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Previous: ACM INSTITUTIONAL RESERVES INC, 497, 1997-05-14 |
Next: GENESIS COMPANIES GROUP INC, 10QSB, 1997-05-14 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] 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 33-34100
Second National Financial Corporation
(Exact name of registrant as specified in its charter)
Virginia 54-1542438
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
102 South Main Street, Culpeper, Virginia 22701
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) 540-825-4800
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 report(s), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No _____.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of April 30, 1997:
Common Stock, $2.50 par value 1,490,479
- ----------------------------- ---------------
Class Number of Shares
<PAGE>
SECOND NATIONAL FINANCIAL CORPORATION
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page Number
<S> <C>
ITEM 1 Consolidated Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Equity 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7-8
ITEM 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-10
</TABLE>
PART II - OTHER INFORMATION
ITEM 1 Legal Proceedings 11
ITEM 2 Changes in Securities 11
ITEM 3 Defaults Upon Senior Securities 11
ITEM 4 Submission of Matters to a Vote of Security Holders 11
ITEM 5 Other information 11
ITEM 6 Exhibits and Reports on Form 8-K 11
SIGNATURES 12
<PAGE>
SECOND NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(000 OMITTED)
<TABLE>
<CAPTION>
March 31, DECEMBER 31,
1997 1996
(unaudited)
<S> <C>
ASSETS
Cash and due from depository institutions
(non-interest bearing deposits) $ 6,235 $ 5,012
Interest-bearing deposits in other banks - -
Securities held to maturity (market value,
1997 - $15,021; 1996 - $14,913) 14,933 14,545
Securities held for sale (market value,
1997 - $62,749; 1996 - $67,848) 62,749 67,848
Federal funds sold and securities
purchased under agreements to resell 4,084 4,368
Loans receivable - net 111,733 107,987
Bank premises and equipment 4,851 4,874
Other assets 2,731 2,840
--------- --------
Total Assets $207,316 $207,474
======== =========
LIABILITIES
DEPOSITS
Non-interest bearing $ 20,336 $ 20,753
Interest bearing 154,404 154,284
--------- --------
Total Deposits 174,740 175,037
Repurchase agreements 1,200 1,200
Master Notes 2,630 2,870
Short-term borrowing 858 579
Other liabilities 1,264 1,213
--------- --------
Total Liabilities 180,692 180,899
--------- --------
STOCKHOLDERS' EQUITY
Preferred stock, no par value:
(Authorized 1,000,000 shares,
no shares outstanding)
Common stock par value $2.50 per share: - -
(Authorized 3,000,000 shares; issued and outstanding
1,409,479 shares 1997;1,506,419 shares 1996) 3,726 3,737
Capital surplus 1,091 1,171
Market valuation AFS securities (435) (162)
Retained earnings 22,242 21,829
--------- --------
Total Stockholders' Equity 26,624 26,575
--------- --------
Total Liabilities and Stockholders'
Equity $207,316 $207,474
======== =========
</TABLE>
See Notes to Consolidated Financial Statements.
-3-
<PAGE>
SECOND NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(000 OMITTED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1997 1996
---------- ------------
(unaudited) (unaudited)
<S> <C>
INTEREST INCOME
Interest and fees on loans $ 2,432 $ 2,290
Interest income from depository institutions 13 22
Interest income on securities:
Taxable interest income 996 970
Interest income exempt from federal taxes 173 159
Dividends 5 3
Interest on federal funds and securities
purchased under agreements to resell 46 89
-------- -------
Total Interest Income 3,665 3,533
-------- -------
INTEREST EXPENSE
Interest on deposits 1,601 1,555
Interest on notes payable - 36
-------- ------
Interest on short-term borrowings 48 39
-------- -------
Total Interest Expense 1,649 1,630
-------- -------
NET INTEREST INCOME 2,016 1,903
Less: Provision for loan losses 19 -
-------- -------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,997 1,903
NONINTEREST INCOME
Commissions and fees from fiduciary activities 86 93
Service charges on deposit accounts 174 137
Other operating income 71 70
-------- -------
Total Noninterest Income 331 300
-------- -------
NONINTEREST EXPENSES
Salaries and employee benefits 731 679
Net occupancy expense of premises 202 185
Computer services 53 42
Other operating expenses 311 322
-------- -------
Total Noninterest Expense 1,297 1,228
-------- -------
Income before income tax expense 1,031 975
Income tax expense 290 253
-------- -------
Net Income $ 741 $ 722
======== =======
Net income per share $ 0.50 $ 0.48
======== =======
Dividends per share $ 0.22 $ 0.19
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
SECOND NATIONAL FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(000 OMITTED)
<TABLE>
<CAPTION>
Unrealized gain (loss)
Common Capital Retained on securites available
Stock Surplus Earnings for sale (net) Total
-----------------------------------------------------------------------------------
<S> <C>
Balances - January 1, 1996 $3,757 $1,323 $20,155 ($18) $25,217
Net Income - - 722 722
Change in unrealized gain (loss) on
securities available for sale,
net of deferred income taxes - - - (222) (222)
Dividend Reinvestment 1 4 - 5
Cash Dividends - (286) (286)
-----------------------------------------------------------------------------------
Balances - March 31, 1996 $3,758 $1,327 $20,591 ($240) $25,436
===================================================================================
Balances - January 1, 1997 $3,737 $1,171 $21,829 ($162) $26,575
Net Income - - 741 741
Change in unrealized gain (loss) on
securities available for sale,
net of deferred income taxes - - - (273) (273)
Dividend Re-investment 11 76 - 87
Stock repurchases (22) (156) - (178)
Cash Dividends - - (328) (328)
--------------------------------------------------------------------------------
Balances - March 31, 1997 $3,726 $1,091 $22,242 ($435) $26,624
================================================================================
</TABLE>
See notes to consolidated financial statements.
-5-
<PAGE>
SECOND NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000 OMITTED)
<TABLE>
<CAPTION>
3 MONTHS ENDING
MARCH 31
1997 1996
----------------- ------------
(Unaudited) (Unaudited)
<S> <C>
OPERATING ACTIVITIES
Net income $ 741 $ 722
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 19 -
Depreciation 126 119
Pension 3 (7)
Amortization (accretion) of premiums
and discounts on securities (16) (16)
Gain on sale of securities (1) -
(Increase) decrease in other assets 106 (17)
Increase (decrease) in other liabilities 51 47
----------- -------------
Net cash provided by operating activities 1,029 848
----------- -------------
INVESTING ACTIVITIES
Net decrease in interest-bearing deposits
in other banks - 1,000
Proceeds from maturity of investment securities 170 -
Proceeds from sales of securities available
for sale 2,000 -
Proceeds from maturity of securities available
for sale 8,314 13,000
Purchase of securities available for sale (5,472) (16,567)
Purchase of investment securities (555) (250)
Purchase of premises and equipment (104) (55)
Net increase in loans (3,766) (3,500)
----------- -------------
Net cash provided by (used in) investing
activities 587 (6,372)
----------- -------------
FINANCING ACTIVITIES
Net increase (decrease) in demand and savings
deposits (1,300) 1,812
Net increase in time deposits 1,003 2,210
Net decrease in long-term borrowings - (75)
Net increase (decrease) in repurchase agreements - (200)
Net increase (decrease) in short-term borrowings 279 602
Net decrease in master notes (240) -
Common stock repurchases (178) (75)
Common stock issued 87 80
Cash dividends paid on common stock (328) (286)
----------- -------------
Net cash provided by (used in) financing
activities (677) 4,068
----------- -------------
Increase (Decrease) in cash and cash equivalents 939 (1,456)
CASH AND CASH EQUIVALENTS
Beginning of the period 9,380 9,009
----------- -------------
End of the period $ 10,319 $ 7,553
=========== =============
</TABLE>
See accompanying notes to consolidated financial statements.
-6-
<PAGE>
SECOND NATIONAL FINANCIAL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND DECEMBER 31, 1996
1. In the opinion of management, the accompanying consolidated financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of March 31,
1997 and December 31, 1996, and the results of operations and cash flows for
the three months ended March 31, 1997 and 1996. The statements should be
read in conjunction with the Notes to Financial Statements included in the
Company's Annual Report for the year ended December 31, 1996.
2. The results of operations for the three month period ended March 31, 1997
and 1996 are not necessarily indicative of the results to be expected for
the full year.
3. The Corporation's securities portfolio is composed of the following (000's
omitted):
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
---------------- ----------------
<S> <C>
Securities being Held to Maturity:
March 31, 1997
-------------------------------------
U. S. Government Agencies $ 1,997 $ 2,536
Obligations of States and Political Subdivisions 12,936 12,485
---------------- ----------------
$ 14,933 $ 15,021
================ ================
<CAPTION>
December 31, 1996
-------------------------------------
<S> <C>
U. S. Government Agencies $ 1,996 $ 2,034
Obligations of States and Political Subdivisions 12,549 12,879
---------------- ----------------
$ 14,545 $ 14,913
================ ================
<CAPTION>
Securities Available For Sale:
March 31, 1997
-------------------------------------
<S> <C>
U. S. Treasury Securities $ 19,424 $ 19,348
U. S. Government Securities 41,994 41,429
Corporate Bonds 1,480 1,461
Other Equity Securities 511 511
---------------- ----------------
$ 63,409 $ 62,749
================ ================
<CAPTION>
December 31, 1996
-------------------------------------
<S> <C>
U. S. Treasury Securities $ 18,421 $ 18,431
U. S. Government Securities 49,255 49,000
Other Equity Securities 417 417
---------------- ----------------
$ 68,093 $ 67,848
================ ================
</TABLE>
-7-
<PAGE>
SECOND NATIONAL FINANCIAL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND DECEMBER 31, 1996
(000 Omitted)
4. The Corporation's loan portfolio is composed of the following:
<TABLE>
<CAPTION>
March 31 Dec. 31
1997 1996
---------------- ----------------
(Unaudited)
<S> <C>
Real estate loans:
Construction $ 8,465 $ 6,274
Secured by farmland 651 627
Secured by 1-4 family residential 51,905 51,927
Other real estate loans 27,783 27,819
Loans to farmers (except secured by
real estate) 400 443
Commercial and industrial loans (except
those secured by real estate) 9,261 9,004
Loans to individuals for personal
expenditures 11,300 9,873
All other loans 3,335 3,353
---------------- ----------------
113,100 109,320
Less:
Deferred loan fees (97) (86)
Allowance for loan losses (1,270) (1,247)
---------------- ----------------
$ 111,733 $ 107,987
================ ================
</TABLE>
5. Activity in the allowance for loan losses is as follows:
<TABLE>
<CAPTION>
March 31 Dec. 31
1997 1996
---------------- ----------------
(Unaudited)
<S> <C>
Balance at January 1 $ 1,247 $ 1,320
Recoveries added to the allowance 5 28
Loan losses charged to the allowance (1) (101)
Provision recorded to expense 19 -
---------------- ----------------
Balance at end of period $ 1,270 $ 1,247
================ ================
</TABLE>
6. Earnings and Dividends Paid Per Share:
The weighted average number of shares outstanding for the three month periods
ended March 31 were 1,492,667 in 1997 and 1,503,265 in 1996.
-8-
<PAGE>
SECOND NATIONAL FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition / Results of Operations
Second National Financial Corporation's consolidated net income amounted to $741
thousand or $.50 per share for the three month and cumulative period ended March
31, 1997, compared with $722 thousand or $.48 per share for the same period in
1996. Operating results for the first three of the fiscal year where positively
impacted by continuing loan growth, good expense control and improvement in the
net interest margin. In addition, earnings for the three month period ended
March 31, 1996 were positively impacted by the collection of $173 thousand of
delinquent interest in connection with a problem loan which paid off during that
period. Net income for the three month period ended March 31, 1997 represented a
1.45% return on average assets and a 11.19% return on stockholder's equity
versus 1.46% and 11.42% for 1996.
Net interest income, the Corporation's primary source of earnings, increased $94
thousand from $1.903 million in 1996 to $1.997 million for the three months
ended March 31, 1997 .The increase reflects improvement in the net interest
margin. The net interest margin improved to 4.43% for the three months ended
March 31, 1997, compared to 4.26% for the same period in 1996.
The mix of average earning assets was positively impacted by growth in the loan
portfolio. Net loans amounted to $111.733 million, up $3.746 million from
$107.987 million at December 31, 1996. Total assets of the Corporation were
$207.3 million at March 31, 1997, a decrease of .1% compared to assets of $207.4
million at December 31, 1996. The loan growth was funded from lower yielding
securities that matured during the period.
Noninterest income consists of earnings generated primarily from service charges
on deposit accounts, fiduciary income and other service charges, commissions and
fees. The Corporation's noninterest income increased $31 thousand or 10.3% from
$300 thousand in 1996 to $331 thousand for the three months ended March 31,
1997. The increase was primarily attributed to increased service charges on
deposit accounts.
Noninterest expenses increased $69 thousand or 5.6% from $1.228 million in 1996
to $1.297 million for the three months ended March 31, 1997. Increases in
employee salaries and benefits of $52 thousand accounted for much of the
increase.
Capital Adequacy
Stockholders' equity as of March 31, 1997 of $26.624 million increased $49
thousand or approximately .2% from $26.575 million at December 31, 1996. The
Corporation's Tier I risk-based capital-to-asset ratio was 23.65% at March 31,
1997, compared to 23.89% at December 31, 1996. Federal Reserve and FDIC
guidelines require 8% of total capital to risk weighted assets, and the
Corporation far exceeds this regulatory requirement.
-9-
<PAGE>
SECOND NATIONAL FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Asset Quality
The Corporation continued to experience high loan quality during the first
quarter of 1997, as evidenced by net charge-offs of $1 thousand for the three
month period ending March 31, 1997, compared to net charge-offs of $101 thousand
for all of 1996. The allowance for loan losses as a percentage of net loans
amounted to 1.12% at March 31, 1997 compared to 1.14% at December 31, 1996.
Nonperforming assets at March 31, 1997 amounted to $890,208 or .79% of loans
receivable.
The adequacy of the allowance for loan losses is reviewed quarterly by
management based on an evaluation of the collectibility of the loan portfolio,
credit concentrations, trends in historical loss experience, specific impaired
loans, and economic conditions. The Bank began to record additional provision
for loan loss in 1997 to maintain its ratio of allowances to outstanding loans
receivable given the growth in the loan portfolio.
Liquidity
Liquidity is identified as the ability to generate or acquire sufficient amounts
of cash when needed and at reasonable cost to accommodate withdrawals, payments
of debt, and increased loan demand. These events may occur daily or other
short-term intervals in the normal operation of the business. Experience helps
management predict time cycles in the amount of cash required. In assessing
liquidity, management gives consideration to relevant factors including
stability of deposits, quality of assets, economy of market served,
concentrations of business and industry, competition, and the Corporation's
overall financial condition. The Corporation's primary source of liquidity are
cash, due from banks, fed funds sold and securities in our available for sale
portfolio. In addition, the Bank has substantial lines of credit from its
correspondent banks and access to the Federal Reserve discount window to support
liquidity.
The Corporation has no brokered deposits. Certificates of deposit in
denominations of $100 thousand or more represent 8.2% of total deposits
primarily from established core depositors.
In the judgment of management, the Company maintains the ability to generate
sufficient amounts of cash to cover normal requirements and any additional needs
which may arise, within realistic limitations.
-10-
<PAGE>
SECOND NATIONAL FINANCIAL CORPORATION
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no material legal proceedings to which the
Registrant or any of its subsidiaries, directors, or officers
is a party or by which they, or any of them, are threatened.
Any legal proceeding presently pending or threatened against
Second National Financial Corporation and its subsidiary are
either not material in respect to the amount in controversy or
fully covered by insurance.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
(b) A Form 8-K was filed on March 3, 1997 announcing
Board authorization for management to pursue
listing the common stock on the NASD Bulletin
Board or NASDAQ Small Cap Market.
-11-
<PAGE>
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.
SECOND NATIONAL FINANCIAL CORPORATION
/s/ O.R. Barham, Jr.
-------------------------
O.R. Barham, Jr., President
Chief Executive Officer
May 12, 1997
/s/ Jeffrey W. Farrar
----------------------------
Jeffrey W. Farrar, CPA
Vice President - Principal Financial Officer
May 12, 1997
-12-
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,235
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,084
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 62,749
<INVESTMENTS-CARRYING> 14,933
<INVESTMENTS-MARKET> 15,021
<LOANS> 111,733
<ALLOWANCE> 1,270
<TOTAL-ASSETS> 207,316
<DEPOSITS> 174,740
<SHORT-TERM> 858
<LIABILITIES-OTHER> 1,264
<LONG-TERM> 0
0
0
<COMMON> 3,726
<OTHER-SE> 22,898
<TOTAL-LIABILITIES-AND-EQUITY> 207,316
<INTEREST-LOAN> 2,432
<INTEREST-INVEST> 1,174
<INTEREST-OTHER> 59
<INTEREST-TOTAL> 3,665
<INTEREST-DEPOSIT> 1,601
<INTEREST-EXPENSE> 1,649
<INTEREST-INCOME-NET> 2,016
<LOAN-LOSSES> 19
<SECURITIES-GAINS> 1
<EXPENSE-OTHER> 1,297
<INCOME-PRETAX> 1,031
<INCOME-PRE-EXTRAORDINARY> 1,031
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 741
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0
<YIELD-ACTUAL> 193,862
<LOANS-NON> 551
<LOANS-PAST> 890
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 6,415
<ALLOWANCE-OPEN> 1,247
<CHARGE-OFFS> 1
<RECOVERIES> 19
<ALLOWANCE-CLOSE> 1,270
<ALLOWANCE-DOMESTIC> 126
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,144
</TABLE>
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