UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended Commission File Number: 0-30541
March 31, 2000
Pioneer Bankshares, Inc.
Virginia 54-1278721
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
263 East Market Street
P. O. Box 10
Stanley, Virginia 22851
(540) 778-2294
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
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
requirement 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 Outstanding at March 31, 2000
Common Stock, par value - $.50 1,116,254 shares
Transitional Small Business Disclosure Format (check one): Yes No X
<PAGE> 1
PIONEER BANKSHARES, INC.
INDEX
Page
PART I FINANCIAL INFORMATION 2
Item 1. Financial Statements
Consolidated Statements of Income - Three Months
Ended March 31, 2000 and 1999 2
Consolidated Balance Sheets - March 31, 2000 and
December 31, 1999 3
Consolidated Statements of Changes in Stockholders'
Equity - Three Months Ended March 31, 2000 and 1999 4
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II OTHER INFORMATION 15
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibit and Reports on Form 8K 16
SIGNATURES 18
<PAGE> 2
Part I Financial Information
Item 1 Financial Statements
PIONEER BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars)
Three Months Ended
March 31,
2000 1999
Interest and Dividend Income:
Loans including fees $ 1,723 $ 1,539
Debt securities - taxable 198 142
Debt securities - nontaxable 33 62
Deposits and federal funds sold 44 91
Equity securities 17 6
--------- ---------
Total Interest and Dividend Income 2,015 1,840
--------- ---------
Interest Expense:
Deposits 739 723
Borrowings 75 -
--------- ---------
Total Interest Expense 814 723
--------- ---------
Net Interest Income 1,201 1,117
Provision for loan losses 15 30
Net interest income after provision --------- ---------
for loan losses 1,186 1,087
--------- ---------
Noninterest Income:
Service charges on deposit accounts 128 97
Other income 217 47
Gain on security transactions 209 101
--------- ---------
Total Noninterest Income 554 245
--------- ---------
Noninterest Expense:
Salaries and benefits 425 339
Occupancy expenses 55 50
Equipment expenses 98 74
Other expenses 376 343
--------- ---------
Total Noninterest Expenses 954 806
--------- ---------
Income before Income Taxes 786 526
Income Tax Expense 272 164
--------- ---------
Net Income $514 $362
======== ========
Earnings Per Share
Net income $0.46 $0.30
======== ========
Weighted Average Shares Outstanding 1,120,182 1,187,810
========== ==========
<PAGE> 3
PIONEER BANKSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)
March 31, December 31,
2000 1999
ASSETS
Cash and due from banks $4,408 $5,199
Federal funds sold 3,610 2,215
Interest bearing deposits in banks 124 4,536
Investment securities
Hold To Maturity 3,513 3,557
Available for sale 12,466 11,628
Loans receivable, net of allowance for loan
losses of 735 and 779 respectively 70,470 69,252
Bank premises and equipment, net 2,891 2,910
Other assets 2,083 1,748
--------- ---------
Total assets $99,565 $101,045
======== ========
LIABILITIES
Deposits
Noninterest bearing demand 14,223 12,246
Interest bearing
Demand 10,603 10,516
Savings 10,027 10,412
Time deposits over $100,000 5,090 5,065
Other time deposits 45,274 44,200
--------- ---------
Total Deposits 85,217 82,439
Accrued expenses and other liabilities 1,679 1,426
Borrowings 1,800 6,350
--------- ---------
Total Liabilities 88,696 90,215
--------- ---------
STOCKHOLDERS' EQUITY
Common stock; $.50 par value, shares 558 561
outstanding 1,116,245 and 1,121,670
for the current period and prior year
Retained earnings 10,361 10,275
Accumulated other comprehensive income (loss) (50) (6)
--------- ---------
Total Stockholders' Equity 10,869 10,830
--------- ---------
Total Liabilities and Stockholders' Equity $99,565 $101,045
======== =======
<PAGE> 4
PIONEER BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands of Dollars)
Three Months Ended
March 31,
2000 1999
Balance, beginning of period $10,830 $11,060
Comprehensive Income:
Net income for period $514 $362
Net change in unrealized gains (losses)
on securities available for sale,
net of income taxes (44) (63)
--------- ---------
Total Comprehensive Income 470 299
Dividends declared (336) (356)
Retirement of common stock (95) (46)
--------- ---------
Balance, end of period $10,869 $10,957
======== ========
<PAGE> 5
PIONEER BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
Three Months Ended
March 31,
2000 1999
Cash Flows from Operating Activities:
Net income $514 $362
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 15 30
Depreciation 71 59
Net Accretion/Amortization of securities 13 10
(Gain)/Loss on sale of securities (209) (101)
Net change in:
Accrued income (40) (60)
Other assets (286) (128)
Accrued expense and other liabilities (10) 73
------- -------
Net Cash Provided by Operating Activities 68 245
------- -------
Cash Flows from Investing Activities:
Net change in federal funds sold (1,395) (1,585)
Net increase in interest bearing deposits 4,412 (2,011)
Proceeds from maturities and sales
of securities available for sale 559 963
Proceeds from maturities and calls
of securities held to maturity 41 529
Purchase of securities available for sale (874) (1,962)
Purchase of securities held to maturity 0 (12)
Net increase in loans (1,233) (662)
Purchase of bank premises and equipment (52) (27)
Investment in life insurance policies (9) (17)
------- -------
Net Cash Provided by (Used in) Investing Activities 1,449 (4,784)
------- -------
Cash Flows from Financing Activities:
Net change in:
Demand and savings deposits 1,679 3,287
Time deposits 1,099 (219)
Short-term borrowings (47) (1)
Proceeds from borrowings 0 2,000
Curtailments of borrowings (4,550) 0
Purchase and subsequent retirement of common stock (95) (46)
Dividends paid (394) (356)
------- -------
Net Cash Provided by (Used in) Financing Activities (2,308) 4,665
------- -------
Cash and Cash Equivalents
Net increase in cash and cash equivalents (791) 126
Cash and Cash Equivalents, beginning of year 5,199 4,400
------- -------
Cash and Cash Equivalents, End of Year $4,408 $4,526
======= =======
Supplemental Disclosure of Cash Paid During the Year for:
Interest $801 $672
Income taxes $13 $52
<PAGE> 6
PIONEER BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 ACCOUNTING PRINCIPLES:
The consolidated financial statements conform to generally accepted
accounting principles and to general industry practices. In the
opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial
position as of March 31, 2000 and the results of operations for the
three-month periods ended March 31, 2000 and March 31, 1999. The
notes included herein should be read in conjunction with the notes
to financial statements included in the 1999 annual report to
stockholders of Pioneer Bankshares, Inc.
NOTE 2 INVESTMENT SECURITIES:
The amounts at which investment securities are carried in the
consolidated balance sheets and their approximate market values at
March 31, 2000 and December 31, 1999 follows:
2000 1999
Carrying Market Carrying Market
Value Value Value Value
Securities held to maturity:
U.S. Treasury and agency
obligations $1,755 $1,731 $1,759 $1,737
State and municipal 1,254 1,278 1,253 1,282
Other securities - - - -
Mortgage-backed securities 504 480 545 522
------- ------- ------- -------
Total $3,513 $3,489 $3,557 $3,541
======= ======= ======= =======
Securities available for sale:
U.S. Treasury and agency
obligations $9,562 $9,260 $10,563 $10,157
Municipal Securities 1,905 1,781 - -
Equity Securities 1,075 1,425 1,049 1,471
Mortgage-backed securities - - - -
------- ------- ------- -------
Total $12,542 $12,466 $11,612 $11,628
======= ======= ======= =======
<PAGE> 7
PIONEER BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 LOANS:
Loans outstanding are summarized as follows:
March 31, December 31,
1999 2000
Real estate loans $53,718 $52,780
Commercial and industrial loans 4,251 4,007
Loans to individuals, primarily
collateralized by autos 14,656 14,468
All other loans 119 60
--------- ---------
Total Loans 72,744 71,315
Less unearned discount (1,539) (1,284)
--------- ---------
Loans, less unearned discount 71,205 70,031
Less allowance for loan losses (735) (779)
--------- ---------
Net Loans Receivable $70,470 $69,252
======== ========
NOTE 4 ALLOWANCE FOR LOAN LOSSES:
A summary of transactions in the allowance for loan losses for the
three months ended March 31, 2000 and 1999 follows:
2000 1999
Balance, beginning of period $ 779 $ 773
Provision charged to operating expenses 15 30
Recoveries of loans charged off 17 9
Loans charged off 76 49
------- -------
Balance, End of Period $735 $763
======= =======
<PAGE> 8
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
Loans increased by 2.15% for the quarter, with substantially all of the
growth in real estate loans and the credit card portfolio. The strong local
economy and increases in secondary market loan rates have contributed to the
growth in the portfolio. Deposits increased $2,778,000, with most of the
increase coming in the form of noninterest bearing demand deposits and
certificates of deposits. Borrowings in the amount of $4,500,000 were
curtailed by repayment of the Federal Home Loan Bank of Atlanta Line of
credit.
Income from operations, exclusive of securities transactions, increased
$44,000 (16.86%). Net income including securities transactions increased
$152,000 (41.99%) after an increase of $71,000 in net after-tax securities
gains realized.
Results of Operations
The dollar amount of the tax equivalent net interest margin increased $84,000
or 7.52% in the first quarter of 2000 compared to the first quarter of 1999.
During the later part of 1999, the Bank borrowed funds from the Federal Home
Loan Bank in the amount of $2,000,000 and this borrowing was outstanding
during the quarter. As mentioned above, borrowings were reduced by repayment
of the Federal Home Loan Bank of Atlanta Line of Credit.
Approximately $79,000 of the $139,000 increase in net interest income is
primarily attributable to an increase in net earning assets (i.e. volume
increases), with the remainder coming from an improvement in the net yield on
earning assets.
Interest expense on Borrowings amounted to $75,000 in the first quarter of
2000. This was a result of borrowings from the Federal Home Loan Bank of
Atlanta. These borrowings started at the very end of the first quarter of
1999.
Noninterest income increased $309,000 in the first three months of 2000. An
increase in securities gains accounted for $108,000 of the total. Other
Income increased $170,000 in the first quarter of 2000 and included the
following three items; an adjustment of $58,000 relating to the bank's
deferred compensation liabilities and the cash value of insurance policies
held to provide funds to meet these liabilities, recognition of receipt of
$95,000 from the company's former president (of which $7,000 was used to
offset expenses incurred in the current period) and an adjustment to
eliminate an unused accrual for Y2K expenses in the amount of $20,000.
Service charges on deposit Accounts increased due to increases in the per
item overdraft fee and an increase in the number of accounts serviced.
Noninterest expense increased $148,000 (18.36%). Salaries and benefits
accounted for $86,000 of this total. These increases resulted from normal
salary increases, the bank president position only being filled for part of
the quarter in 1999 and a new president was included in expenses for the full
first quarter of 2000. Equipment expense increased by $24,000 (32.43%) due to
increased depreciation and repairs and maintenance. Other expense increased
$33,000 (9.62%) resulting primarily from; increase in director fees of
$17,000, increase in professional fees of $24,000 and a decrease of $15,000
in Y2K related expenses.
<PAGE> 9
Financial Condition
Securities
The Company's securities portfolio is held to assist the Company in liquidity
and asset liability management as well as capital appreciation. The
securities portfolio consists of securities held to maturity and securities
available for sale. Securities are classified as held to maturity when
management has the intent and ability to hold the securities to maturity.
These securities are carried at amortized cost. Securities available for
sale include securities that may be sold in response to general market
fluctuations, general liquidity needs and other similar factors. Securities
available for sale are recorded at market value. Unrealized holding gains and
losses of available for sale securities are excluded from earnings and
reported (net of deferred income taxes) as a separate component of
shareholders' equity. As of March 31, 2000, the market value of all
securities available for sale was below their amortized cost by $76,000
($50,000 after the consideration of income taxes). This is the result of
increases in the value of equity securities held by the parent, net of
decreases in the value of the bond portfolio held by the subsidiary bank.
Management has traditionally held debt securities (regardless of
classification) until maturity and thus it does not expect the minor
fluctuation in the value of these securities to have a direct impact on
earnings.
Investments in securities increased 5.29% in the first quarter of 2000 with
funding coming from the increase in deposit liabilities. The Company
generally invests in relatively short-term maturities due to uncertainty in
the direction of interest rates. Of the investments in securities available
for sale, 10.16% (based on market value) are invested in equities, some of
which are dividend producing and subject to the corporate dividend exclusion
for taxation purposes. The Company believes these investments offer adequate
returns and/or have the potential for significant increases in value.
Loan Portfolio
The Company operates in an agriculturally dominated area which includes the
counties of Shenandoah, Page, and Rockingham in the western portion of
Virginia. The Company does not make a significant number of loans to
borrowers outside its primary service area. The Company is very active in
local residential construction mortgages. Commercial lending includes loans
to small and medium sized business within its service area.
An inherent risk in the lending of money is that the borrower will not be
able to repay the loan under the terms of the original agreement. The
allowance for loan losses (see subsequent section) provides for this risk and
is reviewed periodically for adequacy. The risk associated with real estate
and installment notes to individuals is based upon employment, the local and
national economies and consumer confidence. All of these affect the ability
of borrowers to repay indebtedness. The risk associated with commercial
lending is substantially based on the strength of the local and national
economies in addition to the financial strength of the borrower.
While lending is geographically diversified within the service area, the
Company does have some concentration in residential real estate loans. A
significant percentage of residential real estate loans and consumer
installment loans are made to borrowers employed in the agricultural sector
of the economy or employed by businesses outside our service area. The
Company monitors its past due loans closely and has not experienced a high
delinquency rate.
<PAGE> 10
Loan Portfolio (Continued)
The first three months of 2000 resulted in a $1,429,000 increase in the loan
portfolio. Most of the increase was in residential mortgage loans. Although
competition from other local banks and other residential lenders remains
strong, a general increase in secondary market rates has resulted in an
increase in loans.
The risk elements in lending activities include nonaccrual loans, loans 90
days or more past due and restructured loans. Nonaccrual loans are loans on
which interest accruals have been suspended or discontinued permanently.
Restructured loans are loans, which have changed the original interest rate
or repayment terms due to financial hardship. Nonaccrual loans and loans 90
days or more past due totaled $312,000 at March 31, 2000 compared to $326,000
at December 31, 1999. A majority of these past due loans are secured by real
estate. Although the potential exists for some loan losses, management
believes the bank is generally well secured and continues to actively work
with these customers to effect payment.
Problem loans (serious doubt loans) are loans whereby information known by
management indicates that the borrower may not be able to comply with present
payment terms. The Company had no problem loans at March 31, 2000.
As of March 31, 2000 the Company did not hold any real estate that was
acquired through foreclosure.
Allowance for Loan Losses
Management evaluates the loan portfolio in light of national and local
economic trends, changes in the nature and value of the portfolio and
industry standards. Specific factors considered by management in determining
the adequacy of the level of the allowance include internally generated loan
review reports, past due reports, historical loan loss experience and
individual borrower's financial condition. This review also considers
concentrations of loans in terms of geography, business type or level of
risk. Management evaluates the risk elements involved in loans relative to
their collateral value and makes the appropriate adjustments to the allowance
when needed.
The provision for credit losses and changes in the allowance for loan losses
are shown in Note 4 above.
The allowance for loan losses of $735,000 at March 31, 2000 was down $44,000
from its level at December 31, 1999. The allowance was equal to 1.04% and
1.12% of total loans at March 31, 2000 and December 31, 1999 respectively.
The Company believes that its allowance should be viewed in its entirety and,
therefore, is available for potential loan losses in its entire portfolio,
including loans, credit related commitments and other financial instruments.
In the opinion of management, the allowance, when taken as a whole, is
adequate to absorb reasonably estimated losses inherent in the Company's
portfolio.
<PAGE> 11
Deposits
The Company's main source of funds is customer deposits received from
individuals, governmental entities and businesses located within the
Company's service area. Deposit accounts include demand deposits, savings,
money market and certificates of deposit. The Company realized annualized
deposit growth of 3.39% in the first quarter of 2000. This increase was
mainly in the area of noninterest bearing demand deposits and certificates of
deposits.
Borrowings
Borrowings from the Federal Home Loan Bank of Atlanta (FHLB) to finance fixed
rate loans occurred at the end of the first quarter of 1999. The Company's
subsidiary bank borrows funds on a fixed rate basis. These borrowings are
used to fund either fifteen-year fixed rate loans or twenty-year loans, of
which the first ten years have a fixed rate. This program allows the Bank to
match the maturity of its fixed rate real estate portfolio with the maturity
of its debt and thus reduce its exposure to interest rate changes. Due to
the higher rates charged by the FHLB and funds generated from increased
deposits, no additional funds have been borrowed in 2000. Scheduled
repayments have totaled $50,000 in the first quarter of the year.
During 1999, a borrowing on the line of credit from the Federal Home Loan
Bank was utilized to assure adequate liquidity at the change of the
millenium. This loan amounted to $4,500,000 at the end of 1999 and has been
repaid in the first quarter of 2000.
Capital
The Company maintains a strong capital base to expand facilities, promote
public confidence, support operations and grow at a manageable level. As of
March 31, 2000, the Company's total risk based capital and total capital to
total assets ratios were 14.46% and 13.29%, respectively. Both ratios are in
excess of regulatory minimums. Earnings have been sufficient to allow for
dividends to be paid on a quarterly basis in 2000 and management has no
reason to believe this payment schedule will not continue
Liquidity
Liquidity is the ability to meet present and future financial obligations
through either the sale or maturity of existing assets or the acquisition of
additional funds through liability management. Liquid assets include cash,
interest bearing deposits with banks, federal funds sold, investments and
loans maturing within one year. The Company's ability to obtain deposits and
purchase funds at favorable rates determines its liquidity exposure. As a
result of the Company's management of liquid assets and the ability to
generate liquidity through borrowings, management believes that the Company
maintains overall liquidity sufficient to satisfy its depositors'
requirements and meet its customers' credit needs.
Additional sources of liquidity available to the Company include, but are not
limited to, loan repayments, deposits obtained through the adjustment of
interest rates, purchases of federal funds and borrowings. To further meet
its liquidity needs, the Company also maintains lines of credit with the
Federal Home Loan Bank of Atlanta and correspondent banks. In the past,
growth in deposits and proceeds from the maturity of investment securities
has been sufficient to fund most of the net increase in loans and investment
securities.
<PAGE> 12
Interest Rate Sensitivity
Liquidity as of March 31, 2000 remains adequate. The Bank historically has
had a stable core deposit base and, therefore, does not have to rely on
volatile funding sources. Because of the stable core deposit base, changes
in interest rates should not have a significant effect on liquidity. During
2000, the Bank has used maturing investments and deposit growth to meet its
liquidity needs. The Bank's membership in the Federal Home Loan Bank System
also provides liquidity. The matching of the long-term receivables and
liabilities helps the Bank reduce its sensitivity to interest rate changes.
The Company reviews its interest rate gap periodically and makes adjustments
as needed.
There are no off-balance-sheet items that should impair future liquidity.
Table II contains an analysis, which shows the repricing opportunities of
earning assets and interest bearing liabilities as of March 31, 2000.
As of March 31, 2000, the Company had a cumulative Gap Rate Sensitivity Ratio
of (35.68%) for the one year repricing period. This generally indicates that
earnings would improve in a declining interest rate environment as
liabilities reprice more quickly than assets. Conversely, earnings would
probably decrease in periods during which interest rates are increasing.
However, in actual practice, this may not be the case as deposits may not
reprice concurrently with changes in rates within the general economy.
Management constantly monitors the Company's interest rate risk and has
decided the current position is acceptable for a well-capitalized community
bank operating in a rural environment.
Stock Repurchase
On March 31, 2000, the Company repurchased 5,416 shares of stock for $94,780
($17.50 per share) from its's former president as part of an agreement
entered into with the former president. The repurchased shares have been
retired.
Effect of Newly Issued Accounting Standards
The Company does not believe that any newly issued but as yet unapplied
accounting standards will have a material impact on the Company's financial
position or operations.
Securities and Exchange Commission Web Site
The Securities and Exchange Commission maintains a Web site
(http://www.sec.gov)that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission, including Pioneer Bankshares, Inc.
<PAGE> 13
TABLE 1
Pioneer Bankshares, Inc.
Net Interest Margin Analysis
(on a fully tax equivalent basis)
(dollar amounts in thousands)
Three Months Ended Three Months Ended
March 31,2000 March 31,1999
------------------------- ----------------------
Average Income/ Average Income/
Balance Expense Rates Balance Expense Rates
Interest Income
Loans 1
Commercial $3,824 $101 10.56% $3,589 $103 11.48%
Real estate 54,030 1,151 8.52% 48,057 1,031 8.58%
Installment 11,562 422 14.60% 10,520 373 14.18%
Credit Card 1,011 49 19.39% 987 32 12.97%
Federal funds sold 3,108 44 5.66% 8,147 91 4.47%
Interest bearing deposits 1,388 17 4.90% 966 6 2.48%
Investments
Taxable 3 13,119 204 6.21% 10,470 146 5.56%
Nontaxable 2 2,684 50 7.45% 4,035 94 9.31%
------ ------
------ ------ ------ ------
Total earning assets 90,726 2,038 8.98% 86,771 1,876 8.65%
------ ------
------ ------ ------ ------
Interest Expense
Demand deposits 22,759 43 0.76% 22,323 49 0.88%
Savings 10,249 48 1.87% 11,360 71 2.50%
Time deposits 49,887 648 5.20% 47,801 603 5.05%
Borrowings 3,173 75 9.45% 22 0 0.00%
------ ------
------ ------ ------ ------
Total Interest Bearing
Liabilities $86,068 $814 3.78% $81,506 $723 3.55%
===== ===== ===== ===== ===== =====
Net Interest Margin 1 1,224 1,153
===== =====
Net yield on interest
earning assets 5.40% 5.31%
===== =====
1 Interest on loans includes loan fees
2 An incremental tax rate of 34% was used to calculate the tax equivalent income
3 An incremental tax rate of 34% and 70% dividend exclusion was used
to calculate the the tax equivalent income
<PAGE> 14
TABLE 2
Pioneer Bankshares, Inc.
Interest Sensitivity Analysis
March 31, 2000
(dollar amounts in thousands)
0-3 4-12 1-5 Over 5 Not Total
Months Months Years Years Class-
Uses of Funds: ified
Loans:
Commercial $1,211 $1,034 $397 $0 $0 $2,642
Installment 342 645 11,587 560 0 13,134
Real estate 3,015 10,487 30,674 7,335 0 51,511
Credit Card 0 0 0 999 0 999
Interest bearing
bank deposits 2,262 0 0 0 0 2,262
Investment securities 300 1,529 6,022 6,704 448 15,003
Federal funds sold 3,610 0 0 0 3,610
------ ------
------ ------ ------ ------
Total 10,740 13,695 48,680 15,598 448 89,161
------ ------
------ ------ ------ ------
Sources of Funds:
Interest bearing
demand deposits 15,066 0 0 0 0 15,066
Regular savings 10,026 0 0 0 0 10,026
Certificates of deposit
$100,000 and over 1,626 3,272 1,202 0 0 6,100
Other certificates
of deposit 10,498 16,029 17,737 0 0 44,264
Borrowings 50 150 800 800 0 1,800
------ ------
------ ------ ------ ------
Total 37,266 19,451 19,739 800 0 77,256
------ ------
------ ------ ------ ------
Discrete Gap (26,526) (5,756) 28,941 14,798 448 11,905
Cumulative Gap (26,526) (32,282) (3,341) 11,457 11,905
Ratio of Cumulative Gap
To Total Earning Assets -29.24% -35.58% -3.68% 12.63% 13.12%
<PAGE> 15
Part II Other Information
Item 1. Legal Proceedings -
C. Gaylon Waters resigned his positions as president and director of the Bank
and president and director of the Holding Company as of February 15, 1999.
His resignation occurred as part of an agreement with the Bank and the
Holding Company following the discovery of a pattern of unauthorized
expenditures of bank funds. As part of the agreement between Mr. Waters, the
Bank and the Holding Company, Mr. Waters deposited into an escrow account an
amount of Holding Company stock with a market value of approximately
$350,000.00 to secure any claims by the Bank and/or the Holding Company
against Mr. Waters involving the unauthorized expenditures. Since the date
of Mr. Waters' resignation through March 31, 2000, the Bank and the Holding
Company charged approximately $340,000.00 against the escrowed shares. As a
result of these charges, the Bank and the Holding Company believe that they
have recovered substantially all the unauthorized expenditures.
After agreeing to the vast majority of charges against the escrow account,
Mr. Waters has now challenged some of those charges. These challenges have
led to the filing by him (in April, 2000)of a lawsuit for recovery of a
portion of the funds recovered by the Bank and the Holding Company, which
matter is pending in the Circuit Court for the City of Harrisonburg, Virginia
as Waters v. Pioneer Bank, et al. While this litigation is pending, the
amount of exposure to the Bank is substantially less than that for which
disclosure is required under federal securities laws.
As a result of these events, the Bank and the Holding Company have
implemented a number of internal controls and procedures designed to prevent
the reoccurrence of such events. Specifically, the Bank and the Holding
Company have implemented new expenditure confirmation policies which require
proper documentation and multiple signatures in order to obtain most expense
reimbursements. In addition, the internal and external audit functions of
the Bank and Holding Company have been enhanced to require frequent
monitoring of the expenditure of Bank funds.
<PAGE> 16
Item 2. Changes in Securities - Not Applicable
Item 3. Defaults Upon Senior Securities - Not Applicable
Item 4. Submission of Matters to a Vote
of Security Holders - Not applicable
Item 5. Other Information - Not Applicable
Item 6. Exhibits and Reports on 8-K
(a) Exhibits
3 i Articles of Incorporation of Pioneer Bankshares,
Inc. are incorporated by reference to Exhibits to Pioneer Bankshares,
Inc. Form 10SB filed May 1, 2000.
3 ii Bylaws of Pioneer Bankshares, Inc. are incorporated
by reference to Exhibits to Pioneer Bankshares, Inc. Form 10SB filed May
1, 2000.
27 Financial Data Schedule attached.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K for the
quarter ending March 31, 2000.
<PAGE> 17
EXHIBIT INDEX
Exhibit
Index Page Number
27 Financial Data Schedule for the quarter
ending March 31, 2000 19
<PAGE> 18
Signature
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.
Pioneer Bankshares, Inc.
THOMAS R. ROSAZZA
Thomas R. Rosazza
President
BRENDA KITE
Brenda Kite
Vice President and Chief Financial Officer
Date August 12, 2000
