<PAGE>
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 Commission file number
SEPTEMBER 30, 1999 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 such filing
requirements for the past 90 days. X Yes No
----- -----
At October 29, 1999, there were 1,328,041 shares of the Company's $1.00 par
value stock issued, with 1,231,241 shares outstanding.
<PAGE>
FIRST FINANCIAL CORP.
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
Item 1 - Financial Statements................................................................................................... 1
Consolidated Balance Sheets - September 30, 1999 and December 31, 1998..................................................... 1
Consolidated Statements of Income - Three months and nine months ended September 30, 1999 and 1998......................... 2
Consolidated Statements of Stockholders' Equity and Comprehensive Income - Nine months ended September 30, 1999 and
year ended December 31, 1998............................................................................................... 3
Consolidated Statements of Cash Flows - Nine months ended September 30, 1999 and 1998...................................... 4
Notes to Consolidated Financial Statements - September 30, 1999............................................................ 5
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations.................................. 7
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings...................................................................................................... 14
Item 2 - Changes in Securities.................................................................................................. 14
Item 3 - Defaults Upon Senior Securities........................................................................................ 14
Item 4 - Submission of Matters to a Vote of Security Holders.................................................................... 15
Item 5 - Other Information...................................................................................................... 15
Item 6 - Exhibits and Reports on Form 8-K....................................................................................... 15
SIGNATURES...................................................................................................................... 16
EXHIBITS
Computation of per share earnings - Exhibit 11.................................................................................. 17
Financial Data Schedule - Exhibit 27............................................................................................ 18
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
FIRST FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
-------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CASH AND DUE FROM BANKS...................................................... $ 1,835,893 $ 2,342,782
SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL.............................. 2,614,444 2,723,488
LOANS HELD FOR SALE.......................................................... 1,158,207 357,493
INVESTMENT SECURITIES:
Held-to-maturity (market value: $16,025,418 and $13,673,673).............. 16,205,969 13,733,393
Available-for sale (amortized cost: $30,590,928 and $32,969,558).......... 30,373,049 33,087,290
------------ ------------
Total investment securities.......................................... 46,579,018 46,820,683
------------ ------------
FEDERAL HOME LOAN BANK STOCK................................................. 610,100 447,700
LOANS:
Commercial................................................................ 11,419,748 14,762,537
Commercial real estate.................................................... 63,761,538 50,646,390
Residential real estate................................................... 13,491,510 16,417,012
Home equity lines of credit............................................... 3,001,456 3,489,029
Consumer.................................................................. 865,983 1,047,141
------------ ------------
92,540,235 86,362,109
Less - Unearned discount.................................................. 33,366 66,264
Allowance for loan losses................................................. 1,479,782 1,287,058
------------ ------------
Net loans............................................................ 91,027,087 85,008,787
------------ ------------
OTHER REAL ESTATE OWNED...................................................... 47,290 513,127
PREMISES AND EQUIPMENT, net.................................................. 2,137,445 2,416,790
OTHER ASSETS................................................................. 1,785,505 1,288,080
------------ ------------
TOTAL ASSETS................................................................. $147,794,989 $141,918,930
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS:
Demand..................................................................... $ 21,124,026 $ 15,743,185
Savings and money market accounts.......................................... 23,971,884 21,940,330
Time deposits.............................................................. 64,359,438 66,688,413
------------ ------------
Total deposits........................................................ 109,455,348 104,371,928
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE............................... 9,439,699 12,255,880
FEDERAL HOME LOAN BANK ADVANCES.............................................. 12,200,893 6,204,077
ACCRUED EXPENSES AND OTHER LIABILITIES....................................... 1,466,006 1,302,316
SENIOR DEBENTURE............................................................. -- 2,971,487
------------ ------------
TOTAL LIABILITIES............................................................ 132,561,946 127,105,688
------------ ------------
STOCKHOLDERS' EQUITY:
Common Stock, $1 par value
Authorized - 5,000,000 shares
Issued - 1,328,041 shares.............................................. 1,328,041 1,328,041
Surplus.................................................................... 4,431,380 4,431,380
Retained earnings.......................................................... 10,135,684 9,130,143
Accumulated other comprehensive income..................................... (130,727) 70,638
------------ ------------
15,764,378 14,960,202
Less - Treasury stock, at cost, 96,800 shares in 1999; 66,800 shares
in 1998................................................................. 531,335 146,960
------------ ------------
TOTAL STOCKHOLDERS' EQUITY................................................... 15,233,043 14,813,242
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................... $147,794,989 $141,918,930
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE>
FIRST FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- ----------------------------
1999 1998 1999 1998
-------------- ------------- ------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans.................................. $6,423,225 $5,790,886 $2,222,141 $1,979,698
Interest and dividends on investment securities-
U.S. Government and agency obligations................... 1,320,632 1,404,151 467,667 495,037
Collateralized mortgage obligations...................... 102,407 30,396 28,337 14,720
Mortgage-backed securities........................... 302,415 417,021 94,642 143,598
Marketable equity securities and other................... 53,748 53,155 22,050 15,872
Interest on cash equivalents................................ 112,337 172,366 37,828 39,888
---------- ---------- ---------- ----------
Total interest income.................................... 8,314,764 7,867,975 2,872,665 2,688,813
---------- ---------- ---------- ----------
INTEREST EXPENSE:
Interest on deposits........................................ 2,798,458 3,089,046 940,818 1,018,466
Interest on repurchase agreements........................... 443,843 551,110 143,332 197,762
Interest on advances........................................ 365,661 82,484 150,197 43,217
Interest on debenture....................................... 84,503 193,184 -- 64,037
---------- ---------- ---------- ----------
Total interest expense................................... 3,692,465 3,915,824 1,234,347 1,323,482
---------- ---------- ---------- ----------
Net interest income...................................... 4,622,299 3,952,151 1,638,318 1,365,331
PROVISION FOR LOAN LOSSES....................................... 200,000 200,000 75,000 75,000
---------- ---------- ---------- ----------
Net interest income after provision for
loan losses........................................... 4,422,299 3,752,151 1,563,318 1,290,331
---------- ---------- ---------- ----------
NONINTEREST INCOME:
Service charges on deposits................................. 200,080 211,206 67,986 72,252
Gain on sale of securities.................................. ---------- ---------- --------- ----------
Gain on loan sales.......................................... 236,610 115,572 82,456 43,735
Other....................................................... 164,215 134,265 64,795 37,047
---------- ---------- ---------- ----------
Total noninterest income................................. 600,905 461,043 215,237 153,034
---------- ---------- ---------- ----------
NONINTEREST EXPENSE:
Salaries and employee benefits............................. 1,581,673 1,337,968 559,598 444,316
Occupancy expense.......................................... 441,283 299,978 104,336 101,193
Equipment expense.......................................... 224,769 200,468 77,512 68,320
Other real estate owned net (gains) losses and expenses (211,028) 45,285 1,082 10,672
Computer services.......................................... 193,567 158,191 68,931 56,263
Deposit insurance assessments.............................. 8,887 8,962 2,910 2,962
Other operating expenses................................... 671,935 525,803 265,180 188,348
---------- ---------- ---------- ----------
Total noninterest expense................................ 2,911,086 2,576,655 1,079,549 872,074
---------- ---------- ---------- ----------
Income before provision for income taxes................. 2,112,118 1,636,539 699,006 571,291
PROVISION FOR INCOME TAXES...................................... 772,792 579,246 255,751 204,693
---------- ---------- ---------- ----------
NET INCOME...................................................... $1,339,326 $1,057,293 $ 443,255 $ 366,598
========== ========== ========== ==========
Earnings per share:
Basic.................................................... $ 1.09 $ 0.84 $ 0.36 $ 0.29
========== ========== ========== ==========
Diluted.................................................. $ 1.09 $ 0.84 $ 0.36 $ 0.29
========== ========== ========== ==========
Weighted average common shares outstanding...................... 1,233,823 1,261,241 1,231,241 1,261,241
Diluted effect of common stock equivalents...................... -- -- -- --
---------- ---------- ---------- ----------
Weighted average common and common stock equivalent
shares outstanding......................................... 1,233,823 1,261,241 1,231,241 1,261,241
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
<TABLE>
FIRST FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
(UNAUDITED)
ACCUMULATED
OTHER TOTAL
COMMON RETAINED COMPREHENSIVE TREASURY STOCKHOLDERS' COMPREHENSIVE
STOCK SURPLUS EARNINGS INCOME STOCK EQUITY INCOME
----------- ----------- ------------ ------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997....... $1,328,041 $4,431,380 $ 7,982,792 $ 117,380 $ (146,960) $13,712,633
Net income....................... -------- -------- 1,450,048 ------- --------- 1,450,048 $1,450,048
Other comprehensive income, net
of tax:
Unrealized holding losses..... -------- -------- --------- (46,742) --------- (46,742) (46,742)
Comprehensive income............. -------- -------- --------- ------- --------- ----------- $1,403,306
=============
Dividends declared ($.24 per
share)........................ -------- -------- (302,697) ------- --------- (302,697)
----------- ----------- ------------ ------------- ------------ -------------- -------------
Balance, December 31, 1998....... 1,328,041 4,431,380 9,130,143 70,638 (146,960) 14,813,242
Net income....................... --------- --------- 1,339,326 ------- --------- 1,339,326 $1,339,326
Other comprehensive income, net
of tax:
Unrealized holding losses..... --------- --------- --------- (201,365) --------- (201,365) (201,365)
Comprehensive income............. --------- --------- --------- ------- --------- ---------- $1,137,961
=============
Dividends declared ($.27 per
share)........................ --------- --------- (333,785) ------- --------- (333,785)
Repurchase of 30,000 shares
common stock................. --------- --------- --------- ------- (384,375) (384,375)
----------- ----------- ------------ ------------- ------------ -------------- -------------
Balance, September 30, 1999...... $1,328,041 $4,431,380 $10,135,684 $(130,727) $ (531,335) $15,233,043
=========== =========== ============ ============= ============ ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
FIRST FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1999 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................... $ 1,339,326 $ 1,057,293
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses................................................. 200,000 200,000
Depreciation and amortization............................................. 236,282 213,827
Write-off of impaired long-lived asset.................................... 129,362 -----------
Amortization of discount on debenture..................................... 15,860 154,487
Net accretion on investment securities held-to-maturity................... (4,751) (4,285)
Net accretion on investment securities available-for-sale................. (294,930) (183,404)
(Gains) losses on sale of OREO............................................ (219,118) 18,952
Gains on sales of loans.................................................... (236,610) (115,572)
Proceeds from sales of loans.............................................. 4,255,701 2,261,042
Loans originated for sale................................................. (4,819,805) (1,835,421)
Net (decrease) increase in unearned discount............................. (32,898) 25,257
Net (increase) in other assets............................................ (497,425) (65,704)
Net increase (decrease) in deferred loan fees............................. 16,289 (21,366)
Net increase (decrease) in accrued expenses and other liabilities......... 19,366 (211,910)
------------- ------------
Net cash provided by operating activities................................... 106,649 1,493,196
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Federal Home Loan Bank stock....................................... (162,400) -----------
Proceeds from maturities of investment securities
held-to-maturity........................................................... 3,015,257 12,602,696
Proceeds from maturities of investment securities
available-for-sale.......................................................... 251,642,803 88,517,783
Purchase of investment securities held-to-maturity............................. (5,483,082) (10,660,411)
Purchase of investment securities available-for-sale........................... (248,969,243) (94,950,993)
Net increase in loans.......................................................... (6,201,691) (3,513,959)
Purchase of premises and equipment............................................. (86,299) (106,101)
Sales of OREO.................................................................. 684,955 344,217
------------- ------------
Net cash used in investing activities....................................... (5,559,700) (7,766,768)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand accounts................................................ 5,380,841 2,428,466
Net increase (decrease) in savings and money market accounts................... 2,031,554 (1,292,399)
Net (decrease) increase in time deposits....................................... (2,328,975) 1,066,553
Net (decrease) increase in repurchase agreements............................... (2,816,181) 2,096,610
Net increase in Federal Home Loan Bank advances................................ 5,996,816 5,121,336
Repayment of senior debenture.................................................. (2,708,777) -----------
Purchase of common stock for treasury.......................................... (384,375) -----------
Dividends paid................................................................. (333,785) (214,412)
------------- ------------
Net cash provided by financing activities................................... 4,837,118 9,206,154
------------- ------------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS.................................................................... (615,933) 2,932,582
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD........................................................................ 5,066,270 6,715,014
------------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD......................................... $ 4,450,337 $ 9,647,596
============= ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid.................................................................. $ 3,688,797 $ 3,922,304
============= ============
Income taxes paid.............................................................. $ 936,000 $ 872,000
============= ============
SUPPLEMENTAL DISCLOSURE OF NONCASH
TRANSACTIONS:
Transfer of loans to OREO...................................................... $ ----------- $ 145,000
============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED SEPTEMBER 30, 1999
(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
and nine months ended September 30, 1999, are not necessarily indicative of
the results that may be expected for the year ending December 31, 1999, 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, 1998, filed with the Securities
and Exchange Commission.
(2) DIVIDEND DECLARATION
On October 18, 1999, the Company declared dividends of $110,811.69 or $.09
per share to all common stockholders of record on November 1, 1999, payable
on November 15, 1999.
(3) RECENT DEVELOPMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting
and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at
its fair value. This statement requires that changes in the derivative's
fair value be recognized currently in income unless specific hedge
accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the
hedged item in the statement of income and requires that a company must
formally document, designate and assess the effectiveness of transactions
that receive hedge accounting. SFAS No. 133, as amended by SFAS No. 137,
"Deferral of the Effective Date of FASB Statement No. 133", is effective
for fiscal years beginning after June 15, 2000. A company may also
implement the statement as of the beginning of any fiscal quarter after
issuance (that is, financial quarters beginning June 16, 1998 and
thereafter). SFAS No. 133 cannot be applied retroactively. SFAS No. 133
must be applied to (a) derivative instruments and (b) certain derivative
instruments embedded in hybrid contracts that were issued, acquired or
substantively modified after December 31, 1998 (and, at the Company's
election, before January 1, 1999). The Company has not yet quantified the
impact of adopting SFAS No. 133 on its consolidated financial statements
and has not determined the timing or method of its adoption of the
statement. However, the Company does not expect that the adoption of this
statement will have a material impact on its financial position or results
of operations.
(4) BUSINESS SEGMENTS
The Company's community banking business segment consists of commercial and
retail banking. The community banking business segment is managed as a
single strategic unit which derives its revenues from a wide range of
banking services, including investing and lending activities and acceptance
of demand, savings and time deposits. There is no single major customer and
the Company operates within a single geographic area (southeastern New
England).
5
<PAGE>
Nonreportable operating segments of the Company's operations which do not
have similar characteristics to the community banking operations and do not
meet the quantitative thresholds requiring disclosure, are included in the
Other category in the disclosure of business segments below. These
nonreportable segments include the Parent Company.
The accounting policies used in the disclosure of business segments for
these interim financial statements are the same as those used in the
Company's December 31, 1998 annual report and Form 10-K. The consolidation
adjustments reflect certain eliminations of intersegment revenue.
Reportable segment specific information and reconciliation to consolidated
financial information is as follows:
<TABLE>
<CAPTION>
COMMUNITY OTHER ADJUSTMENTS
BANKING OTHER AND ELIMINATIONS CONSOLIDATED
---------- ---------- ----------------- ------------
<S> <C> <C> <C> <C>
Three Months Ended September 30, 1999
Net Interest Income $1,626,814 $ 463,005 $ (451,501) $1,638,318
Provision for Loan Losses 75,000 --------- ---------- 75,000
Total Noninterest Income 215,237 --------- ---------- 215,237
Total Noninterest Expense 1,055,549 24,000 ---------- 1,079,549
Net Income 451,501 443,255 (451,501) 443,255
Three Months Ended September 30, 1998
Net Interest Income $1,381,527 $ 374,291 $ (390,487) $1,365,331
Provision for Loan Losses 75,000 --------- ---------- 75,000
Total Noninterest Income 153,034 --------- ---------- 153,034
Total Noninterest Expense 852,074 20,000 ---------- 872,074
Net Income 390,487 366,598 (390,487) 366,598
Nine Months Ended September 30, 1999
Net Interest Income $4,638,134 $1,381,118 $(1,396,953) $4,622,299
Provision for Loan Losses 200,000 --------- ---------- 200,000
Total Noninterest Income 600,905 --------- ---------- 600,905
Total Noninterest Expense 2,841,086 70,000 ---------- 2,911,086
Net Income 1,396,953 1,339,326 (1,396,953) 1,339,326
Nine Months Ended September 30, 1998
Net Interest Income $4,001,316 $1,077,539 $(1,126,704) $3,952,151
Provision for Loan Losses 200,000 --------- ---------- 200,000
Total Noninterest Income 461,043 --------- ---------- 461,043
Total Noninterest Expense 2,520,655 56,000 ---------- 2,576,655
Net Income 1,126,704 1,057,293 (1,126,704) 1,057,293
</TABLE>
6
<PAGE>
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 commercial and consumer financial products and
services designed to satisfy the deposit and loan needs of its customers. The
Bank's deposit products include interest-bearing and noninterest-bearing
checking accounts, money market accounts, passbook and statement savings
accounts, 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 Bank's products and services are delivered through its four branch network
system. The Bank's main office and branch are located in Providence, Rhode
Island with branches in Cranston, Richmond and North Kingstown, Rhode Island.
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 loans and investment securities, while its
interest-bearing liabilities consist primarily of deposits, securities sold
under agreements to repurchase and Federal Home Loan Bank advances. 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 loan losses,
occupancy costs and, when necessary, expenses related to other real estate owned
acquired through foreclosure (OREO) and to the administration of nonperforming
and other classified assets.
SUMMARY
- -------
For the three months ended September 30, 1999, the Company reported net income
of $443,255 compared to net income of $366,598 for the three months ended
September 30, 1998, or an increase of 20.9%. Basic and diluted net income per
share were $0.36 for the quarter ended September 30, 1999, compared to $0.29 per
share for the same three month period of the prior year. Net income for the nine
months ended September 30, 1999 amounted to $1,339,326 compared to net income of
$1,057,293 for the nine months ended September 30, 1998. Basic and diluted net
income per share for the nine months ended September 30, 1999, were $1.09
compared to $0.84 per share for the nine months ended September 30, 1998.
Exclusive of 1999's second quarter one-time net gains of $61,439, the third
quarter ended September 30, 1999, was another record quarter for the Company;
the sixth (6) consecutive record quarter and; represented the thirteenth (13th)
record quarter of the past fifteen (15) quarters. Overall, this achievement was
accomplished as a result of (i) an increase in net interest spreads and margins,
(ii) balance sheet growth, predominately within the loan portfolio, (iii) an
increase in the recognition of gains on SBA loan sales, and (iv) continued
strength in asset quality.
Total assets increased $5,876,059 or 4.1% to $147,794,989 at September 30,1999,
from $141,918,930 at December 31, 1998. The loan portfolio, net of unearned
discount, increased $6,211,024 or 7.2% to $92,506,869 at September 30, 1999,
from $86,295,845 at December 31, 1998. Investment securities decreased $241,665
to $46,579,018 at September 30, 1999,
7
<PAGE>
from $46,820,683 at December 31, 1998, while cash, cash equivalents, and loans
held for sale increased $184,781 to $5,608,544 at September 30, 1999, from
$5,423,763 at December 31, 1998. The increase in the Company's total assets was
funded primarily from (i) a $5,083,420 or 4.9% increase in total deposits to
$109,455,348 at September 30, 1999, from $104,371,928 at December 31, 1998; (ii)
a $3,180,635 increase in wholesale funding sources; less (iii) the repayment of
the Senior Debenture of $2,971,487.
FINANCIAL CONDITION
ASSET QUALITY
- --------------
The following table sets forth information regarding nonperforming 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 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
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------------ ------------------
1999 1998 1998
------------------ ------------------
(Dollars in Thousands)
<S> <C> <C> <C>
Nonperforming loans................................... $ 344 $ 102 $----
Other real estate owned............................... $ 47 $ 564 $ 513
Total nonperforming assets............................ $ 391 $ 666 $ 513
Loans 30-89 days delinquent........................... $ 75 $ 269 $ 161
Nonperforming assets to total assets.................. 0.26% 0.48% 0.36%
Nonperforming loans to total loans.................... 0.37% 0.13% ----
Net loan charge-offs to average loans................. 0.01% 0.11% 0.22%
Allowance for loan losses to total loans.............. 1.60% 1.70% 1.53%
Allowance for loan losses to nonperforming
loans (multiple)......................................... 4.31X 13.03X NM
</TABLE>
8
<PAGE>
The following represents the activity in the allowance for loan losses for the
three and nine months ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Bank Reserve:
Balance at beginning of period......................... $1,287,058 $1,208,322 $1,393,652 $1,291,097
Provision............................................. 200,000 200,000 75,000 75,000
Loan charge-offs..................................... (53,633) (96,214) (6,781) (44,991)
Recoveries............................................ 46,357 10,830 17,911 1,832
---------- ---------- ---------- ----------
Balance at end of period................................ 1,479,782 1,322,938 1,479,782 1,322,938
---------- ---------- ---------- ----------
Acquired Reserve:
Balance at beginning of period......................... --------- 388,291 --------- 109,898
Loan charge-offs.................................... (266,482) (460,093) --------- (187,905)
Recoveries (Administrative Costs)............... 1,638 (12,072) --------- ( 5,867)
Reclassification to Senior Debenture................. 264,844 83,874 --------- 83,874
Balance at end of period............................... --------- -0- --------- -0-
--------- ---------- ---------- ----------
Total Reserve.......................................... $1,479,782 $1,322,938 $1,479,782 $1,322,938
========= ========== ========== ==========
</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 loan
losses, future adjustments may be necessary if economic conditions differ
substantially from the assumptions used in making the evaluation.
DEPOSITS AND OTHER BORROWINGS
- -----------------------------
Total deposits increased $5,083,420 during the nine months ended September 30,
1999, from $104,371,928 at December 31, 1998, to $109,455,348 at September 30,
1999. During the nine months ended September 30, 1999, demand, savings and money
market deposits increased $7,412,395 while time deposits decreased $2,328,975.
Included in the decrease of time deposits was a $700,000 withdrawal by a single
municipal depositor from a short-term certificate of deposit. The increase in
demand and savings deposits was primarily the result of the development,
delivery and marketing of a new small business demand deposit account, cross-
selling of products, and customer concern over the merger of two major
competitors.
Securities sold under agreements to repurchase decreased $2,816,181 during the
nine months ended September 30, 1999, to $9,439,699 from $12,255,880 at December
31, 1998. Federal Home Loan Bank advances increased $5,996,816 to $12,200,893
at September 30, 1999, from $6,204,077 at December 31, 1998. This increase was
the result of the Company's continued strategy of match funding selected loan
originations, along with the refinancing of a maturing repurchase agreement.
On May 31, 1999, the Company repaid the Senior Debenture in the amount of
$2,708,777, which represented the original face value of $3,000,000, less
$291,223 in net acquired loan losses in excess of the acquired loan loss
reserve.
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) was $4,622,299
for the nine months ended September 30, 1999, compared to $3,952,151 for the
nine months ended September 30, 1998. This increase was the result of an
increase in net interest spread and margin as well as an increase in interest-
earning assets.
9
<PAGE>
The following table sets forth certain information relating to the Company's
average balance sheet and reflects the average yield on assets and average cost
of liabilities for the periods indicated. Such yields and costs are derived by
dividing income or expense by the average balance of assets or liabilities.
Average balances are derived from daily balances. Loans are net of unearned
discount. Nonaccrual loans are included in the average balances used in
calculating this table.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------
1999 1998
-------------------------------------- ----------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------------- ----------- ----------- ------------ ---------- -------
<S> <C> <C> <C> <C> <C> <C>
INTEREST - EARNING ASSETS:
Loans......................................... $ 90,874,046 $6,423,225 9.42% $ 79,719,220 $5,790,886 9.69%
Investment securities taxable - AFS........... 29,477,563 1,179,815 5.34% 31,598,074 1,355,965 5.72%
Investment securities taxable - HTM........... 13,949,265 575,671 5.50% 11,789,641 519,237 5.87%
Securities purchased under agreements to
resell.................................... 3,772,509 112,336 3.97% 4,670,541 172,366 4.92%
Federal Home Loan Bank Stock and other 509,291 23,717 6.21% 650,796 29,521 6.05%
------------ ---------- ---------- ------------ ---------- ----
TOTAL INTEREST-EARNING ASSETS.................... 138,582,674 8,314,764 8.00% 128,428,272 7,867,975 8.17%
---------- ---------- ---------- ----
NONINTEREST-EARNING ASSETS:
Cash and due from banks....................... 2,455,368 2,247,630
Premises and equipment........................ 2,316,530 2,425,423
Other real estate owned....................... 295,549 628,181
Allowance for loan losses..................... (1,317,545) (1,449,007)
Other assets.................................. 1,347,378 1,407,109
------------ ------------
TOTAL NONINTEREST-EARNING ASSETS................. 5, 097,280 5,259,336
------------ ------------
TOTAL ASSETS..................................... $143,679,954 $133,687,608
============ ============
INTEREST - BEARING LIABILITIES:
Deposits:
Interest-bearing demand and NOW
deposits............................. $ 3,370,488 $ 37,031 1.46% $ 3,631,059 $ 53,379 1.96%
Savings deposits.......................... 18,164,147 290,654 2.13% 16,855,297 331,617 2.62%
Money market deposits..................... 1,708,890 26,234 2.05% 1,235,979 22,298 2.41%
Time deposits............................. 65,451,593 2,444,538 4.98% 64,954,932 2,681,752 5.50%
Securities sold under agreements to
repurchase................................ 11,779,565 443,843 5.02% 13,338,248 551,110 5.51%
Federal Home Loan Bank advances.................. 8,431,741 365,662 5.78% 1,770,683 82,484 6.21%
Senior debenture................................. 1,610,164 84,503 7.00% 2,988,448 193,184 8.62%
------------ ---------- ---------- ------------ ---------- ----
TOTAL INTEREST-BEARING LIABILITIES............... 110,516,588 3,692,465 4.45% 104,774,646 3,915,824 4.98%
---------- ---------- ---------- ----
NONINTEREST-BEARING LIABILITIES:
Noninterest-bearing deposits................. 17,055,731 13,571,412
Other liabilities............................ 1,275,887 1,264,137
------------ ------------
TOTAL NONINTEREST-BEARING LIABILITIES............ 18,331,618 14,835,549
STOCKHOLDERS' EQUITY............................. 14,831,748 14,077,413
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY. $143,679,954 $133,687,608
============ ============
NET INTEREST INCOME.............................. $4,622,299 $3,952,151
============ ==========
NET INTEREST SPREAD.............................. 3.55% 3.19%
========== ====
NET INTEREST MARGIN.............................. 4.45% 4.10%
========== ====
</TABLE>
10
<PAGE>
Total interest income for the three months ended September 30, 1999, was
$2,872,665, compared to $2,688,813 for the same three month period of the prior
year. This increase was primarily the result of a $10.1 million increase in
quarterly average interest-earning assets to $140.8 million from $130.7 million,
offset somewhat by a 6 basis point decline in yields to 8.16% from 8.22%. The
quarterly average loan portfolio grew $11.6 million to $92.7 million, while the
investment portfolio declined $1.5 million. Total interest expense declined
$89,135 to $1,234,347 for the three months ended September 30, 1999, from
$1,323,482 for the same three month period of the prior year. This decrease
occurred despite a $4.3 million increase in interest-bearing liabilities. A
favorable interest rate environment along with aggressive reduction in deposit
product pricing enabled the Company's cost of funds to decline 53 basis points
to 4.45% from 4.98%. Overall, net interest income increased $272,987 to
$1,638,318 for the three months ended September 30, 1999 from $1,365,331 for the
same three month period of the prior year; net interest spreads increased 47
basis points to 3.71% from 3.24% and; net interest margin improved 50 basis
points to 4.67% from 4.17%. The improvement in margin was the result of the
improvement in spreads and a $5.8 million increase in noninterest-bearing
liabilities which was used to fund earning asset growth.
Net interest income increased $670,148 or 17.0% to $4,622,299 for the nine
months ended September 30, 1999, from $3,952,151 for the same nine month period
of the prior year. This increase primarily resulted from a $10.2 million
increase in average interest-earning assets, funded primarily by a $5.7 million
increase in interest-bearing liabilities ($5.1 million of which was from
wholesale funding sources) and a $3.5 million increase in noninterest-bearing
liabilities. As a result of a favorable interest rate environment, the yield on
earning assets declined only 17 basis points to 8.00% from 8.17%, while cost of
funds declined 53 basis points to 4.45% from 4.98%. Consequently, net interest
spread increased 36 basis points to 3.55% from 3.19% and net interest margin
improved 35 basis points to 4.45% from 4.10%. In terms of rate/volume, of the
$670,148 increase in net interest income, approximately $558,000 is related to
increases in earning assets and approximately $112,000 is related to changes in
interest rates.
PROVISION FOR LOAN LOSSES
- -------------------------
The provision for loan losses totaled $75,000 for the three months ended
September 30, 1999 and 1998. For the nine months ended September 30, 1999 and
1998, the provision for loan losses amounted to $200,000. With 1999 net charge-
offs to total average loans of only 0.01% and nonperforming loans to total loans
of only 0.37%, the provision was a reflection of portfolio growth rather than
asset quality deterioration.
NONINTEREST INCOME
- ------------------
Total noninterest income increased $62,203 to $215,237 for the three months
ended September 30, 1999, from $153,034 for the three months ended September 30,
1998. For the nine months ended September 30, 1999 and 1998, noninterest income
increased $139,862 to $600,905 from $461,043. For both the three month and nine
month reporting period, the increases were attributable primarily to an increase
in gains on the sale of the guaranteed portion of Small Business Administration
("SBA") loans.
NONINTEREST EXPENSE
- -------------------
Total noninterest expense amounted to $1,079,549 and $872,074 for the three
months ended September 30, 1999 and 1998, respectively. For the nine months
ended September 30, 1999 and 1998, noninterest expense was $2,911,086 and
$2,576,655, respectively. For both the three month and nine month periods ended
September 30, 1999, the increases in overhead costs are primarily the result of
(i) higher salaries and wages associated with filling additional staff
positions, and across-the-board pay increases, (ii) higher benefit costs, (iii)
technology enhancements resulting in increased computer servicing costs, (iv)
increases in legal and professional fees, and (v) higher marketing, advertising
and business development costs.
INCOME TAXES
- ------------
Income taxes for the three months ended September 30, 1999, were $255,751 or
36.6% of pretax income, compared to
11
<PAGE>
$204,693 or 35.8% of pretax income for the three months ended September 30,
1998. For the nine months ended September 30, 1999 and 1998, income taxes were
$772,792 and $579,246, respectively, or 36.6% and 35.4% of pretax income,
respectively. The Company's combined federal and state (net of federal benefit)
statutory income tax rate is 39.9%. The Company's effective combined federal and
state tax rate was lower than the statutory rate primarily due to the exclusion,
from state taxable income, of interest income on U.S. Treasury obligations and
certain government agency debt securities. The higher effective tax rates in
1999 were primarily due to proportionately less income favorably taxed for state
income tax purposes.
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 September
30, 1999:
<TABLE>
<CAPTION>
REGULATORY
MINIMUM (2) ACTUAL
----------- -------
<S> <C> <C>
The Company (1)
Risk-based:
Tier 1........................ 4.00% 16.54%
Totals........................ 8.00 17.79
Leverage........................ 3.00 10.54
The Bank
Risk-based:
Tier 1......................... 4.00% 15.89%
Totals......................... 8.00 17.15
Leverage......................... 3.00 10.08
</TABLE>
(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.
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 June 30, 1999, the most recent date for which this information is available,
the Company's one year static gap position was a negative $10,199,000 or 6.9% of
total assets. By using simulation modeling techniques, the Company is able to
measure its interest rate risk exposure as determined by the impact of sudden
movements in interest rates on net interest
12
<PAGE>
income and equity. This exposure is termed "earnings-at-risk' and 'equity-at-
risk". At June 30, 1999, the Company's earnings-at-risk under a (plus or minus)
200 basis point interest rate shock test measured a negative 2.1% in a worst
case scenario. Under a similar test, the Company's equity-at-risk measured a
negative 12.02% of market value of equity at June 30, 1999. At June 30, 1999,
the Company's earnings-at-risk and equity-at-risk fell well within tolerance
levels established by internal policy.
LIQUIDITY
- ---------
Liquidity is defined as the ability to meet current and future financial
obligations of a short-term nature. The Company further defines liquidity as
the ability to respond to the needs of depositors and borrowers and to earning
enhancement opportunities in a changing marketplace. Primary sources of
liquidity consist of deposit inflows, loan repayments, securities sold under
agreements to repurchase, FHLB advances, maturity of investment securities and
sales of securities from the available-for-sale portfolio. These sources fund
the Bank's lending and investment activities.
At September 30, 1999, cash and due from banks, securities purchased under
agreements to resell, and short-term investments (unpledged and maturing within
one year) amounted to $17.4 million, or 11.8% of total assets. Management is
responsible for establishing and monitoring liquidity targets as well as
strategies and tactics to meet these targets. Through membership in the Federal
Home Loan Bank of Boston (FHLB), the Company has access to both short and long-
term borrowings of nearly $40.0 million, which could assist the Company in
meeting its liquidity needs and funding its asset mix. At September 30, 1999,
the Company held demand deposits of $4.7 million which it considered highly
volatile. Nonetheless, the Company believes that there are no adverse trends in
the Company's liquidity or capital reserves, and the Company believes that it
maintains adequate liquidity to meet its commitments.
The Company is cognizant of the special liquidity demands posed by the Year 2000
issue. Liquidity plans have been developed to ensure adequate liquidity on hand
and available should abnormal demands result from the Year 2000 issue. Refer to
the discussion below regarding Year 2000 compliance.
YEAR 2000 COMPLIANCE
- --------------------
The efficient operation of the Company's business is highly dependent on its
computer software programs and operating systems. Virtually all of these
programs and systems are furnished, supported and maintained by correspondent
institutions, computer service and system providers, and software vendors. As
the year 2000 approaches, a critical business issue has emerged regarding how
existing application software programs and operating systems can accommodate
this date value. As a result, the year 1999 could be the maximum date value
these systems will be able to accurately process. The Company has adopted a
Year 2000 Plan which calls for completion of a risk assessment, identification,
reprogramming and testing of all programs and systems. As of September 30,
1999, the Company completed the risk assessment, identification, reprogramming
and testing phase of the Year 2000 Plan. All programs and systems have been
successfully tested for year 2000 compliance.
The Company's Board of Directors plays a very active role in the Year 2000
compliance effort. The Board has approved the Year 2000 Plan and receives
monthly status reports from members of the project team. The FDIC has also
played a very active role and has visited the Company on several occasions to
examine the Company's progress.
In confronting the Year 2000 problem, the Company faces potential risks to its
and the Bank's operations. As stated above, the Company purchases substantially
all of its software from third parties who face the same Year 2000 challenge as
the Company. In addition, the Company relies almost exclusively on other
companies for the functioning of its automated system. Thus, the Company's
operations could be adversely affected if the operations of these third parties
are adversely affected by the Year 2000 problem. Included among these risks
faced by the Company is the risk that the Year 2000 date change may result in
the inability to process and underwrite loan applications, to credit deposits
and withdrawals from customer accounts, to credit loan payments or track
delinquencies, to properly reconcile and record daily activity or to engage in
similar normal banking activities. Additionally, if those commercial loan
customers of the Bank whose operations depend heavily on computers and computer
software experience Year 2000 compliance problems and suffer adverse effects
with respect to their own operations, their ability to meet their obligations to
the Bank could be
13
<PAGE>
adversely affected. This could force the Bank to increase its provision for loan
losses or take more aggressive collection actions, potentially impacting the
Company's earnings. Furthermore, the Bank faces the risk that in light of
potential uncertainty as to the availability of their funds after the date
change and a decrease in interest rates, the Bank's deposit customers could
withdraw their funds, causing the Bank to experience deposit run-off prior to
the Year 2000 date change. This potential deposit contraction could make it
necessary for the Company to change its sources of funding which could
materially affect the Company's earnings. Moreover, to the extent that the risks
posed by the Year 2000 problem are pervasive in data processing and transmission
and communications services worldwide, the Company cannot predict with any
certainty that its operations will remain materially unaffected after January 1,
2000, or on dates preceding this date at which time post-January 1, 2000 dates
become significant within the Bank's systems. Finally, to the extent that
certain utility and communication services utilized by the Company face Year
2000 problems, the Company's operations could be disrupted.
The Company is in constant communication with its outside vendors, with whom it
is reliant, to ensure that their timetable and progress is consistent with that
of the Company. The Company has also communicated with significant borrowers
and mission critical vendors to determine the status of their Year 2000
compliance efforts. The Company has also kept the Bank's depositors informed of
its efforts. The Company has incorporated a Business Continuity or Contingency
Plan into the Year 2000 Plan. The Contingency Plan, which is a supplement to
the Company's Disaster Recovery Plan, calls for a conversion to another core
system provider in the event of a system failure during the remediation effort.
If the failure occurs on or after January 1, 2000, the Company will convert to a
manual system until the computerized system is remedied. The Company believes
that a major system failure is highly unlikely, but limited exceptions across
its core applications may occur. The Company does not anticipate that the
remedial or systems' failure costs incurred in connection with Year 2000
compliance will be material to its financial condition or results of operations.
The discussion above contains certain forward-looking statements. The costs
of the Year 2000 conversion, the date which the Company has set to complete its
Year 2000 project and statements about anticipated compliance are based on the
Company's current estimates and are subject to various uncertainties that could
cause actual results to differ materially from the Company's expectations. Such
uncertainties include, among others, the success of the Company in identifying
systems that are not Year 2000 compliant, the nature and amount of programming
required to upgrade or replace each of the affected systems, the availability of
qualified personnel, consultants and other resources, and the success of the
Year 2000 compliance efforts of others. Readers are cautioned not to place undue
reliance on these forward looking statements.
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.
14
<PAGE>
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5 - OTHER INFORMATION
Not Applicable
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
11 Computation of Per Share Earnings
27 Financial Data Schedule
(B) Reports on Form 8-K
None
15
<PAGE>
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.
October 29, 1999 /s/ Patrick J. Shanahan, Jr.
- ---------------------------- ---------------------------------------
Date Patrick J. Shanahan, Jr.
Chairman, President and Chief Executive Officer
October 29, 1999 /s/ John A. Macomber
- ---------------------------- ---------------------------------------
Date John A. Macomber
Vice President, Treasurer
and Chief Financial Officer
16
<PAGE>
EXHIBIT 11 - COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding 1,233,823 1,261,241 1,231,241 1,261,241
Weighted average equivalent shares --------- ---------- --------- ---------
--------- ---------- --------- ---------
Weighted average common and common stock
equivalent shares outstanding 1,233,823 1,261,241 1,231,241 1,261,241
========== ========== ========== ==========
Net income $1,339,326 $1,057,293 $ 443,255 $ 366,598
========== ========== ========== ==========
Earnings per share:
Basic $ 1.09 $ 0.84 $ 0.36 $ 0.29
========== ========== ========== ==========
Diluted $ 1.09 $ 0.84 $ 0.36 $ 0.29
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,835,893
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,614,444
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 30,373,049
<INVESTMENTS-CARRYING> 16,205,969
<INVESTMENTS-MARKET> 16,025,418
<LOANS> 92,506,869
<ALLOWANCE> 1,479,782
<TOTAL-ASSETS> 147,794,989
<DEPOSITS> 109,455,348
<SHORT-TERM> 9,439,699
<LIABILITIES-OTHER> 1,466,006
<LONG-TERM> 12,200,893
0
0
<COMMON> 1,328,041
<OTHER-SE> 13,905,002
<TOTAL-LIABILITIES-AND-EQUITY> 147,794,989
<INTEREST-LOAN> 2,222,141
<INTEREST-INVEST> 650,524
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 2,872,665
<INTEREST-DEPOSIT> 940,818
<INTEREST-EXPENSE> 1,234,347
<INTEREST-INCOME-NET> 1,638,318
<LOAN-LOSSES> 75,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,079,549
<INCOME-PRETAX> 699,006
<INCOME-PRE-EXTRAORDINARY> 699,006
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 443,255
<EPS-BASIC> 0.36
<EPS-DILUTED> 0.36
<YIELD-ACTUAL> 4.67
<LOANS-NON> 265,512
<LOANS-PAST> 78,035
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,211,014
<ALLOWANCE-OPEN> 1,393,652
<CHARGE-OFFS> 6,781
<RECOVERIES> 17,911
<ALLOWANCE-CLOSE> 1,479,782
<ALLOWANCE-DOMESTIC> 1,479,782
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
