U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended March 31, 2003
¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from to
Commission file number 0-24958
POTOMAC BANCSHARES, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
West Virginia |
55-0732247 | |
(State or Other Jurisdiction of Incorporation or Organization) |
(IRS Employer Identification Number) | |
111 East Washington Street, Charles Town WV |
25414-1071 | |
(Address of Principal Executive Offices) |
(Zip Code) |
304-725-8431
(Issuers Telephone Number, Including Area Code)
NO CHANGE
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
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 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 ¨
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
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 the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨ Not applicable
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date: 1,781,670 shares
Transitional Small Business Disclosure Format (check one): Yes ¨ No x
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
POTOMAC BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(000 OMITTED)
(Unaudited) March 31 2003 |
December 31 2002 | |||||
Assets: |
||||||
Cash and due from banks |
$ |
9 703 |
$ |
11 243 | ||
Interest-bearing deposits in financial institutions |
|
106 |
|
1 970 | ||
Securities purchased under agreements to resell and federal funds sold |
|
3 971 |
|
3 915 | ||
Securities held to maturity (fair value $8,226 at March 31, 2003 and $9,313 at December 31, 2002) |
|
8 011 |
|
9 013 | ||
Securities available for sale, at fair value |
|
41 381 |
|
42 728 | ||
Loans held for sale |
|
693 |
|
1 924 | ||
Loans, net of allowance for loan losses of $1,705 at March 31, 2003 and $1,642 at December 31, 2002 |
|
118 847 |
|
115 404 | ||
Bank premises and equipment, net |
|
4 650 |
|
4 457 | ||
Accrued interest receivable |
|
998 |
|
1 065 | ||
Other assets |
|
4 217 |
|
1 158 | ||
Total Assets |
$ |
192 577 |
$ |
192 877 | ||
Liabilities and Stockholders Equity: |
||||||
Liabilities: |
||||||
Deposits |
||||||
Noninterest-bearing deposits |
$ |
20 958 |
$ |
21 574 | ||
Interest-bearing deposits |
|
139 177 |
|
140 606 | ||
Total Deposits |
|
160 135 |
|
162 180 | ||
Accrued interest payable |
|
137 |
|
160 | ||
Securities sold under agreements to repurchase |
|
7 275 |
|
6 103 | ||
Federal Home Loan Bank advances |
|
1 962 |
|
2 042 | ||
Other liabilities |
|
1 522 |
|
1 080 | ||
Total Liabilities |
$ |
171 031 |
$ |
171 565 | ||
Stockholders Equity: |
||||||
Common stock, $1 per share par value; 5,000,000 shares authorized; issued, 2003, 1,800,000 shares; 2002, 600,000 shares |
$ |
1 800 |
$ |
600 | ||
Surplus |
|
4 200 |
|
5 400 | ||
Undivided profits |
|
15 232 |
|
14 801 | ||
Accumulated other comprehensive income |
|
562 |
|
759 | ||
$ |
21 794 |
$ |
21 560 | |||
Less cost of shares acquired for the treasury, 2003, 18,330 shares; 2002, 6,110 shares |
|
248 |
|
248 | ||
Total Stockholders Equity |
$ |
21 546 |
$ |
21 312 | ||
Total Liabilities and Stockholders Equity |
$ |
192 577 |
$ |
192 877 | ||
See Notes to Consolidated Financial Statements.
2
POTOMAC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(000 omitted except for per share data)
(Unaudited)
For the Three Months Ended March 31 | ||||||
2003 |
2002 | |||||
Interest and Dividend Income: |
||||||
Interest and fees on loans |
$ |
2 109 |
$ |
2 124 | ||
Interest on securities held to maturitytaxable |
|
115 |
|
286 | ||
Interest on securities available for saletaxable |
|
407 |
|
325 | ||
Interest on securities purchased under agreements to resell and federal funds sold |
|
10 |
|
22 | ||
Other interest and dividends |
|
17 |
|
20 | ||
Total Interest and Dividend Income |
$ |
2 658 |
$ |
2 777 | ||
Interest Expense: |
||||||
Interest on deposits |
|
519 |
|
672 | ||
Interest on securities sold under agreements to repurchase |
|
41 |
|
19 | ||
Federal Home Loan Bank advances |
|
28 |
|
32 | ||
Total Interest Expense |
|
588 |
|
723 | ||
Net Interest Income |
$ |
2 070 |
$ |
2 054 | ||
Provision for Loan Losses |
|
57 |
|
90 | ||
Net Interest Income after Provision for Loan Losses |
$ |
2 013 |
$ |
1 964 | ||
Noninterest Income: |
||||||
Trust and financial services |
$ |
130 |
$ |
112 | ||
Service charges on deposit accounts |
|
268 |
|
271 | ||
Insurance commissions |
|
19 |
|
11 | ||
Loan servicing fees |
|
|
|
1 | ||
Gain on sale of securities available for sale |
|
80 |
|
| ||
Net gain on sale of loans |
|
91 |
|
37 | ||
Other operating income |
|
98 |
|
47 | ||
Total Noninterest Income |
$ |
686 |
$ |
479 | ||
Noninterest Expenses: |
||||||
Salaries and employee benefits |
$ |
988 |
$ |
790 | ||
Net occupancy expense of premises |
|
101 |
|
74 | ||
Furniture and equipment expenses |
|
172 |
|
109 | ||
Stationery and supplies |
|
44 |
|
23 | ||
Communications |
|
35 |
|
22 | ||
Other operating expenses |
|
347 |
|
350 | ||
Total Noninterest Expenses |
$ |
1 687 |
$ |
1 368 | ||
Income before Income Tax Expense |
$ |
1 012 |
$ |
1 075 | ||
Income Tax Expense |
|
349 |
|
386 | ||
Net Income |
$ |
663 |
$ |
689 | ||
Earnings Per Share, basic and diluted |
$ |
.37 |
$ |
.38 | ||
See Notes to Consolidated Financial Statements.
3
POTOMAC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(000 Omitted)
(Unaudited)
Common Stock |
Surplus |
Undivided Profits |
Treasury Stock |
Accumulated Other Comprehensive Income (Loss) |
Comprehensive Income |
Total |
|||||||||||||||||||||
Balances, December 31, 2001 |
$ |
600 |
$ |
5 400 |
|
$ |
13 208 |
|
$ |
|
|
$ |
209 |
|
$ |
19 417 |
| ||||||||||
Comprehensive income |
|||||||||||||||||||||||||||
Net income |
|
|
|
|
|
|
689 |
|
|
|
|
|
|
|
$ |
689 |
|
|
689 |
| |||||||
Other comprehensive (loss), unrealized holding (losses) arising during the period (net of tax $103) |
|
|
|
|
|
|
|
|
|
|
|
|
(200 |
) |
|
(200 |
) |
|
(200 |
) | |||||||
Total comprehensive income |
$ |
489 |
|
||||||||||||||||||||||||
Balances, March 31, 2002 |
$ |
600 |
$ |
5 400 |
|
$ |
13 897 |
|
$ |
|
|
$ |
9 |
|
$ |
19 906 |
| ||||||||||
Balances, December 31, 2002 |
$ |
600 |
$ |
5 400 |
|
$ |
14 801 |
|
$ |
(248 |
) |
$ |
759 |
|
$ |
21 312 |
| ||||||||||
Comprehensive income |
|||||||||||||||||||||||||||
Net income |
|
|
|
|
|
|
663 |
|
|
|
|
|
|
|
$ |
663 |
|
|
663 |
| |||||||
Other comprehensive (loss), unrealized holding (losses) arising during the period (net of tax, $128) |
|
|
|
|
|
|
|
|
|
|
|
|
(250 |
) |
|
(250 |
) |
|
(250 |
) | |||||||
Add: reclassification for gains included in net income (net of tax, $27) |
|
53 |
|
|
53 |
|
|
53 |
| ||||||||||||||||||
Total comprehensive income |
$ |
466 |
|
||||||||||||||||||||||||
Adjustment to reflect 200% stock divided declared as of March 1, 2003 |
|
1 200 |
|
(1,200 |
) |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Cash dividends |
|
|
|
|
|
|
(232 |
) |
|
|
|
|
|
|
|
(232 |
) | ||||||||||
Balances, March 31, 2003 |
$ |
1 800 |
$ |
4 200 |
|
$ |
15 232 |
|
$ |
(248 |
) |
$ |
562 |
|
$ |
21 546 |
| ||||||||||
See Notes to Consolidated Financial Statements.
4
POTOMAC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000 Omitted)
(Unaudited)
For the Three Months Ended |
||||||||
March 31 2003 |
March 31 2002 |
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
Net income |
$ |
663 |
|
$ |
689 |
| ||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
||||||||
Provision for loan losses |
|
57 |
|
|
90 |
| ||
Depreciation |
|
119 |
|
|
70 |
| ||
Discount accretion and premium amortization on securities, net |
|
43 |
|
|
8 |
| ||
(Gain) on sale of securities available for sale |
|
(80 |
) |
|
|
| ||
Proceeds from sale of loans |
|
5 237 |
|
|
2 296 |
| ||
Origination of loans for sale |
|
(4 006 |
) |
|
(1 545 |
) | ||
Changes in assets and liabilities: |
||||||||
Decrease in accrued interest receivable |
|
67 |
|
|
26 |
| ||
(Increase) in other assets |
|
(2 957 |
) |
|
(14 |
) | ||
(Decrease) in accrued interest payable |
|
(23 |
) |
|
(35 |
) | ||
Increase in other liabilities |
|
442 |
|
|
277 |
| ||
Net cash provided by (used in) operating activities |
$ |
(438 |
) |
$ |
1 862 |
| ||
CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
Proceeds from maturity of securities held to maturity |
$ |
1 000 |
|
$ |
|
| ||
Proceeds from maturity of securities available for sale |
|
|
|
|
3 250 |
| ||
Proceeds from sale of securities available for sale |
|
5 079 |
|
|
|
| ||
Purchase of securities available for sale |
|
(3 991 |
) |
|
|
| ||
Net (increase) in loans |
|
(3 500 |
) |
|
(2 926 |
) | ||
Purchases of bank premises and equipment |
|
(313 |
) |
|
(158 |
) | ||
Net cash provided by (used in) investing activities |
$ |
(1 725 |
) |
$ |
166 |
| ||
CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
Net (decrease) in noninterest-bearing deposits |
$ |
(616 |
) |
$ |
(855 |
) | ||
Net increase (decrease) in interest-bearing deposits |
|
(1 429 |
) |
|
1 171 |
| ||
Net proceeds in securities sold under agreements to repurchase |
|
1 172 |
|
|
474 |
| ||
Repayment of Federal Home Loan Bank advances |
|
(80 |
) |
|
(76 |
) | ||
Cash dividends |
|
(232 |
) |
|
|
| ||
Net cash provided by (used in) financing activities |
$ |
(1 185 |
) |
$ |
714 |
| ||
Increase (decrease) in cash and cash equivalents |
$ |
(3 348 |
) |
$ |
2 742 |
| ||
CASH AND CASH EQUIVALENTS |
||||||||
Beginning |
|
17 128 |
|
|
15 729 |
| ||
Ending |
$ |
13 780 |
|
$ |
18 471 |
| ||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
||||||||
Cash payments for: |
||||||||
Interest |
$ |
611 |
|
$ |
759 |
| ||
Income taxes |
$ |
21 |
|
$ |
83 |
| ||
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES |
||||||||
Unrealized (loss) on securities available for sale |
$ |
(298 |
) |
$ |
(303 |
) | ||
See Notes to Consolidated Financial Statements.
5
POTOMAC BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003 (UNAUDITED) AND DECEMBER 31, 2002
1. | In the opinion of management, the accompanying financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of March 31, 2003, and December 31, 2002, and the results of operations and cash flows for the three months ended March 31, 2003 and 2002. The statements should be read in conjunction with Notes to Consolidated Financial Statements included in the Potomac Bancshares, Inc. annual report for the year ended December 31, 2002. The results of operations for the three month periods ended March 31, 2003 and 2002, are not necessarily indicative of the results to be expected for the full year. |
2. | On February 11, 2003 the Board of Directors of Potomac Bancshares, Inc. declared a stock split in the form of a 200% stock dividend payable on March 1, 2003. Shares issued increased from 600,000 to 1,800,000. |
3. | The amortized cost and fair value of securities being held to maturity as of March 31, 2003 and December 31, 2002 are as follows: |
March 31, 2003 | ||||||||||||
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized (Losses) |
Fair Value | |||||||||
(000 Omitted) | ||||||||||||
Obligations of U. S. Government agencies |
$ |
8 011 |
$ |
215 |
$ |
|
$ |
8 226 | ||||
December 31, 2002 | ||||||||||||
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized (Losses) |
Fair Value | |||||||||
(000 Omitted) | ||||||||||||
Obligations of U. S. Government agencies |
$ |
9 013 |
$ |
300 |
$ |
|
$ |
9 313 | ||||
The amortized cost and fair value of securities available for sale as of March 31, 2003 and December 31, 2002 are as follows:
March 31, 2003 | |||||||||||||
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized (Losses) |
Fair Value | ||||||||||
(000 Omitted) | |||||||||||||
Obligations of U. S. Government agencies |
$ |
40 266 |
$ |
1 179 |
$ |
(64 |
) |
$ |
41 381 | ||||
December 31, 2002 | |||||||||||||
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized (Losses) |
Fair Value | ||||||||||
(000 Omitted) | |||||||||||||
Obligations of U.S. Government agencies |
$ |
41 315 |
$ |
1 413 |
$ |
|
|
$ |
42 728 | ||||
6
4. | The consolidated loan portfolio, stated at face amount, is composed of the following: |
March 31 2003 |
December 31 2002 | |||||
(000 Omitted) | ||||||
Mortgage loans on real estate: |
||||||
Construction, land development and other land |
$ |
2 311 |
$ |
2 211 | ||
Secured by farmland |
|
1 789 |
|
1 821 | ||
Secured by 1-4 family residential |
|
66 824 |
|
63 239 | ||
Other real estate |
|
26 326 |
|
26 151 | ||
Loans to farmers (except those secured by real estate) |
|
204 |
|
249 | ||
Commercial and industrial loans (except those secured by real estate) |
|
3 545 |
|
3 447 | ||
Consumer loans |
|
18 862 |
|
19 198 | ||
All other loans |
|
691 |
|
730 | ||
Total loans |
$ |
120 552 |
$ |
117 046 | ||
Less: allowance for loan losses |
|
1 705 |
|
1 642 | ||
$ |
118 847 |
$ |
115 404 | |||
5. | The following is a summary of transactions in the allowance for loan losses: |
March 31 2003 |
December 31 2002 |
|||||||
(000 Omitted) |
||||||||
Balance at beginning of period |
$ |
1 642 |
|
$ |
1 402 |
| ||
Provision charged to operating expense |
|
57 |
|
|
423 |
| ||
Recoveries added to the allowance |
|
34 |
|
|
104 |
| ||
Loan losses charged to the allowance |
|
(28 |
) |
|
(287 |
) | ||
Balance at end of period |
$ |
1 705 |
|
$ |
1 642 |
| ||
6. | There were no impaired loans at March 31, 2003 and December 31, 2002. |
Nonaccrual loans excluded from impaired loan disclosures under FASB 114 amounted to $285,600 at March 31, 2003. If interest on these loans had been accrued, such income would have been $6,715 for the first three months of 2003. There were no nonaccrual loans excluded from impaired loan disclosure under SFAS No. 114 at December 31, 2002.
7. | Weighted Average Number of Shares Outstanding |
2003 |
2002 | |||
Weighted average number of shares outstanding for the three months ending March 31 |
1 781 670 |
1 800 000 |
Shares outstanding have been restated to reflect the 200% stock dividend discussed in Note 2.
8. | Recent Accounting Pronouncements |
There were no recent accounting pronouncements since December 31, 2002.
7
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
CRITICAL ACCOUNTING POLICIES
General
The Corporations financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The financial information contained within our statements is, to a significant extent, financial information that is based on measures of the financial effects of transactions and events that have already occurred. A variety of factors could affect the ultimate value that is obtained either when earning income, recognizing an expense, recovering an asset or relieving a liability. We use historical loss factors as one factor in determining the inherent loss that may be present in our loan portfolio. Actual losses could differ significantly from the historical factors that we use. In addition, GAAP itself may change from one previously acceptable method to another method. Although the economics of our transactions would be the same, the timing of events that would impact our transactions could change.
Allowance for Loan Losses
The allowance for loan losses is an estimate of the losses that may be sustained in our loan portfolio. The allowance is based on two basic principles of accounting: (i) SFAS 5, Accounting for Contingencies, which requires that losses be accrued when they are probable of occurring and estimatable and (ii) SFAS 114, Accounting by Creditors for Impairment of a Loan, which requires that losses be accrued based on the differences between the value of collateral, present value of future cash flows or values that are observable in the secondary market and the loan balance.
Our allowance for loan losses has two basic components: the formula allowance and the unallocated allowance. Each of these components is determined based upon estimates that can and do change when the actual events occur. The formula allowance uses a historical loss view as an indicator of future losses and, as a result, could differ from the loss incurred in the future. However, since this history is updated with the most recent loss information, the errors that might otherwise occur are mitigated. The unallocated allowance captures losses that are attributable to various economic events, industry or geographic sectors whose impact on the portfolio have occurred but have yet to be recognized in the formula allowance.
FINANCIAL OVERVIEW
Between December 31, 2002 and March 31, 2003, total assets have remained stable at $192 million. Investments have decreased $2 million and loans have increased $3 million since December 31, 2002. Loan growth has been primarily in loans secured with 1-4 family residential property with some decline in consumer borrowing for personal expenditures.
Total deposits have decreased $2 million since December 31, 2002. There have been some slight changes between deposit categories which are typical in the normal course of business but no major trend shifts are apparent.
As management anticipated, loans have grown moderately during 2002 and during the first quarter of 2003 rather than dramatically as in 2001. Deposits have followed the same pattern except with a slight decline during the first quarter of 2003.
The March 31, 2003 annualized return on average assets is 1.38% compared to 1.35% at December 31, 2002. At March 31, 2003 the annualized return on average equity is 12.18% compared to 11.97% at December 31, 2002. The leverage capital (equity to assets) ratio is 10.90% at March 31, 2003 compared to 10.77% at December 31, 2002.
The following table is an analysis of the Corporations allowance for loan losses. Net charge-offs for the Corporation have been very low when compared with the size of the total loan portfolio. Management monitors the loan portfolio on a continual basis with procedures that allow for problem loans and potentially problem loans to be highlighted and watched. The loan policy regarding the grading and review system has recently been revised to enhance procedures for our growing portfolio of commercial loans as well as to update procedures for all other loans. Written reports are prepared on a quarterly basis for all loans except the commercial portfolio. Information on commercial loans graded below a certain level are reported to the Board of Directors on a monthly basis. Based on experience, these loan policies and the Banks grading and review system, management believes the loan loss allowance is adequate.
8
March 31, 2003 |
||||
(000 Omitted) |
||||
Balance at beginning of period |
$ |
1 642 |
| |
Charge-offs: |
||||
Commercial, financial and agricultural |
|
|
| |
Real estate construction |
|
|
| |
Real estate mortgage |
|
|
| |
Consumer |
|
28 |
| |
Total charge-offs |
|
28 |
| |
Recoveries: |
||||
Commercial, financial and agricultural |
|
|
| |
Real estate construction |
|
|
| |
Real estate mortgage |
|
|
| |
Consumer |
|
34 |
| |
Total recoveries |
|
34 |
| |
Net charge-offs (recoveries) |
|
(6 |
) | |
Additions charged to operations |
|
57 |
| |
Balance at end of period |
$ |
1 705 |
| |
Ratio of net charge-offs (recoveries) during the period to average loans outstanding during the period |
|
(.005 |
)% | |
Loans are placed on nonaccrual status when a loan is specifically determined to be impaired or when principal or interest is delinquent for 90 days or more. Interest income generally is not recognized on specific impaired loans unless the likelihood of further loss is remote. Interest income on other nonaccrual loans is recognized only to the extent of interest payments received. Following is a table showing the risk elements in the loan portfolio.
March 31, 2003 |
||||
(000 Omitted) |
||||
Nonaccrual loans |
$ |
286 |
| |
Restructured loans |
|
|
| |
Foreclosed properties |
|
|
| |
Total nonperforming assets |
$ |
286 |
| |
Loans past due 90 days accruing interest |
$ |
8 |
| |
Allowance for loan losses to period end loans |
|
1.41 |
% | |
Nonperforming assets to period end loans and foreclosed properties |
|
.237 |
% | |
At March 31, 2003, other potential problem loans (excluding impaired loans) totalled $778,960. Loans are viewed as potential problem loans according to the ability of such borrowers to comply with current repayment terms. These loans are subject to constant management attention, and their status is reviewed on a regular basis. Management has allocated a portion of the allowance for these loans according to the review of the potential loss in each loan situation.
The comparison of the income statements for the three months ended March 31, 2003 and 2002 shows a decrease of 4% in net income in 2003 when compared with 2002. Interest and dividend income is down about 4% in 2003 compared to 2002 primarily due to the lower interest rates. Interest expense is down 19% due to lower rates. Net interest income in 2003 is slightly above 2002 because of the reduction in interest expense.
Noninterest income increased 43% as of March 31, 2003 compared to March 31, 2002. A large part of increased income is from a gain on sale of securities available for sale. Additional increases were from secondary market fee income as a result of activity due to lower interest rates, increased Visa/MC fee income because of increased debit card usage, and income from increase in cash surrender value of bank owned life insurance purchased in January. Noninterest expense increased 23% in 2003 compared to 2002. Salaries and employee benefits increased 25% in 2003 when compared to 2002 due in large part to increased group insurance costs when the bank changed insurance carriers. Furniture and equipment expenses increased 57% in 2003 compared to 2002 due to a major computer conversion started late in 2002 and continuing through mid 2003.
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Liquid assets of the Corporation include cash and due from banks, securities purchased under agreements to resell, federal funds sold, securities available for sale, and loans and investments maturing within one year. The Corporations statement of cash flows details this liquidity. Net income after certain adjustments for noncash transactions provided cash from operating activities that was also spent on operating activities such as initial funding of loans held for sale and purchase of bank owned life insurance. Funds from maturity and sale of securities available for sale were used to fund investing activities. Financing activities provided funds through increases in securities sold under agreements to repurchase. Cash and cash equivalents decreased during this period, however, liquidity of the Corporation is adequate to meet present and future financial obligations.
Item 3. Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures within 90 days of the filing date of this quarterly report. Based on that evaluation, our principal executive officer and principal financial officer have concluded that these controls and procedures are effective. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.
Disclosure controls and procedures are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
There are no material legal proceedings to which the Registrant or its subsidiary, directors or officers is a party or by which they, or any of them, are threatened. All legal proceedings presently pending or threatened against Potomac Bancshares, Inc. and its subsidiary involve routine litigation incidental to the business of the Company or the subsidiary and are either not material in respect to the amount in controversy or fully covered by insurance.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
2. |
Plan of acquisition, reorganization, arrangement, liquidation or succession. Not applicable | |
4. |
Instruments defining the rights of security holders, including indentures. Not applicable | |
10. |
Material contracts. Not applicable | |
11. |
Statement re: computation of per share earnings. Not applicable | |
15. |
Letter on unaudited interim financial information. Not applicable | |
18. |
Letter on change in accounting principles. Not applicable | |
19. |
Reports furnished to security holders. Not applicable | |
22. |
Published report regarding matters submitted to vote of security holders. Not applicable | |
23. |
Consent of experts and counsel. Not applicable | |
24. |
Power of attorney. Not applicable | |
99.1 |
Certification Pursuant to 18 U.S.C. Section 1350, Chief Executive Officer (pursuant to Section 906 of Sarbanes-Oxley Act of 2002) | |
99.2 |
Certification Pursuant to 18 U.S.C. Section 1350, Chief Financial Officer (pursuant to Section 906 of Sarbanes-Oxley Act of 2002) |
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(b) Reports on Form 8-K:
A Form 8-K was filed with SEC on February 26, 2003. The form included notification that the Potomac Board of Directors had authorized
(1) | a 200% stock dividend to shareholders of record as of February 15, 2003 payable March 1, 2003, |
(2) | payment of dividends on a quarterly basis rather than on a semi-annual basis as has been traditional, and |
(3) | the first quarterly dividend of $.13 per share for all shareholders of record on February 15, 2003 payable on March 1, 2003. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
POTOMAC BANCSHARES, INC.
Date: |
May 12, 2003 |
/s/ ROBERT F. BARONNER, JR. | ||||
Robert F. Baronner, Jr. President & CEO |
Date: |
May 12, 2003 |
/s/ GAYLE MARSHALL JOHNSON | ||||
Gayle Marshall Johnson Vice President and Chief Financial Officer |
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CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert F. Baronner, Jr., Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Potomac Bancshares, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (Evaluation Date); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
6. The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: |
May 12, 2003 |
/s/ ROBERT F. BARONNER, JR. | ||||||
Robert F. Baronner, Jr. Chief Executive Officer |
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CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Gayle Marshall Johnson, Chief Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Potomac Bancshares, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (Evaluation Date); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
6. The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: |
May 12, 2003 |
/s/ GAYLE MARSHALL JOHNSON | ||||||
Gayle Marshall Johnson Chief Financial Officer |
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