<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number : 33 - 302132
TRI-STATE, 1ST BANK, INC.
-------------------------
(Exact Name of small business issuer as specified in its charter)
OHIO 34-1824708
- ----- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification
Number)
16924 St. Clair Avenue
P.O. Box 796
East Liverpool, Ohio 43920
(330) 385 - 9200
--------------------------
(Address, including zip code, and
telephone number, including area
code of Principal Executive Officers)
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 requirement for the past 90 days.
Yes X No
----- -----
As of May 14, 1997 there were 205,400 shares outstanding of the issuer's
class of common stock.
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TRI-STATE, 1ST BANK, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-QSB
Page
Number
------
Part I Financial Information
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheet as of March 31, 1997
and December 31, 1996 3
Consolidated Statement of Income for the Three
Months ended March 31, 1997 and 1996 4
Consolidated Statement of Changes in Stockholders'
Equity for the Three Months ended March 31, 1997 5
Consolidated Statement of Cash Flows for the
Three Months ended March 31, 1997 and 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 10
Part II Other Information 11
Signatures 12
2
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Tri-State 1st Bank, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31, December 31,
1997 1996
--------- ---------
(In Thousands)
ASSETS
Cash and due from banks $ 3,042 $ 3,778
Interest-bearing deposits with other banks 71 99
Federal funds sold 650 1,700
Securities available for sale 10,431 9,982
Investment securities (estimated market value of
$2,183 and $2,220) 2,189 2,205
Loans 24,673 24,051
Less allowance for loan losses 288 290
--------- ---------
Net loans 24,385 23,761
Premises and equipment 1,198 1,216
Accrued interest and other assets 509 434
--------- ---------
TOTAL ASSETS $ 42,475 $ 43,175
========= =========
LIABILITIES
Deposits:
Noninterest-bearing demand $ 5,659 $ 5,991
Interest-bearing demand 7,622 8,028
Money market 4,575 4,789
Savings 8,188 7,877
Time 11,791 12,005
--------- ---------
Total deposits 37,835 38,690
Other borrowings 254 279
Accrued interest and other liabilities 250 170
--------- ---------
TOTAL LIABILITIES 38,339 39,139
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, par value $6.25; 1,000,000 shares
authorized, 205,400 issued and outstanding 1,284 1,284
Surplus 1,611 1,611
Retained earnings 1,296 1,159
Net unrealized loss on securities (55) (18)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 4,136 4,036
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 42,475 $ 43,175
========= =========
See accompanying notes to the consolidated financial statements.
3
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Tri-State 1st Bank, Inc. and Subsidiary
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Months Ended
March 31,
1997 1996
--------- ---------
(In Thousands, Except
Per Share Amounts)
INTEREST INCOME
Loans, including fees $ 589 $ 557
Interest-bearing deposits with other banks 1 1
Federal funds sold 22 21
Investment securities:
Taxable 123 105
Exempt from federal income tax 54 37
--------- ---------
Total interest income 789 721
--------- ---------
INTEREST EXPENSE
Deposits 299 283
Other borrowings 4 6
--------- ---------
Total interest expense 303 289
--------- ---------
NET INTEREST INCOME 486 432
Provision for loan losses 8 9
--------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 478 423
OTHER OPERATING INCOME
Service fees on deposit accounts 82 70
Investment security losses - -
Other 10 9
--------- ---------
Total other operating income 92 79
--------- ---------
OTHER OPERATING EXPENSE
Salaries and employee benefits 176 154
Occupancy 44 43
Furniture and equipment 28 32
Federal deposit insurance premiums - -
Other 141 116
--------- ---------
Total other operating expense 389 345
--------- ---------
Income before income taxes 181 157
Income taxes 44 42
--------- ---------
NET INCOME $ 137 $ 115
========= =========
EARNINGS PER SHARE $ 0.59 $ 0.56
AVERAGE SHARES OUTSTANDING 205,400 205,400
See the accompanying notes to the consolidated financial statements.
4
<PAGE>
Tri-State 1st Bank, Inc. and Subsidiary
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
Net
Unrealized
Common Retained Loss on
Stock Surplus Earnings Securities Total
------- ------- ------- -------- -------
(In Thousands Except Per Share Amount)
Balance, December 31, 1996 $ 1,284 $ 1,611 $ 1,159 $ (18) $ 4,036
Net income 137 137
Net unrealized loss on
securities (37) (37)
------- ------- ------- -------- -------
Balance, March 31, 1997 $ 1,284 $ 1,611 $ 1,296 $ (55) $ 4,136
======= ======= ======= ======== =======
See accompanying notes to the consolidated financial statements.
5
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Tri-State 1st Bank, Inc. and Subsidiary
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1997 1996
--------- ---------
(In Thousands)
OPERATING ACTIVITIES
Net income $ 137 $ 115
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 8 9
Depreciation and amortization , net 48 40
Increase in accrued interest receivable (58) (62)
Increase in accrued interest payable 51 51
Other (29) 338
--------- ---------
Net cash provided by operating activities 157 491
--------- ---------
INVESTING ACTIVITIES
Securities available for sale:
Proceeds from sales 1,300 284
Proceeds from principal repayments and maturities 5 69
Purchases of securities (1,812) (303)
Investment securities:
Proceeds from principal repayments and maturities 11 57
Purchases of securities - (132)
Net loan originations (642) (427)
Acquisition of premises and equipment (10) (11)
Proceeds from sale of real estate owned 54 -
--------- ---------
Net cash used for investing activities (1,094) (463)
FINANCING ACTIVITIES
Net increase (decrease) in deposits (852) 475
Principal payments on other borrowings (25) (23)
--------- ---------
Net cash provided by (used for)
financing activities (877) 452
--------- ---------
Increase (decrease) in cash and
cash equivalents (1,814) 480
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,577 4,107
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,763 $ 4,587
========= =========
See accompanying notes to the consolidated financial statements.
6
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Tri-State 1st Bank, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The consolidated financial statements of Tri-State 1st Bank, Inc., (the
"Company"), includes its wholly-owned subsidiary, 1st National Community Bank
(the "Bank"). All significant intercompany balances and transactions have
been eliminated.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with instructions to Form 10-QSB and, therefore, do not
necessarily include all information which would be included in audited
financial statements. The information furnished reflects all normal recurring
adjustments which are, in the opinion of management, necessary for the fair
statement of the results of the period. The results of operations for the
interim periods are not necessarily indicative of the results to be expected
for the full year.
NOTE 2 - PENDING ACCOUNTING STANDARD
- ------------------------------------
On March 3, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128, "Earnings Per Share." This statement
re-defines the standards for computing earnings per share (EPS) previously
found in Accounting Principles Board Opinion No. 15, Earnings Per Share.
Statement No. 128 establishes new standards for computing and presenting EPS
and requires dual presentation of "basic" and "diluted" EPS on the face of the
income statement for all entities with complex capital structures. Under
Statement No. 128, basic EPS is to be computed based upon income available to
common shareholders and weighted average number of common shares outstanding
for the period. Diluted EPS is to reflect the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the Company. Statement No. 128 also requires
the restatement of all prior-period EPS data presented. The Company will
adopt Statement No. 128 on December 31, 1997 and based on current estimates,
does not believe the effect on adoption will have a significant impact on the
Company's financial position or results of operations.
7
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Tri-State 1st Bank, Inc. and Subsidiary
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
- -------------------
Total assets at March 31, 1997 of $42,475,000 represented a decrease of
$700,000 or 1.62% from December 31, 1996. This decrease was primarily the
result of a decrease in cash of $736,000 or 19.48% and a decrease in Federal
Funds Sold of $1,050,000 or 61.76%. There was an increase in the total
Investment Securities Portfolio of $433,000 or 3.55%. This growth in the
Investment Securities Portfolio when coupled with a $622,000 increase in Loans
resulted in the decrease in the liquid assets as described above.
The increase in Investment Securities at March 31, 1997, as compared with
year-end 1996, is part of an overall management strategy to invest in funds in
the securities portfolio methodically in order to employ funds not required
for loan demand in a manner which will provide safety, liquidity and improved
earnings potential. Investing in securities on a regular basis, rather than
investing based upon when interest rates are perceived to peak and trough,
helps hedge against the risk of market value fluctuations which could
adversely impact the value of the Bank's assets. There was a $449,000 or
4.50% increase in Securities Available for Sale which was partially offset by
a $16,000 or .73% decrease in the Investment Securities Held to Maturity
portion of the portfolio. After allowing for the replacement of matured and
called securities during the three month period, the net increase in the
securities can be attributed primarily to $401,000 or 7.29% increase in
federal government sponsored agency obligations.
Loans receivable at March 31, 1997, of $24,673,000 represented an increase of
2.59% from $24,051,000 on December 31, 1996. The growth in the loan portfolio
was primarily attributable to a $396,000 increase in real estate mortgages and
a $278,000 increase in commercial loans. Because there was a decrease of
$81,000 in state and local government loan obligations, the increase in loans
can be entirely attributable to these two loan classifications. Management
has continued to focus its loan origination efforts in 1997 on obtaining a
more balanced mix of loans.
The allowance for loan losses decreased a net of $2,000 for the three month
period ended March 31, 1997. The overall ratio of the allowance to loans
receivable remained essentially unchanged at 1.2% on March 31, 1997, as
compared with December 31, 1996. the relationship between the allowance and
loans receivable is a function of credit quality and known risk factors of the
loan portfolio.
Other assets increased $57,000 or 3.45% to $1,707,000 on March 31, 1997.
There was a $75,000 increase in accrued interest over the three month period.
Total deposits on March 31, 1997, were $37,835,000 for a decrease of $855,000
or 2.21% from $38,690,000 on December 31, 1996. This decrease in deposits is
a prime cause for the underfunding of the increase of security purchases and
loan originations which resulted in the $700,000 reduction in assets as
previously discussed. A decline in deposits during the first three months of a
year follows a seasonal pattern established over the years. A savings deposit
increase of $311,000 was the only type deposit which increased while non-
interest bearing demand, interest bearing demand, money market deposits and
time deposits declined in approximately the same dollar amount for a combined
total of $1,166,000 or 3.78%.
The increase in accrued interest and other liabilities of $80,000 or 47.06% on
March 31, 1997, is attributable to increases in accrued interest payable on
deposits and accrued payroll taxes.
Stockholders' Equity increased $100,000 or 2.48% for the three month period
ended March 31, 1997, due to an increase in net retained earnings from
operations of $137,000 or 11.82%, which was offset by a decrease of $37,000 in
net unrealized losses on securities. The increase in net unrealized loss on
securities is considered temporary in nature and is attributable to a marginal
increase in the market interest rate environment at March 31, 1997 as compared
to December 31, 1996.
RESULTS OF OPERATIONS
- ---------------------
Comparison of the Three Months Ended March 31, 1997 and 1996
- ------------------------------------------------------------
General.
- --------
Net income for the three month period ended March 31, 1997 totaled $137,000 or
$.59 per share compared to $115,000 or $.56 per share on March 31, 1996. This
increase of 19.13% in net income is attributable to increases of $68,000 in
interest income while interest expense increased only $14,000, and other
operating expenses increased $44,000 while other operating income was growing
$13,000 for the like period.
8
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Net Interest Income.
- -------------------
Net interest income on a tax equivalent basis increased $54,000 or 12.50% for
the three months of 1997 compared with the same three months of 1996. This
increase was the result of a $68,000 or 9.43% increase in interest income,
which was partially offset by a $14,000 or 4.84% increase in interest expense.
The increase in interest income was derived primarily from increased earnings
on loans of $32,000 or 5.75% and a $35,000 or 24.65% increase from earnings on
investment securities. The increase in earnings on loans can be attributed
entirely to an increase in loans outstanding, as there has been relatively
insignificant change in the overall average yields on the loan portfolio.
The increase in earnings on investments can be attributed primarily to a
significant increase in the amount of securities held in the portfolio when
comparing the two periods. The large increase in tax exempt securities with
longer maturities resulted in a $17,000 or 45.95% increase in income on tax
exempt securities compared to a $18,000 or 17.14% increase in taxable
securities. This has favorably impacted the earnings on a tax equivalent
basis.
The interest expense increase of $14,000 as of March 31, 1997 compared with
the same period of 1996 was due substantially to an overall increase in the
volume of interest-bearing deposits. The greatest increase in average
deposits was $1,786,000 in interest-bearing transaction accounts excluding
demand deposits, while time deposits increased only $427,000. Therefore, the
greatest increases in balances occurred in the least costly types of accounts.
Total deposits on March 31, 1997, were $2,981,000 or 8.55% greater than the
first three months of 1996.
Provision for Loan Losses.
- -------------------------
The provision for loan losses for the three month period ended March 31, 1997,
was $8,000 compared with $9,000 for the same period in 1996. Management makes
periodic provisions to allowance for loans losses to maintain the allowance at
an acceptable level commensurate with management's assessment of the credit
risks inherent in the loan portfolio.
Other Operating Income.
- ----------------------
Other operating income, which is comprised principally of fees and charges on
customer deposit accounts, increased $13,000 or 16.46% to $92,000 on March 31,
1997. Service charges on deposit customer accounts increased $12,000 or
17.14%, which may be accounted for primarily from an increase in the number of
demand deposit accounts over the past year. Other income increased by $1,000.
Other Operating Expense.
- -----------------------
There was an increase in other operating expense of $44,000 or 12.75% to
$389,000 from the quarter ended March 31, 1996. Salary and employee benefits
increased $22,000 or 14.29% with the hiring of additional personnel as well as
the effect of normal salary and cost increases related to existing staff.
Occupancy and equipment expenses decreased $3,000 or 4.00% due to a reduction
in depreciation expense as new equipment purchases were modest while older,
well-maintained equipment remains in service, and utilities were down with the
milder winter experienced in 1997.
Other operating expenses increased $25,000 or 21.55% which resulted primarily
from increases in advertising expense, customer check and supplies due to
greater numbers of accounts, paper goods, credit bureau costs from larger loan
volume, and postage expense.
Income Tax Expense.
- ------------------
Income tax expense increased $2,000 or 4.76% from the same three month period
of 1996. This is less than the 15.29% increase in pre-tax income. The
increase in tax-exempt securities in relationship to the total investment
securities accounts for this difference in the income tax ratio.
9
<PAGE>
RISK ELEMENTS
- -------------
The following schedule presents the non-performing assets at March 31, 1997
and December 31, 1996.
March 31, December 31,
1997 1996
-------- --------
(In Thousands)
Non-performing loans
Loans past due 90 days
or more $ 168 $ 236
Nonaccrual loans - -
Impaired loans 110 110
-------- --------
Total non-performing loans 278 346
-------- --------
Other non-performing assets
Other real estate owned - 54
Repossessed assets - -
-------- --------
Total other non-performing assets - 54
-------- --------
Total non-performing assets $ 278 $ 400
======== ========
Non-performing loans as a
percentage of total loans 1.13% 1.44%
Non-performing assets as a
percentage of total loans and
other non-performing assets 1.13% 1.66%
On March 31, 1997, non-performing loans, which are comprised of commercial and
consumer loans contractually past due 90 days or more as to interest or
principal payment but are not nonaccrual status because of collateral
considerations or collection status, and unimpaired loans, which represent
nonaccrual commercial loan types, amounted to $278,000, a decrease of $68,000
or 19.65% from December 31, 1996 totals. The $54,000 of Other Real Estate
Owned by the Bank on December 31, 1996, had been disposed of by March 31, 1997
and there were no additional other non-performing assets on March 31, 1997.
Combined non-performing loans and other non-performing assets on March 31,
1997, represented 1.13% of total loans which was down from 1.44% at year-end
1996. There are six loans classified as non-performing, but three loans
combined total $259,000 which is 93.2% of this classification. All three
loans are secured by real estate properties. As part of management's ongoing
assessment of its loan portfolio, $57,000 of the allowance for loan losses at
March 31, 1997 has been allocated for these three loans.
10
<PAGE>
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in rights of the Company's Security holders.
None.
Item 3. Defaults by the Company on its senior securities.
None.
Item 4. Results of votes of security holders.
The following represents the results of matters submitted to a
vote of the shareholders at the annual meeting March 19, 1997:
Election of Directors:
The number of Class 1 Directors to be elected was established
at three (3) based upon the following vote:
For 144,560
Against 0
Abstain 0
The three nominees elected were as follows:
William E. Blair
Stephen W. Cooper
Marvin H. Feldman
Adoption of the 1997 Stock Option Plan:
For 135,110
Against 4,750
Abstain 4,700
Other:
S.R. Snodgrass, A.C. was elected as the Bank's Independent
Auditors for the 1997 fiscal year.
For 142,860
Against 0
Abstain 1,700
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8 - K.
(a) Exhibits.
None.
(b) Reports on Form 8 - K.
None.
11
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Tri - State 1st Bank, Inc.
--------------------------
(Registrant)
Date: May 14, 1997 By: \s\ Charles B. Lang
-----------------------------------------
Charles B. Lang
President and Chief Executive Officer
Date: May 14, 1997 By: \s\ Keith R. Clutter
-----------------------------------------
Keith R. Clutter
Secretary
12
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 3,042
<INT-BEARING-DEPOSITS> 71
<FED-FUNDS-SOLD> 650
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 10,431
<INVESTMENTS-CARRYING> 2,189
<INVESTMENTS-MARKET> 2,183
<LOANS> 24,673
<ALLOWANCE> 288
<TOTAL-ASSETS> 42,575
<DEPOSITS> 37,835
<SHORT-TERM> 0
<LIABILITIES-OTHER> 250
<LONG-TERM> 254
0
0
<COMMON> 1,284
<OTHER-SE> 2,852
<TOTAL-LIABILITIES-AND-EQUITY> 42,475
<INTEREST-LOAN> 589
<INTEREST-INVEST> 177
<INTEREST-OTHER> 23
<INTEREST-TOTAL> 789
<INTEREST-DEPOSIT> 299
<INTEREST-EXPENSE> 303
<INTEREST-INCOME-NET> 486
<LOAN-LOSSES> 8
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 389
<INCOME-PRETAX> 181
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 137
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.49
<LOANS-NON> 110
<LOANS-PAST> 168
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 290
<CHARGE-OFFS> 10
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 288
<ALLOWANCE-DOMESTIC> 288
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 95
</TABLE>
