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 March 31, 2000, 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.
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FIRST CHESTER COUNTY 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 May 15,
2000 was 4,524,918.
<PAGE>
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
<S> <C>
PAGE
Part I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Statements of Condition
March 31, 2000 and December 31, 1999 3
Consolidated Statements of Income
Three-Months Ended March 31, 2000 and 1999 4
Consolidated Statements of Stockholder's Equity 5
Consolidated Statements of Cash Flows
Three-Months Ended March 31, 2000 and 1999 6
Notes to Consolidated Financial Statements 7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-21
Item 3 - Quantitative and Qualitative Disclosures About
Market Risk 22
Part II. OTHER INFORMATION
Item 1 - Legal Proceedings 23
Item 2 - Changes in Securities 23
Item 3 - Defaults upon Senior Securities 23
Item 4 - Submission of Matters to a Vote of Security Holders 23-24
Item 5 - Other Information 25
Item 6 - Exhibits and Reports on Form 8-K 25
Signatures 26
</TABLE>
<PAGE>
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
(Unaudited)
(Dollars in thousands) March 31, December 31,
2000 1999
-------------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks $ 27,852 $ 27,257
Federal funds sold -- 5,000
Interest Bearing Deposits in banks 76 --
--------- ---------
Total cash and cash equivalents 27,928 32,257
--------- ---------
Investment securities held-to-maturity (market value of $3,495 and $4,535 at
March 31, 2000 and December 31, 1999,
respectively) 3,373 4,402
Investment securities available-for-sale, at market value 109,221 108,638
Loans 366,383 354,338
Less: Allowance for loan losses (6,412) (6,261)
--------- ---------
Net loans 359,971 348,077
Premises and equipment 10,522 10,444
Other assets 8,996 8,084
--------- ---------
Total assets $ 520,011 $ 511,902
========= =========
LIABILITIES
Deposits
Noninterest-bearing $ 84,443 $ 82,734
Interest-bearing (including certificates of deposit over $100
of $24,314 and $28,377 - March 31, 2000 and
December 31, 1999 respectively) 365,157 365,699
--------- ---------
Total deposits 449,600 448,433
Securities sold under repurchase agreements 3,606 3,365
Federal Home Loan Bank advances and other borrowings 22,297 16,667
Other liabilities 5,795 5,255
--------- ---------
Total liabilities 481,298 473,720
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, par value $1.00; authorized, 10,000,000 shares;
outstanding, 4,799,666 at March 31, 2000 and December 31, 1999. 4,800 4,800
Additional paid-in capital 602 602
Retained earnings 39,517 38,652
Accumulated other comprehensive income (2,884) (2,893)
Treasury stock, at cost: 275,748 shares and 254,509 shares
at March 31, 2000 and December 31, 1999, respectively. (3,322) (2,979)
--------- ---------
Total stockholders' equity 38,713 38,182
--------- ---------
Total liabilities and stockholders' equity $ 520,011 $ 511,902
========= =========
The accompanying notes are an integral part of these statements.
</TABLE>
3
<PAGE>
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in thousands - except per share) Three Months Ended
March 31,
----------------------------
2000 1999
--------- ---------
<S> <C> <C>
INTEREST INCOME
Loans, including fees $ 7,645 $ 6,636
Investment securities 1,880 1,660
Federal funds sold 28 61
Deposits in banks 1 --
-------- --------
Total interest income 9,554 8,357
-------- --------
INTEREST EXPENSE
Deposits 3,557 3,411
Securities sold under repurchase agreements 36 31
Federal Home Loan Bank advances and other borrowings 335 85
-------- --------
Total interest expense 3,928 3,527
-------- --------
Net interest income 5,626 4,830
Provision for loan losses 290 138
-------- --------
Net interest income after provision for possible loan losses 5,336 4,692
-------- --------
NON-INTEREST INCOME
Financial Management Services 786 629
Service charges on deposit accounts 249 245
Investment securities gains (losses), net (43) 4
Other 346 311
-------- --------
Total non-interest income 1,338 1,189
-------- --------
NON-INTEREST EXPENSE
Salaries and employee benefits 2,632 2,346
Net occupancy, equipment and data processing 990 958
FDIC Bank insurance fund assessments 22 12
Bank shares tax 106 100
Other 927 903
-------- --------
Total non-interest expense 4,677 4,319
-------- --------
Income before income taxes and cumulative effect
of change in accounting for income taxes 1,997 1,562
INCOME TAXES 566 476
-------- --------
NET INCOME $ 1,431 $ 1,086
======== ========
PER SHARE DATA
Basic earnings per common share $ 0.320 $ 0.24
======== ========
Diluted earnings per common share $ 0.310 $ 0.23
======== ========
Dividends declared $ 0.125 $ 0.120
======== ========
Basic weighted average shares outstanding 4,537,464 4,598,887
========= =========
Diluted weighted average shares outstanding 4,557,461 4,673,886
========= =========
The accompanying notes are an integral part of these statements.
</TABLE>
4
<PAGE>
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in thousands) 2000 1999
----------- --------
<S> <C> <C>
Balance at January 1, $ 38,182 $ 39,723
Net income to date 1,431 1,086
Cash dividends declared (566) (553)
Net unrealized gain (loss) on securities available-for-sale 9 (294)
Paid-in capital from treasury stock transactions -- 57
Treasury stock transactions (343) (642)
------- -------
Balance at March 31, $ 38,713 $ 39,377
======= =======
The accompanying notes are an integral part of these statements.
</TABLE>
5
<PAGE>
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31,
---------------------------
(Dollars in thousands) 2000 1999
--------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 1,431 $ 1,086
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 406 342
Provision for loan losses 290 138
Amortization of investment security premiums
and accretion of (discounts) 33 119
Amortization of deferred fees on loans 61 14
Investment securities (gains) losses, net 43 (4)
(Increase) in other assets (904) (587)
Increase in other liabilities 617 1,460
--------- --------
Net cash provided by operating activities 1,977 2,568
--------- --------
INVESTING ACTIVITIES
Increase in interest bearing deposits in banks (76) --
Increase in loans (12,244) (561)
Proceeds from sale of investment securities available-for-sale 2,013 2,441
Proceeds from maturities of investment securities available-for-sale 4,462 9,503
Proceeds from maturities of investment securities held-to-maturity - 1,733
Purchases of investment securities available-for-sale (6,106) (20,022)
Purchase of premises and equipment, net (484) (134)
--------- --------
Net cash provided by investing activities (12,435) (7,040)
--------- --------
FINANCING ACTIVITIES
Increase in Federal Home Loan Bank advances 5,630 1,542
Increase in deposits 1,167 3,536
(Increase) decrease in securities sold under repurchase agreements 241 (39)
Cash dividends (566) (553)
Treasury stock transactions (343) (585)
--------- --------
Net cash provided by financing activities 6,129 3,901
--------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (4,329) (571)
Cash and cash equivalents at beginning of year 32,257 30,681
--------- --------
Cash and cash equivalents at end of period $ 27,928 $ 30,110
========= ========
The accompanying notes are an integral part of these statements.
</TABLE>
6
<PAGE>
FIRST CHESTER COUNTY 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. These interim financial statements
should be read in conjunction with the consolidated financial
statements and footnotes thereto included in our Annual Report on Form
10-K for the fiscal year ended December 31, 1999.
2. The results of operations for the three-month period ended March 31,
2000 are not necessarily indicative of the results to be expected for
the full year.
3. Earnings per share is based on the weighted average number of shares of
common stock outstanding during the period. Diluted net income per
share includes the effect of options granted.
4. We have adopted the provisions of FASB issued SFAS No. 130, Reporting
of Comprehensive Income, which establishes standards for reporting and
display of comprehensive income and its components (revenues, expenses,
gains and losses) in a full set of financial statements. This statement
also requires that all items that are required to be recognized under
accounting standards as components of year-end comprehensive income be
reported in a financial statement that is displayed with the same
prominence as others financial statements. Other comprehensive income
(loss) net of taxes for the three-month period ended March 31, 2000 was
$9 thousand, compared to $(294) thousand in the same period last year.
5. In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities was issued. Subsequent to this statement, SFAS No.
137 was issued, which amended the effective date of SFAS No. 133 to be
all fiscal quarters of all fiscal years beginning after June 15, 2000.
Based on our minimal use of derivatives at the current time, management
does not anticipate the adoption of SFAS No. 133 will have a
significant impact on our earnings or financial position. However, the
impact from adopting SFAS No. 133 will depend on the nature and purpose
of derivative instruments we may be using at that time.
6. Certain prior year amounts have been reclassified to conform to the
current year presentations.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This discussion is intended to further your understanding of the
consolidated financial condition and results of operations of First Chester
County Corporation (the "Corporation") and its wholly-owned subsidiaries, The
First National Bank of Chester County (the "Bank") and Turks Head Properties,
Inc. It should be read in conjunction with the consolidated financial statements
included in this report.
On February 17, 2000 the Board of Directors of the First West Chester
Corporation voted to modify the name of the banks holding company's banking
subsidiary to First National Bank of Chester County and changed the name of the
bank's parent corporation to First Chester County Corporation.
In addition to historical information, this discussion and analysis
contains statements relating to future results of the Corporation that are
considered "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements can often be
identified by the use of forward-looking terminology such as "believes,"
"expects," "intends," "may," "will," "should" "or anticipates" or similar
terminology. These statements involve risks and uncertainties and are based on
various assumptions. Investors and prospective investors are cautioned that such
statements are only projections. The risks and uncertainties noted below, among
others, could cause the Corporation's actual future results to differ materially
from those described in forward looking statements made in this report or
presented elsewhere by Management from time to time.
These risks and uncertainties include, but are not limited to, the
following: (a) loan growth and/or loan margins may be less than expected due to
competitive pressures in the banking industry and/or changes in the interest
rate environment; (b) general economic conditions in the Corporation's market
area may be less favorable than expected resulting in, among other things, a
deterioration in credit quality causing increased loan losses; (c) costs of the
Corporation's planned training initiatives, product development, branch
expansion, new technology and operating systems may exceed expectations; (d)
volatility in the Corporation's market area due to recent mergers of competing
financial institutions may have unanticipated consequences, such as customer
turnover; (e) changes in the regulatory environment, securities markets, general
business conditions and inflation may be adverse; (f) impact of changes in
interest rates on customer behavior; (h) estimated changes in net interest
income; (i) anticipated pressure on net yields; and (j) branch locations. These
risks and uncertainties are all difficult to predict and most are beyond the
control of the Corporation's Management.
Although the Corporation believes that its expectations are based on
reasonable assumptions, readers are cautioned that such statements are only
projections. The Corporation undertakes no obligation to publicly release any
revisions to the forward-looking statements to reflect events or circumstances
after the date of this report.
EARNINGS AND DIVIDEND SUMMARY
Net income for the three months ended March 31, 2000 was $1.431 million,
an increase of $345 thousand or 31.8% from $1.086 million for the same period in
1999. The increase in net income is the direct result of increases in net
interest income and increases in non-interest income, partially offset by
increases in operating expenses. Basic earnings per share for the three months
ending March 31, 2000 were $0.32 per share, a $0.08 or 33.3% increase over the
same period in 1999. Cash dividends declared during the first quarter of 2000
increased $0.005 per share, a 4.2% increase compared to $0.12 per share in the
first quarter of 1999. Over the past ten years, the Corporation's practice has
been to pay a dividend of at least 35.0% of net income.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
March December
------------------------- --------
2000 1999 1999
---- ---- --------
<S> <C> <C> <C>
SELECTED RATIOS
Return on average assets 1.12% 0.93% 1.14%
Return on average equity 14.90% 10.98% 13.13%
Earnings retained 60.38% 49.08% 57.26%
Dividend payout ratio 39.62% 50.92% 42.74%
Book value per share $8.56 $8.58 $8.61
<FN>
The "Consolidated Average Balance Sheet" on page 13 may assist the reader in
following this discussion.
</FN>
</TABLE>
NET INTEREST INCOME
Net interest income is the difference between interest income on
interest-earning assets and interest expense on interest-bearing liabilities.
Net interest income for each of the three-month periods ended March 31, 2000 and
1999, on a tax equivalent basis, was $5.7 million and $4.9 million,
respectively. The increase in net interest income is the result of a higher net
yield on interest-earning assets and an increase in average interest-earning
assets. The average net yield on interest-earning assets, on a tax equivalent
basis was 4.78% for the three-month period ended March 31, 2000 compared to
4.45% for the same period in 1999. The increase in the net interest margin is a
direct result of increases in rates charged on the Corporations loan portfolios
in the recent rising interest rate environment, partially offset by a marginal
increase in the average funding cost. Average interest-earning assets increased
approximately $39.4 million or 9.0% to $476.0 million during the twelve-month
period ending March 31, 2000, compared to $436.7 million during the same period
last year. The increase in average funding assets was the result of increased
loan activity during the first quarter. Despite the increase in average net
yield for the period, the Corporation anticipates that there will be continued
pressure on the net yield on interest-earning assets as competition for new
loans remains very strong and as the incremental cost of funds continues to
increase.
AVERAGE INTEREST RATES (ON A TAX EQUIVALENT BASIS)
<TABLE>
<CAPTION>
Three-Months
Ended March 31,
-----------------------
YIELD ON 2000 1999
- -------- ----- ----
<S> <C> <C>
Interest-Earning Assets 8.08% 7.68%
Interest Bearing Liabilities 4.03% 4.01%
---- ----
Net Interest Spread 4.05% 3.67%
Contribution of Interest-Free Funds 0.73% 0.78%
---- ----
Net Yield on Interest-Earning Assets 4.78% 4.45%
==== ====
</TABLE>
INTEREST INCOME ON FEDERAL FUNDS SOLD
Interest income on federal funds sold for the three-month period ended
March 31, 2000 decreased 54.1% to $28 thousand when compared to the same period
in 1999. This decrease is primarily the result of a decrease in average federal
funds sold of $3.0 million or 58.9%, from $5.1 million at March 31, 1999 to $2.1
million at March 31, 2000, partially offset by a 50 basis point (one basis point
is equal 1/100 of a percent) increase in interest rates.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTEREST INCOME ON INVESTMENT SECURITIES
On a tax equivalent basis, interest income on investment securities
increased 13.5% for the three-month period ended March 31, 2000 to approximately
$1.9 million compared to $1.7 million during the same period in 1999. The
increase was primarily the result of a 11.0% or 66 basis point increase in the
yield earned. Also contributing to the increase was a 2.1% or $2.4 million
increase in the average investment security balance to $113.7 million on a tax
equivalent basis.
INTEREST INCOME ON LOANS
Loan interest income, on a tax equivalent basis, generated by the
Corporation's loan portfolio increased 15.6% to $7.7 million for the three-month
period ended March 31, 2000 compared to $6.7 million for the same time period in
1999. The increase in interest income for the three-month period ended March 31,
2000 is the direct result of a 12.5% increase in average outstanding loan
balances to $360.1 million and a 23 basis point or 2.8% increase on rates earned
on the portfolio.
INTEREST EXPENSE ON DEPOSIT ACCOUNTS
Interest expense on deposit accounts increased 4.3% for the three-month
period ended March 31, 2000 to approximately $3.6 million, compared to the same
period in 1999. The increase is primarily the result of an increase in average
interest-bearing deposits of $20.7 million, partially offset by a 6 basis point
decrease in the rates paid on interest bearing deposits, compared to the same
period in 1999.
Competition for deposits from non-banking institutions such as credit
union and mutual fund companies continues to be strong. Despite the competition,
the Corporation's deposit base continues to grow and growth is expected to
continue as we continue to open new branches and attract new customers with new
products and services. Growth can be attributed to our four new limited service
retirement community branches located in Chester and Delaware counties. New
branch sites are currently under review. New branch sites will help expand the
corporations deposit base. The Corporation's effective rate on interest-bearing
deposits decreased from 3.97% in the first quarter of 1999 to 3.91% for the
first quarter of 2000.
INTEREST EXPENSE ON SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
Interest expense on securities sold under repurchase agreements
increased 16.1% to $36 thousand for the three-month period ended March 31, 2000
compared to the same time period in 1999. The increase is attributable to a 92
basis point or 24.2% increase on average rates paid on securities sold under
repurchase agreements, partially offset by a 6.5% or $211 thousand decrease in
average securities sold under repurchase agreements for the comparable periods.
INTEREST EXPENSE ON FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS
Interest expense on borrowings increased $250 thousand to $335 thousand
for the three-month period ended March 31, 2000 from $85.0 thousand when
compared to the same period in 1999. The need for borrowing increased in the
first quarter of 2000 as a result of a steady increase in loan demand, which has
continued since the second quarter of 1999. As a result, average Federal Home
Loan Bank ("FHLB") and other borrowings increased in the first quarter of 2000
to $22.6 million as compared to $5.2 million during the same period in 1999.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Borrowings at any time may consist of one or more of the following: FHLB
Overnight or Term Advances, and advances under line agreements with our
correspondent banks.
PROVISION FOR LOAN LOSSES
During the first quarter of 2000, the Corporation recorded a $290
thousand provision for loan losses compared to $138 thousand for the same period
in 1999. The increase in the provision expense for the three-month period ended
March 31, 2000 can be attributed to the loan growth over the last several
quarters and does not reflect an erosion of credit quality. The allowance for
loan losses as a percentage of total loans was 1.75% as of March 31, 2000 and
1.85% as of March 31, 1999. See the section titled "Allowance For Loan Losses"
for additional discussion.
NON-INTEREST INCOME
Total non-interest income increased 12.5% to $1.3 million for the three
months ended March 31, 2000, compared to the same period in 1999. The primary
component of non-interest income is Financial Management Services revenue, which
increased $157 thousand or 25.0% to $786 thousand for the three-months ended
March 31, 2000 compared with the same period in 1999. The market value of
Financial Management Services assets under management and custody grew $20.1
million or 4.9% from $409.9 million at March 31, 1999 to $430.0 million at March
31, 2000. The increase in Financial Management Services revenue and growth in
assets under management and custody is primarily the result of market
appreciation and new account relationships acquired through strong marketing and
business development efforts.
Service charges on deposit accounts increased approximately 1.6% to $249
thousand for the three-months ended March 31, 2000 compared to $245 thousand for
the same period in 1999. Other non-interest income increased 11.3% to $346
thousand for the three-months ended March 31, 2000 compared to $311 thousand for
the same period in 1999. This increase can be attributed to several factors, a
one time fee related to a recent Community Development Corporation ("CDC")
investment, increased property rental income and a higher volume of fee income
from our MAC and credit card products.
NON-INTEREST EXPENSE
Total non-interest expense for the first quarter of 2000 increased 8.3%
to $4.7 million compared to the same period in 1999. The various components of
non-interest expense are discussed below.
First quarter 2000 salaries and employee benefits increased 12.2% to
$2.7 million for the three-month period ended March 31, 2000 compared to the
same period in 1999. Annual employee raises and a proportional increase in
employee benefits are primarily responsible for the increase. The hiring of
additional staff for the Matlack Street and retirement home branches during the
second half of 1999 also contributed to this increase. At March 31, 2000 the
corporation employed 207 full time and 37 part time employees compared to 187
full time and 37 part time at March 31, 1999.
Net occupancy, equipment and data processing expense increased 3.3% to
$990 thousand for the three-month period ended March 31, 2000 compared to the
same period last year. The increase is the direct result of increased computer
and related equipment costs associated with the expansion, upgrading and
maintenance of personal computers and our networking infrastructure. Increases
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
in the Corporations facilities also contributed the increase. See "Building
Improvements and Technology Projects" sections for more detail.
Total other non-interest expense increased 2.7% to $927 thousand for the
three months ended March 31, 2000 compared to the same period in 1999. This
increase can be partially attributed to an increase in the Corporation's
marketing efforts to attract new customers and new employees and to promote its
corporate image, and an increase in the amount of professional consulting
services utilized by the corporation.
Planning for additional branch sites continues. The Corporation believes
that the costs associated with the opening of new branch sites will have a
direct impact on all the components of non-interest expense. It is anticipated
that the increases in costs will be offset over time by increases in net
interest and fee income generated by business in the new marketing areas.
12
<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 MARCH 31,
<TABLE>
<CAPTION>
(Dollars in thousands) 2000 1999
----------------------------- ----------------------------
Daily Daily
Average Average
ASSETS Balance Interest Rate Balance Interest Rate
- ------ ------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Federal funds sold $ 2,130 $ 28 5.26% $ 5,181 $ 61 4.71%
Interest bearing deposits in banks 75 1 5.33% -- -- --
Investment securities
Taxable 111,465 1,853 6.65% 109,422 1,634 5.97%
Tax-exempt(1) 2,265 42 7.34% 1,938 36 7.40%
--------- ------ --------- -------
Total investment securities 113,730 1,895 6.66% 111,360 1,670 6.00%
--------- ------ --------- -------
Loans(2)
Taxable 353,894 7,547 8.53% 316,716 6,568 8.30%
Tax-exempt(1) 6,194 141 9.08% 3,412 84 9.89%
--------- ------ --------- -------
Total loans 360,088 7,689 8.54% 320,128 6,652 8.31%
--------- ------ --------- -------
Total interest-earning assets 476,023 9,612 8.08% 436,669 8,383 7.68%
Non-interest earning assets
Allowance for possible loan losses (6,315) (5,913)
Cash and due from banks 20,630 20,672
Other assets 19,309 15,816
--------- ---------
Total assets $ 509,647 $ 467,244
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Savings, NOWS & money market deposits $ 224,869 $ 1,708 3.04% $ 194,008 $ 1,393 2.87%
Certificates of deposits and other time 139,346 1,849 5.31% 149,531 2,018 5.40%
--------- ------ --------- -------
Total interest bearing deposits 364,215 3,557 3.91% 343,539 3,411 3.97%
Securities sold under repurchase agreements 3,052 36 4.72% 3,263 31 3.80%
Federal Home Loan Bank advances and
other borrowings 22,585 335 5.93% 5,274 85 6.45%
--------- ------ --------- -------
Total interest bearing liabilities 389,852 3,928 4.03% 352,076 3,527 4.01%
--------- ------ --------- -------
Non-interest bearing liabilities
Non-interest bearing demand deposits 75,615 69,324
Other liabilities 5,673 6,285
--------- ---------
Total liabilities 471,140 427,685
Stockholders' equity 38,507 39,559
--------- ---------
Total liabilities and stockholders' equity $ 509,647 $ 467,244
========= =========
Net interest income $ 5,684 $ 4,856
====== ======
Net yield on interest earning assets 4.78% 4.45%
==== ====
<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 TEFRA 20%
interest expense disallowance for 2000 and 1999.
(2) Non-accruing loans are included in the average balance.
</FN>
</TABLE>
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INCOME TAXES
Income tax expense for the three-month period ended March 31, 2000 was
$566 thousand, compared to $476 thousand in the same period last year. This
represents an effective tax rate of 28.4% and 30.5% for the first quarter of
2000 and 1999, respectively. This decrease can be attributed to the Corporations
increase in tax-free investments.
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 and credit
facilities. 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:
DEPOSIT ANALYSIS
<TABLE>
<CAPTION>
(Dollars in thousands) March 31, 2000 December 31, 1999 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 $ 62,683 1.72% $ 58,356 1.71% $ 4,327 7.41%
Money Market 28,071 2.89 27,139 2.90 932 3.43
Statement Savings 49,563 2.96 49,144 3.00 419 0.85
Other Savings 2,112 2.84 2,280 2.76 (167) -7.32
CD's Less than $100,000 112,967 5.32 118,228 5.38 (5,261) -4.45
------- ------- ------
Total Core Deposits 255,396 3.69 255,147 3.79 250 0.10
Non-Interest Bearing
Demand Deposit Accounts 75,615 - 72,493 - 3,122 4.31
------- ------- ------
Total Core and Non-Interest
Bearing Deposits 331,011 2.85 327,640 2.95 3,372 1.03
------- ------- ------
Tiered Savings 82,440 4.13 68,067 3.97 14,373 21.12
CD's Greater than $100,000 26,379 5.26 28,863 5.19 (2,485) -8.61
------- ------- ------
Total Deposits $439,830 3.23 $424,570 3.27 $15,260 3.59
======= ======= =======
</TABLE>
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Bank, as a member of the FHLB, maintains a credit facility secured by
the Bank's mortgage-related assets. Additionally, the FHLB offers several other
credit related products which are available to the Bank. As of March 31, 2000,
the amount outstanding under the Bank's line of credit with the FHLB was $22.2
million. The Bank currently has a maximum borrowing capacity with the FHLB of
approximately $119.0 million. During the first quarter of 2000, average FHLB
advances were approximately $22.6 million and consisted of term advances
representing a combination of maturities. The average interest rate on these
advances was approximately 5.9%. FHLB advances are collateralized by a pledge on
the Bank's entire portfolio of unencumbered investment securities, certain
mortgage loans and a lien on the Bank's FHLB stock.
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 future time periods. The Corporation's net
interest rate sensitivity gap within one year is a negative $213.6 million or
41.1% of total assets at March 31, 2000 compared with a negative $165.7 million
or 34.7% of total assets at December 31, 1999. 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.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTEREST SENSITIVITY ANALYSIS
AS OF MARCH 31, 2000
<TABLE>
<CAPTION>
One Over
(Dollars in thousands) Within through five Non-rate
one year five years years sensitive Total
---------- ---------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
ASSETS
Federal funds sold $ -- $ -- $ -- $ -- $ --
Investment securities 20,785 59,685 32,124 -- 112,594
Interest bearing deposits in banks -- -- -- 76 76
Loans and leases 90,408 214,020 61,955 (6,412) 359,971
Cash and cash equivalents -- -- -- 27,852 27,852
Premises and equipment -- -- -- 10,522 10,522
Other assets 4,258 -- -- 4,738 8,996
-------- -------- ------- -------- -------
Total assets $ 115,451 $ 273,705 $ 94,079 $ 36,776 $520,011
======== ======== ======= ======== =======
LIABILITIES AND CAPITAL
Non-interest bearing deposits $ -- $ -- $ -- $ 84,443 $ 84,443
Interest bearing deposits 320,015 43,229 1,913 -- 365,157
Repurchase agreements 3,606 -- -- -- 3,606
FHLB advances and other
borrowings 5,524 11,824 4,949 -- 22,297
Other liabilities -- -- -- 5,795 5,795
Capital -- -- -- 38,713 38,713
-------- -------- ------- -------- -------
Total liabilities & capital $ 329,145 $ 55,053 $ 6,862 $128,951 $520,011
======== ======== ======= ======= =======
Net interest rate
sensitivity gap $(213,694) $218,652 $ 87,217 $(92,175)
======== ======= ======= =======
Cumulative interest rate
sensitivity gap $(213,694) $ 4,958 $ 92,175 $ --
======== ========= ======= =======
Cumulative interest rate
sensitivity gap divided
by total assets (41.1%) 1.0% 17.7%
======== ========= =======
</TABLE>
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is an amount that Management believes
will be adequate to absorb 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.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
ANALYSIS OF CHANGES IN THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
AND COMPARISON OF LOANS OUTSTANDING
<TABLE>
<CAPTION>
(Dollars in thousands) March 31, December 31,
-------------------------- ------------
2000 1999 1999
----------- ---------- ------------
<S> <C> <C> <C>
Balance at beginning of period $ 6,261 $ 5,877 $ 5,877
--------- --------- ---------
Provision charged to operating expense 290 138 799
--------- --------- ---------
Recoveries of loans previously charged-off 43 48 178
Loans charged-off (182) (126) (593)
--------- --------- ---------
Net loans charged-off (139) (78) (415)
--------- --------- ---------
Balance at end of period $ 6,412 $ 5,937 $ 6,261
========= ========= =========
Period-end loans outstanding $ 366,383 $ 320,864 $ 354,338
Average loans outstanding $ 360,088 $ 320,128 $ 331,966
Allowance for loan losses as a
percentage of period-end loans outstanding 1.75% 1.85% 1.77%
Ratio of net charge-offs to average loans
Outstanding (annualized) 0.15% 0.10% 0.13%
</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.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
NON-PERFORMING LOANS AND ASSETS
<TABLE>
<CAPTION>
(Dollars in thousands) March 31, December 31,
--------------------------- ------------
2000 1999 1999
----- ---- ----
<S> <C> <C> <C>
Past due over 90 days and still accruing $ 338 $ 909 $ 175
Non-accrual loans 1,038 1,372 1,207
------- ------ -------
Total non-performing loans 1,376 2,281 1,382
Other real estate owned 470 192 470
------- ------ -------
Total non-performing assets $ 1,846 $ 2,473 $ 1,852
0 ======= ====== =======
Non-performing loans as a percentage
of total loans 0.38% 0.71% 0.39%
Allowance for loan losses as a
percentage of non-performing loans 465.99% 260.28% 453.04%
Non-performing assets as a percentage of
total loans and other real estate owned 0.50% 0.77% 0.52%
Allowance for loan losses as a
percentage of non-performing assets 347.35% 240.1% 338.07%
</TABLE>
The allowance for loan losses as a percentage of non-performing loans
indicates that the allowance for loan losses is sufficient to cover the
principal of all non-performing loans at March 31, 2000. Other real estate owned
("OREO") represents residential and commercial real estate written down to
realizable value (net of estimated disposal costs) based on professional
appraisals.
LOAN IMPAIRMENT
The bank identifies a loan 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 on impaired loans
and no income is recognized until all recorded amounts of interest and principal
are recovered in full. The totals below are included in the non-performing loans
and assets table above.
The balance of impaired loans was $678 thousand, $648 thousand, and
$1,078 thousand at March 31, 2000, December 31, 1998, and March 31, 1999,
respectively. The associated allowance for impaired loans was $300 thousand,
$305 thousand and $333 thousand at March 31, 2000, December 31, 1999, and March
31, 1999, respectively.
For the three months ended March 31, 2000, activity in the allowance
for impaired loan losses include a provision of $0, write offs of $5 thousand
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
and recoveries of $0. Interest income of $0 was recorded for the period while
contractual interest amounted to $17 thousand. Cash collected on loans for the
period was $35 thousand all of which was applied to principal.
For the twelve months ended December 31, 1999, activity in the
allowance for impaired loan losses include a provision of $85 thousand, write
offs of $70 thousand and recoveries of $3 thousand. Interest income of $0 was
recorded for the period while contractual interest amounted to $89 thousand.
Cash collected on loans for the period was $188 thousand all of which was
applied to principal.
For the three months ended March 31, 1999, activity in the allowance
for impaired loan losses include a provision of $50 thousand, write offs of $3
thousand and recoveries of $0. Interest income of $0 was recorded for the period
while contractual interest amounted to $23 thousand. Cash collected on loans for
the period was $10 thousand all of which was applied to principal.
BUILDING IMPROVEMENTS AND TECHNOLOGY PROJECTS
The Corporation acquired and opened limited access branch banking
facilities in four local retirement communities in December of 1999. The
locations include Granite Farms Estates, Lima Estates, and Kendal and Crosslands
Communities. These branch locations will serve the residents and employees of
their communities and bring the total number of branches in the Corporations
network to twelve.
The Corporation is currently working on four new branch sites. These
branch sites, which are in various stages of development, are expected to be
completed and opened within the next six to eighteen months.
In October of 1999, the Bank launched a full line of retail Internet
banking services, "Net Teller" and "BillPay". These new products allow our
retail customers the convenience to access their accounts and pay bills on-line
twenty-four hours a day from home. Since it's release over 1,000 customers have
signed up for "Net Teller". A commercial version of "Net Teller" "Net Cash
Manager" was released in March of 2000. Other technology products include "FNB
Portfolio Link", which gives our Financial Management Services customers the
ability to access their accounts over the Internet, and the banks new web site
at www.fnbchestercounty.com.
------------------------
YEAR 2000 ISSUES
To date, our efforts to be prepared for the Year 2000 appear to have
been successful, but if problems were to develop with our systems or with those
of our suppliers and other vendors, we might be unable to engage in normal
business activities for a period of time or times. Any such disruption could
cause our business to suffer. The Corporation incurred direct Y2K project costs
of $134 thousand and indirect Y2K project costs of $219 thousand through March
31, 2000.
CAPITAL ADEQUACY
The Corporation is subject to Risk-Based Capital Guidelines adopted by
the Federal Reserve Board 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 March 31,
2000, both the Corporation's and the Bank's capital exceeded all minimum
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
regulatory requirements, and were considered "well capitalized" as defined in
the regulations issued pursuant to the FDIC Improvement Act of 1992. The
Corporation's Risk-Based Capital Ratios, shown below, have been computed in
accordance with regulatory accounting policies.
<TABLE>
<CAPTION>
March 31, December 31,
RISK-BASED ---------------------- ------------ "Well Capitalized"
CAPITAL RATIOS 2000 1999 1999 Requirements
- -------------- ---- ---- ---- ------------------
<S> <C> <C> <C> <C>
Corporation
-----------
Leverage Ratio 8.16% 8.43% 8.59% 5.00%
Tier I Capital Ratio 10.87% 11.44% 11.67% 6.00%
Total Risk-Based Capital Ratio 12.13% 12.70% 12.95% 10.00%
Bank
----
Leverage Ratio 8.08% 8.20% 8.36% 5.00%
Tier I Capital Ratio 10.72% 11.12% 11.35% 6.00%
Total Risk-Based Capital Ratio 11.98% 12.37% 12.62% 10.00%
</TABLE>
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Bank is not under any agreement with the regulatory authorities nor
is it aware of any current recommendations by the regulatory authorities which,
if they were to be implemented, would have a material affect on liquidity,
capital resources or operations of the Corporation. The internal capital growth
for the Corporation was 0.44% and (0.87)% for the three months ended March 31,
2000 and 1999, respectively. The growth rate is computed by annualizing the
change in equity during the last period and dividing it by total stockholder's
equity at March 31, 2000 and 1999, respectively.
21
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the Corporation's assessment of
its sensitivity to market risk since its presentation in the 1999 Annual Report,
filed as an exhibit to its Form 10-K for the fiscal year ended December 31, 1999
with the SEC via EDGAR. Please refer to the "Management's Discussion and
Analysis" section on pages 20-34 of the Corporation's Annual Report for more
information.
22
<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 a Vote of Security Holders
The Annual Meeting of Shareholders of the Corporation was held on March
14, 2000 (the "Meeting"). Notice of the Meeting was mailed to
shareholders of record on or about February 15, 2000, together with
proxy solicitation materials prepared in accordance with Section 14(a)
of the Securities Exchange Act of 1934, as amended, and the regulations
promulgated thereunder.
The matters submitted to a vote of shareholders at the meeting were the
following:
1. The election of four Class I directors;
2. The approval of certain amendments to the Corporation's 1995 Stock
Option Plan to modify the formula by which options are awarded to
non-employee directors of the Corporation;
3. The ratification of the appointment of Grant Thornton, LLP as the
Corporation's independent public accountants for the year ending
December 31, 2000; and
There was no solicitation in opposition to the nominees of the Board of
Directors for election to the Board of Directors. All four of the
nominees were elected. The number of votes cast for or withheld as well
as the number of abstentions and broker non-votes for each of the
nominees for election to the Board of Directors were as follows:
23
<PAGE>
PART II - OTHER INFORMATION - CONTINUED
Abstentions and
Nominee For Withheld Broker Non-Votes
------- --- -------- ----------------
John J. Ciccarone 3,325,129 585,988 0
Clifford E. DeBaptiste 3,321,567 589,550 0
J. Carol Hanson 3,340,363 570,754 0
John B. Waldron 3,336,687 574,430 0
The names of the other directors whose terms of office as directors
continued after the Meeting are as follows: M. Robert Clarke, John A.
Featherman, III, John S. Halsted, David L. Peirce, and Charles E. Swope.
The proposal to make certain amendments to the Corporation's 1995 Stock
Option Plan was approved. The number of votes cast for or against as well as
the number of abstentions and broker non-votes for the proposal were as
follows:
For Against Abstentions Broker non-votes
--- ------- ----------- ----------------
3,760,888 93,492 56,787 0
The proposal to ratify the appointment of Grant Thornton, LLP as the
Corporation's independent public accountants for the year ending December
31, 2000 was ratified. The number of votes cast for or against as well as
the number of abstentions and broker non-votes for the ratification were as
follows:
For Against Abstentions Broker non-votes
--- ------- ----------- ----------------
3,903,333 1,254 6,530 0
There was no other business that came before the Meeting or matters incident
to the conduct of the Meeting.
Item 5. Other Information
On February 18, 2000, pursuant to the approval of the
Corporation's Board of Directors, the Corporation filed an amendment to its
Articles of Incorporation to change the Corporation's name to "First Chester
County Corporation." In addition, effective February 17, 2000, the name of the
Bank was changed to the First National Bank of Chester County.
24
<PAGE>
PART II - OTHER INFORMATION - CONTINUED
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3(i). Certificate of Incorporation. Copy of the Corporation's
Certificate of Incorporation, as amended, is incorporated herein by reference to
Exhibit 3(i) to the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1999.
3(ii). Bylaws of the Corporation, as amended. Copy of the Corporation's
Bylaws, as amended, is incorporated herein by reference to Exhibit 3(ii) to the
Corporation's Annual Report on Form 10-K for the year ended December 31, 1998.
10. Material contracts.
------------------
(a) Copy of the Corporation's Amended and Restated 1995 Stock
Option Plan, is incorporated herein by reference to the appendix to the
Corporation's Proxy Statement for the 2000 Annual Meeting of Shareholders as
filed with the SEC.
27. Financial Data Schedule.
-----------------------
(b) Reports on Form 8-K
A Form 8-K was filed with the SEC on January 31, 2000
pertaining to a press release announcing 1999 earnings.
A Form 8-K was filed with the SEC on February 2, 2000
pertaining to a press release regarding a new interactive
web site.
A Form 8-K was filed with the SEC on February 7, 2000
pertaining to a press release regarding the initiation of
a stock repurchase program.
25
<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 CHESTER COUNTY CORPORATION
Charles E. Swope
_____________________________
DATE: May 15, 2000 Charles E. Swope
President
J. Duncan Smith
_____________________________
J. Duncan Smith
Treasurer
(Principal Accounting
and Financial Officer)
26
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000744126
<NAME> First Chester County Corporation
<MULTIPLIER> 1000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-START> Jan-01-2000
<PERIOD-END> Mar-31-2000
<EXCHANGE-RATE> 1.000
<CASH> 27,852
<INT-BEARING-DEPOSITS> 76
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 109,221
<INVESTMENTS-CARRYING> 3,373
<INVESTMENTS-MARKET> 3,495
<LOANS> 366,383
<ALLOWANCE> 6,412
<TOTAL-ASSETS> 520,011
<DEPOSITS> 449,600
<SHORT-TERM> 9,130
<LIABILITIES-OTHER> 22,568
<LONG-TERM> 0
0
0
<COMMON> 4,800
<OTHER-SE> 33,913
<TOTAL-LIABILITIES-AND-EQUITY> 520,011
<INTEREST-LOAN> 7,645
<INTEREST-INVEST> 1,880
<INTEREST-OTHER> 29
<INTEREST-TOTAL> 9,554
<INTEREST-DEPOSIT> 3,557
<INTEREST-EXPENSE> 3,928
<INTEREST-INCOME-NET> 5,626
<LOAN-LOSSES> 290
<SECURITIES-GAINS> (43)
<EXPENSE-OTHER> 4,667
<INCOME-PRETAX> 1,977
<INCOME-PRE-EXTRAORDINARY> 1,977
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,431
<EPS-BASIC> 0.32
<EPS-DILUTED> 0.31
<YIELD-ACTUAL> 4.78
<LOANS-NON> 1,038
<LOANS-PAST> 338
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,261
<CHARGE-OFFS> 182
<RECOVERIES> 43
<ALLOWANCE-CLOSE> 6,412
<ALLOWANCE-DOMESTIC> 6,412
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
