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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT
For the transition period from to
Commission File Number 0-22535
SISTERSVILLE BANCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 31-1516424
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
726 Wells Street, Sistersville, WV 26175
(Address of principal executive offices)
(304) 652-3671
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date:
Class: Common Stock, par value $.10 per share
Outstanding at February 10, 2000: 538,739 shares
Transitional small business disclosure format (check one). Yes No X
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SISTERSVILLE BANCORP, INC.
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) as of
December 31, 1999 and March 31, 1999 3
Consolidated Statements of Income (Unaudited)
for the Three Months ended December 31, 1999 and 1998 4
Consolidated Statements of Comprehensive Income (Unaudited)
for the Three Months ended December 31, 1999 and 1998 5
Consolidated Statements of Income (Unaudited)
for the Nine Months ended December 31, 1999 and 1998 6
Consolidated Statements of Comprehensive Income (Unaudited)
for the Nine Months ended December 31, 1999 and 1998 7
Consolidated Statements of Cash Flows (Unaudited)
for the Nine Months ended December 31, 1999 and 1998 8
Notes to Unaudited Consolidated Financial Statements 9 - 10
Item 2. Management's Discussion and Analysis 10 - 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Default Upon Senior Securities 15
Item 4. Submissions of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
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SISTERSVILLE BANCORP, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
December 31, March 31,
1999 1999
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ASSETS
Cash and Cash Equivalents:
Cash and amounts due from banks $ 389,326 $ 29,823
Interest-bearing deposits with other institutions 305,463 1,843,976
----------- -----------
Total cash and cash equivalents 694,789 1,873,799
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Investment Securities:
Securities held to maturity (fair value of
$262,000 and $356,980) 259,807 350,815
Securities available for sale 4,197,020 4,908,390
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Total investment securities 4,456,827 5,259,205
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Loans receivable, (net of allowance for loan losses
of $173,500 and $172,250) 25,239,589 24,319,941
Office properties and equipment, net 1,018,072 487,735
Accrued interest receivable (net of reserve for
uncollected interest of $565 and $-0-) 204,580 212,644
Other assets 154,562 34,224
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TOTAL ASSETS $31,768,419 $32,187,548
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LIABILITIES
Deposits $21,015,190 $20,847,502
Federal Home Loan Bank advance 1,000,000 1,000,000
Deferred income taxes 230,746 358,818
Accrued interest payable and other liabilities 158,394 189,656
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TOTAL LIABILITIES 22,404,330 22,395,976
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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;
538,739 outstanding at December 31, 1999,
and 567,093 outstanding at March 31, 1999 66,143 66,143
Additional paid - in capital 6,183,065 6,178,859
Treasury Stock, at cost (122,689 shares at
December 31, 1999, and 94,335 shares
at March 31, 1999) (1,649,297) (1,326,770)
Retained Earnings - substantially restricted 4,920,067 4,890,911
Unearned Employee Stock Ownership Plan shares (ESOP) (379,923) (419,074)
Unearned Restricted Stock Plan shares (RSP) (230,334) (284,217)
Accumulated other comprehensive income 454,368 685,720
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TOTAL STOCKHOLDERS' EQUITY 9,364,089 9,791,572
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $31,768,419 $32,187,548
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See accompanying notes to the unaudited consolidated financial statements.
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SISTERSVILLE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended December 31,
1999 1998
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INTEREST AND DIVIDEND INCOME
Taxable interest on loans $ 494,470 $ 495,412
Taxable interest on investments 53,613 86,199
Nontaxable interest on loans 3,875 2,313
Nontaxable interest on investments 10,299 -
Dividends on Federal Home Loan Bank Stock 4,010 3,698
Dividends on Federal Home Loan
Mortgage Corporation Stock 2,867 2,297
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Total interest and dividend income 569,134 589,919
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INTEREST EXPENSE
Deposits 220,387 217,727
Federal Home Loan Bank advances 13,161 13,161
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Total interest expense 233,548 230,888
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NET INTEREST INCOME 335,586 359,031
PROVISION FOR LOAN LOSSES 950 1,300
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 334,636 357,731
NONINTEREST INCOME
Service charges 9,008 9,150
Other income 579 646
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Total noninterest income 9,587 9,796
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NONINTEREST EXPENSE
Compensation and employee benefits 137,898 123,183
Occupancy 12,609 10,659
Furniture and equipment expense 9,429 10,880
Deposit insurance premiums 3,177 2,994
Supervisory examination, audit and legal fees 16,970 14,333
Advertising and public relations 8,349 5,762
Service bureau expense 17,606 16,754
Franchise, payroll and other taxes 15,271 16,277
Other expenses 17,995 18,812
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Total noninterest expense 239,304 219,654
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Income before income taxes 104,919 147,873
INCOME TAXES 38,541 51,212
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NET INCOME $ 66,378 $ 96,661
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EARNINGS PER SHARE
Basic $ .14 $ .19
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Diluted $ .13 $ .18
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AVERAGE SHARES OUTSTANDING - BASIC 484,856 533,187
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AVERAGE SHARES OUTSTANDING - DILUTED 497,035 549,998
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See accompanying notes to the unaudited consolidated financial statements.
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SISTERSVILLE BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended December 31,
1999 1998
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NET INCOME $ 66,378 $ 96,661
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Other comprehensive income, net of tax:
Unrealized gains on securities:
Unrealized holding gains (losses)
arising during the period (96,151) 153,588
Reclassification adjustment for (gains)
losses included in net income 14,806 -
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Other comprehensive income (loss) (81,345) 153,588
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COMPREHENSIVE INCOME (LOSS) $ (14,967) $ 250,249
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See accompanying notes to the unaudited consolidated financial statements.
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SISTERSVILLE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Nine Months Ended December 31,
1999 1998
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INTEREST AND DIVIDEND INCOME
Taxable interest on loans $ 1,474,632 $ 1,501,861
Taxable interest on investments 185,825 254,720
Nontaxable interest on loans 7,700 6,529
Nontaxable interest on investments 30,850 -
Dividends on Federal Home Loan Bank Stock 11,838 11,045
Dividends on Federal Home Loan Mortgage
Corporation Stock 8,600 5,460
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Total interest and dividend income 1,719,445 1,779,615
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INTEREST EXPENSE
Deposits 665,525 650,999
Federal Home Loan Bank advance 39,340 19,026
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Total interest expense 704,865 670,025
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NET INTEREST INCOME 1,014,580 1,109,590
PROVISION FOR LOAN LOSSES 3,095 2,350
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,011,485 1,107,240
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NONINTEREST INCOME
Service charges 25,385 26,383
Gain on sale securities available for sale - 167,536
Other income 1,771 1,836
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Total noninterest income 27,156 195,755
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NONINTEREST EXPENSE
Compensation and employee benefits 407,522 533,015
Occupancy 35,652 29,523
Furniture and equipment expense 27,975 27,253
Deposit insurance premiums 9,308 9,486
Supervisory examination, audit and legal fees 51,972 59,203
Advertising and public relations 23,029 16,993
Service bureau expense 53,402 46,692
Franchise, payroll and other taxes 44,669 50,389
Loss on sale of securities available for sale 22,731 -
Other expenses 56,659 51,985
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Total noninterest expense 732,919 824,539
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Income before income taxes 305,722 478,456
INCOME TAXES 102,883 172,520
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NET INCOME $ 202,839 $ 305,936
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EARNINGS PER SHARE
Basic $ .41 $ .55
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Diluted $ .40 $ .54
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AVERAGE SHARES OUTSTANDING - BASIC 491,838 559,067
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AVERAGE SHARES OUTSTANDING - DILUTED 505,175 570,660
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See accompanying notes to the unaudited consolidated financial statements.
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SISTERSVILLE BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Nine Months Ended December 31,
1999 1998
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NET INCOME $ 202,839 $ 305,936
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Other comprehensive income, net of tax:
Unrealized gains on securities:
Unrealized holding gains (losses)
arising during the period (246,158) 212,809
Reclassification adjustment for (gains)
losses included in net income 14,806 (109,853)
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Other comprehensive income (loss) (231,352) 102,956
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COMPREHENSIVE INCOME (LOSS) $ (28,513) $ 408,892
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See accompanying notes to the unaudited consolidated financial statements.
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SISTERSVILLE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended December 31,
1999 1998
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OPERATING ACTIVITIES
Net income $ 202,839 $ 305,936
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization and accretion, net 39,044 35,443
Loss (gain) on sale of available for
sale securities 22,581 (167,536)
Provision for loan losses 3,095 2,350
Deferred federal income taxes - (6,754)
ESOP and RRP amortization 97,240 171,826
Decrease (increase) in accrued interest
receivable and other assets (118,229) 15,410
Increase (decrease) in accrued interest
payable and other liabilities (31,262) 30,908
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Net cash provided by operating activities 215,308 387,583
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INVESTING ACTIVITIES
Proceeds from maturity of available
for sale securities 900,000 2,960,000
Proceeds from sale of available for
sale securities 382,892 171,053
Purchase of available for sale securities (1,060,000) (2,039,262)
Principal collected on mortgage-backed securities 197,829 140,757
Net increase in loans (922,743) (285,857)
Purchases of office properties and equipment (563,772) (151,398)
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Net cash provided by (used in)
investing activities (1,065,794) 795,293
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FINANCING ACTIVITIES
Net increase (decrease) in deposits 167,686 (21,504)
Federal Home Loan Bank advance - 1,000,000
Dividends paid (173,683) (185,028)
Purchase of RRP shares - (410,084)
Purchase of Treasury Stock (322,527) (409,623)
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Net cash used in financing activities (328,524) (26,239)
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Change in cash and cash equivalents (1,179,010) 1,156,637
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,873,799 1,566,037
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 694,789 $ 2,722,674
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest on deposits and borrowings $ 707,162 $ 672,334
Income taxes 249,040 160,360
See accompanying notes to the unaudited consolidated financial statements.
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SISTERSVILLE BANCORP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements of Sistersville Bancorp, Inc. (the
"Company"), include its wholly-owned subsidiary, First Federal Savings Bank
(the "Bank"). All significant intercompany balances and transactions have
been eliminated.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB and, therefore, do
not necessarily include all information that would be included in audited
financial statements. The information furnished reflects all adjustments
which are, in the opinion of management, necessary for a fair statement of the
results of operations. All such adjustments are of a normal recurring nature.
The results of operations for the interim periods are not necessarily
indicative of the results to be expected for the fiscal year ended March 31,
2000.
These statements should be read in conjunction with the consolidated
statements as of and for the fiscal year ended March 31, 1999, and related
notes which are included in the Company's Annual Report on Form 10-KSB (file
no. 0-22535).
NOTE 2 - CONVERSION TO STOCK FORM OF OWNERSHIP AND FORMATION OF HOLDING
COMPANY
On December 5, 1996, the Board of Directors of First Federal Savings and Loan
Association of Sistersville (the "Association") approved a plan of conversion
(the "Plan") providing for the conversion of the Association from a
federally chartered mutual savings and loan to a federally chartered stock
savings bank and the simultaneous issuance of all of its outstanding stock to
a newly formed holding company, Sistersville Bancorp, Inc. After approval by
the regulatory authorities and the Association's members, the Conversion was
completed on June 25, 1997. As a result of the conversion, the Company was
formed and the Bank became a wholly-owned subsidiary of the Company.
In connection with the completion of the Conversion on June 25, 1997, the
Company completed the sale of 661,428 shares of stock at $10.00 per share.
From the proceeds, $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.
NOTE 3 - RECENT ACCOUNTING STANDARDS
In July 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income." SFAS 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. SFAS 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 currently holds
securities classified as available-for-sale. Under the provisions of SFAS No.
130, unrealized gains and losses on securities classified as
available-for-sale are a component of comprehensive income.
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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 derivative 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. The FASB has also issued SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities-Deferral of the Effective
Date of FASB Statement No. 133." SFAS No. 137 defers the effective date of
SFAS No. 133 to be effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000. 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.
In October 1998, the FASB issued SFAS No. 134, "Accounting for Mortgage-Backed
Securities Retained after the Securitization of Mortgage Loans Held for Sale
by a Mortgage Banking Enterprise." SFAS No. 134 amends SFAS No. 65,
"Accounting for Certain Mortgage Banking Activities" and SFAS No. 115
"Accounting for Certain Investments in Debt and Equity Securities" to require
that after the securitization of mortgage loans held for sale, an entity
engaged in mortgage banking activities classify the resulting mortgage-backed
securities or other retained interests based on its ability and intent to sell
or hold those investments. The statement is effective for the first fiscal
quarter beginning after December 15, 1998. The adoption of SFAS No. 134 did
not have a material impact on the Company.
MANAGEMENT's DISCUSSION AND ANALYSIS
Comparison of Financial Condition at December 31, 1999 and March 31, 1999
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Total assets decreased by approximately $420,000 to $31,768,000 at December
31, 1999, from $32,188,000 at March 31, 1999. Cash and cash equivalents
decreased by $1,179,000 to $695,000 at December 31, 1999, from $1,874,000 at
March 31, 1999. The decrease represented the outflow of cash associated with
the increase in net loans, purchase of office properties and equipment,
payment of dividends, and the purchase of available-for-sale securities and
Treasury Stock, offset by the maturity and sale of available-for-sale
securities, principal collected on mortgage-backed securities, and increase in
depositors' investment in funds. Investment securities decreased $802,000
from $5,259,000 at March 31, 1999, to $4,457,000 at December 31, 1999. The
decrease was the result of $900,000 in matured U.S. Agency securities, sale of
$400,000 in U.S. Agency securities, $198,000 in principal collected on
mortgage-backed securities, and the decrease in the market value of
available-for-sale securities in the amount of $359,000, offset by the
purchase of U.S. Agency securities in the amount of $1,050,000. Net loans
receivable increased $920,000 from $24,320,000 at March 31, 1999, to
$25,240,000 at December 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 competitive
pricing of the Bank's loan products. Office property and equipment increased
by $530,000 from $488,000 at March 31, 1999, to $1,018,000 at
December 31, 1999, which was direct result of the purchase of land and
initial construction costs of a new branch office in Parkersburg, West Virginia.
Total liabilities increased $8,000 from $22,396,000 at March 31, 1999, to
$22,404,000 at December 31, 1999. The increase was a result of the increase
in deposits by $167,000 from $20,848,000 at March 31, 1999, to $21,015,000 at
December 31, 1999. This increase primarily represents funds invested by
depositors because of the stability of the Bank's deposit account interest
rates. The increase was offset by a decrease in deferred income taxes and
accrued interest payable and other liabilities. Deferred income taxes
decreased in the amount of $128,000 from $359,000 at March 31, 1999, to
$231,000 at December 31, 1999, which was a result of the tax effect on the
decrease in the market value of available-for-sale securities during the
period. Interest payable and other liabilities decreased in the amount of
$32,000 from $190,000 at March 31, 1999, to $158,000 at December 31, 1999.
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Stockholders' equity decreased $428,000 to $9,364,000 at December 31, 1999,
compared to $9,792,000 at March 31, 1999. The decrease was attributable to
the payment of dividends in the amount of $174,000, purchase of treasury
shares in the amount of $323,000, a $231,000 decrease in the market value of
available-for-sale securities, net of deferred taxes, offset by net income of
$203,000 and amortization of shares in the ESOP and RRP in the amount of
$97,000 for the nine month period.
Comparison of the Results of Operations for the Three Months Ended
- ------------------------------------------------------------------
December 31, 1999 and 1998
- --------------------------
Net income decreased by $31,000, or 31.3%, from net income of $97,000 for the
three months ended December 31, 1998, to net income of $66,000 for the three
month period ended December 31, 1999.
Interest and dividend income decreased $21,000, or 3.5%, to $569,000 for the
three months ended December 31, 1999, compared to $590,000 for the three
months ended December 31, 1998. The decrease in interest and dividend income
was a result of a decrease in interest on investments of $22,000, or 25.9%,
while interest income on loans remained constant. Interest income on
investments decreased as a result of the decrease in the average balance of
investments by $3,400,000 for the three months ended December 31, 1999.
Interest expense increased by $3,000 for the three months ended December
31,1999, to $234,000 from $231,000 for the same period in 1998. The increase
is attributed to an increase in the average balance of interest bearing
deposits of $695,000, or 2.3%.
Management regularly performs an analysis to identify the inherent risk of
loss in its loan portfolio. This analysis includes evaluation of
concentrations of credit, past loss experience, current economic conditions,
amount and composition of the loan portfolio (including loans being
specifically monitored by management), estimated fair value of underlying
collateral, loan commitments outstanding, delinquencies, and other factors.
Based on this analysis, management established an allowance for loan losses.
The allowance for loan losses is adjusted periodically by a provision for loan
losses which is charged to operations based on management's evaluation of the
losses that may be incurred in the Bank's loan portfolio. The provision for
loan losses decreased by $350, to $950, for the three months ended December
31, 1999, compared to $1,300 for the same period in 1998.
The Bank will continue to monitor its allowance for loan losses and make
future additions to the allowance through the provision for loan losses as
economic conditions indicate. Although the Bank maintains its allowance for
loan losses at a level that it considers to be adequate to provide for the
inherent risk of loss in its loan portfolio, there can be no assurance that
future losses will not exceed estimated amounts or that additional provisions
for loan losses will not be required in future periods. In addition, the
Bank's determination as to the amount of its allowance for loan losses is
subject to review by its primary federal regulator, the Office of Thrift
Supervision ("OTS"), as part of its examination process, which may result in
the establishment of an additional allowance based on the judgment of the OTS
after a review of the information available at the time of the OTS
examination.
Noninterest income remained constant for the three months ended December 31,
1999, as compared to the same period in 1998.
Noninterest expense increased by $20,000 from $220,000 for the three months
ended December 31, 1998, to $240,000 for the three months ended December 31,
1999. Compensation and employee benefits increased by $15,000, or 12.0%, from
$123,000 for the three months ended December 31, 1998, to $138,000 for the
three months ended December 31, 1999. The increase is due to compensation
costs associated with the addition of one employee.
Income tax expense decreased by $13,000 from $51,000 for the three months
ended December 31, 1998, to $38,000 for the three months ended December 31,
1999, attributable to a decrease in pre-tax income.
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12
Comparison of the Results of Operations for the Nine Months Ended December 31,
- ------------------------------------------------------------------------------
1999 and 1998
- -------------
Net income decreased $103,000, or 34%, from net income of $306,000 for the
nine months ended December 31, 1998, to net income of $203,000 for the nine
months ended December 31, 1999.
Interest and dividend income decreased $60,000, or 3.4%, to $1,719,000 for the
nine months ended December 31, 1999, compared to $1,779,000 for the nine
months ended December 31, 1998. The decrease in interest and dividend income
was due a decrease in interest on loans of $26,000, or 1.7%, and by a decrease
in interest on investments of $38,000, or 14.9%. The decrease in interest on
loans was due to a decline in the average yield on loans from 8.38% for the
nine months ended December 31, 1998, to 7.94%, for the same period in 1999.
Interest on investments decreased for the nine months ended December 31, 1999,
as compared to December 31, 1998, as a result of a decrease in the average
balance of investments of $2,400,000 from $7,100,000 for the 1998 period to
$4,700,000 for the 1999 period.
Interest expense increased $35,000, or 5.2%, for the nine months ended
December 31, 1999, to $705,000 as compared to $670,000 for the same period in
1998. The increase was a result of an increase in the average balance of
interest bearing deposits of $633,000 for the nine months ended December 31,
1999, over the same period in 1998. Interest on advances from the Federal
Home Loan Bank increased $20,000 for the nine months ended December 31, 1999,
as compared to the same period in 1998. The increase was the direct result of
the $1.0 million advance being outstanding for the entire 1999 period, but was
outstanding only during a portion of the nine month period ending December 31,
1998.
Management regularly performs an analysis to identify the inherent risk of
loss in its loan portfolio. This analysis includes evaluation of
concentrations of credit, past loss experience, current economic conditions,
amount and composition of the loan portfolio (including loans being
specifically monitored by management), estimated fair value of underlying
collateral, loan commitments outstanding, delinquencies, and other factors.
Based on this analysis, management established an allowance for loan losses.
The allowance for loan losses is adjusted periodically by a provision for loan
losses which is charged to operations based on management's evaluation of the
losses that may be incurred in the Bank's loan portfolio. The provision for
loan losses increased by $745, to $3,095, for the nine months ended December
31, 1999, compared to $2,350 for the same period in 1998.
The Bank will continue to monitor its allowance for loan losses and make
future additions to the allowance through the provision for loan losses as
economic conditions indicate. Although the Bank maintains its allowance for
loan losses at a level that it considers to be adequate to provide for the
inherent risk of loss in its loan portfolio, there can be no assurance that
future losses will not exceed estimated amounts or that additional provisions
for loan losses will not be required in future periods. In addition, the
Bank's determination as to the amount of its allowance for loan losses is
subject to review by its primary federal regulator, the Office of Thrift
Supervision ("OTS"), as part of its examination process, which may result in
the establishment of an additional allowance based on the judgment of the OTS
after a review of the information available at the time of the OTS
examination.
Noninterest income decreased by $169,000 from $196,000 for the nine months
ended December 31, 1998, to $27,000 for the nine months ended December 31,
1999. The decrease is primarily attributable to a gain on the sale of
available-for-sale securities in the 1998 period of $168,000 which was not
present in the 1999 period.
Noninterest expense decreased by $92,000 from $825,000 for the nine months
ended December 31, 1998, to $733,000 for the nine months ended December 31,
1999. Compensation and employee benefits decreased by $125,000 from $533,000
for the nine months ended December 31, 1998, to $408,000, for the nine months
ended December 31, 1999, attributable to compensation costs of $166,000
associated with the Restricted Stock Plan and a one time director retirement
plan implemented in the 1998 period. The decrease in compensation and
employee benefits was offset by a $23,000 loss on the sale of
available-for-sale securities during the 1999 period which did not occur
during the nine months ended December 31, 1998.
<PAGE>
13
Income tax expense decreased by $70,000 from $173,000 for the nine months
ended December 31, 1998, to $103,000 for the nine months ended December 31,
1999. The decrease is due a decrease in pre-tax income.
Year 2000
- ---------
Rapid and accurate data processing is essential to the Bank's operations.
Many computer programs could only distinguish the final two digits of the year
entered (a common programming practice in earlier years) and were 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
evaluated both information technology (computer systems) and non-information
technology systems (e.g., vault timers and electronic door locks). Based upon
such evaluations, management determined that the Bank had 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 upgraded its computer system to address the
Year 2000 risk. The upgrade costs did not have a material impact on the
Company's consolidated financial position or results of operations.
COMPUTERS OF OTHERS USED BY THE BANK's BORROWERS. The Bank evaluated most of
its borrowers and determined that the Year 2000 problem did not, on an
aggregate basis, impact their ability to make payments to the Bank. The Bank
determined that most of its residential borrowers were not dependent on their
home computers for income and that none of their commercial borrowers were so
large that a Year 2000 problem rendered them unable to collect revenue or rent
and, in turn, be unable to continue to make loan payments to the Bank. The
Bank did not incur material costs to address this risk area and determined
they were Year 2000 compliant in this area.
COMPUTERS OF OTHERS WHO PROVIDE THE BANK WITH DATA PROCESSING. The computers
of the third party data processing providers proved to be compliant with the
Year 2000. There was no significant impact on the Bank's financial condition
and results of operation relating to the third party service bureau which
provides most of the Bank's data processing. Other data processing
providers, used by the Bank to a much lesser extent, were Year 2000 compliant.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Bank's primary sources of funds are deposits, amortization and prepayment
of loans, 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. In addition,
the Bank invests excess funds in overnight deposits which provide liquidity to
meet lending requirements.
The Bank has other sources of liquidity if a need for additional funds arises.
Additional sources of liquidity include funds available from the Federal Home
Loan Bank ("FHLB") of Pittsburgh amounting to $20.9 million. As of December
31, 1999, the Bank had $1 million in outstanding advances from the FHLB.
As of December 31, 1999, the Bank had $521,000 in outstanding mortgage and
construction loan commitments. Management believes that it has adequate
sources to meet the actual funding requirements.
Management monitors the Bank's tangible, core, and risk-based capital ratios
in order to assess compliance with OTS regulations. At December 31, 1999, the
Bank exceeded the minimum capital ratios requirements imposed by the OTS.
<PAGE>
14
At December 31, 1999, the Bank's capital ratios were as follows:
Bank
Requirement Actual
----------- -------
Tangible capital 1.50% 26.38%
Core capital 4.00% 26.38%
Risk-based capital 8.00% 52.22%
RISK ELEMENTS
The table below presents information concerning nonperforming assets including
nonaccrual loans, renegotiated loans, loans 90 days or more past due, other
real estate loans, and repossessed assets. A loan is classified as nonaccrual
when, in the opinion of management, there are serious doubts about
collectibility of interest and principal. At the time the accrual of interest
is discontinued, future income is recognized only when cash is received.
Renegotiated loans are those loans which terms have been renegotiated to
provide a reduction or deferral of principal or interest as a result of the
deterioration of the borrower.
December 31, March 31,
1999 1999
-------- -------
(dollars in thousands)
Loans on nonaccrual basis $ 44 $ 2
Loans past due 90 days or more - -
Renegotiated loans - -
------- --------
Total nonperforming loans 44 2
Other real estate - -
Repossessed assets - -
------- --------
Total nonperforming assets $ 44 $ 2
======= ========
Nonperforming loans as a percent of total loans 0.17% 0.01%
======= ========
Nonperforming assets as a percent of total assets 0.14% 0.01%
======= ========
Allowance for loan losses to nonperforming loans 394.32% 8612.50%
======= ========
Management monitors impaired loans on a continual basis. As of December 31,
1999, the Company had no impaired loans.
During the nine months ended December 31, 1999, loans increased $923,000 and
nonperforming loans increased $42,000 while the allowance for loan losses
increased $1,250 for the same period. The percentage of allowance for loan
losses to loans outstanding remained .7% during this time period. The
collateral requirements on such loans reduce the risk of potential losses to
an acceptable level in management's opinion.
<PAGE>
15
PART II. OTHER INFORMATION
Item 1. Legal proceedings
The registrant was not engaged in any material pending legal proceedings
as of the date of this Report. From time to time, the Bank is a party to
legal proceedings within the normal course of business wherein it enforces its
security interest in loans made by it, and other matters of a like kind.
Item 2. Changes in securities
NONE
Item 3. Defaults upon senior securities
NONE
Item 4. Submission of matters to a vote of security holders
NONE
Item 5. Other information
Any proposals of shareholders intended to be included in the Company's
proxy statement and proxy card for the 2000 Annual Meeting of Shareholders
should be sent to the Company by certified mail and must be received by the
Company not later than May 15, 2000. In addition, if a shareholder intends to
present a proposal at the 2000 Annual Meeting without including the proposal
in the proxy materials related to that meeting and, if the proposal is not
received by May 15, 2000, then the proxies designated by the Board of
Directors of the Company for the 2000 Annual Meeting of Shareholders of the
Company may vote in their discretion on any such proposal any shares for which
they have been appointed proxies without mention of such matter in the proxy
statement or on the proxy card for such meeting.
Item 6. Exhibits and Reports on Form 8-K
Financial Data Schedule
<PAGE>
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SISTERSVILLE BANCORP, INC.
Date: February 10, 2000 By: /s/ Stanley M. Kiser
-------------------------------------------
Stanley M. Kiser
President and Chief Executive Officer
(Duly Authorized Officer)
Date: February 10, 2000 By: /s/ Stanley M. Kiser
-------------------------------------------
Stanley M. Kiser
President and Chief Executive Officer
(Principal Executive and Financial Officer)
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