SECURITIES & 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 September 30, 1998
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _________
COMMISSION FILE NUMBER 33-10149
SVB&T Corporation
1500 Main Street
Jasper, IN 47546
Telephone (812) 634-1010
State of Incorporation - Indiana
I.R.S. Employer Identification No. 35-1539978
NOT APPLICABLE
Former name, former address and fiscal year, if changed since last report.
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, and (2) has been subject to the
filing requirements for at least the past 90 days. Yes _X__ No ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock. The Registrant has one class of common stock (no par value)
with approximately 748,187 shares outstanding at November 11, 1998. The
Registrant holds 51,813 shares in the form of Treasury Stock.
SVB&T CORPORATION
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page No.
Consolidated Balance Sheet
September 30, 1998 and 1997 and December 31, 1997........... 3
Consolidated Statement of Income
Three and nine months ended September 30, 1998 and 1997..... 4
Consolidated Statement of Cash Flows
Nine months ended September 30, 1998 and 1997............... 5
Consolidated Statement of Changes in Shareholders' Equity
Nine months ended September 30, 1998 and 1997............... 6
Notes to Consolidated Financial Statements................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 8-10
PART II. OTHER INFORMATION............................................ 11
SIGNATURES............................................................ 12
SVB&T CORPORATION CONSOLIDATED BALANCE SHEET
Sept. 30, Sept. 30, Dec. 31,
(unaudited) 1998 1997 1997
ASSETS:
Cash and due from banks 4,635 3,243 4,474
Federal funds sold 725 0 900
Total cash and cash equivalents 5,360 3,243 5,374
Interest bearing deposits in other banks 87 17 94
Investment securities, available for
sale (carried at market value) 33,714 44,082 38,621
Loans
Loans, net of unearned interest 140,462 136,577 140,604
Allowance for loan losses (1,057) (1,323) (1,402)
Net loans 139,405 135,254 139,202
Buildings and equipment 4,880 4,880 5,033
Other real estate 37 0 0
Interest receivable 1,306 1,228 1,319
Deferred income taxes 0 0 0
Other assets 1,127 1,147 761
Total Assets 185,916 189,851 190,404
LIABILITIES:
Deposits
Non-interest bearing demand 11,594 10,111 13,294
Interest bearing 148,609 149,824 152,578
Total Deposits 160,203 159,935 165,872
Federal Funds Purchased 0 4,700 0
Other Short Term Borrowings 3,500 5,000 4,000
Interest payable 781 781 824
Deferred income taxes 238 285 305
Other liabilities 1,048 703 688
Total Liabilities 165,770 171,404 171,689
SHAREHOLDERS' EQUITY:
Common stock 200 200 200
Capital surplus 6,124 6,094 6,094
Retained earnings 14,327 13,033 13,274
Net unrealized gain (loss) on
investment securities 272 (67) (40)
Treasury stock at cost (27,100 shares) (777) (813) (813)
Total Shareholders' Equity 20,146 18,447 18,715
Total Liabilities and
Shareholders' Equity 185,916 189,851 190,404
The accompanying notes are an integral part of this statement.
SVB&T CORPORATION CONSOLIDATED STATEMENT OF INCOME
Three Months Nine Months
Ended Sept. 30, Ended Sept. 30,
(unaudited) 1998 1997 1998 1997
_____________________________________________________________________________
INTEREST INCOME:
Loans and fees on loans 3,150 2,998 9,383 8,473
Investment securities:
Taxable 372 578 1,183 1,852
Non-taxable 101 101 293 309
Federal funds sold and
securities purchased under
agreements to resell 67 5 141 112
Deposits with banks 3 0 3 1
Total Interest Income 3,693 3,682 11,003 10,747
INTEREST EXPENSE:
Deposits 1,835 1,881 5,527 5,584
Other Short term Funds Borrowed 13 48 28 87
Total interest expense 1,848 1,929 5,555 5,671
Net interest income 1,845 1,753 5,448 5,076
Provision for loan losses 145 100 385 280
Net interest income after
provision for loan losses 1,700 1,653 5,063 4,796
NON-INTEREST INCOME:
Trust fees 219 217 595 547
Service charges on
deposit accounts 145 139 414 363
Insurance and claims processing 40 41 133 137
Securities gains (losses), net 0 2 0 5
Other Income 74 69 185 156
Total Non-interest Income 478 468 1,327 1,208
NON-INTEREST EXPENSE:
Salaries and employee benefits 838 828 2,493 2,456
Premise and equipment expense 258 298 746 861
Other real estate expense 0 0 0 12
FDIC Deposit expense 5 5 15 15
Telephone expense 27 34 87 99
Postage expense 24 27 84 83
Other expenses 312 216 838 662
Total non-interest expense 1,464 1,408 4,263 4,188
Income before income taxes 714 712 2,127 1,816
Provision for income tax 247 185 737 473
Net Income 467 527 1,390 1,343
NET INCOME PER COMMON SHARE:
Primary $.62 $.70 $1.86 $1.80
Weighted average common shares
outstanding 748,187 748,187 748,187 748,187
DIVIDENDS DECLARED:
Cash dividends $.15 $.15 $.45 $.39
The accompanying notes are an integral part of this statement.
SVB&T CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended Sept 30,
(unaudited) 1998 1997
___________________________________________________________________________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income before sale of asset 1,390 1,343
Gain on Sale Asset 0 (19)
Net Income 1,390 1,324
ADJUSTMENTS TO RECONCILE NET INCOME TO CASH
PROVIDED FROM OPERATING ACTIVITIES:
Directors Stock Option Compensation 5 0
Depreciation 253 319
Net premium amortization (discount
accretion) of investment securities 24 3
Provision of loan losses 360 280
Decrease(increase) in interest receivable 19 129
(Increase) decrease in other assets (409) (255)
Increase (decrease) in accrued expenses and
other liabilities 358 157
Net cash flows provided by operating
activities 2,000 1,957
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase of interest bearing deposits
in other banks 25 (17)
Purchase of investment securities available
for sale (14,636) (2,730)
Proceeds from maturities and paydowns of
investment securities available for sale 19,756 9,268
Net (increase) decrease in loans (613) (13,985)
Purchase of premises and equipment (100) (208)
Purchase of Sale of Asset 0 50
Net cash flows used in investing
activities 4,432 (7,623)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits and
short-term borrowings
Non-interest bearing demand (1,699) (2,444)
Total interest-bearing deposits (3,970) 10,784
Federal Funds Purchased 0 (4,170)
Other Short-Term Borrowings (500) 0
Cash dividends paid (338) (291)
Treasury Stock Sold 61 0
Net cash flows provided by (used in)
financing activities (6,446) 3,880
Net decrease in cash equivalents (14) (1,786)
Cash and cash equivalents at beginning of
period 5,374 5,029
Cash and cash equivalents at end of period 5,360 3,243
Total interest paid 5,570 5,640
Total taxes paid 665 615
The accompanying notes are an integral part of this statement.
SVB&T CORPORATION CONSOLIDATED STATEMENT
OF CHANGES IN SHAREHOLDERS' EQUITY
Nine Months Ended Sept. 30,
(unaudited) 1998 1997
_______________________________________________________________________________
Balance, beginning of period 18,716 17,329
Net income 1,390 1,343
Cash dividends (337) (291)
Net unrealized gain (loss) on investment
securities 311 66
Sale of Stock 66 0
Balance, end of period 20,146 18,447
The accompanying notes are an integral part of this statement.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Principles of Consolidation - The consolidated financial statements include the
accounts of SVB&T Corporation and its wholly owned subsidiary, Springs Valley
Bank & Trust Company. All significant intercompany balances and transactions
have been eliminated.
All adjustments which are, in the opinion of management, necessary for a fair
presentation of the results for the periods reported, consisting only of normal
adjustments, have been included in the accompanying unaudited consolidated
condensed financial statements. The results of operations for nine month period
ended September 30, 1997 is not necessarily indicative of those expected for the
remainder of the year. The holding company had a 2 for 1 stock split for
shareholders as of August 1, 1997. The shares were issued on August 11, 1997.
All per share information has been restated based on this stock split.
Sept. 30, 1998 Sept. 30, 1997 Dec. 31, 1997
________________________________________________________________________________
INVESTMENT SECURITIES:
U.S. treasury securities 0 0 0
U.S. Government corporations
& agencies 23,910 34,353 28,395
States and political subdivisions 8,782 8,320 8,836
Mortgage - backed securities 234 331 312
Other domestic securities 197 500 500
Equity Securities 591 578 578
Total Investment Securities 33,714 44,082 38,621
Sept. 30, 1998 Sept. 30, 1997 Dec. 31, 1997
________________________________________________________________________________
LOANS:
Commercial and industrial loans 12,829 16,414 17,636
Real estate loans 78,868 77,569 79,491
Construction loans 1,037 996 1,322
Agricultural production financing
and other loans to farmers 1,799 1,310 1,086
Individual loans for household
and other personal expense 45,120 39,978 40,859
Economic development revenue bonds 0 0 0
Lease Financing Receivable 364 465 437
Other Loans Excluding Consumer 605 0 0
Less: Unearned income on loans (160) (155) (227)
Total Loans 140,462 136,577 140,604
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SUMMARY OF OPERATING RESULTS
EARNINGS ANALYSIS
Net income for the first nine months of $1,390,000 represents an increase of
$47,000 or 3% from the $1,343,000 reported for the same period last year. The
third quarter earnings of $467,000 represents an decrease of $60,000 or 11%
from the $527,000 reported for the third quarter of 1997. The income decrease
is a direct result of taxes being under accrued in 1997. The bank's
non-interest income has increased with income from trustee fees and service
charges on accounts. Non-interest expenses have increased by an average rate
of 2% over the 1997 total expenses.
NET INTEREST INCOME
Springs Valley Bank & Trust Company is a very liability sensitive bank.
Interest bearing deposits reprice much faster than interest bearing loans and
investments. In a declining environment, the bank's income increased because
of a widening interest spread. Thus, our interest spreads have become larger
and income has returned to a more acceptable position. The interest spread is
improving. This subject is reviewed in greater detail in the following
management comments.
SVB&T Corporation's primary source of earnings is net interest income, which
is the difference between interest earned on loans and other investments
and the interest incurred for deposits. In the first nine months of 1998, net
interest income increased by $372,000 or 7% for the same period in 1997. The
third quarter net interest income for 1998 increased by $92,000 or 5%
compared to the third quarter of 1997. The improvement in the net interest
income is due to assets being deployed into higher yielding loans rather than
investments and decreasing interest expense on deposits.
OTHER INCOME
Other income of $1,327,000 for the first three quarters of 1998 is $119,000 or
10% higher than the same period for 1997.The increase is due to increased trust
income, increased service charges on deposit accounts and fees earned from the
alternative investment department. Other non-interest is an important part of
the profitability of the bank and all avenues of additional income are reviewed.
The third quarter increase of other income is $10,000 in 1998 compared to 1997
or 2%.
NON-INTEREST EXPENSES
For the first nine months of 1998, other expenses increased by $75,000 or 2%
compared to the same period of 1997. The three months ended September 30, 1998
total other expense increase was $56,000 or 4% increase over that same period
for 1997. This increase is principally the effect of increased salaries and
employee benefits.
ANALYSIS OF FINANCIAL CONDITION
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The Corporation's allowance for loan losses was $1,057,000 at September 30, 1998
compared to $1,323,000 at September 30, 1997 and $1,402,000 as of December 31,
1997.
At September 30, 1998 the allowance for possible loan losses was .75% of total
loans, net for unearned interest. This compares to an allowance of .97%
at September 30, 1997. Net charge offs for the first nine months of 1998
were $730,000 compared to $356,000 for the same period last year. Management
reviews the loan portfolio and assesses the risk and believes that the allowance
of $1,057,000 is adequate. One larger credit of $56,000 was charged off during
this quarter. This was a participation loan and fraud by the borrower is
involved. This has been turned over to our attorneys and has been submitted to
our insurance company.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
The Corporation's objective in liquidity management is to manage the assets and
liabilities to meet the needs of borrowers while allowing for the possibility
of deposit withdrawals. The primary purpose of asset/liability management is
to minimize the effect on net income of changes in interest rates and to
maintain a prudent match within specified time periods of rate-sensitive
assets and rate-sensitive liabilities.
As of September 30, 1998 the rate-sensitive assets were 74% of rate-sensitive
liabilities in the 1-180 day maturity category and 95% in the 181-365 day
range. These positions are within acceptable ranges as determined by funds
management policy. The Corporation's Funds Management Committee meets weekly
to monitor and effect changes necessary in the liquidity and
rate-sensitivity positions.
CAPITAL
Total shareholders' equity as of September 30, 1998 was $20,146,000 compared to
$18,447,000 for the same period last year. The shareholder's equity has
increased by $1,699,000 or 9% from September 30, 1997 to September 30, 1998.
This increase is attributed to the unrealized loss on investment securities and
profits increasing.
The holding company enacted a 2 for 1 stock split on August 11, 1997. The
total shares increased to 800,000 with 748,187 shares outstanding. This
stock split's goal is to create a larger market for SVB&T Corporations stock
at a reasonable cost.
(ANALYSIS OF FINANCIAL CONDITIONS CONTINUED)
As of September 30, 1998 the bank's leverage capital ratio was 10.8% which
compared to 9.35% at September 30, 1997.
As of September 30, 1998 the bank's total risk-based capital ratio was 14.14%
compared to 15.28% at September 30, 1997.
These ratios are in excess of regulatory requirements of 3% for leverage capital
and 8% for total risk-based capital.
YEAR 2000
The bank is working diligently to minimize the impact of any Year 2000 related
problems that might occur either within the bank or outside the bank and affect
the safe and sound operation of the bank.
A Year 2000 committee and several sub-committees are working to complete all Y2K
related activities according to the guidelines and recommendations of FFIEC.
All recommended deadlines have been met to this point.
The bank expects to spend a total of about $250,000 on Y2K related
activities. Approximately one-half of that expense will be for hardware and
software that can be capitalized and amortized over a period of time. The
remainder is primarily labor costs that will be taken as an operating expense.
Management does not expect this to have a substantial adverse effect on the
bank's income.
The bank is working on both a remediation contingency plan and a business
resumption contingency plan. Management expects those to be completed no later
than the FFIEC recommended guidelines date.
It is impossible to assess the effect of Y2K related problems on the operation
and profitability of the bank. Management plans to be able to offer limited
essential banking services to its customers under even the most adverse
conditions. The severity and length of any Y2K problems will determine the
degree to which the contingency plans must be utilized and how much the
operation and profitability of the bank are impacted.
PART II
OTHER INFORMATION
Item 1 - LEGAL PROCEEDINGS
None
Item 2 - CHANGES IN SECURITIES
None
Item 3 - DEFAULTS UPON SENIOR SECURITIES
None
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5 - OTHER INFORMATION
None
Item 6 - EXHIBITS AND REPORTS OF FORM 8-K
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.
SVB&T Corporation
(Registrant)
By: Ronald G. Seals
President and Chief Executive Officer
By: David Rees
Principal Financial Officer
Date: November 13, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,635
<INT-BEARING-DEPOSITS> 87
<FED-FUNDS-SOLD> 725
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 33,714
<INVESTMENTS-CARRYING> 33,714
<INVESTMENTS-MARKET> 33,714
<LOANS> 140,462
<ALLOWANCE> 1,057
<TOTAL-ASSETS> 185,916
<DEPOSITS> 160,203
<SHORT-TERM> 3,500
<LIABILITIES-OTHER> 2,067
<LONG-TERM> 0
0
0
<COMMON> 200
<OTHER-SE> 19,946
<TOTAL-LIABILITIES-AND-EQUITY> 185,916
<INTEREST-LOAN> 9,383
<INTEREST-INVEST> 1,183
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 11,003
<INTEREST-DEPOSIT> 5,527
<INTEREST-EXPENSE> 5,555
<INTEREST-INCOME-NET> 5,448
<LOAN-LOSSES> 385
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,263
<INCOME-PRETAX> 2,127
<INCOME-PRE-EXTRAORDINARY> 2,127
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,390
<EPS-PRIMARY> 1.86
<EPS-DILUTED> 1.86
<YIELD-ACTUAL> 8.63
<LOANS-NON> 963
<LOANS-PAST> 14
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 963
<ALLOWANCE-OPEN> 1,402
<CHARGE-OFFS> 893
<RECOVERIES> 163
<ALLOWANCE-CLOSE> 1,057
<ALLOWANCE-DOMESTIC> 1,057
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
