_______________________________________________________________________________
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, 1997
[ ] 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, 1997: Common stock, no par value - 10,007,347 shares outstanding.
______________________________________________________________________________1
INDEX Page
_______________________________________________________________________________
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1997,
June 30, 1996 and December 31, 1996 3
Consolidated Statements of Income - Three and Six
Months Ended June 30, 1997 and 1996 4
Consolidated Statement of Changes in Stockholders'
Equity - Six Months Ended June 30, 1997 5
Consolidated Statements of Cash Flows - Six Months
Ended Jne 30, 1997 and 1996 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
June 30, December 31,
CONSOLIDATED BALANCE SHEETS 1997 1996 1996
_______________________________________________________________________________
(in thousands)
ASSETS
Cash and due from banks $37,306 $37,042 $43,285
Securities held for sale 213,477 172,746 182,352
Securities held for investment 105,406 137,548 121,959
Loans held for sale 2,167 121 1,886
Loans receivable, net 1,045,615 929,909 1,021,634
Excess of cost over net assets
of purchased subsidiaries 10,097 8,833 10,586
Premises and equipment 19,120 18,639 19,376
Other assets 17,376 16,340 16,686
--------- --------- ---------
$1,450,564 $1,321,178 $1,417,764
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand deposits $86,532 $80,434 $85,376
Interest-bearing transaction accounts 338,635 309,960 335,977
Savings deposits 82,031 84,125 85,145
Time deposits 617,139 571,816 608,755
--------- --------- ---------
1,124,337 1,046,335 1,115,253
Short-term borrowings 108,385 125,212 132,167
Long-term borrowings 57,103 7,490 14,013
Other liabilities 10,802 9,949 11,782
--------- --------- ---------
Total liabilities 1,300,627 1,188,986 1,273,215
Stockholders' Equity
Common stock 7,818 7,194 7,812
Surplus 69,819 54,144 69,691
Retained earnings 72,008 71,330 66,762
Unrealized net gain (loss) on
securities held for sale 292 (454) 284
Debt on ESOP shares 0 (22) 0
--------- --------- ---------
149,937 132,192 144,549
--------- --------- ---------
$1,450,564 $1,321,178 $1,417,764
========= ========= =========
Fair value of securities held
for investment $108,018 $140,065 $125,061
Common shares issued and outstanding 10,007 9,669 9,999
See accompanying notes to consolidated financial statements. 3
<TABLE>
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Three Months Ended Six Months Ended
June 30, June 30,
CONSOLIDATED STATEMENTS OF INCOME 1997 1996 1997 1996
____________________________________________________________________________________________
(in thousands, except per share data)
INTEREST INCOME
Interest and fees on loans $24,169 $20,994 $47,529 $41,830
Taxable interest on securities 4,156 3,996 8,222 7,872
Nontaxable interest on securities 922 956 1,849 1,953
Interest on short-term investments 31 33 70 70
------ ------ ------ ------
29,278 25,979 57,670 51,725
INTEREST EXPENSE
Interest on deposits 12,666 11,355 24,830 22,698
Other interest expense 2,163 1,457 4,134 2,861
------ ------ ------ ------
14,829 12,812 28,964 25,559
------ ------ ------ ------
Net Interest Income 14,449 13,167 28,706 26,166
Provision for Loan Losses 842 577 1,681 1,154
------ ------ ------ ------
Net Interest Income after
Provision for Loan Losses 13,607 12,590 27,025 25,012
Noninterest Income 2,615 2,029 5,031 4,043
Noninterest Expense 9,511 8,279 18,656 16,604
------ ------ ------ ------
Income Before Income Tax Expense 6,711 6,340 13,400 12,451
Income Tax Expense 2,162 1,985 4,352 3,940
------ ------ ------ ------
NET INCOME $4,549 $4,355 $9,048 $8,511
====== ====== ====== ======
Net Income per Common Share $0.44 $0.44 $0.88 $0.86
Cash Dividend per Common Share 0.19 0.15 0.38 0.29
Average Common Shares Outstanding 10,253 9,920 10,253 9,897
</TABLE>
See accompanying notes to consolidated financial statements. 4
<TABLE>
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<S> <C> <C> <C> <C> <C>
Unrealized
CONSOLIDATED STATEMENTS OF CHANGES net gain
IN STOCKHOLDERS' EQUITY Common Retained (loss) on
Six Months Ended June 30, 1997 stock Surplus earnings securities Total
_________________________________________________________________________________________________________
(in thousands, except per share data)
BALANCE AT JANUARY 1, 1997 $7,812 $69,691 $66,762 $284 $144,549
Net income 9,048 9,048
Cash dividends declared
Common ($0.38 per share) (3,802) (3,802)
Stock issued pursuant to shareholder
and employee plans 30 838 868
Common stock repurchased (24) (710) (734)
Change in unrealized net gain
(loss) on securities held for sale 8 8
------ ------ ------ ------ -------
BALANCE AT JUNE 30, 1997 $7,818 $69,819 $72,008 $292 $149,937
====== ====== ====== ====== =======
</TABLE>
See accompanying notes to consolidated financial statements. 5
Six Months Ended
June 30,
CONSOLIDATED STATEMENTS OF CASH FLOWS 1997 1996
_______________________________________________________________________________
(dollars in thousands)
OPERATING ACTIVITIES
Net income $9,048 $8,511
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,779 1,474
Net premium amortization 83 403
Provision for loan losses 1,681 1,154
Net (increase) decrease in loans held for sale (281) 586
Provision for deferred income taxes (236) (359)
(Decrease) in accrued items (716) (1,011)
Other, net (728) (575)
------ ------
Net Cash Provided by Operating Activities 10,630 10,183
INVESTING ACTIVITIES
Proceeds from maturities, calls and prepay-
ments of securities held for sale 20,146 11,864
Proceeds from maturities, calls and prepay-
ments of securities held for investment 20,702 25,723
Purchase of securities held for sale (50,999) (40,410)
Purchase of securities held for investment (4,155) (3,057)
Net increase in loans (26,053) (30,688)
Purchases of premises and equipment (949) (1,608)
------ ------
Net Cash Used by Investing Activities (41,308) (38,176)
See accompanying notes to consolidated financial statements. 6
Six Months Ended
June 30,
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED 1997 1996
_______________________________________________________________________________
(dollars in thousands)
FINANCING ACTIVITIES
Net increase (decrease) in deposits 9,084 (769)
Net increase (decrease) in short-term borrowings (23,782) 31,742
Proceeds from long-term borrowings 43,500 0
Repayments of long-term borrowings (409) (266)
Proceeds from issuance of common stock 209 426
Repurchase of common stock (735) (1,313)
Cash dividends paid (3,168) (2,309)
------ ------
Net Cash Provided by Financing Activities 24,699 27,511
------ ------
Cash and Cash Equivalents
(Decrease) (5,979) (482)
Beginning of Year 43,285 37,524
------ ------
End of Period $37,306 $37,042
====== ======
SUPPLEMENTAL DISCLOSURES
Cash paid for interest expense $28,466 $26,315
Cash paid for income tax 3,500 4,924
NONCASH INVESTING AND FINANCING TRANSACTIONS
Other real estate transferred to (from) loans, net (392) (43)
Dividends reinvested 635 484
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, First Kentucky Federal Savings Bank and
Guaranty 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 1996 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 period ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997.
NOTE B - SECURITIES HELD FOR SALE AND INVESTMENT
At acquisition, securities are classified into one of three categories: trading,
held for sale or investment. Trading securities are bought and held principally
with the intention of selling them in the near term. The Company currently has
no trading securities. Securities that are being held for indefinite periods of
time, including securities 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 prepayment 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 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 securities held for investment 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.
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
8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
_______________________________________________________________________________
rates, both historical and estimated, using a method which approximates the
level-yield method. Realized gains or losses on securities held for sale or
investment are accounted for using the specific security.
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. 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.
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.
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, 1997 and 1996 and December 31, 1996 is as follows:
9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
_______________________________________________________________________________
Impaired Loans June 30, December 31,
June 30, 1997 1996 1996
________________________________________________________________________________
(in thousands)
Balance of impaired loans $4,543 $3,559 $4,454
Less portion for which no allowance
for loan losses is allocated 191 0 325
------ ------ ------
Portion of impaired loan balance for
which an allowance for loan losses
is allocated $4,352 $3,559 $4,129
====== ====== ======
Portion of allowance for loan losses
allocated to the impaired loan balance $1,308 $1,030 $1,142
====== ====== ======
Six Months Ended
June 30,
Impaired Loans 1997 1996
_______________________________________________________________________________
(in thousands)
Average investment in impaired loans $4,513 $4,785
Interest income recognized on
impaired loans 234 197
Interest income recognized on
impaired loans on cash basis 44 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 amorti-
zation 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 $4.6 million at June 30, 1997,
$3.6 million at June 30, 1996 and $4.1 million December 31, 1996. Amortization
expense was $488,862 and $414,893, respectively, for the six months ended June
30, 1997 and 1996.
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
_______________________________________________________________________________
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.
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
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, 1997, a total of 151,808 shares are
reserved for grants of options. Outstanding stock options are considered common
stock equivalents in the computation of net income per common share.
NOTE G - PER COMMON SHARE DATA
Share and per share information have been adjusted to give effect to 5% stock
dividends declared in January 1997 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, 1997 and 1996 were 10,252,521 and
9,897,036, respectively, and for the three months ended June 30, 1997 and 1996,
were 10,252,760 and 9,919,855, respectively. Common stock equivalents have no
material dilutive effect.
During February, 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" (FAS 128). FAS
128 establishes standards for computing and presenting earnings per share (EPS).
FAS 128 replaces the presentation of primary EPS with a presentation of basic
EPS. Dual presentation of basic and diluted EPS is required on the face of the
statement of income for entities with complex capital structures. Basic EPS
excludes dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. FAS 128 is effective for financial statements
issued for periods ending after December 15, 1997. Management does not expect
the adoption of FAS 128 to have a material effect on the Company's results of
operations since common stock equivalents are not currently a significant factor
in the calculation of EPS.
11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
_______________________________________________________________________________
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 August 30, 1996, the Company consummated the purchase acquisition of Guaranty
Federal Savings Bank (Guaranty) of Clarksville, Tennessee. The Company acquired
all of the outstanding shares of Guaranty in exchange for 315,002 shares of the
Company's common stock.
Guaranty's three locations in Clarksville, Tennessee, are immediately southeast
of the market area served by the Company's other subsidiary banks. Immediately
prior to the acquisition, Guaranty had total assets of approximately $55.9
million and stockholders' equity of $3.2 million.
NOTE J - ACCOUNTING POLICIES
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 130 and No. 131. They are effective for the
Company's next year financial statements. Management does not currently believe
these statements will have a material impact on the Company's financial
statements.
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
_______________________________________________________________________________
Management's discussion and analysis includes forward-looking statements. Many
factors affect Peoples First Corporation's (Company) 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).
Headquartered in Paducah, Kentucky, the Company is a bank and savings and loan
holding company registered with the Federal Reserve Board. The Company's
market area is primarily western Kentucky and the surrounding interstate area.
The Company's one commercial bank subsidiary and two savings bank subsidiaries
operate principally in a single business segment offering general commercial,
consumer and savings bank services through 28 banking offices. Commercial
banking services, mortgage banking and consumer financing are all activities the
Company considers to be their one business segment.
EARNING ASSETS
Average earning assets of the Company for the first six months of 1997 increased
10.5%, or $129.2 million to $1,361.7 million from $1,232.5 million for the first
six months of 1996. Excluding the effect of the savings bank acquisition in the
third quarter of 1996, the increase was 5.9%, or $72.6 million. This compares
to average earning asset growth of 6.1% for the first six months of 1996 over
the first six months of 1995. A consistently favorable ratio of average earning
assets to average total assets has been achieved. The ratio was 95.7% and 95.1%
for the first six months of 1997 and 1996, respectively.
<TABLE>
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Three Months Ended Six Months Ended
Table 1 June 30, June 30,
Average Earning Assets 1997 1996 1997 1996
____________________________________________________________________________________________
(dollars in thousands)
Total average earning assets $1,371,429 $1,241,640 $1,361,737 $1,232,538
Percent of average earning assets
Loans 77.1% 74.7% 77.1% 74.8%
Securities 22.7 25.1 22.7 25.0
Other earning assets 0.2 0.2 0.2 0.2
</TABLE>
The Company's primary business is making real estate, consumer and commercial
loans. 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 1997 were 77.1% of total average earning assets, up from 74.8% for the
13
first six months of 1996. Loan growth, while still strong, has slowed from
previous levels. For the first two quarters of 1997, average loans increased
13.9%, or $128.2 million to $1,049.2 million from $921.0 million for the first
two quarters of 1996. Excluding the effect of the savings bank acquisition in
the third quarter of 1996, the increase was 8.6%. For the first two quarters of
1996, average loans increased 9.9%, or $82.7 million from $838.3 million for the
first two quarters of 1995. 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 three years.
Table 2 June 30, December 31,
Types of Loans 1997 1996 1996
_______________________________________________________________________________
(in thousands)
Real estate
Residential mortgage $433,769 $371,862 $421,129
Commercial mortgage 186,284 158,511 174,576
Construction 30,017 18,522 29,933
Consumer, net 293,777 274,497 289,653
Commercial, financial
and agricultural 115,705 118,788 120,283
Other 1,052 1,644 855
--------- --------- ---------
1,060,604 943,824 1,036,429
Allowance for loan losses (14,989) (13,915) (14,795)
--------- --------- ---------
$1,045,615 $929,909 $1,021,634
========= ========= =========
For the first two quarters of 1997, average total securities increased 0.3%, or
$1.0 million to $309.7 million from $308.7 million for the first two quarters of
1996. Excluding the effect of the savings bank acquisition in the third quarter
of 1996, average total securities decreased 2.0%. For the first two quarters of
1996, average total securities decreased 3.8%, or $12.3 million from $321.0
million for the first quarter of 1995. Management intends to continue to reduce
the amount of loan funding derived from securities activities to better leverage
stockholders' equity.
FUNDING
The most important and stable source of funding is core deposits, considered by
management to include demand deposits, interest-bearing transaction accounts,
saving deposits and time deposits under $100,000. Average core deposits for the
first six months of 1997 increased 6.3%, or $59.5 million to $1,011.3 million
from $951.8 million for 1996. Excluding the savings bank acquisition, the
increase was 2.6%, or $25.1 million. Management plans to increase reliance on
non-core funding. 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
14
programs and satisfy other funding needs. Additional funding totaling approxi-
mately $143.6 million is available at June 30, 1997 from undrawn federal funds
purchased, lines of credit for U. S. treasury notes and FHLB advances.
<TABLE>
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Three Months Ended Six Months Ended
Table 3 June 30, June 30,
Average Interest-bearing Liabilities 1997 1996 1997 1996
____________________________________________________________________________________________
(dollars in thousands)
Total average interest-bearing
liabilities $1,189,672 $1,082,943 $1,180,744 $1,074,000
Percent of average total interest-
bearing liabilities
Interest-bearing core deposits 78.4% 81.2% 78.6% 81.1%
CDs of $100,000 or more 7.5 6.2 7.5 6.4
Brokered deposits 1.1 2.3 1.2 2.4
Short-term borrowings 8.2 9.5 9.3 9.3
Long-term borrowings 4.7 0.7 3.3 0.7
Other 0.1 0.1 0.1 0.1
</TABLE>
NONPERFORMING ASSETS AND RISK ELEMENTS
The Company's loan underwriting guidelines, credit review procedures and
policies are designed to protect the Company from avoidable credit losses. Some
losses although inevitably occur. 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 June 30, 1997 remains at managable levels.
Diversification within the loan portfolio is an important means of reducing
inherent lending risks. At June 30, 1997, 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.
Nonperforming assets were $2.1 million lower at June 30, 1997 than at December
31, 1996. As a percentage of total loans and other real estate, nonperforming
assets were down slightly during the last six months. There are generally good
economic conditions in the market area and management believes the Company's
comprehensive loan administration and workout procedures are adequate to manage
these credit risks. During the last five years, the allowance for loan losses
coverage of nonperforming assets has always been greater than 100%.
15
Table 4 June 30, December 31,
Nonperforming Assets 1997 1996 1996
_______________________________________________________________________________
(dollars in thousands)
Nonaccrual loans $5,226 $2,097 $4,680
Loans past due ninety days 2,622 1,106 4,710
Renegotiated loans 1,654 2,789 2,707
Other real estate owned 499 40 90
------ ------ ------
$10,001 $6,032 $12,187
====== ====== ======
Ratios:
Nonperforming assets to total
loans and other real estate 0.94% 0.64% 1.18%
Allowance for loan losses to
nonperforming assets 150% 231% 121%
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. Since December 31, 1996, loans
that have been identified that may become nonperforming in the future have
increased $8.1 million. This increase is primarily due to additional draws
against an existing credit line and several small commercial loans. At June 30,
1997, loans with a total principal balance of $34.5 million were considered
potential problem loans, compared to $14.7 million at June 30, 1996. 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 level of
chargeoffs and nonperforming assets to remain relatively high during 1997
compared to prior periods due to the cyclical nature of consumer credit and the
Company's increase in consumer lending.
CAPITAL RESOURCES AND DIVIDENDS
The current economic and regulatory environment places increased emphasis on
capital strength. The board of directors develops and reviews the capital goals
and policies of the consolidated entity and subsidiary banks. 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. Stockholders' equity was 10.3% of
assets at June 30, 1997, up from 10.0% at June 30, 1996. Exclusive of the
small increase in the unrealized net gain on securities held for sale, net of
applicable income taxes, stockholders' equity increased $5.4 million, or 7.5%
(annualized), during the first six months of 1997. This compares to an
increase, exclusive of the $1.4 million increase in the unrealized net loss on
securities held for sale, net of applicable income taxes, of $5.4 million, or
16
8.5% (annualized), during the same 1996 period. 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 requirements.
The capital base has been strengthened through earnings retention and the
issuance of common stock. The earnings retention rate, which the board of
directors adjusts through declaration of cash dividends, was 56.8% for the first
two quarters of 1997, compared to 66.3% for the first two quarters of 1996. The
quarterly cash dividend was raised to $0.152 per share in the second quarter
of 1996, to $0.190 per share in the fourth quarter of 1996 and subsequently to
$0.22 per share in the third quarter of 1997. Subsidiary bank dividends are the
principal source of funds for the Company's payment of dividends to its
stockholders. At June 30, 1997, approximately $27.4 million, compared to $23.3
million at June 30, 1996, 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.
The sale of common stock through shareholder and employee plans increased
capital $868,248 and $909,262, respectively, in the first two quarters of 1997
and 1996. In the first quarter of 1996, the board of directors approved the
purchase of up to 400,000 shares of the Company's common stock in the open
market. During the first two quarters of 1997, 30,169 shares were purchased for
$734,121, compared to 61,976 shares purchased for $1.3 million during the first
two quarters of 1996.
Under the Federal Reserve Board's risk-based capital guidelines for bank holding
companies, the minimum ratio of total capital to risk-adjusted assets (including
certain off-balance sheet items, such as standby letters of credit) is currently
8.0%. The minimum Tier I capital to risk-adjusted assets is 4.0%. The
Company's total capital and Tier I capital to risk-adjusted assets ratio was
15.10% and 13.90%, respectively, at June 30, 1997 compared with 15.05% and
13.80%, respectively at June 30, 1996. The Federal Reserve Board also requires
bank holding companies to comply with minimum leverage ratio guidelines. The
leverage ratio is the ratio of Tier I capital to its total consolidated
quarterly average assets, less goodwill and certain other intangible assets.
The guidelines require a minimum leverage ratio of 3.0% for companies that meet
certain specified criteria. The Company's leverage ratio was 9.78% at June 30,
1997, compared with 9.54% at June 30, 1996.
The Federal Deposit Insurance Act requires federal bank regulatory agencies to
take "prompt corrective action" with respect to FDIC-insured depository
institutions that do not meet minimum capital requirements. As of June 30,
1997, all of the Company's insured depository institutions met the criteria to
be classified as "well capitalized".
17
RESULTS OF OPERATIONS
Net income for the first six months increased 6.3% in 1997, reaching $9.0
million, compared to $8.5 million in 1996. Net income for the second quarter
increased 4.5% in 1997, reaching $4.5 million, compared to $4.4 million in 1996.
Net income per common share for the first six months increased 2.3% to $0.88 in
1997, compared to $0.86 for 1996. Net income per common share for the second
quarter was $0.44 in 1997, the same as for 1996. Results for 1997 were impacted
by increased loan volume and improved noninterest income offset by higher
provision for loan losses and noninterest expense.
Return on average stockholders' equity for the first six months of 1997 and 1996
was 12.49% and 13.18%, respectively. Return on average assets for the first six
months of 1997 and 1996 was 1.28% and 1.32%, respectively.
NET INTEREST INCOME
The operating results of the Company depend primarily on its net interest
income, which is the difference between interest income on interest-earning
assets and interest expense on interest-bearing liabilities, consisting
primarily of deposits. Net interest income is determined by the difference
between yields earned on assets and rates paid on liabilities (interest-rate
spread) and the relative amounts of interest-earning assets and interest-bearing
liabilities. The Company's interest-rate spread is affected by regulatory,
economic and competitive factors that influence interest rates, loan demand and
deposit flows.
Table 5
Net Interest Income Analysis Average Average
Six months ended June 30, 1997 volume Interest rate
_______________________________________________________________________________
(dollars in thousands)
Loans $1,049,247 $47,565 9.14%
Securities 309,639 10,962 7.14
Other interest earning assets 2,851 70 4.95
--------- ------
1,361,737 58,597 8.68
Time deposits 612,063 17,222 5.67
All other interest bearing deposits 418,262 7,608 3.67
Other interest bearing liabilities 150,419 4,134 5.54
--------- ------
$1,180,744 28,964 4.95
------ ----
Net interest income (TE) spread $29,633 3.73%
====== ====
Net interest income (TE) as a percent
of average interest-earning assets 4.39%
====
18
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
of average interest-earning assets 4.42%
====
Table 7
Net Interest Income Analysis Average Average
Three months ended June 30, 1997 volume Interest rate
_______________________________________________________________________________
(dollars in thousands)
Loans $1,057,986 $24,187 9.17%
Securities 310,719 5,524 7.13
Other interest earning assets 2,724 31 4.56
--------- ------
1,371,429 29,742 8.70
Time deposits 614,355 8,739 5.71
All other interest bearing deposits 420,224 3,927 3.75
Other interest bearing liabilities 155,093 2,163 5.59
--------- ------
$1,189,672 14,829 5.00
------ ----
Net interest income (TE) spread $14,913 3.70%
====== ====
Net interest income (TE) as a percent 4.36%
of average interest-earning assets ====
19
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 1,456 5.22
--------- ------
$1,082,943 12,811 4.76
------ ----
Net interest income (TE) spread $13,634 3.81%
====== ====
Net interest income (TE) as a percent
of average interest-earning assets 4.42%
====
For the six months ended June 30, 1997, net interest income, on a tax-
equivalent (TE) basis, increased 9.3%, or $2.5 million to $29.6 million compared
to $27.1 million for the six months ended June 30, 1996. The 1997 increase was
attributed to increased volume of earning assets, while volume and margin
improvement provided approximately equal amounts to the 1996 increased net
interest income.
For 1997, 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 4.39% and
4.42% for the six months ended June 30, 1997 and 1996, respectively. Interest
earned on loans for the six months ended June 30, 1997 was 4.19% greater than
the average funding cost, down from 4.35% for the six months ended June 30,
1996. Management attributes this to their concentration on secured residential
real estate lending and a competitive consumer market. Net interest income
margins continue to benefit from a favorable change in the mix of earning assets
and funding sources.
20
PROVISION FOR LOAN LOSSES
The Company's primary business of making real estate, consumer and commercial
loans entails potential loan losses, the magnitude of which depend on a
variety of economic factors affecting borrowers which are beyond the control of
the Company. Accordingly, 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 $1.7 million for the six months ended June 30, 1997,
an increase of $0.5 million or 45.7% when compared to $1.2 for the six months
ended June 30, 1996. The increase in the 1997 provision for loan losses was
influenced by the growth in outstanding loans and net loan chargeoffs,
particularly consumer chargeoffs. The annualized provision for loan losses as a
percentage of average loans was 0.32% for the six months ended June 30, 1997, up
from 0.28% and 0.25%, for the years ended December 31, 1996 and 1995,
respectively. Levels of providing for loan losses reflect, among other things,
management's evaluation of potential problem loans.
Net chargeoffs as a percentage of average loans were 0.29% and 0.13% for the six
months ended June 30, 1997 and 1996, respectively. Net chargeoffs as a percent
of average loans were 0.17% for the five-year period ended December 31, 1996.
The allowance for loan losses is 1.41% and 1.47%, respectively, of outstanding
loans at June 30, 1997 and 1996. The allowance 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
Table 7 June 30, June 30,
Allowance for Loan Losses 1997 1996 1997 1996
____________________________________________________________________________________________
(dollars in thousands)
Balance at beginning of period $15,120 $13,670 $14,795 $13,371
Provision charged to expense 842 577 1,681 1,154
Loans charged off (1,061) (501) (1,713) (882)
Recoveries of chargeoffs 88 169 226 272
------ ------ ------ ------
Net loans charged off (973) (332) (1,487) (610)
------ ------ ------ ------
Balance at end of period $14,989 $13,915 $14,989 $13,915
====== ====== ====== ======
Annualized Ratios:
Provision for loan losses
to average loans 0.32% 0.25% 0.32% 0.25%
Net chargeoffs to
average loans 0.37 0.14 0.29 0.13
Allowance for loan losses
to period end loans 1.41 1.47 1.41 1.47
</TABLE>
21
NONINTEREST INCOME
Noninterest income is an important but not yet significant source of revenue for
the Company, representing 14.5% of tax-equivalent revenues, excluding securities
gains, for the first two quarters of 1997, up from 13.0% for the first two
quarters of 1996. During the last two years, the Company has continued to
engaged outside consulting firms to review banking products and services. As a
result, fees from traditional deposit services as well as revenues from
brokerage activities and other commission business have been increased by
management's focus on improving all areas of noninterest income. Noninterest
income amounted to $5.0 million for the six months ended June 30, 1997, a 24.4%
increase compared to $4.0 million for the six months ended June 30, 1996.
Service charges on deposit accounts, the largest component of noninterest
income, increased 31.4% primarily due to a change in the assessment of overdraft
fees. This level of increase is not expected to continue. The decrease in
trust fees is attributable to timing of certain fees for estates and other
services. Insurance commissions for the year of 1997 are expected to equal
comparative prior periods due to renewed management focus. Management plans to
continue to seek ways to increase fee income from services.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
Table 8 June 30, June 30,
Noninterest Income 1997 1996 1997 1996
____________________________________________________________________________________________
(in thousands)
Service charges on deposits $1,322 $1,010 $2,550 $1,942
Net securities gains (losses) 0 5 0 (4)
Trust fees 322 332 638 671
Insurance commissions 160 170 284 314
Bankcard fees 176 158 351 319
Other income 635 354 1,208 801
----- ----- ----- -----
$2,615 $2,029 $5,031 $4,043
===== ===== ===== =====
Annualized Ratio:
Noninterest income
to average assets 0.73% 0.63% 0.71% 0.63%
</TABLE>
NONINTEREST EXPENSE
The Company's efficiency ratios are approximately the same for the first two
quarters of 1997 and 1996. The ratio of overhead to revenue was 53.82% for the
six months ended June 30, 1997, compared to 53.30% for the six months ended June
30, 1996. Noninterest expense to average assets was approximately the same for
both periods. There is a constant process of evaluation to reach the optimum
balance between revenue and overhead.
The ratio of personnel expense decreased slightly as a percentage of average
total assets to 1.22% for the six months ended June 30, 1997, compared to 1.27%
for the six months ended June 30, 1996. Comparable staffing levels were
22
maintained at June 30, 1997 and 1996. An additional one-time expense amounting
to approximately $116,000 was incurred in the first quarter of 1996 to terminate
a defined benefit plan of an acquired bank.
For the last three years, equipment expense has increased by an average of
approximately 14.9%. For 1997, management expects a double-digit percentage
increase due to implementation of new systems. The Company has made purchases
amounting to approximately $3.3 million for equipment 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.
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 two quarters of 1997 was 13.6% higher than the first two quarters
of 1996, which was significantly higher than the previous year. Bankshare taxes
imposed by the State of Kentucky have been increasing and are expected to
continue to increase in future years. Increased goodwill amortization resulted
from the acquisition of a savings bank in the third quarter of 1996.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
Table 9 June 30, June 30,
Noninterest Expense 1997 1996 1997 1996
____________________________________________________________________________________________
(in thousands)
Salaries $3,589 $3,376 $7,266 $6,851
Employee benefits 674 596 1,359 1,318
Occupancy expense 524 458 1,000 902
Equipment expense 652 530 1,292 1,034
Deposit insurance expense 53 89 105 179
Data processing expense 707 632 1,433 1,261
Bank share taxes 424 384 836 768
Goodwill amortization 244 207 489 415
Legal and consulting fees 487 96 794 167
Other expense 2,157 1,911 4,082 3,709
------ ------ ------ ------
$9,511 $8,279 $18,656 $16,604
====== ====== ====== ======
Annualized Ratios:
Overhead ratio 54.26% 52.86% 53.82% 53.30%
Noninterest expense
to average assets 2.67 2.55 2.64 2.58
</TABLE>
23
INCOME TAXES
The Company's income tax planning is based on the goal of maximizing long-term,
after-tax profitability. Income tax expense is impacted by the mix of taxable
versus tax-exempt revenues from loans and securities as well as certain
nondeductible expenses. 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.
The increase in income tax expense for the six months ended June 30, 1997 from
the comparable 1996 period, is attributable to higher operating earnings and a
higher effective tax rate. The Company's effective tax rate was 32.5% and 31.6%
for the six months ended June 30, 1997 and 1996, respectively. The effective
tax rate increased due to the continued decline in tax-exempt income, an
increase in nondeductible acquisition expenses and interstate taxation.
LIQUIDITY AND INTEREST-RATE SENSITIVITY
The 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. The goal of the asset/liability management (ALM)
process is to manage the structure of the balance sheet to provide the maximum
level of net interest income while maintaining acceptable levels of interest-
sensitivity risk. 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.
Management 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. 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 retail 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. Management considers current liquidity positions of the subsidiary
banks to be adequate to meet depositor and borrower needs.
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. Management seeks to closely match the duration of repricing
24
assets and liabilities over time to avoid unnecessary interest rate risk.
Currently, the Company does not employ interest rate swaps, financial futures or
options to affect interest rate risks.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Table 10
Interest Rate Sensitivity
Analysis 1-91 91-365 Total at 1 - 2 3 - 4 5 - 15 Over 15
June 30, 1997 Days Days 1 year years years years years Total
___________________________________________________________________________________________________________________________________
(in thousands)
Rate Sensitive Assets
Securities, at cost
U.S. treasury
and agencies $200 $1,195 $1,395 $23,735 $41,295 $5,473 $1,671 $73,569
Mortgage-backed 12,935 30,685 43,620 45,850 32,853 45,955 3,024 171,302
Municipal bonds 719 3,313 4,032 7,027 10,395 39,936 436 61,826
Other 10,207 65 10,272 0 1,460 0 0 11,732
------- ------- ------- ------- ------- --------- --------- ---------
24,061 35,258 59,319 76,612 86,003 91,364 5,131 318,429
Loans 335,230 408,065 743,295 157,877 84,177 73,765 3,657 1,062,771
------- ------- ------- ------- ------- --------- --------- ---------
359,291 443,323 802,614 234,489 170,180 165,129 8,788 1,381,200
Rate Sensitive Liabilities
Deposits
Transaction and savings 170,830 0 170,830 29,572 29,573 147,863 42,828 420,666
Time 167,584 255,999 423,583 171,057 19,121 3,378 0 617,139
Short-term borrowings 79,180 29,205 108,385 0 0 0 0 108,385
Long-term borrowings 46,628 2,762 49,390 1,489 889 3,791 1,544 57,103
------- ------- ------- ------- ------- --------- --------- ---------
464,222 287,966 752,188 202,118 49,583 155,032 44,372 1,203,293
------- ------- ------- ------- ------- --------- --------- ---------
Period Gap ($104,931) $155,357 $50,426 $32,371 $120,597 $10,097 ($35,584) $177,907
======= ======= ======= ======= ======= ========= ========= =========
Cumulative Gap at 06/30/97 ($104,931) $50,426 $50,426 $82,797 $203,394 $213,491 $177,907 $177,907
Cumulative Gap at 12/31/96 ($102,059) $63,764 $63,764 $89,661 $166,128 $186,139 $166,128 $166,128
</TABLE>
The subsidiary banks and the Company collectively measure their level of
earnings exposure to future interest rate movements. Simulation and interest
rate gap analyses are used to scrutinize the sensitivity of net interest income
over a relatively short (1-2 years) time horizon. The analyses are used to
examine the impact on earnings of an immediate interest rate shock as well as
other forecasted rate scenarios. Each scenario incorporates what management
believes to be the most reasonable assumptions about such variables as volumes,
prepayment rates for mortgage assets and repricing characteristics. A valuation
analysis is also performed to measure the sensitivity of the Company's net
interest income. This analysis involves discounting projected future cash flows
of assets, liabilities and off-balance sheet positions to arrive at an estimated
net present economic value. The June 30, 1997 cumulative gap at one year
between rate sensitive assets and liabilities has changed little from December
31 or June 30, 1996.
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
08/11/97 /s/ Aubrey W. Lippert
Aubrey W. Lippert
President and Chairman
of the Board
08/11/97 /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-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 37,306
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 213,477
<INVESTMENTS-CARRYING> 105,406
<INVESTMENTS-MARKET> 108,018
<LOANS> 1,060,604
<ALLOWANCE> 14,989
<TOTAL-ASSETS> 1,450,564
<DEPOSITS> 1,124,337
<SHORT-TERM> 108,385
<LIABILITIES-OTHER> 10,802
<LONG-TERM> 57,103
<COMMON> 7,818
0
0
<OTHER-SE> 142,119
<TOTAL-LIABILITIES-AND-EQUITY> 1,450,564
<INTEREST-LOAN> 47,529
<INTEREST-INVEST> 10,071
<INTEREST-OTHER> 70
<INTEREST-TOTAL> 57,670
<INTEREST-DEPOSIT> 24,830
<INTEREST-EXPENSE> 28,964
<INTEREST-INCOME-NET> 28,706
<LOAN-LOSSES> 1,681
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 18,656
<INCOME-PRETAX> 13,400
<INCOME-PRE-EXTRAORDINARY> 13,400
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,048
<EPS-PRIMARY> 0.88
<EPS-DILUTED> 0.88
<YIELD-ACTUAL> 4.39
<LOANS-NON> 5,226
<LOANS-PAST> 2,622
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 34,500
<ALLOWANCE-OPEN> 14,795
<CHARGE-OFFS> 1,713
<RECOVERIES> 226
<ALLOWANCE-CLOSE> 14,989
<ALLOWANCE-DOMESTIC> 14,989
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
