UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
Quarterly Report Pursuant to Section 13 OR 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1998
Commission File Number: 2-88927
FIRST KEYSTONE CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2249083
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
111 West Front Street, Berwick, PA 18603
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (717) 752-3671
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical date:
Common Stock, $2 Par Value, 2,933,727 shares as of March 31, 1998.
<PAGE>
PART I. - FINANCIAL INFORMATION
Item. 1 Financial Statements
<TABLE>
FIRST KEYSTONE CORPORATION
BALANCE SHEETS
(Unaudited)
<CAPTION>
(Amounts in thousands, except per share data)
March December
1998 1997
<S> <C> <C>
ASSETS
Cash and due from banks $ 5,757 $ 6,400
Interest bearing deposits with banks 4,560 7,084
Available-for-sale securities carried
at estimated fair value 94,223 81,651
Investment securities, held to
maturity securities, estimated
fair value of $16,483 and $16,833 16,424 16,808
Loans, net of unearned income 150,188 152,151
Allowance for loan losses (2,361) (2,371)
Net loans $147,827 $149,780
Bank premises and equipment 3,443 3,436
Interest receivable 2,041 1,998
Other assets 549 242
Total Assets $274,824 $267,399
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Non-interest bearing $ 17,427 $ 18,398
Interest bearing 204,309 199,249
Total deposits $221,736 $217,647
Short-term borrowings 6,323 6,102
Long-term borrowings 12,000 9,000
Accrued expenses and other
liabilities 2,408 2,832
Total Liabilities $242,467 $235,581
STOCKHOLDERS' EQUITY
Common stock, par value $2
per share $ 5,867 $ 1,956
Surplus 9,761 9,761
Retained earnings 14,692 17,873
Unrealized gain (loss) on
investment securities available
for sale, net of taxes 2,037 2,228
Total Stockholders' Equity $ 32,357 $ 31,818
Total Liabilities and
Stockholders' Equity $274,824 $267,399
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
1
<PAGE>
<TABLE>
FIRST KEYSTONE CORPORATION
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)
<CAPTION>
(Amounts in thousands except per share data)
1998 1997
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $3,287 $2,986
Interest and dividend income
on securities 1,561 1,611
Interest on deposits in banks 104 11
Total Interest Income $4,952 $4,608
INTEREST EXPENSE
Interest on deposits $2,233 $1,997
Interest on short-term borrowings 58 78
Interest on long-term borrowings 155 162
Total Interest Expense $2,446 $2,237
Net interest income $2,506 $2,371
Provision for loan losses 50 50
Net Interest Income After
Provision for Loan Losses $2,456 $2,321
OTHER INCOME
Service charges on deposit
accounts $ 159 $ 146
Other non-interest income 158 139
Investment securities gains
(losses) net 35 6
Total Other Income $ 352 $ 291
OTHER EXPENSES
Salaries and employee benefits $ 721 $ 659
Net occupancy and fixed asset
expense 228 192
Other non-interest expense 402 364
Total Other Expenses $1,351 $1,215
Income before income taxes $1,457 $1,397
Applicable income tax (benefit) 316 274
Net Income $1,141 $1,123
Net Income Per Weighted
Share Outstanding $ .39 $ .38
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
2
<PAGE>
<TABLE>
FIRST KEYSTONE CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)
<CAPTION>
(Amounts in thousands)
1998 1997
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,141 $ 1,123
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision or loan losses 50 50
Provision for depreciation
and amortization 79 77
Premium amortization on
investment securities 54 33
Discount accretion on investment
securities (32) (31)
Gain on sale of mortgage loans (29) 0
Proceeds from sale of mortgage loans 931 0
Originations of mortgage loans for
resale (1,248) 0
(Gain) loss on sales of investment
securities (35) (6)
Deferred income tax (benefit) 5 (7)
(Increase) decrease in interest
receivable and other assets (350) (201)
Increase (decrease) in interest
payable, accrued expenses and
other liabilities (342) 415
NET CASH PROVIDED BY OPERATING
ACTIVITIES $ 224 $ 1,453
INVESTING ACTIVITIES
Purchases of investment securities
available for sale $(17,083) $ (5,778)
Proceeds from sales of investment
securities available for sale 2,040 4,217
Proceeds from maturities and
redemptions of investment
securities available for sale 2,224 1,584
Purchase of investment securities
held to maturity (677) 0
Proceeds from maturities and
redemption of investment
securities held to maturity 1,043 638
Net (increase) decrease in loans 2,249 (3,990)
Purchase of premises and equipment (86) (120)
NET CASH USED BY INVESTING
ACTIVITIES $(10,290) $ (3,449)
FINANCING ACTIVITIES
Net increase (decrease) in
deposits $ 4,089 $ 4,723
Net increase (decrease) in
short-term borrowings 221 (22)
Net increase (decrease)in
long-term borrowings 3,000 3,000
Cash dividends (411) (311)
NET CASH PROVIDED BY
FINANCING ACTIVITIES $ 6,899 $ 7,390
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENT $ (3,167) $ 5,394
CASH AND CASH EQUIVALENTS,
BEGINNING 13,484 5,179
CASH AND CASH EQUIVALENTS, ENDING $ 10,317 $ 10,573
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash paid during period for
Interest $ 2,453 $ 2,183
Income Taxes 29 0
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
3
<PAGE>
FIRST KEYSTONE CORPORATION
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
March 31, 1998
(Unaudited)
Note 1.
The accounting and reporting policies of First Keystone
Corporation and Subsidiaries conform to generally accepted accounting
principles and to general practices within the banking industry.
These consolidated interim financial statements include the accounts
of First Keystone Corporation and its wholly owned subsidiary, The
First National Bank of Berwick. All significant inter-company
balances have been eliminated.
Note 2.
The accompanying consolidated interim financial statements are
unaudited. In management's opinion, the consolidated interim
financial statements reflect a fair presentation of the consolidated
financial position of First Keystone Corporation and Subsidiary, and
the results of their operations and their cash flows for the interim
periods presented. Further, the consolidated interim financial
statements reflect all adjustments, which are in the opinion of
management, necessary to present fairly the consolidated financial
condition and consolidated results of operations and cash flows for
the interim period presented and that all such adjustments to the
consolidated financial statements are of a normal recurring nature.
Note 3.
The results of operations for the three-month period ended March
31, 1998, are not necessarily indicative of the results to be expected
for the full year.
Note 4.
Net income per share of common stock for the interim periods is
based on the weighted average number of shares outstanding for each
period; 1998 and 1997 - 2,933,727 shares.
Note 5.
LOANS
Loans are stated at their outstanding principal balances, net of
any deferred fees or costs, unearned income, and the allowance for
loan losses. Interest on installment loans is recognized as income
over the term of each loan, generally, by the "actuarial method".
Interest on other loans is primarily recognized based upon the
principal amount outstanding. Loan origination fees and certain
direct loan origination costs have been deferred and the net amount
amortized using the interest method over the contractual life of the
related loans as an interest yield adjustment.
Non-Accrual Loans - Generally, a loan (including a loan impaired
under Statement of Financial Accounting Standards No. 114) is
classified as non-accrual, and the accrual of interest on such a loan
is discontinued when the contractual payment of principal or interest
has become 90 days past due or management has serious doubts about
further collectibility of principal or interest, even though the loan
currently is performing. A loan may remain on accrual status if it is
in the process of collection and is either guaranteed or well secured.
4
<PAGE>
When a loan is placed on non-accrual status, unpaid interest credited
to income in the current year is reversed and unpaid interest accrued
in prior years is charged against the allowance for credit losses.
Potential problem loans are identified by management as a part of its
loan review process.
Income recognition is in accordance with Statement of Financial
Accounting Standards No. 118. Certain non-accrual loans may continue
to perform, that is, payments are still being received. Generally,
the payments are applied to principal. These loans remain under
constant scrutiny and if performance continues, interest income may be
recorded on a cash basis based on management's judgement as to
collectibility of principal.
Allowance for Loan Losses - The allowance for loan losses is
established through provisions for loan losses charged against income.
Loans deemed to be uncollectible are charged against the allowance for
loan losses, and subsequent recoveries, if any, are credited to the
allowance.
The Corporation adheres to the principles provided by Statement
of Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan as amended by Statement of Financial
Accounting Standards No. 118, "Accounting by creditors for Impairment
of a Loan - Income Recognition and Disclosure." Under these
standards, the allowance for loan losses related to loans that are
identified for evaluation in accordance with Statement No. 114 is
based on discounted cash flows using the loan's initial effective
interest rate or the fair value of the collateral for certain
collateral dependent loans. Statement No. 118 allows the continued
use of existing methods for income recognition on impaired loans and
amends disclosure requirements to require information about the
recorded investment in certain impaired loans and related income
recognition on those loans. The allowance for loan losses is
maintained at a level by management to be adequate to absorb estimated
potential loan losses. Management's periodic evaluation of the
adequacy of the allowance for loan losses is based on the
Corporation's past loan experience, known and inherent risks in the
portfolio, adverse situations that may affect the borrower's ability
to repay (including the timing of future payments), the estimated
value of any underlying collateral, composition of the loan portfolio,
current economic conditions, and other relevant factors. this
evaluation is inherently subjective as it requires material estimates,
including the amounts and timing of future cash flows expected to be
received on impaired loans that may be susceptible to significant
change.
<TABLE>
<CAPTION>
The following table presents the changes in the allowance for
credit losses:
(Amounts in thousands)
<S> <C>
Balance at January 1, 1998 $2,372
Provisions charged off 50
Loans charged off 71
Recoveries 10
Balance at March 31, 1998 $2,361
</TABLE>
At March 31, 1998, the recorded investment in loans that are
considered to be impaired under Statement No. 114 was $68,630. No
additional charge to operations is required since the total allowance
for loan losses is estimated by management to be adequate to provide
for the loan loss allowance under Statement No. 114 as well as any
other potential loan losses.
Note 6.
On January 27, 1998, the Board of Directors approved a 3 for 1
stock split issued in the form of a 200% stock dividend distributed on
March 2, 1998, to shareholders of record on February 10, 1998.
5
<PAGE>
<TABLE>
<CAPTION>
(Amounts in thousands, except common share data)
Common Common
Shares Stock Surplus
<S> <C> <C> <C>
Balance at January 1, 1998 977,909 $1,956 $9,761
Net Income
Cash dividends - $.39
per share
3 for 1 stock split in the
form of a 200% stock
dividend 1,955,818 3,911
Change in unrealized gain
(loss) on investment
securities available
for sale
Balance at March 31, 1998 2,933,727 $5,867 $9,761
<CAPTION>
Net Unrealized
Gain (Loss)
on Investment
Securities
Retained Available
Earnings For Sale Total
<S> <C> <C> <C>
Balance at January 1, 1998 $17,873 $2,228 $31,818
Net Income 1,141
Cash dividends - $.39
per share (411) (411)
3 for 1 stock split in the
form of a 200% stock
dividend (3,911) 0
Change in unrealized gain
(loss) on investment
securities available
for sale (191) (191)
Balance at March 31, 1998 $14,692 $2,037 $32,357
</TABLE>
Note 7.
The consolidated interim financial statements have been prepared
in accordance with requirements of Form 10-Q and therefore does not
include all the disclosures normally required by generally accepted
accounting principles, or those normally made in the Corporation's
annual 10-K filing. The reader of these consolidated interim
financial statements may wish to refer to the Corporation's annual
report or Form 10-K for the period ended December 31, 1997, filed with
the Securities and Exchange Commission.
6
<PAGE>
Item 2. First Keystone Corporation Management's Discussion and
Analysis of Financial Condition and Results of Operation
as of March 31, 1998
RESULTS OF OPERATIONS
First Keystone Corporation realized earnings for the first
quarter of 1998 of $1,141,000, an increase of $18,000, or 1.6% over
the first quarter of 1997. The increase in net income for the first
quarter of 1998 was a result of an increase in net interest income and
an increase in total other income. Other expenses, non-interest
expenses, increased 11.2% in the first quarter of 1998 over 1997
primarily because of expenses relating to our seventh full service
office opening in the fourth quarter of 1997. On a per share basis,
net income per share increased to $.39 for the first three months of
1998 compared to $.38 for the first three months of 1997, while
dividends increased to $.14 per share up from $.11 in 1997, or an
increase of 27.3%.
Year-to-date net income annualized amounts to a return on average
common equity of 14.17% and a return on assets of 1.70%. For the
three months ended March 31, 1997, these measures were 16.13% and
1.83%, respectively on an annualized basis.
NET INTEREST INCOME
The major source of operating income for the Corporation is net
interest income, defined as interest income less interest expense. In
the first quarter of 1998, interest income has increased more than
interest expense resulting in improved net interest income. In the
first quarter of 1998, interest income amounted to $4,952,000, an
increase of $344,000 or 7.5% over the first quarter of 1997, while
interest expense amounted to $2,446,000 in the first quarter of 1998,
an increase of $209,000, or 9.3% over the first quarter of 1997.
Accordingly, net interest income was $2,506,000 in the first quarter
of 1998, an increase of $135,000, or 5.7% over the first quarter of
1997.
Our net interest margin for the quarter ended March 31, 1998, was
4.28% compared to 4.58% for the quarter ended March 31, 1997.
PROVISION FOR LOAN LOSSES
The provision for loan losses for the quarter ended March 31,
1998, was $50,000 compared to $50,000 for the first quarter of 1997.
Net charge-offs totaled $61,000 for the three months ended March 31,
1998, as compared to $22,000 for the first three months of 1997. The
allowance for loan losses as a percentage of loans, net of unearned
interest, was 1.57% as of March 31, 1998, as compared to 1.56% as of
March 31, 1997.
NON-INTEREST INCOME
Total non-interest or other income was $352,000 for the quarter
ended March 31, 1998, as compared to $291,000 for the quarter ended
March 31, 1997, an increase of $61,000, or 21.0%. Excluding
investment security gains and losses, non-interest income was $317,000
for the first quarter of 1998, an increase of $32,000 over the first
quarter of 1997. Increased fees generated by our trust department
and an increase in service charges on deposit accounts, were the
primary reasons for the increase in non-interest income.
7
<PAGE>
NON-INTEREST EXPENSES
Total non-interest, or other expenses, was $1,351,000 for the
quarter ended March 31, 1998, as compared to $1,215,000 for the
quarter ended March 31, 1997. The increase of $136,000 is comprised
of salary and benefits increasing $62,000, occupancy expense
increasing $36,000, and other non-interest expense increasing $38,000.
The increase in non-interest expenses was primarily the result of
increased personnel expenses and overhead expenses associated with the
opening in October 1997 of our seventh full service office.
Expenses associated with employees (salaries and employee
benefits) continue to be the largest category of non-interest
expenses. Salaries and benefits amount to 53.4% of total non-interest
expense for the three months ended March 31, 1998, as compared to
54.2% for the first three months of 1997. Net occupancy expense
amounted to $228,000 for the three-months ended March 31, 1998, an
increase of $36,000, or 18.8% over 1997. Other non-interest expenses
amounted to $402,000 for the three months ended March 31, 1998, an
increase of $38,000, or 10.4% over the first three months of 1997.
Even though our non-interest expenses increased in the first quarter
somewhat more than historic averages, our overall non-interest expense
of less than 2% of average assets on an annualized basis, places us
among the leaders of our peer financial institutions at controlling
total non-interest expense.
INCOME TAXES
Effective tax planning has helped produce favorable net income.
The effective total income tax rate was 21.7% for the first quarter of
1998 as compared to 19.6% for the first quarter of 1997. The
increase in our effective tax rate in the first quarter of 1998 was
due primarily to the limited opportunities to purchase municipal (tax-
free investments) securities at attractive interest rates.
ANALYSIS OF FINANCIAL CONDITION
ASSETS
Total assets increased to $274,824,000 as of March 31, 1998, an
increase of $7,425,000, or 2.8% over year-end 1997. Total deposits
increased to $221,736,000 as of March 31, 1998, an increase of
$4,089,000, or 1.9% over year-end 1997.
The Corporation used borrowed funds to support asset growth not
funded by deposit growth. Short-term and long-term borrowing
increased by 21.3% to $18,323,000 as of March 31, 1998, up from
$15,102,000 at December 31, 1997.
EARNING ASSETS
Our primary earning asset, loans, net of unearned income
decreased to $150,188,000 as of March 31, 1998, down $1,963,000, or
1.3% since year-end 1997. The loan portfolio continues to be well
diversified and management believes increases in the portfolio in 1998
will be primarily from increased originations of real estate loans and
commercial loans secured by real estate.
With the decrease in loans, our investment portfolio increased in
size from December 31, 1997, to March 31, 1998. Held-to-maturity
securities amounted to $16,424,000 as of March 31, 1998, a decrease of
$384,000 from December 31, 1997. However, available-for-sale
securities amounted to $94,223,000 as of March 31, 1998, an increase
of $12,572,000, or 15.4% from year-end 1997. Interest bearing
deposits with banks declined $4,560,000 as of March 31, 1998, compared
to $7,084,000 as of December 31, 1997, as less funds were kept short-
term for liquidity and in anticipation of funding loan commitments.
8
<PAGE>
ALLOWANCE FOR LOAN LOSSES
Management performs a quarterly analysis to determine the
adequacy of the allowance for loan losses. The methodology in
determining adequacy incorporates specific and general allocations
together with a risk/loss analysis on various segments of the
portfolio according to an internal loan review process. Management
maintains its loan review and loan classification standards consistent
with those of its regulatory supervisory authority. Management feels,
considering the conservative portfolio composition, which is largely
composed of small retail loans (mortgages and installments) with
minimal classified assets, low delinquencies, and favorable loss
history, that the allowance for loan loss is adequate to cover
foreseeable future losses.
Any loans classified for regulatory purposes as loss, doubtful,
substandard, or special mention that have not been disclosed under
Industry Guide 3 do not (i) represent or result from trends or
uncertainties which management reasonably expects will materially
impact future operating results, liquidity, or capital resources, or
(ii) represent material credits about which management is aware of any
information which causes management to have serious doubts as to the
ability of such borrowers to comply with the loan repayment terms.
The Corporation was required to adopt Financial Accounting
Standards Board Statement No. 114, "Accounting by Creditors for
Impairment of a Loan" - Refer to Note 5 above for details.
NON-PERFORMING ASSETS
Non-performing assets consist of non-accrual and restructured
loans, together with foreclosed assets. As of March 31, 1998, total
non-performing assets were $774,000 as compared to $350,000 on
December 31, 1997. Non-performing assets to total loans and
foreclosed assets was .51% as of March 31, 1998, and .23% as of
December 31, 1997.
Loans past-due 90 days or more and still accruing amounted to
$486,000 as of March 31, 1998, as compared to $336,000 on December 31,
1997.
Interest income received on non-performing loans as of March 31,
1998, was $891 compared to $7,006 as of December 31, 1997. Interest
income, which would have been recorded on these loans under the
original terms as of March 31, 1998, and December 31, 1997, were
$18,476 and $30,027, respectively. As of March 31, 1998 and December
31, 1997, there was no outstanding commitments to advance additional
funds with respect to these non-performing loans.
DEPOSITS AND OTHER BORROWED FUNDS
As indicated previously, deposit growth amounted to $4,089,000 as
total deposits increased to $221,736,000 as of March 31, 1998, up from
$217,647,000 as of year-end 1997. During 1998, the Corporation has
experienced a decrease in non-interest bearing deposits of $971,000,
while interest bearing deposits increased $5,060,000. The majority of
the increase in interest bearing deposits can be associated with an
increase in certificates of deposit.
CAPITAL STRENGTH
Normal increases in capital are generated by net income, less
cash dividends paid out. Also, net unrealized gains on investment
securities available-for-sale increased shareholders' equity, or
capital by $2,037,000 as of March 31, 1998, and $2,228,000 as of
December 31, 1997.
9
<PAGE>
Leverage ratio and risk based capital ratios remain very strong.
As of March 31, 1998, our leverage ratio was 11.27% as compared to
11.23% as of December 31, 1997. In addition, Tier 1 risk based
capital and total risk based capital ratio as of March 31, 1998, were
19.92% and 21.18%, respectively. The same ratios as of December 31,
1997, were 19.43% and 20.68%, respectively.
LIQUIDITY
The liquidity position of the Corporation remains adequate to
meet customer loan demand and deposit fluctuation. Managing liquidity
remains an important segment of asset liability management. Our
overall liquidity position is maintained by an active asset liability
management committee.
Management feels its current liquidity position is satisfactorily
given a very stable core deposit base which has increased annually.
Secondly, our loan payments and principal paydowns on our mortgage
backed securities provide a steady source of funds. Also, short-term
investments and maturing investment securities represent additional
sources of liquidity. Finally, short-term borrowings are readily
accessible at the Federal Reserve Bank, Atlantic Central Bankers Bank,
or the Federal Home Loan Bank.
YEAR 2000 COMPLIANCE
First Keystone Corporation is in the process of becoming Year
2000 compliant. The expenses for maintenance or modification of
software associated with the Year 2000 will be expensed as incurred.
The costs of new software will be capitalized and amortized over the
its useful life. The cost of becoming 2000 compliant is not expected
to be material. The amount expensed in 1997 was immaterial and the
Corporation does not expect the amounts required to be expensed in
1998 and 1999 to have a material effect on its financial position or
results of operation.
10
<PAGE>
PART II - OTHER INFORMATION
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
Annual Meeting of Shareholders of First Keystone
Corporation held on Tuesday, April 21, 1998, at 9:00
a.m.
<TABLE>
<CAPTION>
Votes Votes
Directors Elected Votes For Against Withheld
<S> <C> <C> <C>
John Arndt 2,446,769 31,851 0
J. Gerald Bazewicz 2,446,769 31,851 0
Robert E. Bull 2,455,394 23,226 0
<CAPTION>
Broker
Directors Elected Abstentions Non-Votes
<S> <C> <C>
John Arndt 0 0
J. Gerald Bazewicz 0 0
Robert E. Bull 0 0
</TABLE>
Directors Continuing:
Budd L. Beyer, term expires in 2000
John L. Coates, term expires in 1999
Dudley P. Cooley, term expires in 1999
Frederick E. Crispin, term expires in 2000
Stanley E. Oberrender, term expires in 1999
Robert E. Wise, term expires in 2000
Matters Voted Upon:
Selection of J. H. Williams & Co., as auditors for the
Corporation. Votes For - 2,451,737
Votes Against - 15,315
Votes Withheld - 0
Abstentions - 11,568
Broker Non-Votes - 0
To amend Article 5 of the Articles of Incorporation to increase the
number of authorized shares of common stock from three million to ten
million shares.
Votes For - 2,376,425
Votes Against - 66,663
Votes Withheld - 0
Abstentions - 35,532
Broker Non-Votes - 0
11
<PAGE>
To approve the First Keystone Corporation 1998 Stock Incentive Plan.
Votes For - 2,309,483
Votes Against - 128,430
Votes Withheld - 0
Abstentions - 40,707
Broker Non-Votes - 0
Item 5. Other Information
3 for 1 Stock Split issued in the form of a 200%
Stock Dividend - refer to Consolidated Notes to
Financial Statements Note 6 appearing on page 5 of
this Form 10-Q.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 Regulation S-K
Exhibit Number Description of Exhibit
3(i) Articles of Incorporation, as amended
(Incorporated by reference to Exhibit 3(i) to
Registrant's Annual Report of Form 10-KSB for
the year ended December 31, 1996.)
3(ii) Bylaws, as amended (Incorporated by reference
to Exhibit 3(ii) to Registrant's Annual Report
on Form 10-KSB for the year ended
December 31, 1996.)
10 Material Contracts (Incorporated by reference
to Exhibit 10 to Registrant's Form 10Q for the
quarter ended June 30, 1997.)
11 Statement RE: Computation of Earnings Per
Share.
27 Financial Data Schedule.
(b) The Registrant has filed no reports on Form 8-K for
this quarter.
12
<PAGE>
FIRST KEYSTONE CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly cause this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
FIRST KEYSTONE CORPORATION
Registrant
May 12, 1998 /s/ J. Gerald Bazewicz
J. Gerald Bazewicz
President and
Chief Executive Officer
(Principal Executive Officer)
May 12, 1998 /s/ David R. Saracino
David R. Saracino
Treasurer/Assistant Secretary
(Principal Accounting Officer)
13
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
10 Material Contracts
Profit Sharing Plan Summary (Incorporated by
reference to Exhibit 10 (Page 16) to
Registrant's Form 10Q for the quarter
ended June 30, 1997)
Deferred Compensation (Incorporated by
reference to Exhibit 10 (Page 17) to
Registrant's Form 10Q for the quarter
ended June 30, 1997)
Other Executive Benefits (Incorporated by
reference to Exhibit 99 (Page 9) of the
Corporation's Annual Report on Form
10-KSB for the year ended December 31,
1996)
Management Incentive Compensation Plan
(Incorporated by reference to Exhibit 10
(Page 18) to Registrant's Form 10Q for
the quarter ended June 30, 1997)
11 Compensation of Earning Per Share
27 Financial Data Schedule
14
EXHIBIT 11
FIRST KEYSTONE CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Quarter Ended March 31,
1998 1997
(Dollars in Thousands)
<S> <C> <C>
Primary
Net Income $ 1,141 $ 1,123
Shares<F1>
Weighted average number of
common shares outstanding 2,933,727 2,933,727
Adjustments - increases or
decreases None None
Weighted average number of
common shares outstanding
as adjusted 2,933,727 2,933,727
Primary earnings per
common share $ .39 $ .38
Assuming full dilution
Net Income $ 1,141 $ 1,123
Shares<F1>
Weighted average number of
common shares outstanding 2,933,727 2,933,727
Adjustments - increases or
decreases None None
Weighted average number of
common shares outstanding
as adjusted 2,933,727 2,933,727
Earnings per common share
assuming full dilution $ .39 $ .38
<FN>
<F1>
Restated to reflect a 3 for 1 stock split issued in the form of a 200%
stock dividend paid in 1998.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 5,757
<INT-BEARING-DEPOSITS> 4,560
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 94,223
<INVESTMENTS-CARRYING> 16,424
<INVESTMENTS-MARKET> 16,483
<LOANS> 150,188
<ALLOWANCE> 2,361
<TOTAL-ASSETS> 274,824
<DEPOSITS> 221,736
<SHORT-TERM> 6,323
<LIABILITIES-OTHER> 2,408
<LONG-TERM> 12,000
0
0
<COMMON> 5,867
<OTHER-SE> 26,490
<TOTAL-LIABILITIES-AND-EQUITY> 274,824
<INTEREST-LOAN> 3,287
<INTEREST-INVEST> 1,561
<INTEREST-OTHER> 104
<INTEREST-TOTAL> 4,952
<INTEREST-DEPOSIT> 2,233
<INTEREST-EXPENSE> 213
<INTEREST-INCOME-NET> 2,506
<LOAN-LOSSES> 50
<SECURITIES-GAINS> 35
<EXPENSE-OTHER> 1,351
<INCOME-PRETAX> 1,457
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,141
<EPS-PRIMARY> .39
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.28
<LOANS-NON> 744
<LOANS-PAST> 486
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 3,326
<ALLOWANCE-OPEN> 2,372
<CHARGE-OFFS> 71
<RECOVERIES> 10
<ALLOWANCE-CLOSE> 2,361
<ALLOWANCE-DOMESTIC> 2,361
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 662
</TABLE>
