<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C., 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the quarterly period ended: March 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the transition period from to
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Commission file number: 0-11671
POCAHONTAS BANKSHARES CORPORATION
(Exact name of registrant as specified in its charter)
West Virginia 55-0628089
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
500 Federal Street, Bluefield, WV 24701
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (304) 325-8181
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities 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 X No
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Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
$1.25 Par Value - Common Stock - 1,000,000 shares
<PAGE>
POCAHONTAS BANKSHARES CORPORATION
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
<S> <C>
Page
PART I. FINANCIAL INFORMATION
Financial Statements (Unaudited)
Consolidated Statements of Financial Condition.............. 3
Consolidated Statements of Income........................... 4
Consolidated Statements of Cash Flows....................... 5
Consolidated Statements of Changes on Stockholders' Equity.. 6
Notes to Consolidated Financial Statements.......................... 6
Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................... 7
PART II. OTHER INFORMATION
Exhibits and Reports on Form 8-K.................................... 7
SIGNATURES.......................................................... 7
</TABLE>
The total number of pages of the Form 10-Q Quarterly Report is seven (7)
pages.
2
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POCAHONTAS BANKSHARES CORPORATION
AND SUBSIDIARIES
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited) March 31, December 31,
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(Dollars in thousands)
ASSETS 1996 1995
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<S> <C> <C>
Cash and due from banks $ 9,150 $ 10,000
Interest-bearing balances with banks 1,285 3,833
Securities available for sale: (cost approximated $9,507 at
March 31, 1996, and $5,419 at December 31, 1995) 9,286 5,419
Securities held to maturity: (market value approximated $56,045 at
March 31, 1996 and $53,931 at December 31, 1995) 55,944 53,440
Federal funds sold 6,000 6,300
Loans 181,118 177,794
Less allowance for loan losses 2,150 2,145
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Net loans 178,968 175,649
Premises and equipment 5,997 5,417
Real estate owned other than bank premises 1,059 1,206
Other assets 4,641 4,285
Goodwill and other intangible assets 421 431
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TOTAL ASSETS $ 272,751 $ 265,980
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LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 26,277 $ 27,361
Interest-bearing 209,656 204,811
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Total deposits 235,933 232,172
Federal funds purchased and securities sold under
agreements to repurchase 10,352 8,922
Demand notes to U. S. Treasury and other
liabilities for borrowed money 1,565 720
Other liabilities 1,507 980
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TOTAL LIABILITIES 249,357 242,794
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STOCKHOLDERS' EQUITY
Common stock - par value per share $1.25
Shares authorized: 2,000,000
Shares issued and outstanding: 1,000,000 1,250 1,250
Paid-in capital 2,035 2,035
Retained earnings 20,299 19,901
Unrealized losses on securities (190) -----
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TOTAL STOCKHOLDERS' EQUITY 23,394 23,186
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 272,751 $ 265,980
========== ==========
See accompanying notes to consolidated financial statements
</TABLE>
3
<PAGE>
POCAHONTAS BANKSHARES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
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(Dollars in thousands, except per share data)
INTEREST INCOME 1996 1995
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<S> <C> <C>
Interest and fees on loans $ 4,124 $ 3,907
Interest on balances with banks 38 3
Interest and dividends from securities available 128 93
for sale
Interest and dividends from investment securities:
U.S. Treasury and agencies 701 703
States and political subdivisions 84 71
Other investment securities 16 16
Interest on federal funds sold 91 167
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TOTAL INTEREST INCOME 5,182 4,960
INTEREST EXPENSE
Interest on time certificates of $100,000 or more 312 215
Interest on other deposits 1,949 1,734
Interest on federal funds purchased and securities
sold under agreements to repurchase 88 75
Interest on demand notes to U. S. Treasury
and other liabilities for borrowed money 14 46
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TOTAL INTEREST EXPENSE 2,363 2,070
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Net interest income 2,819 2,890
Provision for loan losses 109 101
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Net interest income after provision for loan losses 2,710 2,789
NONINTEREST INCOME
Income from fiduciary activities 180 180
Other operating income 239 302
Securities gains (losses) -- --
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TOTAL NONINTEREST INCOME 419 482
NONINTEREST EXPENSE
Salaries, wages, and other employee benefits 1,079 1,018
Furniture and equipment expense 267 270
Other noninterest expense 795 950
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TOTAL NONINTEREST EXPENSE 2,141 2,238
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Income before income taxes 988 1,033
Applicable income taxes 340 327
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NET INCOME $ 648 $ 706
======== =======
NET INCOME PER COMMON SHARE $ 0.65 $ 0.71
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
POCAHONTAS BANKSHARES CORPORATION
AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Three Months Ended
March 31,
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(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES 1996 1995
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<S> <C> <C>
Net income $ 648 $ 706
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 109 101
Depreciation and amortization 118 127
Securities gains -- --
(Increase) decrease in interest receivable (81) 19
Net investment amortization and accretion 165 200
Increase in other assets (134) (3)
Increase in interest payable and other liabilities 505 312
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NET CASH PROVIDED BY OPERATING ACTIVITIES 1,330 1,462
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold 300 (2,200)
Purchases of securities held to maturity (6,735) (2,137)
Purchases of securities available for sale (4,085) --
Proceeds from maturities of securities held to maturity 4,063 4,594
Net increase in loans (3,377) (932)
Acquisition of fixed assets (679) (76)
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NET CASH USED BY INVESTING ACTIVITIES (10,513) (751)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand and savings deposits 2,169 (12,196)
Net increase in time deposits 1,591 6,599
Net increase in short-term borrowings 2,275 1,972
Cash dividends paid (250) (200)
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NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 5,785 (3,825)
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NET DECREASE IN CASH AND DUE FROM BANKS $ (3,398) $ (3,114)
CASH AND DUE FROM BANKS AT JANUARY 1, 13,833 10,977
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CASH AND DUE FROM BANKS AT MARCH 31, $ 10,435 $ 7,863
========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 2,240 $ 1,934
Income taxes 52 50
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
POCAHONTAS BANKSHARES CORPORATION
AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
(Unaudited) Three Months Ended
March 31,
----------------------------------
(Dollars in thousands)
1996 1995
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<S> <C> <C>
BALANCE, JANUARY 1, $ 23,186 $ 21,161
Net income 648 706
Cash dividends declared - $0.25 per share in 1996,
and $0.20 per share in 1995 250 200
Change in unrealized losses on securities (190) 145
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BALANCE, MARCH 31, $ 23,394 $ 21,812
========== ========
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Rule S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments considered necessary
for a fair presentation have been included. All such adjustments were of a
normal recurring nature. Certain reclassifications have been made to the prior
period's financial statements to place them on a comparable basis with the
current period's financial statements. Operating results are for the three-month
period ended March 31, 1996, and are not necessarily indicative of the results
that may be expected for the year ending December 31, 1996. For further
information refer to the financial statements and footnotes thereto included as
Exhibit 13 to Corporation's annual report on Form 10-K for the year ended
December 31, 1995.
NOTE B - REGULATORY CAPITAL REQUIREMENTS
Regulators of the corporation and its subsidiaries have implemented risk-based
capital guidelines which require the maintenance of certain minimum capital as a
percent of assets and certain off-balance sheet items adjusted for predefined
credit risk factors. The regulatory minimums for Tier 1 and combined Tier 1 and
Tier 2 capital ratios were 4.0% and 8.0% respectively. Tier 1 capital includes
tangible common shareholders' equity reduced by goodwill and certain other
intangibles. Tier 2 capital includes portions of the allowance for loan losses,
not to exceed Tier 1 capital. In addition to the risk-based guidelines, a
minimum leverage ratio (Tier 1 capital as a percentage of average total
consolidated assets) of 4% is required. This minimum may be increased by at
least 1% or 2% for entities with higher levels of risk or that are experiencing
or anticipating significant growth. The following table contains the capital
ratios for the Corporation and each subsidiary as of March 31, 1996.
<TABLE>
<CAPTION>
Combined Capital
Entity Tier 1 (Tier 1 and Tier 2) Leverage
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<S> <C> <C> <C>
Consolidated.................. 12.40% 13.56% 8.53%
First Century Bank, N.A. ..... 12.32% 13.49% 8.40%
First Century Bank............ 10.67% 11.77% 7.92%
</TABLE>
6
<PAGE>
POCAHONTAS BANKSHARES CORPORATION
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
During the first quarter of 1996 net income decreased $58,000 or 8% from
$706,000 earned during the first three months of 1995, to $648,000 earned during
the same period in 1996. Net interest income for the period ended March 31,
1996, decreased $71,000 or 3% to $2.82 million as compared to $2.89 million for
the first three months of 1995. Compared to the fourth quarter of 1995, net
interest income decreased 3% from $2.9 million. Noninterest income decreased
$63,000 or 13% to $419,000 for the period ended March 31, 1996, compared to
$482,000 for the same period in 1995. Noninterest income increased significantly
compared to the fourth quarter of 1995 level of $125,000. However, this increase
was primarily due to securities losses of $341,000 which were recognized during
the fourth quarter of 1995. Noninterest expense was controlled with a decrease
of 4% to $2.14 million at March 31, 1996, compared to $2.24 million at March 31,
1995. This was an increase of 3% when compared to the fourth quarter of 1995
level of $2.07 million. These factors combined to result in a $45,000 or 4%
decrease in income before income taxes at March 31, 1996 compared to March 31,
1995, and a $219,000 or 29% increase when compared with the fourth quarter of
1995. On a per share basis, earnings per common share through March 31, 1996,
were $0.65 as compared to $0.71 for the same period in 1995, and $0.41 per share
for the fourth quarter of 1995. This reflected a return on average assets of
.96% and a return on average equity of 11.09% for the period ended March 31,
1996.
Total assets increased $6.8 million from December 31, 1995 to March 31, 1996.
Total assets at March 31, 1996 were $272.7 million as compared to $265.9 million
at December 31, 1995. The loan portfolio continued to grow during this three
month period, increasing to $181.1 million or an increase of $3,324,000 or 2%.
This was accompanined by an increase in the investment portfolio of
approximately $6.4 million or 11%. These increases were funded through increased
deposits and short-term borrowings along with a reduction in interest-bearing
balances with the Federal Home Loan Bank of Pittsburgh. Total deposits increased
by $3.7 million to $235.9 million at March 31, 1996 from $232.2 million at
December 31, 1995. The increase in deposits was all in interest-bearing as
noninterest-bearing deposits decreased by $1.1 million. This illustrates the
Corporation's ongoing efforts to compete against other banks, along with other,
nontraditional financial service providers, with aggressive pricing for
deposits.
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K.
(a.) Exhibit 27 - Financial Data Schedule
(b.) None
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
and Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Pocahontas Bankshares Corporation
---------------------------------
By: /s/ J. Ronald Hypes
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J. Ronald Hypes, Treasurer
(Principal Accounting and Financial Officer)
Date: May 13, 1996
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7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 9,150
<INT-BEARING-DEPOSITS> 1,285
<FED-FUNDS-SOLD> 6,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 9,286
<INVESTMENTS-CARRYING> 55,944
<INVESTMENTS-MARKET> 56,045
<LOANS> 181,118
<ALLOWANCE> 2,150
<TOTAL-ASSETS> 272,751
<DEPOSITS> 235,933
<SHORT-TERM> 11,917
<LIABILITIES-OTHER> 1,507
<LONG-TERM> 0
0
0
<COMMON> 1,250
<OTHER-SE> 22,144
<TOTAL-LIABILITIES-AND-EQUITY> 272,751
<INTEREST-LOAN> 4,124
<INTEREST-INVEST> 929
<INTEREST-OTHER> 129
<INTEREST-TOTAL> 5,182
<INTEREST-DEPOSIT> 2,261
<INTEREST-EXPENSE> 2,363
<INTEREST-INCOME-NET> 2,819
<LOAN-LOSSES> 109
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,141
<INCOME-PRETAX> 988
<INCOME-PRE-EXTRAORDINARY> 648
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 648
<EPS-PRIMARY> 0.65
<EPS-DILUTED> 0.65
<YIELD-ACTUAL> 4.38
<LOANS-NON> 3,448
<LOANS-PAST> 787
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,145
<CHARGE-OFFS> 117
<RECOVERIES> 13
<ALLOWANCE-CLOSE> 2,150
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
