<PAGE> 1
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from________ to________.
Commission File number 333-93437
CENTRA FINANCIAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
WEST VIRGINIA 55-0770610
(State or other jurisdiction of (I.R.S. Employer Identification No)
incorporation or organization)
990 ELMER PRINCE DRIVE
P. O. BOX 656
MORGANTOWN, WEST VIRGINIA 26507-0656
(Address of principal executive offices, zip code)
304-598-2000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, address, and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 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 [ ] NO [ X ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
As of March 31, 2000, the number of shares outstanding of the
registrant's only class of common stock was 1,200,000.
Transitional Small Business format (check one): YES [ ] NO [ X ]
<PAGE> 2
Centra Financial Holdings, Inc.
Part I. Financial Information
Item 1. Financial Statements
The unaudited interim consolidated financial statements of Centra
Financial Holdings, Inc. (Centra or Registrant) listed below are
included on pages 2-5 of this report.
Consolidated Statements of Condition at March 31, 2000 and
December 31, 1999
Consolidated Statement of Income for the Quarter ended
March 31, 2000
Consolidated Statement of Stockholders' Equity at
March 31, 2000
Consolidated Statement of Cash Flows for the Quarter Ended
March 31, 2000
Notes to Consolidated Financial Statements
These consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for
interim financial information and with instructions to Form
10-QSB and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all the information and footnotes required by generally
accepted accounting principles for annual year-end financial
statements. In the opinion of management, all adjustments
considered necessary for a fair presentation, have been included
and are of a normal recurring nature. Operating results for the
three-month period ended March 31, 2000, are not necessarily
indicative of the results that may be expected for the year
ending December 31, 2000.
The Private Securities Litigation Act of 1995 indicates that the
disclosure of forward-looking information is desirable for
investors and encourages such disclosure by providing a safe
harbor for forward-looking statements that involve risk and
uncertainty. This Quarterly Report on Form 10-QSB contains
forward-looking statements that involve risk and uncertainty. In
order to comply with the terms of the safe harbor, the
corporation notes that a variety of factors could cause Centra's
actual results and experience to differ materially from the
anticipated results or other expectations expressed in those
forward-looking statements.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Management's Discussion and Analysis of Results of Operations and
Financial Condition is included on pages 7-16 of this report.
Item 3. Quantitative and Qualitative Disclosure of Market Risk
The information called for by this item is provided under the
caption "Market Risk Management" under Item 2. Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
Part II. Other Information
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
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Part I. Financial Information
ITEM 1. FINANCIAL STATEMENTS
Centra Financial Holdings, Inc. and Subsidiaries
Consolidated Statements of Condition
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
2000 1999
------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,191,952 $ 25,000
Interest-bearing deposits in other banks 56,000 31,011
Federal funds sold 9,625,090 2,637,541
------------------------------------
TOTAL CASH AND CASH EQUIVALENTS 10,873,042 2,693,552
Available-for-sale securities, at fair value 10,921,437 7,383,171
Loans, net of unearned income 7,667,004 --
Allowance for loan losses (115,000) --
------------------------------------
NET LOANS 7,552,004 --
Premises and equipment 1,110,760 316,200
Other assets 704,893 120,180
------------------------------------
TOTAL ASSETS $31,162,136 $10,513,103
====================================
LIABILITIES
Demand $ 631,993 $ --
Interest-bearing demand 579,927 --
Savings and money market accounts 15,237,184 --
Savings certificates 854,027 --
Large denomination certificates 1,315,095 --
------------------------------------
TOTAL DEPOSITS 18,618,226 --
Short-term borrowings 1,245,290 --
Other liabilities 218,961 199,254
------------------------------------
TOTAL LIABILITIES 20,082,477 199,254
STOCKHOLDERS' EQUITY
Common stock, $1 par value, 1,900,000 authorized,
1,200,000 outstanding 1,200,000 1,200,000
Additional paid-in capital 10,800,000 10,800,000
Stock subscriptions receivable - (1,202,000)
Accumulated deficit (894,112) (464,786)
Accumulated other comprehensive loss (26,229) (19,365)
------------------------------------
TOTAL EQUITY 11,079,659 10,313,849
------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $31,162,136 $10,513,103
====================================
</TABLE>
2
<PAGE> 4
Centra Financial Holdings, Inc. and Subsidiaries
Consolidated Statement of Income
Quarter Ended March 31, 2000
<TABLE>
<CAPTION>
<S> <C>
INTEREST INCOME
Loans, including fees $ 65,099
Securities available-for-sale 102,619
Interest-bearing bank balances 639
Federal funds sold 77,980
---------------
TOTAL INTEREST INCOME 246,337
INTEREST EXPENSE
Deposits 67,132
Short-term borrowings 5,590
---------------
TOTAL INTEREST EXPENSE 72,722
---------------
NET INTEREST INCOME 173,615
Provision for loan losses 115,000
---------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 58,615
OTHER INCOME
Service charges on deposit accounts 429
Safe deposit 1,169
Other 2,201
---------------
TOTAL OTHER OPERATING REVENUE 3,799
Loss on sales of securities (495)
---------------
TOTAL OTHER INCOME 3,304
OTHER EXPENSE
Salary and employee benefits 224,943
Occupancy expense 74,821
Equipment expense 32,257
Advertising 12,788
Professional fees 9,155
Data processing 26,087
Other 111,194
---------------
TOTAL OTHER EXPENSE 491,245
Net loss before income tax expense (429,326)
Income taxes
Federal --
State --
---------------
TOTAL INCOME TAXES --
---------------
NET LOSS $(429,326)
===============
Loss per share (basic and diluted) $(0.04)
Weighted average shares outstanding (basic and diluted) 11,567,000
</TABLE>
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Centra Financial Holdings, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL STOCK OTHER
COMMON PAID-IN SUBSCRIPTIONS ACCUMULATED COMPREHENSIVE
STOCK CAPITAL RECEIVABLE DEFICIT LOSS TOTAL
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 2000 $1,200,000 $10,800,000 $(1,202,000) $(464,786) $(19,365) $10,313,849
Issuance of common stock 1,202,000 -- -- 1,202,000
Comprehensive loss:
Net loss for the three
months ended March 31, 2000 -- -- -- (429,326) -- (429,326)
Other comprehensive loss:
Unrealized loss on
available-for-sale
securities of $7,359,
net of reclassification
adjustment for losses
included in net income
of $495 (6,864) (6,864)
-------------
Total comprehensive loss (436,190)
------------------------------------------------------------------------------------
Balance, March 31, 2000 $1,200,000 $10,800,000 $ -- $(894,112) $(26,229) $11,079,659
====================================================================================
</TABLE>
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Centra Financial Holdings, Inc. and Subsidiaries
Consolidated Statement of Cash Flows
Quarter Ended March 31, 2000
<TABLE>
<CAPTION>
<S> <C>
OPERATING ACTIVITIES
Net loss $ (429,326)
Adjustments to reconcile net loss to net cash used in operating activities:
Accretion of discounts on securities (62,664)
Provision for loan losses 115,000
Depreciation 20,000
Increase in accrued expenses 19,707
Increase in other assets (584,713)
----------------
NET CASH USED IN OPERATING ACTIVITIES (921,996)
INVESTING ACTIVITIES
Purchases of premises and equipment (814,560)
Purchases of available-for-sale securities (4,966,880)
Sales and maturities of securities 1,484,414
Net increase in loans made to customers (7,667,004)
----------------
NET CASH USED IN INVESTING ACTIVITIES (11,964,030)
FINANCING ACTIVITIES
Net increase in demand, savings and money market accounts 16,449,104
Net increase in savings certificates 2,169,122
Net increase in securities sold under agreement to repurchase 1,245,290
Proceeds of stock offering 1,202,000
----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 21,065,516
----------------
INCREASE IN CASH AND CASH EQUIVALENTS 8,179,490
Cash and cash equivalents, beginning of period 2,693,552
----------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 10,873,042
================
</TABLE>
5
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Centra Financial Holdings, Inc.
Notes to Consolidated Financial Statements
NOTE A - ORGANIZATION
Centra Bank, Inc. (Centra Bank or the Company) is a newly formed (September 27,
1999), full service commercial bank chartered under the laws of the State of
West Virginia. Centra Bank commenced operations on February 14, 2000. Centra
Financial Holdings, Inc. (Centra Financial) was formed on October 25, 1999 for
purposes of becoming a one bank holding company to hold all of the outstanding
stock of Centra Bank. It is anticipated that shares of Centra Bank will be
exchanged for shares of Centra Financial in the second quarter of 2000. The
Company expensed all costs of start-up activities including activities related
to organizing the new entity. Start-up costs include training costs, consulting
fees, utilities and related expenses during the pre-opening period.
NOTE B - BASIS OF PRESENTATION
The accounting and reporting policies of Centra conform to generally accepted
accounting principles and practices in the banking industry. The preparation of
the financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates. All significant intercompany accounts
and transactions have been eliminated in consolidation. The interim financial
information included in this report is unaudited. In the opinion of management,
all adjustments necessary for a fair presentation of the results of the interim
periods have been made. These notes are presented in conjunction with the Notes
to Financial Statements included in the audited financial statements of Centra
Bank, Inc. as of and for the period then ended December 31, 1999, filed on Form
S-4 with the Securities and Exchange Commission on March 14, 2000.
NOTE C - NET INCOME PER COMMON SHARE
Basic net income per common share excludes any dilutive effects of stock options
and is computed by dividing net income by the average common shares outstanding
during the period. Diluted net income per common share is computed by dividing
net income by the average common shares outstanding during the year adjusted for
the dilutive effect of options under Centra's stock option plan (the Plan). No
stock options have been issued under the Plan and, accordingly, the
weighted-average shares are the same for both the basic and diluted net income
per common share computations.
NOTE D - ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities," (FAS 133) which requires all derivatives to
be recorded on the balance sheet at fair value and establishes "special"
accounting for fair value, cash flow, and foreign currency hedges. FAS 133 is
effective, as amended, for quarterly and annual reporting beginning January 1,
2001. This Statement is not expected to impact Centra since Centra currently
does not have derivative financial instruments.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following data should be read in conjunction with the unaudited consolidated
financial statements and the management's discussion and analysis that follows:
<TABLE>
<CAPTION>
<S> <C>
Quarter Ended March 31, 2000
Net loss to:
Average assets (9.91)%
Average stockholders' equity (15.16)
Net interest margin 4.53
Efficiency ratio (1) 276.89
Average stockholders' equity to average assets 65.38
Total loans to total deposits (end of period) 41.18
Allowance for loan losses to total loans (end of period) 1.50
Capital ratios:
Tier 1 capital ratio 98.04
Risk-based capital ratio 98.28
Leverage ratio 63.83
Cash dividends as a percentage of net income 0.00
Per share data:
Book value per share $ 9.23
Market value per share, end of period (closing price) 10.00
Basic and diluted loss per share (0.04)
</TABLE>
(1) The efficiency ratio is a ratio of non-interest expense as a
percentage of net interest income plus non-interest income. All
non-recurring items are removed from the calculation of the
Centra's efficiency ratio.
INTRODUCTION
The following discussion and analysis of the consolidated financial statements
of Centra is presented to provide insight into management's assessment of the
financial results. Centra's wholly-owned banking subsidiary, Centra Bank, Inc.,
is the primary financial entity in this discussion. Unless we note otherwise,
this discussion will be in reference to the bank.
The bank began operations February 14, 2000 at 990 Elmer Prince Drive in
Morgantown, West Virginia. The bank provides a full array of financial products
and services to its customers, including traditional banking products such as
deposit accounts, lending products, debit cards, an Automated Teller Machine,
and safe deposit rental facilities.
Centra was chartered by the State of West Virginia and is subject to regulation,
supervision, and examination by the Federal Deposit Insurance Corporation
("FDIC") and the West Virginia Department of Banking. The bank is not a member
of the Federal Reserve System. The bank is a member of the Federal Home Loan
Bank of Pittsburgh.
You should read this discussion and analysis in conjunction with the prior
year-end audited bank financial statements and footnotes thereto included in a
filing on Form S-4 on March 14, 2000 and the ratios, statistics, and discussions
contained elsewhere in this Form 10-QSB.
7
<PAGE> 9
RESULTS OF OPERATIONS
Overview of the Statement of Income
For the quarter ended March 31, 2000, Centra incurred a loss of $429,326. This
loss is attributable to start up operating expenses that were only partially
offset by net interest income and other operating revenue.
Net interest income totaled $173,615. This was offset by a loan loss provision
of $115,000. The provision for loan losses, which is a product of management's
formal analysis, is designed to reflect the quality of the loan portfolio and
management of the inherent credit risks therein. It has been management's intent
to maintain the allowance for loan losses at 1.5% of total loans during the
start-up phase of bank operations.
Non-interest income, exclusive of security transactions, totaled $3,799. This
income is minimal due to the short period of time that the bank was in
operations. A loss of $495 was incurred on security transactions due to the
liquidation of securities to fund loan growth.
INTEREST INCOME AND EXPENSE
Net interest income is the amount by which interest income on earning assets
exceeds interest paid on interest-bearing liabilities. Interest earning assets
include loans and investment securities. Interest-bearing liabilities include
interest-bearing deposits and borrowed funds. Net interest income remains the
primary source of revenue for the bank. Changes in market interest rates, as
well as changes in the mix and volume of interest-earning assets and
interest-bearing liabilities, impact net interest income.
The bank's interest earning assets and interest-bearing liabilities changed
significantly during the first quarter of 2000. Upon opening, the bank began
accepting all forms of customer deposits as well as offering commercial,
consumer and mortgage products. Therefore, there has been a significant change
in the mix of both assets and liabilities of the bank.
Net interest margin is calculated by dividing net interest income by interest
earning assets. This ratio serves as performance measurement of the net interest
revenue stream generated by the bank's balance sheet. The net interest margin
for the first quarter of 2000 was 4.53%. This margin will change as the ratio of
"free" funds (non-interest bearing demand accounts and stockholders' equity)
changes and assets are re-deployed from investments and federal funds sold to
loans. Average loan balances have grown to $2,940,154 during the first quarter
of 2000.
Management continuously monitors the effects of net interest margin on the
performance of the bank. Net interest margin in future periods will be impacted
by growth and mix of the balance sheet. Management believes that future net
interest margins will continue to be pressured by the continual shifting of
funding sources due to intense competition for deposits.
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<PAGE> 10
AVERAGE BALANCES AND INTEREST RATES
MARCH 31, 2000 - QUARTER TO DATE
<TABLE>
<CAPTION>
INTEREST
AVERAGE INCOME/
BALANCE EXPENSE YIELD
-----------------------------------------
<S> <C> <C> <C>
ASSETS
Interest bearing deposits in banks $ 28,308 $ 639 9.08%
Federal funds sold 5,278,396 77,980 5.94
Investments:
U.S. treasuries 499,314 7,006 5.61
U.S. agencies 6,643,560 95,613 5.76
Loans:
Commercial 2,922,014 61,543 8.47
Consumer 21,091 758 14.45
Real estate 61,543 2,798 18.19
Allowance for loan losses (32,247)
-----------------------------------------
NET LOANS 2,972,401 65,099 8.81
-----------------------------------------
Total earning assets 15,421,979 246,337 6.42%
Cash and due from banks 640,457
Other assets 1,355,606
--------------
Total assets $17,418,042
==============
LIABILITIES
Deposits:
Non-interest bearing demand $ 307,618 $ -- 0.00%
NOW 166,646 1,313 3.17
Money market checking 4,501,626 57,460 5.13
Savings 25,290 151 2.40
IRAs 16,463 315 7.70
CDs 464,763 7,893 6.83
Short-term borrowings 358,715 5,590 6.27
-----------------------------------------
TOTAL INTEREST BEARING LIABILITIES 5,841,121 72,722 5.01
-----------
Other liabilities 189,834
--------------
TOTAL LIABILITIES 6,030,955
EQUITY
Common stock 1,200,000
Paid-in capital 10,800,000
Undivided profits (591,688)
Unrealized gains (losses) (21,225)
--------------
TOTAL EQUITY 11,387,087
--------------
TOTAL LIABILITIES AND EQUITY $17,418,042
==============
Net interest spread 1.42
Impact of non-interest bearing funds on margin 3.11
---------
Net interest income-margin $173,615 4.53%
========================
</TABLE>
PROVISION FOR LOAN LOSSES
The provision for loan losses is based upon management's evaluation of the
adequacy of the allowance for loan losses and is reflective of the quality of
the portfolio and overall management of the inherent credit risk. In the first
quarter of 2000, the bank recorded a provision for loan losses of $115,000.
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Due to start up nature of the bank and management's intention to maintain an
allowance for loan losses of 1.5% of total loans outstanding, management
anticipates the bank's loan loss provision for the year to approximate 1.5% of
total loans. Management will continually evaluate the adequacy of the allowance
for loan losses in consideration of loan delinquencies, portfolio risk and
general economic conditions in our market and in the local and national economy.
NON-INTEREST INCOME
The bank's non-interest income is generated from cost recovery based fees
related to deposit accounts and electronic banking revenue. Due to the start-up
nature of the bank, non-interest income totaled $3,304 for the first quarter of
2000. The bank has undertaken a strategic philosophy of offering free checking
with minimal fees. Therefore, non-interest income is expected to be below our
peers as the bank gains market share.
NON-INTEREST EXPENSE
For the three months ended March 31, 2000, non-interest expense totaled
$491,245. Non-interest expense reflects all costs for the first quarter while
the bank opened on February 14, 2000. This "mismatch" of expenses and revenues
should be reduced as asset growth occurs. The predominant expense areas during
the first quarter were salaries and benefits and occupancy expense.
For the quarter ended March 31, 2000, depreciation of leasehold improvements and
furniture, fixtures and equipment totaled $20,000. Net occupancy expense totaled
$74,821 in the first quarter of 2000. Depreciation expenses will increase in
subsequent quarters due to full quarter's of operations.
Maintaining acceptable levels of non-interest expense and operating efficiency
are key performance indicators for the bank. The financial services industry
uses the efficiency ratio (total non-interest expense less amortization of
intangibles and non-recurring items as a percentage of the aggregate of
fully-tax equivalent net interest income and non-interest income) as a key
indicator of performance. Gains and losses on sales of investment securities are
not included in the calculation of the bank's efficiency ratio. In the first
quarter of 2000, the bank's efficiency ratio was 277% compared to industry
averages of approximately 55%. This variation is due to incurring start up and
normal operating expenses during the first quarter but generating relatively few
interest earning assets. This ratio will decrease in future quarters.
RETURN ON ASSETS AND EQUITY
Returns on assets (ROA) and equity (ROE) were (9.91)% and (15.16)% respectively.
These negative returns are the result of start up costs and minimal interest
earning assets. It is anticipated that these losses will diminish in future
periods.
The bank is considered well-capitalized under regulatory and industry standards
of risk-based capital.
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<PAGE> 12
INCOME TAX EXPENSE
The bank has not recorded income tax expense (benefit) during the first quarter
of 2000. While the bank is generating net operating losses to reduce future tax
liabilities, a valuation allowance has been created to eliminate the tax benefit
from the financial statements.
FINANCIAL CONDITION
OVERVIEW OF THE STATEMENT OF CONDITION
Total assets increased $20.6 million since December 31, 1999. This is
attributable to the bank commencing operations on February 14, 2000. Asset
growth has occurred in all categories of deposits, short-term borrowings and
loans. Investment securities and federal funds sold are utilized to temporarily
invest funds pending anticipated loan demand.
Deposits have grown to $18.6 million as of March 31, 2000. Short-term borrowings
have increased to $1.2 million.
Stockholders' equity has increased approximately $770,000 due to a combination
of the $1.2 million collection of stock receivables from year-end offset by the
first quarter loss.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents totaled $10.9 million as of March 31, 2000. This is an
increase of $8.2 million from year-end. These balances will decrease in
subsequent quarters due to loan demand and the acquisition of short-term
government securities in lieu of federal funds sold.
Management believes the current balance of cash and cash equivalents adequately
serves the bank's liquidity and performance needs. Total cash and cash
equivalents fluctuate on a daily basis due to transactions in process and other
liquidity needs. Management believes the liquidity needs of the bank are
satisfied by the current balance of cash and cash equivalents, readily available
access to traditional and non-traditional funding sources, and the portions of
the investment and loan portfolios that mature within one year. These sources of
funds should enable the bank to meet cash obligations and off-balance sheet
commitments as they come due.
INVESTMENT SECURITIES
Investment securities totaled $10.9 million as of March 31, 2000. U.S.
securities comprise the majority of the portfolio. This is an increase of $3.5
million from year-end.
All of the bank's investment securities are classified as available-for-sale.
Management believes the available-for-sale classification provides flexibility
for the bank in terms of selling securities as well as interest rate risk
management opportunities. At March 31, 2000, the amortized cost of the bank's
investment securities totaled $10.9 million, resulting in unrealized
depreciation in the investment portfolio of $26 thousand and a corresponding
decrease in the bank's equity of $26 thousand.
Management monitors the earnings performance and liquidity of the investment
portfolio on a regular basis through Asset/Liability Committee meetings. The
group also monitors net interest income, sets pricing guidelines, and manages
interest rate risk for the bank. Through active balance sheet management and
analysis of the investment securities portfolio, the bank maintains
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<PAGE> 13
sufficient liquidity to satisfy depositor requirements and the various credit
needs of its customers. Management believes the risk characteristics inherent in
the investment portfolio are acceptable based on these parameters.
LOANS
The bank's lending is primarily focused in North Central, West Virginia, and
consists primarily of retail lending, which includes single-family residential
mortgages, consumer lending, and commercial lending. Loans totaled $7.7 million
as of March 31, 2000.
The following table details total loans outstanding as of March 31, 2000:
(dollars in thousands)
Commercial $7,002
Real estate, construction --
Real estate, mortgage 548
Consumer 117
----------
TOTAL LOANS $7,667
==========
Commercial loans constitute the largest component of the lending portfolio. This
is the result of a concerted effort to attract quality commercial loans while
maintaining appropriate underwriting standards. Management expects commercial
loan demand to continue to be strong during 2000. The bank will continue to
selectively lend to customers outside its primary market area.
LOAN CONCENTRATION
While the bank does have significant commercial loan balances, the bank does not
have a concentration of its loan portfolio in any one industry. Due to the
recent opening of the bank, management has been working closely with the West
Virginia Department of Banking to assure that lending transactions meet
applicable state and federal regulations.
ALLOWANCE FOR LOAN LOSSES
The allowance is maintained at a level believed to be adequate by management to
absorb probable losses in the loan portfolio. Management's determination of the
adequacy of the allowance is based on an evaluation of the portfolio, current
economic conditions, volume and composition of the portfolio, and other inherent
risks in the portfolio, current economic conditions, volume and composition of
the portfolio, and other risks inherent in the portfolio.
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<PAGE> 14
The following table presents activity in the bank's allowance for loan losses
for the first quarter of 2000:
Allowance for losses, January 1 $ --
Charge-offs --
Recoveries --
----------
Net charge-offs --
Provision for loan losses 115
----------
Allowance for loan losses $115
==========
The bank has no nonperforming, nonaccrual, other real estate owned, or
delinquencies as of March 31, 2000.
Management monitors the loan portfolio through its Loan Review Function to
determine the adequacy of the allowance for loan losses and considers it to be
adequate at March 31, 2000. Management expects future loan loss provisions to
continue to be significant in that 1.5% of new loans translates into the loan
loss provision. The allowance for loan losses of 1.5% of total loans at March
31, 2000 is deemed to be adequate to absorb losses inherent in the portfolio.
OTHER ASSETS
Other assets increased by $585,000 as a result of an increase in the cash
surrender value of life insurance policies purchased for certain executives of
the bank during the first quarter of 2000.
FUNDING SOURCES
The bank considers deposits, short-term borrowings, and long-term borrowings
when evaluating funding sources. Traditional deposits continue to be the most
significant source of funds for the bank, reaching $18.6 million at March 31,
2000.
Management believes that the deposit base remains the most significant funding
source for the bank and will continue to concentrate on balancing deposit growth
and adequate net interest margin to meet the bank's strategic goals. The bank
continues to offer a "special" 18-month and 30 month CD designed to compete with
CD pricing in the bank's markets.
Along with traditional deposits, the bank has access to both short-term and
long-term borrowings to fund its operations and investments. The bank's
short-term borrowings consisted of $1.2 million of corporate deposits held in
overnight repurchase agreements at March 31, 2000.
CAPITAL/STOCKHOLDERS' EQUITY
Centra sold 1.2 million shares of stock at $10 per share or a total of $12
million in a private offering during 1999 and completed the issuance in
February, 2000.
The primary source of funds for dividends to be paid by Centra Financial
Holdings, Inc. is dividends received from its subsidiary bank, Centra Bank, Inc.
Dividends paid by the subsidiary bank are subject to restrictions by banking
regulations. The most restrictive provision requires regulatory approval if
dividends declared in any year exceeds the year's retained net profits, as
defined, plus the retained net profits of the two preceding years. As of March
31, 2000, no such dividends have been paid and dividend payments are not
anticipated during the year. Centra Bank, Inc. will not pay dividends without
first obtaining the approval of the West Virginia Commissioner of Banking.
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<PAGE> 15
Centra is subject to various regulatory capital requirements administered by the
federal banking agencies. Under the capital adequacy guidelines and the
regulatory framework for prompt corrective action, Centra must meet specific
capital guidelines that involve quantitative measures of their assets,
liabilities and certain off-balance sheet items as calculated under regulatory
accounting practices. The capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings and
other factors. Failure to meet minimum capital requirements can initiate certain
mandatory, and possible discretionary, actions by regulators that, if
undertaken, could have a direct material effect on Centra's financial
statements.
MARKET RISK MANAGEMENT
The objective of the bank's Asset/Liability Management function is to maintain
consistent growth in net interest income within the bank's policy guidelines.
This objective is accomplished through management of the bank's balance sheet
liquidity and interest rate risk exposure based on changes in economic
conditions, interest rate levels, and customer preferences.
Liquidity measures an organization's ability to meet cash obligations as they
come due. During the quarter ended March 31, 2000, the bank generated cash
primarily from increases in deposit accounts. The bank used cash flows of $7.7
million for the origination of loans and $5.0 million to acquire short-term
government securities.
Additionally, management considers that portion of the loan portfolio that
matures within one year and the maturities within one year in the investment
portfolio as part of the bank's liquid assets. The bank's liquidity is monitored
by its Asset/Liability Committee, which establishes and monitors ranges of
acceptable liquidity. Management feels the bank's current liquidity position is
acceptable.
The principal function of interest rate risk management is to maintain an
appropriate relationship between those assets and liabilities that are sensitive
to changing market interest rates. The bank closely monitors the sensitivity of
its assets and liabilities on an ongoing basis and projects the effect of
various interest rate changes on its net interest margin. Interest sensitive
assets and liabilities are defined as those assets or liabilities that mature or
reprice within a designated time-frame. The difference between rate sensitive
assets and rate sensitive liabilities for a specified period of time is known as
"gap".
To aid in interest rate management, the bank anticipates using FHLB advances as
a low risk means of matching maturities of earning assets with interest bearing
funds to achieve a desired interest rate spread over the life of the earning
assets.
14
<PAGE> 16
A commonly used measure of interest rate risk is the gap report. A gap report
identifies the ratio of earning assets to interest bearing liabilities that will
mature or reprice within a given time period. A sensitivity ratio of greater
than 1.00 (positive gap) indicates that more earning assets than interest
bearing liabilities will be subject to interest rate repricing during a given
period. Thus, an increase in interest rates would tend to have a positive impact
on net interest income, while a decline in rates would tend to have the opposite
effect.
COMPARATIVE RATE SENSITIVITY SUMMARY
MARCH 31, 2000 (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
0-3 4-12 1-3 OVER 3
MONTHS MONTHS YEARS YEARS TOTAL
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EARNING ASSETS
Interest bearing deposits in banks $ 56 $ -- $ -- $ -- $ 56
Federal funds sold 9,625 -- -- -- 9,625
Investments 6,963 3,958 -- -- 10,921
Loans: --
Non real estate 6,923 27 52 430 7,432
Real estate -- 101 20 114 235
Allowance for loan losses (115) -- -- -- (115)
------------------------------------------------------
TOTAL EARNING ASSETS 23,452 4,086 72 544 28,154
INTEREST BEARING LIABILITIES
Deposits:
NOW 580 -- -- -- 580
Money market checking 15,146 -- -- -- 15,146
Savings -- -- 91 -- 91
CDs 235 -- 1,884 50 2,169
Short-term borrowings -- 1,245 -- -- 1,245
------------------------------------------------------
TOTAL INTEREST BEARING LIABILITIES 15,961 1,245 1,975 50 19,231
------------------------------------------------------
Interest sensitivity gap for the period $ 7,491 $ 2,841 $(1,903) $494 $ 8,923
------------------------------------------------------
Cumulative interest sensitivity gap $ 7,491 $10,332 $ 8,429 $8,923
======================================================
Cumulate rate sensitivity ratio 146.93% 328.19% 3.65% 1,088.00%
======================================================
</TABLE>
EFFECTS OF INFLATION ON FINANCIAL STATEMENTS
Substantially all of the bank's assets relate to banking and are monetary in
nature. Therefore they are not impacted by inflation to the same degree as
companies in capital-intensive industries in a replacement cost environment.
During a period of rising prices, a net monetary asset position results in loss
in purchasing power and conversely a net monetary liability position results in
an increase in purchasing power. In the banking industry, typically monetary
assets exceed monetary liabilities. Therefore as prices have recently increased,
financial institutions experienced a decline in the purchasing power of their
net assets.
FUTURE OUTLOOK
Results of operations in the first quarter of 2000 represent the infancy stage
of a typical de novo banking institution. The emphasis in future quarters will
be to attract depositors and deploy those funds in the lending function. The
critical challenge for the bank in the future will be the emphasis on customer
service with the highest quality products and technology and to achieve critical
mass to cover fixed costs inherent with the start-up of any new financial
institution.
15
<PAGE> 17
Future plans also include searching for additional branch locations that will
compliment our delivery system and enable the bank to service a broader customer
base. Also under consideration are additional ATM locations.
The bank is currently initiating internet and web banking. With this advanced
technology, the bank will be able to service all customers, regardless of
location and/or complexity.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK
The information called for by this item is provided under the caption "Market
Risk Management" under Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
16
<PAGE> 18
Part II. Other Information
ITEM 5. OTHER INFORMATION
On April 21, 2000, Centra Bank, Inc. held a special meeting of shareholders, at
which shareholders voted upon and approved a merger/corporate reorganization
that involved the formation of Centra Financial Holdings, Inc. to act as the
bank holding company of Centra Bank, Inc. In the merger/corporate
reorganization, each Centra Bank, Inc. shareholder became a shareholder of
Centra Financial Holdings, Inc. and this holding company now owns all of the
outstanding stock of Centra Bank, Inc.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule for the three months ended March 31,
2000.
(b) No other exhibits are required to be filed herewith.
(c) The corporation was not required to file a Form 8-K during the first quarter
of 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
May 15, 2000 CENTRA FINANCIAL HOLDINGS, INC.
By: /s/ Douglas J. Leech
----------------------------------------
Douglas J. Leech
President and Chief Executive Officer
By: /s/ Kevin D. Lemley
----------------------------------------
Kevin D. Lemley
Chief Financial Officer
17
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,191,952
<INT-BEARING-DEPOSITS> 56,000
<FED-FUNDS-SOLD> 9,625,090
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 10,921,437
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 7,667,004
<ALLOWANCE> 115,000
<TOTAL-ASSETS> 31,162,136
<DEPOSITS> 18,618,226
<SHORT-TERM> 1,245,290
<LIABILITIES-OTHER> 218,961
<LONG-TERM> 0
0
0
<COMMON> 1,200,000
<OTHER-SE> 9,879,659
<TOTAL-LIABILITIES-AND-EQUITY> 31,162,136
<INTEREST-LOAN> 65,099
<INTEREST-INVEST> 102,619
<INTEREST-OTHER> 78,619
<INTEREST-TOTAL> 246,337
<INTEREST-DEPOSIT> 67,132
<INTEREST-EXPENSE> 72,722
<INTEREST-INCOME-NET> 173,615
<LOAN-LOSSES> 115,000
<SECURITIES-GAINS> (495)
<EXPENSE-OTHER> 491,245
<INCOME-PRETAX> (429,326)
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (429,326)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
<YIELD-ACTUAL> 4.53
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 115,000
<ALLOWANCE-DOMESTIC> 115,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
