1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
XX Quarterly report under Section 13 or 15(d) of the Securities Exchange
- ----
Act of 1934
For quarterly period ended September 30, 1996
Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
Commission file number 0-24958
Potomac Bancshares, Inc.
(Exact Name of Small Business Issuer as Specified in Its Charter)
West Virginia 55-0732247
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
111 East Washington Street, Charles Town WV 25414-1071
(Address of Principal Executive Offices) (Zip Code)
304-725-8431
(Issuer's Telephone Number, Including Area Code)
NO CHANGE
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes XXX No
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes No Not applicable
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 600,000 shares
Transitional Small Business Disclosure Format (check one):
Yes No XXX
<PAGE>
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
POTOMAC BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(000 OMITTED)
<TABLE>
<CAPTION>
(Unaudited)
September 30 December 31
1996 1995
<S> <C>
Assets:
Cash and due from banks $ 4,287 $ 3,396
Securities (fair value: September 30, 1996,
$38,224; December 31, 1995, $26,307)
(Note 2) 38,252 26,354
Securities purchased under agreements to resell 8,200 18,700
Loans (Note 3) 73,504 73,651
Less allowance for loan losses (988) (899)
Net loans 72,516 72,752
Bank premises and equipment, net 1,253 1,444
Accrued interest receivable 896 777
Other assets 520 620
--------- ---------
Total Assets $ 125,924 $ 124,043
========= =========
Liabilities and Stockholders' Equity:
Liabilities:
Non-interest bearing deposits $ 13,861 $ 13,847
Interest bearing deposits 97,072 95,942
--------- ---------
Total Deposits 110,933 109,789
Accrued interest payable 330 346
Other liabilities 581 485
--------- ---------
Total Liabilities $ 111,844 $ 110,620
--------- ---------
Stockholders' Equity:
Common stock par value $1.00 per share
(5,000,000 shares authorized, 600,000 shares
issued and outstanding) $ 600 $ 600
Surplus 5,400 5,400
Net unrealized gain (loss) on securities
available for sale (85) --
Undivided profits 8,165 7,423
--------- ---------
Total Stockholders' Equity 14,080 13,423
--------- ---------
Total Liabilities and Stockholders' Equity $ 125,924 $ 124,043
========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
3
POTOMAC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(000 omitted except for per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30 Ended September 30
1996 1995 1996 1995
<S> <C>
Interest Income:
Interest and fees on loans $ 1,684 $ 1,677 $ 5,038 $ 4,884
Interest on investment securities
Taxable 302 388 862 1,274
Interest and dividends on securities
available for sale
Taxable 187 41 474 157
Dividends 6 6 18 18
Interest on securities purchased
under agreements to resell 91 97 353 145
-------- -------- -------- --------
Total Interest Income $ 2,270 $ 2,209 $ 6,745 $ 6,478
Interest Expense:
Interest on deposits $ 908 $ 948 $ 2,733 $ 2,630
Interest on federal funds purchased -- -- -- 4
-------- -------- -------- --------
Total Interest Expense $ 908 $ 948 $ 2,733 $ 2,634
-------- -------- -------- --------
Net Interest Income $ 1,362 $ 1,261 $ 4,012 $ 3,844
Provision for Loan Losses -- -- 125 125
-------- -------- -------- --------
Net Interest Income after
Provision for Loan Losses $ 1,362 $ 1,261 $ 3,887 $ 3,719
-------- -------- -------- --------
Other Income:
Commissions and fees from fiduciary
activities $ 110 $ 101 $ 336 $ 325
Service charges on deposit accounts 73 61 203 179
Fees for other customer services 48 51 142 145
Other operating income 30 7 44 20
-------- -------- -------- --------
Total Other Income $ 261 $ 220 $ 725 $ 669
-------- -------- -------- --------
Other Expenses:
Salaries and employee benefits $ 609 $ 580 $ 1,811 $ 1,770
Net occupancy expense of premises 47 60 156 162
Furniture and equipment expenses 75 66 224 210
Deposit insurance -- (8) 2 118
Other operating expenses 271 280 925 813
-------- -------- -------- --------
Total Other Expenses $ 1,002 $ 978 $ 3,118 $ 3,073
-------- -------- -------- --------
Income before Income Tax Expense $ 621 $ 503 $ 1,494 $ 1,315
Income Tax Expense 224 184 542 482
-------- -------- -------- --------
Net Income $ 397 $ 319 $ 952 $ 833
======== ======== ======== ========
Earnings Per Share, Net Income $ .66 $ .53 $ 1.59 $ 1.39
======== ======== ======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
4
POTOMAC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(000 Omitted)
(Unaudited)
<TABLE>
<CAPTION>
Common Capital Mkt Value Undivided
Stock Surplus AFS Secur Profits Total
<S> <C>
Balances:
January 1, 1996 $ 600 $ 5,400 $ -- $ 7,423 $ 13,423
Net income -- -- -- 952 952
Cash dividends
($.35 per share) -- -- -- (210) (210)
Change in net
unrealized gain
(loss) on
securities
available for sale -- -- (85) -- (85)
-------- --------- ----------- --------- --------
Balances:
September 30, 1996 $ 600 $ 5,400 $ (85) $ 8,165 $ 14,080
======== ========= =========== ========= ========
Balances:
January 1, 1995 $ 600 $ 5,400 $ (31) $ 6,747 $ 12,716
Net income -- -- -- 833 833
Cash dividends
($.35 per share) -- -- -- (210) (210)
Change in net
unrealized gain
(loss) on
securities
available for sale -- -- 32 -- 32
-------- --------- ----------- --------- --------
Balances:
September 30, 1995 $ 600 $ 5,400 $ 1 $ 7,370 $ 13,371
======== ========= =========== ========= ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
5
POTOMAC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000 Omitted)
(Unaudited)
For the Nine Months Ended
September 30 September 30
1996 1995
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 952 $ 833
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 125 125
Depreciation 134 129
Amortization 9 9
Discount accretion and premium
amortization on securities, net 21 2
(Gain) loss on sale of real estate 84 --
(Increase) decrease in accrued interest
receivable (118) 74
(Increase) decrease in other assets 26 (83)
Increase (decrease) in accrued interest
payable (16) 37
Increase in other liabilities 96 99
-------- --------
Net cash provided by operating
activities $ 1,313 $ 1,225
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of investment securities $ 10,000 $ 9,000
Proceeds from maturity of securities
available for sale -- 3,020
Purchase of investment securities (7,976) --
Purchase of securities available for sale (14,072) --
Net (increase) decrease in loans 110 (3,421)
Purchases of bank premises and equipment (267) (38)
Proceeds from sale of real estate 350 --
-------- --------
Net cash provided by (used in)
investing activities $(11,855) $ 8,561
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand deposits,
NOW accounts and savings accounts $ 1,074 $ (4,756)
Net increase in certificates of deposit 69 5,392
Cash dividends (210) (210)
-------- --------
Net cash provided by financing
activities $ 933 $ 426
-------- --------
Increase (decrease) in cash and
cash equivalents $ (9,609) $ 10,212
CASH AND CASH EQUIVALENTS
Beginning 22,096 6,125
-------- --------
Ending $ 12,487 $ 16,337
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest paid to depositors $ 2,748 $ 2,593
======== ========
Income taxes $ 572 $ 406
======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Other real estate acquired in settlement of
loans $ -- $ 108
======== ========
Unrealized gain (loss) on securities
available for sale $ (129) $ 48
======== ========
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
6
POTOMAC BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996 (UNAUDITED) AND DECEMBER 31, 1995
1. In the opinion of management, the accompanying financial statements
contain all adjustments (consisting of only normal recurring accruals)
necessary to present fairly the financial position as of September 30,
1996, and December 31, 1995, the results of operations for the three
months ended September 30, 1996 and 1995, and results of operations and
cash flows for the nine months ended September 30, 1996 and 1995. The
statements should be read in conjunction with Notes to Consolidated
Financial Statements included in the Potomac Bancshares, Inc. annual
report for the year ended December 31, 1995. The results of operations
for the nine month periods ended September 30, 1996 and 1995, are not
necessarily indicative of the results to be expected for the full year.
2. Securities held to maturity as of September 30, 1996 and December 31,
1995 are summarized below:
(000 Omitted)
September 30, 1996
--------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
--------- ---------- ---------- ---------
Securities held to maturity:
U.S. Treasury securities $ 12,978 $ 8 $ (19) $ 12,967
Obligations of U.S.
Government agencies 10,994 1 (18) 10,977
--------- --------- --------- ---------
$ 23,972 $ 9 $ (37) $ 23,944
========= ========= ========= =========
(000 Omitted)
December 31, 1995
--------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
--------- ---------- ---------- ---------
Securities held to maturity:
U.S. Treasury securities $ 15,986 $ 64 $ (42) $ 16,008
Obligations of U.S.
Government agencies 10,000 -- (69) 9,931
--------- -------- -------- --------
$ 25,986 $ 64 $ (111) $ 25,939
========= ======== ======== ========
<PAGE>
7
Securities available for sale as of September 30, 1996 and December 31,
1995 are summarized below:
(000 Omitted)
September 30, 1996
--------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
--------- ---------- ---------- ---------
Securities available for sale:
U.S. Treasury securities $ 14,021 $ -- $ (128) $ 13,893
Federal Home Loan
Bank stock 387 -- -- 387
--------- -------- -------- --------
$ 14,408 $ -- $ (128) $ 14,280
========= ======== ======== ========
(000 Omitted)
December 31, 1995
--------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
--------- ---------- ---------- ---------
Securities available for sale:
Federal Home Loan
Bank stock $ 368 $ -- $ -- $ 368
========= ======== ======== ========
3. The consolidated loan portfolio, stated at face amount, is composed of
the following:
(000 Omitted)
September 30, 1996 December 31, 1995
------------------ -----------------
Real estate loans:
Construction and land development $ 856 $ 1,053
Secured by farmland 1,456 1,208
Secured by 1-4 family residential 37,543 36,586
Other real estate loans 12,256 12,295
Loans to farmers (except those secured
by real estate 479 650
Commercial and industrial loans
(except those secured by real
estate) 1,593 2,383
Loans to individuals for personal
expenditures 19,131 18,998
All other loans 190 478
-------- --------
Total loans $ 73,504 $ 73,651
======== ========
4. The following is a summary of transactions in the reserve for loan
losses:
(000 Omitted)
September 30 December 31
1996 1995
------------ -----------
Balance at beginning of period $ 899 $ 988
Provision charged to operating expense 125 125
Recoveries added to the reserve 32 50
Loan losses charged to the reserve (68) (264)
-------- ----------
Balance at end of period $ 988 $ 899
======== ========
<PAGE>
8
Information about impaired loans as of September 30, 1996 is as
follows:
(000 Omitted)
Impaired loans for which a reserve has been provided $ 410
Impaired loans for which no reserve has been provided --
-----
Total impaired loans $ 410
=====
Reserve provided for impaired loans, included in the
reserve for loan losses $ 205
Average balance in impaired loans $ 514
Interest income recognized $ 27
Nonaccrual loans excluded from impaired loan disclosure under FASB 114
amounted to $285,150 at September 30, 1996. If interest on these loans
had been accrued, such income would have approximated $21,117.
5. The Corporation sponsors a postretirement life insurance plan covering
retirees with 25 years of service over the age of 60 and health care
plan for all retirees and seven current employees that have met certain
eligibility requirements. The plan is contributory for future
retirees, with retiree contributions that are currently set at 20% of
the required premium. Effective January 1, 1995, the Corporation
adopted Financial Accounting Standards Board Statement No. 106 to
account for its share of the costs of those benefits. Under that
Statement, the Corporation's share of the estimated costs that will be
paid after retirement is generally being accrued by charges to expense
over the employees' active service periods to the dates they are fully
eligible for benefits, except that the Corporation's unfunded cost that
existed at January 1, 1995 is being accrued primarily in a
straight-line manner that will result in its full accrual by December
31, 2014. Prior to 1995, the Corporation expensed its share of costs
as they were paid.
Net periodic postretirement benefit cost included the following
components as of September 30, 1996.
(000 Omitted)
Medical Life
Service cost benefits attributable to
service during the period $ 2 $ 2
Interest on accumulated postretirement
benefit obligation 16 9
Amortization of transition obligation 9 5
-------- ---------
$ 27 $ 16
======== =========
Postretirement benefit cost recognized as of September 30, 1996 is
$43,042 ($26,587 for medical and $16,455 for life).
<PAGE>
9
The following table sets forth the plan's funded status reconciled with
the obligation recognized in the accompanying balance sheet at
September 30, 1996:
(000 Omitted)
Medical Life
Accumulated postretirement benefit
obligation
Plan assets:
Accumulated postretirement benefit
obligation in excess of plan assets $ 303 $ 182
Unrecognized transition obligation (209) (109)
Unrecognized net (gain) loss (36) (37)
Premium payments for current retirees (28) (11)
--------- ---------
Obligation included on balance sheet $ 30 $ 25
========= =========
For measurement purposes, a 10 percent annual rate of increase in per
capita health care costs of covered benefits was assumed for 1996, with
such annual rate of increase gradually declining to 5 percent in 2004.
If assumed health care cost trend rates were increased by 1 percentage
point in each year, the accumulated postretirement benefit obligation
at September 30, 1996 would be increased by $26,298 and the aggregate
of the service and interest cost components of net periodic
postretirement benefit cost for the period ended September 30, 1996
would be increased by $2,446.
The weighted average discount rate used in estimating the accumulated
postretirement benefit obligation was 8%.
6. On January 1, 1995, the Corporation adopted Financial Accounting
Standards Statement No. 114, "Accounting by Creditors for Impairment of
a Loan." This Statement has been amended by FASB Statement No. 118,
"Accounting by Creditors for Impairment of a Loan - Income Recognition
and Disclosures." Statement 114, as amended, requires that the
impairment of loans that have been separately identified for evaluation
is to be measured based on the present value of expected future cash
flows or, alternatively, the observable market price of the loans or
the fair value of the collateral. However, for those loans that are
collateral dependent (that is, if repayment of those loans is expected
to be provided solely by the underlying collateral) and for which
management has determined foreclosure is probable, the measure of
impairment of those loans is to be based on the fair value of the
collateral. Statement 114, as amended, also requires certain
disclosures about investments in impaired loans and the allowance for
credit losses and interest income recognized on loans.
7. In October, 1994, Statement of Financial Accounting Standards No. 119,
"Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments" was issued. The Statement is effective for
financial statements issued for fiscal years ending after December 15,
1994. It requires various disclosures for derivative financial
instruments which are futures, forward, swap, or option contract, or
other financial instruments with similar characteristics. The
Corporation does not have any derivative financial instruments as
defined under this Statement.
<PAGE>
10
8. Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of," establishes standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those
assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. This Statement requires
that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The Statement is effective for fiscal years
beginning after December 15, 1995. The Statement does not have a
material impact on the Corporation.
9. Statement of Financial Accounting Standards No. 122, "Accounting for
Mortgage Servicing Rights," amends FASB Statement No. 65, "Accounting
for Certain Mortgage Banking Activities," to require that a mortgage
banking enterprise recognize as separate assets rights to service
mortgage loans for others, however those servicing rights are acquired.
A mortgage banking enterprise that acquires mortgage servicing rights
through either the purchase or origination of mortgage loans and sells
or securitizes those loans with servicing rights retained should
allocate the total cost of the mortgage loans to the mortgage servicing
rights and the loans (without the mortgage servicing rights) based on
their relative fair values if it is practicable to estimate those fair
values. If it is not practicable to estimate the fair values of the
mortgage servicing rights and the mortgage loans (without the mortgage
servicing rights), the entire cost of purchasing or originating the
loans should be allocated to the mortgage loans (without the mortgage
servicing rights) and no cost should be allocated to the mortgage
servicing rights. The Statement is effective for transactions in
fiscal years beginning after December 15, 1995. The Statement does not
have a material impact on the Corporation.
10. Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," establishes financial accounting and
reporting standards for stock-based employee compensation plans. Those
plans include all arrangements by which employees receive shares of
stock or other equity instruments of the employer or the employer
incurs liabilities to employees in amounts based on the price of the
employer's stock. Examples are stock purchase plans, stock options,
restricted stock, and stock appreciation rights. This Statement also
applies to transactions in which an entity issues its equity
instruments to acquire goods or services from nonemployees. Those
transactions must be accounted for based on the fair value of the
consideration received or the fair value of the equity instruments
issued, whichever is more reliably measurable.
The Statement is effective for fiscal years beginning after December
15, 1995. The disclosures must include the pro forma effects of other
awards granted in fiscal years beginning after December 31, 1994. The
Corporation does not have any stock-based employee compensation plans.
<PAGE>
11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Between December 31, 1995 and September 30, 1996, total assets
have increased slightly. The September 30 annualized return on average assets is
1.02% compared to .97% at December 31. At September 30 the annualized return on
average equity is 9.23% compared to 9.08% at December 31. The leverage capital
(equity to assets) ratio is 11.18% at September 30 compared to 10.73% at
December 31. Since dividends are paid on a semi-annual basis, this ratio may
seem higher at the end of the first and third quarters of the year.
The real estate home equity loans have continued to grow in
1996 adding $860,000 to the loan portfolio since December 31. The total balance
of the various adjustable rate mortgage products has increased to $16,171,601 at
September 30 compared with $5,627,604 at December 31.
The table shown below is an analysis of the Corporation's
reserve for loan losses. Net charge-offs for the Corporation have been very low
when compared with the size of the total loan portfolio. Management monitors the
loan portfolio on a quarterly basis with procedures that allow for problem loans
and potentially problem loans to be highlighted and watched. Based on
experience, the loan policies and the current monitoring program, management
believes the loan loss reserve is adequate.
(000 Omitted)
September 30, 1996
Balance at beginning of period $ 899
Charge-offs:
Commercial, financial and agricultural --
Real estate - construction --
Real estate - mortgage --
Consumer 68
------
Total charge-offs 68
------
Recoveries:
Commercial, financial and agricultural --
Real estate - construction --
Real estate - mortgage 6
Consumer 26
------
Total recoveries 32
------
Net charge-offs 36
Additions charged to operations 125
------
Balance at end of period $ 988
======
Ratio of net charge-offs during
the period to average loans
outstanding during the period .0489%
======
<PAGE>
12
Loans are placed on nonaccrual status when a loan is
specifically determined to be impaired or when principal or interest is
delinquent for 90 days or more. Interest income generally is not recognized on
specific impaired loans unless the likelihood of further loss is remote.
Interest income on other nonaccrual loans is recognized only to the extent of
interest payments received. Following is a table showing the risk elements in
the loan portfolio.
(000 Omitted)
September 30, 1996
Nonaccrual loans $ 285
Restructured loans --
Foreclosed properties --
----
Total nonperforming assets $ 285
=====
Loans past due 90 days accruing interest $ 52
=====
Reserve for loan losses to period end loans 1.34%
Nonperforming assets to period end loans and
foreclosed properties .39%
Nonaccrual loans excluded from impaired loan disclosure under
FASB 114 amounted to $285,150 at September 30, 1996. If interest on these loans
had been accrued, such income would have approximated $21,117.
At September 30, 1996, other potential problem loans totalled
$49,446. Loans are viewed as potential problem loans according to the ability of
such borrowers to comply with current repayment terms. These loans are subject
to constant management attention, and their status is reviewed on a regular
basis. Management has allocated a portion of the reserve for these loans
according to the review of the potential loss in each loan situation.
At September 30 deposits are up about $1,000,000 compared with
December 31, 1995. Now, money market, and savings accounts are showing
increases.
The comparison of the income statements for the three months
ended September 30, 1996 and 1995 shows an increase in net income of 24% in
1996. Interest income increased about 3% and interest expense decreased about 4%
in 1996. Total other expenses have increased by 3% in 1996 over 1995 for the
three month period.
When comparing the income statements for the nine months ended
September 30, 1996 and 1995, net income has increased over 12% in 1996 over
1995. Interest income and interest expense have increased about 4% in 1996 over
1995.
Interest income has increased by 3% in interest and fees on
loans and by 7% in income from securities. These increases are due to a
combination of higher rates and increased balances. The increase in interest
expense is also due to a combination of higher rates and increased balances.
Noninterest income has increased over 8% as of September 30,
1996 compared with September 30, 1995. This increase is a combination of an
increase in service charges on deposit accounts as discussed in June, an
increase in fiduciary fees, and a gain on sale of other real estate included in
other operating income.
Noninterest expense has increased by 1% as of September 30,
1996 compared with September 30, 1995. This minimal change is due to the
decrease in deposit insurance and an offsetting increase in various other
operating expenses.
<PAGE>
13
Liquid assets of the Corporation include cash and due from
banks, securities purchased under agreements to resell, securities available for
sale, and loans and investments maturing within one year. The Corporation's
statement of cash flows details this liquidity. Net income after certain
adjustments for noncash transactions provided cash from operating activities.
Maturity of investment securities provided cash from investing activities. This
cash plus cash & cash equivalents on hand were used to replace these matured
securities and to purchase additional securities thus increasing the portfolio.
Financing activities provided cash through the increase of deposits. The
September 30 balance of cash and cash equivalents was reduced due to these
activities. Liquidity of the Corporation is still more than adequate to meet
present and future financial obligations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
There are no material legal proceedings to which the Registrant or its
subsidiary, directors or officers is a party or by which they, or any of them,
are threatened. All legal proceedings presently pending or threatened against
Potomac Bancshares, Inc. and its subsidiary involve routine litigation
incidental to the business of the Company or the subsidiary and are either not
material in respect to the amount in controversy or fully covered by insurance.
<PAGE>
14
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
2. Plan of acquisition, reorganization, arrangement, liquidation
or succession. Not applicable
4. Instruments defining the rights of security holders, including
indentures. Not applicable
10. Material contracts.
Not applicable
11. Statement re: computation of per share earnings.
Not applicable
15. Letter on unaudited interim financial information.
Not applicable
18. Letter on change in accounting principles.
Not applicable
19. Reports furnished to security holders.
Not applicable
22. Published report regarding matters submitted to vote of
security holders. Not applicable
23. Consent of experts and counsel.
Not applicable
24. Power of attorney.
Not applicable
27. Financial Data Schedule.
99. Additional exhibits.
Not applicable
(b) Reports on Form 8-K:
NONE
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
POTOMAC BANCSHARES, INC.
Date ________________________ ____________________________________
Charles W. LeMaster, President & CEO
Date ________________________ ____________________________________
L. Gayle Marshall Johnson, Vice
President & Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 4,279
<INT-BEARING-DEPOSITS> 8
<FED-FUNDS-SOLD> 8,200
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 14,280
<INVESTMENTS-CARRYING> 23,972
<INVESTMENTS-MARKET> 23,944
<LOANS> 73,504
<ALLOWANCE> 988
<TOTAL-ASSETS> 125,924
<DEPOSITS> 110,933
<SHORT-TERM> 0
<LIABILITIES-OTHER> 911
<LONG-TERM> 0
0
0
<COMMON> 600
<OTHER-SE> 13,480
<TOTAL-LIABILITIES-AND-EQUITY> 125,924
<INTEREST-LOAN> 5,038
<INTEREST-INVEST> 1,354
<INTEREST-OTHER> 353
<INTEREST-TOTAL> 6,745
<INTEREST-DEPOSIT> 2,733
<INTEREST-EXPENSE> 2,733
<INTEREST-INCOME-NET> 4,012
<LOAN-LOSSES> 125
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,118
<INCOME-PRETAX> 1,494
<INCOME-PRE-EXTRAORDINARY> 952
<EXTRAORDINARY> 0
<CHANGES> 0
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<YIELD-ACTUAL> 7.55
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<LOANS-PAST> 52
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<ALLOWANCE-OPEN> 899
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<RECOVERIES> 32
<ALLOWANCE-CLOSE> 988
<ALLOWANCE-DOMESTIC> 988
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
