterest expense and the provision for income taxes of $54,000, $6,000 and
$48,000, respectively.
Average Balance Sheet and Yield/Rate Analysis. The following table sets forth,
for periods indicated, information concerning the total dollar amounts of
interest income from interest-earning assets and the resultant average yields,
the total dollar amounts of interest expense on interest-bearing liabilities and
the resulting average costs, net interest income, interest rate spread and the
net interest margin earned on average interest-earning assets. For purposes of
this table, average loan balances include non-accrual loans and exclude the
allowance for loan losses, and interest income includes accretion of net
deferred loan fees. Interest and yields on tax-exempt loans and securities
(tax-exempt for federal income tax purposes) are shown on a fully tax equivalent
basis.
(Dollar amounts in thousands) Three months ended September 30,
2002 2001
------------------------------------------------------------------
Average Yield / Average Yield /
Balance Interest Rate Balance Interest Rate
------------------------------------------------------------------------------------------------------------
Interest-earning assets:
------------------------
Loans 168,163 $3,099 7.37% $156,767 $3,172 8.09%
Securities, taxable 31,179 371 4.76% 19,984 311 6.22%
Securities, tax exempt 12,396 207 6.68% 7,698 134 6.94%
------------------------------------------------------------------
43,575 578 5.31% 27,682 445 6.42%
------------------------------------------------------------------
Interest-earning cash equivalents 4,765 24 2.01% 7,547 65 3.45%
Federal bank stocks 1,338 13 3.89% 1,261 21 6.66%
------------------------------------------------------------------
6,103 37 2.43% 8,808 86 3.91%
------------------------------------------------------------------
Total interest-earning assets 217,841 3,714 6.82% 193,257 3,703 7.66%
Cash and due from banks 6,660 6,437
Other noninterest-earning assets 6,076 5,395
------------------------------------------------------------------
Total assets $230,577 $3,714 6.44% $205,089 $3,703 7.22%
==================================================================
Interest-bearing liabilities:
-----------------------------
Interest-bearing demand deposits $72,545 $209 1.15% $66,623 $225 1.35%
Time deposits 95,806 1,034 4.32% 85,949 1,269 5.91%
------------------------------------------------------------------
168,351 1,243 2.95% 152,572 1,494 3.92%
------------------------------------------------------------------
Borrowed funds, term 5,000 57 4.56% - - 0.00%
Borrowed funds, overnight 427 2 1.87% - - 0.00%
------------------------------------------------------------------
5,427 59 4.35% - - 0.00%
------------------------------------------------------------------
Total interest-bearing liabilities 173,778 1,302 3.00% 152,572 1,494 3.92%
Noninterest-bearing demand deposits 32,884 - - 30,449 -
------------------------------------------------------------------
Funding and cost of funds 206,662 1,302 2.52% 183,021 1,494 3.27%
Other noninterest-bearing liabilities 1,439 1,171
----------- -----------
Total liabilities 208,101 184,192
Stockholders' equity 22,476 20,897
------------------------------------------------------------------
Total liabilities and stockholders' equity $230,577 $1,302 2.52% $205,089 $1,494 3.27%
==================================================================
Net interest income $2,412 $2,209
=========== ===========
Interest rate spread (difference between 3.82% 3.74%
=========== ===========
weighted average rate on interest-earning
assets and interest-bearing liabilities)
Net interest margin (net interest 4.43% 4.57%
=========== ===========
income as a percentage of average
interest-earning assets)
11
Analysis of Changes in Net Interest Income. The following table analyzes the
changes in interest income and interest expense in terms of: (1) changes in
volume of interest-earning assets and interest-bearing liabilities and (2)
changes in yields and rates. The table reflects the extent to which changes in
the Corporation's interest income and interest expense are attributable to
changes in rate (change in rate multiplied by prior year volume), changes in
volume (changes in volume multiplied by prior year rate) and changes
attributable to the combined impact of volume/rate (change in rate multiplied by
change in volume). The changes attributable to the combined impact of
volume/rate are allocated on a consistent basis between the volume and rate
variances. Changes in interest income on loans and securities reflect the
changes in interest income on a fully tax equivalent basis.
(In thousands) Three months ended September 30,
2002 versus 2001
Increase (decrease) due to
---------------------------------
Volume Rate Total
-----------------------------------------------------------------------------------------
Interest income:
Loans $221 $(294) $(73)
Securities 221 (88) 133
Interest-earning cash equivalents (19) (22) (41)
Federal bank stocks 1 (9) (8)
---------------------------------
Total interest-earning assets 424 (413) 11
---------------------------------
Interest expense:
Deposits 143 (394) (251)
Borrowed funds 59 - 59
---------------------------------
Total interest-bearing liabilities 202 (394) (192)
---------------------------------
Net interest income $222 $(19) $203
=================================
Net interest income. Net interest income on a tax equivalent basis increased
$203,000 or 9.2% to $2.4 million for the three months ended September 30, 2002,
compared to $2.2 million for the same period in the prior year. This increase
can be attributed to an increase in interest income of $11,000 and a decrease in
interest expense of $192,000.
Interest income. Interest income on a tax equivalent basis increased $11,000 to
$3.71 million for the three months ended September 30, 2002, compared to $3.70
million for the same period in the prior year. This net increase in interest
income can be attributed to an increase in interest earned on securities of
$133,000, partially offset by a decrease in interest earned on loans, cash
equivalents and federal bank stocks of $73,000, $41,000 and $8,000,
respectively.
Contributing to the increase in net interest income was an increase in average
interest-earning assets of $24.5 million or 12.7% to $217.8 million for the
three months ended September 30, 2002, compared to $193.3 million for the same
period in the prior year. The increase in average interest-earning assets can be
attributed to increases in average loans receivable and average securities of
$11.4 million and $15.9 million, respectively, partially offset by a decrease in
interest-earning cash equivalents of $2.8 million. Average loans receivable
increased to $168.2 million and average securities increased to $43.6 million
during the three months ended September 30, 2002, compared to $156.7 million and
$27.7 million, respectively, during the same period in the prior year. Partially
offsetting the increase in interest income due to the increase in volume of
interest-earning assets was a decrease in the yield on interest earning assets
of 84 basis points to 6.82% for the three months ended September 30, 2002,
compared to 7.66% for the same period in the prior year. The yield on average
loans, securities and interest-earning deposits decreased to 7.37%, 5.31% and
2.01%, respectively, during the three months ended September 30, 2002, compared
to 8.09%, 6.42%, and 3.45%, respectively, for the same period in the prior year.
Interest expense. Interest expense decreased $192,000 or 12.9% to $1.3 million
for the three months ended September 30, 2002, compared to $1.5 million for the
same period in the prior year. This decrease in interest expense can be
attributed to a 92 basis point decline in the interest rate on average
interest-bearing liabilities to 3.00% during the three months ended September
30, 2002, compared to 3.92% for the same period in the prior year. The average
cost of deposits decreased to 2.95% during the three months ended September 30,
2002, compared to 3.92% for the same period in the prior year.
12
The decrease in interest expense due to rate was partially offset by an increase
in the average balance of interest-bearing liabilities, as average
interest-bearing deposits and borrowed funds increased to $168.3 million and
$5.4 million, respectively, during the three months ended September 30, 2002,
compared to $152.6 million and $-0-, respectively, during the same period in the
prior year.
Provision for loan losses. The Corporation records provisions for loan losses to
bring the total allowance for loan losses to a level deemed adequate to cover
probable losses inherent in the loan portfolio. In determining the appropriate
level of allowance for loan losses, management considers historical loss
experience, the present and prospective financial condition of borrowers,
current and prospective economic conditions (particularly as they relate to
markets where the Corporation originates loans), the status of non-performing
assets, the estimated underlying value of the collateral and other factors
related to the collectibility of the loan portfolio. The $54,000 increase in the
Corporation's provision for loans losses between the three-month periods ended
September 30, 2002 and 2001 was the result of adjusting the allowance for loans
losses to levels adequate to cover probable losses at September 30, 2002 based
on management's periodic review of the collectibility of loans in light of the
factors noted above.
Noninterest income. Noninterest income increased $14,000 or 4.1% to $357,000
during the three months ended September 30, 2002, compared to $343,000 during
the same period in the prior year. This increase can principally be attributed
the $39,000 gain on the sale of loans held for sale during the quarter ended
September 30, 2002, partially offset by a slight decrease in other noninterest
income. Service fees and other noninterest income, comprised primarily of fees
on depository accounts, general transactional income, certain loan transaction
costs and other miscellaneous income, remained relatively stable between the
three months ended September 30, 2002 and the same period in the prior year.
Noninterest expense. Noninterest expense increased $6,000 to $1.773 million
during the three months ended September 30, 2002, compared to $1.767 million
during the same period in the prior year. This increase in noninterest expense
can be attributed to increases in compensation and employee benefits, premises
and equipment and other expenses of $40,000, $13,000 and $10,000, respectively,
partially offset by a decrease in intangible amortization expense of $57,000.
See "Note 7 - Goodwill" on page 7.
Compensation and employee benefits expense increased $40,000 or 4.2% to $986,000
during the three months ended September 30, 2002, compared to $946,000 for the
same period in the prior year. This increase can be attributed primarily to
normal and expected salary and benefit cost increases and increased management
and employee incentive costs between the two periods, partially offset by lower
levels of full-time equivalent employees.
Premises and equipment costs increased $13,000 or 5.0% to $274,000 during the
three months ended September 30, 2002, compared to $261,000 for the same period
in the prior year. This increase can be attributed to the realization of certain
bank equipment repairs and branch office improvement expenditures during the
past year.
Other noninterest expense increased $10,000 or 2.0% to $501,000 during the three
months ended September 30, 2002, compared to $491,000 for the same period in the
prior year. This increase can primarily be attributed to increased professional
fee and telephone cost expenses between the two periods. Professional fees
increased as a result of the Corporation retaining a transfer agent during late
2001, costs associated with the recently announced dividend reinvestment plan
and expanded regulatory financial reporting requirements.
Provision for income taxes. The provision for income taxes increased $48,000 or
22.2% to $264,000 for the three months ended September 30, 2002, compared to
$216,000 for the same period in the prior year. This increase is a direct result
of the increase in net income before taxes between the two periods, partially
offset by a decrease in the Corporation's effective tax rate as a result of
increased investment in tax-free municipal securities.
13
Comparison of Results for the Nine-month Periods Ended September 30, 2002
and 2001
General. The Corporation reported net income of $1.6 million and $1.3 million
for the nine months ended September 30, 2002 and 2001, respectively. The
$291,000 or 22.3% increase in net income for the nine months ended September 30,
2002, as compared to the nine months ended September 30, 2001, was attributable
to increases in net interest income and noninterest income of $802,000 and
$2,000, respectively, partially offset by increases in the provision for loan
losses, noninterest expense and the provision for income taxes of $173,000,
$237,000 and $103,000, respectively.
Average Balance Sheet and Yield/Rate Analysis.
(Dollar amounts in thousands) Nine months ended September 30,
2002 2001
------------------------------------------------------------------
Average Yield / Average Yield /
Balance Interest Rate Balance Interest Rate
-------------------------------------------------------------------------------------------------------
Interest-earning assets:
-------------------------------------
Loans $166,413 $9,346 7.49% $153,818 $9,496 8.23%
Securities, taxable 29,160 1,122 5.13% 19,431 904 6.20%
Securities, exempt from Federal tax 11,789 602 6.81% 7,513 387 6.88%
------------------------------------------------------------------
40,949 1,724 5.61% 26,944 1,291 6.39%
------------------------------------------------------------------
Interest-earning cash equivalents 4,390 55 1.67% 7,281 236 4.32%
Federal bank stocks 1,308 41 4.18% 1,250 61 6.51%
------------------------------------------------------------------
5,698 96 2.25% 8,531 297 4.64%
------------------------------------------------------------------
Total interest-earning assets 213,060 11,166 6.99% 189,293 11,084 7.81%
Cash and due from banks 5,554 6,225
Other noninterest-earning assets 5,493 5,481
------------------------------------------------------------------
Total assets $224,107 $11,166 6.64% $200,999 $11,084 7.35%
==================================================================
Interest-bearing liabilities:
-------------------------------------
Interest-bearing demand deposits $71,636 $613 1.14% $64,806 $776 1.60%
Time deposits 92,628 3,091 4.45% 84,730 3,850 6.06%
------------------------------------------------------------------
164,264 3,704 3.01% 149,536 4,626 4.12%
------------------------------------------------------------------
Borrowed funds, term 5,000 175 4.67% 733 32 5.82%
Borrowed funds, overnight 115 1 1.16% - - 0.00%
------------------------------------------------------------------
5,115 176 4.59% 733 32 5.82%
------------------------------------------------------------------
Total interest-bearing liabilities 169,379 3,880 3.05% 150,269 4,658 4.13%
Noninterest-bearing demand deposits 31,390 - - 29,073 - -
------------------------------------------------------------------
Total financial liabilities/cost of
funds 200,769 3,880 2.58% 179,342 4,658 3.46%
Other noninterest-bearing liabilities 1,442 1,240
----------- -----------
Total liabilities 202,211 180,582
Stockholders' equity 21,896 20,417
------------------------------------------------------------------
Total liabilities and stockholders'
equity $224,107 $3,880 2.58% $200,999 $4,658 3.46%
==================================================================
Net interest income $7,286 $6,426
=========== ===========
Interest rate spread (difference between 3.94% 3.68%
=========== ===========
weighted average rate on interest-earning
assets and interest-bearing liabilities)
Net interest margin (net interest 4.56% 4.53%
=========== ===========
income as a percentage of average
interest-earning assets)
14
Analysis of Changes in Net Interest Income.
(In thousands) Nine months ended September 30,
2002 versus 2001
Increase (decrease) due to
---------------------------------------------------
Volume Rate Total
----------------------------------------------------------------------------------------------------
Interest income:
Loans $744 $(894) $(150)
Securities 605 (172) 433
Interest-earning cash equivalents (71) (110) (181)
Federal bank stocks 3 (23) (20)
---------------------------------------------------
Total interest-earning assets 1,281 (1,199) 82
---------------------------------------------------
Interest expense:
Deposits 423 (1,345) (922)
Borrowed funds 152 (8) 144
---------------------------------------------------
Total interest-bearing liabilities 575 (1,353) (778)
---------------------------------------------------
Net interest income $706 $154 $860
===================================================
Net interest income. Net interest income on a tax equivalent basis increased
$860,000 or 13.4% to $7.3 million for the nine months ended September 30, 2002,
compared to $6.4 million for the same period in the prior year. This increase
can be attributed to an increase in interest income of $82,000 and a decrease in
interest expense of $778,000.
Aside from changes in the volume and rates of interest-earning assets and
interest-bearing liabilities discussed herein, $93,000 of the increase in net
interest income between the periods can be attributed to the payoff of a
previously non-performing commercial real estate loan in March 2002 that had
been on non-accrual status. In connection with the loan payoff, the Corporation
received all principal and interest due under the contractual terms of the loan
agreement and therefore interest collected was recorded as loan interest income
during the current period.
Interest income. Interest income on a tax equivalent basis increased $82,000 to
$11.2 million for the nine months ended September 30, 2002, compared to $11.1
million for the same period in the prior year. This net increase in interest
income can be attributed to the aforementioned $93,000 collection and
recognition of interest on a non-performing commercial real estate loan and an
increase in interest earned on securities of $433,000; partially offset by
decreases in interest earned on loans, cash equivalents and federal bank stocks
of $150,000, $181,000 and $20,000, respectively.
Contributing to the increase in net interest income was an increase in average
interest-earning assets of $23.8 million or 12.6% to $213.1 million for the nine
months ended September 30, 2002, compared to $189.3 million for the same period
in the prior year. The increase in average interest-earning assets can be
attributed to increases in average loans receivable and average securities of
$12.6 million and $14.0 million, respectively, partially offset by a decrease in
interest-earning cash equivalents of $2.9 million. Average loans receivable
increased to $166.4 million and average securities increased to $40.9 million
during the nine months ended September 30, 2002, compared to $153.8 million and
$26.9 million, respectively, during the same period in the prior year. Partially
offsetting the increase in interest income due to the increase in volume of
interest-earning assets was a decrease in the yield on interest earning assets
of 82 basis points to 6.99% for the nine months ended September 30, 2002,
compared to 7.81% for the same period in the prior year. The yield on average
loans, securities and interest-earning cash equivalents decreased to 7.49%,
5.61% and 1.67%, respectively, during the nine months ended September 30, 2002,
compared to 8.23%, 6.39%, and 4.32%, respectively, for the same period in the
prior year.
15
Interest expense. Interest expense decreased $778,000 or 16.7% to $3.9 million
for the nine months ended September 30, 2002, compared to $4.7 million for the
same period in the prior year. This decrease in interest expense can be
attributed to a 108 basis point decline in the interest rate on average
interest-bearing liabilities to 3.05% during the nine months ended September 30,
2002, compared to 4.13% for the same period in the prior year. The average cost
of deposits and borrowed funds decreased to 3.01% and 4.59%, respectively,
during the nine months ended September 30, 2002, compared to 4.12% and 5.82%,
respectively, for the same period in the prior year.
The decrease in interest expense due to rate was partially offset by an increase
in the average balance of interest-bearing liabilities as average
interest-bearing deposits and borrowed funds increased to $164.3 million and
$5.1 million, respectively, during the nine months ended September 30, 2002,
compared to $149.5 million and $733,000, respectively, during the same period in
the prior year.
Provision for loan losses. The $173,000 increase in the Corporation's provision
for loans losses between the nine-month periods ended September 30, 2002 and
2001 was the result of adjusting the allowance for loans losses to levels
adequate to cover probable losses at September 30, 2002 based on management's
periodic review of the collectibility of loans.
Noninterest income. Noninterest income increased $2,000 to $995,000 for the nine
months ended September 30, 2002 compared to $993,000 for the same period in the
prior year. This increase can be attributed to the aforementioned gain on the
sale of loans held for sale partially offset by a lower volume of customer
service fees between the two periods.
Noninterest expense. Noninterest expense increased $237,000 or 4.5% to $5.6
million during the nine months ended September 30, 2002, compared to $5.3
million during the same period in the prior year. This increase in noninterest
expense can be attributed to increases in compensation and employee benefits,
premises and equipment and other expenses of $176,000, $51,000 and $108,000,
respectively, partially offset by a decrease in intangible amortization expense
of $98,000.
Compensation and employee benefits expense increased $176,000 or 6.3% to $3.0
million during the nine months ended September 30, 2002, compared to $2.8
million for the same period in the prior year. This increase can be attributed
primarily to normal and expected salary and benefit cost increases and increased
management and employee incentive costs between the two periods, partially
offset by lower levels of full-time equivalent employees.
Other noninterest expense increased $108,000 or 7.24% to $1.6 million during the
nine months ended September 30, 2002, compared to $1.5 million for the same
period in the prior year. This increase can primarily be attributed to increased
professional fee and telephone cost expenses between the two periods.
Professional fees increased as a result of the Corporation retaining a transfer
agent during late 2001, costs associated with the recently announced dividend
reinvestment plan and expanded regulatory financial reporting requirements.
Provision for income taxes. The provision for income taxes increased $103,000 or
18.4% to $663,000 for the nine months ended September 30, 2002, compared to
$560,000 for the same period in the prior year. This increase is a direct result
of the increase in net income before taxes between the two periods, partially
offset by a decrease in the Corporation's effective tax rate as a result of
increased investment in tax-free municipal securities during the latter half of
2001.
LIQUIDITY
The Corporation's primary sources of funds generally have been deposits obtained
through the offices of the Bank, borrowings from the FHLB, and amortization and
prepayments of outstanding loans and maturing securities. During the nine months
ended September 30, 2002, the Corporation used its sources of funds primarily to
fund loan commitments and, to a lesser extent, purchase securities. As of such
date, the Corporation had outstanding loan commitments, including undisbursed
loans and amounts available under credit lines, totaling $16.2 million, and
standby letters of credit totaling $636,000.
16
At September 30, 2002, time deposits amounted to $99.5 million or 48.8% of the
Corporation's total consolidated deposits, including approximately $33.2
million, which were scheduled to mature within the next year. Management of the
Corporation believes that it has adequate resources to fund all of its
commitments, that all of its commitments will be funded as required by related
maturity dates and that, based upon past experience and current pricing
policies, it can adjust the rates of time deposits to retain a substantial
portion of maturing liabilities.
Aside from liquidity available from customer deposits or through sales and
maturities of securities, the Corporation has alternative sources of funds such
as a line of credit and term borrowing capacity from the FHLB and, to a limited
and rare extent, the sale of loans. At September 30, 2002, the Corporation's
borrowing capacity with the FHLB, net of funds borrowed, was $96.4 million.
Management is not aware of any conditions, including any regulatory
recommendations or requirements, which would adversely impact its liquidity or
its ability to meet funding needs in the ordinary course of business.
RECENT REGULATORY DEVELOPMENTS
On July 30, 2002, President Bush signed into law new legislation that addresses
accounting oversight and corporate governance. The new law creates a five-member
oversight board appointed by the Securities and Exchange Commission (SEC) that
will set standards for accountants and have investigative and disciplinary
powers. The new legislation bars accounting firms from providing a number of
consulting services to audit clients and requires accounting firms to rotate
partners among client assignments every five years. The new legislation also
increases penalties for financial crimes, requires expanded disclosure of
corporate operations and internal controls, enhances controls on and reporting
of insider trading, expands the SEC's budget, and places statutory separations
between investment bankers and analysts. Various aspects of the new legislation
are dependent upon subsequent rulemaking by the SEC. Management is currently
evaluating what impacts the new legislation will have upon the Corporation. The
Corporation utilizes its external attestation auditor only for audit services
and assistance with the preparation of tax returns.
Item 3. Controls and Procedures
(a) The Corporation maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the
Corporation's Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms,
and that such information is accumulated and communicated to the
Corporation's management, including its Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure based closely on the definition of "disclosure
controls and procedures" in Rule 13a-14(c).
Within 90 days prior to the date of this report, the Corporation carried
out an evaluation, under the supervision and with the participation of the
Corporation's management, including the Corporation's Chief Executive
Officer and the Corporation's Chief Financial Officer, of the
effectiveness of the design and operation of the Corporation's disclosure
controls and procedures. Based on the foregoing, the Corporation's Chief
Executive Officer and Chief Financial Officer concluded that the
Corporation's disclosure controls and procedures were effective.
(b) There have been no significant changes in the Corporation's internal
controls or in other factors that could significantly affect the internal
controls subsequent to the date the Corporation completed its evaluation
17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Corporation is involved in various legal proceedings occurring in the
ordinary course of business. It is the opinion of management, after consultation
with legal counsel, that these matters will not materially effect the
Corporation's consolidated financial position or results of operations.
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
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 99.1 CEO Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Exhibit 99.2 CFO Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
None.
18
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.
EMCLAIRE FINANCIAL CORP.
Date: November 8, 2002 By: /s/ David L. Cox
--------------------------------------------
David L. Cox
Chairman of the Board,
President and Chief Executive Officer
Date: November 8, 2002 By: /s/ William C. Marsh
--------------------------------------------
William C. Marsh
Treasurer/Secretary
(Principal Financial and Accounting Officer)
19
Certification of the Principal Executive Officer
(Section 302 of the Sarbanes-Oxley Act of 2002)
I, David L. Cox, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Emclaire
Financial Corp. (the Corporation);
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Corporation as of, and for, the periods presented in
this quarterly report;
4. The Corporation's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Corporation
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Corporation, including its
consolidated subsidiary, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the Corporation's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Corporation's other certifying officer and I have disclosed, based
on our most recent evaluation, to the Corporation's auditors and the
audit committee of Corporation's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Corporation's ability to
record, process, summarize and report financial data and have
identified for the Corporation's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Corporation's internal
controls; and
6. The Corporation's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 8, 2002 By: /s/ David L. Cox
--------------------------------------
David L. Cox
Chairman of the Board,
President and Chief Executive Officer
20
Certification of the Principal Financial Officer
(Section 302 of the Sarbanes-Oxley Act of 2002)
I, William C. Marsh, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Emclaire
Financial Corp. (the Corporation);
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Corporation as of, and for, the periods presented in
this quarterly report;
4. The Corporation's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Corporation
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Corporation, including its
consolidated subsidiary, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the Corporation's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Corporation's other certifying officer and I have disclosed, based
on our most recent evaluation, to the Corporation's auditors and the
audit committee of Corporation's board of directors (or persons
performing the equivalent function):
d) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Corporation's ability to
record, process, summarize and report financial data and have
identified for the Corporation's auditors any material weaknesses in
internal controls; and
e) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Corporation's internal
controls; and
6. The Corporation's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 8, 2002 By: /s/ William C. Marsh
-----------------------------------------------
William C. Marsh
Treasurer/Secretary
(Principal Financial and Accounting Officer)
21