SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2002
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
For the transition period from ____________ to ____________
Commission File Number 0-22535
Sistersville Bancorp, Inc.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 31-1516424
- -------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
726 Wells Street, Sistersville, WV 26175
----------------------------------------
(Address of principal executive offices)
(304) 652-3671
--------------
(Registrant's telephone number, including area code)
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after distribution of
securities under a plan confirmed by a court. 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:
Class: Common Stock, par value $.10 per share
Outstanding at October 31, 2002: 437,592 shares
SISTERSVILLE BANCORP, INC.
INDEX
Page
Number
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) as of
September 30, 2002, and March 31, 2002 3
Consolidated Statements of Income (Unaudited)
for the Three Months ended September 30, 2002 and 2001 4
Consolidated Statements of Comprehensive Income (Unaudited)
for the Three Months ended September 30, 2002 and 2001 5
Consolidated Statements of Income (Unaudited)
for the Six Months ended September 30, 2002 and 2001 6
Consolidated Statements of Comprehensive Income (Unaudited)
for the Six Months ended September 30, 2002 and 2001 7
Consolidated Statements of Cash Flows (Unaudited)
for the Six Months ended September 30, 2002 and 2001 8
Notes to Unaudited Consolidated Financial Statements 9 - 10
Item 2. Management's Discussion and Analysis 11 - 14
Item 3. Controls and Procedures 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6 Exhibits and Reports on Form 8-K 16
SIGNATURES
CERTIFICATION
SISTERSVILLE BANCORP, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 30, March 31,
2002 2002
---------------- ----------------
ASSETS
Cash and Cash Equivalents:
Cash and amounts due from banks $ 290,669 $ 302,562
Interest-bearing deposits with other institutions 3,148,104 4,531,561
---------------- ----------------
Total cash and cash equivalents 3,438,773 4,834,123
---------------- ----------------
Investment Securities:
Securities held-to-maturity (fair value of $90,672
and $107,001, respectively) 88,344 103,894
Securities available-for-sale 9,760,623 3,589,205
---------------- ----------------
Total investment securities 9,848,967 3,693,099
---------------- ----------------
Loans receivable, (net of allowance for loan losses
of $177,900 and $178,100, respectively) 30,302,906 30,264,877
Office properties and equipment, net 1,584,877 1,581,909
Accrued interest receivable (net of reserve for
uncollected interest of $2,481 and $1,314, respectively) 281,678 215,253
Other assets 310,132 291,768
---------------- ----------------
TOTAL ASSETS $ 45,767,333 $ 40,881,029
================ ================
LIABILITIES
Deposits $ 36,395,170 $ 31,344,131
Deferred income taxes 319,501 326,474
Accrued interest payable and other liabilities 218,793 133,648
---------------- ----------------
TOTAL LIABILITIES 36,933,464 31,804,253
---------------- ----------------
STOCKHOLDERS' EQUITY
Preferred Stock, $.10 par value;
500,000 shares authorized, none issued -- --
Common Stock, $.10 par value;
2,000,000 shares authorized, 661,428 issued;
437,592 outstanding 66,143 66,143
Additional paid-in capital 6,239,165 6,213,295
Treasury Stock, at cost (223,836 shares) (3,036,271) (2,644,227)
Retained Earnings - substantially restricted 5,195,289 5,128,824
Unearned Employee Stock Ownership Plan shares (ESOP) (237,241) (260,866)
Unearned Restricted Stock Plan shares (RSP) (103,505) (137,467)
Accumulated other comprehensive income 710,289 711,074
---------------- -----------------
TOTAL STOCKHOLDERS' EQUITY 8,833,689 9,076,776
---------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 45,767,333 $ 40,881,029
================ ================
See accompanying notes to the unaudited consolidated financial statements.
3
SISTERSVILLE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended September 30,
2002 2001
------------ ------------
INTEREST AND DIVIDEND INCOME
Taxable interest on loans $ 578,911 $ 579,158
Taxable interest on investments 102,471 32,221
Nontaxable interest on loans 3,801 4,359
Nontaxable interest on investments 10,235 10,249
Dividends on Federal Home Loan Bank Stock 2,276 4,236
Dividends on Federal Home Loan Mortgage Corporation Stock 3,985 3,822
------------ ------------
Total interest and dividend income 701,679 634,045
------------ ------------
INTEREST EXPENSE
Deposits 285,884 275,296
Federal Home Loan Bank advance -- 11,178
------------ ------------
Total interest expense 285,884 286,474
------------ ------------
NET INTEREST INCOME 415,795 347,571
Provision for loan losses 600 300
------------ ------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 415,195 347,271
------------ ------------
NONINTEREST INCOME
Service charges 20,342 12,907
Other income 681 333
Gain on call and sale of available-for-sale securities 91,007 --
------------ ------------
Total noninterest income 112,030 13,240
------------ ------------
NONINTEREST EXPENSE
Compensation and employee benefits 259,135 155,331
Occupancy 24,461 18,756
Furniture and equipment expense 21,552 15,494
Deposit insurance premiums 1,351 1,152
Supervisory examination, audit, and legal fees 16,710 12,823
Advertising and public relations 8,750 9,339
Service bureau expense 31,692 28,076
Franchise, payroll, and other taxes 16,209 14,369
Other expenses 27,503 21,265
------------ ------------
Total noninterest expense 407,363 276,605
------------ ------------
Income before income taxes 119,862 83,906
Income taxes 40,696 9,038
------------ ------------
NET INCOME $ 79,166 $ 74,868
============ ============
EARNINGS PER SHARE
Basic $ .19 $ .18
============ ============
Diluted $ .19 $ .17
============ ============
AVERAGE SHARES OUTSTANDING - BASIC 414,850 419,507
============ ============
AVERAGE SHARES OUTSTANDING - DILUTED 425,066 429,502
============ ============
See accompanying notes to the unaudited consolidated financial statements.
4
SISTERSVILLE BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended September 30,
2002 2001
---------- -----------
NET INCOME $ 79,166 $ 74,868
---------- -----------
Other comprehensive income, net of tax:
Unrealized gain (loss) on securities:
Unrealized holding gain (loss) (22,331) (41,069)
Less: Reclassification adjustment for
(loss) gain included in net income 30,942 --
---------- -----------
Other comprehensive income (loss) (53,273) (41,069)
---------- -----------
COMPREHENSIVE INCOME $ 25,893 $ 33,799
========== ===========
See accompanying notes to the unaudited consolidated financial statements.
5
SISTERSVILLE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Six Months Ended September 30,
2002 2001
------------- ------------
INTEREST AND DIVIDEND INCOME
Taxable interest on loans $ 1,178,945 $ 1,122,526
Taxable interest on investments 167,896 65,722
Nontaxable interest on loans 7,815 6,883
Nontaxable interest on investments 20,503 20,530
Dividends on Federal Home Loan Bank Stock 4,509 8,423
Dividends on Federal Home Loan Mortgage Corporation Stock 7,402 7,645
------------- ------------
Total interest and dividend income 1,387,070 1,231,729
------------- ------------
INTEREST EXPENSE
Deposits 568,512 552,761
Federal Home Loan Bank advance -- 11,178
------------- ------------
Total interest expense 568,512 563,939
------------- ------------
NET INTEREST INCOME 818,558 667,790
Provision for loan losses 1,200 600
------------- ------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 817,358 667,190
------------- ------------
NONINTEREST INCOME
Service charges 39,487 25,297
Other income 1,224 674
Gain on sale of available-for-sale securities 91,007 --
------------- ------------
Total noninterest income 131,718 25,971
------------- ------------
NONINTEREST EXPENSE
Compensation and employee benefits 429,155 297,406
Occupancy 47,659 39,035
Furniture and equipment expense 38,572 29,782
Deposit insurance premiums 2,644 2,254
Supervisory examination, audit, and legal fees 32,579 26,668
Advertising and public relations 16,804 17,669
Service bureau expense 63,059 58,684
Franchise, payroll, and other taxes 30,482 30,420
Other expenses 47,836 44,893
------------- ------------
Total noninterest expense 708,790 546,811
------------- ------------
Income before income taxes 240,286 146,350
Income taxes 79,706 21,039
------------- ------------
NET INCOME $ 160,580 $ 125,311
============= ============
EARNINGS PER SHARE
Basic $ .38 $ .30
============= ============
Diluted $ .37 $ .29
============= ============
AVERAGE SHARES OUTSTANDING - BASIC 420,929 418,443
============= ============
AVERAGE SHARES OUTSTANDING - DILUTED 433,125 428,179
============= ============
See accompanying notes to the unaudited consolidated financial statements.
6
SISTERSVILLE BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Six Months Ended September 30,
2002 2001
----------- ------------
NET INCOME $ 160,580 $ 125,311
----------- ------------
Other comprehensive income, net of tax:
Unrealized gain (loss) on securities:
Unrealized holding gain (loss) during the period 30,157 3,070
Less: reclassification adjustment for
(loss) gain included in net income 30,942 --
----------- ------------
Other comprehensive income (loss) (785) 3,070
----------- ------------
COMPREHENSIVE INCOME $ 159,795 $ 128,381
=========== ============
See accompanying notes to the unaudited consolidated financial statements.
7
SISTERSVILLE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended September 30,
2002 2001
------------- --------------
OPERATING ACTIVITIES
Net income $ 160,580 $ 125,311
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization, and accretion, net 59,418 41,926
Gain on maturity or call of available-for-sale securities (91,007) --
Provision for loan losses 1,200 600
Deferred federal income taxes -- (5,000)
ESOP and RSP amortization 83,457 46,431
Decrease (increase) in accrued interest receivable
and other assets (84,789) 4,976
Increase (decrease) in accrued interest payable
and other liabilities 85,147 (28,805)
------------- -----------
Net cash provided by operating activities 214,006 185,439
------------- -----------
INVESTING ACTIVITIES
Purchase of available-for-sale securities (7,064,946) (100,000)
Principal collected on mortgage-backed securities 165,578 130,958
Proceeds from maturity or call of available-for-sale securities 811,540 450,000
Net increase in loans (39,229) (2,572,446)
Purchases of office properties and equipment (47,178) (5,992)
------------- -----------
Net cash used for investing activities (6,174,235) (2,097,480)
------------- -----------
FINANCING ACTIVITIES
Net increase in deposits 5,051,039 2,062,400
Net Federal Home Loan Bank advance -- 1,000,000
Dividends paid (94,116) (85,400)
Purchase of Treasury Stock (392,044) (210,802)
------------- -----------
Net cash provided by financing activities 4,564,879 2,766,198
------------- -----------
Change in cash and cash equivalents (1,395,350) 854,157
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 4,834,123 1,125,056
------------- -----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 3,438,773 $ 1,979,213
============= ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid during the period for:
Interest on deposits and borrowings $ 289,694 $ 547,908
Income taxes 72,000 37,800
See accompanying notes to the unaudited consolidated financial statements.
8
SISTERSVILLE BANCORP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements of Sistersville Bancorp, Inc. (the
"Company"), include its wholly-owned subsidiary, First Federal Savings Bank (the
"Bank"). All significant inter-company balances and transactions have been
eliminated.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-QSB and, therefore, do not
necessarily include all information that would be included in audited financial
statements. The information furnished reflects all adjustments which are, in the
opinion of management, necessary for a fair statement of the results of
operations. All such adjustments are of a normal recurring nature. The results
of operations for the interim periods are not necessarily indicative of the
results to be expected for the fiscal year ended March 31, 2003.
These statements should be read in conjunction with the consolidated statements
as of and for the fiscal year ended March 31, 2002, and related notes which are
included in the Company's Annual Report on Form 10-KSB (file no. 0-22535).
NOTE 2 - RECENT ACCOUNTING STANDARDS
The FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets," which
addresses financial accounting and reporting for acquired goodwill and other
intangible assets and supersedes APB Opinion No. 17, "Intangible Assets," but it
does carry forward some guidance from that statement. This statement requires
that an intangible asset that is acquired either individually or with a group of
other assets (but not those acquired in a business combination) shall be
initially recognized and measured based on its fair value. Under SFAS No. 142,
goodwill is not amortized and intangible assets with a finite useful life are
amortized and those intangible assets with an infinite life are not amortized.
This statement is generally effective for fiscal years beginning after December
15, 2001, to all goodwill and other intangible assets recognized in an entity's
statement of financial position at the beginning of that fiscal year, regardless
of when those previously recognized assets were initially recognized. The
provisions of this statement shall be initially applied at the beginning of a
fiscal year; retroactive application is not permitted. The adoption of SFAS No.
142 did not have a material impact on the Company.
The FASB recently issued SFAS No. 143, "Accounting for Asset Retirement
Obligations," which addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. This statement requires an entity to recognize the fair
value of a liability for an asset retirement obligation in the period in which
it is incurred if a reasonable estimate of fair value can be made. This
statement is effective for financial statements issued for fiscal years
beginning after June 15, 2002. Initial application of this statement is as of
the beginning of an entity's fiscal year. Management does not believe the
adoption of SFAS No. 143 will have a material impact on the Company.
The FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." SFAS No. 144 supercedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed," and
the Accounting Principles Board Opinion No. 30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," and
amends Accounting Research Bulletin No. 51, "Consolidated Financial Statements."
This statement is generally effective for financial statements issued for fiscal
years beginning after December 31, 2001, and interim periods within those fiscal
years. The adoption of SFAS No. 144 did not have a material impact on the
Company.
The FASB also issued SFAS No. 145, "Rescission of SFAS No. 4, 44, and 64,
Amendment of SFAS No. 13, and Technical Corrections." This Statement rescinds
SFAS No. 4, "Reporting Gains and Losses from Extinguishments of Debt," and an
amendment of that Statement, SFAS No. 64, "Extinguishments of Debt made to
Satisfy Sinking-Fund Requirements." This Statement also rescinds SFAS No. 44,
"Accounting for Intangible Assets of Motor Carriers." This Statement amends SFAS
No. 13, "Accounting for Leases," to eliminate the inconsistency between the
required accounting for sale-leaseback transactions and the required accounting
for certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. This Statement also amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings, or describe their
9
applicability under changed conditions. This statement is generally effective
for financial statements issued on or after May 15, 2002. The adoption of SFAS
No. 144 did not have a material impact on the Company.
The FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or
Disposal Activities." This Statement requires that a liability for a cost
associated with an exit or disposal activity be recognized and measured
initially at fair value when the liability is incurred. This statement nullifies
Emerging Issues Task Force Issue No. 94-3, which required the recognition of a
liability for an exit cost at the date of an entity's commitment to an exit
plan. The effective date of this Statement is for exit or disposal activities
that are initiated after December 31, 2002, with early application encouraged.
Management believes the adoption of this Statement will not have a material
impact on the Company.
10
MANAGEMENT'S DISCUSSION AND ANALYSIS
Comparison of Financial Condition at September 30, 2002, and March 31, 2002
Total assets increased by $4.9 million to $45.8 million at September 30, 2002,
from $40.9 million at March 31, 2002. Cash and cash equivalents decreased by
$1.4 million to $3.4 million at September 30, 2002, from $4.8 million at March
31, 2002. The decrease represented the outflow of cash from the increase in loan
production, payment of dividends, and the purchase of available-for-sale
securities, office properties and equipment, and shares for treasury offset by
the inflow of cash from operating activities, customers' investment of funds in
deposit accounts, proceeds from the maturity or call of available-for-sale
securities, and principal collected on mortgage-backed securities. Investment
securities increased $6.1 million from $3.7 million at March 31, 2002, to $9.8
million at September 30, 2002. The increase was the direct result of the
purchase of $4.5 million in U.S. agency obligations and $2.6 million in
mortgage-backed securities offset by the call of U.S. agency obligations of
$719,000 and the principal collected on mortgage-backed securities of $166,000.
Net loans receivable was relatively unchanged at $30.3 million at September 30,
2002.
Total liabilities increased $5.1 million to $36.9 million at September 30, 2002,
from $31.8 million at March 31, 2002. The increase was the direct result of an
increase in customer deposits of $5.1 million from $31.3 million at March 31,
2002, to $36.4 million at September 30, 2002. The increase in deposits is
attributable to the relatively stable interest rates offered by the Bank on
deposit accounts as compared to alternative investment products. Accrued
interest payable and other liabilities increased $85,000 to $219,000 at
September 30, 2002, from $134,000 at March 31, 2002. The increase was
attributable to the recognition of $87,000 in accrued compensation expense for
the implementation of the First Federal Savings Bank Directors Consultation and
Retirement Plan, effective July 1, 2002. This plan was implemented to encourage
Board of Director participation and service to the Bank, and following
retirement, to encourage such directors to continue to serve the Bank as a
consulting director for a period of time thereafter.
Stockholders' equity decreased by $243,000, from $9.1 million at March 31, 2002,
to $8.8 million at September 30, 2002. The decrease was attributable to the
payment of dividends of $94,000 and purchase of shares for treasury of $392,000,
offset by net income of $161,000 and amortization of the ESOP and RSP of
$83,000.
Comparison of the Results of Operations for the Three Months ended September 30,
2002 and 2001
Net income increased by $4,000, or 5.7%, from net income of $75,000 for the
three months ended September 30, 2001, to net income for the three months ended
September 30, 2002, of $79,000.
Interest and dividend income increased $68,000, 10.7%, from $634,000 at
September 30, 2001, to $702,000 at September 30, 2002. The increase is
attributed to the increase in interest on investments of $70,000, or 165.4%. The
increase in interest on investments was due to the increase in the average
investments of $5.9 million, from $4.7 million for the three-month period ended
September 30, 2001, to $10.6 million for the three-month period ended September
30, 2002.
Interest expense decreased by $1,000 for the three months ended September 30,
2002, to $286,000. The decrease was attributable to the decrease in Federal Home
Loan Bank advance interest expense of $11,000 for which no borrowing from the
Federal Home Loan Bank existed during the three months ended September 30, 2002.
This was offset by an increase in interest expense on deposits of $10,000, or
3.9%, from $276,000 for the three months ended September 30, 2001, to $286,000
for the same period ending September 30, 2002. The increase in interest expense
on deposits was the direct result of an increase in the average balance of
interest-bearing deposits of $10.5 million, from $24.5 million for the
three-month period ended September 30, 2001, to $35.0 million for the same
period in 2002, offset by the 122 basis point decrease in the cost of funds from
4.49% for the three months ended September 30, 2001, to 3.27% for the three
months ended September 30, 2002.
Management regularly performs an analysis to identify the inherent risk of loss
in its loan portfolio. This analysis includes evaluation of concentrations of
credit, past loss experience, current economic conditions, amount and
composition of the loan portfolio (including loans being specifically monitored
by management), estimated fair value of underlying collateral, loan commitments
outstanding, delinquencies, and other factors. Based on this analysis,
management established an allowance for loan losses. The allowance for loan
losses is adjusted periodically by a provision for loan losses, which is charged
to operations based on management's evaluation of the losses that may be
incurred in the Bank's portfolio. The provision for loan losses increased by
$300 for the three months ended September 30, 2002, as compared to the same
three months ended September 30, 2001.
11
The Bank will continue to monitor its allowance for loan losses and make future
additions to the allowance through the provision for loan losses as economic
conditions dictate. Although the Bank maintains its allowance for loan losses at
a level that it considers to be adequate to provide for the inherent risk of
loss in its loan portfolio, there can be no assurance that future losses will
not exceed estimated amounts or that additional provisions for loan losses will
not be required in future periods. In addition, the Bank's determination as to
the amount of its allowance for loan losses is subject to review by its primary
federal regulator, the Office of Thrift Supervision ("OTS"), as part of its
examination process, which may result in the establishment of an additional
allowance based on the judgment of the OTS after a review of the information
available at the time of the OTS examination.
Non-interest income increased by $99,000 to $112,000 for the three-month period
ended September 30, 2002, from $13,000 for the same period in 2001. The increase
was due to the gain on sale and call of available-for-sale securities in the
amount of $91,000 for the three months ended September 30, 2002, which did not
occur during the three months ended September 30, 2001.
Non-interest expense increased by $130,000, or 47.3%, to $407,000 for the three
months ended September 30, 2002, from $277,000 for the same period in 2001.
Compensation and employee benefits increased by $104,000, or 66.9%, to $259,000
for the three months ended September 30, 2002, from $155,000 for the same period
in 2001. The increase in compensation and employee benefits was attributable to
the recognition of $87,000 in compensation expense relating to the
implementation of the First Federal Savings Bank Directors Consultation and
Retirement Plan, effective July 1, 2002. The increase in compensation and
employee benefits was also attributable to an increase in pension expense in the
amount of $8,000.
Income tax expense increased by $32,000, from $9,000 for the three months ended
September 30, 2001, to $41,000 for the three months ended September 30, 2002.
Comparison of the Results of Operations for the Six Months ended September 30,
2002 and 2001
Net income increased by $36,000, or 28.2%, from net income of $125,000 for the
six months ended September 30, 2001, to net income for the six months ended
September 30, 2002, of $161,000.
Interest and dividend income increased $155,000, or 12.6%, from $1.2 million for
the six months ended September 30, 2001, to $1.4 million for the six months
ended September 30, 2002. The increase is attributed to the increase in interest
on loans of $57,000, or 5.1%, and the increase in interest on investments of
$102,000, or 118.4%. The increase in interest on loans is attributed to the
average balance on loans increasing by $2.5 million to $30.6 million for the
six-month period ended September 30, 2002, from $28.1 million for the same
period in 2001. The increase in interest on investments was due to the increase
in the average investments of $5.2 million, from $4.5 million for the six-month
period ended September 30, 2001, to $9.7 million for the six-month period ended
September 30, 2002, offset by the 77 basis point decrease in the average yield
from 4.05% for the six months ended September 30, 2001, to 3.28% for the six
months ended September 30, 2002
Interest expense increased by $5,000, or .8%, for the six months ended September
30, 2002, to $569,000, from $564,000 for the six months ended September 30,
2001. The increase was attributable an increase in interest expense on deposits
of $16,000, or 2.9%, from $553,000 for the six months ended September 30, 2001,
to $569,000 for the same period ending September 30, 2002. The increase in
interest expense on deposits was the direct result of an increase in the average
balance of interest-bearing deposits of $9.4 million, from $24.2 million for the
six-month period ended September 30, 2001, to $33.6 million for the same period
in 2002, offset by the 119 basis point decrease in the cost of funds from 4.57%
for the six months ended September 30, 2001, to 3.38% for the six months ended
September 30, 2002. The increase in interest expense on deposits was offset by
the decrease in Federal Home Loan Bank advance interest expense of $11,000 for
which no borrowing from the Federal Home Loan Bank existed during the six months
ended September 30, 2002.
Management regularly performs an analysis to identify the inherent risk of loss
in its loan portfolio. This analysis includes evaluation of concentrations of
credit, past loss experience, current economic conditions, amount and
composition of the loan portfolio (including loans being specifically monitored
by management), estimated fair value of underlying collateral, loan commitments
outstanding, delinquencies, and other factors. Based on this analysis,
management established an allowance for loan losses. The allowance for loan
losses is adjusted periodically by a provision for loan losses, which is charged
to operations based on management's evaluation of the losses that may be
incurred in the Bank's portfolio. The provision for loan losses increased by
$600 for the six months ended September 30, 2002, as compared to the same six
months ended September 30, 2001.
12
The Bank will continue to monitor its allowance for loan losses and make future
additions to the allowance through the provision for loan losses as economic
conditions dictate. Although the Bank maintains its allowance for loan losses at
a level that it considers to be adequate to provide for the inherent risk of
loss in its loan portfolio, there can be no assurance that future losses will
not exceed estimated amounts or that additional provisions for loan losses will
not be required in future periods. In addition, the Bank's determination as to
the amount of its allowance for loan losses is subject to review by its primary
federal regulator, the Office of Thrift Supervision ("OTS"), as part of its
examination process, which may result in the establishment of an additional
allowance based on the judgment of the OTS after a review of the information
available at the time of the OTS examination.
Non-interest income increased by $106,000 to $132,000 for the six-month period
ended September 30, 2002, from $26,000 for the same period in 2001. The increase
was due to the gain on sale and call of available-for-sale securities in the
amount of $91,000 for the six months ended September 30, 2002, which did not
occur during the six months ended September 30, 2001. The increase was also
attributable to the increase of $14,000, or 56.1%, in service charge income. The
increase in service charge income from $25,000 for the six-month period ended
September 30, 2001 to $39,000 for the six-month period ended September 30, 2002
was the direct result of the increase in the average balance of deposit accounts
in the amount of $9.4 million.
Non-interest expense increased by $162,000, or 29.7%, to $709,000 for the six
months ended September 30, 2002, from $547,000 for the same period in 2001.
Compensation and employee benefits increased $132,000, or 44.3%, to $429,000 for
the six months ended September 30, 2002, from $297,000 for the same period in
2001. The increase in compensation and employee benefits was partially
attributable to the recognition of $87,000 in compensation expense for the First
Federal Savings Bank Directors Consultation and Retirement Plan, effective July
1, 2002. The increase was also attributable to the increase in compensation
costs of $21,000 associated with the RSP and $7,000 associated with the ESOP.
The increase in RSP costs was the direct result of participants electing to
defer vesting of RSP shares for the period of July 1, 2000, to July 1, 2001. As
a result, RSP compensation expense would not have been recognized during the
three-month period ending September 30, 2001. ESOP costs are recognized monthly
based on the fair value of Company stock. The increase in ESOP costs is the
direct result of an increase in the fair value of Company stock during the
six-month period ending September 30, 2002, as compared to the same period in
2001. The increase in compensation and employee benefits was also attributable
to an increase in pension expense in the amount of $15,000.
Income tax expense increased by $59,000, from $21,000 for the six months ended
September 30, 2001, to $80,000 for the six months ended September 30, 2002.
Liquidity and Capital Resources
The Bank's primary sources of funds are deposits, amortization and repayment of
loans, maturities of investment securities, and funds provided from operations.
While scheduled loan repayments 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 has other sources of liquidity if a need for additional funds arises.
Additional sources of liquidity include funds available from the Federal Home
Loan Bank ("FHLB") of Pittsburgh amounting to $31.3 million. As of September 30,
2002, the Bank had no outstanding advances from the FHLB.
As of September 30, 2002, the Bank had $1.2 million in outstanding mortgage and
construction loan commitments. Management believes that it has adequate sources
to meet the actual funding requirements.
Management monitors the Bank's tangible, core, and risk-based capital ratios in
order to assess compliance with OTS regulations. At September 30, 2002, the Bank
exceeded the minimum capital ratios requirements imposed by the OTS.
At September 30, 2002, the Bank's capital ratios were as follows:
Bank
Requirement Actual
----------- ------
Tangible capital 1.5% 18.16%
Core capital 4.0% 18.16%
Risk-based capital 8.0% 41.86%
13
Risk Elements
The table below presents information concerning non-performing assets including
non-accrual loans, renegotiated loans, loans 90 days or more past due, other
real estate loans, and repossessed assets. A loan is classified as non-accrual
when, in the opinion of management, there are serious doubts about
collectibility of interest and principal. At the time the accrual of interest is
discontinued, future income is recognized only when cash is received.
Renegotiated loans are those loans for which terms have been renegotiated to
provide a reduction or deferral of principal or interest as a result of the
deterioration of the borrower's ability to pay.
September 30, March 31,
2002 2002
------------- ----------
(dollars in thousands)
Loans on non-accrual basis $ - $ -
Loans past due 90 days or more 30 60
Renegotiated loans - -
---------- ----------
Total non-performing loans 30 60
---------- ----------
Other real estate - -
Repossessed assets - -
---------- ----------
Total non-performing assets $ 30 $ 60
========== ==========
Non-performing loans as a percent of total loans .10% .20%
========== ==========
Non-performing assets as a percent of total assets .07% .15%
========== ==========
Allowance for loan losses to non-performing loans 593.00% 296.67%
========== ==========
Management monitors impaired loans on a continual basis. As of September 30,
2002, the Company had no impaired loans. During the six months ended September
30, 2002, loans increased $39,000 and non-performing loans decreased $30,000,
while the allowance for loan losses decreased $200 for the same period. The
percentage of allowance for loan losses to loans outstanding remained at .6%
during this time period. The collateral requirements on such loans reduce the
risk of potential losses to an acceptable level in management's opinion.
14
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company's President and Chief Executive Officer (Principal Executive Officer
and Principal Accounting and Financial Officer), after evaluating the
effectiveness of the Company's disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) as of a date within 90 days prior to the
filing of this report (the "Evaluation Date"), has concluded that, as of the
Evaluation Date, the Company's disclosure controls and procedures were adequate
and effective to ensure that material information required to be disclosed by
the Company in reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms.
Changes in Internal Controls
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect the Company's disclosure controls and
procedures subsequent to the date of their evaluation, nor were there any
significant deficiencies or material weaknesses in the Company's internal
controls. As a result, no corrective actions were required or undertaken.
15
PART II. OTHER INFORMATION
Item 1. Legal proceedings
The registrant was not engaged in any material pending legal proceedings as
of the date of this report. From time to time, the Bank is a party to legal
proceedings within the normal course of business wherein it enforces its
security interest in loans made by it, and other matters of a like kind.
Item 2. Changes in securities
NONE
Item 3. Defaults upon senior securities
NONE
Item 4. Submission of matters to a vote of security holders
The Annual Meeting of Shareholders of Sistersville Bancorp, Inc. was held
on July 18, 2002. The following are the votes cast on each matter presented to
the shareholders:
1. The election of director for a term expiring in 2005:
For Withheld
------- --------
Michael Melrose 352,042 81,219
Item 5. Other information
Any proposals of shareholders intended to be included in the Company's
proxy statement and proxy card for the 2003 Annual Meeting of Shareholders
should be sent to the Company by certified mail and must be received by the
Company not later than February 10, 2003. In addition, if a shareholder intends
to present a proposal at the 2003 Annual Meeting without including the proposal
in the proxy materials related to that meeting and, if the proposal is not
received by May 19, 2003, then the proxies designated by the Board of Directors
of the Company for the 2003 Annual Meeting of Shareholders of the Company may
vote in their discretion on any such proposal, any shares for which they have
been appointed proxies without mention of such matter in the proxy statement or
on the proxy card for such meeting.
Item 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits:
99.1 Independent Accountant's Report
99.2 Certification Pursuant to 18 U.S.C.(S)1350, As Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Report on Form 8-K
Form 8-K dated September 25, 2002, filed on September 27, 2002, reporting
under Item 5, the announcement that the Registrant had completed the
repurchase of 23,031 shares or 5% of its outstanding common stock in the
open market pursuant to a stock repurchase program originally announced on
April 1, 2002.
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SISTERSVILLE BANCORP, INC.
Date: October 31, 2002 By: /s/Stanley M. Kiser
-----------------------------------------------
Stanley M. Kiser
President and Chief Executive Officer
(Duly Authorized Officer)
Date: October 31, 2002 By: /s/Stanley M. Kiser
-----------------------------------------------
Stanley M. Kiser
President and Chief Executive Officer
(Principal Executive and Financial Officer)
CERTIFICATION
I, Stanley M. Kiser, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Sistersville
Bancorp, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and I have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiary, is made known to us by others within that
entity, particularly during the period in which this quarterly
report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. I have disclosed, based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors:
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
October 31, 2002
/s/ Stanley M. Kiser
--------------------------------------------------
Stanley M. Kiser
President and Chief Executive Officer
(Principal Executive Officer and Principal
Accounting and Financial Officer)