-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WgsfAYW8BnuuLtxY2gP5fRhS1c/19Kvn8g6RDD7V9EexwgwFfwu0OOSt43UvHXrk dBgDowcPiUk36TXr84Ch9Q== 0000950169-97-000991.txt : 19971113 0000950169-97-000991.hdr.sgml : 19971113 ACCESSION NUMBER: 0000950169-97-000991 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: POTOMAC BANCSHARES INC CENTRAL INDEX KEY: 0000925173 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 550732247 STATE OF INCORPORATION: WV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-24958 FILM NUMBER: 97716675 BUSINESS ADDRESS: STREET 1: 111 EAST WASHINGTON ST CITY: CHARLES TOWN STATE: WV ZIP: 25414 BUSINESS PHONE: 3047258431 MAIL ADDRESS: STREET 1: P O BOX 906 CITY: CHARLES TOWN STATE: WV ZIP: 25414 10QSB 1 POTOMAC BANCSHARES 1 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) XX Quarterly report under Section 13 or 15(d) of the Securities Exchange - ---- Act of 1934 For quarterly period ended September 30, 1997 ____ Transition report under Section 13 or 15(d) of the Exchange Act For the transition period from _________________ to _____________________ Commission file number 0-24958 Potomac Bancshares, Inc. (Exact Name of Small Business Issuer as Specified in Its Charter) West Virginia 55-0732247 (State or Other Jurisdiction of (IRS Employer Incorporation or Organization) Identification Number) 111 East Washington Street, Charles Town WV 25414-1071 (Address of Principal Executive Offices) (Zip Code) 304-725-8431 (Issuer's Telephone Number, Including Area Code) NO CHANGE (Former Name, Former Address and Former Fiscal Year, 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 XXX No _____ _____ APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes No Not applicable _____ _____ APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 600,000 shares Transitional Small Business Disclosure Format (check one): Yes No XXX _____ _____ 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements POTOMAC BANCSHARES, INC. CONSOLIDATED BALANCE SHEETS (000 OMITTED)
(Unaudited) September 30 December 31 1997 1996 ------------- ------------ Assets: Cash and due from banks $ 5 493 $ 3 401 Securities (fair value: September 30, 1997, $38,456; December 31, 1996, $40,331) (Note 2) 38 421 40 333 Securities purchased under agreements to resell 6 000 4 800 Loans (Note 3) 78 703 73 525 Less reserve for loan losses (1 196) (1 139) --------- --------- Net loans 77 507 72 386 Bank premises and equipment, net 1 197 1 255 Accrued interest receivable 1 025 1 021 Other assets 625 584 --------- --------- Total Assets $ 130 268 $ 123 780 ========= ========= Liabilities and Stockholders' Equity: Liabilities: Non-interest bearing deposits $ 14 249 $ 14 037 Interest bearing deposits 99 731 94 476 --------- --------- Total Deposits 113 980 108 513 Accrued interest payable 332 326 Securities sold under agreements to repurchase -- -- Other liabilities 647 722 --------- --------- Total Liabilities $ 114 959 $ 109 561 --------- --------- Stockholders' Equity: Common stock par value $1.00 per share (5,000,000 shares authorized, 600,000 shares issued and outstanding) $ 600 $ 600 Surplus 5 400 5 400 Net unrealized losses on securities available for sale (7) (41) Undivided profits 9 316 8 260 --------- --------- Total Stockholders' Equity 15 309 14 219 --------- --------- Total Liabilities and Stockholders' Equity $ 130 268 $ 123 780 ========= =========
See Accompanying Notes to Consolidated Financial Statements 3 POTOMAC BANCSHARES, INC. CONSOLIDATED STATEMENTS OF INCOME (000 omitted except for per share data) (Unaudited)
For the Three Months For the Nine Months Ended September 30 Ended September 30 -------------------- ----------------------- 1997 1996 1997 1996 -------- -------- -------- ------ Interest Income: Interest and fees on loans $ 1 788 $ 1 684 $ 5 246 $ 5 038 Interest on investment securities Taxable 418 302 1 230 862 Interest and dividends on securities available for sale Taxable 162 187 532 474 Dividends 7 6 19 18 Interest on securities purchased under agreements to resell 43 91 102 353 -------- -------- -------- -------- Total Interest Income $ 2 418 $ 2 270 $ 7 129 $ 6 745 Interest Expense: Interest on deposits $ 929 $ 908 $ 2 703 $ 2 733 Interest on federal funds purchased 11 -- 16 -- -------- -------- -------- -------- Total Interest Expense $ 940 $ 908 $ 2 719 $ 2 733 -------- -------- -------- -------- Net Interest Income $ 1 478 $ 1 362 $ 4 410 $ 4 012 Provision for Loan Losses 50 -- 125 125 -------- -------- -------- -------- Net Interest Income after Provision for Loan Losses $ 1 428 $ 1 362 $ 4 285 $ 3 887 -------- -------- -------- -------- Other Income: Commissions and fees from fiduciary activities $ 121 $ 110 $ 384 $ 336 Service charges on deposit accounts 97 73 298 203 Fees for other customer services 38 48 125 142 Other operating income 10 30 34 44 -------- -------- -------- -------- Total Other Income $ 266 $ 261 $ 841 $ 725 -------- -------- -------- -------- Other Expenses: Salaries and employee benefits $ 618 $ 609 $ 1 820 $ 1 811 Net occupancy expense of premises 55 47 146 156 Furniture and equipment expenses 94 75 261 224 Deposit insurance 4 -- 10 2 Other operating expenses 255 271 796 925 -------- -------- -------- -------- Total Other Expenses $ 1 026 $ 1 002 $ 3 033 $ 3 118 -------- -------- -------- -------- Income before Income Tax Expense $ 668 $ 621 $ 2 093 $ 1 494 Income Tax Expense 247 224 767 542 -------- -------- -------- -------- Net Income $ 421 $ 397 $ 1 326 $ 952 ======== ======== ======== ======== Earnings Per Share, Net Income $ .70 $ .66 $ 2.21 $ 1.59 ======== ======== ======== ========
See Accompanying Notes to Consolidated Financial Statements 4 POTOMAC BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (000 Omitted) (Unaudited)
Common Capital Mkt Value Undivided Stock Surplus AFS Secur Profits Total ------ ------- --------- --------- ----- Balances: January 1, 1997 $ 600 $ 5 400 $ (41) $ 8 260 $14 219 Net income -- -- -- 1 326 1 326 Cash dividends ($.45 per share) -- -- -- (270) (270) Change in net unrealized gain (loss) on securities available for sale -- -- 34 -- 34 -------- --------- ----------- --------- ------- Balances: September 30, 1997 $ 600 $ 5 400 $ (7) $ 9 316 $15 309 ======== ========= =========== ========= ======= Balances: January 1, 1996 $ 600 $ 5 400 $ -- $ 7 423 $13 423 Net income -- -- -- 952 952 Cash dividends ($.35 per share) -- -- -- (210) (210) Change in net unrealized gain (loss) on securities available for sale -- -- (85) -- (85) -------- --------- ----------- --------- ------- Balances: September 30, 1996 $ 600 $ 5 400 $ (85) $ 8 165 $14 080 ======== ========= =========== ========= =======
See Accompanying Notes to Consolidated Financial Statements 5 POTOMAC BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (000 Omitted) (Unaudited)
For the Nine Months Ended --------------------------------- September 30 September 30 1997 1996 ------------ ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 1 326 $ 952 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 125 125 Depreciation 157 134 Amortization 9 9 Discount accretion and premium amortization on securities, net 27 21 Loss on sale of real estate -- 84 (Increase) in accrued interest receivable (4) (118) (Increase) decrease in other assets (68) 26 Increase (decrease) in accrued interest payable 6 (16) Increase (decrease) in other liabilities (75) 96 -------- -------- Net cash provided by operating activities $ 1 503 $ 1 313 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from maturity of investment securities $ 4 000 $ 10 000 Proceeds from maturity of securities available for sale 6 000 -- Purchase of investment securities (6 049) (7 976) Purchase of securities available for sale (2 014) (14 072) Net (increase) decrease in loans (5 245) 110 Purchases of bank premises and equipment (100) (267) Proceeds from sale of real estate -- 350 -------- -------- Net cash (used in) investing activities $ (3 408) $(11 855) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase in demand deposits, NOW accounts and savings accounts $ 3 579 $ 1 074 Net increase in certificates of deposit 1 889 69 Cash dividends (270) (210) -------- -------- Net cash provided by financing activities $ 5 198 $ 933 -------- -------- Increase (decrease) in cash and cash equivalents $ 3 293 $ (9 609) CASH AND CASH EQUIVALENTS Beginning 8 201 22 096 -------- -------- Ending $ 11 494 $ 12 487 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest paid to depositors $ 2 713 $ 2 748 ======== ======== Income taxes $ 933 $ 572 ======== ======== SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES Unrealized gain (loss) on securities available for sale $ 51 $ (129) ======== ========
See Accompanying Notes to Consolidated Financial Statements 6 POTOMAC BANCSHARES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996 1. In the opinion of management, the accompanying financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of September 30, 1997, and December 31, 1996, the results of operations for the three months ended September 30, 1997 and 1996, and results of operations and cash flows for the nine months ended September 30, 1997 and 1996. The statements should be read in conjunction with Notes to Consolidated Financial Statements included in the Potomac Bancshares, Inc. annual report for the year ended December 31, 1996. The results of operations for the nine month periods ended September 30, 1997 and 1996, are not necessarily indicative of the results to be expected for the full year. 2. Securities held to maturity as of September 30, 1997 and December 31, 1996 are summarized below:
(000 Omitted) September 30, 1997 ----------------------------------------------------------- Gross Gross Amortized Unrealized Unrealized Fair Cost Gains (Losses) Value --------- ---------- ---------- -------- Securities held to maturity: U.S. Treasury securities $ 16 049 $ 27 $ (15) $ 16 061 Obligations of U.S. Government agencies 11 995 25 (2) 12 018 --------- -------- -------- -------- $ 28 044 $ 52 $ (17) $ 28 079 ========= ======== ======== ========
(000 Omitted) December 31, 1996 ----------------------------------------------------------- Gross Gross Amortized Unrealized Unrealized Fair Cost Gains (Losses) Value --------- ---------- ---------- -------- Securities held to maturity: U.S. Treasury securities $ 14 005 $ 25 $ (42) $ 13 988 Obligations of U.S. Government agencies 11 992 21 (6) 12 007 --------- -------- -------- -------- $ 25 997 $ 46 $ (48) $ 25 995 ========= ======== ======== ========
7 Securities available for sale as of September 30, 1997 and December 31, 1996 are summarized below:
(000 Omitted) September 30, 1997 ----------------------------------------------------------- Gross Gross Amortized Unrealized Unrealized Fair Cost Gains (Losses) Value --------- -------- -------- -------- Securities available for sale: U.S. Treasury securities $ 9 986 $ 19 $ (30) $ 9 975 Federal Home Loan Bank stock 402 -- -- 402 --------- -------- -------- -------- $ 10 388 $ 19 $ (30) $ 10 377 ========= ======== ======== ========
(000 Omitted) December 31, 1996 ----------------------------------------------------------- Gross Gross Amortized Unrealized Unrealized Fair Cost Gains (Losses) Value --------- -------- -------- -------- Securities available for sale: U.S. Treasury securities $ 14 011 $ 12 $ (74) $ 13 949 Federal Home Loan Bank stock 387 -- -- 387 --------- -------- -------- -------- $ 14 398 $ 12 $ (74) $ 14 336 ========= ======== ======== ========
3. The consolidated loan portfolio, stated at face amount, is composed of the following:
(000 Omitted) September 30 December 31 1997 1996 ----------- ---------- Real estate loans: Construction and land development $ 502 $ 759 Secured by farmland 1 727 1 501 Secured by 1-4 family residential 43 390 38 221 Other real estate loans 12 369 12 125 Loans to farmers (except those secured by real estate) 306 229 Commercial and industrial loans (except those secured by real estate) 1 854 1 857 Loans to individuals for personal expenditures 18 261 18 655 All other loans 294 178 -------- -------- Total loans $ 78 703 $ 73 525 ======== ========
4. The following is a summary of transactions in the reserve for loan losses:
(000 Omitted) September 30 December 31 1997 1996 ------------ ----------- Balance at beginning of period $ 1 139 $ 899 Provision charged to operating expense 125 100 Recoveries added to the reserve 29 238 Loan losses charged to the reserve (97) (98) -------- -------- Balance at end of period $ 1 196 $ 1 139 ======== ========
8 Information about impaired loans as of September 30, 1997 and December 31, 1996 is as follows:
(000 Omitted) --------------------------------- September 30 December 31 1997 1996 ------------ ----------- Impaired loans for which a reserve has been provided $ 398 $ 407 Impaired loans for which no reserve has been provided -- -- ----- ----- Total impaired loans $ 398 $ 407 ===== ===== Reserve provided for impaired loans, included in the reserve for loan losses $ 199 $ 204 Average balance in impaired loans $ 402 $ 472 Interest income recognized $ 27 $ 36
Nonaccrual loans excluded from impaired loan disclosure under FASB 114 amounted to $285,150 at September 30, 1997 and December 31, 1996. If interest on these loans had been accrued, such income would have approximated $21,890 for the first nine months of 1997 and $28,494 in 1996. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Between December 31, 1996 and September 30, 1997, total assets increased $6,488,000. The September 30 annualized return on average assets is 1.39% compared to 1.13% at December 31. At September 30 the annualized return on average equity is 11.62% compared to 10.19% at December 31. The leverage capital (equity to assets) ratio is 11.75% at September 30 compared to 11.43% at December 31. Since dividends are paid on a semi-annual basis, this ratio may seem higher at the end of the first and third quarters of the year. The increase in assets is a combination of a decrease in the securities portfolio, an increase in the loan portfolio and an increase in cash and cash equivalents. As noted for the second quarter, the increase in loans is primarily for real estate secured by 1-4 family residential property. Floating rate loans make up 39% of the loan portfolio at September 30 as compared with 29% at December 31. 9 The table shown below is an analysis of the Corporation's reserve for loan losses. Net charge-offs for the Corporation have been very low when compared with the size of the total loan portfolio. Management monitors the loan portfolio on a quarterly basis with procedures that allow for problem loans and potentially problem loans to be highlighted and watched. Based on experience, the loan policies and the current monitoring program, management believes the loan loss reserve is adequate. (000 Omitted) September 30, 1997 ------------------ Balance at beginning of period $1 139 Charge-offs: Commercial, financial and agricultural -- Real estate - construction -- Real estate - mortgage -- Consumer 97 ------ Total charge-offs 97 ------ Recoveries: Commercial, financial and agricultural -- Real estate - construction -- Real estate - mortgage -- Consumer 29 ------ Total recoveries 29 ------ Net charge-offs 68 Additions charged to operations 125 ------ Balance at end of period $1 196 ====== Ratio of net charge-offs during the period to average loans outstanding during the period .0893% ====== Loans are placed on nonaccrual status when a loan is specifically determined to be impaired or when principal or interest is delinquent for 90 days or more. Interest income generally is not recognized on specific impaired loans unless the likelihood of further loss is remote. Interest income on other nonaccrual loans is recognized only to the extent of interest payments received. Following is a table showing the risk elements in the loan portfolio. (000 Omitted) September 30, 1997 ------------------ Nonaccrual loans $ 285 Restructured loans -- Foreclosed properties -- ----- Total nonperforming assets $ 285 ===== Loans past due 90 days accruing interest $ 137 ===== Reserve for loan losses to period end loans 1.52% Nonperforming assets to period end loans and foreclosed properties .36% Nonaccrual loans excluded from impaired loan disclosure under FASB 114 amounted to $285,150 at September 30, 1997. If interest on these loans had been accrued, such income would have approximated $21,890 for the nine months ended September 30, 1997. At September 30, 1997, other potential problem loans totalled $45,705. Loans are viewed as potential problem loans according to the ability of such borrowers to comply with current repayment terms. These loans are subject to constant management attention, and their status is reviewed on a regular basis. Management has allocated a portion of the reserve for these loans according to the review of the potential loss in each loan situation. 10 Total deposits have increased $5,467,000 as of September 30 compared with December 31, 1996. In August 1997, the Corporation began offering a new type of NOW account called Select Checking that pays a higher rate of interest than other NOW accounts on balances of $5,000 and above. As of September 30, the balance in Select Checking accounts is approximately $6,000,000. NOW accounts (other than Select Checking) and savings accounts have decreased in total about $3,500,000 since December 31. Certificates of deposit have increased almost $2,000,000 since December 31. Balances in demand deposits and money market accounts remain basically unchanged compared to December 31. The comparison of the income statements for the three months ended September 30, 1997 and 1996 shows an increase of 6% in net income in 1997. Net interest income increased 9% with increases in interest income and in interest expense. Noninterest income increased 2% with increases in fiduciary activities income and service charges on deposit accounts. Noninterest expenses increased 2%. The comparison of the income statements for the nine months ended September 30, 1997 and 1996 shows an increase in net income of 42% in 1997. Interest income has increased about 6% in 1997 compared to 1996, and interest expense has decreased less than 1%. The increase in interest income is from an increase in interest and fees on loans due to increased loan balances and increased rates and an increase in interest on securities due primarily to increased rates. The decrease in interest expense is primarily due to decreased interest rates. Noninterest income has increased 16% as of September 30, 1997 compared with September 30, 1996. The increase includes increases in commissions and fees from fiduciary activities and service charges on deposit accounts. The increased service charges are due to increases in some existing fees and the start of fees on customer ATM transactions at foreign ATM's. Noninterest expense has decreased 3% as of September 30, 1997 compared with September 30, 1996. The major decreases are in occupancy expense and other operating expenses. Liquid assets of the Corporation include cash and due from banks, securities purchased under agreements to resell, securities available for sale, and loans and investments maturing within one year. The Corporation's statement of cash flows details this liquidity. Net income after certain adjustments for noncash transactions provided cash from operating activities. Funds from maturity of investment securities and existing cash were used to fund investing activities. Financing activities were funded through an increase in total deposits. Cash and cash equivalents have increased during this period insuring liquidity of the Corporation is more than adequate to meet present and future financial obligations. 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings. There are no material legal proceedings to which the Registrant or its subsidiary, directors or officers is a party or by which they, or any of them, are threatened. All legal proceedings presently pending or threatened against Potomac Bancshares, Inc. and its subsidiary involve routine litigation incidental to the business of the Company or the subsidiary and are either not material in respect to the amount in controversy or fully covered by insurance. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: 2. Plan of acquisition, reorganization, arrangement, liquidation or succession. Not applicable 4. Instruments defining the rights of security holders, including indentures. Not applicable 10. Material contracts. Not applicable 11. Statement re: computation of per share earnings. Not applicable 15. Letter on unaudited interim financial information. Not applicable 18. Letter on change in accounting principles. Not applicable 19. Reports furnished to security holders. Not applicable 22. Published report regarding matters submitted to vote of security holders. Not applicable 23. Consent of experts and counsel. Not applicable 24. Power of attorney. Not applicable 27. Financial Data Schedule. 99. Additional exhibits. Not applicable (b) Reports on Form 8-K: NONE 12 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. POTOMAC BANCSHARES, INC. Date November 12, 1997 /s/ Charles W. LeMaster ______________________ _____________________________________ Charles W. LeMaster, President & CEO Date November 12, 1997 /s/ L. Gayle Marshall Johnson ______________________ _____________________________________ L. Gayle Marshall Johnson, Vice President & Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
9 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 5,493 18 6,000 0 10,377 28,044 28,079 78,703 1,196 130,268 113,980 0 979 0 0 0 600 14,709 130,268 5,246 1,781 102 7,129 2,703 2,719 4,410 125 0 3,033 2,093 1,326 0 0 1,326 2.21 2.21 7.896 285 137 0 46 1,139 97 29 1,196 1,196 0 0
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