FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997, OR
-------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________.
Commission File No. 0-12870.
FIRST WEST CHESTER CORPORATION
(Exact name of Registrant as specified in its charter)
Pennsylvania 23-2288763
------------ ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
9 North High Street, West Chester, Pennsylvania 19380
- ----------------------------------------------- -----
(Address of principal executive office) (Zip code)
(610) 692-1423
--------------
(Registrant's telephone number, including area code)
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
---
The number of shares outstanding of Common Stock of the Registrant as of July 1,
1997 was 2,291,833.
<PAGE>
FIRST WEST CHESTER CORPORATION AND SUBSIDIARIES
INDEX
-----
PAGE
----
Part I. FINANCIAL INFORMATION
Consolidated Statements of Condition
June 30, 1997 and December 31, 1996 3
Consolidated Statements of Income
Three Months and Six Months Ended
June 30, 1997 and 1996 4
Consolidated Statements of Stockholders' Equity 5
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1997 and 1996 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-20
Part II. OTHER INFORMATION
Item 1 - Legal Proceedings
Item 2 - Changes in Securities
Item 3 - Defaults upon Senior Securities
Item 4 - Submission of Matters to Vote of Security Holders
Item 5 - Other Information
Item 6 - Exhibits and Reports on Form 8-K 21-22
Signatures 23
<PAGE>
FIRST WEST CHESTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
(Dollars in thousands) Unaudited
June 30, December 31,
1997 1996
------------ ------------
ASSETS
<S> <C> <C>
Cash and due from banks $ 21,227 $ 21,956
Federal funds sold 8,600 3,800
Total cash and cash equivalents 29,827 25,756
-------- --------
Interest bearing deposits with banks - 1,000
Investment securities held-to-maturity (market value of $12,809 and $15,749
at June 30, 1997 and December 31,
1996, respectively) 12,779 15,667
Investment securities available-for-sale, at fair value 61,489 82,008
Loans 306,375 264,582
Less allowance for possible loan losses (5,653) (5,218)
-------- --------
Net loans 300,722 259,364
Premises and equipment, net 6,652 6,752
Other assets 6,546 7,137
-------- --------
TOTAL ASSETS $ 418,015 $ 397,684
======== ========
LIABILITIES
Deposits
Non-interest bearing $ 60,505 $ 63,591
Interest bearing 302,204 287,675
-------- --------
Total deposits 362,709 351,266
Securities sold under repurchase agreements 8,385 7,943
Federal Home Loan Bank Advances 6,433 -
Other liabilities 5,962 5,300
-------- --------
Total liabilities 383,489 364,509
-------- --------
STOCKHOLDERS' EQUITY
Common stock, par value $1-authorized, 5,000,000 shares, Issued, 2,399,833
and 1,799,941 at June 30, 1997 and
December 31, 1996 respectively; 2,400 1,800
Additional paid-in capital 2,714 3,305
Retained earnings 31,495 30,133
Net unrealized loss on securities available-for-sale (327) (242)
Treasury stock, at cost: 108,000 shares and 84,000 shares at
June 30, 1997 and December 31, 1996, respectively; (1,756) (1,821)
-------- --------
Total stockholders' equity 34,526 33,175
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 418,015 $ 397,684
======== ========
Book Value Per Share $15.06 $14.50
===== =====
The accompanying notes are an integral part of these statements.
</TABLE>
3
<PAGE>
FIRST WEST CHESTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in thousands - except per share data) Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- ------------------
1997 1996 1997 1996
---- ---- ---- ----
INTEREST INCOME
<S> <C> <C> <C> <C>
Loans, including fees $6,680 $5,652 $12,833 $11,208
Investment securities 1,331 1,487 2,806 2,924
Federal funds sold 61 202 85 422
Deposits in banks -- 15 12 18
----- ----- ------ ------
Total interest income 8,072 7,356 15,736 14,572
----- ----- ------ ------
INTEREST EXPENSE
Deposits 3,163 2,957 6,141 5,916
Securities sold under repurchase agreements 68 78 132 160
Other borrowings 111 -- 175 --
----- ----- ------ ------
Total interest expense 3,342 3,035 6,448 6,076
----- ----- ------ ------
Net interest income 4,730 4,321 9,288 8,496
Provision for loan losses 446 276 656 552
----- ----- ------ ------
Net interest income after provision
for possible loan losses 4,284 4,045 8,632 7,944
----- ----- ------ ------
NON-INTEREST INCOME
Financial Management Services 500 453 1,000 905
Service charges on deposit accounts 249 219 480 420
Other 157 255 326 434
----- ----- ------ ------
Total non-interest income 906 927 1,806 1,759
----- ----- ------ ------
NON-INTEREST EXPENSE
Salaries and employee benefits 2,018 1,950 4,054 3,852
Net occupancy and equipment 702 653 1,473 1,222
FDIC deposit insurance 11 1 21 1
Bank shares tax 85 77 170 154
Other 851 663 1,572 1,372
----- ----- ------ ------
Total non-interest expense 3,667 3,344 7,290 6,601
----- ----- ------ ------
Income before income taxes 1,523 1,628 3,148 3,102
INCOME TAXES 394 532 919 1,006
----- ----- ------ ------
NET INCOME $1,129 $1,096 $ 2,229 $ 2,096
===== ===== ====== ======
PER SHARE DATA
Net income $0.49 $0.48 $0.97 $0.92
==== ==== ==== ====
Dividends declared $0.19 $0.17 $0.38 $0.34
==== ==== ==== ====
Weighted average shares outstanding 2,307,432 2,290,430 2,304,231 2,287,652
========= ========= ========= =========
The accompanying notes are an integral part of these statements.
</TABLE>
4
<PAGE>
FIRST WEST CHESTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996
-------- --------
<S> <C> <C>
Balance at January 1, $33,175 $30,692
Net income to date 2,229 2,096
Cash dividends declared (867) (788)
Net unrealized gain (loss) on securities available-for-sale (85) (648)
Treasury stock transactions 65 --
Paid in capital from treasury stock transactions 9 --
------ ------
Balance at June 30, $34,526 $31,352
====== ======
The accompanying notes are an integral part of these statements.
</TABLE>
5
<PAGE>
FIRST WEST CHESTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
(Dollars in thousands) 1997 1996
------------ --------
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $ 2,229 $ 2,096
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 498 345
Provision for loan losses 656 552
Amortization of investment security premiums
and accretion of discounts 22 113
Amortization of deferred fees on loans 84 17
Investment securities (gains) losses, net 14 --
(Decrease) increase in other assets 635 (349)
Increase in other liabilities 662 675
-------- --------
Net cash provided by operating activities 4,800 3,449
-------- --------
INVESTING ACTIVITIES
(Increase) decrease in interest bearing deposits in banks 1,000 (1,000)
Increase in loans (42,099) (6,029)
Proceeds from sales of investment securities available-for-sale 24,606 --
Proceeds from sales of investment securities held-to-maturity -- --
Proceeds from maturities of investment securities available-for-sale 6,521 9,103
Proceeds from maturities of investment securities held-to-maturity 2,909 8,083
Purchases of investment securities available-for-sale (10,793) (21,704)
Purchases of investment securities held-to-maturity -- (999)
Purchase of premises and equipment, net (398) (1,019)
-------- --------
Net cash used in investing activities (18,254) (13,565)
-------- --------
FINANCING ACTIVITIES
Increase in Federal Home Loan Bank advances 6,433 --
Increase (decrease) in deposits 11,443 (2,156)
Increase in securities sold under repurchase agreements 442 83
Cash dividends (867) (839)
Treasury stock transactions 74 --
-------- --------
Net cash provided (used in) by financing activities 17,525 (2,912)
-------- --------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS 4,071 (13,028)
Cash and cash equivalents at beginning of period 25,756 44,644
-------- --------
Cash and cash equivalents at end of period $ 29,827 $ 31,616
======== ========
The accompanying notes are an integral part of these statements.
</TABLE>
6
<PAGE>
FIRST WEST CHESTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary for a
fair presentation of the financial position and the results of
operations for the interim period presented have been included. For
further information, refer to the consolidated financial statements
and footnotes thereto included in First West Chester Corporation and
Subsidiaries' (the "Corporation") Annual Report on Form 10-K for the
year ended December 31, 1996.
2. The results of operations for the three-month and six-month periods
ended June 30, 1997 and 1996 are not necessarily indicative of the
results to be expected for the full year.
3. Per share data is based on the weighted average number of shares of
common stock outstanding during the period. All per share data in
this report has been restated to reflect the stock split in the form
of a 331/3% stock dividend, declared on February 20, 1997 to
shareholders of record on March 21, 1997 and paid on April 21, 1997.
4. The Financial Accounting Standards Board issued a new standard, SFAS
128, "Earnings per Share", which is effective for financial
statements issued after December 15, 1997. Early adoption of the new
standard is not permitted. The new standard eliminates primary and
fully diluted earnings per share and requires presentation of basic
and diluted earnings per share together with disclosure of how the
per share amounts were computed. Basic earnings per share excludes
dilution and is computed by dividing income available to common
shareholders by the weighted-average common shares outstanding for
the period. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue
common stock were exercised and converted into common stock or
resulted in the issuance of common stock that then shared in the
earnings of the entity. The adoption of this new standard is not
expected to have a material impact on the disclosure of earnings per
share in the financial statements.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
EARNINGS SUMMARY AND HIGHLIGHTS
Net income for the three-month period ended June 30, 1997 was $1.13
million, an increase of $33 thousand or 3.0% from $1.10 million in the
three-month period ended June 30, 1996. Net income for the six-month period
ended June 30, 1997 was $2.23 million, an increase of $133 thousand or 6.3% from
$2.10 million in the six-month period ended June 30, 1996. Increases in net
income are primarily the result of increases in net interest income and a
reduction in the effective tax rate, partially offset by higher loan loss
provisions and increases in operating expenses. The lower effective tax rate
results from expected tax credits relating to a community development project.
For further information see the section titled "Income Taxes." Earnings per
share for the three- and six-month periods ended June 30, 1997 were $0.49 and
$0.97 per share, respectively, increases of $0.01 and $0.05 per share compared
to the same periods in 1996, respectively.
Cash dividends declared during the second quarter of 1997 increased to
$0.19 per share, an 11.8% increase compared to $0.17 per share in the second
quarter of 1996. On a year-to-date basis, cash dividends increased to $0.38 per
share, an 11.8% increase compared to $0.34 per share in the same period of 1996.
Over the past ten years, the Corporation's practice has been to pay a dividend
of at least 35.0% of net income.
The "Consolidated Average Balance Sheet" on pages 9 and 10 may assist the reader
in following this discussion.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ----------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
SELECTED RATIOS
Return on Average Assets 1.10% 1.14% 1.10% 1.09%
Return on Average Equity 13.31% 14.08% 13.24% 13.53%
Earnings Retained 61.20% 64.05% 61.10% 62.40%
Dividend Payout Ratio 38.80% 35.95% 38.90% 37.60%
Book Value Per Share $15.06 $13.73 $15.06 $13.73
</TABLE>
NET INTEREST INCOME
Net interest income is the difference between interest income on
earning assets and interest expense on interest-bearing liabilities. Net
interest income for the three- and six-month periods ended June 30, 1997, on a
tax equivalent basis, was $4.80 million and $9.41 million, compared to $4.38
million and $8.61 million for the same periods in 1996, respectively. Net yields
on interest earning assets, on a tax equivalent basis, were 4.97% for both the
three- and six-month periods ended June 30, 1997 compared to 4.86% and 4.80% for
the same periods in 1996, respectively. Average interest earning assets
increased approximately $25.6 million to $386.0 million during the second
quarter of 1997 from $360.5 million in the same period last year. The increase
in average earning assets was a direct result of strong loan demand in all
areas, particularly our third party automobile loan and lease programs. The
increase in earning asset yields was a result of changes in the earning asset
mix. Although the net yield on earning assets has increased during the six month
period ended June 30, 1997 over the same period in 1996, the Corporation
anticipates continued pressure on the net interest margin as competition for new
loan business remains very strong and incremental deposit growth becomes more
expensive.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CONSOLIDATED AVERAGE BALANCE SHEET
AND TAXABLE EQUIVALENT INCOME/EXPENSE AND RATES FOR THE
THREE MONTHS ENDED JUNE 30,
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996
---------------------------------- ---------------------------------
Daily Daily
Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Federal funds sold $ 4,389 $ 61 5.56% $ 14,954 $ 200 5.35%
Interest bearing deposits in banks -- -- -- 1,000 15 6.00%
Investment securities
Taxable 79,753 1,301 6.53% 94,023 1,455 6.19%
Tax-exempt (1) 2,375 41 6.91% 2,471 43 6.96%
------- ----- ------- -----
Total investment securities 82,128 1,342 6.54% 96,494 1,498 6.21%
------- ----- ------- -----
Loans (2)
Taxable 289,905 6,528 9.01% 241,388 5,531 9.17%
Tax-exempt (1) 9,649 209 8.66% 6,666 166 9.96%
------- ----- ------- -----
Total loans 299,554 6,737 9.00% 248,054 5,697 9.19%
------- ----- ------- -----
Total interest earning assets 386,071 8,140 8.43% 360,502 7,410 8.22%
Non-interest earning assets
Allowance for possible loan losses (5,436) (4,745)
Cash and due from banks 18,453 16,688
Other assets 13,241 12,957
------- -------
Total assets $412,329 $385,402
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Savings, NOWS & money market deposits $174,556 $ 1,362 3.12% $168,013 $ 1,292 3.08%
Certificates of deposits and other time 125,283 1,801 5.75% 117,232 1,664 5.68%
------- ------ ------- ------
Total interest bearing deposits 299,839 3,163 4.22% 285,245 2,956 4.15%
Securities sold under repurchase agreements 8,313 68 3.27% 9,507 77 3.24%
Federal Home Loan Bank Advances 6,775 105 6.20% -- -- --
Other borrowings 402 6 5.97% -- -- --
------- ------ ------- ------
Total interest bearing liabilities 315,329 3,342 4.24% 294,752 3,033 4.12%
------- ------ ------- ------
Non-interest bearing liabilities
Non-interest bearing demand deposits 57,180 54,247
Other liabilities 5,892 5,267
-------- --------
Total liabilities 378,401 354,266
Stockholders' equity 33,928 31,136
-------- --------
Total liabilities and stockholders' equity $ 412,329 $ 385,402
======== ========
Net interest income $ 4,798 $ 4,377
====== ======
Net yield on interest earning assets 4.97% 4.86%
==== ====
<FN>
(1) The indicated income and annual rate are presented on a taxable equivalent
basis using the Federal marginal rate of 34% adjusted for the 20% interest
expense disallowance for 1997 and 1996.
(2) Non-accruing loans are included in the average balance.
</FN>
</TABLE>
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CONSOLIDATED AVERAGE BALANCE SHEET
AND TAXABLE EQUIVALENT INCOME/EXPENSE AND RATES FOR THE
SIX MONTHS ENDED JUNE 30,
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996
----------------------------------------------------------------------
Daily Daily
Average Average
Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Federal funds sold $ 3,124 $ 85 5.44% $ 15,613 $ 421 5.39%
Interest bearing deposits in banks 398 12 6.03% 593 18 6.07%
Investment securities
Taxable 84,410 2,745 6.50% 93,294 2,860 6.13%
Tax-exempt (1) 2,437 84 6.89% 2,554 88 6.89%
------- ------ ------- ------
Total investment securities 86,847 2,829 6.51% 95,848 2,948 6.15%
Loans (2)
Taxable 279,279 12,554 8.99% 239,699 10,964 9.15%
Tax-exempt (1) 8,933 383 8.57% 6,697 335 10.00%
------- ------ ------- ------
Total loans 288,212 12,937 8.98% 246,396 11,299 9.17%
------- ------ ------- ------
Total Interest Earning Assets 378,581 15,863 8.38% 358,450 14,686 8.19%
Non-interest earning assets
Allowance for possible loan losses (5,356) (4,676)
Cash and due from banks 18,035 16,421
Other assets 13,474 12,673
------- -------
Total assets $404,734 $382,868
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Savings, NOWS & money market deposits $173,079 $ 2,687 3.10% $165,862 $ 2,570 3.10%
Certificates of deposits and other time 121,802 3,454 5.67% 117,381 3,346 5.70%
------- ------- ------- -------
Total interest bearing deposits 294,881 6,141 4.17% 283,243 5,916 4.18%
Securities sold under repurchase agreements 8,113 132 3.25% 9,782 160 3.27%
Federal Home Loan Bank Advances 5,432 165 6.08% -- -- --
Other borrowings 390 11 5.64% -- -- --
------- ------- ------- -------
Total interest bearing liabilities 308,816 6,449 4.18% 293,025 6,076 4.15%
------- ------- ------- -------
Non-interest bearing liabilities
Non-interest bearing demand deposits 56,336 53,683
Other liabilities 5,905 5,172
------- -------
Total liabilities 371,057 351,880
Stockholders' equity 33,677 30,988
------- -------
Total liabilities and stockholders' equity $404,734 $382,868
======= =======
Net interest income $ 9,414 $ 8,610
====== =======
Net yield on interest earning assets 4.97% 4.80%
===== =====
<FN>
(1) The indicated income and annual rate are presented on a taxable equivalent
basis using the Federal marginal rate of 34% adjusted for the 20% interest
expense disallowance for 1997 and 1996.
(2) Non-accruing loans are included in the average balance.
</FN>
</TABLE>
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
AVERAGE INTEREST RATES (ON A TAX EQUIVALENT BASIS)
<TABLE>
<CAPTION>
Three-Months Six-Months
Yield On: Ended June 30, Ended June 30,
--------- ------------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest Earning Assets 8.43% 8.22% 8.38% 8.19%
Interest Bearing Liabilities 4.24% 4.12% 4.18% 4.15%
---- ---- ---- ----
Net Interest Spread 4.19% 4.10% 4.20% 4.04%
Contribution of Interest Free Funds 0.78% 0.76% 0.77% 0.76%
---- ---- ---- ----
Net Yield on Interest Earning Assets 4.97% 4.86% 4.97% 4.80%
==== ==== ==== ====
</TABLE>
INTEREST INCOME ON FEDERAL FUNDS SOLD
Interest income on federal funds sold for the three- and six-month
periods ended June 30, 1997, decreased $139 thousand and $336 thousand to $61
thousand and $85 thousand, respectively, when compared to the same periods in
1996. The decrease in federal funds interest income for the three- and six-
month periods ended June 30, 1997 is primarily the result of a $10.6 million and
$12.5 million decrease in average balances, partially offset by a 21 and 5 basis
point (a basis point equals one hundredth of one percent) increase in rates
compared to the same periods in 1996, respectively. The decrease in average
balances is attributable to the continued strength in loan demand through the
six month period ended June 30, 1997.
INTEREST INCOME ON INVESTMENT SECURITIES
On a tax equivalent basis, interest income on investment securities
decreased $156 thousand and $119 thousand for the three- and six-month periods
ended June 30, 1997 to $1.34 million and $2.83 million, respectively, when
compared to the same periods in 1996. The decrease for the three- and six-month
period is primarily due to a decrease in average balances of $14.37 million and
$9.00 million, partially offset by 33 and 36 basis point increases in the yield
earned on securities compared to the same periods last year, respectively.
Proceeds from net investment securities sales and maturities have been used to
fund loan growth over the last two quarters.
INTEREST INCOME ON LOANS
Loan interest income, on a tax equivalent basis, generated by the
Corporation's loan portfolio increased $1.04 million and $1.64 million to $6.74
million and $12.94 million for the three- and six-month periods ended June 30,
1997, compared to the same periods in 1996, respectively. The increase in
interest income on loans for the three- and six-month period ended June 30,1997
is attributable to a $51.50 million and $41.82 million increase in average loans
outstanding respectively, partially offset by a 19 basis point decrease in rates
earned for both time periods. The decrease in the loan portfolio yield is a
direct result of increased competition for new and existing loan relationships
and volume increases in lower yielding automobile related loans and leases.
There has been a noticeable increase in pricing and fee competition on large
(over $500,000) loans (new and renewals) during the past 18 months. It is
anticipated that this pricing pressure will continue to reduce overall loan
yields and net interest margins.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTEREST EXPENSE ON DEPOSIT ACCOUNTS
Interest expense on deposit accounts increased $207 thousand and $225
thousand for the three- and six-month periods ended June 30, 1997 to $3.16
million and $6.14 million, compared to the same periods in 1996. The increase
for the three month period ended June 30, 1997 is the result of increases in
average interest-bearing deposits of $14.59 million, and a 7 basis point
increase in the rates paid on interest-bearing deposits. The increase for the
six month period ended June 30, 1997 is the result of an increase in average
interest-bearing deposits of $11.6 million, partially offset by a 1 basis point
decrease in rates paid on interest-bearing deposits.
The Corporation's effective rate on interest-bearing deposits increased
from 4.15% in the second quarter 1996 to 4.22% in the second quarter 1997.
Competition for deposits from credit unions and non-banking institutions such as
mutual fund companies continues to grow. The slow growth rates for interest
bearing and non-interest bearing deposits are expected to continue for future
time periods. The Bank is considering opening new branches in order to attract
new deposits.
INTEREST EXPENSE ON SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
Interest expense on securities sold under repurchase agreements
decreased $9 thousand and $28 thousand to $68 thousand and $132 thousand for the
three- and six-month periods ended June 30, 1997, respectively, compared to the
same periods in 1996. The decreases are primarily attributable to $1.19 million
and $1.67 million decreases in average securities sold under repurchase
agreements outstanding compared to the three- and six-month periods ended June
30, 1996, respectively.
INTEREST EXPENSE ON BORROWINGS
Interest expense on borrowings was $111 thousand and $176 thousand for
the three- and six-month periods ended June 30, 1997, respectively. There were
no borrowings during the first and second quarters of 1996. The need for
borrowings is the result of strong loan demand out pacing increases in deposits.
Borrowings consist of overnight Fed Funds purchased, FHLB FlexLine, and FHLB
term advances.
PROVISION FOR POSSIBLE LOAN LOSSES
During the three- and six-month periods ended June 30, 1997, the
Corporation recorded a $446 thousand and a $656 thousand provision for possible
loan losses compared to $276 thousand and $552 thousand for the same periods in
1996. The increased provisions in 1997 are a direct result of increased loan
activity and are not indicative of loan quality. The allowance for possible loan
losses as a percentage of total loans was 1.85% as of June 30, 1997 compared to
1.97% and 1.95% as of December 31, 1996 and June 30, 1996, respectively. See the
section titled "Allowance For Possible Loan Losses" for additional discussion.
NON-INTEREST INCOME
Total non-interest income decreased $21 thousand and increased $47
thousand to $906 thousand and $1.81 million for the three- and six-month periods
ended June 30, 1997, respectively, compared to the same periods in 1996. The
primary component of non-interest income is Financial Management Services
revenue, which increased $47 thousand and $95 thousand to $500 thousand and
$1.00 million for the three- and six-month periods ended June 30, 1997,
respectively, compared to the same periods in 1996. The market value of
Financial Management Services' assets increased $46.3 million to $307.6 million
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
at June 30, 1997 from $261.3 million at June 30, 1996. The growth in Financial
Management Services' assets under management and revenues is primarily the
result of market appreciation and new account relationships.
Service charges on deposit accounts increased $30 thousand and $60
thousand to $249 thousand and $480 thousand for the three- and six-month period
ended June 30, 1997, respectively, compared to the same periods in 1996. The
increases relate to more effective enforcement of service charge policies.
Other non-interest income decreased $98 thousand and $108 thousand to
$157 thousand and $326 thousand for the three- and six-month periods ended June
30, 1997 compared to the same periods in 1996. Second quarter and Year-to-date
1996 other non-interest income figures include a $135 thousand net gain from the
sale of property owned by the Corporation's subsidiary, 323 East Gay Street
Corp.
NON-INTEREST EXPENSE
Total non-interest expense for the three- and six-month periods ended
June 30, 1997 was $3.67 million and $7.29 million, increases of $323 thousand
and $689 thousand from $3.34 million and $6.60 million for the same periods in
1996. The various components of non-interest expense changes are discussed
below.
Salaries and employee benefits increased $68 thousand and $202 thousand
for the three- and six-month periods ended June 30, 1997 to $2.02 million and
$4.05 million compared to the same periods in 1996, respectively. Annual
employee raises and a staff increase from 182 full-time equivalents (FTE's)
employees in the second quarter of 1996 to 190 FTE's in the second quarter of
1997 are responsible for the increase. These staffing increases reflect
additions to the Corporation's sales, marketing and related staff. The
Corporation also experienced proportionate increases in employee benefits.
Net occupancy, equipment, and data processing expense was $702 thousand
and $1.47 million for the three- and six-month periods ended June 30, 1997,
representing increases of $49 thousand and $251 thousand over the same periods
last year, respectively. The increases in the first half of 1997 are a direct
result of increased costs associated with the opening of our new mortgage
center, renovations to the Financial Management Services building and the
depreciation on the new teller on-line system and document imaging system.
The FDIC's Bank Insurance Fund ("BIF") insurance assessment was $0 for
the three- and six-month periods ended June 30, 1997, compared to $1 thousand
for each of the same periods last year. Effective January 1, 1997, in accordance
with the Deposit Insurance Act of 1996 an additional assessment by the Financing
Corporation ("FICO") became applicable to all insured institutions. This
assessment is not tied to the FDIC risk classification. The BIF FICO assessment
will be 1.296 basis points per $100 in deposits for 1997. For the three- and
six-month periods ended June 30, 1997, the Bank's assessments for the BIF FICO
were $11 thousand and $21 thousand, respectively.
Bank shares tax was $85 thousand and $170 thousand for the three- and
six-month period ended June 30, 1997, increases of $8 thousand and $16 thousand
over the same periods last year, respectively. The Pennsylvania Bank Shares Tax
is calculated on quarter-end Bank stockholders' equity and paid annually.
Other non-interest expense increased $188 thousand and $200 thousand
for the three- and six-month periods ended June 30, 1997 to $851 thousand and
$1.57 million, compared to the same periods in 1996, respectively.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
These increases are primarily the result of a $100 thousand accrual to comply
with a conciliation agreement with the United States Department of Labor's
Office of Federal Contract Compliance Program. Additionally, increases are
attributed to additional operating expenses associated with increased staff and
premises.
INCOME TAXES
Income tax expense for the three- and six-month periods ended June 30,
1997 was $394 thousand and $919 thousand, compared to $532 thousand and $1,006
thousand in the same periods last year. This represents effective tax rates of
25.9% and 29.2% for the three- and six-month periods ended June 30, 1997,
compared with 32.7% and 32.4% for the same periods in 1996, respectively.
Effective tax rates were reduced to account for an expected 1997 historic
rehabilitation tax credit of approximately $198 thousand. The tax credit is the
result of an investment the Bank made in a local community development project.
This tax credit was not used in the first quarter's tax calculation due to
uncertainties relating to the completion date of the project. If the effective
tax rate of 29.0% was applied for the three-month period ended June 30, 1997,
income tax expenses would have been $442 thousand or $48 thousand higher.
Additionally there has been an increase in tax-exempt instruments as a
percentage of total assets. Average tax-exempt assets as a percentage of total
average assets were 2.81% and 2.42% at June 30, 1997 and 1996, respectively.
LIQUIDITY MANAGEMENT AND INTEREST RATE SENSITIVITY
The objective of liquidity management is to ensure the availability of
sufficient cash flows to meet all financial commitments and to capitalize on
opportunities for business expansion. Liquidity management addresses the
Corporation's ability to meet deposit withdrawals either on demand or at
contractual maturity, to repay borrowings as they mature and to make new loans
and investments as opportunities arise. Liquidity is managed on a daily basis
enabling Senior Management to effectively monitor changes in liquidity and to
react accordingly to fluctuations in market conditions. The primary source of
liquidity for the Corporation is its available-for-sale portfolio of liquid
investment grade securities. Funding sources include NOW, money-market, savings,
and smaller denomination certificates of deposit accounts. The Corporation
considers funds from such sources to comprise its "core" deposit base because of
the historical stability of such sources of funds. Additional liquidity comes
from the Corporation's non-interest bearing demand deposit accounts. Other
deposit sources include a three-tiered savings product and certificates of
deposit in excess of $100,000. Details of core deposits, non-interest bearing
demand deposit accounts and other deposit sources are highlighted in the
following table:
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DEPOSIT ANALYSIS
<TABLE>
<CAPTION>
(Dollars in thousands) June 30, 1997 December 31, 1996 Average Balance
------------------------ ------------------------- ------------------------
Average Effective Average Effective Dollar Percentage
DEPOSIT TYPE Balance Yield Balance Yield Variance Variance
- ------------ ------- --------- --------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
NOW Accounts $ 51,630 2.18% $ 47,984 2.20% $ 3,646 7.60%
Money Market 28,685 3.12 28,974 3.09 (289) (1.00)
Statement Savings 49,861 3.28 48,834 3.24 1,027 2.10
Other Savings 3,199 2.69 4,222 2.75 (1,023) (24.23)
CD's Less than $100,000 106,408 5.73 102,566 5.76 3,842 3.75
------- ------- ------
Total Core Deposits 239,783 4.10 232,580 4.11 7,203 3.10
Non-Interest Bearing
Demand Deposit Accounts 56,336 -- 55,018 -- 1,318 2.40
------- ------- ------
Total Core and Non-Interest
Bearing Deposits 296,119 -- 287,598 -- 8,521 2.96
Tiered Savings 39,704 4.10 38,514 4.11 1,190 3.09
CD's Greater than $100,000 15,392 5.31 12,677 5.36 2,715 21.42
------- ------- ------
Total Deposits $351,215 -- $338,789 -- $12,426 3.67
======= ======= ======
</TABLE>
The Bank, as a member of the Federal Home Loan Bank ("FHLB"), maintains
an $8.0 million line of credit secured by the Bank's mortgage related assets. As
of June 30, 1997, the amount outstanding on this line of credit was $0. In
addition to the line of credit, the Bank has additional borrowing capacity at
the FHLB of approximately $90 million. FHLB advances as of June 30, 1997
consisted of $6.4 million in term advances, which represent a combination of
maturities ranging from 9 months to 10 years.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The goal of interest rate sensitivity management is to avoid
fluctuating net interest margins, and to enhance consistent growth of net
interest income through periods of changing interest rates. Such sensitivity is
measured as the difference in the volume of assets and liabilities in the
existing portfolio that are subject to repricing in a future time period. The
Corporation's net interest rate sensitivity gap within one year is a negative
$121 million or 29% of total assets at June 30, 1997, compared with negative
$76.3 million and negative 19.7% at June 30, 1996, respectively. The
Corporation's gap position is one factor used to evaluate interest rate risk and
the stability of net interest margins. Other factors include computer
simulations of what might happen to net interest income under various interest
rate forecasts and scenarios. Management monitors interest rate risk as a
regular part of bank operations with the intention of maintaining a stable net
interest margin.
INTEREST SENSITIVITY ANALYSIS
AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
(Dollars in thousands)
One Over
Within through five Non-rate
one year five years years sensitive Total
-------- ---------- ----- --------- -----
<S> <C> <C> <C> <C> <C>
ASSETS
Federal funds sold $ 8,600 $ -- $ -- $ -- $ 8,600
Investment securities 12,136 37,077 25,055 -- 74,268
Interest bearing deposits in banks -- -- -- -- --
Loans and leases 131,303 157,725 17,347 (5,653) 300,722
Cash and cash equivalents -- -- -- 21,227 21,227
Premises & equipment -- -- -- 6,652 6,652
Other assets -- -- -- 6,546 6,546
-- -- -- ----------- ----------
Total assets $ 152,039 $ 194,802 $ 42,402 $ 28,772 $ 418,015
========== ========== ========== =========== ==========
LIABILITIES AND CAPITAL
Non-interest bearing deposit $ -- $ -- $ -- $ 60,505 $ 60,505
Interest bearing deposits 260,793 41,221 190 -- 302,204
FHLB Term Advance 3,950 -- 2,483 -- 6,433
Borrowed funds 8,385 -- -- -- 8,385
Other liabilities -- -- -- 5,962 5,962
Capital -- -- -- 34,526 34,526
-- ---------- ---------- ----------- ----------
Total liabilities & capital $ 273,128 $ 41,221 $ 2,673 $ 100,993 $ 418,015
========== ========== ========== =========== ==========
Net interest rate
sensitivity gap $ (121,089) $ 153,581 $ 39,729 $ (72,221) $ --
========== ========== ========== =========== ==========
Cumulative interest rate
sensitivity gap $ (121,089) $ 32,492 $ 72,221 $ -- $ --
========== ========== ========== =========== ==========
Cumulative interest rate
sensitivity gap divided
by total assets (29.0%) 7.8% 17.3%
========== ========== ==========
</TABLE>
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses is an amount that management
believes will be adequate to absorb possible loan losses on existing loans that
may become uncollectible based on evaluations of the collectibility of loans.
The evaluations take into consideration such factors as changes in the nature
and volume of the loan portfolio, overall portfolio quality, adequacy of
collateral, review of specific problem loans, and current economic conditions
that may affect the borrower's ability to pay.
ANALYSIS OF CHANGES IN THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
AND COMPARISON OF LOANS OUTSTANDING
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
------------------------ ----------------------
(Dollars in thousands) 1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Balance at beginning of period $ 5,387 $ 4,667 $ 5,218 $ 4,506
------- ------- ------- ------
Provision charged to operating expense 446 276 656 552
------- ------- ------- ------
Recoveries of loans previously charged-off 42 5 69 38
Loans charged-off (222) (117) (290) (265)
------- ------- ------- ------
Net loans charged-off (180) (112) (221) (227)
------- ------- ------- ------
Balance at end of period $ 5,653 $ 4,831 $ 5,653 $ 4,831
======= ======= ======= ======
Period-end loans outstanding 306,375 $248,372 $306,375 $248,372
Average loans outstanding 299,554 $248,054 $288,212 $246,396
Ratio of net charge-offs to average loans
outstanding 0.06% 0.05% 0.08% 0.05%
</TABLE>
Non-performing loans include loans on non-accrual status and loans past
due 90 days or more and still accruing. The Bank's policy is to write down all
non-performing loans to net realizable value based on updated appraisals.
Non-performing loans are generally collateralized by real estate and are in the
process of collection. Management is not aware of any loans other than those
included in the following table that would be considered potential problem loans
and cause management to have doubts as to the borrower's ability to comply with
loan repayment terms. The reduction in the current levels of non-performing
assets from year end 1996 levels can primarily be attributed to two items: A
loan for $1.2 million was assumed by another borrower and brought current; and a
$600 thousand asset, classified as OREO, was sold. At June 30, 1997 there were
no concentration of loans exceeding 10% of total loans which are not otherwise
disclosed.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
NON-PERFORMING LOANS AND ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
------------------------ ------------
(Dollars in thousands) 1997 1996 1996
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Past due over 90 days and still accruing $ 740 $ 621 $ 2,772
Non-accrual loans 1,089 681 713
------ ------ ------
Total non-performing loans 1,829 1,302 3,485
Other real estate owned 851 1,447 1,274
------ ------ ------
Total non-performing assets $ 2,680 $ 2,749 $ 4,759
====== ====== ======
Non-performing loans as a percentage
of total loans 0.60% 0.52% 1.32%
Allowance for possible loan losses as a
percentage of non-performing loans 309.08% 371.04% 149.7%
Allowance for possible loan losses as a
percentage of non-performing assets 210.9% 175.7% 109.6%
Allowance for possible loan losses as a
percentage of period-end loans outstanding 1.85% 1.96% 1.97%
</TABLE>
The allowance for possible loan losses as a percentage of
non-performing loans ratio indicates that the allowance for possible loan losses
is sufficient to cover the principal of all non-performing loans at June 30,
1997. Other Real Estate Owned ("OREO") represents residential and commercial
real estate that has been written down to realizable value (net of estimated
disposal costs) based on professional appraisals. Management intends to
liquidate OREO in the most expedient and cost-effective manner. This process
could take up to twenty-four months, although swifter disposition is
anticipated.
LOAN IMPAIRMENT
In accordance with FAS 114, the Bank identifies certain loans as
impaired when it is probable that interest and principal will not be collected
according to the contractual terms of the loan agreement. The accrual of
interest is discontinued in such loans and no income is recognized until all
recorded amounts of interest and principal are recovered in full. These loans
are included in the non-accrual loans total in the above analysis.
Loan impairment is measured by estimating the expected future cash
flows and discounting them at the respective effective interest rate or by
valuing the underlying collateral. The recorded investment in these loans and
the valuation for credit losses related to loan impairment are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) June 30, 1997 June 30, 1996 December 31, 1996
------------- ------------- -----------------
<S> <C> <C> <C>
Principal amount of impaired loans $ 706 $ 422 $ 443
Less valuation allowance 318 406 419
---- ---- ----
$ 388 $ 16 $ 24
==== ==== ====
</TABLE>
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The activity in the valuation allowance for the three- and six-month periods
ended June 30, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
June 30,1997 June 30, 1996
------------------ -------------------
Three Six Three Six
Months Months Months Months
Ended Ended Ended Ended
------ ------ ------- ------
<S> <C> <C> <C> <C>
Valuation allowance at beginning of period $ 454 $ 419 $ 380 $ 433
Provision for loan impairment 25 75 100 100
Direct charge-offs (161) (176) (75) (159)
Recoveries -- -- 1 32
----- ----- ----- -----
Valuation allowance at end of period $ 318 $ 318 $ 406 $ 406
===== ===== ===== =====
</TABLE>
Total cash collected on impaired loans during the three- and six-month
periods ended June 30, 1997 was $6 thousand and $212 thousand, respectively, of
which $6 thousand and $176 thousand was credited to the principal balance
outstanding on such loans. Interest that would have been accrued on impaired
loans during the three- and six-month periods ended June 30, 1997 was $15
thousand and $25 thousand. Interest income recognized during the three- and
six-month periods ended June 30, 1997 was $0 and $36 thousand, respectively.
Total cash collected on impaired loans during the three- and six- month
periods ended June 30, 1996 was $3 thousand and $9 thousand, respectively, all
of which was credited to the principal balance outstanding on such loans.
Interest that would have been accrued on impaired loans during the three- and
six- month periods ended June 30, 1996 was $12 thousand and $22 thousand,
respectively. Interest income recognized during the three- and six-month periods
ended June 30, 1996 was $0.
BUILDING IMPROVEMENTS AND TECHNOLOGY PROJECTS
Renovations to the former Commonwealth Bank building, which was
purchased in 1995, are now complete. Improvements to the property cost
approximately $580 thousand. The building was occupied during the fourth quarter
of 1996 and houses our new Mortgage Center. Renovations and expansion of the
Miller building which house the Financial Management Services Department were
completed during the second quarter of 1996 at a cost of approximately $408
thousand.
The Branch teller automation project is still in process. Depreciation
on the project started in 1996 at approximately $6 thousand per month. The
customer check imaging project has been completed. Depreciation on the project
started during the second quarter of 1996 at approximately $10 thousand per
month.
Management is in the process of reviewing the adequacy of its mainframe
computer and software for possible replacement of some or all of its components.
The cost associated with such a project could be significant. An estimate of
costs has not yet been determined. A vendor will be selected during the fourth
quarter of this year and conversion is expected to occur in 1998.
Management is aware of and is taking the appropriate steps to address
the year 2000 date change issue. Management will ensure that all systems and
controls are in place to comply with applicable regulations.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CAPITAL ADEQUACY
The Corporation is subject to Risk-Based Capital Guidelines adopted by
the Federal Reserve Board ("FRB") for bank holding companies. The Bank is also
subject to similar capital requirements adopted by the Office of the Comptroller
of the Currency. Under these requirements, the regulatory agencies have set
minimum thresholds for Tier I Capital, Total Capital, and Leverage ratios. At
June 30, 1997, both the Corporation's and the Bank's capital exceeded all
minimum regulatory requirements, and were considered "well capitalized" as
defined in the regulations issued pursuant to the FDIC Improvement Act of 1991.
The Corporation's Risk-Based Capital Ratios, shown below, have been computed in
accordance with regulatory accounting policies.
<TABLE>
<CAPTION>
RISK-BASED June 30, December 31,
CAPITAL RATIOS ------------------------ ------------- "Well Capitalized"
- -------------- 1997 1996 1996 Requirements
---- ---- ---- ------------------
<S> <C> <C> <C> <C>
Leverage Ratio 8.44% 8.26% 8.58% 5.00%
Tier I Capital Ratio 11.24% 11.95% 12.05% 6.00%
Total Risk-Based Capital Ratio 12.49% 13.21% 13.31% 10.00%
</TABLE>
The Bank is not under any agreement with the regulatory authorities nor
is it aware of any current recommendations by the regulatory authorities that,
if they were to be implemented, would have a material affect on liquidity,
capital resources or operations of the Corporation. The internal capital growth
rate for the Corporation was 8.14% and 4.30% for the six months ended June 30,
1997 and 1996, respectively.
20
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Various actions and proceedings are presently pending to which
the Corporation is a party. These actions and proceedings
arise out of routine operations and, in management's opinion,
will not, either individually or in the aggregate, have a
material adverse effect on the consolidated financial position
of the Corporation and its subsidiaries.
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to Vote of Security Holders
-------------------------------------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
The following is a list of exhibits incorporated by
reference into this report:
(3)(a) Articles of Incorporation.
-------------------------
(i.) Copy of the Corporation's Articles of
Incorporation, filed on March 9, 1984 is
incorporated by reference to Exhibit 3
(a)(iii) to the Corporation's Annual Report
on Form 10-K for the year ended December
31, 1988.
(ii.) Copy of the Corporation's Certificate
of Amendment to the Articles of
Incorporation filed with the Secretary of
the Commonwealth of Pennsylvania on April
2, 1986 is incorporated by reference to
Exhibit 3 (a)(I) to the Corporation's
Annual Report on Form 10-K for the year
ended December 31, 1988.
(iii.) Copy of the Corporation's
Certificate of Amendment to the Articles of
Incorporation filed with Secretary of the
Commonwealth of Pennsylvania on March 23,
1984 is incorporated by reference to
Exhibit 3(a)(II) to the Corporation's
Annual Report on Form 10-K for the year
ended December 31, 1988.
21
<PAGE>
PART II - OTHER INFORMATION
(CONTINUED)
(3)(b) Bylaws of the Corporation, as amended. Copy
--------------------------------------
of the Corporation's Bylaws, as amended, is
incorporated by reference to Exhibit 3 (b) to the
Corporation's Annual Report on Form 10-K for the
year ended December 31, 1988.
(27) Financial Data Schedule
(b) Reports on Form 8-K
-------------------
A Form 8-K was filed on February 24, 1997 with the sec via
EDGAR pertaining to a press release on the stock split.
A Form 8-K was filed on June 24, 1997 with the SEC via EDGAR
pertaining to a press release on a conciliation agreement with
the Department of Labor.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST WEST CHESTER CORPORATION
Charles E. Swope
/s/ Charles E. Swope
--------------------
President
DATE: August 13, 1997
J. Duncan Smith
/s/ J. Duncan Smith
-------------------
Treasurer
(Principal Accounting
and Financial Officer)
23
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This is Exhibit 27 of First West Chester Corporation's Form 10-Q for the period
ending June 30, 1997
</LEGEND>
<CIK> 0000744126
<NAME> First West Chester Corporation
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 21,277
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 8,600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 61,489
<INVESTMENTS-CARRYING> 12,779
<INVESTMENTS-MARKET> 12,809
<LOANS> 306,375
<ALLOWANCE> 5,653
<TOTAL-ASSETS> 418,015
<DEPOSITS> 362,709
<SHORT-TERM> 8,385
<LIABILITIES-OTHER> 9,912
<LONG-TERM> 2,483
0
0
<COMMON> 2,400
<OTHER-SE> 32,126
<TOTAL-LIABILITIES-AND-EQUITY> 418,015
<INTEREST-LOAN> 12,833
<INTEREST-INVEST> 2,806
<INTEREST-OTHER> 97
<INTEREST-TOTAL> 15,736
<INTEREST-DEPOSIT> 6,141
<INTEREST-EXPENSE> 6,448
<INTEREST-INCOME-NET> 9,288
<LOAN-LOSSES> 656
<SECURITIES-GAINS> (14)
<EXPENSE-OTHER> 7,290
<INCOME-PRETAX> 3,148
<INCOME-PRE-EXTRAORDINARY> 2,229
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,229
<EPS-PRIMARY> 0.97
<EPS-DILUTED> 0.97
<YIELD-ACTUAL> 4.97
<LOANS-NON> 1,089
<LOANS-PAST> 740
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,218
<CHARGE-OFFS> 290
<RECOVERIES> 69
<ALLOWANCE-CLOSE> 5,653
<ALLOWANCE-DOMESTIC> 5,653
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
