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, 1997
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X 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 of incorporation (I.R.S. Employer
or organization) Identification No.)
200 MAIN STREET, BECKLEY, WEST VIRGINIA 25801
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(304) 252-6201
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(Registrant's telephone number, including area code)
N/A
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(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 July 22, 1997:
Class Outstanding
----- -----------
$.10 par value common stock 602,465 shares
<PAGE>
BECKLEY BANCORP, INC.
INDEX
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. - Financial Statements
------
Consolidated Statements of Financial Position
as of June 30, 1997 (Unaudited) and as of
December 31, 1996 1
Consolidated Statements of Income for the
Six Months Ended June 30, 1997 and
1996 (Unaudited) 2
Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1997
and 1996 (Unaudited) 3 - 4
Consolidated Statements of Shareholders'
Equity for the Six Months Ended June 30,
1997 and 1996 (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 4. - Submission of Matters to a Vote of Security Holders 15
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Item 5. - Other Information 16
-------
Item 6. - Exhibits and Reports on Form 8-K 17
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SIGNATURES 18
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<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,
1997 1996
------------- -------------
(Unaudited) *1
ASSETS
<S> <C> <C>
Cash and due from banks $ 469 $ 334
Interest bearing deposits in other banks 912 916
Securities available for sale 4,272 5,997
Securities held-to-maturity (market
values of $1,497 and $997, respectively) 1,497 997
Collateralized mortgage obligations and
other mortgage-backed securities
available-for-sale 16,255 16,484
Loans receivable, net - Note 4 20,554 20,180
Bank premises and equipment, at cost
net of accumulated depreciation 552 551
Federal Home Loan Bank stock - at cost 175 172
Accrued interest receivable 256 268
Other assets 36 65
------------- -------------
TOTAL ASSETS 44,978 45,964
============= =============
LIABILITIES AND
STOCKHOLDERS' EQUITY
LIABILITIES
Deposit accounts 32,775 32,246
Short-term borrowings -- 2,000
Deferred income tax liability 252 121
Accrued expenses and other liabilities 379 315
------------- -------------
TOTAL LIABILITIES 33,406 34,682
------------- -------------
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 5,684 5,674
Retained earnings (substantially restricted) 5,502 5,474
Unearned ESOP shares, at cost (136) (153)
Unearned MSBP shares, at cost (47) (59)
Net unrealized gain on
securities available for sale 509 286
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 11,572 11,282
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 44,978 $ 45,964
============= =============
</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,
----------------- -----------------
1997 1996 1997 1996
------- -------- -------- --------
INTEREST AND DIVIDEND INCOME
<S> <C> <C> <C> <C>
Loans, including certain fees $ 427 $ 376 $ 846 $ 739
Investment securities 65 70 143 155
Collateralized mortgage obligations and
other mortgage-backed securities 263 282 530 576
Interest bearing deposit accounts 21 22 40 47
Dividends, FHLB and other 7 6 13 12
------- ------- ------- -------
TOTAL INTEREST INCOME 783 756 1,572 1,529
------- ------- ------- -------
INTEREST EXPENSE
Deposit Accounts 358 332 704 664
Other -- 1 16 1
------- ------- ------- -------
TOTAL INTEREST EXPENSE 358 333 720 665
------- ------- ------- -------
NET INTEREST INCOME 425 423 852 864
Provision for losses on loans - Note 1 2 5 4 20
------- ------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOSSES ON LOANS 423 418 848 844
------- ------- ------- -------
NON-INTEREST INCOME
Service charges on deposit accounts 17 13 30 24
Gain on sale of investment securities -- -- -- --
Other income 3 3 7 7
------- ------- ------- -------
TOTAL NON-INTEREST INCOME 20 16 37 31
------- ------- ------- -------
NON-INTEREST EXPENSE
Salaries and employee benefits 133 127 271 264
Occupancy and equipment expense 19 18 40 40
Federal deposit insurance premiums 5 19 10 38
Service bureau and other data processing 31 29 62 61
Other 150 88 250 178
------- ------- ------- -------
TOTAL NON-INTEREST EXPENSE 338 281 633 581
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 105 153 252 294
------- ------- ------- -------
Provision for income taxes 41 59 95 114
------- ------- ------- -------
NET INCOME $ 64 $ 94 $ 157 $ 180
======= ======= ======= =======
EARNINGS PER COMMON SHARE - Note 3 $ 0.11 0.16 $ 0.26 0.31
======= ======= ======= =======
</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>
Six Months Ended June 30,
1997 1996
------------- ------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $ 157 $ 180
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 11 11
(Accretion) and amortization, net (22) (24)
Provision for losses on loans 4 20
Increase (decrease) in deferred loan fees (3) (8)
Amortized ESOP benefits 28 24
Amortized MSBP compensation 11 11
(Increase) decrease in accrued income and
and other assets 41 (70)
Increase (decrease) in accrued expenses
and other liabilities 64 64
----------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 291 208
----------- -----------
INVESTING ACTIVITIES:
Principal repayments and redemptions on
collateralized mortgage obligations and
other mortgage-backed securities
-Available-for-sale 317 600
Purchases of investment securities
-Available-for-sale -- (3,000)
-Held-to-maturity (4,986) (2,495)
Proceeds from maturities or calls of
investment securities
-Available-for-sale 2,000 1,250
-Held-to-maturity 4,500 6,500
Net increase in loans made to customers (376) (2,590)
Redemption of Federal Home Loan Bank stock -- 4
Purchase of Federal Home Loan Bank stock (3) --
Additions to premises and equipment (12) (122)
----------- -----------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES $ 1,440 $ 147
----------- -----------
</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,
1997 1996
------------ ------------
FINANCING ACTIVITIES:
<S> <C> <C>
Net increase/(decrease) in deposit accounts $ 529 $ (1,071)
Proceeds from short-term borrowings 1,000 1,000
Repayments of short-term borrowings (3,000) --
Cash dividends paid on common stock (129) (116)
----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES (1,600) (187)
----------- -----------
Increase in cash and cash equivalents 131 168
Cash and cash equivalents, beginning
of year 1,250 1,371
----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 1,381 $ 1,539
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest $ 715 $ 664
=========== ===========
Income taxes $ 67 $ 228
=========== ===========
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, 1996
<S> <C> <C> <C> <C> <C> <C> <C>
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
========== =========== ========= ========= =========== ==== ========
SIX MONTHS ENDED JUNE 30, 1997
Balance, December 31, 1996 $ 60 $ 5,674 $ 5,474 $ (153) $ (59) 286 $ 11,282
Payment of $0.14 per share regular
cash dividend on February 18, 1997 (82) (82)
Payment of $0.08 per share special
cash dividend on February 18, 1997 (47) (47)
Net income, six months ended
June 30, 1997 157 157
Change in unrealized gain/(loss)
on available-for-sale
securities, net of tax 223 223
Change in unearned ESOP shares 11 17 28
Change in unearned MSBP shares (1) 12 11
---------- ---------- --------- --------- ------------- ---- --------
Balance, June 30, 1997 $ 60 $ 5,684 $ 5,502 $ (136) $ (47) 509 $ 11,572
========== =========== ========= ========= ============= ==== ========
</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 six month period ended June 30, 1997 are
not necessarily indicative of the results which may be expected for the
year ending December 31, 1997.
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, 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, 1997 or December 31, 1996.
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, 1997 and December 31, 1996, consisted of the
following:
<TABLE>
<CAPTION>
(In thousands)
Jun 30, Dec 31,
1997 1996
---------- ---------
First mortgage loans:
<S> <C> <C>
One to four family dwellings $ 13,695 $ 13,102
Multi-family dwellings and
non-residential property 1,402 1,409
Construction 8 96
Loans secured by deposits 617 616
Non-mortgage loans, consumer
and commercial 5,160 5,283
-------- --------
TOTAL LOANS 20,882 20,506
Less:
Allowance for losses (307) (303)
Net deferred loan fees and
reserve for uncollected
interest (21) (23)
-------- --------
LOANS RECEIVABLE, NET $ 20,554 $ 20,180
-------- --------
Non-accruing loans at June 30
and December 31 were
as follows: $ 89 $ 53
-------- --------
</TABLE>
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, 1997 or December 31, 1996.
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 $1.0 million, or 2.2%, from $46.0 million at December
31, 1996 to $45.0 million at June 30, 1997. This decrease was primarily
attributable to the maturities of investment securities and the repayment of
short-term borrowings.
Cash and Cash Equivalents increased $0.1 million, or 7.7%, from $1.3 million at
December 31, 1996 to $1.4 million at June 30, 1997.
Investment Securities decreased by $1.2 million, or 17.1%, from $7.0 million at
December 31, 1996 to $5.8 million at June 30, 1997. This decrease was
attributable to the maturities of a $6.5 million in securities and partially
offset by the purchases of $5.0 million in securities and an increase of $0.3
million in the market value of securities classified as available-for-sale.
Collateralized Mortgage Obligations and Other Mortgage-Backed Securities
decreased $0.2 million, or 1.2%, from $16.5 million at December 31, 1996 to
$16.3 million at June 30, 1997. This decrease was primarily due to principal
repayments on the securities.
Loans Receivable increased $0.4 million, or 2.0%, from $20.2 million at December
31, 1996 to $20.6 million at June 30, 1997. This increase was primarily the
result of $3.8 million in mortgage and non-mortgage loan originations partially
offset by principal repayments of $3.4 million. Management increased the
allowance for losses on loans by $4,000 during the quarter. There were no
charge-offs during the quarter. 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."
Total Liabilities decreased $1.3 million, or 3.7%, from $34.7 million at
December 31, 1996 to $33.4 million at June 30, 1997. This decrease was primarily
due to a $2.0 million decrease in short-term borrowings which was partially
offset by a $0.5 million increase in deposit account balances and a $0.2 million
increase in deferred income taxes and other accrued expenses.
Deposit Accounts increased $0.5 million, or 1.6%, from $32.2 million at December
31, 1996 to $32.7 million at June 30, 1997. This increase was the result of
customer deposits in excess of customer withdrawals and interest being credited
to customer deposit accounts.
Short-term borrowings decreased $2.0 million, or 100%, to zero at June 30, 1997.
This decrease resulted from the maturities of such borrowings.
9
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 2. - (Continued)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION (Continued)
Stockholders' Equity increased $0.3 million, or 2.7%, from $11.3 million at
December 31, 1996 to $11.6 million at June 30, 1997. This increase was primarily
due to net income of $157,000 and a net increase in the market value of
securities classified as available- for-sale of $223,000 which were partially
offset by the payment of regular and special cash dividends on February 18, 1997
of $129,000.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS FOR THE THREE
MONTHS ENDED JUNE 30, 1997
Net income for the three month period ended June 30, 1997 decreased $30,000, or
31.9% from $94,000 for the same period in 1996 to $64,000 in 1997. This increase
was primarily due to an increase in non-interest expense which was partially
offset by increases in net interest income and non-interest income and a
decrease in the provision for income taxes.
Interest income for the three month period ended June 30, 1997 increased
$27,000, or 3.6%, from $756,000 for the same period in 1996 to $783,000 in 1997.
This increase was the result of increased interest income on loans of $51,000.
This increase was partially offset by a decreases in interest income on
collateralized mortgage obligations and other mortgage-backed securities of
$19,000 and in interest income on investment securities of $5,000. The increases
and decreases in the separate components of interest income were primarily the
result of changes in the average balances of the investments relating to each
component.
Interest expense for the three month period ended June 30, 1997 increased
$25,000, or 7.5%, from $333,000 for the same period in 1996 to $358,000 in 1997.
This increase was primarily due to interest expense paid on deposit accounts of
$26,000 as a result of a general market increase in the average interest rates
paid on deposit accounts.
Net interest income for the three month period ended June 30, 1997 increased
$2,000, or 0.5%, from $423,000 for the same period in 1996 to $425,000 in 1997.
This increase was primarily due to a $27,000 increase in interest income which
was partially offset by a $25,000 increase in interest expense.
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, 1997 (Continued)
Provision for loan losses was increased by $2,000 for the three month period
ended June 30, 1997 compared to an increase of $5,000 for the same period in
1996. 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, 1997 indicated that
the allowance should be increased by $2,000. 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, 1997, 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, 1997 increased
$4,000, or 25%, from $16,000 for the same period in 1996 to $20,000 in 1997.
This increase was primarily due to increases in service charges and fees on
deposit accounts.
Non-interest expense for the three month period ended June 30, 1997 increased
$57,000, or 20.3%, from $281,000 for the same period in 1996 to $338,000 in
1997. This increase was primarily due to increases in other non-interest expense
of $62,000 and in salaries and employee benefits of $6,000. The increase in
other non-interest expense was primarily attributable to approximately $69,000
in professional fees paid in connection with the proposed merger (See Part II,
Item 5). These increases were partially offset by a $14,000, or 73.7% decrease
in federal deposit insurance premiums.
Income tax expense for the three month period ended June 30, 1997 decreased
$18,000, or 30.5%, from $59,000 for the same period in 1996 to $41,000 in 1997.
This decrease is primarily the result of an decrease in taxable income.
11
<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, 1997
Net Income for the six month period ended June 30, 1997 decreased $23,000, or
12.8% from $180,000 for the same period in 1996 to $157,000 in 1997. This
decrease was primarily due to a $52,000 increase in non-interest expense which
was partially offset by an increase in non-interest income of $6,000 and a
$19,000 decrease in the provision for income taxes.
Interest Income for the six month period ended June 30, 1997 increased $43,000,
or 2.8%, to $1.57 million from $1.53 million for the same period in 1996. This
was primarily due to changes in the composition of interest earning assets which
produced higher yields. Interest income on loans increased $107,000 and interest
income on collateralized mortgage obligations and other mortgage-backed
securities decreased $46,000. Interest income from investment securities and
interest-bearing deposit accounts decreased $12,000 and $7,000, respectively.
Interest Expense for the six month period ended June 30, 1997 increased $55,000,
or 8.3%, to $720,000 from $665,000 for the same period in 1996. The increase was
due to an increase in the general level of interest rates paid on deposit
accounts and increased interest expense on short-term borrowings.
Net Interest Income for the six month period ended June 30, 1997 decreased
$12,000, or 1.4%, to $852,000 from $864,000 for the same period in 1996. This
was due to a $55,000 increase in interest expense partially offset by a $43,000
increase in interest income.
Provision for Loan Losses was increased by $4,000 for the six month period ended
June 30, 1997 compared to an increase of $20,000 for the same period in 1996.
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, 1997 and March 31, 1997
indicated that the allowance should be increased by $2,000 at the end of each of
the two quarters. 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, 1997,
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.
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, 1997 (Continued)
Non-Interest Income for the six month period ended June 30, 1997 increased
$6,000, or 19.4%, to $37,000 from $31,000 for the same period in 1996. This
increase was the result of increases in service charges and fees on deposit
accounts.
Non-Interest Expense for the six month period ended June 30, 1997 increased
$52,000, or 9.0%, from $581,000 for the same period in 1996 to $633,000 in 1997.
This increase was primarily due to a $72,000 increase in other non-interest
expense and a $7,000 increase in salaries and employee benefits. The increase in
other non-interest expense was primarily attributable to approximately $72,000
in professional fees paid in connection with the proposed merger (See Part II,
Item 5). These increases were partially offset by a $28,000 decrease in federal
deposit insurance premiums.
Income tax expense for the six month period ended June 30, 1997 decreased
$19,000, or 16.7%, from $114,000 for the same period in 1996 to $95,000 in 1997.
This decrease is primarily the result of an decrease in taxable income. No
provision for deferred taxes has been recorded for the six month period ended
June 30, 1997 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 16.9% during June, 1997. 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.
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.
13
<PAGE>
BECKLEY BANCORP, INC.
PART I - FINANCIAL INFORMATION, Item 2. - (Continued)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
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,
1997 the Savings Bank had outstanding loan commitments of $31,000. In addition,
it had certificates of deposit scheduled to mature within one year of $16.0
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, 1997, as compared to the minimum regulatory requirements:
Amount Percent of
(in thousands) Adjusted Assets
-------------- ---------------
Tangible Capital:1
Actual $7,715 17.46%
Required 663 1.50%
------ ------
Excess $7,052 15.96%
------ ------
Core Capital:1
Actual $7,715 17.46%
Required 1,325 3.00%
------ ------
Excess $6,390 14.46%
------ ------
Risk-Based Capital:2
Actual $7,954 41.84%
Required 1,521 8.00%
------ ------
Excess $6,433 33.84%
------ ------
1 Based on tangible and core assets of $44,176
2 Based on risk-weighted assets of $19,008
PART II - OTHER INFORMATION
Item 4. - Submission of Matters to a Vote of Security Holders
(a) The Corporation held its 1997 Annual Meeting of Stockholders at the
Raleigh County Armory-Civic Center located at 200 Armory Drive, Beckley,
West Virginia on May 20, 1997 at 10:00 a.m. A total of 480,172 shares, or
79.83% of the total shares outstanding, were present in person or by proxy
at the meeting.
(b) T. Arnold Graybeal and Duane K. Sellards were re-elected as directors of
the Corporation at the 1997 Annual Meeting. Robert N. File, James H.
Perry, Jr., Ned H. Ragland, Jr. and Tracy L. Riffe will continue to serve
as directors of the Corporation.
(c) The following proposals were presented to the stockholders and voted upon
at the 1997 Annual Meeting. Each proposal was fully described in a Proxy
Statement provided to the stockholders and filed with the Securities and
Exchange Commission on April 10, 1997.
15
<PAGE>
(c) (continued)
1.) The election of T. Arnold Graybeal and Duane K. Sellards as directors of
the Corporation.
T. Arnold Graybeal Duane K. Sellards
------------------ -----------------
Votes For: 470,172 470,172
Votes Withheld: 10,000 10,000
2.) The ratification of the appointment of Mason & Bashaw, CPAs, A.C. as
independent auditors of the Corporation for the fiscal year ended December
31, 1997.
% of Votes
# of Votes Cast
---------- ----------
Votes For: 470,172 97.92%
Votes Against: 10,000 2.08%
Abstained: 0 0.00%
Broker Non-votes: 0 0.00%
No other items of business were voted upon at the meeting.
(d) None.
Item 5. - Other Information
Proposed Merger - On May 30, 1997, the registrant entered into an
Agreement and Plan of Merger with HB Acquisition Company, a wholly owned
subsidiary of Horizon Bancorp, Inc. The Agreement provides that each outstanding
share of common stock of the registrant shall be acquired for a cash payment of
$25.64 per share. Unless delayed by the registrant, if the transaction does not
close before October 1, 1997, the price per share will increase by $0.02 per
month. The transaction is subject to approval by the appropriate regulatory
authorities and the stockholders of the registrant with an expected closing
during the late third or early fourth quarter of 1997.
16
<PAGE>
Item 6. - Exhibits and Reports on Form 8-K
(a) None
(b) On May 22, 1997, a Form 8-K (Items 5 and 7) was filed disclosing the
execution of a non-binding letter of intent for the acquisition of the
registrant by Horizon Bancorp, Inc. On June 5, 1997, a second Form 8-K
(Items 5 and 7) was filed disclosing the execution of an Agreement and
Plan of Merger dated May 30, 1997 between HB Acquisition Company, a
subsidiary of Horizon Bancorp, Inc., and the registrant.
17
<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: July 22, 1997 By: /s/ Duane K. Sellards
----------------- -------------------------------
DUANE K. SELLARDS
President and Chief
Executive Officer
Date: July 22, 1997 By: /s/ Brian K. Pate
----------------- -------------------------------
BRIAN K. PATE
Vice President and Chief
Financial Officer
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