<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, 1997
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>
Page
<S> <C>
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 in Stockholders' Equity.. 6
Notes to Consolidated Financial Statements....................... 6 - 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 7
PART II. OTHER INFORMATION
Exhibits and Reports on Form 8-K................................. 8
SIGNATURES....................................................... 8
</TABLE>
The total number of pages of the Form 10-Q Quarterly Report is eight (8)
pages.
2
<PAGE>
POCAHONTAS BANKSHARES CORPORATION
AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
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(Dollars in thousands)
ASSETS 1997 1996
---------- -----------
<S> <C> <C>
Cash and due from banks $ 10,233 $ 12,421
Interest-bearing balances with banks 2,072 1,982
Securities available for sale: (cost approximated $31,687 at
March 31, 1997, and $26,632 at December 31, 1996) 31,170 26,438
Securities held to maturity: (market value approximated $32,909 at
March 31, 1997 and $39,218 at December 31, 1996) 32,903 39,062
Federal funds sold 4,500 5,750
Loans 183,394 179,956
Less allowance for loan losses 2,248 2,240
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Aet loans 181,146 177,716
Premises and equipment 8,593 8,052
Real estate owned other than bank premises 1,818 1,976
Other assets 4,796 4,784
Goodwill and other intangible assets 380 391
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TOTAL ASSETS $ 277,611 $ 278,572
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 27,218 $ 30,562
Interest-bearing 208,760 206,160
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Total deposits 235,978 236,722
Federal funds purchased and securities sold under
agreements to repurchase 10,940 14,514
Demand notes to U. S. Treasury and other
liabilities for borrowed money 4,468 1,756
Other liabilities 1,535 951
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TOTAL LIABILITIES 252,921 253,943
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STOCKHOLDERS' EQUITY
Common stock - par value per share $1.25
Shares authorized: 10,000,000
Shares issued and outstanding: 2,000,000 2,500 2,500
Paid-in capital 785 785
Retained earnings 21,826 21,521
Unrealized losses on securities (421) (177)
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TOTAL STOCKHOLDERS' EQUITY 24,690 24,629
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 277,611 $ 278,572
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
POCAHONTAS BANKSHARES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
(Dollars in thousands, except per share data)
INTEREST INCOME 1997 1996
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<S> <C> <C>
Interest and fees on loans $ 4,170 $ 4,124
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Interest on balances with banks 25 38
Interest and dividends from securities available for sale:
Taxable 472 128
Interest and dividends from securities held to maturity:
Taxable 454 717
Tax-exempt 101 84
Interest on federal funds sold 47 91
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TOTAL INTEREST INCOME 5,269 5,182
INTEREST EXPENSE
Interest on time deposits of $100,000 or more 292 312
Interest on other deposits 1,966 1,949
Interest on federal funds purchased and securities
sold under agreements to repurchase 121 88
Interest on demand notes to U. S. Treasury
and other liabilities for borrowed money 16 14
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TOTAL INTEREST EXPENSE 2,395 2,363
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Net interest income 2,874 2,819
Provision for loan losses 141 109
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Net interest income after provision for loan losses 2,733 2,710
NONINTEREST INCOME
Income from fiduciary activities 180 180
Other operating income 309 239
Securities gains (losses) -- --
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TOTAL NONINTEREST INCOME 489 419
NONINTEREST EXPENSE
Salaries, wages, and other employee benefits 1,103 1,079
Furniture and equipment expense 301 267
Other noninterest expense 916 795
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TOTAL NONINTEREST EXPENSE 2,320 2,141
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Income before income taxes 902 988
Applicable income taxes 297 340
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NET INCOME $ 605 $ 648
======== ========
NET INCOME PER COMMON SHARE $ 0.30 $ 0.32
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
POCAHONTAS BANKSHARES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES 1997 1996
--------- ---------
<S> <C> <C>
Net income $ 605 $ 648
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Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 141 109
Depreciation and amortization 154 118
Securities gains -- --
Net investment amortization and accretion 84 165
Decrease (increase) in interest receivable and other assets 206 (215)
Increase in interest payable and other liabilities 501 505
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NET CASH PROVIDED BY OPERATING ACTIVITIES 1,691 1,330
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in federal funds sold 1,250 300
Purchases of securities held to maturity -- (6,735)
Purchases of securities available for sale (5,078) (4,085)
Proceeds from maturities of securities held to maturity 6,098 4,063
Net increase in loans (3,438) (3,377)
Acquisition of fixed assets (689) (679)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (1,857) (10,513)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand and savings deposits 987 2,169
Net increase (decrease) in time deposits (1,731) 1,591
Net increase (decrease) in short-term borrowings (888) 2,275
Cash dividends paid (300) (250)
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NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (1,932) 5,785
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NET DECREASE IN CASH AND DUE FROM BANKS $ (2,098) $ (3,398)
CASH AND DUE FROM BANKS AT JANUARY 1, 14,403 13,833
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CASH AND DUE FROM BANKS AT MARCH 31, $ 12,305 $ 10,435
========= ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 2,283 $ 2,240
Income taxes 2 52
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
POCAHONTAS BANKSHARES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
(Dollars in thousands)
1997 1996
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<S> <C> <C>
BALANCE, JANUARY 1, $ 24,629 $ 23,186
Net income 605 648
Cash dividends declared - $0.150 per share in 1997, and
$0.125 per share in 1996 300 250
Change in unrealized losses on securities (244) (190)
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BALANCE, MARCH 31, $ 24,690 $ 23,394
========= =========
</TABLE>
See accompanying notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally ac cepted 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, 1997, and are not necessarily indicative of the
results that may be expected for the year ending December 31, 1997. 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, 1996.
NOTE B - EARNINGS PER SHARE
Earnings per common share are computed on the weighted average number of
shares of common stock outstanding during the period. There are no stock
options or other capital items that would dilute the Corporation's
earnings per share. Earnings per share for the quarter ended March 31,
1996, have been adjusted to reflect a two-for-one stock split, which was
effected in the form of a 100% stock dividend, payable on May 6, 1996,
to shareholders of record on April 26, 1996.
6
<PAGE>
POCAHONTAS BANKSHARES CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1997
NOTE C - 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 as
defined by regulation 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. The following
table contains the capital ratios for the Corporation and each subsidiary
as of March 31, 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
--------------------------------------- ---------------------------------------
Combined Capital Combined Capital
Entity Tier 1 (Tier 1 and Tier 2) Leverage Tier 1 (Tier 1 and Tier 2) Leverage
-------------------------- ------- ------------------- -------- ------- ------------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Consolidated.............. 12.66% 13.82% 8.85% 12.40% 13.56% 8.53%
First Century Bank, N.A... 12.48% 13.64% 8.70% 12.32% 13.49% 8.40%
First Century Bank........ 11.67% 12.83% 8.39% 10.67% 11.77% 7.92%
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
During the first quarter of 1997 net income decreased $43,000 or 7% from
$648,000 earned during the first three months of 1996, to $605,000 earned
during the same period in 1997. Net interest income for the period ended
March 31, 1997, increased $55,000 or 2% to $2.87 million as compared to
$2.82 million for the first three months of 1996. Compared to the fourth
quarter of 1996, net interest income decreased 1% from $2.9 million.
Noninterest income increased $70,000 or 17% to $489,000 for the period
ended March 31, 1997, compared to $419,000 for the same period in 1996.
Noninterest income decreased compared to the fourth quarter of 1996 level
of $637,000. However, this decrease was primarily due to annual trust
fees of $110,000 which were recognized during the fourth quarter of 1996.
Noninterest expense increased 8% to $2.32 million at March 31, 1997,
compared to $2.14 million at March 31, 1996. This was an increase of 3%
when compared to the fourth quarter of 1996 level of $2.25 million. Due
to management's concern over the national and local trends of increased
consumer delinquencies and bankruptcies, valuation write-downs of
approximately $75,000 were recognized during the first quarter of 1997
for repossessed automobiles and other real estate owned. These factors
combined to result in an $86,000 or 9% decrease in income before income
taxes at March 31, 1997 compared to March 31, 1996, and a $186,000 or 17%
decrease when compared with the fourth quarter of 1996. On a per share
basis, earnings per common share through March 31, 1997, were $0.30 as
compared to $0.32 for the same period in 1996, and $0.36 per share for
the fourth quarter of 1996. This reflected a return on average assets of
.87% and a return on average equity of 9.77% for the period ended March
31, 1997.
Total assets decreased $961,000 from December 31, 1996 to March 31, 1997.
Total assets at March 31, 1997 were $277.6 million as compared to $278.6
million at December 31, 1996. The loan portfolio continued to grow during
this three month period, increasing to $183.4 million or an increase of
$3,438,000 or 2%. This was partially funded by a decrease in the
investment portfolio of approximately $1.4 million or 2%. Additional
funding was provided through a reduction in federal funds sold of
approximately $1.3 million. Total deposits decreased by $744,000 to
$235,978,000 at March 31, 1997 from $236,722,000 at December 31, 1996.
The decrease in deposits was all in noninterest-bearing as interest-
bearing deposits increased by $2.6 million. This illustrates the
Corporation's ongoing efforts to compete against other banks, along with
other, nontraditional financial service providers, with competitive
pricing for deposits.
7
<PAGE>
POCAHONTAS BANKSHARES CORPORATION
AND SUBSIDIARIES
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
--------------------------------
J. Ronald Hypes, Treasurer
(Principal Accounting and Financial Officer)
Date: May 12, 1997
----------------------
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 10,233
<INT-BEARING-DEPOSITS> 2,072
<FED-FUNDS-SOLD> 4,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 31,170
<INVESTMENTS-CARRYING> 32,903
<INVESTMENTS-MARKET> 32,909
<LOANS> 183,394
<ALLOWANCE> 2,248
<TOTAL-ASSETS> 277,611
<DEPOSITS> 235,978
<SHORT-TERM> 15,408
<LIABILITIES-OTHER> 1,535
<LONG-TERM> 0
0
0
<COMMON> 2,500
<OTHER-SE> 22,190
<TOTAL-LIABILITIES-AND-EQUITY> 277,611
<INTEREST-LOAN> 4,170
<INTEREST-INVEST> 1,027
<INTEREST-OTHER> 47
<INTEREST-TOTAL> 5,269
<INTEREST-DEPOSIT> 2,258
<INTEREST-EXPENSE> 2,395
<INTEREST-INCOME-NET> 2,874
<LOAN-LOSSES> 141
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,320
<INCOME-PRETAX> 902
<INCOME-PRE-EXTRAORDINARY> 605
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 605
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
<YIELD-ACTUAL> 0.00
<LOANS-NON> 1,405
<LOANS-PAST> 1,189
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,240
<CHARGE-OFFS> 140
<RECOVERIES> 7
<ALLOWANCE-CLOSE> 2,248
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
