SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED SEPTEMBER 30, 2000 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: 333-30640
PEOPLES FIRST, INC.
________________________________________________________________
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-0962050
________________________________ _________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
24 SOUTH THIRD STREET, OXFORD, PENNSYLVANIA 19363
___________________________________________ _________
(Address of principal executive offices) (Zip Code)
(610) 932-9294
________________
Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ].
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical
date.
COMMON STOCK Par Value $ 1.00 per share
3,053,208 shares outstanding as of September 30, 2000
PEOPLES FIRST INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
September 30, December 31,
2000 1999
(Unaudited) (Note)
ASSETS
Cash and due from banks $ 9,159 $ 21,517
Interest-bearing deposits with
banks 10,448 4,216
Federal funds sold 16,881 1,095
Securities
Available for sale, at fair 49,267 44,934
value
Held to maturity, at
amortized cost 3,255 3,330
Total securities 52,522 48,264
Loans - net of unearned income 222,370 207,587
Allowance for loan losses 3,852 3,343
Net loans 218,518 204,244
Bank premises and equipment net 8,866 5,935
Accrued interest receivable and
other assets 8,541 7,237
Total assets $324,935 $292,508
======= =========
LIABILITIES
Deposits:
Demand, non-interest bearing $56,148 $54,984
NOW and SuperNOW 47,283 27,813
Money market funds 21,823 21,907
Savings 42,898 43,339
Time 87,269 83,186
Total deposits 255,421 231,229
Securities sold under agreements
to repurchase 6,675 4,750
Long-term debt 19,847 16,110
Accrued interest payable and
other liabilities 2,198 2,240
Total liabilities 284,141 254,329
STOCKHOLDERS' EQUITY
Common stock, par value $1.00
Per share; authorized shares
10,000,000; outstanding shares:
3,053,208 at September, 30, 2000;
2,996,290 at December 31, 1999 3,053 2,996
Surplus 16,172 16,197
Retained earnings 21,722 19,320
Accumulated other comprehensive
income (loss) (153) (334)
Total stockholders' equity 40,794 38,179
Total liabilities and
stockholders' equity $324,935 $292,508
======== ========
Memoranda: Standby Letters
of Credit $ 5,615 $ 4,689
======== ========
Note: The balance sheet at December 31, 1999, has been derived
from the audited financial statements at that date.
The accompanying notes are an integral part of these financial
statements.
PEOPLES FIRST INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Interest income:
Loans receivable, including fees $ 14,081 $ 11,677 $ 4,858 $ 4,063
Securities
Taxable 1,824 1,618 639 541
Tax-exempt 412 448 139 142
Other 943 927 457 303
Total interest income 17,260 14,670 6,093 5,049
Interest expense:
Deposits 5,722 4,421 2,163 1,503
Short-term borrowings 188 106 73 42
Long-term debt 893 562 306 210
Total interest expense 6,803 5,089 2,542 1,755
Net interest income 10,457 9,581 3,551 3,294
Provision for loan losses 360 251 105 105
Net interest income after provision
for loan losses 10,097 9,330 3,446 3,189
Other income:
Service charge on deposit accounts 851 773 289 288
Income from fiduciary activities 349 305 123 106
Investment management fees 587 -- 198 --
Mortgage banking activities 107 106 56 41
Other income 692 390 250 155
Total other income 2,586 1,574 916 590
Other expenses:
Salaries and employee benefits 4,812 3,726 1,701 1,281
Occupancy 475 396 171 135
Furniture and equipment 416 317 171 112
Communications and supplies 456 369 153 132
Taxes, other than income 251 227 85 76
Professional fees 276 108 63 40
Other 1,290 1,172 442 362
Total other expenses 7,976 6,315 2,786 2,138
Income before income taxes 4,707 4,589 1,576 1,641
Income tax expense 1,373 1,351 457 481
Net income $ 3,334 $ 3,238 $ 1,119 $ 1,160
======= ======= ======= =======
Weighted average number of shares
outstanding 3,053 2,996 3,053 2,996
======= ======= ======= =======
Basic earnings per share $ 1.09 $ 1.08 $ 0.37 $ 0.39
======= ======= ======= =======
Dividends declared per share $ 0.34 $ 0.31 $ 0.12 $ 0.11
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial
statements.
PEOPLES FIRST INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Nine Months Ended
September 30,
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,334 $ 3,238
Adjustments to reconcile net
income to net cash
Provided by operating activities:
Depreciation and amortization 451 359
Amortization of securities premium
(discount), net (3) (15)
Provision for loan losses 360 251
Deferred income taxes (193) (78)
(Increase) decrease in other assets (1,191) (151)
Increase (decrease) in other liabilities (79) (510)
Net cash provided by operating
activities 2,679 3,094
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in
interest-bearing deposits with banks (6,232) 2,592
Net (increase) decrease in federal
funds sold (15,786) 7,410
Securities held-to-maturity:
Proceeds from maturities 75 40
Purchases -- --
Securities available-for-sale:
Proceeds from maturities 9,145 10,085
Purchases (13,200) (9,208)
Net increase in loans receivable (14,634) (20,474)
Purchases of premises and equipment (3,264) (709)
Purchase of life insurance _____-- (3,500)
Net cash used in investing activities (43,896) (13,764)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in non-interest bearing
demand deposits, NOW, SuperNOW,
money market and savings deposits 20,109 6,033
Net increase (decrease) in time deposits 4,083 5,604
Net increase (decrease) in securities
sold under agreements to repurchase 1,925 995
Proceeds from long-term debt 8,000 4,500
Repayments of long-term debt (4,263) (223)
Dividends paid and cash in lieu of
fractional shares (995) (899)
Net cash provided by financing
activities 28,859 16,010
Net increase(decrease) in cash
and due from banks (12,358) 5,340
Cash and due from banks:
Beginning of year 21,517 11,397
End of period $ 9,159 $16,737
====== ======
The accompanying notes are an integral part of these financial
statements.
PEOPLES FIRST INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30, 1999
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Accumulated
Other
Common Retained Comprehensive
Stock Surplus Earnings Income Total
<S> <C> <C> <C> <C> <C>
Balance December 31, 1998 $ 2,996 $16,197 $16,411 $ 448 $36,052
Comprehensive income:
Net Income 3,238 3,238
Net change in unrealized appreciation on
securities available for sale, net of income taxes (626) (626)
Total comprehensive income 2,612
Cash dividends declared, $.31 per share ______ ______ (929) ______ (929)
Balance September 30, 1999 $ 2,996 $16,197 $18,720 $(178) $37,735
====== ====== ======= ====== ========
</TABLE>
PEOPLES FIRST INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30, 2000
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Accumulated
Other
Common Retained Comprehensive
Stock Surplus Earnings Income Total
<S> <C> <C> <C> <C> <C>
Balance December 31, 1999 $ 2,996 $16,197 $19,320 $(334) $38,179
Comprehensive income:
Net Income 3,334 3,334
Net change in unrealized appreciation on
securities available for sale, net of income taxes 181 181
Total comprehensive income 3,515
Cash dividends declared, $.34 per share (1,032) (1,032)
Common stock issued in acquisition 57 (25) 100 ______ 132
Balance September 30, 2000 $ 3,053 $16,172 $21,722 $(153) $40,794
====== ====== ======= ====== ========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
PEOPLES FIRST, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
September 30, 1999
Note A - Basis of Presentation
On July 27, 2000, Peoples First, Inc., a Pennsylvania
business corporation, completed the reorganization of The
Peoples Bank of Oxford into the holding company form of
ownership. In the reorganization The Peoples Bank of Oxford
became a wholly-owned banking subsidiary of Peoples First, Inc.
The consolidated financial statements include Peoples
First, Inc. (Peoples) and the wholly-owned subsidiary, The
Peoples Bank of Oxford (Bank). All significant inter-company
accounts and transactions have been eliminated. Currently, the
only asset of Peoples is its investment in the Bank.
The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and are presented in accordance with the instructions to Form
10-Q and Rule 10-01 of the Securities and Exchange Commission
Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the nine months ended September 30, 2000,
are not necessarily indicative of the results that may be
expected for the year ended December 31, 2000.
The consolidated financial statements presented in this
report should be read in conjunction with the audited financial
statements and the accompanying notes included in The Peoples
Bank of Oxford's Annual Report and Form 10-K filed with the
Federal Deposit Insurance Corporation for the year ended
December 31, 1999.
Note B - Accounting Policies
The accounting policies of Peoples First, Inc. as applied
in the interim consolidated financial statements presented, are
substantially the same as those followed on an annual basis as
presented in The Peoples Bank of Oxford's 1999 Annual Report and
the Form 10-K filed with the Federal Deposit Insurance
Corporation, for the year ended December 31, 1999.
Note C - Comprehensive Income
The only comprehensive income item that Peoples presently
has is unrealized gains (losses) on securities available for
sale. The federal income taxes allocated to the unrealized gains
(losses) are as follows:
Nine Months Ended
September 30,
2000 1999
(In Thousands)
Unrealized holding gains (losses)
arising during the period:
Before tax amount $274 $(948)
Tax (expense) benefit ( 93) 322
Net of tax amount $181 $(626)
Note D - Acquisition
On April 10, 2000, the Bank issued 56,918 shares of common
stock, with a fair value of $1.4 million, to acquire all of the
outstanding common stock of Gee, Wilmerding & Associates, Inc.,
a Villanova based investment firm. The company is a wholly owned
subsidiary of The Peoples Bank of Oxford and the transaction has
been accounted for as a pooling of interests. Revenues for the
nine months ended September 30, 2000, totaled $599,000. Periods
prior to January 1, 2000, have not been restated as the
adjustments are considered to be immaterial.
Note E - New Accounting Standards
In June 1998, the Financing Accounting Standards Board
issued Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (as amended by Statement Nos. 137 and
138), which becomes effective for Peoples January 1, 2001. The
adoption of the Statement is not expected to have a significant
impact on Peoples financial condition or results of operations.
In September 2000, the Financial Accounting Standards Board
issued Statement No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities" (as a replacement of Statement No. 125), which
becomes effective for Peoples January 1, 2001. The adoption of
the Statement is not expected to have a significant impact on
Peoples financial condition or results of operations.
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Forward Looking Statements
Except for historical information, this report may be
deemed to contain "forward looking" statements regarding Peoples
First, Inc. Examples of forward looking statements include, but
are not limited to, (a) projections or statements regarding
future earnings, expenses, net interest income, other income,
earnings or loss per share, asset mix and quality, growth
prospects, capital structure and other financial terms,
(b) statements of plans and objectives of management or the
Board of Directors, and (c) statements of assumptions, such as
economic conditions in Peoples' market areas. Such forward
looking statements can be identified by the use of forward
looking terminology such as "believes", "expects", "may",
"intends", "will", "should", "anticipates", or the negative of
any of the foregoing or other variations of the terms or
comparable terminology, or by discussion of strategy.
No assurance can be given that the future results covered
by forward-looking statements will be achieved. Such statements
are subject to risks, uncertainties, and other factors which
could cause actual results to differ materially from future
results expressed or implied by such forward-looking statements.
Important factors that could impact Peoples' operating results
include, but are not limited to, (i) the effects of changing
economic conditions in the local market areas and nationally,
(ii) credit risks of commercial, real estate, consumer and other
lending activities, (iii) significant changes in interest rates,
(iv) changes in federal and state banking laws and regulations
which could impact Peoples' operations, (v) funding costs, and
(vi) other external developments which could materially affect
Peoples' business and operations.
Year 2000 Project Readiness
All of Peoples efforts to resolve any possible Y2K problems
and problems related to February 29, 2000, paid off with an
uneventful transition through the time periods. Peoples will
continue to monitor its systems, but does not anticipate any
problems or additional costs. Likewise, Peoples has not been
made aware of any vendor or customer Y2K or February 29, 2000,
related problems.
Financial Condition
Peoples' total consolidated assets increased $32,427,000 or
11.09% during the first nine months of 2000. The increases in
deposits of $24,192,000, increases in securities sold under
agreements to repurchase of $1,925,000, Federal Home Loan Bank
borrowings of $3,737,000 and the increase in retained earnings
of $2,402,000 were the primary resources for the growth in
assets.
Net loans grew $14,274,000 or 6.99% for the nine months
ended September 30, 2000. Loans secured by one-to-four family
residential properties increased by $3,833,000 and loans secured
by commercial properties increased by $3,239,000. Federal funds
sold increased by $15,786,000, along with interest-bearing
deposits with banks by $6,232,000, which were partly funded by
the decrease in cash levels following Y2K. The increase of
$2,931,000 in premises and equipment, primarily reflects the new
Operations Center, which Peoples began to occupy in August 2000.
Total deposits increased by $24,192,000 or 10.46% since
year end 1999. Most of this growth was in NOW and SuperNOW
accounts which grew $19,470,000 or 70.00%; time accounts which
grew $4,083,000 or 4.91%; and demand deposits which grew
$1,164,000 or 2.12%. Helping this growth was a revamped SuperNOW
product, under the name Premier Checking, along with a special
marketing campaign to promote the product. In addition, NOW
accounts increased due to public fund tax revenue deposits,
which will run-off over the next six months.
Peoples borrowed additional long term money, from the
Federal Home Loan Bank, during the first quarter of 2000, for a
net increase of $3,737,000 for the first nine months of 2000.
The majority of long term debt is matched against a similar
volume and maturity of mortgages to our customers, which Peoples
chose to hold in its loan portfolio, instead of selling on the
secondary market. Matching these maturities has enabled Peoples
to lock in an interest rate spread and eliminate the interest
rate risk associated with holding long term mortgages, while
providing a long term cash flow of interest income.
Results of Operations
Net income for the first nine months of 2000 totaled
$3,334,000 or $1.09 per share and totaled $1,119,000 or $.37 per
share for the three months ended September 30, 2000. In
comparison, net income for the first nine months of 1999 was
$3,238,000 or $1.08 per share and $1,160,000 or $.39 per share
for the third quarter 1999. This reflects an increase in net
income of $96,000 or 2.96% for the first nine months of this
year compared to last year and a decrease of $41,000 or 3.53%
for the third quarter 2000 compared to the third quarter 1999.
Net interest income for the first nine months of 2000,
increased by $876,000 or 9.14% compared to the first nine months
of 1999. Likewise, for the third quarter of 2000, net interest
income increased $257,000 or 7.80% compared to the same period
in 1999. The increase in net interest income is primarily due to
increased interest income on the higher volume of loans
maintained during the first nine months of 2000, compared to the
similar time period in 1999. Net interest income continues to be
squeezed, with continued competition in product pricing,
including both assets and liabilities, and use of long-term debt
to fund mortgage lending (as noted above). This squeeze is
reflected in a decrease in the net interest margin of 5.19% for
the first nine months of 1999, compared to 5.03% for the year to
date 2000.
The provision for loan losses totaled $360,000 for the
first nine months of 2000, compared to $251,000 for the first
nine months of 1999. This represents an increase of $109,000 or
43.43% in relation to the provision for the first nine months of
1999. The provision for the third quarter 2000, totaled $105,000
the same as the provision for the third quarter 1999. As a
percentage of loans, the allowance for loan losses at 1.73%
increased from 1.61% at the end of 1999. Management makes
regular assessments of the provision in relation to credit
exposure, balance changes and other relevant factors and feels
the allowance is adequate at September 30, 2000.
Non-interest income increased by $1,012,000 or 64.29% and
$326,000 or 55.25% for the nine and three month time periods
ending September 30, 2000, respectively, compared to the same
periods in 1999. The increase in non-interest income, compared
to the same time period in 1999, was primarily attributed to an
increase of $587,000 in investment management fees as a result
of the Bank acquiring Gee, Wilmerding & Associates, Inc. and
$302,000 or 77.44% increase in other income. The increase in
other income was primarily a result of income from investment
products and services, which Peoples began to offer its
customers during the second quarter of 1999; and income from a
life insurance investment.
Non-interest expense increased by $1,661,000 or 26.30% for
the first nine months of 2000 compared to the same time period
in 1999 and $654,000 or 30.59% for the third quarter 2000
compared to the second quarter 1999. The largest increase was in
salaries and employee benefits, which increased by $1,086,000 or
29.15% compared to the first nine months of 1999 and $420,000 or
32.79% for the third quarter 2000 in comparison to the same
respective time period in 1999. This is primarily due to payroll
increases as a result of normal merit increases and to a greater
extent additions to staff as Gee, Wilmerding & Associates, Inc.,
expenses were combined with Peoples. Increases in payroll are
anticipated as the Bank continues to grow in size, locations,
and product offerings. In addition, professional fees increased
by $168,000 or 155.56% for the first nine months of 2000
compared to 1999. Increases in legal and accounting costs can be
attributed to the expenses associated with the acquisition of
Gee, Wilmerding & Associates, Inc., together with expenses
related to the formation of the holding company, Peoples First,
Inc. Increases in non-interest expenses were anticipated as
Peoples expanded its product lines, opened a small branch
facility at Jenners Pond, occupied the new Operations Center and
utilized advances in technology. Operating expenses are expected
to continue at higher levels as Peoples continues to expand with
new branches and products.
Liquidity
Liquidity represents Peoples' ability to efficiently manage
cash flows to support customers' loan demand, withdrawals by
depositors, the payment of operating expenses, as well as the
ability to take advantage of business and investment
opportunities as they arise. One of the Bank's sources of
liquidity is $236,258,000 in core deposits which increased
$26,214,000 or 12.48% over total core deposits of $210,044,000
at year end. Other sources of liquidity are available from
investments in federal funds sold and FHLB deposits, which total
$27,329,000 and securities maturing in one year or less, which
total $13,912,000. In comparison, federal funds sold and FHLB
deposits totaled $5,311,000 and securities maturing in one year
or less totaled $11,087,000 at year end 1999. In addition, lines
of credit have been established with the Federal Home Loan Bank
of Pittsburgh, the Federal Reserve Bank of Philadelphia and with
two of our correspondent banks, which can be drawn upon if
needed as a source of liquidity. Management is of the opinion
that the Bank's liquidity is sufficient to meet its anticipated
needs.
Capital Resources
Total stockholders' equity was $40,794,000, as of
September 30, 2000, representing a $2,615,000 increase from the
beginning of the year. The growth in capital was primarily a
result of net earnings retention of $2,402,000.
At September 30, 2000, the Bank had a leverage ratio of
12.73%, a Tier I capital to risk-based assets ratio of 17.70%,
and a total capital to risk-based assets ratio of 18.96%. These
ratios indicate the Bank exceeds the federal regulatory minimum
requirements for a "well capitalized bank."
In October 2000, the Board approved the repurchase of up to
$1,000,000 of Peoples' common stock in open market and private
transactions over the next six months. The buyback is not
expected to have a significant impact on the capital ratios.
Item 3. Quantitative and Qualitative Disclosure About Market
Risk
Please refer to The Peoples Bank of Oxford's annual report
to shareholders on Form 10-K filed with the Federal Deposit
Insurance Corporation for December 31, 1999.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
Not Applicable
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
10.1 Form of Lease Agreement for Longwood
Branch, between Ben R. Beiler, Director,
and The Peoples Bank of Oxford
10.2 Employment Agreement for George C. Mason,
Chairman and CEO
27 Financial Data Schedule
(b) Form 8-K was filed on July 28, 2000.
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.
PEOPLES FIRST, INC.
(Registrant)
Date: November 10, 2000 BY: /s/ George C. Mason
George C. Mason
Chairman of the Board
and Chief Executive
Officer
Date: November 10, 2000 BY: /s/ Susan H. Reeves
Susan H. Reeves
Senior Vice President
and Chief Financial
Officer
