FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997 Commissionfile number 0-27878
FIRST FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
RHODE ISLAND 05-0391383
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
180 WASHINGTON STREET, PROVIDENCE, RHODE ISLAND 02903
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (401) 421-3600
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 filing requirements
for the past 90 days. X Yes No
At April 30, 1997, there were 1,328,041 shares of the Company's $1.00 par value
stock issued, with 1,261,241 shares outstanding.
FIRST FINANCIAL CORP.
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements............................................ 1
Consolidated Balance Sheets - March 31, 1997 and December 31, 1996....... 1
Consolidated Statements of Income - Three months ended March 31, 1997 and
1996.................................................................... 2
Consolidated Statements of Stockholders' Equity - Three months ended
March 31, 1997 and year ended December 31, 1997......................... 3
Consolidated Statements of Cash Flows - Three months ended March 31, 1997
and 1996................................................................ 4
Notes to Consolidated Financial Statements - March 31, 1997.............. 5
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................... 7
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings............................................... 12
Item 2 - Changes in Securities........................................... 12
Item 3 - Defaults Upon Senior Securities................................. 12
Item 4 - Submission of Matters to a Vote of Security Holders............. 12
Item 5 - Other Information............................................... 12
Item 6 - Exhibits and Reports on Form 8-K................................ 13
SIGNATURES............................................................... 14
EXHIBITS
Computation of per share earnings - Exhibit 11...................... 15
Financial Data Schedule - Exhibit 27................................ 16
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
FIRST FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------- ------------
ASSETS (Unaudited)
<S> <C> <C>
CASH AND DUE FROM BANKS......................................................... $1,935,895 $1,988,713
----------- ------------
SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL................................. 1,577,000 2,376,000
----------- ------------
LOANS HELD FOR SALE............................................................. 610,170 160,000
----------- ------------
SECURITIES:
Held-to-maturity (market value: $12,076,129 and $13,747,464)............... 12,137,955 13,780,519
Available-for sale (amortized cost: $27,032,054 and $28,354,439)........... 26,966,606 28,411,326
----------- ------------
Total investment securities........................................... 39,104,561 42,191,845
----------- ------------
FEDERAL HOME LOAN BANK STOCK.................................................... 447,700 348,100
----------- ------------
LOANS:
Commercial................................................................. 5,143,524 5,074,679
Commercial real estate..................................................... 42,419,431 40,225,717
Residential real estate.................................................... 22,435,270 22,978,397
Home equity lines of credit................................................ 3,087,264 3,088,134
Consumer................................................................... 1,158,166 1,236,216
----------- ------------
74,243,655 72,603,143
Less - Unearned discount................................................... 59,348 66,716
Allowance for possible loan losses......................................... 1,979,708 1,942,457
----------- ------------
Net loans............................................................. 72,204,599 70,593,970
----------- ------------
OTHER REAL ESTATE OWNED......................................................... 760,176 675,607
----------- ------------
PREMISES AND EQUIPMENT,net...................................................... 1,887,907 1,645,280
----------- ------------
OTHER ASSETS.................................................................... 1,762,503 1,433,485
----------- ------------
TOTAL ASSETS.................................................................... $120,290,511 $121,413,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS:
Demand......................................................................... $11,503,816 $ 11,270,046
Savings and money market accounts.............................................. 22,447,108 22,749,700
Time deposits.................................................................. 58,548,269 59,856,363
----------- ------------
Total deposits............................................................. 92,499,193 93,876,109
----------- ------------
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE.................................. 10,778,000 10,778,000
----------- ------------
ACCRUED EXPENSES AND OTHER LIABILITIES.......................................... 1,290,070 1,294,594
----------- ------------
SENIOR DEBENTURE, net of unamortized discount
of $40,558 and $105,604.................................................... 2,959,442 2,894,396
----------- ------------
STOCKHOLDERS' EQUITY:
Common Stock, $1 par value
Authorized - 5,000,000 shares
Issued - 1,328,041 shares and 750,000 shares............................ 1,328,041 1,328,041
Surplus.................................................................... 4,431,380 4,431,380
Retained earnings.......................................................... 7,190,613 6,923,308
Unrealized (loss) gain on securities available-for-sale, net of taxes...... (39,268) 34,132
----------- ------------
12,910,766 12,716,861
Less - Treasury stock, at cost, 66,800 shares.............................. 146,960 146,960
----------- ------------
Total stockholders' equity............................................ 12,763,806 12,569,901
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................................... $120,290,511 $121,413,000
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1
FIRST FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
1997 1996
---- ----
(Unaudited)
INTEREST INCOME:
<S> <C> <C>
Interest and fees on loans..................................................... $1,769,959 $1,621,750
Interest on investment securities -
U.S. Government and agency obligations..................................... 396,889 332,363
Collateralized mortgage obligations........................................ 31,044 26,925
Mortgage backed securities................................................. 202,554 -------
Marketable equity securities and other......................................... 6,145 1,638
Interest on cash equivalents................................................ .. 30,808 40,571
--------- ---------
Total interest income.......................................................... 2,437,399 2,023,247
--------- ---------
INTEREST EXPENSE:
Interest on deposits........................................................... 938,550 908,131
Interest on repurchase agreements.............................................. 159,762 --------
Interest on debenture.......................................................... 65,046 62,094
--------- ---------
Total interest expense......................................................... 1,163,358 970,225
--------- ---------
Net interest income............................................................. 1,274,041 1,053,022
PROVISION FOR POSSIBLE LOAN LOSSES................................................ 75,000 70,000
Net interest income after provision for possible loan losses............... 1,199,041 983,022
NONINTEREST INCOME:
Service charges on deposits.................................................... 83,055 75,165
Gain on sale of securities..................................................... -------- --------
Gain on loan sales............................................................. -------- --------
Other.......................................................................... 40,343 36,656
--------- ---------
Total noninterest income................................................... 123,398 111,821
--------- ---------
NONINTEREST EXPENSE:
Salaries and employee benefits................................................. 428,120 419,933
Occupancy expense.............................................................. 88,474 99,416
Equipment expense.............................................................. 50,193 51,526
Other real estate owned net losses, and expenses............................... 17,120 28,089
Computer services.............................................................. 41,214 41,890
Deposit insurance assessments.................................................. 2,435 --------
Other operating expenses....................................................... 177,070 167,014
--------- ---------
Total noninterest expense................................................. 804,626 807,868
--------- ---------
Income before provision for income taxes.................................. 517,813 286,975
PROVISION FOR INCOME TAXES........................................................ 187,446 86,887
--------- ---------
NET INCOME........................................................................ $ 330,367 $ 200,088
========== =========
Earnings per share................................................................ $ 0.26 $ 0.28
========== =========
Dividends paid per share.......................................................... $ 0.05 $ 0.03
========== =========
Weighted average common and common stock equivalent shares outstanding............ 1,261,241 711,483
========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
FIRST FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unrealized
Gain (Loss)
on Securities
Available Total
Common Retained for Sale, Net Treasury Stockholders'
Stock Surplus Earnings of Taxes Stock Equity
----- ------- -------- -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $750,000 $500,000 $6,013,638 $ 74,911 $(146,960) $7,191,589
Net income ----------- ----------- 1,043,677 ----------- ---------- 1,043,677
Dividends ($.12 per share) ----------- ----------- (134,007) ----------- ---------- (134,007)
Exercise of stock options and
related tax effect 28,041 (41,744) ---------- ----------- ---------- (13,703)
Issuance of 550,000 shares of
common stock, net of offering
costs 550,000 3,973,124 ---------- ----------- ---------- 4,523,124
Change in net unrealized gain (loss)
on securities available-for-sale ----------- ----------- ---------- (40,779) ---------- (40,779)
----------- ----------- ---------- ---------- ---------- ----------
Balance, December 31, 1996 1,328,041 4,431,380 6,923,308 34,132 (146,960) 12,569,901
Net income ----------- ---------- 330,367 ----------- ---------- 330,367
Dividends declared
($.05 per share) ----------- ----------- (63,062) ----------- ---------- (63,062)
Change in net unrealized gain (loss)
on securities available-for-sale ----------- ----------- ---------- (73,400) ---------- (73,400)
----------- ----------- ---------- ---------- ---------- ----------
Balance, March 31, 1997 $1,328,041 $4,431,380 $7,190,613 $ (39,268) $(146,960) $12,763,806
========== ========== ========== ========= ========= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
FIRST FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
---- ----
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income........................................................... ............... $330,367 $200,088
Adjustments to reconcile net income to net cash (used in) provided by operating
activities:
Provision for possible loan losses................................................... 75,000 70,000
Depreciation and amortization........................................................ 46,348 46,363
Losses (gains) on sale of OREO....................................................... 982 (8,384)
Gain on sales of loans............................................................... --------- ----------
Proceeds from sales of loans......................................................... 168,018 219,683
Loans originated for sale............................................................ (610,170) (203,710)
Net (accretion) on investment securities held-to-maturity........................... (3,167) (1,057)
Net (accretion) on investment securities available-for-sale.......................... (25,717) (16,161)
Net (decrease) in unearned discount.................................................. (7,368) (11,347)
Net (increase) in other assets...................................................... (329,018) (169,644)
Accretion of discount on debenture................................................... 50,269 62,094
Net increase (decrease) in deferred loan fees........................................ 44,486 (5,630)
Net increase in accrued expenses and other liabilities............................... 33,963 15,595
------ ------
Net cash (used in) provided by operating activities.................................. (226,007) 197,890
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Federal Home Loan Bank stock............................................. (99,600) ----------
Proceeds from maturities of investment securities held-to-maturity................... 2,895,731 6,247,088
Proceeds from maturities of investment securities available-for-sale................. 9,065,310 5,900,000
Purchase of investment securities held-to-maturity................................... (1,250,000) (1,998,202)
Purchase of investment securities available-for-sale................................. (7,717,208) (4,888,555)
Net increase in loans................................................................ (1,891,765) (2,451,664)
Purchase of premises and equipment................................................... (288,975) (10,972)
Sales of OREO........................................................................ 75,449 216,384
------ -------
Net cash provided by investing activities............................................ 788,942 3,014,079
------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand accounts........................................... 233,770 (2,820,115)
Net (decrease) in savings and money market accounts.................................. (302,592) (277,669)
Net (decrease) increase in time deposits............................................. (1,308,094) 2,347,245
Dividends paid....................................................................... (37,837) (20,496)
------- -------
Net cash (used in) financing activities.............................................. (1,414,753) (771,035)
---------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS.................................. (851,818) 2,440,934
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........................................ 4,364,713 2,901,249
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD.............................................. $3,512,895 $5,342,183
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid........................................................................ $1,141,449 $ 879,371
========== ==========
Income taxes paid.................................................................... $ 234,937 $ 82,750
========== ==========
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Transfer of loans to OREO............................................................ $ 161,000 $ 3,000
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MARCH 31, 1997
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Article 10 of 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 considered necessary for a fair
presentation of the financial statements, primarily consisting of
normal recurring adjustments, have been included. Operating results for
the three months ended March 31, 1997 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1997
or any other interim period.
For further information refer to the consolidated financial statements,
notes and other information included in the Company's annual report and
Form 10-K for the period ended December 31, 1996, filed with the
Securities and Exchange Commission.
(2) PUBLIC OFFERING
On May 13, 1996, the Securities and Exchange Commission simultaneously
declared effective the Company's Registration Statement on Form S-1
filed under the Securities Act of 1933, as amended and its Registration
Statement on Form 8-A filed under the Securities Exchange Act of 1934,
as amended. The Registration Statement related to the public offering
of 550,000 shares of Common Stock. On May 13, 1996 the Company entered
into an Underwriting Agreement with Sandler O'Neill & Partners, L.P.
(Underwriter) to purchase from the Company the shares of the Common
Stock at the public offering price of $9.75 per share, less an
underwriting discount of $.58 per share. On May 17, 1996, the Company
received from the Underwriter the net proceeds of the public offering
in the amount of $5,043,500 exclusive of $520,376 in expenses incurred
in connection with the offering, while the number of common shares
outstanding increased to 1,261,241 shares; including 28,041 shares
issued in connection with the exercise of certain stock options.
(3) DIVIDEND DECLARATION
On February 10, 1997 the Company declared dividends of $63,062 or $.05
per share to all common stockholders of record on March 14, 1997,
payable on April 1, 1997.
5
(4) RECENT DEVELOPMENTS
In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings
per Share". SFAS No. 128 standardized the calculation of earnings per
share with International Accounting Standard No. 33. SFAS No. 128 is
effective for both interim and annual periods ending after December 15,
1997. Early application is prohibited, although footnote disclosure of
pro forma earnings per share amounts computed under SFAS No. 128 is
permitted.
The following table presents the earnings per share computations as
reported and pro forma for the three months ended March 31,1997 and
1996.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1997 1996
---- ----
<S> <C> <C>
Average shares outstanding............................. 1,261,241 683,200
Average dilutive option shares......................... ------ 28,283
------ --------
Total average shares................................. 1,261,241 711,483
========= =======
Net income............................................. $ 330,367 $200,088
========== ========
As Reported:
Earnings per share................................... $ 0.26 $ 0.28
========== ========
Pro Forma:
Basic earnings per share............................. $ 0.26 $ 0.29
========== ========
Diluted earnings per share........................... $ 0.26 $ 0.28
========== ========
</TABLE>
In January 1997, the Bank entered into a definitive agreement with Wal-Mart
Stores, Inc. of Bentonville, Arkansas, pursuant to which the Bank will open de
novo branch offices in two Wal-Mart Stores located in Rhode Island. Upon opening
of the branches, the Bank will be the first financial institution headquartered
in Rhode Island to open banking offices in Wal-Mart, the world renowned retailer
which operates more than 2,200 stores in the United States.
The Bank expects to open the branches in June 1997, subject to receipt of
required regulatory approvals. The branches will be full-service retail branches
offering all of the retail products offered at the Bank's three other branch
offices, including checking and savings accounts, consumer loans, and mortgages.
The branches will be open seven days a week and will include full service
automated teller machines (ATMs). First Bank estimates it will hire up to 18
individuals to staff the in-store branches.
In February 1997, the Bank gave notice to NCR Corporation that the Bank was
terminating its Data Processing Contract with NCR Corporation. In connection
with the termination of the Data Processing Contract, the Bank will incur a
termination penalty of approximately $83,000, which was fully reserved for by
the Bank. In April 1997, the Bank entered into a contract with BYSIS for the
provision of data processing services commencing in the latter part of the
second quarter of 1997.
6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
First Financial Corp. ("Company") is a bank holding company that was organized
under Rhode Island law in 1980 for the purposes of owning all of the outstanding
capital stock of First Bank and Trust Company ("Bank") and providing greater
flexibility in helping the Bank achieve its business objectives. The Bank is a
Rhode Island chartered commercial bank that was originally chartered and opened
for business on February 14, 1972. The Bank provides a broad range of lending
and deposit products primarily to individuals and small businesses ($10 million
or less in total revenues). Although the Bank has full commercial banking and
trust powers, it has not exercised its trust powers and does not, at the current
time, provide asset management or trust administration services. The Bank's
deposits are insured by the FDIC up to applicable limits.
The Bank offers a variety of consumer financial products and services designed
to satisfy the deposit and loan needs of its retail customers. The Bank's retail
products include interest-bearing and noninterest-bearing checking accounts,
money market accounts, passbook and statement savings, club accounts, and
short-term and long-term certificates of deposit. The Bank also offers customary
check collection services, wire transfers, safe deposit box rentals, and
automated teller machine (ATM) cards and services. Loan products include
commercial, commercial mortgage, residential mortgage, construction, home equity
and a variety of consumer loans.
The Company's results of operations depend primarily on its net interest income,
which is the difference between interest and dividend income on interest-earning
assets and interest expense on its interest-bearing liabilities. Its
interest-earning assets consist primarily of deposits, securities sold under
agreements to repurchase and the Senior Debenture. The Company's net income is
also affected by its level of noninterest income, including fees and service
charges, as well as by its noninterest expenses, such as salary and employee
benefits, provisions to the allowance for possible loan losses, occupancy costs
and, when necessary, expenses related to OREO and to the administration of
non-performing and other classified assets.
SUMMARY
Total assets decreased $1,122,489 or 0.9% from $121,413,000 at December 31, 1996
to $120,290,511 at March 31, 1997. The loan portfolio increased $1,640,512 or
2.3% from $72,603,143 at December 31, 1996 to $74,243,655 at March 31, 1997. The
loan growth was primarily funded from Securities and Cash and Cash Equivalents
which decreased $3,939,102 from $46,556,558 at December 31, 1996 to $42,617,456
at March 31, 1997. Total deposits decreased $1,376,916 from $93,876,109 at
December 31, 1996 to $92,499,193 at March 31, 1997.
For the three months ended March 31, 1997, the Company reported net income of
$330,367 compared to net income of $200,088 for the three months ended March 31,
1996, or an increase of 65.1%. Fully diluted net income per share for the
quarter ended March 31, 1997 was $.26, compared to $.28 per share in the first
quarter of 1996.
The Company's improved earnings performance resulted from (i) an increase in
earning assets funded from the net proceeds of the public offering completed in
May 1996 and the use of repurchase agreements, (ii) improvement in asset quality
reflected by decreases in nonperforming loans, nonperforming assets, and net
loan charge-offs, and (iii) controlled overhead spending.
7
FINANCIAL CONDITION
ASSET QUALITY
The following table sets forth information regarding non-performing assets and
delinquent loans 30-89 days past due as to interest or principal, and held by
the Company at the dates indicated. The amounts and ratios shown are exclusive
of the acquired loans and acquired allowance for possible loan losses associated
with the 1992 acquisition of certain assets and the assumption of certain
liabilities of the former Chariho-Exeter Credit Union:
<TABLE>
<CAPTION>
AS OF AND FOR THE AS OF AND FOR THE
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
--------- ------------
1997 1996 1996
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Nonperforming loans........................................ $ 289 $ 515 $ 428
Other real estate owned.................................... 760 1,265 676
Total nonperforming assets................................. 1,049 1,780 1,104
Loans 30-89 days delinquent................................ 533 250 196
Nonperforming assets to total assets....................... 0.91% 1.78% 0.95%
Nonperforming loans to total loans......................... 0.42% 0.77% 0.64%
Net loan charge-offs to average loans...................... 0.01% 0.08% 0.19%
Allowance for possible loan losses to total loans..... 1.84% 1.45% 1.78%
Allowance for possible loan losses
to nonperforming loans................................... 439.18% 172.06% 280.35%
</TABLE>
The following represents the activity in the allowance for possible loan losses
for the three months ended March 31, 1997:
<TABLE>
<CAPTION>
BANK ACQUIRED TOTAL
---- -------- -----
<S> <C> <C> <C>
Balance at December 31, 1996...................... $1,199,617 $742,840 $1,942,457
Provision for Possible loan losses................ 75,000 ----------- 75,000
Charge-offs....................................... (17,130) (28,654) (45,784)
Recoveries........................................ 10,019 (1,984) 8,035
------ ------ -----
Balance at March 31, 1997......................... $1,267,506 $712,202 $1,979,708
========== ======== ==========
</TABLE>
The Company continually reviews its delinquency position, underwriting and
appraisal procedures, charge-off experience and current real estate market
conditions with respect to its entire loan portfolio. While management believes
it uses the best information available in establishing the allowance for
possible loan losses, future adjustments may be necessary if economic conditions
differ substantially from the assumptions used in making the evaluation.
DEPOSITS
Total deposits decreased $1,376,916 during the three months ended March 31, 1997
from $93,876,109 at December 31, 1996, to $92,499,193 at March 31, 1997. Demand,
Savings and Money Market accounts remained relatively flat while the majority of
the decrease occurred within Time Deposits. This decrease was primarily the
result of a competititve deposit pricing environment.
8
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income (the difference between interest earned on loans and
investments and interest paid on deposits and other borrowings) increased to
$1,274,041 at March 31, 1997, compared to $1,053,022 for the first quarter of
1996. This increase was the result of an increase in interest earning assets
which was partially offset by a decrease in net interest margin.
The table below shows the average balance sheet, the interest earned and paid on
interest-earning assets and interest-bearing liabilities, and the resulting net
interest spread and margin for the periods presented.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
---------------------------------- -----------------------------------
INTEREST AVERAGE INCREASE AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
(DOLLARS IN THOUSANDS)
INTEREST - EARNING ASSETS:
<S> <C> <C> <C> <C> <C> <C>
Loans ...................................... $73,625 $1,770 9.62% $65,773 $1,621 9.86%
Investment securities taxable - AFS......... 27,479 445 6.48 12,169 191 6.28
Investment securities taxable - HTM......... 12,975 185 5.70 12,667 169 5.34
Securities purchased under agreements to
resell.................................... 2,629 31 4.72 3,260 41 5.03
Federal Home Loan Bank Stock................ 349 6 6.88 348 1 1.15
--- - ---- --- - ----
TOTAL INTEREST-EARNING ASSETS................. 117,057 2,437 8.33 94,217 2,023 8.59
NONINTEREST-EARNING ASSETS:
Cash and due from banks..................... 1,366 1,827
Premises and equipment...................... 1,671 1,805
Other real estate owned..................... 799 1,391
Allowance for possible loan losses.......... (1,883) (1,858)
Other assets................................ 1,098 1,021
----- -----
TOTAL NONINTEREST-EARNING ASSETS.............. 3,051 4,186
----- -----
TOTAL ASSETS.................................. $120,108 $98,403
======== =======
INTEREST - BEARING LIABILITIES:
Deposits:
Interest bearing demand and NOW
deposits................................ $2,919 14 1.92 $ 2,414 12 1.99
Savings deposits.......................... 18,193 119 2.62 19,626 129 2.63
Money market deposits..................... 1,497 9 2.40 1,754 10 2.28
Time deposits............................. 59,207 796 5.38 52,890 757 5.73
Securities sold under agreements to
repurchase................................ 10,778 160 5.94 ----- ---- -----
Senior debenture............................ 2,927 65 8.88 2,876 62 8.62
----- -- ---- ----- -- ----
TOTAL INTEREST-BEARING LIABILITIES............ 95,521 1,163 4.87 79,560 970 4.88
NONINTEREST-BEARING LIABILITIES:
Noninterest-bearing deposits................ 11,510 10,943
Other liabilities........................... 399 632
--- ---
TOTAL NONINTEREST-BEARING LIABILITIES......... 11,909 11,575
STOCKHOLDERS' EQUITY.......................... 12,678 7,268
------ -----
TOTAL LIABILITIES AND STOCKHOLDERS'
equity...................................... $120,108 $98,403
======== =======
NET INTEREST INCOME........................... $1,274 $ 1,053
====== ========
NET INTEREST SPREAD........................... 3.46% 3.71%
==== ====
NET INTEREST MARGIN........................... 4.35% 4.47%
==== ====
</TABLE>
9
Total interest income for the three months ended March 31, 1997 was $2,437,399,
compared to $2,023,247 for the same three month period of the prior year. This
increase of $414,152, or 20.5%, was primarily the result of a $22,840,000
increase in quarterly average interest-earning assets, offset somewhat by a 26
basis point reduction in yields on earning assets to 8.33% during the first
quarter of 1997 compared to 8.59% during the first quarter of 1996. The increase
in average interest-earning assets was funded primarily from the net proceeds of
the second quarter 1996 public offering of $4.5 million; the leveraging, to some
extent, of the net proceeds of the public offering through the execution of
securities sold under agreements to repurchase in the amount of $10.8 million;
and a $5.7 million increase in average interest and noninterest-bearing
deposits. The decline in yields on interest-earning assets was largely due to
the origination or repricing of loans in a lower interest rate environment,
along with a shift in earning asset mix, wherein the higher-yielding loan
portfolio comprised 62.9% of total average interest-earning assets for the first
quarter of 1997, as compared to 69.8% during the first quarter of 1996.
Total interest expense for the three months ended March 31, 1997 was $1,163,358,
compared to $970,225 for the same period of 1996. This increase of $193,133, or
19.9%, was solely attributable to a $15,961,000 increase in average
interest-bearing liabilities. Although a shifting of interest-bearing
liabilities occurred within various deposit catagories, growth within deposits
occurred in time deposits in a lower interest rate environment. This offset the
increase in securities sold under agreements to repurchase at rates higher than
the overall cost of funds. Effectively, the Company's rate on interest-bearing
liabilities remained unchanged at 4.87% for the first quarter of 1997, compared
to 4.88% for the first quarter of 1996.
Despite a 25 basis point reduction in net interest spread, the Company's net
interest margin decreased 12 basis points to 4.35% for the three months ended
March 31, 1997, compared to 4.47% for the three months ended March 31, 1996. The
diminished decrease in margins relative to spreads is primarily attributable to
the utilization within earning assets of the increase in noninterest-bearing
deposits and stockholders' equity.
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses totaled $75,000 for the three months
ended March 31, 1997, as compared to $70,000 during the same period of the prior
year. Despite improvement in asset quality, the provision remained flat in order
to provide for the overall growth of the loan portfolio.
NONINTEREST INCOME
Total noninterest income totaled $123,398 for the three months ended March 31,
1997 as compared to $111,821 during the same period of the prior year. Service
charges on deposits increased $6,890 primarily due to increased volumes in
transaction accounts.
10
NONINTEREST EXPENSE
Total noninterest expense decreased $3,242 or .4% to $804,626 from $807,868
during the three month period ended March 31, 1997 and March 31, 1996,
respectively.
Salaries and employee benefits increased $8,187 to$428,120 from $419,933. This
increase was primarily attributed to salary adjustments and adoption of an
employee savings incentive (401K) plan, both effective on January 1, 1997.
Occupancy expense decreased $10,942 to $88,474 from $99,416, mainly due to lower
snow removal and winter related repair costs. Carrying and disposition costs
related to other real estate owned (OREO) decreased $10,969, or 39.1%, to
$17,120 from $28,089. This decrease bears a direct correlation to OREO which
declined 39.9% to $760,176 at March 31, 1997, from $1,265,310 at March 31, 1996.
INCOME TAXES
Income taxes for the three months ended March 31, 1997 were 36.2% of pretax
income, compared to 30.3% for the comparable period of 1996. The lower effective
tax rate in 1996 was the result of the reversal of excess federal tax reserves.
CAPITAL ADEQUACY
The FDIC and the Federal Reserve Board have established guidelines with respect
to the maintenance of appropriate levels of capital by both the Bank and the
Company.
Set forth below is a summary of FDIC and Federal Reserve Board capital
requirements, and the Company's and the Bank's capital ratios as of March 31,
1997:
REGULATORY
MINIMUM (2) ACTUAL
----------- ------
The Company (1)
Risk-based:
Tier 1............ 4.00% 16.32%
Totals............ 8.00 17.57
Leverage............. 3.00 10.61
The Bank
Risk-based:
Tier 1............ 4.00% 15.18%
Totals............ 8.00 16.43
Leverage.......... 3.00 10.16
- -------------------------
(1) The regulatory capital guidelines with respect to bank holding companies are
not applicable unless the bank holding company has either consolidated assets in
excess of $150 million or either: (i) engages in any bank activity involving
significant leverage; or (ii) has a significant amount of outstanding debt that
is held by the general public. Otherwise, the Federal Reserve Board applies its
capital adequacy requirements on a "bank only" basis.
(2) The 3% regulatory minimum leverage ratio applies only to certain
highly-rated banks. Other institutions are subject to higher
requirements.
11
ASSET/LIABILITY MANAGEMENT
The Company's objective with respect to asset/liability management is to
position the Company so that sudden changes in interest rates do not have a
material impact on net interest income and stockholders' equity. The primary
objective is to manage the assets and liabilities to provide for profitability
and capital at prudent levels of liquidity and interest rate, credit, and market
risk.
The Company uses a static gap measurement as well as a modeling approach to
review its level of interest rate risk. The internal targets established by the
Company are to maintain: (i) a static gap of no more than a positive 10% or
negative 15% of total assets at the one year time frame; (ii) a change in
economic market value from base present value of no more than positive or
negative 30%; and (iii) a change in net interest income from base of no more
than positive or negative 17%.
At December 31, 1996, the most recent date for which this information is
available, the Company's one year static gap position was a negative $15,124,000
or 12.46% of total assets.
LIQUIDITY
Deposits and borrowings are the principal sources of funds for use in investing,
lending and for general business purposes. Loan and investment amortization and
prepayments provide additional significant cash flows. At March 31, 1997, the
Company had $30,479,501, or 25.3% of assets in cash and cash equivalents and
investments classified available-for-sale. The Bank is a member of the Federal
Home Loan Bank of Boston, and as such has access to an unused borrowing capacity
of $8,960,000 at March 31, 1997, of which $2,022,000 was in the form of an
overnight Line of Credit.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company and the Bank are involved in routine legal proceedings occurring in
the ordinary course of business. In the opinion of management, final disposition
of these lawsuits will not have a material adverse effect on the financial
condition or results of operations of the Company or the Bank in the aggregate.
ITEM 2 - CHANGES IN SECURITIES
Not applicable.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5 - OTHER INFORMATION
Not applicable.
12
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
10.12 Service Agreement dated as of
April 1, 1997 by and between
First Bank and Trust
Company and BISYS, Inc.
(Confidential treatment to be
requested for certain portions
of the Exhibit) Computation
11 of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
None
13
SIGNATURES
Under 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.
First Financial Corp.
May 9, 1997 \s\ Patrick J. Shanahan, Jr.
- ----------- ----------------------------
Date Patrick J. Shanahan, Jr.
President and Chief Executive Officer
May 9, 1997 \s\ John A. Macomber
- ----------- --------------------
Date John A. Macomber
Vice President, Treasurer
and Chief Financial Officer
14
EXHIBIT 10.12
SERVICES AGREEMENT
BISYS, INC. Contract No.
11 Greenway Plaza --------------
Houston, Texas 77046-1102 Price List No.
------------
Client First Bank and Trust Company
--------------------------------------------------------------------------
Address 180 Washington Street
-------------------------------------------------------------------------
City Providence State Rhode Island Code 02901-0758
------------------------- --------------------------- --------------
1. SCOPE OF AGREEMENT
Client agrees to convert to the BISYS system (defined in Paragraph 2(C) below)
and BISYS, Inc. ("BISYS") shall provide Client, in accordance with this
Agreement, the services selected by Client from BISYS' then applicable Standard
Services Price List and/or Special Services Price List (collectively, the "Price
Lists") (collectively, the "Services"). BISYS shall provide the reports listed
on the Standard Reports List and Special Reports List as applicable to the
Services selected by Client. The current Price Lists are attached hereto and
made a part hereof.
2. TERM OF AGREEMENT
A. The initial term of this Agreement shall commence the date this Agreement is
executed by both parties and end 96 full calendar months after the
"Conversion Date" (as defined in Paragraph 4 (B)) (the "Initial Period").
B. The Agreement shall automatically continue after the Initial Period for
subsequent consecutive terms of three years each unless and until it is
terminated by either party upon written notice to the other given at least
180 days prior to the end of the Initial Period or any additional three year
period.
C. If Client has given BISYS notice pursuant to Paragraph 2(B) and Client
intends to deconvert from the BISYS data processing system ("BISYS System"),
Client may, upon written notice to BISYS given at any time during the final
120 days of this Agreement (as determined in accordance with 2(B) above) or
any extension hereof pursuant to this Paragraph 2(C), extend the termination
date to the date indicated in such notice, which date shall not be, in any
event, less than 120 days after the date of such notice. Commencing at the
end of the Initial Period or any renewal period (as applicable), Client
shall pay for Services at the prices set forth in the then current BISYS
Price Lists notwithstanding the giving of extension notice.
D. Continuing obligations under this Agreement including, without limitation,
those relating to "BISYS Products" (defined in Paragraph 10(A));
"Confidential Information" (defined in Paragraph 10(F)) and "Client Files"
(defined in Paragraph 8(A)), shall survive any termination.
3. CHARGES
A. Each month commencing Conversion Date, whether or not Client actually uses
any Services during such month, Client shall pay a minimum monthly charge
equal to the greater of (i) $ ; (ii) BISYS' charges for the Services
actually used by Client during such month; (iii) 80% of the charges invoiced
to Client during the immediately preceding month; or (iv) 80% of the charges
invoiced to Client for the month immediately preceding any deconversion by
Client if Client deconverts from the BISYS System.
B. The initial charges for the Services are specified in the Price Lists, and
shall be recorded by the BISYS System or by any other means used by BISYS of
determining Client's usage. The charges for the Services listed on the
Standard Services Price List as of the date hereof will not be changed by
BISYS until the expiration of the first year following Conversion Date.
Thereafter, during the remaining term of the Initial Period, the charges for
the Services listed on the Standard Services Price List may be changed by
BISYS at any time and from time to time upon at least 90 days prior written
notice to Client. During the Initial Period, the charges for the Services
listed on the Special Services Price List as of the date hereof may be
changed by BISYS at any time after the date hereof upon at least 90 days
prior written notice to Client. After the Initial Period, the charges for
the Services listed on the Price Lists shall automatically, and without
notice, be changed to BISYS' standard (non-discounted) list prices then in
effect for the respective Services; such prices may, thereafter, be changed
by BISYS, at any time and from time to time, upon at least 90 days prior
written notice to Client.
C. There shall be added to all charges for the Services furnished Client
hereunder amounts equal to any applicable taxes levied or based on such
Services, exclusive of taxes based on BISYS' income.
D. No later than the 5th day of each calendar month, BISYS shall invoice (the
"Monthly Invoice") Client: (i) for all Services projected to be used by
Client during that billing month (the "Billing Month") which charge will be
based upon either actual usage and number of accounts during the month prior
to the Billing Month or the minimum charge pursuant to Paragraph 3(A); (ii)
an amount equal to 100% of the recurring pass through charges (e.g.
communication charges) actually utilized by Client during the prior month as
the estimated pass through charges for the Billing Month; (iii) adjustments
(debits/credits) to the prior month's estimated charges set forth in (i) and
(ii) above and; (iv) all other charges incurred by Client during the prior
month. For the projected portion of the invoice, the first Monthly Invoice
shall be based upon BISYS' estimates of usage and shall also include for the
prior month (during which the Conversion Date occurred) a full month's
charges unless the Conversion Date is after the 15th of the prior month, in
which event Client shall be assessed one-half month's charges for the prior
month. Client agrees to pay all amounts set forth in the Monthly Invoice by
automatic debit by BISYS on the last business day of the Billing Month from
a Client bank account established for this purpose (the "Payment Account").
Client agrees to execute any and all required documentation to enable BISYS
to perform such automatic debiting of the Payment Account. If Client fails
to pay any amounts due under this Agreement, Client shall, upon demand, pay
interest at the rate of 1-1/2% per month, but in no event more than the
highest interest rate allowable, on such delinquent amounts from their due
date until the date of payment. Client agrees to reimburse BISYS for any and
all expenses BISYS may incur, including reasonable attorney fees, in taking
action to collect any amounts due BISYS hereunder. All amounts due must be
paid prior to Client's deconversion from the BISYS System.
4. CONVERSION TO THE SERVICES
A. BISYS shall, to the extent applicable, convert machine readable Client Files
to make them compatible with the Services selected by Client from the
Standard Services Price List. Client agrees to cooperate with BISYS and
provide all necessary information and assistance required for BISYS to
successfully convert such Client Files. Client will assign a liaison person
to assist and cooperate with BISYS in such conversion.
B. BISYS shall determine in accordance with its normal acceptance procedures
when the applicable Client Files have been successfully converted and when
the Services selected by Client from the Standard Services Price List are
operational and available for Client's use. The date the first of the
Services selected by Client from the Standard Services Price List is
operational and available for Client's use is the "Conversion Date".
5. AVAILABILITY OF THE SERVICES
A. Hours for accessing Services on an on-line basis ("On-Line Hours") at the
BISYS data center providing Services to Client ("Data Center") are 7:00 A.M.
to 9:00 P.M. Monday through Friday and 7:00 A.M. to 5:00 P.M. Saturday (Data
Center time) exclusive of BISYS holidays (New Years Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day). A
particular Service may also be available at other than On-Line Hours; in
which event Client may, at its option and subject to any additional charges
therefor, use that Service at such other times.
B. BISYS will make every reasonable effort to have the Services available
during the On-Line Hours. However, BISYS cannot and does not guarantee such
availability. Accordingly, Client's remedy and BISYS' sole liability to
Client or any third party for claims, notwithstanding the form of such
claims (e.g., contract, negligence or otherwise), arising out of (i) the
unavailability of the BISYS System or (ii) the interruption in or delay of
the Services provided or to be provided by BISYS hereunder, shall be for
BISYS to use all reasonable efforts to make the BISYS System available
and/or to resume the Services as promptly as reasonably practicable.
C. Client shall, at it's expense, be responsible for delivering and
transmitting to and from Client's offices, the offices of the applicable
regulatory authorities and any other location authorized by Client, and the
Data Center all data and information necessary for BISYS to furnish the
Services to Client.
6. USE OF THE SERVICES
A. Client is exclusively responsible for the consequences of its own actions;
for any instructions it gives BISYS; for its failure to access the Services
in the manner prescribed by BISYS, and for its failure to supply accurate
input information. Client is responsible for auditing, balancing, verifying
the correctness of calculation routines (such as interest and service
charges) and reconciling any out-of-balance condition, and for notifying
BISYS of any errors in the foregoing within three business days after
receipt of the incorrect information. Client's remedy and BISYS' sole
liability to Client or any third party for any claims, notwithstanding the
form of such claims (e.g., contract, negligence or otherwise), arising out
of errors or omissions in the Services provided or to be provided by BISYS
hereunder and caused by BISYS shall be for BISYS to furnish the correct
report and/or to correct the applicable Client Files, provided that Client
promptly advises BISYS thereof.
B. Client shall use the Services in accordance with such reasonable
instructions as may be established by BISYS from time to time as set forth
in any written materials furnished by BISYS to Client.
C. Except as otherwise permitted by BISYS, Client will use the Services only
for its own internal and proper business purposes and will not sell or
otherwise provide, directly or indirectly, any of the Services or any
portion thereof to any third party.
D. Client shall not make any alteration, change or modification to any of the
computer programs, data bases and/or BISYS supported files used by BISYS in
connection with providing the Services to Client hereunder, without BISYS'
prior written consent in each instance.
E. BISYS shall give Client written notice of any BISYS system change which
materially affects Client. Nothing herein shall preclude or limit BISYS'
ability to make changes to its data processing system.
7. COMMUNICATION LINES AND EQUIPMENT.
A. BISYS shall order, on Client's behalf and with Client's approval, the
installation of appropriate telephone lines and communications equipment to
enable Client to access the Services. Client shall pay all charges relating
to the installation and use of such telephone lines and communications
equipment.
B. BISYS shall not be responsible for the reliability, or continued
availability, of telephone lines and communications equipment used by Client
in accessing the Services.
8. FILE SECURITY AND RETENTION.
A. Any Client data bases and files or other information provided by Client to
BISYS for use with the Services (the "Client Files") shall remain the
confidential property of Client. BISYS will provide reasonable security
provisions to insure that third parties do not have access to the Client
Files. BISYS reserves the right to issue and change regulations and
procedures from time to time to improve file security. BISYS will instruct
its employees having access to the Client files to keep the same
confidential by using the same care and discretion that BISYS uses with
respect to its own confidential property.
B. BISYS will take reasonable precautions to prevent the loss of, or alteration
to, Client Files, but BISYS cannot guarantee against any such loss or
alteration. Accordingly, Client will, to the extent deemed necessary by
Client, keep copies of all source documents of information delivered to
BISYS and will maintain a procedure external to the BISYS System for the
reconstruction of lost or altered Client Files. In connection with the
foregoing, it is understood that Client shall assume and be responsible for
risk of loss and/or damage to documents and records while they are in
transit to and from the Data Center.
C. During the term of this Agreement, BISYS will retain the Client Files in
accordance with, and to the extent provided by BISYS' then prevailing
records retention policies for the Services, which policies will be
consistent with guidelines covering the Services established by appropriate
regulatory authorities. BISYS will, upon the expiration of any retention
period for Client Files, dispose of Client Files in any manner deemed
appropriate by BISYS unless Client, prior to such disposal, furnishes to
BISYS written instructions for the disposition of such Client Files at
Client's expense. Client shall pay for the provision of Client Files to
Client at BISYS' standard rates for such services and BISYS shall provide
such Client Files provided that BISYS has been paid for all Services
provided hereunder through the date such requested Client Files are returned
to Client.
D. BISYS has a written Disaster Recovery Plan establishing emergency
procedures, including off-premises backup facility. In connection therewith,
BISYS has prepared a Disaster Recovery Manual. The Disaster Recovery Plan
and Disaster Recovery Manual are available at the Data Center for
examination by bank auditors and examiners and, as they may be modified from
time to time, will remain in existence during the term of this Agreement.
BISYS shall provide Client, upon written request, with information necessary
for Client to develop a disaster contingency plan which will work in concert
with BISYS' Disaster Recovery Plan.
9. DUTIES UPON TERMINATION; RETURN OF RECORDS.
A. Upon the termination of this Agreement for any reason, BISYS will dispose of
all Client Files still in the BISYS System in any manner deemed appropriate
by BISYS unless Client, not later than 30 days after such termination,
furnishes to BISYS written instructions for the disposition of such Client
Files at Client's expense as set forth in Paragraph 9(B).
B. At Client's request as set forth in Paragraph 9(A), BISYS shall deliver to
Client all of the Client Files then retained by BISYS including file layouts
and their descriptions in BISYS format and shall provide in accordance with
BISYS deconversion policies, reasonable and necessary assistance with the
deconversion from the BISYS System to a non-BISYS system ("Deconversion").
Client shall pay BISYS for Deconversion assistance in accordance with BISYS'
then current Deconversion rate schedule. Payment for Deconversion together
with all other payments which are due, and which will become due pursuant to
the provisions of this Agreement shall be paid to BISYS prior to delivery of
such Client Files.
C. Client Files returned to Client shall be in a standard BISYS machine
readable format.
10. OWNERSHIP, USE AND CONFIDENTIALITY; BISYS PRODUCTS AND CONFIDENTIAL
INFORMATION.
A. All computer programs and related documentation made available, directly or
indirectly, by BISYS to Client as part of the Services (the "BISYS
Products") are the exclusive and confidential property of BISYS or the third
parties from whom BISYS has secured the right to use such computer programs
and documentation.
2
B. A personal, non-exclusive, non-transferable right and license is being
granted to Client to use, during the term of this Agreement, any
applications software programs included in the BISYS Products (the
"Application Programs") which are delivered to Client as part of the
Services solely for Client's own business usage. Client shall not have any
interest in the Applications Programs except for this limited license.
C. Client shall receive all improvements, enhancements, modifications and
updates to any Applications Programs which are delivered to Client as part
of the Services if, and as, made available by BISYS to its clients
generally. All such improvements, enhancements, modifications and updates
shall be delivered to Client in the form of a computer media, which media
shall be provided to Client by BISYS and shall be installed by Client. If
Client fails to install any such media within 45 days of its receipt from
BISYS, BISYS shall have no further obligation to provide Client with
improvements, enhancements, modifications or updates to such Application
Programs.
D. Client acknowledges that it shall be deemed a sublicensee of BISYS for any
systems software programs included in the BISYS Products (the "Systems
Programs") which are delivered to Client as part of the Services. Client
accepts a sublicense from BISYS of the Systems Programs on a personal,
non-exclusive, non-transferable basis with the right to use, during the term
of this Agreement, such Systems Programs solely in connection with the
Services.
E. Client shall not copy, in whole or in part, any BISYS Products or related
documentation, whether in the form of computer media, printed or in any
other form. Client shall not make any alteration, change or modification to
any BISYS Products.
F. Client shall treat as confidential and will not disclose or otherwise make
available any of the BISYS Products or any trade secrets, processes,
proprietary data, information or documentation related thereto including,
without limitation, any flow charts, logic diagrams or source code
(collectively the "Confidential Information"), in any form, to any person
other than employees of Client. Client will instruct its employees who have
access to the BISYS Products and the Confidential Information to keep the
same confidential by using the same care and discretion that Client uses
with respect to its own confidential property and trade secrets. Upon the
termination of this Agreement for any reason, Client shall return to BISYS
any and all copies of the BISYS Products and the Confidential Information
which are in its possession.
11. GOVERNMENTAL AGENCIES.
A. Client shall provide all required notices to the appropriate regulatory
authorities concerning the initiation or termination of this Agreement, or
of any substantial changes in the Services being provided to Client. BISYS
agrees that any and all Client Files maintained by it for the Client
pursuant to this Agreement shall be available for inspection by the
appropriate regulatory authorities and Client's internal auditors and
independent public accountants, upon prior written notice to BISYS. All
costs incurred by BISYS in the preparation of data for inspection,
examination or audit will be charged to Client at BISYS' then standard rates
for such services.
B. BISYS shall provide annually to the appropriate regulatory authorities any
Third Party Review Reports prepared by independent public accountants with
respect to the Services performed by BISYS at the Data Center and copies of
BISYS' audited financial statements. By entering into this Agreement, BISYS
agrees that it extends to the Office of Thrift Supervision ("OTS") the same
authority and responsibility (as applicable to Client) provided to the other
regulatory agencies pursuant to the Bank Service Corporation Act, 12 U.S.C.
1867(C) relating to services performed by contract or otherwise.
C. If after the date hereof any modifications to the Services shall be required
by law or by any governmental regulatory authority, BISYS shall, except to
the extent such changes may be beyond the capability of the BISYS System to
implement, conform the Services to be in compliance with such modified laws
or governmental regulations. BISYS may, at its discretion, pass on, in whole
or in part, on an equitable basis to all users of the Services (including
Client) affected by any such modification the actual costs incurred by BISYS
in making any such modification to the Services.
12. WARRANTY.
A. BISYS represents and warrants that the Services will conform materially to
their design specifications and user documentation which may be changed from
time to time. This warranty shall not extend to any of the computer
programs, data bases and/or BISYS supported files used by BISYS in
connection with providing the Services to Client hereunder which have been
altered, changed or modified in any way, without BISYS' prior written
consent in each instance.
B. EXCEPT AS SPECIFICALLY PROVIDED HEREIN, THERE ARE NO WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OR
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
13. LIMITATION OF LIABILITY.
A. The remedies specified in this Agreement constitute Client's sole and
exclusive remedies in the event of any alleged defaults by BISYS under this
Agreement. BISYS' sole liability, if any, for damages (monetary or
otherwise) resulting from claims made by Client or any third party arising
from or related to any and all causes not covered by the foregoing remedies
shall be limited to the lesser of (i) the amount of actual damages incurred
by Client or (ii) an amount which shall not exceed the charges paid by
Client during the six (6) month period immediately preceding the event from
which such liability arose for the Services performed which gave rise to the
claim.
B. IN NO EVENT WILL BISYS BE RESPONSIBLE FOR SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES WHICH CLIENT MAY INCUR OR EXPERIENCE ON ACCOUNT OF
ENTERING INTO OR RELYING ON THIS AGREEMENT, EVEN IF BISYS HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES.
14. PATENT AND COPYRIGHT INDEMNIFICATION.
BISYS will hold Client harmless and, at its own expense, will defend any action
brought against Client based on a claim that the Services used within the scope
of this Agreement infringe a United States patent or copyright provided Client
notifies BISYS promptly in writing of the claim, BISYS has sole control of the
defense of the action and all negotiations for its settlement or compromise, and
Client cooperates with BISYS in the defense of the action. In the event any of
the Services becomes, or in BISYS' opinion is likely to become, the subject of a
claim of infringement of patent or copyright, BISYS, at its option, may (i)
secure for Client the right to continue using such Service(s), (ii) replace or
modify such Services to make it or them non-infringing, (iii) cease providing
the affected Service(s) or (iv) if none of the foregoing options is commercially
reasonable, in BISYS' opinion, terminate this Agreement. If BISYS exercises its
option hereunder to terminate this Agreement, such termination shall be at no
penalty to BISYS except that BISYS shall provide the Deconversion assistance
described in Paragraph 9(B) at no charge to Client.
15. INSURANCE.
BISYS shall maintain, during the term of this Agreement, $10,000,000 of coverage
under a Blanket Crime Policy covering fraudulent and dishonest acts committed by
its employees for which it is legally responsible. BISYS shall maintain, on its
own behalf, insurance coverage for loss from fire, disaster, or other causes
contributing to interruption of normal services. Client, at its own expense,
will maintain all insurance and fidelity bonds required by the applicable
regulatory authorities.
16. DEFAULT; REMEDIES UPON DEFAULT.
A. Any of the following events will constitute an "Event of Default" under the
Agreement: (i) non-payment of any amounts due hereunder to BISYS by Client;
(ii) non-performance of any of Client's or BISYS' other material obligations
hereunder; (iii) if any representation or warranty of Client or BISYS is
materially breached; (iv) if Client or BISYS files a petition for bankruptcy
or becomes the subject of an involuntary bankruptcy petition which is not
vacated within 60 days of filing,
3
or becomes insolvent; or (v) if any substantial part of Client's or BISYS'
property becomes subject to any levy, seizure, assignment, application or
sale for or by any creditor or governmental agency.
B. Upon occurrence of an Event of Default under the Agreement, the
non-defaulting party may, at its option, terminate this Agreement provided
at least 30 days (or longer period as may be required by the applicable
regulatory authorities) prior written notice has been given to the other and
such default has not been cured within such period. Upon such termination by
BISYS, BISYS may declare all amounts due and to become due hereunder
immediately due and payable. The remedies contained in this Paragraph 16 are
cumulative and in addition to all other rights and remedies available to the
parties under this Agreement or by operation of law or otherwise.
17. FORCE MAJEURE
BISYS shall not be liable or deemed to be in default for any delay or failure to
perform under this Agreement or for interruption of the Services resulting,
directly or indirectly, from any cause beyond BISYS' reasonable control.
18. GENERAL.
A. BISYS shall provide Client upon written request, copies of The BISYS Group,
Inc.'s (BISYS' parent corporation) current audited financial statements.
B. Client acknowledges that it has not been induced to enter into this
Agreement by any representation or warranty not set forth in this Agreement.
This Agreement contains the entire agreement of the parties with respect to
its subject matter and supersedes all existing agreements and all other
oral, written or other communications between them concerning its subject
matter. This Agreement shall not be modified in any way except by a writing
signed by both parties.
C. The failure by either party hereto to insist upon strict performance of any
of the provisions contained herein shall in no way constitute a waiver of
its rights as set forth herein, at law or equity, or a waiver by either
party of any other provisions or subsequent default by the other party in
the performance of or compliance with any of the terms and conditions set
forth herein.
D. This Agreement may not be assigned by either party, in whole or in part,
without the prior written consent of the other which consent shall not be
unreasonably withheld. It shall not be deemed an assignment requiring
consent if the stock of either is sold, or all, or substantially all, of the
assets are sold so long as such sale does not materially negatively affect
the basis of the financial bargain upon which this Agreement is based as of
the date hereof and such sale does not materially negatively affect the
provision of the Services hereunder. If there is such a negative impact,
then the sale shall be deemed an assignment requiring consent as set forth
above. This Agreement shall be binding upon and shall inure to the benefit
of BISYS and Client and their respective successors and permitted assigns.
E. If any provision of this Agreement (or any portion thereof) shall be held to
be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remainder of this Agreement shall not in any way be
affected or impaired thereby.
F. The headings in this Agreement are intended for convenience of reference and
shall not affect its interpretation.
G. The individuals executing this Agreement on behalf of BISYS and Client do
each hereby represent and warrant that they are duly authorized by all
necessary action to execute this Agreement on behalf of their respective
principals.
H. Client acknowledges that a breach of any of its obligations under this
Agreement relating to the BISYS Products and/or the Confidential Information
will cause BISYS irreparable injury and damage and therefore may be enjoined
through injunctive proceedings in addition to any other rights or remedies
which may be available to BISYS, at law or in equity and BISYS grants Client
the same rights with respect to a breach of BISYS' obligations relating to
the confidentiality of Client Files.
I. During the term of this Agreement, neither party hereto shall, directly or
indirectly, solicit or encourage to leave, any employee of the other without
prior written consent, which consent shall not be unreasonably withheld.
BISYS, INC. FIRST BANK AND TRUST COMPANY
Agreed to: /s/ William W. Neville Agreed to: /s/ John A. Macomber
------------------------------- -----------------------
(signature-Authorized Officer) (signature-Authorized
Representative)
Name: William W. Neville Name: John A. Macomber
------------------------------------ ----------------------------
(print or type) (print or type)
Date: 3/31/97 Date: 4/1/97
Title: Senior Vice President Title: V.P., Treasurer, CRO
----------------------------------- ---------------------------
(print or type) (print or type)
- --------------------------------------------------------------------------------
THIS AGREEMENT SHALL BECOME EFFECTIVE UPON BEING SIGNED BY AUTHORIZED OFFICERS
OF BISYS AND CLIENT. BISYS' MARKETING REPRESENTATIVES DO NOT HAVE THE AUTHORITY
TO BIND BISYS.
- --------------------------------------------------------------------------------
4
ADDENDUM TO SERVICES AGREEMENT NO. ___________________
SERVICES AGREEMENT DATED AS OF __________________
Reference is made to the above Services Agreement between the undersigned (the
"Agreement") to which this Addendum is attached and made a part thereof.
The Agreement is hereby amended and supplemented as follows:
1. Except as expressly amended and supplemented hereby, all terms defined
in the Agreement shall have the same meanings when used herein.
2. Term of Agreement
2.1 Section 2 of the Agreement is supplemented by inserting the following
new paragraph after Paragraph 2(D):
"E. Client shall have the opportunity to terminate this
Agreement prior to the end of the Initial Period by providing
BISYS with at least 180 days prior written notice not later
than the last day of the fifty-fourth (54th) calendar month
following Conversion Date, and such termination shall be
effective provided that:
1. The effective termination date must occur
during the sixtieth (60th) calendar month
following Conversion Date;
2. Client shall pay BISYS for all Services,
including pass-through charges, provided to
Client through the effective termination
date of this Agreement;
3. Client shall pay BISYS for all Deconversion
assistance in accordance with Paragraph 9(B)
of this Agreement; and
4. All payments must be made prior to delivery
of Client Files.
F. Notwithstanding anything to the contrary contained in
Paragraph 2 of the Agreement, if at any time during the
Initial Period Client is acquired by or merged into (and is
not the surviving entity) a financial organization which does
not have a valid Services Agreement with BISYS, Client shall
have the option to terminate this Agreement prior to the end
of the Initial Period upon at least 180 days prior written
notice to BISYS of its intention to terminate this Agreement
and such termination shall be effective provided that:
1. Client provides written notice of its
intention to terminate this Agreement not
later than 90 days after the receipt of
regulatory approval from the appropriate
government regulatory agency;
2. Client shall pay BISYS an amount based on
the month during which the effective
termination date occurs as follows:
(a) if the effective termination date
occurs prior to the last day of the
fifty-ninth (59th) month following
Conversion Date, then Client pays
BISYS an amount equal to (i)
thirty-six (36) times (ii) the
charges for Services invoiced to
Client for the month immediately
preceding the date of the notice of
termination;
(b) if the effective termination dates
occurs after the last day of the
fifty-ninth 59th) month following
Conversion Date, then Client pays
BISYS twenty-four (24), or if the
number of months remaining in the
Initial Period is less than
twenty-four months then such number
of remaining months, times the
charges for Services invoiced to
Client for the month immediately
preceding the date of the notice of
termination.
3. Client shall pay BISYS for all Services
provided by BISYS through the effective
termination date, including pass-through
charges;
4. Client shall pay BISYS for all Deconversion
assistance in accordance with Paragraph 9(B)
of the Agreement; and
5. All payments must be made prior to delivery
of Client Files.
3. Charges
3.1 Section 3 of the Agreement is supplemented by inserting the
following new paragraphs after Paragraph 3(D):
"E. For purposes of this Agreement and Addendum the following
terms shall have the meanings stated:
"Client Accounts" shall mean deposit and loan accounts on the
BISYS System, including, but not limited to Savings
Accounts-Account Base, Time Deposits/ Certificates of Deposits
Accounts-Account Base, Transaction Accounts-Account Base
(including DDA, MMDA, NOW, SUPER NOW, Money Market), Line of
Credit Accounts- Account Base, Mortgage Loans-Account Base,
Construction Loans-On Line History, Commercial Loans-Account
Base, Installment Loans-Account Base, Adjustable Installment
Loans, Commercial Loan Processing, Construction/Commercial
Loan Control Accounts-Construction Loans,
Construction/Commercial Loan Control Accounts- Commercial
Loans.
"Exhibit A Services" shall mean the Services identified on
attached Exhibit A (both the Standard Services and Special
Services listed on Exhibit A). The parties agree that included
in the definition of Exhibit A Services are Client usage of
any features associated with the Services listed on the
Standard Services portion of Exhibit A which features are in
existence and available to Client as of the date of this
Addendum. Neither features, nor Services, listed on the Price
Lists as of the date hereof, but not set forth on Exhibit A
shall be deemed to be part of the Exhibit A Services and such
other Services and/or features shall be billed to Client in
accordance with the provisions of Paragraph 3(G) below. The
parties also agree that Exhibit A Services are recurring
Services and do not include any installation charges, training
charges, one-time license fees or any other one-time charges.
"One Year Period" shall mean each twelve (12) calendar month
period commencing the first day of the first full calendar
month following the Conversion Date and the indication as to
which twelve (12) month period is indicated will be with the
addition of an ordinal number preceding the term One Year
Period, e.g., First One Year Period, Second One Year Period,
etc.
F. For any and all usage of Exhibit A Services, Client agrees
to pay BISYS each month, a fixed monthly charge (the "Fixed
Monthly Charge") in accordance with the following:
1. On Conversion Date, BISYS will determine the
number of Client Accounts converted to the
BISYS System. During the First One Year
Period, the Fixed Monthly Charge will be
______ Client accounts times $_.__ or
$________. If the number of Client Accounts
is greater than ______, then the Fixed
Monthly Charge during the First One Year
Period will be calculated as (x) $________
plus (y) (the number of Client Accounts in
excess of ______ times $____).
2
2. At the end of each One Year Period, BISYS
will calculate the average number of Client
Accounts on the BISYS System each month
based on the number of Client Accounts on
the BISYS System during the immediately
preceding twelve (12) months (the "Year End
Accounts"). The Fixed Monthly Charge for the
next One Year Period will be calculated in
accordance with the provisions of Paragraph
3(F)(1) above.
G. In addition to the Fixed Monthly Charge for the Exhibit A
Services, Client will pay BISYS each month:
1. For all usage of Services, not specifically
set forth on Exhibit A; and
2. For all pass-through charges.
H. During the first eighteen (18) months of the Initial
Period, BISYS agrees to grant Client a non-cumulative monthly
credit in the amount of $_________ to be applied against the
charges for Services set forth on the Monthly Invoice,
provided, however, in no event will the aggregate amount of
this credit exceed $_________.
I. Despite the provisions of Paragraph 3(B), the charges for
the Standard Services (including the Standard Services set
forth on Exhibit A), will not change during the First, Second
and Third One Year Periods. Commencing on the first day of the
Fourth One Year Period, the charges for the Standard Services
may be changed by a percentage not to exceed
__________________, provided however, that during the
remainder of the Initial Period, in no event will the charges
for the Standard Services be increased in the aggregate by an
amount greater than _________________.
J. BISYS agrees that the one-time installation charges
associated with the Services set forth on Exhibit B will not
be changed during the First One Year Period. Thereafter, these
charges are subject to the increase provisions of Paragraph
3(B) of the Agreement and do not include pass-through charges.
K. BISYS agrees that the monthly recurring charges for the
Special Services listed on Exhibit C represent estimated
monthly recurring charges based on account volumes presented
to BISYS by Client prior to Conversion Date. Accordingly, such
charges may be subject to change after Conversion Date. These
charges will be subject to the price increase provisions of
Paragraph 3(b) of the Agreement.
4. Availability of Services.
4.1 Paragraph 5(A) of the Agreement is amended by inserting the
following language after the last sentence: "During the
Initial Period, BISYS will make available to Client 'memo post
transaction' processing from 7:00 AM to 5:00 PM Sunday,
exclusive of the aforementioned BISYS holidays".
5. BISYS Services/Products Upgrades.
5.1 During the Initial Period, BISYS anticipates that a
Windows(R)-based version of Total Financial Manager (the "TFM
Upgrade") will be made available to BISYS clients.
Accordingly, BISYS agrees that if Client elects to purchase
the TFM Upgrade, BISYS will grant Client a credit against the
one-time implementation charges associated with the TFM
Upgrade provided, however, that Client purchases the TFM
Upgrade not later than six (6) months after the TFM Upgrade
has been made generally available to all BISYS clients. The
credit will be in an amount equivalent to the one-time
implementation charges paid to BISYS by Client for the current
version of TFM.
3
6. Neither BISYS nor Client shall (except to persons acting on behalf of
such party) disclose, and neither party shall permit any of its
employees or other persons who act or acted in its behalf to disclose,
any of the terms and conditions of the Agreement, including without
limitation any Addendum or pricing terms, except as may be required by
law.
Except as expressly amended and supplemented hereby, the Agreement shall remain
unchanged and continue to be in full force and effect.
This Addendum supersedes and replaces any prior agreement (written or oral) as
to its subject matter. If there is any conflict between the terms and conditions
of this Addendum and the terms and conditions of the Agreement or any prior
addendum to this Agreement, the Terms and Conditions of this Addendum shall
prevail.
BISYS, INC. FIRST BANK AND TRUST COMPANY
By: /s/ William W. Neville By: /s/ John A. Macomber
------------------------------------ --------------------------------
Name: William W. Neville Name: John A. Macomber
------------------------------------ ------------------------------
Title: Senior Vice President Title: V.P., Treasurer, CFO
--------------------------------- -----------------------------
Date: March 31, 1997 Date: April 1, 1997
---------------------------------- ------------------------------
- --------------------------------------------------------------------------------
THIS ADDENDUM SHALL BECOME EFFECTIVE UPON BEING SIGNED BY AN AUTHORIZED OFFICER
OF BISYS. BISYS' MARKETING REPRESENTATIVES DO NOT HAVE THE AUTHORITY TO BIND
BISYS.
- --------------------------------------------------------------------------------
4
FIRST BANK AND TRUST COMPANY
EXHIBIT A SERVICES
TRANSACTION ACCOUNT PROCESSING (DDA, MMDA, NOW, COMMERCIAL DDA, SUPERNOW)
Account Processing Check Register on Statement DDA Statement Production
(includes interim statements) Account Analysis Line-of-Credit
Processing Variable Interest Rate Processing
AutomaticData Capture (includes exception item pull, detail record
transmitted, statement rendering file and detail record
transmitted)
Interactive Exception Handling
Item Processing Interface
SAVINGS AND CERTIFICATES OF DEPOSITS
On line History
Retirement Accounts
Statement Production (monthly)
Interest Checks
Variable Interest Rate Processing
OTHER DEPOSIT SERVICES
Anniversary Processing
CD Renewal Confirmation
Electronic Funds Transfer Notification
Combined Statements
Currency Reporting
Additional History Retention
On Line File Maintenance History
Overdraft Remainder Notices
Host Signature Support
Trust/Surrogate/Escrow Minor
Retirement Account Annual Statements
Service Charging
Tenant Rent Security Processing
Account Reconciliation
Sweep Account Processing
ACHIPS
ACHIPS Processing
Return Item Module
Pre-processing Module
Transit Processing Module
MORTGAGE LOANS
Mortgage Loan Preceding
Escrow Analysis
History- One Year
Tax and Insurance System
Adjustable Loans (includes payment/interest adjustment customer
notices)
FIRST BANK & TRUST COMPANY
EXHIBIT A SERVICES (CONT.)
Investor Reporting (includes multi-investor reporting, GNMA/FNMA Pools,
FHLMC MIDANET Remittance Tape (form 308), and Report to Credit
Bureaus)
LASERNET Remittance Tape
Automatic Posting of Mortgage Loan Investor Transactions to GL & DDA
FASB #91
Lock Box Stop Tape Production
Interest on Ecrow Accounting
Mortgage Loan History cards
CONSTRUCTION LOANS (MORTAGE LOAN SYSTEM)
Per construction loan account
Per Monthly interest billling notice
On line History
CONSUMER LOANS PROCESSING
Adjustable Installment Loans (notices)
On line history
Extended on line history for life of loan
Bill & receipt consumer loan accounts
Coupon loans (MICR/OCR tape)
Customer notices and billings (share loan, maturity, fixed rate,
floating rate, line of credit)
Dealer Reporting and floor planning
Investor Reporting
Multi-investor reporting
Pool reporting
Lock box stop tape production
Student loan processing
FASB # 91
Credit Bureau Reporting Per Tape
Overdraft Loan Notices
Student Loan Check Production
COMMERCIAL LOANS
ACH PROCESSING
Incoming and Outgoing Transaction Processing (does not include TTM or
ACHIPS)
CENTRAL INFORMATION FILE
CIF Account Processing (includes action and collection memos)
GENERAL LEDGER & FINANCIAL
Total Financial Manager General Ledger
Accounts Payable
Fixed Asset Accounting
OTHER
1099, 1098, W-2 Processing
TargetPlus (twenty reports per month)*
Remote Report Printing
*any Client usage of TargetPlus in excess of this number will be
charged to Client at the charges set forth in the Price Lists
FIRST BANK AND TRUST COMPANY
EXHIBIT B
<TABLE>
<CAPTION>
SERVICE ONE-TIME INSTALLATION CHARGE(1)
- ------- -------------------------------
<S> <C>
Conversion Service(2) $
Total Financial Manager Core Package for LAN(2) $
ATM Electronic Funds Transfer Network Interface
for Batch Processing(2) $(3)
TOTALPLUS Information Management System (TIMS/QM)
including purchase of BISYS recommended hardware(2) $
Terminal Operator Security System (TOSS)(2) $
BISYS Encore Branch Automation Software License
(includes maximum 16 Teller Stations, 12 Platform
Stations and 19 Back-Office Copies)(2) $
Safe Deposit Box Tracking(2) $
ACHIPS - ACH Return Item Processing(2) $
Total Access Banking Voice Response System for 4 line
model, including purchase of BISYS recommended
hardware(2) $
On-Line Debit Card Processing $
Total Sales Manager installation and training fee $
Total Marketing Manager with BISYS Householding
license, installation and training fee $
Total Treasury Manager Autocash Manager license fee for
10 copies of software $
Summit Customer Profitability System Level One LAN software
installation fee $
Commercial Loan Origination $
Total Financial Manager ALBUM (Asset Liability) software
installation charge for LAN $
Telecommunications Services for 5 locations(2) $
</TABLE>
(1)These one-time installation charges do not include out-of-pocket travel and
lodging expenses or other pass-through charges incurred by BISYS associated with
the installation of the Services.
(2)This amount represents the initial conversion to the BISYS System and
includes travel and lodging expenses associated with this initial conversion.
(3)If Client elects to utilize BISYS' on-line ATM Services ("On-Line ATM ), this
amount will be applied against the $________ one time charges associated with
On-Line ATM.
FIRST BANK AND TRUST COMPANY
EXHIBIT C
<TABLE>
<CAPTION>
ESTIMATED
MONTHLY FEES
------------
<S> <C>
SPECIAL SERVICES
ATM Batch Processing (through Deluxe) $
TIMMS/QM Optical System
BISYS Encore Branch Automation (includes 16 Teller,
12 Platform, 19 Back-Office Copies)
Disaster Recovery Assessment
Host Safe Deposit Box Tracking
ACHIPS - ACH Return Item Processing
ReconPlus - Account Reconciliation
Terminal Connection Services (47 Terminals)
OPTIONAL SERVICES
TABS Voice Response $
On Line Debit Card Processing
Commercial Loan Origination
TSM - Sales and Incentive Tracking
TMM - Total Marketing Manager
TTM - Total Treasury Manager (10 Copies)
Customer Profitability
ALBUM - Asset Liability Management
TELECOMMUNICATIONS SERVICES
Frame Relay Wide Area Network with ISDN Dial Backup
Support (5 Locations) $
</TABLE>
NOTE: These charges are estimated monthly fees and may be subject to change
if any volumes change after Conversion Date.
EXHIBITS
Computation of per share earnings - Exhibit 11
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1997 1996
---------- ---------
<S> <C> <C>
Average shares outstanding 1,261,241 683,200
Average dilutive option shares - 28,283
--------- --------
Total average shares 1,261,241 711,483
========= ========
Net income $ 330,367 $200,088
========= ========
Earnings per share $ 0.26 $ 0.28
========= ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 1,935,895
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,577,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 26,966,606
<INVESTMENTS-CARRYING> 12,137,955
<INVESTMENTS-MARKET> 12,076,129
<LOANS> 74,794,477
<ALLOWANCE> 1,979,708
<TOTAL-ASSETS> 120,290,511
<DEPOSITS> 92,499,193
<SHORT-TERM> 10,778,000
<LIABILITIES-OTHER> 1,290,070
<LONG-TERM> 2,959,442
0
0
<COMMON> 1,328,041
<OTHER-SE> 11,435,765
<TOTAL-LIABILITIES-AND-EQUITY> 120,290,511
<INTEREST-LOAN> 1,769,959
<INTEREST-INVEST> 667,440
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 2,437,399
<INTEREST-DEPOSIT> 938,550
<INTEREST-EXPENSE> 1,163,358
<INTEREST-INCOME-NET> 1,274,041
<LOAN-LOSSES> 75,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 804,626
<INCOME-PRETAX> 517,813
<INCOME-PRE-EXTRAORDINARY> 517,813
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 330,367
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
<YIELD-ACTUAL> 4.35
<LOANS-NON> 288,605
<LOANS-PAST> 73,308
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,236,813
<ALLOWANCE-OPEN> 1,942,457
<CHARGE-OFFS> 45,784
<RECOVERIES> 8,035
<ALLOWANCE-CLOSE> 1,979,708
<ALLOWANCE-DOMESTIC> 1,979,708
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
