<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
MARK ONE
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the Transition Period From ____________ to ___________
Commission File Number 33-426222
----------
FIRST FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer As Specified in its Charter)
Tennessee 62-1474162
- -------------------------------- ------------------------------
(State or Other Jurisdiction of (IRS Employer Identification
Incorporation or Organization) Number)
1691 N. Mt. Juliet Road, Mount Juliet, TN 37122
-----------------------------------------------
(Address of Principal Executive Offices)
(615) 754-2265
---------------------------
(Issuer's Telephone Number)
Not Applicable
----------------------------------------------------
Former Name, Former Address and Former Fiscal Years,
If Changed Since Last Report
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
----- ----
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date:
Common stock outstanding: 1,012,720 shares at August 3, 1999.
Transitional Small Business Disclosure Format (check one).
YES NO X
----- ----
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited consolidated financial statements of the small business issuer and
its wholly-owned subsidiary are as follows:
Consolidated Balance Sheets - June 30, 1999 and December 31, 1998.
Consolidated Statements of Earnings - For the three months and six months
ended June 30, 1999 and 1998.
Consolidated Statements of Comprehensive Earnings - For the three and six
months ended June 30, 1999 and 1998.
Consolidated Statements of Cash Flows - For the six months ended June 30,
1999 and 1998.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
2
<PAGE> 3
FIRST FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---- ----
(In Thousands)
<S> <C> <C>
Assets
Loans $ 199,382 174,371
Less: Allowance for loan losses 2,000 1,821
--------- --------
Net loans 197,382 172,550
Securities available-for-sale, at market (amortized cost
$48,575,000 and $55,790,000, respectively) 48,251 56,347
Loans held for sale 1,704 5,438
Federal funds sold 9,975 12,485
--------- --------
Total earning assets 257,312 246,820
Cash and due from banks 8,003 11,284
Bank premises and equipment, net of accumulated depreciation 7,957 8,068
Accrued interest receivable 2,197 2,024
Deferred income taxes 553 233
Other assets 861 805
--------- --------
$ 276,883 269,234
========= ========
Liabilities and Stockholders' Equity
Deposits $ 254,589 247,711
Advances from Federal Home Loan Bank 107 683
Accrued interest payable 1,208 1,119
Other liabilities 221 455
Long-term debt 378 381
--------- --------
Total liabilities 256,503 250,349
--------- --------
Stockholders' equity:
Preferred stock, no par value, authorized 5,000,000 shares,
no shares issued -- --
Common stock, $2.50 par value; authorized 5,000,000 shares,
issued 1,147,393 and 1,090,486 shares, respectively 2,869 2,726
Additional paid-in capital 4,756 4,208
Retained earnings 14,213 12,862
Net unrealized gains on available-for-sale securities, net of
applicable income tax benefit of $123,000 and income tax
expense of $211,000, respectively (201) 346
Less cost of 137,926 shares of treasury stock (1,257) (1,257)
--------- --------
Total stockholders' equity 20,380 18,885
--------- --------
$ 276,883 269,234
========= ========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
3
<PAGE> 4
FIRST FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- --------------------
1999 1998 1999 1998
---- ---- ---- ----
(Dollars in Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $4,499 3,744 $ 8,650 7,407
Interest and dividends on securities:
Taxable securities 540 469 1,104 908
Exempt from Federal income taxes 172 161 352 322
Interest on loans held for sale 42 65 95 112
Interest on federal funds sold 29 218 91 329
------ ----- ------- -----
Total interest income 5,282 4,657 10,292 9,078
------ ----- ------- -----
Interest expense:
Interest on deposits 2,291 2,188 4,536 4,246
Interest on short term borrowings -- -- -- 8
Interest on advances from Federal Home Loan Bank 9 17 21 34
Interest on long-term debt 6 6 13 13
------ ----- ------- -----
Total interest expense 2,306 2,211 4,570 4,301
------ ----- ------- -----
Net interest income 2,976 2,446 5,722 4,777
Provision for loan losses 150 120 310 240
------ ----- ------- -----
Net interest income after provision for
loan losses 2,826 2,326 5,412 4,537
------ ----- ------- -----
Non-interest income:
Service charges on deposit accounts 310 247 589 504
Other fees and commissions 327 57 439 124
Gain on sale of securities -- -- 1 --
Other income 268 330 530 561
------ ----- ------- -----
905 634 1,559 1,189
------ ----- ------- -----
Non-interest expenses:
Salaries and employee benefits 1,181 1,108 2,378 2,234
Occupancy expenses, net 122 108 252 212
Furniture and equipment expense 199 161 396 312
Other operating expenses 893 510 1,429 992
Data processing fees 73 59 147 118
------ ----- ------- -----
2,468 1,946 4,602 3,868
------ ----- ------- -----
Earnings before income taxes 1,263 1,014 2,369 1,858
Income taxes 346 335 715 609
------ ----- ------- -----
Net earnings $ 917 679 $ 1,654 1,249
====== ===== ======= =====
Basic earnings per common share $ .94 .73 $ 1.71 1.33
====== ===== ======= =====
Diluted earnings per common share $ .94 .71 $ 1.69 1.30
====== ===== ======= =====
Dividends per share $ -- -- $ -- --
====== ===== ======= =====
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
4
<PAGE> 5
FIRST FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
1999 1998 1999 1998
----- ---- ------- -----
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Net earnings $ 917 679 $ 1,654 1,249
----- ---- ------- -----
Other comprehensive earnings (losses) net of tax:
Unrealized gains (losses) on available-for-sale
securities arising during period, net of tax
benefits of $247,000, $5,000 and $334,000,
and tax expense of $4000, respectively (403) (8) (546) 7
Reclassification adjustment for gains included in net
earnings, net of taxes -- -- (1) --
----- ---- ------- -----
Other comprehensive earnings (loss) (403) (8) (547) 7
----- ---- ------- -----
Comprehensive earnings $ 514 671 $ 1,107 1,256
===== ==== ======= =====
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
5
<PAGE> 6
FIRST FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
---- ----
(In Thousands)
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 9,996 8,894
Fees and commissions received 767 628
Interest paid (4,481) (4,207)
Originations of loans held for sale (25,736) (32,754)
Proceeds from loan sales 30,000 31,221
Cash paid to suppliers and employees (4,503) (3,691)
Income taxes paid (505) (623)
-------- -------
Net cash provided by (used in) operating activities 5,538 (532)
-------- -------
Cash flows from investing activities:
Loans made to customers, net of repayments (25,142) (5,568)
Proceeds from sales of available-for-sale securities 1,000 --
Proceeds from maturities of available-for-sale securities 11,591 4,902
Purchase of available-for-sale securities (5,253) (15,218)
Purchase of premise and equipment (317) (612)
Proceeds from sale of premises and equipment 105 --
Proceeds from sale of other real estate -- (57)
-------- -------
Net cash used in investing activities (18,016) (16,553)
-------- -------
Cash flows from financing activities:
Net increase in time deposits 8,882 10,584
Net increase (decrease) in non-interest bearing, savings
and NOW deposit accounts (2,004) 10,887
Repayment of short-term borrowings -- (600)
Repayment of advances from Federal Home Loan Bank (576) (238)
Repayment of long-term debt (3) (2)
Issuance of common stock 691 9
Payment of dividends to shareholders (303) --
-------- -------
Net cash provided by financing activities 6,687 20,640
-------- -------
Net increase (decrease) in cash and cash equivalents (5,791) 3,555
Cash and cash equivalents at beginning of period 23,769 15,400
-------- -------
Cash and cash equivalents at end of period $ 17,978 18,955
======== =======
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
6
<PAGE> 7
FIRST FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
---- ----
(In Thousands)
<S> <C> <C>
Reconciliation of net earnings to net cash provided by
operating activities:
Net earnings $ 1,654 1,249
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 200 227
Provision for loan losses 310 240
(Increase) decrease in loans held for sale 3,734 (2,094)
Increase in interest receivable (173) (140)
(Increase) decrease in other assets, net (144) (147)
Increase (decrease) in other liabilities (132) 39
Increase in interest payable 89 94
------- ------
Total adjustments 3,884 (1,781)
------- ------
Net cash provided by (used in) operating activities $ 5,538 (532)
======= ======
Supplemental schedule of non-cash activities:
Unrealized gain in value of securities available-for
sale, net of tax benefit of $334,000 in 1999 and
expense of $4,000 in 1998 $ (546) 7
======= ======
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
7
<PAGE> 8
FIRST FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The unaudited consolidated financial statements include the
accounts of First Financial Corporation (Company) and its wholly-owned
subsidiary, First Bank and Trust (First Bank) and First Bank's wholly-owned
title insurance agency, American Title and Escrow Company and First Bank's
inactive finance company subsidiary, First Southern Finance, Inc.
The accompanying consolidated financial statements have been
prepared, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations.
In the opinion of management, the statements contain all
adjustments and disclosures necessary to summarize fairly the financial position
of the Company as of June 30, 1999 and December 31, 1998, and the results of
operations for the three months and six months ended June 30, 1999 and 1998, and
comprehensive earnings for the three and six months ended June 30, 1999 and 1998
and changes in cash flows for the six months ended June 30, 1999 and 1998,
respectively. All significant intercompany transactions have been eliminated.
The interim consolidated financial statements should be read in conjunction with
the notes to the consolidated financial statements presented in the Company's
1998 Annual Report to stockholders. The results for interim periods are not
necessarily indicative of results to be expected for the complete fiscal year.
Certain reclassifications have been made to 1999 information to
conform to the presentation of 1998 information.
ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1999 1998
---- ----
(In Thousands)
<S> <C> <C>
Balance, January 1, 1999 and 1998, respectively $ 1,821 1,704
Add (deduct):
Losses charged to allowance (148) (320)
Recoveries credited to allowance 17 21
Provision for loan losses 310 240
-------- --------
Balance, June 30, 1999 and 1998, respectively $ 2,000 1,645
======== ========
</TABLE>
8
<PAGE> 9
FIRST FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
PROPOSED MERGER
On May 1, 1999, the Company entered into an Agreement and Plan of
Merger (the Plan) whereby all of the Company's common stock will be acquired by
National Commerce Bancorporation (NCBC) for stock of NCBC (the Merger). Pursuant
to the terms of the Plan, NCBC will be the surviving company. The Plan has
received Shareholder and regulatory approval and became effective on August 3,
1999. The Company has filed a Current Report on Form 8-K in respect of the Plan.
EARNINGS PER SHARE
Statement of Financial Accounting Standards ("SFAS") 128 "Earnings
Per Share" establishes uniform standards for computing and presenting earnings
per share. SFAS 128 replaces the presentation of primary earnings per share with
the presentation of basic earnings per share and diluted earnings per share. The
computation of basic earnings per share is based on the weighted average number
of common shares outstanding during the period. The computation of diluted
earnings per share for the Company begins with the basic earnings per share plus
the effect of common shares contingently issuable from stock options.
The following is a summary of components comprising basic and
diluted earnings per share (EPS) for the three months and six months ended June
30, 1999 and 1998:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- ------------------------
(In Thousands, except share amounts) 1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic EPS Computation:
Numerator - net earnings available to
common shareholders $ 917 679 $ 1,654 1,249
----------- ----------- ---------- ----------
Denominator - weighted average number of
common shares outstanding 986,364 942,646 969,622 942,419
----------- ----------- ---------- ----------
Basic earnings per common share $ .94 .73 $ 1.71 1.33
=========== =========== ========== ==========
Diluted EPS Computation:
Numerator $ 917 679 $ 1,654 1,249
----------- ----------- ---------- ----------
Denominator:
Weighted average number of common
shares outstanding 986,364 942,646 969,622 942,419
Dilutive effect of stock options 11,604 21,625 11,604 21,625
----------- ----------- ---------- ----------
997,968 964,271 981,226 964,044
----------- ----------- ---------- ----------
Diluted earnings per common share $ .94 .71 $ 1.69 1.30
=========== =========== ========== ==========
</TABLE>
Management is not aware of any current recommendations by the
regulatory authorities which, if implemented, would have a material effect on
the Company's liquidity, capital resources or operations.
9
<PAGE> 10
FIRST FINANCIAL CORPORATION
FORM 10-QSB, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The purpose of this discussion is to provide insight into the
financial condition and results of operations of the Registrant and its
subsidiary. This discussion should be read in conjunction with the consolidated
financial statements. Reference should also be made to the Company's 1998 Annual
Report to stockholders for a complete discussion of factors that impact
liquidity, capital and the results of operations.
As discussed in Item 1, on May 1, 1999, the Company signed an
Agreement and Plan of Merger (the "Agreement") with National Commerce
Bancorporation ("NCBC") under which NCBC would acquire 100% of the outstanding
stock of First Financial Corporation for stock of NCBC. Any outstanding options
will be converted to options to acquire stock of NCBC. Pursuant to the terms of
the Agreement, each share of First Financial Corporation common stock will
receive 2.8502 shares of NCBC shares and each holder of an option to purchase a
share of the Company will receive an option to purchase 2.8502 shares of NCBC at
the option price divided by 2.8502. The exchange ratio is based on a closing
market price per share of $24.25 of NCBC shares at April 12, 1999. The Merger
has received regulatory approval and received First Financial Corporation
stockholder approval on August 3, 1999.
FORWARD-LOOKING STATEMENTS
Management's discussion of the Company, and management's analysis
of the Company's operations and prospects, and other matters, may include
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 and other provisions of federal and state
securities laws. Although the Company believes that the assumptions underlying
such forward-looking statements contained in this Report are reasonable, any of
the assumptions could be inaccurate and, accordingly, there can be no assurance
that the forward-looking statements included herein will prove to be accurate.
The use of such words as expect, anticipate, forecast, and comparable terms
should be understood by the reader to indicate that the statement is "forward
looking" and thus subject to change in a manner that can be unpredictable.
Factors that could cause actual results to differ from the results anticipated,
but not guaranteed, in this Report, include (without limitation) economic and
social conditions, competition for loans, mortgages, and other financial
services and products, changes in interest rates, unforeseen changes in
liquidity, results of operations, and financial conditions affecting the
Company's customers, material unforeseen complications related to addressing
Year 2000 issues (both as to the Company and as to its customers, vendors,
consultants and governmental agencies), as well as other risks that cannot be
accurately quantified or completely identified. Many factors affecting the
Company's financial condition and profitability, including changes in economic
conditions, the volatility of interest rates, political events and competition
from other providers of financial services simply cannot be predicted. Because
these factors are unpredictable and beyond the Company's control, earnings may
fluctuate from period to period. The purpose of this type of information (such
as in Item 2, as well as other portions of this Report) is to provide Form
10-QSB readers with information relevant to understanding and assessing the
financial condition and results of operations of the Company not to predict the
future or to guarantee results. The Company is unable to predict the types of
circumstances, conditions, and factors that can cause anticipated results to
change. The Company undertakes no obligation to publish revised forward-looking
statements to reflect the occurrence of changes or of unanticipated events,
circumstances, or results.
10
<PAGE> 11
FIRST FINANCIAL CORPORATION
FORM 10-QSB, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION, CONTINUED
LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT
The concept of liquidity involves the ability of the Company and
its subsidiary to meet future cash flow requirements, particularly those of
customers who are either withdrawing funds from their accounts or borrowing to
meet their credit needs.
Proper asset/liability management is necessary to maintain
stability in the balance of interest-sensitive assets to interest-sensitive
liabilities in order to provide a stable growth in net interest margins.
Earnings on interest-sensitive assets such as loans tied to the prime rate of
interest and federal funds sold, may vary considerably from fixed rate assets
such as long-term investment securities and fixed rate loans. Interest-sensitive
liabilities such as large certificates of deposit and money market certificates,
generally require higher costs than fixed rate instruments such as passbook
savings.
Banks, in general, must maintain large cash balances to meet
day-to-day cash flow requirements as well as maintaining required reserves for
regulatory agencies. The cash balances maintained are the primary source of
liquidity. Federal funds sold, which are basically overnight or short-term loans
to other banks that increase the other bank's required reserves, are also a
major source of liquidity.
The Company's investment portfolio consists of earning assets that
provide interest income. All securities have been classified as
available-for-sale and include securities intended to be used as a part of the
Company's asset/liability strategy and/or securities that may be sold in
response to changes in interest rate, prepayment risk, the need or desire to
increase capital and similar economic factors. The Company has approximately
$11.4 million of securities scheduled to mature or reprice in the next twelve
months.
A secondary source of liquidity is the Bank's loan portfolio. At
June 30, 1999 first mortgage loans of approximately $18.5 million and other
loans of approximately $93.6 million either will become due or will be subject
to rate adjustments within twelve months from the respective date. Continued
emphasis will be placed on structuring adjustable rate loans.
As for liabilities, certificates of deposit of $100,000 or greater
of approximately $33.3 million will become due or subject to repricing during
the next twelve months. The Bank's deposit base increased approximately $6.9
million during the six months ended June 30, 1999.
The Company also has the ability to meet its liquidity needs
through advances from the Federal Home Loan Bank. At June 30, 1999 the Bank had
$107,000 of these advances and has a total line of credit with the FHLB of
$9,000,000. In addition, the subsidiary has a line of credit with other banks
totaling $14,000,000 which can be used to purchase Federal funds. The Company
also has a $5,000,000 line of credit which currently has no outstanding balance.
The Company's line of credit is secured by a pledge of all shares of First Bank
and Trust. Pursuant to the Merger with NCBC, this pledge was terminated.
As of June 30, 1999, the Bank's asset sensitivity was 16.7%, (the
excess of interest sensitive assets over earning liabilities divided by total
assets at the one year threshold). Management estimates an increase or decrease
in interest rates would have an immaterial impact on earnings.
11
<PAGE> 12
FIRST FINANCIAL CORPORATION
FORM 10-QSB, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION, CONTINUED
LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT, CONTINUED
It is anticipated that with present maturities, the anticipated
growth in deposit base, and the efforts of management in its asset/liability
management program, liquidity will not pose a problem in the foreseeable future.
At the present time, there are no known trends or any known commitments,
demands, events or uncertainties that will result in or that are reasonably
likely to result in the Company's liquidity changing in any material way.
Liquidity was 20.0% at June 30, 1999 and 23.3% at December 31, 1998.
CAPITAL RESOURCES
A primary source of capital is internal growth through retained
earnings. The ratio of stockholders' equity to total assets was 7.4% at June 30,
1999 and 7.0% at December 31, 1998. Total assets increased 2.8% during the six
months ended June 30, 1999. Cash dividends of $.25 per share were paid during
the year ended December 31, 1998. Cash dividends of $303,000 or $.30 per share
were paid during the first six months of 1999 and none were paid during the same
period in 1998. Cash dividends will be paid or increased in the remainder of
1999 over 1998 only in the discretion of the Board of Directors to the extent of
available profits.
Effective June 6, 1996, the Company established a Dividend
Reinvestment Plan. The Plan offers eligible shareholders the opportunity to
purchase additional shares of common stock, upon the Company's declaration of
dividends. There were 6,395 shares issued under the Plan during 1998. Due to the
Merger with NCBC, the Company discontinued the Dividend Reinvestment Plan. No
material changes in the mix or cost of capital is anticipated in the foreseeable
future.
At the present time there are no material commitments for capital
expenditures.
The FDIC, which is the subsidiary's primary Federal regulator, has
specified guidelines for purposes of evaluating a bank's capital adequacy. Under
these guidelines, a credit risk is assigned to various categories of assets and
commitments ranging from 0% to 100% based on the risk associated with the asset
or commitment.
The following schedule details the Company's risk-based capital at
June 30, 1999 (excluding the effect of the adoption of SFAS No. 115):
<TABLE>
<CAPTION>
In Thousands
------------
(except percentages)
<S> <C>
Tier I capital:
Stockholders' equity $ 20,581
Tier II capital:
Allowable allowance for loan losses 2,000
---------
Total capital $ 22,581
=========
Risk-weighted assets $ 217,100
=========
Risk-based capital ratios:
Tier I capital ratio 9.48%
========
Tier II capital ratio 10.40%
========
</TABLE>
12
<PAGE> 13
FIRST FINANCIAL CORPORATION
FORM 10-QSB, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION, CONTINUED
CAPITAL RESOURCES, CONTINUED
The Company is required to maintain a Tier II capital to risk
weighted asset ratio of 8% and a Tier I capital to risk weighted asset ratio of
4%. At June 30, 1999, the Company and its subsidiary bank were in compliance
with these requirements.
In addition, the Company and its subsidiary are required to
maintain a leverage ratio (defined as equity divided by the most recent quarter
average total assets) of 4%. The leverage ratio at June 30, 1999 was 7.4%.
Management continues to implement its plan to maximize the
leverage position of the Company consistent with safe and sound business
practices and the current regulatory environment. Past decisions by management
have committed the Company to a path of growth to achieve the strategic goals of
maximum leverage. Management is cognizant of the pressures of this philosophy
but believes various combinations of retained earnings, additional capital stock
issues, preferred stock offerings, and other avenues will enable the Company to
maintain a capital position consistent with sound banking principles and at the
same time reward stockholders with significant profits.
Effective January 1, 1992, the Company acquired 100% of the common
stock of First Bank and, accordingly, became a one bank holding company. The
Board of Directors and management believe that the holding company structure
will permit greater flexibility in the expansion of the Bank's present business
and will assist the Bank in being more responsive to its customers' broadening
and changing financial needs. In particular, the holding company structure was
adopted to provide greater flexibility in raising additional capital for the
Bank. Greater flexibility in raising capital is an important component in
seeking to assure that the growth of the Bank's capital will keep pace with its
asset growth.
There is no established trading market for the Company's stock.
From time to time the Company may acquire shares of its stock to provide
liquidity in the shares. All shares of common stock have been retroactively
adjusted for the two-for-one stock split approved on April 18, 1996. During the
six months ended June 30, 1999, the Company issued 56,907 shares of its common
voting stock in connection with the exercise of stock options and no shares were
redeemed. No shares of the Company's voting common stock were redeemed for the
year ending December 31, 1998. Privately negotiated trades may involve the
Company, its directors and officers and, accordingly, may not be reliable
indicators of value.
In April, 1993, the stockholders approved a stock option plan
whereby 159,000 shares of the Company's stock is available for issuance to
directors, officers and employees of the Company. At June 30, 1999, 79,400
shares had been granted at $10 per share (46,056 shares have been exercised at
June 30, 1999), 2,000 shares had been granted at $12 per share (1,000 shares
have been exercised at June 30, 1999), 4,000 shares were granted at $13 per
share, (1,600 shares have been exercised as of June 30, 1999), 29,792 shares
were granted at $15 per share (12,568 shares have been exercised at June 30,
1999), 528 shares were granted at $19 per share (no shares have been exercised
at June 30, 1999), 13,000 shares were granted at $22.50 per share (4,500 shares
have been exercised at June 30, 1999) and 2,000 shares were granted at $33 per
share (400 shares have been exercised as of June 30, 1999). The options are
granted at the estimated market price of the stock at the date the option was
13
<PAGE> 14
FIRST FINANCIAL CORPORATION
FORM 10-QSB, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION, CONTINUED
CAPITAL RESOURCES, CONTINUED
granted. At June 30, 1999 there were 64,596 shares granted but not exercised.
The options are generally exercisable ratably over a ten year period from the
date granted. At June 30, 1999 options to purchase 28,280 common shares were
available for grant in future years. However, the Company did not grant any more
options prior to the Merger with NCBC.
At present, the net book value of premises and equipment is 39.0%
of the Company's capital. The subsidiary bank now has a significant presence in
the Wilson County market with offices in Mt. Juliet, Tennessee, Hermitage,
Tennessee and Lebanon, Tennessee. The bank also has a new branch bank facility
in Smyrna, Rutherford County, Tennessee which opened in the fourth quarter of
1996 and a branch in Donelson, Davidson County, Tennessee. Management believes
that expansion into these different markets diversifies its risk and provides
increased opportunity for generating growth and profits. At present the ratio of
fixed assets to capital at the subsidiary bank level is 40.2%. Investment in
fixed assets can have a detrimental impact on profits, particularly in the short
term.
The Company's subsidiary, First Bank and Trust, formed a 100%
owned subsidiary in 1998, American Title and Escrow Company. American Title and
Escrow Company provides full service mortgage loan closing services and began
full operations in January, 1999. First Bank and Trust also owns 100% interest
in an inactive finance company, First Southern Finance, Inc.
YEAR 2000 ISSUES
The term "Year 2000 issue" refers to the necessity of converting
computer information systems so that such systems recognize more than two digits
to identify a year in any given date field, and are thereby able to
differentiate between years in the twentieth and twenty-first centuries ending
with the same two digits (e.g., 1900 and 2000). To address the Year 2000 issue,
the Company has adopted a broad-based approach designed to encompass the
Company's total environment.
The Board of Directors of First Bank has taken a proactive approach.
A Y2K Coordinator was appointed and the EDP Committee was asked to serve as the
Y2K Steering Committee. The Y2K Action Team was formed consisting of key people
from all areas of the bank. The Action team is following a comprehensive seven
phase Y2K Action Plan with a detailed Work Plan. Senior management and the Board
of Directors approved a timeline and budget of $213,435. Actual expenditures to
date and currently anticipated future expenditures are within this estimate. The
Board of Directors reviews the status of the plan on a monthly basis. Areas
being addressed by the Y2K Action Team are:
- The mission critical hardware and software within the bank. This
includes FiServ, Inc., the bank's data processor. Twelve additional
pieces of software are included on this list.
- Software interfaces.
- Hardware. The bank's Wide Area Network and each workstation or stand
alone PC.
- Communications - Includes the phone systems.
14
<PAGE> 15
FIRST FINANCIAL CORPORATION
FORM 10-QSB, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION, CONTINUED
YEAR 2000 ISSUES, CONTINUED
- Customer Awareness. Brochures have been developed, seminars conducted
with employees and customers, information added to the bank's web site
www.1firstbank.com.
- Customer Evaluations. The loan and deposit bases have been evaluated
for possible risk. This evaluation will be on going through January 1,
2000. Evaluation rating will be adjusted as necessary.
- Environment. The physical building and systems utilized to keep it
operating smoothly and comfortably for the bank's employees.
- Vendors.
- Printed Paper Forms. All forms have been evaluated for combination two
digits date fields. Those beginning with 19 will be replaced.
First Bank's Y2K Action Team has contacted each vendor or supplier
to determine their Year 2000 readiness. The Action Team is continuing the
process of testing and validating the renovation of all systems and hardware and
had substantially met all goals as of March 31, 1999.
First Bank does not expect the Year 2000 issue to have a material
impact to operations, liquidity or financial condition due to the comprehensive
plan carried out by the Y2K Action Team. However, there are no guarantees with
the Year 2000 and the team will continuously evaluate the Company's position
until January 31, 2000. Management also believes that First Bank's (and the
Company's) ultimate ability to successfully address the Year 2000 issue will be
significantly affected by external factors such as the success of governmental
agencies, suppliers and customers to address their own Year 2000 issues.
Although management is actively addressing and establishing contingency plans to
deal with these external factors, they ultimately are beyond management's
control.
RESULTS OF OPERATIONS
Net earnings were $1,654,000 for the six months ended June 30, 1999
as compared to $1,249,000 for the same period in 1998. Basic earnings per share
increased from $1.33 for the six months ended June 30, 1998 to $1.71 for the
same period in 1999. Diluted earnings per share increased from $1.30 for the six
months ended June 30, 1998 to $1.69 for the same period in 1999.
As in most financial institutions, a major element in analyzing
the statement of earnings is net interest income, which is the excess of
interest earned over interest paid. This is particularly true with the
volatility in interest rates encountered in recent years.
The Company's interest income, excluding tax equivalent
adjustments, increased by $1,214,000 or 13.4% during the six months ended June
30, 1999 and $1,125,000 or 14.1% for the same period in 1998. Interest income
for the quarter ended June 30, 1999 increased $625,000 or 13.4% over the quarter
ended June 30, 1998 and $272,000 or 5.4% over the first quarter of 1999. The
increases were primarily attributable to higher volumes of earning assets. The
ratio of average earning assets to total average assets was 92.9% for the six
months ended June 30, 1999 and 93.1% for the year ended December 31, 1998.
15
<PAGE> 16
FIRST FINANCIAL CORPORATION
FORM 10-QSB, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION, CONTINUED
RESULTS OF OPERATIONS, CONTINUED
Interest expense increased by $269,000 the six months ended June
30, 1999 or 6.3% compared to an increase of $615,000 or 16.7% for the same
period in 1998. Interest expense for the quarter ended June 30, 1999 increased
$95,000 or 4.3% as compared to the quarter ended June 30, 1998 and increased
$42,000 or 1.9% over the first quarter of 1999. The increases in 1999 and 1998
can be attributable largely to an increase in volume.
The foregoing resulted in an increase in net interest income of
$945,000 or 19.8% during the first six months of 1999 and $510,000 or 12.0% in
the comparable period of 1998. Net interest income for the quarter ended June
30, 1999 increased $530,000 or 21.7% as compared to $246,000 or 11.2% for the
comparable period of 1998.
Since assets are more sensitive to movements in rates this should
favor the income statement. Should loan demand not increase, the competition,
intent on increasing market share, could drive interest expenses up and the
Company's net interest margin will decline.
The Company follows the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment
of a Loan" and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures". These pronouncements apply to impaired
loans except for large groups of smaller-balance homogeneous loans that are
collectively evaluated for impairment including credit card, residential
mortgage, and consumer installment loans.
A loan is impaired when it is probable that the Company will be
unable to collect the scheduled payments of principal and interest due under the
contractual terms of the loan agreement. Impaired loans are measured at the
present value of expected future cash flows discounted at the loan's effective
interest rate, at the loan's observable market price, or the fair value of the
collateral if the loan is collateral dependent. If the measure of the impaired
loan is less than the recorded investment in the loan, the Company shall
recognize an impairment by creating a valuation allowance with a corresponding
charge to the provision for loan losses or by adjusting an existing valuation
allowance for the impaired loan with a corresponding charge or credit to the
provision for loan losses.
The Company's first mortgage single family residential, consumer
and credit card loans which total approximately $44,583,000, $26,850,000 and
$104,000, respectively at June 30, 1999, are divided into various groups of
smaller-balance homogeneous loans that are collectively evaluated for impairment
and thus are not subject to the provisions of SFAS Nos. 114 and 118.
Substantially all other loans of the Company are evaluated for impairment under
the provisions of SFAS Nos. 114 and 118.
16
<PAGE> 17
FIRST FINANCIAL CORPORATION
FORM 10-QSB, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION, CONTINUED
RESULTS OF OPERATIONS, CONTINUED
The Company considers all loans on nonaccrual status to be
impaired. Loans are placed on nonaccrual status when doubt as to timely
collection of principal or interest exists, or when principal or interest is
past due 90 days or more unless such loans are well-secured and in the process
of collection. Delays or shortfalls in loan payments are evaluated with various
other factors to determine if a loan is impaired. Generally, delinquencies under
90 days are considered insignificant unless certain other factors are present
which indicate impairment is probable. The decision to place a loan on
nonaccrual status is also based on an evaluation of the borrower's financial
condition, collateral, liquidation value, and other factors that affect the
borrower's ability to pay.
Generally, at the time a loan is placed on nonaccrual status, all
interest accrued on the loan in the current fiscal year is reversed from income,
and all interest accrued and uncollected from the prior year is charged off
against the allowance for loan losses. Thereafter, interest on nonaccrual loans
is recognized as interest income only to the extent that cash is received and
future collection of principal is not in doubt. If the collectibility of
outstanding principal is doubtful, such interest received is applied as a
reduction of principal. A nonaccrual loan may be restored to accruing status
when principal and interest are no longer past due and unpaid and future
collection of principal and interest on a timely basis is not in doubt. At June
30, 1999 and 1998 impaired loans which had been placed on non-accrual status
totaled $121,000 and $23,000, respectively.
Loans not on nonaccrual status are classified as impaired in
certain cases where there is inadequate protection by the current net worth and
financial capacity of the borrower or of the collateral pledged, if any. In
those cases, such loans have a well-defined weakness or weaknesses that
jeopardize the liquidation of the debt, and if such deficiencies are not
corrected, there is a probability that the Company will sustain some loss. In
such cases, interest income continues to accrue as long as the loan does not
meet the Company's criteria for nonaccrual status.
The Company's charge-off policy for impaired loans is similar to
its charge-off policy for all loans in that loans are charged-off in the month
when they are considered uncollectible.
Impaired loans and related allowance for loan loss amounts at June 30,
1999 and December 31, 1998 were as follows:
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
----------------------------- -------------------------
Allowance Allowance
Recorded for Recorded for
Investment Loan Loss Investment Loan Loss
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Impaired loans with allowance for
loan loss $1,209,154 241,830 1,540,387 308,077
Impaired loans with no allowance
for loan loss -- -- -- --
---------- --------- --------- -------
$1,209,154 241,830 1,540,387 308,077
========== ========= ========= =======
</TABLE>
17
<PAGE> 18
FIRST FINANCIAL CORPORATION
FORM 10-QSB, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION, CONTINUED
RESULTS OF OPERATIONS, CONTINUED
The provision for loan losses was $310,000 for the first six
months of 1999 compared to $240,000 for the same period in 1998. The provision
for loan losses is based on past loan experience and other factors which, in
management's judgment, deserve current recognition in estimating possible loan
losses. Such other factors considered by management include growth and
composition of the loan portfolio, review of specific loan problems, the
relationship of the allowance for loan losses to outstanding loans, adverse
situations that may affect the borrower's ability to repay, the estimated value
of any underlying collateral and current economic conditions that may affect the
borrower's ability to repay. Management has in place a system designed to
identify and monitor problem loans on a timely basis.
The allowance for loan loss related to impaired loans were
measured based upon the estimated fair value of related collateral.
The average recorded investment in impaired loans for the six
months ended June 30, 1999 and 1998 was approximately $1,374,000 and $975,000,
respectively. The related amount of interest income recognized on the accrual
method for the period that such loans were impaired was $49,000 and $70,000 for
the six months ended June 30, 1999 and 1998, respectively. There was no interest
income recognized on the cash method for the period that such loans were
impaired.
The following schedule details selected information as to
non-performing loans of the Company at June 30, 1999:
<TABLE>
<CAPTION>
Past Due
90 Days Non-Accrual
------- -----------
(In Thousands)
<S> <C> <C>
Real estate loans $ 26 115
Installment loans 51 --
Commercial 3 6
-------- --------
$ 80 121
======== ========
Renegotiated loans $ -- --
======== ========
</TABLE>
At June 30, 1999, loans which include the above, totaling
$1,666,000 were included in the Company's internal classified loan list. Of
these loans $734,000 are consumer and $932,000 are commercial loans. The
collateral values, based on estimates received by management, securing these
loans are approximately $3,420,000, ($1,835,000 related to consumer loans and
$1,585,000 related to commercial loans). Such loans are listed as classified
when information obtained about possible credit problems of the borrower has
prompted management to question the ability of the borrower to comply with the
agreed repayment terms of the loan agreement. The loan classifications do not
represent or result from trends or uncertainties which management expects will
materially impact future operating results, liquidity or capital resources.
18
<PAGE> 19
FIRST FINANCIAL CORPORATION
FORM 10-QSB, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION, CONTINUED
RESULTS OF OPERATIONS, CONTINUED
There were no material amounts of other interest-bearing assets
(interest-bearing deposits with other banks, municipal bonds, etc.) at June 30,
1999 which would be required to be disclosed as past due, non-accrual,
restructured or potential problem loans, if such interest-bearing assets were
loans.
Non-interest income, excluding securities transactions, increased
$369,000 or 31.0% during the six months ended June 30, 1999 and increased
$185,000 or 18.4% for the same period in 1998. The increase for the quarter
ended June 30, 1999 was $271,000 or 42.7% as compared to the comparable quarter
in 1998 and an increase of $252,000 or 38.6% as compared to the three months
ended March 31, 1999. The primary increase in non-interest income consists of an
increase in income generated from sales of mortgage loans. Mortgage loan income
(included in other income) for the six month period ended June 30, 1999, was
$530,000 as compared to $561,000 for the period ending June 30, 1998. The
decrease of $31,000 or 5.8% has been caused by a slow down in lending resulting
from an increase in rates during the quarter and a decrease in mortgage
refinancings but continues to remain strong because an increase in housing
development in the subsidiary bank's service area. Other increases in 1999 and
1998 resulted from increased service charges on deposits, primarily for demand
deposit and NOW accounts. These increases in service charges were the result of
additional volume combined with modest price increases to offset a portion of
the interest costs of NOW accounts and the increased costs of processing the
demand deposit accounts. Additionally, other fees and commissions increased
$84,000 resulting from the opening of American Title and Escrow in the beginning
of 1999. Commissions and service charges are monitored continually to insure
maximum return based on costs and competition.
There were no security losses in the available-for-sale category
for the six months ended June 30, 1999 and 1998. Securities gains in the
available-for-sale category totaled $1,000 during the six months ended June 30,
1999.
Non-interest expense, excluding securities transactions, increased
$734,000 or 19.0% during the first six months of 1999 and $638,000 or 19.8%
during the same period in 1998. The increase for the quarter ended June 30, 1999
was $522,000 or 26.8% as compared to the quarter ended June 30, 1998 and
$334,000 or 15.7% as compared to the three months ended March 31, 1999. The
increases in 1999 and 1998 were primarily attributable to increases in salaries
and employee benefits, which is due to increased number of employees and
increases in annual compensation, increased occupancy expense resulting from the
opening of a new branch and the expansion and improvement of existing branches,
and an increase in costs related to the Merger.
Management is not aware of any known trends, events or uncertainties
that will have or reasonably likely to have a material effect on the Company's
liquidity, capital resources or operations of the Company. The Company is not
aware of any current recommendations, which, if they were to be implemented,
would have a material effect on liquidity, capital resources or operations other
than as discussed in the capital resources section of this plan.
19
<PAGE> 20
FIRST FINANCIAL CORPORATION
FORM 10-QSB, CONTINUED
IMPACT OF INFLATION
The primary impact which inflation has on the results of the
Company's operations is evidenced by its effects on interest rates. Interest
rates tend to reflect, in part, the financial market's expectations of the level
of inflation and, therefore, will generally rise or fall as the level of
expected inflation fluctuates. To the extent interest rates paid on deposits and
other sources of funds rise or fall at a faster rate than the interest income
earned on funds, loans or investments, net interest income will vary. Inflation
also affects non-interest expenses as goods and services are purchased, although
this has not appeared to have a significant effect on net earnings. If the
inflation rate stays flat or increases slightly, the effect on profits will not
likely be significant.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary component of market risk is interest rate
volatility. Fluctuations in interest rates will ultimately impact both the level
of income and expense recorded on a large portion of the Company's assets and
liabilities, and the market value of all interest-earning assets and
interest-bearing liabilities, other than those which possess a short term to
maturity. Based upon the nature of the Company's operations, the Company is not
subject to foreign currency exchange or commodity price risk.
Interest rate risk (sensitivity) management focuses on the
earnings risk associated with changing interest rates. Management seeks to
maintain profitability in both immediate and long term earnings through funds
management/interest rate risk management. The Company's rate sensitivity
position has an important impact on earnings. Senior management of the Company
meets monthly to analyze the rate sensitivity position. These meetings focus the
spread between the cost of funds and interest yields generated primarily through
loans and investments.
There have been no material changes in reported market risks
during the six months ended June 30, 1999. Please refer to Item 2 of this report
for additional information related to market and other risks.
20
<PAGE> 21
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
(a) On May 1, 1999, the Company's Board of Directors approved an Agreement
and Plan of Merger ("Plan") pursuant to which the Company would merge
with and into National Commerce Bancorporation ("NCBC"), with NCBC as
the surviving corporation. The Company filed a Current Report on
Form 8-K in respect of the Plan and the option. The Plan has received
shareholder and regulatory approval and became effective August 3,
1999.
(b) Please refer to Item 2(a).
(c) The Registrant issued 56,139 shares of its $2.50 par value common stock
pursuant to exercised options and no shares of such common stock
pursuant to its Dividend Reinvestment Plan. Notice of termination of
the Dividend Reinvestment Plan has been given.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
(a) None
(b) None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Corporation's Annual Meeting of Shareholders was held on April 16,
1999. Matters submitted to, and approved by shareholders are listed
below.
(b) The following persons nominated as Directors were elected:
<TABLE>
<CAPTION>
Broker
Name For Against Abstain Non-Votes
---- --- ------- ------- ---------
<S> <C> <C> <C> <C>
Harold G. Bone 609,089 0 0 0
Robert L. Callis 609,089 0 0 0
Morris D. Ferguson 609,089 0 0 0
Arthur P. Gardner 609,089 0 0 0
David Major 609,089 0 0 0
M. Dale McCulloch 609,089 0 0 0
Dan E. Midgett 609,089 0 0 0
Monty Mires 609,089 0 0 0
James S. Short 609,089 0 0 0
Harold W. Sutton 609,089 0 0 0
</TABLE>
21
<PAGE> 22
PART II. OTHER INFORMATION, CONTINUED
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS, CONTINUED
(c) The election by the Board of Directors of Maggart and Associates, P.C.,
as the Corporation's independent accountants and auditors for the year
ending December 31, 1999 was ratified by the following vote:
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
--- ------- ------- ---------
<S> <C> <C> <C>
599,226 9,623 240 0
</TABLE>
(d) None
ITEM 5. OTHER INFORMATION
(a) None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 Financial Data Schedule (for SEC use only) - This schedule
contains summary financial information extracted from the financial
statements of the Company at June 30, 1999 (unaudited) and is qualified
in its entirety by reference to such financial statements as set forth
in the Company's quarterly report on Form 10-QSB for the period ending
June 30, 1999.
(b) The Company filed a Form 8-K on May 17, 1999 related to the Merger
discussed in Items 1 and 2. The Form 8-K included: 1) the Agreement and
Plan of Merger by and between National Commerce Bancorporation and
First Financial Corporation, 2) stock option agreement by and between
National Commerce Bancorporation and First Financial Corporation and 3)
a press release issued May 3, 1999 by First Financial Corporation.
22
<PAGE> 23
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST FINANCIAL CORPORATION
--------------------------------------
(Registrant)
DATE: 8/9/99 /s/ David Major
---------------------- ---------------------------------------
David Major
Chairman, President and Chief Executive
Officer
DATE: 8/9/99 /s/ Sally Kimble
---------------------- ---------------------------------------
Sally Kimble
Treasurer, Chief Financial Officer, and
Chief Accounting Officer
23
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 8,003
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 9,975
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 48,251
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 199,382
<ALLOWANCE> 2,000
<TOTAL-ASSETS> 276,883
<DEPOSITS> 254,589
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,429
<LONG-TERM> 485
0
0
<COMMON> 2,869
<OTHER-SE> 17,511
<TOTAL-LIABILITIES-AND-EQUITY> 276,883
<INTEREST-LOAN> 8,745
<INTEREST-INVEST> 1,456
<INTEREST-OTHER> 91
<INTEREST-TOTAL> 10,292
<INTEREST-DEPOSIT> 4,536
<INTEREST-EXPENSE> 4,570
<INTEREST-INCOME-NET> 5,722
<LOAN-LOSSES> 310
<SECURITIES-GAINS> 1
<EXPENSE-OTHER> 4,602
<INCOME-PRETAX> 2,369
<INCOME-PRE-EXTRAORDINARY> 2,369
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,654
<EPS-BASIC> 1.71
<EPS-DILUTED> 1.69
<YIELD-ACTUAL> 4.78
<LOANS-NON> 121
<LOANS-PAST> 80
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,666
<ALLOWANCE-OPEN> 1,821
<CHARGE-OFFS> 148
<RECOVERIES> 17
<ALLOWANCE-CLOSE> 2,000
<ALLOWANCE-DOMESTIC> 2,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
