PEOPLES FIRST INC - 10-Q Quarterly Report

Back to GetFilings.com

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED JUNE 30, 2003 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 number: 333-30640

PEOPLES FIRST, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)

PENNSYLVANIA 23-3028825
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

24 SOUTH THIRD STREET, OXFORD, PENNSYLVANIA 19363
- ------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)

(610) 932-9294
----------------------------------------------------
(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 [ ].

Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange Act).
[ ] Yes [X] No

Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical
date.

COMMON STOCK, Par Value $1.00 per share
2,965,284 shares outstanding as of June 30, 2003

Item 1. Financial Statements

PEOPLES FIRST, INC.

CONSOLIDATED BALANCE SHEETS

Note: The balance sheet at December 31, 2002 has been derived
from the audited financial statements at that date.

See Notes to Consolidated Financial Statements

2

PEOPLES FIRST, INC.
CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

See Notes to Consolidated Financial Statements

4

PEOPLES FIRST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

See Notes to Consolidated Financial Statements

6

PEOPLES FIRST, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Six Months Ended June 30, 2002
(Unaudited)

PEOPLES FIRST, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Six Months Ended June 30, 2002
(Unaudited)

7

PEOPLES FIRST, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

June 30, 2003

Note A - Basis of Presentation

The consolidated financial statements include the accounts of
Peoples First, Inc. and its wholly owned subsidiary, The Peoples
Bank of Oxford (the "Bank") and its subsidiaries (collectively
"Peoples"). The Bank's subsidiaries include Wilmerding &
Associates, Inc. ("Wilmerding"), an investment advisor
registered with the SEC and based in Rosemont, Pennsylvania and
Peoples First Business Investment Company, LLC ("PFBI"), a non-
operating company formed in January 2002 for the purpose of
holding certain equity investments in operating entities. One
of such operating entities is Peoples First Land Transfer, LLC,
which commenced operations in January 2002 and derives its
income from the sale of title insurance. The other operating
entity is Peoples First Mortgage Company, LLC, which commenced
operation in May 2003 and derives its income from the sale of
mortgages. All material inter-company transactions have been
eliminated. Peoples First, Inc. was formed on July 27, 2000 and
is subject to regulation by the Board of Governors of the
Federal Reserve System.

The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and are
presented in accordance with the instructions to Form 10-Q and
Rule 10-01 of the Securities and Exchange Commission Regulation
S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the three and six month periods
ended June 30, 2003, are not necessarily indicative of the
results that may be expected for the year ending December 31,
2003.

The consolidated financial statements presented in this report
should be read in conjunction with the audited financial
statements and the accompanying notes included in the Annual

8

Report on Form 10-K of Peoples First, Inc. filed with the
Securities and Exchange Commission for the year ended
December 31, 2002.

Note B - Accounting Policies

The accounting policies of Peoples as applied in the interim
financial statements presented, are substantially the same as
those followed on an annual basis as presented in the Annual
Report on Form 10-K of Peoples First, Inc. filed for the year
ended December 31, 2002, except as described in the following
paragraph.

At June 30, 2003, the Peoples had one stock-based employee
compensation plan, which is described more fully in Note E.
Peoples accounts for this plan under the recognition and
measurement principles of APB Opinion No. 25, "Accounting for
Stock Issued to Employees," and related Interpretations. No
stock-based employee compensation cost is reflected in net
income, as all options granted under the plan had an exercise
price equal to the market value of the underlying common stock
on the date of grant. The following table illustrates the
effect on net income and earnings per share if Peoples had
applied the fair value recognition provisions of FASB Statement
No. 123, "Accounting for Stock-Based Compensation," to stock-
based employee compensation.

10

Note C - Earnings per Share

Basic earnings per share represents income available to common
shareholders divided by the weighted-average number of common
shares outstanding during the period. Diluted earnings per
share reflects additional common shares that would have been
outstanding if dilutive potential common shares (stock options)
had been issued.

Stock options were first granted in June 2003, but were not
dilutive for the three and six months ended June 30, 2003.
Earnings per common share calculations prior to 2003 consisted
of net income available to common shareholders divided by the
average shares outstanding for the period. Earnings per common
share for the three and six month periods ended June 30, 2003
have been computed based upon the following:

3 Months Ended 6 Months Ended
June 30, 2003 June 30, 2003
-------------- --------------
Numerator -net income $1,253,000 $2,486,000
========== ==========
Denominator:
Average basic shares
outstanding 2,965,284 2,965,284
Effect of dilutive stock
options - -
---------- ----------
Average diluted shares
outstanding 2,965,284 2,965,284
========== ==========

Note D - Comprehensive Income

The only comprehensive income item that Peoples presently has is
unrealized gains on securities available for sale. Total
comprehensive income, which is the sum of net income and other
comprehensive income for the three and six month periods ended
June 30, 2003, was $1,661,000 and $2,829,000 compared to

10

$1,938,000 and $2,639,000 for the same period last year. The
federal income taxes allocated to the unrealized gains are as
follows:

Note E - Stock Option Plan

During 2001, Peoples stockholders approved a stock option plan
for key employees and directors of Peoples and its subsidiaries
that is administered by a committee of the Board of Directors.
Under the Plan, the Board is authorized to grant "incentive
stock options" and "non-qualified stock options." A total of
200,000 shares of Peoples' common stock has been reserved for
issuance under the Plan. The option price for options issued
under the plan must be at least equal to 100% of the fair market
value of the common stock on the grant date. No incentive stock
options have been granted.

On June 17, 2003, Peoples granted 85,950 nonqualified stock
options to purchase common stock at $24.13 per share to
employees of Peoples. Options granted under the Plan are
exercisable over a period not less than one year after the grant
date, but no later than ten years and one month after the date
of grant in accordance with the vesting period as determined by
the Plan Committee. Options expire on the earlier of ten years
after the date of grant, up to twenty-four months from the date
of retirement, as of the date of termination for cause, or one

11

year from the date of death, permanent disability or a change in
control.

Transactions under the plan are summarized as follows:

Exercise
Number of Price Per
Options Share
--------- ---------
Outstanding December 31, 2002 - -
Options granted 2003 85,950 $24.13
------ ------
Outstanding June 30, 2003 85,950 $24.13
------ ------

No options are exercisable at June 30, 2003. To date, no
options have been exercised, forfeited or expired. The weighted
average remaining contractual life of the options outstanding is
ten years.

The fair value of each option grant is estimated using the
Black-Scholes option-pricing model with the following weighted-
average assumptions: dividend yield of 2.5 %, expected
volatility of 30.67%, risk-free interest rate of 2.81%, and
expected life of 7 years. The fair value of options granted in
2003 was $6.53.

Note F - Standby Letters of Credit

Outstanding letters of credit written are conditional
commitments issued by Peoples to guarantee the performance of a
customer to a third party. Peoples' exposure to credit loss in
the event of non-performance by the other party to the financial
instrument for standby letters of credit is represented by the
contractual amount of those instruments. Peoples had $6,695,000
of standby letters of credit as of June 30, 2003 and $5,638,000
at December 31, 2002. The Bank uses the same credit policies in
making conditional obligations as it does for on-balance sheet
instruments.

The majority of these standby letters of credit expire within
the next twelve months. The credit risk involved in issuing
letters of credit is essentially the same as that involved in
extending other loan commitments. Peoples requires collateral
and personal guarantees supporting these letters of credit as

12

deemed necessary. Management believes that the proceeds
obtained through a liquidation of such collateral and the
enforcement of personal guarantees would be sufficient to cover
the maximum potential amount of future payments required under
the corresponding guarantees. The current amount of the
liability as of June 30, 2003, for guarantees under standby
letters of credit issued after December 31, 2002 is not
material.

Note G - Summary of New Accounting Standards

In January 2003, the Financial Accounting Standards Board issued
FASB Interpretation No. 46, "Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51". This interpretation
provides new guidance for the consolidation of variable interest
entities (VIEs) and requires such entities to be consolidated by
their primary beneficiaries if the entities do not effectively
disperse risk among parties involved. The interpretation also
adds disclosure requirements for investors that are involved
with unconsolidated VIEs. The disclosure requirements apply to
all financial statements issued after January 31, 2003. The
consolidation requirements apply immediately to VIEs created
after January 31, 2003 and are effective for the first fiscal
year or interim period beginning after June 15, 2003 for VIEs
acquired before February 1, 2003. The adoption of this
interpretation did not have a significant impact on Peoples'
financial condition or results of operations.

In April 2003, the FASB issued Statement No. 149, "Amendment of
Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities." This Statement clarifies the definition of
a derivative and incorporates certain decisions made by the
Board as part of the Derivatives Implementation Group process.
This Statement is effective for contracts entered into or
modified, and for hedging relationships designated after
June 30, 2003 and should be applied prospectively. The
provisions of the Statement that relate to implementation issues
addressed by the Derivatives Implementation Group that have been
effective should continue to be applied in accordance with their
respective effective dates. Adoption of this standard is not
expected to have a significant impact on Peoples' financial
condition or results of operations.

In May 2003, the Financial Accounting Standards Board issued
Statement No. 150, "Accounting for Certain Financial Instruments

13

with Characteristics of both Liabilities and Equity." This
Statement requires that an issuer classify a financial
instrument that is within its scope as a liability. Many of
these instruments were previously classified as equity. This
Statement was effective for financial instruments entered into
or modified after May 31, 2003 and otherwise was effective
beginning July 1, 2003. The adoption of this standard did not
have a significant impact on Peoples' financial condition or
results of operations.

Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations

Forward-Looking Statements

Except for historical information, this report may be deemed to
contain "forward-looking" statements regarding Peoples.
Examples of forward-looking statements include, but are not
limited to, (a) projections or statements regarding future
earnings, expenses, net interest income, other income, earnings
or loss per share, asset mix and quality, growth prospects,
capital structure and other financial terms, (b) statements of
plans and objectives of management or the board of directors,
and (c) statements of assumptions, such as economic conditions
in Peoples' market areas. Such forward-looking statements can
be identified by the use of forward-looking terminology such as
"believes," "expects," "may," "intends," "will," "should,"
"anticipates," or the negative of any of the foregoing or other
variations thereon or comparable terminology, or by discussion
of strategy.

No assurance can be given that the future results covered by
forward-looking statements will be achieved. Such statements
are subject to risks, uncertainties, and other factors that
could cause actual results to differ materially from future
results expressed or implied by such forward-looking statements.
Important factors that could impact Peoples' operating results
include, but are not limited to, (i) the effects of changing
economic conditions in Peoples' market areas and nationally,
(ii) credit risks of commercial, real estate, consumer and other
lending activities, (iii) significant changes in interest rates,
(iv) changes in federal and state banking laws and regulations
which could impact Peoples' operations, (v) funding costs,

14

(vi) the effects of armed conflicts involving the United States
or its interests, and (vii) other external developments which
could materially affect Peoples' business and operations.

Critical Accounting Policies

Note 2 to the consolidated financial statements of Peoples
First, Inc. (included in Item 8 of the Annual Report on Form 10-
K of Peoples First, Inc. for the year ended December 31, 2002)
lists significant accounting policies used in the development
and presentation of its financial statements. This discussion
and analysis, the significant accounting policies, and other
financial statement disclosures identify and address key
variables and other qualitative and quantitative factors that
are necessary for an understanding and evaluation of Peoples and
its results of operations.

The most significant estimates in the preparation of Peoples'
financial statements are for the allowance for loan losses and
the stock option plan. Please refer to the discussion of the
allowance for loan loss calculation under "Results of
Operations" below and refer to Note E above for the discussion
on the stock option plan.

Financial Condition

Total assets of Peoples increased $42,796,000 or 10.5% during
the first half of 2003. Increases in deposits of $37,989,000,
securities sold under agreements to repurchase of $1,610,000,
long-term debt of $1,617,000 and the increase in retained
earnings of $1,596,000 were the primary resources for the growth
in assets. This growth funded increases in federal funds sold
of $17,303,000 and net loans of $27,584,000, along with
increases in securities of $921,000, interest-bearing deposits
with banks of $470,000 and $135,000 in premises and equipment,
for the first half of 2003. Peoples' investment in FHLB stock
increased by $84,000, resulting from the FHLB's stock ownership
requirements as it relates to the long-term debt increase. Cash
and due from bank balances decreased by $3,656,000, along with a
decrease of $45,000 in accrued interest receivable and other
assets.

Net loans grew $27,584,000 or 9.3% during the first six months
of 2003. The majority of this loan growth was in real estate

15

secured loans, which increased $28,341,000 or 11.9%, commercial
loans, which were up $2,437,000 or 7.9% and tax-free loans which
were up $967,000 or 8.5%. Decreases were noted in agricultural
loans, which were down $1,184,000 or 16.5% and total consumer
loans, which were down $945,000 or 7.0%. The growth in real
estate loans was distributed through various categories in which
construction and development loans were up $11,312,000,
commercial real estate loans grew $8,986,000, loans secured by
agricultural properties increased $5,402,000, and home equity
lines of credit increased $4,325,000. The real estate secured
loan categories reflecting decreases were residential second
lien loans, which decreased by $1,220,000 and multi-family
mortgage loans, which were down $394,000. Residential first lien
mortgages remained flat, due to the majority of these mortgages
being sold on the secondary market.

Total deposits increased by $37,989,000 or 11.8% since year-end
2002. The increases were realized in demand deposit accounts up
$14,507,000 or 18.2%, NOW and SuperNOW accounts increased
$3,156,000 or 5.3%, money market accounts increased $5,769,000
or 15.7%, savings accounts jumped $14,276,000 or 28.0%, and time
deposits increased $281,000 or .3% during the six months ended
June 30, 2003. Impacting the increase in deposits was the trust
department savings funds that were put on deposit at the Bank
during the first quarter of 2003 and totaled $6,548,000 at
June 30, 2003.

Short and long-term debt both reflected increases this half.
Securities sold under agreements to repurchase increased
$1,610,000 or 20.5% and long-term debt increased by $1,617,000
or 5.4%.

Results of Operations

Net income for the first half 2003 was $2,486,000 and totaled
$1,253,000 for the three months ended June 30, 2003. In
comparison, net income for the first half of 2002 was $2,308,000
and totaled $1,194,000 for the three months ended June 30, 2002.
This reflects a $178,000 or 7.7% increase in net income for the
first half of 2003 compared to 2002 and an increase of $59,000
or 4.9% for the second quarter 2003 compared to the second
quarter 2002. Basic and diluted earnings per share for the
first half of 2003 were $.84 per share, up from $.77 per share

16

for the first half of 2002. Basic and diluted earnings per
share for the second quarter of 2003 were $.42 per share, up
from $.40 per share for the same period in 2002.

Net interest income for the first half of 2003 increased by
$261,000 or 3.3%, compared to the first half of 2002. Likewise,
for the second quarter 2003, net interest income increased by
$67,000 or 1.7%, compared to the same time period in 2002. This
increase is a result of increased volume in earning assets.
While the net interest margin averaged 4.90% for the first half
of 2002, the margin began to compress during the third quarter
last year and has continued to compress through the fourth
quarter of 2002, averaging 4.71% for the year 2002. The
compression has continued throughout the first half of 2003.
For the first six months of 2003, the net interest margin has
averaged 4.34%. With the current rate environment, the most
recent federal funds rate reduction, the already low interest
rates being paid on deposit accounts and loans continuing to be
refinanced at lower rates, continued compression of the margin
could occur, which could negatively impact net interest income
in future periods.

Peoples recorded a $300,000 provision for loan losses during the
first half of 2003, that was up $120,000, as compared to a
provision of $180,000 for the first half of 2002. The provision
for the second quarter of 2003, totaled $150,000, which was up
$60,000 compared to the second quarter 2002. As a percentage of
loans, the allowance for loan losses was 1.44% at June 30, 2003,
compared to 1.49% at year-end 2002 and 1.56% at June 30, 2002.
Provisions for loan losses are charged to income to bring the
allowance for loan losses to a level deemed appropriate by
management. Management determines the adequacy of the allowance
based on on-going quarterly assessments of the loan portfolio,
including such factors as: changes in the nature and volume of
the portfolio, effects of concentrations of credit, current and
projected economic and business conditions, regulatory and
consultant recommendations, repayment patterns on loans,
borrower's financial condition, current charge-offs, trends in
volume and severity of past due loans and classified loans,
potential problem loans and supporting collateral. Management
believes the allowance is presently adequate to cover the
inherent risks associated with Peoples' loan portfolio.

17

Non-interest income increased by $617,000 or 29.3% and $375,000
or 36.7% for the six and three month time periods ending
June 30, 2003, respectively compared to the same periods in
2002. The largest increase in non-interest income for the first
half of 2003 compared to 2002 was $307,000 in mortgage banking
activities. Peoples derives this income from the sale of
residential mortgage loans on the secondary market. The
favorable rate environment for mortgage banking activities
during 2003 and 2002 has led to an increased demand for both
purchase-money and refinancing mortgage loans. This increased
demand and Peoples' efforts to expand the mortgage business by
working more closely with local realtors in its market area has
led to the increased income from mortgage banking activities.
In addition, service charges on deposit accounts increased by
$192,000 or 28.4%, compared to the first half of 2002. The
increased service charges on deposit accounts are consistent
with the continued growth in the Bank's core deposit accounts,
which generate these fees. Income from fiduciary activities was
up by $37,000 or 13.0%, compared to the first six months of
2002. The income increase is consistent with the increase in
Peoples' Trust Department total assets under management, which
equaled $129,334,000 on June 30, 2003, up from $106,187,000 at
June 30, 2002. Contrary to that, investment management fees
from Wilmerding decreased by $96,000 or 24.8% for the same time
period. This decrease is consistent with Wilmerding's total
assets under management, which equaled $209,765,000 on June 30,
2003, down from $236,820,000 at June 30, 2002. Peoples has
reached an agreement with an unaffiliated third party for the
sale of Wilmerding, which is expected to be a stock sale with an
anticipated closing date in the third quarter.

Other income reflected an increase of $168,000 or 38.7% for the
first half of 2003, compared to 2002. This increase was a
result of increased income from debit card commissions, earnings
from investment sales through INVEST, a third party for which
Peoples uses to sell investment products, and incurring a small
gain on the sale of a fixed asset during the first half of 2003
versus a loss on the sale of a fixed asset in 2002.

Total non-interest expense increased by $425,000 or 6.3% for the
first half of 2003, compared to the same time period in 2002,
and $262,000 or 7.8% for the second quarter of 2003 compared to

18

the second quarter 2002. The largest increase in non-interest
expense was in salaries and employee benefits, which increased
by $322,000 or 7.8% for the first half of 2003, compared to the
first half of 2002. The increases in payroll and payroll related
expenses resulted from normal merit increases, additions to
staff and increased incentive compensation accruals. Increases
in salary and benefits are anticipated as Peoples continues to
grow in size and number of locations.

Comparing the first half of 2003 to first half of 2002,
occupancy expenses were up by $49,000, furniture and fixture
expense increased $20,000, communications and supplies expense
was up $13,000, taxes other than income was up $12,000, and
other operating expenses were up $17,000. These increases were
partially offset by a decrease of $8,000 in professional fees.

Income tax expense was $934,000 for the first half of 2003,
compared to $779,000 for first half of 2002 and $471,000 for the
second quarter 2003, compared to $410,000 for the second quarter
2002. Income tax expense as a percentage of income before
income taxes was 27.3% for the half of 2003, compared to 25.2%
for the first half of 2002. The difference in Peoples'
effective tax rate from the statutory rate of 34.0% is a result
of tax-exempt income on loans, securities, and bank owned life
insurance, along with tax credits on an investment in a low-
income housing partnership.

Liquidity

Liquidity represents Peoples' ability to efficiently manage cash
flows to support customers' loan demand, withdrawals by
depositors, the payment of operating expenses, as well as the
ability to take advantage of business and investment
opportunities as they arise. One of Peoples' sources of
liquidity is $335,802,000 in core deposits at June 30, 2003,
which increased $38,111,000 over total core deposits of
$297,691,000 at year-end. Core deposits consist of demand
deposits, NOW and Super NOW, money market funds, savings, and
time deposits under $100,000. Other sources of liquidity are
available from investments in interest-bearing deposits with
banks and federal funds sold, which totaled $27,753,000, and
securities maturing in one year or less, which totaled
$10,455,000, at June 30, 2003. In comparison, interest-bearing
due from banks and federal funds sold totaled $9,980,000 and

19

securities maturing in one year or less totaled $11,167,000, at
year-end 2002. In addition, Peoples has established federal
funds lines of credit with other commercial banks, has borrowing
capacity with the Federal Home Loan Bank of Pittsburgh, and has
the Federal Reserve Discount Window, any of which can be drawn
upon if needed as a source of liquidity. Management is of the
opinion that Peoples' liquidity is sufficient to meet its
anticipated needs.

Capital Resources

Total stockholders' equity was $48,803,000 as of June 30, 2003,
representing a $1,939,000 increase from the beginning of the
year. The growth in capital was primarily a result of net
earnings retention of $1,596,000, along with an increase of
$343,000 in accumulated other comprehensive income.

At June 30, 2003, Peoples had a leverage ratio of 10.90%, a
Tier I capital to risk-based assets ratio of 12.87%, and a total
capital to risk-based assets ratio of 14.12%. At June 30, 2003,
the Bank had a leverage ratio of 9.38%, a Tier I capital to
risk-based assets ratio of 11.00%, and a total capital to risk-
based assets ratio of 12.26%. These ratios indicate Peoples
First, Inc. and the Bank both exceed the federal regulatory
minimum requirements to be considered "well capitalized."

In 2001, shareholders approved the 2001 Stock Option Plan. On
June 17, 2003, 85,950 options were granted under the plan.

Item 3. Quantitative and Qualitative Disclosure about Market

There are no material changes in Peoples' interest rate risk
exposure since December 31, 2002. Please refer to the Annual
Report on Form 10-K of Peoples First, Inc. for the year ended
December 31, 2002, filed with the Securities and Exchange
Commission.

Item 4. Controls and Procedures

Peoples, under the supervision and with the participation of
Peoples' management, including the Chief Executive Officer and
the Chief Financial Officer, has evaluated the effectiveness of
the design and operation of Peoples' disclosure controls and

20

procedures. Based on that evaluation, Peoples' Chief Executive
Officer and Chief Financial Officer concluded that Peoples'
disclosure controls and procedures are effective as of June 30,
2003. There has been no change in Peoples' internal control
over financial reporting that occurred during the quarter ended
June 30, 2003 that has materially affected, or is reasonably
likely to materially affect, Peoples' internal control over
financial reporting.

Securities and Exchange Commission rules define "disclosure
controls and procedures" as controls and other procedures of an
issuer that are designed to ensure that information required to
be disclosed by the issuer in the reports that it files or
submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods
specified in the Commission's rules and forms. Disclosure
controls and procedures include, without limitation, controls
and procedures designed to ensure that such information is
accumulated and communicated to the issuer's management,
including its principal executive officer and principal
financial officer, as appropriate to allow timely decisions
regarding required disclosure.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Not Applicable

Item 2. Changes in Securities and Use of Proceeds

Not Applicable

Item 3. Defaults Upon Senior Securities

Not Applicable

Item 4. Submission of Matters to a Vote of Security Holders

The Annual Meeting of Shareholders of Peoples First, Inc. was
held on May 13, 2003. The only matter presented for shareholder
action at the meeting was the election of three (3) class III
directors to hold office for three years from the election date.

21

There was no solicitation in opposition to the nominees of the
Board of Directors for election as directors. All nominees of
the Board of Directors were elected. The number of votes cast
for or withheld for each nominee was as follows:

Nominee Name Votes for Votes withheld
- ------------ ------------ --------------
George C. Mason 2,306,508.66 18,122.00
Ross B. Cameron, Jr. 2,322,704.00 1,927.00
Lawrie R. Drennen, Jr. 2,321,138.20 3,492.46

Item 5. Other Information

Not Applicable

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

Exhibit Title

3.1 Articles of Incorporation of Peoples First, Inc..
(Incorporated by reference to Exhibit 3.1 to Peoples'
Registration Statement on Form S-4, No. 333-30640.)

3.2 Bylaws of Peoples First, Inc.. (Incorporated by
reference to Exhibit 3.2 to Peoples' Registration
Statement on Form S-4, No. 333-30640.)

31.1 Exchange Act Rules 13a-14 and 15d-14 Certification of
Chief Executive Officer

31.2 Exchange Act Rules 13a-14 and 15d-14 Certification of
Chief Financial Officer

32.1 18 U.S.C. Section 1350 Certification of Chief
Executive Officer under Section 906 of the Sarbanes-
Oxley Act of 2002

32.2 18 U.S.C. Section 1350 Certification of Chief
Financial Officer under Section 906 of the Sarbanes-
Oxley Act of 2002

22

(b) Reports on Form 8-K

Peoples filed a Form 8-K on May 1, 2003
disclosing a press release issued by Peoples
discussing first quarter earnings.

23

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act
of 1934, Peoples has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.

PEOPLES FIRST, INC.
(Registrant)

Date: August 13, 2003 BY: /s/ Hugh J. Garchinsky
-----------------------------
Hugh J. Garchinsky
President and Chief Executive
Officer

Date: August 13, 2003 BY: /s/ Susan H. Reeves
-----------------------------
Susan H. Reeves
Senior Vice President and
Chief Financial Officer

24

1

08/08/03/SL1 373382v1/00000.000

1
08/08/03/SL1 373382v1/00000.000