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 June 30, 2002
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
For the transition period from ____________ to ____________
Commission File Number 0-22535
Sistersville Bancorp, Inc.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 31-1516424
- -------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
726 Wells Street, Sistersville, WV 26175
---------------------------------------------
(Address of principal executive offices)
(304) 652-3671
---------------------------
(Registrant's telephone number, including area code)
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after distribution of
securities under a plan confirmed by a court. Yes X No
---
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date:
Class: Common Stock, par value $.10 per share
Outstanding at August 2, 2002: 460,623 shares
SISTERSVILLE BANCORP, INC.
INDEX
Page
Number
---------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) as of
June 30, 2002, and March 31, 2002 3
Consolidated Statements of Income (Unaudited)
for the Three Months ended June 30, 2002 and 2001 4
Consolidated Statements of Comprehensive Income (Unaudited)
for the Three Months ended June 30, 2002 and 2001 5
Consolidated Statements of Cash Flows (Unaudited)
for the Three Months ended June 30, 2002 and 2001 6
Notes to Unaudited Consolidated Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis 9 - 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6 Exhibits and Reports on Form 8-K 12
SIGNATURES 13
SISTERSVILLE BANCORP, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, March 31,
2002 2002
------------ -------------
ASSETS
Cash and Cash Equivalents:
Cash and amounts due from banks $ 302,641 $ 302,562
Interest-bearing deposits with other institutions 3,132,090 4,531,561
------------ -------------
Total cash and cash equivalents 3,434,731 4,834,123
------------ -------------
Investment Securities:
Securities held-to-maturity (fair value of $99,274
and $107,001, respectively) 95,775 103,894
Securities available-for-sale 7,847,847 3,589,205
------------ -------------
Total investment securities 7,943,622 3,693,099
------------ -------------
Loans receivable, (net of allowance for loan losses
of $178,700 and $178,100, respectively) 30,714,524 30,264,877
Office properties and equipment, net 1,592,348 1,581,909
Accrued interest receivable (net of reserve for
uncollected interest of $1,808 and $1,314, respectively) 236,180 215,253
Other assets 310,148 291,768
------------ -------------
TOTAL ASSETS $ 44,231,553 $ 40,881,029
============ =============
LIABILITIES
Deposits $ 34,609,783 $ 31,344,131
Deferred income taxes 352,322 326,474
Accrued interest payable and other liabilities 106,019 133,648
------------ -------------
TOTAL LIABILITIES 35,068,124 31,804,253
------------ -------------
STOCKHOLDERS' EQUITY
Preferred Stock, $.10 par value;
500,000 shares authorized, none issued -- --
Common Stock, $.10 par value;
2,000,000 shares authorized, 661,428 issued;
460,623 outstanding 66,143 66,143
Additional paid-in capital 6,230,143 6,213,295
Treasury Stock, at cost (200,805 shares) (2,644,227) (2,644,227)
Retained Earnings - substantially restricted 5,116,123 5,128,824
Unearned Employee Stock Ownership Plan shares (ESOP) (247,638) (260,866)
Unearned Restricted Stock Plan shares (RSP) (120,677) (137,467)
Accumulated other comprehensive income 763,562 711,074
------------ -------------
TOTAL STOCKHOLDERS' EQUITY 9,163,429 9,076,776
------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 44,231,553 $ 40,881,029
============ =============
See accompanying notes to the unaudited consolidated financial statements.
3
SISTERSVILLE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended June 30,
2002 2001
---------- ----------
INTEREST AND DIVIDEND INCOME
Taxable interest on loans $600,034 $543,368
Taxable interest on investments 65,426 33,501
Nontaxable interest on loans 4,014 2,524
Nontaxable interest on investments 10,268 10,281
Dividends on Federal Home Loan Bank Stock 2,233 4,187
Dividends on Federal Home Loan Mortgage Corporation Stock 3,416 3,822
-------- --------
Total interest and dividend income 685,391 597,683
-------- --------
INTEREST EXPENSE
Deposits 282,627 277,465
-------- --------
Total interest expense 282,627 277,465
-------- --------
NET INTEREST INCOME 402,764 320,218
Provision for loan losses 600 300
-------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 402,164 319,918
-------- --------
NONINTEREST INCOME
Service charges 19,145 12,390
Other income 477 341
-------- --------
Total noninterest income 19,622 12,731
-------- --------
NONINTEREST EXPENSE
Compensation and employee benefits 170,020 142,076
Occupancy 23,198 20,280
Furniture and equipment expense 17,020 14,288
Deposit insurance premiums 1,292 1,102
Supervisory examination, audit, and legal fees 15,870 13,845
Advertising and public relations 8,054 8,329
Service bureau expense 31,367 30,608
Franchise, payroll, and other taxes 14,274 16,051
Other expenses 20,266 23,626
-------- --------
Total noninterest expense 301,361 270,205
-------- --------
Income before income taxes 120,425 62,444
Income taxes 39,010 12,001
-------- --------
NET INCOME $ 81,415 $ 50,443
======== ========
EARNINGS PER SHARE
Basic $ .19 $ .12
======== ========
Diluted $ .18 $ .12
======== ========
AVERAGE SHARES OUTSTANDING - BASIC 427,007 417,379
======== ========
AVERAGE SHARES OUTSTANDING - DILUTED 441,112 426,856
======== ========
See accompanying notes to the unaudited consolidated financial statements.
4
SISTERSVILLE BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended June 30,
2002 2001
------------ -------------
NET INCOME $ 81,415 $ 50,443
------------ -------------
Other comprehensive income, net of tax:
Unrealized gain (loss) on securities:
Unrealized holding gain (loss) arising during the period 52,488 44,139
Reclassification adjustment for gains included in net income -- --
------------ -------------
Other comprehensive income (loss) 52,488 44,139
------------ -------------
COMPREHENSIVE INCOME $ 133,903 $ 94,582
============ =============
See accompanying notes to the unaudited consolidated financial statements.
5
SISTERSVILLE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended June 30,
2002 2001
-------------- ---------------
OPERATING ACTIVITIES
Net income $ 81,415 $ 50,443
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization, and accretion, net 25,590 20,989
Provision for loan losses 600 300
ESOP and RSP amortization 46,866 16,449
Decrease (increase) in accrued interest receivable
and other assets (39,307) 20,831
Increase (decrease) in accrued interest payable
and other liabilities (27,629) (29,977)
-------------- --------------
Net cash provided by operating activities 87,535 79,035
-------------- --------------
INVESTING ACTIVITIES
Purchase of available-for-sale securities (4,326,005) (100,000)
Principal collected on mortgage-backed securities 50,076 81,768
Proceeds from maturity or call of available-for-sale securities 100,000 --
Net increase in loans (450,247) (703,970)
Purchases of office properties and equipment (32,287) (2,263)
-------------- --------------
Net cash used for investing activities (4,658,463) (724,465)
-------------- --------------
FINANCING ACTIVITIES
Net increase in deposits 3,265,652 1,043,457
Dividends paid (94,116) (85,401)
Purchase of Treasury Stock -- (210,802)
-------------- --------------
Net cash provided by financing activities 3,171,536 747,254
-------------- --------------
Change in cash and cash equivalents (1,399,392) 101,824
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 4,834,123 1,125,056
-------------- --------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 3,434,731 $ 1,226,880
============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid during the period for:
Interest on deposits and borrowings $ 288,870 $ 274,252
Income taxes 51,000 5,200
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 inter-company balances and transactions have been
eliminated.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-QSB and, therefore, do not
necessarily include all information that would be included in audited financial
statements. The information furnished reflects all adjustments, which are in the
opinion of management, necessary for a fair statement of the results of
operations. All such adjustments are of a normal recurring nature. The results
of operations for the interim periods are not necessarily indicative of the
results to be expected for the fiscal year ended March 31, 2003.
These statements should be read in conjunction with the consolidated statements
as of and for the fiscal year ended March 31, 2002, and related notes which are
included in the Company's Annual Report on Form 10-KSB (file no. 0-22535).
NOTE 2 - RECENT ACCOUNTING STANDARDS
The Financial Accounting Standards Board (the "FASB") issued SFAS No. 141,
"Business Combinations." SFAS No. 141 addresses financial accounting and
reporting for business combinations and supersedes APB Opinion No. 16, "Business
Combinations," and FASB Statement No. 38, "Accounting for Pre-acquisition
Contingencies of Purchased Enterprises," but it does carry forward some guidance
from those statements. This statement requires that all business combinations be
accounted for by the purchase method and that acquired intangible assets be
recognized as assets apart from goodwill if they meet one of two criteria. The
statement also sets forth additional disclosure requirements as a result of a
business combination. The provisions of this statement apply to all business
combinations initiated after June 30, 2001. This statement also applies to all
business combinations accounted for using the purchase method for which the date
of acquisition is July 1, 2001, or later. The adoption of SFAS No. 141 did not
have a material impact on the Company.
The FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets," which
addresses financial accounting and reporting for acquired goodwill and other
intangible assets and supersedes APB Opinion No. 17, "Intangible Assets," but it
does carry forward some guidance from that statement. This statement requires
that an intangible asset that is acquired either individually or with a group of
other assets (but not those acquired in a business combination) shall be
initially recognized and measured based on its fair value. Under SFAS No. 142,
goodwill is not amortized and intangible assets with a finite useful life are
amortized and those intangible assets with an infinite life are not amortized.
This statement is generally effective for fiscal years beginning after December
15, 2001, to all goodwill and other intangible assets recognized in an entity's
statement of financial position at the beginning of that fiscal year, regardless
of when those previously recognized assets were initially recognized. The
provisions of this statement shall be initially applied at the beginning of a
fiscal year; retroactive application is not permitted. The adoption of SFAS No.
142 did not have a material impact on the Company.
The FASB recently issued SFAS No. 143, "Accounting for Asset Retirement
Obligations," which addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. This statement requires an entity to recognize the fair
value of a liability for an asset retirement obligation in the period in which
it is incurred if a reasonable estimate of fair value can be made. This
statement is effective for financial statements issued for fiscal years
beginning after June 15, 2002. Initial application of this statement is as of
the beginning of an entity's fiscal year. Management does not believe the
adoption of SFAS No. 143 will have a material impact on the Company.
The FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." SFAS No. 144 supercedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed," and
the Accounting Principles Board Opinion No. 30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," and
amends Accounting Research Bulletin No. 51, "Consolidated Financial Statements."
This statement is generally effective for financial statements issued for fiscal
years beginning after December 31, 2001,
7
and interim periods within those fiscal years. The adoption of SFAS No. 144 did
not have a material impact on the Company.
The FASB also issued SFAS No. 145, "Rescission of SFAS No. 4, 44, and 64,
Amendment of SFAS No. 13, and Technical Corrections." This Statement rescinds
SFAS No. 4, "Reporting Gains and Losses from Extinguishments of Debt," and an
amendment of that Statement, SFAS No. 64, "Extinguishments of Debt made to
Satisfy Sinking-Fund Requirements." This Statement also rescinds SFAS No. 44,
"Accounting for Intangible Assets of Motor Carriers." This Statement amends SFAS
No. 13, "Accounting for Leases," to eliminate the inconsistency between the
required accounting for sale-leaseback transactions and the required accounting
for certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. This Statement also amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under changed conditions. This
statement is generally effective for financial statements issued on or after May
15, 2002. Management does not believe the adoption of SFAS No. 144 will have a
material impact on the Company.
NOTE 3 - SUBSEQUENT EVENT
On July 1, 2002, the Board of Directors of the Bank implemented the First
Federal Savings Bank Directors Consultation and Retirement Plan. The terms of
the plan required the Bank to incur benefits expense in the amount of $57,000,
net of tax, as of that date.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS
Comparison of Financial Condition at June 30, 2002, and March 31, 2002
Total assets increased by $3.4 million to $44.2 million at June 30, 2002, from
$40.8 million at March 31, 2002. Cash and cash equivalents decreased by $1.4
million to $3.4 million at June 30, 2002, from $4.8 million at March 31, 2002.
The decrease represented the outflow of cash from the increase in loan
production, payment of dividends, and the purchase of available-for-sale
securities offset by the inflow of cash from customers' investment of funds in
deposit accounts, and proceeds from the call of available-for-sale securities
and principal collected on mortgage-backed securities. Investment securities
increased $4.2 million from $3.7 million at March 31, 2002, to $7.9 million at
June 30, 2002. The increase was the direct result of the purchase of $3.3
million in U.S. agency obligations and $1.0 million in mortgage-backed
securities offset by the call of U.S. agency obligations of $100,000 and the
principal collected on mortgage-backed securities of $50,000. Net loans
receivable increased $450,000 to $30.7 million at June 30, 2002, from $30.3
million at March 31, 2002. The increase in loans was attributable to an increase
in one-to-four family residential mortgage loans and other consumer loans. Such
increases primarily reflect the economic health of the Bank's market area and
competitive pricing of the Bank's loan products.
Total liabilities increased $3.3 million to $35.1 million at June 30, 2002, from
$31.8 million at March 31, 2002. The increase was the direct result of an
increase in customer deposits of $3.3 million from $31.3 million at March 31,
2002, to $34.6 million at June 30, 20002. The increase in deposits is
attributable to the relatively stable interest rates offered by the Bank on
deposit accounts as compared to alternative investment products.
Stockholders' equity increased by $87,000, from $9.1 million at March 31, 2002,
to $9.2 million at June 30, 2002. The increase was attributable to net income of
$81,000, amortization of the ESOP and RSP of $47,000, and an increase of $53,000
in accumulated other comprehensive income, offset by the payment of dividends of
$94,000.
Comparison of the Results of Operations for the Three Months ended June 30, 2002
and 2001
Net income increased by $31,000, or 61.4%, from net income of $50,000 for the
three months ended June 30, 2001, to net income for the three months ended June
30, 2002, of $81,000.
Interest and dividend income increased $87,000, from $598,000 at June 30, 2001,
to $685,000 at June 30, 2002. The increase is attributed to the increase in
interest on loans of $58,000, or 10.7%, and the increase in interest on
investments of $32,000, or 72.9%. The increase in interest on loans is
attributed to the average balance on loans increasing by $3.3 million to $30.6
million for the three-month period ended June 30, 2002, from $27.3 million for
the same period in 2001. The increase in interest on investments was due to the
increase in the average investments of $5.3 million, from $4.7 million for the
three-month period ended June 30, 2001, to $10.0 million for the three-month
period ended June 30, 2002, offset by the decrease in the average yield on
investments of 111 basis points from 4.36% for the three months ended June 30,
2001, to 3.25% for the three months ended June 30, 2002.
Interest expense increased by $5,000, or 1.9%, for the three months ended June
30, 2002, to $283,000, from $278,000 at June 30, 2001, due to an increase in
interest expense on deposits. The increase in interest expense on deposits was
the direct result of an increase in the average balance of interest-bearing
deposits of $8.4 million, from $23.9 million for the three-month period ended
June 30, 2001, to $32.3 million for the same period in 2002, offset by the 114
basis point decrease in the cost of funds from 4.64% for the three months ended
June 30, 2001, to 3.50% for the three months ended June 30, 2002.
Management regularly performs an analysis to identify the inherent risk of loss
in its loan portfolio. This analysis includes evaluation of concentrations of
credit, past loss experience, current economic conditions, amount and
composition of the loan portfolio (including loans being specifically monitored
by management), estimated fair value of underlying collateral, loan commitments
outstanding, delinquencies, and other factors. Based on this analysis,
management established an allowance for loan losses. The allowance for loan
losses is adjusted periodically by a provision for loan losses, which is charged
to operations based on management's evaluation of the losses that may be
incurred in the Bank's portfolio. The provision for loan losses increased by
$300 for the three months ended June 30, 2002, as compared to the same three
months ended June 30, 2001.
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
9
will not be required in future periods. In addition, the Bank's determination as
to the amount of its allowance for loan losses is subject to review by its
primary federal regulator, the Office of Thrift Supervision ("OTS"), as part of
its examination process, which may result in the establishment of an additional
allowance based on the judgment of the OTS after a review of the information
available at the time of the OTS examination.
Noninterest income increased by $7,000, or 54.1%, to $20,000 for the three-month
period ended June 30, 2002, from $13,000 for the same period in 2001.
Noninterest expense increased by $31,000, or 11.5%, to $301,000 for the three
months ended June 30, 2002, from $270,000 for the same period in 2001.
Compensation and employee benefits increased by $28,000, or 19.7%, to $170,000
for the three months ended June 30, 2002, from $142,000 for the same period in
2001. The increase was partly attributable to the increase in compensation costs
of $17,000 associated with the RSP and $5,000 associated with the ESOP. The
increase in RSP costs was the direct result of participants electing to defer
vesting of RSP shares for the period of July 1, 2000, to July 1, 2001. As a
result, RSP compensation expense would not have been recognized during the
three-month period ending June 30, 2001. ESOP costs are recognized monthly based
on the fair value of Company stock. The increase in ESOP costs is the direct
result of an increase in the fair value of Company stock during the three-month
period ending June 30, 2002, as compared to the same period in 2001. The
increase in compensation and employee benefits is also attributable to an
increase in pension expense in the amount of $6,000.
Income tax expense increased by $27,000, from $12,000 for the three months ended
June 30, 2001, to $39,000 for the three months ended June 30, 2002.
Liquidity and Capital Resources
The Bank's primary sources of funds are deposits, amortization and repayment of
loans, maturities of investment securities, and funds provided from operations.
While scheduled loan repayments are a relatively predictable source of funds,
deposit flows and loan prepayments are greatly influenced by general interest
rates, economic conditions, and competition.
The Bank has other sources of liquidity if a need for additional funds arises.
Additional sources of liquidity include funds available from the Federal Home
Loan Bank ("FHLB") of Pittsburgh amounting to $24.3 million. As of June 30,
2002, the Bank had no outstanding advances from the FHLB.
As of June 30, 2002, the Bank had $1.2 million in outstanding mortgage and
construction loan commitments. Management believes that it has adequate sources
to meet the actual funding requirements.
Management monitors the Bank's tangible, core, and risk-based capital ratios in
order to assess compliance with OTS regulations. At June 30, 2002, the Bank
exceeded the minimum capital ratios requirements imposed by the OTS.
At June 30, 2002, the Bank's capital ratios were as follows:
Bank
Requirement Actual
----------- ------
Tangible capital 1.50% 18.65%
Core capital 4.00% 18.65%
Risk-based capital 8.00% 40.98%
10
Risk Elements
The table below presents information concerning non-performing assets including
non-accrual loans, renegotiated loans, loans 90 days or more past due, other
real estate loans, and repossessed assets. A loan is classified as non-accrual
when, in the opinion of management, there are serious doubts about
collectibility of interest and principal. At the time the accrual of interest is
discontinued, future income is recognized only when cash is received.
Renegotiated loans are those loans for which terms have been renegotiated to
provide a reduction or deferral of principal or interest as a result of the
deterioration of the borrower's ability to pay.
June 30, March 31,
2002 2002
-------------- -------------
(dollars in thousands)
Loans on non-accrual basis $ - $ -
Loans past due 90 days or more 31 60
Renegotiated loans - -
------------- ------------
Total non-performing loans 31 60
------------- ------------
Other real estate - -
Repossessed assets - -
------------- ------------
Total non-performing assets $ 31 $ 60
============= ============
Non-performing loans as a percent of total loans .10% .20%
======== =======
Non-performing assets as a percent of total assets .07% .15%
======== =======
Allowance for loan losses to non-performing loans 577.42% 296.67%
======== =======
Management monitors impaired loans on a continual basis. As of June 30, 2002,
the Company had no impaired loans. During the three months ended June 30, 2002,
loans increased $500,000 and non-performing loans decreased $29,000, while the
allowance for loan losses increased $600 for the same period. The percentage of
allowance for loan losses to loans outstanding remained at .6% during this time
period. The collateral requirements on such loans reduce the risk of potential
losses to an acceptable level in management's opinion.
11
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. Exhibits and Reports on Form 8-K
(a) List of Exhibits:
99.1 Independent Accountant's Report
(b) Report on Form 8-K
NONE
12
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: August 2, 2002 By: /s/ Stanley M. Kiser
-----------------------------------------------
Stanley M. Kiser
President and Chief Executive Officer
(Duly Authorized Officer)
Date: August 2, 2002 By: /s/ Stanley M. Kiser
-----------------------------------------------
Stanley M. Kiser
President and Chief Executive Officer
(Principal Executive and Financial Officer)
13