<PAGE> 1
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 nine months ended September 30, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
SEC Commission File No : 0-22578
FIRST PATRIOT BANKSHARES CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
State of Virginia 54-1514125
- ---------------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2071 Chain Bridge Road, Vienna, Virginia 22182
- ---------------------------------------- ------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code : (703) 471-0900
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 .
----- ---
Common stock, $2.50 par value per share Outstanding at October, 31 1996
- --------------------------------------- -------------------------------
(Title of Class) 2,020,827 shares
----------------
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FIRST PATRIOT BANKSHARES CORPORATION
FORM 10-Q
INDEX
-----
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
- ------ --------------------- ----
<S> <C> <C>
Item 1. Condensed Financial Statements (unaudited)
Consolidated Balance Sheets
September 30, 1996 and December 31, 1995...........................................3
Consolidated Statements of Operations
Nine months ended September 30, 1996 and 1995......................................4
Consolidated Statements of Stockholders' Equity
Nine months ended September 30, 1996 and 1995......................................5
Consolidated Statements of Cash Flows
Nine months ended September 30, 1996 and 1995......................................6
Notes to Consolidated Financial Statements ......................................7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ..................................9-16
PART II OTHER INFORMATION
- ------- -----------------
Item 5. Other Information..............................................................17-19
Item 6. Exhibits and Reports on Form 8-K ..............................................17-19
</TABLE>
2
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FIRST PATRIOT BANKSHARES CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
(dollars in thousands) 1996* 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Earning assets
Loans $114,028 $93,759
Loans held for sale 10,048 12,917
Allowance for loan losses (1,436) (1,332)
- --------------------------------------------------------------------------------------------------------
Loans, net of allowance for loan losses 122,640 105,344
Investments available for sale at fair value 29,873 28,665
Federal funds sold 10,083 10,219
- --------------------------------------------------------------------------------------------------------
Total earning assets, net of allowance for loan losses 162,596 144,228
Cash and due from banks 6,160 7,879
Premises and equipment, net 5,210 4,894
Other assets 2,490 1,790
- --------------------------------------------------------------------------------------------------------
Total assets $176,456 $158,791
========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Non-interest bearing deposits $28,427 $28,555
Interest bearing deposits 113,158 91,704
- --------------------------------------------------------------------------------------------------------
Total deposits 141,585 120,259
Other borrowings 20,193 23,915
Accrued expenses and other liabilities 950 1,879
- --------------------------------------------------------------------------------------------------------
Total liabilities 162,728 146,053
STOCKHOLDERS' EQUITY
Total stockholders' equity 13,728 12,738
- --------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $176,456 $158,791
========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
* Unaudited
3
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FIRST PATRIOT BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------------------------------------
(dollars in thousands) 1996* 1995* 1996* 1995*
- --------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
<S> <C> <C> <C> <C>
Interest and fees on loans $3,105 $2,350 $8,810 $6,602
Interest on investments 537 533 1,578 1,075
Interest on federal funds sold 183 201 364 460
- --------------------------------------------------------------------------------------------------------------------------
Total interest income $3,825 $3,084 $10,752 $8,137
INTEREST EXPENSE
Interest on deposits $1,327 $1,045 $3,535 $2,664
Interest on other borrowings 244 204 751 499
- --------------------------------------------------------------------------------------------------------------------------
Total interest expense $1,571 $1,249 $4,286 3,163
- --------------------------------------------------------------------------------------------------------------------------
Net interest income $2,254 $1,835 $6,466 4,974
Provision for loan losses 119 58 609 140
- --------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses $2,135 $1,777 $5,857 $4,834
NON-INTEREST INCOME
Service charges on deposit accounts $177 $118 $464 $312
Other income 403 580 1,188 1,237
Gain on sale of loans and investments, net 103 (25) 338 140
- --------------------------------------------------------------------------------------------------------------------------
Total non-interest income $683 $673 $1,990 $1,689
NON-INTEREST EXPENSE
Salaries and benefits $1,004 $817 $2,886 $2,440
Occupancy and equipment 279 473 816 957
Other operating expense 644 543 1,989 1,644
- --------------------------------------------------------------------------------------------------------------------------
Total non-interest expense $1,927 $1,833 $5,691 $5,041
- --------------------------------------------------------------------------------------------------------------------------
Income before income tax $891 $617 $2,156 $1,482
Income tax expense 322 204 747 476
- --------------------------------------------------------------------------------------------------------------------------
Net income $569 $413 $1,409 $1,006
==========================================================================================================================
Earnings per share (note 2):
Earnings per common share and common equivalent share $0.25 $0.20 $0.63 $0.49
==========================================================================================================================
Weighted average common and common equivalent shares 2,236,959 2,171,693 2,232,205 2,118,646
</TABLE>
See accompanying notes to the consolidated financial statements
* Unaudited
4
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FIRST PATRIOT BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
UNREALIZED GAIN (LOSS)
ON AVAILABLE FOR
ADDITIONAL SALE INVESTMENTS ACCUMULATED TOTAL
COMMON PAID-IN NET OF DEFERRED (DEFICIT) STOCKHOLDERS'
(dollars in thousands) STOCK CAPITAL TAXES SURPLUS EQUITY
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995 $4,924 $5,039 ($244) $1,113 $10,832
Cash dividends paid -- -- -- (118) ($118)
Unrealized gain on available for sale investments,
net of deferred taxes -- -- 283 -- 283
Net income -- -- -- 1,006 1006
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1995 $4,924 $5,039 $39 $2,001 $12,003
==================================================================================================================================
Balance, January 1, 1996 $5,013 $5,155 $110 $2,460 $12,738
Net proceeds from the issuance of common stock 39 113 -- -- 152
Cash dividends paid -- -- -- (182) (182)
Unrealized gain on available for sale investments,
net of deferred taxes -- -- (389) -- (389)
Net income -- -- -- 1,409 1,409
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1996 $5,052 $5,268 ($279) $3,687 $13,728
==================================================================================================================================
</TABLE>
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FIRST PATRIOT BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
------------------------
(dollars in thousands) 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
NET INCOME $1,409 $1,006
ADJUSTMENTS FOR NONCASH ITEMS INCLUDED IN NET INCOME:
Depreciation and amortization 518 290
Provision for loan losses 609 139
(Gain)/Loss on sale of loans (338) (198)
Amort. of def. gain on sale of loans (48) (15)
Gain on sale of securities 0 58
Increase in other assets (487) (592)
Increase (decrease) in accrued expenses and other liabilities (2,145) 447
- -------------------------------------------------------------------------------------------
Net cash provided by operating activities (482) 1,135
- -------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in banking subsidiary loans (24,168) (15,367)
Proceeds from sale of loans 7,169 2,646
Proceeds from sale of securities 0 3,651
Purchase of investments (16,096) (24,717)
Proceeds from maturity of investments 14,299 2,243
Net charged-off loans (505) (5)
Acquisition of premises and equipment (834) (1,085)
- -------------------------------------------------------------------------------------------
Net cash flow used by investing activities (20,135) (32,634)
- -------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits (128) 3,406
Net increase in NOW and savings accounts 1,733 (232)
Net (decrease) increase in money market accounts 3,560 1,416
Net increase in time deposits 16,160 19,276
Net increase (decrease) in other borrowings (2,523) 14,608
Net decrease in notes payable (10) --
Net increase in capital from new stock issues 152 --
Cash dividends paid (182) (118)
- -------------------------------------------------------------------------------------------
Net cash provided by financing activities 18,762 38,356
- -------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (1,855) 6,857
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 18,098 9,986
- -------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $16,243 $16,843
===========================================================================================
Supplemental disclosure of cash flow information:
Interest paid to depositors $ 3,515 $ 225
Interest on short-term borrowings 752 42
Unrealized loss on available for sale investments (422) 58
Income taxes paid 1,248 215
===========================================================================================
</TABLE>
6
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FIRST PATRIOT BANKSHARES CORPORATION
Notes to Consolidated Financial Statements
(unaudited)
The accompanying unaudited consolidated financial statements, which
include the accounts of First Patriot Bankshares Corporation, (the "Company")
and its wholly-owned subsidiary, Patriot National Bank, (the "Bank") have been
prepared in accordance with the instructions to Form 10-Q and do not include
all of the disclosures required by generally accepted accounting principles.
All adjustments have been made, which, in the opinion of management, are
necessary for a fair presentation of the results for the interim periods
presented. Such adjustments are all of a normal and recurring nature. The
results of operations for the nine months ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 1996.
NOTE 1 - ACCOUNTING POLICIES AND OTHER DATA
Reference should be made to the Notes to Consolidated Financial
Statements included in the Annual Report to Stockholders on Form 10-K for the
year ended December 31, 1995 which contain the Company's accounting policies
and other data.
NOTE 2 - COMMON STOCK AND EARNINGS PER SHARE
Common stock issued and outstanding totaled 2,020,827 shares at
September 30, 1996 and 2,005,200 shares at December 31, 1995. Stock options
outstanding at September 30, 1996, and December 31, 1995, totaled 119,738 and
112,480, respectively. Warrants outstanding totaled 271,798 at both September
30, 1996 and December 31, 1995. The total number of options and warrants
outstanding has been retroactively adjusted for a 2% stock dividend issued on
September 30, 1994 and a two for one stock split issued on April 30, 1993.
Earnings per common share and common equivalent share were computed by
dividing net income by the weighted average number of common shares outstanding
during the period, including average common equivalent shares attributable to
dilutive stock options and warrants. The number of common shares was increased
by the number of shares issuable on the exercise of options and warrants when
the market price of the common stock exceeded the exercise price of the options
and warrants. This increase in the number of shares was reduced by the number
of common shares that are assumed to have been purchased with the proceeds from
the exercise of the options and warrants; those purchases were assumed to have
been made when the market price of the common stock exceeded the exercise price
of the options and warrants. The average number of shares used in the
determination of earnings per common share and common equivalent shares
7
<PAGE> 8
were 2,232,205 and 2,118,646 respectively, for the nine months ended September
30, 1996 and 1995. For the three months ended September 30, 1996 and 1995 the
average number of shares used in the determination of earnings per common share
and common equivalent share were 2,236,959 and 2,171,693, respectively.
8
<PAGE> 9
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
CONSOLIDATED FINANCIAL REVIEW
First Patriot Bankshares and its principal subsidiary, Patriot National
Bank, experienced continued growth in assets and earnings during the third
quarter of 1996. Net income for the third quarter of 1996 was $569 thousand up
38% from $413 thousand for the third quarter of 1995. Primary earnings per
share was $.25 for the third quarter of 1996 compared to $.20 for the same
period in 1995. Year-to-date income totaled $1.4 million at September 30,
1996, compared to $1.0 million at September 30, 1995, an increase of 40%.
Earnings per share for the nine month period rose to $.63 from $.49 for the
first nine months of 1995. Return on average equity increased from 13.85%
during the third quarter of 1995 to 16.93% for the third quarter of 1996. The
year-to-date return on average equity was 14.44% compared to 11.76% for the
first nine months of 1995. Return on average assets increased 10% to 1.30% for
the three months ended September 30, 1996. Assets totaled $176.5 million at
September 30, 1996, up 11% from the year-end balance of $158.8 million at
December 31, 1995.
BALANCE SHEET ANALYSIS
LOANS
Total loans, net of unearned income, were $124.1 million at September
30, 1996 compared to $106.7 million at December 31, 1995. A schedule of
outstanding loans at September 30, 1996 and December 31, 1995 is shown below.
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
(dollars in thousands) 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Commercial & SBA $31,981 $32,270
Commercial mortgage 38,969 23,187
Construction 17,890 16,777
Residential Mortgage 15,601 12,431
Home Equity 5,375 5,275
Installment 4,802 4,243
SBA loans held for Sale 10,048 12,917
-------------------------------
Total Gross Loans $124,666 $107,100
Unearned Income (591) (424)
-------------------------------
Loans, net of unearned income $124,075 $106,676
Allowance for Loan Losses (1,436) (1,332)
-------------------------------
Loans, net of allowance for loan losses $122,639 $105,344
===============================
</TABLE>
9
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Commercial mortgage loans, which are primarily comprised of fully leased
or owner occupied properties, accounted for 31.4% of the loan portfolio, net of
unearned income, at September 30, 1996, compared to 21.7% at December 31, 1995.
12.6% of the loan portfolio at September 30, 1996 consisted of residential
mortgage loans as compared to 11.6% at December 31, 1995. These loans are
primarily owner-occupied single-family residences. At September 30, 1996, real
estate construction loans composed approximately 14.42% of the Company's loan
portfolio; down from 15.7% at December 31, 1995. The majority of loans are for
construction of owner-occupied pre-sold residential homes. Commercial and
S.B.A. loans totaled $32.0 million or 25.8% of the Bank's total loan portfolio
at the end of the third quarter of 1996. At December 31, 1995 these loans
amounted to $32.3 million or 30.3% of the Bank's loan portfolio. Commercial
business loans typically are made on the basis of the borrower's ability to
make payment from the cash flow of its business and are either unsecured or
secured by business assets, such as accounts receivable, equipment and
inventory.
The Bank is a "Preferred" S.B.A. lender. This designation means that
the S.B.A. has reviewed the Bank's loan procedures and determined that the Bank
meets S.B.A. standards for the underwriting and packaging of loans. At
September 30, 1996 total S.B.A. loans were $24.3 million or 19.6% of total
loans, constituting one of the fastest growing segments of the Bank's loan
portfolio. Total S.B.A. loans available for sale were $10.0 million at
September 30, 1996, which was 8.1% of the Bank's total loan portfolio. S.B.A.
loans are 75-90% guaranteed by the Federal government. The guaranteed portion
of S.B.A. loans are saleable in the secondary market.
Installment loans were $4.8 million at September 30, 1996 up from $4.2
million at December 31, 1995. Installment loans consist primarily of loans to
individuals and credit card loans. Home Equity loans were up slightly from
December 31, 1995 to $5.4 million at September 30, 1996.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level at which
potential loan losses inherent in the loan portfolio would be absorbed. The
allowance consists of funds set aside for specific loans and a general
unallocated reserve to offset any additional allocations needed. At September
30, 1996 the allowance was $1.43 million or 1.16% of total loans as compared to
$1.3 million and 1.25% of total loans at December 31, 1995.
Management periodically reviews and evaluates the loan portfolio to
determine the adequacy of the allowance for loan losses. This evaluation is
based on the risk characteristics of the portfolio and considers such factors
as past loan loss experience, the financial condition of borrowers, current
economic conditions, net realizable value of collateral, and other factors.
The following table presents the activity in the allowance for loan losses.
10
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ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Nine months Year ended
ended September 30 December 31,
(dollars in thousands) 1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C>
Beginning Balance $1,332 $965
Provision for the period 609 372
Charge-offs (505) (9)
Recoveries -- 4
- ----------------------------------------------------------------------------
Balance at end of period $1,436 $1,332
============================================================================
Allowance to loans * 1.16% 1.25%
Net charge-offs to total loans * 0.40% 0.01%
* net of unearned income
- ----------------------------------------------------------------------------
</TABLE>
NON-PERFORMING AND PAST-DUE LOANS
Past-due loans are loans whose principal is past-due 90 or more days but
are continuing to accrue interest because collection is in progress and the
loans are well-secured. At September 30, 1996 there were four loans totaling
$774 thousand that were past due 90 days or greater. This total includes one
commercial loan in the amount of $663 thousand which is fully secured and no
loss is anticipated. Total past-due loans also include a commercial loan in
the amount of $16 thousand that was placed on non-accrual subsequent to
September 30. Past due loans of 90 days or greater at December 31, 1995
consisted of three loans totaling $223 thousand. Non-accrual loans consist of
loans that are significantly past-due and the collection of principal and
interest on these loans has been deemed by management to be in doubt. There was
one loan on non-accrual at September 30, 1996 for $30 thousand which has been
fully reserved. There were no loans on non-accrual at December 31, 1995.
During the third quarter of 1996, a commercial loan in the amount of
$500 thousand was charged off. This loan was on non-accrual at June 30, 1996
and was fully reserved at the time of the charge-off. In addition, a credit
card loan in the amount of $5 thousand was charged off during the third quarter
of 1996. In the same period of 1995, there were no loans charged off.
INVESTMENTS
The Company's securities portfolio is comprised of U.S. Treasury
securities, U.S. Government Agency securities, U.S. Government Agency mortgage
backed securities and tax exempt obligations of states and political
subdivisions.
All of the company's investments at September 30, 1996 and December 31,
1995 were classified as available for sale. The Financial Accounting Standards
Board requires that available for sale securities be recorded at fair value.
The associated unrealized gains or losses
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<PAGE> 12
on these securities are recorded, net of tax, as a separate component of
stockholders' equity. There was an unrealized loss at September 30, 1996 of
$422 thousand and an unrealized gain of $168 thousand on December 31, 1995.
The securities portfolio is summarized below.
SECURITIES - AVAILABLE FOR SALE
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
---------------------------------------------------------------------
(dollars in thousands) Amortized Cost Fair Value Amortized Cost Fair Value
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securites $500 $500 $2,999 $3,010
U.S. Government securities 28,176 27,766 23,928 24,087
Municipal securities - Revenue
Obligations 235 235 235 233
Mortgage backed securites
Guaranteed by GNMA 627 615 678 678
All other equity securities 756 756 657 657
- -------------------------------------------------------------------------------------------------
Total Securities $30,295 $29,873 $28,497 $28,665
=================================================================================================
</TABLE>
DEPOSITS
Total deposits were $141.6 million at September 30, 1996 up $21.3
million from December 31, 1995. The Bank offers a full range of deposit
services, including checking accounts, savings accounts and other time
deposits of various types, ranging from daily money market accounts to
longer-term certificates of deposit. Deposits represent the primary funding
source of the Company. The increase in deposits is due to the increased number
of banking offices and marketing efforts to increase deposits to support future
loan funding needs. A summary of deposit balances at September 30, 1996 and
December 31, 1995 are shown in the following schedule.
<TABLE>
<CAPTION>
September 30 December 31
(dollars in thousands) 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
NOW $10,175 $10,147
Savings 10,326 8,620
Money Market 22,731 19,171
Certificates of Deposit less than $100,000 47,284 32,117
Certificates of Deposit greater than $100,000 15,312 14,617
IRA and Keogh 7,330 7,032
- -----------------------------------------------------------------------------------------------
Total Interest-Bearing Deposits $113,158 $91,704
Non-Interest-Bearing Deposits 28,427 28,555
- -----------------------------------------------------------------------------------------------
Total Deposits $141,585 $120,259
===============================================================================================
</TABLE>
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OTHER BORROWINGS
The Company borrows short-term and long-term monies in the form of
purchased Federal Funds, repurchase agreements, master note agreements, and
from the Federal Home Loan Bank of Atlanta. At both September 30, 1996 and
December 31, 1995 there were no Federal Funds Purchased. A summary of other
borrowings is presented to the right.
<TABLE>
<CAPTION>
September 30, December 31,
(dollars in thousands) 1996 1995
- -------------------------------------------------------------------
<S> <C> <C>
Repurchase agreements $10,527 $ 4,916
Master note agreements 7,356 15,491
FHLB borrowings 1,121 2,309
Other long-term debt 1,190 1,199
- -------------------------------------------------------------------
Total Other Borrowings $20,193 $23,915
===================================================================
</TABLE>
INTEREST RATE SENSITIVITY
The Company monitors interest rate sensitivity of the balance sheet and
reviews asset and liability repricing weekly to minimize the earnings
sensitivity to changes in interest rates while maintaining a net interest
margin within the Company's objectives. The following table represents the
Company's interest rate sensitivity at September 30, 1996, using known
maturities and repricing schedules of loans, deposits and securities. This
table presents a position that existed at one particular day and is not
necessarily indicative of the Company's position at any other time.
RATE SENSITIVITY ANALYSIS AT SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Interest Sensitivity Period
------------------------------------------------------------------------
After 3 months After 6 months After 12
(dollars in thousands) Within 3 months Within 6 months Within 12 months months Total
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EARNING ASSETS:
Loans 82,850 4,182 8,806 28,237 124,075
Investment securities 1,000 500 235 28,139 29,874
Federal Funds Sold 10,083 -- -- 10,083
- -------------------------------------------------------------------------------------------------------------------------
Total earning assets 93,933 4,682 9,041 56,376 164,032
- -------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS: -- -- -- 12,424 12,424
- -------------------------------------------------------------------------------------------------------------------------
Total assets 93,933 4,682 9,041 68,800 176,456
=========================================================================================================================
EARNING ASSET FUNDING:
Interest-bearing deposits 51,106 7,537 24,638 29,876 113,157
Other borrowed funds 18,317 427 260 0 19,004
Other long-term debt -- -- -- 1,190 1,190
Non-interest bearing funds 28,427 -- -- -- 28,427
- -------------------------------------------------------------------------------------------------------------------------
Earning assets funding 97,850 7,964 24,898 31,066 161,778
- -------------------------------------------------------------------------------------------------------------------------
OTHER LIABILITIES: -- -- -- 950 950
EQUITY: -- -- -- 13,728 13,728
- -------------------------------------------------------------------------------------------------------------------------
Total Liabilities & Equity 97,850 7,964 24,898 45,744 176,456
=========================================================================================================================
RATE SENSITIVITY GAP:
Period (3,917) (3,282) (15,857) 25,310 2,254
Cumulative (3,917) (7,199) (23,056) 2,254 --
- -------------------------------------------------------------------------------------------------------------------------
ADJUSTED GAP AS A PERCENT OF EARNING ASSETS:
Period -2.39% -2.00% -9.67% 15.43% 1.37%
Cumulative -2.39% -4.39% -14.06% 1.37% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 14
LIQUIDITY
The Company maintains a stable base of core deposits, cash and cash
equivalents, federal funds sold, and securities available for sale to meet
potential funding needs of loan and deposit customers. The total of cash and
due from banks, available for sale securities and Federal funds sold was $46.1
million at September 30, 1996 and $46.8 million at December 31, 1995.
CAPITAL RESOURCES
The Company strives to maintain a level of capital that will support
future growth and sustain current operations. In doing so, The Company follows
the Federal Reserve Board risk-based capital guidelines for the holding company
and the similar guidelines of the OCC for the bank. As shown in the following
table, The Company's capital ratios are well in excess of the Federal Reserve
minimums and therefore maintains a well-capitalized position.
REGULATORY CAPITAL
<TABLE>
<CAPTION>
Patriot National First Patriot Well-
Bank Bankshares Capitalized
SEPTEMBER 30 SEPTEMBER 30 Regulatory
(dollars in thousands) 1996 1996 Minimums
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CAPITAL:
Tier 1 Capital:
Shareholders' common equity $11,929 $13,728
Less disallowed intangibles -- 232
Add unrealized holding losses
on available for sale securities 279 280
- ---------------------------------------------------------------------------------------------
Total Tier 1 capital 12,208 13,776
- ---------------------------------------------------------------------------------------------
Tier 2 Capital:
Qualifying allowance for loan
losses 1,436 1,436
- ---------------------------------------------------------------------------------------------
Total Tier 2 capital 1,436 1,436
- ---------------------------------------------------------------------------------------------
Total Capital $13,644 $15,212
=============================================================================================
Gross risk-adjusted assets 120,437 122,453
Less excess allowance for loan
losses 0 0
- ---------------------------------------------------------------------------------------------
Net risk-adjusted assets 120,437 122,453
Average total assets 171,213 173,622
- ---------------------------------------------------------------------------------------------
RATIOS:
Tier 1 capital to net risk-adjusted
assets 10.14% 11.25% 6.00%
Tier 2 capital to net risk-adjusted
assets 1.19% 1.17%
- ----------------------------------------------------------------------------------------------------------------
Total capital to net risk-adjusted
assets 11.33% 12.42% 10.00%
================================================================================================================
Leverage - Tier 1 capital to
average assets 7.13% 7.93% 5.00%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 15
INCOME STATEMENT ANALYSIS
Interest income accounted for 85% of the Company's total income for the
third quarter of 1996. Interest income was $3.8 million for the quarter ended
September 30, 1996 compared to $3.1 million for the same period in 1995.
Interest and fees on loans totaled $3.0 million for the third quarter of 1996,
up approximately 27% over the same period in 1995. Interest on investment
securities increased from $533 thousand in the third quarter of 1995 to $537
thousand as of September 30, 1996. For the nine months ended September 30,
1996 interest income was $10.8 million up 32% from the first nine months of
1995. Interest on investment securities and interest and fees on loans were
$1.6 million and $8.8 million respectively for the first nine months of 1996 as
compared to $1.1 million and $6.6 million for the first nine months of 1995.
Average earning assets were approximately $160.4 million for the third
quarter of 1996, compared to $128.7 million for the third quarter of 1995; an
increase of 25%. Average loans increased from $83.6 million in the third
quarter of 1995 to $116.4 million for the same period in 1996. Year-to-date
average earning assets were $150.9 million, up $38.0 million over the first
nine months of 1995. Average loans increased from $80.1 million for the
firstnine months of 1995 to $109.9 million for the period of January through
September, 1996. The increase in loans is largely due to strong loan demand
and expansion of the loan department.
Average interest-bearing deposits were $109.9 million in the third
quarter of 1996, an increase 27.8% over the third quarter of 1995. Interest
expense was $1.6 million and $1.3 million for the quarters ended September 30,
1996 and 1995, respectively. Net interest income was $2.3 million for the
quarter ended September 30, 1996 and $1.8 million for the quarter ended
September 30, 1995; an increase of 22.9%. Year-to-date net interest income was
$6.5 million, up from $5.0 million for the nine months ended September 30,
1995.
Non-interest income consists of service charges, fees on bank services
and deposit accounts, and gains on sales of S.B.A. loans. Total non-interest
income was $683 thousand for the third quarter of 1996 and $673 thousand for
the same period in 1995. Non-interest income for the nine month period ended
September 30, 1996 was $2.0 million, up 17.8% over the same period in 1995.
Salaries and benefits, occupancy and equipment, and other operating
expenses make up the total of non-interest expense. These expenses increased
$95 thousand from the quarter ended September 30, 1995 to September 30, 1996 to
the current balance of $1.9 million, an increase of 5.2%. Non-interest expense
totaled $5.7 million and $5.0 million for the nine months ended September 30,
1996 and 1995, respectively. The increased non-interest expense is due to the
expansion of the bank from 5 branches at September 30, 1995 to 8 branches and 3
loan production offices at September 30, 1996.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
FIRST PATRIOT BANKSHARES CORPORATION
By: /s/ November 13, 1996
----------------------------------
Carroll C. Markley
President, Chief Executive Officer
and Director
By: /s/ November 13, 1996
----------------------------------
Charles Wimer
Senior Vice President and Chief
Financial Officer
16
<PAGE> 17
PART II
ITEM 5. OTHER INFORMATION
On September 13,1996 the Company announced the engagement of the investment
banking firm of Baxter Fentriss and Company. See Exhibit 28.
ITEM 6. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8K.
Financial statements and schedules are included in Part 1, Item 1 above.
Form 8 K - There were no reports on Form 8 K filed during the third quarter
Exhibit 11 - Computation of earnings per share is on page 18.
Exhibit 28 - Press release dated September 13, 1996.
17
<PAGE> 1
EXHIBIT 11.0
FIRST PATRIOT BANKSHARES CORPORATION
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
THREE NINE
MONTHS MONTHS
ENDED ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1996
-------------------------------------------------
<S> <C> <C>
Weighted average number of shares
outstanding during the period 2,020,827 2,016,861
Shares issuable upon assumed exercise
of stock options 62,319 62,553
Shares issuable upon assumed exercise
of warrants 153,813 152,791
Line A Weighted average number of common and
common equivalent shares outstanding
during the period 2,236,959 2,232,205
Additional shares issuable upon assumed
exercise of stock options-assuming
maximum dilution 2,839 1,011
Additional shares issuable upon assumed
exercise of warrants-assuming
maximum dilution 5,833 6,855
Line B Fully diluted weighted average number of
shares outstanding during the period 2,245,631 2,240,071
=================================================
Line C Net income for the period $569,303 $1,409,991
=================================================
Earnings per share:
Earnings per common share and common
equivalent share (Line C divided by Line A) $0.25 $0.63
=================================================
Earnings per common share and common
equivalent share=assuming full
dilution (Line C divided by Line B) $0.25 $0.63
=================================================
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 6,160
<INT-BEARING-DEPOSITS> 113,158
<FED-FUNDS-SOLD> 10,083
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 29,873
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 124,075
<ALLOWANCE> 1,436
<TOTAL-ASSETS> 176,456
<DEPOSITS> 141,585
<SHORT-TERM> 18,743
<LIABILITIES-OTHER> 950
<LONG-TERM> 1,450
0
0
<COMMON> 5,052
<OTHER-SE> 8,676
<TOTAL-LIABILITIES-AND-EQUITY> 176,456
<INTEREST-LOAN> 8,810
<INTEREST-INVEST> 1,578
<INTEREST-OTHER> 364
<INTEREST-TOTAL> 10,752
<INTEREST-DEPOSIT> 3,535
<INTEREST-EXPENSE> 4,286
<INTEREST-INCOME-NET> 6,466
<LOAN-LOSSES> 609
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,691
<INCOME-PRETAX> 2,156
<INCOME-PRE-EXTRAORDINARY> 1,409
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,409
<EPS-PRIMARY> .63
<EPS-DILUTED> .63
<YIELD-ACTUAL> 5.31
<LOANS-NON> 30
<LOANS-PAST> 774
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,332
<CHARGE-OFFS> 505
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,436
<ALLOWANCE-DOMESTIC> 1,436
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE> 1
EXHIBIT 28.0
FIRST PATRIOT BANKSHARES CORPORATION
NEWS RELEASE
For Immediate Release September 13, 1996
The Board of Directors of First Patriot Bankshares Corporation announced today
that it had formed a special committee for the purpose of exploring methods of
enhancing shareholder value and, if appropriate, making recommendations to the
full Board of Directors. The Committee has engaged the investment banking firm
of Baxter Fentriss and Company to assist the committee in identifying and
assessing alternative value enhancement strategies. The Committee hopes to
complete its study by the end of 1996.
First Patriot Bankshares Corporation is the $180 million holding company for
First Patriot National Bank. The bank is headquartered in Reston, Virginia and
has offices throughout Northern Virginia.
Contact: Carroll C. Markley, President & C.E.O. (703) 442-7199
19
