SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ x ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________________ to ___________________
Commission file number 0-21285
MID-ATLANTIC COMMUNITY BANKGROUP, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
VIRGINIA 54-1809409
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
7171 George Washington Mem. Hwy.
Gloucester, Virginia 23061
-----------------------------------------------
(Address of Principal Executive Offices)
(804) 693-0628
------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
-------------------------------------------------------------------------
(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 X . No .
----- -----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of March 31, 1998.
Common stock, $5 par value--2,198,900
-------------------------------------
<PAGE>
INDEX
<TABLE>
<CAPTION>
<S> <C>
MID-ATLANTIC COMMUNITY BANKGROUP, INC. Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets--
March 31, 1998 and December 31, 1997 3
Consolidated Statements of Income--
Three months ended March 31, 1998 and 1997 4
Consolidated Statements of Stockholders Equity--
Three months ended March 31, 1998 and 1997 5
Consolidated Statements of Cash Flows--
Three months ended March 31, 1998 and 1997 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II. Other Information:
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security
Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports of Form 8-K 14
</TABLE>
2
<PAGE>
Item 1. FINANCIAL INFORMATION
MID-ATLANTIC COMMUNITY BANKGROUP, INC. AND AFFILIATE
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS: 1998 1997
-------------- ------------
<S> <C> <C>
Cash and due from bank $ 9,531 $ 6,960
Securities available for sale (at market value) 22,944 24,104
Securities held to maturity (market value
$12,570 in 1998 and $7,381 in 1997) 12,476 7,290
Federal funds sold 11,929 8,414
Loans, net 107,658 104,240
Premises and equipment 6,584 5,928
Other real estate owned 371 208
Other assets 2,906 2,161
---------- ----------
TOTAL ASSETS $ 174,399 $ 159,305
========== ==========
LIABILITIES:
Deposits
Demand $ 22,706 $ 18,791
Interest-bearing demand 31,161 25,673
Savings 16,561 15,758
Certificates of deposit, $100,000 or more 15,013 13,528
Other time 67,677 64,673
---------- ----------
TOTAL DEPOSITS 153,118 138,423
Short-term debt 184 292
Long-term debt 28 31
Other liabilities 1,001 1,282
---------- ----------
TOTAL LIABILITIES 154,331 140,028
---------- ----------
SHAREHOLDERS' EQUITY:
Common stock, par value $5 per share,
10,000,000 shares authorized, 2,198,900
shares issued in 1998 and 1,093,833 in 1997 10,995 5,477
Surplus 4,026 9,294
Undivided profits 4,957 4,453
Accumulated other comprehensive
income, net 90 53
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 20,068 19,277
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 174,399 $ 159,305
========== ==========
</TABLE>
Notes to financial statements are an integral part of these statements.
3
<PAGE>
MID-ATLANTIC COMMUNITY BANKGROUP, INC. AND AFFILIATE
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars)
Three Months Ended
March 31,
----------------------
1998 1997
---- ----
INTEREST INCOME:
Loans and Fees $ 2804 $ 2413
Federal Funds Sold 132 36
Investment Securities 563 510
------- -------
Total Interest Income 3499 2959
INTEREST EXPENSE:
Demand Deposits 234 191
Savings Deposits 114 105
Certificates of Deposit, $100,000 or more 190 134
Other Time Deposits 932 770
Short-term Debt 2 2
Long-term Debt 1 1
------- -------
Total Interest Expense 1473 1203
------- -------
Net Interest Income 2026 1756
PROVISION FOR LOAN
AND LEASE LOSSES 81 93
------- -------
Net Interest Income After
Provision for Loan
and Lease Losses 1945 1663
OTHER INCOME:
Service Chgs on Deposit Accts 172 147
Other Service Charges & Fees 65 45
Securities Gains (Losses) 1 1
------- -------
Total Other Income 238 193
OTHER EXPENSES:
Salaries & Employee Benefits 766 665
Occupancy Expenses 119 40
Furniture & Equipment Expenses 163 166
Other Operating Expenses 385 390
------- -------
Total Other Expenses 1433 1261
------- -------
Income Before Income Taxes 750 595
Applicable Income Taxes 246 180
------- -------
Net Income $ 504 $ 415
======= =======
Earnings Per Share, Basic .23 .22
======= =======
Earnings Per Share, Assuming
Dilution .22 .21
======= =======
Notes to financial statements are an integral part of these statements.
4
<PAGE>
MID-ATLANTIC COMMUNITY BANKGROUP, INC. AND AFFILIATE
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive Retained Comprehensive Common Capital
Total Income Earnings Income Stock Surplus
<S> <C> <C> <C> <C> <C> <C>
Balances - January 1, 1997 $ 14,431 $ 3,170 ($162) $ 4,729 $ 6,694
Comprehensive income:
Net income 415 $ 415 415
Other comprehensive income,
net of tax
Unrealized gain (loss) on
securities available for sale:
Unrealized holding gain (loss)
arising during the period: (180) (180)
Less: reclassification
adjustment: 2 2
--------- --------
Other comprehensive income,
net of tax (182) (182) (182)
--------- -------- ---------
Total comprehensive income 233 $ 233 ($344)
--------- ======== --------- ========= --------- ---------
Balances - March 31, 1997 $ 14,664 $ 3,585 $ 4,729 $ 6,694
========= ========= ========= =========
Balances - January 1, 1998 $ 19,277 $ 4,453 $ 53 $ 5,477 $ 9,294
Comprehensive income:
Net income 504 $ 504 504
Other comprehensive income,
net of tax
Unrealized gain on securities
for sale:
Unrealized holding gain arising
during the period 38 38
Less: reclassification
adjustment 1 1
---------- --------
Other comprehensive income,
net of tax 37 37 37
---------- -------- ---------
Total comprehensive income $ 541 $ 541
---------- ========
Issuance of common stock -
100% stock split 5,490 (5,490)
Issuance of common stock -
Johnson Mortgage Co. 250 28 222
---------- -------- ---------- --------- ----------
Balances - March 31, 1998 $ 20,068 $ 4,957 $ 90 $ 10,995 $ 4,026
========== ======== ========== ========= ==========
</TABLE>
Notes to financial statements are an integral part of these statements.
5
<PAGE>
MID-ATLANTIC COMMUNITY BANKGROUP, INC. AND AFFILIATE
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 504 $ 415
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 110 88
Provision for loan losses 81 93
Amortization of premiums 19 --
(Profits) on sale of securities available for sale (1) (1)
Changes in operating assets and liabilities:
(Increase) in other assets (764) (268)
Increase (decrease) in other liabilities (281) (362)
--------- ---------
Net Cash Provided By Operating Activities ($332) ($35)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) in loans ($3,662) ($3,001)
Purchase of securities available for sale (1,932) (2,343)
Proceeds from sales of securities available for sale 200 1,593
Maturities of securities available for sale 2,930 --
Purchase of investment securities (6,050) --
Maturities of investment securities 864 --
(Increase) decrease in federal funds sold - net (3,515) 941
Purchase of premises and equipment (766) (776)
--------- ---------
Net Cash (Used In) Investing Activities ($11,931) ($3,586)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposits - net $ 14,695 $ 2,097
Issuance of common stock 250 --
Curtailment of other borrowed funds (111) (3)
--------- ---------
Net Cash Provided by Financing Activities $ 14,834 $ 2,094
--------- ---------
Net Increase (decrease) In Cash and Due From Banks $ 2,571 ($1,527)
CASH AND DUE FROM BANKS - BEGINNING OF PERIOD 6,960 6,015
--------- ---------
CASH AND DUE FROM BANKS - END OF PERIOD $ 9,531 $ 4,488
========= =========
</TABLE>
Notes to financial statements are an integral part of these statements.
6
<PAGE>
MID-ATLANTIC COMMUNITY BANKGROUP, INC. AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The consolidated statements include the accounts of Mid-Atlantic Community
BankGroup, Inc. and its affiliate, Peninsula Trust Bank. All significant
intercompany balances and transactions have been eliminated. In the
opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial positions 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 results of operations for the three months ended March 31, 1998 and
1997 are not necessarily indicative of the results to be expected for the
full year.
2. Investment Securities
Amortized cost and carrying amount (estimated fair value) of securities
available for sale are summarized as follows:
<TABLE>
<CAPTION>
March 31, 1998
--------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------------------------------------------------------
(In Thousands of Dollars)
<S> <C> <C> <C> <C>
US Treasury Securities 629 3 5 627
US Government Agencies & Corporations 8,415 69 2 8,482
Obligations of States & Political Subdivisions 4,742 88 17 4,813
Mortgage-backed Securities 8,621 43 42 8,622
Federal Reserve Bank Stock 343 -- -- 343
Other Equity Securities 57 -- -- 57
-------- -------- -------- --------
$ 22,807 $ 203 $ 66 $ 22,944
======== ======== ======== ========
</TABLE>
Amortized cost and carrying amount (estimated fair value) of securities
held to maturity are summarized as follows:
<TABLE>
<CAPTION>
March 31, 1998
--------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------------------------------------------------------
(In Thousands of Dollars)
<S> <C> <C> <C> <C>
US Government Agencies & Corporations 7,088 23 5 7,106
Obligations of States & Political Subdivisions 1,911 52 -- 1,963
Mortgage-backed Securities 3,477 24 -- 3,501
-------- -------- -------- --------
$ 12,476 $ 99 $ 5 $ 12,570
======== ======== ======== ========
</TABLE>
7
<PAGE>
Securities available for sale at December 31, 1997 consist of the
following:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------------------------------------------------------
(In Thousands of Dollars)
<S> <C> <C> <C> <C>
US Treasury Securities 632 -- 3 629
US Government Agencies & Corporations 10,301 84 4 10,381
Obligations of States & Political Subdivisions 4,946 90 80 4,956
Mortgage-backed Securities 7,743 40 46 7,737
Federal Reserve Bank Stock 343 -- -- 343
Other Equity Securities 57 -- -- 57
-------- -------- -------- --------
$ 24,024 $ 215 $ 135 $ 24,104
======== ======== ======== ========
</TABLE>
Securities held to maturity at December 31, 1997 consist of the following:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------------------------------------------------------
(In Thousands of Dollars)
<S> <C> <C> <C> <C>
US Government Agencies & Corporations 3,035 23 -- 3,058
Obligations of States & Political Subdivisions 1,682 52 -- 1,734
Mortgage-backed Securities 2,573 16 -- 2,589
-------- -------- -------- ---------
$ 7,290 $ 91 $ -- $ 7,381
======== ======== ======== =========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
(In Thousands of Dollars)
<S> <C> <C>
Gross proceeds from sales of securities 200 1,593
======== ========
Gross Gains on Sale of Securities 1 2
Gross Losses on Sale of Securities -- --
-------- --------
Net Securities Losses 1 2
======== ========
</TABLE>
8
<PAGE>
MID-ATLANTIC COMMUNITY BANKGROUP, INC. AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
3. Loans
The following is a summary of loans outstanding at the end of the periods
indicated:
March 31, December 31,
1998 1997
----------- ------------
(In Thousands of Dollars)
Commercial Mortgage 21,985 23,135
Residential Mortgage 29,619 28,987
Home Equity 12,348 10,905
Construction 6,910 6,059
Commercial 13,795 12,477
Installment 24,333 23,926
All Other 565 617
------------ ------------
109,555 106,106
Less Unearned Income 525 542
------------ ------------
109,030 105,564
Less Allowance for Loan and Lease Losses 1,372 1,324
------------ ------------
$ 107,658 $ 104,240
============ ============
The following schedule summarizes the changes in the allowance for loan
and lease losses:
<TABLE>
<CAPTION>
Three Months Three Months
Ending Ending
March 31, March 31, December 31,
1998 1997 1997
------------- ------------ ------------
(In Thousands of Dollars)
<S> <C> <C> <C>
Balance, Beginning 1,324 1,112 1,112
Provision Charged Against Income 81 93 347
Recoveries 16 7 55
Loans Charged Off (49) (16) (190)
-------- -------- ---------
Balance, Ending $ 1,372 $ 1,196 $ 1,324
======== ======== =========
</TABLE>
Nonperforming assets consist of the following:
March 31, December 31,
1998 1997
------------- ------------
(In Thousands of Dollars)
Nonaccrual Loans $ 609 $ 302
Restructured Loans -- --
-------- -------
Nonperforming Loans 609 302
Foreclosed Properties 371 208
-------- -------
Nonperforming Assets $ 980 $ 510
======== =======
Total loans past due 90 days or more and still accruing were $320 on March
31, 1998 and $77 on December 31, 1997.
9
<PAGE>
MID-ATLANTIC COMMUNITY BANKGROUP, INC. AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
4. Earnings Per Share
The following shows the weighted average number of shares used in
computing earnings per share and the effect on weighted average number of
shares of diluted potential common stock income available to common
shareholders.
<TABLE>
<CAPTION>
March 31, 1998 March 31, 1997
-------------- --------------
Per Share Per Share
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Basic Earnings Per Share 2,187,791 $ .23 1,888,666 $ .22
Effect of dilutive securities:
Nonemployee directors' stock options 46,529 36,902
Employee incentive stock options 55,794 34,097
--------- ---------
Diluted Earnings Per Share 2,290,114 $ .22 1,959,665 $ .21
========= ======= ========= =======
</TABLE>
5. Capital Requirements
A comparison of the Company's capital as of March 31, 1998 with the
minimum requirements is presented below:
Minimum
Actual Requirements
Tier I Risk-based Capital 16.69 % 4.00 %
Total Risk-based Capital 17.86 % 8.00 %
Leverage Ratio 12.13 % 4.00 %
10
<PAGE>
Item 2. Management's Discussion and Analysis
The following presents management's discussion and analysis of the consolidated
financial condition and results of operations of Mid-Atlantic Community
BankGroup, Inc. (the "Company") as of the dates and for the periods indicated.
This discussion should be read in conjunction with the Selected Financial Data,
the Company's Consolidated Financial Statements and the Notes thereto, and other
financial data appearing elsewhere in this report. The consolidated financial
statements include the accounts of the Company and its wholly-owned subsidiary,
Peninsula Trust Bank (the "Bank").
PENINSULA TRUST BANK
Results of Operations
The Company consummated acquisition of a 50% ownership in a newly formed
mortgage company, Johnson Mortgage Company LLC (JMC) as of March 31, 1998. The
purchase price of $500,000 was represented by approximately $167,000 interest in
stockholders' equity and the remainder as a premium on the capital which will be
amortized over 15 years. JMC is primarily an originator of residential mortgage
loans and has historically sold all originated loans in the secondary market.
JMC will continue to sell loans as opposed to maintaining a portfolio of its
own. It is anticipated that their fees and sale of servicing rights will
contribute substantially to the Company's long-term noninterest income
performance. Additionally, it enables the Bank to enhance its product line.
The Bank experienced strong balance sheet expansion during the first quarter
1998, with total assets increasing $15.1 million, or 9.5% over December 31,
1997. Growth was funded with new deposits, in the form of interest-bearing
demand deposits and other time deposits, which reflected $5.5 million and $3.0
million increases, respectively, for the three months ending March 31, 1998.
Loan demand was moderate during the first quarter, evidenced by net loans
increasing $3.4 million, or 3.3%, over December 31, 1997. Competition for loans
intensified primarily relative to pricing as all banks in the Bank's trade area
were experiencing similar moderation in overall loan demand.
Asset quality continues to be sound with problem credits considered to be at
satisfactory and manageable levels. Total loans past due 30 days or more equaled
$3.2 million (2.92% of total outstandings). Included in the 30 day total are
$320,000 which are 90 days or more past due and still accruing interest.
Non-accrual loans totaled $609,000 at March 31, 1998, which represented 0.56% of
total outstanding loans and 44.4% of the loan loss reserve. Foreclosed
properties totaled $371,000 at March 31, 1998. The provision for loan losses was
$81,000 in the first quarter 1998. Gross charge-offs for the quarter were
$49,000, while total recoveries were $16,000.
The Bank maintained its practice during the first quarter of selling Federal
funds, having sold continuously on a daily basis in amounts averaging $9.7
million, 5.98% of average total assets. These figures compare to $2.7 million
and 1.98%, respectively, for the first quarter 1997. The quarter-end balance of
$11.9 million represented a $3.5 million (or 41.8%) increase from December 31,
1997. The increase in short-term liquidity was to in part to one of the Bank's
existing customers depositing in excess of $4 million in March. The customer
informed the Bank that his intention was to temporarily park the money in a
money market account with an expectation that he would be moving substantially
all of this short-term money to alternative investment vehicles. Therefore, even
though this was unsolicited "hot money", the Bank chose to maintain these funds
in the overnight Fed funds instrument.
The level of the investment account increased approximately $4 million (12.8%)
during the first quarter 1998, ending the period at $35.4 million or 20.3% of
total assets. The portfolio was used to absorb some of the rapid deposit growth
which occurred during the first quarter while loan demand, discussed above, was
too soft to fully employ all of the deposit expansion. Management did choose to
invest some of these
11
<PAGE>
increases in short-term investments to allow the Bank to be positioned for
funding expanded loan demand in the near future. The portfolio is comprised of
2% US Treasuries, 78% US Government Agencies and Mortgage-backed Securities, 19%
State, County and Municipal governments, and 1% other equity securities and
Federal Reserve Bank Stock.
The Financial Accounting Standards Board (FASB) Statement 115 stipulated the way
in which banks must classify and account for their securities portfolio,
beginning with the first quarter of 1994. Securities are classified as
Investment Securities when management has both the intent and the ability at the
time of purchase to hold the securities until maturity. Investment Securities
are carried at cost adjusted for amortization of premiums and accretion of
discounts. Securities which are held for an indefinite period of time are
classified as Securities Available for Sale and are marked to market at each
financial reporting date, or at each month-end. Securities Available for Sale
include securities that may be sold in response to changes in interest rates,
changes in the security's prepayment risk, increases in loan demand, general
liquidity needs and other similar factors.
The Bank elected, as of year-end 1995, to classify the entire portfolio as
"available for sale". In an effort to manage the fluctuation in the "net
unrealized gains/losses", the Bank elected to reclassify $5.1 million of the
portfolio as "held to maturity" as of July 31, 1997, resulting in a one time
capital adjustment for the gain. These reclassified bonds have longer final
maturities. However, due their respective call structures, exhibit more price
volatility with subtle changes in overall interest rates. Also the need for such
bonds to be used for liquidity purposes is considered remote. The Bank purchased
an additional $1.9 million and $5.8 million, during the first quarter 1998,
which were classified as available for sale and held to maturity, respectively.
Management has implemented additional tools for the measurement of three
critical elements in portfolio management: interest rate risk, call and/or
extension risk and maturity distribution. Activities of the Bank's Asset
Liability Committee (ALCO) will include establishing parameters for the
effective modified duration (EMD) for the portfolio in the future. With better
tools to monitor duration, long-term earnings performance of the portfolio is
expected to demonstrate improved stability over varying interest rate cycles.
These parameters will also draw a tighter relationship between EMD and bond
convexity. Convexity measures the percentage amount of portfolio price
appreciation if interest rates fall 1% relative to the percentage of price
depreciation if interest rates rise 1%. The more a bond declines relative to its
depreciation, the higher the negative convexity and, consequently the more
potential call and extension risk that bond is likely to have. The Bank's
overall portfolio has a current negative convexity of 1.40. Relative to the
current EMD, management is targeting a reduction in negative convexity to a
level of .70. This may be accomplished through a mixture of future purchases
blending shorter term maturities and longer term maturities with an absence of
call features in individual bonds.
Deposits represent 99.2% of total liabilities of the Bank, including
non-interest bearing checking accounts which represent 12.9% of total deposits.
Earnings
Net income for the first quarter 1998 increased to $504,000, compared to
$415,000 for the first quarter 1997. The increase in earnings resulted from an
increase in net interest income and non-interest income, which was offset
somewhat by an increase in non-interest expense.
Net interest income for the first quarter 1998 (tax equivalent interest income
less interest expense) totaled $2.0 million (a 15.0% increase over the first
quarter 1997), while the net interest margin (tax equivalent net interest income
expressed as a percentage of average earning assets) declined from 5.71% in the
first quarter 1997 to 5.43% in the first quarter 1998. The average yield on
interest earning assets declined 23 basis points during a time when the average
rate on interest bearing liabilities increased 4 basis points. As a result, the
18.3% increase in interest income for the first quarter 1998 compared to first
quarter 1997 was offset by a 22.4% increase in interest expense for the same
period. The quarter over quarter decline
12
<PAGE>
was due primarily to an increased reliance on interest from Federal funds sold
as a percentage of total interest income. While the average yield on these
overnight investment assets remained constant, their absolute yield of 5.46% was
well below yields of alternative earning assets such as loans or investment
securities. However, the temporary buildup of excess liquidity discussed above
should be curtailed during the next two quarters.
Non-interest expense for the first quarter totaled $1.4 million, compared to
$1.3 million in the first quarter 1997. The loan loss provision for the first
quarter 1998 totaled $81,000, maintaining management's 1.25% loan loss reserve
target.
Capital and Liquidity
Equity capital at March 31, 1998 totaled $20.1 million, representing 11.5% of
total assets. On March 31, 1998, the Company consummated an agreement to acquire
a 50% membership interest in Johnson Mortgage Company L.L.C., which is the
successor to Johnson Mortgage Company of Newport News. Half of the purchase
price was paid in cash and the other half was paid in shares of the Company's
common stock, for a total purchase price of $500,000. This resulted in the
issuance of 11,234 additional shares of the Company's common stock. This level
of capital will position the Company for growth well into the future and could
support asset growth to more than $200 million.
Liquidity is provided by both excess funds in the form of Federal funds sold and
access to the Federal funds market through the purchase of Federal funds from
correspondent banks. The Bank maintains lines of credit to purchase Federal
funds totaling $5.4 million. Federal funds sold equaled 22.1% of total demand
deposits at March 31, 1998. This compares to 11.5% at March 31, 1997. This is
considered an adequate level of liquidity to meet anticipated deposit
withdrawals and expected loan demand.
Future Plans
Construction of the permanent facility for the Newport News office began during
the first half of 1997 and is near completion at this writing. The branch will
move to its new location at the corner of Thimble Shoals Boulevard and J. Clyde
Morris Boulevard near the entrance to the Oyster Point Industrial Park during
the second quarter 1998. The Company acquired the land for its permanent Newport
News branch site in 1996 at a cost of approximately $620,000. Construction costs
for the branch building are expected to be approximately $850,000, and combined
with site work should result in total capitalized improvements approximating
$1,000,000. The current operations for the Newport News branch are conducted in
rented office space, with a lease that expires in October 1998.
The Company has executed an agreement with First Virginia Bank-Commonwealth to
purchase a branch office located on Route 33 in Mattaponi, King and Queen
County, Virginia, for $600,000, subject to regulatory approval. The branch
office is expected to be converted to a Peninsula Trust Bank branch office
before the end of July 1998.
The Company plans to establish a branch office located at 100 McLaws Circle in
Williamsburg, Virginia during the third quarter 1998, subject to regulatory
approval. The location was purchased from Wachovia Bank of North Carolina for
$443,400 and was previously operated as a branch of Jefferson Bank.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities and Use of Proceeds
(a) Not applicable.
(b) Not applicable.
(c) On March 31, 1998, the Company issued 11,234 shares of its
Common Stock to J. Morris Johnson and R. Allen Barber, III. This issuance was
made in connection with the acquisition of a 50% membership interest in Johnson
Mortgage Company L.L.C., the successor to Johnson Mortgage Company of Newport
News, pursuant to a Purchase Agreement, dated April 1, 1997, by and between the
Company, Messrs. Johnson and Barber, Johnson Mortgage Company, L.L.C and Johnson
Mortgage Company, Inc. An exemption from the registration of such issuance was
claimed under Section 4(2) of the Securities Act of 1933, as amended.
(d) Not applicable.
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule (filed electronically only).
(b) Reports on Form 8-K - None.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MID-ATLANTIC COMMUNITY BANKGROUP, INC.
Date: May 14, 1998 BY /s/ W. J. Farinholt
------------------------
W. J. Farinholt, President & CEO
Date: May 14, 1998 BY /s/ Kenneth E. Smith
-------------------------
Kenneth E. Smith, Exec. Vice President
& Chief Financial Officer
Date: May 14, 1998 BY /s/ Kathleen C. Healy
--------------------------
Kathleen C. Healy, Sr. Vice President &
Chief Accounting Officer
15
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