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Previous: IONIC FUEL TECHNOLOGY INC, 8-K/A, 2000-05-11 |
Next: CENTRAL EUROPEAN MEDIA ENTERPRISES LTD, 10-Q, 2000-05-11 |
<PAGE>
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, 2000
--------------
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>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
POTOMAC BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(000 OMITTED)
<TABLE>
<CAPTION>
(Unaudited)
March 31 December 31
2000 1999
---------- -----------
<S> <C> <C>
Assets:
Cash and due from banks $ 5 787 $ 5 523
Securities purchased under agreements to resell
and federal funds sold 10 970 15 531
Securities held to maturity (fair value of $20,755 at
March 31, 2000 and $14,917 at December 31, 1999 20 911 15 007
Securities available for sale, at fair value 27 246 27 281
Loans, net of allowance for loan losses of $1,206 at
March 31, 2000 and $1,218 at December 31, 1999 77 723 77 112
Other real estate owned 125 202
Bank premises and equipment, net 2 592 2 143
Accrued interest receivable 1 130 1 112
Other assets 940 803
-------- --------
Total Assets $147 424 $144 714
======== ========
Liabilities and Stockholders' Equity:
Liabilities:
Non-interest bearing deposits $ 16 793 $ 16 034
Interest bearing deposits 112 015 110 650
-------- --------
Total Deposits 128 808 126 684
Accrued interest payable 292 308
Other liabilities 1 268 1 034
-------- --------
Total Liabilities $130 368 $128 026
-------- --------
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
Accumulated other comprehensive income (loss) (281) (256)
Undivided profits 11 337 10 944
-------- --------
Total Stockholders' Equity 17 056 16 688
-------- --------
Total Liabilities and Stockholders' Equity $147 424 $144 714
======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
POTOMAC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(000 omitted except for per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31
----------------------------
2000 1999
-------- --------
<S> <C> <C>
Interest Income:
Interest and fees on loans $1 665 $ 1650
Interest on investment securities
Taxable 280 364
Interest and dividends on securities available for sale
Taxable 404 324
Dividends 8 7
Interest on securities purchased under agreements
to resell and federal funds sold 139 120
------ ------
Total Interest Income $2 496 $2 465
Interest Expense,
interest on deposits 975 1 074
------ ------
Net Interest Income $1 521 $1 391
Provision for Loan Losses -- --
------ ------
Net Interest Income after
Provision for Loan Losses $1 521 $1 391
------ ------
Other Income:
Commissions and fees from fiduciary activities $ 127 $ 193
Service charges on deposit accounts 77 84
Fees for other customer services 32 39
Other operating income 26 60
------ ------
Total Other Income $ 262 $ 376
------ ------
Other Expenses:
Salaries and employee benefits $ 728 $ 634
Net occupancy expense of premises 60 48
Furniture and equipment expenses 93 102
Other operating expenses 276 306
------ ------
Total Other Expenses $1 157 $1 090
------ ------
Income before Income Tax Expense $ 626 $ 677
Income Tax Expense 233 249
------ ------
Net Income $ 393 $ 428
====== ======
Earnings Per Share, basic and diluted $.65 $.71
====== ======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
POTOMAC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(000 Omitted)
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Other
Common Capital Undivided Comprehensive Comprehensive
Stock Surplus Profits Income Income Total
------ ------- ------------ -------------- -------------- -------
<S> <C> <C> <C> <C> <C> <C>
- ---
Balances, December 31, 1998 $600 $5 400 $10 091 $ 105 $16 196
Comprehensive income
Net income -- -- 428 -- $428 428
Other comprehensive income
net of tax, unrealized
holding (losses) arising
during the period -- -- -- (74) (74) (74)
----
Comprehensive income $354
---- ------ ------- ------ ==== -------
Balances, March 31, 1999 $600 $5 400 $10 519 $ 31 $16 550
==== ====== ======= ====== =======
Balances, December 31, 1999 $600 $5 400 $10 944 $(256) $16 688
Comprehensive income
Net income -- -- 393 -- $393 393
Other comprehensive income
net of tax, unrealized
holding (losses) arising
during the period -- -- -- (25) (25) (25)
----
Comprehensive income $368
---- ------ ------- ------ ==== -------
Balances, March 31, 2000 $600 $5 400 $11 337 $(281) $17 056
==== ====== ======= ===== =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
POTOMAC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000 Omitted)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
----------------------------------
March 31 March 31
2000 1999
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 393 $ 428
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses -- --
Depreciation 51 62
Amortization -- 9
Discount accretion and premium amortization on securities, net (7) 10
Gain on sale of real estate (19) (54)
Gain on sale of equipment (1) --
(Increase) in accrued interest receivable (18) (36)
(Increase) decrease in other assets (124) 11
(Decrease) in accrued interest payable (16) (20)
Increase in other liabilities 234 278
------- -------
Net cash provided by operating activities $ 493 $ 688
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of securities held to maturity $ 2 000 $ --
Proceeds from maturity of securities available for sale -- 3 000
Purchase of securities held to maturity (7 898) --
Purchase of securities available for sale -- (3 221)
Net (increase) in loans (611) (587)
Purchases of bank premises and equipment (500) (17)
Proceeds from sale of real estate 95 163
------- -------
Net cash (used in) investing activities $(6 914) $ (662)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in non-interest bearing deposits $ 759 $(1 505)
Net increase (decrease) in interest bearing deposits 1 365 (42)
------- -------
Net cash provided by (used in) financing activities $ 2 124 $(1 547)
------- -------
(Decrease) in cash and cash equivalents $(4 297) $(1 521)
CASH AND CASH EQUIVALENTS
Beginning 21 054 18 129
------- -------
Ending $16 757 $16 608
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 991 $ 1 095
======= =======
Income taxes $ 17 $ --
======= =======
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Other real estate acquired in settlement of loans $ -- $ 125
======= =======
Loans made on sale of real estate $ -- $ 191
======= =======
Unrealized gain (loss) on securities available for sale $ (37) $ (113)
======= =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
POTOMAC BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 (UNAUDITED) AND DECEMBER 31, 1999
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, 2000, and December 31,
1999, and the results of operations and cash flows for the three months
ended March 31, 2000 and 1999. 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, 1999. The
results of operations for the three month periods ended March 31, 2000 and
1999, are not necessarily indicative of the results to be expected for the
full year.
2. Securities held to maturity as of March 31, 2000 and December 31, 1999 are
summarized below:
<TABLE>
<CAPTION>
(000 Omitted)
March 31, 2000
------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
--------- ---------- ------------- -------
<S> <C> <C> <C> <C>
Securities held to maturity:
U.S. Treasury securities $ 2 000 $ -- $ -- $ 2 000
Obligations of U.S. Government
agencies 18 911 -- (156) 18 755
--------- -------- -------- -------
$20 911 $ -- $(156) $20 755
========= ======== ======== =======
<CAPTION>
(000 Omitted)
December 31, 1999
------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
--------- ---------- ------------- -------
<S> <C> <C> <C> <C>
Securities held to maturity:
U.S. Treasury securities $ 2 000 $ 2 $ -- $ 2 002
Obligations of U.S. Government
agencies 13 007 1 (93) 12 915
--------- -------- -------- -------
$15 007 $ 3 $ (93) $14 917
========= ======== ======== =======
</TABLE>
Securities available for sale as of March 31, 2000 and December 31, 1999
are summarized below:
<TABLE>
<CAPTION>
(000 Omitted)
March 31, 2000
------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
--------- ---------- ------------- -------
<S> <C> <C> <C> <C>
Securities available for sale:
U.S. Treasury securities $ 2 000 $ -- $ -- $ 2 000
Obligations of U.S. Government
agencies 25 221 -- (425) 24 796
Federal Home Loan Bank stock 450 -- -- 450
------- -------- ----------- -------
$27 671 $ -- $(425) $27 246
======= ======== =========== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(000 Omitted)
December 31, 1999
------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
--------- ---------- ------------- -------
<S> <C> <C> <C> <C>
Securities held to maturity:
U.S. Treasury securities $ 2 000 $ 1 $ -- $ 2 001
Obligations of U.S. Government
agencies 25 220 -- (390) 24 830
Federal Home Loan Bank stock 450 -- -- 450
--------- -------- -------- -------
$27 670 $ 1 $(390) $27 281
========= ======== ======== =======
</TABLE>
3. The consolidated loan portfolio, stated at face amount, is composed of the
following:
<TABLE>
<CAPTION>
(000 Omitted)
March 31 December 31
2000 1999
-------- -----------
<S> <C> <C>
Real estate loans:
Construction and land development $ 14 $ 31
Secured by farmland 2 658 2 605
Secured by 1-4 family residential 43 915 43 798
Other real estate loans 11 625 11 859
Loans to farmers (except those secured by real estate) 345 389
Commercial and industrial loans (except those secured
by real estate) 1 944 2 435
Loans to individuals for personal expenditures 18 223 16 879
All other loans 205 334
------- -------
Total loans $78 929 $78 330
======= =======
</TABLE>
4. The following is a summary of transactions in the reserve for loan losses:
<TABLE>
<CAPTION>
(000 Omitted)
March 31 December 31
2000 1999
-------- -----------
<S> <C> <C>
Balance at beginning of period $ 1 218 $ 1 140
Provision charged to operating expense -- 125
Recoveries added to the reserve 10 42
Loan losses charged to the reserve (22) (89)
------- -------
Balance at end of period $ 1 206 $ 1 218
======= =======
</TABLE>
<PAGE>
5. Information about impaired loans as of March 31, 2000 and December 31,
1999 is as follows:
<TABLE>
<CAPTION>
(000 Omitted)
March 31 December 31
2000 1999
-------- -----------
<S> <C> <C>
Impaired loans for which a reserve has been provided $ 232 $ 232
Impaired loans for which no reserve has been provided -- --
----- -----
Total impaired loans $ 232 $ 232
===== =====
Reserve provided for impaired loans, included in the
reserve for loan losses $ 69 $ 69
===== =====
Average balance in impaired loans $ 331 $ 373
===== =====
Interest income recognized $ 5 $ 22
===== =====
</TABLE>
Nonaccrual loans excluded from impaired loan disclosures under FASB 114
amounted to $112,844 at March 31, 2000 and at December 31, 1999. If
interest on these loans had been accrued, such income would have been
$2,522 for the first three months of 2000 and $5,377 in 1999.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Between December 31, 1999 and March 31, 2000, total assets have increased
$2,700,000. Investments overall have increased $1,300,000. There has been a
shift from our daily investments to the held to maturity investment portfolio of
$4,500,000 to reduce liquidity since Y2K has presented no problems for the Bank.
There has been an additional increase of $1,300,000 in the held to maturity
investments. Loans to consumers are up $1,300,000 since December 31. There are
decreases in other loan categories to bring the net increase in loans to
$600,000. Bank premises and equipment has increased $450,000 due to the
building and renovation project scheduled for completion by the end of June.
The March 31 annualized return on average assets is 1.08% compared to 1.05% at
December 31. At March 31 the annualized return on average equity is 9.32%
compared to 9.33% at December 31. The leverage capital (equity to assets) ratio
is 11.57% at March 31 compared to 11.55% at December 31.
The table on the next page 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.
<PAGE>
<TABLE>
<CAPTION>
(000 Omitted)
March 31, 2000
--------------
<S> <C>
Balance at beginning of period $1 218
Charge-offs:
Commercial, financial and agricultural --
Real estate - construction --
Real estate - mortgage --
Consumer 22
------
Total charge-offs 22
------
Recoveries:
Commercial, financial and agricultural --
Real estate - construction --
Real estate - mortgage --
Consumer 10
------
Total recoveries 10
------
Net charge-offs 12
Additions charged to operations --
------
Balance at end of period $1 206
======
Ratio of net charge-offs during the period to average
loans outstanding during the period .0153%
======
</TABLE>
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.
<TABLE>
<CAPTION>
(000 Omitted)
March 31, 2000
--------------
<S> <C>
Nonaccrual loans $113
Restructured loans --
Foreclosed properties 125
----
Total nonperforming assets $238
====
Loans past due 90 days accruing interest $251
====
Reserve for loan losses to period end loans 1.53%
====
Nonperforming assets to period end loans and foreclosed properties .301%
====
</TABLE>
At March 31, 2000, other potential problem loans totalled $10,196. 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.
Total deposits have increased slightly over $2,000,000 as of March 31, 2000
compared with December 31, 1999. This net increase is made up of increases and
decreases among the various account types. Non of these changes appear to be
particularly significant at this time.
The comparison of the income statements for the three months ended March 31,
2000 and 1999 shows a decrease of 8% in net income in 2000. Net interest income
increased 9%, interest income increased slightly over 1%, and interest expense
decreased 9%.
The decrease in interest expense as of March 31, 2000 compared with March 31,
1999, is due to the decrease in rates as well as the decrease in deposit
balances.
<PAGE>
Noninterest income decreased 30% as of March 31, 2000 compared to March 31,
1999. This was partially due to slight decreases in service charges on deposit
accounts and fees for other customer services. In addition fiduciary activities
and other operating income show marked decreases. Decreases in theses two areas
are due to the fact that during the quarter ended March 31, 1999, those same
areas showed marked increases due to estate fee income and gain on sale of real
estate which did not occur to such an extent in the quarter ended March 31,
2000. Noninterest expense increased almost 6%. The majority of this increase
is due to almost a 15% increase in salaries and employee benefits in 2000
compared to 1999. There are several reasons for this. As of January 1, 1999,
the Bank changed employee insurance coverage and due to the change the expenses
were minimal during the first quarter but were caught up during the rest of the
year. Insurance coverage expenses during 2000 are more normal. Also wages were
increased as of January 1, 2000, among the teller operation to remain
competitive in the market place and to keep employees for a longer term of
employment.
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
securities held to maturity and cash on hand were used to fund investing
activities. Financing activities provided funds since total deposits increased.
Cash and cash equivalents decreased during this period, but liquidity of the
Corporation is more than adequate to meet present and future financial
obligations.
<PAGE>
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>
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 11, 2000 /s/ Charles W. LeMaster
------------- ------------------------------------
Charles W. LeMaster, President & CEO
Date May 11, 2000 /s/ L. Gayle Marshall Johnson
------------- -------------------------------------
L. Gayle Marshall Johnson, Vice
President and Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 5,787
<INT-BEARING-DEPOSITS> 99
<FED-FUNDS-SOLD> 10,970
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 27,246
<INVESTMENTS-CARRYING> 20,911
<INVESTMENTS-MARKET> 20,755
<LOANS> 78,929
<ALLOWANCE> 1,206
<TOTAL-ASSETS> 147,424
<DEPOSITS> 128,808
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,268
<LONG-TERM> 0
0
0
<COMMON> 600
<OTHER-SE> 16,456
<TOTAL-LIABILITIES-AND-EQUITY> 147,424
<INTEREST-LOAN> 1,665
<INTEREST-INVEST> 692
<INTEREST-OTHER> 139
<INTEREST-TOTAL> 2,496
<INTEREST-DEPOSIT> 975
<INTEREST-EXPENSE> 975
<INTEREST-INCOME-NET> 1,521
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,157
<INCOME-PRETAX> 626
<INCOME-PRE-EXTRAORDINARY> 393
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 393
<EPS-BASIC> .65
<EPS-DILUTED> .65
<YIELD-ACTUAL> 7.38
<LOANS-NON> 113
<LOANS-PAST> 251
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 10
<ALLOWANCE-OPEN> 1,218
<CHARGE-OFFS> 22
<RECOVERIES> 10
<ALLOWANCE-CLOSE> 1,206
<ALLOWANCE-DOMESTIC> 1,206
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
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