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Previous: SUMMIT DESIGN INC, NT 10-Q, 1997-05-15 |
Next: SPECIALTY TELECONSTRUCTORS INC, NT 10-Q, 1997-05-15 |
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 March 31, 1997
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)
March 31 December 31
1997 1996
------------- ------------
<S> <C>
Assets:
Cash and due from banks $ 3 827 $ 3 401
Securities (fair value: March 31, 1997,
$42,092; December 31, 1996, $40,331)
(Note 2) 42 348 40 333
Securities purchased under agreements to resell 2 600 4 800
Loans (Note 3) 74 674 73 525
Less reserve for loan losses (1 105) (1 139)
--------- ---------
Net loans 73 569 72 386
Bank premises and equipment, net 1 211 1 255
Accrued interest receivable 1 035 1 021
Other assets 604 584
--------- ---------
Total Assets $ 125 194 $ 123 780
========= =========
Liabilities and Stockholders' Equity:
Liabilities:
Non-interest bearing deposits $ 13 855 $ 14 037
Interest bearing deposits 95 421 94 476
--------- ---------
Total Deposits 109 276 108 513
Accrued interest payable 328 326
Other liabilities 931 722
--------- ---------
Total Liabilities $ 110 535 $ 109 561
--------- ---------
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 losses on securities
available for sale (68) (41)
Undivided profits 8 727 8 260
--------- ---------
Total Stockholders' Equity 14 659 14 219
--------- ---------
Total Liabilities and Stockholders' Equity $ 125 194 $ 123 780
========= =========
</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
Ended March 31
----------------------
1997 1996
--------- --------
<S> <C>
Interest Income:
Interest and fees on loans $ 1 715 $ 1 685
Interest on investment securities
Taxable 396 284
Interest and dividends on securities
available for sale:
Taxable 184 114
Dividends 6 6
Interest on securities purchased
under agreements to resell 43 146
-------- --------
Total Interest Income $ 2 344 $ 2 235
Interest Expense:
Interest on deposits $ 881 $ 918
Interest on federal funds purchased -- --
-------- --------
Total Interest Expense $ 881 $ 918
-------- --------
Net Interest Income $ 1 463 $ 1 317
Provision for loan losses -- 75
-------- --------
Net Interest Income after
Provision for Loan Losses $ 1 463 $ 1 242
-------- --------
Other Income:
Commissions and fees from fiduciary
activities $ 122 $ 117
Service charges on deposit accounts 101 62
Fees for other customer services 41 48
Other operating income 16 7
-------- --------
Total Other Income $ 280 $ 234
-------- --------
Other Expenses:
Salaries and employee benefits $ 597 $ 607
Net occupancy expense of premises 47 58
Furniture and equipment expenses 86 64
Deposit insurance 3 1
Other operating expenses 270 269
-------- --------
Total Other Expense $ 1 003 $ 999
-------- --------
Income before Income Tax Expense $ 740 $ 477
Income Tax Expense 273 175
-------- --------
Net Income $ 467 $ 302
======== ========
Earnings Per Share, Net Income $ .78 $ .50
======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
4
POTOMAC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED March 31, 1997 AND 1996
(000 Omitted)
(Unaudited)
<TABLE>
<CAPTION>
Common Capital Mkt Value Undivided
Stock Surplus AFS Secur Profits Total
------- -------- --------- --------- -------
<S> <C>
Balances:
January 1, 1997 $ 600 $ 5 400 $ (41) $ 8 260 $14 219
Net income -- -- -- 467 467
Change in net
unrealized (losses)
on securities
available for sale -- -- (27) -- (27)
-------- --------- ----------- --------- -------
Balances:
March 31, 1997 $ 600 $ 5 400 $ (68) $ 8 727 $14 659
======== ========= =========== ========= =======
Balances:
January 1, 1996 $ 600 $ 5 400 $ -- $ 7 422 $13 422
Net income -- -- -- 302 302
Net unrealized gains
on securities
available for sale -- -- (82) -- (82)
-------- --------- ----------- --------- -------
Balances:
March 31, 1996 $ 600 $ 5 400 $ (82) $ 7 724 $13 642
======== ========= =========== ========= =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
5
POTOMAC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000 Omitted)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
------------------------------------
March 31 March 31
1997 1996
------------ -------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 467 $ 302
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses -- 75
Depreciation 48 33
Amortization 3 3
Discount accretion and premium
amortization on securities, net 8 9
(Increase) in accrued interest
receivable (14) (125)
(Increase) in other assets (7) (107)
Increase (decrease) in accrued interest
payable 2 (17)
Increase in other liabilities 208 214
-------- --------
Net cash provided by operating
activities $ 715 $ 387
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of investment securities $ 4 000 $ 4 000
Proceeds from maturity of securities
available for sale -- --
Purchase of investment securities (6 049) (1 981)
Purchase of securities available for sale (15) (11 100)
Net (increase) in loans (1 183) (457)
Purchases of bank premises and equipment (6) (60)
-------- --------
Net cash (used in)
investing activities $ (3 253) $ (9 598)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) in demand deposits, NOW
accounts and savings accounts $ (500) $ (1 430)
Net increase in certificates of deposit 1 264 801
-------- --------
Net cash provided by (used in)
financing activities $ 764 $ (629)
-------- --------
(Decrease) in cash and cash
equivalents $ (1 774) $ (9 840)
CASH AND CASH EQUIVALENTS
Beginning 8 201 22 096
-------- --------
Ending $ 6 427 $ 12 256
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest paid to depositors $ 879 $ 935
======== ========
Income taxes $ -- $ --
======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Unrealized gain (loss) on securities
available for sale $ (41) $ (125)
======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
6
POTOMAC BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997 (UNAUDITED) AND December 31, 1996
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 March 31,
1997, and December 31, 1996, and results of operations and cash flows
for the three months ended March 31, 1997 and 1996. 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, 1996. The results of operations for the
three month periods ended March 31, 1997 and 1996, are not necessarily
indicative of the results to be expected for the full year.
2. Securities held to maturity as of March 31, 1997 and December 31, 1996
are summarized below:
<TABLE>
<CAPTION>
(000 Omitted)
March 31, 1997
-----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
---------- ---------- ----------- ---------
<S> <C>
Securities held to maturity:
U.S. Treasury securities $ 16 055 $ 4 $ (163) $ 15 896
Obligations of U.S.
Government agencies 11 993 -- (97) 11 896
--------- -------- -------- --------
$ 28 048 $ 4 $ (260) $ 27 792
========= ======== ======== ========
<CAPTION>
(000 Omitted)
December 31, 1996
-----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
---------- ---------- ----------- ---------
<S> <C>
Securities held to maturity:
U.S. Treasury securities $ 14 005 $ 25 $ (42) $ 13 988
Obligations of U.S.
Government agencies 11 992 21 (6) 12 007
--------- -------- -------- --------
$ 25 997 $ 46 $ (48) $ 25 995
========= ======== ======== ========
</TABLE>
<PAGE>
7
Securities available for sale as of March 31, 1997 and December 31,
1996 are summarized below:
<TABLE>
<CAPTION>
(000 Omitted)
March 31, 1997
-----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
---------- ---------- ----------- ---------
<S> <C>
Securities available for sale:
U.S. Treasury securities $ 14 002 $ -- $ (103) $ 13 899
Federal Home Loan Bank stock 402 -- -- 402
--------- -------- -------- --------
$ 14 404 $ -- $ (103) $ 14 301
========= ======== ======== ========
<CAPTION>
(000 Omitted)
December 31, 1996
-----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
---------- ---------- ----------- ---------
<S> <C>
Securities available for sale:
U.S. Treasury securities $ 14 011 $ 12 $ (74) $ 13 949
Federal Home Loan Bank stock 387 -- -- 387
--------- -------- -------- --------
$ 14 398 $ 12 $ (74) $ 14 336
========= ======== ======== ========
</TABLE>
3. The consolidated loan portfolio, stated at face amount, is composed of
the following:
<TABLE>
<CAPTION>
(000 Omitted)
March 31 December 31
1997 1996
---------- -----------
<S> <C>
Real estate loans:
Construction and land development $ 553 $ 759
Secured by farmland 1 581 1 501
Secured by 1-4 family residential 39 047 38 221
Other real estate loans 12 452 12 125
Loans to farmers (except those secured
by real estate 299 229
Commercial and industrial loans (except those
secured by real estate) 2 104 1 857
Loans to individuals for personal expenditures 18 467 18 655
All other loans 171 178
-------- --------
Total loans $ 74 674 $ 73 525
======== ========
</TABLE>
4. The following is a summary of transactions in the reserve for loan
losses:
<TABLE>
<CAPTION>
(000 Omitted)
March 31 December 31
1997 1996
----------- -----------
<S> <C>
Balance at beginning of period $ 1 139 $ 899
Provision charged to operating expense -- 100
Recoveries added to the reserve 6 238
Loan losses charged to the reserve (40) (98)
-------- --------
Balance at end of period $ 1 105 $ 1 139
======== ========
</TABLE>
<PAGE>
8
Information about impaired loans as of March 31, 1997 and December 31,
1996 is as follows:
<TABLE>
<CAPTION>
(000 Omitted)
----------------------------
March 31 December 31
1997 1996
---------- ----------
<S> <C>
Impaired loans for which a reserve
has been provided $ 403 $ 407
Impaired loans for which no reserve
has been provided -- --
----- ----
Total impaired loans $ 403 $ 407
===== =====
Reserve provided for impaired loans, included
in the reserve for loan losses $ 201 $ 204
Average balance in impaired loans $ 419 $ 472
Interest income recognized $ 9 $ 36
</TABLE>
Nonaccrual loans excluded from impaired loan disclosure under FASB 114
amounted to $285,150 at March 31, 1997 and December 31, 1996. If
interest on these loans had been accrued, such income would have
approximated $7,217 in the first quarter of 1997 and $28,494 in 1996.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Between December 31, 1996 and March 31, 1997, total assets
increased $1,414,000. The March 31 annualized return on average assets is 1.50%
compared to 1.13% at December 31. At March 31 the annualized return on average
equity is 12.94% compared to 10.19% at December 31. The leverage capital (equity
to assets) ratio is 11.71% at March 31 compared to 11.43% 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 majority of the increase in assets was in real estate
loans secured by 1-4 family residential property. The percentage of floating
rate loans in the loan portfolio is continuing to increase. The percentage is
34% at March 31 compared to 29% at December 31.
<PAGE>
9
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)
March 31, 1997
--------------
Balance at beginning of period $1 139
Charge-offs:
Commercial, financial and agricultural --
Real estate - construction --
Real estate - mortgage --
Consumer 40
------
Total charge-offs 40
------
Recoveries:
Commercial, financial and agricultural --
Real estate - construction --
Real estate - mortgage --
Consumer 6
------
Total recoveries 6
------
Net charge-offs 34
Additions charged to operations --
------
Balance at end of period $1 105
======
Ratio of net charge-offs during
the period to average loans
outstanding during the period .0458%
======
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)
March 31, 1997
--------------
Nonaccrual loans $ 285
Restructured loans --
Foreclosed properties --
-----
Total nonperforming assets $ 285
=====
Loans past due 90 days accruing interest $ 80
=====
Reserve for loan losses to period end loans 1.48%
Nonperforming assets to period end loans and
foreclosed properties .38%
Nonaccrual loans excluded from impaired loan disclosure under
FASB 114 amounted to $285,150 at March 31, 1997. If interest on these loans had
been accrued, such income would have approximated $7,217 in the first quarter of
1997.
At March 31, 1997, other potential problem loans totalled
$61,504. 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.
<PAGE>
10
Deposits have increased $755,000 as of March 31 compared with
December 31, 1996. The deposit mix at March 31, 1997 has remained much the same
with an increase in certificates of deposit.
The comparison of the income statements for the three months
ended March 31, 1997 and 1996 shows an increase in net income of 55% in 1997.
Interest income has increased about 5% in 1997 compared to 1996, and interest
expense has decreased about 4%.
The increase in interest income is from an increase in
interest and fees on loans due to increased loan balances and increased rates.
The decrease in interest expense is primarily due to decreased interest rates.
Noninterest income has increased 20% as of March 31, 1997
compared with March 31, 1996. The increase shows in almost all categories of
noninterest income, including a 63% increase in service charges on deposit
accounts. This was due to increases in some existing fees and the start of fees
on customer ATM transactions at foreign ATM's.
Noninterest expense has increased less than 1% as of March 31,
1997 compared with March 31, 1996.
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.
Funds from maturity of investment securities and existing cash were used to fund
investing activities. Financing activities provided cash through the increase of
certificates of deposit. Although cash and cash equivalents were reduced during
this period, liquidity of the Corporation is still more than adequate to meet
present and future financial obligations.
<PAGE>
11
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.
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
<PAGE>
12
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 May 14, 1997 /s/ Charles W. LeMaster
____________ ____________________________________
Charles W. LeMaster, President & CEO
Date May 14, 1997 /s/ L. Gayle Marshall Johnson
____________ ____________________________________
L. Gayle Marshall Johnson, Vice
President & Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,827
<INT-BEARING-DEPOSITS> 6
<FED-FUNDS-SOLD> 2,600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 14,301
<INVESTMENTS-CARRYING> 28,048
<INVESTMENTS-MARKET> 27,792
<LOANS> 74,674
<ALLOWANCE> 1,105
<TOTAL-ASSETS> 125,194
<DEPOSITS> 109,276
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,259
<LONG-TERM> 0
0
0
<COMMON> 600
<OTHER-SE> 14,059
<TOTAL-LIABILITIES-AND-EQUITY> 125,194
<INTEREST-LOAN> 1,715
<INTEREST-INVEST> 586
<INTEREST-OTHER> 43
<INTEREST-TOTAL> 2,344
<INTEREST-DEPOSIT> 881
<INTEREST-EXPENSE> 881
<INTEREST-INCOME-NET> 1,463
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,003
<INCOME-PRETAX> 740
<INCOME-PRE-EXTRAORDINARY> 467
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 467
<EPS-PRIMARY> .78
<EPS-DILUTED> .78
<YIELD-ACTUAL> 7.87
<LOANS-NON> 285
<LOANS-PAST> 80
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 62
<ALLOWANCE-OPEN> 1,139
<CHARGE-OFFS> 40
<RECOVERIES> 6
<ALLOWANCE-CLOSE> 1,105
<ALLOWANCE-DOMESTIC> 1,105
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
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