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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-11242
First Commonwealth Financial Corporation
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1428528
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
22 North Sixth Street Indiana, PA 15701
(Address of principal executive offices) (Zip Code)
724-349-7220
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No .
Number of shares outstanding of issuer's common stock, $1.00 Par Value as
of May 12, 2000 was 58,095,061.
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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Included in Part I of this report: PAGE
First Commonwealth Financial Corporation and
Subsidiaries Consolidated Balance Sheets . . . . . 3
Consolidated Statements of Income. . . . . . . . . 4
Consolidated Statements of Changes in
Shareholders' Equity . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows. . . . . . . 6
Notes to Consolidated Financial Statements . . . . 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . 9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK . . . . . . . . . . . . . . . . . . . . . . . . 22
PART II - OTHER INFORMATION
Other Information . . . . . . . . . . . . . . . . . . . . . . 23
Signatures . . . . . . . . . . . . . . . . . . . . Signature Page
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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
March 31, December 31,
2000 1999
ASSETS
Cash and due from banks on demand.... $ 81,584 $ 92,673
Interest-bearing deposits with banks. 749 1,218
Federal funds sold .................. 1,775 8,700
Securities available for sale, at
market.............................. 1,143,614 1,144,042
Securities held to maturity, at cost,
(Market value $412,650 in 2000 and
$435,000 in 1999).................. 426,485 448,347
Loans................................ 2,518,852 2,503,687
Unearned income.................... (3,135) (3,628)
Allowance for credit losses........ (33,803) (33,539)
Net loans....................... 2,481,914 2,466,520
Property and equipment............... 44,036 43,380
Other real estate owned.............. 1,840 1,707
Other assets......................... 139,168 134,259
TOTAL ASSETS.................... $4,321,165 $4,340,846
LIABILITIES
Deposits (all domestic):
Noninterest-bearing................ $ 243,507 $ 251,404
Interest-bearing................... 2,663,271 2,697,425
Total deposits.................. 2,906,778 2,948,829
Short-term borrowings................ 444,799 424,827
Other liabilities.................... 44,163 42,152
Company obligated mandatorily
redeemable capital securities of
subsidiary trust.................... 35,000 35,000
Other long-term debt................. 606,095 603,355
Total long-term debt............ 641,095 638,355
Total liabilities............... 4,036,835 4,054,163
SHAREHOLDERS' EQUITY
Preferred stock, $1 par value per
share, 3,000,000 shares authorized,
none issued........................ -0- -0-
Common stock $1 par value per share,
100,000,000 shares authorized;
62,525,412 shares issued; 58,095,060
and 58,142,848 shares outstanding at
March 31, 2000 and December 31, 1999,
respectively....................... 62,525 62,525
Additional paid-in capital........... 68,170 68,330
Retained earnings.................... 261,091 257,773
Accumulated other comprehensive income (45,472) (40,304)
Treasury stock (4,430,352 shares at
March 31, 2000 and 4,382,564 at
December 31, 1999, at cost)........ (55,934) (55,448)
Unearned ESOP shares................. (6,050) (6,193)
Total shareholders' equity......... 284,330 286,683
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY.......... $4,321,165 $4,340,846
The accompanying notes are an integral part of these consolidated financial
statements.
3
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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
For the 3 Months
Ended March 31,
2000 1999
<S> <C> <C>
Interest Income
Interest and fees on loans............ $51,110 $47,935
Interest and dividends on investments:
Taxable interest.................... 22,392 20,465
Interest exempt from Federal income
taxes.............................. 2,444 2,249
Dividends........................... 930 704
Interest on Federal funds sold........ 49 49
Interest on bank deposits............. 18 61
Total interest income.............. 76,943 71,463
Interest Expense
Interest on deposits.................. 26,165 25,867
Interest on short-term borrowings..... 6,162 2,429
Interest on company obligated
mandatorily redeemable capital
securities of subsidiary trust....... 831 -0-
Interest on other long-term debt...... 8,346 8,444
Total interest on long-term debt... 9,177 8,444
Total interest expense............. 41,504 36,740
Net Interest Income..................... 35,439 34,723
Provision for credit losses........... 2,505 2,213
Net interest income after provision for
credit losses......................... 32,934 32,510
Other Income
Securities gains...................... -0- 563
Trust income.......................... 1,362 1,814
Service charges on deposit accounts... 2,514 2,396
Gain on sale of loans................. 3 924
Other income.......................... 3,479 3,006
Total other income................. 7,358 8,703
Other Expenses
Salaries and employee benefits........ 13,911 13,078
Net occupancy expense................. 1,714 1,756
Furniture and equipment expense....... 1,860 1,873
Data processing expense............... 767 899
Pennsylvania shares tax expense....... 894 847
Other operating expenses.............. 6,004 6,221
Total other expenses............... 25,150 24,674
Income before income taxes.............. 15,142 16,539
Applicable income taxes............... 3,691 4,534
Net income.............................. $11,451 $12,005
Average Shares Outstanding(a)...........57,505,462 61,152,708
Average Shares Outstanding
Assuming Dilution(a)..................57,606,948 61,432,570
Per Share Data:
Basic earnings per share.............. $ 0.20 $ 0.20
Diluted earnings per share............ $ 0.20 $ 0.20
Cash dividends per share.............. $ 0.140 $ 0.115
(a) Share amounts have been restated to reflect the two-for-one stock split effected in the form of a 100%
stock dividend declared on October 19, 1999.
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
4
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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Accumulated
Additional Other Unearned Total
Common Paid-in Retained Comprehensive Treasury ESOP Shareholders'
Stock Capital Earnings Income Stock Shares Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998......$62,525 $ 68,978 $235,623 $ 2,199 $(5,913) $(8,007) $355,405
Comprehensive income
Net income...................... -0- -0- 12,005 -0- -0- -0- 12,005
Other comprehensive income, net
of tax: Unrealized holding gains
(losses) on securities arising
during the period.............. -0- -0- -0- (3,860) -0- -0- (3,860)
Less: reclassification adjust-
ment for gains on securities
included in net income....... -0- -0- -0- ( 366) -0- -0- ( 366)
Total other comprehensive
income....................... -0- -0- -0- (4,226) -0- -0- (4,226)
Total comprehensive income...... -0- -0- 12,005 (4,226) -0- -0- 7,779
Cash dividends declared......... -0- -0- (7,117) -0- -0- -0- (7,117)
Decrease in unearned ESOP shares -0- -0- -0- -0- -0- 710 710
Discount on dividend reinvestment
plan purchases................ -0- (179) -0- -0- -0- -0- (179)
Treasury stock acquired......... -0- -0- -0- -0- -0- -0- -0-
Treasury stock reissued......... -0- 1 -0- -0- 73 -0- 74
Balance at March 31, 1999.........$62,525 $ 68,800 $240,511 $(2,027) $(5,840) $(7,297) $356,672
Balance at December 31, 1999......$62,525 $ 68,330 $257,773 $(40,304) $(55,448) $(6,193) $286,683
Comprehensive income
Net income...................... -0- -0- 11,451 -0- -0- -0- 11,451
Other comprehensive income, net
of tax: Unrealized holding gains
(losses) on securities arising
during the period............ -0- -0- -0- ( 5,168) -0- -0- ( 5,168)
Less: reclassification adjust-
ment for gains on securities
included in net income....... -0- -0- -0- -0- -0- -0- -0-
Total other comprehensive
income....................... -0- -0- -0- ( 5,168) -0- -0- ( 5,168)
Total comprehensive income...... -0- -0- 11,451 (5,168) -0- -0- 6,283
Cash dividends declared......... -0- -0- (8,133) -0- -0- -0- (8,133)
Decrease in unearned ESOP shares -0- -0- -0- -0- -0- 143 143
Discount on dividend reinvestment
plan purchases................ -0- (147) -0- -0- -0- -0- (147)
Treasury stock acquired......... -0- -0- -0- -0- (873) -0- (873)
Treasury stock reissued......... -0- (88) -0- -0- 387 -0- 299
Tax benefit of stock options.... -0- 75 -0- -0- -0- -0- 75
Balance at March 31, 2000.........$62,525 $ 68,170 $261,091 $(45,472) $(55,934) $(6,050) $284,330
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
5
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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
For the 3 Months
Ended March 31,
2000 1999
Operating Activities
Net income....................................... $11,451 $12,005
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for credit losses................... 2,505 2,213
Depreciation and amortization................. 1,773 2,217
Net gains on sales of assets.................. (389) (1,389)
Income from increase in cash surrender value
of bank owned life insurance................. (536) (519)
Decrease in interest receivable............... 609 92
Decrease in interest payable.................. (720) (1,071)
Increase in income taxes payable.............. 3,878 5,363
Change in deferred taxes...................... (162) (1,819)
Other-net..................................... (3,100) (7,856)
Net cash provided by operating activities... 15,309 9,236
Investing Activities
Transactions with securities held to maturity:
Proceeds from sales........................... -0- -0-
Proceeds from maturities and redemptions...... 21,877 33,134
Purchases..................................... -0- (31,768)
Transactions with securities available for sale:
Proceeds from sales........................... -0- 38,085
Proceeds from maturities and redemptions...... 19,416 68,668
Purchases..................................... (26,954) (193,328)
Proceeds from sales of loans and other assets.... 4,767 56,257
Investment in bank owned life insurance.......... -0- (20,000)
Net decrease in time deposits with banks......... 469 55
Net increase in loans............................ (22,401) (42,454)
Purchases of premises and equipment.............. (2,513) (1,134)
Net cash used by investing activities....... (5,339) (92,485)
Financing Activities
Repayments of long-term debt..................... (25,117) (57)
Proceeds from issuance of long-term debt......... 28,000 -0-
Discount on dividend reinvestment plan purchases. (147) (178)
Dividends paid................................... (8,141) (5,086)
Net increase in Federal funds purchased.......... 125,050 64,900
Net increase (decrease) in other short-term
borrowings..................................... (105,078) 33,008
Net decrease in deposits......................... (42,051) (26,041)
Stock option tax benefit......................... 75 -0-
Purchase of treasury stock....................... (873) -0-
Proceeds from sale of treasury stock............. 298 74
Net cash provided (used) by financing
activities................................. (27,984) 66,620
Net increase (decrease) in cash and cash
equivalents................................ (18,014) (16,629)
Cash and cash equivalents at January 1............. 101,373 97,615
Cash and cash equivalents at March 31.............. $83,359 $ 80,986
The accompanying notes are an integral part of these consolidated financial
statements.
6
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FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
NOTE 1 Management Representation
In the opinion of management, the unaudited interim consolidated
financial statements include all adjustments (consisting of only
normal recurring adjustments) necessary for a fair statement of
financial position as of March 31, 2000 and the results of
operations for the three month periods ended March 31, 2000 and
1999, and statements of cash flows and changes in shareholders'
equity for the three month periods ended March 31, 2000 and 1999.
The results of the three months ended March 31, 2000 and 1999 are
not necessarily indicative of the results to be expected for the
entire year. The interim consolidated financial statements
should be read in conjunction with the annual consolidated
financial statements of First Commonwealth Financial Corporation
and Subsidiaries, including the notes thereto.
NOTE 2 Financial Statement Reclassifications
Amounts in prior periods have been reclassified to conform to the
presentation format used in 2000. The reclassifications had no
effect on the Corporation's financial condition or results of
operations.
NOTE 3 Cash Flow Disclosures (dollar amounts in thousands)
2000 1999
Cash paid during the first three
months of the year for:
Interest $42,224 $37,811
Income Taxes $ -0- $ 950
Noncash investing and financing
activities:
ESOP loan reductions $ 143 $ 711
Loans transferred to other real
estate owned and repossessed
assets $ 2,349 $ 1,446
Gross decrease in market value
adjustment to securities
available for sale $(7,951) $(6,502)
7
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FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
NOTE 4 Comprehensive Income Disclosures
The following table identifies the related tax effects allocated
to each component of other comprehensive income in the Statements
of Changes in Shareholders' Equity: (dollar amounts in thousands)
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
Tax Net of Tax Net of
Pre-tax (Expense) Tax Pre-tax (Expense) Tax
Amount Benefit Amount Amount Benefit Amount
<S> <C> <C> <C> <C> <C> <C>
Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
arising during the period $(7,951) $2,783 $(5,168) $(5,939) $2,079 $(3,860)
Less: reclassification adjustment for
gains realized in net income -0- -0- -0- (563) 197 (366)
Net unrealized gains (losses) (7,951) 2,783 (5,168) (6,502) 2,276 (4,226)
Other comprehensive income $(7,951) $2,783 $(5,168) $(6,502) $2,276 $(4,226)
</TABLE>
NOTE 5 New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB")
issued statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("FAS No. 133"). FAS No. 133 establishes
accounting and reporting standards for derivative instruments and
for hedging activities which require that an entity recognize all
derivatives as either assets or liabilities in a balance sheet
and measure those instruments at fair value. FAS No. 133 was
amended by FASB statement No. 137 in June 1999. FAS No. 137
delays the effective date of FAS No. 133 to the first quarter of
years beginning after June 15, 2000. Management's preliminary
analysis is that adoption of FAS No. 133 would not have had a
material impact on the Corporation's financial condition or
results of operations.
8
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ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
First Three Months of 2000 as Compared to the First Three Months
of 1999
This discussion and the related financial data are presented to
assist in the understanding and evaluation of the consolidated
financial condition and results of operations of First
Commonwealth Financial Corporation (the "Corporation") including
its subsidiaries. In addition to historical information, this
discussion and analysis contains forward-looking statements. The
forward-looking statements contained herein are subject to
certain risks and uncertainties that could cause actual results
to differ materially from those projected in the forward-looking
statements. Important factors that might cause such a difference
include, but are not limited to, those discussed in this
"Management's Discussion and Analysis of Financial Condition and
Results of Operations." Readers are cautioned not to place undue
reliance on these forward-looking statements, which reflect
management's analysis only as of the date hereof. The
Corporation undertakes no obligation to publicly revise or update
these forward-looking statements to reflect events or
circumstances that arise after the date hereof.
Net income in the three months of 2000 was $11.5 million
reflecting a decrease of $554 thousand over 1999 results of $12.0
million. The decrease in net income for the 2000 period was
primarily the result of gains on the sale of securities and loans
which were earned during the 1999 period. Basic earnings per
share and diluted earnings per share were both $0.20 per share
for the three months of 2000 and the three months of 1999.
9
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ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS (Continued)
First Three Months of 2000 as Compared to the First Three Months
of 1999 (Continued)
Basic earnings per share excluding gains on sale of assets was
$0.19 for the three months of 2000 compared to $0.18 for the
three months of 1999, representing an increase of 6%. Changes in
net interest income increased earnings by $0.05 per share during
2000 while changes in salary and benefit expense decreased
earnings by $0.03 during 2000. Return on average assets was
1.07% and return on average equity was 15.96% during the 2000
period, compared to 1.18% and 13.45%, respectively during the
same period of 1999.
Net interest income, the most significant component of earnings,
is the amount by which interest generated from earning assets
exceeds interest expense on liabilities. Net interest income was
$35.4 million for the three months of 2000 compared to $34.7
million for the same period of 1999. Net interest margin (net
interest income, on a tax-equivalent basis, as a percentage of
average earning assets) was 3.71% for the three months of 2000
compared to 3.77% for the three months of 1999.
The following table shows the effect of changes in volumes and
rates on interest income and interest expense.
Analysis of Changes in Net Interest Income
(dollar amounts in thousands)
2000 Change from 1999
Total Change Due Change Due
Change To Volume To Rate
Interest-earning assets:
Time deposits with banks $ (43) $ (39) $ (4)
Securities 2,348 463 1,885
Federal funds sold -0- (7) 7
Loans 3,175 2,410 765
Total interest income 5,480 2,827 2,653
Interest-bearing liabilities:
Deposits 298 315 (17)
Short-term borrowings 3,733 3,191 542
Long-term debt 733 142 591
Total interest expense 4,764 3,648 1,116
Net interest income $ 716 $ (821) $1,537
Interest and fees on loans increased $3.2 million for 2000 over
1999 levels, primarily as a result of volume increases for
commercial loans. Average loans for the three months of 2000
increased $123.3 million compared to averages for the three
months of 1999 and included increases in commercial loans and
municipal loans which were partially offset by decreases in
average mortgage loans and credit card loans. The decrease in
mortgage loans and credit card loans for the 2000 period resulted
from the sale of $42.2 million of 1-4 family residential mortgage
10
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ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS (Continued)
First Three Months of 2000 as Compared to the First Three Months
of 1999 (Continued)
loans in the first quarter of 1999 and the sale of $20.4 million
of consumer credit card loans during the second quarter of 1999.
The total yield on loans for the first quarter of 2000 was 8.35%
representing an increase of 9 basis points (0.09%) compared to
the first quarter of 1999.
Interest income on investments increased $2.3 million for the
three months of 2000 compared to the corresponding period of 1999
and included increases due to rate for U.S. government agency
securities and increases due to volume for corporate bonds.
Yields on U.S. government agency securities increased 44 basis
points (0.44%) for the three months of 2000 compared to the three
months of 1999. Average balances of corporate bonds increased
$82.7 million for the first quarter of 2000 compared to averages
for the first quarter of 1999. Yields on investments for the
first quarter of 2000 were 6.88% compared to 6.40% for the first
quarter of 1999 period.
Interest on deposits increased $298 thousand for the 2000 period
compared to 1999, and included increases in interest on time
deposits of $461 thousand and decreases in interest on total
savings deposits of $163 thousand as customers reinvested
deposits in longer term and higher yielding deposit products.
Average savings deposits decreased $45.0 million for the three
months of 2000 compared to 1999 averages while average time
deposits increased $48.8 million for the 2000 period compared to
1999 averages.
Interest expense on short-term borrowings increased $3.7 million
for the three months of 2000 compared to the three months of 1999
as the average balance of repurchase agreements increased $181.2
million over 1999 averages. The cost of short-term borrowings
for the three months of 2000 also increased by 98 basis points
(0.98%) compared to 1999 costs of 4.64%.
Interest expense on long-term debt increased $733 thousand for
2000 compared to the 1999 period. The long-term debt increase
for 2000 resulted primarily from the funding of the repurchase of
3.8 million shares of the Corporation's common stock through a
"modified Dutch Auction" tender offer during 1999. The aggregate
amount of $49.7 million paid by the Corporation in connection
with the repurchase of common shares was funded through the
issuance of capital securities and the issuance of a bank loan
from an unrelated financial institution. Capital securities
borrowings in the amount of $35 million were issued during the
third quarter of 1999 bearing an interest rate of 9.50% and
maturing in thirty years.
11
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ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS (Continued)
First Three Months of 2000 as Compared to the First Three Months
of 1999 (Continued)
The provision for credit losses was $2.5 million for the three
months of 2000 compared to $2.2 million during the 1999 period.
Net charge-offs against the allowance for credit losses were $2.2
million in the 2000 period and $1.4 million in the 1999 period
reflecting a increase of $830 thousand. The 2000 increase in net
charge-offs included increases in net charge-offs for commercial
loans not secured by real estate of $622 thousand and increases
in net charge-offs of credit card loans of $189 thousand compared
to 1999 net charge-offs. See the "Credit Review" section for an
analysis of the quality of the loan portfolio.
Below is an analysis of the consolidated allowance for credit
losses for the three month periods ended March 31, 2000 and 1999.
2000 1999
(Amounts in thousands)
Balance January 1, $33,539 $32,304
Loans charged off:
Commercial, financial and
agricultural 839 100
Real estate-construction -0- -0-
Real estate-commercial -0- 11
Real estate-residential 191 288
Loans to individuals 1,464 1,329
Lease financing receivables 97 -0-
Total loans charged off 2,591 1,728
Recoveries of previously
charged off loans:
Commercial, financial and
agricultural 132 25
Real estate-construction -0- -0-
Real estate-commercial -0- -0-
Real estate-residential 7 14
Loans to individuals 195 278
Lease financing receivables 16 -0-
Total recoveries 350 317
Net charge offs 2,241 1,411
Provision charged to operations 2,505 2,213
Balance March 31, $33,803 $33,106
12
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ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS (Continued)
First Three Months of 2000 as Compared to the First Three Months
of 1999 (Continued)
Net securities gains decreased $563 thousand during the 2000
period as there were no securities gains during the 2000 period.
The securities gains during 1999 resulted in part from the sales
of fixed rate U.S. government agency securities and U.S. Treasury
securities classified as securities "available for sale" having
book values of $15.0 million and $21.9 million, respectively,
which resulted in security gains of $167 thousand and $317
thousand, respectively. Proceeds from the sale of U.S. Treasury
securities in 1999 were the primary funding source for the
acquisition of $20 million of bank owned life insurance during
the first quarter.
During the three months of 2000 gains on the sale of loans were
$3 thousand compared to gains on sale of loans of $924 thousand
for the three months of 1999. Gains on sale of loans for the
1999 period resulted primarily from the sale of $42.2 million of
residential mortgage loans during the first quarter of 1999 which
generated a gain of $890 thousand. Service charges on deposits
were $2.5 million for the first quarter of 2000 compared to $2.4
million for the first quarter of 1999. Other income for the
first three months of 2000 was $3.5 million, representing an
increase of $473 thousand compared to the first three months of
1999. Other income for the 2000 period reflected increases in
gains on sale of fixed assets of $515 thousand, merchant discount
of $117 thousand and reinsurance income of $55 thousand which
were partially offset by decreases in loan servicing revenue of
$160 thousand and letter of credit fees of $33 thousand.
Noninterest expense was $25.2 million for the three months of
2000 reflecting an increase of $476 thousand over the 1999 level
of $24.7 million. Although total noninterest expense for 2000
increased over 1999 levels, total noninterest expense as a
percent of average assets declined from 2.42% for the three
months of 1999 to 2.34% for the same period of 2000. Employee
costs were $13.9 million in 2000, representing 1.30% of average
assets on an annualized basis compared to $13.1 million or 1.28%
of average assets on an annualized basis for 1999. Employee
costs for the three months of 2000 reflected increases in total
salaries of $483 thousand which included true salary increases of
$218 thousand and increases due to reductions in deferred loan
origination costs of $265 thousand compared to the corresponding
period of 1999. True salary increases for the 2000 period
represented an increase of only 1.98% compared to 1999 salaries.
The number of full time equivalent employees at March 31, 2000
was 1,432 compared to 1,478 at March 31, 1999, primarily as a
result of the early retirement plan offered to employees during
1998. Employee benefit costs for the first three months of 2000
reflected increases of $350 thousand over the first three months
of 1999 and included increases in health insurance costs of $122
thousand, increases in the 401(k) plan expenses of $117 thousand
13
<PAGE>
<PAGE>
ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS (Continued)
First Three Months of 2000 as Compared to the First Three Months
of 1999 (Continued)
and increases due to the impact of deferred loan origination
costs of $75 thousand compared to the first three months of 1999.
Outside data processing expenses for the three months of 2000
decreased $132 thousand over the three months of 1999 as a result
of decreases in the cost of credit card processing and the
elimination of outside processing costs for a subsidiary sold
during the second quarter of 1999. Other operating expenses for
the 2000 period were $6.0 million reflecting a decrease of $217
thousand from the 1999 amount of $6.2 million. Other operating
expenses for the first three months of 2000 included a decrease
in write-down of mortgage servicing rights in the amount of $336
thousand. Legal fees, other professional fees and stationery and
supplies expenses reflected decreases for the first three months
of 2000 of $148 thousand, $185 thousand and $85 thousand,
respectively compared to the 1999 period. The first quarter of
2000 included increases in charge card interchange expenses,
collection and repossession expenses and FDIC expense compared to
the first quarter of 1999.
Income tax expense was $3.7 million for the three months of 2000
compared to $4.5 million for the same period of 1999. The
Corporation's effective tax rate was 24.4% for the 2000 period
compared to 27.4% for 1999. The reduction of the Corporation's
effective tax rate for 2000 was primarily the result of increased
tax free income from municipal loans during 2000 compared to the
1999 period.
LIQUIDITY
Liquidity is a measure of the Corporation's ability to
efficiently meet normal cash flow requirements of both borrowers
and depositors. In the ordinary course of business, funds are
generated from deposits (primary source) and the maturity or
repayment of earning assets, such as securities and loans. As an
additional secondary source, short-term liquidity needs may be
provided through the use of overnight Federal funds purchased,
borrowings through the use of lines available for repurchase
agreements, and borrowings from the Federal Reserve Bank.
Additionally, the banking subsidiaries are members of the Federal
Home Loan Bank and may borrow under overnight and term borrowing
arrangements. The sale of earning assets may also provide an
additional source of liquidity.
The Corporation monitors liquidity through regular computations
of prescribed liquidity ratios. The Corporation actively manages
liquidity within a defined range and has developed liquidity
contingency plans, including ensuring availability of alternate
14
<PAGE>
<PAGE>
ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY (Continued)
funding sources to maintain liquidity under a variety of business
conditions. In addition to the previously described funding
sources the Corporation's ability to access the capital markets
was demonstrated during 1999 through the issuance of $35 million
of capital securities.
Net loans increased by $15.4 million in the first three months of
2000 as increases in commercial loans secured by real estate and
increases in municipal loans were partially offset by decreases
in loans to individuals and decreases in commercial loans not
secured by real estate. Growth of the commercial loan portfolio
has been achieved in part through continued development of
commercial lending specialists.
Total deposits decreased $42.1 million for the first three months
of 2000 and included decreases in noninterest bearing deposits of
$7.9 million and decreases in total savings deposits of $39.1
million which were partially offset by increases in time deposits
of $4.9 million since year-end. Customers continue to reinvest
savings deposits in higher yielding investments both within and
outside the commercial banking industry. Future sources of
deposits utilized could include the use of brokered time deposits
offered outside the Corporation's traditional market area.
Marketable securities that the Corporation holds in its
investment portfolio are an additional source of liquidity.
These securities are classified as "securities available for
sale" and while the Corporation does not have specific intentions
to sell these securities they have been designated as "available
for sale" because they may be sold for the purpose of obtaining
future liquidity, for management of interest rate risk or as part
of the implementation of tax management strategies. As of
March 31, 2000, securities available for sale had an amortized
cost of $1,213.5 million and an approximate fair value of
$1,143.6 million.
Interest Sensitivity
The objective of interest rate sensitivity management is to
maintain an appropriate balance between the stable growth of
income and the risks associated with maximizing income through
interest sensitivity imbalances. While no single number can
accurately describe the impact of changes in interest rates on
net interest income, interest rate sensitivity positions, or
"gaps", when measured over a variety of time periods, may be
helpful.
15
<PAGE>
<PAGE>
ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Interest Sensitivity (Continued)
An asset or liability is considered to be interest-sensitive if
the rate it yields or bears is subject to change within a
predetermined time period. If interest-sensitive assets ("ISA")
exceed interest-sensitive liabilities ("ISL") during the
prescribed time period, a positive gap results. Conversely, when
ISL exceeds ISA during a time period, a negative gap results.
A positive gap tends to indicate that earnings will be impacted
favorably if interest rates rise during the period and negatively
when interest rates fall during the time period. A negative gap
tends to indicate that earnings will be affected inversely to
interest rate changes. In other words, as interest rates fall, a
negative gap should tend to produce a positive effect on
earnings, and when interest rates rise, a negative gap should
tend to affect earnings negatively.
The primary components of ISA include adjustable rate loans and
investments, loan repayments, investment maturities and money
market investments. The primary components of ISL include
maturing certificates of deposit, money market deposits, savings
deposits, NOW accounts and short-term borrowings.
16
<PAGE>
<PAGE>
ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Interest Sensitivity (Continued)
The following table lists the amounts and ratios of assets and
liabilities with rates or yields subject to change within the
periods indicated as of March 31, 2000 and December 31, 1999
(Dollar amounts in thousands):
March 31, 2000
0-90 91-180 181-365 Cumulative
Days Days Days 0-365 Days
Loans....................$ 587,458 $117,887 $ 227,739 $ 933,084
Investments.............. 37,176 33,696 62,246 133,118
Other interest-earning
assets.................. 11,114 3,776 3,176 18,066
Total interest-sensitive
assets................ 635,748 155,359 293,161 1,084,268
Certificates of deposits. 315,636 179,782 271,124 766,542
Other deposits........... 1,025,683 -0- -0- 1,025,683
Borrowings............... 468,014 25,301 1,436 494,751
Total interest-sensitive
liabilities........... 1,809,333 205,083 272,560 2,286,976
GAP....................$(1,173,585) $(49,724) $ 20,601 $(1,202,708)
ISA/ISL.................. 0.35 0.76 1.08 0.47
Gap/Total assets......... 27.16% 1.15% 0.48% 27.83%
December 31, 1999
0-90 91-180 181-365 Cumulative
Days Days Days 0-365 Days
Loans....................$ 697,645 $113,547 $ 204,090 $ 1,015,282
Investments.............. 44,666 39,497 66,465 150,628
Other interest-earning
assets.................. 18,799 2,759 4,532 26,090
Total interest-sensitive
assets................ 761,110 155,803 275,087 1,192,000
Certificates of deposits. 325,985 231,804 277,769 835,558
Other deposits........... 1,074,451 -0- -0- 1,074,451
Borrowings............... 467,255 961 127,108 595,324
Total interest-sensitive
liabilities........... 1,867,691 232,765 404,877 2,505,333
GAP....................$(1,106,581) $(76,962) $(129,790) $(1,313,333)
ISA/ISL.................. 0.41 0.67 0.68 0.48
Gap/Total assets......... 25.49% 1.77% 2.99% 30.26%
17
<PAGE>
<PAGE>
ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Interest Sensitivity (Continued)
Although the periodic gap analysis provides management with a
method of measuring current interest rate risk, it only measures
rate sensitivity at a specific point in time. Therefore, to more
precisely measure the impact of interest rate changes on the
Corporation's net interest income, management simulates the
potential effects of changing interest rates through computer
modeling. The income simulation model used by the Corporation
captures all assets, liabilities, and off-balance sheet financial
instruments, accounting for significant variables that are
believed to be affected by interest rates. These variables
include prepayment speeds on mortgage loans and mortgage backed
securities, cash flows from loans, deposits and investments and
balance sheet growth assumptions. The model also captures
embedded options, such as interest rate caps/floors or call
options, and accounts for changes in rate relationships as
various rate indices lead or lag changes in market rates. The
Corporation is then better able to implement strategies which
would include an acceleration of a deposit rate reduction or lag
in a deposit rate increase. The repricing strategies for loans
would be inversely related.
The Corporation's asset/liability management policy guidelines
limit interest rate risk exposure for the succeeding twenty-four
month period. Simulations are prepared under the base case where
interest rates remain flat and most likely case where interest
rates are defined using projections of economic factors.
Additional simulations are produced estimating the impact on net
interest income of a 300 basis point (3.00%) movement upward or
downward from the base case scenario. The Corporation's current
asset/liability management policy indicates that a 300 basis
point (3.00%) change in interest rates up or down cannot result
in more than a 7.5% change in net interest income when compared
to a base case, without Board approval and a strategy in place to
reduce interest rate risk below the established maximum level.
The analysis at March 31, 2000, indicated that a 300 basis point
(3.00%) movement in interest rates in either direction over the
next twelve months would not have a significant impact on the
Corporation's anticipated net interest income over that time
frame nor over the next twenty-four months and the Corporation's
position would remain well within current policy guidelines.
The Corporation's "Asset/Liability Management Committee" ("ALCO")
is responsible for the identification, assessment and management
of interest rate risk exposure, liquidity, capital adequacy and
investment portfolio position. The primary objective of the ALCO
process is to ensure that the Corporation's balance sheet
structure maintains prudent levels of risk within the context of
currently known and forecasted economic conditions and to
establish strategies which provide the Corporation with
appropriate compensation for the assumption of those risks. The
ALCO attempts to mitigate interest rate risk through the use of
strategies such as asset disposition, asset and liability pricing
and matched maturity funding. The ALCO strategies are
established by the Corporation's senior management and are
approved by the Corporation's board of directors.
18
<PAGE>
<PAGE>
ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
CREDIT REVIEW
The following table identifies amounts of loan losses and
nonperforming loans. Past due loans are those which were
contractually past due 90 days or more as to interest or
principal payments but are well secured and in the process of
collection. Renegotiated loans are those loans which terms have
been renegotiated to provide a reduction or deferral of principal
or interest as a result of the deteriorating financial position
of the borrower and are in compliance with the restructured
terms.
At March 31,
2000 1999
(amounts in thousands)
Nonperforming Loans:
Loans on nonaccrual basis $ 11,643 $ 10,649
Past due loans 14,468 13,013
Renegotiated loans 1,482 64
Total Nonperforming Loans $ 27,593 $ 23,726
Other real estate owned $ 1,840 $ 2,053
Loans outstanding at end of period $2,515,717 $2,360,694
Average loans outstanding (year-to-date) $2,507,679 $2,384,385
Nonperforming loans as percent of
total loans 1.10% 1.01%
Provision for credit losses $ 2,505 $ 2,213
Net charge-offs $ 2,241 $ 1,411
Net charge-offs as percent of
average loans outstanding 0.09% 0.06%
Provision for credit losses as percent
of net charge-offs 111.78% 156.84%
Allowance for credit losses as percent
of average loans outstanding 1.35% 1.39%
Allowance for credit losses as percent
of end-of-period loans outstanding 1.34% 1.40%
Allowance for credit losses as percent
of nonperforming loans 122.51% 139.53%
19
<PAGE>
<PAGE>
ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
CREDIT REVIEW (Continued)
The Corporation considers a loan to be impaired when, based on
current information and events, it is probable that the
Corporation will be unable to collect principal or interest due
according to the contractual terms of the loan. Loan impairment
is measured based on the present value of expected cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the loan's observable market price or the
fair value of the collateral if the loan is collateral dependent.
Payments received on impaired loans are applied against the
recorded investment in the loan. For loans other than those that
the Corporation expects repayment through liquidation of the
collateral, when the remaining recorded investment in the
impaired loan is less than or equal to the present value of the
expected cash flows, income is recorded on a cash basis.
Impaired loans include loans on a nonaccrual basis and
renegotiated loans.
The following table identifies impaired loans, and information
regarding the relationship of impaired loans to the reserve for
credit losses at March 31, 2000 and March 31, 1999:
2000 1999
(amounts in thousands)
Recorded investment in impaired loans at end
of period $13,125 $10,713
Year to date average balance of impaired loans $12,932 $10,373
Allowance for credit losses related to impaired
loans $ 2,928 $ 2,431
Impaired loans with an allocation of the allowance
for credit losses $ 5,568 $ 5,180
Impaired loans with no allocation of the allowance
for credit losses $ 7,557 $ 5,533
Year to date income recorded on impaired loans on
a cash basis $ 199 $ 159
Other than those described above, there are no material credits
that management has serious doubts as to the borrower's ability
to comply with the present loan repayment terms. Additionally,
the portfolio is well diversified and as of March 31, 2000, there
were no significant concentrations of credit.
Nonperforming loans at March 31, 2000 increased $3.9 million
compared to 1999 levels and included increases in past due loans,
nonaccrual loans and renegotiated loans of $1.5 million, $994
thousand and $1.4 million, respectively. Past due loans
reflected increases in past due loans secured by residential real
estate of $1.6 million. Nonaccrual loans reflected increases in
nonaccrual loans secured by commercial real estate of $617
thousand and increases in nonaccrual commercial loans not secured
by real estate of $659 thousand. Increases in nonaccrual
20
<PAGE>
<PAGE>
ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
CREDIT REVIEW (Continued)
commercial loans for 2000 were partially offset by decreases in
nonaccrual loans secured by residential real estate of $170
thousand. The increase in renegotiated loans at March 31, 2000
compared to the corresponding period of 1999 were the result of
the modification of loan terms for one commercial borrower.
Although nonperforming loans as a percent of total loans have
increased from 1.01% at March 31, 1999 to 1.10% at March 31, 2000
this ratio has decreased since year-end 1999 amounts of 1.15%.
The allowance for credit losses as a percent of nonperforming
loans at March 31, 2000 has also increased over year-end 1999
levels.
The Corporation's loan portfolio continues to be monitored by
senior management to identify potential portfolio risks and
detect potential credit deterioration in the early stages.
Credit risk is mitigated through the use of sound underwriting
policies and collateral requirements. Management attempts to
minimize loan losses by analyzing and modifying collection
techniques on a periodic basis. Management believes that the
allowance for credit losses and nonperforming loans remain safely
within acceptable levels.
CAPITAL RESOURCES
Equity capital decreased $2.4 million in the first three months
of 2000. Dividends declared reduced equity by $8.1 million
during the 2000 period, while earnings retention was $3.3
million, representing an earnings retention rate of 29%. The
retained net income remains in permanent capital to fund future
growth and expansion. Payments by the Corporation's Employee
Stock Ownership Plan ("ESOP") to reduce debt it incurred to
acquire the Corporation's common stock for future distribution as
employee compensation, net of fair value adjustments to Unearned
ESOP shares, increased equity by $143 thousand. Amounts paid to
fund the discount on reinvested dividends reduced equity by $147
thousand. The market value adjustment to securities available
for sale decreased equity by $5.2 million. The cost of
purchasing treasury shares decreased equity by $873 thousand
while proceeds from the reissuance of treasury shares to provide
for stock options exercised increased equity by $299 thousand
during 2000.
A capital base can be considered adequate when it enables the
Corporation to intermediate funds responsibly and provide related
services, while protecting against future uncertainties. The
evaluation of capital adequacy depends on a variety of factors,
including asset quality, liquidity, earnings history and
prospects, internal controls and management caliber. In
consideration of these factors, management's primary emphasis
with respect to the Corporation's capital position is to maintain
an adequate and stable ratio of equity to assets.
21
<PAGE>
<PAGE>
ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
CAPITAL RESOURCES (Continued)
The Federal Reserve Board has issued risk-based capital adequacy
guidelines which are designed principally as a measure of credit
risk. These guidelines require: (1) at least 50% of a banking
organization's total capital be common and other "core" equity
capital ("Tier I Capital"); (2) assets and off-balance-sheet
items be weighted according to risk; (3) the total capital to
risk-weighted assets ratio be at least 8%; and (4) a minimum
leverage ratio of Tier I capital to average total assets. The
minimum leverage ratio is not specifically defined, but is
generally expected to be 3-5 percent for all but the most highly
rated banks, as determined by a regulatory rating system.
The table below presents the Corporation's capital position at
March 31, 2000:
Percent
Amount of Adjusted
(in thousands) Assets
Tier I Capital $352,849 13.1%
Risk-Based Requirement 107,689 4.0
Total Capital 386,501 14.4
Risk-Based Requirement 215,378 8.0
Minimum Leverage Capital 352,849 8.2
Minimum Leverage Requirement 129,303 3.0
At March 31, 2000 the Corporation's banking subsidiaries are
considered well capitalized as defined by the Federal Deposit
Insurance Corporation Improvement Act of 1991.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Information appearing in Item 2 of this report under the caption
"Interest Sensitivity" is incorporated herein by reference in
response to this item.
22
<PAGE>
<PAGE>
FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There were no material legal proceedings to which
the Corporation or its subsidiaries are a party, or
of which any of their property is the subject,
except proceedings which arise in the normal course
of business and, in the opinion of management, will
not have a material adverse effect on the
consolidated operations or financial position of the
Corporation and its subsidiaries.
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
None
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
23
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
FIRST COMMONWEALTH FINANCIAL CORPORATION
(Registrant)
DATED: MAY 15, 2000 /S/ Joseph E. O'Dell
Joseph E. O'Dell, President and
Chief Executive Officer
DATED: MAY 15, 2000 /S/ John J. Dolan
John J. Dolan, Executive Vice
President and Chief Financial
Officer
24
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 81,584
<INT-BEARING-DEPOSITS> 749
<FED-FUNDS-SOLD> 1,775
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,143,614
<INVESTMENTS-CARRYING> 426,485
<INVESTMENTS-MARKET> 412,650
<LOANS> 2,518,852
<ALLOWANCE> 33,803
<TOTAL-ASSETS> 4,321,165
<DEPOSITS> 2,906,778
<SHORT-TERM> 444,799
<LIABILITIES-OTHER> 44,163
<LONG-TERM> 641,095
0
0
<COMMON> 62,525
<OTHER-SE> 221,805
<TOTAL-LIABILITIES-AND-EQUITY> 4,321,165
<INTEREST-LOAN> 51,110
<INTEREST-INVEST> 25,766
<INTEREST-OTHER> 67
<INTEREST-TOTAL> 76,943
<INTEREST-DEPOSIT> 26,165
<INTEREST-EXPENSE> 41,504
<INTEREST-INCOME-NET> 35,439
<LOAN-LOSSES> 2,505
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 25,150
<INCOME-PRETAX> 15,142
<INCOME-PRE-EXTRAORDINARY> 11,451
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,451
<EPS-BASIC> 0.20
<EPS-DILUTED> 0.20
<YIELD-ACTUAL> 7.80
<LOANS-NON> 11,643
<LOANS-PAST> 14,468
<LOANS-TROUBLED> 1,482
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 33,539
<CHARGE-OFFS> 2,591
<RECOVERIES> 350
<ALLOWANCE-CLOSE> 33,803
<ALLOWANCE-DOMESTIC> 0
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