_______________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported) July 28, 1994
Commission File Number Number 0-16839
PEOPLES FIRST CORPORATION
(Exact name of registrant as specified in its charter)
Kentucky 61-1023747
(State or other jurisdiction of (I R S Employer
incorporation or organization) Identification No.)
100 South Fourth Street
Paducah, Kentucky 42002-2200
(Address of principal exective offices) (Zip Code)
Registrant's telephone number, including area code: (502) 441-1200
______________________________________________________________________________1
Item 5. OTHER EVENTS
On July 12, 1994 Peoples First Corporation (Peoples First) filed a registration
statement under the Securities Act of 1933 on Form S-4 to register securites to
be issued in connection with the acquisition of Libsab Bancorp, Inc. Previous-
ly, on March 10, 1994, subsequent to the most recent fiscal year, Peoples First
consummated a significant business combination accounted for by the pooling of
interest method.
The acquisition of First Kentucky Bancorp, Inc. (First Kentucky), the parent
company of First Kentucky Federal Savings Bank (Bank), Central City, Kentucky,
into Peoples First Acquisition Corporation (Subsidiary), a wholly-owned
subsidiary of Peoples First, became effective upon the filing of Articles of
Merger with the Kentucky Secretary of State on March 10, 1994. The surviving
Subsidiary acquired all the assets and assumed all the liabilities of First
Kentucky. At the time of the acquisition, the principal asset of First Kentucky
was the stock of the Bank.
Peoples First exchanged 929,794 shares of its common stock for all the out-
standing shares of First Kentucky. Peoples First's common stock is traded on
the National Association of Securities Dealers Automated Quotation System
(NASDAQ) National Market System (NMS) under the symbol PFKY. The last trading
price reported by NASDAQ on March 10, 1994, for PFKY was $27.00 per share.
Peoples First generally intends to continue to use the assets acquired for the
purpose of the general business conducted by a savings bank, their use
immediately before the acquisition.
The following Supplemental Consolidated Financial Statements restate Peoples
First's most recent fiscal year comparative historical consolidated financial
statements to reflect the First Kentucky business combination.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
Listed below are the financial statements, pro forma financial information and
exhibits, if any, filed as a part of this report:
(a) Financial statements of businesses acquired - Not applicable
(b) Pro forma financial information - Not applicable
(c) Exhibits
(23.1) Consent of KPMG Peat Marwick
2
Independent Auditors' Report
_______________________________________________________________________________
The Board of Directors and Stockholders
Peoples First Corporation
We have audited the accompanying supplemental consolidated balance sheets of
Peoples First Corporation and subsidiaries as of December 31, 1993 and 1992,
and the related supplemental consolidated statements of income, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1993. These supplemental consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these supplemental consolidated
financial statements based upon our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The supplmental consolidated financial statements give retroactive effect to
the merger of Peoples First Corporation and subsidiaries and First Kentucky
Bancorp, Inc., on March 10, 1994, which has been accounted for as a pooling of
interest as describe in the notes to the supplemental consolidated financial
statements. Generally accepted accounting principles proscribe giving effect
to a consummated business combination accounted for by the pooling of interest
method in financial statements that do not included the date of consummation.
Theses financial statements do not extend through the date of consummation.
However, they will become the historical consolidated financial statements of
Peoples First Corporation and subsidiaries after financial statments covering
the date of consummation of the business combination are issued.
In our opinion, the supplemental consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Peoples First Corporation and subsidiaries as of December 31, 1993 and 1992,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1993, in conformity with generally
accepted accounting principles applicable after financial statements are issued
for a period which includes the date of consummation of the business
combination.
As discussed in Note 1 to the supplemental consolidated financial statements,
the Company changed its method of accounting for investment securities to adopt
the provisions of the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities, at December 31, 1993.
/s/ KPMG Peat Marwick
St. Louis, Missouri
July 28, 1994 3
December 31, December 31,
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS 1993 1992
_______________________________________________________________________________
(in thousands)
ASSETS
Cash and due from banks $34,655 $37,952
Federal funds sold 2,100 13,750
Securities held for sale 67,431 41,859
Investment securities 246,096 290,384
Loans 636,225 564,576
Allowance for loan losses (9,818) (8,016)
--------- ---------
Loans, net 626,407 556,560
Excess of cost over net assets
of purchased subsidiaries 10,908 11,737
Premises and equipment 13,999 14,039
Other assets 13,300 13,904
--------- ---------
$1,014,896 $980,185
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand deposits $73,029 $68,306
Interest-bearing transaction accounts 209,707 204,065
Savings deposits 93,133 87,794
Time deposits 497,664 499,911
--------- ---------
873,533 860,076
Repurchase agreements 19,705 19,534
Federal funds purchased 12,600 0
Notes payable 9,747 12,320
Other liabilities 6,843 6,821
--------- ---------
Total liabilities 922,428 898,751
Stockholders' Equity
Common stock 5,539 5,501
Surplus 30,851 29,704
Retained earnings 54,990 46,432
Unrealized appreciation of securities held
for sale, net of deferred income tax 1,246 --
Debt on ESOP shares (158) (203)
--------- ---------
92,468 81,434
--------- ---------
$1,014,896 $980,185
========= =========
Fair value of securities held for sale $67,431 $41,957
Fair value of investment securities 255,606 298,964
Common shares issued and outstanding 7,090 7,042
See accompanying notes to supplemental consolidated financial statements. 4
SUPPLEMENTAL CONSOLIDATED STATEMENTS Year Ended December 31,
OF INCOME 1993 1992 1991
_______________________________________________________________________________
(in thousands except per share data)
INTEREST INCOME
Interest on Federal funds sold $295 $724 $2,188
Taxable interest on securities 16,426 17,260 11,285
Nontaxable interest on securities 3,951 3,480 2,974
Interest and fees on loans 50,863 48,491 46,381
------ ------ ------
71,535 69,955 62,828
INTEREST EXPENSE
Interest on deposits 31,699 36,062 38,277
Interest on repurchase agreements 667 906 188
Other interest expense 1,190 612 175
------ ------ ------
33,556 37,580 38,640
------ ------ ------
Net Interest Income 37,979 32,375 24,188
Provision for Loan Losses 2,229 3,026 2,338
------ ------ ------
Net Interest Income after
Provision for Loan Losses 35,750 29,349 21,850
Noninterest Income 5,641 5,566 3,769
Noninterest Expense 25,828 22,626 16,136
------ ------ ------
Income Before Income Tax Expense 15,563 12,289 9,483
Income Tax Expense 4,272 3,427 2,389
------ ------ ------
NET INCOME $11,291 $8,862 $7,094
====== ====== ======
Net Income per Common Share
and Common Share Equivalent $1.54 $1.32 $1.28
Cash Dividend per Common Share 0.40 0.36 0.31
See accompanying notes to supplemental consolidated financial statements. 5
<TABLE>
<CAPTION>
Unrealized
SUPPLEMENTAL CONSOLIDATED STATEMENTS Common Retained securities ESOP
OF CHANGES IN STOCKHOLDERS' EQUITY stock Surplus earnings appreciation debt Total
______________________________________________________________________________________________________________________
(in thousands, except per data)
<S>
BALANCE AT DECEMBER 31, 1990 <C> <C> <C> <C> <C> <C>
As orginally reported $3,716 $8,699 $27,359 -- $0 $39,774
Adjustment to reflect pooling
of interest 6,576 6,576
------ ------ ------ ------ ------ ------
Restated for pooling of interest 3,716 8,699 33,935 -- 0 46,350
Net income 7,094 7,094
Cash dividends declared ($0.31 per share) (1,479) (1,479)
Initial stock offering, mutual savings
bank association conversion 726 2,425 (254) 2,897
Stock issued pursuant to shareholder
and employee plans 37 376 413
------ ------ ------ ------ ------ ------
BALANCE AT DECEMBER 31, 1991 4,479 11,500 39,550 -- (254) 55,275
Net income 8,862 8,862
Cash dividends declared ($0.36 per share) (1,980) (1,980)
Stock issued pursuant to shareholder
and employee plans 71 897 968
Reduction of ESOP debt 51 51
Stock issued in acquisition 951 17,307 18,258
------ ------ ------ ------ ------ ------
BALANCE AT DECEMBER 31, 1992 5,501 29,704 46,432 -- (203) 81,434
Net income 11,291 11,291
Cash dividends declared
Common ($0.40 per share) (2,452) (2,452)
By pooled company prior to merger (281) (281)
Stock issued pursuant to shareholder
and employee plans 38 1,147 1,185
Reduction of ESOP debt
Adjustment of securities held for 45 45
sale to fair value 1,246 1,246
------ ------ ------ ------ ------ ------
BALANCE AT DECEMBER 31, 1993 $5,539 $30,851 $54,990 $1,246 ($158) $92,468
====== ====== ====== ====== ====== ======
</TABLE>
See accompanying notes to supplemental consolidated financial statements. 6
<TABLE>
<CAPTION>
SUPPLEMENTAL CONSOLIDATED STATEMENTS Year Ended December 31,
OF CASH FLOWS 1993 1992 1991
____________________________________________________________________________________________
(in thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $11,291 $8,862 $7,094
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,141 1,689 942
Net (discount accretion) premium
amortization 1,909 1,712 5
Provision for loan losses 2,229 3,026 2,338
Net (increase) decrease in loans
held for sale 737 (1,241) --
Provision for deferred income taxes (1,223) (858) (152)
Other, net 1,882 60 (228)
------ ------ ------
Net Cash Provided by Operating
Activities 18,966 13,250 9,999
INVESTING ACTIVITIES
Net decrease in Federal funds sold 11,650 10,050 3,700
Proceeds from sales of securities
held for sale 2,536 25,993 3,175
Proceeds from maturities of securities
held for sale 2,500 1,950 --
Proceeds from maturities of investment
securities 50,991 64,107 30,788
Principal collected on mortgage-backed
securities held for sale 4,619 572 --
Principal collected on mortgage-backed
investment securities 30,218 18,440 4,384
Purchase of securities held for sale (10,928) (3,527) --
Purchase of investment securities (61,142) (128,289) (79,659)
Net increase in loans (73,532) (19,766) (14,712)
Purchases of premises and equipment (1,217) (948) (849)
Net cash paid for acquisition
of subsidiary -- (7,454) --
------ ------ ------
Net Cash Used by Investing Activities (44,305) (38,872) (53,173)
</TABLE>
See accompanying notes to supplemental consolidated financial statements. 7
<TABLE>
<CAPTION>
SUPPLEMENTAL CONSOLIDATED STATEMENTS Year Ended December 31,
OF CASH FLOWS - CONTINUED 1993 1992 1991
____________________________________________________________________________________________
(in thousands)
<S> <C> <C> <C>
FINANCING ACTIVITIES
Net increase in deposits 13,456 30,953 16,226
Net increase (decrease) in repurchase
agreements 171 (5,355) 23,890
Net increase in Federal funds purchased 12,600 0 0
Proceeds from notes payable borrowings 6,200 2,700 54
Repayments of notes payable (8,753) (743) (14)
Proceeds from issuance of common stock 661 522 3,292
Cash dividends paid (2,293) (1,633) (1,208)
------ ------ ------
Net Cash Provided by Financing Activities 22,042 26,444 42,240
------ ------ ------
Cash and Cash Equivalents
Increase (Decrease) (3,297) 822 (934)
Beginning of Year 37,952 37,130 38,064
------ ------ ------
End of Year $34,655 $37,952 $37,130
====== ====== ======
SUPPLEMENTAL DISCLOSURES
Cash paid for interest expense $33,904 $38,328 $38,981
Cash paid for income tax 5,805 4,024 2,529
NONCASH INVESTING AND FINANCING TRANSACTIONS
Other real estate transferred
from loans, net 544 101 327
Dividends reinvested 439 347 271
Notes payable issued in acquisition
of subsidiary -- 10,025 --
Common stock issued in purchase
acquisition of subsidiary -- 18,258 --
</TABLE>
See accompanying notes to supplemental consolidated financial statements. 8
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Peoples First Corporation (Company) through its subsidiaries, Peoples First
National Bank and Trust Company, First Liberty Bank, First National Bank of
LaCenter, Salem Bank, Inc., Bank of Murray and First Kentucky Federal Savings
Bank, provides a full range of banking services to individual and corporate
customers in the western Kentucky and contiguous interstate area. The Company
and the subsidiary banks are subject to the regulations of various Federal and
state agencies and undergo periodic examination by regulators.
The accounting policies and reporting practices of the Company are based upon
generally accepted accounting principles and conform to predominant practices
within the banking industry. In preparing financial statements, management is
required to make assumptions and estimates which affect the Company's reported
amounts of assets and liabilities and the results of operations. The more
significant policies are summarized below.
PRINCIPLES OF CONSOLIDATION
The supplemental consolidated financial statements include the accounts of the
parent company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated.
As further described below, the Company acquired First Kentucky Bancorp, Inc.
(First Kentucky) on March 10, 1994 under the pooling of interest method of
accounting. The Supplemental Consolidated Financial Statements present the
combined operations of the Company and First Kentucky. Since the preacquisition
year end for First Kentucky was September 30, for which audited financial
statements were prepared, the Supplemental Consolidated Financial Statements
for December 31, 1993, 1992 and 1991 consist of the Company for the twelve
months ended December 31, combined with First Kentucky for the twelve months
ended the previous September 30, for the respective years.
RESTATEMENTS
The Supplemental Consolidated Financial Statements give retroactive effect to
the First Kentucky transaction and, as a result, the Supplemental Consolidated
Statements of Income, Balance Sheets and Statements of Cash Flows are presented
as if the combining companies had been consolidated for all periods presented.
As required by generally accepted accounting principles, the Supplemental
Consolidated Statements will become the historical consolidated financial
statements upon issuance of the consolidated financial statements for the period
that includes the date of the transaction. The Supplemental Consolidated
Statements of Changes in Stockholders' Equity reflect the accounts of the
Company as if the appropriate amount of common stock issued in the First
Kentucky acquisition was outstanding effective June 18, 1991, the date First
Kentucky made its initial public offering of common stock. The Supplemental
Consolidated Statements, including the notes thereto, should be read in
conjunction with historical consolidated financial statements of the Company
included in its Annual Report on Form 10-K.
9
SECURITIES HELD FOR SALE AND INVESTMENT SECURITIES
The Company adopted Financial Accounting Standard No. 115 "Accounting for Cer-
tain Investments in Debt and Equity Securities" (FAS 115) as of the end of 1993.
This new accounting policy expands the use of fair value accounting for secur-
ities for which there is not a positive intent and ability to hold to maturity.
At acquisition, FAS 115 requires that securities be classified into one of three
catergories: trading, held for sale or investment. Trading securities are
bought and held principally with the intention of selling them in the near term.
The Company has no trading securities. Investment securities are those securi-
ties for which the Company has the ability and intent to hold until maturity.
All other debt securities are classified as held for sale. There was no effect
of this change on 1993 net income.
Securities held for sale are stated at fair value for December 31, 1993 and at
the lower of amortized cost or market for December 31, 1992. Fair value is
based on market prices quoted in financial publications or other independent
sources. Subsequent to adoption of FAS 115, net unrealized gains or losses are
excluded from earnings and reported, net of deferred income taxes, as a separate
component of stockholders' equity until realized. The adjusted cost of the
specific security held for sale that is sold is used to compute any gain or loss
upon sale.
Investment securities are carried at cost, adjusted for amortization of premiums
and accretion of discounts, which are recognized as adjustments to interest
income on the level-yield method. Gain or loss is recorded when realized on a
specific identity basis or when, in the opinion of management, an unrealized
loss is other than temporary in nature. Mortgage-backed securities represent a
significant portion of the investment security portfolio. Amortization of pre-
miums and accretion of discounts on mortgage-backed securities are analyzed in
relation to the corresponding prepayment rates, both historical and estimated,
using a method which approximates the level-yield method.
Transfers of debt securities between categories are recorded at fair value at
the date of transfer. Unrealized gains or losses associated with transfers of
debt securities from the investment to the held for sale category are recorded
and maintained as a separate component of stockholders' equity. The unrealized
gains or losses included as a separate component of stockholders' equity for
debt securities transferred to the investment from the held for sale category
are maintained and amortized into earnings over the remaining life of the debt
securities as an adjustment to yield in a manner consistent with the amortiza-
tion or accretion of premiums or discounts on the associated securities.
At the end of the third quarter of 1992, the Company evaluated the conditions
under which it might sell any of its debt securities. As a result, management
decided that certain types of debt securities might be sold in the future as
part of the Company's efforts to manage interest rate risk or in response to
changes in interest rates or other economic factors. Based upon this decision,
the Company classified these selected securities as held for sale. At December
31, 1992 (prior to adoption of FAS 115), debt securities classified as held for
sale were stated at the lower of amortized cost or market.
10
LOANS RECEIVABLE
Loans receivable held for investment are carried at cost, as the Company has the
ability and it is management's intention to hold them to maturity. Interest on
commercial and real estate mortgage loans is accrued if deemed collectible and
credited to income based upon the principal amount outstanding. Consumer
installment loans are generally made on a discount basis. The unearned discount
attributable to these loans is credited to income using a method which approxi-
mates the level yield method. Mortgage loans originated principally under
programs with the Government National Mortgage Association (GNMA) or the Federal
National Mortgage Association (FNMA) and held for sale, are carried at the lower
of cost or market value.
The Company evaluates the collectibility of both contractual interest and
contractual principal of all receivables when assessing the need for a loss
accrual. When in the opinion of management the collection of interest on a loan
is unlikely or when either principal or interest is past due over 90 days, that
loan is generally placed on nonaccrual status and interest is not recognized
unless received in cash. When a loan is placed in nonaccrual status, accrued
interest for the current period is reversed and charged against earnings and
accrued interest from prior periods is charged against the allowance for loan
losses. A loan remains on nonaccrual status until the loan is current as to
payment of both principal and interest and/or the borrower demonstrates the
ability to pay and remain current. Interest payments received on nonaccrual
loans are applied to principal if there is any doubt as to the collectibility of
total principal, otherwise these payments are recorded as interest income.
ALLOWANCE FOR LOAN LOSSES
The allowance is increased by provisions for loan losses charged to operations
and is maintained at an adequate level to absorb estimated credit losses
associated with the loan portfolio, including binding commitments to lend and
off-balance sheet credit instruments. At the end of each quarter, or more
frequently if warranted, management uses a systematic, documented approach in
determining the appropriate level of the allowance for loan losses.
Management's approach provides for general and specific allowances and is based
upon current economic conditions, past losses, collection experience, risk
characteristics of the loan portfolio, assessment of collateral values and such
other factors which in management's judgement deserve current recognition in
estimating potential loan losses.
During May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment
of a Loan" (FAS 114), which is effective for fiscal years beginning after
December 15, 1994. FAS 114 requires that impaired loans be measured at the
present value of expected future cash flows discounted at the loan's effective
interest rate, or at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. The Company is currently
evaluating when and how it will adopt FAS 114, as well as the possible financial
impact to the Company.
11
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated depreciation and
amortization. The provision for depreciation and amortization is computed using
the straight-line method over the estimated useful lives of the assets. Esti-
mated useful lives on buildings range from ten to thirty years and two to ten
years on equipment. Leasehold improvements are amortized over the term of the
related leases. Expenditures for major renewals and betterments of premises and
equipment are capitalized and those for maintenance and repairs are expensed as
incurred.
OTHER REAL ESTATE
Real estate acquired through foreclosure or deed in lieu of foreclosure is in-
cluded in other assets, and is recorded at the lower of cost or the property's
fair value at the time of foreclosure less estimated disposal costs, if any.
The excess of cost over fair value of other real estate at the date of
acquisition is charged to the allowance for loan losses. Subsequent reductions
in carrying value to reflect current fair value and any other period costs are
charged to expense as incurred. In-substance foreclosed assets are accounted
for the same as foreclosed assets.
INCOME TAXES
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (FAS 109), was issued by the Financial Accounting Standards Board in
February 1992, to be effective January 1, 1993 with earlier adoption encouraged.
The Company elected to adopt the new standard effective January 1, 1992 on a
prospective basis. FAS 109 provides for the recognition of a current tax
liability or asset for the estimated taxes payable or refundable on tax returns
for the current year. A deferred tax liability or asset is recognized for the
estimated future tax effects attributable to temporary differences and carry-
forwards. The measurement of current and deferred tax liabilities and assets is
based on provisions of enacted tax laws. The measurement of deferred tax assets
is reduced, if necessary, by the amount of any tax benefits that, based upon
management's judgement of available evidence, are not expected to be realized.
The deferred method of accounting for income taxes under APB Opinion 11, which
applied in 1991 and prior years, requires the recognition of deferred income
taxes for income and expense items that are reported in different years for
financial reporting purposes and for income tax purposes using the tax rate
applicable for the year of the calculation. Under this method, deferred taxes
are not adjusted for subsequent changes in tax rates.
The significant components of deferred tax assets and liabilities are
principally related to provisions for loan losses, amortization of premiums on
debt securities, depreciation and deferred compensation.
NET INCOME PER COMMON SHARE AND COMMON SHARE EQUIVALENT
Net income per common share and common share equivalent is determined by divid-
ing net income by the weighted average number of common shares actually out-
standing and common stock equivalents pertaining to common stock options.
Earnings of First Kentucky are excluded from the net income per common share
calculation from October 1, 1990 through June 18, 1991, the date First
12
Kentucky made its Initial public offering of common stock. Also on June 18,
1991, First Kentucky Federal Savings bank, a wholly-owned subsidiary of First
Kentucky, converted from a federally chartered mutual savings bank to a feder-
ally chartered stock savings bank. The average number of shares outstanding
including common stock equivalents for 1993, 1992 and 1991 were 7,337,528,
6,690,484 and 5,152,988, respectively. The computations of average shares
outstanding is based upon the new number of shares outstanding as a result of a
two-for-one stock split effected on January 4, 1994. Common stock equivalents
have no material dilutive effect.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all cash and
due from banks to be cash equivalents.
PURCHASE ACCOUNTING
In accordance with the purchase method of accounting, the assets and liabilities
of purchased institutions are stated at estimated fair values at the date of
acquisition less accumulated amortization and depreciation. Intangible assets
related to purchased banks are amortized primarily on the straight-line method
over a fifteen year period.
RECLASSIFICATIONS
Certain amounts in the 1992 and 1991 consolidated financial statements have been
reclassified to conform with the 1993 presentation.
2. BUSINESS COMBINATIONS
On May 4, 1992, the Company consummated the acquisition of an additional banking
organization, Bank of Murray. At acquisition, the bank had total assets of
approximately $235.3 million. The purchase price of approximately $42.4 million
consisted of 1,217,246 shares of the Company's common stock, $10.0 million of
subordinated two-year notes with an interest rate of 7.25% and $14.1 million in
cash. The transaction was accounted for using the purchase method of
accounting. The results of operations of the acquired entity are included in
the supplemental consolidated financial statements subsequent to its acquisition
date and the excess of the cost over fair value of the net assets acquired,
$11.9 million, is being amortized over fifteen years on a straight-line basis.
The following table presents unaudited pro forma results of operations for the
years ended December 31, 1992 and 1991, assuming the purchase of Bank of Murray
had taken place on January 1, 1991:
13
Pro Forma Statements of Income (unaudited)
Year Ended December 31, 1992 1991
_______________________________________________________________________________
(in thousands, except per share data)
Interest income $75,221 $80,262
Interest expense 41,059 51,066
------ ------
Net interest income 34,162 29,196
Provision for loan losses 3,499 2,798
------ ------
Net interest income after
provision for loan losses 30,663 26,398
Noninterest income 5,989 4,912
Noninterest expense 24,916 22,030
------ ------
Income before income tax expense 11,736 9,280
Income tax expense 3,315 2,299
------ ------
Net income $8,421 $6,981
====== ======
Net income per common share
and common share equivalent $1.22 $1.15
_______________________________________________________________________________
This pro forma information is not necessarily indicative of the actual results
of operations which would have occurred had the acquisition of Bank of Murray
been consummated as of January 1, 1991, nor is it necessarily indicative of
future operating results.
On February 24, 1994, the Company entered into an affiliation agreement with
Libsab Bancorp, Inc. (Libsab), the bank holding company for Liberty Bank &
Trust Company of Mayfield, Kentucky. The agreement was subsequently amended on
April 15, 1994. The agreement, as amended, is subject to the approval of
Libsab shareholders and regulators. The Company will issue 1,078,000 shares
of the Company's stock for all the outstanding stock of Libsab. Liberty Bank
& Trust Company is a commercial bank with total assets of approximately $140.9
million at December 31, 1993 that is well established in western Kentucky with
its principal office in Mayfield, Kentucky. The business combination will be
accounted for as a pooling of interest. Consummation of the transaction is
expected to occur in the third quarter of 1994.
3. CASH AND DUE FROM BANKS
The Company's bank subsidiaries are required to maintain certain reserve
balances in accordance with Federal Reserve Board requirements. The reserve
balances maintained in accordance with such requirements as of December 31, 1993
and 1992 were $6,991,000 and $6,565,000, respectively.
14
4. SECURITIES HELD FOR SALE AND INVESTMENT SECURITIES
The amortized cost and fair value of securities held for sale as of
December 31, 1993 and 1992 are summarized as follows:
Gross Gross
Securities Held For Sale Amortized unrealized unrealized Fair
December 31, 1993 cost gains losses value
_______________________________________________________________________________
(in thousands)
U.S. treasury and agencies $31,700 $1,788 $0 $33,488
Mortgage-backed securities 33,844 189 (90) 33,943
------ ------ ------ ------
$65,544 $1,977 ($90) $67,431
====== ====== ====== ======
Gross Gross
Securities Held For Sale Amortized unrealized unrealized Fair
December 31, 1992 cost gains losses value
_______________________________________________________________________________
(in thousands)
U.S. treasury and agencies $16,319 $422 ($25) $16,716
Mortgage-backed securities 25,540 74 (373) 25,241
------ ------ ------ ------
$41,859 $496 ($398) $41,957
====== ====== ====== ======
The amortized cost and fair value of investment securities as of December 31,
1993 and 1992 are summarized as follows:
Gross Gross
Investment Securities Amortized unrealized unrealized Fair
December 31, 1993 cost gains losses value
_______________________________________________________________________________
(in thousands)
U.S. treasury and agencies $74,929 $1,908 ($1) $76,836
Mortgage-backed securities 97,081 2,148 (62) 99,167
State and political
subdivisions 64,085 5,316 (18) 69,383
Other 10,001 312 (93) 10,220
------- ------- ------- -------
$246,096 $9,684 ($174) $255,606
======= ======= ======= =======
15
Gross Gross
Investment Securities Amortized unrealized unrealized Fair
December 31, 1992 cost gains losses value
_______________________________________________________________________________
(in thousands)
U.S. treasury and agencies $133,839 $2,704 ($312) $136,231
Mortgage-backed securities 89,603 2,872 (59) 92,416
State and political
subdivisions 58,488 3,226 (31) 61,683
Other 8,454 180 0 8,634
------- ------- ------- -------
$290,384 $8,982 ($402) $298,964
======= ======= ======= =======
Proceeds from sales of debt securities during 1993, 1992 and 1991 were
$2,536,445, $25,993,188 and $3,174,840, respectively. Gross gains of $40,577,
$593,181 and 28,356 were realized on those sales during 1993, 1992 and 1991,
respectively, and gross losses of $3,158 were realized on those sales during
1991.
The amortized cost, estimated fair value and the weighted average yield of
securities held for sale and investment securities at December 31, 1993, by
contractual maturity, are shown below. Actual maturities will differ from the
depicted maturities because of the borrowers' right to call or prepay obliga-
tions with or without prepayment penalties. Contractual maturities are not
meaningful for mortgage-backed securities, which are particularly exposed to
prepayments in the current interest rate environment. Management evaluates, on
an on-going basis, the potential maturities for asset/liability purposes.
Yields on tax-exempt obligations have not been computed on a tax-equivalent
basis.
Securities Held for Sale Portfolio Weighted
Maturity Distribution Amortized Fair average
December 31, 1993 cost value yield
_______________________________________________________________________________
(in thousands)
U.S. treasury and agencies
1 year or less $9,020 $9,096 6.58%
Over 1 through 5 years 7,865 8,033 5.50
Over 5 through 10 years 14,814 16,359 6.70
Over 10 years -- -- --
Mortgage-backed securities 33,845 33,943 5.68
------ ------
$65,544 $67,431 6.01%
====== ======
16
Investment Securities Portfolio Weighted
Maturity Distribution Amortized Fair average
December 31, 1993 cost value yield
_______________________________________________________________________________
(in thousands)
U.S. treasury and agencies
1 year or less $30,472 $30,858 5.95%
Over 1 through 5 years 44,457 45,977 6.20
Over 5 through 10 years -- -- --
Over 10 years -- -- --
Mortgage-backed securities 97,081 99,167 6.33
State and political sudivisions
1 year or less 5,619 5,682 5.43
Over 1 through 5 years 18,185 19,535 6.43
Over 5 through 10 years 19,825 22,158 6.63
Over 10 years 20,456 22,009 6.65
Other
1 year or less 2,364 2,394 6.35
Over 1 through 5 years 6,003 6,285 6.92
Over 5 through 10 years 38 35 7.50
Over 10 years 1,596 1,506 4.74
------- -------
$246,096 $255,606 6.36%
======= =======
At December 31, 1993 and 1992, securities with carrying values of approximately
$105,315,000 and $94,794,000, respectively, were pledged to secure repurchase
agreements, public and trust deposits and for other purposes as required by law.
17
5. LOANS
The Company's lending activities are concentrated primarily in the contiguous
interstate area of western Kentucky, southern Illinois, northwestern Tennessee
and southeastern Missouri. The loan portfolio is well diversified and consists
of business loans extending across many industry types, as well as loans to
individuals. As of December 31, 1993 and 1992, total loans to any group of
customers engaged in similar activities and having similar economic character-
istics, as defined by standard industrial classifications, did not exceed 10%
of total loans.
Major classification of loans are as follows:
December 31, 1993 1992
_______________________________________________________________________________
(in thousands)
Commercial:
Manufacturing $8,295 $8,671
Retail 43,981 40,511
Wholesale 21,547 17,305
Health services 14,734 16,836
Financial institutions 1,220 2,079
Agricultural 21,169 20,724
Transportation, moving
and warehousing 12,939 8,107
Contractors 7,566 9,046
Hotels and motels 17,979 12,452
Shopping centers and apartments 33,942 28,430
Recreational 2,480 4,634
Real estate development 1,559 1,332
Other 41,995 37,041
------- -------
229,406 207,168
One-to-four family residential mortgage 251,161 225,850
Manufactured housing loans 35,022 28,342
Installment loans 119,814 105,516
Consumer revolving credit 3,924 3,323
Other 5,685 3,075
------- -----------
645,012 573,274
Unearned income (8,787) (8,698)
------- -------
$636,225 $564,576
======= =======
The Company evaluates each customer's creditworthiness on a case by case basis.
The amount of collateral obtained, if deemed necessary by the Company upon
extension of credit, is based on management's credit evaluation of the
counterparty. Collateral varies but may include accounts receivable, inventory,
property, plant and equipment, income producing commercial properties, real
estate mortgages and other property owned by the borrowers.
18
Nonaccrual and renegotiated loans totaled $3,656,424 and $5,141,403 at
December 31, 1993 and 1992, respectively.
Allowance for Loan Losses
Year Ended December 31, 1993 1992 1991
_______________________________________________________________________________
(in thousands)
Balance at beginning of year $8,016 $5,965 $5,418
Balance of purchased subsidiary
bank at acquisition -- 1,485 --
Provision charged to expense 2,229 3,026 2,338
Loans charged off (981) (2,815) (1,993)
Recoveries of loans
previously charged off 554 355 202
----- ----- -----
Net loans charged off (427) (2,460) (1,791)
----- ----- -----
Balance at end of year $9,818 $8,016 $5,965
===== ===== =====
Certain officers and directors of Peoples First Corporation and its subsidiaries
and certain corporations and individuals related to them incurred indebtedness
in the form of loans as customers. These loans were made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other customers and did not involve more
than the normal risk of collectibility. The activity of these loans is
summarized below:
Loans to Officers and Directors
Year Ended December 31, 1993 1992
_______________________________________________________________________________
(in thousands)
Balance at beginning of year $15,034 $13,438
Additions 5,326 2,382
Repayments (1,229) (786)
----- -----
Balance at end of year $19,131 $15,034
====== ======
19
6. PREMISES AND EQUIPMENT
A summary of premises and equipment is as follows:
Premises and Equipment
December 31, 1993 1992
_______________________________________________________________________________
(in thousands)
Land $1,986 $1,986
Buildings 14,676 14,691
Equipment 8,422 7,914
Leasehold improvements 217 217
Construction in progress 182 --
------ ------
25,483 24,808
Accumulated depreciation (11,484) (10,769)
------ ------
$13,999 $14,039
====== ======
The amount of depreciation and amortization related to premises and equipment
that was charged to operating expenses in 1993, 1992 and 1991 was $1,230,352,
$1,020,925 and $826,942 respectively.
7. NOTES PAYABLE
The Company issued unsecured, subordinated, short-term notes on May 4, 1992 in
connection with an acquisition of a subsidiary bank. The balance outstanding
at December 31, 1993 and 1992 was $5,012,500 and $10,025,000, respectively.
Interest is payable quarterly at the annual rate of 7.25%. The remaining prin-
cipal amount is due and payable on May 4, 1994.
In May 1993, the Company obtained a $10,200,000 loan commitment from a regional
bank, which was used to retire short-term notes and other bank debt. The
balance outstanding at December 31, 1993 and 1992 was $4,576,792 and $2,076,792,
respectively, and is secured by the pledge of the outstanding stock of a
subsidiary bank (Bank of Murray). The note agreement contains various financial
covenants pertaining to levels of net worth and indebtedness. The Company was
in compliance with all such covenants at December 31, 1993. Interest is payable
quarterly at the lender's prime rate which can be adjusted daily (6.00% at
December 31, 1993 and December 31, 1992). The note provides for quarterly
principal payments of $261,604 and a final maturity in May 2004.
One of the Company's subsidiaries is obligated to pay, through annual contri-
butions and dividends to their Employee Stock Ownership Plan, a note payable to
a regional financial institution. An original amount of $253,570 was borrowed
in May, 1991. The balance outstanding at December 31, 1993 and 1992 was
$158,481 and $202,856, respectively. The loan is secured by the pledge of
certain shares of the subsidiary stock. Interest is payable quarterly at the
lender's prime rate less 0.50% which can be adjusted daily (7.00% at December
31, 1993 and December 31, 1992). The note provides for annual principal
payments of $25,357 and a final maturity in May 2001.
20
At December 31, 1993, the Company's lead bank had available up to $10.5 million
and the Company's savings bank subsidiary had available $4.6 million from the
Federal Home Loan Bank (FHLB) of Cincinnati which could be used for short-term
funding and other requirements. Certain single-family mortgage loans totaling
approximately $86.4 million and debt securities with a total carrying value of
approximately $14.4 were pledged to secure the line of credit. The arrangement
is subject to periodic review and cancellation by either party. There was no
outstanding indebtedness to the FHLB at December 31, 1993 and 1992.
8. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. The Company's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument for commitments to
extend credit and standby letters of credit is represented by the contractual
amount of those instruments.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Standby
letters of credit are conditional commitments issued by the Company to guarantee
the performance of a customer to a third party. These off-balance-sheet
financial instruments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since some of the financial
instruments may expire without being drawn upon, the total amounts do not
necessarily represent future cash requirements. Commitments to extend credit
and standby letters of credit are subject to the same underwriting and collater-
alizing standards as on-balance-sheet items.
Contractual commitments to extend credit and standby letters of credit at
December 31, 1993 and 1992 are summarized as follows:
Financial Instruments with
Off-Balance-Sheet Risk
December 31, 1993 1992
_______________________________________________________________________________
(in thousands)
Contractual commitments to extend credit $79,229 $76,834
Standby letters of credit 3,231 2,847
9. EMPLOYEE BENEFITS
The Company maintains two noncontributory Employee Stock Ownership Plans (ESOP)
and an employer matching 401(k) Plan which was made available to employees in
1991. The plans cover substantially all of the Company's employees.
Employer contributions to the ESOPs are determined annually by the Company's
board of directors and were $195,357, $170,357 and $143,157 for the years ended
1993, 1992 and 1991, respectively. The ESOP's investments include 268,080 and
262,848 shares of the Company's common stock at December 31, 1993 and 1992,
respectively.
21
During November 1993, the American Institute of Certified Public Accountants
issued Statement of Position 93-6, "Employers' Accounting for Employee Stock
Ownership Plans" (SOP 93-6), which is effective for for fiscal years beginning
after December 15, 1993. SOP 93-6 replaces existing accounting guidance and
will significantly change the accounting for companies that maintain a leveraged
employee stock ownership plan (ESOP). Management has not yet evaluated the
potential impact of SOP 93-6 on the Company's financial condition or results of
operations.
Under the 401(k) Plan, participants may voluntarily contribute a percentage of
their salary through payroll deductions. The Company is currently committed to
make contributions to the 401(k) Plan annually in an amount equal to 100% of the
first 3% contribution of each participant's base salary. For the years ended
December 31, 1993, 1992 and 1991, the Company's required matching contribution
amounted to $184,472, $148,665 and $113,249, respectively. Employees have four
investment options in which their contributions may be invested.
In accordance with the terms of the acquisition, as described in Note 2., Bank
of Murray's defined benefit plan was terminated and their employees became eli-
gible to participate in the Company's ESOP and 401(k) plans during 1992. The
fair value of Bank of Murray's defined benefit plan assets, which were distri-
buted to plan participants in 1993, exceeded the actuarial present value of all
accrued benefits. The plan termination had no financial effect on the Company.
Post retirement benefits other than pensions are not provided for the Company's
employees. Eligible retired employees may for a period of time maintain certain
health care benefits through policies of the Company at the employee's expense.
There was no cost for employee benefits for retired employees in 1993, 1992 and
1991.
10. CAPITAL STOCK
On December 15, 1993, the Company's Board of Directors announced a common stock
split to be effected on January 4, 1994 by the issuance of shares equal to 100%
of the previously outstanding shares. All shares outstanding and per share
amounts have been adjusted to reflect the two-for-one stock split.
The Company has ten million authorized shares of no par, $0.7812 stated value
common stock. At December 31, 1993 and 1992, 820,322 shares and 854,234 shares,
respectively, of an original authorization of of 1,040,000 shares were reserved
for issuance under the Peoples First Corporation Share Owner Dividend Reinvest-
vestment and Stock Purchase Plan. In addition, at December 31, 1993 and 1992,
31,820 shares and 114,420 shares, respectively, of an original authorization of
600,000 shares were reserved for issuance under the Peoples First Corporation
1986 Stock Option Plan.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Plan provides for sale from shares reserved of unissued authorized shares of
the Company's common stock, at market value, to existing shareholders. All
shareholders may purchase stock with optional payments up to $500 but not less
than $100 per dividend payment cycle. Participating shareholders owning a
minimum of 500 common shares may reinvest all or part of cash dividends. At
December 31, 1993, a total of 219,678 shares have been issued pursuant to the
plan, of which 33,912 shares were issued during 1993.
22
STOCK OPTION PLAN
The Plan authorizes the granting to key employees of the Company incentive stock
options and nonqualified stock options to purchase common stock of the Company
at market value at the time the options are granted. Shares sold under the Plan
may be either unissued authorized shares or shares reacquired by the Company.
Options granted under the plan are exercisable, subject to vesting and other
requirements, at varying times from the first through the tenth year after the
grant date. Optionees may exercise their options with cash or with shares of
the Company's common stock. Of the 446,960 shares under option outstanding at
December 31, 1993, a total of 202,600 shares were currently exercisable,
compared to a total of 156,152 shares exercisable at December 31, 1992.
<TABLE>
<CAPTION>
Number Option price
Stock Option Plan Activity of shares range per share
____________________________________________________________________________________
<S> <C> <C>
Outstanding at December 31, 1990 321,400 $5.00 - $7.66
Granted 76,600 9.38
Exercised (15,920) 5.00 - 7.66
Expired (20,160) 7.62 - 9.38
-------
Outstanding at December 31, 1991 361,920 5.00 - 9.38
Granted 86,300 12.38
Exercised (69,240) 5.00 - 9.38
Expired 0
-------
Outstanding at December 31, 1992 378,980 5.00 - 12.38
Granted 89,000 16.25 - 16.88
Exercised (14,620) 7.41 - 12.38
Expired (6,400) 7.46 - 12.38
-------
Outstanding at December 31, 1993 446,960 $5.00 -$16.88
=======
</TABLE>
LIQUIDATION ACCOUNT
In connection with the Company's savings bank subsidiary conversion from mutual
to stock form of ownership during 1991, the subsidiary established a liquidation
account in the amount of $6,750,000 for the purpose of granting to elibible
account holders a priority in the event of future liquidation. Only in such an
event, an elibible account holder who continues to maintain a savings account
will be entitled to receive a distribution from the liquidation account. The
total amount of the liquidation account decreases in an amount proportionately
corresponding to decreases in the savings account balances of the elibible
account holders.
11. DIVIDEND LIMITATIONS
Subsidiary bank dividends are the principal source of funds for payment of
dividends by the Company to its shareholders. National banks, federally
chartered savings banks and banks chartered by the State of Kentucky are
prohibited from paying dividends in excess of respective regulatory formulas,
which are generally based upon current year income as well as retained income
from the two preceding years in some circumstances unless prior Federal or
state regulatory approval is obtained. At December 31, 1993, approximately
23
$15.2 million in retained earnings of Peoples First Corporation's subsidiary
banks were available for the payment of dividends to the Company without
regulatory approval or without reducing the capital of the respective subsidiary
banks below present minimum regulatory standards.
12. INCOME TAXES
The current and deferred portions of income tax expense were as follows:
Year Ended December 31, 1993 1992 1991
_______________________________________________________________________________
(in thousands)
Current taxes $5,495 $4,285 $2,541
Deferred taxes (1,223) (858) (152)
----- ----- -----
Income tax expense $4,272 $3,427 $2,389
===== ===== =====
As discussed in Note 1, the Company adopted FAS 109 as of January 1, 1992,
changing the method of computing deferred taxes on a prospective basis. No
cumulative adjustment was required for the adoption of FAS 109.
The Company and its subsidiaries file a consolidated Federal income tax return.
Deferred taxes result from temporary differences in the recognition of income
and expense for tax and financial reporting purposes. The sources of these
differences and the tax effect of each were as follows:
Year Ended December 31, 1993 1992 1991
_______________________________________________________________________________
(in thousands)
Provision for loan losses ($893) ($240) ($148)
Amortization of security premiums (399) (431) 0
Accretion of security discounts (8) (67) (3)
Interest income on nonaccrual loans 98 0 0
Deferred compensation (54) (31) (39)
Depreciation (8) (14) 4
Other real estate owned (3) (104) 0
Other, net 44 29 34
----- ----- -----
Deferred income taxes ($1,223) ($858) ($152)
===== ===== =====
24
The following is a reconciliation between the amount of income tax expense and
the amount of tax computed by applying the statutory Federal income tax rates:
Year Ended December 31, 1993 1992 1991
_______________________________________________________________________________
(in thousands)
Tax computed at statutory rates $5,321 $4,179 $3,224
Increase (decrease) in taxes
resulting from:
Tax-exempt income (1,396) (1,178) (929)
Goodwill amortization 290 192 12
Other, net 57 234 82
----- ----- -----
Income tax expense $4,272 $3,427 $2,389
===== ===== =====
Enacted in September, 1993, the Revenue Reconciliation Act of 1993 was a change
in the tax laws that raised the Company's top income tax rate. Adjustment to
the deferred tax asset required by this rate change was insignificant. Not all
temporary differences are accounted for through income tax expense on the state-
ments of income. The tax effects of temporary differences, that give rise to
significant elements of the deferred tax assets and deferred tax liabilities are
as follows:
December 31, 1993 1992
_______________________________________________________________________________
(in thousands)
Deferred tax assets:
Allowance for loan losses ($2,765) ($1,872)
Deferred compensation (339) (285)
Other real estate owned (107) (104)
Other (209) (226)
----- -----
(3,420) (2,487)
Deferred tax liabilities:
Premiums on securities 196 595
Discounts on securities 25 32
Unrealized security appreciation 644 0
Accrued interest income 98 0
Premises and equipment 907 901
Other 197 177
----- -----
2,067 1,705
----- -----
Net deferred tax assets ($1,353) ($782)
===== =====
Deferred tax assets have not been reduced by a valuation allowance since based
on the weight of available evidence, management believes it is more likely than
not that all of the deferred tax assets will be realized.
25
Neither current or deferred taxes have been provided for approximately $2.6
million of income at December 31, 1993 and 1992 which represents allocations
for bad debt deductions for tax purposes only. If the amounts that qualify
for federal income tax purposes are later used for purposes other than bad debt
losses, including distributions in liquidation, such distributions will be
subject to federal income tax at the then current corporate rate.
13. SUPPLEMENTAL INCOME STATEMENT INFORMATION
Details of noninterest income and noninterest expense are as follows:
Year Ended December 31, 1993 1992 1991
_______________________________________________________________________________
(in thousands)
Noninterest Income
Service charges on deposits $3,033 $2,651 $2,128
Net securities gains 41 593 25
Trust department fees 1,186 1,078 762
Insurance commissions 285 262 360
Other income 1,096 982 494
----- ----- -----
$5,641 $5,566 $3,769
===== ===== =====
Year Ended December 31, 1993 1992 1991
_______________________________________________________________________________
(in thousands)
Noninterest Expense
Salaries $10,099 $8,595 $6,603
Employee benefits 1,948 1,816 1,275
Occupancy expense 1,299 1,244 985
Equipment expense 1,300 1,053 844
FDIC insurance expense 1,877 1,711 1,279
Data processing expense 1,682 1,448 1,186
Bankshare taxes 1,091 861 627
Goodwill amortization 830 565 34
Other expense 5,702 5,333 3,303
------ ------ ------
$25,828 $22,626 $16,136
====== ====== ======
26
14. PARENT COMPANY FINANCIAL INFORMATION
Following are condensed balance sheets of Peoples First Corporation (parent
company only) as of December 31, 1993 and 1992, and the related condensed
statements of income and cash flows for the years ended 1993, 1992 and 1991:
Condensed Balance Sheets
December 31, 1993 1992
__________________________________________________________________
(in thousands)
Assets
Cash in subsidiary bank $956 $535
Investment in subsidiaries 100,658 92,633
Cost in excess of net
assets acquired 202 225
Other assets 558 495
------- -------
$102,374 $93,888
======= =======
Liabilities and Stockholders' Equity
Liabilities
Notes payable $9,589 $12,102
Other liabilities 317 352
------- -------
Total liabilities 9,906 12,454
Stockholders' equity
Common stock 5,539 5,501
Surplus 30,851 29,704
Retained earnings 54,990 46,432
Unrealized appreciation of securities held
for sale, net of deferred income tax 1,246 --
Debt on ESOP shares (158) (203)
------- -------
92,468 81,434
------- -------
$102,374 $93,888
======= =======
Common shares issued and outstanding 7,090 7,042
27
Condensed Statements of Income
Year Ended December 31, 1993 1992 1991
_______________________________________________________________________________
(in thousands)
Income
Dividends from subsidiaries $5,753 $3,520 $2,191
Other income 7 84 83
------ ------ ------
5,760 3,604 2,274
Expense
Salaries and employee benefits 0 127 134
Interest expense 745 578 5
Legal and accounting fees 335 140 159
Other expense 450 596 219
------ ------ ------
1,530 1,441 517
------ ------ ------
Income before income taxes
and equity in undistributed
income from subsidiaries 4,230 2,163 1,757
Income tax benefit 434 429 134
Income before equity in ------ ------ ------
undistributed income
of subsidiaries 4,664 2,592 1,891
Equity in undistributed
income of subsidiaries 6,627 6,270 5,203
------ ------ ------
Net Income $11,291 $8,862 $7,094
====== ====== ======
28
Condensed Statement of Cash Flows
Year Ended December 31, 1993 1992 1991
_______________________________________________________________________________
(in thousands)
Operating Activities
Net income $11,291 $8,862 $7,094
Adjustments to reconcile income to net
cash provided by operating activities
Equity in undistributed
income of subsidiaries (6,627) (6,270) (5,203)
Amortization and other, net (16) (149) 229
Net cash provided by ----- ----- -----
operating activities 4,648 2,443 2,120
Investing Activities
Cash paid for acquisition of subsidiary,
net of dividend received -- (3,914) --
----- ----- ---------
Net cash used by investing activities -- (3,914) --
Financing Activities
Proceeds from notes payable 6,200 2,700 --
Repayments of notes payable (8,713) (623) --
Issuance of common stock 299 386 142
Cash dividends paid (2,013) (1,633) (1,208)
Net cash provided (used) ----- ----- -----
by financing activities (4,227) 830 (1,066)
Net Increase (Decrease) in Cash 421 (641) 1,054
and Cash Equivalents
Cash and Cash Equivalents at
Beginning of Year 535 1,176 122
----- ----- -----
Cash and Cash Equivalents at End of
Year $956 $535 $1,176
===== ===== =====
Supplemental Disclosures
Cash paid for interest expense $716 $551 $0
Cash received for income taxes (365) (338) (351)
Noncash Investing and Financing Activities
Dividends reinvested 439 347 271
Notes payable issued in purchase
acquisition of subsidiary -- 10,025 --
Common stock issued in purchase
acquisition of subsidiary -- 18,258 --
29
15. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
In December, 1991, Financial Accounting Standard (FAS) No. 107, "Disclosures
about Fair Value of Financial Instruments" was issued. This standard requires
that the Company disclose the fair value of financial instruments for both on
and off-balance sheet assets and liabilities for which it is practicable to
estimate that value. Where readily available, quoted market prices were util-
ized by the Company. If quoted market prices were not available, fair values
were based on estimates using present value and other valuation techniques.
These techniques were significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. The calculated fair value
estimates, therefore, cannot be substantiated by comparison to independent
markets and, in many cases, could not be realized in immediate settlement of the
instrument. FAS 107 excludes certain financial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts presented are not
intended to represent the underlying value of the Company.
The following methods and assumptions were used in estimating the fair value for
financial instruments.
CASH, DUE FROM BANKS, ACCRUED INTEREST RECEIVABLE, FEDERAL FUNDS SOLD, FEDERAL
FUNDS PURCHASED AND ACCRUED INTEREST PAYABLE
The carrying amount reported for cash, due from banks, accrued interest receiv-
able, Federal funds sold, Federal funds purchased and accrued interest payable
approximates the fair value for those assets and liabilities.
DEBT SECURITIES
For both securities held for sale and investment, fair values are based on
quoted market prices or dealer quotes, if available. If a quoted market price
is not avialable, fair value is estimated using quoted prices for similar
securities.
LOANS RECEIVABLE
Loan balances were assigned fair values based on a discounted cash flow
analysis. The discount rate was based on the treasury yield curve, with rate
adjustments for credit risk, liquidity, sevicing costs and the prepayment
uncertainty.
DEPOSIT LIABILITIES AND REPURCHASE AGREEMENTS
The fair value for demand deposits, any interest bearing deposit with no fixed
maturity date or short-term repurchase agreement liabilities was considered to
be equal to the amount payable on demand or maturity date at the reporting date.
Time deposits and repurchase agreement liabilities other than short-term, were
assigned fair values based on a discounted cash flow analysis using discount
rates which approximate interest rates currently being offered on liabilities
with comparable maturities.
NOTES PAYABLE
Long-term debt was fair valued using discounted cash flow analysis with a
discount rate based on current incremental borrowing rates for similar types of
arrangements.
30
UNRECOGNIZED FINANCIAL INSTRUMENTS
No fair value of loan commitments is presented since the Company does not
generally collect fees for loan commitments. The fair value of guarantees and
letters of credit is based on equivalent fees that would be charged for similar
agreements and is less than $10,000 for 1993 and 1992.
The book values and estimated fair values for financial instruments as of
December 31, 1993 and 1992 are reflected below.
Financial Instruments
December 31, 1993 Book value Fair value
_______________________________________________________________________________
(in thousands)
Financial Assets
Cash and due from banks $34,655 $34,655
Federal funds sold 2,100 2,100
Securities held for sale 67,431 67,431
Investment securities 246,096 255,606
Loans, net 626,407 629,702
Accrued interest receivable 7,455 7,455
Financial Liabilities
Deposits 873,533 879,476
Repurchase agreements 19,705 19,705
Federal funds purchased 12,600 12,600
Notes payable 9,747 9,771
Accrued interest payable 3,507 3,507
Financial Instruments
December 31, 1992 Book value Fair value
_______________________________________________________________________________
(in thousands)
Financial Assets
Cash and due from banks $37,952 $37,952
Federal funds sold 13,750 13,750
Securities held for sale 41,859 41,957
Investment securities 290,384 298,964
Loans, net 556,560 565,050
Accrued interest receivable 8,703 8,703
Financial Liabilities
Deposits 860,076 867,243
Repurchase agreements 19,534 19,534
Notes payable 12,320 12,373
Accrued interest payable 3,921 3,921
31
SIGNATURE
_______________________________________________________________________________
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, on August 1, 1994.
PEOPLES FIRST CORPORATION
By: /s/ Allan B. Kleet
Allan B. Kleet
Principal Financial Officer
32
INDEX TO EXHIBITS Page
_______________________________________________________________________________
(23.1) Consent of KPMG Peat Marwick 34
33
EXHIBIT 23.1 - CONSENT OF KPMG PEAT MARWICK INDEPENDENT PUBLIC ACCOUNTANTS
________________________________________________________________________________
The Board of Directors
Peoples First Corporation:
We consent to the incorporation by reference in the Registration Statements
No. 33-28301 on Form S-3, No. 33-28304 on Form S-8 and No. 33-54535 on Form
S-4 of Peoples First Corporation, of our report dated July 28, 1994, relating to
the supplemental consolidated balance sheets of Peoples First Corporation and
subsidiaries as of December 31, 1993 and 1992, and the related supplemental
consolidated statements of income, changes in stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1993
which report appears in the Current Report of Form 8-K dated July 28, 1994 of
Peoples First Corporation.
/s/ KPMG Peat Marwick
St. Louis, Missouri
July 28, 1994
34
