TRI STATE 1ST BANK INC
10QSB, 1999-08-13
NATIONAL COMMERCIAL BANKS
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                       SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C.  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 June 30, 1999


     [     ]       TRANSITION REPORT UNDER 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
                     ---------------------------
              (Address of principal executive offices)


                         (330)385-9200
                         -------------
                   (Issuer's telephone number)


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 August 9, 1999 there were 566,534 shares outstanding of the issuer's
class of common stock.

Transitional small business disclosure format:   Yes        No   X
                                                    -----     -----
<PAGE>
                       TRI-STATE, 1ST BANK, INC.
                INDEX TO QUARTERLY REPORT ON FORM 10-QSB




                                                                 Page
                                                               Reference
                                                             -------------

Part I - Financial Information

    Item 1.   Financial Statements (unaudited)

              Consolidated Balance Sheet                                 3

              Consolidated Statement of Income                         4-5

              Consolidated Statement of Changes in Stockholders'
              Equity                                                     6

              Consolidated Statement of Cash Flows                       7

              Notes to Consolidated Financial Statements               8-9


    Item 2.   Management's Discussion and Analysis of Financial
              Condition and Results of Operations                    10-17


Part II   Other Information                                             18


Signatures                                                              19

<PAGE>
                         TRI-STATE 1ST BANK, INC.
                       CONSOLIDATED BALANCE SHEET
                              (Unaudited)

<TABLE>
<CAPTION>
                                                   June 30,    December 31,
                                                     1999          1998
                                                   --------      --------
                                                      (In thousands)

<S>                                                <C>           <C>
ASSETS
Cash and due from banks                            $  4,088      $  4,319
Interest-bearing deposits with other banks              103            80
Federal funds sold                                    2,750         1,100
Investment securities available for sale             20,482        19,958
Investment securities held to maturity
 (estimated market value of $1,689 and $1,765)        1,668         1,700
Loans                                                30,114        28,939
Less allowance for loan losses                          365           340
                                                   --------      --------
   Net Loans                                         29,749        28,599

Premises and equipment                                1,967         1,850
Accrued interest and other assets                       860           697
                                                   --------      --------

     TOTAL ASSETS                                  $ 61,667      $ 58,303
                                                   ========      ========

LIABILITIES
Deposits:
   Noninterest - bearing demand                    $  7,630      $  8,362
   Interest - bearing demand                         12,087        12,088
   Money market                                       4,945         4,599
   Savings                                           11,273        10,297
   Time                                              18,213        16,003
                                                   --------      --------
     Total deposits                                  54,148        51,349

Securities sold under agreement to repurchase         2,342         1,500
Other borrowings                                         10            67
Accrued interest and other liabilities                  236           309
                                                   --------      --------
     TOTAL LIABILITIES                               56,736        53,225
                                                   --------      --------

STOCKHOLDERS' EQUITY
Common stock, no par value; 1,000,000 shares
    authorized; 566,534 and 565,159 issued
    and outstanding                                   3,917         3,890
Retained earnings                                     1,206           990
Accumulated other comprehensive income (loss)          (192)          198
                                                   --------      --------
     TOTAL STOCKHOLDERS' EQUITY                       4,931         5,078
                                                   --------      --------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY    $ 61,667      $ 58,303
                                                   ========      ========
</TABLE>

See accompanying unaudited notes to the consolidated financial statements.

3

<PAGE>
                       TRI-STATE 1ST BANK, INC.
                 CONSOLIDATED STATEMENT OF INCOME
                          (Unaudited)

<TABLE>
<CAPTION>
                                                     Three Months Ended
                                                          June 30,
                                                  -----------------------
                                                     1999          1998
                                                  ---------     ---------
                                                       (In thousands)
<S>                                               <C>           <C>
INTEREST INCOME
  Interest and fees on loans                      $     695     $     668
  Interest-bearing deposits with other banks              1             1
  Federal funds sold                                     55            91
  Investment securities:
     Taxable                                            179           170
     Tax exempt                                         114            77
                                                  ---------     ---------
          Total interest income                       1,044         1,007
                                                  ---------     ---------

INTEREST EXPENSE
  Deposits                                              408           408
  Other borrowings                                       23            19
                                                  ---------     ---------
          Total interest expense                        431           427
                                                  ---------     ---------

NET INTEREST INCOME                                     613           580

Provision for loan losses                                19            10
                                                  ---------     ---------

NET INTEREST INCOME AFTER PROVISION FOR
  LOAN LOSSES                                           594           570
                                                  ---------     ---------

NONINTEREST INCOME
  Service fees on deposit accounts                       84            80
  Other                                                  41            36
                                                  ---------     ---------
          Total noninterest income                      125           116
                                                  ---------     ---------

NONINTEREST EXPENSE
  Salaries and employee benefits                        270           223
  Occupancy                                              63            49
  Furniture and equipment                                45            40
  Other                                                 180           161
                                                  ---------     ---------
          Total noninterest expense                     558           473
                                                  ---------     ---------

INCOME BEFORE INCOME TAXES                              161           213
Income taxes                                             14            45
                                                  ---------     ---------

NET INCOME                                        $     147     $     168
                                                  =========     =========

EARNINGS PER SHARE:
     Basic                                        $    0.26     $    0.30
     Diluted                                           0.25          0.30

</TABLE>

See accompanying unaudited notes to the consolidated financial statements.
4

<PAGE>
                       TRI-STATE 1ST BANK, INC.
                 CONSOLIDATED STATEMENT OF INCOME
                          (Unaudited)

<TABLE>
<CAPTION>
                                                     Six Months Ended
                                                          June 30,
                                                  -----------------------
                                                     1999          1998
                                                  ---------     ---------
                                                       (In thousands)
<S>                                               <C>           <C>
INTEREST INCOME
  Interest and fees on loans                      $   1,364     $   1,311
  Interest-bearing deposits with other banks              2             2
  Federal funds sold                                     98           148
  Investment securities:
     Taxable                                            356           316
     Tax exempt                                         224           147
                                                  ---------     ---------
          Total interest income                       2,044         1,924
                                                  ---------     ---------

INTEREST EXPENSE
  Deposits                                              795           768
  Other borrowings                                       43            31
                                                  ---------     ---------
          Total interest expense                        838           799
                                                  ---------     ---------

NET INTEREST INCOME                                   1,206         1,125

Provision for loan losses                                34            33
                                                  ---------     ---------

NET INTEREST INCOME AFTER PROVISION FOR
  LOAN LOSSES                                         1,172         1,092
                                                  ---------     ---------

NONINTEREST INCOME
  Service fees on deposit accounts                      162           148
  Other                                                  93            92
                                                  ---------     ---------
          Total noninterest income                      255           240
                                                  ---------     ---------

NONINTEREST EXPENSE
  Salaries and employee benefits                        539           454
  Occupancy                                             128            94
  Furniture and equipment                                87            76
  Other                                                 351           326
                                                  ---------     ---------
          Total noninterest expense                   1,105           950
                                                  ---------     ---------

INCOME BEFORE INCOME TAXES                              322           382
Income taxes                                             38            80
                                                  ---------     ---------

NET INCOME                                        $     284     $     302
                                                  =========     =========

EARNINGS PER SHARE:
     Basic                                        $    0.50     $    0.54
     Diluted                                           0.49          0.54

</TABLE>

See accompanying unaudited notes to the consolidated financial statements.
5
<PAGE>

                                     TRI-STATE 1ST BANK, INC.
                   CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                         (Unaudited)

<TABLE>
<CAPTION>


                                                               Accumulated
                                                                 Other
                                   Common        Retained     Comprehensive
                                   Stock          Earnings    Income (Loss)        Total
                                ----------     ----------     -------------    ----------

                                                  (In thousands)


<S>                             <C>            <C>            <C>              <C>
Balance, December 31, 1998      $    3,890     $      990     $      198       $    5,078

Comprehensive Income:
Net income                                            284                             284
Other comprehensive income:
 Unrealized loss on securities                                      (390)            (390)
                                                                               ----------
Total comprehensive income (loss)                                                    (106)
Dividends declared ($.12 per share)                   (68)                            (68)
Stock options exercised (1,719
   Shares)                              27                                             27
                                 ---------     ----------     ----------       ----------
Balance, June 30, 1999          $    3,917     $    1,206     $     (192)       $   4,931
                                 =========     ==========     ==========       ==========
</TABLE>







See accompanying unaudited notes to the consolidated financial statements.

6
<PAGE>
                         TRI-STATE 1ST BANK, INC.
                  CONSOLIDATED STATEMENT OF CASH FLOWS
                                (Unaudited)

<TABLE>
<CAPTION>
                                                          Six Months Ended
                                                               June 30,
                                                       ----------------------
                                                         1999          1998
                                                       ---------    ---------
                                                           (In thousands)
<S>                                                    <C>          <C>
OPERATING ACTIVITIES
   Net income                                          $     284    $     302
   Adjustments to reconcile net income to net cash
    provided by operating activities:
     Provision for loan losses                                34           33
     Depreciation, amortization, and accretion, net           84           79
     Increase in accrued interest receivable                 (26)         (88)
     Increase (decrease) in accrued interest payable          (1)          20
     Other, net                                               (9)         (26)
                                                       ---------    ---------
         Net cash provided by operating activities           366          320
                                                       ---------    ---------

INVESTING ACTIVITIES
   Investment securities available for sale:
     Proceeds from maturities and repayments               3,578        2,000
     Purchases                                            (4,680)      (7,347)
   Investment securities held to maturity:
     Proceeds from maturities and repayments                  32          133
   Net increase in loans                                  (1,196)      (1,630)
   Purchases of premises and equipment                      (202)        (108)
                                                       ---------    ---------
         Net cash used for investing activities           (2,468)      (6,952)
                                                       ---------    ---------

FINANCING ACTIVITIES
   Net increase in deposits                                2,800        8,543
   Increase in securities sold under agreement to
    repurchase                                               842        1,224
   Principal payments on other borrowings                    (57)         (54)
   Stock options exercised                                    27           -
   Cash dividends paid                                       (68)         (62)
                                                       ---------    ---------
         Net cash provided by financing activities         3,544        9,651
                                                       ---------    ---------
         Increase (decrease) in cash and
          Cash equivalents                                 1,442        3,019

CASH AND CASH EQUIVALENTS AT
   BEGINNING OF PERIOD                                     5,499        5,683
                                                       ---------    ---------

CASH AND CASH EQUIVALENTS AT END OF PERIOD             $   6,941    $   8,702
                                                       =========    =========
</TABLE>
See accompanying unaudited notes to the consolidated financial statements.
7
<PAGE>
                            TRI-STATE 1ST BANK, INC.
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (Unaudited)

NOTE 1   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation
- ---------------------------

The consolidated financial statements of Tri-State 1st Bank, Inc.,
(the "Company"), includes its wholly-owned subsidiaries, 1st National
Community Bank, (the "Bank") and Gateminder Corporation,
("Gateminder"). All significant intercompany balances and transactions
have been eliminated.

Nature of Operations
- --------------------

Tri-State 1st Bank, Inc. is the parent company of 1st National Community
Bank and Gateminder Corporation.  The Company was formed as an Ohio
corporation on April 24, 1996 and owns and controls all of the capital
stock of the Bank, a national banking association and Gateminder Corporation,
an Ohio corporation.  The Company is a bank holding company which, under
existing laws, is restricted to activities generally relating to banking.
The Company's primary regulator is the Board of Governors of the Federal
Reserve System.

The Bank was chartered as a national banking association in June 1987,
headquartered near East Liverpool, Ohio.  Business is conducted through
its four full service offices located in Columbiana County, Ohio, and one
full service office in Hancock County, West Virginia.  The Bank operates a
full service community bank, offering a variety of financial services to
meet the needs of its market area.  Services include: accepting demand and
time deposits from the general public and together with borrowings and other
funds, using the proceeds to originate secured and unsecured commercial and
consumer loans and provide construction and mortgage loans, as well as home
equity and personal lines of credit.  In addition, funds are also used to
purchase investment securities.  The Bank's deposits are insured to the
legal maximum amount by the Federal Deposit Insurance Corporation.

On April 14, 1999, Gateminder Corporation was incorporated under the laws
of the state of Ohio as a wholly owned non-bank subsidiary of the Company.
Headquartered in East Liverpool, Ohio, Gateminder was established by the
Company to provide non-bank activities for Automated Teller Machines ("ATM").
The non-bank subsidiary sells ATM machines to businesses and merchants
that operate ATMs at their place of business and provides the means for
processing the transactions and distributing the funds taken from the
account of the user/cardholder back to the operator of the ATM.
Gateminder commenced operations on June 25, 1999.


Basis of Presentation
- ---------------------

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.


Stock Split
- -----------

On July 22, 1999, the Board of Directors declared a 5-for-4 stock split to
stockholders of record on August 4, 1999.  As a result of this split,
113,290 shares of Tri-State 1st Bank stock will be issued on
August 25, 1999.  Amounts per share have been retroactively restated
to reflect the stock split for all periods presented.

8
<PAGE>

NOTE 1   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Pronouncements
- --------------------------------

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities."  The statement provides accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, by requiring the recognition of those items as
assets or liabilities in the statement of financial position,
recorded at fair value.  Statement No. 133 precludes a held-to-maturity
security from being designated as a hedged item, however, at the date of
initial application of this statement, an entity is permitted to transfer any
held-to-maturity security into the available-for-sale or trading categories.
The unrealized holding gain or loss on such transferred securities shall be
reported consistent with the requirements of Statement No. 115, "Accounting
for Certain Investments in Debt and Equity Securities."  Such transfers do not
raise an issue regarding an entity's intent to hold other debt securities to
maturity in the future.  This statement applies prospectively for all fiscal
quarters of all years beginning after June 15, 2000.

The Financial Accounting Standards Board also issued Statement of Financial
Accounting Standards No. 134, "Accounting for Mortgage-backed Securities
Retained After the Securitization of Mortgage Loans Held for Sale by a
Mortgage Banking Enterprise."  This Statement requires that after the
securitization of mortgage loans, an entity classify the resulting
mortgage-backed securities or other retained interest based on its ability
and intent to sell or hold these securities in accordance with Statement
No. 115.  This Statement applies to the first fiscal quarter beginning after
December 31, 1998.

Earnings Per Share
- ------------------

The following table sets forth the comparison of Basic and Diluted earnings
per share.  There were no convertible securities which would effect the
numerator in calculating Basic and Diluted earnings per share: therefore, net
income as presented on the Consolidated Statement of Income will be used as
the numerator.  The following table sets forth a reconciliation of the
denominator of the Basic and Diluted earnings per share computation.

<TABLE>
<CAPTION>
                                Three Months Ended         Six Months Ended
                                   June 30,                   June 30,
                                 1999        1998          1999       1998
                               --------    --------      -------     -------
<S>                             <C>           <C>         <C>         <C>
     Weighted average common
      shares used to calculate
      basic earnings per share 566,534     566,159      565,858      565,159

     Common stock equivalents
      (stock options) used to
      calculate diluted
      earnings per share          9,741       1,394        9,741        1,394
                                -------     -------      -------      -------
     Weighted average common
      shares and Common stock
      equivalents used to
      calculate diluted
      earnings per share        576,275     566,553      575,599      566,553
                                =======     =======      =======     ========

</TABLE>

Supplemental Disclosure of Cash Flow Information
- ------------------------------------------------
<TABLE>
<CAPTION>
                                                     Six Months Ended
                                                          June 30,
                                                      1999         1998
                                                   ---------    ---------
<S>                                                   <C>          <C>
Cash paid during the period for:
   Interest                                           $839         $797
   Income taxes                                         10           95
</TABLE>
9
<PAGE>
                          TRI-STATE 1ST BANK, INC.

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS


FINANCIAL CONDITION


Summary of Financial Condition
- ------------------------------

The consolidated assets of Tri-State 1st Bank were $61,667,000 at June 30,
1999, an increase of $3,364,000 or 5.8% over total assets at December 31,
1998. The increase in total assets for the first half of 1999 was fueled
by the Company's deposit growth, which increased by $2,799,000 or 5.5%
during the same period. Total earning assets, which principally include
loans, investment securities and federal funds sold equaled $55,117,000
at June 30, 1999 and represented an increase of $3,340,000 or 6.5% over
total earning assets at December 31, 1998.

Total stockholders' equity equaled $4,931,000 at June 30, 1999, representing
a decrease of $147,000 or 2.9% from total equity at December 31, 1998.
The decrease in the Company's equity for the first half of 1999 was
a result of a decrease in the net unrealized gain previously held on the
investment securities available for sale portfolio, offset by net
income earned, less dividends paid to shareholders.

Federal Funds Sold and Investment Securities
- --------------------------------------------

Federal funds sold and investment securities available for sale serve a
primary role in the overall context of balance sheet management by the Company.
The decision to purchase or sell securities is based upon the current
assessment of economic and financial conditions, including the interest rate
environment and other on and off-balance sheet positions.

Federal funds sold at June 30, 1999 totaled $2,750,000 up $1,650,000 from
year-end 1998. On an average basis, federal funds sold were $4,110,000
for the first six months of 1999.  Management has generally attempted to have
available between $2 million and $4 million in federal funds sold in order
to meet the liquidity needs and loan demand of bank customers. However,
this range may shift upward as deposits increase or as cash liquidity needs
change.

The investment securities available for sale portfolio was $20,482,000 at
June 30, 1999 compared to $19,958,000 at December 31, 1998, an increase
of $524,000 or 2.6%. Management's overall investment strategy is to invest
funds in the investment portfolio methodically in order to employ funds
not required for loan demand in a manner which will provide safety,
liquidity and improved earnings potential.  Total purchases during the
first half of 1999 totaled $4.7 million, offset by regular pay downs,
calls and maturities of $3.6 million. In June, short-term interest rates
rose, resulting in a decline in the market value of the Company's
investment portfolio. Unrealized losses on the available for sale portfolio
totaled $291,000 at June 30, 1999 compared to an unrealized gain of
$299,000 at December 31, 1998.

Investment securities held to maturity decreased $32,000 or 1.9% in the
first half of 1999 when compared to the prior year-end. This decrease was
attributable to scheduled principal repayments as there were no additions
to the held to maturity portfolio during the period.

10
<PAGE>

Loans
- -----

Loans receivable at June 30, 1999 were $30,114,000 up $1,175,000 or 4.1%
from year-end 1998.  Loan originations for the first six months of 1999
have exceeded originations from the same prior year period.  Demand for
commercial and residential real-estate loans was strong during the period
as commercial loans increased $1.4 million or 32.4% and residential
real-estate loans increased $1.2 million or 9.1%. Consumer loans also
increased during the period by $354,000 or 8.4% while commercial
real-estate loans decreased.  Much of the increase in the loan portfolio
can be attributed to a stable and healthy economy, a favorable interest
rate environment and the deployment of a Business Development Officer
by the Bank to generate new business within the Bank's market area.

The following table illustrates the loan composition at June 30, 1999 and
December 31, 1998.

                                           June 30,     December 31,
                                            1999           1998
                                          --------      --------
                                               (In thousands)
Commercial and agricultural               $  5,892      $  4,450
Real estate mortgages:
   Residential                              14,708        13,476
   Commercial                                4,919         6,772
Consumer                                     4,595         4,241
                                          --------      --------
                                            30,114        28,939
Less allowance for loan losses                 365           340
                                          --------      --------
Net loans                                 $ 29,749      $ 28,599
                                          ========      ========

Allowance for Loan Losses
- -------------------------

The Company's allowance for loan losses was $365,000 at June 30, 1999
compared to $340,000 at December 31, 1998.  This represents a $25,000 or
7.4% increase over December 31, 1998.  Constituting the increase was a
$34,000 loan loss provision charged to operations during the first half of
1999 offset by net charge-offs of $9,000.


The following table illustrates the activity in the allowance for loan losses:

<TABLE>
<CAPTION>

                                                     Six Months Ended
                                                          June 30,
                                                      1999         1998
                                                   ---------    ---------
                                                        (In thousands)

<S>                                                <C>          <C>
Balance, beginning of period                       $     340    $     309
Charge-offs:
  Real estate loans                                        -            5
  Installment loans                                       18           22
  Commercial loans                                         -            -
                                                   ---------    ---------
     Total charge-offs                                    18           27
                                                   ---------    ---------
Recoveries:
  Real estate loans                                        5            -
  Installment loans                                        4            8
  Commercial loans                                        -             -
                                                   ---------    ---------
     Total recoveries                                      9            8
                                                   ---------    ---------
Net charge-offs                                            9           19
                                                   ---------    ---------
Provision charged to operations                           34           33
                                                   ---------    ---------
Balance, end of period                             $     365    $     323
                                                   =========    =========
</TABLE>
11
<PAGE>


Allowance for Loan Losses (continued)
- -------------------------------------

The Company believes that the allowance for loan losses at June 30, 1999 of
$365,000 is adequate to cover losses inherent in the portfolio as of such
date.  However, there can be no assurance that the Company will not sustain
losses in future periods, which could be substantial in relation to the size
of the allowance at June 30, 1999.


Non-Performing Assets
- ---------------------

On June 30, 1999, non-performing loans, which are comprised of commercial
and consumer loans contractually past due 90 days or more as to interest or
principal payments but not on non-accrual status because of collateral
considerations or collection status, and non-accrual commercial loan types
which are not considered impaired, amounted to $405,000, an increase of
$226,000 or 126.3% from December 31, 1998. The increase in non-performing
loans was mostly attributable to an increase in commercial and residential
real-estate loan delinquencies 90 days or more past due. At June 30, 1999,
there were three commercial real-estate loans having a combined loan balance
of $274,000 or 67.7% of total loans past due 90 days or more.  Of the three
loans, one is an SBA loan with a 75% guarantee, the other has since become
current and the third is in the process of being foreclosed on.  Each of
the loans are considered to be adequately secured.  Residential real-estate
loans 90 days or more past due totaled $108,000 or 26.7% of loans past due
90 days or more. Of these loans, two are in foreclosure and the third has
since become current, all of which Management considers to be adequately
secured.

 The following presents the non-performing assets at June 30, 1999, and
December 31, 1998.

<TABLE>
<CAPTION>
                                                   June 30,  December 31,
                                                     1999          1998
                                                  ----------  ----------
                                                      (In thousands)

<S>                                               <C>         <C>
Non-accrual loans                                 $       -   $       -

Loans past due 90 days or more                           405         179

Restructured loans                                        -           -
                                                  ----------  ----------
 Total non-performing loans                              405         179

Other real estate owned                                   -           -
                                                  ----------  ----------

Total non-performing assets                       $      405  $      179
                                                  ==========  ==========
Non-performing loans as a percentage
 of total loans                                         1.35%        .62%

Non-performing assets as a percentage
 of total assets                                        .66%        .31%

Non-performing assets as a percentage
 of allowance for loan losses                        111.00%      52.65%

</TABLE>
12
<PAGE>
Deposits
- --------

Deposits continue to be 1st National Community Bank's primary source for
funding its earning assets.  The Bank offers a wide variety of products
designed to attract and retain customers. Total deposits increased
$2,799,000 or 5.5% when compared to total deposits at December 31, 1998.
Although increases were experienced in almost all of the Bank's deposit
types, a significant portion of the growth occurred in time deposits,
which increased $2,210,000 or 13.8%.  Savings increased $976,000 or 9.5%
and money market accounts were up by $346,000 or 7.5%, while demand deposits
decreased $733,000 or 8.8%.  The deposit growth for the first half of 1999
is due to the expansion of the Bank's branch offices as well as the an
ongoing commitment of the Bank to provide exceptional deposit services
at a competitive rate.

Borrowings
- ----------

The Company from time to time uses various funding sources other than
Deposits to provide the funds necessary for the loan and investment
Securities portfolios. Total borrowings increased  $785,000 or 50.1% at
June 30, 1999 from year-end 1998.  Total borrowings consist of securities
sold under repurchase agreements, which are agreements with "in-market"
customers of the bank that are collateralized by various securities and upon
maturity, returned back to the bank, and advances with the Federal Home Loan
Bank of Cincinnati.  During the first half of 1999, repurchase agreements
increased by $842,000 or 56.1% while other borrowings decreased by $57,000 or
85.1%.  Customer demand contributed for the increase in repurchase agreements,
while the decrease in advances with the Federal Home Loan Bank is
attributable to the maturity and scheduled principal and interest payments
on two separate advances. One advance matured in May, with the remaining
advance scheduled to mature in July of 1999.


RESULTS OF OPERATIONS

COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS
ENDED JUNE 30, 1999 AND 1998


Summary of Earnings
- -------------------

Net income for the second quarter of 1999 was $147,000 or $0.26 and $0.25
per basic and diluted shares, respectively.  This compares to net income
of $168,000 or $0.30 per basic and diluted share amounts earned in the second
quarter of 1998.  The decrease in net income for the period was a result of
increases in noninterest expenses and provision for loan losses, offset by
increases in net interest income, noninterest income and a decrease in tax
expenses.

Interest Income
- ---------------

Interest income on loans increased $27,000 or 4.0% for the three months
ended June 30, 1999 compared to the same prior year period. This increase
was a result of a $2,298,000 or 8.5% increase in the average loan balance
outstanding during the 1999 period offset by a 15 basis point decrease
on the yield earned.

Interest income on federal funds sold decreased $36,000 or 39.6% during the
second quarter of 1999 when compared to the second quarter of 1998. This
decrease was a result of a $1,440,000 or 23.1% decrease in the average balance
outstanding during the 1999 period as well as a decrease in the yield earned.

Interest income earned on investment securities increased during the second
quarter of 1999 by $46,000 or 18.6% from the same prior year period. This
increase was a result of an increase of $2,929,000 or 12.1% in the average
balance outstanding offset by a 27 basis point decrease in the yield earned
on the investment portfolio.
13
<PAGE>
Interest Expense
- ----------------
Although there was no change in interest expense on deposits during the
second quarter of 1999 when compared to the same prior year period, average
deposits for the quarter grew by $5,491,000 or 12.6%.  The increase in
the balance was offset by a decrease in the rates paid on these funds
when compared to the same prior year period and resulted in the interest
expense remaining at 1998's level.

Interest expense on repurchase agreements and other borrowings increased
$4,000 or 21.1% in the second quarter of 1999 when compared to the same prior
year period. This increase was due to an increase of $1,004,000 or 66.3% in
the average balance of borrowed funds outstanding, offset by a decrease
of 82 basis points in the rate paid on these funds.


Net Interest Income
- -------------------
Net interest income is the amount that interest income generated by earning
assets, including securities and loans, exceeds interest expense associated
with interest-bearing liabilities, including deposits and borrowed funds. Net
interest income for the second quarter of 1999 totaled $613,000, an increase of
$33,000, or 5.7%, over the same prior year period. The increase in net
interest income was the result of an increase in Tri-State's average earning
assets offset by lessor increases in the average balance and cost of funds on
interest-bearing liabilities.

Provision and Allowance for Loan Losses
- ---------------------------------------
The provision for loan losses charged to operations in the second quarter of
1999 was $19,000, an increase of $9,000 or 90.0% from the prior year period.
The amount of the provision for both periods was based on such factors as the
credit risks inherent in the loan portfolio, increase in the balance of the
loan portfolio outstanding and Management's ongoing analysis of the adequacy
of the allowance for loan losses.

Noninterest Income
- ------------------
Total noninterest income increased $9,000 or 7.8% in the second quarter of 1999
compared to the same prior year period. Other income increased $5,000 or 13.9%.
Service fees on deposit accounts increased $4,000 or 5.0% relating to the
increase in the number of deposit accounts serviced by the bank.

Noninterest Expense
- -------------------
Total salary and employee benefits increased $47,000 or 21.1% in the second
quarter of 1999. Salaries and wages increased primarily due to the hiring of
additional personnel throughout the past twelve months ended June 30, 1999,
and to a lessor extent, normal merit increases relating to existing employees.
Total full-time equivalent employees increased by 28% from June 30, 1998 to
June 30, 1999 as a result of increased staffing level needs and the opening
of the new Wal-Mart in-store branch.  Employee benefit costs were also up
in the second quarter of 1999 with much of the increase stemming from
increased health insurance costs.

Net occupancy expense increased $14,000 or 28.6% in the second quarter of
1999 primarily as a result of the addition of the Wal-Mart in-store branch,
expansion of the main office facility and an overall general increase in
occupancy costs.

Furniture and equipment expense increased $5,000 or 12.5% in the second quarter
of 1999 when compared to the same prior year period.  This increase is
attributable to increases in capital investments relating to new equipment and
furniture, and resulted higher depreciation costs.

Other expenses increased $19,000 or 11.8%, in the second quarter of 1999 due
to increases in overall general and administrative expenses such as,
stationery and printing, postage and telephone costs and MAC expenses.

The provision for income tax was $14,000 in the second quarter of 1999 compared
to $45,000 in the same prior year period.  This represents a decrease of
$31,000 or 68.9% and is due to a decrease in taxable income.
14
<PAGE>

COMPARISON OF THE RESULTS OF OPERATIONS FOR THE SIX MONTHS
ENDED JUNE 30, 1999 AND 1998

Summary of Earnings
- ------------------

Net income for the six months ended June 30, 1999 was $284,000 or $0.50 and
$0.49 per basic and diluted shares, respectively.  This compares to net
income of $302,000 or $0.54 per basic and diluted share amounts earned in
the same prior year period.  The decrease in net income for the period was
a result of increases in noninterest expenses, offset by increases in net
interest income, noninterest income and a decrease in tax expenses. The
increase in noninterest expenses, which resulted in a decline in net income,
were a result of the Bank expanding its branch network through the addition of
an in-store Wal-Mart office that occurred in late 1998 and the formation of
a new non-bank subsidiary, Gateminder Corporation, in the second quarter.

Interest Income
- ---------------

Interest income on loans increased $53,000 or 4.0% for the six months
ended June 30, 1999 compared to the same prior year period. This increase
was a result of a $1,941,000 or 7.2% increase in the average loan balance
outstanding during the 1999 period offset by a 27 basis point decrease on
the yield earned.

Interest income on federal funds sold decreased $50,000 or 33.4% during the
first six months of 1999 when compared to the same prior year period. This
decrease was a result of a $1,098,000 or 21.1% decrease in the average balance
outstanding during the 1999 period as well as a decrease of 93 basis points
in the yield earned.

Interest income earned on investment securities increased during the second
quarter of 1999 by $117,000 or 25.3% from the same prior year period. This
increase was a result of an increase of $2,915,000 or 12.7% in the average
balance outstanding as well as a slight increase in the yield earned on the
investment portfolio.

Interest Expense
- ----------------

Interest expense on deposits increased $27,000 or 3.5% in the first six
months of 1999 when compared to the same prior year period. This increase
was due to an increase of $5,119,000 or 12.0% in the average balance of
deposits outstanding, offset by a decrease of 15 basis points in the rate
paid on these funds.

Interest expense on repurchase agreements and other borrowings increased
$12,000 or 38.7% for the six months ended June 30, 1999 when compared to the
same prior year period. This increase was due to an increase of $945,000
or 68.8% in the average balance of borrowed funds outstanding, offset by a
decrease of 17 basis points in the rate paid on these funds.


Net Interest Income
- -------------------

Net interest income is the amount that interest income generated by earning
assets, including securities and loans, exceeds interest expense associated
with interest-bearing liabilities, including deposits and borrowed funds. Net
interest income for the six month period ended June 30, 1999 totaled
$1,206,000, an increase of $81,000, or 7.2%, over the same prior year period.
The increase in net interest income was the result of an increase in the
Company's average earning assets offset by lessor increases in the average
balance and cost of funds on interest-bearing liabilities.

15
<PAGE>





Provision and Allowance for Loan Losses
- ---------------------------------------

The provision for loan losses charged to operations in the first half of
1999 was $34,000, an increase of $1,000 or 3.0% from the prior year period.
The amount of the provision for both periods was based on such factors as the
credit risks inherent in the loan portfolio, increase in the balance of the
loan portfolio outstanding and Management's ongoing analysis of the adequacy
of the allowance for loan losses.


Noninterest Income
- ------------------

Total noninterest income increased $15,000 or 6.3% in the first half of 1999
compared to the same prior year period. Other income increased $1,000 or 1.0%.
Service fees on deposit accounts increased $14,000 or 9.5% relating to the
increase in the number of deposit accounts serviced by the bank.

Noninterest Expense
- -------------------

Total salary and employee benefits increased $85,000 or 18.7% during the six
months ended June 30, 1999. Salaries and wages increased primarily due to the
hiring of additional personnel throughout the past twelve months ended June 30,
1999, and to a lessor extent, normal merit increases relating to existing
employees. Total full-time equivalent employees increased by 28% from June 30,
1998 to June 30, 1999 as a result of increased staffing level needs and the
opening of the new Wal-Mart in-store branch.  Employee benefit costs were also
up in the second quarter of 1999 with much of the increase stemming from
increased health insurance costs.

Net occupancy expense increased $34,000 or 36.2% in the first half of 1999
primarily as a result of the addition of the Wal-Mart in-store branch,
expansion of the main office facility and an overall general increase in
occupancy costs.

Furniture and equipment expense increased $11,000 or 14.5% in the first half
of 1999 when compared to the same prior year period.  This increase is
attributable to increases in capital investments relating to new equipment and
furniture, and resulted higher depreciation costs.

Other expenses increased $25,000 or 7.7%, in the first half of 1999 due
to increases in overall general and administrative expenses such as,
stationery and printing, postage and telephone costs and MAC expenses.

The provision for income tax was $38,000 for the first half of 1999 compared
to $80,000 in the same prior year period.  This represents a decrease of
$42,000 or 52.5% and is due to a decrease in taxable income.

Liquidity
- ---------
The liquidity of a banking institution reflects its ability to provide funds
to meet loan requests, to accommodate the possible outflows of deposits and to
take advantage of interest rate market opportunities.  It requires continuous
analysis by management in order to match the maturaties of short-term loans
and investments with the various types of deposits and borrowings.  Bank
liquidity is normally considered in terms of the nature and the mix of the
Bank's sources and uses of funds.

The Bank's primary sources of funds are deposits, proceeds from principal and
interest payments on loans and mortgage-backed securities and interest payments
and maturities on investment securities.  While scheduled principal repayments
on loans and mortgage-backed securities and interest payments on investment
securities are a relatively predictable source of funds, deposit outflows and
mortgage-backed prepayments are greatly influenced by general interest rates,
economic conditions, competition and other factors.

Management is not aware of any known trends, events or uncertainties that
would have a material effect on the liquidity, capital resources or operations
of the Corporation.  Management is not aware of any current recommendations by
the regulatory authorities, which, if implemented, would have a material
effect on the liquidity, capital resources or operations of the Company.
16
<PAGE>
Year 2000 Compliance
- ------------------

As a financial institution holding company, Tri-State is highly dependent upon
computers and computer programs and the accuracy of these computer programs is
critical to Tri-State's operations.  The approach of the year 2000 presents
the possibility that the Bank or its customers, suppliers or correspondent
banks may be subject to errors caused by computer programs not correctly
recognizing the year 2000 and making inaccurate calculations.

The Company has been actively working on the Year 2000 computer problem
since 1997 and has completed a comprehensive plan of action addressing
system-related Year 2000 issues.  The Company has completed its awareness,
assessment, renovation, validation, implementation, and testing phases; the
results of which reflect the Company's internal systems to be Year 2000 ready.
FFIEC's guidelines have been followed, customer relations training has been
achieved, and the Company is actively involved in the final stages of
contingency planning training sessions.

Many of the Company's business system applications have either been modified
or replaced. The Company in conjunction with its vendors, has tested all of
its mission critical systems and has required representations from its vendors
that the products are or will be Year 2000 compliant. Both internal and
external resources were utilized in completing the Company's testing
objectives.  Internal tests have been completed, and test results, which have
been documented and validated, are deemed to be year 2000 compliant.

The Company has established a contingency and business resumption plan in
the unlikely event that the systems tested do not, in fact, operate
properly when the year 2000 does arrive.   The business resumption plan
focuses on steps needed to maintain the Bank's customer accounts, deposit
and loans, as well as accounting systems on a manual basis, if needed,
to ensure business continuation while systems are being corrected.

The ability of the Bank's loan customers to repay their obligations could
also be affected by business interruptions caused by Year 2000 data processing
problems.  The Bank has established and put into place an on-going monitoring
system to assess its largest borrowers and their Year 2000 readiness in
relation to their ability to repay their obligations to the Bank.

Much attention has also been given to the Bank's deposit customers, as they
may require the need to have additional cash on hand in the latter part of
1999.  In response to anticipated cash demands, which are not expected to be
material, the Company will maintain higher liquidity levels in the latter
part of 1999.

The Company believes that the Year 2000 issue will not pose significant
operational problems and is not anticipated to be material to its financial
position or results of operations.  The Company currently believes that all
major expenditures relating to Year 2000 have been incurred and totaled
approximated $40,000, net of taxes. The Company does not anticipate any
significant additional costs to insure it's readiness for the Year 2000
beyond regularly scheduled software and hardware upgrades.
17
<PAGE>






                        TRI-STATE 1ST BANK, INC.
                              FORM 10-QSB


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

           (a)  The Company's annual meeting of shareholders was held on
                April 14, 1999.

           (b)  The number of Class 3 Directors to be elected was
                established at three (3) with the following directors
                each elected for a term of three (3) years to serve
                until the year 2002 A.D.:
                Charles B. Lang
                R. Lynn Leggett
                John C. Thompson

                The following persons are current Directors of 1st Bank who
                are serving as either Class 1 Directors, whose terms expire
                in 2000, or Class 2 Directors, whose terms expire in 2001.

                Class 1 Directors - Expire in 2000
                William E. Blair, Jr.
                Stephen W. Cooper
                Marvin H. Feldman

                Class 2 Directors - Expire in 2001
                Keith R. Clutter
                G. Allen Dickey
                John P. Scotford, Sr.

           (c)  Shareholders ratified the appointment of S.R. Snodgrass, A.C.
                as independent certified public accountants to audit the
                consolidated financial statements of the Company for the fiscal
                year 1999.

           The results of the votes from the annual meeting were as follows:
                                      For            Against     Abstain
                                    -------    ---------   ---------

              Charles B. Lang       357,456        -            836
              R. Lynn Leggett       353,777        -          4,515
              John C. Thompson      357,236        -          1,056

              S.R. Snodgrass, A.C.  357,236        -          1,056

Item 5.    Other information

           None

Item 6.    Exhibits and Reports on Form 8-K
           (a)    Exhibits
                  27 Financial Data Schedule, filed herewith

           (b)    Reports on Form 8-K
                  None

18
<PAGE>
SIGNATURES

   In accordance with the requirements of the Securities and Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                      Tri-State 1st Bank, Inc.
                                      (Registrant)


Date:                               By:  /s/ Charles B. Lang
                                       ----------------------------------
August 9, 1999                            Charles B. Lang
                                          President and Chief Executive Officer

Date:                               By: /s/ Keith R. Clutter
                                       ----------------------------------
August 9, 1999                            Keith R. Clutter
                                          Secretary


19


<TABLE> <S> <C>

<ARTICLE> 9
<MULTIPLIER> 1,000

<S>                             <C>
<PERIOD-TYPE>                   6-MOS
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-END>                               JUN-30-1999
<CASH>                                           4,088
<INT-BEARING-DEPOSITS>                             103
<FED-FUNDS-SOLD>                                 2,750
<TRADING-ASSETS>                                     0
<INVESTMENTS-HELD-FOR-SALE>                     20,482
<INVESTMENTS-CARRYING>                           1,668
<INVESTMENTS-MARKET>                             1,689
<LOANS>                                         30,114
<ALLOWANCE>                                        365
<TOTAL-ASSETS>                                  61,667
<DEPOSITS>                                      54,148
<SHORT-TERM>                                     2,342
<LIABILITIES-OTHER>                                236
<LONG-TERM>                                          0
                                0
                                          0
<COMMON>                                         3,917
<OTHER-SE>                                       1,014
<TOTAL-LIABILITIES-AND-EQUITY>                  61,667
<INTEREST-LOAN>                                  1,364
<INTEREST-INVEST>                                  582
<INTEREST-OTHER>                                    98
<INTEREST-TOTAL>                                 2,044
<INTEREST-DEPOSIT>                                 795
<INTEREST-EXPENSE>                                 838
<INTEREST-INCOME-NET>                            1,206
<LOAN-LOSSES>                                       34
<SECURITIES-GAINS>                                   0
<EXPENSE-OTHER>                                  1,105
<INCOME-PRETAX>                                    322
<INCOME-PRE-EXTRAORDINARY>                         322
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                       284
<EPS-BASIC>                                     0.50
<EPS-DILUTED>                                     0.49
<YIELD-ACTUAL>                                    4.89
<LOANS-NON>                                          0
<LOANS-PAST>                                       405
<LOANS-TROUBLED>                                     0
<LOANS-PROBLEM>                                      0
<ALLOWANCE-OPEN>                                   340
<CHARGE-OFFS>                                       18
<RECOVERIES>                                         9
<ALLOWANCE-CLOSE>                                  365
<ALLOWANCE-DOMESTIC>                               365
<ALLOWANCE-FOREIGN>                                  0
<ALLOWANCE-UNALLOCATED>                              0


</TABLE>


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