SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended December 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
For the transition period from to
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Commission File Number 0-22535
Sistersville Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Delaware 31-1516424
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization
726 Wells Street, Sistersville, WV 26175
(Address of principal executive offices)
(304) 652-3671
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date:
Class: Common Stock, par value $.10 per share
Outstanding at February 3, 1998: 661,428 shares
SISTERSVILLE BANCORP, INC.
INDEX
Page
Number
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet (Unaudited) as of
December 31, 1997 and March 31, 1997 3
Consolidated Statement of Income (Unaudited)
for the Nine Months ended December 31, 1997 and 1996 4
Consolidated Statement of Income (Unaudited)
for the Three Months ended December 31, 1997 and 1996 5
Consolidated Statement of Cash Flows (Unaudited)
for the Nine Months ended December 31, 1997 and 1996 6
Notes to Unaudited Consolidated Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis 8 - 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Default Upon Senior Securities 13
Item 4. Submissions of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6.(a) Exhibits 14
Item 6.(b) Report on Form 8-K 14
SIGNATURES 15
SISTERSVILLE BANCORP, INC.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
December 31, March 31,
1997 1997
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ASSETS
Cash and Cash Equivalents:
Cash and amounts due from banks $ 93,622 $ 81,065
Interest-bearing deposits with other institutions 727,980 1,713,394
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Total cash and cash equivalents 821,602 1,794,459
Investment Securities:
Securities held to maturity (fair value of $297,039
and $335,053) 287,460 328,053
Securities available for sale 7,463,101 2,319,633
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Total investment securities 7,750,561 2,647,686
Loans receivable, (net of allowance for loan losses
of $167,800 and $164,150) 23,639,822 21,724,869
Office properties and equipment, net 353,300 363,538
Accrued interest receivable 269,654 144,071
Other assets 29,874 142,127
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TOTAL ASSETS $ 32,864,813 $ 26,816,750
============ ============
LIABILITIES
Deposits $ 21,474,472 $ 21,699,725
Deferred income taxes 337,370 215,091
Accrued interest payable and other liabilities 127,549 98,620
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TOTAL LIABILITIES 21,939,391 22,013,436
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STOCKHOLDERS' EQUITY
Preferred Stock, $.10 par value;
500,000 shares authorized, none issued - - Common Stock,
$.10 par value; 2,000,000 shares
authorized, 661,428 issued and outstanding 66,143 -
Additional paid - in capital 6,144,929 -
Retained Earnings - substantially restricted 4,601,838 4,410,275
Net unrealized gain on securities available for sale 606,729 393,039
Unearned Employee Stock Ownership Plan shares (ESOP) (494,217) -
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TOTAL STOCKHOLDERS' EQUITY 10,925,422 4,803,314
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 32,864,813 $ 26,816,750
============ ============
See accompanying notes to the unaudited consolidated financial statements.
3
SISTERSVILLE BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Nine Months Ended December 31,
1997 1996
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INTEREST AND DIVIDEND INCOME
Taxable interest on loans $ 1,450,933 $ 1,341,916
Taxable interest on investments 301,000 174,257
Dividends on Federal Home Loan Bank Stock 9,765 8,708
Dividends on Federal Home Loan Mortgage Corporation Stock 6,811 5,959
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Total interest and dividend income 1,768,509 1,530,840
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INTEREST EXPENSE
Deposits 755,494 735,607
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Total interest expense 755,494 735,607
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NET INTEREST INCOME 1,013,015 795,233
Provision for loan losses 5,174 5,583
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NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,007,841 789,650
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NONINTEREST INCOME
Service charges 16,885 15,847
Other income 1,579 5,440
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Total noninterest income 18,464 21,287
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NONINTEREST EXPENSE
Compensation and employee benefits 318,767 309,733
Occupancy 26,472 30,561
Furniture and equipment expense 25,644 26,271
Deposit insurance premiums 10,246 163,302
Supervisory examination, audit and legal fees 50,524 17,851
Advertising and public relations 17,127 16,793
Service bureau expense 47,520 42,587
Franchise, payroll and other taxes 43,413 35,071
Other expenses 41,439 50,500
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Total noninterest expense 581,152 692,669
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Income before income taxes 445,153 118,268
Income taxes 156,229 32,558
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NET INCOME $ 288,924 $ 85,710
============ ============
Basic Earnings per share (Note 4) $.34 $ -
See accompanying notes to the unaudited consolidated financial statements.
4
SISTERSVILLE BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Three Months Ended December 31,
1997 1996
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INTEREST AND DIVIDEND INCOME
Taxable interest on loans $ 492,534 $ 458,351
Taxable interest on investments 111,774 52,808
Dividends on Federal Home Loan Bank Stock 3,267 2,875
Dividends on Federal Home Loan Mortgage Corporation Stock 2,270 1,986
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Total interest and dividend income 609,845 516,020
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INTEREST EXPENSE
Deposits 247,159 247,686
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Total interest expense 247,159 247,686
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NET INTEREST INCOME 362,686 268,334
Provision for loan losses 1,274 3,183
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NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 361,412 265,151
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NONINTEREST INCOME
Service charges 4,595 6,251
Other income 490 4,418
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Total noninterest income 5,085 10,669
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NONINTEREST EXPENSE
Compensation and employee benefits 116,644 105,425
Occupancy 8,474 11,072
Furniture and equipment expense 8,308 9,864
Deposit insurance premiums 3,415 9,391
Supervisory examination, audit and legal fees 25,763 6,750
Advertising and public relations 4,810 3,925
Service bureau expense 15,310 14,444
Franchise, payroll and other taxes 16,521 11,736
Other expenses 13,940 24,815
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Total noninterest expense 213,185 197,422
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Income (loss) before income taxes 153,312 78,398
Income taxes (benefit) 51,848 18,687
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NET INCOME (LOSS) $ 101,464 $ 59,711
============ ============
Basic Earnings per share (Note 4) $.17 $ -
See accompanying notes to the unaudited consolidated financial statements.
5
SISTERSVILLE BANCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Nine Months Ended December 31,
1997 1996
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OPERATING ACTIVITIES
Net income $ 288,924 $ 85,710
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization and accretion, net 28,189 27,630
Gain on sale of other real estate - (3,903)
Provision for loan losses 5,174 5,583
Deferred federal income taxes 7,457 (394)
ESOP amortization 51,869 -
Decrease (increase) in accrued interest receivable
and other assets (13,330) (18,315)
Increase (decrease) in accrued interest payable
and other liabilities 20,057 (12,666)
Increase (decrease) in accrued federal income taxes 8,874 (60,833)
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Net cash provided by operating activities 397,214 22,812
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INVESTING ACTIVITIES
Purchase of term deposits - (400,000)
Purchase of available for sale securities (5,239,047) -
Maturity of available for sale security 425,000 -
Maturities of held to maturity securities - 400,000
Principal collected on mortgage - backed securities 40,593 35,035
Net increase in loans (1,920,127) (1,602,249)
Disposition of real estate owned - 32,549
Purchases of office properties and equipment (18,862) (2,627)
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Net cash used for investing activities (6,712,443) (1,537,292)
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FINANCING ACTIVITIES
Net increase (decrease) in deposits (225,253) 107,850
Dividends paid (97,362) -
Proceeds from sale of common stock 5,664,987 -
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Net cash provided by financing activities 5,342,372 107,850
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Decrease in cash and cash equivalents (972,857) (1,406,630)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 1,794,459 2,424,571
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CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 821,602 $ 1,017,941
=========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest on deposits and borrowings $ 762,888 $ 742,562
Income taxes 106,000 99,000
See accompanying notes to the unaudited consolidated financial statements.
6
SISTERSVILLE BANCORP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements of Sistersville Bancorp, Inc. (the
"Company"), include its wholly-owned subsidiary, First Federal Savings Bank
(the "Bank"). All significant intercompany balances and transactions have
been eliminated.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB and, therefore, do
not necessarily include all information that would be included in audited
financial statements. The information furnished reflects all adjustments
which are, in the opinion of management, necessary for a fair statement of the
results of operations. All such adjustments are of a normal recurring nature.
The results of operations for the interim periods are not necessarily
indicative of the results to be expected for the fiscal year ended March 31,
1998.
These statements should be read in conjunction with the consolidated
statements as of and for the fiscal year ended March 31, 1997, and related
notes which are included in the Company's Annual Report on Form 10-KSB (file
no. 0-22535).
NOTE 2 - CONVERSION TO STOCK FORM OF OWNERSHIP AND FORMATION OF HOLDING
COMPANY
On December 5, 1996, the Board of Directors of First Federal Savings and Loan
Association of Sistersville (the "Association") approved a plan of conversion
(the "Plan") whereby the Association was to convert from a federally
chartered mutual savings and loan to a federally chartered stock savings bank
and simultaneously reorganized into a holding company form of organization
(collectively, the "Conversion"). After approval by the regulatory
authorities and the Association's members, the Conversion was completed on
June 25, 1997. As a result of the Conversion, the Company was formed and the
Bank became a wholly-owned subsidiary of the Company.
In connection with the completion of the Conversion on June 25, 1997, the
Company completed the sale of 661,428 shares of stock at $10.00 per share.
From the proceeds, $66,143 was allocated to common stock based on a par value
of $.10 per share and $6,127,984, which is net of conversion costs of
$420,153, was allocated to additional paid in capital.
NOTE 3 - PENDING ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting and
displaying comprehensive income and its components (revenues, expenses, gains,
and losses) in a full set of general-purpose financial statements. SFAS No.
130 requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements and requires that an enterprise (a) classify items of
other comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of the
balance sheet. Under existing accounting standards, other comprehensive
income shall be classified separately into foreign currency items, minimum
pension liability adjustments, and unrealized gains and losses on certain
investments in debt and equity securities. The provisions of SFAS No. 130 are
effective for fiscal years beginning after December 15, 1997. The effect on
the Company will be to classify unrealized gains and losses on investments
available-for-sale as a component of comprehensive income.
7
In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities." The statement provides consistent
standards for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings based on a control-oriented "financial-
components" approach. Under this approach, after a transfer of financial
assets, an entity recognizes the financial and servicing assets it controls
and liabilities it has incurred, derecognizes financial assets when control
has been surrendered and derecognizes liabilities when extinguished. The
provisions of Statement No. 125 are effective for transactions occurring after
December 31, 1996, except those provisions relating to repurchase agreements,
securities lending, and other similar transactions and pledged collateral,
which have been delayed until after December 31, 1997, by Statement No. 127,
"Deferral of the Effective Date of Certain Provisions of FASB Statement No.
125, an amendment of FASB Statement No. 125." The adoption of these
statements is not expected to have a material impact on the Company's
consolidated financial position or results of operations.
NOTE 4 - EARNINGS PER SHARE
Earnings per share for the nine months ended December 31, 1997, reflects
earnings for the period July 1 through December 31, 1997. Earnings for the
period from the closing of the conversion on June 25, 1997, to June 30, 1997,
was determined to be not meaningful. The Company accounts for the 52,914
shares acquired by the ESOP in accordance with Statement of Position 93-6;
shares controlled by the ESOP are not considered in the weighted average
shares outstanding until the shares are committed for allocation to employee
accounts.
On March 3, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128, "Earnings Per Share." This statement
re-defines the standards for computing earnings per share (EPS) previously
found in Accounting Principles Board Opinion No. 15, "Earnings Per Share."
Statement No. 128 establishes new standards for computing and presenting EPS
and requires dual presentation of "basic" and "diluted" EPS on the face of the
income statement for all entities with complex capital structures. Under
Statement No. 128, basic EPS is to be computed based upon income available to
common shareholders and the weighted average number of common shares
outstanding for the period. Diluted EPS is to reflect the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the Company. Statement No. 128 also
requires the restatement of all prior-period EPS data presented. The Company
adopted Statement No. 128 for the periods ending on December 31, 1997, and
had no effect on the Company's earnings per share calculations.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Comparison of Financial Condition at December 31, 1997, and March 31, 1997
- --------------------------------------------------------------------------
On December 5, 1996, the Board of Directors of the Association approved the
Plan. After approval by the regulatory authorities and the Association's
members, the Conversion was completed on June 25, 1997, and as a result, the
Company was formed and the Bank became a wholly-owned subsidiary of the
Company. In connection with the Conversion on June 25, 1997, the Company
completed the sale of 661,428 shares (the "Offering") at $10 per share and
received net proceeds of approximately $5,665,000. The Company transferred
approximately $3,097,000 of the net proceeds to the Bank for the purchase of
all of the capital stock of the Bank. In addition, $529,140 was loaned to the
Bank's Employee Stock Ownership Plan ("ESOP") for the purchase of shares in
the Offering.
8
Total assets increased by approximately $6,048,000 to $32,865,000 at December
31, 1997, from $26,817,000 at March 31, 1997. The increase in assets was
directly attributable to the Offering. Investment securities increased
$5,103,000 from $2,648,000 at March 31, 1997, to $7,751,000 at December 31,
1997. The increase represented the investment of funds received from the
purchase of Common Stock in the Offering. The increase in investments was in
the available-for-sale classification, as all investment purchases made during
this nine month period were classified as available-for-sale. These
securities have staggering maturities ranging from one to seven years. Net
loans receivable increased $1,915,000 from $21,725,000 at March 31, 1997, to
$23,640,000 at December 31, 1997. The increase in loans was attributable to
an increase in one-to-four family residential mortgage loans. Such increases
primarily reflect the economic health of the Bank's market area and the
competitive pricing of the Bank's loan product. The funding for loan growth
was provided by funds received from the Offering and by a decrease in cash and
cash equivalents by $973,000 to $822,000 at December 31, 1997, from $1,795,000
at March 31, 1997. Deposits decreased approximately $225,000 to $21,475,000
at December 31, 1997, from $21,700,000 at March 31, 1997. This decrease
primarily represents funds withdrawn by depositors which were used to purchase
stock in the Offering.
Stockholders' equity increased $6,122,000 to $10,925,000 at December 31, 1997
compared to $4,803,000 at March 31, 1997. As discussed previously, the
increase was primarily attributed to the Offering and the result of net income
of $289,000 and recognition of shares in the Employee Stock Ownership Plan
amounting to $52,000. Through December 31, 1997, the Company initiated the
payment of dividends of $.16 per share, while maintaining capital ratios well
in excess of regulatory guidelines. Future dividend policies will be
determined by the Board of Directors in light, among other factors, of the
earnings and financial condition of the Company, including applicable
governmental regulations and policies.
Comparison of the Results of Operations for the Nine Months Ended December 31,
- ------------------------------------------------------------------------------
1997 and 1996
- -------------
Net income increased by $203,000 or 237.1% from net income of $86,000 for the
nine months ended December 31, 1996, to net income of $289,000 for the nine
months ended December 31, 1997.
Interest and dividend income increased $238,000, or 15.5%,to $1,769,000 for
the nine months ended December 31, 1997, compared to $1,531,000 for the nine
months ended December 31, 1997. The increase in interest income resulted from
an increase in earnings on loans of $109,000, or 8.1%, and an increase in
earnings on investments, including interest-bearing deposits, of $129,000, or
68.1%. These increases were due to an increase in the average balance of
loans of $1.8 million and investments, including interest-bearing deposits, of
$ 3.6 million for the nine months ended December 31, 1997, compared with same
nine month period ended in 1996. The increase in interest income on
investments and loans was directly attributable to proceeds received in the
Offering. The yield on loans remained relatively unchanged for the nine
months ended December 31, 1997, compared to the same period in 1996 at 8.5%
for both periods.
Interest expense increased $20,000 from $736,000 for the nine months ended
December 31, 1996, to $756,000 for the nine months ended December 31, 1997.
The increase in interest expense was attributable to an increase in the
average balance of interest-bearing liabilities to $21.8 million from $21.1
million, which was due primarily to the temporary holding of funds received in
connection with the Offering. The cost of funds remained relatively unchanged
from the same period a year ago decreasing 3 basis points from 4.65% for the
1996 period to 4.62% for the 1997 period.
Net interest income increased $218,000, or 27.4%, from $795,000 for the nine
months ended December 31, 1996, to $1,013,000 for the nine months ended
December 31, 1997. The
9
Company's net yield on interest-earning assets increased from 4.17% for the
nine months ended December 31, 1996 to 4.40% for the nine months ended
December 31, 1997.
Management regularly performs an analysis to identify the inherent risk of
loss in its loan portfolio. This analysis includes evaluation of
concentrations of credit, past loss experience, current economic conditions,
amount and composition of the loan portfolio (including loans being
specifically monitored by management), estimated fair value of underlying
collateral, loan commitments outstanding, delinquencies, and other factors.
Based on this analysis, management established an allowance for loan losses.
The allowance for loan losses is adjusted periodically by a provision for loan
losses which is charged to operations based on management's evaluation of the
losses that may be incurred in the Bank's loan portfolio. The provision for
loan losses remained relatively constant at $5,200 and $5,600 for the nine
months ended December 31, 1997 and 1996.
The Bank will continue to monitor its allowance for loan losses and make
future additions to the allowance through the provision for loan losses as
economic conditions dictate. Although the Bank maintains its allowance for
loan losses at a level that it considers to be adequate to provide for the
inherent risk of loss in its loan portfolio, there can be no assurance that
future losses will not exceed estimated amounts or that additional provisions
for loan losses will not be required in future periods. In addition, the
Bank's determination as to the amount of its allowance for loan losses is
subject to review by its primary federal regulator, the Office of Thrift
Supervision ("OTS"), as part of its examination process, which may result in
the establishment of an additional allowance based upon the judgment of the
OTS after a review of the information available at the time of the OTS
examination.
Noninterest income decreased by $3,000 from $21,000 for the nine months ended
December 31, 1996, to $18,000 for the nine months ended December 31, 1997.
Noninterest income is comprised primarily of service charges on deposit
accounts.
Noninterest expense decreased by $112,000 from $693,000 for the nine months
ended December 31, 1996, to $581,000 for the nine months ended December 31,
1997. Noninterest expense decreased primarily as a result of a one-time charge
of $129,000 in federal insurance premiums during the nine months ended
December 31, 1996. On September 30, 1996, the President signed into law
legislation which included the recapitalization of the Savings Association
Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation by a one-
time charge to SAIF-insured institutions of 65.7 basis points per one hundred
dollars of insurable deposits. Supervisory Examination, Audit, and Legal
expenses increased by $33,000 from $18,000 for the nine months ended December
31, 1996 to $51,000 for the nine months ended December 31, 1997, as a result
of additional costs associated with stock ownership. Compensation and
employee benefits increased $9,000 from $310,000 for the nine months ended
December 31, 1996 to $319,000 for the same period in 1997. The increase was
due primarily to the employee stock ownership plan expense from the
distribution of additional shares which was partially offset by the Company
operating with one less employee.
Income tax expense increased from $33,000 for the nine months ended December
31, 1996, to $156,000 for the nine months ended December 31, 1997, as a result
of an increase in pre-tax income.
Comparison of the Results of Operations for the Three Months Ended December
- ------------------------------------------------------------------------------
31, 1997 and 1996
- -----------------
Net income increased by $42,000 or 69.9% from net income of $60,000 for the
three months ended December 31, 1996, to net income of $102,000 for the three
months ended December 31, 1997.
10
Interest and dividend income increased $94,000, or 18.2%,to $610,000 for the
three months ended December 31, 1997, compared to $516,000 for the three
months ended December 31, 1996. The increase in interest income resulted from
an increase in earnings on loans of $34,000, or 7.5%, and an increase in
earnings on investments, including interest-bearing deposits, of $60,000, or
103.4%. These increases were due to an increase in the average balance of
loans of $1.8 million and investments, including interest-bearing deposits of
$4.4 million for the three months ended December 31, 1997, compared with the
same three month period ending in 1996. Funding of these increases was
directly attributable to the Offering.
Interest expense decreased less than $1,000 for the three months ended
December 31, 1997 to $247,000 as compared to the same period in 1996. An
increase in the average balance of interest-bearing liabilities of $50,000 to
$21.2 million was offset by a decrease in the cost of funds by 2 basis points
to 4.66% for the 1997 period from 4.68% for the 1996 period.
Net interest income increased $95,000, or 35.2%, from $268,000 for the three
months ended December 31, 1996, to $363,000 for the three months ended
December 31, 1997. The increase is primarily attributable to an increase in
average interest-earning assets of $6.2 million from $26.3 million for the
three months ended December 31, 1996, to $32.5 million for the three months
ended December 31, 1997. The Company's net yield on interest-earning assets
increased from 4.08% for the three months ended December 31, 1996, to 4.47%
for the three months ended December 31, 1997.
Management regularly performs an analysis to identify the inherent risk of
loss in its loan portfolio. This analysis includes evaluation of
concentrations of credit, past loss experience, current economic conditions,
amount and composition of the loan portfolio (including loans being
specifically monitored by management), estimated fair value of underlying
collateral, loan commitments outstanding, delinquencies, and other factors.
Based on this analysis, management established an allowance for loan losses.
The allowance for loan losses is adjusted periodically by a provision for loan
losses which is charged to operations based on management's evaluation of the
losses that may be incurred in the Bank's loan portfolio. The provision for
loan losses decreased to $1,300 for the three months ended December 31, 1997,
from $3,200 for the three months ended December 31, 1996 based on management's
analysis of the reserve's adequacy.
The Bank will continue to monitor its allowance for loan losses and make
future additions to the allowance through the provision for loan losses as
economic conditions dictate. Although the Bank maintains its allowance for
loan losses at a level that it considers to be adequate to provide for the
inherent risk of loss in its loan portfolio, there can be no assurance that
future losses will not exceed estimated amounts or that additional provisions
for loan losses will not be required in future periods. In addition, the
Bank's determination as to the amount of its allowance for loan losses is
subject to review by its primary federal regulator, the Office of Thrift
Supervision ("OTS"), as part of its examination process, which may result in
the establishment of an additional allowance based upon the judgment of the
OTS after a review of the information available at the time of the OTS
examination.
Noninterest income decreased by $6,000 from $11,000 for the three months ended
December 31, 1996, to $5,000 for the three months ended December 31, 1997. The
decrease is primarily attributable to a gain on the sale of real estate in the
1996 period of $4,000 which was not present in the 1997 period. The remaining
portion of noninterest income is comprised primarily of service charges on
deposit accounts.
Noninterest expense increased by $16,000 from $197,000 for the three months
ended December 31, 1996, to $213,000 for the three months ended December 31,
1997. Compensation and employee benefits increased by $11,000 from $106,000
for the three months ended December 31, 1996, to $117,000 for the three months
ended December 31, 1997. The increase
11
is due to compensation costs associated with the Employee Stock Ownership Plan
which was partially offset by the Bank operating with one less employee.
Supervisory Examination, Audit, and Legal expenses increased by $19,000 from
$7,000 for the three months ended December 31, 1996, to $26,000 for the three
months ended December 31, 1997, as a result of additional costs associated
with public stock ownership and regulatory requirements.
Income tax expense increased by $33,000 from $19,000 for the three months
ended December 31, 1996, to $52,000 for the three months ended December 31,
1997. The increase is due to an increase in pre-tax income.
Liquidity and Capital Resources
- -------------------------------
The Bank's primary sources of funds are deposits, amortization and prepayment
of loans, maturities of investment securities, and funds provided from
operations. While scheduled loan repayments are a relatively predictable
source of funds, deposit flows and loan prepayments are greatly influenced by
general interest rates, economic conditions, and competition. In addition,
the Bank invests excess funds in overnight deposits which provide liquidity to
meet lending requirements.
The Bank has other sources of liquidity if a need for additional funds arises.
Additional sources of funds include a line of credit with the Federal Home
Loan Bank ("FHLB") of Pittsburgh amounting to $1.9 million. As of December
31, 1997, the Bank had no outstanding advances from the FHLB.
As of December 31, 1997, the Bank had $350,000 in outstanding mortgage and
construction loan commitments. Management believes that it has adequate
sources to meet the actual funding requirements.
Management monitors both the Company's and the Savings Bank's tangible, core,
and risk-based capital ratios in order to assess compliance with OTS
regulations. At December 31, 1997, the Company and Bank exceeded the minimum
capital ratios requirements imposed by the OTS.
At December 31, 1997, the Bank and Company's capital ratios were as follows:
Bank Company
Requirement Actual Actual
----------- ------ ------
Tangible capital 1.50% 26.11% 31.99%
Core capital 3.00% 26.11% 31.99%
Risk-based capital 8.00% 55.96% 71.45%
Risk Elements
- -------------
The table below presents information concerning nonperforming assets including
nonaccrual loans, renegotiated loans, loans 90 days or more past due, other
real estate loans, and repossessed assets. A loan is classified as nonaccrual
when, in the opinion of management, there are serious doubts about
collectibility of interest and principal. At the time the accrual of interest
is discontinued, future income is recognized only when cash is received.
Renegotiated loans are those loans which terms have been renegotiated to
provide a reduction or deferral of principal or interest as a result of the
deterioration of the borrower.
12
December 31, March 31,
1997 1997
----------- ----------
(dollars in thousands)
Loans on nonaccrual basis $ - $ 10
Loans past due 90 days or more - 70
Renegotiated loans - -
----------- ----------
Total nonperforming loans - 80
----------- ----------
Other real estate - -
Repossessed assets - -
----------- ----------
Total nonperforming assets $ - $ 80
=========== ==========
Nonperforming loans as a percent of total loans 0.00% 0.36%
=========== ==========
Nonperforming assets as a percent of total assets 0.00% 0.30%
=========== ==========
Allowance for loan losses to nonperforming loans 0.00% 205.19%
=========== ==========
Management monitors impaired loans on a continual basis. As of December 31,
1997, the Company had no impaired loans.
During the nine months ended December 31, 1997, loans increased $1.9 million
and nonperforming loans decreased $80,000 while the allowance for loan losses
increased $4,000 for the same period. The percentage of allowance for loan
losses to loans outstanding remained .7% during this time period.
Nonperforming loans were primarily made up of one to four family residential
mortgages at March 31, 1997. The collateral requirements on such loans reduce
the risk of potential losses to an acceptable level in management's opinion.
13
PART II. OTHER INFORMATION
Item 1. Legal proceedings
The registrant was not engaged in any material pending legal proceedings
as of the date of this Report. From time to time, the Bank is a party to
legal proceedings within the normal course of business wherein it enforces its
security interest in loans made by it, and other matters of a like kind.
Item 2. Changes in securities
NONE
Item 3. Defaults upon senior securities
NONE
Item 4. Submission of matters to a vote of security holders
NONE
Item 5. Other information
NONE
Item 6.(a) Exhibit 11 - Statement Regarding Computation of Earnings
Per Share
Item 6.(b) Report on Form 8-K
On December 15, 1997, the Company filed a Current Report on Form 8-K,
Item 5, dated December 4, 1997, to report the declaration of a cash
dividend of $.16 per share on its Common Stock.
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SISTERSVILLE BANCORP, INC.
Date: November 3, 1997 By: /s/ Stanley M. Kiser
---------------------------------
Stanley M. Kiser
President and Chief Executive
Officer
(Duly Authorized Officer)
Date: November 3, 1997 By: /s/ Stanley M. Kiser
---------------------------------
Stanley M. Kiser
President and Chief Executive
Officer
(Principal Executive and
Financial Officer)
15