_______________________________________________________________________________
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 June 30, 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
June 30, 1996: Common stock, no par value - 9,208,983 shares outstanding.
______________________________________________________________________________1
INDEX Page
_______________________________________________________________________________
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1996,
June 30, 1995 and December 31, 1995 3
Consolidated Statements of Income - Three and Six
Months Ended June 30, 1996 and 1995 4
Consolidated Statement of Changes in Stockholders'
Equity - Six Months Ended June 30, 1996 5
Consolidated Statements of Cash Flows - Six Months
Ended June 30, 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 26
Item 2. Changes in Securities 26
Item 3. Defaults on Senior Securities 26
Item 4. Submission of Matters to a Vote of Securities Holders 26
Item 5. Other Information 26
Item 6. Exhibits and Reports on Form 8-K 26
Signatures 27
2
June 30, December 31,
CONSOLIDATED BALANCE SHEETS 1996 1995 1995
_______________________________________________________________________________
(in thousands)
ASSETS
Cash and due from banks $37,042 $36,079 $37,524
Short-term investments 0 0 0
Securities held for sale 172,746 138,050 146,322
Securities held for investment 137,548 180,630 160,320
Loans 943,945 871,223 914,497
Allowance for loan losses (13,915) (12,518) (13,371)
--------- --------- ---------
Loans, net 930,030 858,705 901,126
Excess of cost over net assets
of purchased subsidiaries 8,833 9,663 9,248
Premises and equipment 18,639 17,434 18,226
Other assets 16,340 13,974 14,830
--------- --------- ---------
$1,321,178 $1,254,535 $1,287,596
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand deposits $80,434 $81,977 $86,360
Interest-bearing transaction accounts 309,960 247,725 291,539
Savings deposits 84,125 88,026 83,607
Time deposits 571,816 605,549 585,598
--------- --------- ---------
1,046,335 1,023,277 1,047,104
Short-term borrowings 125,212 93,582 93,469
Long-term borrowings 7,490 7,974 7,757
Other liabilities 9,949 9,972 11,094
--------- --------- ---------
Total liabilities 1,188,986 1,134,805 1,159,424
Stockholders' Equity
Common stock 7,194 6,777 7,207
Surplus 54,144 42,491 53,269
Retained earnings 71,330 70,929 66,878
Unrealized net gain (loss) on
securities held for sale (454) (334) 926
Debt on ESOP shares (22) (133) (108)
--------- --------- ---------
132,192 119,730 128,172
--------- --------- ---------
$1,321,178 $1,254,535 $1,287,596
========= ========= =========
Fair value of securities held
for investment $140,065 $183,432 $165,042
Common shares issued and outstanding 9,209 9,109 9,225
See accompanying notes to consolidated financial statements. 3
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30,
CONSOLIDATED STATEMENTS OF INCOME 1996 1995 1996 1995
____________________________________________________________________________________________
(in thousands, except per share data)
INTEREST INCOME
Interest on short-term investments $33 $40 $70 $58
Taxable interest on securities 3,996 4,024 7,872 8,175
Nontaxable interest on securities 956 1,013 1,953 2,043
Interest and fees on loans 20,994 19,339 41,830 37,133
------ ------ ------ ------
25,979 24,416 51,725 47,409
INTEREST EXPENSE
Interest on deposits 11,355 11,491 22,698 22,026
Other interest expense 1,457 1,427 2,861 2,625
------ ------ ------ ------
12,812 12,918 25,559 24,651
------ ------ ------ ------
Net Interest Income 13,167 11,498 26,166 22,758
Provision for Loan Losses 577 448 1,154 891
------ ------ ------ ------
Net Interest Income after
Provision for Loan Losses 12,590 11,050 25,012 21,867
Noninterest Income 2,059 2,040 4,095 3,762
Noninterest Expense 8,309 8,272 16,656 16,586
------ ------ ------ ------
Income Before Income Tax Expense 6,340 4,818 12,451 9,043
Income Tax Expense 1,985 1,408 3,940 2,616
------ ------ ------ ------
NET INCOME $4,355 $3,410 $8,511 $6,427
====== ====== ====== ======
Net Income per Common Share $0.46 $0.36 $0.90 $0.69
Cash Dividend per Common Share 0.160 0.109 0.303 0.217
Average Common Shares Outstanding 9,447 9,377 9,426 9,365
</TABLE>
See accompanying notes to consolidated financial statements. 4
<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 8,511 8,511
Cash dividends declared
Common ($0.303 per share) (2,793) (2,793)
Stock issued pursuant to shareholder
and employee plans 34 875 909
Common stock repurchased (47) (1,266) (1,313)
Reduction of ESOP debt 86 86
Change in unrealized net gain
(loss) on securities held for sale (1,380) (1,380)
------ ------ ------ ------ ------ -------
BALANCE AT JUNE 30, 1996 $7,194 $54,144 $71,330 ($454) ($22) $132,192
====== ====== ====== ====== ====== =======
</TABLE>
See accompanying notes to consolidated financial statements. 5
Six Months Ended
June 30,
CONSOLIDATED STATEMENTS OF CASH FLOWS 1996 1995
_______________________________________________________________________________
(dollars in thousands)
OPERATING ACTIVITIES
Net income $8,511 $6,427
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,474 1,332
Net (discount accretion) premium
amortization 403 393
Provision for loan losses 1,154 891
Net (increase) decrease in loans held for sale 586 (197)
Provision for deferred income taxes (359) (579)
Other, net (1,586) 3,272
------ ------
Net Cash Provided by Operating Activities 10,183 11,539
INVESTING ACTIVITIES
Proceeds from maturities of securities
held for sale 3,000
Proceeds from maturities of investment
securities 14,369 12,086
Principal collected on mortgage-backed
securities held for sale 8,864 4,594
Principal collected on mortgage-backed
investment securities 11,354 22,799
Purchase of securities held for sale (40,410) (18,163)
Purchase of investment securities (3,057) 0
Net increase in loans (30,688) (65,661)
Purchases of premises and equipment (1,608) (1,345)
------ ------
Net Cash Used by Investing Activities (38,176) (45,690)
continued
See accompanying notes to consolidated financial statements. 6
Six Months Ended
June 30,
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED 1996 1995
_______________________________________________________________________________
(dollars in thousands)
FINANCING ACTIVITIES
Net increase (decrease) in deposits (769) 24,693
Net increase in short-term borrowings 31,742 9,015
Proceeds from long-term borrowings 0 140
Repayments of long-term borrowings payable (266) (1,701)
Proceeds from issuance of common stock 426 423
Repurchase of common stock (1,313) 0
Cash dividends paid (2,309) (1,673)
------ ------
Net Cash Provided by Financing Activities 27,511 30,897
------ ------
Cash and Cash Equivalents
Decrease (482) (3,254)
Beginning of Year 37,524 39,333
------ ------
End of Period $37,042 $36,079
====== ======
SUPPLEMENTAL DISCLOSURES
Cash paid for interest expense $26,315 $22,764
Cash paid for income tax 4,924 2,768
NONCASH INVESTING AND FINANCING TRANSACTIONS
Other real estate transferred to (from) loans, net (43) (20)
Dividends reinvested 484 314
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 June 30, 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
June 30, 1996, June 30, 1995 and December 31, 1995 is as follows:
June 30, December 31,
Impaired Loans 1996 1995 1995
________________________________________________________________________________
(in thousands)
Balance of impaired loans $3,559 $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 $3,559 $910 $3,801
====== ====== ======
Portion of allowance for loan losses
allocated to the impaired loan balance $1,030 $332 $829
====== ====== ======
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
_______________________________________________________________________________
Six Months Ended
June 30,
Impaired Loans 1996 1995
_______________________________________________________________________________
(in thousands)
Average investment in impaired loans $4,785 918
Interest income recognized on
impaired loans 197 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 $3.6
million at June 30, 1996, $2.8 million at June 30, 1995 and $3.2 million
December 31, 1995. Amortization expense was $414,893 for the six months ended
June 30, 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 June 30, 1996, a total of 191,419 shares are
reserved for future 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 six months ended June 30, 1996 and 1995 were 9,425,749 and
9,364,730, respectively, and for the three months ended June 30, 1996 and 1995,
were 9,447,481 and 9,376,619, 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 June 30, 1996. The business combination is
expected to be consummated in August of 1996.
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
_______________________________________________________________________________
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 Company is headquartered in Paducah, Kentucky.
Many factors affect the Company's financial position and profitability,
including changes in economic conditions, the volatility of interest rates,
political events and competition from other providers of financial services.
Because these factors are unpredictable and beyond the Company's control,
earnings may fluctuate from period to period. 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 June 30, 1996.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Table 1
Disaggregated Data First Parent Co
As of and for the six months Peoples Kentucky and elim- Consol-
ended June 30, 1996 Bank FSB nations dated
____________________________________________________________________________________________
(dollars in thousands)
Net income $7,860 $879 ($228) $8,511
Average assets 1,123,821 171,520 99 1,295,440
Return on average equity 13.99% 11.10% 13.18%
Average equity / assets 10.06 9.29 10.03
Net interest margin 4.59 3.41 4.42
Provision for loan losses /
average loans 0.27 0.13 0.25
Allowance for loan loss /
loans outstanding 1.54 0.90 1.47
Overhead ratio 0.54 0.54 0.53
</TABLE>
EARNING ASSETS
Average earning assets of the Company for the first six months of 1996 increased
6.1%, or $71.1 million to $1,232.5 million from $1,161.4 million for the first
six months of 1995. This compares to average earning asset growth of 5.6%, or
$61.4 million for the first six months of 1995 over the first six months of
1994. A consistently favorable ratio of average earning assets to average
total assets has been achieved. The ratio was 95.1% for the first six months
of both 1996 and 1995.
13
Loans are the Company's primary earning asset and management believes the
Company should be a prominent lender. Average loans for the first six months of
1996 were 74.7% of total average earning assets, up from 72.2% for the first six
months of 1995. Loan growth, while still strong, has slowed from previous
levels. Average loans for the first two quarters of 1996 increased 9.9%, or
$82.7 million to $921.0 million from $838.3 million for the first two quarters
of 1995. Average loans for the first two quarters of 1995 increased 14.9%, or
$109.0 million from $729.3 million for the first two quarters of 1994. The
Company primarily directs lending activities to its regional market. The
largest increase was in residential real estate mortgage which grew $28.9
million during the twelve-month period ended June 30, 1996. Strong consumer
loan demand and commercial real estate lending accounted for the remainder of
customer loan growth. The Company maintains a portfolio of securities held for
sale as a potential source of funding for loan growth.
Table 2 June 30, December 31,
Types of Loans 1996 1995 1995
________________________________________________________________________________
(in thousands)
Commercial, financial
and agricultural $118,788 $121,108 $113,929
Real estate
Construction 18,522 16,540 19,386
Residential mortgage 371,862 342,913 364,607
Commercial mortgage 158,511 147,479 158,429
Installment loans to
individuals 274,177 248,407 260,724
Consumer revolving credit 8,535 6,366 8,231
Loans held for sale 121 353 708
Other 1,644 1,477 1,463
------- ------- -------
952,160 884,643 927,477
Unearned income (8,215) (13,420) (12,980)
------- ------- -------
$943,945 $871,223 $914,497
======= ======= =======
FUNDING
Core deposits, which management relies on as the most important and stable
source of funding, of the Company for the first six months of 1996 increased
4.8%, or $43.5 million to $958.7 million from $915.2 million for 1995. Core
deposits are considered by management to include demand deposits, interest-
bearing transaction accounts, saving deposits and time deposits under $100,000.
Management anticipates an increasing need to rely on more volatile purchased
liabilities due to both the highly competitive local deposit market and systemic
banking trends. 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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
Table 3 June 30, June 30,
Average Interest-bearing Liabilities 1996 1995 1996 1995
____________________________________________________________________________________________
(in thousands)
Total average interest-bearing
liabilities $1,082,943 $1,031,550 $1,074,000 $1,018,437
Percent of average total interest-
bearing liabilities
Average interest-bearing core deposits 81.8% 81.0% 81.7% 81.7%
Average CDs of $100,000 or more 5.6 7.3 5.8 7.2
Average brokered deposits 2.3 2.4 2.4 2.3
Average short-term borrowings 9.5 8.4 9.3 7.9
Average long-term borrowings 0.7 0.8 0.7 0.9
Other 0.1 0.1 0.1 0.1
</TABLE>
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 of
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 June 30, 1996 remains relatively low.
Diversification within the loan portfolio is an important means of reducing
inherent lending risks. At June 30, 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 June 30, 1996 were 0.64% of total loans and other real
estate, down 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 June 30, December 31,
Nonperforming Assets 1996 1995 1995
_______________________________________________________________________________
(in thousands)
Nonaccrual loans $2,097 $827 $1,817
Loans past due 90 days or more 1,106 2,074 1,471
Other real estate owned 40 662 644
Renegotiated loans 2,789 2,948 2,874
----- ----- -----
$6,032 $6,511 $6,806
===== ===== =====
Ratios:
Nonperforming assets to total
loans and other real estate 0.64% 0.75% 0.74%
Allowance for loan losses to
nonperforming assets 231% 192% 196%
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 June 30, 1996, loans with a
total principal balance of $14.7 million have been identified that may become
nonperforming in the future, compared to $12.5 million at June 30, 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 June 30, 1996, up
from 9.5% at June 30, 1995. Exclusive of the $1.4 million unrealized net loss
on securities held for sale, net of applicable income taxes, stockholders'
equity increased $5.4 million, or 8.5% (annualized), during the first six months
of 1996. The increase was due to a 66.3% earnings retention rate and the sale
of common stock through shareholder and employee plans ($0.9 million), offset
by the repurchase of $1.3 million of the Company's common stock. This compares
to an increase, exclusive of the $4.3 million unrealized net gain on securities
held for sale, net of applicable income taxes, of $5.2 million, or 9.1%
(annualized), during the same 1995 period when the earnings retention rate was
68.3% and proceeds from the sale of common stock through shareholder and
employee plans was $0.7 million.
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
16
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. At June 30, 1996, a total of 59,025 shares had been
purchased. 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 June 30, 1996, approximately $23.3
million, compared to $16.6 million at June 30, 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 June 30, 1996 and December
31, 1995, the Company and the banks' total capital and leverage ratios were as
follows:
Total Leverage Ratio
Table 5 Jun 30, Dec 31, Jun 30, Dec 31,
Risk-Based Capital 1996 1995 1996 1995
_______________________________________________________________________________
Company 15.05% 14.41% 9.54% 9.30%
Peoples First National
Bank 14.28 13.71 9.45 9.29
First Kentucky FSB 22.00 20.08 9.65 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 was $8.5 million for the first six months of 1996, up 32.8% from $6.4
million for the first six months of 1995. Net income for the second quarter of
1996 was $4.4 million, up 29.4% from $3.4 million for the second quarter of
1995. Net income per common share was $0.90 for the first six months of 1996,
up 30.4% from $0.69 for the first six months of 1995. Net income per common
share for the second quarter of 1996 was $0.46, up 27.8% from $0.36 for the
second quarter of 1995. Results in the first two quarters of 1996 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 six months of 1996 and 1995
was 13.18% and 11.36%, respectively. Return on average assets for the first six
months of 1996 and 1995 was 1.32% and 1.06%, respectively. Return on average
stockholders' equity for the three months ended June 30, 1996 and 1995 was
13.40% and 11.73%, respectively. Return on average assets for the three months
ended June 30, 1996 and 1995 was 1.34% and 1.10%, respectively.
17
NET INTEREST INCOME
The primary source of income for the Company remains the amount by which
interest earned on assets exceeds the interest paid on supporting funds. The
two important factors that determine net interest income are the volume of
earning assets and the margin earned thereon. For the six months ended June 30,
1996, net interest income, on a tax-equivalent (TE) basis, increased 13.9%, or
$3.3 million to $27.1 million as compared to $23.8 million for the six months
ended June 30, 1995. Volume of earning assets 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.
Net interest income (TE) as a percent of average earning assets was 4.42% and
4.13% for the six months ended June 30, 1996 and 1995, respectively. Interest
earned on loans was 4.35% greater than the average funding cost, up from 4.06%
for the six months ended June 30, 1995. Net interest income margins continue to
benefit from a favorable change in the mix of earning assets and funding
sources. The highest cost funding source, time deposits, was 53.8% of all
interest-bearing liabilities for the first six months of 1996, down from 58.6%
for the first six months of 1995. Competitively priced short-term money market
accounts partially contributed to customer choices.
Table 6
Net Interest Income Analysis Average Average
Six months ended June 30, 1996 volume Interest rate
_______________________________________________________________________________
(dollars in thousands)
Loans $920,993 $41,868 9.14%
Securities 308,667 10,731 6.99
Other interest earning assets 2,878 70 4.89
--------- ------
1,232,538 52,669 8.59
Time deposits 578,167 15,948 5.55
All other interest bearing deposits 387,230 6,750 3.51
Other interest bearing liabilities 108,603 2,861 5.30
--------- ------
$1,074,000 25,559 4.79
------ ----
Net interest income (TE) spread $27,110 3.80%
====== ====
Net interest income (TE) as a percent 4.42%
of average interest-earning assets ====
18
Table 7
Net Interest Income Analysis Average Average
Six months ended June 30, 1995 volume Interest rate
_______________________________________________________________________________
(dollars in thousands)
Loans $838,325 $37,176 8.94%
Securities 320,952 11,174 7.02
Other interest earning assets 2,079 58 5.63
--------- ------
1,161,356 48,408 8.41
Time deposits 596,971 16,590 5.60
All other interest bearing deposits 331,769 5,436 3.30
Other interest bearing liabilities 89,697 2,625 5.90
--------- ------
$1,018,437 24,651 4.88
------ ----
Net interest income (TE) spread $23,757 3.53%
====== ====
Net interest income (TE) as a percent 4.13%
of average interest-earning assets ====
Table 8
Net Interest Income Analysis Average Average
Three months ended June 30, 1996 volume Interest rate
_______________________________________________________________________________
(dollars in thousands)
Loans $927,621 $21,016 9.11%
Securities 311,317 5,396 6.97
Other interest earning assets 2,702 33 4.91
--------- ------
1,241,640 26,445 8.57
Time deposits 576,928 7,910 5.51
All other interest bearing deposits 393,828 3,445 3.52
Other interest bearing liabilities 112,187 1,457 5.22
--------- ------
$1,082,943 12,812 4.76
------ ----
Net interest income (TE) spread $13,633 3.81%
====== ====
Net interest income (TE) as a percent 4.42%
of average interest-earning assets ====
19
Table 9
Net Interest Income Analysis Average Average
Three months ended June 30, 1995 volume Interest rate
_______________________________________________________________________________
(dollars in thousands)
Loans $856,454 $19,356 9.06%
Securities 317,740 5,508 6.95
Other interest earning assets 2,868 41 5.73
--------- ------
1,177,062 24,905 8.49
Time deposits 607,546 8,737 5.77
All other interest bearing deposits 328,210 2,754 3.37
Other interest bearing liabilities 95,794 1,427 5.97
--------- ------
$1,031,550 12,918 5.02
------ ----
Net interest income (TE) spread $11,987 3.47%
====== ====
Net interest income (TE) as a percent 4.08%
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 for the
first six months of 1996 was increased to $1.2 million from $0.9 million for the
first six months of 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 six months ended June 30, 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, the
amount of net loan chargeoffs and 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 0.13% for the six-
month periods ending June 30, 1996 and 1995. Net chargeoffs as a percent of
average loans were 0.21% for the five-year period ended December 31, 1995.
Substantially all of the net chargeoffs for 1996 were related to loans other
than commercial loans, compared to less than one-half for 1995. The allowance
for loan losses was 1.47% of outstanding loans at June 30, 1996, which is
slightly more than the average during the last five years. The June 30, 1996
allowance is 231% compared to 196% 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.
20
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
Table 10 June 30, June 30,
Allowance for Loan Losses 1996 1995 1996 1995
____________________________________________________________________________________________
(dollars in thousands)
Balance at beginning of period $13,670 $12,452 $13,371 $12,188
Provision charged to expense 577 448 1,154 891
Loans charged off (501) (432) (882) (711)
Recoveries of chargeoffs 169 50 272 150
------ ------ ------ ------
Net loans charged off (332) (382) (610) (561)
------ ------ ------ ------
Balance at end of period $13,915 $12,518 $13,915 $12,518
====== ====== ====== ======
Annualized Ratios:
Provision for loan losses
to average loans 0.25% 0.21% 0.25% 0.21%
Net chargeoffs to
average loans 0.14 0.18 0.13 0.13
Allowance for loan losses
to period end loans 1.47 1.44 1.47 1.44
</TABLE>
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 $4,095,270 for the six months ended
June 30, 1996, an 8.8% increase compared to $3,762,383 for the six months ended
June 30, 1995. Service charges on deposit accounts, the largest component of
noninterest income, increased 6.1% due to more uniform application of charges.
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 two quarters 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 approximates the growth in net interest income.
Noninterest income, excluding securities losses, was 13.1% of total net interest
income (TE) plus noninterest income for both the first six months of 1996 and
1995. Management plans to continue to seek ways to increase fee income from
services.
21
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
Table 11 June 30, June 30,
Noninterest Income 1996 1995 1996 1995
____________________________________________________________________________________________
(in thousands)
Service charges on deposits $1,010 $967 $1,942 $1,829
Net securities gains (losses) 5 172 (4) 172
Trust fees 332 254 671 531
Insurance commissions 170 165 314 332
Bankcard fees 189 157 371 296
Other income 353 325 801 602
----- ----- ----- -----
$2,059 $2,040 $4,095 $3,762
===== ===== ===== =====
Annualized Ratio:
Noninterest income
to average assets 0.63% 0.67% 0.64% 0.62%
</TABLE>
NONINTEREST EXPENSE
At the beginning of 1995, management implemented a restructuring plan to control
the rate of increase of noninterest expense. As part of the plan, six of the
previously separate corporate subsidiaries were consolidated 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 six 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 52.80% for the six months ended June 30, 1996, compared to 56.14%
for the six months ended June 30, 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 1.27% for the six months ended June 30, 1996, compared to
1.32% for the six months ended June 30, 1995. Blanket restraints were imposed
on salary increases at the beginning of 1996. Staffing levels have been
creeping up. Management attributes this to the increasing need for qualified
employees. At June 30, 1996 the number of full-time equivalent employees was
510, up from 508 at June 30, 1995 and 490 at December 31, 1995. Technology has
advanced and the need to leverage personnel costs has intensified. For 1996,
management expects double-digit percentage increases in equipment and data
processing expenses due to implementation of new systems.
22
The Company has made purchases amounting to approximately $6.8 million for
facilities and equipment during the last two and one-half years and outsourced
some processes. 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
Table 12 June 30, June 30,
Noninterest Expense 1996 1995 1996 1995
____________________________________________________________________________________________
(in thousands)
Salaries $3,376 $3,311 $6,851 $6,724
Employee benefits 596 641 1,318 1,291
Occupancy expense 458 444 902 854
Equipment expense 530 449 1,034 889
Deposit insurance expense 89 569 179 1,138
Data processing expense 662 550 1,313 1,100
Bank share taxes 385 342 767 685
Goodwill amortization 207 207 415 415
Other expense 2,006 1,759 3,877 3,490
------ ------ ------ ------
$8,309 $8,272 $16,656 $16,586
====== ====== ====== ======
Annualized Ratios:
Overhead ratio 52.95% 58.97% 53.38% 60.27%
Noninterest expense
to average assets 2.56 2.68 2.59 2.74
</TABLE>
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 risk characteristics. Assessments for
deposit insurance were $178,998 and $1,137,784 for the six months ended June 30,
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 June 30, 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
23
BIF and SAIF rates will generally offset the expense of the anticipated special
SAIF assessment. Due to management's focus on limiting the increase in staff,
coupled with outsourcing some functions, particularly related to credit card
operations, data processing expense for the first two quarters of 1996 was 19.4%
higher than the first two quarters 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 and six month periods ended
June 30, 1996 from comparable 1995 periods, are attributable to higher
operating earnings and a higher effective tax rate. The Company's effective tax
rate was 31.6% and 28.9% for the six-month period ended June 30, 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 short-term
borrowings. Management considers current liquidity positions of the subsidiary
24
banks to be adequate to meet depositor and borrower needs. Because banks must
assume interest rate risks as part of their normal operations, 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 June 30, 1996 cumulative gap at one year between rate
sensitive assets and liabilities is slightly less sensitive to rising interest
rates than at December 31, 1995.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Table 13
Interest Rate Sensitivity
Analysis 1-92 93-184 185 days Total at Over
June 30, 1996 Days Days to 1 year 1 year 1 year Total
_________________________________________________________________________________________________________
(in thousands)
Rate Sensitive Assets
Securities, at cost
U.S. treasury
and agencies $14,276 $10,307 $6,512 $31,095 $43,668 $74,763
Mortgage-backed 14,467 16,095 31,349 61,911 99,189 161,100
Municipal bonds 1,531 1,050 835 3,416 58,230 61,646
Other 8,947 0 0 8,947 4,525 13,472
------- ------- ------- ------- ------- ---------
39,221 27,452 38,696 105,369 205,612 310,981
Loans 289,697 111,408 235,616 636,721 307,224 943,945
------- ------- ------- ------- ------- ---------
328,918 138,860 274,312 742,090 512,836 1,254,926
Rate Sensitive Liabilities
Deposits
Transaction and savings 146,696 0 0 146,696 247,389 394,085
Time 185,450 116,952 91,826 394,228 177,588 571,816
Short-term borrowings 98,728 25,314 1,170 125,212 0 125,212
Long-term borrowings 103 211 143 457 7,033 7,490
------- ------- ------- ------- ------- ---------
430,977 142,477 93,139 666,593 432,010 1,098,603
------- ------- ------- ------- ------- ---------
Period Gap ($102,059) ($3,617) $181,173 $75,497 $80,826 $156,323
======= ======= ======= ======= ======= =========
Cumulative Gap at 06/30/96 ($102,059) ($105,676) $75,497 $75,497 $156,323 $156,323
Cumulative Gap at 12/31/95 ($100,928) ($19,511) $97,825 $97,825 $157,766 $157,766
</TABLE>
25
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 - None
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 - None
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
08/08/96 /s/ Aubrey W. Lippert
Aubrey W. Lippert
President and Chairman
of the Board
08/08/96 /s/ Allan B. Kleet
Allan B. Kleet
Principal Accounting Officer
27
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> Jun-30-1996
<CASH> 37,042
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 172,746
<INVESTMENTS-CARRYING> 137,548
<INVESTMENTS-MARKET> 140,065
<LOANS> 943,945
<ALLOWANCE> 13,915
<TOTAL-ASSETS> 1,321,178
<DEPOSITS> 1,046,335
<SHORT-TERM> 125,212
<LIABILITIES-OTHER> 9,949
<LONG-TERM> 7,490
<COMMON> 7,194
0
0
<OTHER-SE> 124,998
<TOTAL-LIABILITIES-AND-EQUITY> 1,321,178
<INTEREST-LOAN> 41,830
<INTEREST-INVEST> 9,825
<INTEREST-OTHER> 70
<INTEREST-TOTAL> 51,725
<INTEREST-DEPOSIT> 22,698
<INTEREST-EXPENSE> 25,559
<INTEREST-INCOME-NET> 26,166
<LOAN-LOSSES> 1,154
<SECURITIES-GAINS> (4)
<EXPENSE-OTHER> 16,656
<INCOME-PRETAX> 12,451
<INCOME-PRE-EXTRAORDINARY> 12,451
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,511
<EPS-PRIMARY> 0.90
<EPS-DILUTED> 0.90
<YIELD-ACTUAL> 4.42
<LOANS-NON> 2,097
<LOANS-PAST> 1,106
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 14,700
<ALLOWANCE-OPEN> 13,371
<CHARGE-OFFS> 882
<RECOVERIES> 272
<ALLOWANCE-CLOSE> 13,915
<ALLOWANCE-DOMESTIC> 13,915
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
