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 the quarter ended Commission File No. 0-16761
March 31, 1996
HIGHLANDS BANKSHARES, INC.
West Virginia 55-0650793
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
P. O. Box 929
Petersburg, West Virginia 26847
(304) 257-4111
(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, 1996
Common Stock, par value - $5 514,066 shares
Page
HIGHLANDS BANKSHARES, INC.
INDEX
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income - Three Months
Ended March 31, 1996 and 1995 2
Consolidated Balance Sheets - March 31, 1996 and
December 31, 1995 3
Consolidated Statements of Cash Flows - Three
Months Ended March 31, 1996 and 1995 4
Consolidated Statements of Changes in Stockholders'
Equity - Three Months Ended March 31, 1996 and 1995 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 16
Item 1. Legal Proceedings 16
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 20
Page
Part I Financial Information
Item 1. Financial Statements
HIGHLANDS BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars)
Three Months Ended
March 31,
1996 1995
Interest Income
Interest and fees on loans $ 2,685 $ 2,348
Interest on federal funds sold 89 71
Interest on time deposits 13 5
Interest and dividends on investment securities
Taxable 555 495
Nontaxable 58 48
Total Interest Income 3,400 2,967
Interest Expense
Interest on time deposits over $100,000 300 179
Interest on other deposits 1,451 1,133
Total Interest Expense 1,751 1,312
Net Interest Income 1,649 1,655
Provision for Loan Losses 30 30
Net Interest Income After Loan Losses 1,619 1,625
Noninterest Income
Service charges 53 48
Other 86 100
Loss on security transactions (4) (2)
Total Noninterest Income 135 146
Noninterest Expense
Salaries and employee benefits 598 538
Occupancy expense 58 48
Equipment expense 67 54
FDIC insurance 1 77
Data processing 92 93
Other 239 231
Total Noninterest Expense 1,055 1,041
Income Before Income Taxes 699 730
Provision for Income Taxes 234 242
Net Income $ 465 $ 488
Per Share Data
Net Income $ .90 $ .95
Cash Dividends $ .18 $ .16
Weighted Average Common Shares Outstanding 514,066 514,066
The accompanying notes are an integral part of these statements.
Page
HIGHLANDS BANKSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)
March 31, December 31,
1996 1995
ASSETS
Cash and due from banks $ 2,927 $ 3,287
Federal funds sold 5,680 6,016
Time deposits in other banks 930 995
Securities held to maturity (note 2) 9,290 9,807
Securities available for sale (note 3) 34,108 29,040
Other investments 620 552
Loans, net of unearned interest (note 5) 113,782 113,935
Less allowance for loan losses (note 6) (1,342) (1,319)
Net Loans 112,440 112,616
Bank premises and equipment 3,380 3,338
Interest receivable 1,466 1,303
Deferred income tax benefits 380 242
Other assets 664 688
Total Assets $ 171,885 $ 167,884
LIABILITIES
Deposits:
Noninterest bearing
Demand deposits $ 15,409 $ 14,134
Interest bearing
Money market and checking 13,493 14,819
Money market savings 12,088 14,578
Savings 17,990 16,989
Time deposits over $100,000 18,771 15,841
All other time deposits 73,543 71,352
Total Deposits 151,294 147,713
Borrowed money 164 157
Accrued expenses and other liabilities 1,427 1,152
Total Liabilities 152,885 149,022
STOCKHOLDERS' EQUITY
Common stock ($5 par value, 1,000,000 shares
authorized, 546,764 shares issued) 2,734 2,734
Surplus 1,662 1,662
Retained earnings 15,321 14,949
Net unrealized gain (loss) on securities
available for sale (223) 11
19,494 19,356
Treasury stock (at cost, 32,698 shares) (494) (494)
Total Stockholders' Equity 19,000 18,862
Total Liabilities and Stockholders' Equity $ 171,885 $ 167,884
The accompanying notes are an integral part of these statements.
Page
HIGHLANDS BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
Three Months Ended
March 31,
1996 1995
Cash Flows from Operating Activities:
Net income $ 465 $ 488
Adjustments to reconcile net income to net
cash provided by operating activities:
Loss on sale of securities 4 2
Depreciation 55 39
Net amortization 37 49
Provision for loan losses 30 30
(Increase) decrease in interest receivable (163) 13
Decrease in other assets 25 18
Increase in accrued expenses 275 327
Net Cash Provided by Operating Activities 728 966
Cash Flows from Investing Activities:
Proceeds from maturities of securities
available for sale 2,777 3,906
Proceeds from maturities of securities
held to maturity 1,002 244
Purchase of securities held to maturity (500)
Purchase of securities available for sale (8,314) (2,081)
Net change in time deposits in other banks 67 (100)
Net change in loans 146 (2,590)
Purchase of property and equipment (97) (144)
Net change in federal funds sold 336 (1,104)
Construction in progress payments (609)
Net Cash Consumed by Investing Activities (4,583) (2,478)
Cash Flows from Financing Activities:
Net increase in deposits 3,581 1,334
Dividends paid in cash (93) (82)
Other borrowed money 7
Net Cash Provided by Financing Activities 3,495 1,252
Net Decrease in Cash and Cash Equivalents (360) (260)
Cash and Cash Equivalents, Beginning of Period 3,287 3,327
Cash and Cash Equivalents, End of Period $ 2,927 $ 3,067
Supplemental Disclosures:
Cash Paid For:
Income taxes $ 13 $ 47
Interest 1,691 1,246
The accompanying notes are an integral part of these statements.
Page
HIGHLANDS BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands of Dollars)
Three Months Ended
March 31,
1996 1995
Balance, beginning of period $ 18,862 $ 16,776
Net income for period 465 488
Cash dividends (93) (82)
Change in unrealized gain (loss) on securities
available for sale (234) 297
Balance, end of period $ 19,000 $ 17,479
The accompanying notes are an integral part of these statements.
Page
HIGHLANDS 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, 1996, and the results of operations for the three month
periods ended March 31, 1996 and 1995. The notes included
herein should be read in conjunction with the notes to financial
statements included in the 1995 annual report to stockholders of
Highlands Bankshares, Inc.
NOTE 2 SECURITIES HELD TO MATURITY:
The amortized cost and fair value of securities held to
maturity as of March 31, 1996 and December 31, 1995, are as
follows:
1996 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
US Treasury securities
and obligations of
US Government
corporations
and agencies $ 5,329 $ 5,387 $ 5,743 $ 5,836
Obligations of
states and
political
subdivisions 3,961 3,986 4,064 4,144
Total $ 9,290 $ 9,373 $ 9,807 $ 9,980
NOTE 3 SECURITIES AVAILABLE FOR SALE:
The amortized cost and fair value of securities available for
sale as of March 31, 1996 and December 31, 1995, are as follows:
1996 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
US Treasury securities
and obligations of
US Government
corporations
and agencies $ 32,852 $ 32,730 $ 27,405 $ 27,633
Obligations of
states and
political
subdivisions 200 180 200 200
Other investments 1,408 1,198 1,417 1,207
Total $ 34,460 $ 34,108 $ 29,022 $ 29,040
Page
HIGHLANDS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 LOANS OUTSTANDING:
A summary of loans outstanding as of March 31, 1996 and
December 31, 1995, is as follows:
1996 1995
Commercial $ 20,742 $ 20,749
Real estate - construction 540 2,622
- mortgages 67,651 65,971
Consumer installment 26,955 26,740
Total 115,888 116,082
Unearned interest (2,106) (2,147)
Net loans outstanding $ 113,782 $ 113,935
NOTE 5 ALLOWANCE FOR LOAN LOSSES:
A summary of transactions in the allowance for loan losses
for the three months ended March 31, 1996 and 1995, follows:
1996 1995
Balance, beginning of period $ 1,319 $ 1,454
Provisions charged to operating expenses 30 30
Loan recoveries 43 39
Loan charge-offs (50) (69)
Balance, end of period $ 1,342 $ 1,454
Page
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company's net income was $465,000 in the first quarter of 1996, a
decrease of 4.71% compared to the first quarter of 1995. Earnings were
$.90 per share for the first quarter of 1996 compared to $.95 per share for
the same quarter in 1995. The Company's annualized return on average
equity was 9.80% in the first quarter of 1996 compared to 11.40% for the
first quarter of 1995. Return on average assets was 1.10% for 1996 and
1.27% for 1995.
The decrease in earnings per share for the first quarter was due to a
modest increase in noninterest expenses and a slight decrease in
noninterest income. Net interest income on a tax equivalent basis was
unchanged as increases in income from earning assets were offset by
increases in interest paid on time deposits. Many customers availed
themselves of a certificate of deposit promotion in the first quarter of
1995 that locked in rates for eighteen months and this will continue to
affect the cost of funds through the third quarter of 1996. Provision for
loan losses was unchanged as the Company's loan portfolio continues to show
only nominal losses despite a growth in average loans outstanding of 8.56%.
Net Interest Income
The Company's net interest income on a tax equivalent basis was 4.16%
($1,680,000) in the first quarter of 1996 compared to 4.55% ($1,680,000) in
the first quarter of 1995. Real estate and commercial loan yields
increased while consumer rates fell in the first quarter. Yields on
federal funds sold and interest bearing deposits moved with the market.
Yields on securities increased by 35 basis points due to the maturity in
1995 of lower yielding investments and the reinvestment in 1995 and early
1996 at higher rates. The overall increase in net interest earned was
offset by higher interest expense on deposits, particularly time deposits.
Due to intense competition from other financial institutions in Petersburg
and Moorefield, the Banks have paid rates on time deposits substantially
higher than those rates paid in other parts of the state. This competition
did not plateau until late 1995 and rates paid on deposits as a result of
promotions will be reflected in operations through late 1996. The
increasing cost of deposits left the net margin for 1996 flat with no
change in the margin between 1996 and 1995.
Loans outstanding at the end of the first quarter of 1996 increased
6.73% from the first quarter of 1995. The prior year showed an excellent
loan demand as evidenced by the increase in loans, however, loans
outstanding for the first quarter of 1996 were virtually unchanged from the
December 31, 1995 levels. Reasons for the lack of loan growth in the first
quarter include the particularly harsh winter of 1996 (which affected
construction significantly) and rising interest rates in the first quarter.
Management is unable to quantify the effects of the 1996 winter on loan
demand but believes some recovery will occur in the construction and
durable goods lending and that loan levels will begin to increase in the
second quarter of 1996.
Interest rates paid on transaction and savings accounts declined to
levels comparable with the Banks' statewide competition in the first
quarter of 1996. In early 1995, many depositors took advantage of a "no
penalty" time deposit promotion and this resulted in a reallocation of
deposits from transaction to time deposits. With this reallocation came a
higher cost of funds for existing deposits and a large influx of new
deposits. This higher cost of time deposits increased the overall cost of
deposits by 94 basis points in 1996. This situation is expected to
continue through the third quarter of 1996 when higher yielding deposits
should mature and be replaced with lower yielding deposits.
A complete yield analysis is shown as Table I on page 14.
Page
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Noninterest Income
Noninterest income declined 7.53% during the first quarter of 1996
compared to the same quarter in 1995. The decrease was due to lower income
from insurance operations which was the result of a lower level of policies
written. Service charges on deposit accounts increased during the first
quarter of 1996 as compared to the first quarter in 1995 due to a higher
level of deposit activity.
Noninterest Expenses
Overall noninterest expenses rose 1.34% for the first quarter of 1996
when compared to the first quarter of 1995. Personnel expenses increased
11.15% in the first quarter of 1996 over the same quarter in 1995. The
increases reflect merit and inflationary raises and changes in employee
benefits. Occupancy, data processing and FDIC insurance costs decreased
29.61% during the first quarter of 1996 as compared to the same quarter in
1995. The reason for this decline was the virtual cessation of FDIC
insurance premiums as of June 1, 1995. Other noninterest expenses saw
negligible increases in line with inflation in the first quarter of 1996.
Excluding the FDIC insurance premium reduction, noninterest expense
increased 9.34% for the quarter. This increase was anticipated due to the
expansion of the Petersburg and Moorefield facilities and the resulting
increase in total assets of 10.26% during the last twelve months.
Loan Portfolio
The Company is an active residential mortgage and construction lender
and generally extends commercial loans to small and medium sized businesses
within its primary service area. The Company's commercial lending activity
extends across its primary service areas of Grant, Hardy and northern
Pendleton counties. Consistent with its focus on providing community-based
financial services, the Company does not attempt to diversify its loan
portfolio geographically by making significant amounts of loans to
borrowers outside of its primary service area.
The principal economic risk associated with each of the categories of
loans in the Company's portfolio is the creditworthiness of its borrowers.
Within each category, such risk is increased or decreased depending on
prevailing economic conditions. The risk associated with the real estate
mortgage loans and installment loans to individuals varies based upon
employment levels, consumer confidence, fluctuations in value of
residential real estate and other conditions that affect the ability of
consumers to repay indebtedness. The risk associated with commercial,
financial and agricultural loans varies based upon the strength and
activity of the local economies of the Company's market areas. The risk
associated with real estate construction loans varies based upon the supply
of and demand for the type of real estate under construction.
Loans outstanding declined $153,000 or .13% in the first quarter in
1996 compared to levels at December 31, 1995. Modest gains in consumer and
mortgage lending were offset by declines in construction lending, a victim
of the harsh winter of 1996. The loan to deposit ratio was 75.21% at March
31, 1996 compared to 77.13% at December 31, 1995. Loan demand is expected
to remain satisfactory in the near future with construction lending
increasing during the spring and summer months.
Page
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Asset Quality
Nonperforming loans 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 on which the original interest rate or
repayment terms have been changed due to financial hardship of the
borrower. The loans on nonaccrual status consist of real estate mortgages
and commercial loans. The total of nonaccrual loans as of March 31, 1996
and December 31, 1995 was $95,000. Real estate acquired through
foreclosure was $246,000 at March 31, 1996 compared to $260,000 at December
31, 1995. All foreclosed property held at March 31, 1996 was in the
Company's primary service area. The Company's practice is to value real
estate acquired through foreclosure at the lower of (i) an independent
current appraisal or market analysis less anticipated costs of disposal, or
(ii) the existing loan balance. The Company is actively marketing all
foreclosed real estate and does not anticipate material write-downs in
value before disposition.
Allowance for Loan Losses
Management evaluates the loan portfolio in light of national and
local economic changes, changes in the nature and value of the portfolio
and industry standards. The Company's loan classification system, which
rates existing loans, provides the basis for adjusting the allowance for
loan losses. Management reviews these classification totals, along with
internally generated loan review reports, past due reports, historical loan
loss experience and individual borrower's financial health to determine the
necessary amount to be provided in the allowance for loan losses.
Management evaluates nonperforming loans relative to their collateral value
and makes the appropriate adjustments to the allowance when needed.
Management believes, based on its review, that the Company has an adequate
allowance to absorb any losses in the loan portfolio.
The net amount of charge-offs for the first quarter ended March 31,
1996 was $7,000 compared to $30,000 for the first quarter of 1995. The
allowance for loan losses was $1,342,000 at March 31, 1996 compared to the
balance at December 31, 1995 of $1,319,000. The allowance as a percent of
loans outstanding was 1.18% at March 31, 1996 compared to 1.16% at December
31, 1995. The provision for loan losses for the first quarter of 1996 and
1995 was $30,000. Loan losses and loan collection costs have remained in
line with peer group statistics for the last two years and reflect
improvements in overall loan portfolio.
Securities
The Company's securities portfolio serves several purposes. Portions
of the portfolio secure certain public and trust deposits while the
remaining portions are held as investments or used to assist the Company in
liquidity and asset liability management. Total securities at March 31,
1996 were $44,018,000 compared to $39,399,000 at December 31, 1995. Total
securities as percent of total assets was 25.61% at March 31, 1996 compared
to 23.47% at December 31, 1995. The increase in securities is the result
of an increase in deposits (especially large certificates of deposit) and a
lackluster loan demand influenced heavily by abnormally bad weather in the
first quarter of 1996.
Page
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Securities (Continued)
The securities portfolio consists of three components, securities
held to maturity, securities available for sale and restricted securities.
Securities are classified as held to maturity when management has the
intent and the Company has the ability at the time of purchase to hold the
securities to maturity. Held to maturity securities are carried at cost,
adjusted for amortization of premiums and accretion of discounts.
Securities to be held for indefinite periods of time are classified as
available for sale and accounted for at market value. Securities available
for sale include securities that may be sold in response to changes in
market interest rates, changes in the security's prepayment risk, increases
in loan demand, general liquidity needs and other similar factors.
Restricted securities are those purchased as a requirement to be a member
of certain government chartered organizations. The Company's recent
purchases of all securities have generally been limited to securities of
high credit quality with short to medium term maturities. Changes within
the year in the market values of securities available for sale are
reflected as changes in stockholders' equity, net of the deferred tax
effect. As of March 31, 1996, the cost of the securities available for
sale exceeded their market value by $354,000 ($223,000 after tax
considerations).
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.
Total deposits increased 2.42% between December 31, 1995 and March
31, 1996, primarily in the area of time deposit accounts. The cost of
funds for the first quarter of 1996 was 5.20% compared to 4.26% for the
same quarter in 1995. The yields on demand and savings deposits declined
slightly within the period while yields on time deposits increased
substantially. The majority of the Company's deposits are time deposits
which are attractive to persons seeking high yields on their deposits but
without the need for liquidity. The Company has not actively pursued
deposits in excess of $100,000 due to the volatile nature of these
relationships.
Capital
The Company seeks to maintain a strong capital base to expand
facilities, promote public confidence, support current operations and grow
at a manageable level. As of March 31, 1996 the Company's total risk based
capital ratio was 20.28% which is far above the regulatory minimum of 8.0%.
The ratio of total capital to total assets was 11.05% at March 31, 1996
which exceeds that of the Company's peers. Earnings have been satisfactory
to allow an increase in dividends in 1996 over those levels experienced in
1995.
Page
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
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 liability liquidity. As a result of the Company's management of liquid
assets and the ability to generate liquidity through liability funding,
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, the ability to obtain deposits through
the adjustment of interest rates and the purchasing of federal funds. To
further meet its liquidity needs, the Company also maintains lines of
credit with correspondent financial institutions and the Federal Reserve
Bank of Richmond. Both subsidiary banks have lines of credit with the
Federal Home Loan Bank of Pittsburgh although utilization has been quite
limited. In the past, growth in deposits and proceeds from the maturity of
investment securities have been sufficient to fund the net increase in
loans.
Interest Rate Sensitivity
In conjunction with maintaining a satisfactory level of liquidity,
management must also control the degree of interest rate risk assumed on
the balance sheet. Managing this risk involves regular monitoring of the
interest sensitive assets relative to interest sensitive liabilities over
specific time intervals.
At March 31, 1996 the Company had a negative gap position. This
liability sensitive position typically produces an unfavorable contribution
to earnings during a period of increasing rates. Because the financial
markets were in an increasing rate environment and the Company had a
negative gap position, the Company experienced no increase in its net
interest margin on a tax equivalent basis in the first quarter of 1996.
With the largest amount of interest sensitive assets and liabilities
repricing within three years, the Company monitors these areas very
closely. Early withdrawal of deposits, prepayments of loans and loan
delinquencies are some of the factors that could affect actual versus
expected cash flows. In addition, changes in rates on interest sensitive
assets and liabilities may not be equal, which could result in a change in
net interest margin. While the Company does not match each of its interest
sensitive assets against specific interest sensitive liabilities, it does
seek to enhance the net interest margin while minimizing exposure to
interest rate fluctuations.
Page
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Effects of Inflation
Inflation significantly affects industries having high proportions of
property, plant and equipment or high levels of inventories. Although the
Company is not significantly affected in these areas, inflation does have
an impact on the growth of assets. As assets grow rapidly, it becomes
necessary to increase equity capital at proportionate levels to maintain
the appropriate equity to asset ratios. Traditionally, the Company's
earnings and high capital retention levels have enabled the Company to meet
these needs.
The Company's reported earnings results have been affected by
inflation, but isolating the effect is difficult. The different types of
income and expense are affected in various ways. Interest rates are
affected by inflation, but the timing and magnitude of the changes may not
coincide with changes in the consumer price index. Management actively
monitors interest rate sensitivity, as illustrated by the Gap Analysis
(Table II, page 15) in order to minimize the effects of inflationary trends
on interest rates. Other areas of noninterest expenses may be more
directly affected by inflation.
Page
TABLE 1
<TABLE>
HIGHLANDS BANKSHARES, INC.
NET INTEREST MARGIN ANALYSIS
(Dollar Amounts in Thousands)
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1996 March 31, 1995
Average Income/ Average Income/
Balance 2 Expense Rates Balance 2 Expense Rates
<S> <C> <C> <C> <C> <C> <C>
Interest Income
Loans
Commercial $ 21,226 $ 576 10.85% $ 19,566 $ 427 8.73%
Consumer 24,478 618 10.10 22,748 613 10.78
Real estate 67,427 1,491 8.85 61,901 1,308 8.45
Total Loans 113,131 2,685 9.49 104,215 2,348 9.01
Federal funds sold 6,678 89 5.33 5,023 71 5.65
Interest bearing
deposits 968 13 5.37 388 5 5.15
Investments
Taxable 36,473 555 6.09 34,448 495 5.75
Tax exempt 1 4,198 89 8.48 3,513 73 8.31
Total Earning Assets 1 161,448 3,431 8.50 147,587 2,992 8.10
Interest Expense
Demand deposits 27,110 198 2.92 30,107 232 3.08
Savings 17,080 153 3.58 17,375 163 3.75
Time deposits 90,221 1,398 6.20 75,607 917 4.85
Other borrowed money 154 2 5.19
Total Interest
Bearing Liabilities 134,565 1,751 5.20 123,089 1,312 4.26
Net Interest Margin $ 1,680 $ 1,680
Net Yield on Interest
Earning Assets 1 4.16% 4.55%
<F1>
1 Yields are on a taxable equivalent basis.
2 Includes loans in nonaccrual status.
</TABLE>
Page
TABLE II
<TABLE>
HIGHLANDS BANKSHARES, INC.
INTEREST RATE SENSITIVITY ANALYSIS
MARCH 31, 1996
(In Thousands of Dollars)
<CAPTION>
More than
5 Years
1 - 90 91 - 365 1 to 3 3 to 5 or Without
Days Days Years Years Maturity Total
<S> <C> <C> <C> <C> <C> <C>
EARNINGS ASSETS
Loans $ 17,792 $ 37,457 $ 44,659 $ 7,150 $ 6,724 $ 113,782
Fed funds sold 5,680 5,680
Securities 6,375 6,462 11,908 7,732 11,541 44,018
Interest bearing
time deposits 230 400 300 930
Total 30,077 44,319 56,867 14,882 18,265 164,410
INTEREST BEARING LIABILITIES
Transaction
accounts 13,493 13,493
Money market
savings 12,088 12,088
Savings accounts 17,990 17,990
Time deposits more
than $100,000 3,580 7,753 5,480 1,648 310 18,771
Time deposits less
than $100,000 17,172 31,224 20,077 5,070 73,543
Other borrowed
money 13 13 35 39 64 164
Total 64,336 38,990 25,592 6,757 374 136,049
Discrete interest
sensitivity GAP (34,259) 5,329 31,275 8,125 17,891 28,361
Cumulative interest
sensitivity GAP (34,259) (28,930) 2,345 10,470 28,361
Ratio of cumulative
interest sensitive
assets to cumulative
interest sensitive
liabilities 46.75% 72.00% 101.82% 107.72% 120.85%
Assumes all transaction, money market and savings deposit accounts reprice within 90 days.
</TABLE>
Page
Part II Other Information
Item 1. Legal Proceedings - Not Applicable
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 Highlands
Bankshares, Inc. are incorporated by reference
to Appendix C to Highlands Bankshares, Inc.'s
Form S-4 filed October 20, 1986.
3 (ii) Bylaws of Highlands Bankshares, Inc. are
incorporated by reference to Appendix D to
Highland Bankshares, Inc.'s Form S-4 filed
October 20, 1986.
27 Financial Data Schedule attached.
(b) Reports on Form 8-K filed during the three months ended
March 31, 1996
None
Page
EXHIBIT INDEX
Exhibit
Index Page Number
27 Financial Data Schedule for the quarter ending
March 31, 1996 18
Page
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.
HIGHLANDS BANKSHARES, INC.
LESLIE A. BARR
Leslie A. Barr
President
CLARENCE E. PORTER
Clarence E. Porter
Secretary/Treasurer
Date May 13, 1995
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from Highlands
Bankshares, Inc. Form 10QSB and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,927
<INT-BEARING-DEPOSITS> 930
<FED-FUNDS-SOLD> 5,680
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 34,108
<INVESTMENTS-CARRYING> 9,910
<INVESTMENTS-MARKET> 9,993
<LOANS> 113,782
<ALLOWANCE> (1,342)
<TOTAL-ASSETS> 171,885
<DEPOSITS> 151,294
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,427
<LONG-TERM> 164
0
0
<COMMON> 2,734
<OTHER-SE> 16,266
<TOTAL-LIABILITIES-AND-EQUITY> 171,885
<INTEREST-LOAN> 2,685
<INTEREST-INVEST> 613
<INTEREST-OTHER> 102
<INTEREST-TOTAL> 3,400
<INTEREST-DEPOSIT> 1,751
<INTEREST-EXPENSE> 1,751
<INTEREST-INCOME-NET> 1,649
<LOAN-LOSSES> 30
<SECURITIES-GAINS> (4)
<EXPENSE-OTHER> 1,055
<INCOME-PRETAX> 699
<INCOME-PRE-EXTRAORDINARY> 465
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 465
<EPS-PRIMARY> .90
<EPS-DILUTED> .90
<YIELD-ACTUAL> 4.16
<LOANS-NON> 95
<LOANS-PAST> 755
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,319
<CHARGE-OFFS> 50
<RECOVERIES> 43
<ALLOWANCE-CLOSE> 1,342
<ALLOWANCE-DOMESTIC> 1,342
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
