SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report pursuant to section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the fiscal year ended March 31, 1999
--------------
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to .
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Commission File No. 0-22535
SISTERSVILLE BANCORP, INC.
--------------------------
(Name of Small Business Issuer in Its Charter)
Delaware 31-1516424
- --------------------------------------------- ------------------
(State or Other Jurisdiction of Incorporation I.R.S. Employer
or Organization)
Identification No.
726 Wells Street, Sistersville, West Virginia 26175
- --------------------------------------------- -----
(Address of Principal Executive Offices (Zip Code)
Issuer's Telephone Number, Including Area Code: (304) 652-3671
--------------
Securities registered under to Section 12(b) of the Exchange Act: None
----
Securities registered under to Section 12(g) of the Exchange Act:
Common Stock, par value $0.10 per share
---------------------------------------
(Title of Class)
Check whether the issuer: (1) has 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. .
--- ---
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $ 2,364,637.
-----------
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based on $11.25 per share sale price of the registrant's Common
Stock on April 30, 1999, was $4,936,680.
As of June 7, 1999, there were 567,093 outstanding shares of the
registrant's Common Stock.
Transition Small Business Disclosure Format (check one):
YES NO X
--- ---
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Annual Report to Stockholders for the Fiscal Year
ended March 31, 1999 (the "Annual Report"). (Part II)
2. Portions of the Proxy Statement for the Annual Meeting of Stockholders
for the Fiscal Year ended March 31, 1999. (Part III)
<PAGE>
PART I
Item 1. Description of Business
- -------------------------------
Forward Looking Statements
Sistersville Bancorp, Inc. (the "Company") may from time to time make
written or oral "forward-looking statements", including statements contained in
the Company's filings with the Securities and Exchange Commission (including
this Annual Report on Form 10-KSB and the exhibits thereto), in its reports to
stockholders and in other communications by the Company, which are made in good
faith by the Company pursuant to the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995.
These forward-looking statements involve risks and uncertainties, such
as statements of the Company's plans, objectives, expectations, estimates and
intentions, that are subject to change based on various important factors (some
of which are beyond the Company's control). The following factors, among others,
could cause the Company's financial performance to differ materially from the
plans, objectives, expectations, estimates and intentions expressed in such
forward-looking statements: the strength of the United States economy in general
and the strength of the local economies in which the Company conducts
operations; the effects of, and changes in, trade, monetary and fiscal policies
and laws, including interest rate policies of the Board of Governors of the
Federal Reserve System, inflation, interest rate, market and monetary
fluctuations; the timely development of and acceptance of new products and
services of the Company and the perceived overall value of these products and
services by users, including the features, pricing and quality compared to
competitors' products and services; the willingness of users to substitute
competitors' products and services for the Company's products and services; the
success of the Company in gaining regulatory approval of its products and
services, when required; the impact of changes in financial services' laws and
regulations (including laws concerning taxes, banking, securities and
insurance); technological changes, acquisitions; changes in consumer spending
and savings habits; and the success of the Company at managing the risks
involved in the foregoing.
The Company cautions that the foregoing list of important factors is
not exclusive. The Company does not undertake to update any forward-looking
statement, whether written or oral, that may be made from time to time by or on
behalf of the Company.
Business of the Company
The Company is a Delaware corporation organized in March 1997 at the
direction of First Federal Savings and Loan Association of Sistersville (the
"Association") to acquire all of the capital stock that the Association issued
in its conversion from the mutual to stock form of ownership (the "Conversion").
On June 25, 1997, the Conversion was completed and the Association became a
wholly owned subsidiary of the Company and changed its name to First Federal
Savings Bank (the "Bank"). The Company is a unitary savings and loan holding
company which, under existing laws, generally is not restricted in the types of
business activities in which it may engage provided that the Bank retains a
specified amount of its assets in housing-related investments. The Company
conducts no significant business or operations of its own other than holding all
of the outstanding stock of the Bank and investing the Company's portion of the
net proceeds obtained in the Conversion.
The Bank is a federally chartered stock savings bank headquartered in
Sistersville, West Virginia. The Bank is subject to examination and
comprehensive regulation by the Office of Thrift
2
<PAGE>
Supervision ("OTS") and its deposits are federally insured by the Savings
Association Insurance Fund ("SAIF"). The Bank is a member of and owns capital
stock in the FHLB of Pittsburgh, which is one of the 12 regional banks in the
FHLB System. Unless otherwise stated, the term "Bank" refers to both the Bank's
and Company's activities on a consolidated basis.
The Bank operates a traditional savings bank business, attracting
deposit accounts from the general public and using those deposits, together with
other funds, primarily to originate and invest in loans secured by single-family
residential real estate.
Competition
The Bank is one of many financial institutions serving its market area
which consists of Tyler, Pleasants, Wetzel and Wood Counties in West Virginia.
The competition for deposit products comes from other insured financial
institutions such as commercial banks, thrift institutions, credit unions, and
multi-state regional banks in the Bank's market area. Deposit competition also
includes a number of insurance products sold by local agents and investment
products such as mutual funds and other securities sold by local and regional
brokers. Loan competition varies depending upon market conditions and comes from
other insured financial institutions such as commercial banks, thrift
institutions, credit unions, multi-state regional banks, and mortgage bankers.
Lending Activities
Analysis of Loan Portfolio. Set forth below is selected data relating
to the composition of the Company's loan portfolio by type of loan and type of
security on the dates indicated:
<TABLE>
<CAPTION>
At March 31,
1999
--------------------------------------------------
1999 1998
----------------------- -------------------------
$ % $ %
--------- ------- -------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Type of Loans:
Real Estate Loans:
Construction $ 119 0.48% $ 701 2.88%
1-4 family 23,682 95.16 22,594 92.78
Multi-family -- 0.00 -- 0.00
Commercial -- 0.00 -- 0.00
Consumer loans:
Automobiles 699 2.81 699 2.87
Savings accounts 100 0.40 234 0.96
Other 18 0.07 27 0.11
Commercial 269 1.08 96 0.39
------ ------ ------ ------
Total loans 24,887 100.00% 24,351 100.00%
====== ======
Less:
Loans in process (343) (463)
Deferred loan origination fees and costs (52) (72)
Allowance for possible loan losses (172) (169)
------ ------
Total loans, net $ 24,320 $ 23,647
====== ======
</TABLE>
3
<PAGE>
Loan Maturity Tables
The following table sets forth the maturity of the Bank's loan
portfolio at March 31, 1999. The table does not include prepayments or scheduled
principal repayments. Prepayments and scheduled principal repayments on loans
totalled $5.0 million and $3.5 million for the years ended March 31, 1999 and
1998, respectively. All mortgage loans are shown as maturing based on
contractual maturities.
1-4 Family
Real Estate
Mortgage Construction Consumer Commercial Total
-------- ------------ -------- ---------- -----
(In Thousands)
Non-performing ........ $ -- $ -- $ 2 $ -- $ 2
Amounts Due:
Within 3 months ....... 3 -- 9 -- 12
3 months to 1 Year .... 8 -- 27 6 41
After 1 year:
1 to 3 years ........ 134 -- 210 168 512
3 to 5 years ........ 273 -- 530 -- 803
5 to 10 years ....... 2,956 -- 39 -- 2,995
10 to 20 years ...... 13,599 -- -- 95 13,694
Over 20 years ....... 6,708 119 -- -- 6,827
------- ------- ------- ------- -------
Total amount due ...... $23,681 $ 119 $ 817 $ 269 $24,886
------- ------- ------- ------- -------
Less:
Allowance for loan loss 138 -- 34 -- 172
Loans in process ...... 229 114 -- -- 343
Deferred loan fees .... 51 -- -- -- 51
------- ------- ------- ------- -------
Loans receivable, net . $23,263 $ 5 $ 783 $ 269 $24,320
======= ======= ======= ======= =======
The following table sets forth the dollar amount of all loans due after
March 31, 2000, which have pre-determined interest rates and which have floating
or adjustable interest rates.
Floating or
Fixed Rates Adjustable Rates Total
----------- ---------------- -----
(In Thousands)
1-4 family ................. $23,640 $ 30 $23,670
Commercial ................. 263 -- 263
Construction ............... 119 -- 119
Consumer ................... 779 -- 779
------- ------- -------
Total .................... $24,801 $ 30 $24,831
====== ======= =======
4
<PAGE>
The following table shows the total loan originations,
repayments, and sales activity by the Bank for the periods indicated:
Years Ended March 31,
---------------------
1999 1998
--------- ---------
Total gross loans receivable
at beginning of period .................. $ 24,351 $ 22,293
-------- --------
Loans originated:
1-4 family residential ................... 4,329 3,714
Construction loans ....................... 745 1,222
Consumer loans ........................... 311 551
Commercial business loans ................ 185 80
-------- --------
Total loans originated ..................... 5,570 5,567
Loan principal repayments .................. (5,034) (3,508)
Charge-offs ................................ -- (1)
-------- --------
Net loan activity .......................... 536 2,058
-------- --------
Total gross loans receivable
at end of period ........................ $ 24,887 $ 24,351
======== ========
One- to Four-Family Residential Loans. The Bank's primary lending
activity consists of the origination of one- to four-family fixed-rate
residential mortgage loans secured by property located in the Bank's primary
market areas. The Bank also originates construction permanent loans on one- to
four-family residences. The Bank generally originates owner-occupied one- to
four-family residential mortgage loans in amounts up to 80% of the lesser of the
appraised value or selling price of the mortgaged property without requiring
mortgage insurance. The Bank may originate a mortgage loan in an amount up to
90% of the lesser of the appraised value or selling price of a mortgaged
property, however, mortgage insurance is required for the amount in excess of
80% of such value. The Bank generally retains all of the mortgage loans that it
originates. Fixed-rate loans can have maturities of up to 30 years depending on
the terms of the loan.
Consumer Loans. The Bank offers consumer loans in order to provide a
wider range of financial services to its customers. Federal savings associations
are permitted to make secured and unsecured consumer loans up to 35% of their
assets. In addition, savings associations have lending authority above the 35%
limitation for certain consumer loans, such as home improvement, credit card,
education, automobile, and savings account or passbook loans. Secured consumer
loans are made at an interest rate that is 2% above the rate paid on the
underlying deposit account. Consumer and other loans totalled $817,000, or 3.3%
of the Bank's total loans, of which loans secured by automobiles totalled
$699,000, or 2.8% of the Bank's total loans at March 31, 1999. The Bank
originates automobile loans with terms of up to six years for both new and used
automobiles. Most of these automobile loans are originated directly by the Bank.
Commercial Loans. The Bank had three commercial loan participations as
of March 31, 1999, totalling $269,000. These loans were made to a local fire
department and a local hospital for working capital purposes and a local
municipality for a commercial line of credit.
5
<PAGE>
Construction Lending. The Bank makes construction loans primarily for
the construction of single-family dwellings. The Bank will permit owner-built
construction loans. The aggregate outstanding balance of such loans on March 31,
1999, was $119,000, representing .5% of the Bank's total loan portfolio. All of
these loans were made to persons who are constructing properties for the purpose
of occupying them. Loans made to individual property owners are
"construction-permanent" loans which generally provide for the payment of
interest only during a construction period, after which the loans convert to a
permanent loan at original contractual rates.
Loan Underwriting Risks. While consumer or other loans provide benefits
to the Bank's asset/liability management program by reducing the Bank's exposure
to interest rate changes, due to their generally shorter terms, and producing
higher yields, such loans may entail significant additional credit risks
compared to owner-occupied residential mortgage lending. However, the Bank
believes that the higher yields and shorter terms compensate the Bank for the
increased credit risk associated with such loans.
In addition, due to the type and nature of the collateral, and, in some
cases the absence of collateral, consumer lending generally involves more credit
risk when compared with one- to four-family residential lending. Consumer
lending collections are typically dependent on the borrower's continuing
financial stability, and thus, are more likely to be adversely effected by job
loss, divorce, illness, and personal bankruptcy. In most cases, any repossessed
collateral for a defaulted consumer loan will not provide an adequate source of
repayment of the outstanding loan balance.
Construction lending is generally considered to involve a higher level
of credit risk than one- to four-family residential lending since the risk of
loss on construction loans is dependent largely upon the accuracy of the initial
estimate of the individual property's value upon completion of the project and
the estimated cost (including interest) of the project. If the cost estimate
proves to be inaccurate, the Bank may be required to advance funds beyond the
amount originally committed to permit completion of the project.
Loan Approval Authority and Underwriting. The Bank has established
various lending limits for its officers and maintains a Loan Committee. All
mortgage loan applications are reviewed and approved by the Board of Directors,
which meets twice per month. The Loan Committee may approve mortgage loans but
such action must be ratified at a subsequent Board meeting. The President and
Vice President of the Bank each have the authority to approve all applications
for consumer loans up to $25,000 for non-real estate secured loans and up to
$2,000 for unsecured loans.
Loan Commitments. At March 31, 1999, the Bank had $467,000 outstanding
commitments to originate loans and $343,000 in undisbursed funds related to
construction loans. Management believes that less than 1% of loan commitments
expire.
Loans to One Borrower. Regulations limit loans to one borrower or
affiliated group of borrowers in an amount equal to 15% of unimpaired capital
and unimpaired surplus of the Bank. The Bank is authorized to lend up to an
additional 10% of unimpaired capital and unimpaired surplus if the loan is fully
secured by readily marketable collateral. At March 31, 1999, the Bank's lending
limit for loans to one borrower was approximately $1.2 million.
At March 31, 1999, the largest loan of the Bank was a $267,000 loan
that was secured by the borrower's residence.
6
<PAGE>
Non-Performing and Problem Assets
Loan Delinquencies. Loans are reviewed on a monthly basis and are
placed on non-accrual status when considered doubtful of collection by
management. Generally, loans past due 90 days or more as to principal or
interest are placed on non-accrual status. Interest accrued and unpaid at the
time a loan is placed on non-accrual status is charged against interest income.
Subsequent cash payments are generally applied to interest income unless, in the
opinion of management, the collection of principal and interest is doubtful. In
those cases, subsequent cash payments would be applied to principal. At March
31, 1999, nonaccrual loans and loans past due greater than 90 days totalled
$2,000 or 0.01% of total assets.
Non-performing Assets
The following table sets forth information regarding non-accrual loans,
real estate owned, and certain other repossessed assets and loans. As of the
dates indicated, the Bank had no loans categorized as troubled debt
restructuring within the meaning of SFAS 15.
March 31,
------------------
1999 1998
------- -------
(Dollars in Thousands)
Loans accounted for on a non-accrual basis:
Mortgage loans:
One- to four-family ....................................... $-- $166
Multi-family .............................................. -- --
Commercial ................................................ -- --
Construction .............................................. -- --
Consumer .................................................... 2 --
Commercial .................................................. -- --
---- ----
Total non-accrual loans ..................................... 2 166
---- ----
Accruing loans greater than 90 days past due: Mortgage loans:
One- to four-family ....................................... -- --
Multi-family .............................................. -- --
Commercial ................................................ -- --
Construction .............................................. -- --
Consumer .................................................... -- --
Commercial .................................................. -- --
---- ----
Total accruing loans greater than 90 days
past due .................................................. -- --
---- ----
Total non-performing loans .................................. 2 166
Real estate acquired in settlement of loans ................. -- --
---- ----
Other non-performing assets ................................. 2 166
==== ====
Total non-performing loans to total loans ................... 0.01% 0.70%
==== ====
Total non-performing loans to total assets .................. 0.01% 0.52%
==== ====
Total non-performing assets to total assets ................. 0.01% 0.52%
==== ====
7
<PAGE>
Interest income that would have been recorded on loans accounted for on
a non-accrual basis under the original terms of such loans was $-0- for the year
ended March 31, 1999, and $-0- was collected and included in the Bank's interest
income from non-accrual loans for the year ended March 31, 1999.
Classified Assets
OTS Regulations provided for a classification system for problem assets
of insured institutions. Under this classification system, probable assets of
insured institutions are classified as "substandard," "doubtful," or "loss." An
asset is considered substandard if it is inadvertently protected by the current
equity and paying capacity of the obligor or of the collateral pledged, if any.
Substandard assets include those characterized by the "distinct possibility"
that the insured institution will sustain "some loss" if the deficiencies are
not corrected. Assets classified as doubtful have all the weaknesses inherent in
those classified as substandard, with the added characteristics that the
weaknesses present make "collection or liquidation in full," on the basis of
currently existing facts, conditions, and values, "highly questionable and
improbable." Assets classified as loss are those considered "uncollectible" and
of such little value that their continuance as assets without the establishment
of a specific loss reserve is not warranted. Assets may be designated "special
mention" because a weakness that does not currently warrant classification in
one of the aforementioned categories.
When an insured institution classifies problem assets as either
substandard or doubtful, it may establish general allowances for loan losses in
an amount deemed prudent by management. General allowances represent loss
allowances which have been established to recognize the inherent risk associated
with lending activities, but which, unlike specific allowances, have not been
allocated to particular problem assets. When an insured institution classifies
problem assets as loss, it is required either to establish a specific allowance
for losses equal to 100% of that portion of the asset and the amount of its
valuation allowances is subject to review by the OTS, which may order the
establishment of additional general or specific loss allowances. A portion of
general loss allowances established to cover possible losses related to assets
classified as substandard or doubtful may be included in determining an
institutions' regulatory capital, while specific valuation allowances for loan
losses generally do not qualify as regulatory capital.
On the basis of management's review of its assets, at March 31, 1999,
the Bank had classified $2,000 of assets as substandard, no assets as doubtful
nor as loss, and $15,000 assets as special mention.
8
<PAGE>
Analysis of Allowance for Loan Losses
The following table sets forth information with respect to the Bank's
allowance for loan losses at the dates indicated:
At March 31,
--------------------
1999 1998
--------- ---------
Total gross loans outstanding ....... $ 24,887 $ 24,351
======== ========
Average gross loans outstanding ..... $ 24,810 $ 23,486
======== ========
Allowance balances (at beginning of
period) ........................... $ 169 $ 164
Provision (credit):
Residential ....................... 2 4
Commercial real estate ............ -- --
Consumer .......................... 1 2
Charge-offs
Residential ....................... -- --
Consumer .......................... -- (1)
Commercial ........................ -- --
Recoveries:
Residential ....................... -- --
Commercial real estate ............ -- --
Consumer .......................... -- --
-------- --------
Allowance balance (at end of period) 172 169
======== ========
Allowance for loan losses as
a percentage of total loans ......... 0.69% 0.69%
outstanding
Net loans charged off as a percentage
of average loans outstanding ........ 0.00% 0.00%
- --------------------
(1) Non-performing assets include non-accrual loans, accruing loans more than
90 days past due and real estate acquired in settlement of loans.
Allocation of the Allowance for Loan Losses
The following table sets forth the allocation of the allowance for loan
losses by category as prepared by the Bank. In management's opinion, the
allocation has, at best, a limited utility. It is based on management's
assessment as of a given point in time of the risk characteristics of each of
the component parts of the total loan portfolio and is subject to changes as and
when the risk factors of each such component part change. The allocation is not
indicative of either the specific amounts or the loan categories in which future
charge-offs may be taken, nor should it be taken as an indicator of future loss
trends. In addition, by presenting the allocation, management does not mean to
imply that the allocation is exact or that the allowance has been precisely
determined from the allocation. The allocation of the allowance to each category
is not necessarily indicative of future loss in any particular category and does
not restrict the use of the allowance to absorb losses in any category.
9
<PAGE>
<TABLE>
<CAPTION>
At March 31,
------------------------------------------------------
1999 1998
----------------------- ---------------------------
Percent of Percent of
Loans in Each Loans in Each
Category Category
Amount to Total Loans Amount to Total Loans
------ -------------- ------ --------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Mortgages:
One- to four-family $138 95.16 % $135 92.78%
Construction -- 0.48 -- 2.88
Consumer 34 3.28 34 3.94
Commercial -- 1.08 -- 0.40
--- ------- ---- ------
Total $172 100.00 % $169 100.00%
=== ======= === ======
</TABLE>
Investment Activities
Investment Securities. The Bank is required under federal regulations
to maintain a minimum amount of liquid assets which may be invested in specified
short term securities and certain other investments. The Bank classifies its
investments as securities available for sale or investments securities held to
maturity in accordance with SFAS No. 115.
The Bank's securities available for sale and investment securities held
to maturity portfolios at March 31, 1999 did not contain securities of any
issuer with an aggregate book value in excess of 10% of the Bank's equity,
excluding those issued by the United States Government or its agencies. As of
March 31, 1999, the Bank's investment portfolio was comprised of FHLB stock,
FHLMC stock, municipal securities, U.S. federal agency securities and
mortgage-backed securities with market value of $5.3 million.
Mortgage-Backed Securities. To supplement lending activities, the Bank
has invested in residential mortgage-backed securities. Mortgage-backed
securities can serve as collateral for borrowings and, through repayments, as a
source of liquidity. Mortgage-backed securities represent a participation
interest in a pool of single-family or other type of mortgages, the principal
and interest payments on which are passed from the mortgage originators, through
intermediaries (generally quasi-governmental agencies) that pool and repackage
the participation interests in the form of securities, to investors such as the
Bank. These quasi-governmental agencies guarantee the payment of principal and
interest to investors.
The Bank's mortgage-backed securities were classified as held to
maturity and available for sale at March 31, 1999, and were issued by the
Government National Mortgage Bank ("GNMA") and Federal Home Loan Mortgage
Corporation ("FHLMC"), representing participating interests in direct
pass-through pools of long-term mortgage loans originated and serviced by the
issuers of the securities. Expected maturities will differ from contractual
maturities due to scheduled repayments and because borrowers may have the right
to call or prepay obligations with or without prepayment penalties.
At March 31, 1999, the Bank held mortgage-backed securities in its
investment securities held to maturity portfolio with an amortized cost of
$351,000 and in its available for sale portfolio with an amortized cost of
$459,000. The average yield on mortgage-backed securities at March 31, 1999, was
6.28%.
10
<PAGE>
Investment Portfolio. The following table sets forth the carrying value
of the Bank's investments.
At March 31,
-------------------------
1999 1998
-------- --------
(Dollars in Thousands)
Investment Securities:
U.S. Government and agency Securities $2,237 $4,111
Municipal Securities 886 --
FHLMC Stock 1,101 1,073
----- -----
Total Investment Securities 4,224 5,184
Interest-bearing Deposits 1,844 1,469
FHLB Stock 226 203
Mortgage-backed Securities 351 527
Mortgage-backed Securities Held For Sale
458 --
------ ------
Total Investments $7,103 $7,383
====== ======
11
<PAGE>
The following table sets forth information regarding the carrying
values, and weighted average yields and maturities of the Bank's investment
securities portfolio at March 31, 1999. The following table does not take into
consideration the effects of scheduled repayments or the effects of possible
prepayments.
<TABLE>
<CAPTION>
As of March 31, 1999
------------------------------------------------------------------------------------------------------
Total
One Year or Less One to Five Years Five to Ten Years More than Ten Years Investment Securities
---------------- ----------------- ----------------- ------------------- ------------------------
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Average Market
Value Yield Value Yield Value Yield Value Yield Value Yield Value
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Securities:
U.S.agency securities
available for sale(2).......... $ 203 5.96% $837 5.75% $ 997 6.11% $200 6.85% $2,237 6.03% $2,237
Municipal securities(2)........ -- -- -- -- -- -- 886 6.95 886 6.95 886
FHLMC Stock(2)................. 1,101 0.72 -- -- -- -- -- -- 1,101 0.72 1,101
Interest-bearing deposits
in other financial
institutions(1).............. 1,844 5.09 -- -- -- -- -- -- 1,844 5.09 1,844
FHLB Stock(1).................. 226 6.50 -- -- -- -- -- -- 226 6.50 226
------ ------- ---- ----- ------ ------- ------ -------- ----- ---- ------
6.50
$3,374 3.81% $837 5.75% $997 6.11% $1,086 6.93% $6,294 4.97% $6,294
Mortgage-backed securities(3).. -- -- 123 8.02 13 6.79 673 5.96 809 6.28 816
------ ------- --- ------ ------ ------- ------ -------- --- ----- ------
Total........................ $3,374 3,81% $960 6.04% $1,010 6.12% $1,759 6.56% $7,103 5.12% $7,110
====== ======= ==== ====== ====== ======= ====== ======== ====== ===== ======
- --------------------
(1) Recorded at cost.
(2) Recorded at market value.
(3) Recorded at cost, except for $459,000 in available for sale securities with
a maturity of more than ten years which are recorded at market value.
</TABLE>
12
<PAGE>
Sources of Funds
General. Deposits are the major source of the Bank's funds for lending
and other investment purposes. The Bank also derives funds from the amortization
and prepayment of loans, sales, maturities, and calls of securities, and
operations. Scheduled loan principal repayments are a relatively stable source
of funds, while deposit inflows and outflows and loan prepayments are
significantly influenced by general interest rates and market conditions.
Deposits. Consumer and commercial deposits are attracted principally
from within the Bank's primary market areas through the offering of a selection
of deposit instruments including savings accounts, NOW accounts, money market
accounts, and time deposits or certificate of deposit accounts.
Borrowings
The Bank obtained an advance from the FHLB of Pittsburgh to supplement
its supply of lendable funds. The advance from the FHLB of Pittsburgh is secured
by a pledge of the Bank's various assets in the amount of $20.6 million. The
borrowing is a 5.15% fixed interest obligation with an optional change to a
variable interest rate at August 21, 1999. The advance matures on August 31,
2008, while interest payments are payable monthly on the outstanding principal
balance. At March 31, 1999, the Bank had $1.0 million in borrowings outstanding
from the FHLB of Pittsburgh. The Bank had no FHLB advances outstanding during
the year ended March 31, 1998.
Personnel
At March 31, 1999, the Bank had 9 full-time and four part-time
employees. None of the Bank's employees are represented by a collective
bargaining group. The Bank believes that its relationship with its employees is
good.
Regulation
Set forth below is a brief description of laws that relate to the
regulation of the Bank and the Company. The description is not complete and is
qualified in its entirety by reference to applicable laws and regulations.
Company Regulation
General. The Company is required to register and file reports with the
OTS and is subject to regulation and examination by the OTS. In addition, the
OTS has enforcement authority over the Company and its non-savings association
subsidiaries, should such subsidiaries be formed, which permits the OTS to
restrict or prohibit activities that are determined to be a serious risk to the
Bank. This regulation and oversight is intended primarily for the protection of
the depositors of the Bank and not for the benefit of stockholders of the
Company.
Qualified Thrift Lender ("QTL") Test. As a unitary savings and loan
holding company, the Company generally is not subject to activity restrictions,
provided the Bank satisfies the QTL test. If the Company acquired control of
another savings institution as a separate subsidiary, it would lose the ability
to diversity its operations into nonbanking related activities unless the other
savings institutions each also qualify as a QTL or were acquired in a supervised
acquisition. See "Bank Regulation - Qualified Thrift Lender Test."
13
<PAGE>
Restrictions or Acquisitions. The Company must obtain approval from the
OTS before acquiring control of any other SAIF-insured savings institution. No
person may acquire control of a federally insured savings institution without
providing at least 60 days written notice to the OTS and giving the OTS an
opportunity to disapprove the proposed acquisition.
Bank Regulation
General. As a federally chartered, SAIF-insured savings association,
the Bank is subject to extensive regulation by the OTS and the Federal Deposit
Insurance Corporation (the "FDIC"). Lending activities and other investments
must comply with various federal and state statutory and regulatory
requirements. The Bank is also subject to certain reserve requirements
promulgated by the Board of Governors of the Federal Reserve System ("Federal
Reserve System").
Insurance of Deposit Accounts. The Bank's deposit accounts are insured
by the SAIF to a maximum of $100,000 for each insured member (as defined by law
and regulation). Insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe or unsound practices, is in
an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC or the
institution's primary regulator.
As a member of the SAIF, the Bank pays an insurance premium to on the
FDIC. The FDIC also maintains another insurance fund, the Bank Insurance Fund
("BIF"), which primarily insures commercial bank deposits.
The deposit insurance assessment for most SAIF members is .064% of
deposits on an annual basis through the end of 1999. During this same period,
BIF members will be assessed approximately .013% of deposits. After 1999,
assessments for BIF and SAIF members should be the same. It is expected that
these continuing assessments for both SAIF and BIF members will be used to repay
outstanding Financing Corporation bond obligations.
Regulatory Capital Requirements. OTS capital regulations require
savings institutions to meet three capital standards: (1) tangible capital equal
to 1.5% of total adjusted assets, (2) a leverage ratio (core capital) equal to
at least 3% of total adjusted assets, and (3) risk-based capital equal to 8% of
total risk-weighted assets. In addition, the OTS prompt corrective action
regulation provides that a savings institution that has a leverage capital ratio
of less than 4% (3% for institutions receiving the highest examination rating)
will be deemed to be "undercapitalized" and may be subject to certain
restrictions.
Dividend and Other Capital Distribution Limitations. A savings
association that is a subsidiary of a savings and loan holding company, such as
the Bank, must file an application or a notice with the OTS at least 30 days
before making a capital distribution, including cash dividends. Savings
associations are not required to file an application for permission to make a
capital distribution if the following conditions are met: (1) they are eligible
for expedited treatment under OTS regulations, (2) they would remain adequately
capitalized after the distribution, (3) the annual amount of capital
distribution does not exceed net income for that year to date added to retained
net income for the two preceding years, and (4) the capital distribution would
not violate any agreements between OTS and the savings association or any OTS
regulations. Any other distribution would require a notice to the OTS.
14
<PAGE>
In addition, the OTS could prohibit a proposed capital distribution by
any institution, which would otherwise be permitted by the regulation, if the
OTS determines that the distribution would constitute an unsafe or unsound
practice.
A federal savings institution is prohibited from making a capital
distribution if, after making the distribution, the savings institution would be
unable to meet any one of its minimum regulatory capital requirements. Further,
a federal savings institution cannot distribute regulatory capital that is
needed for its liquidation account.
Qualified Thrift Lender Test. Savings institutions must meet a
qualified thrift lender ("QTL") test. If the Bank maintains an appropriate level
of qualified thrift investments ("QTIs") (primarily residential mortgages and
related investments, including certain mortgage-related securities) and
otherwise qualifies as a QTL, it will continue to enjoy full borrowing
privileges from the FHLB of Pittsburgh. The required percentage of QTIs is 65%
of portfolio assets (defined as all assets minus goodwill and other intangible
assets, property used by the institution in conducting its business and liquid
assets in an amount not exceeding 20% of total assets). In addition, savings
associations may include shares of stock of the FHLBs, FNMA, and FHLMC as QTIs.
Compliance with the QTL test is determined on a monthly basis in nine out of
every 12 months. As of March 31, 1999, the Bank was in compliance with its QTL
requirement.
Federal Reserve System. The Federal Reserve System requires all
depository institutions to maintain non-interest bearing reserves at specified
levels against their transaction accounts (primarily checking, NOW and Super NOW
checking accounts) and non-personal time deposits. The balances maintained to
meet the reserve requirements imposed by the Federal Reserve System may be used
to satisfy the liquidity requirements that are imposed by the OTS. At March 31,
1999, the Bank was in compliance with these Federal Reserve Board requirements.
Item 2. Description of Property
- --------------------------------
(a) Properties.
Currently, the Company does not own real property but utilizes the
offices of the Bank. The Bank operates from its office located at 726 Wells
Street, Sistersville, West Virginia. The Bank owns this office facility.
(b) Investment Policies.
See "Item 1. Description of Business" above for a general description
of the Bank's investment policies and any regulatory or Board of Directors'
percentage of assets limitations regarding certain investments. The Bank's
investments are primarily acquired to produce income, and to a lesser extent,
possible capital gain.
(1) Investments in Real Estate or Interests in Real Estate. See "Item
1. Description of Business - Lending Activities," "Item 1. Description of
Business - Bank Regulation," and "Item 2. Description of Property (a)
Properties" above.
(2) Investments in Real Estate Mortgages. See "Item 1. Description of
Business - Lending Activities" and "Item 1. Description of Business - Bank
Regulation."
15
<PAGE>
(3) Securities of or Interests in Persons Primarily Engaged in Real
Estate Activities. See "Item 1. Description of Business - Lending Activities,"
"Item 1. Description of Business - Bank Regulation."
(c) Description of Real Estate and Operating Data.
Not Applicable.
Item 3. Legal Proceedings
- --------------------------
There are various claims and lawsuits in which the Company or the Bank
are periodically involved, such as claims to enforce liens, condemnation
proceedings on properties in which the Bank holds security interests, claims
involving the making and servicing of real property loans, and other issues
incident to the Bank's business. In the opinion of management, no material loss
is expected from any of such pending claims or lawsuits.
Item 4. Submission of Matters to a Vote of Security Holders
- -------------------------------------------------------------
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
- ------------------------------------------------------------------
The information contained under the section captioned "Corporate
Profile" and "Stock Market Information" of the Company's Annual Report is
incorporated herein by reference.
Item 6. Management's Discussion and Analysis or Plan of Operation
- -------------------------------------------------------------------
The information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Annual Report is incorporated herein by reference.
Item 7. Financial Statements
- ------------------------------
The Registrant's financial statements listed under Item 13 are
incorporated herein by reference.
Item 8. Changes in and Disagreements with Accountants On Accounting and
Financial Disclosure
- --------------------------------------------------------------------------------
There were no changes in or disagreements with accountants on
accounting and financial disclosure during the last fiscal year.
PART III
Item 9. Directors Executive Officers, Promoters and Control Persons: Compliance
with Section 16(a) of the Exchange Act.
- --------------------------------------------------------------------------------
The information contained under the sections captioned "Section 16(a)
Beneficial Ownership Reporting Compliance" and "Proposal I - Information with
Respect to Nominees for Director, Directors Continuing in Office, and Executive
Officers - Election of Directors" and " - Biographical Information" in the
"Proxy Statement" is incorporated herein by reference.
16
<PAGE>
Item 10. Executive Compensation
- --------------------------------
The information contained in the section captioned "Director and
Executive Officer Compensation" in the Proxy Statement is incorporated herein by
reference.
Item 11. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
Information required by this item is incorporated herein by
reference to the section captioned "Voting Securities and
Principal Holders Thereof" in the Proxy Statement.
(b) Security Ownership of Management
Information required by this item is incorporated herein by
reference to the chart in the section captioned "Voting
Securities and Principal Holders Thereof" and to the first
chart in the section captioned "I - Information with Respect
to Nominees for Director, Directors Continuing in Office, and
Executive Officers" in the Proxy Statement.
(c) Management of the Registrant knows of no arrangements,
including any pledge by any person of securities of the
Registrant, the operation of which may at a subsequent date
result in a change in control of the Registrant.
Item 12. Certain Relationships and Related Transactions
- --------------------------------------------------------
The information required by this item is incorporated herein by
reference to the section captioned "Certain Relationships and Related
Transactions" in the Proxy Statement.
Item 13. Exhibits, List and Reports on Form 8-K
- -----------------------------------------------
(a) The following documents are filed as a part of this report:
1. The following financial statements and the report of
independent accountants of the Registrant included in the Annual Report for the
fiscal year ended March 31, 1999, are incorporated herein by reference and also
in Item 7 of this report.
Report of Independent Auditors
Consolidated Balance Sheet at March 31, 1999 and 1998.
Consolidated Statements of Income for the Years Ended March 31, 1999
and 1998.
Consolidated Statements of Comprehensive Income for the Years Ended
March 31, 1999 and 1998.
Consolidated Statements of Stockholders' Equity for the Years Ended
March 31, 1999 and 1998.
Consolidated Statements of Cash Flows for the Years Ended March 31,
1999 and 1998.
17
<PAGE>
Notes to Consolidated Financial Statements.
2. Except for Exhibits 11 and 27 below, Financial Statement
Schedules for which provision is made in the applicable accounting regulations
of the SEC are not required under the related instructions or are inapplicable
and therefore have been omitted.
3. The following exhibits are included in this Report or
incorporated herein by reference:
<TABLE>
<CAPTION>
<S> <C>
(a) List of Exhibits:
3(i) Certificate of Incorporation of Sistersville Bancorp, Inc.*
3(ii) Bylaws of Sistersville Bancorp, Inc.*
10.1 Employment Agreement with Stanley M. Kiser*
10.2 1998 Stock Option Plan of Sistersville Bancorp, Inc.**
10.3 First Federal Savings Bank Restricted Stock Plan and Trust Agreement**
11 Statement regarding computation of earnings per share
13 Annual Report to Stockholders for the fiscal year ended March 31, 1999
21 Subsidiaries of the Registrant
23 Consent of S.R. Snodgrass, A.C.
27 Financial Data Schedule***
</TABLE>
(b) The Registrant filed a Current Report on Form 8-K dated March 1, 1999
to report the repurchase of 29,847 or 5% of its outstanding common
stock pursuant to a stock repurchase program.
- ---------------------
* Incorporated by reference to the registration statement on Form S-1 (File
No. 333-23147) declared effective by the SEC on May 12, 1997.
** Incorporated by reference to the exhibits to the proxy statement for the
1998 Annual Meeting of Stockholders held on July 16, 1998 and filed with
the SEC on June 2, 1998 (File No. 0-22535).
*** Filed in electronic format only.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 as of June 11, 1999.
SISTERSVILLE BANCORP, INC.
By: /s/Stanley M. Kiser
----------------------------
Stanley M. Kiser
President, Chief Executive
Officer, and Director (Duly
Authorized Representative)
Pursuant to the requirement of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated as of June 11, 1999.
/s/Stanley M. Kiser /s/Lester C. Doak
- ----------------------------------- ------------------------------------
Stanley M. Kiser Lester C. Doak
President, Chief Executive Officer, Chairman of the Board
and Director (Principal Executive
Officer)
/s/Ellen E. Thistle /s/Gary L. Ward
- ----------------------------------- ------------------------------------
Ellen E. Thistle Gary L. Ward
Director Director
/s/David W. Miller /s/Charles P. LaRue
- ----------------------------------- ------------------------------------
David W. Miller Charles P. LaRue
Director Director
EXHIBIT 11
<PAGE>
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
Period
April 1, 1998,
Through
March 31,
1999
--------------
Earnings of the Company $389,366
Basic:
Average shares outstanding 545,755
Earnings per share $.71
Diluted:
Average shares outstanding 558,363
Earnings per share $.70
EXHIBIT 13
<PAGE>
[LOGO] Sistersville
===================
Bancorp, Inc.
1999
ANNUAL REPORT
<PAGE>
[LOGO] Sistersville
==========================
Bancorp, Inc.
726 WELLS STREET, P.O. BOX 187
SISTERSVILLE, WV 26175
304-652-3671
Report to Shareholders:
I am pleased to provide to you the Sistersville Bancorp, Inc. (the "Company")
1999 Annual Report. The fiscal year which ended March 31, 1999 marks the end of
the Company's second reporting year as a public company, and the first year
covering a full twelve month period.
During the year, to enhance shareholder value, the Company repurchased 61,264
shares of its common stock in the open market. Combined with the repurchase
completed in March 1998, a total of 94,335 shares have been repurchased since
the mutual to stock conversion in June 1997. The repurchases have increased the
book value of the stock to $17.26 per share.
A total of $202,016.92 was paid to our shareholders in the form of cash
dividends. More than half of the total was considered a return of capital and
therefore was nontaxable to shareholders.
I am happy to report that First Federal Savings Bank (the "Bank"), the Company's
subsidiary, opened a new drive through in July. The drive through has proven to
be quite popular with customers due to the convenience it provides and its
extended hours of operation.
Efforts have been ongoing throughout the year to assure a smooth transition for
the date changeover to the Year 2000. Most of our system testing has been
completed and the Company and the Bank will both be ready for the date
changeover well in advance of December 31, 1999.
I look forward to the challenges of enhancing shareholder value during the
upcoming year. I commend the dedication and efforts of our employees and
directors, and express my appreciation for the continued support of our
customers and shareholders.
Sincerely,
/s/Stanley M. Kiser
Stanley M. Kiser
President
<PAGE>
SISTERSVILLE BANCORP, INC.
Corporate Profile
Sistersville Bancorp, Inc. (the "Company") is a Delaware corporation organized
in March, 1997, at the direction of First Federal Savings and Loan Association
of Sistersville (the "Association") to acquire all of the capital stock that the
Association issued in its conversion from the mutual to stock form of ownership
(the "Conversion"). On June 25, 1997, the Conversion was completed and the
Association became a wholly owned subsidiary of the Company and changed its name
to First Federal Savings Bank (the "Bank"). The Company is a unitary savings and
loan holding company which, under existing laws, generally is not restricted in
the types of business activities in which it may engage provided that the Bank
retains a specified amount of its assets in housing-related investments. The
Company conducts no significant business or operations of its own other than
holding all of the outstanding stock of the Bank and investing the Company's
portion of the net proceeds obtained in the Conversion.
The Bank is a federally chartered stock savings bank headquartered in
Sistersville, West Virginia. The Bank is subject to examination and
comprehensive regulation by the Office of Thrift Supervision ("OTS") and its
deposits are federally insured by the Savings Association Insurance Fund
("SAIF"). The Bank is a member of and owns capital stock in the FHLB of
Pittsburgh, which is one of the 12 regional banks in the FHLB system. Unless
otherwise stated, the term "Bank" refers to both the Bank's and Company's
activities on a consolidated basis.
The Bank operates a traditional savings bank business, attracting deposit
accounts from the general public and using those deposits, together with other
funds, primarily to originate and invest in loans secured by single-family
residential real estate.
Stock Market Information
The Company's common stock has been traded under the symbol "SVBC" since it
commenced trading in June, 1997. Price information with respect to the common
shares of SVBC is quoted on the OTC Bulletin Board. The following table sets
forth the high and low bid prices for the common shares of SVBC for each quarter
of fiscal 1998 and 1999 ending after June 25, 1997, the date of completion of
the Conversion. Price quotations reflect inter-dealer prices without retail
mark-up, mark-down, or commission, and may not represent actual transactions.
Date High Low
---- ---- ---
Fiscal year ended March 31, 1999:
April 1, 1998 - June 30, 1998 $ 16.00 $ 15.00
July 1, 1998 - September 30, 1998 16.50 13.00
October 1, 1998 - December 31, 1998 13.50 12.75
January 1, 1999 - March 31, 1999 13.38 12.38
Fiscal year ended March 31, 1998:
June 25, 1997 - June 30, 1997 $ 14.00 $ 13.13
July 1, 1997 - September 30, 1997 16.00 13.25
October 1, 1997 - December 31, 1997 16.00 14.75
January 1, 1998 - March 31, 1998 16.50 15.50
-2-
<PAGE>
SVBC declared a semi-annual dividend of $.16 per share in December, 1997 and in
June, 1998. A semi-annual dividend per share of $.17 was also declared in
December, 1998. The number of shareholders of record of common stock as of the
record date of May 28, 1999, was approximately 200. This does not reflect the
number of persons or entities who held stock in nominee or "street" name through
various brokerage firms. At May 28, 1999, there were 567,093 shares of common
stock outstanding. The Company's ability to pay dividends to stockholders is
primarily dependent upon the dividends it receives from the Bank. The Bank may
not declare or pay a cash dividend on any of its stock if the effect thereof
would cause the Bank's regulatory capital to be reduced below (1) the amount
required for the liquidation account established in connection with the
Conversion, or (2) the regulatory capital requirements imposed by the OTS.
-3-
<PAGE>
SELECTED CONSOLIDATED
FINANCIAL INFORMATION AND OTHER DATA
The following table sets forth certain information concerning the consolidated
financial condition, earnings and other data regarding Sistersville Bancorp at
the dates and for the periods indicated.
Selected financial condition and other data:
At March 31,
-----------------------
1999 1998
---- ----
(Dollars in thousands)
Total assets $32,188 $31,735
Loans receivable, net 24,320 23,647
Mortgage-backed securities 809 527
Investments (1) 6,294 6,856
Cash - noninterest bearing 30 97
Savings deposits 20,848 20,596
Other borrowings 1,000 0
Shareholders' equity (2) 9,792 10,581
Number of full-service offices 1 1
(1) Includes FHLB stock, FHLMC stock and interest bearing deposits in other
financial institutions
(2) Includes accumulated other comprehensive income, net of applicable income
taxes for March 31, 1998, through March 31, 1999
Summary of Operations
Year Ended March 31,
--------------------
1999 1998
---- ----
(Dollars in Thousands)
Interest and Dividend Income $ 2,364 $ 2,350
Interest Expense 896 986
------- -------
Net Interest Income 1,468 1,364
------- -------
Provision for Loan Losses 3 6
------- -------
Net interest income after provision for loan losses 1,465 1,358
------- -------
Non-interest income:
Service charges 32 24
Gain (loss) on sale of real estate, net 0 0
Gain (loss) on sale of investments, net 168 0
Other income 2 2
------- -------
Total other income 202 26
------- -------
Non-interest expense:
Compensation and employee benefits 663 440
Occupancy and equipment 78 72
Deposit insurance premiums 13 14
Other general and administrative 301 275
------- -------
Total non-interest expense 1055 801
------- -------
Income before income taxes 612 583
Provision for federal income taxes 223 209
------- -------
Net income $ 389 $ 374
======= =======
-4-
<PAGE>
The table below sets forth certain performance ratios of the Company for the
periods indicated:
For the Year Ended
March 31,
------------------
1999 1998
---- ----
Capital Ratios;
Average equity to average assets ratio
(average equity divided by average total assets) 32.25% 30.30%
Equity to assets at period end 30.42% 33.34%
performance Ratios:
Return on average equity (net income
divided by average equity 3.77% 3.96%
Return on average assets (net income
divided by average total assets) 1.22% 1.20%
Net interest rate spread 3.32% 3.08%
Net yield on average interest earnings assets 4.71% 4.48%
Average interest earning assets to
average interest-bearing liabilities 148.43% 143.45%
Net interest income after provision for possible
loan losses, to total other expenses 138.86% 169.54%
Non-interest expense to average assets 3.30% 2.57%
Efficiency Ratio(1) 63.26% 57.88%
Asset Quality Ratios:
Non-performing loans to total assets 0.01% 0.52%
Non-performing loans to total loans 0.01% 0.70%
Allowance for loan losses to total loans 0.71% 0.71%
Allowance for loan losses to total non-performing loans 8600.00% 101.81%
Allowance for loan losses to total non-performing assets(2) 8600.00% 101.81%
- --------------------------------------------------------------------------------
(1) Operating Expenses as a percent of net interest income plus non interest
income.
(2) Non-performing assets include non-accrual loans, accruing loans more than
90 days past due and real estate acquired in settlement of loans.
-5-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company was recently formed, therefore, its results from operations consist
primarily of interest income from the investing of funds from proceeds generated
by the sale of common stock and expense incurred in the maintaining of the
investment portfolio. The Bank's results of operations are primarily dependent
on its net interest income, which is the difference between the interest income
earned on its assets, primarily loans and investments, and the interest expense
on its liabilities, primarily deposits. Net interest income may be affected
significantly by general economic and competitive conditions and policies of
regulatory agencies, particularly those with respect to market interest rates.
The results of operations are also influenced by the level of non-interest
expense, such as employee benefits and other income, loan-related fees, and fees
on deposit-related services.
The Bank primarily originates fixed-rate loans with terms of up to 30 years and
attempts to maintain sufficient capital and other liquid assets to manage
interest rate risk.
ASSET/LIABILITY MANAGEMENT
The Bank's net interest income is sensitive to changes in interest rates, as the
rates paid on interest-bearing liabilities generally change faster than the
rates earned on interest-earning assets. As a result, net interest income will
frequently decline in periods of rising interest rates and increase in periods
of decreasing interest rates.
To mitigate the impact of changing interest rates on its net interest income,
the Bank manages its interest rate sensitivity and asset/liability products
through two committees of the Board, the Loan Committee and the Interest
Committee. The committees meet, as necessary, to determine the rates of interest
for loans and deposits. Rates on deposits are primarily based on the Bank's need
for funds and on a review of rates offered by other financial institutions in
the Bank's market areas. Interest rates on loans are primarily based on the
interest rates offered by other financial institutions in the Bank's primary
market areas as well as the Bank's cost of funds.
The committees manage the interest rate sensitivity of the Bank through the
determination and adjustment of asset/liability composition and pricing
strategies. The committees then monitor the impact of interest rate risk and
earnings consequences of such strategies for consistency with the Bank's
liquidity needs, growth, and capital adequacy. The Bank's principal strategy is
to manage interest rate sensitivity of its interest earning assets and interest
bearing liabilities by maintaining sufficient capital and other liquid assets in
the event of an increase in interest rate risk, typically because of an increase
in market interest rates.
-6-
<PAGE>
NET PORTFOLIO VALUE
The Bank computes amounts by which the net present value of cash flow from
assets, liabilities and off balance sheet items ("the net portfolio value" or
"NPV") would change in the event of a range of assumed changes in market
interest rates. These computations estimate the effect on the Bank's NPV from
instantaneous and permanent 1% to 3% (100 to 300 basis points) increases and
decreases in market interest rates. Based upon OTS assumptions, the following
table presents the Bank's NPV at March 31, 1999.
Net Portfolio Value
-------------------
Change Board
in Market NPV Policy
Interest Rates Ratio (1) Limit (2)
-------------- ------------ ---------
+300 bp 25.79 % 10%
+200 bp 27.15 10
+100 bp 28.28 10
0 bp 28.95 10
-100 bp 29.51 10
-200 bp 30.02 10
-300 bp 30.63 10
- --------------
(1) The NPV ratio is calculated as the estimated NPV divided by the estimated
NPV of assets.
(2) Minimum acceptable NPV ratio limits are established by the Board of
Directors of the Bank.
Certain assumptions utilized by the OTS in assessing the interest rate risk of
savings institutions were employed in preparing the previous table. These
assumptions relate to interest rates, loan prepayment rates, deposit decay
rates, and the market values of certain assets under the various interest rate
scenarios. It was also assumed that delinquency rates will not change as a
result of changes in interest rates although there can be no assurance that this
will be the case. Even if interest rates change in the designated amounts, there
can be no assurance that the Bank's assets and liabilities would perform as set
forth above.
-7-
<PAGE>
AVERAGE BALANCE SHEET
The following table sets forth certain information relating to the Company's
average balance sheet and reflects the average yield on assets and average cost
of liabilities for the periods indicated and the average yields earned and rates
paid. Such yields and costs are derived by dividing income and expense by the
average balance of assets and liabilities, respectively, for the periods
presented. Average balances are derived from month-end balances. Management does
not believe that the use of month-end balances instead of daily average balances
has caused any material differences in the information presented
<TABLE>
<CAPTION>
Year Ended March 31, At March 31,
--------------------------------------------------------------------- ------------------------
1999 1998 1999
--------------------------------- -------------------------------- ------------------------
Average Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost Balance Yield/Cost
------- -------- ---------- ------- -------- ---------- ------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1) $24,032 2,002 8.33% $22,873 $1,930 8.44% $24,320 7.94%
Investment securities (2)(6) 6,580 322 4.89% 7,244 397 5.48% 6,294 3.61%
Mortgage - backed securities 568 41 7.22% 337 24 7.12% 809 6.28%
--------- --------- ---------- -------- -------- -------- -------- ----------
Total interest - earning assets 31,180 2,365 7.58% 30,454 2,351 7.72% 31,423 7.03%
--------- ---------- -------- -------- -------- ----------
Non-interest - earning assets 807 709 765
--------- -------- --------
Total assets $31,987 $31,163 32,188
========= ======== ========
Interest - bearing liabilities:
Regular Savings deposits 8,233 295 3.58% 8,521 358 4.20% 8,426 3.50%
Now Accounts 1,224 29 2.37% 1,325 37 2.79% 1,327 2.50%
Money Market Demand 1,160 34 2.93% 1,351 51 3.77% 1,136 3.25%
Time Deposits 9,775 506 5.18% 10,033 540 5.38% 9,959 4.68%
--------- --------- ---------- -------- -------- -------- -------- ----------
Subtotal Deposits 20,392 864 4.24% 21,230 986 4.64% 20,848 3.99%
Short -term borrowings 615 32 5.20% 0 0 - 1,000 5.15%
--------- --------- ---------- -------- -------- -------- -------- ----------
Total interest - bearing liabilities 21,007 896 4.27% 21,230 986 4.64% 21,848 4.04%
--------- ---------- -------- -------- ----------
Noninterest - bearing liabilities 665 491 548
--------- -------- --------
Total Liabilities 21,672 21,721 22,396
Retained Earnings (3) 10,315 9,442 9,792
--------- -------- --------
Total liabilities and
retained earnings $31,987 $31,163 $32,188
========= ======== ========
Net interest income $1,469 $1,365
========= ========
Interest rate spread(4) 3.32% 3.08% 2.99%
========== ======== ==========
Net yield on interest - earning
assets(5) 4.71% 4.48% 4.67%
========== ======== ==========
Ratio of average interest - earning
assets to average interest -
bearing liabilities 148.43% 143.45% 143.84%
========== ======== ==========
</TABLE>
- ------------
(1) Average balances include non-accrual loans.
(2) Includes interest - bearing deposits in other financial institutions, FHLB
stock and FHLMC stock; bonds
(3) Includes accumulated other comprehensive income on securities available for
sale, net of applicable deferred income taxes.
(4) Interest rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(5) Net yield on interest - earning assets represents net interest income as a
percentage of average interest - earning assets.
(6) Includes municipal securites whose average yield/cost is calculated on the
tax equivalent yield.
-8-
<PAGE>
Rate/Volume Analysis
The table below sets forth certain information regarding changes in interest
income and interest expense of the Company for the periods indicated. For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume
(changes in average volume multiplied by old rate); (ii) changes in rates
(changes in rate multiplied by old average volume); (iii) changes in rate-volume
(changes in rate multiplied by the change in average volume).
Year Ended March 31,
1999 vs. 1998
-----------------------------------------------
Rate/
Volume Rate Volume Net
------ ---- ------ ---
Interest-earning assets:
Loans receivable $ 98 ($ 25) ($ 2) $ 71
Investment securities (36) (43) 4 (75)
Mortgage - backed securities 16 0 0 16
----- ----- ----- -----
Total interest - earning assets 78 (68) 2 12
----- ----- ----- -----
Interest - bearing liabilities:
Savings deposits (36) (85) 3 (118)
Short -term borrowings 32 0 32 64
----- ----- ----- -----
Total interest - bearing liabilities (4) (85) 35 (54)
----- ----- ----- -----
Net change in net interest income $ 82 $ 17 ($ 33) $ 66
===== ===== ===== =====
-9-
<PAGE>
Comparison of Financial Condition
In connection with the Conversion on June 25, 1997, the Company completed the
sale of 661,428 shares (the "Offering") at $10 per share and received net
proceeds of approximately $5,665,000. The Company transferred approximately
$3,097,000 of the net proceeds to the Bank for the purchase of all of the
capital stock of the Bank. In addition, $529,140 was loaned to the Bank's
Employee Stock Ownership Plan ("ESOP") for the purchase of shares in the
Offering.
The Company's total assets increased by approximately $453,000 to $32,188,000 at
March 31, 1999, from $31,735,000 at March 31, 1998. Cash and cash equivalents
increased $308,000 to $1,874,000 at March 31, 1999, from $1,566,000 at March 31,
1998. This increase represented the inflow of cash associated with Federal Home
Loan Bank advances, depositors' investment of funds, maturity of
available-for-sale securities, and principal collected on mortgage-backed
securities offset by the purchase of available-for-sale securities, increase in
loan production, and purchase of shares for the Bank's Restricted Stock Plan
("RSP") and Treasury shares. Investment securities decreased $655,000 from
$5,914,000 at March 31, 1998, to $5,259,000 at March 31, 1999. This decrease was
the result of $4.1 million in matured U.S. Government and Agency securities and
$173,000 in principal collected on mortgage-backed securities offset by the
purchase of $3.0 million in U.S. Agency and Municipal securities and purchase of
$515,000 in mortgage-backed securities. Net loans receivable increased $673,000
from $23,647,000 at March 31, 1998, to $24,320,000 at March 31, 1999. The
increase in loans was attributable to an increase in one-to-four family
residential mortgage loans. Such increases primarily reflect the economic health
of the Bank's market area and the competitive pricing of the Bank's loan
products. Office property and equipment increased $109,000 from $378,000 at
March 31, 1998, to $488,000 at March 31, 1999, which was the direct result of
the construction of a drive-thru facility at the Bank.
Total liabilities increased $1,242,000 from $21,154,000 at March 31, 1998 to
$22,396,000 at March 31, 1999. The increase was the result of $1,000,000
advanced from the Federal Home Loan Bank in order to fund future loan growth.
Deposits increased by $252,000 to $20,848,000 at March 31, 1999, from
$20,596,000 at March 31, 1998 as a result of the relative stability of the
Bank's deposit account interest rates, compared to a reduction in deposit
interest rates for alternative investment products available.
Stockholders' equity decreased $790,000 to $9,792,000 at March 31, 1999,
compared to $10,582,000 at March 31, 1998. The decrease was attributable to the
purchase of RSP shares and Treasury shares in the amounts of $410,000 and
$798,000, respectively, offset by net income of $389,000, allocation of shares
in the ESOP amounting to $88,000 and vesting of shares in the RSP in the amount
of $126,000. Stockholders' equity was also reduced by dividends of $185,000.
-10-
<PAGE>
Comparison of the Results of Operations for the Years Ended March 31, 1999 and
1998
Net Income. Net income increased by $16,000, or 4.2%, from net income of
$373,000 for the year ended March 31, 1998, to net income of $389,000 for the
same period in 1999.
Interest and Dividend Income. Interest and dividend income increased $14,000, or
.6%, to $2,365,000 for the year ended March 31, 1999, compared to $2,351,000 for
the year ended March 31, 1998. The increase in interest and dividend income was
due to an increase in taxable interest on loans of $73,000, or 3.8%, offset by a
decrease in interest on investments of $59,000, or 14.8%. The increase in
interest on loans was due to an increase in the average balance of loans of $1.2
million for the year ended March 31, 1999 as compared to the same period in
1998, offset by a decline of 11 basis points in average yield from 8.44% at
March 31, 1998 to 8.33% for the same period in 1998. Interest on investments
decreased for the year ended March 31, 1999, as compared to March 31, 1998, as a
result of downward fluctuations in yields on investment securities and by a
decrease in the average balance of investments of $664,000 from $7.2 million for
the year ended March 31, 1998 to $6.6 million for the year ended March 31, 1999.
Interest Expense. Interest expense decreased $90,000, or 9.1%, from $986,000 for
the year ended March 31, 1998, to $896,000 for same period ended in 1999. A
decrease in the average balance of interest-bearing deposits of $838,000 to
$20.4 million from $21.2 million and a reduction in the cost of funds from 4.6%
for the year ended March 31, 1998, as compared to 4.2% for the year ended March
31, 1999, resulted in the decrease in interest expense on deposits of $122,000.
The decrease in interest on deposits was offset by an increase in interest on
advances from the Federal Home Loan Bank of $32,000.
Net Interest Income. Net interest income increased $104,000, or 7.6%, from
$1,364,000 for the year ended March 31, 1998, to $1,468,000 for the same period
ended in 1999. The increase is primarily attributable to a decrease in the
balance of interest-bearing deposits and an increase in the average balance of
loans from the year ended March 31, 1998, to the same period in 1999, as
previously discussed.
Provision For Loan Losses. The provision for loan losses decreased $2,800 from
$6,200 for the year ended March 31, 1998, to $3,400 for the same period ended
March 31, 1999, based on management's analysis of the reserve's adequacy. The
reserve for loan losses was $172,250 at March 31, 1999 as compared to $168,850
at March 31, 1998.
Noninterest income. Noninterest income increased by $176,000 from $26,000 for
the year ended March 31, 1998, to $202,000 for the year ended March 31, 1999.
The increase is primarily attributable to a gain on the sale of
available-for-sale securities in the 1999 period of $168,000 which was not
present in the 1998 period. The remaining portion of noninterest income is
comprised primarily of service charges on deposit accounts.
Noninterest Expense. Noninterest expense increased by $254,000 from $801,000 for
the year ended March 31, 1998, to $1,055,000 for the same period ended in 1999.
Compensation and employee benefits increased by $223,000 from $440,000 for the
year ended March 31, 1998, to $663,000 for the year ended March 31, 1999. The
change is due to an increase in compensation costs associated with the RSP and
merit base pay increases of $142,000, and by special one-time retirement
agreements executed by four directors resulting in a pre-tax charge of
approximately $94,000 in the year ended March 31, 1999, offset by a decrease in
directors fees of $20,000 due to the reduction in the number of directors being
compensated . Under terms of the agreements, the four directors accepting the
offer relinquished their positions as directors on July 2, 1998. The RSP was
initiated in July, 1998, and resulted in stock awarded to employees being earned
at a rate of one-fifth per year at July 16, 1998, through 2002. Franchise,
payroll, and other taxes increased by $9,000 from $58,000 for the year ended
March 31, 1998, to $67,000 for the year ended March 31, 1999. The change is the
result of increased payroll taxes on merit base pay increases and on RSP shares
awarded to employees for the year ended March 31, 1999. Other expenses increased
by $15,000 to $70,000
-11-
<PAGE>
for the year ended March 31, 1999, from $55,000 for the same period in 1998. The
increase is attributable to an increase in stationery and printing expenses
related to costs associated with public stock ownership and regulatory
requirements and an increase in expenses related to the Year 2000 risk.
Income Taxes. Income tax expense increased by $14,000 from $209,000 for the year
ended March 31, 1998, to $223,000 for the year ended March 31, 1999. The
increase is due to an increase in pre-tax income.
Liquidity and Capital Resources
The Bank's sources of funds are deposits, amortization and prepayment of loans
and mortgage-backed securities, maturities of investment securities, and funds
provided from operations. While scheduled loan repayments are a relatively
predictable source of funds, deposit flows and loan prepayments are greatly
influenced by general interest rates, economic conditions, and competition. The
Bank uses its sources of funds to fund existing and future existing and future
loan commitments, to fund maturing certificates of deposit and demand deposit
withdrawals, to invest in other interest-earning assets, to maintain liquidity,
and to meet operating expenses.
Net cash provided by operating activities for the year ended March 31, 1999,
totaled $463,000, a decrease of $169,000 from $632,000 for the year ended March
31, 1998. The change was primarily attributable to net income of $389,000 for
the year ended March 31, 1999, adjusted by a $168,000 gain on available-for-sale
securities and the amortization of the ESOP and RSP in the amount of $88,000 and
$126,000, respectively.
Net cash used in investing activities for the year ended March 31, 1999, totaled
$14,000, a decrease of $4,782,000 from $4,796,000 for the year ended March 31,
1998. The decrease in cash used for investing activities was attributable to an
increase of $4,411,000 provided by maturities of investments and repayments on
mortgage-backed securities. This change was offset by $3,595,000 used to
purchase investment securities, $676,000 in net loan originations, and $153,000
used in purchases of office properties and equipment.
Net cash used in financing activities for 1999 totaled $141,000, as compared to
net cash provided by financing activities of $3,935,000 for the 1998 period. The
decrease of $4,076,000 was the result of the Federal Home Loan Bank advances in
the amount of $1 million offset by the purchase of Treasury shares in the amount
of $798,000, and the purchase of RSP shares in the amount of $410,000.
Liquidity may be adversely affected by unexpected deposit outflows, excessive
interest rates paid by competitors, adverse publicity relating to the savings
and loan industry, and similar matters. Management monitors projected liquidity
needs and determines the level desired based, in part, on the Bank's commitments
to make loans and management's assessment of the Bank's ability to generate
funds.
Certificates of deposit scheduled to mature during the year ended March 31,
1999, total $5,500,000. The Bank may renew these certificates, attract new
replacement deposits or replace such funds with borrowed funds. Management
believes, based on past experience, that the Bank will retain much of the
deposits or replace them with new deposits.
Under federal regulations, the Bank is required to meet certain minimum
regulatory capital guidelines. The Bank was in compliance with these
requirements at March 31, 1999. See Note 7 of the Notes to Consolidated
Financial Statements.
-12-
<PAGE>
Impact of Inflation and Changing Prices
The consolidated financial statements and the accompanying notes presented
elsewhere in this document, have been prepared in accordance with generally
accepted accounting principles, which require the measurement of financial
position and operating results in terms of historical dollars without
considering the change in the relative purchasing power of money over time and
due to inflation. Unlike industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates have a more significant impact on a financial institution's
performance than the effects of general levels of inflation. Interest rates do
not necessarily move in the direction or with the same magnitude as the prices
of goods and services.
Recent Accounting Pronouncements
In July 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income." Statement No. 130 is effective for fiscal years beginning after
December 15, 1997. This statement establishes standards for reporting and
presentation of comprehensive income and its components (revenue, expenses,
gains, losses) in a full set of general purpose financial statements. It
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is presented with the same prominence as other financial
statements. Statement No. 130 requires that companies (i) classify items of
other comprehensive income by their nature in a financial statement and (ii)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of the
statement of financial condition. Reclassification of financial statements for
earlier periods provided for comprehensive purpose is required. The Company
current holds securities classified as available-for-sale. Under the provisions
of Statement No. 130, unrealized gains and losses on securities classified as
available-for-sale are a component of comprehensive income.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 provides accounting and
reporting standards for derivatives instruments, including certain derivative
instruments embedded in other contracts, by requiring the recognition of those
items as assets or liabilities in the statement of financial position, recorded
at fair value. SFAS No. 133 precludes a held-to-maturity security from being
designated as a hedge item. However, at the date of initial application of SFAS
No. 133, an entity is permitted to transfer any held-to-maturity security into
the available-for-sale or trading categories. The unrealized holding gain or
loss on such transferred securities shall be reported consistent with the
requirements of SFAS No. 115, "Accounting for Certain Investment in Debt and
Equity Securities." Such transfers do not raise an issue regarding an entity's
intent to hold other debt securities to maturity in the future. SFAS No. 133
applies prospectively for all fiscal quarters of all years beginning after June
15, 1999. Earlier adoption is permitted for any fiscal quarter that begins after
the issue date of SFAS No. 133. Management does not believe the adoption of SFAS
No. 133 will have a material impact on the Company.
Year 2000
Rapid and accurate data processing is essential to the Bank's operations. Many
computer programs that can only distinguish the final two digits of the year
entered (a common programming practice in earlier years) are expected to read
entries for the Year 2000 as the year 1900 or as zero and incorrectly attempt to
compute payment, interest, delinquency, and other data. The Bank has been
evaluating both information technology (computer systems) and non-information
technology systems (e.g., vault timers and electronic door lock). Based upon
such evaluations, management has determined that the Bank has Year 2000 risk in
three areas: (1) Bank's own computers (2) Computers of others used by the Bank's
borrowers, and (3) Computers of others who provide the Bank with data
processing.
Bank's Own Computers. The Bank has upgraded its computer system to address the
Year 2000 risk. The Bank does not expect to have material additional costs to
address this risk. The Bank expects, although there is no assurance, to be Year
2000 compliant in this risk area by June 30, 1999. The upgrade costs did not
have a material impact on the Company's consolidated financial position or
results of operations.
-13-
<PAGE>
Computers of Others Used by the Bank's Borrowers. The Bank has evaluated most of
its borrowers and does not believe the Year 2000 problem should, on an aggregate
basis, impact their ability to make payments to the Bank. The Bank believes that
most of its residential borrowers are not dependent on their home computers for
income and that none of their commercial borrowers are so large that a Year 2000
problem would render them unable to collect revenue or rent and, in turn, be
unable to continue to make loan payments to the Bank. The Bank does not expect
any material costs to address this risk area and believes they are Year 2000
compliant in this risk area.
Computers of Others Who Provide the Bank with Data Processing. Should the
computers of third party data processing providers prove to be non-compliant
with the Year 2000, the Bank would likely experience significant delays,
mistakes, or failures. These delays, mistakes, or failures could have a
significant impact on the Bank's financial condition and results of operation.
The third party service bureau which provides most of the Bank's data
processing, has advised the Bank that it expects to be fully compliant before
the Year 2000. Testing of the data processing provided by this service bureau
was completed in February, 1999, whereby various Year 2000 date scenarios were
input, and transactional processing was completed satisfactorily. Other data
processing providers, used by the Bank to a much lesser extent, have advised the
Bank that Year 2000 testing and compliance will be completed by June 30, 1999.
Contingency Plan. The Bank is monitoring its service bureau to evaluate whether
the bureau's data processing system will fail and is being provided with
periodic updates on the status of testing and upgrades being made by the service
bureau. If the Bank service bureau fails, the Bank will attempt to locate an
alternative service bureau that is Year 2000 compliant. If the Bank is
unsuccessful, the Bank will calculate loan and deposit balances and interest
using manual ledgers. If this labor intensive approach is necessary, management
and employees will become much less efficient. However, the Bank believes that
it would be able to operate in this manner indefinitely, until its existing
service bureau, or their replacement, is able to again provide data processing
services. If very few financial institution service bureaus were operating in
the Year 2000, the Bank's replacement costs, assuming the Bank could negotiate
an agreement, could be material.
-14-
<PAGE>
SNODGRASS
Certified Public Accountants and Consultants
[LOGO]
Independent Auditor's Report
----------------------------
Board of Directors
Sistersville Bancorp, Inc.
We have audited the accompanying consolidated balance sheets of Sistersville
Bancorp, Inc. as of March 31, 1999 and 1998, and the related consolidated
statements of income, changes in shareholders' equity, and cash flows for each
of the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Sistersville
Bancorp, Inc. at March 31, 1999 and 1998, and the consolidated results of its
operations, changes in shareholders' equity, and cash flows for each of the
years then ended, in conformity with generally accepted accounting principles.
/s/S.R. Snodgrass, A.C.
Wheeling, West Virginia
April 15, 1999
<TABLE>
<CAPTION>
<S> <C>
S.R. Snodgrass, A.C.
980 National Road Wheeling WV 26003-6400 Phone:304-233-5030 Facsimile:304-233-3062
</TABLE>
-15-
<PAGE>
SISTERSVILLE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
1999 1998
-------------------- -------------------
ASSETS
<S> <C> <C>
Cash and Cash Equivalents
Cash and amounts due from banks $ 29,823 $ 97,009
Interest - bearing deposits with other institutions 1,843,976 1,469,028
-------------------- -------------------
Total cash and cash equivalents 1,873,799 1,566,037
-------------------- -------------------
Investment Securities
Securities held to maturity (fair value of $356,980
and $536,365) 350,815 527,006
Securities available for sale 4,908,390 5,387,243
-------------------- -------------------
Total investment securities 5,259,205 5,914,249
-------------------- -------------------
Loans receivable, (net of allowance for loan losses
of $172,250 and $168,850) 24,319,941 23,646,924
Office properties and equipment, net 487,735 378,362
Accrued interest receivable (net of reserve 212,644 202,166
for uncollected interest of $-0- and $5,504)
Other assets 34,224 27,244
-------------------- -------------------
TOTAL ASSETS $ 32,187,548 $ 31,734,982
==================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $ 20,847,502 $ 20,595,965
Federal Home Loan Bank advance 1,000,000 -
Deferred income taxes 358,818 354,210
Accrued interest payable and other liabilities 189,656 203,361
-------------------- -------------------
Total liabilities 22,395,976 21,153,536
-------------------- -------------------
STOCKHOLDERS' EQUITY
Preferred Stock, $.10 par value;
500,000 shares authorized, none issued - -
Common Stock, $.10 par value;
2,000,000 shares authorized; 661,428 issued;
567,093 outstanding at March 31, 1999, and
628,357 outstanding at March 31, 1998 66,143 66,143
Additional paid - in capital 6,178,859 6,152,518
Treasury Stock (94,335 shares at March 31, 1999; (1,326,770) (529,136)
33,071 shares at March 31, 1998)
Retained Earnings - substantially restricted 4,890,911 4,686,573
Accumulated other comprehensive income 685,720 686,337
Unearned Employee Stock Ownership Plan shares (ESOP) (419,074) (480,989)
Unearned Restricted Stock Plan shares (RSP) (284,217) -
-------------------- -------------------
Total stockholders' equity 9,791,572 10,581,446
-------------------- -------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 32,187,548 $ 31,734,982
==================== ===================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-16-
<PAGE>
SISTERSVILLE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended March 31,
1999 1998
---------- -----------
<S> <C> <C>
INTEREST AND DIVIDEND INCOME
Taxable interest on loans $2,002,397 $1,929,638
Taxable interest on investments 339,653 398,476
Dividends on Federal Home Loan Bank stock 14,663 13,023
Dividends on Federal Home Loan Mortgage Corporation stock 7,924 9,536
---------- ----------
Total interest and dividend income 2,364,637 2,350,673
---------- ----------
INTEREST EXPENSE
Deposits 864,295 986,282
Federal Home Loan Bank advances 31,901 --
---------- ----------
Total interest expense 896,196 986,282
---------- ----------
NET INTEREST INCOME 1,468,441 1,364,391
PROVISION FOR LOAN LOSSES 3,400 6,224
---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,465,041 1,358,167
---------- ----------
NONINTEREST INCOME
Service charges 31,908 23,629
Gain on securities available for sale 167,536 --
Other income 2,408 2,064
---------- ----------
Total noninterest income 201,852 25,693
---------- ----------
NONINTEREST EXPENSE
Compensation and employee benefits 662,954 440,196
Occupancy 41,672 37,370
Furniture and equipment expense 36,691 34,626
Deposit insurance premiums 12,714 13,590
Supervisory examination, audit and legal 77,308 74,835
Advertising and public relations 22,935 24,149
Service bureau expense 63,879 63,416
Franchise, payroll and other taxes 66,337 57,704
Other expenses 70,008 54,868
---------- ----------
Total noninterest expense 1,054,498 800,754
---------- ----------
INCOME BEFORE INCOME TAXES 612,395 583,106
INCOME TAXES 223,029 209,447
---------- ----------
NET INCOME $ 389,366 $ 373,659
========== ==========
EARNINGS PER SHARE (SINCE JULY 1, 1997)
Basic $ 0.71 $ 0.47
========== ==========
Diluted $ 0.70 $ 0.47
========== ==========
AVERAGE SHARES OUTSTANDING
Basic 545,755 608,262
========== ==========
Diluted 558,363 608,262
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-17-
<PAGE>
SISTERSVILLE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Year Ended March 31,
1999 1998
--------------- ------------------
<S> <C> <C>
NET INCOME $ 389,366 $ 373,659
---------------- -------------
OTHER COMPREHENSIVE INCOME, NET OF TAX
Unrealized gains on securities:
Unrealized holding gains arising during the period 109,236 293,298
Reclassification adjustment for gains included in net income (109,853) -
---------------- -------------
Other comprehensive income (loss) (617) 293,298
---------------- -------------
COMPREHENSIVE INCOME $ 388,749 $ 666,957
================ =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-18-
<PAGE>
SISTERSVILLE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
Retained Other Total
Additional Earnings- Compre- Unearned Unearned Share-
Preferred Common Paid In Substantially hensive Shares in Shares in Treasury holders'
Stock Stock Capital Restricted Income ESOP RSP Stock Equity
--------- ---------- ------------ ---------- --------- ----------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
MARCH 31, 1997 $ -- $ -- $ -- $4,410,275 $393,039 $ -- $ -- $ -- $ 4,803,314
1998 Net Income -- -- -- 373,659 -- -- -- -- 373,659
Sale of Common
Stock -- 66,143 6,127,984 -- -- (529,140) -- -- 5,664,987
Accrued
compensation
expense - ESOP -- -- 24,534 -- -- 48,151 -- -- 72,685
Other
comprehensive
income,
net of tax -- -- -- -- 293,298 -- -- -- 293,298
Cash Dividends
declared
($.16 per
share) -- -- -- (97,361) -- -- -- -- (97,361)
Purchase of
Treasury
Stock -- -- -- -- -- -- -- (529,136) (529,136)
-------- ------- ---------- ---------- -------- ---------- ------------ ------------ ------------
BALANCE,
MARCH 31, 1998 -- 66,143 6,152,518 4,686,573 686,337 (480,989) -- (529,136) 10,581,446
1999 Net Income -- -- -- 389,366 -- -- -- -- 389,366
Accrued
compensation
expense - ESOP -- -- 26,341 -- -- 61,915 -- -- 88,256
Purchase of RSP
shares -- -- -- -- -- -- (410,084) -- (410,084)
Vesting of RSP
shares -- -- -- -- -- -- 125,867 -- 125,867
Other
comprehensive
income (loss),
net of tax -- -- -- -- (617) -- -- -- (617)
Cash Dividends
declared
($.33 per
share) -- -- -- (185,028) -- -- -- -- (185,028)
Purchase of
Treasury
Stock -- -- -- -- -- -- -- (797,634) (797,634)
-------- ------- ---------- ---------- -------- ---------- ------------ ------------ ------------
BALANCE,
MARCH 31, 1999 $ -- $66,143 $6,178,859 $4,890,911 $685,720 $ (419,074) $ (284,217) $ (1,326,770) $ 9,791,572
======== ======= ========== ========== ======== ========== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-19-
<PAGE>
SISTERSVILLE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended March 31,
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 389,366 $ 373,659
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation, amortization and accretion, net 49,496 38,667
Gain on sale of available for sale securities (167,536) --
Provision for loan losses 3,400 6,224
Deferred federal income taxes 4,961 (20,483)
ESOP amortization 88,256 72,685
RSP amortization 125,867 --
Decrease (increase) in accrued interest receivable
and other assets (17,458) 56,788
Increase (decrease) in accrued interest payable
and other liabilities (13,705) 104,743
----------- -----------
Net cash provided by operating activities 462,647 632,283
----------- -----------
INVESTING ACTIVITIES
Purchase of available for sale securities (3,595,339) (6,039,047)
Proceeds from sale of available for sale securities 171,053 --
Proceeds from maturity of available for sale securities 4,067,447 3,425,000
Purchase of mortgage-backed securities held to maturity -- (251,516)
Principal collected on mortgage - backed securities 172,736 51,669
Net increase in loans (676,417) (1,928,279)
Purchases of office properties and equipment (153,156) (53,261)
----------- -----------
Net cash used in investing activities (13,676) (4,795,434)
----------- -----------
FINANCING ACTIVITIES
Net increase (decrease) in deposits 251,537 (1,103,760)
Federal Home Loan Bank advance 1,000,000 --
Purchase of RSP shares (410,084) --
Dividends Paid (185,028) (97,362)
Purchase of Treasury stock (797,634) (529,136)
Proceeds from sale of common stock -- 5,664,987
----------- -----------
Net cash provided by (used in) financing activities (141,209) 3,934,729
----------- -----------
(Increase) decrease in cash equivalents 307,762 (228,422)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 1,566,037 1,794,459
----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 1,873,799 $ 1,566,037
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid during the period for:
Interest on deposits $ 898,729 $ 990,795
Income taxes 240,927 173,104
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-20-
<PAGE>
SISTERSVILLE BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Sistersville Bancorp, Inc. (the "Company") was organized in March, 1997,
as a State of Delaware chartered corporation. The Company acquired 100% of
the common stock of First Federal Savings Bank (the "Bank") upon the
conversion of First Federal Savings and Loan Association of Sistersville
(the "Association") from a federally-chartered mutual savings and loan to
a federally- chartered stock savings bank in June, 1997. The operating
results of the Company depend primarily upon the operating results of the
Bank.
Nature of Operations - The Company provides savings and financing services
primarily to individuals through its wholly-owned subsidiary, First
Federal Savings Bank located in Sistersville, West Virginia. Primary
deposit products consist of savings, NOW, and Money Market deposit
accounts, and certificates of deposit. Primary lending products consist of
conventional mortgage, construction, and consumer loans. The Bank's
primary market area for lending and deposits consists of Wood, Pleasants,
Tyler, and Wetzel Counties in West Virginia.
Principles of Consolidation - The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiary, First
Federal Savings Bank. Material intercompany accounts and transactions have
been eliminated.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosures of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Held to Maturity Securities - These securities are purchased with the
original intent to hold to maturity and events which may be reasonably
anticipated are considered when determining the Company's intent and
ability to hold to maturity. Securities meeting such criteria at the date
of purchase and as of the balance sheet date are carried at cost, adjusted
for amortization of premiums and accretion of discounts.
Available for Sale Securities - Securities to be held for indefinite
periods of time and not intended to be held to maturity are classified as
available for sale and carried at market value with unrealized gains and
losses, net of tax, reflected as a component of shareholders' equity until
realized. Securities held for indefinite periods of time include
securities that may be sold to meet liquidity needs or in response to
significant changes in interest rates or prepayment risks as part of the
Company's overall asset/liability management strategy. Realized securities
gains and losses are computed using the specific identification method.
Interest and Fees on Loans - Interest on loans is credited to income as
earned and is accrued only if it is considered collectible. An allowance
for uncollected interest on mortgage loans is provided for all accrued
interest on loans which are delinquent 90 days or more resulting in
interest previously accrued on those loans being reversed from income and,
thereafter, interest is recognized only to the extent of payments
received. Loans are returned to accrual status when less than 90 days
delinquent and when, in management's judgment, collection is probable.
-21-
<PAGE>
SISTERSVILLE BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company adopted the provisions of Statement of Financial Accounting
Standards Nos. 114 and 118, "Accounting for Creditors for Impairment of a
Loan." It is the Company's policy not to recognize interest income on
specific impaired loans unless the likelihood of future loss is remote.
Interest payments received on such loans are applied as a reduction of the
loan principal balance.
Since the adoption of SFAS Nos.114 and 118, the Company had no loans which
management has determined to be impaired.
Loan origination and commitment fees and certain direct loan origination
costs are deferred, and the net amount amortized over the contractual
lives of the related loans or commitments as an adjustment of the related
loan's yield using the interest method.
Allowance for Loan Losses - The allowance for loan losses is maintained at
a level which, in management's judgment, is adequate to absorb credit
losses inherent in the loan portfolio. The amount of the allowance is
based on management's evaluation of the collectibility of the loan
portfolio, including the nature of the portfolio, credit concentrations,
trends in historical loss experience, specific impaired loans, and
economic conditions. Allowances for impaired loans are generally
determined based on collateral values or the present value of estimated
cash flows. The allowance is increased by a provision for loan losses,
which is charged to expense and reduced by charge-offs, net of recoveries.
Changes in the allowance relating to impaired loans are charged or
credited to the provision for loan losses. Because of uncertainties
inherent to the estimation process, management's estimate of credit losses
inherent in the loan portfolio and the related allowance may change in the
near term.
Real Estate Acquired in Settlement of Loans - Real estate acquired in
settlement of loans is classified separately on the balance sheets at the
lower of the recorded investment in the property or its fair value minus
estimated costs of sale.
Office Properties and Equipment - Premises and equipment are stated
at cost, less accumulated depreciation. Provisions for depreciation are
computed on the straight-line method over the estimated useful lives of
the assets.
When units of property are disposed of, the premises and equipment
accounts are relieved of the cost and the accumulated depreciation related
to such units. Any resulting gains or losses are credited to or charged
against income. Costs and repairs and maintenance are charged to expense
as incurred. Major renewals and betterments are capitalized at cost.
Income Taxes - Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or
settled.
-22-
<PAGE>
SISTERSVILLE BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings Per Common Share - On June 25, 1997, the Company issued 661,428
shares of common stock. Earnings per share data for the 1998 period has
been determined by dividing net income since July 1, 1997, of $288,809 by
the weighted average number of shares issued and outstanding since the
original issued date. Earnings from June 25, 1997, through June 30, 1997,
were determined not to be meaningful. As discussed in Note 10, the Company
accounts for the 52,914 shares acquired by the Employee Stock Ownership
Plan (the "ESOP") in accordance with Statement of Position 93-6; shares
controlled by the ESOP are not considered in the weighted average shares
outstanding until the shares are committed for allocation to employee
accounts. The proforma net income per share for the 1999 period is $.59,
assuming the shares had been outstanding for the entire period.
In February, 1997, the Financial Accounting Standards Board issued
Statement on Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS No. 128"). SFAS No. 128 differs from prior accounting guidance in
that earnings per share is classified as basic earnings per share and
diluted earnings per share, compared to primary earnings per share and
fully diluted earnings per share under prior standards. Basic earnings per
share differs from primary earnings per share in that it includes only the
weighted average common shares outstanding and does not include any
dilutive common stock equivalents in the calculation. Diluted earnings per
share under the new standard differs in certain calculations compared to
fully diluted earnings per share under prior standards.
The following table sets forth the computation of basic and diluted
earnings per share. There were no convertible securities which would
affect the numerator in calculating basic and diluted earnings per share;
therefore, net income as presented on the Consolidated Statements of
Income for March 31, 1999, and net income, since inception, July 1, 1997,
of $288,809 for March 31, 1998, will be used as the numerator. The
following tables set forth a reconciliation of the denominator of the
basic and diluted earnings per share computation:
December 31,
1999 1998
---- ----
Denominator:
Denominator for basic earnings per share-weighted-
average shares 545,755 608,262
Employee stock options (antidilutive) -- --
Unvested RSP shares 12,608 --
------- -------
Denominator for diluted earnings per share-adjusted
weighted-average assumed conversions 558,363 608,262
======= =======
Reclassification - Certain prior year amounts have been reclassified to
conform with the current year's presentation.
Cash Flows Information - The Company's policy is to include cash on hand,
amounts due from depository institutions, and overnight deposits with the
Federal Home Loan Bank in the definition of cash and cash equivalents.
-23-
<PAGE>
SISTERSVILLE BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 1998
NOTE 2 STOCKHOLDERS' EQUITY
On June 25, 1997, the Company completed the sale of 661,428 common shares
at $10 per share and received net proceeds of $5,664,987. Included in the
661,428 shares were 52,914 shares acquired by the ESOP.
On March 9, 1998, the Company completed the repurchase of 33,071 shares or
5% of its outstanding common stock in the open market pursuant to a stock
repurchase program. During the fiscal year ended March 31, 1999, the
Company repurchased an additional 61,264 shares of its common stock.
The following table represents the change in the Company's outstanding
shares:
Preferred Common
Stock Stock
----- -----
Shares outstanding, March 31, 1997 - -
Shares issued - 661,428
Shares repurchased - (33,071)
--------- ------------
Shares outstanding, March 31, 1998 - 628,357
Shares repurchased - (61,264)
--------- ------------
Shares outstanding, March 31, 1999 - 567,093
========= ============
NOTE 3 - INVESTMENT SECURITIES
The carrying amounts and fair values of investment securities are as
follows at March 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999
-----------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Securities Available for Sale:
Federal Home Loan Bank Stock
(restricted) $ 225,700 $ - $ - $ 225,700
Federal Home Loan Mortgage
Corporation Stock 18,714 1,082,615 - 1,101,329
Municipal securities 906,621 - (20,861) 885,760
U.S. Agency Obligations 2,251,369 1,200 (15,510) 2,237,059
Mortgage-Backed Securities-
GNMA 458,542 - - 458,542
------------- ------------ ---------- -----------
Total Available for Sale 3,860,946 1,083,815 (36,371) 4,908,390
Securities to be Held to Maturity:
Mortgage-Backed Securities-
GNMA and FHLMC 350,815 6,165 356,980
------------- ------------ ---------- -----------
Total $ 4,211,761 $ 1,089,980 $ (36,371) $ 5,265,370
============= ============ =========== ===========
</TABLE>
-24-
<PAGE>
SISTERSVILLE BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 1998
NOTE 3 - INVESTMENT SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
1998
---------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Securities Available for Sale:
Federal Home Loan Bank Stock
(restricted) $ 203,300 $ - $ - $ 203,300
Federal Home Loan Mortgage
Corporation Stock 22,231 1,050,532 - 1,072,763
U.S. Government and
Agency Obligations 4,113,299 1,355 (3,474) 4,111,180
------------- ------------ ----------- -------------
Total Available for Sale 4,338,830 1,051,887 (3,474) 5,387,243
Securities to be Held to Maturity:
Mortgage-Backed Securities-
GNMA and FHLMC 527,006 9,563 (204) 536,365
------------- ------------ ----------- -------------
Total $ 4,865,836 $ 1,061,450 $ (3,678) $ 5,923,608
============= ============ =========== =============
</TABLE>
The amortized and estimated market value of investment securities at March
31, 1999 and 1998, by contractual maturity, follow. Expected maturities
will differ from contractual maturities because issuers may have the right
to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
March 31, 1999
---------------------------------------------------------------
Securities Securities
Available for Sale Held to Maturity
------------------------------ ----------------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
---- ----- ---- -----
<S> <C> <C> <C> <C>
Due in one year or less $ 201,489 $ 202,688 $ - $ -
Due after one year
through five years 849,478 837,327 - -
Due after five years
through ten years 1,000,402 997,042 - -
Due after ten years 1,106,621 1,085,762 - -
Mortgage-backed securities 458,542 458,542 350,815 356,980
Equity securities 244,414 1,327,029 - -
------------- ------------ ----------- -------------
Total $ 3,860,946 $ 4,908,390 $ 350,815 $ 356,980
============= ============ =========== =============
</TABLE>
-25-
<PAGE>
SISTERSVILLE BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 1998
NOTE 3 - INVESTMENT SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
March 31, 1998
------------------------------------------------------------
Securities Securities
Available for Sale Held to Maturity
------------------------------ -----------------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
---- ----- ---- -----
<S> <C> <C> <C> <C>
Due in one year or less $ 3,109,289 $ 3,106,054 $ - $ -
Due after one year
through five years 204,010 205,126 - -
Due after five years
through ten years 800,000 800,000 - -
Mortgage-backed securities - - 527,006 536,365
Equity securities 225,531 1,276,063 - -
------------- ------------ ----------- -------------
Total $ 4,338,830 $ 5,387,243 $ 527,006 $ 536,365
============= ============ =========== =============
</TABLE>
There were no transfers of securities between classifications in 1999 or
1998.
NOTE 4 - LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
Loans outstanding at March 31 are as follows:
1999 1998
------------ ---------------
Mortgage Loans:
Construction $ 119,000 $ 701,350
1-4 family 23,681,466 22,593,575
Consumer Loans:
Automobiles 699,069 698,752
Savings account 99,454 234,072
Other 18,432 27,000
Commercial 269,270 96,446
----------- ---------------
Total 24,886,691 24,351,195
Less:
Allowance for loan losses 172,250 168,850
Undisbursed funds 342,928 463,171
Net deferred loan fees 51,572 72,250
----------- ---------------
Loans receivable, net $24,319,941 $ 23,646,924
=========== ===============
-26-
<PAGE>
SISTERSVILLE BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 1998
NOTE 4 - LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES (CONTINUED)
Activity in the allowance for loan losses for the years ended March 31,
1999 and 1998, is summarized as follows:
1999 1998
-------- --------
Balance, beginning of year $168,850 $164,150
Add provisions charged to operations 3,400 6,224
-------- --------
172,250 170,374
Less loans charged off - 1,524
-------- --------
Balance, end of period $172,250 $168,850
======== ========
In the normal course of business, loans are extended to directors and
executive officers and their associates. In management's opinion, all
loans are on substantially the same terms and conditions as loans to other
individuals and businesses of comparable creditworthiness. Total loans
outstanding to officers and directors at March 31, 1999 and 1998, were
$28,633 and $56,142, respectively.
NOTE 5 - OFFICE PROPERTIES AND EQUIPMENT
Properties and equipment at March 31 are summarized as follows:
1999 1998
-------- --------
Land $ 38,500 $ 38,500
Office buildings and improvements 543,300 422,648
Furniture, fixtures, and equipment 242,192 209,688
-------- --------
Total 823,992 670,836
Less accumulated depreciation 336,257 292,474
-------- --------
Premises and equipment, net $487,735 $378,362
======== ========
Depreciation charged to operations amounted to $43,783 and $38,438 for the
years ended March 31, 1999 and 1998, respectively.
-27-
<PAGE>
SISTERSVILLE BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 1998
NOTE 6 - DEPOSITS ANALYSIS
Deposit accounts at March 31 are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------- -------------------------------
Percent of Percent of
Amount Portfolio Amount Portfolio
------ --------- ------ ---------
<S> <C> <C> <C> <C>
Savings accounts $ 8,426,081 40.4% $ 8,194,602 39.8%
NOW accounts 1,326,967 6.4% 1,338,296 6.5%
Money market accounts 1,136,401 5.4% 1,189,391 5.8%
-------------- ---------- -------------- ----------
10,889,449 52.2% 10,722,289 52.1%
-------------- ---------- -------------- ----------
Certificates of deposit:
4.01 - 6.00% 8,997,052 43.2% 8,332,910 40.4%
6.01 - 8.00% 961,001 4.6% 1,540,766 7.5%
-------------- ---------- -------------- ----------
9,958,053 47.8% 9,873,676 47.9%
-------------- ---------- -------------- ----------
Total $ 20,847,502 100.0% $ 20,595,965 100.0%
============== ========== ============== ==========
</TABLE>
The scheduled maturities of certificates of deposit at March 31, 1999, are
as follows:
Amount
------
Within one year $ 5,480,937
Due after one year, but within two years 1,855,861
Due after two years, but within three years 1,370,470
Due after three years 1,250,785
-------------
Total $ 9,958,053
=============
Certificates of deposit issued in denominations of $100,000 or more
amounted to $566,403 at March 31, 1999, and $410,729 at March 31, 1998.
Deposits in excess of $100,000 are not federally insured.
Interest expense by deposit category is as follows:
Year Ended March 31,
1999 1998
---- ----
Savings - passbook $ 295,396 $ 358,125
NOW and money market 63,497 87,930
Time certificates of deposit 505,402 540,227
-------------- -------------
Total $ 864,295 $ 986,282
============== =============
-28-
<PAGE>
SISTERSVILLE BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 1998
NOTE 7 - REGULATORY MATTERS
The Subsidiary Bank is subject to various regulatory capital requirements
administered by its primary federal regulator, the Office of Thrift
Supervision. Failure to meet the minimum regulatory capital requirements
can initiate certain mandatory, and possible additional discretionary
actions by regulators, that if undertaken, could have a direct material
affect on the Bank's financial statements. Under the regulatory capital
adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines involving
quantitative measures of the Bank's assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification under the prompt
corrective action guidelines are also subject to qualitative judgement by
the regulators about components, risk weighting, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital (as defined in the regulations)
to risk-weighted assets (as defined), and of tangible and core capital (as
defined) to adjusted assets (as defined). Management believes, as of March
31, 1999, that the Bank meets all capital adequacy requirements to which
they are subject.
As of March 31, 1999, the most recent notification from the Office of
Thrift Supervision categorized the Bank as "well capitalized" under the
regulatory framework for prompt corrective action. To be categorized as
"well capitalized", the Bank must maintain minimum total risk- based, Tier
I (core) risk-based, core, and tangible ratios as set forth in the table.
There are no conditions or events since the notification that management
believes have changed the institution's category.
The following table reconciles capital under generally accepted accounting
principles to regulatory capital:
March 31,
1999 1998
---- ----
(In Thousands)
Total equity $ 8,894 $ 8,518
Accumulated other comprehensive income (688) (687)
-------- --------
Tier I (core) and tangible capital 8,206 7,831
Allowance for loan losses 172 169
------- -------
Risk-based capital $ 8,378 $ 8,000
======= =======
-29-
<PAGE>
SISTERSVILLE BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 1998
NOTE 7 - REGULATORY MATTERS (CONTINUED)
At March 31, the actual capital levels of the Bank and the minimum
required levels are as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------- ----------------------
Amount Ratio Amount Ratio
------ ----- ------ -----
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Total Capital to Risk-Weighted Assets
Actual $ 8,378 54.12% $ 8,000 55.65%
For capital adequacy purposes 1,238 8.00% 1,150 8.00%
To be "well capitalized" 1,548 10.00% 1,438 10.00%
Tier I (Core) Capital to Risk-Weighted Assets
Actual $ 8,206 53.01% $ 7,831 54.47%
For capital adequacy purposes 619 4.00% 575 4.00%
To be "well capitalized" 929 6.00% 863 6.00%
Tier I (Core) Capital to Adjusted Assets
Actual $ 8,206 26.83% $ 7,831 26.84%
For capital adequacy purposes 917 3.00% 875 3.00%
To be "well capitalized" 1,529 5.00% 1,459 5.00%
Tangible Capital to Adjusted Assets
Actual $ 8,206 26.83% $ 7,831 26.84%
For capital adequacy purposes 459 1.50% 438 1.50%
To be "well capitalized" N/A N/A N/A N/A
</TABLE>
NOTE 8 - INCOME TAX
Until 1996, thrift institutions were permitted a special bad debts
deduction limited generally to 8% of otherwise taxable income and subject
to certain limitations based on aggregate loans and savings account
balances at the end of the year. On August 20, 1996, the Small Business
Job Protection Act (the "Act") was signed into law. The Act eliminated the
percentage of taxable income bad debt deduction for thrift institutions
and requires that bad debts for federal income tax purposes be determined
based primarily on the experience method. The Act provides that bad debt
reserves accumulated after 1987 are subject to recapture over a maximum of
six years. The Act provides that bad debt reserves accumulated prior to
1988 be exempt from recapture. If the amounts that qualify as deductions
for federal income tax purposes are later used for purposes other than for
bad debt losses, they will be subject to federal income tax at the then
corporate rate. Retained income, at March 31, 1999 and 1998, included
approximately $618,000 (pre 1988 reserves) for which federal income tax
has not been provided.
-30-
<PAGE>
SISTERSVILLE BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 1998
NOTE 8 - INCOME TAX (CONTINUED)
The provisions for Federal income taxes consist of:
<TABLE>
<CAPTION>
Year Ended March 31,
1999 1998
---- ----
<S> <C> <C>
Current $ 218,068 $ 229,930
Deferred 4,961 (20,483)
------------- ------------
Total $ 223,029 $ 209,447
============= ============
</TABLE>
The following temporary differences gave rise to the deferred tax (asset)
liability at:
<TABLE>
<CAPTION>
March 31,
1999 1998
---- ----
<S> <C> <C>
Deferred loan fees $ (17,534) $ (24,565)
Other income and expense recognized in the financial
statements on the accrual basis, but on the cash basis
for tax purposes 29,081 13,464
Bad debt reserve, net (22,865) (24,143)
RSP amortization (18,424) -
Depreciation 16,595 19,761
Others 3,876 7,398
------------ ------------
(9,271) (8,085)
Unrealized gains on available-for-sale securities 368,089 362,295
------------ ------------
Net deferred tax liability $ 358,818 $ 354,210
============ ============
</TABLE>
A reconciliation between the amount of reported income tax expense and the
amount computed by applying the statutory federal income tax rate to
income before income taxes is as follows:
<TABLE>
<CAPTION>
Year Ended March 31,
1999 1998
---- ----
<S> <C> <C>
Tax at statutory rate (34%) $ 208,214 $ 198,256
Increase (decrease) in taxes resulting from:
Nondeductible ESOP compensation 8,956 8,342
Other, net 5,859 2,849
------------- ------------
Total $ 223,029 $ 209,447
============= ============
Effective rate 36.4% 35.9%
============= ============
</TABLE>
-31-
<PAGE>
SISTERSVILLE BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 1998
NOTE 9 - RETIREMENT PLAN
The Bank participates in the multi-employer Financial Institutions
Retirement Fund covering all full-time officers and employees completing
one year of service and attainment of age 21. Because the plan is a
multi-employer plan, plan information for the Bank separately is not
determinable. Pension expense, including administrative charges, for the
years ended March 31, 1999 and 1998, was $1,800 and $600, respectively.
NOTE 10 - EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP")
During the year ended March 31, 1998, the Bank adopted an ESOP for the
benefit of officers and employees who have met certain eligibility
requirements related to age and length of service. An ESOP trust was
created and acquired 52,914 shares of common stock in the Company's
initial public offering, using proceeds of a loan obtained from the
Company, which bears interest at an annual rate of 8.25%. The loan, which
is secured by shares of stock purchased, calls for quarterly interest over
a ten-year period and annual principal payments of $52,914.
The Bank is scheduled to make quarterly contributions to the trust to
allow the trust to make the required interest payments and an annual
contribution to allow the trust to make the required principal payment.
Shares are released from collateral based upon the proportion of annual
principal payments made on the loan each year and allocated to qualified
employees. As shares are committed to be released from collateral based on
the terms of the loan, the Bank reports compensation expense based upon
the fair value of the shares, and the shares become outstanding for
earnings per share computations. Dividends paid on allocated ESOP shares
are recorded as a reduction of retained earnings. Dividends paid on
unallocated shares are recorded as compensation expense. Compensation
expense for the ESOP for the years ended March 31, 1999 and 1998, was
$81,171 and $74,771, respectively.
The following table represents the components of the ESOP shares at March
31:
1999 1998
---------- -------------
Allocated shares - -
Shares committed for allocation 11,007 4,815
Shares distributed - -
Unallocated (noncommitted) shares 41,907 48,099
---------- -----------
Total ESOP shares 52,914 52,914
========== ===========
Fair value of noncommitted shares $ 518,599 $ 751,547
========== ===========
-32-
<PAGE>
SISTERSVILLE BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 1998
NOTE 11 - RESTRICTED STOCK PLAN (RSP)
The Board of Directors adopted a RSP for directors and certain officers
and employees which was approved by stockholders at the annual meeting
held on July 16, 1998. The objective of this RSP is to enable the Bank to
retain its corporate officers, key employees, and directors who have the
experience and the ability necessary to manage these entities. Directors,
officers, and key employees who are selected by members of the
Board-appointed committee are eligible to receive benefits under the RSP.
Non-employee directors of the Bank serve as trustees for the RSP, and have
the responsibility to invest all funds contributed by the Bank to the
Trust created for the RSP.
In August, 1998, the Trust purchased, with funds contributed by the Bank,
shares of the common stock of which 23,185 shares were awarded to
directors and employees, and 3,272 shares remained unawarded. Directors,
officers, and employees who terminate their employment with the Bank shall
forfeit the right to any shares which were awarded but not earned, except
in the event of death, disability, retirement, or a change in control of
the Bank or Company. The Bank granted a total of 23,185 shares of common
stock on July 16, 1998, of which 4,637 became immediately vested under the
plan. Remaining shares become earned and non-forfeitable over a four-year
period on each anniversary date of the award beginning July 16, 1999. The
RSP shares purchased in the conversion initially will be excluded from
stockholders' equity. The Company recognizes compensation expense in the
amount of fair value of the common stock at the grant date, pro rata, over
the years during which the shares are earned and recorded as an addition
to stockholders' equity. Net compensation expense attributable to the RSP
amounted to $125,866 for the year ended March 31, 1999.
NOTE 12 - STOCK OPTION PLAN
The Board of Directors adopted a Stock Option Plan for the directors,
officers, and employees which was approved by stockholders at the annual
meeting held on July 16, 1998. An aggregate of 66,142 shares of authorized
but unissued common stock of the Company was reserved for issuance under
the Stock Option Plan. The Company granted options to purchase 58,000
shares of common stock. The options are first exercisable over a five-year
period beginning July 16, 1998. The stock options typically have
expiration terms of ten years. The per share exercise price of a stock
option shall be, at a minimum, equal to the fair value of a share of
common stock on the date the option is granted. Proceeds from the exercise
of the stock options are credited to common stock for the aggregate par
value and the excess is credited to additional paid-in capital.
The Company adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation". This statement encourages, but
does not require the Company to recognize compensation expense for all
awards of equity instruments issued. The statement established a fair
value based method of accounting for stock-based compensation plans. The
standard applies to all transactions in which an entity acquires goods or
services by issuing equity instruments or by incurring liabilities in
amounts based on the price of the entity's common stock or other equity
instruments. Statement No. 123 permits companies to continue to account
for such transactions under Accounting Principles Board No. 25,
"Accounting for Stock Issued to Employees," but requires disclosure of pro
forma net income and earnings per share as if the Company had applied the
new method.
-33-
<PAGE>
SISTERSVILLE BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 1998
NOTE 12 - STOCK OPTION PLAN (CONTINUED)
Under Accounting Principles Board Opinion 25, no compensation expense has
been recognized with respect to the options granted under the stock option
plans. Had compensation expense been determined on the basis of fair value
pursuant to Statement No. 123, net income and earnings per share would
have been reduced as follows:
March 31,
1999
----
Net income:
As reported $ 389,366
Pro forma $ 313,464
Basic earnings per share:
As reported $ .71
Pro forma $ .57
Diluted earnings per share:
As reported $ .70
Pro forma $ .56
The following table presents share data related to the Stock Option Plan:
Shares Under Option
-------------------
1999 1998
---- ----
Outstanding, beginning of year - -
Granted during the period 58,000 -
Cancelled during the period - -
Exercised during the period - -
------- ------
Outstanding, end of period (option price of
$15.8125 per share) 58,000 -
======= ======
NOTE 13 - COMMITMENTS AND CONTINGENCIES
The Subsidiary Bank is a party to financial instruments with
off-balance-sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments include
commitments to extend credit. These instruments involve, to varying
degrees, elements of credit risk in excess of the amount recognized in the
consolidated balance sheets. The contract amounts of these instruments
reflect the extent of involvement the institution has in particular
classes of financial instruments.
-34-
<PAGE>
SISTERSVILLE BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 1998
NOTE 13 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit is represented by the contractual amount of those instruments. The
Company uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.
The following represents financial instruments whose contract amounts
represent credit risk at March 31:
Contract Amount
--------------------------------
1999 1998
------------- ---------------
Commitments to originate loans:
Fixed rate $ 467,000 $ 891,000
Loans in process 343,000 463,000
Unused lines of credit - 170,000
------------- -------------
Total $ 810,000 $ 1,524,000
============= =============
The range of interest rates on fixed rate residential mortgage loan
commitments was 6.99% to 7.25% at March 31, 1999.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments
are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The Company
evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the Company upon
extension of credit, is based on management's credit evaluation of the
counter party. Collateral held consists primarily of single-family
residences.
Concentration of Credit Risk
----------------------------
The Subsidiary Bank's real estate loans and loan commitments are primarily
for properties located throughout Northern West Virginia. Repayment of
these loans is in part dependent upon the economic conditions in this
region. These loans are primarily at fixed interest rates.
NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used in estimating fair values
of financial instruments as disclosed herein:
Cash and Cash Equivalents: For those short-term instruments, the
carrying amount is a reasonable estimate of fair value.
-35-
<PAGE>
SISTERSVILLE BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 1998
NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Investment Securities and Securities Held for Sale: For debt
securities and marketable equity securities held for investment
purposes and for sale, fair values are based on quoted market prices
or dealer quotes. If a quoted market price is not available, fair
value is estimated using quoted market prices for similar securities.
Loans: For certain homogeneous categories of loans, such as some
residential mortgages, fair value is estimated using the quoted market
prices for securities backed by similar loans. The fair value of other
types of loans is estimated by discounting the future cash flows using
the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities.
Deposit Liabilities: The fair value of demand deposits, savings
accounts, and certain money market deposits is the amount payable on
demand at the reporting date. The fair value of fixed-maturity
certificates of deposit is estimated using the rates currently offered
for deposits of similar remaining maturities.
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
March 31, 1999 March 31, 1998
------------------------------- ------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Financial Assets:
Cash and cash equivalents $ 1,874,000 $ 1,874,000 $ 1,566,000 $ 1,566,000
Securities available for sale 4,908,000 4,908,000 5,387,000 5,387,000
Securities held to maturity 351,000 357,000 527,000 536,000
Loans, net 24,320,000 24,902,000 23,647,000 24,240,000
Financial Liabilities:
Deposits 20,848,000 20,956,000 20,596,000 20,663,000
</TABLE>
NOTE 15 - CONVERSION AND REORGANIZATION
On December 5, 1996, the Board of Directors of the Association adopted the
Plan of Conversion pursuant to which the Association proposed to convert
from a federally-chartered mutual savings and loan to a
federally-chartered stock savings bank and concurrently form a unitary
savings and loan holding company.
As part of the conversion process, the Company was organized in March,
1997, at the direction of the Board of Directors of the Association for
the purpose of acquiring all of the capital stock to be issued by the Bank
in the Conversion. After approval by regulatory authorities and the
Association's members, the conversion was completed on June 25, 1997. The
Company became a unitary savings and loan company with its principal
assets being the capital stock of the Bank and a percentage of the
Conversion proceeds permitted to be retained. From the proceeds from the
sale of 661,428 shares of stock at $10.00 per share, $66,143 was allocated
to common stock based on a par value of $.10 per share and $6,127,984,
which is net of conversion costs of $420,153, was allocated to additional
paid-in capital.
-36-
<PAGE>
SISTERSVILLE BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 1998
NOTE 15 - CONVERSION AND REORGANIZATION (CONTINUED)
In accordance with regulations, at the time that the Association converted
from a mutual savings and loan to a stock savings bank, a portion of
retained earnings will be restricted by establishing a liquidation
account. The liquidation account will be maintained for the benefit of
eligible account holders who continue to maintain their accounts at the
Bank after the conversion. The liquidation account will be reduced
annually to the extent that eligible account holders have reduced their
qualifying deposits. Subsequent increases will not restore an eligible
account holder's interest in the liquidation account. In the event of a
complete liquidation of the Bank, each account holder will be entitled to
receive a distribution from the liquidation account in an amount
proportionate to the current adjusted qualifying balances for accounts
then held.
NOTE 16 - ADVANCES FROM FEDERAL HOME LOAN BANK
As of March 31, 1999, the Bank had outstanding an advance from the Federal
Home Loan Bank (FHLB) of Pittsburgh of $1,000,000. Various assets with a
total collateral value of $20,600,000 were pledged to the FHLB as
collateral at March 31, 1999. The advance is a 5.15% fixed-interest
obligation with an optional change to a variable interest rate at August
21, 1999. The advance matures on August 31, 2008, while interest payments
are payable monthly on the outstanding principal balance.
NOTE 17 - DIRECTOR RETIREMENT AGREEMENT
Effective May 7, 1998, the Company and Subsidiary Bank offered individual
retirement agreements with current directors of the Company and the Bank
having completed a minimum of fifteen years of service. Under the terms of
the agreement, retiring directors receive $1,200 for each year of past
service as a board member of the Bank or Association and the Company.
Retirement benefits were payable either in quarterly installments over a
five-year period commencing September 17, 1998, or in a lump sum with the
total benefit discounted at an annual rate of five percent (5%). Directors
executing the retirement agreement discontinued serving as active
directors to the Company and Bank on July 2, 1998.
At May 16, 1998, four directors executed retirement agreements. Based on
the past service of those directors involved, the Company took a pre-tax
charge of $94,000 in the first fiscal quarter of the year ending March 31,
1999, representing the present value of benefit payments.
-37-
<PAGE>
SISTERSVILLE BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 1998
NOTE 18 - COMPREHENSIVE INCOME
In June, 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income." This statement establishes standards for reporting and display of
comprehensive income in a full set of financial statements. The Bank
adopted this statement on April 1, 1998, and has reclassified information
in the 1998 financial statements to reflect application of the provisions
of this statement. Unrealized gains and losses on securities available for
sale are the only components of other comprehensive income (loss) that
apply to the Bank.
1999 1998
----------- -------------
Before-tax amount $ (968) $ 452,900
Tax effect 351 (159,602)
--------- ------------
Net-of-tax amount $ (617) $ 293,298
========= ============
NOTE 20 - CONDENSED PARENT COMPANY FINANCIAL STATEMENTS
Effective June 25, 1997, active operations of Sistersville Bancorp, Inc.
were initiated with the approval of the stock conversion of the
Association and correspondent purchase of all the stock of the
wholly-owned Subsidiary Bank by the Company, which coincided with the
initial public offering of the Company stock. The condensed financial
statements of Sistersville Bancorp, Inc.
are as follows:
BALANCE SHEET
MARCH 31, 1999
ASSETS
Deposits with Subsidiary Bank $ 265,016
Investment in Subsidiary Bank 8,364,584
Investment securities available for sale 849,158
Loan receivable from ESOP 529,140
Receivable from Subsidiary 71,190
Other assets 27,536
--------------
TOTAL ASSETS $ 10,106,624
==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Payable from subsidiary $ 284,217
Other liabilities 30,835
Shareholders' equity 9,791,572
--------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,106,624
==============
-38-
<PAGE>
SISTERSVILLE BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999 AND 1998
NOTE 20 - CONDENSED PARENT COMPANY FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF INCOME
YEAR ENDED MARCH 31, 1999
INCOME
Interest $ 91,113
OPERATING EXPENSES 65,382
-----------
Income before income tax and equity
in undistributed income of Subsidiary 25,731
INCOME TAX (12,600)
EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARY 376,235
-----------
NET INCOME $ 389,366
===========
STATEMENT OF CASH FLOWS
YEAR ENDED MARCH 31, 1999
OPERATING ACTIVITIES
Net income $ 389,366
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed earnings of Subsidiary (376,235)
Investment amortization/accretion, net 2,098
ESOP amortization 88,256
RSP amortization 125,867
Increase in other assets 8,575
Increase in other liabilities 284,776
-----------
Net cash provided by operating activities 522,703
-----------
INVESTING ACTIVITIES
Investment purchases (852,500)
Investment maturities 1,460,000
-----------
Net cash provided by investing activities 607,500
-----------
FINANCING ACTIVITIES
Purchase of RSP shares (410,084)
Purchase of treasury stock (797,634)
Dividends paid (185,028)
-----------
Net cash used in financing activities (1,392,746)
-----------
DECREASE IN CASH AND CASH EQUIVALENTS (262,543)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 527,559
-----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 265,016
===========
SUPPLEMENTAL DISCLOSURES
Income tax payments $ 23,103
Interest paid --
-39-
<PAGE>
SISTERSVILLE BANCORP, INC. AND FIRST FEDERAL SAVINGS BANK
CORPORATE OFFICE INDEPENDENT AUDITORS
- ---------------- --------------------
726 Wells Street S. R. Snodgrass, A.C.
Sistersville, WV 26175 980 National Road
(304) 652-3671 Wheeling, WV 26003
SPECIAL COUNSEL
- ---------------
Malizia Spidi and Fisch, P.C.
One Franklin Square
1301 K Street, N.W., Suite 700 East
Washington, D.C. 20005
TRANSFER AGENT
- --------------
American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
SISTERSVILLE BANCORP, INC. AND FIRST FEDERAL SAVINGS BANK
- ---------------------------------------------------------
BOARD OF DIRECTORS
- ------------------
Lester C. Doak, Chairman Ellen E. Thistle
David W. Miller Charles P. LaRue
Gary L. Ward Stanley M. Kiser
SISTERSVILLE BANCORP, INC. OFFICERS
- -----------------------------------
Stanley M. Kiser, President
Cynthia R. Carson, Vice-President & Corporate Secretary
Shelley R. Maxwell, Treasurer
FIRST FEDERAL SAVINGS BANK OFFICERS
- -----------------------------------
Stanley M. Kiser, President & CEO
Cynthia R. Carson, Vice-President & Corporate Secretary
Barbara Vincent, Vice-President - Savings
Shelley R. Maxwell, Treasurer
P. Jane Fuchs, Cashier
Sistersville Bancorp, Inc.'s Annual Report on Form 10-KSB for the fiscal year
ended March 31, 1999, as filed with the Securities and Exchange Commission, is
available without charge to shareholders upon written request. The 1999 Annual
Meeting of Stockholders will be held on July 14, 1999, at 9:00 a.m. at the
offices of First Federal Savings Bank, 726 Wells Street, Sistersville, West
Virginia.
-40-
EXHIBIT 21
<PAGE>
SUBSIDIARIES OF THE REGISTRANT
Percentage of Ownership
Jurisdiction of held
Subsidiary Incorporation by Registrant
- ---------- ------------- -------------
First Federal Savings Bank United States 100%
The financial statements of the subsidiary of the registrant are consolidated
with those of the registrant.
EXHIBIT 23
<PAGE>
SNODGRASS
Certified Public Accountants and Consultants
[LOGO]
Board of Directors
Sistersville Bancorp, inc.
726 Wells Street
Sistersville, WV 26175
INDEPENDENT AUDITOR'S CONSENT
We consent to the use of our report dated April 15, 1999, on the financial
statements of Sistersville Bancorp, Inc., as of March 31, 1999 and 1998, and for
the two years in the period ended March 31, 1999, appearing in Sistersville
Bancorp, Inc.'s annual Form 10-KSB.
/s/ S R Snodgrass, A.C.
Wheeling, West Virginia
June 14, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
S.R. Snodgrass, A.C.
980 National Road Wheeling, WV 26003-6400 Phone: 304-233-5030 Facsimile: 304-233-3062
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE ANNUAL REPORT ON FORM 10-KSB40 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Mar-31-1999
<PERIOD-END> Mar-31-1999
<CASH> 30
<INT-BEARING-DEPOSITS> 1,844
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,908
<INVESTMENTS-CARRYING> 351
<INVESTMENTS-MARKET> 357
<LOANS> 24,320
<ALLOWANCE> 172
<TOTAL-ASSETS> 32,188
<DEPOSITS> 20,848
<SHORT-TERM> 0
<LIABILITIES-OTHER> 548
<LONG-TERM> 1,000
0
0
<COMMON> 66
<OTHER-SE> 9,726
<TOTAL-LIABILITIES-AND-EQUITY> 32,188
<INTEREST-LOAN> 2,002
<INTEREST-INVEST> 363
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 2,365
<INTEREST-DEPOSIT> 864
<INTEREST-EXPENSE> 896
<INTEREST-INCOME-NET> 1,468
<LOAN-LOSSES> 3
<SECURITIES-GAINS> 168
<EXPENSE-OTHER> 1,054
<INCOME-PRETAX> 612
<INCOME-PRE-EXTRAORDINARY> 612
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 389
<EPS-BASIC> .71
<EPS-DILUTED> .70
<YIELD-ACTUAL> 4.7
<LOANS-NON> 2
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 169
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 172
<ALLOWANCE-DOMESTIC> 172
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
