-----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, VqxAxYUKoN8WCz8DrOPXGQkylA4uQnxbsa9pNMSB0lQg0NMLn8O38TodLTolgOh2 7/mIsASmGQY5DW5TcRqSuw== 0000950169-98-000514.txt : 19980515 0000950169-98-000514.hdr.sgml : 19980515 ACCESSION NUMBER: 0000950169-98-000514 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 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: 98620926 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, INC. 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 March 31, 1998 ---------------- 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) March 31 December 31 1998 1997 ---------- ----------- Assets: Cash and due from banks $ 3,836 $ 4,518 Securities (fair value: March 31, 1998, $41,506; December 31, 1997, $37,508) (Note 2) 41,457 37,444 Securities purchased under agreements to resell 11,100 8,600 Loans (Note 3) 78,190 78,213 Less reserve for loan losses (Note 4) (1,067) (1,139) -------- -------- Net loans 77,123 77,074 Bank premises and equipment, net 1,201 1,202 Accrued interest receivable 1,080 1,009 Other assets 757 710 -------- -------- Total Assets $136,554 $130,557 ======== ======== Liabilities and Stockholders' Equity: Liabilities: Non-interest bearing deposits $ 14,180 $ 15,014 Interest bearing deposits 105,329 99,168 -------- -------- Total Deposits 119,509 114,182 Accrued interest payable 341 343 Other liabilities 968 734 -------- -------- Total Liabilities $120,818 $115,259 -------- -------- 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 Accumulated other comprehensive income 9 6 Undivided profits 9,727 9,292 -------- -------- Total Stockholders' Equity 15,736 15,298 -------- -------- Total Liabilities and Stockholders' Equity $136,554 $130,557 ======== ======== 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 Ended March 31 -------------------- 1998 1997 --------- --------- Interest Income: Interest and fees on loans $1,768 $1,715 Interest on investment securities Taxable 400 396 Interest and dividends on securities available for sale Taxable 186 184 Dividends 6 6 Interest on securities purchased under agreements to resell 99 43 ------ ------ Total Interest Income $2,459 $2,344 Interest Expense: Interest on deposits $1,028 $ 881 Interest on federal funds purchased -- -- ------ ------ Total Interest Expense $1,028 $ 881 ------ ------ Net Interest Income $1,431 $1,463 Provision for Loan Losses -- -- ------ ------ Net Interest Income after Provision for Loan Losses $1,431 $1,463 ------ ------ Other Income: Commissions and fees from fiduciary activities $ 143 $ 122 Service charges on deposit accounts 93 101 Fees for other customer services 37 41 Other operating income 8 16 ------ ------ Total Other Income $ 281 $ 280 ------ ------ Other Expenses: Salaries and employee benefits $ 650 $ 597 Net occupancy expense of premises 45 47 Furniture and equipment expenses 84 86 Deposit insurance 4 3 Other operating expenses 236 270 ------ ------ Total Other Expenses $1,019 $1,003 ------ ------ Income before Income Tax Expense $ 693 $ 740 Income Tax Expense 258 273 ------ ------ Net Income $ 435 $ 467 ====== ====== Earnings Per Share, basic and diluted $ .73 $ .78 ====== ====== See Accompanying Notes to Consolidated Financial Statements 4 POTOMAC BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (000 Omitted) (Unaudited)
Unrealized Gain (Loss) on Securities Common Capital Comprehensive Undivided Available for Stock Surplus Income Profits Sale, Net Total ------ ------- ------------- --------- -------------- ------- Balances, January 1, 1998 $600 $5,400 $9,292 $ 6 $15,298 Comprehensive income Net income -- -- $ 435 435 -- 435 Other comprehensive income, net of tax Unrealized gain (loss) on securities -- -- 3 -- 3 3 ------- Comprehensive Income $ 438 ======= ---- ------ ------ ------ ------- Balances, March 31, 1998 $600 $5,400 $9,727 $ 9 $15,736 ==== ====== ====== ====== ======= Balances, January 1, 1997 $600 $5,400 $8,260 $ (41) $14,219 Comprehensive income Net income -- -- $ 467 467 -- 467 Other comprehensive income, net of tax Unrealized gain (loss) on securities -- -- (27) -- (27) (27) ------- Comprehensive Income $ 440 ======= ---- ------ ------ ------ ------- Balances, March 31, 1997 $600 $5,400 $8,727 $ (68) $14,659 ==== ====== ====== ====== =======
See Accompanying Notes to Consolidated Financial Statements 5 POTOMAC BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (000 Omitted) (Unaudited)
For the Three Months Ended -------------------------- March 31 March 31 1998 1997 --------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 435 $ 467 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses -- -- Depreciation 46 48 Amortization 3 3 Discount accretion and premium amortization on securities, net 1 8 Loss on sale of real estate -- -- (Increase) in accrued interest receivable (71) (14) (Increase) in other assets (50) (7) Increase (decrease) in accrued interest payable (2) 2 Increase in other liabilities 232 208 ------- ------- Net cash provided by operating activities $ 594 $ 715 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from maturity of investment securities $ 1,000 $ 4,000 Proceeds from maturity of securities available for sale 1,000 -- Purchase of investment securities (6,009) (6,049) Purchase of securities available for sale -- (15) Net (increase) in loans (49) (1,183) Purchases of bank premises and equipment (45) (6) Proceeds from sale of real estate -- -- ------- ------- Net cash (used in) investing activities $(4,103) $(3,253) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in demand deposits, NOW accounts and savings accounts $ 4,062 $ (500) Net increase in certificates of deposit 1,265 1,264 ------- ------- Net cash provided by financing activities $ 5,327 $ 764 ------- ------- Increase (decrease) in cash and cash equivalents $ 1,818 $(1,774) CASH AND CASH EQUIVALENTS Beginning 13,118 8,201 ------- ------- Ending $14,936 $ 6,427 ======= ======= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest $ 1,030 $ 879 ======= ======= Income taxes $ 7 $ -- ======= ======= SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES Unrealized gain (loss) on securities available for sale $ 5 $ (41) ======= =======
See Accompanying Notes to Consolidated Financial Statements 6 POTOMAC BANCSHARES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1998 (UNAUDITED) AND DECEMBER 31, 1997 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 March 31, 1998, and December 31, 1997, and the results of operations and cash flows for the three months ended March 31, 1998 and 1997. 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, 1997. The results of operations for the three month periods ended March 31, 1998 and 1997, are not necessarily indicative of the results to be expected for the full year. 2. Securities held to maturity as of March 31, 1998 and December 31, 1997 are summarized below:
(000 Omitted) March 31, 1998 ---------------------------------------------- Gross Gross Amortized Unrealized Unrealized Fair Cost Gains (Losses) Value --------- ---------- ---------- ----- Securities held to maturity: U.S. Treasury securities $11,041 $29 $ (1) $11,069 Obligations of U.S. Government agencies 18,004 35 (14) 18,025 ------- --- ---- ------- $29,045 $64 $(15) $29,094 ======= === ==== ======= (000 Omitted) December 31, 1997 ---------------------------------------------- Gross Gross Amortized Unrealized Unrealized Fair Cost Gains (Losses) Value --------- ---------- ---------- ----- Securities held to maturity: U.S. Treasury securities $12,045 $33 $ (1) $12,077 Obligations of U.S. Government agencies 11,995 32 -- 12,027 ------- --- ---- ------- $24,040 $65 $ (1) $24,104 ======= === ==== =======
7 Securities available for sale as of March 31, 1998 and December 31, 1997 are summarized below:
(000 Omitted) March 31, 1998 ---------------------------------------------- Gross Gross Amortized Unrealized Unrealized Fair Cost Gains (Losses) Value --------- ---------- ---------- ----- Securities available for sale: U.S. Treasury securities $ 6,992 $21 $(15) $ 6,998 Obligations of U.S. Government agencies 5,004 8 -- 5,012 Federal Home Loan Bank stock 402 -- -- 402 ------- --- ---- ------- $12,398 $29 $(15) $12,412 ======= === ==== ======= (000 Omitted) December 31, 1997 ---------------------------------------------- Gross Gross Amortized Unrealized Unrealized Fair Cost Gains (Losses) Value --------- ---------- ---------- ----- Securities available for sale: U.S. Treasury securities $ 7,988 $26 $(20) $ 7,994 Obligations of U.S. Government agencies 5,005 4 (1) 5,008 Federal Home Loan Bank stock 402 -- -- 402 ------- --- ---- ------- $13,395 $30 $(21) $13,404 ======= === ==== =======
3. The consolidated loan portfolio, stated at face amount, is composed of the following: (000 Omitted) March 31 December 31 1998 1997 -------- ----------- Real estate loans: Construction and land development $ 232 $ 393 Secured by farmland 1,413 1,718 Secured by 1-4 family residential 44,063 43,283 Other real estate loans 12,795 12,497 Loans to farmers (except those secured by real estate) 250 270 Commercial and industrial loans (except those secured by real estate) 2,187 2,045 Loans to individuals for personal expenditures 16,979 17,706 All other loans 271 301 ------- ------- Total loans $78,190 $78,213 ======= ======= 4. The following is a summary of transactions in the reserve for loan losses: (000 Omitted) March 31 December 31 1998 1997 -------- ----------- Balance at beginning of period $1,139 $1,139 Provision charged to operating expense -- 128 Recoveries added to the reserve 7 48 Loan losses charged to the reserve (79) (176) ------ ------ Balance at end of period $1,067 $1,139 ====== ====== 8 Information about impaired loans as of March 31, 1998 and December 31, 1997 is as follows: (000 Omitted) March 31 December 31 1998 1997 -------- ----------- Impaired loans for which a reserve has been provided $398 $398 Impaired loans for which no reserve has been provided -- -- ---- ---- Total impaired loans $398 $398 ==== ==== Reserve provided for impaired loans, included in the reserve for loan losses $199 $199 Average balance in impaired loans $398 $399 Interest income recognized $ 8 $ 34 Nonaccrual loans excluded from impaired loan disclosure under FASB 114 amounted to $-0- at March 31, 1998 and $285,150 at December 31, 1997. If interest on these loans had been accrued, such income would have been $-0- for the first three months of 1998 and $29,267 in 1997. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Between December 31, 1997 and March 31, 1998, total assets increased $5,997,000. The March 31 annualized return on average assets is 1.30% compared to 1.36% at December 31. At March 31 the annualized return on average equity is 11.21% compared to 11.58% at December 31. The leverage capital (equity to assets) ratio is 11.52% at March 31 compared to 11.83% at December 31. The increase in assets is a combination of an increase in the securities portfolio and an increase in securities purchased under agreements to resell. The asset increases are offset on the liability side by increases in deposits. Floating rate loans make up 44% of the loan portfolio at March 31, 1998. 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) March 31, 1998 -------------- Balance at beginning of period $1,139 Charge-offs: Commercial, financial and agricultural -- Real estate - construction -- Real estate - mortgage -- Consumer 79 ------ Total charge-offs 79 ------ Recoveries: Commercial, financial and agricultural -- Real estate - construction -- Real estate - mortgage -- Consumer 7 ------ Total recoveries 7 ------ Net charge-offs 72 Additions charged to operations -- ------ Balance at end of period $1,067 ====== Ratio of net charge-offs during the period to average loans outstanding during the period .0921% ===== 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) March 31, 1998 -------------- Nonaccrual loans $ -- Restructured loans -- Foreclosed properties 100 ---- Total nonperforming assets $100 ==== Loans past due 90 days accruing interest $ 62 ==== Reserve for loan losses to period end loans 1.36% Nonperforming assets to period end loans and foreclosed properties .13% There were no loans on nonaccrual status at March 31, 1998. At March 31, 1998, other potential problem loans totalled $31,815. 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 $5,327,000 as of March 31, 1998 compared with December 31, 1997. The Select Checking balances have increased from $11,000,000 at December 31, 1997 to $17,000,000 at March 31, 1998. Select Checking is the NOW account started in August 1997 that pays a higher rate of interest on balances of $5,000 or more. Money market accounts have decreased slightly over $1,000,000 and certificates of deposits have increased slightly over $1,000,000 as of March 31 compared with December 31. Non-interest bearing deposits have decreased approximately $1,000,000 at March 31 compared with December 31. NOW accounts (other than Select Checking) and savings accounts remain basically unchanged when comparing March 31 to December 31. The comparison of the income statements for the three months ended March 31, 1998 and 1997 shows a decrease of 7% in net income in 1998. Net interest income decreased 2% with increases in interest income and in interest expense. Interest income increased 5% as of March 31, 1998 compared with March 31, 1997. This is due to increased balances in the loan portfolio and securities purchased under agreements to resell. Interest expense has increased 17% as of March 31, 1998 compared with March 31, 1997. This increase is due to the increase in deposits overall of which a good portion went to Select Checking and the movement of funds into Select Checking from existing deposit accounts paying a lower interest rate. Noninterest income remained about the same in 1998 as in 1997, although income from fiduciary activities increased 17% and the other categories of income decreased. Noninterest expenses increased almost 2%. Salaries and employee benefits increased 9% due to increases in salaries and wages and group insurance expenses. There were decreases in the other noninterest expense categories. 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 May 12, 1998 /s/ Charles W. LeMaster ___________________ ____________________________________ Charles W. LeMaster, President & CEO Date May 12, 1998 /s/ L. Gayle Marshall Johnson ___________________ ____________________________________ L. Gayle Marshall Johnson, Vice President & Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
9 3-MOS DEC-31-1998 MAR-31-1998 3,836 82 11,100 0 12,412 29,045 29,094 78,190 1,067 136,554 119,509 0 1,309 0 0 0 600 15,136 136,554 1,768 592 99 2,459 1,028 1,028 1,431 0 0 1,019 693 435 0 0 435 .73 .73 7.781 0 62 0 32 1,139 79 7 1,067 1,067 0 0
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