_______________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934, For the Quarter Ended March 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission File 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
P. O. Box 2200
Paducah, Kentucky 42002-2200
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (502) 441-1200
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 require-
ments for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of the Registrant's only class of stock as of
March 31, 1996: Common stock, no par value - 9,218,029 shares outstanding.
______________________________________________________________________________1
INDEX Page
_______________________________________________________________________________
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1996,
March 31, 1995 and December 31, 1995 3
Consolidated Statements of Income - Three Months
Ended March 31, 1996 and 1995 4
Consolidated Statement of Changes in Stockholders'
Equity - Three Months Ended March 31, 1996 5
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 1996 and 1995 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 25
Item 2. Changes in Securities 25
Item 3. Defaults on Senior Securities 25
Item 4. Submission of Matters to a Vote of Securities Holders 25
Item 5. Other Information 26
Item 6. Exhibits and Reports on Form 8-K 26
Signatures 27
2
March 31, December 31,
CONSOLIDATED BALANCE SHEETS 1996 1995 1995
_______________________________________________________________________________
(in thousands)
ASSETS
Cash and due from banks $41,750 $41,249 $37,524
Short-term investments 0 0 0
Securities held for sale 158,749 132,486 146,322
Securities held for investment 151,794 187,699 160,320
Loans 914,373 835,025 914,497
Allowance for loan losses (13,670) (12,452) (13,371)
--------- --------- ---------
Loans, net 900,703 822,573 901,126
Excess of cost over net assets
of purchased subsidiaries 9,040 9,870 9,248
Premises and equipment 18,302 17,203 18,226
Other assets 16,099 14,680 14,830
--------- --------- ---------
$1,296,437 $1,225,760 $1,287,596
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand deposits $79,096 $83,743 $86,360
Interest-bearing transaction accounts 304,054 239,473 291,539
Savings deposits 85,558 88,297 83,607
Time deposits 577,918 608,621 585,598
--------- --------- ---------
1,046,626 1,020,134 1,047,104
Short-term borrowings 101,461 73,238 93,469
Long-term borrowings 7,575 9,026 7,757
Other liabilities 10,784 8,320 11,094
--------- --------- ---------
Total liabilities 1,166,446 1,110,718 1,159,424
Stockholders' Equity
Common stock 7,201 6,443 7,207
Surplus 53,707 35,306 53,269
Retained earnings 69,090 75,769 66,878
Unrealized net gain (loss) on
securities held for sale 32 (2,343) 926
Debt on ESOP shares (39) (133) (108)
--------- --------- ---------
129,991 115,042 128,172
--------- --------- ---------
$1,296,437 $1,225,760 $1,287,596
========= ========= =========
Fair value of securities held
for investment $154,995 $188,285 $165,042
Common shares issued and outstanding 9,218 9,092 9,225
See accompanying notes to consolidated financial statements. 3
Three Months Ended
March 31,
CONSOLIDATED STATEMENTS OF INCOME 1996 1995
________________________________________________________________________________
(in thousands, except per share data)
INTEREST INCOME
Interest on short-term investments $37 $18
Taxable interest on securities 3,876 4,151
Nontaxable interest on securities 996 1,030
Interest and fees on loans 20,836 17,794
------ ------
25,745 22,993
INTEREST EXPENSE
Interest on deposits 11,343 10,535
Other interest expense 1,404 1,198
------ ------
12,747 11,733
------ ------
Net Interest Income 12,998 11,260
Provision for Loan Losses 577 443
------ ------
Net Interest Income after
Provision for Loan Losses 12,421 10,817
Noninterest Income 2,036 1,722
Noninterest Expense 8,347 8,314
------ ------
Income Before Income Tax Expense 6,110 4,225
Income Tax Expense 1,955 1,208
------ ------
NET INCOME $4,155 $3,017
====== ======
Net Income per Common Share $0.44 $0.32
Cash Dividend per Common Share 0.143 0.109
Average Common Shares Outstanding 9,487 9,353
See accompanying notes to consolidated financial statements. 4
Three Months Ended
March 31,
CONSOLIDATED STATEMENTS OF CASH FLOWS 1996 1995
_______________________________________________________________________________
(dollars in thousands)
OPERATING ACTIVITIES
Net income $4,155 $3,017
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 729 662
Net (discount accretion) premium
amortization 220 156
Provision for loan losses 577 443
Net (increase) decrease in loans held for sale (527) (46)
Provision for deferred income taxes (272) (88)
Other, net (870) 1,721
------ ------
Net Cash Provided by Operating Activities 4,012 5,865
INVESTING ACTIVITIES
Proceeds from maturities of investment
securities 4,905 12,525
Principal collected on mortgage-backed
securities held for sale 3,980 1,387
Principal collected on mortgage-backed
investment securities 4,925 3,392
Purchase of securities held for sale (17,792) (575)
Purchase of investment securities (1,362) 0
Net (increase) decrease in loans 333 (29,212)
Purchases of premises and equipment (596) (659)
------ ------
Net Cash Used by Investing Activities (5,607) (13,142)
continued
See accompanying notes to consolidated financial statements. 5
Three Months Ended
March 31,
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED 1996 1995
_______________________________________________________________________________
(dollars in thousands)
FINANCING ACTIVITIES
Net increase (decrease) in deposits (478) 21,550
Net increase (decrease) in short-term borrowings 7,992 (11,329)
Proceeds from long-term borrowings 0 140
Repayments of long-term borrowings payable (182) (650)
Proceeds from issuance of common stock 228 315
Repurchase of common stock (649) 0
Cash dividends paid (1,090) (833)
------ ------
Net Cash Provided by Financing Activities 5,821 9,193
------ ------
Cash and Cash Equivalents
Increase 4,226 1,916
Beginning of Year 37,524 39,333
------ ------
End of Period $41,750 $41,249
====== ======
SUPPLEMENTAL DISCLOSURES
Cash paid for interest expense $13,896 $11,412
Cash paid for income tax 1,224 0
NONCASH INVESTING AND FINANCING TRANSACTIONS
Other real estate transferred to (from) loans, net (40) 0
Dividends reinvested 228 154
See accompanying notes to consolidated financial statements. 6
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Unrealized
CONSOLIDATED STATEMENTS OF CHANGES net gain
IN STOCKHOLDERS' EQUITY Common Retained (loss) on ESOP
(unaudited) stock Surplus earnings securities debt Total
______________________________________________________________________________________________________________________
(in thousands, except per data)
BALANCE AT JANUARY 1, 1996 $7,207 $53,269 $66,878 $926 ($108) $128,172
Net income 4,155 4,155
Cash dividends declared
Common ($0.143 per share) (1,318) (1,318)
Stock issued pursuant to shareholder
and employee plans 18 438 456
Common stock repurchased (24) (625) (649)
Reduction of ESOP debt 69 69
Change in unrealized net gain
(loss) on securities held for sale (894) (894)
------ ------ ------ ------ ------ -------
BALANCE AT MARCH 31, 1996 $7,201 $53,707 $69,090 $32 ($39) $129,991
====== ====== ====== ====== ====== =======
</TABLE>
See accompanying notes to consolidated financial statements. 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_______________________________________________________________________________
NOTE A - BASIS OF PRESENTATION
Peoples First Corporation (Company) through its subsidiaries, Peoples First
National Bank and Trust Company and First Kentucky Federal Savings Bank,
operates principally in a single business segment offering 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. Estimates and
assumptions involve future events and may change. The accompanying consolidated
financial statements are unaudited and should be read in conjunction with the
notes to consolidated financial statements contained in the 1995 annual report
on Form 10-K. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the periods ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996.
NOTE B - SECURITIES HELD FOR SALE AND INVESTMENT SECURITIES
At acquisition, securities are classified into one of three categories: trading,
held for sale or investment. 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 stock-
holders' 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 amortization or accretion of premiums or
discounts on the associated securities.
Trading securities are bought and held principally with the intention of selling
them in the near term. The Company currently has no trading securities.
Securities that are being held for indefinite periods of time, including secur-
ities that management intends to use as a part of its asset/liability strategy,
or that may be sold in response to changes in interest rates, changes in prepay-
ment risk, to meet liquidity needs, the need to increase regulatory capital or
other similar factors, are classified as securities held for sale and are stated
at fair value. Fair value is based on market prices quoted in financial
8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
_______________________________________________________________________________
publications or other independent sources. Net unrealized gains or losses are
excluded from earnings and reported, net of applicable income taxes, as a
separate component of stockholders' equity until realized. Securities for which
the Company has the ability and positive intent to hold until maturity are
classified as investment securities and 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.
Realized gains or losses on securities held for sale or investment are accounted
for using the specific security. Mortgage-backed securities represent a
significant portion of the security portfolios. Amortization of premiums 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.
NOTE C - LOAN REVENUES
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 include a significant number of loans made on a discount
basis. The unearned discount attributable to these loans is credited to income
using a method which approximates 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.
The Company became subject to Statement of Financial Accounting Standards No.
122, "Accounting for Mortgage-Servicing Rights", (FAS 122) effective for the
year beginning January 1, 1996. FAS 122 requires a mortgage banking enterprise
that acquires mortgage servicing rights through either purchase or origination
of mortgage loans and sells or securitizes those loans with servicing rights
retained to allocate the total cost of the mortgage loans to the mortgage
9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
_______________________________________________________________________________
servicing rights and the loans (without the mortgage servicing rights) bases on
their relative fair values if it is practical to estimate those fair values.
FAS 122 had no effect on the consolidated financial statements other than
required disclosure.
NOTE D - ALLOWANCE FOR LOAN LOSSES
The allowance is increased by provisions for loan losses charged to operations
and is maintained at a level adequate to absorb estimated credit losses asso-
ciated 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. Manage-
ment's approach provides for general and specific allowances and is based upon
current economic conditions, past losses, collection experience, risk charac-
teristics 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. The Company recognizes interest income on
nonaccrual impaired loans equal to the amount of interest received in cash.
Loans, except large groups of smaller-balance homogeneous loans, for which the
full collection of principal and interest is not probable, or a delay in
payments is expected, are evaluated for impairment. The Company measures and
reports impaired loans that are within the scope of FAS 114 at either the
present value of expected future cash flows discounted at the loan's effective
rate, the market price of the loan, or fair value of the underlying collateral
if the loan is collateral dependent. Information regarding impaired loans at
March 31, 1996 and 1995 is as follows:
Impaired Loans March 31, December 31,
March 31, 1996 1995 1995
________________________________________________________________________________
(in thousands)
Balance of impaired loans $4,602 $910 $4,109
Less portion for which no allowance
for loan losses is allocated 0 0 308
------ ------ ------
Portion of impaired loan balance for
which an allowance for loan losses
is allocated $4,602 $910 $3,801
====== ====== ======
Portion of allowance for loan losses
allocated to the impaired loan balance $1,047 $332 $829
====== ====== ======
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
_______________________________________________________________________________
Three Months Ended
March 31,
Impaired Loans 1996 1995
_______________________________________________________________________________
(in thousands)
Average investment in impaired loans $4,525 918
Interest income recognized on
impaired loans 106 19
Interest income recognized on
impaired loans on cash basis 0 0
NOTE E - EXCESS OF COST OVER NET ASSETS OF PURCHASED SUBSIDIARIES
Net assets of subsidiaries acquired in purchase transactions are recorded at
fair value at the date of acquisition. The excess of cost over net assets
acquired is amortized by systematic charges in the consolidated statements of
income over the period benefited. Management evaluates the periods of
amortization continually to determine whether later events and circumstances
warrant revised estimates. Currently, amortization is provided on a
straight-line basis over fifteen years. Accumulated amortization was $3.4
million at March 31, 1996, $2.6 million at March 31, 1995 and $3.2 million
December 31, 1995. Amortization expense was $207,430 for three months ended
March 31, 1996 and 1995.
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of", (FAS 121) effective for the year beginning January 1, 1996.
FAS 121 requires the recognition of a loss on impaired assets when the
carrying amount of the asset may not be recoverable. This statement applies to
assets other than loans, which are covered under FAS 114 which the Company
adopted in 1995. Management periodically evaluates whether events of
circumstances have occurred that would result in impairment in the value or life
of goodwill or other intangibles. Management considers an intangible to be
potentially impaired if internal management reports for respective business
units show a net loss before amortization of intangibles. The recoverability of
the asset is then evaluated using undiscounted cash flow projections. The
Company's adoption of FAS 121 had no effect on the consolidated financial
statements other than required disclosure.
NOTE F - STOCK OPTION PLAN
The Peoples First Corporation 1986 Stock Option Plan (Option Plan), as amended
in 1994, 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
11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
_______________________________________________________________________________
Option Plan may be either unissued authorized shares or shares reacquired by the
Company. Options granted 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. At March 31, 1996, a total of 182,512 shares are
reserved for grants of options. Outstanding stock options are considered common
stock equivalents in the computation of net income per common share.
The Company adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation", (FAS 123) effective for the year
beginning January 1, 1996. FAS 123 defines the accounting available for
employee stock compensation plans. The statement defines a fair value based
method of accounting for an employee stock option and permits companies to
switch to this method to record compensation costs for new and modified employee
stock options. The Company elected to continue to apply APB Opinion 25 and
related interpretations to account for the Company's Option Plan. Accordingly,
consistent with previous Company accounting practices, no compensation cost is
recognized in the consolidated statements of income.
NOTE G - PER COMMON SHARE DATA
Share and per share information have been adjusted to give effect to 5% stock
dividends declared in April 1995 and January 1996. Net income per common share
is determined by dividing net income by the weighted average number of common
shares outstanding and common stock equivalents pertaining to common stock
options. The average number of shares outstanding including common stock
equivalents for the three months ended March 31, 1996 and 1995 were 9,486,517
and 9,353,093, respectively. Common stock equivalents have no material dilutive
effect.
NOTE H - CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company considers
all cash and due from banks to be cash equivalents.
NOTE I - BUSINESS COMBINATIONS
On February 16, 1996, the Company entered into an acquisition agreement with
Guaranty Federal Savings Bank (Guaranty FSB) of Clarksville, Tennessee. The
agreement is subject to the approval of Guaranty FSB shareholders and regula-
tors. The Company will issue between 270,988 and 331,182 shares of the
Company's common stock, depending on the average share price during a definitive
period prior to closing, for all the outstanding stock of Guaranty FSB.
Guaranty FSB, a well established savings bank in northwestern Tennessee, has
three branch offices in Clarksville, Tennessee and had total assets of
approximately $55.9 million at March 31, 1996. The business combination is
expected to be consummated in the third quarter of 1996.
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
_______________________________________________________________________________
Headquartered in Paducah, Kentucky, Peoples First Corporation (Company) is a
multi-bank and unitary savings and loan holding company registered with the
Federal Reserve Board. Through 25 banking offices, the Company serves primarily
the western Kentucky and surrounding interstate area. The purpose of this
discussion and analysis is to provide financial statement readers with
information relevant to understanding and assessing the financial condition and
results of operations of Peoples First Corporation (Company).
The Company operates principally in a single business segment offering general
commercial and savings bank services. Commercial banking services, mortgage
banking and consumer financing are all activities the Company considers to be
their one business segment. Table 1 provides certain subsidiary, parent company
and consolidated information as of and for the period ended March 31, 1996.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Table 1
Disaggregated Data First Parent Co
As of and for the three months Peoples Kentucky and elim- Consol-
ended March 31, 1996 Bank FSB nations dated
____________________________________________________________________________________________
(dollars in thousands)
Net income $3,869 $413 ($127) $4,155
Average assets 1,111,413 173,733 (2) 1,285,144
Return on average equity 13.85% 10.56% 12.95%
Average equity / assets 10.11 9.06 10.04
Net interest margin 4.61 3.36 4.43
Provision for loan losses /
average loans 0.27 0.13 0.25
Allowance for loan loss /
loans outstanding 1.56 0.97 1.50
Overhead ratio 0.52 0.56 0.54
</TABLE>
EARNING ASSETS
Average earning assets of the Company for the first three months of 1996 in-
creased 6.8%, or $78.1 million to $1,223.5 million from $1,145.4 million for the
first three months of 1995. This compares to average earning asset growth of
4.7% for the first quarter of 1995 over the first quarter of 1994. A consist-
ently favorable ratio of average earning assets to average total assets has been
achieved. The ratio was 95.2% and 95.1% for the first three months of 1996 and
1995, respectively.
Loans are the Company's primary earning asset and management believes the
Company should be a prominent lender. Average loans for the first three months
of 1996 were 74.7% of total average earning assets, up from 71.6% for the first
13
three months of 1995. Loan growth, while still strong, has slowed from previous
levels. Average loans for the first quarter of 1996 increased 11.5%, or $94.4
million to $914.4 million from $820.0 million for the first quarter of 1995.
Average loans for the first quarter of 1995 increased 14.9%, or $106.6 million
from $713.4 million. The Company primarily directs lending activities to its
regional market. Management has focused on retail lending and the growth of
residential real estate mortgage loans over the last two years. The Company
maintains a portfolio of securities held for sale as a potential source of
funding for loan growth.
Table 2 March 31, December 31,
Types of Loans 1996 1995 1995
________________________________________________________________________________
(in thousands)
Commercial, financial
and agricultural $110,510 $114,517 $113,929
Real estate
Construction 17,201 15,931 19,386
Residential mortgage 363,987 330,385 364,607
Commercial mortgage 157,952 146,337 158,429
Installment loans to
individuals 264,456 231,291 260,724
Consumer revolving credit 8,064 6,903 8,231
Loans held for sale 1,235 201 708
Other 1,497 1,787 1,463
------- ------- -------
924,902 847,352 927,477
Unearned income (10,529) (12,327) (12,980)
------- ------- -------
$914,373 $835,025 $914,497
======= ======= =======
FUNDING
Core deposits, which management relies on as the most important and stable
source of funding, of the Company for the first three months of 1996 increased
3.2%, or $31.2 million to $1,014.4 million from $983.2 million for 1995. Local
markets for deposits are highly competitive. Management anticipates an
increasing need to rely on more volatile purchased liabilities. The Company's
subsidiaries have obtained various short-term and long-term advances from the
Federal Home Loan Bank (FHLB) under Blanket Agreements for Advances and Security
Agreements (Agreements). The Agreements entitle the banks to borrow additional
funds from the FHLB to fund mortgage loan programs and satisfy other funding
needs.
14
Three Months Ended
Table 3 March 31,
Average Interest-bearing Liabilities 1996 1995
_______________________________________________________________________________
(in thousands)
Total average interest-bearing
liabilities $1,065,027 $1,005,163
Percent of average total interest-
bearing liabilities
Average interest-bearing core deposits 87.6% 89.6%
Average brokered deposits 2.5 2.1
Average short-term borrowings 9.0 7.4
Average long-term borrowings 0.7 0.8
Other 0.2 0.1
NONPERFORMING ASSETS AND RISK ELEMENTS
The Company's process for monitoring loan quality includes detailed, monthly
analyses of delinquencies, nonperforming assets and potential problem loans
from each subsidiary bank. Management extensively monitors credit policies,
including policies related to appraisals, assessing the financial condition of
borrowers, restrictions on out-of-area lending and avoidance of loan
concentrations.
The level of nonperforming assets at March 31, 1996 remains relatively low.
Diversification within the loan portfolio is an important means of reducing
inherent lending risks. At March 31, 1996, the Company had no concentrations of
ten percent or more of total loans in any single industry nor any geographical
area outside of the Paducah, Kentucky, western Kentucky region, the immediate
market area of the subsidiary banks.
The Company discontinues the accrual of interest on loans which become ninety
days past due as to principal or interest, or when in the opinion of management
the collection of interest is unlikely, unless the loans are adequately secured
and in the process of collection. Other real estate owned is carried at the
lower of cost or fair value less estimated disposal costs, if any. A loan is
classified as a renegotiated loan when the interest rate is materially reduced
or the term is extended beyond the original maturity date because of the
inability of the borrower to service the debt under the original terms.
Nonperforming assets at March 31, 1996 were 0.65% of total loans and other real
estate, up slightly from prior periods. Management continues to exert efforts
to monitor and minimize nonperforming assets even though the nonperforming
totals are significantly lower than peer bank holding company ratios.
Significant focus on underwriting standards is maintained by management and the
subsidiary bank boards.
15
Table 4 March 31, December 31,
Nonperforming Assets 1996 1995 1995
_______________________________________________________________________________
(in thousands)
Nonaccrual loans $2,435 $893 $1,817
Other real estate owned 673 956 644
Renegotiated loans 2,837 2,718 2,874
----- ----- -----
$5,945 $4,567 $5,335
===== ===== =====
Loans past due ninety days and still
accruing interest $1,873 $1,513 $1,471
Ratios:
Nonperforming assets to total
loans and other real estate 0.65% 0.55% 0.58%
Allowance for loan losses to
nonperforming assets 230% 273% 251%
Internal credit review procedures are designed to alert management of possible
credit problems which would create serious doubts as to the future ability of
borrowers to comply with loan repayment terms. At March 31, 1996, loans with a
total principal balance of $15.8 million have been identified that may become
nonperforming in the future, compared to $13.9 million at March 31, 1995.
Potential problem loans are not included in nonperforming assets since the
borrowers currently meet all applicable loan agreement terms.
The banking industry is currently experiencing an increase in consumer
delinquencies and chargeoffs. Management expects the Company's credit quality
to decline somewhat during the next year, due to cyclical deterioration of
consumer credit quality.
CAPITAL RESOURCES AND DIVIDENDS
The current economic and regulatory environment places increased emphasis on
capital strength. Stockholders' equity was 10.0% of assets at March 31, 1996,
up from 9.4% at March 31, 1995. Exclusive of the $0.9 million decrease in the
unrealized net gain on securities held for sale, net of applicable income taxes,
stockholders' equity increased $2.7 million, or 8.6% (annualized), during the
first three months of 1996 due to a 67.5% earnings retention rate and the sale
of common stock through shareholder and employee plans ($456,262). This
compares to an increase, exclusive of the $2.3 million decrease in the
unrealized net loss on securities held for sale, net of applicable income taxes,
of $2.5 million, or 8.8% (annualized), during the same 1995 period when the
earnings retention rate was 65.9% and proceeds from the sale of common stock
through shareholder and employee plans was $468,171.
16
The board of directors frequently increases the quarterly cash dividend. The
quarterly cash dividend was raised to $0.109 per share in the third quarter of
1994, to $0.143 per share in the third quarter of 1995 and to $0.160 per share
in the second quarter of 1996. Stock dividends of 5% were declared in April
1995 and in January 1996. To partially fund the stock dividend, the board of
directors approved the purchase of up to 400,000 shares of the Company's common
stock in the open market. The Company's capital policies are designed to retain
sufficient amounts for healthy financial ratios and to maintain, at a minimum, a
capital position that meets the federal regulators' well capitalized
classification.
Subsidiary bank dividends are the principal source of funds for the Company's
payment of dividends to its stockholders. At March 31, 1996, approximately
$20.8 million, compared to $14.4 million at March 31, 1995, in retained earnings
of subsidiary banks were available for dividend payments to the Company without
regulatory approval or without reducing capital of the respective banks below
minimum standards. Capital ratios of all of the Company's subsidiaries are in
excess of applicable regulatory capital ratios. At March 31, 1996 and December
31, 1995, the Company and the banks' total capital and leverage ratios were as
follows:
Total Leverage Ratio
Table 5 Mar 31, Dec 31, Mar 31, Dec 31,
Risk-Based Capital 1996 1995 1996 1995
_______________________________________________________________________________
Company 14.84% 14.41% 9.48% 9.30%
Peoples First National
Bank 14.11 13.71 9.47 9.29
First Kentucky FSB 21.41 20.08 9.13 8.74
Regulatory minimum 8.00 8.00 4.00 4.00
Bank regulatory agencies' minimum capital guidelines assign relative measures of
credit risk to balance sheet assets and off-balance sheet exposures. Based upon
the nature and makeup of their current businesses, growth expectations, stock
repurchase program and dividend increases, management expects all of the
reporting entities' capital ratios to continue to exceed regulatory minimums.
RESULTS OF OPERATIONS
Net income per common share for the first three months of 1996 increased 37.5%
to $0.44, from $0.32 for the same 1995 period. Results in the first quarter
were impacted by increased interest margins partially offset with a higher
provision for loan losses, improved noninterest income and reduced deposit
insurance expense.
Return on average stockholders' equity for the first three months of 1996 and
1995 was 12.95% and 10.94%, respectively. Return on average assets for the
first three months of 1996 and 1995 was 1.31% and 1.02%, respectively.
17
NET INTEREST INCOME
The amount by which interest earned on assets exceeds the interest paid on sup-
porting funds, constitutes the primary source of income for the Company. For
the three months ended March 31, 1996, net interest income, on a tax-equivalent
(TE) basis, increased 14.4%, or $1.7 million to $13.5 million as compared to
$11.8 million for the three months ended March 31, 1995. Volume of earning
asset and margin improvement contributed approximate equal amounts to the
increased net interest income.
Although the subsidiary banks generally maintain a relatively balanced position
between volumes of rate-repricing assets and liabilities to guard against
adverse effects to net interest income from possible fluctuations in interest
rates, net interest income was unfavorably affected in 1995 by interest rate
caps on a significant portion of residential mortgage loans that repriced less
quickly than the average liability funding rate during the same period.
Management has significantly increased the amount of loans outstanding while
decreasing lower yielding debt securities during the last two years. For 1996,
management is attempting to balance volume increases and pricing to a greater
degree. Low levels of nonperforming loans favorably contributed to margins each
period.
Net interest income (TE) as a percent of average earning assets was 4.43% and
4.17% for the three months ended March 31, 1996 and 1995, respectively.
Interest earned on loans was 4.36% greater than the average funding cost, up
from 4.08% for the three months ended March 31, 1995. Net interest income
margins continue to benefit from a favorable change in the mix of earning assets
and funding sources.
Table 6
Net Interest Income Analysis Average Average
Three months ended March 31, 1996 volume Interest rate
_______________________________________________________________________________
(dollars in thousands)
Loans $914,362 $20,851 9.17%
Securities 306,058 5,336 7.01
Other interest earning assets 3,053 37 4.87
--------- ------
1,223,473 26,224 8.62
Time deposits 579,409 8,038 5.58
All other interest bearing deposits 380,600 3,305 3.49
Other interest bearing liabilities 105,018 1,404 5.38
--------- ------
$1,065,027 12,747 4.81
------ ----
Net interest income (TE) spread $13,477 3.81%
====== ====
Net interest income (TE) as a percent 4.43%
of average interest-earning assets ====
18
Table 7
Net Interest Income Analysis Average Average
Three months ended March 31, 1995 volume Interest rate
_______________________________________________________________________________
(dollars in thousands)
Loans $819,996 $17,820 8.81%
Securities 324,159 5,665 7.09
Other interest earning assets 1,283 18 5.69
--------- ------
1,145,438 23,503 8.32
Time deposits 586,278 7,856 5.43
All other interest bearing deposits 335,337 2,683 3.24
Other interest bearing liabilities 83,548 1,194 5.80
--------- ------
$1,005,163 11,733 4.73
------ ----
Net interest income (TE) spread $11,770 3.59%
====== ====
Net interest income (TE) as a percent 4.17%
of average interest-earning assets ====
PROVISION FOR LOAN LOSSES
A significant factor in the Company's past and future operating results is the
level of the provision for loan losses. The provision for loan losses amounted
to $577,000 for the three months ended March 31, 1996, an increase of $134,000
or 30.2% when compared to $443,000 for the three months ended March 31, 1995.
The increase in the 1996 provision for loan losses was influenced by the growth
in outstanding loans and net loan charge-offs. The annualized provision for
loan losses as a percentage of average loans was 0.25% for the three months
ended March 31, 1996, the same as for the year ended December 31, 1995 and up
slightly from 0.23% for the year ended December 31, 1994. Levels of providing
for loan losses reflect, among other things, management's evaluation of
potential problem loans.
Net loan chargeoffs over the last three years are at levels below previous
trends. Net chargeoffs as a percentage of average loans were 0.12% and 0.09%
for the three months ended March 31, 1996 and 1995, respectively. Net
chargeoffs as a percent of average loans were 0.21% for the five-year period
ended December 31, 1995. The allowance for loan losses was 1.50% of outstanding
loans at March 31, 1996, which is slightly more than the average during the last
five years. The March 31, 1996 allowance is 230% compared to 251% at December
31, 1995, of nonperforming assets and is maintained at a level which management
considers adequate to absorb estimated potential losses in the loan portfolio,
after reviewing the individual loans and in relation to risk elements in the
portfolios and giving consideration to the prevailing economy and anticipated
changes.
19
Three Months Ended
Table 8 March 31,
Allowance for Loan Losses 1996 1995
__________________________________________________________________
(dollars in thousands)
Balance at beginning of period $13,371 $12,188
Provision charged to expense 577 443
Loans charged off (381) (279)
Recoveries of chargeoffs 103 100
------ ------
Net loans charged off (278) (179)
------ ------
Balance at end of period $13,670 $12,452
====== ======
Annualized Ratios:
Provision for loan losses
to average loans 0.25% 0.22%
Net chargeoffs to
average loans 0.12 0.09
Allowance for loan losses
to period end loans 1.50 1.49
NONINTEREST INCOME
Fees from traditional deposit services as well as revenues from insurance,
brokerage activities and other commission business have been increased by
management's focus on improving all areas of noninterest income during the last
two years. Noninterest income amounted to $2,036,441 for the three months ended
March 31, 1996, an 18.2% increase compared to $1,722,896 for the three months
ended March 31, 1995. Service charges on deposit accounts, the largest
component of noninterest income, increased 8.1%. Approximately one-half of the
increase in trust fees is attributable to timing of certain fees for estates and
other services. Insurance commissions for the first quarter of 1995 were
significantly up from prior periods and impacted by special promotions.
Relatively low long-term fixed mortgage rates at the beginning of 1996
provided greater opportunities for fee income from secondary-market mortgage
loan services than in 1995. Prior to the second quarter of 1995, the Company
originated and retained student loans for its loan portfolio. After that time,
loans were originated and sold to produce fee income. The current year is the
second full year for investment brokerage services and property and casualty
insurance to be offered. The relative improvement in fee income slightly
exceeds the growth in net interest income. Noninterest income, excluding
securities losses, was 13.2% of total net interest income (TE) plus noninterest
income for the three months ended March 31, 1996, compared to 12.8% for the
three months ended March 31, 1995. Management plans to continue to seek ways to
increase fee income from services.
20
Three Months Ended
Table 9 March 31,
Noninterest Income 1996 1995
__________________________________________________________________
(in thousands)
Service charges on deposits $932 $862
Net securities gains (losses) (9) 0
Trust fees 339 277
Insurance commissions 144 167
Bankcard fees 183 139
Other income 447 277
----- -----
$2,036 $1,722
===== =====
Annualized Ratio:
Noninterest income
to average assets 0.64% 0.58%
NONINTEREST EXPENSE
In the second quarter of 1995, management announced a restructuring plan to
control the rate of increase of noninterest expense. As part of the plan, the
Company consolidated six of the previously separate corporate subsidiaries into
one bank to allow the personnel at all locations to better focus on quality
customer service and increasing the volume of business as well as reducing a
small amount of redundant costs. The plan provided for the reduction of the
number of employees by approximately 4% and targeted an expense reduction of
$1.0 million. While focused on expenses, the plan encompassed increased revenue
volumes designed to gain some operational ratio efficiencies. The restructuring
plan has been partially successful.
During the first three months of 1996, it required less noninterest expense
(overhead) to produce total net interest income (TE) plus noninterest income
(revenue) due mainly to improved net interest margins and reduced deposit
insurance. The ratio of overhead, exclusive of deposit insurance expense, to
revenue was 53.20% for the three months ended March 31, 1996, compared to 57.41%
for the three months ended March 31, 1995. There is a constant process of
evaluation to reach the optimum balance between revenue and overhead.
The ratio of personnel expense has slightly decreased as a percentage of average
total assets and was 1.31% for the three months ended March 31, 1996, compared
to 1.37% for the three months ended March 31, 1995. Blanket restraints were
imposed on salary increases at the beginning of 1996. Staffing levels at March
31, 1996 are down 2.9% from March 31, 1995 as the number of full-time equivalent
employees dropped to 503 from 518.
For 1996, management expects double-digit percentage increases in occupancy and
equipment expenses due to implementation of new systems. The Company has made
purchases amounting to approximately $6.0 million for facilities and equipment
21
during the last two years as technology has advanced and the need to leverage
personnel costs has intensified. Management is attempting to increase customers
volumes and leverage personnel expense through the use of additional technology
and plans to continue to purchase technology for new product delivery systems.
Three Months Ended
Table 10 March 31,
Noninterest Expense 1996 1995
__________________________________________________________________
(in thousands)
Salaries $3,475 $3,413
Employee benefits 722 649
Occupancy expense 444 410
Equipment expense 504 440
Deposit insurance expense 90 569
Data processing expense 651 532
Bank share taxes 383 343
Goodwill amortization 207 207
Other expense 1,871 1,751
------ ------
$8,347 $8,314
====== ======
Annualized Ratios:
Overhead ratio 53.81% 61.62%
Noninterest expense
to average assets 2.61 2.80
The Federal Deposit Insurance Corporation (FDIC) currently administers two
separate deposit insurance funds, the Bank Insurance Fund (BIF) and the Savings
Association Insurance Fund (SAIF). The Company's lead bank pays deposit
insurance premiums to the BIF and the Company's other subsidiary pays insurance
premiums to the SAIF based on a rate applied to their respective assessable
deposits. Both subsidiaries received the lowest applicable deposit assessment
rates from the FDIC based upon their risks characteristics. Assessments for
deposit insurance were $89,749 and $568,892 for the three months ended March 31,
1996 and 1995, respectively. The decrease is attributable to a BIF rate
reduction. During September 1995, as a result of the stability of the
commercial bank industry and the level of insurance fund reserves, the FDIC
reduced rates applicable for the lead bank. Congress is considering a variety
of legislation that will recapitalize the SAIF through a special assessment on
the assessable deposits of SAIF member institutions such as the Company's
savings association subsidiary. At March 31, 1996, the Company had not accrued
a liability for the potential special assessment. The expense for any special
assessment will be recorded as a component of operating income in the period of
the enacted legislation. Management estimates the special assessment will be
between $1.2 million and $1.5 million. The legislation may provide for lower
premiums following the special assessment. Management currently believes lower
BIF and SAIF rates will generally offset the expense of the anticipated special
SAIF assessment.
22
Due to management's focus on reducing staff coupled with outsourcing some func-
tions, particularly related to credit card operations, data processing expense
for the first quarter of 1996 was 22.4% higher than the first quarter of 1995.
Bankshare taxes imposed by the State of Kentucky have been increasing and are
expected to continue to increase in future years. Kentucky has raised the
assessment level and is attempting to significantly increase this taxation,
which is based upon net income of the subsidiaries.
INCOME TAXES
The increase in income tax expense for the three months ended March 31, 1996
from the comparable 1995 period, is attributable to higher operating earnings
and a higher effective tax rate. The Company's effective tax rate was 32.0% and
28.6% for the quarters ended March 31, 1996 and 1995, respectively. Operating
earnings are now at a level that the 1% federal income tax rate increase
mandated by the Omnibus Budget Reconciliation Act of 1993 is applicable. The
effective tax rate also increased due to the continued decline in tax-exempt
income. The Company manages the effective tax rate to some degree, based upon
changing tax laws, particularly alternative minimum tax provisions, the
availability and price of nontaxable investment securities and other portfolio
considerations.
LIQUIDITY AND INTEREST-RATE SENSITIVITY
The Company's objective of liquidity management is to ensure the ability to
access funding which enables each bank to efficiently satisfy the cash flow
requirements of depositors and borrowers. Asset/Liability management (ALM)
involves the funding and investment strategies necessary to maintain an
appropriate balance between interest sensitive assets and liabilities as well as
to assure adequate liquidity. The Company's ALM committee monitors funds
available from a number of sources to meet its objectives. The primary source
of liquidity for the banks, in addition to loan repayments, is their debt
securities portfolios. Debt securities classified as held for sale are those
that the Company intends to use as part of its asset/liability management and
that may be sold prior to maturity in response to changes in interest rates,
resultant prepayment risks and other factors. The Company's access to the re-
tail deposit market through individual banks located in nine different counties
has been a stable source of funds. Additional funds for liquidity are available
by borrowing of Federal funds from correspondent banks, Federal Home Loan Bank
borrowings and brokered deposits. Various types of analyses are performed to
ensure adequate liquidity, and to evaluate the desirability of the relative
interest rate sensitivity of assets and liabilities. In the past, as was
typical for most financial institutions, the Company's cash flows provided by
financing activities, primarily through core deposit generation, generally
greatly exceeded cash flows from operations and were used to fund investing
activities. During the past two years, due to strong loan demand, financing
activities funding was partially derived from increased levels of brokered
deposits and short-term borrowings. Management considers current liquidity
positions of the subsidiary banks to be adequate to meet depositor and borrower
needs.
23
Because banks must assume interest rate risks as part of their normal opera-
tions, the Company actively manages its interest rate sensitivity as well as
liquidity positions. Both interest rate sensitivity and liquidity are affected
by maturing assets and sources of funds; however, management must also consider
those assets and liabilities with interest rates which are subject to change
prior to maturity. The primary objective of the ALM Committee is to optimize
earnings results, while controlling interest rate risks within internal policy
constraints. The subsidiary banks and the Company collectively measure their
level of earnings exposure to future interest rate movements. A balance-sheet
analysis is conducted to determine the impact on net interest income for the
following twelve months under several interest-rate scenarios. Currently, the
Company does not employ interest rate swaps, financial futures or options to
affect interest rate risks. The March 31, 1996 cumulative gap at one year
between rate sensitive assets and liabilities has changed little from March 31,
1995.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Table 11
Interest Rate Sensitivity
Analysis 1-91 92-183 184 days Total at Over
March 31, 1996 Days Days to 1 year 1 year 1 year Total
_________________________________________________________________________________________________________
(in thousands)
Rate Sensitive Assets
Securities, at cost
U.S. treasury
and agencies $10,024 $14,319 $13,777 $38,120 $35,636 $73,756
Mortgage-backed 23,779 16,289 28,591 68,659 93,426 162,085
Municipal bonds 520 1,532 1,147 3,199 58,826 62,025
Other 7,705 0 0 7,705 4,924 12,629
------- ------- ------- ------- ------- ---------
42,028 32,140 43,515 117,683 192,812 310,495
Loans 272,030 128,484 210,160 610,674 303,699 914,373
------- ------- ------- ------- ------- ---------
314,058 160,624 253,675 728,357 496,511 1,224,868
Rate Sensitive Liabilities
Deposits
Transaction and savings 147,009 0 0 147,009 242,603 389,612
Time 165,141 104,719 128,155 398,015 179,903 577,918
Short-term borrowings 75,951 510 25,000 101,461 0 101,461
Long-term borrowings 98 201 136 435 7,140 7,575
------- ------- ------- ------- ------- ---------
388,199 105,430 153,291 646,920 429,646 1,076,566
------- ------- ------- ------- ------- ---------
Period Gap ($74,141) $55,194 $100,384 $81,437 $66,865 $148,302
======= ======= ======= ======= ======= =========
Cumulative Gap at 03/31/96 ($74,141) ($18,947) $81,437 $81,437 $148,302 $148,302
Cumulative Gap at 12/31/95 ($100,928) ($19,511) $97,825 $97,825 $157,766 $157,766
</TABLE>
24
PART II
_______________________________________________________________________________
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders
(a) The regular annual meeting of the shareholders of Peoples First
Corporation was held May 2, 1996, at the Executive Inn in
Paducah, Kentucky.
(b) The Corporation's Board of Directors consists of 19 members in
three classes. Directors are usually elected to three-year
terms, and ordinarily one class of directors is elected at each
annual meeting. Cumulative voting applies in the election of
directors. The following eight nominees were elected to the board
of directors for the terms and by the votes indicated below:
Term For Against
Nominee Expires Votes Votes
Glen Berryman 1998 7,426,006 5,545
James T. Holloway 1999 7,733,568 5,545
Allan B. Kleet 1999 7,419,861 15,939
Rufus E. Pugh 1999 7,431,851 5,545
Neal H. Ramage 1999 7,433,568 5,545
Mary Warren Sanders 1999 7,434,712 10,609
Victor F. Speck, Jr. 1999 7,426,006 5,545
Twelve other directors continued their terms of office after the
meeting. Six directors, Walter L. Apperson, William R. Dibert,
R.E. Fairhurst, Dennis W. Kirtley, Aubrey W. Lippert and Allan R.
Rhodes, Jr., continue in office until 1997. Six additional
directors, Joe Dick, William Rowland Hancock, Robert P. Meriwether,
Joe Harry metzger, Jerry L. Page and C. Steve Story continue in
office until 1998.
(c) Shareholders ratified the Board of Director's appointments to
the Audit Committee. The Audit Committee, which is composed
entirely of nonmanagement directors, reviews the audit plans and
the results of audits of the Corporation and subsidiary banks
performed by the Corporation's internal audit department and
independent certified public accountants, reviews the adequacy
of internal controls and reviews the accounting principles em-
ployed in financial reporting.
25
The appointments of R. E. Fairhurst, Jr., William Rowland Hancock,
Allan Rhodes, Jr., Victor F. Speck, Jr. and Mary Warren Sanders
were ratified by the following vote:
For: 7,387,203 Against: 1,841 Abstain: 48,076
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27.1) Financial Data Schedules (SEC use only)
(b) Reports on Form 8-K
Peoples First Corporation filed a current report on Form
8-K on January 17, 1996, reporting the January 17, 1996
press release announcement of the declaration of a 5%
stock dividend payable March 18, 1996.
Peoples First Corporation filed a current report on Form
8-K on February 20, 1996, reporting the February 20, 1996
press release announcement of the signing of a definitive
merger agreement with Guaranty Federal Savings Bank. The
agreement provides for the acquisition by the Company of
100% of Guaranty FSB's outstanding capital stock, subject
to approval of their shareholders and regulators.
26
SIGNATURES
_______________________________________________________________________________
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
PEOPLES FIRST CORPORATION
05/10/96 /s/ Aubrey W. Lippert
Aubrey W. Lippert
President and Chairman
of the Board
05/10/96 /s/ Allan B. Kleet
Allan B. Kleet
Principal Accounting Officer
27
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 41,750
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 158,749
<INVESTMENTS-CARRYING> 151,794
<INVESTMENTS-MARKET> 154,995
<LOANS> 914,373
<ALLOWANCE> 13,670
<TOTAL-ASSETS> 1,296,437
<DEPOSITS> 1,046,626
<SHORT-TERM> 101,461
<LIABILITIES-OTHER> 10,784
<LONG-TERM> 7,575
<COMMON> 7,201
0
0
<OTHER-SE> 122,790
<TOTAL-LIABILITIES-AND-EQUITY> 1,296,437
<INTEREST-LOAN> 20,836
<INTEREST-INVEST> 4,872
<INTEREST-OTHER> 37
<INTEREST-TOTAL> 25,745
<INTEREST-DEPOSIT> 11,343
<INTEREST-EXPENSE> 12,747
<INTEREST-INCOME-NET> 12,998
<LOAN-LOSSES> 577
<SECURITIES-GAINS> (9)
<EXPENSE-OTHER> 8,347
<INCOME-PRETAX> 6,110
<INCOME-PRE-EXTRAORDINARY> 6,110
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,155
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.44
<YIELD-ACTUAL> 4.43
<LOANS-NON> 2,435
<LOANS-PAST> 1,873
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 15,800
<ALLOWANCE-OPEN> 13,371
<CHARGE-OFFS> 381
<RECOVERIES> 103
<ALLOWANCE-CLOSE> 13,670
<ALLOWANCE-DOMESTIC> 13,670
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
