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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10 - QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1996
--------------------
Commission File Number 0-16587
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South Branch Valley Bancorp, Inc.
-------------------------------------
(Exact name of small business issuer as
specified in its charter)
West Virginia 55-0672148
- - -------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
310 North Main Street
Moorefield, West Virginia 26836
- - -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(304) 538-2353
- - -------------------------------------------------------------------------------
(Issuer's telephone number, including area code)
Check whether the issuer: (1) filed all reports required 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 X No
---- ----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
378,510 common shares were outstanding as of May 9, 1995.
1
SOUTH BRANCH VALLEY BANCORP, INC. AND SUBSIDIARY
INDEX
Page
I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed consolidated balance sheets
March 31, 1996 (unaudited) and
December 31, 1995 3
Condensed consolidated statements of
income for the three months ended
March 31, 1996 and 1995 (unaudited) 4
Condensed consolidated statements of
cash flows for the three months ended
March 31, 1996 and 1995 (unaudited) 5-6
Condensed consolidated statements of
shareholders' equity for the three
months ended March 31, 1996 and
1995 (unaudited) 7
Notes to condensed consolidated financial
statements (unaudited) 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9-13
II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
2
SOUTH BRANCH VALLEY BANCORP, INC., AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1996 1995
ASSETS (Unaudited) *
---------------- ----------------
Cash and due from banks $2,210,491 $2,191,647
Interest bearing deposits with other banks 2,044,976 2,134,919
Federal funds sold 180,503 2,161,745
Securities available for sale 32,120,276 31,480,580
Loans, net 72,462,746 70,598,398
Bank premises and equipment, net 3,159,978 3,180,351
Accrued interest receivable 1,037,496 983,841
Other assets 320,029 386,377
---------------- ----------------
Total Assets $113,536,495 $113,117,858
================ ================
LIABILITIES
Non-interest bearing deposits $7,950,635 $7,832,774
Interest bearing deposits 91,718,633 92,213,562
---------------- ----------------
Total deposits 99,669,268 100,046,336
Long-term borrowings 1,743,891 750,000
Other liabilities 722,131 992,862
---------------- ----------------
Total Liabilities 102,135,290 101,789,198
---------------- ----------------
SHAREHOLDERS' EQUITY
Common stock, $2.50 par value, authorized
600,000 shares, issued 382,625 shares 956,562 956,562
Surplus 685,534 685,534
Net unrealized gain (loss) on securities 102,010 340,650
Retained earnings 9,824,069 9,512,884
Less cost of shares acquired for the
treasury 1996, 4,115; and 1995, 4,115 (166,970) (166,970)
---------------- ----------------
Total Shareholders' Equity 11,401,205 11,328,660
---------------- ----------------
Total Liabilities and Shareholders'
Equity $113,536,495 $113,117,858
================ ================
*December 31, 1995 financial information has been extracted from
audited financial statements.
See Notes to Condensed Consolidated Financial Statements
3
SOUTH BRANCH VALLEY BANCORP, INC., AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 1996 and 1995
(Unaudited)
Three Months Ended
March 31, March 31,
1996 1995
-------------- ---------------
Interest income:
Interest and fees on loans $1,797,817 $1,533,055
Interest on securities:
Taxable 471,978 416,108
Tax-exempt 47,784 35,437
Interest on Federal funds sold 23,257 9,251
-------------- ---------------
Total interest income 2,340,836 1,993,851
-------------- ---------------
Interest expense:
Interest on deposits 1,140,623 864,353
Interest on other borrowings 21,225 27,260
-------------- ---------------
Total interest expense 1,161,848 891,613
-------------- ---------------
Net interest income 1,178,988 1,102,238
Provision for loan losses 10,000 25,000
-------------- ---------------
Net interest income after
provision for loan losses 1,168,988 1,077,238
-------------- ---------------
Non-interest income:
Insurance commissions 22,563 19,855
Trust department income (8) 508
Service fee income 49,905 49,549
Securities gains (losses) 33,912 (3,147)
Other income 14,737 14,122
-------------- ---------------
Total other income 121,109 80,887
-------------- ---------------
Non-interest expense:
Salaries and employee benefits 443,697 391,212
Net occupancy expense 53,326 29,195
Equipment expense 47,806 40,794
FDIC insurance premiums 1,000 48,481
Other expenses 267,913 215,656
-------------- ---------------
Total other expense 813,742 725,338
-------------- ---------------
Income before income tax expense 476,355 432,787
Income tax expense 165,170 160,178
-------------- ---------------
Net Income $311,185 $272,609
============== ===============
Earnings per common share $0.82 $0.72
============== ===============
Dividends per common share $--- $---
============== ===============
See Notes to Condensed Consolidated Financial Statements
4
SOUTH BRANCH VALLEY BANCORP, INC., AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1996 and 1995
(Unaudited)
Three Months Ended
March 31, March 31,
1996 1995
---------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $311,185 $272,609
Adjustments to reconcile net earnings to net
cash provided by operating activitites:
Depreciation 53,431 36,820
Provision for loan losses 10,000 25,000
Securities (gains) losses (33,911) 3,147
Provision for deferred income tax expense(benefit) 9,237 (1,367)
(Increase) in accrued income receivable (53,655) (72,347)
Amortization of security premiums and
(accretion of discounts), net 15,748 27,153
(Increase) decrease in other assets 57,111 (39,290)
Increase (decrease) in other liabilities (121,338) 5,379
---------- ------------
Net cash provided by operating activities 247,808 257,104
---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities available for
sale 2,209,305 487,500
Proceeds from maturities of securities available
for sale 2,500,000 100,000
Purchases of securities available for sale (5,857,400) (6,100)
Principal payments received on securities held to
maturity -- 94,160
Principal payments received on securities
available for sale 138,529 28,374
(Increase) decrease in Federal funds sold, net 1,981,242 (1,504,076)
Principal collected on (loans to customers), net (1,874,348) 295,955
Proceeds from interest bearing
deposits with other banks 89,943 179,946
Purchase of Bank premises and equipment (33,058) (5,155)
--------- ------------
Net cash provided by (used in) investing
activities (845,787) (329,396)
---------- ------------
Continued
See Notes to Condensed Consolidated Financial Statements
5
SOUTH BRANCH VALLEY BANCORP, INC., AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
For the Three Months Ended March 31, 1996 and 1995
(Unaudited)
Three Months Ended
March 31, March 31,
1996 1995
--------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) in demand deposits, NOW and
savings accounts (766,959) (1,003,375)
Proceeds from sales of time deposits, net 389,891 1,369,426
Net increase in other borrowings 993,891 --
--------------- ------------
Net cash provided by (used in) financing
activities 616,823 366,051
--------------- ------------
Increase (decrease) in cash and due from banks 18,844 293,759
Cash and due from banks:
Beginning 2,191,647 2,152,919
--------------- ------------
Ending $2,210,491 $2,446,678
=============== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest paid to depositors $1,140,402 $874,019
=============== ============
Income taxes $0 $6,030
=============== ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Other real estate acquired in settlement of
loans $0 $0
=============== ============
See Notes to Condensed Consolidated Financial Statements
6
SOUTH BRANCH VALLEY BANCORP, INC., AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Three Months ended March 31, 1996 and 1995
(Unaudited)
Three Months Ended
---------------------------------
March 31, March 31,
1996 1995
-------------- ---------------
Balance, beginning of period $11,328,660 $9,378,140
Net income 311,185 272,609
Change in net unrealized gain (loss)
on securities (238,640) 329,994
-------------- ---------------
Balance, March 31 $11,401,205 $9,980,743
============== ===============
See Notes to Condensed Consolidated Financial Statements
7
SOUTH BRANCH VALLEY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The financial information included herein is unaudited; however,
such information reflects all adjustments (consisting solely of
normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of results for the
interim periods.
The presentation of financial statements in conformity with
generally accepted accounting procedures requires management to make
estimates and assumptions that effect the reported amount of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from the estimates.
The results of operations for the three month period ended March 31,
1996 are not necessarily indicative of the results to be expected
for the full year. The Condensed Consolidated Financial Statements
and notes included herein should be read in conjunction with the
Company's 1995 audited financial statements and Form 10-K.
Note 2. Earnings Per Share
Earnings per common share are computed based upon the weighted
average shares outstanding. The weighted average shares outstanding
were 378,510 at March 31, 1996 and 1995, respectively.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION AND SUMMARY
The following is Management's discussion and analysis of the financial
condition and financial results of operations for South Branch Valley Bancorp,
Inc. and its wholly owned subsidiary, South Branch Valley National Bank, as of
March 31, 1996. Since the primary business activities of South Branch Valley
Bancorp, Inc. are conducted through the Bank, this discussion focuses primarily
on the financial condition and operations of the Bank.
Net income for the first quarter of 1996 totaled $311,000, a $38,000 or a
13.9% increase from the $273,000 earned during the same period of 1995.
Annualized return on average assets for 1996 was 1.10% as compared to 1.13% at
March 31, 1995. Earnings per share totaled $.82 at March 31, 1996 compared to
$.72 at March 31, 1995.
RESULTS OF OPERATIONS
Net Interest Income
- - -------------------
For purposes of this discussion, the "taxable equivalent basis" adjustment
has been included in interest income to reflect the level of income had income
on state and municipal obligations exempt from Federal income tax been taxable,
assuming a Federal tax rate of 34% in both 1996 and 1995. The amounts of the tax
equivalent adjustments were $12,000 in 1996 and $9,000 in 1995.
For the three months ended March 31, 1996, the Company's net interest
income, as adjusted, increased $77,000 or 7.0% to $1,179,000 as compared with
$1,102,000 for the three months ended March 31, 1995. However, the Company's net
interest yield on earning assets (net interest margin) decreased 31 basis points
from 4.77% for the three months ended March 31, 1995 to 4.46% for the three
months ended March 31, 1996. See Table I for a detailed analysis of these
changes.
Provision for Loan Losses and Loan Quality
- - ------------------------------------------
An allowance for loan losses is maintained by the Company and is funded
through the provision for loan losses as a charge to current earnings. The
allowance for loan losses is reviewed by management on a quarterly basis to
determine it is maintained at levels considered necessary to cover potential
losses associated with the Bank's current lending activities. For the three
months ended March 31, 1996, the
9
South Branch Valley Bancorp, Inc. and Subsidiary
- - ----------------------------------------------------------------------------------------------
Table I - Average Distribution of Assets, Liabilities and Shareholders'
Equity, Interest Earnings & Expenses, and Average Rates
March 31, 1996 March 31, 1995
--------------------------------- -------------------------------
(In thousands ofdollars) Average Earnings/ Yield/ Average Earnings/ Yield/
Balances Expense Rate Balances Expense Rate
--------------------------------- -------------------------------
ASSETS
Interest earning assets:
Loans, net of unearned
interest $72,125 $1,798 9.97% $63,912 $1,533 9.59%
Securities
Taxable 27,312 436 6.39% 24,670 391 6.34%
Tax-exempt 3,486 59 6.77% 2,408 44 7.31%
Interest bearing deposits
with other banks 2,116 36 6.81% 1,586 26 6.56%
Federal funds sold 1,690 23 5.44% 613 9 5.87%
---------- ---------- --------- --------- -------- ---------
Total interest earning
assets 106,729 2,352 8.81% 93,189 2,003 8.60%
Noninterest earning assets:
Cash & due from banks 2,405 2,150
Bank premises & equipment 3,173 1,575
Other assets 1,316 582
Allowance for loan losses (863) (1,014)
---------- ---------
Total assets $112,760 $96,482
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Interest bearing
demand deposits $18,989 $160 3.37% $15,148 $125 3.30%
Regular savings 15,728 142 3.61% 13,178 108 3.28%
Time savings 56,588 839 5.93% 48,874 632 5.17%
Other borrowings 1,430 21 5.87% 1,777 27 6.08%
---------- ---------- --------- --------- -------- ---------
92,735 1,162 5.01% 78,977 892 4.52%
Noninterest bearing liabilities:
Demand deposits 7,789 7,365
Other liabilities 946 610
---------- ---------
Total liabilities 101,470 86,952
Shareholders' equity 11,290 9,530
---------- ---------
Total liabilities and
shareholders' equity $112,760 $96,482
========== =========
NET INTEREST EARNINGS $1,190 $1,111
========== ========
NET INTEREST YIELD ON EARNING ASSETS 4.46% 4.77%
========= =========
10
Company's provision for loan losses totaled $10,000, compared to $25,000 during
the first three months of 1995. The following table represents a summary of the
Company's past due and non-performing assets:
SUMMARY OF PAST DUE LOANS AND NON-PERFORMING ASSETS
March 31 December 31
------------------------ ------------
1996 1995 1995
Loans contractually past due
90 days or more and still
accruing interest $285 $ 233 $260
==== ====== ====
Non-performing assets:
Non-accruing loans $430 $1,060 $538
Other real estate owned 40 22 40
---- ------ ----
$470 $1,082 $578
==== ====== ====
Although the amount of loans past due 90 days or more has increased by
$52,000 during the past 12 months, non-performing assets decreased by $612,000.
Thus, total loans past due 90 days or more plus non-performing assets have
decreased approximately $560,000 or 42.6% from the same period last year. Loans
on non-accrual status have decreased approximately $108,000 since December 1995.
Approximately $138,000 or 32.1% of the total non-accrual balance at March 31,
1996 is comprised of one loan which is current as to both principal and interest
payments but is classified non-accrual due to cash flow problems being
experienced by the entity.
At March 31, 1996, the allowance for loan losses totaled $849,000 or 1.2%
of net loans compared to $988,000 or 1.6% of net loans at March 31, 1995, and
$860,000 or 1.2% at December 31, 1995. While there may be some loans or portions
of loans identified as potential problem credits which are not specifically
identified as either non-accrual or accruing loans past due 90 or more days,
they are considered by management to be insignificant to the overall disclosure
and are therefore not specifically quantified within the Management's Discussion
and Analysis.
Non-interest Income
- - -------------------
Total non-interest income increased approximately $40,000 or 49.4% for the
three months ended March 31, 1996 as compared to the three months ended March
31, 1995.
Insurance commissions increased from approximately $20,000 to $23,000 or
15.0% for the three months ended March 31, 1996 compared to the three months
ended March 31, 1995. Management believes the Company will be able to maintain
levels of insurance income similar to this throughout the remainder of 1996.
Net realized gains on securities increased by approximately $37,000 for
the three month period ended March 31, 1996 as compared with the three month
period ended March 31, 1995.
11
Non-interest expense
- - --------------------
Non-interest expense increased approximately $89,000 or 12.3% during the
first three months of 1996. It is the Bank's policy to review salaries and have
employee evaluations during the fourth quarter of each year. Deserving employees
are then awarded raises as of the first of the year. These raises and slight
increases in insurance costs resulted in a 13.3% increase in salaries and
employee benefits for the three months ended March 31, 1996 as compared to March
31, 1995.
Net occupancy expense increased from approximately $29,000 to $53,000 or
82.8%. Equipment expense also increased 17.1% from approximately $41,000 for the
period ending March 31, 1995 to $48,000 for the period ending March 31, 1996.
These increases were expected and planned for by management due to the purchase
of the Petersburg branch during the fourth quarter of 1995 and the recently
completed renovation and addition to the Company's home office in Moorefield.
Due to the decrease in the semi-annual rate of deposit insurance from
$.115 per hundred dollars of deposits to the minimum of $1,000, FDIC insurance
premiums decreased approximately $47,000 for the first quarter of 1996 as
compared to the first quarter of 1995.
Other expenses increased approximately $52,000 or 24.1% from $216,000 to
$268,000 during the first three months of 1996 compared to 1995. The major
factors contributing to this increase are as follows:
** Telephone and communications increased by 25.0% from
$12,000 to $15,000.
** During the first quarter of 1996 the bank did a computer conversion
and experienced some one time expenses. Data processing expense
increased 100.0% from approximately $21,000 in 1995 to $42,000 in
1996. ATM expense increased from $2,000 to $6,000 or 200.0%.
Management does not expect these large increases to expenses to
continue.
** An increase in the number of accounts served by the bank of
approximately 13.7%, primarily due to the acquisition of the
Petersburg branch in the fourth quarter of 1995 contributed to the
increase in postage expense. Postage expense, which totaled
approximately $19,000 in 1995, increased 21.1% to $23,000 in 1996.
** Also associated with the acquisition of the new branch in Petersburg
was the creation of a new expense, Amortized goodwill. This expense
totaled $9,000 in 1996.
12
Liquidity
- - ---------
Liquidity in commercial banking can be defined as the ability to satisfy
customer loan demand and meet deposit withdrawals while maximizing net interest
income. The Company's primary sources of funds are deposits and principal and
interest payments on loans. Additional funds are provided by maturing
securities. The bank uses ratio analysis to monitor the changes in its sources
and uses of funds so that an adequate liquidity position is maintained. At March
31, 1996 the loan to deposit ratio was 72.7% compared to 70.6% at December
31,1995. Cash and due from banks coupled with Federal funds sold totaled
$2,391,000 or 2.1% of total assets. Additionally, securities and interest
bearing deposits with other banks maturing within one year approximated
$3,853,000 or 3.4% of total assets. Management believes that the liquidity of
the Company is adequate and foresees no demands or conditions that would
adversely affect it.
Financial Condition
- - -------------------
Total deposits have decreased approximately .4% or $377,000 from December
31, 1995. The overall composition of the Company's assets has not changed
significantly since year end 1995.
The Company's total shareholders' equity has increased approximately
$72,000 or .6% since December 31, 1995. This is the net result of an increase of
$311,000 in retained earnings and a $239,000 decrease in net unrealized gains on
securities. The Company's equity to total assets ratio was 10.0% at March 31,
1996 and at December 31, 1995. The Company's subsidiary bank's total risk
weighted capital ratio was approximately 16.5% at March 31, 1996 and is well
within Federal regulatory guidelines. The Company is not aware of any pending
regulation which would have a material negative impact on its operations or
financial condition.
13
PART II
Item 6 - Exhibits and Reports on Form 8-K
- - -----------------------------------------
A. Exhibit - Financial Data Schedule required by Part I Item 601
of Regulation S-B.
B. No reports on Form 8-K were filed by the Company during the
quarter ended March 31, 1996.
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
South Branch Valley Bancorp, Inc.
(registrant)
By:
-------------------------------------------
H. Charles Maddy, III, President and
Chief Financial Officer
By:
-------------------------------------------
Russell Ratliff, Jr., Treasurer
Date: May 13 , 1996
- - -----------------------
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
South Branch Valley Bancorp, Inc.
(registrant)
By: /s/ H. Charles Maddy, III
-------------------------------------------
H. Charles Maddy, III, President and
Chief Financial Officer
By: /s/ Russell Ratliff, Jr.
-------------------------------------------
Russell Ratliff, Jr., Treasurer
Date: May 13, 1996
- - ------------------------
16
9 0000811808 SOUTH BRANCH VALLEY NATIONAL BANK 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 2,210,491 2,044,976 180,503 0 32,120,276 0 0 73,312,220 (849,474) 113,536,495 99,669,268 0 722,131 1,743,891 0 0 956,562 10,444,643 113,536,495 1,797,817 483,851 59,168 2,340,836 1,140,623 1,161,848 1,178,988 10,000 33,912 813,742 476,355 311,185 0 0 311,185 .82 .82 4.50 430,508 285,269 55,469 908,723 859,681 25,524 5,317 849,474 849,474 0 0