UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1996
------------------
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITES EXCHANGE ACT OF 1934
For the transition period from to
------------ ------------
Commission File Number: 0-23878
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BECKLEY BANCORP, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 55-0733525
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
200 MAIN STREET, BECKLEY, WEST VIRGINIA 25801
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(304) 252-6201
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the regristrant (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.
X Yes No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of November 1, 1996:
Class Outstanding
----- -----------
$.10 par value common stock 601,465 shares
<PAGE>
BECKLEY BANCORP, INC.
INDEX
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. - Financial Statements
------
Consolidated Statements of Financial Position
as of September 30, 1996 (Unaudited) and as of
December 31, 1995 1
Consolidated Statements of Income for the
Three and Nine Months Ended September 30,
1996 and 1995 (Unaudited) 2
Consolidated Statements of Cash Flows for
the Nine Months Ended September 30, 1996
and 1995 (Unaudited) 3 - 4
Consolidated Statements of Shareholders'
Equity for the Nine Months Ended September
30, 1996 and 1995 (Unaudited) 5
Notes to Consolidated Financial
Statements (Unaudited) 6 - 8
Item 2. - Managements Discussion and Analysis of
------ Financial Condition and Results of
Operations 9 - 15
PART II - OTHER INFORMATION
Item 5. - Other Information 15 - 16
-------
Item 6. - Exhibits and Reports on Form 8-K 16
-------
SIGNATURES 17
- ----------
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 1. - Financial Statements
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Amounts in Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
---- ----
(Unaudited) *1
ASSETS
<S> <C> <C>
Cash and due from banks $ 337 $ 406
Interest bearing deposits in other banks 939 965
Securities available for sale 6,856 5,021
Securities held-to-maturity (market
value of $3,993) -- 3,993
Collateralized mortgage obligations and
other mortgage-backed securities
available-for-sale 16,676 17,954
Loans receivable, net - Note 4 18,938 15,965
Bank premises and equipment, at cost
net of accumulated depreciation 548 441
Federal Home Loan Bank stock - at cost 172 176
Accrued interest receivable 297 253
Other assets 212 39
------------- -------------
TOTAL ASSETS 44,975 45,213
============= =============
LIABILITIES AND
STOCKHOLDERS' EQUITY
LIABILITIES
Deposit accounts 32,340 33,427
Short-term borrowings 1,000 --
Deferred income tax liability 78 215
Accrued expenses and other liabilities 511 303
------------- -------------
TOTAL LIABILITIES 33,929 33,945
------------- -------------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value,
250,000 shares authorized, none issued -- --
Common stock, $.10 par value,
1,250,000 shares authorized,
601,465 shares issued and outstanding 60 60
Additional paid-in-capital 5,670 5,659
Retained earnings (substantially restricted) 5,348 5,391
Unearned ESOP shares, at cost (159) (185)
Unearned MSBP shares, at cost (65) (83)
Net unrealized gain on
securities available for sale 192 426
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 11,046 11,268
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 44,975 $ 45,213
============= =============
</TABLE>
*1 - Derived from the audited financial statements.
The accompanying notes are an integral part of these statements.
1
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 1. - (Continued)
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Amounts in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
1996 1995 1996 1995
------- ------- ------- -------
INTEREST AND DIVIDEND INCOME
<S> <C> <C> <C> <C>
Loans, including certain fees $ 393 $ 321 $ 1,132 $ 903
Investment securities 158 90 313 357
Collaterilized mortgage obligations and
other mortgage-backed securities 208 307 784 834
Interest bearing deposit accounts 13 49 60 134
Dividends, FHLB and other 7 6 19 18
------- ------- ------- -------
TOTAL INTEREST INCOME 779 773 2,308 2,246
------- ------- ------- -------
INTEREST EXPENSE
Deposit Accounts 339 343 1,003 970
Other 15 -- 16 --
------- ------- ------- -------
TOTAL INTEREST EXPENSE 354 343 1,019 970
------- ------- ------- -------
NET INTEREST INCOME 425 430 1,289 1276
Provision for losses on loans - Note 1 22 13 42 69
------- ------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOSSES ON LOANS 403 417 1,247 1,207
------- ------- ------- -------
NON-INTEREST INCOME
Service charges on deposit accounts 10 12 34 35
Gain on sale of investment securities 26 -- 26 35
Other income 5 4 12 10
------- ------- ------- -------
TOTAL NON-INTEREST INCOME 41 16 72 80
------- ------- ------- -------
NON-INTEREST EXPENSE
Salaries and employee benefits 136 127 400 389
Occupancy and equipment expense 19 20 59 55
Federal deposit insurance premiums 230 18 268 55
Service bureau and other data processing 31 31 92 91
Other 76 74 254 268
------- ------- ------- -------
TOTAL NON-INTEREST EXPENSE 492 270 1,073 858
------- ------- ------- -------
INCOME BEFORE INCOME TAXES (48) 163 246 429
------- ------- ------- -------
Provision for income taxes (17) 66 97 170
------- ------- ------- -------
NET INCOME $ (31) $ 97 $ 149 $ 259
======= ======= ======= =======
EARNINGS PER COMMON SHARE - Note 3 $ (0.05) $ 0.16 $ 0.25 $ 0.44
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 1. - (Continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1996 1995
----------- -----------
OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $ 149 $ 259
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 17 11
(Accretion) and amortization, net (28) (130)
Provision for losses on loans 42 69
Increase (decrease) in deferred loan fees (8) 2
Amortized ESOP benefits 43 29
Amortized MSBP compensation 15 22
Increase (decrease) in accrued income
and other assets (217) 35
Increase (decrease) in accrued expenses
and other liabilities 208 (164)
----------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 221 133
----------- -----------
INVESTING ACTIVITIES:
Purchases of collateralized mortgage obligations
and other mortgage-backed securities
-Available-for-sale -- (3,920)
Proceeds from the sale of collateralized
mortgage obligations and other mortgage-
backed securities
-Available-for-sale -- 993
Principal repayments and redemptions on
collateralized mortgage obligations and
other mortgage-backed securities
-Available-for-sale 813 548
Purchases of investment securities
-Available-for-sale (3,000) (3,202)
-Held-to-maturity (2,495) (35,926)
Proceeds from maturities or calls of
investment securities
-Available-for-sale 1,250 4,461
-Held-to-maturity 6,500 38,700
Net increase in loans made to customers (2,985) (1,809)
Redemption of Federal Home Loan Bank stock 4 --
Purchase of Federal Home Loan Bank stock -- (7)
Additions to premises and equipment (124) --
----------- -----------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES $ (37) $ (162)
----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 1. - (Continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)
(Amounts in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1996 1995
----------- -----------
FINANCING ACTIVITIES:
<S> <C> <C>
Net increase/(decrease) in deposit accounts $ (1,087) $ 1,176
Proceeds from short-term borrowings 1,000 --
Cash dividends paid on common stock (192) (143)
----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES (279) 1,033
Increase in cash and cash equivalents (95) 1,004
Cash and cash equivalents, beginning
of year 1,371 1,254
----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 1,276 $ 2,258
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest $ 1,003 $ 964
=========== ===========
Income taxes $ 291 $ 147
=========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING ACTIVITIES
Automobiles acquired in settlement
of loans $ 16 $ --
=========== =========
Loans resulting from disposition of
repossessed assets $ 16 $ --
=========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 1. - (Continued)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
(Amounts in thousands)
<TABLE>
<CAPTION>
Unrealized
Gains/
(Losses) on
Deferred Unearned Available
Common Paid-in Retained ESOP MSBP For-Sale
Stock Surplus Earnings Benefit Compensation Securities TOTAL
---------- -------- --------- ---------- ------------ ---------- ---------
NINE MONTHS ENDED SEPTEMBER 30, 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $ 60 $ 5,541 $ 5,133 $ (214) $ 0 $ (677) $ 9,843
Payment of $0.12 per share cash
dividends on February 15, 1995
and August 15, 1995 (143) (143)
Granting of 7,140 shares of common
stock under the Management
Stock Bonus Plan (MSBP) (97) (97)
Net Income, nine months ended
September 30, 1995 259 259
Change in unrealized gain/(loss)
on available-for-sale
securities, net of tax 963 963
Change in unearned ESOP shares 9 20 29
Change in unearned MSBP shares 14 14
---------- -------- --------- --------- ------------- --------- ---------
Balance, September 30, 1995 $ 60 $ 5,550 $ 5,249 $ (194) $ (83) $ 286 $ 10,868
========== ======== ========= ========= ============= ========= =========
NINE MONTHS ENDED SEPTEMBER 30, 1996
Balance, December 31, 1995 $ 60 $ 5,659 $ 5,391 $ (185) $ (83) $ 426 $ 11,268
Payment of $0.13 per share cash
dividends on February 15, 1996
and August 15, 1996 (151) (151)
Payment of $0.07 per share special
cash dividend on February 15, 1996 (41) (41)
Net Income, nine months ended
September 30, 1996 149 149
Change in unrealized gain/(loss)
on available-for-sale
securities, net of tax (234) (234)
Change in unearned ESOP shares 12 26 38
Change in unearned MSBP shares (1) 18 17
---------- -------- --------- --------- ----------- --------- ---------
Balance, September 30, 1996 $ 60 $ 5,670 $ 5,348 $ (159) $ (65) $ 192 $ 11,046
========== ======== ========= ========= =========== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION / Item 1.- (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The unaudited consolidated financial
statements include the accounts of Beckley Bancorp, Inc. (the
"Corporation") and Beckley Federal Savings Bank (the "Savings Bank"), its
wholly owned subsidiary. All significant intercompany balances and
transactions have been eliminated in consolidation.
BASIS OF ACCOUNTING: The accompanying unaudited consolidated financial
statements were prepared in accordance with generally accepted accounting
principles for interim financial information and with instructions for
Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they do not
include all information and disclosures required by generally accepted
accounting principles for complete financial statements. However, all
normal recurring adjustments have been made which, in the opinion of
management, are necessary to the fair presentation of the financial
statements.
The results of operations for the nine month period ended September 30,
1996 are not necessarily indicative of the results which may be expected
for the year ending December 31, 1996.
LOANS: Loans are stated at the unpaid principal amount outstanding, net of
unearned income, deferred fees and the allowance for losses. Interest on
loans is credited to income as earned and accrued, only if deemed
collectible. The Bank discontinues recognizing accrued interest when a
loan is specifically determined to be impaired or when payment of interest
becomes past due by more than ninety days. Unpaid interest previously
accrued on these loans is reversed from income. Non-accrual loans may be
restored to accrual status when principal and interest become current and
full payment of principal and interest is expected.
Loan origination fees and certain costs of originating and closing
mortgage loans are deferred and recognized over the life of the loans as
an adjustment of yield. These amounts are not considered material to
operations.
ALLOWANCE FOR LOSSES ON LOANS: The allowance for loan losses
is maintained at a level believed adequate by management to
absorb potential losses in the loan portfolio. The amount of
the allowance is based upon management's evaluation of the
6
<PAGE>
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
collectibility of the loan portfolio. The amount of the allowance is based
upon management's evaluation of the collectibility of the loan portfolio,
including historical loan loss experience, growth and composition of the
loan portfolio, known and inherent risks in the portfolio, current
economic conditions, adverse situations which may affect the borrowers'
ability to repay, and the estimated value of any underlying collateral.
The allowance is increased by provisions for loan losses charged against
income, and reduced by charge-offs, net of recoveries.
REAL ESTATE ACQUIRED IN SETTLEMENT OF LOANS: Real estate acquired in
settlement of loans is recorded, on the date acquired, at the lower of the
Bank's cost or management's estimate of its fair market value. Subsequent
adjustments made to reflect any decline in value below management's
original estimates are charged to current operations through the provision
for losses on real estate owned. Operating expenses of such properties,
related income, and gains and losses on their disposition are included in
operations. The Bank held no real estate acquired in settlement of loans
at September 30, 1996 or December 31, 1995.
NOTE 2. EARNINGS PER SHARE
Earnings per share were computed using the weighted average number of
common and common equivalent shares outstanding. Common equivalent shares
include shares issuable upon exercise of dilutive options outstanding
determined under the treasury stock method. The Corporation accounts for
the shares acquired by its ESOP in accordance with Statement of Position
93-6 and the shares acquired for its Management Stock Bonus Plan ("MSBP")
in a manner similar to the ESOP shares; shares acquired by the ESOP and
MSBP are not considered in the weighted average shares outstanding until
the shares are committed for allocation or allocated to an employee's
individual account.
7
<PAGE>
NOTE 3 LOANS RECEIVABLE
Loans receivable at September 30, 1996 and December 31, 1995, consisted of
the following:
(In thousands)
Sep 30, Dec 31,
1996 1995
---------- -------
First mortgage loans:
One to four family dwellings $ 12,230 $ 12,214
Multi-family dwellings and
non-residential property 1,064 1,237
Construction 142 103
Loans secured by deposits 564 617
Non-mortgage loans, consumer
and commercial 5,255 2,081
---------- --------
TOTAL LOANS 19,255 16,252
Less:
Allowance for losses (293) (255)
Net deferred loan fees and
reserve for uncollected
interest (24) (32)
----------- --------
LOANS RECEIVABLE, NET $ 18,938 $ 15,965
----------- --------
Non-accruing loans at September 30
and December 31 were
as follows: $ 15 $ 53
----------- --------
In accordance with the provisions of FASB 114, "Accounting by Creditors
for Impairment of a Loan," and FASB 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures," the Bank
measures impaired loans on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a practical
expedient, at the loan's observable market price or the fair market value
of the collateral if the loan is collateral dependent. Management has
evaluated the loan portfolio and has determined that no impaired loans
existed at September 30, 1996 or December 31, 1995.
8
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Total Assets decreased by $.23 million, or 0.53%, from $45.21 million at
December 31, 1995 to $44.98 million at September 30, 1996. This decrease was
primarily attributable to a $3.99 million decrease in securities
held-to-maturity and a $1.23 million decrease in collateralized mortgage
obligations and other mortgage-backed securities. These decreases were partially
offset by a $1.84 million increase in securities available-for-sale and a $2.97
million increase in loans receivable.
Cash and Cash Equivalents decreased $0.09 million, or 6.93%, from $1.37 million
at December 31, 1995 to $1.28 million at September 30, 1996.
Securities Available-for-Sale increased by $1.84 million, or 36.55%, from $5.02
million at December 31, 1995 to $6.86 million at September 30, 1996. This
increase was attributable to the purchase of $3.0 million of callable government
agency bonds which was partially offset by the call of a $1.0 million government
agency bond and the maturity of a $0.25 million government security.
Securities Held-to-Maturity decreased by $3.99 million, or 100%, from $3.99
million at December 31, 1995 to zero at September 30, 1996. This decrease was
attributable to the maturity of a short-term government agency security. The
proceeds from this security were primarily invested in government agency
securities classified as "available-for-sale" and in loans.
Collateralized Mortgage Obligations and Other Mortgage-Backed Securities
decreased $1.27 million, or 7.12%, from $17.95 million at December 31, 1995 to
$16.68 million at September 30, 1996. This decrease was primarily the result of
a decrease in the market value of these securities in addition to the receipt of
scheduled and unscheduled principal payments.
Loans Receivable increased $2.97 million, or 18.62%, from $15.96 million at
December 31, 1995 to $18.93 million at September 30, 1996. This increase was
primarily the result of approximately $2.27 million of mortgage loan
originations and $5.05 million of non-mortgage loan originations which was
partially offset by principal repayments on mortgage and non-mortgage loans of
approximately $4.35 million. As a result of the increased loan balances,
management increased the allowance for losses on loans by $42,000 during the
nine month period ended September 30, 1996. Charge-offs for the nine-month
period totalled $4,000. The increase in the allowance for losses on loans is
further discussed in "Management's Discussion and Analysis of Results of
Operations - Provision for Losses on Loans."
9
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 2. - (Continued)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
(Continued)
Bank Premises and Equipment increased $107,000, or 24.26%, from $441,000 at
December 31, 1995 to $548,000 at September 30, 1996. This increase is
attributable to architectural and engineering fees incurred in connection with
the design and planning of a new office building. The increase is partially
offset by accumulated depreciation for the period. The proposed office building
and the estimated costs and increases in non-interest expense is discussed in
detail under Part II, Item 5.
Total Liabilities decreased $0.02 million, or 0.05%, from $33.95 million at
December 31, 1995 to $33.93 million at September 30, 1996. This decrease was
primarily due to a $1.09 million decrease in deposit account balances which was
partially offset by a $1.0 million increase in short-term borrowings.
Deposit Accounts decreased $1.09 million, or 3.25%, from $33.43 million at
December 31, 1995 to $32.34 million at September 30, 1996. This decrease was the
result of customer withdrawals in excess of customer deposits which was
partially offset by interest being credited to customer deposit accounts during
the nine month period ended September 30, 1996.
Short-term Borrowings increased $1.0 million, or 100%, from zero at December 31,
1995 to $1.0 million at September 30, 1996. The proceeds were invested in a
government agency security classified as "available-for-sale."
Stockholders' Equity decreased $0.22 million, or 1.97%, from $11.27 million at
December 31, 1995 to $11.05 million at June 30, 1996. This decrease was
primarily due to the payment of regular and special cash dividends on February
15, 1996 of $116,000, payment of regular cash dividends on August 15, 1996 of
$76,000 and a $234,000 decrease, net of income taxes, in the market value of
securities classified as available-for-sale. These decreases were partially
offset by the Corporation's net income for the nine-month period ended September
30, 1996 of $149,000 along with decreases in the unearned ESOP and MSBP shares
due to accrued allocations.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 1996
Net Loss for the three month period ended September 30, 1996 was $31,000
compared to net income of $97,000 for the same period in 1995. This loss was
primarily due to a one-time special premium assessment by the Savings
Association Insurance Fund of approximately $212,000. See Part II, Item 5 for
detailed information relating to the special assessment.
10
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 2. - (Continued)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 1996 (Continued)
Interest Income for the three month period ended September 30, 1996 increased
$6,000, or 0.78%, from $773,000 for the three month period ended September 30,
1995 to $779,000 for the same period in 1996. As a result of changes in the
composition of interest earning assets, interest income on loans increased
$72,000 and interest income on investment securities increased by $68,000. These
increases were partially offset by decreases in interest income on
collateralized mortgage obligations and other mortgage-backed securities and
interest bearing deposit accounts of $99,000 and $36,000, respectively.
Interest Expense for the three month period ended September 30, 1996 increased
$11,000, or 3.21%, to $354,000 for the three month period ended September 30,
1996 from $343,000 for the same period in 1995. The increase was primarily the
result of interest expense associated with the Savings Bank's short-term
borrowings.
Net Interest Income for the three month period ended September 30, 1996
decreased $5,000, or 1.16%, from $430,000 for the three month period ended
September 30, 1995 to $425,000 for the same period in 1996.
Provision for Loan Losses was increased by $22,000 for the three month period
ended September 30, 1996 compared to an increase of $13,000 for the same period
in 1995. Management's periodic evaluation of the adequacy of the allowance for
losses on loans, which included an evaluation of each delinquent loan, past loan
loss experience, current economic conditions, volume, growth and composition of
the loan portfolio and other relevant factors, at September 30, 1996 indicated
that the allowance should be increased by $22,000. As indicated by the
evaluation, management increased the allowance for losses on loans primarily to
reflect the inherent risk associated with the growth in the non-mortgage loan
portfolio. Although, at September 30, 1996, management believed the allowance to
be adequate, there can be no assurances that further additions will not be made
and that any losses that may occur will not exceed the amount provided by the
allowance.
Non-Interest Income for the three month period ended September 30, 1996
increased $25,000, or 156.25%, to $41,000 from $16,000 for the same period in
1995. This increase was the result of a non-recurring gain on the sale of
investment securities of $26,000 for the quarter ended September 30, 1996.
Non-Interest Expense for the three month period ended September 30, 1996
increased $222,000, or 82.22%, from $270,000 for the same period in 1995 to
$492,000 in 1996. This increase was primarily due to a one-time special deposit
premium insurance assessment of $212,000. See Part II, Item 5 for detailed
information on the special assessment.
11
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 2. - (Continued)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 1996 (Continued)
Provision for income taxes for the three month period ended September 30, 1996
shows a tax benefit of $17,000 compared to income tax expense of $66,000 for the
same period in 1995. This decrease is primarily the result of a net taxable loss
for the third quarter of 1996 compared to taxable income for the same period of
1995. No provision for deferred taxes has been recorded for the three month
periods ended September 30, 1996 and 1995 due to immateriality.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1996
Net Income for the nine month period ended September 30, 1996 decreased
$110,000, or 42.47% from $259,000 for the same period in 1995 to $149,000 in
1996. This decrease was primarily due to a one-time special premium assessment
by the Savings Association Insurance Fund of approximately $212,000. See Part
II, Item 5 for detailed information relating to the special assessment.
Interest Income for the nine month period ended September 30, 1996 increased
$62,000, or 2.76%, to $2.31 million from $2.25 million for the same period in
1995. This was primarily due to changes in the composition of interest earning
assets which produced higher yields. Interest income on loans increased
$229,000. This increase was partially offset by a decrease of $50,000 in
interest income from investment securities, a $50,000 decrease in interest
income from collateralized mortgage obligations and other mortgage-backed
securities and, a $74,000 decrease in interest income from deposit accounts with
other banks.
Interest Expense for the nine month period ended September 30, 1996 increased
$49,000, or 5.05%, to $1.02 million from $0.97 million for the same period in
1995. Approximately $33,000 of this increase was due to an increase in the
general level of interest rates paid on deposit accounts. The remaining $16,000
of the increase was due to interest expense assoicated with the Savings Bank's
short-term borrowings.
Net Interest Income for the nine month period ended September 30, 1996 increased
$13,000, or 1.02%, to $1.29 million from $1.28 million for the same period in
1995. This was due to a $62,000 increase in interest income partially offset by
a $49,000 increase in interest expense.
Provision for Loan Losses was increased by $42,000 for the nine month period
ended September 30, 1996 compared to an increase of $69,000 for the same period
in 1995. Management's periodic evaluation of the adequacy of the allowance for
losses on loans, which included an evaluation of each delinquent loan, past loan
loss experience, current economic conditions, volume, growth and composition of
the
12
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 2. - (Continued)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (Continued)
Provision for Loan Losses (Continued)
loan portfolio and other relevant factors, at September 30, 1996, June 30, 1996
and March 31, 1996 indicated that the allowance should be increased by $22,000,
$5,000 and $15,000, respectively. As indicated by the evaluation, management
increased the allowance for losses on loans primarily to reflect the inherent
risk associated with the growth in the non-mortgage loan portfolio. Although, at
September 30, 1996, management believed the allowance to be adequate, there can
be no assurances that further additions will not be made and that any losses
that may occur will not exceed the amount provided by the allowance.
Non-Interest Income for the nine month period ended September 30, 1996 decreased
$8,000, or 10.00%, to $72,000 from $80,000 for the same period in 1995. This
decrease was primarily the result of a non-recurring gain on the sale of
investment securities of $35,000 in 1995 compared to $25,000 in 1996.
Non-Interest Expense for the nine month period ended September 30, 1996
increased $215,000, or 25.06%, from $0.86 million for the same period in 1995 to
$1.07 million in 1996. This increase was primarily due to a one-time special
deposit premium insurance assessment of $212,000. See Part II, Item 5 for
detailed information on the special assessment. Also, salaries and employee
benefit expense increased by $11,000. These increases were partially offset by a
$14,000 decrease in other non-interest expenses.
Income tax expense for the nine month period ended September 30, 1996 decreased
$73,000, or 42.94%, from $170,000 for the same period in 1995 to $97,000 in
1996. This increase is primarily the result of an decrease in taxable income. No
provision for deferred taxes has been recorded for the nine month periods ended
September 30, 1996 and 1995 due to immateriality.
LIQUIDITY AND CAPITAL RESOURCES
The Savings Bank is required to maintain minimum levels of liquid assets, as
defined by the Office of Thrift Supervision (OTS) regulations. This requirement,
which may be varied from time to time depending upon economic conditions and
deposit flows, is based upon a percentage of deposits and short-term borrowings.
The required minimum ratio is currently 5%. The Savings Bank's liquidity ratio
averaged 18.25% during September 1996. The Savings Bank manages its liquidity
ratio to meet its funding needs, including: deposit outflows; disbursement of
payments collected from borrowers for taxes and insurance; and loan principal
disbursements. The Savings Bank also manages its liquidity ratio to meet its
asset and liability management objectives.
13
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 2. - (Continued)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
In addition to funds provided from operations, the Savings Bank's primary
sources of funds are: savings deposits; principal repayments on loans and
mortgage-backed and related securities; and matured or called investment
securities. If necessary, the Savings Bank has the ability to borrow funds from
the Federal Home Loan Bank of Pittsburgh, although the need is not anticipated.
Scheduled loan repayments and maturing investment securities are a relatively
predictable source of funds. However, savings deposit flows and prepayments on
loans and mortgage-backed and related securities are significantly influenced by
changes in market interest rates, economic conditions, and competition. The
Savings Bank strives to manage the pricing of its deposits to maintain a
balanced stream of cash flows commensurate with its loan commitments and other
predictable funding needs.
The Savings Bank invests its excess funds in an interest bearing overnight
deposit account with the Federal Home Loan Bank of Pittsburgh. This provides
sufficient liquidity to meet immediate loan commitment and savings withdrawal
funding requirements. When applicable, cash in excess of immediate funding needs
is invested into longer-term investments and mortgage-backed and related
securities which typically earn a higher yield than overnight deposits. These
types of investments may qualify as liquid investments under OTS regulations,
depending upon their stated maturities.
The Savings Bank anticipates that it will have sufficient funds available to
meet its current loan commitments and normal savings withdrawals. At September
30, 1996, the Savings Bank had outstanding loan commitments of $485,000. In
addition, it had certificates of deposit scheduled to mature within one year of
$15.65 million. Management believes that a substantial portion of such deposits
will remain with the Savings Bank.
As required by the Financial Institutions Reform, Recovery and Enforcement Act
of 1989 (FIRREA), the Office of Thrift Supervision (OTS) prescribed three
separate standards of capital adequacy. The regulations require financial
institutions to have minimum tangible capital equal to 1.50% of tangible assets;
minimum core capital equal to 3.00% of adjusted tangible assets; and minimum
risk-based capital equal to 8.00% of risk-weighted assets.
14
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 2. - (Continued)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
The following table sets forth the Savings Bank's regulatory capital position at
June 30, 1996, as compared to the minimum regulatory requirements:
Amount Percent of
(in thousands) Adjusted Assets
-------------- ---------------
Tangible Capital:1
Actual $7,594 17.00%
Required 670 1.50%
------ ------
Excess $6,924 15.50%
------ ------
Core Capital:1
Actual $7,594 17.00%
Required 1,340 3.00%
------ ------
Excess $6,254 14.00%
------ ------
Risk-Based Capital:2
Actual $7,821 43.12%
Required 1,451 8.00%
------ ------
Excess $6,370 35.12%
------ ------
1 Based on tangible and core assets of $44,668
2 Based on risk-weighted assets of $18,137
PART II - OTHER INFORMATION
Item 5. - Other Information
New Office Building - As discussed in the Corporation's 1995 Annual Report
and the June 30, 1996 Form 10-QSB, the Savings Bank is planning on constructing
a new office building on a piece of property currently owned which is adjacent
to its branch facility. Due to unexpected delays in the architectural process
and the fast approaching winter weather season, construction has been delayed
until Spring 1997. After the first of the year, the Board will again review the
plans and anticipated costs associated with the proposed building before giving
final approval to commence construction.
As of September 30, 1996, the Savings Bank had incurred approximately
$112,000 in architectural and engineering fees associated with the new building.
Such fees will be capitalized as part of the cost of the project. Should the
project be terminated, such fees will be charged to non-interest expense in the
period in which termination occurs.
15
<PAGE>
BECKLEY BANCORP, INC.
PART II - OTHER INFORMATION
Item 5. - Other Information (continued)
FDIC Special Premium Assessment - As previously discussed in the
Corporation's 1995 Annual Report, there has been a significant deposit insurance
premium disparity between the Savings Association Insurance Fund (the "SAIF")
and the Bank Insurance Fund (the "BIF"), both of which are divisions of the
Federal Deposit Insurance Corporation (the "FDIC"). The Corporation, through the
Savings Bank has been paying an insurance premium to the SAIF equal to .23% of
its insured deposits. In September 1995, the FDIC lowered premiums for members
of the BIF, primarily commercial banks, to a range of between .04% to .31% of
insured deposits. In January 1995, the total annual premium for most BIF members
was lowered to a flat fee of $2,000. Over the past year, several alternatives to
mitigate the effect of the BIF/SAIF insurance premium disparity have been
proposed and considered.
On September 30, 1996, the Deposit Insurance Funds Act was signed into law
by the President. As required under this law, the FDIC issued a one-time special
premium assessment of 65.7 cents per $100 of insured deposits on all members of
the SAIF. This assessment will be used to fully capitalize the SAIF and, going
forward, will allow the FDIC to significantly reduce the deposit insurance
premiums being paid by all SAIF insured institutions. It is expected that, as a
result of this one-time charge, future assessments for the SAIF will be reduced
from 23 cents to approximately 18 cents per $100 of insured deposits for the
fourth quarter of 1996 and further reduced to 6.4 cents per $100 of insured
deposits beginning January 1, 1997 and continuing through December 31, 1999.
Beginning January 1, 2000, the rate is projected to decrease further to 2.4
cents per $100 of insured deposits. Beginning January 1, 1997, it is projected
that the SAIF assessment of 6.4 cents will result in a reduction of
approximately 70 percent, or an estimated $53,000, in annual assessment expense,
which, over a four year period, is expected to offset the special assessment.
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which this report
is filed.
16
<PAGE>
BECKLEY BANCORP, INC.
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.
BECKLEY BANCORP, INC.
Date: November 1, 1996 By: /s/ Duane K. Sellards
------------------- ----------------------
DUANE K. SELLARDS
President and Chief
Executive Officer
Date: November 1, 1996 By: /s/ Brian K. Pate
------------------- ------------------
BRIAN K. PATE
Vice President and Chief
Financial Officer
17
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