FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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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
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
--- ---
The number of shares outstanding of each of the issuer's classes of common
stock, as of May 10, 2000: $0.10 par value - 423,612 common shares.
Transitional Small Business Disclosure Format (check one):
Yes No X
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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, 2000 (unaudited) and June 30, 1999 1
Consolidated Statements of Income for the Three
and Nine Months Ended March 31, 2000 and
March 31, 1999 (unaudited) 2
Consolidated Statements of Comprehensive Income
for the Three and Nine Months Ended March 31, 2000
and March 31, 1999 (unaudited) 3
Consolidated Statements of Cash Flows for the
Nine Months Ended March 31, 2000 and
March 31, 1999 (unaudited) 4
Notes to Unaudited Interim Consolidated
Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION 12
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SWVA BANCSHARES, INC & SUBSIDIARY
Consolidated Statements of Financial Condition
(In thousands)
Assets
Mar 31 June 30
------------ ------------
2000 1999
------------ ------------
(Unaudited)
Cash and cash equivalents $ 1,399 $ 2,454
Interest-bearing deposits 3,040 6,278
Investment & Mortgage Backed Securities:
Held to Maturity, at amortized cost 261 283
Available for Sale, at fair value 21,767 22,934
Restricted at cost 550 600
Loans held for sale 270 476
Loans receivable, net 52,684 45,576
Property and equipment, net 1,653 1,688
Accrued interest receivable 615 594
Prepaid expenses and other assets 884 831
----------- -----------
Total assets $ 83,123 $ 81,714
=========== ===========
Liabilities and Stockholders' Equity
Deposits $ 65,240 $ 62,094
Advances from Federal Home Loan Bank 10,250 12,000
Advances from borrowers
for taxes and insurance 378 210
Other liabilities and deferred income 629 619
----------- -----------
Total liabilities 76,497 74,923
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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, 423,612 outstanding
as of March 31, 2000 and
June 30, 1999 42 42
Additional paid-in capital 2,827 2,838
Less unearned ESOP shares (27,385 shares) (228) (228)
Less unearned MSBP shares (14,895 shares) (241) (254)
Dividends declared and paid (152) (180)
Retained earnings
(substantially restricted) 5,237 5,088
Valuation allowance
marketable equity securities (859) (515)
----------- -----------
Total Stockholders' Equity 6,626 6,791
----------- -----------
Total Liabilities
and Stockholders' Equity $ 83,123 $ 81,714
=========== ===========
Book Value Per Share (not in thousands) $ 15.64 $ 16.03
=========== ===========
1
SWVA BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands)
Three Months Nine Months
Ended
March 31
----------------------------------
2000 1999 2000 1999
---- ---- ---- ----
(Unaudited)
Interest Income
Loans $1,033 $ 934 $2,967 $2,936
Mortgage-backed and related securities 157 137 477 448
U.S. Government obligations including agencies 206 158 620 472
Municipal Bonds 30 17 89 40
Other investments, including overnight deposits 84 162 315 482
------ ------ ------ ------
Total interest income 1,510 1,408 4,468 4,378
------ ------ ------ ------
Interest expense
Deposits 696 676 2,021 2,206
Borrowed funds 126 119 409 342
------ ------ ------ ------
Total interest expense 822 795 2,430 2,548
------ ------ ------ ------
Net interest income 688 613 2,038 1,830
Provision for credit losses 3 3 9 9
------ ------ ------ ------
Net interest income after
provision for credit losses 685 610 2,029 1,821
------ ------ ------ ------
Noninterest income
Loan and other customer service fees 50 40 191 114
Gain on sale of mortgage loans 17 60 85 267
Gross rental income 25 25 76 76
Gain (loss) on Available for Sale Investments 0 0 0 0
Other 0 0 0 9
------ ------ ------ ------
Total noninterest income 92 125 352 466
------ ------ ------ ------
Noninterest expenses
Personnel 390 372 1,113 1,072
Office occupancy and equipment 84 84 255 251
Data processing 64 57 181 167
Federal insurance of accounts 4 10 22 30
Other 129 108 356 345
------ ------ ------ ------
Total noninterest expenses 671 631 1,927 1,865
------ ------ ------ ------
Income before income taxes 106 104 454 422
Provision for income taxes 9 40 125 162
------ ------ ------ ------
Net Income $ 97 $ 64 $ 329 $ 260
====== ====== ====== ======
Basic earnings per share $ .24 $ .14 $ .82 $ .56
====== ====== ====== ======
Diluted earnings per share $ .24 $ .14 $ .82 $ .56
====== ====== ====== ======
Cash dividends per share $ .20 $ .20 $ .40 $ .40
====== ====== ====== ======
2
SWVA BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(In thousands)
Three Months Nine Months
Ended
March 31
---------------------------------
2000 1999 2000 1999
---- ---- ---- ----
(Unaudited)
Net Income $ 97 $ 64 $ 329 $ 260
Other comprehensive income, net of tax
Unrealized gains (losses) on securities 66 (143) (345) (158)
----- ----- ----- -----
Comprehensive Income $ 163 $ (79) $ (16) $ 102
===== ===== ===== =====
3
SWVA BANCSHARES, INC. & SUBSIDIARIES
Consolidated Statements of Cash Flow
(In Thousands)
Nine Months Ended
Mar 31
2000 1999
------- ----------
(Unaudited)
Operating Activities
Net Income $ 329 $ 260
Adjustments to Reconcile Net Income to Net Cash
Provided by (used in) operating activities
MSBP Shares Allocated 13 45
Provision for credit losses 9 9
Provision for depreciation and amortization 86 79
Loans Originated for Sale (5,899) (24,795)
Proceeds from sales of loans originated for sale 6,189 25,937
Gain on Sale of Loans, from fees (84) (267)
Gain on Disposal of Property and Equipment - -
Net gain on sale of investments, available for sale - -
Net (increase) decrease in Other Assets 111 126
Net increase (decrease) in Other Liabilities 169 41
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Net cash provided by (used in) operating activities 923 1,435
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Investing activities
Proceeds from maturity of investments
and interest-bearing deposits 4,725 5,136
Proceeds from sale of FHLB Stock 109 -
Proceeds from sale of available for sale investments (1,487) 7,250
Purchase of investments and interest-bearing deposits - (5,014)
Purchase of available for sale investments - (9,571)
Purchase of property and equipment (50) (51)
Purchase of FHLB Stock (59) -
Net (increase) decrease in loans (5,217) 4,193
Purchase of loans (1,900) (1,313)
Principal repayments on Mortgage Backed Securities 657 2,639
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Net cash provided by (used in) investing activities (3,222) 3,269
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Financing activities
Curtailment of advances and other borrowings (6,500) (1,000)
Proceeds from advances and other borrowings 4,750 3,000
Net increase (decrease) in savings deposits 3,146 (4,456)
Repurchase of stock - (1,209)
Dividends paid (152) (173)
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Net cash used in financing activities 1,244 (3,838)
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Increase (decrease) in cash and cash equivalents (1,055) 866
Cash and cash equivalents at beginning of period 2,454 3,193
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Cash and cash equivalents at end of period $ 1,399 $ 4,059
======= ======
4
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 nine months ended March 31, 2000, are not necessarily
indicative of the results that may be expected for the year ending June 30,
2000.
NOTE 2 -- EARNINGS PER SHARE
The following table sets forth the reconciliation of the numerators and
denominators of the basic and diluted earnings per share (EPS) computations:
Three Months Nine Months
Ended
March 31,
---------------------------------------------------
2000 1999 2000 1999
---- ---- ---- ----
(Unaudited)
Numerator:
(a) Net income available to shareholders $ 97 $ 64 $ 329 $ 260
========= ========= ========= =========
Denominator:
Weighed-average shares outstanding 423,612 473,968 423,612 487,759
Less: ESOP weighed-average shares outstanding (22,819) (27,385) (22,819) (27,385)
--------- --------- --------- ---------
(b) Basic EPS weighed-average shares outstanding 400,793 446,583 400,793 460,374
Effect of dilutive securities:
Incremental shares attributable to the Stock Option
Plan and Management Stock Bonus Plan 0 0 0 0
--------- --------- --------- ---------
(c) Diluted EPS weighed-average shares outstanding 400,793 446,583 400,793 460,374
========= ========= ========= ========
Basic earnings per share (a/b) $ .24 $ .14 $ .82 $ .56
========= ========= ========= ========
Diluted earnings per share (a/c) $ .24 $ .14 $ .82 $ .56
========= ========= ========= ========
5
NOTE 3 -- FASB Statement on Reporting Comprehensive Income
Effective July 1, 1998, the Company adopted FASB Statement No. 130, "Reporting
Comprehensive Income." Statement No. 130 requires the reporting of comprehensive
income in addition to net income from operations. Comprehensive income is a more
inclusive financial reporting methodology that includes certain disclosure of
certain financial information that has historically not been recognized in the
calculation of net income.
The company had unrealized gain on securities held for sale, for the three
months ended March 31, 2000 of $66,000 after tax versus an unrealized loss of
$143,000 after tax for the three months ended March 31, 1999. The Company had
unrealized loss on securities held as available for sale, for the nine months
ended March 31, 2000 of $345,000 after tax versus and unrealized loss of
$158,000 after tax for the nine months ended March 31, 1999. The before and
after tax amount, as well as the tax benefit is summarized below.
Tax
Before (Expense) After
Tax Benefit Tax
--- ------- ---
Three months ended March 31, 2000:
Unrealized gains (losses) on securities $ 99 ($33) $ 66
Three months ended March 31, 1999:
Unrealized gains (losses) on securities ($144) $ 1 ($143)
Nine months ended March 31, 2000:
Unrealized gains (losses) on securities ($522) $177 ($345)
Nine months ended March 31, 1999:
Unrealized gains (losses) on securities ($168) $10 ($158)
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Comparison of Financial Condition at March 31, 2000 and June 30, 1999
- ---------------------------------------------------------------------
Total assets increased $1.4 million or 1.72% from $81.7 million at June 30, 1999
to $83.1 million at March 31, 2000. Net loans receivable increased $7.1 million
or 15.60% to $52.7 million at March 31, 2000 from $45.6 million at June 30, 1999
due primarily to additional mortgage loans added to the Bank's portfolio and
continued growth in consumer and commercial loans during the quarter ended March
31, 2000.
.
Cash and cash equivalents decreased $1.1 million from $2.5 million at June 30,
1999 to $1.4 million at March 31, 2000. The cash flow from loan payments and
payoffs on mortgage loans and mortgage backed securities and from certificates
of deposits was used to fund new loans. Interest bearing deposits decreased $3.3
million or 51.58% from $6.3 million at June 30, 1999 as compared to $3.0 million
at March 31, 2000, due to a decrease in jumbo certificates in the Bank's
portfolio which are matched with interest bearing deposits. Available for Sale
Investments decreased $1.1 million to $21.8 million at March 31, 2000 due mainly
to principal paybacks on Mortgage Backed Securities. Loans held for sale
decreased $206,000 from $476,000 at June 30, 1999 to $270,000 at March 31, 2000
due to a reduction in the local market demand for mortgage loans.
There were non-performing loans at March 31, 2000 totaling $118,000. The loans
are secured by single family real estate and no loss is anticipated. There were
no non-performing assets at June 30, 1999. Classified assets totaled $531,000.
An unsecured consumer loan for $4,000 was classified as doubtful. The remaining
classified loans were classified as substandard and were primarily single family
mortgage loans.
Deposits increased $3.1 million, or 5.07% from $62.1 million at June 30, 1999 to
$65.2 million at March 31, 2000 due mainly to an increase in certificates of
deposits. These funds were used to fund loan growth. Core deposits were $19.5
million or 29.80% of total deposits.
At March 31, 2000, there were $10.3 million outstanding in advances from the
Federal Home Loan Bank of Atlanta. The decrease in advances of $1.7 million was
due to payment of cash available from funds received on certificates of deposit.
Advances from borrowers for taxes and insurance increased $168,000 due to the
accumulation of funds to pay real estate taxes due during the quarter ending
June 30, 2000.
Results of Operations for the three months ended March 31, 2000
- ---------------------------------------------------------------
and March 31, 1999
- ------------------
Net Income Net income increased $33,000 or 51.56%, from $64,000 for the
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three months ended March 31, 1999 to $97,000 for the three months ended March
31, 2000. The increase was mainly due to increased net interest income.
Interest Income Interest income increased $102,000, or 7.24%, from $1.4
---------------
million for the three months ended March 31, 1999 to $1.5 million for the three
months ended March 31, 2000. The increase was mainly a result in the increase in
earnings on a larger loan portfolio.
Interest Expense Interest expense increased $27,000 or 3.40% from
-----------------
$795,000 for the three months ended March 31, 1999 to $822,000 for the three
months ended March 31, 2000. The increase was due mainly to an increase in loan
production and upward adjustments on variable rate loans.
Net Interest Income Net interest income increased by $75,000 or 12.23%
------------
from $613,000 for the three months ended March 31, 1999 to $688,000 for the
three months ended March 31, 2000. The increase was due mainly to an increase in
loans and an increase in borrowed funds and certificates of deposits.
Provision for Credit Losses The Bank made an addition of $3,000 to the
----------------------------
provision for credit losses for the quarter ended March 31, 2000. The allowance
for credit losses was $219,000 at March 31, 2000. The Bank made an addition of
$3,000 to the provision for credit losses for the quarter ended March 31, 1999.
The allowance for credit losses was $206,000 at March 31, 1999.
7
Results of Operations for the three months ended March 31, 2000
- ---------------------------------------------------------------
and March 31, 1999, cont.
- -------------------------
Non-interest Income Non-interest income decreased by $33,000, or 26.40%
-------------------
from $125,000 for the three months ended March 31, 1999 to $92,000 for the three
months ended March 31, 2000. The decrease was mainly due to a decrease in gains
on the sale of mortgage loans.
Non-interest Expense Non-interest expense increased by $40,000, or
---------------------
6.34% from $631,000 for the three months ended March 31, 1999 to $671,000 for
the three months ended March 31, 2000, mainly due to an increase in personnel
expense, data processing, and advertising expenses partially offset by a
reduction in Federal insurance of account premiums.
Provision for income taxes The provision for income taxes for the three
--------------------------
months ended March 31, 1999 was $40,000 as compared to $9,000 for the three
months ended March 31, 2000. The decrease was due to adjustment for taxes paid
in prior years on deferred compensation expenses and a review of the tax accrual
on municipal bonds.
Results of Operations for the nine months ended March 31, 2000
- --------------------------------------------------------------
and March 31, 1999
- ------------------
Net Income Net income increased $69,000 or 26.54%, from $260,000 for
----------
the nine months ended March 31, 1999 to $329,000 for the nine months ended March
31, 2000. The increase was mainly due to increased net interest income.
Interest Income Interest income increased $90,000, or 2.06%, from $4.4
---------------
million for the nine months ended March 31, 1999 to $4.5 million for the nine
months ended March 31, 2000. The increase was mainly a result in the increase in
earnings on a larger loan portfolio, particularly in consumer and commercial
loans.
Interest Expense Interest expense decreased $118,000 or 4.63% from $2.5
----------------
million for the nine months ended March 31, 1999 to $2.4 million for the nine
months ended March 31, 2000. The decrease was due mainly to a decrease in cost
of funds as high cost certificates of deposits matured and were repriced.
Net Interest Income Net interest income increased by $208,000 or 11.37%
-------------------
from $1.8 million for the nine months ended March 31, 1999 to $2.0 million for
the nine months ended March 31, 2000. The increase was mainly due to a decrease
in interest paid on deposits and by increased income on investment securities
and loans.
Provision for Credit Losses The Bank made an addition of $9,000 to the
----------------------------
provision for credit losses for the nine months ended March 31, 2000. The
allowance for credit losses was $219,000 at March 31, 2000. The allowance for
credit losses was $206,000 at March 31, 1999. A charge to the provision for
credit losses was made for a $9,000 loss on a consumer loan during the nine
months ended March 31, 1999.
Non-interest Income Non-interest income decreased by $114,000 from
--------------------
$466,000 for the nine months ended March 31, 1999 to $352,000 for the nine
months ended March 31, 2000. The decrease was mainly due to a decrease in gains
on the sale of mortgage loans although mitigated by an increase in other fee
income.
Non-interest Expense Non-interest expense increased by $62,000 to $1.9
---------------------
million for the nine months ended March 31, 2000, mainly due to increases in
personnel expense, data processing expense and advertising expenses.
Provision for income taxes The provision for income taxes for the nine
---------------------------
months ended March 31, 2000 was $125,000 compared to $162,000 for the nine
months ended March 31, 1999. The decrease was due to the tax savings associated
with municipal bonds and an adjustment during the quarter ended March 31, 2000
for prior year tax adjustment on deferred compensation expense.
8
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,
2000:
Percent of
----------
Amount Assets
------ ------
GAAP Capital.................... $7,200 8.54%
===== =====
Tangible Capital................ $7,200 8.54%
Tangible Capital Requirement.... 1,265 1.50%
----- -----
Excess.......................... $5,935 7.04%
===== =====
Core Capital.................... $7,200 8.54%
Core Capital Requirement........ 2,530 3.00%
----- -----
Excess.......................... $4,670 5.54%
===== =====
Total Risk-Based Capital........ $7,419 15.91%
Risk-Based Capital Requirement.. 3,731 8.00%
----- -----
Excess.......................... $3,688 7.91%
===== =====
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, 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. Current regulations require the Bank
to maintain liquid assets of not less than 4% of its net withdrawable accounts
plus short term borrowings. Those levels may be changed from time to time by the
regulators to reflect current economic conditions. The Bank's regulatory
liquidity was 26.79% at March 31, 2000 and 30.11% as of June 30, 1999.
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.
9
SWVA BANCSHARES, INC. & SUBSIDIARIES
PART II
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities and Use of Proceeds
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K.
None.
10
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 10, 2000 By: /s/ D. W. Shilling
--------------------
D. W. Shilling
President, Chief Financial Officer, and Director
Date: May 10, 2000 By: /s/ Mary G. Staples
--------------------
Mary G. Staples
Controller/Treasurer
Principal Financial Officer