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 JUNE 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 August 7, 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 June 30, 1996 (Unaudited) and as of
December 31, 1995 1
Consolidated Statements of Income for the
Three and Six Months Ended June 30, 1996
and 1995 (Unaudited) 2
Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1996 and
1995 (Unaudited) 3 - 4
Consolidated Statements of Shareholders'
Equity for the Six Months Ended
June 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 17
-------
SIGNATURES 18
- ----------
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 1. - Financial Statements
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Amounts in Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------------- --------------
(Unaudited) *1
ASSETS
<S> <C> <C>
Cash and due from banks $ 268 $ 406
Interest bearing deposits in other banks 1,271 965
Securities available for sale 6,770 5,021
Securities held-to-maturity (market
value of $3,993) -- 3,993
Collateralized mortgage obligations and
other mortgage-backed securities
available-for-sale 17,113 17,954
Loans receivable, net - Note 4 18,528 15,965
Bank premises and equipment, at cost
net of accumulated depreciation 552 441
Federal Home Loan Bank stock - at cost 172 176
Accrued interest receivable 299 253
Repossessed assets 16 --
Other assets 63 39
------------- -------------
TOTAL ASSETS 45,052 45,213
============= =============
LIABILITIES AND
STOCKHOLDERS' EQUITY
LIABILITIES
Deposit accounts 32,356 33,427
Short-term borrowings 1,000 --
Deferred income tax liability 122 215
Accrued expenses and other liabilities 367 303
------------- -------------
TOTAL LIABILITIES 33,845 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 5,665 5,659
Retained earnings (substantially restricted) 5,455 5,391
Unearned ESOP shares, at cost (168) (185)
Unearned MSBP shares, at cost (71) (83)
Net unrealized gain on
securities available for sale 266 426
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 11,207 11,268
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 45,052 $ 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 Six Months
Ended Ended
June 30, June 30,
------------------- --------------------
1996 1995 1996 1995
---- ---- ---- ----
INTEREST AND DIVIDEND INCOME
<S> <C> <C> <C> <C>
Loans, including certain fees $ 376 $ 297 $ 739 $ 582
Investment securities 70 127 155 267
Mortgage-backed and related securities 282 287 576 527
Interest bearing deposit accounts 22 40 47 85
Dividends, FHLB and other 6 6 12 12
------- ------- ------- -------
TOTAL INTEREST INCOME 756 757 1,529 1,473
------- ------- ------- -------
INTEREST EXPENSE
Deposit Accounts 332 333 664 627
Other 1 -- 1 --
------- ------- ------- -------
TOTAL INTEREST EXPENSE 333 333 665 627
------- ------- ------- -------
NET INTEREST INCOME 423 424 864 846
Provision for losses on loans - Note 1 5 36 20 56
------- ------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOSSES ON LOANS 418 388 844 790
------- ------- ------- -------
NON-INTEREST INCOME
Service charges on deposit accounts 13 12 24 23
Gain on sale of investment securities -- 35 -- 35
Other income 3 3 7 6
------- ------- ------- -------
TOTAL NON-INTEREST INCOME 16 50 31 64
------- ------- ------- -------
NON-INTEREST EXPENSE
Salaries and employee benefits 127 132 264 262
Occupancy and equipment expense 18 19 40 35
Federal deposit insurance premiums 19 18 38 37
Service bureau and other data processing 29 30 61 60
Other 88 98 178 194
------- ------- ------- -------
TOTAL NON-INTEREST EXPENSE 281 297 581 588
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 153 141 294 266
------- ------- ------- -------
Provision for income taxes 59 58 114 104
------- ------- ------- -------
NET INCOME $ 94 $ 83 $ 180 $ 162
======= ======= ======= =======
EARNINGS PER COMMON SHARE - Note 3 $ 0.16 0.14 $ 0.31 0.27
======= ==== ======= ====
</TABLE>
2
The accompanying notes are an integral part of these statements.
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 1. - (Continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1996 1995
----------- -----------
OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $ 180 $ 162
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 11 8
(Accretion) and amortization, net (24) (100)
Provision for losses on loans 20 56
Increase (decrease) in deferred loan fees (8) 1
Amortized ESOP benefits 24 20
Amortized MSBP compensation 11 --
Increase in accrued income and
other assets (70) (66)
Increase (decrease) in accrued expenses
and other liabilities 64 (159)
----------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 208 (78)
----------- -----------
INVESTING ACTIVITIES:
Purchases of collateralized mortgage obligations
and other mortgage-backed securities
-Available-for-sale -- (2,336)
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 600 296
Purchases of investment securities
-Available-for-sale (3,000) (29,151)
-Held-to-maturity (2,495) --
Proceeds from maturities or calls of
investment securities
-Available-for-sale 1,250 --
-Held-to-maturity 6,500 31,961
Net increase in loans made to customers (2,590) (1,002)
Redemption of Federal Home Loan Bank stock 4 --
Purchase of Federal Home Loan Bank stock -- (7)
Additions to premises and equipment (122) --
----------- -----------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES $ 147 $ 754
----------- -----------
</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>
Six Months Ended June 30,
1996 1995
----------- -----------
FINANCING ACTIVITIES:
<S> <C> <C>
Net increase/(decrease) in deposit accounts $ (1,071) $ 1,115
Proceeds from short-term borrowings 1,000 --
Cash dividends paid on common stock (116) (71)
----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES (187) 1,044
----------- -----------
Increase in cash and cash equivalents 168 1,720
Cash and cash equivalents, beginning
of year 1,371 1,253
----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 1,539 $ 2,973
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest $ 664 $ 621
=========== ===========
Income taxes $ 228 $ 112
=========== ===========
Automobiles acquired in settlement
of loans $ 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
Additional Deferred Unearned Available
Common Paid-in Retained ESOP MSBP For-Sale
Stock Capital Earnings Benefit Compensation Securities TOTAL
----- ------- -------- ------- ------------ ---------- -----
SIX MONTHS ENDED JUNE 30, 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $ 60 $ 5,541 $ 5,133 $ (214) $ -- $ (677) $ 9,843
Payment of $0.12 per
share regular cash
dividend on February 15,
1995 (71) (71)
Net income, six months ended
June 30, 1995 162 162
Change in unrealized gain/
loss on available-for-sale
securities, net of tax 880 880
Change in unearned ESOP shares 6 14 20
---------- ----------- --------- --------- ------------- ------------ --------
Balance, June 30, 1995 $ 60 $ 5,547 $ 5,224 $ (200) $ 0 $ 203 $ 10,834
========== =========== ========= ========= ============= ============ ========
SIX MONTHS ENDED JUNE 30, 1996
Balance, December 31, 1995 $ 60 $ 5,659 $ 5,391 $ (185) $ (83) 426 $ 11,268
Payment of $0.13 per share
regular cash dividend
on February 15, 1996 (75) (75)
Payment of $0.07 per share
special cash dividend
on February 15, 1996 (41) (41)
Net income, six months ended
June 30, 1996 180 180
Change in unrealized gain/(loss)
on available-for-sale
securities, net of tax (160) (160)
Change in unearned ESOP shares 7 17 24
Change in unearned MSBP shares (1) 12 11
---------- ----------- --------- --------- ------------- ------------ --------
Balance, June 30, 1996 $ 60 $ 5,665 $ 5,455 $ (168) $ (71) 266 $ 11,207
========== =========== ========= ========= ============= ============ ========
</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"), Beckley Federal Savings Bank (the "Savings Bank") and
Two-Hundred Corporation, the Savings Bank's wholly owned inactive
service corporation. 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 six-month period ended June 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 June 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 June 30, 1996 and December 31, 1995, consisted of
the following:
(In thousands)
Jun 30, Dec 31,
1996 1995
---------- ---------
First mortgage loans:
One to four family dwellings $ 12,087 $ 12,214
Multi-family dwellings and
non-residential property 1,108 1,237
Construction 61 103
Loans secured by deposits 549 617
Non-mortgage loans, consumer
and commercial 5,018 2,081
---------- ---------
TOTAL LOANS 18,823 16,252
Less:
Allowance for losses (271) (255)
Net deferred loan fees and
reserve for uncollected
interest (24) (32)
---------- ---------
LOANS RECEIVABLE, NET $ 18,528 $ 15,965
---------- ---------
Non-accruing loans at June 30
and December 31 were
as follows: $ -- $ 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 June 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 $.16 million, or 0.36%, from $45.21 million at
December 31, 1995 to $45.05 million at June 30, 1996. This decrease, which was
primarily attributable to a $3.99 million decrease in securities
held-to-maturity and a $0.84 million decrease in collateralized mortgage
obligations and other mortgage-backed securities. These decreases were partially
offset by a $1.75 million increase in securities available-for-sale and a $2.56
million increase in loans receivable.
Cash and Cash Equivalents increased $0.17 million, or 12.25%, from $1.37 million
at December 31, 1995 to $1.54 million at June 30, 1996.
Securities Available-for-Sale increased by $1.75 million, or 34.86%, from $5.02
million at December 31, 1995 to $6.77 million at June 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 June 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 $0.84 million, or 4.68%, from $17.95 million at December 31, 1995 to
$17.11 million at June 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 $2.56 million, or 16.10%, from $15.96 million at
December 31, 1995 to $18.53 million at June 30, 1996. This increase was
primarily the result of approximately $2.87 million of net non-mortgage loan
originations which was partially offset by principal repayments on mortgage
loans exceeding mortgage loan originations by approximately $0.30 million. As a
result of the increased non-mortgage loan balances, management increased the
allowance for losses on loans by $20,000 during the six month period ended June
30, 1996. Charge-offs for the six-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 $111,000, or 25.17%, from $441,000 at
December 31, 1995 to $552,000 at June 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 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 $0.10 million, or 0.29%, from $33.95 million at
December 31, 1995 to $33.85 million at June 30, 1996. This decrease was
primarily due to a $1.07 million decrease in deposit account balances which was
partially offset by a $1.0 million increase in short-term borrowings.
Deposit Accounts decreased $1.07 million, or 3.20%, from $33.43 million at
December 31, 1995 to $32.36 million at June 30, 1996. This decrease was the
result of approximately $1.62 million of customer withdrawals in excess of
customer deposits which was partially offset by $0.55 million of interest being
credited to customer deposit accounts during the six month period ended June 30,
1996.
Short-term Borrowings increased $1.0 million, or 100%, from zero at December 31,
1995 to $1.0 million at June 30, 1996. The proceeds were invested in a
government agency security classified as "available-for-sale."
Stockholders' Equity decreased $61,000, or 0.54%, from $11.27 million at
December 31, 1995 to $11.21 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 and a $160,000 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 six-month period ended
June 30, 1996 of $180,000 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 JUNE 30, 1996
Net Income for the three month period ended June 30, 1996 increased $11,000, or
13.25% from $83,000 for the same period in 1995 to $94,000 in 1996. This
increase was primarily due to a $31,000 decrease in the amount charged to the
provision for losses on loans and a $16,000 decrease in non-interest expense
partially offset by a $34,000 decrease in non-interest income.
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 JUNE 30, 1996 (Continued)
Interest Income for the three month period ended June 30, 1996 was approximately
equal to interest income for the same period in 1995. As a result of changes in
the composition of interest earning assets, interest income on loans increased
$79,000 while interest income on investment securities, collateralized mortgage
obligations and other mortgage-backed securities and interest bearing deposit
accounts decreased $57,000, $5,000 and $18,000, respectively.
Interest Expense for the three month period ended June 30, 1996 was
approximately equal to interest expense for the same period in 1995. Although
there was a decrease in interest bearing deposit accounts, the average interest
rate paid on such deposits has increased.
Net Interest Income for the three month period ended June 30, 1996 was
approximately equal to net interest income for the same period in 1995.
Provision for Loan Losses was increased by $5,000 for the three month period
ended June 30, 1996 compared to an increase of $36,000 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 June 30, 1996 indicated that
the allowance should be increased by $5,000. 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 June 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 June 30, 1996 decreased
$34,000, or 68.00%, to $16,000 from $50,000 for the same period in 1995. This
decrease was the result of a non-recurring gain on the sale of investment
securities of $35,000 in 1995.
Non-Interest Expense for the three month period ended June 30, 1996 decreased
$16,000, or 5.39%, from $297,000 for the same period in 1995 to $281,000 in
1996. This decrease was primarily due to a $5,000 decrease in salaries and
employee benefits and a $10,000 decrease in other non-interest expense.
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 JUNE 30, 1996 (Continued)
Income tax expense for the three month period ended June 30, 1996 increased
$1,000, or 1.72%, from $58,000 for the same period in 1994 to $59,000 in 1996.
This increase is primarily the result of an increase in taxable income and a
decrease in the amount charged to the provision for losses on loans, which is a
non-deductible item. No provision for deferred taxes has been recorded for the
three month periods ended June 30, 1996 and 1995 due to immateriality.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS FOR
THE SIX MONTHS ENDED JUNE 30, 1996
Net Income for the six month period ended June 30, 1996 increased $18,000, or
11.11% from $162,000 for the same period in 1995 to $180,000 in 1996. This
increase was primarily due to an $18,000 increase in net interest income, a
$36,000 decrease in the amount charged to the provision for losses on loans and
a $7,000 decrease in non-interest expense partially offset by a $33,000 decrease
in non-interest income.
Interest Income for the six month period ended June 30, 1996 increased $56,000,
or 3.80%, to $1.53 million from $1.47 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 $157,000 and interest
income on collateralized mortgage obligations and other mortgage-backed
securities increased $49,000. These increase were partially offset by a decrease
of $112,000 in interest income from investment securities and a $38,000 decrease
in interest income from deposit accounts with other banks.
Interest Expense for the six month period ended June 30, 1996 increased $38,000,
or 6.06%, to $665,000 from $627,000 for the same period in 1995. The increase
was due to an increase in the general level of interest rates paid on deposit
accounts.
Net Interest Income for the six month period ended June 30, 1996 increased
$18,000, or 2.13%, to $864,000 from $846,000 for the same period in 1995. This
was due to a $56,000 increase in interest income partially offset by a $38,000
increase in interest expense.
Provision for Loan Losses was increased by $20,000 for the six month period
ended June 30, 1996 compared to an increase of $56,000 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 SIX MONTHS ENDED JUNE 30, 1996 (Continued)
Provision for Loan Losses (Continued)
loan portfolio and other relevant factors, at June 30, 1996 and March 31, 1996
indicated that the allowance should be increased by $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 June 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 six month period ended June 30, 1996 decreased
$33,000, or 51.56%, to $31,000 from $64,000 for the same period in 1995. This
decrease was the result of a non-recurring gain on the sale of investment
securities of $35,000 in 1995.
Non-Interest Expense for the six month period ended June 30, 1996 decreased
$7,000, or 1.19%, from $588,000 for the same period in 1995 to $581,000 in 1996.
This decrease was primarily due to a $16,000 decrease in other non-interest
expense partially offset by a $5,000 increase in occupancy and equipment
expenses and small increases in salaries and employee benefits, federal deposit
insurance premiums and service bureau and other data processing expenses.
Income tax expense for the six month period ended June 30, 1996 increased
$10,000, or 9.62%, from $104,000 for the same period in 1995 to $114,000 in
1996. This increase is primarily the result of an increase in taxable income and
a decrease in the amount charged to the provision for losses on loans, which is
a non-deductible item. No provision for deferred taxes has been recorded for the
six month period ended June 30, 1996 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 18.65% during June, 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.
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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 June 30,
1996, the Savings Bank had outstanding loan commitments of $218,000. In
addition, it had certificates of deposit scheduled to mature within one year of
$16.04 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.
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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 $7,619 17.01%
Required 672 1.50%
------ -----
Excess $6,947 15.51%
------ -----
Core Capital:1
Actual $7,619 17.01%
Required 1,344 3.00%
------ -----
Excess $6,275 14.01%
------ -----
Risk-Based Capital:2
Actual $7,817 43.89%
Required 1,425 8.00%
------ -----
Excess $6,392 35.89%
------ -----
1 Based on tangible and core assets of $44,786
2 Based on risk-weighted assets of $17,812
PART II - OTHER INFORMATION
Item 5. - Other Information
Dividend Payments - On July 9, 1996, the Board of Directors of the
Corporation declared a $0.13 per share regular semi-annual cash dividend payable
on August 15, 1996 to stockholders of record as of July 31, 1996. The
Corporation expects to continue its policy of paying regular semi-annual cash
dividends; however, further declarations of dividends will depend on a number of
factors, including investment opportunities, capital requirements, regulatory
limitations, results of operations and financial condition, tax considerations,
and general economic conditions.
New Office Building - As discussed in the Corporation's 1995 Annual
Report, the Savings Bank is in the process of finalizing contracts for the
construction of a new office building on a piece of property currently owned
which is adjacent to its branch facility. Upon completion, the Savings Bank
plans to designate the new facility as its home office and redesignate its
current home office facility as a branch office. The Savings Bank has received
approval from the Office of Thrift Supervision for such redesignation.
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BECKLEY BANCORP, INC.
PART II - OTHER INFORMATION
Item 5. - Other Information (Continued)
Construction should commence before the end of August, however, if
there are significant delays which would prohibit the building from being under
roof before winter, the project may be delayed until the spring. It is estimated
that the project will take nine to twelve months to complete.
In addition to the new building, the Savings Bank plans to update its
teller equipment in both offices. The total cost of the project is currently
estimated to be approximately $1.7 million. Upon completion, the project is
expected to increase pre-tax expenses by approximately $160,000 annually. The
increase in expenses includes the loss of investment income on funds used for
the project and increased depreciation and maintenance expense. Also, additional
personnel will be required.
Management anticipates that the new facility will enhance the Savings
Bank's ability to attract new deposits and to increase lending volume.
Management projects that, within a two-year period, such activity will generate
additional revenue in an amount equal to or greater than the total increase in
expense associated with the project. Although not anticipated, such projections
may not materialize and the project could result in a decrease in pre-tax net
income of up to $160,000 annually.
As of June 30, 1996, the Savings Bank had incurred approximately
$100,000 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.
Stock Option Plans - On June 11, 1996, the Board of Directors adopted
the 1996 Directors Stock Option Plan (the "1996 Plan"). Under the terms of the
1996 Plan, the Corporation is authorized to issue up to 30,000 shares of common
stock, or such number of shares of common stock as may be adjusted in accordance
with the 1996 Plan, upon the exercise of options. On the same date, the Stock
Option Committee (the "Committee") granted 6,000 stock options to each of the
Corporation's five non-employee directors. As of June 30, 1996, no options have
been exercised under the 1996 Plan. A Form S-8 will be filed with the Securities
and Exchange Commission in August 1996.
In conjunction with the adoption of the 1996 Plan, the Board reduced
the number of shares of common stock reserved for issuance under the 1994 Stock
Option Plan ( the "1994 Plan") by 30,000 shares.
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BECKLEY BANCORP, INC.
PART II - OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibit 10 - 1996 Directors Stock Option Plan
Exhibit 27 - Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
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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: August 9, 1996 By: /s/ Duane K. Sellards
----------------- ------------------------------
DUANE K. SELLARDS
President and Chief
Executive Officer
Date: August 9, 1996 By: /s/ Brian K. Pate
----------------- ------------------------------
BRIAN K. PATE
Vice President and Chief
Financial Officer
18
Exhibit A
BECKLEY BANCORP, INC.
1996 DIRECTORS STOCK OPTION PLAN
1. Purpose of the Plan. The Plan shall be known as the Beckley Bancorp,
Inc. ("Corporation") 1996 Directors Stock Option Plan (the "Plan"). The purpose
of the Plan is to attract and retain qualified personnel to serve as members of
the Board of Directors of the Corporation and the Board of Directors of Beckley
Federal Savings Bank necessary to promote the success of the business
enterprise.
2. Definitions. The following words and phrases when used in this Plan
with an initial capital letter, unless the context clearly indicates otherwise,
shall have the meaning as set forth below. Wherever appropriate, the masculine
pronoun shall include the feminine pronoun and the singular shall include the
plural.
(a) "Award" means the grant of Stock Options to Directors of the
Corporation and the Savings Bank as specified by the terms of the Plan.
(b) "Board" shall mean the Board of Directors of the Corporation, or
any successor or parent corporation thereto.
(c) "Change in Control" shall mean: (i) the sale of all, or a
material portion, of the assets of the Corporation; (ii) a merger or
recapitalization in the Corporation whereby the Corporation is not the surviving
entity; (iii) a change in control of the Corporation, as otherwise defined or
determined by the Office of Thrift Supervision or regulations promulgated by it;
or (iv) the acquisition, directly or indirectly, of the beneficial ownership
(within the meaning of that term as it is used in Section 13(d) of the
Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder) of twenty-five percent (25%) or more of the outstanding voting
securities of the Corporation by any person, trust, entity or group. This
limitation shall not apply to the purchase of shares by underwriters in
connection with a public offering of Corporation stock, or the purchase of
shares of up to 25% of any class of securities of the Corporation by a
tax-qualified employee stock benefit plan which is exempt from the approval
requirements, set forth under 12 C.F.R. ss.574.3(c)(1)(vi) as now in effect or
as may hereafter be amended. The term "person" refers to an individual or a
corporation, partnership, trust, association, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein. The decision of the Committee as to whether a Change
in Control has occurred shall be conclusive and binding.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended,
and regulations promulgated thereunder.
(e) "Committee" shall mean the Stock Option Committee appointed by
the Board in accordance with Section 5(a) of the Plan.
(f) "Common Stock" shall mean common stock, par value $.10 per
share, of the Corporation, or any successor or parent corporation thereto.
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(g) "Corporation" shall mean the Beckley Bancorp, Inc., the parent
corporation of the Savings Bank, or any successor or Parent thereof.
(h) "Director" shall mean a member of the Board of the Corporation
or the Savings Bank, or any successor or parent corporation thereto.
(i) "Director Emeritus" shall mean a person serving as a director
emeritus, advisory director, consulting director or other similar position as
may be appointed by the Board of Directors of the Savings Bank or the
Corporation from time to time.
(j) "Disability" means any physical or mental impairment which
renders the Participant incapable of continuing in the employment or service of
the Savings Bank or the Parent in his then current capacity as determined by the
Committee.
(k) "Effective Date" shall mean the date specified in Section 11
hereof.
(l) "Fair Market Value" shall mean: (i) if the Common Stock is
traded otherwise than on a national securities exchange, then the Fair Market
Value per Share shall be equal to the mean between the last bid and ask price of
such Common Stock on such date or, if there is no bid and ask price on said
date, then on the immediately prior business day on which there was a bid and
ask price. If no such bid and ask price is available, then the Fair Market Value
shall be determined by the Committee in good faith; or (ii) if the Common Stock
is listed on a national securities exchange, then the Fair Market Value per
Share shall be not less than the average of the highest and lowest selling price
of such Common Stock on such exchange on such date, or if there were no sales on
said date, then the Fair Market Value shall be not less than the mean between
the last bid and ask price on such date.
(m) "Stock Option" shall mean an option to purchase shares of Common
Stock granted pursuant to Section 8 hereof, which option is not intended to
qualify under Section 422 of the Code as an incentive stock option.
(n) "Optioned Stock" shall mean stock subject to a Stock Option
granted pursuant to the Plan.
(o) "Optionee" shall mean any person who receives a Stock Option or
Award pursuant to the Plan.
(p) "Parent" shall mean any present or future corporation which
would be a "parent corporation" as defined in Subsections 424(e) and (g) of the
Code.
(q) "Participant" means any director of the Corporation or any
Parent or Subsidiary of the Corporation who by the express terms of the Plan is
granted an Award.
(r) "Plan" shall mean the Beckley Bancorp, Inc. 1996 Directors
Stock Option Plan.
(s) "Savings Bank" shall mean Beckley Federal Savings Bank,
Beckley, West Virginia, or any successor corporation thereto.
(t) "Share" shall mean one share of the Common Stock.
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(u) "Subsidiary" shall mean any present or future corporation which
constitutes a "subsidiary corporation" as defined in Subsections 424(f) and (g)
of the Code.
3. Shares Subject to the Plan. Except as otherwise required by the
provisions of Section 9 hereof, the aggregate number of Shares with respect to
which Awards may be made pursuant to the Plan shall not exceed 30,000 shares of
Common Stock. Such Shares may either be from authorized but unissued shares,
treasury shares or shares purchased in the market for Plan purposes.
If an Award shall expire, become unexercisable, or be forfeited for any
reason prior to its exercise, new Awards may be granted under the Plan with
respect to the number of Shares as to which such expiration has occurred.
4. Six Month Holding Period.
Except in the event of death or disability of the Optionee, a
minimum of six months must elapse between the date of the grant of an Option and
the date of the sale of the Common Stock received through the exercise of such a
Stock Option.
5. Administration of the Plan.
(a) Composition of the Committee. The Plan shall be administered by
a the Committee which shall consist of at least three non-employee Directors of
the Corporation appointed by the Board and serving at the pleasure of the Board.
(b) Powers of the Committee. The Committee is authorized (but only
to the extent not contrary to the express provisions of the Plan or to
resolutions adopted by the Board) to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the form and
content of Awards to be issued under the Plan and to make other determinations
necessary or advisable for the administration of the Plan, and shall have and
may exercise such other power and authority as may be delegated to it by the
Board from time to time. A majority of the entire Committee shall constitute a
quorum and the action of a majority of the members present at any meeting at
which a quorum is present shall be deemed the action of the Committee. In no
event may the Committee revoke outstanding Awards without the consent of the
Participant.
The President of the Corporation and such other officers as shall be
designated by the Committee are hereby authorized to execute written agreements
evidencing Awards on behalf of the Corporation and to cause them to be delivered
to the Participants. Such agreements shall set forth the Option exercise price,
the number of shares of Common Stock subject to such a Stock Option, the
expiration date of such a Stock Options, and such other terms and restrictions
applicable to such Award as are determined in accordance with the Plan or the
actions of the Committee.
(c) Effect of Committee's Decision. All decisions, determinations
and interpretations of the Committee shall be final and conclusive on all
persons affected thereby.
6. Eligibility for Awards and Limitations.
Stock Options under the Plan shall be granted in accordance with
Section 8 of the Plan to non-employee Directors of the Corporation and the
Savings Bank.
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7. Term of the Plan. The Plan shall continue in effect for a term of ten
(10) years from the Effective Date. No Stock Option shall be granted under the
Plan after ten (10) years from the Effective Date.
8. Terms and Conditions of Stock Options. Each Stock Option granted
pursuant to the Plan shall be evidenced by an instrument in such form as the
Committee shall from time to time approve. Each Stock Option granted pursuant to
the Plan shall comply with and be subject to the following terms and conditions.
(a) Option Price. The exercise price per Share of Common Stock for
each Stock Option granted pursuant to the Plan shall be equal to the Fair Market
Value of such Common Stock on the Effective Date as determined by the Committee
in good faith.
(b) Awards. Upon the Effective Date, each non-employee Director of
the Corporation shall be granted a Stock Option to purchase 6,000 shares of
Common Stock. Such Stock Options shall be first exercisable as of the date that
is six-months after the Effective Date; except however, such Stock Options shall
be immediately exercisable upon the death or Disability of the Participant.
(c) Term. The term of exercisability of each Stock Option granted
pursuant to the Plan shall be ten (10) years from the Effective Date.
(d) Exercise Generally. The Committee may impose additional
conditions upon the right of any Participant to exercise any Stock Option
granted hereunder which is not inconsistent with the terms of the Plan.
(e) Payment. Full payment for each Share of Common Stock purchased
upon the exercise of any Stock Option granted under the Plan shall be made at
the time of exercise of each such Stock Option and shall be paid in cash (in
United States Dollars), Common Stock or a combination of cash and Common Stock.
Common Stock utilized in full or partial payment of the Option exercise price
shall be valued at its Fair Market Value at the date of exercise. The
Corporation shall accept full or partial payment in Common Stock only to the
extent permitted by applicable law. No Shares of Common Stock shall be issued
until full payment has been received by the Corporation and no Optionee shall
have any of the rights of a stockholder of the Corporation until the Shares of
Common Stock are issued to the Optionee.
(f) Cashless Exercise. An Optionee who has held a Stock Option for
at least six months may engage in the "cashless exercise" of the Option. Upon a
cashless exercise, an Optionee gives the Corporation written notice of the
exercise of the Stock Option together with an order to a registered
broker-dealer or equivalent third party, to sell part or all of the Optioned
Stock and to deliver enough of the proceeds to the Corporation to pay the Option
exercise price and any applicable withholding taxes. If the Optionee does not
sell the Optioned Stock through a registered broker-dealer or equivalent third
party, the Optionee can give the Corporation written notice of the exercise of
the Option and the third party purchaser of the Optioned Stock shall pay the
Option exercise price plus any applicable withholding taxes to the Corporation.
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(g) Transferability. Any Stock Option granted pursuant to the Plan
shall be exercised during an Optionee's lifetime only by the Optionee to whom it
was granted and shall not be assignable or transferable otherwise than by will
or by the laws of descent and distribution.
(h) Exercisability Following Death. In the event of the death of an
Optionee, any Stock Options granted to such Optionee may thereafter be exercised
by the person or persons to whom the Optionee's rights under any such Stock
Options pass by will or by the laws of descent and distribution (including the
Optionee's estate during the period of administration) at any time prior to the
normal expiration date of such Option. At the discretion of the Committee, upon
exercise of such Options, the Optionee may receive Shares or cash or a
combination thereof. If cash shall be paid in lieu of Shares, such cash shall be
equal to the difference between the Fair Market Value of such Shares and the
exercise price of such Options on the exercise date.
9. Recapitalization, Merger, Consolidation, Change in Control and Other
Transactions.
(a) Adjustment. Subject to any required action by the stockholders
of the Corporation, within the sole discretion of the Committee, the aggregate
number of Shares of Common Stock for which Options may be granted hereunder, the
number of Shares of Common Stock covered by each outstanding Option, and the
exercise price per Share of Common Stock of each such Option, shall all be
proportionately adjusted for any increase or decrease in the number of issued
and outstanding Shares of Common Stock resulting from a subdivision or
consolidation of Shares (whether by reason of merger, consolidation,
recapitalization, reclassification, split-up, combination of shares, or
otherwise) or the payment of a stock dividend (but only on the Common Stock) or
any other increase or decrease in the number of such Shares of Common Stock
effected without the receipt or payment of consideration by the Corporation
(other than Shares held by dissenting stockholders).
(b) Change in Control. All outstanding Awards shall become
immediately exercisable in the event of a Change in Control of the Corporation,
as determined by the Committee. In the event of such a Change in Control, the
Committee and the Board of Directors will take one or more of the following
actions to be effective as of the date of such Change in Control:
(i) provide that such Options shall be assumed, or equivalent
options shall be substituted, ("Substitute Options") by the acquiring or
succeeding corporation (or an affiliate thereof), provided that: (A) any such
Substitute Options exchanged for Incentive Stock Options shall meet the
requirements of Section 424(a) of the Code, and (B) the shares of stock issuable
upon the exercise of such Substitute Options shall constitute securities
registered in accordance with the Securities Act of 1933, as amended, ("1933
Act") or such securities shall be exempt from such registration in accordance
with Sections 3(a)(2) or 3(a)(5) of the 1933 Act, (collectively, "Registered
Securities"), or in the alternative, if the securities issuable upon the
exercise of such Substitute Options shall not constitute Registered Securities,
then the Optionee will receive upon consummation of the Change in Control
transaction a cash payment for each Option surrendered equal to the difference
between (1) the Fair Market Value of the consideration to be received for each
share of Common Stock in the Change in Control transaction times the number of
shares of Common Stock subject to such surrendered Options, and (2) the
aggregate exercise price of all such surrendered Options, or
(ii) in the event of a transaction under the terms of which the
holders of the Common Stock of the Corporation will receive upon consummation
thereof a cash payment (the "Merger Price") for each share of Common Stock
exchanged in the Change in Control transaction, to make or to provide
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for a cash payment to the Optionees equal to the difference between (A) the
Merger Price times the number of shares of Common Stock subject to such Options
held by each Optionee (to the extent then exercisable at prices not in excess of
the Merger Price) and (B) the aggregate exercise price of all such surrendered
Options in exchange for such surrendered Options.
(c) Extraordinary Corporate Action. Notwithstanding any provisions
of the Plan to the contrary, subject to any required action by the stockholders
of the Corporation, in the event of any Change in Control, recapitalization,
merger, consolidation, exchange of Shares, spin-off, reorganization, tender
offer, partial or complete liquidation or other extraordinary corporate action
or event, the Committee, in its sole discretion, shall have the power, prior or
subsequent to such action or event to:
(i) appropriately adjust the number of Shares of Common Stock
subject to each Option, the Option exercise price per Share of Common Stock, and
the consideration to be given or received by the Corporation upon the exercise
of any outstanding Option;
(ii) cancel any or all previously granted Options, provided
that appropriate consideration is paid to the Optionee in connection therewith;
and/or
(iii) make such other adjustments in connection with the Plan
as the Committee, in its sole discretion, deems necessary, desirable,
appropriate or advisable.
Except as expressly provided in Sections 9(a), 9(b) and 9(e) hereof,
no Optionee shall have any rights by reason of the occurrence of any of the
events described in this Section 9.
(d) Acceleration. The Committee shall at all times have the power to
accelerate the exercise date of Options previously granted under the Plan.
(e) Non-recurring Dividends. Upon the payment of a special or
non-recurring cash dividend that has the effect of a return of capital to the
stockholders, the Option exercise price per share shall be adjusted
proportionately with regard to such special or non-recurring cash dividends.
10. Date of Granting Options. The date of grant of an Option under the
Plan shall, for all purposes, be the date on which the Plan is adopted by the
Board of the Corporation. Notice of the grant of an Option shall be given to
each individual to whom an Option is so granted within a reasonable time after
the date of such grant in a form determined by the Committee.
11. Effective Date. The Plan shall become effective upon the date of
adoption of the Plan by the Board of the Corporation.
12. Modification of Options. At any time and from time to time, the Board
may authorize the Committee to direct the execution of an instrument providing
for the modification of any outstanding Option, provided no such modification,
extension or renewal shall confer on the holder of said Option any right or
benefit which could not be conferred on the Optionee by the grant of a new
Option at such time, or shall not materially decrease the Optionee's benefits
under the Option without the consent of the holder of the Option, except as
otherwise permitted under Section 13 hereof.
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13. Amendment and Termination of the Plan.
(a) Action by the Board. The Board may alter, suspend or discontinue
the Plan, except that no action of the Board may increase (other than as
provided in Section 9 hereof) the maximum number of Shares permitted to be
issued under the Plan.
(b) Change in Applicable Law. Notwithstanding any other provision
contained in the Plan, in the event of a change in any federal or state law,
rule or regulation which would make the exercise of all or part of any
previously granted Option unlawful or subject the Corporation to any penalty,
the Committee may restrict any such exercise without the consent of the Optionee
or other holder thereof in order to comply with any such law, rule or regulation
or to avoid any such penalty.
14. Conditions Upon Issuance of Shares; Limitations on Option Exercise;
Cancellation of Option Rights.
(a) Shares shall not be issued with respect to any Option granted under
the Plan unless the issuance and delivery of such Shares shall comply with all
relevant provisions of applicable law, including, without limitation, the
Securities Act of 1933, as amended, ("1933 Act") the rules and regulations
promulgated thereunder, including Rule 144 of the 1933 Act, any applicable state
securities laws and the requirements of any stock exchange upon which the Shares
may then be listed.
(b) The inability of the Corporation to obtain any necessary
authorizations, approvals or letters of non-objection from any regulatory body
or authority deemed by the Corporation's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder shall relieve the Corporation of any
liability in respect of the non-issuance or sale of such Shares.
(c) As a condition to the exercise of an Option, the Corporation may
require the person exercising the Option to make such representations and
warranties as may be necessary to assure the availability of an exemption from
the registration requirements of federal or state securities law.
(d) Notwithstanding anything herein to the contrary, upon the termination
of employment or service of an Optionee by the Corporation or its Subsidiaries
for "cause" as defined at 12 C.F.R. 563.39(b)(1) as determined by the Board of
Directors, all Options held by such Participant shall cease to be exercisable as
of the date of such termination of employment or service.
(e) Upon the exercise of an Option by an Optionee (or the Optionee's
personal representative), the Committee, in its sole and absolute discretion,
may make a cash payment to the Optionee, in whole or in part, in lieu of the
delivery of shares of Common Stock. Such cash payment to be paid in lieu of
delivery of Common Stock shall be equal to the difference between the Fair
Market Value of the Common Stock on the date of the Option exercise and the
exercise price per share of the Option. Such cash payment shall be in exchange
for the cancellation of such Option. Such cash payment shall not be made in the
event that such transaction would result in liability to the Optionee or the
Corporation under Section 16(b) of the Securities Exchange Act of 1934, as
amended, and regulations promulgated thereunder.
15. Reservation of Shares. During the term of the Plan, the Corporation
will reserve and keep available a number of Shares sufficient to satisfy the
requirements of the Plan.
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16. Unsecured Obligation. No Participant under the Plan shall have any
interest in any fund or special asset of the Corporation by reason of the Plan
or the grant of any Option under the Plan. No trust fund shall be created in
connection with the Plan or any grant of any Option hereunder and there shall be
no required funding of amounts which may become payable to any Participant.
17. Withholding Tax. The Corporation shall have the right to deduct from
all amounts paid in cash with respect to the cashless exercise of Options under
the Plan any taxes required by law to be withheld with respect to such cash
payments. Where a Participant or other person is entitled to receive Shares
pursuant to the exercise of an Option, the Corporation shall have the right to
require the Participant or such other person to pay the Corporation the amount
of any taxes which the Corporation is required to withhold with respect to such
Shares, or, in lieu thereof, to retain, or to sell without notice, a number of
such Shares sufficient to cover the amount required to be withheld.
18. No Employment Rights. No Director shall have a right to be selected as
a Participant under the Plan. Neither the Plan nor any action taken by the Board
or the Committee in administration of the Plan shall be construed as giving any
person any rights of employment or retention as a Director or in any other
capacity with the Corporation, the Savings Bank or other Subsidiaries.
19. Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of West Virginia, except to the extent
that federal law shall be deemed to apply.
A-8
<TABLE> <S> <C>
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