1
EXHIBIT 13
2
FIRST
PATRIOT
BANKSHARES
CORPORATION
1996
ANNUAL REPORT
3
CORPORATE PROFILE
First Patriot Bankshares Corporation (the "Company"), a Virginia
corporation, is a bank holding company founded on August 31, 1989 and is
headquartered in Reston, Virginia. The Company has two subsidiaries,
Patriot National Bank (the "Bank"), a fully owned bank subsidiary that
opened for business on April 13, 1990, and 2071 Chain Bridge Road,
L.L.C., a wholly owned Virginia limited liability company formed for the
purpose of purchasing and owning an office building in the Tysons Corner
area that houses the offices of the Company and the Bank. The Bank
operates nine offices throughout Northern Virginia specializing in
providing convenient quality service. The bank was the leading
originator of U.S. Small Business Administration loans in the
metropolitan Washington D.C. area for the fifth consecutive year.
The common stock of First Patriot Bankshares Corporation is traded on the
Nasdaq Stock Market under the symbol FPBK. Deposits at the Bank are
insured up to $100,000 by the Federal Deposit Insurance Corporation.
TABLE OF CONTENTS
Financial Highlights................................................................................2
Letter to Stockholders..............................................................................3
Selected Consolidated Financial Data................................................................4
Management's Discussion and Analysis................................................................5
Financial Statements...............................................................................16
Board of Directors.................................................................................45
Patriot National Bank Officers.....................................................................46
Advisory Board and Bank Departments................................................................47
Corporate and Stockholder Information..............................................................48
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FINANCIAL HIGHLIGHTS
FIRST PATRIOT BANKSHARES CORPORATION
% Change
----------------------
1996 1995
vs. vs.
(dollars in thousands,except per share data) 1996 1995 1994 1995 1994
---- ---- ---- ---- ----
FOR THE YEAR
Net income $2,090 $1,524 $1,096 37% 39%
Dividends declared on comon stock 246 177 -- -- --
Earnings per share:
Primary $0.93 $0.71 $0.54 31% 31%
Fully Diluted 0.93 0.71 0.53 31% 34%
Dividends declared per share $0.12 $0.09 -- -- --
=======================================================================================================================
AT YEAR END
Assets $191,852 $158,791 $104,910 21% 51%
Earning Assets 178,649 145,560 96,525 23% 51%
Loans - net of unearned income 127,868 106,676 75,272 20% 42%
Deposits 154,329 120,259 84,842 28% 42%
Total equity 14,525 12,738 10,832 14% 18%
Book value per share 7.19 6.35 5.50 13% 15%
Common shares outstanding 2,020,929 2,005,200 1,969,896
=======================================================================================================================
KEY RATIOS (FOR THE YEAR)
Return on average assets 1.25% 1.19% 1.10%
Return on average total equity 15.66% 13.06% 10.57%
Average equity to average assets 7.99% 9.09% 10.40%
Net interest margin 5.65% 5.88% 5.41%
=======================================================================================================================
TOTAL ASSETS
($ in millions)
1992 1993 1994 1995 1996
$69 $95 $105 $159 $191
RETURN ON ASSETS
(percent)
1992 1993 1994 1995 1996
0.78 1.00 1.10 1.19 1.25
EARNINGS
($ in thousands)
1992 1993 1994 1995 1996
$431 $806 $1,096 $1,524 $2,090
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TO OUR STOCKHOLDERS
First Patriot Bankshares Corporation experienced another record setting year of
growth and earnings performance in 1996. Earnings increased 37%, topping the
two million dollar threshold. Assets increased 21% and primary earnings per
share increased 31%.
Other accomplishments of 1996 include a return on average assets of 1.25% and a
return on average equity of 15.66%. These ratios compare with a return on
average assets of 1.19% and a return on average equity of 13.06% in 1995.
Our ninth branch banking office located in Herndon, Virginia at the McLearen
shopping center opened on February 15, 1997. Three additional branches are
scheduled to open during 1997 which will give us a total of twelve locations
throughout Northern Virginia serving the counties of Fairfax, Loudoun and
Prince William.
For the fifth consecutive year, Patriot National Bank was recognized for
originating more U.S. Small Business Administration (SBA) loans than any other
bank in the Washington D.C. metropolitan area. Patriot National Bank is
designated a Preferred Lender by the SBA with authority to originate loans
throughout Virginia, Maryland and the District of Columbia.
Perhaps the most significant event in the history of First Patriot Bankshares
Corporation occurred on February 19, 1997 when we announced that First Patriot
Bankshares Corporation and United Bankshares, Inc. had entered into a
definitive merger agreement. Under the terms of the agreement, shareholders of
First Patriot Bankshares Corporation will receive $17.00 for each share of
First Patriot stock. The consummation of the merger is subject to shareholder
and regulatory approval. More detailed information relating to the proposed
merger will be provided to shareholders in a proxy statement in connection with
a special shareholders meeting that will be held to vote on the merger
agreement and plan of merger.
United Bankshares, Inc., with $2.3 billion in assets, is the second largest
bank holding company headquartered in West Virginia with 43 offices throughout
West Virginia and two offices in Virginia, one in McLean and the other in
Arlington.
We appreciate your support and welcome any questions you may have.
Sincerely,
Carroll C. Markley John H. Rust, Jr.
President and Chief Executive Officer Chairman of the Board
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SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,
RESULTS OF OPERATIONS 1996 1995 1994 1993 1992
=================================================================================================================
Net interest income $8,777 $6,969 $5,104 $3,777 $2,752
Provision for loan losses 751 372 178 279 208
Noninterest income 2,908 2,281 1,505 1,240 347
Noninterest expense 7,748 6,471 4,770 3,795 2,460
--------- --------- --------- --------- ---------
Income before taxes 3,186 2,407 1,661 943 431
Income tax expense 1,096 883 565 137 148
--------- --------- --------- --------- ---------
Income before extraordinary item 2,090 1,524 1,096 806 283
Extraordinary tax benefit -- -- -- -- 148
--------- --------- --------- --------- ---------
Net income $2,090 $1,524 $1,096 $806 $431
========= ========= ========= ========= =========
Primary earnings per share:
Income before extraordinary item $0.93 $0.71 $0.54 $0.51 $0.20
Extraordinary tax benefit -- -- -- -- 0.11
--------- --------- --------- --------- ---------
Net income $0.93 $0.71 $0.54 $0.51 $0.31
========= ========= ========= ========= =========
Weighted average shares outstanding 2,243,695 2,138,556 2,046,960 1,580,113 1,388,567
Fully diluted earnings per share:
Income before extraordinary item $0.93 $0.71 $0.53 $0.51 $0.20
Extraordinary tax benefit -- -- -- -- 0.11
--------- --------- --------- --------- ---------
Net income $0.93 $0.71 $0.53 $0.51 $0.31
--------- --------- --------- --------- ---------
Weighted average shares outstanding 2,249,763 2,148,278 2,061,940 1,580,113 1,388,567
========= ========= ========= ========= =========
AT DECEMBER 31,
FINANCIAL CONDITION 1996 1995 1994 1993 1992
=================================================================================================================
Assets $191,852 $158,791 $104,910 $95,304 $69,059
Loans, gross $127,868 $106,676 $75,272 $63,253 $45,561
Investments & Federal Funds Sold $50,781 $38,884 $15,749 $13,213 $12,453
Earning assets $178,649 $145,560 $96,525 $90,929 $65,242
Deposits $154,329 $120,259 $84,842 $75,969 $58,591
Stockholders' equity $14,525 $12,738 $10,832 $9,997 $6,195
Book value per share $7.19 $6.35 $5.50 $5.07 $4.46
Common shares outstanding 2,020,929 2,005,200 1,969,896 1,969,896 1,388,567
Number of full service offices 8 8 5 2 1
PERFORMANCE RATIOS
=================================================================================================================
Return on average assets 1.25% 1.19% 1.10% 1.00% 0.78%
Return on average equity 15.66% 13.06% 10.57% 10.98% 7.91%
Net interest margin 5.65% 5.88% 5.41% 4.96% 5.19%
ASSET QUALITY
=================================================================================================================
Allowance for loan losses $1,530 $1,332 $965 $793 $552
Allowance for loan losses to loans, gross 1.20% 1.25% 1.28% 1.25% 1.21%
Nonperforming loans -- -- -- $19 $97
Nonperforming loans to loans, gross -- -- -- 0.03% 0.21%
Net charge-offs to average loans 0.48% -- -- 0.07% --
LIQUIDITY AND CAPITAL RATIOS
=================================================================================================================
Average loans to average deposits 86.88% 84.41% 89.00% 80.61% 80.63%
Risk-based capital:
Tier 1 11.22% 11.59% 15.61% 17.42% 16.55%
Total 12.39% 12.81% 16.87% 18.67% 17.96%
Leverage 8.16% 8.27% 10.32% 10.64% 9.88%
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The following discussion is an analysis of the significant changes in the
financial condition and results of operations of First Patriot Bankshares
Corporation and subsidiaries for the years 1994-1996. The discussion should be
read in conjunction with the accompanying consolidated financial statements and
related notes.
ORGANIZATIONAL BACKGROUND
First Patriot Bankshares Corporation (the "Company") was incorporated in
Virginia on August 31, 1989 and is headquartered in Reston, Virginia. With the
proceeds of its initial public offering, the Company acquired all of the issued
and outstanding stock of Patriot National Bank ("the bank"), a national banking
association located in Reston, Virginia that began operations on April 13,
1990.
In April 1993, the Company declared a two for one split of its common
stock. As a result of the split, 680,670 additional shares were issued and the
par value of the Company's stock was reduced to $2.50 per share.
On October 22, 1993, the Company completed its second common stock
offering, which resulted in the issuance of 570,000 additional shares at a
price of $5.75, which in turn resulted in net proceeds of approximately $3
million. A portion of the new capital was used to open its second banking
office.
On June 30, 1994 the Company issued a 2% stock dividend, which resulted
in 38,556 additional shares being issued. During 1994, the Company expanded
its banking operations with the opening of three new offices.
In September 1994, the Company formed 2071 Chain Bridge Road, L.L.C., a
majority-owned limited liability company for the purpose of purchasing an
office building that houses offices for both the Company and the Bank.
In March 1995, the Company paid its first cash dividend representing
$.02 per share. The Company subsequently increased the cash dividend to $.03
for the fourth cash dividend paid on November 30, 1995. The company paid a
$.12 annual dividend in 1996.
The Company opened three new banking offices in 1995. This brings the
total banking offices to eight throughout Northern Virginia.
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INCOME STATEMENT ANALYSIS
EARNINGS SUMMARY
First Patriot Bankshares Corporation reported net income of $2.090 million
for 1996, an increase of 37% over 1995 earnings of $1.524 million. Fully
diluted earnings per share were $.93, an increase of 31% over $.71 reported in
1995.
Return on assets for 1996 was 1.25%, compared to 1.19% for 1995 and 1.10%
for 1994. Return on shareholders' equity was 15.66% for 1996, compared to
13.06% for 1995 and 10.57% for 1994.
Net interest income increased as a result of a 30.9% increase in average
earning assets. Net interest margin decreased to 5.65% in 1996 compared to
5.88% in 1995 and 5.41% in 1994. This decrease reflects the highly competitive
market for both deposits and loans.
The provision for loan losses doubled from last year as a result of a 20%
increase in loans outstanding and the charge-off of a commercial loan in the
amount of $500,000. The allowance for loan losses as a percentage of
outstanding loans was 1.20% at December 31, 1996, compared to 1.25% at December
31, 1995 and 1.28% at December 31, 1994.
Non-interest income totaled approximately $2.9 million in 1996 compared to
$2.3 million in 1995, an increase of 27%. In 1995, non-interest income
increased 52% over 1994. These increases are largely attributable to increased
service charges on deposit accounts and gains on the sale of loans.
Non-interest expense increased 20% in 1996, following increases of 36% in
1995 and 26% in 1994. Salaries and benefits increased 21% over 1995,
reflecting additional staffing requirements throughout the organization
necessary to support growth. Occupancy, equipment, and other non-interest
expense likewise increased, reflecting the growth of the organization.
NET INTEREST INCOME
Net interest income increased $1.8 million in 1996 or 25.9%, compared to
increases of 36.5% in 1995 and 35.1% in 1994. Net interest margin was 5.65% in
1996 versus 5.88% in 1995 and 5.41% in 1994. The increases in net interest
income were primarily due to increases in average earning assets. Table 1
provides the components of average assets and liabilities together with their
respective yields. Table 2 provides a reconciliation of the changes in net
interest income attributable to variations in balances and yields.
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TABLE 1 - AVERAGE BALANCES, INTEREST INCOME AND EXPENSES,
AVERAGE YIELDS AND RATES
Years Ended December 31,
1996 1995 1994
------------------------------ ---------------------------- ----------------------------
Interest Interest Interest
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
(dollars in thousands) Balance Expense Rate Balance Expense Rate Balance Expense Rate
------------------------------ ---------------------------- ----------------------------
Assets:
Interest earning assets:
Federal funds sold $9,122 $488 5.35% $9,167 $539 5.88% $10,322 $444 4.30%
Investments:
U.S. Treasury securities 1,625 98 6.01% 4,228 215 5.09% 7,064 317 4.49%
Obligations of U.S. government
agencies and corporations 28,626 2,014 7.03% 18,825 1,373 7.29% 5,656 304 5.37%
Other securities 962 55 5.71% 1,256 64 5.10% 1,387 63 4.54%
-------- ------ -------- ------ ------- ------
Total investments 31,213 2,166 6.94% 24,309 1,652 6.80% 14,107 684 4.85%
Loans (3) 114,911 12,036 10.47% 85,083 9,281 10.91% 69,855 6,702 9.59%
-------- ------ -------- ------ ------- ------
Total interest earning assets 155,246 14,690 9.46% 118,559 11,472 9.68% 94,284 7,830 8.30%
Noninterest earning assets:
Cash and due from banks 5,953 5,253 3,891
Other assets 7,390 5,665 2,400
Less: allowance for loan losses (1,547) (1,063) (887)
Total noninterest earning assets 11,796 9,855 5,404
-------- -------- -------
Total assets $167,042 $128,414 $99,688
======== ======== -------
Liabilities and stockholders' equity
Interest bearing liabilities
Deposits:
Interest bearing demand $10,529 216 2.05% $7,795 189 2.42% $6,948 176 2.53%
Savings and money market accounts 30,398 964 3.17% 24,942 849 3.40% 25,795 746 2.89%
Other time 63,928 3,734 5.84% 46,180 2,695 5.84% 30,530 1,406 4.61%
-------- ------ -------- ------ ------- ------
Total interest bearing deposits 104,855 4,914 4.69% 78,917 3,733 4.73% 63,273 2,328 3.68%
Short-term borrowings 18,600 887 4.77% 14,316 762 5.32% 10,144 398 3.92%
Other borrowings 1,125 112 9.95% 100 8 8.00% --
-------- ------ -------- ------ ------- ------ ------
Total interest bearing liabilities 124,580 5,913 4.75% 93,333 4,503 4.82% 73,417 2,726 3.71%
Noninterest bearing liabilities:
Demand deposits 27,416 21,880 15,217
Other liabilities 1,704 1,528 688
-------- -------- -------
Total noninterest bearing liabilities 29,120 23,408 15,905
Total liabilities 153,700 116,741 89,322
Stockholders' equity 13,342 11,673 10,366
-------- -------- -------
Total liabilities and stockholders' equity $167,042 $128,414 $99,688
======== ======== =======
Interest spread (1) 4.72% 4.85% 4.59%
Net interest income $8,777 $6,969 $5,104
====== ======= ======
Net Interest margin (2) 5.65% 5.88% 5.41%
(1) Interest spread is the average yield earned on earning assets less the
average rate incurred on interest bearing liabilities.
(2) Net interest margin is net interest income expressed as a percentage of
average earning assets.
(3) Loan fees included for 1996, 1995, & 1994 are: $465 ,$440, and $395
Average earning assets increased $36.7 million in 1996 compared to an
increase of $24.3 million in 1995. Loans on average increased $29.8 million or
35.1% compared to an increase of 21.8% in 1995. Loans outstanding totaled
$127.9 million at December 31, 1996 compared to $106.7 million in 1995, an
increase of 20%. This follows an increase of 42% from year-end 1994 to
December 31, 1995. The Company's investment portfolio increased on average
$6.9 million or 28.4% in 1996 compared to an increase of 72.3% in 1995. The
increase in the investment portfolio in 1996 was principally the result of
deposit growth exceeding the increase in loan demand.
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Average earning assets comprised 92.9% of average total assets in 1996,
compared to 92.3% in 1995 and 94.6% in 1994.
Average interest-bearing liabilities increased $31.2 million or 33.5% in
1996, compared to an increase of 27.1% in 1995 and 18.8% in 1994. Average
interest-bearing liabilities as a ratio of earning assets was 80.2% in 1996,
78.7% in 1995 and 77.9% in 1994.
Average non-interest-bearing deposits grew $5.5 million or 25.3% in 1996,
compared to increases of 43.8% in 1995 and 33.0% in 1994. The ratio of average
non-interest-bearing deposits to total average deposits was 20.7% for 1996,
compared to 21.7% in 1995 and 19.4% in 1994. On average, short-term borrowings,
consisting primarily of repurchase agreements, increased $4.3 million to $18.6
million in 1996, compared to $14.3 million in 1995 and $10.1 million in 1994.
These increases are attributable to increased usage of our cash management
services.
The Company's net interest rate spread decreased 13 basis points during
1996, following increases of 26 basis points in 1995 and 1994. Yields on
earning assets decreased 22 basis points in 1996 compared to an increase of 138
basis points in 1995 and an increase of 59 basis points in 1994. At December
31, 1996, approximately 74% of the Company's loans were variable rate loans
indexed to the national prime lending rate. Average loan yields decreased 44
basis points
TABLE 2 - VOLUME AND RATE ANALYSIS
Years Ended December 31,
-------------------------------------------------------
1996 Versus 1995 1995 Versus 1994
-------------------------- ---------------------------
Change Due To: Change Due To:
-------------- --------------
(dollars in thousands) Volume Rate Total Volume Rate Total
- - --------------------------------------------------------------------------------------------------------
Interest income:
Federal funds sold ($3) ($48) ($51) ($42) $137 $95
Investments: 0 0
U.S. Treasury securities (167) 50 (117) (153) 51 (102)
Obligations of U.S. government
agencies and corporations 686 (45) 641 930 139 1,069
Other (19) 10 (9) (3) 4 1
------ ----- ------ ------ ---- ------
Total investments 500 15 515 774 194 968
Loans 3,107 (353) 2,754 1,585 994 2,579
------ ----- ------ ------ ---- ------
Total interest income 3,604 (386) 3,218 2,317 1,325 3,642
Interest expense:
Deposits:
Interest bearing demand 48 (21) 27 20 (7) 13
Savings and money market 167 (52) 115 (21) 124 103
Time 1,039 0 1,039 851 438 1,289
------ ----- ------ ------ ---- ------
Total deposits 1,254 (73) 1,181 850 555 1,405
Borrowings 266 (37) 229 201 171 372
------ ----- ------ ------ ---- ------
Total interest expense 1,520 (110) 1,410 1,051 726 1,777
Increase/(decrease) in net interest income $2,084 ($276) $1,808 $1,266 $599 $1,865
====== ===== ====== ====== ==== ======
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during 1996. Yields on the investment portfolio increased 14 basis points
reflecting the addition of $6.9 million in average investment securities at
higher yields.
Interest rates paid on interest-bearing liabilities decreased 7 basis
points during 1996, compared to a 111 basis point increase in 1995 and a 33
basis point increase in 1994.
NON-INTEREST INCOME
Non-interest income increased $627 thousand and totaled $2.9 million in
1996, compared to $2.3 million in 1995 and $1.5 million in 1994. The most
significant increases occurred in gains on the sale of loans and investments as
shown in the consolidated statements of operations in the financial statements.
NON-INTEREST EXPENSE
Non-interest expense totaled $7.7 million, up from $6.5 million in 1995
and $4.8 million in 1994. Total salaries and employee benefits increased $692
thousand over 1995, which is partially attributable to the full twelve months
impact of the three branches opened in 1995. Additional staffing was also
required to support the continued level of growth. Occupancy and equipment
expenses also experienced increases attributable to growth. Other operating
expenses are detailed in Note 7 to the financial statements.
BALANCE SHEET ANALYSIS
INVESTMENT SECURITIES PORTFOLIO
The Company adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" effective
December 31, 1993. In accordance with SFAS 115, securities are classified as
either securities held to maturity, securities available for sale or trading
account securities. Securities classified as held to maturity are carried at
amortized cost on the Company's Consolidated Balance Sheets and represent
securities that the Company has the intent and ability to hold to maturity.
Securities classified as available for sale are carried at fair value
and may be sold to meet liquidity needs or in response to significant changes
in interest rates or prepayment risks. The Company did not have any securities
classified as trading securities. In accordance with SFAS 115, unrealized
gains or losses on securities available for sale are excluded from Consolidated
Statement of Income and reported, net of tax, as a separate component of
shareholder's equity. In 1995, The Financial Accounting Standards Board gave
companies a one-time opportunity to reclassify their investment securities for
fiscal year 1995. Accordingly, the Company transferred its held to maturity
securities to the available for sale category in December 1995. At December
31, 1996 all securities were classified as available for sale.
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At December 31, 1996, the securities portfolio totaled $40.8 million, an
increase of 42.5% over year-end 1995. Average securities increased 28.4% in
1996 compared to 72.3% in 1995. The growth in securities occurred in the U.S.
Government Agencies category. Average securities represented 20.1% of earning
assets in 1996, compared to approximately 20.5% in 1995. The increase in the
percentage of earning assets is largely due to deposits growing more rapidly
than loan demand. Table 3 summarizes the composition of the security
portfolio. Maturity distribution and weighted average yields of the Company's
securities portfolio are summarized in Table 4.
TABLE 3 - INVESTMENT SECURITIES
(dollars in thousands) 1996 1995 1994
- - --------------------------------------------------------------------------------------------------------------
United States treasuries and agencies $39,847 $27,775 $14,393
Obligations of states and political subdivisions 235 233 646
Other securities 756 657 710
------------------------------------
Total $40,838 $28,665 $15,749
====================================
TABLE 4 - SECURITIES PORTFOLIO MATURITY DISTRIBUTION AT DECEMBER 31, 1996
After One But After Five But
Within One Year Within Five Years Within Ten Years After Ten Years
------------------ -------------------- ------------------- --------------------
(dollars in thousands) Amount Yield Amount Yield Amount Yield Amount Yield
- - ----------------------------------------------------------------------------------------------------------------
United States treasuries
and agencies $500 4.50% $8,163 6.91% $30,585 7.05% $599 6.68%
Obligations of states
political subdivisions 235 3.40% -- -- -- -- -- --
Other securities -- -- -- -- -- -- 756 6.72%
---------- ---------- ---------- ----------
Total $735 $8,163 $30,585 $1,355
========== ========== ========== ==========
LOANS HELD FOR SALE
Loans held for sale consist of loans originated under the U.S. Small
Business Administration program. The SBA loan program, designed to provide
financial assistance to small businesses through participating banks, provides
guarantees ranging from 75% to 90%. The guaranteed portion of these loans may
be sold in the secondary market to provide liquidity and funding for new loans.
Patriot National Bank originated more loans of this type in fiscal year 1996
than any other bank in the Metropolitan Washington D.C. area. This is the
fifth consecutive year that Patriot has achieved this distinction,
demonstrating its commitment to small businesses in the community. At December
31, 1996, SBA loans held for sale totaled $8.3 million, down from $12.9 million
on December 31, 1995 a decrease of 36%. This decrease is attributable to the
volume of loans sold during 1996.
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LOAN PORTFOLIO
The loan portfolio, including available for sale loans, totaled $128.5
million at December 31, 1996, an increase of 20% from December 31, 1995. This
follows an increase of 42.3% in 1995. Average loans, including loans held for
sale, amounted to $114.9 million in 1996, representing an increase of 35.1%
over last year. Note 3 of the financial statements provides a listing of the
various types of loans. Table 5 provides a maturity distribution of the loan
portfolio.
TABLE 5 - MATURITY OF LOANS AT DECEMBER 31, 1996
Maturing
---------------------------------------------------------
After One
Within One But Within After Five
(dollars in thousands) Year Five Years Years Total
- - ------------------------------------- ------------- -------------- --------------
Commercial and SBA $11,713 $8,337 $23,231 $43,281
Commercial mortgage 4,673 18,697 14,184 37,554
Construction 6,188 6,591 6,282 19,061
Residential Mortgage 4,299 6,472 6,826 17,597
Home Equity 699 5,512 0 6,212
Installment 1,584 3,196 35 4,815
-------------- ------------- -------------- --------------
Total $29,157 $48,804 $50,558 $128,520
============== ============= ============== ==============
Loans maturing after one year (included in the above table) with:
Fixed interest rates $ 15,520
Variable interest rates 78,517
--------------
Total $ 94,387
==============
LOAN MIX- 12/31/96
$128,520
Comm SBA 43281
Comm Mort 37554
Construction 19061
Res Mort 17594
Equity 6212
Installment 4815
Commercial loans decreased $1.9 million from year-end 1995 to $43.3 million
at year-end 1996, a 4.4% decrease. Commercial mortgage loans increased
approximately 62% from $23.2 million at December 31, 1995 to $37.5 million on
December 31, 1996. The increase in commercial loans is due to the Company's
continuing efforts to expand the commercial loan portfolio by focusing on the
credit needs of small to medium-sized businesses. The Company has no highly
leveraged transactions.
Construction loans, consisting of both residential and commercial
properties increased $2.3 million or 12.0% from the previous year. Residential
construction loans are comprised of individual properties that are owner
occupied and small project development loans. The increase in construction
loans is due to continued strength in the local real estate market.
Residential mortgage loans totaled $17.6 million at December 31, 1996,
compared to $12.4 million on December 31, 1995, an increase of 41.6%. The
growth in residential mortgage loans is primarily the result of the Company
retaining a larger number of the loans it originates.
Installment loans increased approximately $572 thousand and home equity
loans increased 17.8% to $6.2 million on December 31, 1996, up from $5.3
million on December 31, 1995. Home Equity loans are lines of credit secured by
the borrower's primary residence.
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ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses was $1.5 million and represented 1.20% of
loans outstanding at December 31, 1996. The provision for loan losses
increased to $751 thousand in 1996, up from $372 thousand and $178 thousand at
year-end 1995 and 1994, respectively. The increase in the provision is
attributable to the overall growth in the loan portfolio and the charge-off of
a $500 thousand commercial loan.
The level, provision, and allocation of the allowance for loan losses are
based upon internal loan reviews, risk assessments, current economic conditions
in our local market and the level and composition of non performing assets.
Note 3 to the financial statements summarizes the transactions in the allowance
for loan losses.
Table 6 summarizes the allocation of the allowance for loan losses by
major categories of loans and percentages of loans in each category to total
loans. The allocation follows very closely the loan portfolio risk weightings
assigned by individual loan officers and internal loan review. Management's
evaluation of the effect of general economic conditions on the loan portfolio
are also factored into the allocation. Since the criteria used in determining
the allocation is subject to change, the allocation of the allowance is not
necessarily indicative of the trend for future losses in a particular loan
category.
TABLE 6 - ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
1996 1995 1994
----------------------------------- ----------------------------------- ---------------------------------
% of Loans % of Loans % of Loans
in Category in Category in Category
% of to Total % of to Total % of to Total
(dollars in thousands) Amount Allowance Loans Amount Allowance Loans Amount Allowance Loans
------ --------- ----- ------ --------- ----- ------ --------- -----
Commercial and SBA $472 30.9 33.7 $389 29.2 42.2 $205 21.2 38.3
Commercial mortgage 642 42.0 29.2 483 36.3 21.6 292 30.3 24.0
Construction 152 10.0 14.8 214 16.1 15.6 65 6.7 12.3
Residential mortgage 146 9.5 13.7 119 8.9 11.7 103 10.7 12.6
Home equity 62 4.1 4.8 78 5.9 4.9 212 22.0 6.3
Installment 56 3.6 3.7 49 3.7 4.0 88 9.1 6.6
----------------------------------- ----------------------------------- ---------------------------------
Total $1,530 100.0 100.0 $1,332 100.0 100.0 $965 100.0 100.0
=================================== =================================== =================================
RISK ELEMENTS
There were no loans on non-accrual at December 31, 1996 or December 31,
1995. There were three loans totaling $737 thousand that were more than 90
days past due on December 31, 1996 that were not on non-accrual. The loans are
fully collateralized in amounts sufficient to cover principal and accrued
interest.
12
15
The Company is continually analyzing its loan portfolio in order to
identify early risk elements that require management's attention. The loan
portfolio is subject to review by lending management, internal loan review
staff, internal audit, the Company's independent auditors and regulatory
agencies.
DEPOSITS
Average deposits, as shown in table 7, increased 31.2% for 1996. Average
non-interest-bearing deposits increased 25.3% for 1996, which follows increases
of 43.8% in 1995 and 33.0% in 1994. Average time deposits less than $100
thousand increased 47.8% in 1996, compared to increases of 85.0% in 1995 and
21.4% in 1994. The increase in average deposits is partially attributable to
our expanded branch network. Table 8 sets forth the remaining maturities of
CDS in amounts of $100 thousand or more.
TABLE 7 - AVERAGE DEPOSITS AND WEIGHTED AVERAGE RATES PAID
Years Ended December 31,
-------------------------------------------------------------------------------------------
1996 1995 1994
----------------------------- -------------------------------- ----------------------------
Average Average Average Average Average Average
(dollars in thousands) Balance Rate Balance Rate Balance Rate
------- ---- ------- ---- ------- ----
Noninterest bearing demand deposits $27,416 0.00% $21,880 0.00% $15,217 0.00%
Interest bearing demand deposits 10,529 2.05% 7,795 2.42% 6,948 2.53%
Savings and money market deposits 30,398 3.17% 24,942 3.40% 25,795 2.89%
Time deposits $100,000 and over 15,099 5.93% 13,139 5.75% 12,666 4.51%
Other time deposits 48,829 5.81% 33,041 5.87% 17,864 4.67%
----------- ---------- ----------
Total $132,271 3.71% $100,797 3.70% $78,490 2.97%
=========== ========== ==========
DEPOSIT MIX - 12/31/96
$154,329
CD LESS THAN $100K 56,607
CD GREATER THAN $100K 15,858
Savings 10,690
NOW 12,178
DDA 33,466
MMDA 16,979
IRA 8,551
DEPOSIT GROWTH AT YEAR-END
($ in thousands)
1992 1993 1994 1995 1996
Deposits $58,591 $75,969 $84,842 $120,259 $154,329
TABLE 8 - REMAINING MATURITIES OF CD'S
IN AMOUNTS OF $100,000 OR MORE
(dollars in thousands) 1996
- - ----------------------------------------
Three months or less $2,248
Three through six months $3,903
Six through twelve months $3,686
Over twelve months $6,021
- - ----------------------------------------
Total $15,858
========================================
RATE SENSITIVITY
The Company's Funds Management Committee monitors interest rate
sensitivity of the balance sheet and reviews asset and liability repricing in
the context of current and future rate scenarios
13
16
and current economic conditions both nationally and locally. The objective of
the committee is to minimize the impact to earnings from changes in interest
rates while maintaining a net interest margin within the Company's objectives.
Table 9 represents the Company's interest rate sensitivity at December 31,
1996, using known maturities and repricing schedules of loans, deposits and
securities. This table presents a position that existed at one particular day,
that changes continually, and is not necessarily indicative of the Company's
position at any other time.
TABLE 9 - INTEREST SENSITIVITY ANALYSIS
Maturing or Repricing In:
----------------------------------------------------------------------------
0-3 4-12 1-3 Over
(dollars in thousands) Months Months Years 3 Years (1) Total
- - -------------------------------------------------------------- -------------- --------------- --------------- --------------
Interest earning assets:
Federal funds sold 9,943 -- -- 9,943
Investments available for sale 500 235 0 40,103 40,838
Loans 85,553 12,067 14,794 15,454 127,868
-------------- -------------- --------------- --------------- --------------
Total interest earning assets $95,996 $12,302 $14,794 $55,557 $178,649
============== ============== =============== =============== ==============
Interest bearing liabilities:
Deposits:
Interest bearing demand $12,178 $-- $-- $-- $12,178
Savings and money market 26,377 2,295 1,667 5,882 36,221
Time deposits $100,000 and over 2,248 7,589 2,915 3,106 15,858
Other time deposits 5,873 30,291 15,840 4,603 56,607
Other borrowed money 19,301 433 260 1,185 21,179
-------------- -------------- --------------- --------------- --------------
Total interest bearing liabilities $65,977 $40,608 $20,682 $14,776 $142,043
============== ============== =============== =============== ==============
Periodic Gap $30,019 ($28,306) ($5,888) $40,781 $36,606
Cumulative Gap $30,019 $1,713 ($4,175) $36,606
Ratio of cumulative gap to
total earning assets 16.80% 0.96% -2.34% 20.49%
(1) Investments available for sale include $756 of equity securities
LIQUIDITY
Liquidity management involves planning to meet both anticipated and
unanticipated funding needs. Long-term liquidity is a function of core
deposits and a strong capital position. The Company is committed to continued
growth in core deposits through pricing, product development, and building
long-term relationships with depositors.
Short-term liquidity needs arise from the continuous fluctuations in cash
flow from both sides of the balance sheet. Cash and bank balances, federal
funds sold, and securities available for sale
14
17
are the principal sources of short-term liquidity. Other sources of short-term
liquidity include federal funds purchased, repurchase agreements, and
borrowings from the Federal Reserve and Federal Home Loan Bank. Maturing loans
and securities are also sources of liquidity.
EFFECTS OF INFLATION
The majority of assets and liabilities of a financial institution are
monetary in nature and therefore differ greatly from most commercial and
industrial companies that have significant investments in premises, equipment,
and inventory. Inflation has an important impact on the growth of total assets
in the banking industry and the resulting need to increase equity capital at
higher than normal rates in order to maintain an appropriate equity assets
ratio. Also, another significant effect of inflation is on other expenses,
which tend to rise during periods of inflation.
Management believes the most significant impact on financial results is
the Company's ability to align its asset liability management program to react
to changes in interest rates.
CAPITAL
Shareholders equity increased 14.0% in 1996 to $14.5 million as compared
to $12.7 million in 1995. The Company paid four cash dividends of $.03 per
share in 1996. The company also provides a dividend reinvestment plan.
The Company and the Bank both exceeded regulatory requirements for being well
capitalized. Table 10 shows the Company's risk-based capital ratios and
stockholders' equity to total assets at December 31, 1996 and 1995.
TABLE 10 - ANALYSIS OF CAPITAL
Regulatory Guidelines
----------------------------------
Adequately Well December 31, December 31,
Capitalized Capitalized 1996 1995
---------------- ----------------- --------------- ------------------
Capital ratios:
Risk-based capital:
Tier 1 4.00% 6.00% 11.22% 11.59%
Total 8.00% 10.00% 12.39% 12.81%
Leverage 4.00% 5.00% 8.16% 8.27%
Stockholders' equity to total assets N/A N/A 7.57% 8.02%
15
18
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
First Patriot Bankshares Corporation
Reston, VA
We have audited the accompanying consolidated balance sheet of First Patriot
Bankshares Corporation (the "Company") and subsidiaries as of December 31, 1996
and 1995, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the years ended December 31, 1996 and 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. The consolidated financial statements of First
Patriot Bankshares Corporation and subsidiaries as of December 31, 1994, and
for the year ended December 31, 1994, were audited by other auditors whose
report dated February 2, 1995, expressed an unqualified opinion on those
statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the 1996 and 1995 consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of First Patriot Bankshares Corporation and subsidiaries as of
December 31, 1996 and 1995, and the results of their consolidated operations
and their consolidated cash flows for the years ended December 31, 1996 and
1995, in conformity with generally accepted accounting principles.
Homes Lowry Horn & Johnson, Ltd.
February 18, 1997
16
19
FIRST PATRIOT BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
(dollars in thousands)
ASSETS 1996 1995
-------------- --------------
Cash and due from banks $ 6,775 $ 7,879
Federal funds sold 9,943 10,219
Investments available for sale, amortized cost of
1996 $41,275 and 1995 $28,497 (Notes 2 and 8) 40,838 28,665
Loans, net (Note 3) 118,074 92,427
Loans held for sale (Note 3) 8,264 12,917
Premises and equipment, net (Note 4) 5,195 4,894
Other assets 2,763 1,790
-------------- --------------
Total assets $ 191,852 $ 158,791
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Non-interest bearing demand deposits $ 33,466 $ 28,555
Interest bearing deposits (Note 5) 120,863 91,704
-------------- --------------
Total deposits $ 154,329 $ 120,259
Repurchase and master note agreements (Note 8) 17,904 20,407
FHLB borrowings (Note 8) 1,121 2,309
Other borrowings (Notes 8 and 9) 2,154 1,199
Accrued expenses and other liabilities 1,819 1,879
-------------- --------------
Total liabilities $ 177,327 $ 146,053
-------------- --------------
STOCKHOLDERS' EQUITY (Notes 12 and 14)
Preferred stock ($25 par value; 10 million shares
authorized; -0- issued or outstanding) $ - $ -
Common stock ($2.50 par value; 100 million authorized;
2,020,929 shares issued and outstanding at December 31,
1996 and 2,005,200 in 1995 5,052 5,013
Additional paid-in capital 5,458 5,155
Unrealized gain (loss) on investments available for sale,
net of deferred taxes (289) 110
Retained earnings 4,304 2,460
-------------- --------------
Total stockholders' equity $ 14,525 $ 12,738
-------------- --------------
COMMITMENTS AND CONTINGENCIES (Notes 4 and 17)
Total liabilities and stockholders' equity $ 191,852 $ 158,791
============== ==============
See accompanying notes to consolidated financial statements.
17
20
FIRST PATRIOT BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1996, 1995 and 1994
(dollars in thousands, except per share amounts)
1996 1995 1994
------------- ------------ -------------
Interest income
Interest and fees on loans $ 12,035 $ 9,281 $ 6,702
Interest on investment securities 2,166 1,651 684
Interest on federal funds sold 488 539 444
------------- ------------ -------------
Total interest income $ 14,689 $ 11,471 $ 7,830
------------- ------------ -------------
Interest expense
Interest on deposits (Note 5) $ 4,914 $ 3,733 $ 2,328
Interest on repurchase and master note
agreements (Note 8) 783 574 234
Interest on FHLB and other borrowings
(Notes 8 and 9) 215 195 164
------------- ------------ -------------
Total interest expense $ 5,912 $ 4,502 $ 2,726
------------- ------------ -------------
Net interest income $ 8,777 $ 6,969 $ 5,104
Provision for loan losses (Note 3) 751 372 178
------------- ------------ -------------
Net interest income after provision for loan losses $ 8,026 $ 6,597 $ 4,926
------------- ------------ -------------
Non-interest income
Service charges on deposit accounts $ 694 $ 447 $ 369
Gain on sale of loans and investments, net 628 355 324
Other (Note 6) 1,586 1,479 812
------------- ------------ -------------
Total Non-interest income $ 2,908 $ 2,281 $ 1,505
------------- ------------ -------------
Non-interest expense
Salaries and benefits $ 4,008 $ 3,316 $ 2,361
Occupancy 502 577 419
Equipment 573 405 247
Other (Note 7) 2,665 2,173 1,743
------------- ------------ -------------
Total Non-interest expense $ 7,748 $ 6,471 $ 4,770
------------- ------------ -------------
Income before taxes $ 3,186 $ 2,407 $ 1,661
Income tax expense (Note 10) 1,096 883 565
------------- ------------ -------------
Net income $ 2,090 $ 1,524 $ 1,096
============= ============ =============
Earnings per common share (Note 14):
Primary $ .93 $ .71 $ 0.54
============= ============ =============
Assuming full dilution $ .93 $ .71 $ 0.53
============= ============ =============
See accompanying notes to consolidated financial statements.
18
21
FIRST PATRIOT BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1996, 1995 and 1994
(dollars in thousands)
- - ---------------------- Unrealized
Gain (Loss)
on Investments
Available
Additional For Sale, Net Retained Total
Common Paid-in of Deferred Earnings Stockholders'
Stock Capital Taxes (Deficit) Equity
------------- ------------- ------------------ ------------ ----------------
Balance, January 1, 1994 $ 4,924 $ 5,039 $ 17 $ 17 $ 9,997
Unrealized loss on invest-
ments available for sale,
net of deferred taxes - - (261) - (261)
Net income for year
ended December 31, 1994 - - - 1,096 1,096
------------- ------------- ------------------ ------------ ----------------
Balance, December 31, 1994 $ 4,924 $ 5,039 $ (244) $ 1,113 $ 10,832
Net proceeds from
the issuance of
common stock 89 116 - - 205
Cash dividends paid - - - (177) (177)
Unrealized gain on invest-
ments available for sale,
net of $57 deferred taxes - - 354 - 354
Net income for year
ended December 31, 1995 - - - 1,524 1,524
------------- ------------- ------------------ ------------ ----------------
Balance, December 31, 1995 $ 5,013 $ 5,155 $ 110 $ 2,460 $ 12,738
Net proceeds from
the issuance of
common stock 39 113 - - 152
Cash dividends paid - - - (246) (246)
Unrealized loss on invest-
ments available for sale,
net of $149 deferred taxes - - (399) - (399)
Stock options outstanding - 190 - - 190
Net income for year
ended December 31, 1996 - - - 2,090 2,090
------------- ------------- ------------------ ------------ ----------------
Balance, December 31, 1996 $ 5,052 $ 5,458 $ (289) $ 4,304 $ 14,525
============= ============= ================== ============ ================
See accompanying notes to consolidated financial statements.
19
22
FIRST PATRIOT BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996, 1995 and 1994
(dollars in thousands)
1996 1995 1994
------------- ------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,090 $ 1,524 $ 1,096
Adjustments for noncash items included in
net income:
Depreciation and amortization 632 427 234
Provision for loan losses 751 372 178
Gain on sale of loans (586) (413) (369)
(Gain) loss on sale of investments, net (42) 58 45
(Gain) loss on sale of fixed assets - 16 (14)
Increase in other assets (277) (453) (372)
Increase (decrease) in accrued expenses and
other liabilities (87) 547 184
------------- ------------ -------------
Net cash provided by operating activities $ 2,481 $ 2,078 $ 982
------------- ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans $ (32,485) $ (33,913) $ (17,030)
Proceeds from sale of loans 11,352 2,876 5,398
Purchase of securities available for sale (39,095) (25,217) (10,071)
Proceeds from maturity of securities
available for sale 18,820 6,162 260
Proceeds from sale of investments
available for sale 7,542 3,651 6,764
Proceeds from maturities of securities
held to maturity - 3,010 1,500
Purchase of securities held to maturity - - (1,451)
Purchase of subsidiary (767) - -
Proceeds from sale of fixed assets - - 14
Acquisition of premises and equipment (468) (1,809) (3,177)
------------- ------------ -------------
Net cash used by investing activities $ (35,101) $ (45,240) $ (17,793)
============= ============ =============
See accompanying notes to consolidated financial statements.
20
23
1996 1995 1994
------------- ------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits $ 34,070 $ 35,417 $ 8,873
Net increase (decrease) in short-term borrowings (2,722) 14,630 (286)
Proceeds (repayments) on long-term borrowings (14) 1,199 -
Proceeds from issuance of common stock, net 152 205 -
Cash dividends paid (246) (177) -
------------- ------------ -------------
Net cash provided by financing activities $ 31,240 $ 51,274 $ 8,587
------------- ------------ -------------
Net increase (decrease) in cash and cash
equivalents $ (1,380) $ 8,112 $ (8,224)
Cash and cash equivalents, beginning of year 18,098 9,986 18,210
------------- ------------ -------------
Cash and cash equivalents, end of year $ 16,718 $ 18,098 $ 9,986
============= ============ =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 5,887 $ 4,771 $ 2,721
============= ============ =============
Income taxes paid $ 1,406 $ 746 $ 946
============= ============ =============
21
24
FIRST PATRIOT BANKSHARES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Operations and Significant Accounting Policies
Nature of Operations:
First Patriot Bankshares Corporation, a Virginia corporation,
is a bank holding company headquartered in Reston, Virginia.
Patriot National Bank is a wholly owned subsidiary of First
Patriot Bankshares Corporation. Patriot National Bank is a
full service community bank with eight offices throughout
Northern Virginia. The Bank provides competitive financial
services, specializing in quality personal service, to
businesses and individuals located in its market.
The subsidiary, 2071 Chain Bridge Road, L.L.C., owns an office
building in Tysons Corner that houses offices of the Company
and the Bank. It also leases space to other parties.
Patriot National Bank offers a full range of loan products,
ranging from credit cards to permanent real estate loans. The
Bank is the area's leading originating bank of U.S. Small
Business Administration loans.
Significant Accounting Policies:
Method of accounting:
The consolidated financial statements of First Patriot
Bankshares Corporation and subsidiaries are prepared in
conformity with generally accepted accounting principles.
Certain reclassifications have been made to prior-year
financial statements to conform them to the current-year
presentation. A summary of the more significant accounting
policies is provided as follows:
(a) Principles of Consolidation
The consolidated financial statements include the
accounts of First Patriot Bankshares Corporation (the
"Company"), its wholly-owned subsidiary Patriot
National Bank (the "Bank") and their wholly-owned
subsidiary, 2071 Chain Bridge Road, L.L.C. The
Corporation purchased 75 percent of 2071 Chain Bridge
Road L.L.C. in 1995 and the Bank purchased the
remaining 25 percent minority interest in 1996. All
significant intercompany balances and transactions
have been eliminated in consolidation.
(b) Use of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles
requires management to make estimates and assumptions
that affect the reported amounts 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 those estimates.
22
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Operations and Significant Accounting Policies
(continued)
(c) Loans, Interest and Unearned Income
Loans, net, are stated at unpaid principal balances
less the allowances for loan losses, unearned income
and deferred gains on the sale of loans.
Interest on loans is accrued on the basis of the
daily amount of principal outstanding. The accrual
of interest is discontinued when reasonable doubt
exists about the full and timely collection of
interest or principal. When a loan is placed on
nonaccrual status, all interest previously accrued
but not collected is reversed against current period
interest income. Income on such loans is then
recognized only to the extent that cash is received
and where the future collection of principal is
probable. Interest accruals are resumed on such
loans only when they are brought fully current with
respect to interest and principal and when, in the
judgment of management, the loans have demonstrated a
period of performance and are estimated to be fully
collectible as to both principal and interest. The
classification of a loan as nonaccrual is not
necessarily indicative of potential loan loss.
Loan origination and commitment fees and certain
direct loan origination costs are deferred and
recognized as an adjustment to the yield over the
lives of the related loans.
(d) Loans Held for Sale
The Bank originates loans under the Small Business
Administration ("SBA") Program that generally
provides for SBA guarantees of 75 percent to 90
percent of each loan. The Bank may sell the
guaranteed portion of each loan to a third party and
retain the unguaranteed portion in its own portfolio.
Those loans that may be sold are classified as loans
held for sale and are carried at the lower of cost or
estimated market value, based on secondary market
quotes. A gain is recognized on sale of these loans
through collection of a premium over the adjusted
carrying value. The Company's investment in the
remaining SBA loan is based upon a relative fair
market value allocation between the portion of the
loan sold, the portion of the loan retained and any
excess servicing retained. The gain on the sold
portion is recognized over the estimated life of the
loan. The carrying value of the retained portion of
the loan is reduced and amortized into income over
the life of the loan, thereby increasing the future
yield, and any excess servicing would be recorded as
an asset and subsequently amortized to servicing
income. The Bank utilizes a 1 percent normal
servicing fee and has not recorded any excess
servicing assets. Excess servicing assets have been
deemed immaterial at December 31, 1996.
23
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Operations and Significant Accounting Policies
(continued)
(e) Allowance for Loan Losses
Management periodically reviews and evaluates the
loan portfolio to determine the adequacy of the
allowance for loan losses. This evaluation is based
on the risk characteristics of the loan portfolio and
considers such factors as past loan loss experience,
the financial condition of the borrower, current
economic conditions, net realizable value of the
collateral, and other relevant factors. The
allowance for loan losses is increased by provisions
for loan losses charged to income, which may include
charges to reduce the recorded balance of loans
receivable and loans foreclosed to their estimated
net realizable value or fair value less selling costs
as applicable. Such provisions are based on
management's estimate of net realizable value or fair
value of the collateral, which are dependent upon
current and currently anticipated future operating or
sales conditions. Such estimates are particularly
susceptible to changes that could result in material
adjustments to the results of operations in the near
term. Recovery of the carrying value of such loans
is dependent to a great extent on economic,
operating, and other conditions that may be beyond
the Bank's control.
Various regulatory agencies, as an integral part of
their examination process, periodically review the
allowance for loan losses. Such agencies may require
the Bank to recognize additions to the allowance
based on their judgments about information available
to them at the time of their examination.
(f) Investments in Securities
The Company adopted the provisions of Statement of
Financial Accounting Standards No. 115, Accounting
for Certain Investments in Debt and Equity Securities
(SFAS 115) effective December 31, 1993. The Company
recognizes the effects of unrealized gains/losses net
of deferred taxes in stockholders' equity. Under
SFAS 115, the Company is required to classify its
securities into one of three categories: available
for sale, held to maturity, or trading.
Trading securities are bought and held principally
for the purpose of selling them in the near term.
Securities purchased for trading are carried at fair
value. Net unrealized gains and losses are
recognized in a valuation allowance by credits or
charges to income. The Company held no assets
classified as trading securities at December 31, 1996
and 1995.
Held to maturity securities are those securities in
which the Company has the ability and intent to hold
the securities until maturity. Held to maturity
securities are recorded at cost, adjusted for the
amortization or accretion of premiums or discounts.
Premiums and discounts are amortized or accreted over
the life of the related security as an adjustment to
yield using the effective interest method. The
company held no assets classified as held to maturity
securities at December 31, 1996 and 1995.
24
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Operations and Significant Accounting Policies
(continued)
Available for sale securities are recorded at fair
value and include all securities not classified as
trading or held to maturity. Unrealized gains and
losses, net of the related deferred tax effects, are
excluded from earnings and are reported as a separate
component of stockholders' equity.
Dividend and interest income are recognized when
earned. Realized gains and losses for securities
classified as available for sale and held to maturity
are included in earnings and are derived using the
specific identification method for determining the
cost of the security sold. There are no off-balance
sheet hedging mechanisms.
(g) Premises and Equipment
Premises and equipment are stated at cost, less
accumulated depreciation and amortization.
Depreciation and amortization are computed using the
straight-line method over the estimated useful lives
of the respective assets, except for tenant and
leasehold improvements which are amortized over the
terms of the respective leases or the estimated
useful lives of the improvements, whichever is
shorter. The estimated useful lives of the principal
items of premises and equipment are generally as
follows: building and improvements - 39 years;
furniture, fixtures and equipment - 3 to 15 years.
(h) Cash and Cash Equivalents
For the purpose of presentation in the consolidated
statements of cash flows, cash and cash equivalents
consist of federal funds sold, cash, and due from
banks. Included in cash and due from banks are
balances maintained with the Federal Reserve Bank and
other correspondent banks to compensate for services
provided.
(i) Income Taxes
Effective January 1, 1993, the Company adopted the
provisions of Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (SFAS
109). Under the asset and liability method of SFAS
109, deferred tax assets and liabilities are
recognized for the future tax consequence
attributable to differences between the financial
statement carrying amounts of existing assets and
liabilities and their respective tax bases and
operating loss carryforwards. Deferred tax assets
and liabilities are measured using the enacted tax
rates expected to apply to taxable income in the
years in which those temporary differences are
expected to be recovered or settled. Under SFAS 109,
the effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the
period which includes the enactment date.
25
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Operations and Significant Accounting Policies
(continued)
(j) Stock-Based Compensation
The Company has opted not to adopt the stock
compensation cost method of SFAS 123, Accounting for
Stock-Based Compensation. The Company has opted to
continue to account for stock-based compensation
under existing standards that measure compensation
cost based on the difference between the market price
of the stock at the grant date (or other measurement
date) and the exercise price.
(k) Earnings Per Share
Primary earnings per share are computed by dividing
net income by the weighted average number of common
shares outstanding during the year, including average
common equivalent shares attributable to dilutive
stock options and warrants.
Fully diluted earnings per share are computed by
dividing net income by the weighted average number of
common shares outstanding during the year, including
the maximum dilutive effect of average common
equivalent shares. See Note 14 for additional
information.
(l) New Accounting Pronouncements
Statement of Financial Accounting Standards No. 125,
Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities (SFAS 125),
was issued in June 1996, and was effective for
transactions occurring after December 31, 1996. In
December 1996, the Financial Accounting Standards
Board delayed the effective date of certain SFAS 125
provisions until after December 31, 1997. Management
does not expect SFAS 125 to have a material impact on
the Company's financial statements.
(m) Reclassifications
Certain reclassifications were made to prior year
financial statements to conform to current year
presentation. The reclassifications did not affect
net income or earnings per share.
26
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Investments Available for Sale
On December 29, 1995, as allowed by a Special Report to Statement
of Financial Accounting Standards No. 115, Accounting for Certain
Investments, the Company made a one-time reassessment of the
classification of its investments held to maturity. As a result
of the reassessment, all of the investments held to maturity were
transferred to the investments available for sale category. On
December 29, 1995, the date of transfer, those investments had an
amortized cost of $2.985 million. The net unrealized loss on
that date was $4,000, and was recognized as a separate component
of stockholders' equity, rather than being recognized in net
income. There were no investments classified as held to maturity
at December 31, 1996 and 1995. The amortized cost basis and
approximate fair value of investments available for sale at
December 31, 1996 and 1995, are shown below:
1996
--------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gain Loss Value
---------------- --------------- --------------- ----------------
U.S. Treasuries $ - $ - $ - $ -
Obligations of U.S.
government agencies 39,677 - (429) 39,248
Municipal 235 - - 235
Mortgage-backed securities 607 - (8) 599
Equity securities 756 - - 756
---------------- --------------- --------------- ----------------
Total $ 41,275 $ - $ (437) $ 40,838
================ =============== =============== ================
1995
--------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gain Loss Value
---------------- --------------- --------------- ----------------
U.S. Treasuries $ 2,999 $ 11 $ - $ 3,010
Obligations of U.S.
government agencies 23,928 159 - 24,087
Municipal 235 - 2 233
Mortgage-backed securities 678 - - 678
Equity securities 657 - - 657
---------------- --------------- --------------- ----------------
Total $ 28,497 $ 170 $ 2 $ 28,665
================ =============== =============== ================
The Company pledges securities as collateral for repurchase
agreements, treasury, tax, and loan payments and other purposes
in the normal course of business. The approximate carrying value
of securities pledged by the Company at December 31, 1996 and
1995, was $18.043 million and $5.115 million, respectively.
27
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Investments Held to Maturity and Investments Available for Sale
(continued)
Proceeds from sales of investments available for sale during
1996, 1995 and 1994 were $7,452,000, $3,651,000 and $6,764,000,
respectively. Gross realized gains (losses) for these years were
$42,000, $(58,000) and $(45,000), respectively..
As a member of the Federal Reserve and FHLB, the Bank is required
to hold stock in the Federal Reserve Bank of Richmond and the
FHLB of Atlanta. Included in equity securities were Federal
Reserve stock of $239,050 and $210,000 at December 31, 1996 and
1995, respectively, and FHLB stock of $467,300 and $397,000 at
December 31, 1996 and 1995, respectively.
The remaining maturity of the investments available for sale at
December 31, 1996, are as follows:
Amortized Fair
Cost Value
-------------- --------------
Due in 1 year or less $ 735 $ 735
Due after 1 year through 5 years 8,179 8,163
Due after 5 years through 10 years 30,998 30,585
Mortgage-backed securities 607 599
Equity securities 756 756
-------------- --------------
Total $ 41,275 $ 40,838
============== ==============
Note 3. Loans
Residential loans totaling $4.354 million and $5.476 million were
pledged for FHLB borrowings of $1.121 million and $2.309 million
at December 31, 1996 and 1995, respectively. Loans at December
31, 1996 and 1995 are summarized as follows:
1996 1995
--------------- ----------------
Commercial $ 35,017 $ 32,270
Commercial mortgage 37,554 23,187
Construction 19,061 16,777
Residential mortgage 17,598 12,431
Home equity 6,212 5,275
Installment 4,815 4,243
--------------- ----------------
Subtotal $ 120,257 $ 94,183
Unearned income (653) (424)
Allowance for loan losses (1,530) (1,332)
--------------- ----------------
Loans, net $ 118,074 $ 92,427
=============== ================
SBA loans held for sale $ 8,264 $ 12,917
=============== ================
28
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3. Loans (continued)
An analysis of the allowance for loan losses for the years ended
December 31, 1996, 1995 and 1994 is summarized as follows:
1996 1995 1994
------------- ------------- -------------
Balance, January 1 $ 1,332 $ 965 $ 793
Provision for loan losses 751 372 178
Charge-offs (553) (9) (6)
Recoveries - 4 -
------------- ------------- -------------
Balance, December 31 $ 1,530 $ 1,332 $ 965
============= ============= =============
There were no nonaccrual loans at December 31, 1996 and 1995. At
December 31, 1996, loans totaling $737,454 were past due 90 days
or more. At December 31, 1995, loans totaling $223,000 were past
due 90 days or more and were not on nonaccrual status
Restructured loans are defined as those loans on which
concessions in terms have been granted because of a borrower's
financial difficulty. The Company had no restructured loans in
1996 and 1995.
Loans serviced for others are not included in the accompanying
consolidated balance sheets. The unpaid principal balances of
loans serviced for others was $29.0milllion and $19.2 million at
December 31, 1996 and 1995, respectively.
Note 4. Premises and Equipment
A summary of the premises and equipment for the years ended
December 31, 1996 and 1995, is as follows:
1996 1995
-------------- --------------
Land* $ 568 $ 413
Building and improvements* 2,879 2,501
Leasehold improvements 866 833
Furniture, fixtures and equipment 2,544 2,114
-------------- --------------
Total premises and equipment, at cost $ 6,857 $ 5,861
Less accumulated depreciation and amortization 1,662 967
-------------- --------------
Total premises and equipment, net $ 5,195 $ 4,894
============== ==============
29
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Premises and Equipment (continued)
* At December 31, 1996, the Company occupies 42 percent of the
building and the remaining 58 percent is leased to outside
parties. The book value of the property is $3,205,436 at
December 31, 1996. The building is collateral for a loan (see
Note 9).
At December 31, 1996, the annual aggregate future minimum lease
receivables are as follows:
December 31, 1997 $ 413
1998 368
1999 292
2000 221
2001 80
2002 - 2010 224
---------------
$ 1,598
===============
Leasing commitments:
The Company occupies and leases its branches, and its operations
center under long-term operating lease agreements. Rent expense
for 1996 was approximately $330,000 compared to $374,000 for 1995
and $360,000 for 1994. At December 31, 1996, the annual
aggregate future minimum lease payments are as follows:
December 31, 1997 $ 415
1998 422
1999 415
2000 230
2001 147
2002 - 2011 428
---------------
$ 2,057
===============
Note 5. Deposits
The detail by type of interest-bearing deposits for the years
ended December 31, 1996 and 1995, is as follows:
1996 1995
---------------- ----------------
NOW $ 12,178 $ 10,147
Savings 10,690 8,620
Money market 16,979 19,171
Certificates of deposit less than $100,000 56,607 32,117
Certificates of deposit of $100,000 or more 15,858 14,617
IRA and Keogh accounts 8,551 7,032
---------------- ----------------
Total interest-bearing deposits $ 120,863 $ 91,704
================ ================
At December 31, 1996, the scheduled maturities of certificates of
deposit are as follows:
December 31, 1997 $ 46,000
1998 11,134
1999 7,621
2000 5,885
2001 1,640
30
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5. Deposits (continued)
A breakdown of deposit interest expense for the years ended
December 31, 1996, 1995 and 1994, is shown below:
1996 1995 1994
-------------- -------------- --------------
NOW $ 216 $ 189 $ 176
Savings 350 274 354
Money market 614 576 392
Certificates of deposit less than $100,000 2,424 1,609 671
Certificates of deposit of $100,000 or more 895 754 571
IRA and Keogh accounts 415 331 164
-------------- -------------- --------------
Total deposit interest expense $ 4,914 $ 3,733 $ 2,328
============== ============== ==============
Note 6. Non-interest Income
Significant amounts included in other Non-interest income for the
years ended December 31, 1996, 1995 and 1994, respectively, are
as follows:
1996 1995 1994
-------------- -------------- --------------
Credit card $ 512 $ 362 $ 312
Mortgage loan fees 774 809 340
Loan servicing fees 212 102 56
Other 88 206 104
-------------- -------------- --------------
$ 1,586 $ 1,479 $ 812
============== ============== ==============
Note 7. Non-interest Expense
Significant amounts included in other Non-interest expense for
the years ended December 31, 1996, 1995 and 1994, respectively,
are as follows:
1996 1995 1994
-------------- -------------- --------------
Legal and professional $ 319 $ 227 $ 218
Data processing 379 278 201
Advertising and promotion 198 112 46
Printing and supplies 171 214 134
FDIC insurance 2 98 178
Virginia franchise tax 81 68 83
Directors fees 74 74 57
Credit card expenses 450 304 256
Miscellaneous 991 798 570
-------------- -------------- --------------
Total $ 2,665 $ 2,173 $ 1,743
============== ============== ==============
31
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8. Short-Term Borrowings
Short-term borrowings consist of the following:
1996 1995
-------------- --------------
Securities sold under agreements to repurchase $ 17,904 $ 4,916
Master note agreements - 15,491
Federal Home Loan Bank 1,121 2,309
Cash overdraft 969 -
-------------- --------------
$ 19,994 $ 22,716
============== ==============
Securities sold under agreements to repurchase and master note
agreements generally mature in less than 30 days. See Notes 2
and 3 for collateral. The securities underlying the agreements
are under the Bank's control. Information concerning securities
sold under agreements to repurchase is summarized as follows:
1996 1995
-------------- --------------
Average balance during the year
(average computed on a daily basis) $ 8,861 $ 4,958
============== ==============
Average interest rate during the year 4.63% 4.96%
============== ==============
Maximum month-end balance during the year $ 17,904 $ 5,405
============== ==============
Note 9. Other Borrowings
In 1995, the subsidiary, 2071 Chain Bridge Road, L.L.C., borrowed
the following:
Fixed Original Balance Owed
Rate Amount 12/31/96 12/31/95
---------- ------------- ------------ -------------
USG Annuity & Life Company,
interest payable monthly,
matures December 2000,
secured by headquarters
building with a carrying
amount of $3,205,000 8.25% $ 1,200 $ 1,185 $ 1,199
============ =============
Interest expense on long-term borrowings was $98,334 and $8,250
in 1996 and 1995, respectively.
Aggregate maturities during the next four years are: 1997
$16,000; 1998 $18,000; 1999 $19,000; 2000 $1.131 million.
32
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10. Income Taxes
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 1996 and 1995, are as follows:
1996 1995
--------------- --------------
Deferred tax assets:
Allowance for loan losses $ 462 $ 441
Accrued expenses 78 21
Unrealized gain on loans held for sale 197 -
Unrealized loss on available for sale
securities 149 -
Deferred rent 47 53
--------------- --------------
Total deferred tax assets $ 933 $ 515
=============== ==============
Deferred tax liabilities:
Depreciation $ (26) $ (61)
Unrealized
gain on available for
sale securities - (57)
Accrual to cash adjustment (4) (9)
--------------- --------------
Total deferred tax liabilities $ (30) $ (127)
--------------- --------------
Net deferred tax asset $ 903 $ 388
=============== ==============
The provision (benefit) for income taxes attributed to operations
for the years ended December 31, 1996, 1995 and 1994, is
summarized as follows:
1996 1995 1994
------------- ------------ -------------
Federal income tax
Current $ 1,405 $ 996 $ 538
Deferred (309) (113) 27
------------- ------------ -------------
Total income tax expense $ 1,096 $ 883 $ 565
============= ============ =============
33
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10. Income Taxes (continued)
A reconciliation of the statutory federal income tax rate to the
Company's effective income tax rate for the years ended December
31, 1996, 1995 and 1994, is as follows:
1996 1995 1994
------------- ------------- -------------
Statutory federal tax rate 34.00% 34.00% 34.00%
Other .22 2.68 .02
------------- ------------- -------------
Effective income tax rate 34.22% 36.68% 34.02%
============= ============= =============
Deferred tax expense (benefit) results from timing differences in
the recognition of revenue and expense for tax and financial
statement purposes. The primary source of these differences for
the year ended December 31, 1996, is the difference in treatment
of loan losses for financial statement and tax purposes.
Note 11. Parent Company and Regulatory Restrictions
The activities of the Company are primarily regulated by the
Federal Reserve Bank, whereas the Bank is primarily regulated by
the Office of the Comptroller of the Currency. Certain
regulatory restrictions exist regarding the ability of the Bank
to transfer funds to the Company in the form of cash dividends,
loans or advances. As of December 31, 1996, the Bank has
undivided profits of approximately $4.8 million that could be
distributed to the Company as dividends without prior regulatory
approval.
The Bank is subject to various regulatory capital requirements.
Failure to meet minimum capital requirements can initiate certain
mandatory--and possibly additional discretionary--actions by
regulators that, if undertaken, could have a direct material
effect on the Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines
that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital
amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings,
and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios
(set forth in the table below) of total and Tier I capital (as
defined in the regulations) to risk-weighted assets (as defined),
and of Tier I capital (as defined) to average assets (as
defined). The Bank's actual capital amounts and ratios are also
presented in the table. Management believes, as of December 31,
1996, that the Bank meets all capital adequacy requirements to
which it is subject.
As of December 31, 1996, the most recent notification from the
Office of the Comptroller of the Currency categorized the Bank as
well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized the
Bank must maintain minimum total risk-based, Tier I risk-based,
and Tier I leverage ratios as set forth in the table. There are
no conditions or events since that notification that management
believes have changed the institution's category.
34
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11. Parent Company and Regulatory Restrictions (continued)
For Capital
Actual Adequacy Purposes
--------------------- ------------------------------------------------------------------
(dollars in thousands) Amount Ratio Amount Ratio
- - ---------------------- ---------- -------- ------------------------------- -----------------------------
As of December 31, 1996:
Total capital (to risk-
weighted assets):
Consolidated $ 16,115 12.39% Greater than or equal to $10,401 Greater than or equal to 8.00%
Patriot National Bank $ 14,335 11.21% Greater than or equal to $10,226 Greater than or equal to 8.00%
Tier I Capital (to risk-
weighted assets):
Consolidated $ 14,585 11.22% Greater than or equal to $ 5,200 Greater than or equal to 4.00%
Patriot National Bank $ 12,806 10.02% Greater than or equal to $ 5,113 Greater than or equal to 4.00%
Tier I Capital (to
average assets):
Consolidated $ 14,585 8.16% Greater than or equal to $ 7,151 Greater than or equal to 4.00%
Patriot National Bank $ 12,806 7.26% Greater than or equal to $ 7,057 Greater than or equal to 4.00%
As of December 31, 1995:
Total capital (to risk-
weighted assets):
Consolidated $ 13,960 12.81% Greater than or equal to $ 8,718 Greater than or equal to 8.00%
Patriot National Bank $ 11,430 10.77% Greater than or equal to $ 8,494 Greater than or equal to 8.00%
Tier I Capital (to risk-
weighted assets):
Consolidated $ 12,628 11.59% Greater than or equal to $ 4,358 Greater than or equal to 4.00%
Patriot National Bank $ 10,098 9.51% Greater than or equal to $ 4,247 Greater than or equal to 4.00%
Tier I Capital (to
average assets):
Consolidated $ 12,628 8.27% Greater than or equal to $ 6,105 Greater than or equal to 4.00%
Patriot National Bank $ 10,098 6.73% Greater than or equal to $ 6,000 Greater than or equal to 4.00%
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
---------------------------------------------------------
(dollars in thousands) Amount Ratio
- - ---------------------- ---------------- ----------------------------------
As of December 31, 1996:
Total capital (to risk-
weighted assets):
Consolidated $ 13,001 Greater than or equal to 10.00%
Patriot National Bank $ 12,783 Greater than or equal to 10.00%
Tier I Capital (to risk-
weighted assets):
Consolidated $ 7,800 Greater than or equal to 6.00%
Patriot National Bank $ 7,670 Greater than or equal to 6.00%
Tier I Capital (to
average assets):
Consolidated $ 8,939 Greater than or equal to 5.00%
Patriot National Bank $ 8,821 Greater than or equal to 5.00%
As of December 31, 1995:
Total capital (to risk-
weighted assets):
Consolidated $ 10,898 Greater than or equal to 10.00%
Patriot National Bank $ 10,617 Greater than or equal to 10.00%
Tier I Capital (to risk-
weighted assets):
Consolidated $ 6,537 Greater than or equal to 6.00%
Patriot National Bank $ 6,371 Greater than or equal to 6.00%
Tier I Capital (to
average assets):
Consolidated $ 7,631 Greater than or equal to 5.00%
Patriot National Bank $ 7,500 Greater than or equal to 5.00%
35
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11. Parent Company and Regulatory Restrictions (continued)
Condensed parent company financial statements for the years ended
December 31, 1996 and 1995, and for the three-year period ended
December 31, 1996, are as follows:
PARENT COMPANY ONLY BALANCE SHEETS
December 31, 1996 and 1995
1996 1995
--------------- ----------------
Cash $ 396 $ 281
Premises and equipment, net - 75
Investment in banking subsidiary 12,517 10,208
Investment in other subsidiary 1,417 2,173
Due from banking subsidiary 190 -
Other assets 3 1
--------------- ----------------
Total assets $ 14,523 $ 12,738
=============== ================
Stockholders' equity $ 14,523 $ 12,738
=============== ================
PARENT COMPANY ONLY INCOME STATEMENTS
Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
--------------- --------------- ----------------
Income:
Interest income $ - $ 56 $ 102
Management fees 7 18 18
Loss on sale of investments - (45) -
--------------- --------------- ----------------
Total income $ 7 $ 29 $ 120
--------------- --------------- ----------------
Expenses:
Occupancy $ 7 $ 18 $ 18
Interest on note payable - 101 34
Other 42 97 70
--------------- --------------- ----------------
Total expenses $ 49 $ 216 $ 122
--------------- --------------- ----------------
Loss before equity in undistributed
net income of subsidiaries $ (42) $ (187) $ (2)
Undistributed net income
of subsidiaries 2,132 1,711 1,098
--------------- --------------- ----------------
Net income $ 2,090 $ 1,524 $ 1,096
=============== =============== ================
36
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11. Parent Company and Regulatory Restrictions (continued)
PARENT ONLY STATEMENT OF CASH FLOWS
Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
----------------- ----------------- -----------------
Net income $ 2,090 $ 1,524 $ 1,096
Less noncash items:
Depreciation and amortization 7 21 30
Realized loss on sale of
investments - 45 -
Undistributed net income of
subsidiaries (2,132) (1,711) (1,098)
(Increase) decrease in other assets (2) 15 -
Increase (decrease) in accrued
expenses and other liabilities - - (31)
----------------- ----------------- -----------------
Net cash provided (used)
by operations $ (37) $ (106) $ (3)
----------------- ----------------- -----------------
Investment in subsidiaries $ (900) $ (285) $ (1,814)
Distributions from subsidiaries 1,146 201 -
Proceeds on sale of investment
securities - 2,164 -
----------------- ----------------- -----------------
Net cash provided (used)
by investing activities $ 246 $ 2,080 $ (1,814)
----------------- ----------------- -----------------
Proceeds (payment) of loan from
bank subsidiary $ - $ (1,849) $ 1,849
Stock issuance proceeds, net 152 205 -
Cash dividends paid (246) (177) -
----------------- ----------------- -----------------
Net cash provided (used)
by financing activities $ (94) $ (1,821) $ 1,849
----------------- ----------------- -----------------
Net increase in cash $ 115 $ 153 $ 32
Cash, beginning of year 281 128 96
----------------- ----------------- -----------------
Cash, end of year $ 396 $ 281 $ 128
================= ================= =================
37
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Stock Option Plans
In recognition of their services, employees and executive
officers of the Bank, and the Directors of the Company and the
Bank, were granted options in the Company's stock. The stock
option transactions for the years ended December 31, 1995 and
1994, are as follows:
Option
Executive Price Per
Directors Officers Employees Total Common Share
--------- ------------ --------- ----------- ------------------
Outstanding,
December 31, 1993 30,600 47,130 12,963 90,693 $4.17 to $5.88
Granted - 11,414 - 11,414 $4.90 to $6.00
Forfeited - - (408) (408) $5.88
---------- ---------- -------- ----------
Outstanding,
December 31, 1994 30,600 58,544 12,555 101,699 $4.17 to $6.00
Granted - 11,744 3,750 15,494 $4.90 to $10.75
Exercised (3,060) - - (3,060) $4.41 to $5.52
Forfeited - - (1,653) (1,653) $5.88
---------- ---------- -------- ----------
Outstanding,
December 31, 1995 27,540 70,288 14,652 112,480 $4.17 to $10.75
========== ========== ======== ==========
Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation (SFAS 123), is effective for years
beginning after December 15, 1995. SFAS 123 encourages, but does
not require, companies to record compensation cost for
stock-based employee compensation plans at fair value. Under
SFAS 123, compensation cost is based on the fair value of the
award on the date of grant. The company has opted to continue to
account for stock-based compensation under existing standards
that measure compensation cost based on the difference between
the market price of the stock at the grant date (or other
measurement date) and the exercise price. The required proforma
disclosures have not been presented because the effect of
applying SFAS 123's fair value method to the company's
stock-based awards results in net income and earnings per share
that are not materially different from the 1996 amounts reported.
Of the 125,137 options for common stock outstanding at December
31, 1996, 121,287 are exercisable immediately, and an additional
3,850 are exercisable on December 31, 1998. All options and
dollar prices have been adjusted for the stock dividend as
described in Note 14. During 1996, compensation expense of
$155,917 was taken relating to options granted at a price below
the fair market value on the date of grant was recorded. The
exercise price for options outstanding as of December 31, 1996,
range from $4.17 to $12.00. There are 3,350 options at $10.75,
1,000 at $12.00 and 120,787 that range between $4.17 and $5.88.
The maximum term of options granted is ten years. The stock
option plan authorizes the issuance of up to 200,000 options to
purchase shares of common stock.
38
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Stock Option Plans (continued)
A summary of the Company's stock option activity and related
information for the year ended December 31, 1996, follows:
Weighted-
Average
Exercise
Options Price
------------- -------------
Outstanding - January 1, 1996 112,480 $ 5.288
Granted 20,574 6.022
Exercised (5,519) 5.804
Forfeited (2,398) 8.386
-------------
Outstanding - December 31, 1996 125,137 5.327
=============
Exercisable - December 31, 1996 121,287 5.087
Weighted-average fair value of options
granted during 1996 $ 8.18
The fair value of the weighted-average of options granted during
1996 was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average
assumptions for 1996: risk-free interest rate of 6.06 percent;
dividend yields of 1.25 percent; volatility factors of the
expected market price of the Company's common stock of 29 to 47;
and a weighted-average expected life of the option of .50 to 1.5.
Note 13. Warrants
The Company has granted warrants to the original organizers in
recognition of the services performed in connection with the
organization of the Company. The warrants were granted based on
three warrants, at $4.90 per share, for every four shares of the
Company's common stock that the Directors had subscribed to in
the initial offering. These warrants are exercisable on or
before March 31, 2000. The total number of warrants granted,
adjusted for the stock split and the stock dividend, was 298,343.
Warrants totaling $-0-, $26,545 and $-0- were exercised in 1996,
1995 and 1994, respectively. Warrants outstanding on December
31, 1996, are 271,798.
39
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14. Stockholders' Equity and Earnings Per Share
Cash dividends of 3 cents per share were paid on February 29,
1996, May 31, 1996, August 30, 1996, and November 29, 1996.
Cash dividends of 2 cents per share were paid on March 30, 1995,
June 30, 1995, and August 30, 1995. A 3 cents per share cash
dividend was paid on November 30, 1995.
On May 26, 1994, the Company declared a 2 percent stock dividend,
payable on June 30, 1994, to stockholders of record as of June
10, 1994. As a result of the stock dividend, 38,556 shares of
common stock were issued and the total number of common shares
outstanding increased to 1,969,896. The financial statements
have been retroactively restated to reflect the stock dividend.
On October 22, 1993, the Company completed a stock offering of
570,000 shares of common stock at a price of $5.75. The offering
netted approximately $3 million to enable the Company to take
advantage of continued growth opportunities. On April 22, 1993,
the Company announced a two-for-one stock split of the Company's
common stock, $5.00 par value, payable to stockholders of record
at the close of business on April 30, 1993. The stock split
reduced the par value of the Company's common stock to $2.50 per
share. The financial statements have been retroactively restated
to reflect the stock split.
Note 15. Significant Concentrations of Credit Risk
Most of the Company's business activity is with customers located
in Northern Virginia. Accordingly, the ultimate collectibility
of a substantial portion of the Bank's loan portfolio, which
primarily consists of real estate loans (see Note 3), is
susceptible to changes in these markets.
Note 16. Related Party Transactions
During 1994, the Bank made a loan to the Company to capitalize a
new subsidiary formed for the purpose of purchasing and owning an
office building. The building is utilized by the Bank for its
corporate offices and its operations departments. The loan
required interest payments monthly at the prime rate and was paid
in full during 1995. The loan was fully secured by U.S. Treasury
and agency securities.
Note 17. Commitments and Contingencies
In the normal course of business, the Company makes various
commitments to extend credit and incurs contingent liabilities
which are not reflected in the balance sheets.
Commitments to extend credit are agreements to lend to a customer
as long as there is no violation of any condition established in
the contract. Commitments generally have fixed expiration dates
or other termination clauses and may require payment of a fee.
Since many of the commitments are expected to expire without
being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. At December 31, 1996 and
1995, the commitments to extend credit were $34.2 million and
$23.1 million, respectively.
40
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 17. Commitments and Contingencies (continued)
Standby letters of credit are conditional commitments issued by
the Company to guarantee the performance of a customer to a third
party. Those guarantees are primarily issued to support lease
deposits, infrastructure development, and private borrowing
arrangements. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loan
commitments to customers. The Company holds marketable
securities and other collateral supporting those commitments for
which collateral is deemed necessary. Commitments under standby
letters of credit were $2.680 million at December 31, 1996, and
$1.671 million at December 31, 1995. The portion of standby
letters of credit collateralized was 99 percent at December 31,
1996 and 1995. The commitments for loans and lines of credit are
predominately at variable rates based upon prime.
The Company also maintains federal funds lines of approximately
$10.5 million with a number of larger regional banking
institutions. None of these lines were in use at December 31,
1996 and 1995.
The Bank sells the guaranteed portion of some SBA loans. The
loans are sold with full recourse for the first ninety days after
settlement. The credit risk involved in selling the loans with
the ninety-day recourse provisions is that there is a potential
that the Bank would have to repurchase the loans and thereby
reverse the gross gain previously recognized if the original
borrowers default within 90 days. At December 31, 1996, in
relation to SBA loans sold after September 30, 1996, the Bank had
collected gross proceeds of $4.2 million and recognized gain
during 1996 of $212,169. At December 31, 1995, in relation to
loans sold after September 30, 1995, the Bank had collected gross
proceeds of $3.7 million and recognized gain during 1995 of
$214,858. The principal balances of these sold loans were $3.9
million and $2.9 million, respectively, at December 31, 1996 and
1995.
Note 18. Fair Value of Financial Instruments
SFAS No. 107, Disclosures About Fair Value of Financial
Instruments, requires disclosure of fair value information about
financial instruments, whether or not recognized in the balance
sheet, for which it is practicable to estimate that value. In
cases where quoted market prices are not available, fair values
are based on estimates using present value techniques. Those
techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows.
The derived fair value estimates cannot be substantiated by
comparison to independent markets and, in many cases, could not
be realized in immediate settlement of the instrument. SFAS No.
107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the
underlying value of the Company.
The following methods and assumptions were used by the Company in
estimating the fair value for its financial instruments as
defined by SFAS No. 107:
CASH, DUE FROM BANKS AND FEDERAL FUNDS SOLD: The carrying amount
approximates fair value.
SECURITIES AVAILABLE FOR SALE: Fair values are based on
published market prices.
LOANS AND LOANS HELD FOR SALE: For credit card and equity line
receivables with short-term and/or variable characteristics,
total receivables outstanding approximate fair value. This
amount excludes any value related to account relationship. The
fair value of other types of loans, including loans held for
sale, is estimated by discounting the future cash flows using the
comparable risk-free rate and adjusting for credit risk and
operating costs.
41
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 18. Fair Value of Financial Instruments (continued)
INTEREST RECEIVABLE AND INTEREST PAYABLE: The carrying amount
approximates fair value.
NON-INTEREST-BEARING DEPOSITS: The fair value of these
instruments is the amount payable on demand at the reporting
date.
INTEREST-BEARING DEPOSITS: The fair value of demand deposits,
savings accounts and money market deposits with no defined
maturity is the amount payable on demand at the reporting date.
The fair value of certificates of deposit is estimated by
discounting the future cash flows using the current rates at
which similar deposits would be made.
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS, FEDERAL FUNDS
PURCHASED, AND OTHER SHORT-TERM BORROWINGS: For these short-term
instruments, the carrying amount approximates fair value.
LONG-TERM BORROWINGS: Fair value is based on estimates made by
discounting the future cash flows using the current rates at
which similar borrowings would be made.
COMMITMENTS TO EXTEND CREDIT AND STANDBY AND COMMERCIAL LETTERS
OF CREDIT: The fair value of commercial lending related letters
of credit and commitments is estimated based upon the amount of
fees currently charged to enter into similar agreements, and
taking into account the present creditworthiness of the
counterparties. The fair value of such instruments was not
considered material.
The estimated fair values of the Company's financial instruments
at December 31, 1996 and 1995, required to be disclosed under
SFAS No. 107 is as follows:
1996 1995
--------------------------------- ---------------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
-------------- -------------- -------------- --------------
Financial Assets:
Cash, due from banks
and federal funds sold $ 16,718 $ 16,718 $ 18,098 $ 18,098
Loans receivable and
loans held for sale, net 126,338 129,314 105,344 108,031
Investments available for
sale 40,838 40,838 28,665 28,665
Interest receivable 1,323 1,323 1,106 1,106
Financial Liabilities:
Deposit accounts $ 154,329 $ 154,813 $ 120,259 $ 121,169
Repurchase and master
note agreements 17,904 17,904 20,407 20,407
FHLB borrowings 1,121 1,089 2,309 2,312
Other borrowings 2,154 2,154 1,199 1,199
Interest payable 174 174 162 162
42
45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 19. Subsequent Event
On February 18, 1997, First Patriot Bankshares Corporation
entered into a merger agreement with United Bankshares
Incorporated, subject to shareholder and regulatory approval.
Note 20. 401(k) Pension Plan
The Company maintains a qualified pension plan that covers
substantially all employees who meet certain age and service
requirements. The qualified plan was established in 1990.
Contributions to the plan by the Company are discretionary. The
Company contributed $58,717 in 1996, $30,000 in 1995, and $-0- in
1994.
Note 21. Transactions With Directors and Others
The Company has engaged in banking transactions in the ordinary
course of business with some of its directors, officers, and
their associates. All loans or commitments to extend loans are
made on the same terms, including interest rates and collateral,
as those prevailing at the time for comparable loans to unrelated
borrowers. These loans to related parties for the years ended
December 31, 1996 and 1995 are as follows:
1996 1995
--------------- ---------------
Balance, January 1 $ 3,038 $ 4,458
New loans/commitments 1,260 1,631
Participations sold (repayments) 800 (3,051)
--------------- ---------------
Balance, December 31 $ 5,098 $ 3,038
=============== ===============
These related parties had deposits with the Bank totaling $1.8
million at December 31, 1996
Included in legal and professional fees are fees paid to a law
firm, whose partner is a director of the Company and the Bank,
totaling approximately $104,690, $18,000 and $14,000 for the
years ended December 31, 1996, 1995 and 1994, respectively.
43
46
FIRST PATRIOT BANKSHARES CORPORATION
SUMMARY OF OPERATIONS BY QUARTER
(unaudited)
1996 Quarters Ended
---------------------------------------------
(dollars in thousands) 3/31 6/30 9/30 12/31 Total
----------------------------------------------------------
Interest income $3,420 $3,507 $3,825 $3,937 $14,689
Interest expense 1,362 1,354 1,571 1,625 5,912
----------------------------------------------- ----------
Net interest income 2,058 2,153 2,254 2,312 8,777
Provision for loan losses 127 363 119 142 751
Noninterest income 515 794 683 916 2,908
Noninterest expense 1,804 1,959 1,927 2,058 7,748
----------------------------------------------- ----------
Income before tax expense 642 625 891 1,028 3,186
Income tax expense 251 175 322 348 1,096
----------------------------------------------- ----------
Net income $391 $450 $569 $680 $2,090
=============================================== ==========
Earnings per share (1):
Primary $0.17 $0.20 $0.26 $0.30 $0.93
=============================================== ==========
Fully diluted $0.18 $0.20 $0.25 $0.30 $0.93
=============================================== ==========
First Patriot Bankshares Corporation
Summary of Operations by Quarter
(unaudited)
1995 Quarters Ended
---------------------------------------------
(dollars in thousands) 3/31 6/30 9/30 12/31 Total
----------------------------------------------------------
Interest income $2,314 $2,740 $3,084 $3,333 $11,471
Interest expense 826 1,087 1,250 1,339 4,502
----------------------------------------------- ----------
Net interest income 1,488 1,653 1,834 1,994 6,969
Provision for loan losses 38 44 58 232 372
Noninterest income 324 566 601 790 2,281
Noninterest expense 1,351 1,733 1,760 1,627 6,471
----------------------------------------------- ----------
Income before tax expense 423 442 617 925 2,407
Income tax expense 132 140 204 407 883
----------------------------------------------- ----------
Net income $291 $302 $413 $518 $1,524
=============================================== ==========
Earnings per share (1):
Primary $0.14 $0.14 $0.20 $0.23 $0.71
=============================================== ==========
Fully diluted $0.14 $0.14 $0.20 $0.23 $0.71
=============================================== ==========
(1) Per share amounts have been restated to give the effects of the
two-for-one stock split, effective April 30, 1993 and the 2% stock
dividend, effective June 30, 1994.
44
47
BOARD OF DIRECTORS
"PICTURE" "PICTURE" "PICTURE"
DAN R. BANNISTER ROBERT M. BARLOW WAYNE W. BROADWATER
Dyncorp Prospect Enterprises, Inc. Shipmates, Ltd.
T/A Rental Depot
"PICTURE" "PICTURE" "PICTURE"
BRONSON F. BYRD NANCY K. FALCK HARVEY W. HUNTZINGER
Attorney, Investment Advisor Business Woman National Systems Management
"PICTURE" "PICTURE" "PICTURE"
JONES V. ISAAC CARROLL C. MARKLEY JOHN H. RUST, JR.
Isaac Enterprises Inc. First Patriot Bankshares McCandlish & Lillard
Corporation
Patriot National Bank
45
48
PATRIOT NATIONAL BANK
OFFICERS
CYNTHIA L. CALDWELL SUSAN E. OGREN, C.P.A.
Vice President Accounting Officer
MICHAEL W. CLARKE KENNETH L. O'SHEA
Executive Vice President Vice President
JUDY DEMASI DEBORAH ROBERTSON
Compliance Officer Assistant Vice President
DOUGLAS R. GILBERT CRAIG W. SACKNOFF
Assistant Vice President Vice President
MARY N. KIDD ROBERT C. SHOEMAKER
Assistant Vice President Senior Vice President
JAMES KERNS DEBORAH STEINBERGER
Branch Officer Assistant Vice President
MICHAEL K. KUHNS CARL WALLACE
Vice President Vice President
THEODORE P. LAUER CAROL WALNETSKI
Vice President Vice President
CARROLL C. MARKLEY CHARLES WIMER
President and Chief Executive Officer Senior Vice President and Chief
Financial Officer
KELLY MARSH SANDRA M. ZARESKI
Corporate Secretary Vice President
STEPHANIE H. OGLE
Senior Vice President
46
49
PATRIOT NATIONAL BANK DEPARTMENTS
ACCOUNTING Charles Wimer 442-7130
COMPLIANCE Judy DeMasi 442-7192
FACILITIES Carol Walnetski 442-7185
DISCOUNT BROKERAGE / IRA Kathryn Freese 442-7191
LOAN ADMINISTRATION Stephanie Ogle 442-7110
COMMERCIAL LOANS Michael Clarke 442-7140
CONSUMER LOANS Diane Holmes 442-7193
MARKETING Susan Pierson 442-7196
MERCHANT BANKCARD Travis Miller 442-7190
MORTGAGE LENDING Kenneth O'Shea 442-7100
OPERATIONS Cynthia Caldwell 442-7127
HUMAN RESOURCES Sandra Zareski 442-7194
ADVISORY BOARD MEMBERS
FRANK ALSTON RUSSELL A. DECARLO EDWARD MILLER, PH. D
e. Villages L.L.C. Russell A, DeCarlo, D.D.S. FBLA-PBL, Inc.
KENNETH L. BONNER J. ANTHONY FULKERSON DAVE MOREY
Bonner Metropolitan Architecture Fulkerson Financial Group Ameriprint
J. GREGG BORCHELT BOB GALLOWAY JOE MOTON
The Brick Institute of America Insty Prints Moton Insurance Agency
MICHAEL M. BOWMAN GREGORY A. HARRISON, P.E. DON OWENS, JR.
Michael M. Bowman & Associates Gregory A. Harrison, P.E. & Associates Griffin Owens Insurance Agency
JOHN G. COLBY TIMOTHY D.C. MC INERNEY ANN PAGE
J.G. Colby & Co. Kol Bio Medical Instruments NOVA Commercial Realty
E.T. CONRAD EVAN JOHNSON KEN STRICKLAND
SCS Engineers HMS Enterprises Hair Quarters of McLean
ROBERT D. DAIN ANDREW E. KAUDERS PAULINE THOMPSON
Dain, Oxley and Associates Storage Solver Tysons Realty
STEVE WARD
Scott & Stringfellow
47
50
CORPORATE AND STOCKHOLDER INFORMATION
CORPORATE HEADQUARTERS: CORPORATE OFFICES:
12120 Sunset Hills Road 2071 Chain Bridge Road
Reston, Virginia 22090 Vienna, Virginia 22182
(703) 471-0900 (703) 917-1400
Fax (703) 708-7242 Fax (703) 917-8333
TRANSFER AGENT (stock registration and transfer questions should be directed
to):
First Union National Bank of North Carolina
Shareholder Services Group
230 South Tryon Street, 10th Floor
Charlotte, North Carolina 28288-1154
CORPORATE PUBLICATIONS:
The Annual Reports and Form 10-K, Quarterly Reports and other
corporate publications are available with charge to the stockholders
by calling or writing Charles Wimer at the Corporate Offices as
shown above.
STOCK INFORMATION:
First Patriot Bankshares common stock is traded on the Nasdaq Stock
Market (symbol FPBK). A dividend reinvestment program is available,
wherein common shareholders receive a 5% discount from market price
when they reinvest their First Patriot Bankshares dividends in
additional shares. Shareholders participating in the Plan can also
make optional cash purchases of common stock at market price and pay
no brokerage commissions. As of January 2, 1997, the Company had
approximately 424 holders of record of its common stock. To obtain
the Plan prospectus and enrollment card, write or call our Investor
Relations Department at the corporate offices shown above.
QUARTERLY COMMON STOCK PRICES AND DIVIDENDS:
The high and low market prices of the Company's common stock, as
well as dividend payout information, during each quarter of the last
two years is shown below:
FIRST PATRIOT BANKSHARES
QUARTERLY COMMON STOCK PRICES
1996 1995
Market Price Market Price
----------------------- Dividends ----------------------- Dividends
High Low Declared High Low Declared
---------------------------------- -----------------------------------
First Quarter $13.00 $11.50 $0.03 $7.00 $5.50 $0.02
Second Quarter 12.00 9.25 0.03 8.00 6.38 0.02
Third Quarter 12.50 10.00 0.03 10.63 8.00 0.02
Fourth Quarter 16.00 11.50 0.03 13.00 9.00 0.03
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51
PATRIOT NATIONAL BANK
(703) 917-1400
RESTON FAIRFAX FALLS CHURCH
12120 Sunset Hills Rd 10855 Lee Highway 511 W. Broad St
Reston, VA 22090 Fairfax, VA 22030 Falls Church, VA 22042
(703) 471-0900 (703) 385-4440 (703) 237-7800
MCLEAN VIENNA STERLING
1345 Chain Bridge Rd 302 Maple Ave W 101 E Holly Ave
McLean, VA 22102 Vienna, VA 22180 Sterling, VA 20164
(703) 506-1900 (703) 242-6700 (703) 421-8000
TYSONS MANASSAS MCLEAREN
2071 Chain Bridge Rd 8669 Sudley Rd 3065 Centreville Rd
Vienna, VA 22182 Manassas, VA 22110 Herndon, VA 20171
(703) 556-0900 (703) 331-0607 (703) 471-7200
Loan Production Offices also located in Winchester, Warrenton,
and Front Royal