FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------------------
(Mark One)
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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 No. 0-11526
----------------------------------------------------
FIRST COLONIAL GROUP, INC.
---------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PENNSYLVANIA 23-2228154
- ---------------------------------------- ------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
76 S. MAIN ST., NAZARETH, PA 18064
- ---------------------------------------- --------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 610-746-7300
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO _____
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INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK AS OF THE LATEST PRACTICABLE DATE: 1,655,102 SHARES OF COMMON
STOCK, $5 PAR VALUE, OUTSTANDING ON MARCH 31, 1998.
<PAGE>
FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION PAGE NO.
ITEM 1 - Financial Statements
Consolidated Balance Sheet 2
Consolidated Statement of Income 3
Statement of Comprehensive Income 4
Consolidated Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6
ITEM 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
ITEM 3 - Quantitative and Qualitative Discussion About
Market Risk 23
PART II - OTHER INFORMATION
ITEM 5 - Other Information 27
ITEM 6 - Exhibits and Reports on Form 8-K 27
SIGNATURES 28
<PAGE>
FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
<TABLE>
March 31 Dec. 31
ASSETS 1998 1997
--------- ---------
<S> <C> <C>
Cash and Due From Banks $ 12,911 $ 12,629
Federal Funds Sold -- 2,200
--------- ---------
Total Cash and Cash Equivalents 12,911 14,829
Interest-Bearing Deposits With Banks 4,211 395
Investment Securities Held-to-Maturity
(Fair Value: Mar. 31, 1998 - $20,623;
Dec. 31, 1997 - $17,946) 20,506 7,756
Securities Available-for-Sale at Fair Value 83,418 73,024
Mortgage Loans Held-for-Sale 1,407 759
Total Loans, Net of Unearned Discount 217,757 229,587
LESS: Allowance for Possible Loan Losses (2,674) (2,664)
--------- ---------
Net Loans 215,083 226,923
Premises and Equipment, Net 7,136 7,299
Accrued Interest Income 2,521 2,232
Other Real Estate Owned 194 284
Other Assets 4,033 3,237
--------- ---------
TOTAL ASSETS $ 351,420 $ 346,738
========= =========
LIABILITIES
Deposits
Non-Interest Bearing Deposits $ 35,998 $ 32,800
Interest-Bearing Deposits 254,377 249,455
--------- ---------
Total Deposits 290,375 282,255
Securities Sold Under Agreements to Repurchase 4,544 8,804
Short-Term Borrowing
Long-Term Debt 18,374 18,390
Accrued Interest Payable 3,361 3,466
Other Liabilities 3,962 3,466
--------- ---------
TOTAL LIABILITIES 320,616 316,381
--------- ---------
SHAREHOLDERS' EQUITY
Preferred Stock, Par Value $5.00 a share
Authorized - 500,000 shares, none issued -- --
Common Stock, Par Value $5.00 a share
Authorized - 10,000,000 shares
Issued - 1,655,411 shares at Mar. 31, 1998
and 1,655,413 shares at Dec. 31, 1997 8,277 8,277
Additional Paid in Capital 11,014 11,014
Retained Earnings 10,708 10,250
Less Treasury Stock at Cost: 309 shares at
Mar. 31, 1998 and
2,779 shares at Dec. 31, 1997 (10) (94)
Employee Stock Ownership Plan Debt (374) (390)
Net Unrealized Gain on Securities Available-for-Sale 1,189 1,300
--------- ---------
Total Shareholders' Equity 30,804 30,357
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 351,420 $ 346,738
========= =========
</TABLE>
See accompanying notes to interim consolidated financial statements.
<PAGE>
FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands)
(Unaudited
<TABLE>
Three Months Ended
Mar. 31 Mar. 31,
1998 1997
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $ 4,913 $ 4,718
Interest on Investment Securities
Taxable 1,170 1,104
Tax-Exempt 259 190
Interest on Deposits with Banks and
Federal Funds Sold 43 18
------- -------
Total Interest Income 6,385 6,030
------- -------
INTEREST EXPENSE
Interest on Deposits 2,327 2,213
Interest on Short-Term Borrowings 66 69
Interest on Long-Term Debt 146 275
------- -------
Total Interest Expense 2,686 2,557
------- -------
NET INTEREST INCOME 3,699 3,473
Provision for Possible Loan Losses 112 113
------- -------
Net Interest Income After Provision
for Possible Loan Losses 3,587 3,360
------- -------
OTHER INCOME
Trust Revenue 211 187
Service Charges on Deposit Accounts 350 293
Investment Securities Gains, Net 100 140
Gain (Loss) on Sale of Mortgage Loans 40 (1)
Other Operating Income 159 142
------- -------
Total Other Income 860 761
------- -------
OTHER EXPENSES
Salaries and Employee Benefits 1,614 1,481
Net Occupancy and Equipment Expense 551 532
Other Operating Expenses 1,243 1,141
------- -------
Total Other Expenses 3,408 3,154
------- -------
Income Before Income Taxes 1,039 967
Applicable Income Taxes 271 263
------- -------
NET INCOME $ 768 $ 704
======= =======
PER SHARE DATA
Basic and Diluted Net Income $ 0.47 $ 0.44
Cash Dividends $ 0.47 $ 0.44
</TABLE>
See accompanying notes to interim consolidated financial statements.
<PAGE>
FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
STATEMENT OF COMPREHENSIVE INCOME
(Dollars in Thousands)
(Unaudited)
Three Months Ended
Mar. 31, Mar. 31,
1998 1997
<TABLE>
<S> <C> <C>
Net Income $ 768 $ 704
Other Comprehensive Income, Net of Tax
Unrealized gains (losses) on securities
Unrealized gains (losses) arising in period (73) (237)
Reclassification adjustment; gain included
in net income (78) (94)
Other Comprehensive Income (151) (331)
------ -----
Comprehensive Income $ 617 $ 373
====== ======
</TABLE>
Other comprehensive income is shown net of tax of $78 and $171 for March 31,
1998 and March 31, 1997, respectively.
See accompanying notes to interim consolidated financial statements.
<PAGE>
FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
Three Months Ended
March 31, 1998 March 31, 1997
OPERATING ACTIVITIES (Unaudited)
<S> <C> <C>
Net Income $ 768 $ 704
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Provision for Possible Loan Losses 112 113
Depreciation and Amortization 243 202
Amortization of Security Discounts (20) (16)
Amortization of Security Premiums 28 40
Amortization of Deferred Fees on Loans (107) (7)
Mortgage Loans Originated for Sale (19,929) (4,201)
Mortgage Loan Sales 19,281 3,487
(Gain) Loss on Sale of Mortgage Loans (40) 1
Investment Securities Gains, Net (100) (140)
Changes in Assets and Liabilities:
Increase in Accrued Interest Income (289) (431)
Decrease in Accrued Interest Payable (105) (134)
Net Increase in Other Assets (846) (471)
Net Increase in Other Liabilities 586 291
------- -------
Net Cash (Used In) Operating Activities (478) (562)
------- -------
INVESTING ACTIVITIES
Proceeds from Maturities of Securities
Available-for-Sale 6,542 1,281
Proceeds from Maturities of Securities
Held-to-Maturity 3,523 415
Proceeds from Sales of Securities
Available-for-Sale 1,430 2,556
Proceeds from Sales of Securities
Held-to-Maturity 248 ---
Purchase of Securities Available-for-Sale (18,423) (10,808)
Purchase of Securities Held-to-Maturity (6,540) (1,004)
Net Decrease in Interest Bearing Deposits
With Banks (3,816) 143
Net Increase in Loans 11,935 (4,397)
Purchase of Premises and Equipment, Net (63) (378)
Proceeds from Sale of Other Real Estate Owned 90 184
------- -------
Net Cash (Used In) Investing Activities (5,074) (12,008)
------- -------
FINANCING ACTIVITIES
Net Increase in Interest and Non-Interest
Bearing Demand Deposits and Savings Accounts 7,218 3,105
Net Increase in Certificates of Deposits 902 3,931
Proceeds from Sale of Treasury Stock 84 20
Net (Decrease) in Repurchase Agreements (4,260) (682)
Net Increase in Short-Term Borrowings --- 3,330
Proceeds from Issuance of Stock --- 45
Cash Dividends Paid (310) (276
------- -------
Net Cash Provided by Financing Activities 3,634 9,473
------- -------
(Decrease) in Cash and Cash Equivalents (1,918) (3,097)
Cash and Cash Equivalents, January 1 14,829 13,929
------- -------
Cash and Cash Equivalents, March 31, $12,911 $10,832
======= =======
</TABLE>
See accompanying notes to interim consolidated financial statements.
<PAGE>
FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - GENERAL
The accompanying financial statements, footnotes and discussion should be read
in conjunction with the audited financial statements, footnotes, and discussion
contained in the Company's Annual Report for the year ended December 31, 1997.
The financial information presented herein is unaudited; however, in the opinion
of management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the unaudited financial information have been made.
The results for the three months ended March 31, 1998 are not necessarily
indicative of results to be expected for the full year or any other interim
period.
NOTE B - SUBSIDIARIES
First Colonial Group, Inc. (the Company) is a Pennsylvania business corporation
which is registered as a bank holding company under the Bank Holding Company Act
of 1956. The Company has two wholly-owned subsidiaries, Nazareth National Bank
and Trust Company (the "Bank") founded in 1897 and First C. G. Company, Inc.
founded in 1986.
NOTE C - INVESTMENT CONSIDERATIONS
In analyzing whether to make, or to continue, an investment in the Company,
investors should consider, among other factors, certain investment
considerations more particularly described in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1997, a copy of which can be
obtained from Reid L. Heeren, Vice President, First Colonial Group, Inc., 76 S.
Main Street, Nazareth, PA 18064.
NOTE D - FORWARD LOOKING STATEMENTS
The information contained in this Quarterly Report contains forward looking
statements (as such term is defined in the Securities Exchange Act of 1934 and
the regulations thereunder), including, without limitation, statements as to the
allowance and provision for possible loan losses, future interest rates and
their effect on the Company's financial condition or results of operations, the
classification of the Company's investment portfolio, statements or estimates
concerning the effect of the "Year 2000" issues on the Company's systems and
software and the Company's plans with regard to "Year 2000" issues and other
statements as to management's beliefs, expectations or opinions. Such forward
<PAGE>
looking statements are subject to risks and uncertainties and may be affected by
carious factors which may cause actual results to differ materially from those
in the forward looking statements. Certain of these risks, uncertainties and
other factors are discussed in this Quarterly Report or in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1997, a copy of which may
be obtained from the Company upon request and without charge (except for the
exhibits thereto).
NOTE E - CASH DIVIDENDS
On February 20, 1998 the Company paid its 1998 first quarter dividend on its
common stock of $.19 per share to shareholders of record on February 6, 1998.
NOTE F - STOCK DIVIDEND
On June 19, 1997 the Company paid a 5% stock dividend to shareholders of record
on May 30, 1997. Fractional shares were paid in cash based on the closing price
of $23.875 per share on the record date. Net income per share and average shares
outstanding have been restated to reflect the 5% stock dividend.
NOTE G - EARNINGS PER SHARE
During 1997, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 128, "Earnings Per Share (SFAS 128)". SFAS 128
eliminates primary and fully diluted earnings per share and requires
presentation of basic and diluted earnings per share in conjunction with the
disclosures of the methodology used in computing such earnings per share. Basic
earnings per share excludes dilution and is computed by dividing income
available to common shareholders by the weighted-average common shares
outstanding during the period. Diluted earnings per share takes into account the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised and converted into common stock. Prior periods
earnings per share calculations have been restated to reflect the adoption of
SFAS No. 128. There is no difference between basic and diluted earnings per
share for the three month period March 31, 1998 and 1997. Basic and diluted
earnings per share are calculated as follows.
<PAGE>
For the Three Months Ended March 31,
<TABLE>
Average
Income Shares Per Share
(numerator) (denominator) Amount
1998
<S> <C> <C> <C>
Net Income $ 768
Basic Earnings Per Share
Income Available to Common Shareholders $ 768 1,633,328 $ 0.47
Effect of Dilutive Securities
Stock Options 7,370
------ --------- -------
Diluted Earnings Per Share
Income Available to Common Shareholders
plus Assumed Exercise of Options $ 768 1,640,688 $ 0.47
------ --------- -------
1997
Net Income $ 704
Basic Earnings Per Share
Income Available to Common Shareholders $ 704 1,614,039 $ 0.44
Effect of Dilutive Securities
Stock Options 5,430
------ --------- -------
Diluted Earnings Per Share
Income Available to Common Shareholders
plus Assumed Exercise of Options $ 704 1,619,469 $ 0.44
------ --------- -------
</TABLE>
Average common shares outstanding in the three month period ending March 31,
1998 and 1997 do not include 22,034 and 29,419, respectively of average weighted
unallocated shares held by the ESOP. The exclusion of these unallocated shares
held by the ESOP is due to the Company's adoption of SOP 93-6. Share and per
share information have been restated to reflect the 5% stock dividend of May
1997.
<PAGE>
NOTE H - ALLOWANCE FOR POSSIBLE LOAN LOSSES
Transactions in the allowance for possible loan losses were as follows:
<TABLE>
Three Month Period Ended March 31, 1998 1997
<S> <C> <C>
Beginning Balance $2,664,000 $2,532,000
Additions
Provision for loan losses charged to
operating expenses 112,000 113,000
Recoveries of loans 24,000 20,000
---------- ----------
Total Additions 136,000 133,000
Deductions
Loans charged off 126,000 128,000
---------- ----------
Ending Balance $2,674,000 $2,537,000
</TABLE>
NOTE I - IMPAIRED LOANS
The Company measures impairment of a loan based on the present value of expected
future cash flows discounted at the loan's effective interest rate, except that
as a practical expedient, impairment may be measured based on a loan's
observable market price, or the fair value of the collateral if the loan is
collateral dependent. Regardless of the measurement method, a creditor must
measure impairment based on the fair value of the collateral when the creditor
determines that foreclosure is probable. SFAS No. 118 allows creditors to use
existing methods for recognizing interest income on impaired loans.
The Company has identified a loan as impaired when it is probable that interest
and principal will not be collected according to the contractual terms of the
loan agreement. The accrual of interest is discontinued on such loans and no
income is recognized until all recorded amounts of interest and principal are
recovered in full.
Loan impairment is measured by estimating the expected future cash flows and
discounting them at the respective effective interest rate or by valuing the
underlying collateral. The recorded investment in these loans and the valuation
for credit loses related to loan impairment are as follows:
<PAGE>
<TABLE>
At March 31, 1998 1997
<S> <C> <C>
Principal amount of impaired loans $1,428,000 $721,000
Deferred loan costs 1,000 6,000
-------- --------
1,429,000 727,000
Less valuation allowance 504,000 197,000
-------- --------
$ 926,000 $530,000
</TABLE>
On January 1, 1995 a valuation for credit losses related to impaired loans was
established. The activity in this allowance account for the quarter ending March
31, 1998 is as follows:
<TABLE>
1998 1997
<S> <C> <C>
Valuation allowance at January 1, $138,000 $128,000
Provision for loan impairment 112,000 95,000
Transfer from Unallocated Allowance 279,000 ---
Direct charge-offs 25,000 (26,000)
-------- --------
Valuation allowance at March 31, $504,000 $197,000
</TABLE>
Total cash collected on impaired loans during the quarter ended March 31, 1998
was $9,000, of which $8,000 was credited to the principal balance outstanding on
such loans and $1,000 was recognized as interest income. Interest that would
have been accrued on impaired loans during the quarter was $45,000. Interest
income recognized during the quarter was $6,385,000. The valuation allowance for
impaired loans of $504,000 at March 31, 1998 is included in the "Allowance for
Possible Loan Losses" which amounts to $2,674,000 at March 31, 1998. The
provision for loan impairment of $112,000 for the three month period ended March
31, 1998 is included in the "Provision for Possible Loan Losses" as reflected on
the "Consolidated Statement of Income" for the same period.
NOTE J - REPORTING OF COMPREHENSIVE INCOME
On January 1, 1998, the Corporation adopted the Financial Accounting Standards
Board issued (SFAS) No. 130, "Reporting Comprehensive Income", which requires
presenting a complete set of financial statements to include details of
comprehensive income that arises in the reporting period. Comprehensive income
consist of net income or loss for the current period and other comprehensive
income - income, expenses, gains and losses that bypass the income statement and
are reported directly in a separate component of equity. Other comprehensive
income includes, for example, foreign currency items, minimum pension liability
adjustments and unrealized gains and losses on certain investment securities.
The Corporation has elected to report comprehensive on a separate scheduled
titled "Statement of Comprehensive Income".
<PAGE>
NOTE K - DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND
RELATED INFORMATION
On January 1, 1998, the Corporation adopted the Financial Accounting Standards
Board issued (SFAS) No. 131, "Disclosures about Segments of an Enterprise and
Related Information". This statement provides users of financial statements with
information about an entity's different types of business activities and the
different economic environments in which it operates to better understand the
entity's performance and its prospects for future net cash flows, and to make
more informed judgments about the entity as a whole. The effect of adopting SFAS
No. 131 is not expected to have a material impact on the Company's financial
statements.
<PAGE>
ITEM 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following financial review and analysis is of the financial condition and
earnings performance of the Company and its wholly owned subsidiaries for the
three month period ended March 31, 1998.
Liquidity and Capital Resources
Liquidity is a measure of the Company's ability to raise funds to
support asset growth, meet deposit withdrawal and other borrowing needs,
maintain reserve requirements and otherwise operate the Company on an ongoing
basis. The Company manages its assets and liabilities to maintain liquidity and
earnings stability. Among the sources of liquidity are money market investments,
securities available-for-sale, funds received from the repayment of loans,
short-term borrowings and borrowings from the Federal Home Loan Bank. At March
31, 1998, cash, due from banks, Federal funds sold and interest bearing deposits
with banks totaled $17,122,000, and securities maturing within one year totaled
$3,730,000. At December 31, 1996, cash, due from banks, Federal funds sold and
interest bearing deposits with banks, totaled $15,224,000, and securities
maturing within one year were $3,861,000. Securities sold under an agreement to
repurchase totaled $4,544,000 at March 31, 1998 and $8,804,000 at December 31,
1997. The Bank is a member of the Federal Home Loan Bank of Pittsburgh. The Bank
had interest bearing demand deposits at the Federal Home Loan Bank of Pittsburgh
in the amount of $4,189,000 at March 31, 1998 and $110,000 at December 31, 1997.
These deposits are included in due from banks on the Company's financial
statements. As a result of this relationship, the Company places most of its
short-term funds at the Federal Home Loan Bank of Pittsburgh. There were no
Federal funds sold at March 31, 1998. At December 31, 1997 there were Federal
funds sold totaling $2,200,000.
The Federal Home Loan Bank of Pittsburgh provides the Bank with a line of credit
in the amount of $14,288,000 at March 31, 1998, subject to certain collateral
requirements. The Bank had no short-term (overnight) borrowings against this
line at March 31, 1998 or at December 31, 1997. The Bank had additional
borrowings from the Federal Home Loan Bank at March 31, 1998 totaling
$18,000,000 of which $5,000,000 is due in November 1998, $8,000,000 is due in
August 2000 and $5,000,000 is due in December 2001.
<PAGE>
Cash flows for the three months ended March 31, 1998 consisted of cash
used in operating activities of $478,000 and cash used in investing activities
of $5,074,000, offset in part by cash provided by financing activities of
$3,634,000 resulting in a decrease in cash and cash equivalents of $1,918,000.
Cash used in operating activities was the result of mortgage loans
originated for sale of $19,929,000, an increase in other assets of $846,000, an
increase in accrued interest income of $289,000 and a decrease in accrued
interest payable of $105,000, partially reduced by mortgage loan sales of
$19,281,000, net operating income of $768,000, increases in other liabilities of
$586,000, depreciation and amortization of $243,000 and a provision for possible
loan losses of $112,000. Cash was used in investing activities for the purchase
of securities available-for-sale and held-to-maturity of $18,243,000 and
$6,540,000, respectively, net increase in interest-bearing deposits with banks
of $3,816,000 and the net purchase of premises and equipment of $63,000,
partially offset by decreases in loans of $11,935,000, proceeds from the
maturities of available-for-sale securities of $6,542,000 and proceeds from
maturities of held-to-maturity securities of $3,523,000. Cash provided by
financing activities consisted principally of increases in interest and
non-interest bearing demand deposits and savings accounts of $7,218,000,
increases in certificates of deposit of $902,000 offset in part by a decrease in
repurchase agreements of $4,260,000 and the payment of cash dividends of
$310,000. Also affecting financing activities was the issuance of 2,470 treasury
shares of common stock pursuant to the Dividend Reinvestment Plan for proceeds
of $84,000.
The Company recognizes the importance of maintaining adequate capital
levels to support sound, profitable growth and to encourage depositor and
investor confidence. Shareholders' equity at March 31, 1998 was $30,804,000 as
compared to $30,357,000 at December 31, 1997, for an increase of $447,000 or
1.5%. This increase was attributable to a $458,000 increase in retained earnings
during the first three months of 1998 as a result of operating income of
$768,000 less the payment of a cash dividend of $310,000. Proceeds of the sale
of treasury stock in the Dividend Reinvestment Plan of $84,000, a reduction in
the unrealized gain of securities available-for-sale of $111,000 due to a
decrease in the fair value of these securities (see discussion on "Investment
Securities"), and a reduction of $16,000 of debt related to the Company's
Employee Stock Ownership Plan contributed to the change in shareholder equity.
The Company maintains a Dividend Reinvestment and Stock Purchase Plan.
During the first three months of 1998, 2,470 shares of common stock were
purchased from authorized and unissued shares at an average price of $33.90 per
share for proceeds of approximately $84,000.
<PAGE>
The Company and the Bank are subject to various regulatory capital
requirements administered by the Federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Company's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Company and the Bank must meet specific capital guidelines that involve
quantitative measures of the Company's and the Bank's assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Company's and the Bank's capital amounts and classification are
also subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Company and the Bank to maintain minimum amounts and ratios
of Tier I capital of at least 4% and total capital, Tier I and Tier 2, of 8% of
risk-adjusted assets and of Tier 1 capital of at least 4% of average assets
(leverage ratio). Tier 1 capital includes common shareholders' equity and
qualifying perpetual preferred stock together with related surpluses and
retained earnings. Tier 2 capital may be comprised of limited life preferred
stock, qualifying debt instruments, and the allowance for possible loan losses.
Management believes, that as of March 31, 1998, the Company and the Bank met all
capital adequacy requirements to which they were subject.
<PAGE>
CAPITAL RATIOS
<TABLE>
To Be Well
Capitalized
Required Under Prompt
For Capital Corrective
Actual Purposes Provisions
(Dollars in Thousands)
At March 31, 1998 Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
Total Capital
(To Risk-Weighted Assets)
Company, (Consolidated) $31,808 16.33% $15,583 8.00% --- ---
Bank $27,847 14.40% $15,471 8.00% $19,338 10.00%
Tier 1 Capital
(To Risk-Weighted Assets)
Company, (Consolidated) $29,369 15.08% $ 7,790 4.00 --- ---
Bank $24,827 12.84% $ 7,734 4.00% $11,601 6.00%
Tier 1 Capital
(To Average Assets,
Leverage)
Company, (Consolidated) $29,369 8.48% $13,853 4.00% --- ---
Bank $24,827 7.26% $13,679 4.00% $17,098 5.00%
</TABLE>
<TABLE>
To Be Well
Capitalized
Required Under Prompt
For Capital Corrective
Actual Adequacy Action
(Dollars in Thousands)
At December 31, 1997 Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
Total Capital
(To Risk-Weighted Assets)
Company, (Consolidated) $31,271 16.03% $15,609 8.00% --- ---
Bank $27,200 13.97% $15,576 8.00% $19,470 10.00%
Tier 1 Capital
(To Risk-Weighted Assets)
Company, (Consolidated) $28,829 14.78% $ 7,804 4.00% --- ---
Bank $24,163 12.41% $ 7,788 4.00% $11,682 6.00%
Tier 1 Capital
(To Average Assets,
Leverage)
Company, (Consolidated) $28,829 8.33% $13,551 4.00% --- ---
Bank $24,163 7.06% $13,416 4.00% $16,770 5.00%
</TABLE>
<PAGE>
The Company is not aware of any trends, events or uncertainties that
will have a material effect on the Company's liquidity, capital resources or
operations, except for higher interest rates which could cause deposit
disintermediation and an increase in interest expense and the possibility of
inflationary trends, the results of which cannot be determined at this time. The
Company is not under any agreement with the regulatory authorities nor is it
aware of any current recommendation by regulatory authorities which, if they
were implemented, would have a material adverse effect on liquidity, capital
resources, or the operations of the Company.
Assets and Liabilities
Total assets at March 31, 1998 were $351,420,000, representing an
increase of 1.4% over total assets of $346,738,000 at December 31, 1997.
Deposits increased by $8,120,000 or 2.9% from $282,255,000 on December 31, 1997
to $290,375,000 on March 31, 1998. Contributing to this increase were increases
in interest-bearing checking deposits of $3,648,000, non-interest bearing
checking deposits of $3,198,000, certificates of deposit of $637,000 and savings
and money market deposits of $637,000. Loans outstanding at March 31, 1998 were
$217,757,000 as compared to $229,587,000 at December 31, 1997. This is a
decrease of $11,830,000 or 5.2%. The decline in loans was primarily the result
of a decrease of $13,380,000 or 14.5% in residential real estate loans. During
the first quarter of 1998, $19,281,000 of residential real estate loans were
sold. Most of the loans sold were fixed rate with 30 or 15 year maturities.
These loans were sold to reduce the Company's interest-rate risk and to provide
liquidity for future lending opportunities. Most of the loans sold were
originated in years prior to 1998. The Bank continues to service all of these
loans. There were $1,407,000 of residential real estate loans identified as
held-for-sale at March 31, 1998. Partially offsetting the decrease in
residential real estate loans was an increase of $521,000 or 0.8% in consumer
loans and $1,033,000 or 1.5% in commercial loans during the first three months
of 1998. The loan to deposit ratio was 75.0% at March 31, 1998 and 81.3% at
December 31, 1997.
Premises and equipment decreased by $163,000 to $7,136,000 at March 31,
1998 from $7,299,000 at December 31, 1997.
The Company had long-term debt totaling $18,374,000 at March 31, 1998
as compared to $18,390,000 at December 31, 1997. Included in this total were
outstanding borrowings of $18,000,000 from the Federal Home Loan Bank of
Pittsburgh at March 31, 1998 and December 31, 1997. Of this amount $5,000,000
matures in November 1998, $8,000,000 matures in August 2000 and the remaining
$5,000,000 matures in December 2001. The interest rates associated with these
loans are 5.96% fixed, 5.89% fixed and 5.99% variable (changes quarterly based
on the three month LIBOR plus 8 basis points), respectively. The loans are
secured by the Bank's investment and residential real estate loans and
securities. These funds were borrowed to improve liquidity and to fund loans.
<PAGE>
At March 31, 1998 and December 31, 1997 the Bank had no short-term
borrowings from the Federal Home Loan Bank of Pittsburgh against a line of
credit of $12,148,000.
Results of Operations
Net income for the three months ended March 31, 1998 was $768,000
compared to $704,000 for the same period in 1997. The earnings improvement is
primarily attributable to an increase in net interest income. During the first
quarter of 1998, net interest income increased $226,000 or 6.5% as compared to
March 31, 1997. Also affecting earnings was a $139,000 increase in total other
income exclusive of security gains of $100,000, an increase in total other
expenses of $254,000 and and increase in Federal income taxes of $8,000.
Basic and diluted earnings per share for the three months ended March
31, 1998 were $0.47 compared to $0.44 for the first three months of 1997.
Average shares outstanding during this three month period were 1,640,698 in 1998
and 1,618,717 in 1997. Shares outstanding and earnings per share have been
adjusted to reflect the 5% stock dividend of May 1997. (see Note G)
Net Interest Income
The fully taxable-equivalent net interest income was $3,838.000 for the
first three months of 1998, compared to $3,579,000 for the same period in 1997,
a 7.2% or $259,000 increase as shown in the following "Rate/Volume Analysis"
table. This increase in taxable-equivalent net interest income was primarily due
to a $802,000 increase related to volume partially offset by a $543,000 decrease
related to interest rates.
Total taxable-equivalent interest income grew $388,000 primarily the
result of the higher volumes in both the security and loan earning asset
categories. Income from securities for the first quarter increased $169,000 or
12.1% over the first quarter of 1997. This was comprised of an $885,000 increase
due to volume partially offset by a $710,000 decrease due to rates as a result
of declining yields. Income from loans for the first quarter increased $194,000
or 4.1% over the first quarter of 1997. Increased income due to volume was
$307,000 partially offset by a $113,000 decrease attributable to rates. Average
year-to-date earning assets increased to $322,528,000 at March 31, 1998 from
$303,106,000 at March 31, 1997 a 6.4% increase.
Total interest expense grew $129,000 during the first three months of
1998, compared to the same period in 1997. This growth was principally the
result of higher volumes, primarily due to an increase in time deposits.
Interest expense attributed to time deposits increased $153,000 during the first
three months of 1998, compared to the first three months of 1997. The increase
in time deposits was used to finance the earning asset growth. Partially
offsetting this growth in interest expense were lower interest rates paid on
savings accounts as a result of repricing due to market conditions (see
Quantitative and Qualitative Discussion About Market Risk).
<PAGE>
The following table sets forth a "Rate/Volume Analysis" which
segregates in detail the major factors that contributed to the changes innet
interest income for the three months ended March 31, 1998. The interest income
included in the table has been adjusted to a fully taxable equivalent amount
using the Federal statutory tax rate of 34%.
RATE/VOLUME ANALYSIS
(Dollars in Thousands)
(Unaudited)
<TABLE>
Three Months Ended
March 31, 1998
Over / (Under)
March 31, 1997
CHANGE DUE TO:
TOTAL RATE VOLUME
<S> <C> <C> <C>
(Fully Taxable Equivalent)
INTEREST INCOME
Interest-Bearing Balances With Banks $ 11 $ (85) $ 96
Federal Funds Sold 14 (43) 57
Investment Securities 169 (716) 885
Loans Held for Sale (10) (10) --
Loans 204 (103) 307
------- ------- -------
Total Interest Income 388 (957) 1,345
------- ------- -------
INTEREST EXPENSE
Demand Deposits, Savings & Clubs (39) (88) 49
Time Deposits 153 (359) 512
Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase 32 (80) 112
Short-Term Borrowings (29) 96 (125)
Long-Term Borrowings 12 17 (5)
------- ------- -------
Total Interest Expense 129 (414) 543
------- ------- -------
Net Increase (Decrease) in Interest Income $ 259 $ (543) $ 802
</TABLE>
<PAGE>
Other Income and Other Expenses
Other income for the three months ended March 31, 1998 including
service charges, trust fees, gains on the sale of mortgage loans and other
miscellaneous income, but exclusive of securities gains or losses, was $760,000
as compared to $621,000 for the same period in 1997 This was an increase of
$139,000 or 22.4%. In the three month period ended March 31, 1998 service
charges were $350,000, a $57,000 or 19.5% increase over the 1997 amount of
$293,000. The increase in service charge income is the result of the
implementation of fees assessed to noncustomers use of the Bank's ATM network
and the introduction of a new Debit Card program. The revenues from the Trust
Department operations were $211,000 for the three months ended March 31, 1998 as
compared to $187,000 for the three months ended March 31, 1997, an increase of
$24,000 or 12.8%. During the three months ended March 31, 1998, sales of
mortgage loans resulted in a gain of $40,000 as compared to a loss of $1,000 for
the same period in 1997. The gain in 1998 was the result of the sale of
$19,281,000 of residential real estate loans in the first quarter (see
discussion on Assets and Liabilitites). Other operating income for the three
months ended March 31, 1998 was $159,000 as compared to $142,000 for the same
period in 1997, an increase of $17,000 or 12.0%.
Other expenses for the three months ended March 31, 1998 increased by
$254,000 or 8.1%, to $3,408,000 from $3,154,000 for the same period in 1997.
Salaries and employee benefits were $1,614,000 for the three months ended March
31, 1997 as compared to $1,481,000 for the three months ended March 31, 1997
representing an increase of $133,000or 9.0%. These increases are primarily due
to general salary increases of approximately 4% and additional staff
necessitated by current and planned future growth. Occupancy and equipment
expenses were $551,000 for the three months ended March 31, 1998 and $532,000
for the three months ended March 31, 1997, a decrease of $19,000 or 3.6%. Other
operating expenses for the three months ended March 31, 1998 were $1,243,000 in
relation to $1,141,000 for the three months ended March 31, 1997, an increase of
$102,000 or 8.9%.
Investment Securities
The Company classifies its debt and marketable securities into three
categories: trading, available-for-sale, and held-to-maturity as provided by the
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". The Company had no trading securities at March 31,
1998 and December 31, 1997.
Available-for-sale securities are carried at fair value with the net
unrealized gains or losses reported in equity. The Company had $83,418,000 in
available-for-sale securities at March 31, 1998 with a net unrealized gain of
$1,189,000. At December 31, 1997 available-for-sale securities amounted to
$73,024,000 with a net unrealized gain of $1,300,000.
<PAGE>
During the three month period ended March 31, 1998 $1,430,000 of
securities available-for-sale were sold for a net gain of $100,000 as compared
to $2,556,000 of securities available-for-sale were sold for a net gain of
$140,000 for the same time period in 1997.
Held-to-maturity securities totaling $20,506,000 at March 31, 1998 are
carried at cost. At December 31, 1997 the held-to-maturity securities totaled
$17,756,000. The Company has the intent and ability to hold the held-to-maturity
securities until maturity. The Company, at March 31, 1998, did not hold any
securities identified as derivatives.
Allowance and Provision for Possible Loan Losses
The provision is based on management's analysis of the adequacy of the
allowance for loan losses. In its evaluation, management considers past loan
experience, overall characteristics of the loan portfolio, current economic
conditions and other relevant facators. At present, management currently
believes that the allowance is adequate to absorb known and inherent losses in
the loan portfolio. Ultimately, however, the adequacy of the allowance is
largely dependent upon economic conditions which are beyond the scope of
management's control.
For the first three months of 1998, the provision for loan losses was
$112,000 compared to $113,000 for the same period in 1997. Net charge offs were
$102,000 for the three months ended March 31, 1998 compared with $108,000 for
the three months ended March 31, 1997. The ratio of the allowance for loan
losses to total loans at March 31, 1998 was 1.22% compared to 1.16% at both
December 31, 1997 and March 31, 1997. This was primarily the result of a decline
in total loans to $217,757,000 at March 31, 1998 from $229,587,000 at December
31, 1997. This decline was the result of the sale of $19,281,000 of mortgage
loans during the first quarter of 1998. The allowance for possible loan losses
at March 31, 1998 totaled $2,674,000, an increase of $10,000 or 0.4% over the
December 31, 1997 amount of $2,664,000 and $137,000 or 5.4% over the March 31,
1997 balance of $2,537,000.
As provided by SFAS No. 114, as amended by SFAS No. 118, $504,000 of
the Allowance for Possible Loan Losses is allocated to impaired loans at March
31, 1998 (See Note I "Impaired Loans").
Transactions in the allowance for loan losses are as follows:
<TABLE>
ALLOWANCE FOR LOAN LOSSES
1998 1997
<S> <C> <C>
Balance, January 1, $ 2,664,000 $ 2,532,000
Provision charged to Operating Expenses 112,000 113,000
Loans Charged Off (126,000) (128,000)
Recoveries 24,000 20,000
----------- ----------
Balance March 31, $ 2,674,000 $ 2,537,000
</TABLE>
<PAGE>
The following table sets forth an allocation of the allowance for loan
losses by loan category:
<TABLE>
At March 31, 1998
<S> <C> <C>
Commercial $1,346,000
Residential Real Estate 110,000
Consumer 652,000
Unallocated 566,000
----------
Total $2,674,000
</TABLE>
Non-Performing Loans
The following discussion relates to the Bank's non-performing loans
which consist of those on a non-accrual basis and accruing loans which are past
due ninety days or more.
Accrual of interest is discontinued on a loan when management believes,
after considering economic and business conditions and collection effort, that
the borrower's financial condition is such that the collection of interest is
doubtful. The Company views these loans as non-accrual, but considers the
principal to be substantially collectible because the loans are protected by
adequate collateral or other resources. Interest on these loans is recognized
only when received. The following table shows the balance of non-performing
loans for each of the periods indicated.
Non performing assets (non accruing loans and loans past due over 90
days) were 1.13% of total loans at March 31, 1998 compared to 0.90% at March 31,
1997. The increase in this ratio is the result of a $428,000 or 20.9% increase
in non performing loans to $2,457,000 over the one year period ending March 31,
1998. The ratio of the allowance for loan losses to non performing assets was
108.8% at March 31, 1998 compared to 125.2% at March 31, 1997.
Non accruing loans at March 31, 1998 of $1,926,000 increased from March
31, 1997 level of $1,006,000. This $920,000 increase was primarily the result of
three commercial loans being placed on non accrual status during the first
quarter of 1998. These loans are secured by commercial real estate and various
guarantees. At the present time, management is of the opinion that these loans
present a minimal amount of exposure to the bank.
<PAGE>
Loans past due 90 days or more and still accruing interest are loans
that are generally well secured and expected to be restored to a current status
in the near future. As of March 31, 1998, loans past due 90 days or more and
still accruing interest were $531,000 compared to $1,020,000 at March 31, 1997.
The $489,000 decrease in loans past due 90 days from March 31, 1997 to March 31,
1998 was primarily the result of declines in all categories of loans past due 90
days or more. Consumer, commercial and mortgage loans past due 90 days or more
declined $209,000, $162,000 and $118,000, respectively from March 31, 1997 to
March 31, 1998.
<TABLE>
NON-PERFORMING LOANS
March 31, December 31, March 31,
1998 1997 1997
<S> <C> <C> <C>
Non-accrual loans on a cash basis $1,926,000 $ 813,000 $1,006,000
Non-accrual loans as a percentage
of total loans .88% .35% .45%
Accruing loans past due 90 days
or more $ 531,000 $ 802,000 $1,020,000
Accruing loans past due 90 days
or more as a percentage of total
loans .24% .35% .49%
Other Real Estate Owned from
Foreclosed Property $ 194,000 $ 284,000 $ 670,000
Allowance for loan losses to
nonperforming loans 108.83% 163.64% 125.22%
Nonperforming assets to total loans 1.13% .71% .90%
Allowance for loan losses to total loans 1.23% 1.16% 1.13%
</TABLE>
There are no significant loans classified for regulatory purposes that
have not been included in the above table of non-performing loans. The Company
has no significant loans that qualify as "Troubled Debt Restructuring" as
defined by the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 15 "Accounting for Debtors and Creditors for Troubled
Debt Restructuring" at March 31, 1998.
<PAGE>
ITEM 3. Quantitative and Qualitative Discussion About Market Risk
As a financial institution, the Company's primary component of market
risk is interest rate volatility. Fluctuations in interest will ultimately
impact both the level of income and expense recorded on a large portion of the
Company's assets and liabilities, and the market value of all interest earning
assets, other than those which possess a short term to maturity. Since most of
the Company's interest-bearing assets and liabilities are located at the Bank,
the majority of the Company's interest rate risk is at the Bank level. As a
result, most interest rate risk management procedures are performed at the Bank
level.
The following table "Consolidated Comparative Statement Analysis" sets
forth a comparison of average daily balances, interest income and interest
expense on a fully taxable equivalent basis and interest rates calculated for
each major category of interest-earning assets and interest-bearing liabilities.
For the purposes of this analysis, the computations inthe "Consolidated
Comparative Statement Analysis" were prepared using the Federal statutory rate
of 34%; there were no state or local taxes on income applicable to the Company.
<PAGE>
<TABLE>
FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED COMPARATIVE STATEMENT ANALYSIS
(Dollars in Thousands)
(Unaudited)
Three Months Ended, March 31, 1998 1997
Int Avg Int Avg
Avg Inc/ Yield/ Avg Inc/ Yield/
Bal Exp Rate Bal Exp Rate
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
INTEREST-EARNING ASSETS
Int-Bearing Deposits with Banks $ 2,393 $ 28 4.68% $ 538 $ 17 5.20%
Federal Funds Sold 1,067 15 5.64 49 1 5.60
Investment Securities
Taxable 74,798 1,169 6.24 67,430 1,104 6.56
Non-Taxable (1) 20,615 392 7.60 14,917 288 7.72
Net Loans Held for Sale 1,360 9 2.64 1,353 19 5.60
Loans (1) (2) 225,002 4,911 8.72 221,396 4,707 8.52
Reserve for Loan Losses (2,707) -- -- (2,577) -- --
--------- ----- -------- -----
Net Loans 222,295 4,911 8.84 218,819 4,707 8.60
--------- ----- -------- -----
Total Interest-Earning Assets 322,528 6,524 8.08 303,106 6,136 8.08
Non-Interest Earning Assets 24,162 -- -- 23,225 -- --
--------- ----- -------- -----
TOTAL ASSETS, INT INCOME $ 346,690 6,524 7.52 $326,331 6,136 7.52
--------- ----- -------- -----
LIABILITIES
INTEREST-BEARING LIABILITIES
Interest-Bearing Deposits
Demand Deposits $ 47,463 136 1.16 $ 42,823 129 1.20
Money Market Deposits 14,423 101 2.80 14,330 99 2.76
Savings & Club Deposits 60,801 331 2.16 63,090 379 2.40
CD's over $100,000 4,780 46 3.84 5,274 57 4.32
All Other Time Deposits 123,367 1,713 5.56 113,439 1,549 5.48
--------- ----- -------- -----
Total Int-Bearing Deposits 250,834 2,327 3.72 238,956 2,213 3.72
Federal Funds Purchased
and Securities Sold Under
Agreements to Repurchase 7,141 66 3.68 3,930 34 3.48
Short-Term Borrowings 321 6 7.48 2,901 35 4.84
Long-Term Borrowings 18,374 287 6.24 18,459 275 5.96
--------- ----- -------- -----
Total Int-Bearing Liabilities 276,670 2,686 3.88 264,246 2,557 3.88
NON-INTEREST-BEARING LIABILITIES
Non-Interest-Bearing Deposits 32,315 -- -- 29,184 -- --
Other Liabilities 7,365 -- -- 5,870 -- --
--------- ----- -------- -----
TOTAL LIABILITIES 316,350 2,686 3.40 299,300 2,557 3.40
SHAREHOLDERS' EQUITY 30,340 -- -- 27,031 -- --
--------- ----- -------- -----
TOTAL LIABILITIES AND EQUITY $ 346,690 2,686 3.08 $326,331 2,557 3.12
NET INTEREST INCOME $3,838 $3,579
----- -----
Net Interest Spread 4.20 4.20
Effect of Interest-Free Sources
Used to Fund Earnings Assets 0.56 0.52
Net Interest Margin 4.76% 4.72%
---- ----
</TABLE>
<PAGE>
The net interest margin of 4.76% for the three month period ended March
31, 1998, increased from the 4.72% net interest margin for the first three
months of 1997. The yield on interest earning assets was 8.08% during the first
three months of 1998 and 1997. A decrease in yields on investments securities
was partially offset by an increase in loan yields. The average interest rate
paid on interest bearing deposits and other borrowings was 3.88% for the first
three months of 1998 and 1997. The increase in the net interest margin was
supported by an increase in the effect of interest from sources of funds to
0.56% for the first three months of 1998 from 0.52% in the same period in 1997.
This increase is the result of higher non-interest bearing deposits in 1998.
Interest Rate Sensitivity
Interest rate sensitivity is a measure of the extent to which net
interest income would change due to changes in the level of interest rates. The
objective of interest rate sensitivity management is to reduce a company's
vulnerability to future interest rate fluctuations and to enhance consistent
growth of net interest income
Rate sensitivity arises from the difference between the volumes of
assets which are rate-sensitive as compared to the volumes of liabilities which
are rate-sensitive. The mismatch of assets and liabilities in a specific time
frame is referred to as interest sensitivity gap. Generally, in an environment
of rising interest rates, a negative gap will decrease net interest income, and
in an environment of falling interest rates, a negative gap will increase net
interest income.
Assets and liabilities are allocated to a specific time period based on
their scheduled repricing date or on an historical basis. At March 31, 1998,
assets of $158,964,000 (45% of total assets) were subject to interest rate
changes within one year. Liabilities subject to rate change within one year were
$168,497,000. A negative one-year gap position of $9,533,000 existed as of March
31, 1998. The rato of rate-sensitive assets to rate-sensitive liabilities for
the one-year time frame was .94. The "Interest Sensitivity Analysis" in the
following table presents a sensitivity gap analysis of the Company's assets and
liabilities at March 31, 1998.
<PAGE>
Interest Sensitivity Analysis
(Dollars in Thousands) as of March 31, 1998
<TABLE>
0-90 91-180 181-365 1-5 Over
Days Days Days Years 5 years Total
<S> <C> <C> <C> <C> <C> <C>
Interest-Bearing
Deposits with Banks $ 4,211 $ --- $ --- $ --- $ --- $ 4,211
Federal Funds Sold --- --- --- --- --- ---
Inv Securities 14,288 18,622 22,901 33,502 14,611 103,924
Loans Held-for-Sale 1,407 --- --- --- --- 1,407
Loans 42,737 15,916 25,971 71,676 58,783 215,083
Other Assets 12,911 --- --- --- 13,884 26,795
------- -------- -------- ------- -------- --------
TOTAL ASSETS $75,554 $34,538 $ 48,872 $105,178 $ 87,278 $351,420
------- -------- -------- ------- -------- --------
Non-Interest-Bearing
Deposits (1) $ --- $ --- $ --- $ --- $ 35,998 $ 35,998
Int-Bearing
Deposits 88,118 17,755 39,706 47,139 61,659 254,377
Time Deposits --- --- --- --- --- ---
Securities Sold
Under Agreements
to Repurchase 4,544 --- --- --- --- 4,544
Long-Term Debt 374 13,000 5,000 --- --- 18,374
Other --- --- --- --- 7,323 7,323
Capital --- --- --- --- 30,804 30,804
------- -------- -------- ------- -------- --------
TOTAL LIABILITIES
AND CAPITAL $ 93,036 $30,755 $ 44,706 $47,139 $135,784 $351,420
------- -------- -------- ------- -------- --------
Net Interest
Sensitivity Gap $(17,482) $(3,783)$ 4,166 $58,039 $(48,506) $ ---
Cumulative Int
Sensitivity Gap $(17,482)$(13,699)$( 9,533) $48,506 $ --- $ ---
Cumulative Gap
RSA/RSL 81.2% 88.9% 94.3% 122.5% 100.0%
</TABLE>
(1) Historically, non-interest-bearing deposits reflect insignificant changes in
deposit trends and, therefore, the Company classifies these deposits over five
years.
<PAGE>
PART II - OTHER INFORMATION
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8K
No reports on Form 8K were filed for the quarter during
which this report is filed.
<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 COLONIAL GROUP, INC.
DATE: May 15, 1998 BY: /S/ S. ERIC BEATTIE
----------------------- --------------------
S. ERIC BEATTIE
PRESIDENT
(PRINCIPAL EXECUTIVE OFFICER)
DATE: May 15, 1998 BY: /S/ REID L. HEEREN
---------------------- -------------------
REID L. HEEREN
VICE PRESIDENT
(PRINCIPAL FINANCIAL OFFICER)
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000714719
<NAME> First Colonial Group
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Mar-31-1998
<CASH> 12,911
<INT-BEARING-DEPOSITS> 4,211
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 83,418
<INVESTMENTS-CARRYING> 20,506
<INVESTMENTS-MARKET> 20,623
<LOANS> 217,757
<ALLOWANCE> 2,674
<TOTAL-ASSETS> 351,420
<DEPOSITS> 290,375
<SHORT-TERM> 4,544
<LIABILITIES-OTHER> 7,323
<LONG-TERM> 18,374
0
0
<COMMON> 8,277
<OTHER-SE> 22,527
<TOTAL-LIABILITIES-AND-EQUITY> 351,420
<INTEREST-LOAN> 4,913
<INTEREST-INVEST> 1,429
<INTEREST-OTHER> 43
<INTEREST-TOTAL> 6,385
<INTEREST-DEPOSIT> 2,327
<INTEREST-EXPENSE> 2,686
<INTEREST-INCOME-NET> 3,699
<LOAN-LOSSES> 112
<SECURITIES-GAINS> 100
<EXPENSE-OTHER> 3,408
<INCOME-PRETAX> 1,039
<INCOME-PRE-EXTRAORDINARY> 768
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 768
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0.47
<YIELD-ACTUAL> 4.76
<LOANS-NON> 1,926
<LOANS-PAST> 531
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,664
<CHARGE-OFFS> 126
<RECOVERIES> 24
<ALLOWANCE-CLOSE> 2,674
<ALLOWANCE-DOMESTIC> 2,108
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 566
</TABLE>
