U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10 - QSB/A
(Amendment number 1)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1997
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Commission File Number 0-16587
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South Branch Valley Bancorp, Inc.
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(Exact name of small business issuer as
specified in its charter)
West Virginia 55-0672148
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
310 North Main Street
Moorefield, West Virginia 26836
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(Address of principal executive offices) (Zip Code)
(304) 538-2353
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(Issuer's telephone number, including area code)
Check whether the issuer: (1) has filed all reports required by Section 13 or
15(d) of the 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 requirements for the past 90 days. Yes X No
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State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
412,827 common shares were outstanding as of November 7, 1997.
Transitional Small Business Disclosure Format (Check one):
Yes No X
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This report contains 5 pages.
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This 10-QSB/A is being filed solely for the purpose of expanding the discussion
of allowance for loan losses in the section labeled Provision for Loan Losses
and Loan Quality within the Management's Discussion and Analysis section.
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Provision for Loan Losses and Loan Quality
An allowance for loan losses is maintained by the Company and is funded
through the provision for loan losses as a charge to current earnings. The
allowance for loan losses is reviewed by management on a quarterly basis to
determine that it is maintained at levels considered necessary to cover
potential losses associated with the Bank's current loan portfolio. The
Company's provision for loan losses for the first nine months of 1997 totaled
$110,000 compared to $40,000 for the nine months ended September 30, 1996. This
increase was primarily to provide for potential losses inherent in the Company's
loan portfolio due to its continued growth in net loans outstanding.
Net loan charge-offs for the first nine months of 1997 were $134,000 as
compared to $50,000 for the first nine months of 1996. Expressed as a percentage
of loans (net of unearned interest), net charge-offs were .15% for the first
nine months of 1997 compared to .07% for the comparable period of 1996.
The total of non-performing assets and loans past due 90 days or more
and still accruing interest has remained relatively stable during the past 12
months, and management has no knowledge that would lead them to believe that
such assets will increase substantially during the remainder of 1997.
Summary of Past Due Loans and Non-Performing Assets
(in thousands of dollars)
<TABLE>
<CAPTION>
September 30 December 31
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<S> <C> <C> <C>
1997 1996 1996
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Loans contractually past due
90 days or more and still
accruing interest $ 31 $238 $324
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Non-performing assets:
Non-accruing Loans $125 $384 $343
Other Repossessed Assets 35 -- 40
Other Real Estate Owned 55 30 29
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$215 $414 $412
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</TABLE>
The level of non-performing assets has decreased during the past year
due to management's continuing efforts to improve the quality of the Company's
assets. Total loans past due 90 days or more plus non-performing assets have
decreased approximately $406,000 or 62.3% from the same period last year. Loans
contractually past due 90 days or more plus non-performing assets decreased
approximately 66.6% or $490,000 since December 31, 1996. These decreases are
primarily attributable to certain loans being charged to the reserve for loan
loss and vigorous collection activity that resulted in several loans, including
one with an approximate balance of $171,000 being paid to current status during
the first nine months of 1997. While there may be some loans or portions of
loans identified as potential problem credits which are not specifically
identified as either non-accrual or accruing loans past due 90 or more days,
they are considered by management to be insignificant to the overall disclosure
and are therefore not specifically quantified within the Management's Discussion
and Analysis.
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Impaired loans totaled approximately $180,000 at September 30, 1997 and
$384,000 December 31, 1996. A loan is impaired when, based on current
information and events, it is probable that all amounts due will not be
collected in accordance with the contractual terms of the specific loan
agreement. Impaired loans, other than certain large groups of smaller-balance
homogeneous loans that are collectively evaluated for impairment, are reported
at the present value of expected future cash flows discounted using the loan's
original effective interest rate or, alternatively, at the loan's observable
market price, or at the fair value of the loan's collateral if the loan is
collateral dependent.
At September 30, 1997, the allowance for loan losses totaled $835,000
or .9% of net loans compared to $858,000 or 1.0% of net loans at December 31,
1996 and $849,000 or 1.1% of net loans at September 30, 1996. The decline in the
allowance both as a percentage and as a dollar amount is due primarily to
increasing loan quality, especially in the Company's commercial portfolio. The
Company performs a quarterly analysis of the allowance for loan losses. The
calculation uses a four-year moving average of net charge-offs to estimate
reserve requirements for inherent losses contained in homogeneous consumer and
residential real estate loan pools (which represent approximately 74% of the
Company's loan portfolio at September 30, 1997), and commercial loans which have
not been individually reviewed for potential loss. Large commercial loans, the
majority of which are secured by real estate or other collateral, and large
non-conforming homogeneous loans are individually analyzed and specific reserves
are established for all known problem and watch list loans. Large commercial
loans receive special attention and are thoroughly reviewed twice annually.
Using this methodology, the most recent review conducted as of September 30,
1997 showed adequate reserves to cover potential losses identified as probable
and estimable in the loan portfolio as of the evaluation date. In addition to
the base calculation noted above, the Company maintains an unallocated portion
of its reserve in order to prepare the Company for unknown or unidentified
risks, which approximated $234,000 as of September 30, 1997, compared to $67,700
at December 31, 1996. Finally, total loans 30 or more days past due expressed as
a percentage of net loans declined from 1.23% at December 31, 1995 to 1.16% at
December 31, 1996, and finally to .81% at September 30, 1997. This is attributed
to closer scrutiny in credit origination and enhanced collection efforts.
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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.
South Branch Valley Bancorp, Inc.
(registrant)
By: /s/ H. Charles Maddy, III
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H. Charles Maddy, III, President and
Chief Financial Officer
By: /s/ Russell F. Ratliff, Jr.
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Russell F. Ratliff, Jr.
Treasurer
Date: December 10, 1997
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