10-Q 1 form10q.txt UNITED STATES 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 SEPTEMBER 30, 2002 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 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 2,968,284 shares outstanding as of September 30, 2002 Item 1. Financial Statements PEOPLES FIRST, INC. CONSOLIDATED BALANCE SHEETS (In Thousands)

Note: The balance sheet at December 31, 2001, has been derived from the audited financial statements at that date. The accompanying notes are an integral part of these financial statements. PEOPLES FIRST, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In Thousands, Except Per Share Data)

The accompanying notes are an integral part of these financial statements. PEOPLES FIRST, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In Thousands)

The accompanying notes are an integral part of these financial statements. PEOPLES FIRST, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For the Nine Months Ended September 30, 2001 (Unaudited) (In Thousands)

PEOPLES FIRST, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For the Nine Months Ended September 30, 2002 (Unaudited) (In Thousands)

PEOPLES FIRST, INC. NOTES TO FINANCIAL STATEMENTS (Unaudited) September 30, 2002 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"). Peoples 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. 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 nine months ended September 30, 2002 are not necessarily indicative of the results that may be expected for the year ended December 31, 2002. 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 Report on Form 10-K of Peoples First, Inc. filed with the Securities and Exchange Commission for the year ended December 31, 2001. 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, 2001. Note C - Comprehensive Income The only comprehensive income item that Peoples presently has is unrealized gains (losses) on securities available for sale. Total comprehensive income, which is the sum of net income and other comprehensive income for the three month and nine month periods ended September 30, 2002, was $1,930,000 and $4,569,000 compared to $1,495,000 and $3,909,000 for the same period last year. The federal income taxes allocated to the unrealized gains are as follows: Nine Months Three Months Ended Ended September 30, September 30, 2002 2001 2002 2001 ---------------- -------------- (In Thousands) Unrealized holding gains arising during the period: Before tax amount $1,392 $1,229 $ 891 $ 668 Income tax effect (473) (418) (303) (227) ---------------- -------------- Net of tax amount $ 919 $ 811 $ 588 $ 441 ================ ============== Note D - New Accounting Standards Financial Accounting Standard Board ("FASB") Statement No. 142, "Goodwill and Other Intangible Assets," prescribes that goodwill associated with a business combination and intangible assets with an indefinite useful life should not be amortized but should be tested for impairment at least annually. The Statement requires intangibles that are separable from goodwill and that have a determinable useful life to be amortized over the determinable useful life. The provisions of this Statement became effective for Peoples in January 2002. Upon adoption of this statement, goodwill and other intangible assets arising from acquisitions completed before July 1, 2001 would be accounted for in accordance with the provisions of this statement. This transition provision could require a reclassification of a previously separately recognized intangible to goodwill and vice versa if the intangibles in question do not meet the new criteria for classification as a separately recognizable intangible. Adoption of this Statement did not have an impact on Peoples' financial condition or results of operations as Peoples had no goodwill or other intangibles on its balance sheet. In July 2001, the FASB issued Statement 143, "Accounting for Asset Retirement Obligations," which addresses the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. This Statement will become effective for Peoples on January 1, 2003 and will not have an impact on Peoples' financial condition or results of operations. In August 2001, the FASB issued Statement 144, "Accounting for the Impairment of or Disposal of Long-Lived Assets." This Statement supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions for the disposal of a segment of a business." This Statement also amends ARB No. 51, "Consolidated Financial Statements." The provisions of this Statement became effective for Peoples on January 1, 2002 and did not have a significant impact on Peoples' financial condition or results of operations. In April 2002, the Financial Accounting Standards Board issued Statement No. 145, "Rescission of Statements No. 4, 44 and 64, Amendment of Statement No. 13." This statement requires that debt extinguishment no longer be classified as an extraordinary item since debt extinguishment has become a risk management strategy for many companies. It also eliminates the inconsistent accounting treatment for sale-leaseback transactions and certain lease modifications that have economic effects similar to sale-leaseback transactions. This statement became effective May 15, 2002 and did not have any impact on Peoples' financial condition or results of operations. In June 2002, the Financial Accounting Standards Board issued Statement No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which nullifies EITF Issue 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." This statement delays recognition of these costs until liabilities are incurred and requires fair value measurement. It does not impact the recognition of liabilities incurred in connection with a business combination or the disposal of long-lived assets. The provisions of this statement are effective for exit or disposal activities initiated after December 31, 2002 and are not expected to have a significant impact on Peoples' financial condition or results of operations. In October 2002, the Financial Accounting Standards Board issued Statement No. 147, "Acquisitions of Certain Financial Institutions." This statement provides guidance on accounting for the acquisition of a financial institution, including the acquisition of part of a financial institution. The statement defines criteria for determining whether the acquired financial institution meets the conditions for a "business combination." If the acquisition meets the conditions of a "business combination," the specialized accounting guidance under Statement No. 72, "Accounting for Certain Acquisitions of Banking or Thrift Institutions" will not apply after September 30, 2002 and the amount of the unidentifiable intangible asset will be reclassified to goodwill upon adoption of Statement No. 147. The transition provisions were effective on October 1, 2002 and did not have any 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, (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, 2001) 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 estimate in the preparation of Peoples' financial statements is for the allowance for loan losses. Please refer to the discussion of this calculation under "Results of Operations" below. Financial Condition Total assets of Peoples increased $44,151,000 or 12.2% during the first nine months of 2002. Increases in deposits of $34,476,000, long-term debt of $6,532,000, other liabilities of $908,000 and the increase in retained earnings of $2,490,000 were the primary resources for the growth in assets. This growth funded an increase in net loans of $37,088,000 or 15.0% for the first nine months of 2002. In addition, federal funds sold increased $9,180,000 and accrued interest receivable and other assets increased $1,924,000 along with increases in interest- bearing deposits with banks of $306,000 and cash and due from bank balances of $240,000. Peoples' investment in FHLB stock increased by $201,000 resulting from the FHLB's stock ownership requirements as it relates to the long-term debt increase. Total securities decreased by $4,647,000 along with a decrease of $141,000 in net premises and equipment. Net loans grew $37,088,000 or 15.0% for the first nine months of 2002. The majority of this loan growth was in real estate secured loans, which increased $32,501,000 or 16.5% and total consumer loans were up $4,139,000 or 43.6%. The growth in real estate loans was distributed throughout the various categories in which commercial loans increased $8,310,000, construction and development loans were up $8,061,000, home equity lines of credit increased $6,667,000, residential first mortgages grew $4,792,000, multi-family mortgages were up $4,575,000 and agricultural loans increased $1,348,000. The only real estate secured category to decrease was residential second liens, which decreased by $1,252,000. Total deposits increased by $34,476,000 or 12.2% since year-end 2001. The increases were in all deposit categories with demand deposit accounts up $6,732,000 or 9.8%, NOW and SuperNOW accounts grew $11,381,000 or 20.5%, money market accounts were up $9,816,000 or 37.5%, savings accounts increased $4,909,000 or 11.7% and time deposits increased $1,638,000 or 1.8% for the nine months ended September 30, 2002. The effects of the depressed stock market have contributed to the growth in deposits, along with public funds deposits from collected tax revenues and Peoples' expansion and business development. Results of Operations Net income for the first nine months of 2002 was $3,650,000 or $1.22 per share and totaled $1,342,000 or $.45 per share for the three months ended September 30, 2002. In comparison, net income for the first nine months of 2001 was $3,098,000 or $1.02 per share and $1,054,000 or $.35 per share for the quarter ended September 30, 2001. This reflects a $552,000 or 17.8% increase in net income for the first nine months of 2002 compared to 2001 and an increase of $288,000 or 27.3% for the third quarter 2002 compared to the third quarter 2001. Net interest income for the first nine months 2002 increased by $1,344,000 or 12.7% compared to the first nine months of 2001. Likewise, for the third quarter 2002, net interest income increased by $476,000 or 13.3% compared to the same time period in 2001. This increase is a result of increased volume and an improved net interest margin. The net interest margin held steady at 4.71% for the year 2001. For the first nine months of 2002, the net interest margin has averaged 4.79%, adding to net interest income. While the margin for the first nine months of 2002 has remained above 2001 levels, during the third quarter it again started to compress. With the current rate environment and loans continuing to be refinanced at lower rates, Peoples anticipates continued compression of the margin, which could negatively impact net interest income in future periods. Peoples recorded a $330,000 provision for loan losses for the first nine months of 2002, as compared to a provision of $270,000 for the first nine months of 2001. The provision for the third quarter of 2002, totaled $150,000 which was up by $90,000 or 150.0% compared to the third quarter 2001. As a percentage of loans, the allowance for loan losses was 1.53% at September 30, 2002, compared to 1.66% at year-end 2001 and 1.70% at September 30, 2001. Although the amount of the allowance for loan losses at September 30, 2002 increased $236,000, or 5.6%, over the amount at December 31, 2001, the allowance for loan losses as a percentage of total loans has declined 13 basis points since year-end 2001, principally as a result of loan growth. Because the loan growth over the first nine months of 2002 primarily involved real estate loans, management did not feel it necessary to maintain the level of the allowance for loan losses, as a percentage of total loans, at the same level that existed at December 31, 2001. 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. Non-interest income increased by $554,000 or 18.4% and $416,000 or 39.9% for the nine and three month time periods ending September 30, 2002, respectively, compared to the same periods in 2001. The largest increase in non-interest income for the first nine months of 2002 compared to 2001 was $387,000 in realized gains on securities that were called. This gain resulted from a recovery of the write-down that was taken on these same bonds during the fourth quarter of 2000, along with a 2% premium that was paid on the called principal. Fees from mortgage banking activities, added an additional $181,000 to non-interest income in the first nine months of 2002 compared to the same period in 2001, increasing 54.7%. Peoples derives this income from the sale of residential mortgage loans on the secondary market. The favorable rate environment for mortgage banking activities during 2001 and 2002 has led to an increase in mortgage loan and refinancing demand. This increased demand and Peoples' efforts to expand the business by working more closely with local realtors has led to the increased fee income from mortgage banking activities. In addition, service charges on deposit accounts increased by $97,000 or 10.0%, compared to the first nine months of 2001. 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 $25,000 or 6.2% compared to the first nine months of 2001. Contrary to that, investment management fees from Wilmerding decreased by $34,000 or 6.0% for the same time period. The investment management fees for Wilmerding decreased as a result of a change in status of certain accounts and a downturn in the market impacting the value of securities under management and ultimately the management fees assessed. Peoples' Trust Department and Wilmerding's total assets under management equaled $326,169,000 on September 30, 2002, down from $341,180,000 at September 30, 2001. There were other decreases in non-interest income, the largest being an $84,000 write-down on an impaired security. This bond is a municipal bond under a Housing and Urban Development Program. The balance of the bond, net of the 15% reserve, is $476,000. Management continues to closely monitor this security. Also reflecting a decrease, other income was down by $18,000 or 2.4% for the first nine months 2002 compared to 2001, which resulted primarily from a loss on the sale of an asset. Total non-interest expense increased by $1,140,000 or 12.5% for the first nine months of 2002 compared to the same time period in 2001 and $394,000 or 12.6% for the third quarter of 2002 compared to the third quarter 2001. The largest increase in non-interest expense was in salaries and employee benefits, which increased by $805,000 or 14.6% for the first nine months of 2002 compared to the first nine months 2001. The increases in payroll and payroll related expenses resulted from normal merit increases, additions to staff and increased incentive compensation accruals, along with the rising costs of medical insurance. Increases in salary and benefits are anticipated as Peoples continues to grow in size and number of locations. Comparing the first nine months of 2002 to the first nine months of 2001, other expenses were up by $276,000 or 19.5%, primarily as a result of increased loan origination related expenses and fees paid by Peoples on deposit accounts with other banks. Increases were noted in furniture and fixture expense, which increased $89,000 or 19.8%, along with occupancy expense, which reflected an increase of $76,000 or 11.6%. The Rising Sun Branch that opened in December 2001 contributed to the increase in occupancy and furniture and fixture expenses. As Peoples continues to add new offices and services, additional operating costs will be generated. Over time it is anticipated these costs will be offset by the additional income generated through the expansion of services to our customers and community and new business development. Taxes, other than income, which is primarily Pennsylvania shares tax expense, were up $15,000 or 5.4%, which correlates with growth in the Bank's shareholders' equity. Reductions were achieved in communications and supplies expense, which were down by $28,000 or 5.5%, along with professional fees which decreased by $93,000 or 33.7%. These reductions were a result of improved management of the supply inventory and reduced legal and consulting costs. Income tax expense was $1,271,000 for the first nine months of 2002 compared to $1,125,000 for first nine months of 2001, and $492,000 for the third quarter 2002 compared to $372,000 for the third quarter 2001. Income tax expense as a percentage of income before income taxes was 25.8% for the first nine months of 2002 compared to 26.6% for the first nine months of 2001. The decrease in Peoples' effective tax rate away 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 $294,484,000 in core deposits at September 30, 2002, which increased $34,443,000 over total core deposits of $260,041,000 at year-end. Other sources of liquidity are available from investments in interest-bearing deposits with banks and federal funds sold which totaled $19,729,000, and securities maturing in one year or less, which totaled $12,375,000, at September 30, 2002. In comparison, interest- bearing due from banks and federal funds sold totaled $10,243,000 and securities maturing in one year or less totaled $10,250,000 at year-end 2001. In addition, Peoples has established federal funds lines of credit with other commercial banks and with the Federal Home Loan Bank of Pittsburgh, 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 $46,407,000 as of September 30, 2002, representing a $2,765,000 increase from the beginning of the year. The growth in capital was primarily a result of net earnings retention of $2,490,000, along with increased accumulated other comprehensive income up $919,000, and partially offset with treasury stock purchases of $644,000. In November 2001, the Board approved a second stock repurchase plan authorizing the repurchase of $1,000,000 in Peoples' stock with a termination date of October 2002. Under this plan 33,843 shares have been repurchased at a cost of $728,000 through September 30, 2002. In addition, on June 18, 2002, the Board approved a third repurchase plan for repurchasing another $1,000,000 in Peoples' stock with a termination date of June 2003. At September 30, 2002, Peoples had a leverage ratio of 11.40%, a Tier I capital to risk-based assets ratio of 14.51% and a total capital to risk-based assets ratio of 15.76%. At September 30, 2002, the Bank had a leverage ratio of 9.62%, a Tier I capital to risk-based assets ratio of 12.10% and a total capital to risk-based assets ratio of 13.35%. 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. No options have been granted under this plan. Item 3. Quantitative and Qualitative Disclosure about Market Risk There are no material changes in Peoples' interest rate risk exposure since December 31, 2001. Please refer to the Annual Report on Form 10-K of Peoples First, Inc. for the year ended December 31, 2001, filed with the Securities and Exchange Commission. Item 4. Controls and Procedures Within ninety days prior to filing this report, Peoples, under the supervision and with the participation of Peoples' management, including the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of Peoples' disclosure controls and procedures. Based on that evaluation, Peoples' Chief Executive Officer and Chief Financial Officer concluded that Peoples' disclosure controls and procedures are effective. There were no significant changes to Peoples' internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. Securities and Exchange Commission Rule 13a-14 defines "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 Not Applicable 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. (Incorporated by reference to Exhibit 3.1 to Peoples' Registration Statement on Form S-4, No. 333-30640.) 3.2 Bylaws of Peoples. (Incorporated by reference to Exhibit 3.2 to Peoples' Registration Statement on Form S-4, No. 333-30640.) 99.1 Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002 99.2 Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K There were no reports filed on Form 8-K during the third quarter of 2002. 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: November 13, 2002 BY: /s/ Hugh J. Garchinsky ------------------------------ Hugh J. Garchinsky President and Chief Executive Officer Date: November 13, 2002 BY: /s/ Susan H. Reeves ------------------------------ Susan H. Reeves Senior Vice President and Chief Financial Officer CERTIFICATIONS I, Hugh J. Garchinsky, Chief Executive Officer of Peoples First, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Peoples First, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d- 14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 /s/ Hugh J. Garchinsky ------------------------------ Hugh J. Garchinsky Chief Executive Officer I, Susan H. Reeves, Chief Financial Officer of Peoples First, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Peoples First, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d- 14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 /s/ Susan H. Reeves ------------------------------ Susan H. Reeves Chief Financial Officer

PEOPLES FIRST INC 10-Q