UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
Commission file number 0-24958
POTOMAC BANCSHARES, INC.
(Exact Name of Registrant as Specified in Its Charter)
| West Virginia | 55-0732247 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
111 East Washington Street
PO Box 906
Charles Town WV 25414
(Address of Principal Executive Offices) (Zip Code)
304-725-8431
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of May 9, 2005, Potomac Bancshares, Inc. had 3,393,122 shares of common stock outstanding.
FORM 10-Q
March 31, 2005
INDEX
| PAGE | ||||
| PART I. |
FINANCIAL INFORMATION | |||
| Item 1. |
Financial Statements. | |||
| Consolidated Balance Sheets as of March 31, 2005 (Unaudited) and December 31, 2004 (Audited) |
3 | |||
| Consolidated Statements of Income (Unaudited) for the Three Months Ended March 31, 2005 and 2004 |
4 | |||
| 5 | ||||
| Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2005 and 2004 |
6 | |||
| 7 - 10 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
10 | ||
| Item 3. |
13 | |||
| Item 4. |
14 | |||
| Part II. |
OTHER INFORMATION | |||
| Item 1. |
15 | |||
| Item 2. |
Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities. |
15 | ||
| Item 5. |
15 | |||
| Item 6. |
15 | |||
| 16 | ||||
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 evidences Congress’ determination that the disclosure of forward-looking information is desirable for investors and encourages such disclosure by providing a safe harbor for forward-looking statements by corporate management. This Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements that involve risk and uncertainty. “Forward-looking statements” are easily identified by the use of words such as “could,” “anticipate,” “estimate,” “believe,” and similar words that refer to a future outlook. To comply with the terms of the safe harbor, the company notes that a variety of factors could cause the company’s actual results and experience to differ materially from the anticipated results or other expectations expressed in the company’s forward-looking statements.
The risks and uncertainties that may affect the operations, performance, development and results of the company’s business include, but are not limited to, the growth of the economy, interest rate movements, the impact of competitive products, services and pricing, customer business requirements, Congressional legislation and similar matters. We caution readers of this report not to place undue reliance on forward-looking statements which are subject to influence by the named risk factors and unanticipated future events. Actual results, accordingly, may differ materially from management expectations.
2
POTOMAC BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands)
| (Unaudited) March 31 2005 |
December 31 2004 |
|||||||
| Assets: |
||||||||
| Cash and due from banks |
$ | 9 477 | $ | 11 371 | ||||
| Interest-bearing deposits in financial institutions |
102 | 794 | ||||||
| Securities purchased under agreements to resell and federal funds sold |
94 | 6 | ||||||
| Securities available for sale, at fair value |
46 943 | 47 339 | ||||||
| Loans held for sale |
844 | 148 | ||||||
| Loans, net of allowance for loan losses of $2,015 and $1,966 respectively |
190 085 | 177 039 | ||||||
| Bank premises and equipment, net |
5 936 | 5 787 | ||||||
| Accrued interest receivable |
1 040 | 913 | ||||||
| Other assets |
5 513 | 5 139 | ||||||
| Total Assets |
$ | 260 034 | $ | 248 536 | ||||
| Liabilities and Stockholders’ Equity: |
||||||||
| Liabilities: |
||||||||
| Deposits |
||||||||
| Noninterest-bearing deposits |
$ | 32 337 | $ | 34 236 | ||||
| Interest-bearing deposits |
176 029 | 166 315 | ||||||
| Total Deposits |
208 366 | 200 551 | ||||||
| Accrued interest payable |
223 | 180 | ||||||
| Securities sold under agreements to repurchase and federal funds purchased |
18 490 | 17 577 | ||||||
| Federal Home Loan Bank advances |
8 281 | 6 370 | ||||||
| Other liabilities |
1 659 | 1 102 | ||||||
| Total Liabilities |
$ | 237 019 | $ | 225 780 | ||||
| Stockholders’ Equity: |
||||||||
| Common stock, $1 per share par value; 5,000,000 shares authorized; issued, 2005, 3,600,000 shares; 2004, 1,800,000 shares |
$ | 3 600 | $ | 1 800 | ||||
| Surplus |
2 400 | 4 200 | ||||||
| Undivided profits |
19 248 | 18 631 | ||||||
| Accumulated other comprehensive (loss), net |
(383 | ) | (25 | ) | ||||
| $ | 24 865 | $ | 24 606 | |||||
| Less cost of shares acquired for the treasury, 2005, 206,878 shares; 2004, 103,439 shares |
1 850 | 1 850 | ||||||
| Total Stockholders’ Equity |
$ | 23 015 | $ | 22 756 | ||||
| Total Liabilities and Stockholders’ Equity |
$ | 260 034 | $ | 248 536 | ||||
See Notes to Consolidated Financial Statements.
3
POTOMAC BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share data)
(Unaudited)
| For the Three Months Ended March 31 | ||||||
| 2005 |
2004 | |||||
| Interest and Dividend Income: |
||||||
| Interest and fees on loans |
$ | 3 014 | $ | 2 339 | ||
| Interest on securities held to maturity - taxable |
— | 35 | ||||
| Interest on securities available for sale - taxable |
369 | 340 | ||||
| Interest on securities available for sale - nontaxable |
13 | — | ||||
| Interest on securities purchased under agreements to resell and federal funds sold |
3 | 16 | ||||
| Other interest and dividends |
9 | 5 | ||||
| Total Interest and Dividend Income |
$ | 3 408 | $ | 2 735 | ||
| Interest Expense: |
||||||
| Interest on deposits |
$ | 609 | $ | 469 | ||
| Interest on securities sold under agreements to repurchase and federal funds purchased |
99 | 44 | ||||
| Federal Home Loan Bank advances |
71 | 23 | ||||
| Total Interest Expense |
$ | 779 | $ | 536 | ||
| Net Interest Income |
$ | 2 629 | $ | 2 199 | ||
| Provision for Loan Losses |
64 | 35 | ||||
| Net Interest Income after Provision for Loan Losses |
$ | 2 565 | $ | 2 164 | ||
| Noninterest Income: |
||||||
| Trust and financial services |
$ | 224 | $ | 223 | ||
| Service charges on deposit accounts |
343 | 341 | ||||
| BCT Visa/MC fees |
57 | 34 | ||||
| Cash surrender value of life insurance |
32 | 35 | ||||
| Gain on sale of securities |
— | 2 | ||||
| Other operating income |
117 | 101 | ||||
| Total Noninterest Income |
$ | 773 | $ | 736 | ||
| Noninterest Expenses: |
||||||
| Salaries and employee benefits |
$ | 1 054 | $ | 1 015 | ||
| Net occupancy expense of premises |
113 | 97 | ||||
| Furniture and equipment expenses |
225 | 208 | ||||
| Auditing and accounting expense |
44 | 19 | ||||
| Communications |
36 | 37 | ||||
| Postage |
28 | 36 | ||||
| Advertising and marketing |
46 | 35 | ||||
| ATM and check card expenses |
55 | 44 | ||||
| Other operating expenses |
369 | 321 | ||||
| Total Noninterest Expenses |
$ | 1 970 | $ | 1 812 | ||
| Income before Income Tax Expense |
$ | 1 368 | $ | 1 088 | ||
| Income Tax Expense |
479 | 378 | ||||
| Net Income |
$ | 889 | $ | 710 | ||
| Earnings Per Share, basic and diluted |
$ | .26 | $ | .21 | ||
See Notes to Consolidated Financial Statements.
4
POTOMAC BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(in thousands)
(Unaudited)
| Common Stock |
Surplus |
Undivided Profits |
Treasury Stock |
Accumulated Other Comprehensive Income (Loss) |
Comprehensive Income |
Total |
|||||||||||||||||||||
| Balances, December 31, 2003 |
$ | 1 800 | $ | 4 200 | $ | 16 543 | $ | (1 709 | ) | $ | 498 | $ | 21 332 | ||||||||||||||
| Comprehensive income |
|||||||||||||||||||||||||||
| Net income |
— | — | 710 | — | — | $ | 710 | 710 | |||||||||||||||||||
| Other comprehensive income: |
|||||||||||||||||||||||||||
| unrealized holding gains arising during the period (net of tax, $63) |
— | — | — | — | 122 | 122 | 122 | ||||||||||||||||||||
| Add: reclassification for gains included in net income (net of tax, $1) |
— | — | — | — | 1 | 1 | 1 | ||||||||||||||||||||
| Total comprehensive income |
$ | 833 | |||||||||||||||||||||||||
| Cash dividends ($.14 per share) |
— | — | (238 | ) | — | — | (238 | ) | |||||||||||||||||||
| Purchase of treasury shares: 3,854 shares |
— | — | — | (88 | ) | — | (88 | ) | |||||||||||||||||||
| Balances, March 31, 2004 |
$ | 1 800 | $ | 4 200 | $ | 17 015 | $ | (1 797 | ) | $ | 621 | $ | 21 839 | ||||||||||||||
| Balances, December 31, 2004 |
$ | 1 800 | $ | 4 200 | $ | 18 631 | $ | (1 850 | ) | $ | (25 | ) | $ | 22 756 | |||||||||||||
| Comprehensive income |
|||||||||||||||||||||||||||
| Net income |
— | — | 889 | — | — | $ | 889 | 889 | |||||||||||||||||||
| Other comprehensive income (loss): |
|||||||||||||||||||||||||||
| unrealized holding (losses) arising during the period (net of tax, $184) |
— | — | — | — | (358 | ) | (358 | ) | (358 | ) | |||||||||||||||||
| Total comprehensive income |
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