FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
for the transition period from to
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Commission File Number 0-24674
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SWVA BANCSHARES, INC
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VIRGINIA 54-1721629
- --------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
302 Second Street, SW, Roanoke Virginia 24011-1597
- --------------------------------------- ----------
(Address of Principal executive offices) (Zip Code)
Registrant's telephone number, including area code (540) 343-0135
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 and 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.
Yes X No
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The number of shares outstanding of each of the issuer's classes of common
stock, as of May 11, 1998: $0.10 par value - 506,284 common shares.
Transitional Small Business Disclosure Format (check one):
Yes No X
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<PAGE>
SWVA BANCSHARES, INC. & SUBSIDIARIES
INDEX
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PART I. FINANCIAL INFORMATION PAGE
===================== ====
Item 1. Financial Statements
Consolidated Statements of Financial Condition
at March 31, 1998 and June 30, 1997 (unaudited) 1
Consolidated Statements of Income for the
Three and Nine Months Ended March 31, 1998 and
March 31, 1997 (unaudited) 2
Consolidated Statements of Cash Flows for the
Nine Months Ended March 31, 1998 and
March 31, 1997 (unaudited) 3
Notes to Unaudited Interim Consolidated
Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
PART II. OTHER INFORMATION 10
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<PAGE>
SWVA BANCSHARES, INC & SUBSIDIARY
Consolidated Statements of Financial Condition
(In thousands)
<TABLE>
<CAPTION>
Assets Mar 31 June 30
1998 1997
---------------------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 1,436 $ 1,276
Interest-bearing deposits 6,291 5,304
Investment & Mortgage Backed Securities:
Held to Maturity, at amortized cost 325 365
Available for Sale, at fair value 20,185 8,748
Restricted at cost 961 961
Loans held for sale 1,780 727
Loans receivable, net 47,891 50,982
Property and equipment, net 1,626 1,666
Accrued interest receivable 672 437
Prepaid expenses and other assets 297 287
-------- --------
Total assets $ 81,464 $ 70,753
======== ========
Liabilities and Stockholders' Equity
Deposits $ 68,666 $ 57,933
Advances Federal Home Loan Bank 3,500 3,500
Advances from borrowers for taxes and insurance 431 205
Other liabilities and deferred income 480 513
Total liabilities 73,077 62,151
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Stockholders' Equity
Preferred Stock, 275,000 shares
authorized, no shares issued or
outstanding
Common stock, $.10 par value, 2,225,000 shares authorized, 506,284 outstanding
as of March 31, 1998 and 510,984
outstanding as of June 30, 1997 51 51
Additional paid-in capital 4,226 4,286
Dividends declared and paid (612) (143)
Less unearned ESOP shares (31,951 shares) (319) (319)
Less unearned MSBP shares (17,537 shares) (305) (349)
Retained earnings
(substantially restricted) 5,288 5,047
Valuation allowance
Investments Available for Sale 58 29
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Total Stockholders' Equity 8,387 8,602
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Total Liabilities
and Stockholders' Equity $ 81,464 $ 70,753
======== ========
</TABLE>
1
<PAGE>
SWVA BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended
March 31
-------------------------------------
1998 1997 1998 1997
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Interest income
Loans $ 1,035 $ 1,101 $ 3,171 $ 3,210
Mortgage-backed and related securities 97 89 186 332
U. S. Government obligations
including agencies 224 18 513 54
Municipal bonds 10 11
Other investments, including
overnight deposits 154 133 456 346
------- ------- ------- -------
Total interest income 1,520 1,341 4,337 3,942
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Interest expense
Deposits 785 622 2,175 1,891
Borrowed funds 65 42 182 101
------- ------- ------- -------
Total interest expense 850 664 2,357 1,992
------- ------- ------- -------
Net interest income 670 677 1,980 1,950
Provision for credit losses 3 0 30 0
------- ------- ------- -------
Net interest income after
provision for credit losses 667 677 1,950 1,950
------- ------- ------- -------
Noninterest income
Loan and other customer service fees 34 35 97 108
Gain on sale of mortgage loans 63 16 137 73
Gross rental income 24 25 74 73
Net gain on sale of investments,
available for sale 0 0 (17) 39
------- ------- ------- -------
Total noninterest income 121 76 291 293
------- ------- ------- -------
Noninterest expenses
Personnel 325 319 942 932
Office occupancy and equipment 72 74 220 214
Data processing 47 37 120 103
Federal insurance of accounts 9 9 27 421
Other 94 90 319 289
------- ------- ------- -------
Total noninterest expenses 547 529 1,628 1,959
------- ------- ------- -------
Income before income taxes 241 224 613 284
Provision for income taxes 88 82 229 112
------- ------- ------- -------
Net income $ 153 $ 142 $ 384 $ 172
======= ======= ======= =======
Per common share:
Basic earnings per share .32 .29 .80 .37
Diluted earnings per share .31 .29 .79 .37
</TABLE>
2
<PAGE>
SWVA BANCSHARES, INC. & SUBSIDIARIES
Consolidated Statements of Cash Flow
(In Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
March 31
1998 1997
---------------------
<S> <C> <C>
Operating Activities (Unaudited)
Net Income $ 384 $ 172
Adjustments to Reconcile Net Income to Net Cash
Provided by (used in) operating activities
MSBP Shares Allocated 44 0
Provision for credit losses 30 0
Provision for depreciation and amortization 72 65
Provision for Deferred Income Tax 0 (27)
Loans Originated for Sale (14,464) (6,007)
Proceeds from sales of loans originated for sale 13,548 6,273
Gain on Sale of Loans, from fees (136) (74)
Gain on Sale of Real Estate 0 0
Loss (Gain) on Disposal of Property and Equipment 1 0
Net gain on sale of investments, available for sale (17) 39
Net (increase) decrease in Other Assets (280) (15)
Net increase (decrease) in Other Liabilities 206 278
-------- --------
Net cash provided by (used in) operating activities (612) 704
Investing activities
Proceeds from sale of property and equipment 0 0
Proceeds from maturity of investments
and interest-bearing deposits 5,344 2,458
Proceeds from sale of available for sale investments 3,257 3,300
Purchase of investments and interest-bearing deposits (5,832) (3,838)
Purchase of available for sale investments (15,617) (1,992)
Purchase of property and equipment (30) (44)
Net (increase) decrease in loans 3,375 (4,167)
Purchase of loans (315) (22)
Principal repayments on Mortgage Backed Securities 566 81
-------- --------
Net cash provided by (used in) investing activities (9,252) (4,224)
-------- --------
Financing activities
Curtailment of advances and other borrowings (3,000) (2,500)
Proceeds from advances and other borrowings 3,000 3,500
Net increase (decrease) in savings deposits 10,733 868
Repurchase of stock (97) (341)
Dividends paid (612) (143)
-------- --------
Net cash used in financing activities 10,024 1,384
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Increase (decrease) in cash and cash equivalents 160 (2,136)
Cash and cash equivalents at beginning of period 1,276 5,262
-------- --------
Cash and cash equivalents at end of period $ 1,436 $ 3,126
======== ========
</TABLE>
3
<PAGE>
SWVA BANCSHARES, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
The accompanying consolidated financial statements include the accounts of SWVA
Bancshares, Inc. ("Company") and its wholly-owned subsidiary, Southwest Virginia
Savings Bank, FSB ("Bank") and its wholly-owned subsidiary, Southwest Virginia
Service Corporation. All significant intercompany balances and transactions have
been eliminated in consolidation.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for fair presentation have been included.
Operating results for the three and nine months ended March 31, 1998, are not
necessarily indicative of the results that may be expected for the year ending
June 30, 1998.
NOTE 2 - STOCK REPURCHASE
The Company has adopted a stock repurchase program that allows for the
repurchase, from time to time, of up to 30,000 (5.9%) shares of common stock.
The stock repurchase program that the Company had previously adopted had expired
during 1997. The current plan to repurchase up to 30,000 shares does not state
an expiration date. Any shares repurchased may be used for general and other
corporate purposes, including the issuance of shares upon the exercise of stock
options.
During the quarter ended March 31, 1998, the Company repurchased 4,700 shares of
common stock in the open market at an aggregate purchase price of approximately
$98,000. The amount repurchased represented approximately 0.92% of the Company's
total shares outstanding prior to the repurchase.
NOTE 3 - DIRECTORS STOCK COMPENSATION PLAN
On March 18, 1998, the Company granted 10,122 options to purchase shares of
common stock to its Directors. The purchase price of common stock, under these
options, is $21.00 per share (market price at the date of grant). All of the
above options are exercisable at the date of grant and expire ten (10) years
from the date of grant.
4
<PAGE>
NOTE 4 -- RECENT ACCOUNTING PRONOUNCEMENTS
FASB Statement on Earnings Per Share.
In March, 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128. The Statement
establishes standards for computing and presenting earnings per share and
applies to entities with publicly held common stock or potential common stock.
This statement simplifies the standards for computing earnings per share
previously found in Accounting Principles Board ("APS") Opinion No. 15, Earnings
per Share ("EPS"), and makes them comparable to international EPS standards. It
replaces the presentation of primary EPS with a presentation of basic EPS. It
also requires dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures and requires a
reconciliation of the numerator and the denominator of the basic EPS computation
to the numerator and denominator of the diluted EPS computation. Basic EPS
excludes dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shares
in the earnings of the entity. Diluted EPS is computed similarly to fully
diluted EPS pursuant to APB Opinion No. 15. This statement supersedes Opinion 15
and AICPA Accounting Interpretation 1-102 of Opinion 15. This statement is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods. We do not believe the impact of adopting SFAS
No. 28 will be material to our financial statements.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Comparison of Financial Condition at March 31, 1998 and June 30, 1997
- ---------------------------------------------------------------------
Total assets increased $10.7 million or 15.13% from $70.8 million at June 30,
1997 to $81.5 million at March 31, 1998 due to an increase in deposits and an
increase in Available for Sale Investments purchased. Net loans receivable
decreased $3.1 million or 6.06% from $51.0 million at June 30, 1997 to $47.9
million at March 31, 1998 due primarily to loan payoffs of adjustable rate
(ARM's) and fixed rate mortgage loans and a reduction in construction loans
outstanding.
Interest-bearing deposits increased $1.0 million or 18.61% from $5.3 million at
June 30, 1997 to $6.3 million at March 31, 1998 due mainly to an increase in
cash available to invest in interest-bearing deposits. Cash and cash equivalents
increased $160,000 or 12.54% from $1.3 million at June 30, 1997 to $1.4 million
at March 31, 1998 due mainly to increased cash received from loan payoffs and
funds received on savings deposits net of funds invested in investments and
mortgage backed securities. Available for Sale Investments increased $12.4
million from $8.7 million at June 30, 1997 to $21.1 million at March 31, 1998.
The increase in Available for Sale Investments were funded from growth in
deposits and borrowings from the FHLB. Deposits increased $10.8 million or
18.53%. This deposit growth came when loan demand for adjustable rate mortgage
loans (ARM's) had slowed. Therefore, the funds were invested in available for
sale investments such as FHLB notes, FHLMC notes, FNMA notes, GNMA II & FNMA
mortgage backed investments and municipal bonds. In addition, some of the
securities were purchased with funds borrowed from the FHLB in order to leverage
capital with the expectation of increasing return on equity. This approach could
increase interest rate risk.
Accrued interest receivable increased $235,000 or 53.55% from $437,000 at June
30, 1997 to $672,000 at March 31, 1998 due to an increase in accruals on
available for sale investments.
There were no non-performing assets at March 31, 1998 as compared to $60,000 in
non-performing assets at June 30, 1997. Classified assets totaled $302,000 at
March 31, 1998. Such assets were classified as substandard and were on single
family mortgage loans.
Deposits increased $10.8 million, or 18.53% from $57.9 million at June 30, 1997
to $68.7 million at March 31, 1998 due mainly to an increase in funds in
certificates of deposits. Core deposits were $16.9 million or 24.63% of total
deposits. This strong deposit growth was enhanced with new customers. There are
currently several mergers of other banks taking place in our market with out of
state banks which we feel has contributed directly to this growth. We believe
that this is an indication that local customers want to be served by home town
banks.
At June 30, 1997 and March 31, 1998 there were $3.5 million outstanding in
advances from the Federal Home Loan Bank of Atlanta. Funds from advances have
been used to leverage investment purchases.
6
<PAGE>
THE YEAR 2000 ISSUE
- -------------------
The Bank's Board of Directors has adopted an action plan for addressing the
computer-related concerns raised by Year 2000. An internal committee has been
appointed by the Board to manage this effort.
A process is already underway to identify all equipment and systems that may
potentially be impacted. All outside servicers and major vendors have been
contacted in order to ascertain their individual degrees of readiness for Year
2000. This will be an on-going effort to include documented equipment and
systems testing. Currently, because the larger part of the Bank's data
processing is out-sourced, the remaining in-house systems can be made ready
without the need for external project management assistance.
Large loan customers have been contacted in order to both instill awareness and
to determine their state of readiness for Year 2000.
Although the Bank is already paying some additional surcharges to various
vendors for equipment and systems up-grading, it is currently estimated that the
amount of financial expenditure required to become Year 2000 compliant will NOT
be significant. However, expenses will be closely monitored in conjunction with
periodic servicer and vendor status reports.
7
<PAGE>
Results of Operations for the three months ended March 31, 1998 and March 31,
- --------------------------------------------------------------------------------
1997
- ----
Net Income Net income increased $11,000 or 7.75%, from $142,000 for the
three months ended March 31, 1997 to $153,000 for the three months ended March
31, 1998. The increase in net income was mainly due to an increase in gain on
sale of mortgage loans offset by increased non interest expenses.
Interest Income Interest income increased $179,000, or 13.35%, from
$1.3 million for the three months ended March 31, 1997 to $1.5 million for the
three months ended March 31, 1998. The increase was mainly a result of interest
earned on funds invested offset by a decrease in the interest received on loans.
Interest Expense Interest expense increased $186,000 or 28.01% from
$664,000 for the three months ended March 31, 1997 to $850,000 for the three
months ended March 31, 1998. The increase was due mainly to an increase in
interest paid on deposits and an increase in interest paid on borrowed funds.
Net Interest Income Net interest income decreased by $7,000 or 1.03%
from $677,000 for the three months ended March 31, 1997 to $670,000 for the
three months ended March 31, 1998.
Provision for Credit Losses The Bank made an addition of $3,000 to the
provision for credit losses for the three months ended March 31, 1998. The
allowance for credit losses is $203,000. No provision for credit losses was made
during the quarter ending March 31, 1997.
Non-interest Income Non-interest income increased by $45,000, or 59.21%
from $76,000 for the three months ended March 31, 1997 to $121,000 for the three
months ended March 31, 1998. This was mainly the result of an increase in income
on loans sold in the secondary market for the three months ended March 31, 1998.
Non-interest Expense Non-interest expense increased by $18,000, or
3.40% from $529,000 for the three months ended March 31, 1997 to $547,000 for
the three months ended March 31, 1998, mainly due to a an increase in data
processing expenses and personnel expenses.
Provision for income taxes The provision for income taxes for the three
months ended March 31, 1998 was $88,000 as compared to $82,000 for the three
months ended March 31, 1997. The increase was due to increased pre-tax income.
8
<PAGE>
Results of Operations for the nine months ended March 31, 1998 and March 31,
- --------------------------------------------------------------------------------
1997
- ----
Net Income Net income increased $212,000 or 123.26%, from $172,000 for
the nine months ended March 31, 1997 to $384,000 for the nine months ended March
31, 1998. The increase was mainly due to the one time SAIF Special Assessment
offset by the net gains on sale of available for sale of investments and
additional provisions for income taxes during the nine months ended March 31,
1997.
Interest Income Interest income increased $395,000, or 10.02%, from
$3.9 million for the nine months ended March 31, 1997 to $4.3 million for the
nine months ended March 31, 1998. The increase was mainly a result of additional
cash received on savings deposits which were invested and mortgage loans put in
the Bank's portfolio during the first quarter.
Interest Expense Interest expense increased $365,000 or 18.32%, from
$2.0 million for the nine months ended March 31, 1997 to $2.4 million for the 9
months ended March 31, 1998. The increase was mainly the result of a increase in
the cost of deposits and an increase in the cost of funds borrowed.
Net Interest Income Net interest income increased by $30,000 or 1.54%.
This resulted mainly from an increase in the interest earned on Mortgage Backed
and related securities and other investments offset by increased cost of
deposits and borrowed money.
Provision for Credit Losses The Bank added $30,000 to the provision for
credit losses for the nine months ended March 31, 1998. The addition was made
due to a loss of $44,000 on a delinquent real estate loan. The allowance for
credit losses was $203,000 at March 31, 1998. No provision for credit losses
were made during the nine months ending March 31, 1997.
Non-interest Income Non-interest income decreased by $2,000 or 0.68%
from $293,000 for the nine months ended March 31, 1997 to $291,000 for the nine
months ended March 31, 1998. This resulted from a net gain of $39,000 on the
sale of investments during the nine months ended March 31, 1997, a net loss of
$17,000 on the sale of investments during the nine months ended March 31, 1998
and an increase in gain on sale of mortgage loans and a reduction in loan and
other customer service fees.
Non-interest Expense Non-interest expense decreased by $331,000, or
16.90% from $2.0 million for the nine months ended March 31, 1997 to $1.6
million for the nine months ended March 31, 1998, due mainly to the one time
SAIF Special Assessment offset by an increase in data processing costs
associated with the start-up cost of the new ATM and Debit Card program, an
increase in expenses associated with the annual meeting and increased personnel
expenses.
Provision for income taxes The provision for income taxes for the nine
months ended March 31, 1998 was $229,000 as compared to $112,000 for the nine
months ended March 31, 1997. Tax calculations for the nine months ended March
31, 1997 were affected by the loss recorded during the first quarter for the one
time SAIF Special Assessment.
9
<PAGE>
Regulatory Capital Requirements
OTS capital regulations require savings institutions to meet three capital
standards: (1) tangible capital equal to 1.5% of total adjusted assets, (2) a
leverage ratio (core capital) equal to at least 3.0% of total adjusted assets
and (3) a risk-based capital requirement equal to 8.0% of total risk- weighted
assets.
As shown below, the Bank's tangible, core and risk-based capital significantly
exceed all applicable regulatory capital requirements of the OTS at March 31,
1998:
Percent of
Amount Assets
GAAP Capital.................... $7,602 9.29%
====== ====
Tangible Capital................ $7,602 9.29%
Tangible Capital Requirement.... 1,228 1.50%
------ -----
Excess.......................... $6,374 7.79%
====== =====
Core Capital.................... $7,602 9.29%
Core Capital Requirement........ 2,456 3.00%
------ -----
Excess.......................... $5,146 6.29%
====== =====
Total Risk-Based Capital........ $7,805 20.36%
Risk-Based Capital Requirement.. 3,067 8.00%
------ -----
Excess.......................... $4,738 12.36%
------ -----
During the quarter ending December 31, 1997, the Bank paid a cash dividend to
SWVA Bancshares, Inc. in the amount of $725,000.
Management believes that under current regulations, the Bank will continue to
meet its minimum capital requirements in the foreseeable future. Events beyond
the control of the Bank, such as increased interest rates or downturn in the
economy in areas in which the Bank operates could adversely affect future
earnings and as a result, the ability of the Bank to meet its future minimum
capital requirements.
Liquidity
The Bank's liquidity is a measure of its ability to fund loans, withdrawals of
deposits and other cash outflows in a cost effective manner. The Bank's primary
sources of funds are deposits and proceeds from principal and interest payments
on loan and mortgage backed securities. The Bank also obtains funds from sales
and maturities of investment securities, short-term investments and borrowings,
namely advances from the FHLB of Atlanta. The Bank uses such funds primarily to
meet commitments on existing and continuing loan commitments, to fund maturing
time deposits and savings withdrawals and to maintain liquidity. While loan
payments, maturing investments and mortgage-backed securities are a relatively
predictable source of funds,
10
<PAGE>
Liquidity, cont.
deposit flows and loan prepayments are greatly influenced by general interest
rates, economic conditions and competition. The Bank's liquidity is also
influenced by the level of demand for funding loan originations.
The Bank is required under federal regulations to maintain certain specified
levels of "liquid investments," which include certain United States government
obligations and other approved investments. During the quarter ending December
31, 1997, a change in regulations changed the liquidity requirements for
thrifts. Some of these changes included reducing the liquid asset requirement
from 5% to 4% of the liquidity base and elimination of the 5 year maximum
maturity limitation.
The Bank's regulatory liquidity was 24.08% at March 31, 1998. Using the
requirements set forth on June 30, 1997, the Bank's regulatory liquidity was
6.74%.
Impact of Inflation and Changing Prices
The consolidated financial statements of the Company and notes thereto,
presented elsewhere herein, have been prepared in accordance with GAAP, which
require the measurement of financial position and operating results in terms of
historical dollars without considering the change in the relative purchasing
power of money over time due to inflation. The impact of inflation is reflected
in the increased cost of the Company's operations. Unlike most industrial
companies, nearly all the assets and liabilities of the Company are financial.
As a result, interest rates have a greater impact on the Company's performance
than do the effects of general levels of inflation. Interest rates do not
necessarily move in the same direction or to the same extent as the prices of
goods and services.
11
<PAGE>
SWVA BANCSHARES, INC. & SUBSIDIARIES
PART II
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 10.1 SWVA Bancshares, Inc. 1998
Directors Stock Compensation Plan
Exhibit 99.1 Press releases issued by the registrant.
12
<PAGE>
SWVA BANCSHARES, INC. & SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
SWVA Bancshares, Inc.
Date: May 14, 1998 By: /s/ B. L. Rakes
-----------------
B. L. Rakes
President, Chief Executive Officer,
Chief Financial Officer, and Director
Date: May 14, 1998 By: /s/ Mary G. Staples
---------------------
Mary G. Staples
Vice President/Treasurer
Principal Financial Officer
11
EXHIBIT 10.1
<PAGE>
SWVA BANCSHARES, INC.
1998 DIRECTORS STOCK COMPENSATION PLAN
1. Purpose of the Plan. The Plan shall be known as the SWVA BANCSHARES,
INC. ("Company") 1998 Directors Stock Compensation Plan (the "Plan"). The
purpose of the Plan is to retain and reward qualified personnel for positions of
substantial responsibility as members of the Board of Directors of the Company
or any present or future parent or subsidiary of the Company to promote the
success of the business. The Plan is intended to provide for the grant of Stock
Options that are not "Incentive Stock Options," within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
2. Definitions. The following words and phrases when used in this Plan
with an initial capital letter, unless the context clearly indicates otherwise,
shall have the meaning as set forth below. Wherever appropriate, the masculine
pronoun shall include the feminine pronoun and the singular shall include the
plural.
(a) "Award" means the grant by the Committee or in accordance
with the terms of the Plan of a Stock Option.
(b) "Board" shall mean the Board of Directors of the Company,
or any successor or parent corporation thereto.
(c) "Change in Control" shall mean: (i) the sale of all, or a
material portion, of the assets of the Company; (ii) the merger or
recapitalization of the Company whereby the Company is not the surviving entity;
(iii) a change in control of the Company, as otherwise defined or determined by
the Office of Thrift Supervision or regulations promulgated by it; or (iv) the
acquisition, directly or indirectly, of the beneficial ownership (within the
meaning of that term as it is used in Section 13(d) of the Securities Exchange
Act of 1934 and the rules and regulations promulgated thereunder) of twenty-five
percent (25%) or more of the outstanding voting securities of the Company by any
person, trust, entity or group. This limitation shall not apply to the purchase
of shares by underwriters in connection with a public offering of Company stock,
or the purchase of shares of up to 25% of any class of securities of the Company
by a tax-qualified employee stock benefit plan. The term "person" refers to an
individual or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or any other
form of entity not specifically listed herein. The decision of the Committee as
to whether a Change in Control has occurred shall be conclusive and binding.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and regulations promulgated thereunder.
(e) "Committee" shall mean the Board or the Stock Option
Committee appointed by the Board in accordance with Section 5(a) of the Plan.
(f) "Common Stock" shall mean the common stock of the Company,
or any successor or parent corporation thereto.
1
<PAGE>
(g) "Company" shall mean the SWVA BANCSHARES, INC., the parent
corporation of the Savings Bank, or any successor or Parent thereof.
(h) "Director" shall mean a member of the Board of the
Company, or any successor or parent corporation thereto.
(i) "Director Emeritus" shall mean a person serving as a
director emeritus, advisory director, consulting director, or other similar
position as may be appointed by the Board of Directors of the Savings Bank or
the Company from time to time.
(j) "Disability" means any physical or mental impairment which
renders the Participant incapable of continuing in the employment or service of
the Savings Bank or the Parent in his then current capacity as determined by the
Committee.
(k) "Effective Date" shall mean March 18, 1998.
(l) "Employee" shall mean any person employed by the Company
or any present or future Parent or Subsidiary of the Company. "Non-Employee"
shall mean an individual not employed by the Company or any present or future
Parent or Subsidiary of the Company.
(m) "Fair Market Value" shall mean the last reported sale
price of such Common Stock on such date or within the preceding 20 business
days, or if there is no reported sale price during such period, then the mean of
the last reported bid and ask price during such period. If no such bid and ask
price is available, then the Fair Market Value shall be determined by the
Committee in good faith.
(n) "Option" or "Stock Option" shall mean an Award granted
pursuant to this Plan providing the holder of such Option with the right to
purchase Common Stock.
(o) "Optioned Stock" shall mean stock subject to an Option
granted pursuant to the Plan.
(p) "Optionee" shall mean any person who receives an Option or
Award pursuant to the Plan.
(q) "Parent" shall mean any present or future corporation
which would be a "parent corporation" as defined in Sections 424(e) and (g) of
the Code.
(r) "Participant" means any director of the Company or any
Parent or Subsidiary of the Company or any other person providing a service to
the Company who is selected by the Committee to receive an Award, or who by the
express terms of the Plan is granted an Award.
(s) "Plan" shall mean the SWVA Bancshares, Inc. 1998 Directors
Stock Compensation Plan.
(t) "Savings Bank" shall mean Southwest Virginia Savings Bank,
FSB, or any successor corporation thereto.
(u) "Share" shall mean one share of the Common Stock.
2
<PAGE>
(v) "Subsidiary" shall mean any present or future corporation
which constitutes a "subsidiary corporation" as defined in Sections 424(f) and
(g) of the Code.
3. Shares Subject to the Plan. Except as otherwise required by the
provisions of Section 11 hereof, the aggregate number of Shares with respect to
which Awards may be made pursuant to the Plan shall not exceed 10,122 Shares.
Such Shares may either be from authorized but unissued shares or shares
purchased in the market for Plan purposes. If an Award shall expire, become
unexercisable, or be forfeited for any reason prior to its exercise, new Awards
may be granted under the Plan with respect to the number of Shares as to which
such expiration has occurred.
4. Six Month Holding Period.
Except in the event of the death or disability of the Optionee
or a Change in Control of the Company, a minimum of six months must elapse
between the date of the grant of an Option and the date of the sale of the
Common Stock received through the exercise of such Option.
5. Administration of the Plan.
(a) Composition of the Committee. The Plan shall be
administered by the Board of Directors of the Company or a Committee which shall
consist of not less than two Directors of the Company appointed by the Board and
serving at the pleasure of the Board. All persons designated as members of the
Committee shall meet the requirements of a "Non-Employee Director" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, as
found at 17 CFR ss.240.16b-3.
(b) Powers of the Committee. The Committee is authorized (but
only to the extent not contrary to the express provisions of the Plan or to
resolutions adopted by the Board) to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the form and
content of Awards to be issued under the Plan and to make other determinations
necessary or advisable for the administration of the Plan, and shall have and
may exercise such other power and authority as may be delegated to it by the
Board from time to time. A majority of the entire Committee shall constitute a
quorum and the action of a majority of the members present at any meeting at
which a quorum is present shall be deemed the action of the Committee. In no
event may the Committee revoke outstanding Awards without the consent of the
Participant.
The President of the Company and such other officers as shall
be designated by the Committee are hereby authorized to execute written
agreements evidencing Awards on behalf of the Company and to cause them to be
delivered to the Participants. Such agreements shall set forth the Option
exercise price, the number of shares of Common Stock subject to such Option, the
expiration date of such Options, and such other terms and restrictions
applicable to such Award as are determined in accordance with the Plan or the
actions of the Committee.
(c) Effect of Committee's Decision. All decisions,
determinations and interpretations of the Committee shall be final and
conclusive on all persons affected thereby.
3
<PAGE>
6. Eligibility for Awards and Limitations.
(a) The Committee shall from time to time determine
the Participants who shall be granted Awards under the Plan and the number of
Awards to be granted to each such persons. In selecting Participants and in
determining the number of Shares of Common Stock to be granted to each such
Participant, the Committee may consider the nature of the prior and anticipated
future services rendered by each such Participant, each such Participant's
current and potential contribution to the Company and such other factors as the
Committee may, in its sole discretion, deem relevant. Participants who have been
granted an Award may, if otherwise eligible, be granted additional Awards.
(b) In no event shall Shares subject to Options
granted to any Participant exceed more than 15% of the total number of Shares
authorized for delivery under the Plan.
7. Term of the Plan. The Plan shall continue in effect for a term of
ten (10) years from the Effective Date, unless the Plan is terminated by the
Board in accordance with the Plan.
8. Terms and Conditions of Stock Options. Stock Options may be granted
or awarded only to Participants. Each Stock Option granted pursuant to the Plan
shall be evidenced by an instrument in such form as the Committee shall from
time to time approve. Each Stock Option granted pursuant to the Plan shall
comply with, and be subject to, the following terms and conditions:
(a) Option Price. The price per Share at which each Stock
Option granted by the Committee under the Plan may be exercised shall not, as to
any particular Stock Option, be less than the Fair Market Value of the Common
Stock on the date that such Stock Option is granted.
(b) Payment. Full payment for each Share of Common Stock
purchased upon the exercise of any Stock Option granted under the Plan shall be
made at the time of exercise of each such Stock Option and shall be paid in cash
(in United States Dollars), Common Stock or a combination of cash and Common
Stock. Common Stock utilized in full or partial payment of the exercise price
shall be valued at the Fair Market Value at the date of exercise. The Company
shall accept full or partial payment in Common Stock only to the extent
permitted by applicable law. No Shares of Common Stock shall be issued until
full payment has been received by the Company, and no Optionee shall have any of
the rights of a stockholder of the Company until Shares of Common Stock are
issued to the Optionee.
(c) Term of Stock Option. The term of exercisability of each
Stock Option granted pursuant to the Plan shall be not more than ten (10) years
from the date each such Stock Option is granted.
(d) Exercise Generally. Except as otherwise provided by the
terms of the Plan or by action of the Committee at the time of the grant of the
Options, the Options granted will be first exercisable as of the date of grant
of such options and shall remain exercisable during such periods of service as a
Director or Director Emeritus.
(e) Cashless Exercise. Subject to vesting requirements, if
applicable, an Optionee who has held an Stock Option for at least six months may
engage in the "cashless exercise" of the Option. Upon a cashless exercise, an
Optionee shall give the Company written notice of the exercise of the Option
together with an order to a registered broker-dealer or equivalent third party,
to sell part or all of the Optioned Stock and to deliver enough of the proceeds
to the Company to pay the Option exercise price
4
<PAGE>
and any applicable withholding taxes. If the Optionee does not sell the Optioned
Stock through a registered broker-dealer or equivalent third party, the Optionee
can give the Company written notice of the exercise of the Option and the third
party purchaser of the Optioned Stock shall pay the Option exercise price plus
any applicable withholding taxes to the Company.
(f) Transferability. An Stock Option granted pursuant to the
Plan shall be exercised during an Optionee's lifetime only by the Optionee to
whom it was granted and shall not be assignable or transferable otherwise than
by will or by the laws of descent and distribution.
9. Awards to Directors.
As of March 18, 1998, Stock Options to purchase 1,446 shares
of Common Stock shall be granted to each Director of the Company or the Savings
Bank. Such Options shall be exercisable at a price equal to the Fair Market
Value of the Common Stock as of the date of grant of such Options. Such Options
will be first exercisable as of the Date of Grant. Such Options shall continue
to be exercisable for a period of ten years following the date of grant without
regard to the continued services of such Director as an Employee, Director or
Director Emeritus. In the event of the Optionee's death, such Options may be
exercised by the personal representative of his estate or person or persons to
whom his rights under such Option shall have passed by will or by the laws of
descent and distribution. Unless otherwise inapplicable, or inconsistent with
the provisions of this paragraph, the Options to be granted to Directors
hereunder shall be subject to all other provisions of this Plan.
10. Withholding Tax. The Company shall have the right to deduct from
all amounts paid in cash with respect to the cashless exercise of Options under
the Plan any taxes required by law to be withheld with respect to such cash
payments. Where a Participant or other person is entitled to receive Shares
pursuant to the exercise of an Option, the Company shall have the right to
require the Participant or such other person to pay the Company the amount of
any taxes which the Company is required to withhold with respect to such Shares,
or, in lieu thereof, to retain, or to sell without notice, a number of such
Shares sufficient to cover the amount required to be withheld.
11. Recapitalization, Merger, Consolidation, Change in Control and
Other Transactions.
(a) Adjustment. Subject to any required action by the
stockholders of the Company, within the sole discretion of the Committee, the
aggregate number of Shares of Common Stock for which Options may be granted
hereunder, the number of Shares of Common Stock covered by each outstanding
Option, and the exercise price per Share of Common Stock of each such Option,
shall all be proportionately adjusted for any increase or decrease in the number
of issued and outstanding Shares of Common Stock resulting from a subdivision or
consolidation of Shares (whether by reason of merger, consolidation,
recapitalization, reclassification, split-up, combination of shares, or
otherwise) or the payment of a stock dividend (but only on the Common Stock) or
any other increase or decrease in the number of such Shares of Common Stock
effected without the receipt or payment of consideration by the Company (other
than Shares held by dissenting stockholders).
(b) Change in Control. All outstanding Awards shall become
immediately exercisable in the event of a Change in Control of the Company, as
determined by the Committee. In the event of such a Change in Control, the
Committee and the Board of Directors will take one or more of the following
actions to be effective as of the date of such Change in Control:
5
<PAGE>
(i) provide that such Options shall be assumed, or equivalent
options shall be substituted, ("Substitute Options") by the acquiring or
succeeding corporation (or an affiliate thereof), provided that: the shares of
stock issuable upon the exercise of such Substitute Options shall constitute
securities registered in accordance with the Securities Act of 1933, as amended,
("1933 Act") or such securities shall be exempt from such registration in
accordance with Sections 3(a)(2) or 3(a)(5) of the 1933 Act, (collectively,
"Registered Securities"), or in the alternative, if the securities issuable upon
the exercise of such Substitute Options shall not constitute Registered
Securities, then the Optionee will receive upon consummation of the Change in
Control transaction a cash payment for each Option surrendered equal to the
difference between (1) the Fair Market Value of the consideration to be received
for each share of Common Stock in the Change in Control transaction times the
number of shares of Common Stock subject to such surrendered Options, and (2)
the aggregate exercise price of all such surrendered Options, or
(ii) in the event of a transaction under the terms of which
the holders of the Common Stock of the Company will receive upon consummation
thereof a cash payment (the "Merger Price") for each share of Common Stock
exchanged in the Change in Control transaction, to make or to provide for a cash
payment to the Optionees equal to the difference between (A) the Merger Price
times the number of shares of Common Stock subject to such Options held by each
Optionee (to the extent then exercisable at prices not in excess of the Merger
Price) and (B) the aggregate exercise price of all such surrendered Options in
exchange for such surrendered Options.
(c) Extraordinary Corporate Action. Notwithstanding any
provisions of the Plan to the contrary, subject to any required action by the
stockholders of the Company, in the event of any Change in Control,
recapitalization, merger, consolidation, exchange of Shares, spin-off,
reorganization, tender offer, partial or complete liquidation or other
extraordinary corporate action or event, the Committee, in its sole discretion,
shall have the power, prior or subsequent to such action or event to:
(i) appropriately adjust the number of Shares of
Common Stock subject to each Option, the Option exercise price per Share of
Common Stock, and the consideration to be given or received by the Company upon
the exercise of any outstanding Option;
(ii) cancel any or all previously granted Options,
provided that appropriate consideration is paid to the Optionee in connection
therewith; and/or
(iii) make such other adjustments in connection
with the Plan as the Committee, in its sole discretion, deems necessary,
desirable, appropriate or advisable.
(d) Acceleration. The Committee shall at all times have the
power to accelerate the exercise date of Options previously granted under the
Plan.
(e) Non-recurring Dividends. Upon the payment of a special or
non-recurring cash dividend that has the effect of a return of capital to the
stockholders, the Option exercise price per share shall be adjusted
proportionately and in an equitable manner.
Except as expressly provided in Sections 11(a), 11(b) and 11(e) hereof,
no Optionee shall have any rights by reason of the occurrence of any of the
events described in this Section 11.
6
<PAGE>
12. Time of Granting Options. The date of grant of an Option under the
Plan shall, for all purposes, be the date specified in accordance with the Plan
or the date on which the Committee makes the determination of granting such
Option. Notice of the grant of an Option shall be given to each individual to
whom an Option is so granted within a reasonable time after the date of such
grant in a form determined by the Committee.
13. Modification of Options. At any time and from time to time, the
Board may authorize the Committee to direct the execution of an instrument
providing for the modification of any outstanding Option, provided no such
modification, extension or renewal shall confer on the holder of said Option any
right or benefit which could not be conferred on the Optionee by the grant of a
new Option at such time, or shall not materially decrease the Optionee's
benefits under the Option without the consent of the holder of the Option,
except as otherwise permitted under Section 14 hereof.
14. Amendment and Termination of the Plan.
(a) Action by the Board. The Board may alter, suspend or
discontinue the Plan.
(b) Change in Applicable Law. Notwithstanding any other
provision contained in the Plan, in the event of a change in any federal or
state law, rule or regulation which would make the exercise of all or part of
any previously granted Option unlawful or subject the Company to any penalty,
the Committee may restrict any such exercise without the consent of the Optionee
or other holder thereof in order to comply with any such law, rule or regulation
or to avoid any such penalty.
15. Conditions Upon Issuance of Shares; Limitations on Option Exercise;
Cancellation of Option Rights.
(a) Shares shall not be issued with respect to any Option granted under
the Plan unless the issuance and delivery of such Shares shall comply with all
relevant provisions of applicable law, including, without limitation, the
Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder, any applicable state securities laws and the requirements of any
stock exchange upon which the Shares may then be listed.
(b) The inability of the Company to obtain any necessary
authorizations, approvals or letters of non-objection from any regulatory body
or authority deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares issuable hereunder shall relieve the Company of
any liability with respect to the non-issuance or sale of such Shares.
(c) As a condition to the exercise of an Option, the Company may
require the person exercising the Option to make such representations and
warranties as may be necessary to assure the availability of an exemption from
the registration requirements of federal or state securities law.
(d) Notwithstanding anything herein to the contrary, upon the
termination of employment or service of an Optionee by the Company or its
Subsidiaries for "cause" within the sole discretion of the Board, all Options
held by such Participant shall cease to be exercisable as of the date of such
termination of employment or service.
(e) Upon the exercise of an Option by an Optionee (or the Optionee's
personal representative), the Committee, in its sole and absolute discretion,
may make a cash payment to the
7
<PAGE>
Optionee, in whole or in part, in lieu of the delivery of shares of Common
Stock. Such cash payment to be paid in lieu of delivery of Common Stock shall be
equal to the difference between the Fair Market Value of the Common Stock on the
date of the Option exercise and the exercise price per share of the Option. Such
cash payment shall be in exchange for the cancellation of such Option. Such cash
payment shall not be made in the event that such transaction would result in
liability to the Optionee or the Company under Section 16(b) of the Securities
Exchange Act of 1934, as amended, and regulations promulgated thereunder.
16. Reservation of Shares. During the term of the Plan, the Company
will reserve and keep available a number of Shares sufficient to satisfy the
requirements of the Plan.
17. Unsecured Obligation. No Participant under the Plan shall have any
interest in any fund or special asset of the Company by reason of the Plan or
the grant of any Option under the Plan. No trust fund shall be created in
connection with the Plan or any grant of any Option hereunder and there shall be
no required funding of amounts which may become payable to any Participant.
18. No Employment Rights. No Director, Employee or other person shall
have a right to be selected as a Participant under the Plan. Neither the Plan
nor any action taken by the Committee in administration of the Plan shall be
construed as giving any person any rights of employment or retention as an
Employee, Director or in any other capacity with the Company, the Savings Bank
or other Subsidiaries.
19. Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of Virginia, except to the extent that
federal law shall be deemed to apply.
8
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM THE
QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,436
<INT-BEARING-DEPOSITS> 6,291
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 21,146
<INVESTMENTS-CARRYING> 325
<INVESTMENTS-MARKET> 325
<LOANS> 47,891
<ALLOWANCE> 204
<TOTAL-ASSETS> 81,464
<DEPOSITS> 68,666
<SHORT-TERM> 3,500
<LIABILITIES-OTHER> 911
<LONG-TERM> 0
0
0
<COMMON> 51
<OTHER-SE> 8,336
<TOTAL-LIABILITIES-AND-EQUITY> 81,464
<INTEREST-LOAN> 3,171
<INTEREST-INVEST> 1,166
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 4,337
<INTEREST-DEPOSIT> 2,175
<INTEREST-EXPENSE> 182
<INTEREST-INCOME-NET> 1,980
<LOAN-LOSSES> 30
<SECURITIES-GAINS> (17)
<EXPENSE-OTHER> 1,628
<INCOME-PRETAX> 613
<INCOME-PRE-EXTRAORDINARY> 613
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 384
<EPS-PRIMARY> .80
<EPS-DILUTED> .79
<YIELD-ACTUAL> 8.06
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 200
<CHARGE-OFFS> 44
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 203
<ALLOWANCE-DOMESTIC> 203
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
EXHIBIT 99.1
<PAGE>
SWVA [LOGO]
Bancshares, Inc.
NEWS RELEASE
------------
Contact: B. L. Rakes, President & CEO
540-343-0135
Date: May 1, 1998
FOR IMMEDIATE RELEASE
---------------------
SWVA Bancshares, Inc. the holding company of Southwest Virginia Savings Bank,
FSB, Roanoke, Virginia, is pleased to announce that Mr. Don Shilling has become
affiliated with the Savings Bank as Executive Vice President and Chief
Operations Officer. In this capacity he will oversee the operations of the Bank.
Mr. Shilling has been in banking twenty-seven (27) years. For the past ten (10)
years he has been affiliated with Central Fidelity Bank having worked in the
Roanoke, Bedford and Martinsville areas since January 1995 serving as Senior
Vice President and Area Manager.
Bill Rakes, President & CEO, stated that he was pleased to have Mr. Shilling
join the Bank's management team. Mr. Rakes further stated that Southwest
Virginia Savings Bank, FSB, is an independent community bank and Mr. Shilling's
experience will aid the bank in taking advantage of the opportunities becoming
available as larger institutions are sold or consolidated in our market area.
Southwest Virginia Savings Bank, FSB is a federally chartered savings bank, the
deposits of which are insured by the FDIC to the fullest extent provided by law.
The Bank is headquartered in Roanoke, Virginia with assets of $82 million and
operates 5 full-service banking facilities and a mortgage origination office
serving Roanoke City, Roanoke County, Salem City and adjacent counties. The Bank
has served the community since 1927.
- --------------------------------------------------------------------------------
302 Second Street, S.W. - Roanoke, Virginia 24011-1597 - Telephone:(540)343-0135
- --------------------------------------------------------------------------------
<PAGE>
SWVA [LOGO]
Bancshares, Inc.
NEWS RELEASE
------------
Contact: B. L. Rakes, President & CEO
Mary G. Staples, PFO
(540) 343-0135
Date: May 1, 1998
FOR IMMEDIATE RELEASE
---------------------
SWVA BANCSHARES, INC. ANNOUNCES THIRD QUARTER EARNINGS
Roanoke, Virginia, May 1, 1998: SWVA Bancshares, Inc., the holding
company of Southwest Virginia Savings Bank, FSB, Roanoke, Virginia, announced
earnings for the third quarter of fiscal year 1998.
Net income for the nine months ended March 31, 1998 was $384,000 or
$0.80 per share. Net income for the nine months ended March 31, 1997 was
$172,000. This was an increase of $212,000 or 123.26%. At March 31, 1998, the
return on average assets was .69% and return on average equity was 6.02%.
Net income increased $11,000 or 7.75%, from $142,000 for the three
months ended March 31, 1997 to income of $153,000 for the three months ended
March 31, 1998. The increase in net income was mainly due to an increase in gain
on sale of mortgage loans offset by increased non-interest expenses.
Interest income increased $179,000, or 13.35% from $1.3 million for the
three months ended March 31, 1997 to $l.5 million for the three months ended
March 31, 1998. The increase was mainly a result of interest earned on funds
invested offset by a decrease in the interest received on loans.
Interest expense increased $186,000 or 28.01% from $664,000 for the
three months ended March 31, 1997 to $850,000 for the three months ended March
31, 1998. The increase was due mainly to an
- --------------------------------------------------------------------------------
302 Second Street, S.W. - Roanoke, Virginia 24011-1597 - Telephone:(540)343-0135
- --------------------------------------------------------------------------------
<PAGE>
increase in interest paid on deposits and an increase in interest
paid on borrowed funds.
Net interest income decreased by $7,000 or 1.03% from $677,000 for the
three months ended March 31, 1997 to $670,000 for the three months ended March
31, 1998.
The Bank made an addition of $3,000 to the provision for credit losses
for the three months ended March 31, 1998. The allowance for credit losses is
$203,000. No provision for credit losses was made during the quarter ended March
31, 1997. There were no non-performing loans on March 31, 1998.
Non-interest income increased by $45,000, or 59.21% from $76,000 for
the three months ended March 31, 1997 to $121,000 for the three months ended
March 31, 1998. This was mainly the result of an increase in income on loans
sold in the secondary market for the three months ended March 31, 1998.
Non-interest expense increased by $18,000, or 3.40% from $529,000 for
the three months ended March 31, 1997 to $547,000 for the three months ended
March 31, 1998, mainly due to an increase in data processing expenses and
personnel expenses.
The Company's assets and stockholders' equity amounted to $81.5 million
and $8.4 million, respectively, at March 31, 1998.
Southwest Virginia Savings Bank, FSB is a federally chartered savings
bank, the deposits of which are insured by the FDIC to the fullest extent
provided by law. The Bank is headquartered in Roanoke, Virginia and operates 5
full-service banking facilities and a mortgage origination office serving
Roanoke City, Roanoke County, Salem City and adjacent counties. The Bank has
served the community since 1927.
The Bank exceeds all current regulatory capital ratio requirements and
continues to meet the "well capitalized" regulatory definition, the highest such
rating.
SWVA Bancshares, Inc's common stock shares are listed over-the-counter
through the National Daily Quotation System "Pink Sheets" under the symbol
"SWVB".
<PAGE>
SWVA BANCSHARES, INC.
(Dollars in thousands, except per share data)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended
Mar 31
------
1998 1997
---- ----
(unaudited)
Interest income 4,337 3,942
Interest expense 2,357 1,992
------- -------
Net interest income 1,980 1,950
Provision for credit losses 30 0
------- -------
Net interest income after
provision for credit losses 1,950 1,950
Noninterest income 291 293
Noninterest expense 1,628 1,959
------- -------
Income before income taxes 613 284
Provision for income taxes 229 112
------- -------
Net Income $ 384 $ 172
======= =======
Basic earnings per common share $ 0.80 0.37
Diluted earnings per common share $ 0.79 0.37
Return on average assets .69% .33%
Return on average equity 6.02% 2.70%
Interest rate spread 3.21% 3.58%
Net interest margin 3.68% 3.99%
Noninterest expense to average assets 2.91% 3.77%
CONDENSED CONSOLIDATED BALANCE SHEETS
Mar 31 June 30
------------------
1998 1997
---- ----
(unaudited)
Cash and Interest-bearing deposits $ 7,727 $ 6,580
Investments & Mortgage Backed Securities 21,471 10,074
Loans held for sale 1,780 727
Loans receivable, net 47,891 50,982
Property and equipment, net 1,626 1,666
Other assets 969 724
------- -------
Total assets $81,464 $70,753
======= =======
Deposits $68,666 $57,933
Advances FHLB 3,500 3,500
Accrued expenses and other liabilities 911 718
Stockholders' Equity 8,387 8,602
------- -------
Total liabilities and stockholders' equity $81,464 $70,753
======= =======
Nonaccrual and 90 days past due loans $ 0 $ 60
Total nonperforming assets $ 0 $ 60
======= =======
Allowance for credit losses
to nonperforming assets .00% 416.99%
Nonperforming loans to total loans .00% .10%
Nonperforming assets to total assets .00% .08%
Book value per share $ 16.56 (1) 16.83 (1)
(1) Book value per share has been calculated by taking Stockholders' Equity
and dividing by the number of shares outstanding. Shares outstanding on
March 31, 1998 were 506,284 and on June 30, 1997 were 510,984.
