FORM - 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the three months ended March 31, 1995
Commission file number 33-17172
Matewan BancShares, Inc.
(Exact name of registrant as specified in its charter)
Delaware 55-0639363
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
Box 100
Second Avenue and Vinson Street
Williamson, West Virginia 25661
(Address of principal executive offices) (Zip Code)
304 235-1544
(registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by section13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter periods that the registrant was required to file
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Common Stock, $1 Par Value - 3,332,904 shares March 31, 1995
Matewan BancShares, Inc.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - March 31, 1995, March 31,
1994, and December 31, 1994
Consolidated Statements of Income - Three months ended
March 31, 1995 and March 31, 1994
Consolidated Statement of Changes in Shareholders' Equity
for the three months ended March 31, 1995 and 1994
Consolidated Statements of Cash Flows for the three months
ended March 31, 1995 and 1994
Notes to Consolidated Financial Statements
Item 2. Manangement's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MATEWAN BANCSHARES, INC. AND SUBSIDIARIES
(dollars in thousands, except per share data)
March 31 December 31 March 31
ASSETS 1995 1994 1994
Cash and due from banks $17,505 $20,539 $19,372
Federal funds sold 10,505 4,770 18,841
Cash and cash equivalents 28,010 25,309 38,213
Interest bearing deposits
in other banks 265 2,876 1,920
Investment securities:
Available-for-sale at
fair value 10,806 11,051 10,965
Held-to-maturity at cost 98,122 98,930 89,571
(Approximate fair value
$96,652 at March 31, 1995;
$89,570 at March 31, 1994;
and $95,904 at December 31,
1994)
Loans - net 216,710 214,744 196,051
Premises and equipment 9,177 9,252 7,966
Accrued interest receivable
and other assets 8,896 9,248 8,227
TOTAL ASSETS $371,986 $371,410 $352,913
======== ======== ========
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MATEWAN BANCSHARES, INC. AND SUBSIDIARIES
(dollars in thousands, except per share data)
March 31 December 31 March 31
LIABILITIES AND 1995 1994 1994
SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $44,197 $44,130 $41,920
Interest bearing 268,252 266,517 258,005
TOTAL DEPOSITS 312,449 310,647 299,925
Short-term borrowings:
Repurchase agreements 12,299 12,089 6,080
Other 1,419 2,908 4,457
TOTAL SHORT TERM
BORROWINGS 13,718 14,997 10,537
Accrued interest payable
and other liabilities 3,079 3,963 3,455
TOTAL LIABILITIES 329,246 329,607 313,917
SHAREHOLDERS' EQUITY
Preferred stock
$1 par value; 1,000,000 shares
authorized; none issued
Common Stock - $1 par value 3,349 3,349 3,349
10,000,000 shares authorized;
3,349,344 shares outstanding,
including 16,440, 14,640, and
15,640 shares in treasury at
March 31, 1995, March 31, 1994,
and December 31, 1994
Surplus 6,460 6,460 6,460
Retained earnings 33,091 32,185 29,192
Treasury stock (64) (48) (30)
Net unrealized loss on
available-for-sale
securities, net of income
taxes of $49 (96) (143) 25
TOTAL SHAREHOLDERS' EQUITY 42,740 41,803 38,996
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $371,986 $371,410 $352,913
======== ======== ========
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
MATEWAN BANCSHARES, INC. AND SUBSIDIARIES
(dollars in thousands, except per share data)
Three months ended
March 31, 1995 March 31, 1994
INTEREST INCOME
Interest and fees on loans $5,959 $5,080
Interest and dividends
on investment securities:
Taxable 1,473 1,556
Tax-exempt 27 10
Other interest income 146 125
TOTAL INTEREST INCOME 7,605 6,771
INTEREST EXPENSE
Deposits 2,758 2,424
Short-term borrowings 142 40
TOTAL INTEREST EXPENSE 2,900 2,464
NET INTEREST INCOME 4,705 4,307
PROVISION FOR LOAN LOSSES 345 451
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,360 3,856
OTHER INCOME
Service fees 384 259
Other 201 217
Credit life insurance
commissions 134 120
TOTAL OTHER INCOME 719 596
OTHER EXPENSES
Salaries and employee
benefits 1,455 1,237
Net occupancy 239 158
Advertising 140 197
Federal deposit insurance 195 192
Other 1,114 950
TOTAL OTHER EXPENSE 3,143 2,734
INCOME BEFORE INCOME TAXES 1,936 1,718
APPLICABLE INCOME TAXES 697 639
NET INCOME $ 1,239 $ 1,079
========= =========
Net income per share $.37 $.32
========= =========
Average common shares
outstanding 3,333,471 3,334,704
========= =========
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
MATEWAN BANCSHARES, INC. AND SUBSIDIARIES
(dollars in thousands, except per share data)
Net
Unrealized
Loss on
Available-
Common Capital
Retained Treasury for-Sale
Stock Surplus
Earnings Stock Securities Total
Balance January 1, 1994 $837 $8,972
$28,321 ($30) ($69) $38,031
Adjustment to beginning balance for
change in accounting method, net
of income tax effect of $30
127 127
Change in net unrealized loss on
available-for-sale securities, net of
income tax effect of $50 0 0
0 0 (33) (33)
Dividends on Common Stock 0 0
(208) 0 0 (208)
($.0625 per share)
Net income 0 0
1,079 0 0 1,079
Four-for-one stock split in the form of
a 300% stock dividend 2,512 (2,512)
0 0 0 0
Balance March 31, 1994 $3,349 $6,460
$29,192 ($30) $25 $38,996
======= =========
========== ====== ====== ==========
Net
Unrealized
Loss on
Available-
Common Capital
Retained Treasury for-Sale
Stock Surplus
Earnings Stock Securities Total
Balance January 1, 1995 $3,349 $6,460
$32,185 ($48) ($143) $41,803
Treasury Stock Purchases
(16) (16)
Change in net unrealized loss on
available-for-sale securities, net of
income tax effect of $19 0 0
0 0 47 47
Dividends on Common Stock 0 0
(333) 0 0 (333)
($.10 per share)
Net income 0 0
1,239 0 0 1,239
Balance March 31, 1995 $3,349 $6,460
$33,091 ($64) ($96) $42,740
======= =========
========== ======= --======= ==========
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
MATEWAN BANCSHARES, INC. AND SUBSIDIARIES
(dollars in thousands)
For the three months ended
March 31, March 31,
1995 1994
OPERATING ACTIVITIES
NET INCOME $1,239 $1,079
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
DEPRECIATION 175 148
AMORTIZATION 147 56
PROVISION FOR LOAN LOSSES 345 451
PROVISION FOR DEFERRED TAXES 13 8
NET CHANGE IN ACCRUED INTEREST
RECEIVABLE AND OTHER ASSETS 298 (173)
NET CHANGE IN ACCRUED INTEREST
PAYABLE AND OTHER LIABILITIES (935) 1,272
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,282 2,841
INVESTING ACTIVITIES
PROCEEDS FROM MATURITIES OF
AVAILABLE-FOR-SALE SECURITIES 3,261 1,000
PROCEEDS FROM MATURITIES OF
HELD-TO-MATURITY SECURITIES 16,145 13,503
PURCHASES OF AVAILABLE-FOR-SALE
SECURITIES (2,946) 0
PURCHASES OF HELD-TO-MATURITY
SECURITIES (15,430) (15,211)
NET CHANGE IN INTEREST BEARING
DEPOSITS IN OTHER BANKS 2,611 (1,918)
NET CHANGE IN LOANS (2,312) (649)
PURCHASES OF PREMISES
AND EQUIPMENT (265) (480)
PROCEEDS FROM SALE OF
PREMISES AND EQUIPMENT 165 0
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 1,229 (3,755)
FINANCING ACTIVITIES
NET CHANGE IN DEPOSITS 1,802 8,772
NET CHANGE IN SHORT-TERM
BORROWINGS (1,279) (1,053)
CASH DIVIDENDS PAID (333) (208)
NET CASH PROVIDED BY
FINANCING ACTIVITIES 190 7,511
NET CHANGE IN CASH AND CASH EQUIVALENTS 2,701 6,597
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 25,309 31,616
CASH AND EQUIVALENTS AT END OF PERIOD $ 28,010 $ 38,213
========== ==========
See Accompanying Notes to Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MATEWAN BANCSHARES, INC. AND SUBSIDIARIES
MARCH 31, 1995
(Dollars in thousands, except per share data)
1. The accompanying unaudited interim 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 Article 10 of Regulation 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
(consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the
interim period are not necessarily indicative of the results that may
be expected for the year ending December 31, 1995. For further
information, refer to the consolidated financial statements and
footnotes thereto included in Matewan BancShares, Inc. and
Subsidiaries' annual report on Form 10-K for the year ended December
31, 1994.
2. The financial statements presented herein reflect Matewan
BancShares, Inc. and its consolidated subsidiaries, The Matewan
National Bank, Matewan Bank FSB, and Matewan Venture Fund, Inc.
3. The Company adopted Financial Accounting Standards Board Statement
No. 114, "Accounting by Creditors for Impairment of a Loan," on
January 1, 1995. Statement No. 114 requires that impaired loans be
measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a practical
expedient, at the loan's observable market price or fair value of
collateral if the loan is collateral dependent. The adoption and
implementation of this standard has not had a material effect on the
Company's financial statements.
At March 31, 1995, the recorded investment in loans that are
considered to be impaired under FASB 114 was $2,838 (of which $1,262
were on a nonaccrual basis). Included in this amount is $1,610 of
impaired loans for which the related allowance for credit losses is
$565 and $1,228 of impaired loans for that because of adequate
collateral positions do not have a specific allowance for credit
losses.
MATEWAN BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Dollars in thousands, except for share data)
FINANCIAL CONDITION
During the three month period ended March 31, 1995, total assets and
total deposits increased approximately $576 and $1,802 respectively
compared to December 31, 1994. Year end figures for both categories
were inflated $4,000 by a short term commercial deposit that was not
expected to remain beyond January of the current year. Consequently,
actual core growth in both categories over the first quarter of 1995
was stronger than period end comparisons might suggest. Total assets
at March 31, 1995 increased approximately $19,073 since March 31,
1994. This level of growth and the concurrent asset mix reflect the
effects of both the Company's market expansion efforts and increased
loan demand in the Company's core market over this time. Deposit
growth of approximately $12,524, short term borrowing growth of
approximately $3,818 and retained earnings growth of approximately
$3,899 provided funding for most of the asset growth in this twelve
month period.
The asset structure of the Company's balance sheet at March 31, 1995
compared to March 31, 1994 reflects several substantive trends. Net
loans have increased approximately $20,659 over the prior period level
reflecting composition levels of 58.3% and 55.6% of total assets.
Increasing market penetration, new market expansion, and generally
strong loan demand over this interval of time are the major reasons
for this increase. Deposit and short term borrowing growth funded most
of this loan growth, increasing approximately $15,705 over the same
time period. Investment securities have increased approximately $8,392
over the same period, representing 29.3% of the Company's total assets
on March 31, 1995 versus 28.5% on March 31, 1994. Cash and cash
equivalent balances decreased approximately $10,203 over the same
interval. Interest bearing deposits in other banks decreased
approximately $1,655. Virtually all of the growth in the investment
portfolio over this time was funded through decreased levels of cash
and interest bearing deposits in other banks. Relatively more
attractive yields available in investment securities rendered them
more attractive investment alternatives than federal funds sold or
short term deposits over this intervening time period, particularly in
the first quarter of 1995. Premises and equipment increased
approximately $1,211, or 15.2% over prior period levels. Commencement
of operations for two Matewan Bank FSB facilities and relocation of
the principal executive and lending offices of the Company account for
most of the increase.
Deposits increased approximately $12,524 (4.2%)and short term
borrowings approximately $3,181 (30.2%)in the prior twelve months.
Non-interest bearing deposits and interest bearing deposits increased
approximately $2,277 (5.4%)and $10,247 (4.0%), repectively, at March
31, 1995, from March 31, 1994. The two Matewan Bank FSB operations
produced approximately $2,706 and $20,358 of non-interest bearing and
interest bearing deposit balances during this period. Both depository
subsidiaries of the Company have interest rate structures that offer
yields that have been consistently competitive with other deposit
products available in the market over this same time frame. Because of
its deposit pricing posture, the Company has been able to insulate its
earnings from rising interest rate pressures prevalent for the last
twelve months.
From March 31, 1994 to March 31, 1995, short-term borrowings have
increased approximately $3,181. Factors contributing to these changes
are the volatile nature of these funds (primarily tax deposits) and
the increase in public funds placed with Company affiliates. It has
become Company policy to place as much public funds as possible in
nondeposit instruments. Other liabilities decreased approximately $376
over period from March 31, 1994 through March 31, 1995.
Internal capital retention has allowed for equity growth of
approximately $3,744 from March 31, 1994 through March 31, 1995.
Equity capital as a percentage of total assets was 11.48% and 11.04%
at March 31, 1995 and March 31, 1994, respectively. The percentage on
December 31, 1993 was 11.25%. The Company is now required to meet
certain regulatory capital requirements for capital on a risk-adjusted
basis. Risk adjustment allows for the inclusion of off-balance sheet
items such as unused credit commitments, exclusion of certain no-risk
assets, as well as inclusion of other factors that may cause
additional risk to the Company. The Company's risk-weighted capital to
risk-weighted asset percentage was 19.38% at March 31, 1995, 18.94% at
March 31, 1994, and 19.23% at December 31, 1994.
On April 19, 1994, the Company filed an application with the National
Association of Securities Dealers, Inc. ("NASDAQ") for the purpose of
registering and listing its common stock for trading on the NASDAQ
National Market. On June 1, 1994, the common stock of the Company
commenced trading on the NASDAQ National Market under the symbol MATE.
The initial market makers for the common stock of the Company were
Wheat First Butcher Singer, Inc. and Scott & Stringfellow Inc., both
of whom continue in that capacity. In November of 1994, Ferris Baker
Watts, Inc. also began to make a market for the Company's stock.
On January 10, 1995, the Board of Directors authorized the Company to
purchase and hold an additional 100,000 shares of its own Common
Stock. Purchases may be made from time to time, subject to regulatory
requirements, in the open market or in privately negotiated
transactions. Purchased shares may be used from time to time for
various corporate purposes.
On January 18, Matewan Bank FSB filed applications with the Office of
Thrift Supervision to establish branch offices in two supermarkets in
Pikeville, Kentucky and South Williamson, Kentucky. These offices are
scheduled to be in full operation before the end of the second quarter
of 1995.
On February 14, 1995, the Company executed a contract with Electronic
Data Services, Inc. ("EDS"). Although the immediate objective of the
agreement was the outsourcing of the core back-office and data
processing operations of the Company, the strategic implications of
the association with EDS for the Company are much broader. A worldwide
leader in providing technology driven solutions in industries far
removed from the Company's own, EDS will provide both technology and
expertise on a much wider and diverse scale than previously available
to the Company. Access to and employment of EDS technology and
expertise will enable the Company to concentrate on growing its
customer base and expanding market share. Effective management of this
technology will supply the basis for a wider and more diverse range of
product offerings. It will also provide quicker state of the art
delivery systems that should provide the Company with a substantial
competitive advantage in any market that it chooses to operate.
However, the most immediate effect may be that the Company experiences
some near term increases in data processing related expenses.
MATEWAN BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)
SUMMARY
Net income for the first quarter of 1995 was approximately $1,239, or
$.37 per share, versus $1,079, or $.32 per share for the same period
in 1994. Return on Average Assets was 1.36% and 1.30% for the quarters
ended March 31, 1995 and March 31, 1994, respectively. Return on
Average Equity was 11.89% and 11.35% for the same respective time
periods. Net income for the first quarter of 1995 was approximately
$160 higher than that of the first quarter of 1994. First quarter of
1995 net income of $1,239 for earnings and $.37 earnings per share
represent first quarter records for the Company.
RESULTS OF OPERATIONS
Net interest income was $4,705 for the quarter ended March 31, 1995
versus $4,307 for the same period ended March 31, 1994. This increase
of approximately $398 was attributable to a combination of the Company
managing to hold its cost of funds relatively steady in the rising
interest rate environment during much of 1995 and the employment of
increasingly aggressive pricing in its loan portfolio. It is important
to evaluate the Company's performance in the context of it being a
short term liability sensitive institution. Under normal
circumstances, in a rising interest rate environment, an institution
that is liability sensitive in the short run would expect an
unfavorable reaction in net interest income as interest-bearing
liabilities reprice at higher rates faster than interest-earning
assets reprice. Because the Company has exercised extreme vigilance in
maintaining its funds pricing positions, as interest rates increased,
net interest income was not as vulnerable to erosion as might have
been expected. Net Interest Margin (net interest income divided by
average earning assets) for the quarter ended March 31, 1995 was 5.69%
versus 5.19% for the same period in 1994. The Company continues to be
liability sensitive and accordingly future increases in market
interest rates would generally adversely impact net interest income,
while decreases in market interest rates would generally have a
positive impact.
The Company's provision for loan losses for the first quarter of 1995
was $345 versus $451 for the same period in 1994. Non-performing
assets (loans past due greater than ninety days, nonaccrual loans, and
other real estate owned) approximated $3,303 at March 31, 1995 versus
$1,806 at March 31, 1994. Management has analyzed and evaluated the
condition of the loan portfolio, has made provision for known of
anticipated losses, and does not anticipate any further significant
losses. The percentage of allowance for loan losses to total
non-performing assets was 77.81% and 168.94% at March 31, 1995 and 1994,
respectively.
Non-interest income increased $123 (20.3%) during the first quarter of
1995 when compared to the same period in 1994. Service fees and other
fees generally increased in the current year due to both normal
business growth and expansion realized in the markets served by
Matewan Bank FSB. Stronger sales of credit insurance in the same
periods translated into commissions approximately $14 higher in 1995
than for the same period in 1994.
Non-interest expenses increased $409 (14.9%)for the first quarter of
1995 over the same period in 1994. Most of this increase was related
to expenses incurred in 1995 related to operating two Matewan Bank FSB
offices and opening two new offices. Higher personnel and occupancy
expenses, in particular, were experienced.
In comparing the three month periods ended March 31, 1995 and March
31, 1994, respectively, net income before taxes increased $218 (12.7%)
Applicable income taxes increased by $58 or 9.1%. The effective income
tax rate for the first quarter of 1995 was 36.00% versus 37.19% for
the first quarter of 1994. This decrease reflects a change in
composition of the Company's earnings and favorable tax effects
attributable to Matewan Bank FSB.
Analysis of the allowance for Loan Losses (Unaudited)
MATEWAN BANCSHARES, INC AND SUBSIDIARIES
(Amounts listed in thousands)
Three months ended
Year-to-date amounts listed through March 31, March 31,
1995 1994
Balance at begining of period $2,932 $2,961
Loans charged-off (802) (441)
Recoveries 95 80
Provision for loan losses 345 451
Balance at the end of period $2,570 $3,051
===== =====
Non-performing assets $3,303 $1,806
Ratio of allowance for loan losses
to non-performing loans 77.81% 168.94%
MATEWAN BANCSHARES, INC.
EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits are required
(b) None
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.
MATEWAN BANCSHARES, INC.
(Registrant)
March 31, 1995 By: /s/Dan R. Moore
Dan R. Moore
Chairman of the Board of Directors
and President
March 31, 1995 By: /s/Lee M. Ellis
Lee M. Ellis
Vice President & Chief Financial Officer