UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) July 30, 2010
Potomac Bancshares, Inc.
(Exact Name of Registrant as Specified in Charter)
West Virginia
(State of Other Jurisdiction of Incorporation)
0-24958
(Commission File Number)
55-0732247
(IRS Employer Identification No.)
111 E. Washington St., PO Box 906, Charles Town WV 25414-0906
(Address of Principal Executive Offices) (Zip Code)
304-725-8431
Registrant’s telephone number, including area code
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Section 2 – Financial Information
| Item 2.02. | Results of Operations and Financial Condition. |
For Immediate Release July 30, 2010
Robert F. Baronner Jr., President and CEO of Potomac Bancshares, Inc., announced the following unaudited results for the second quarter of 2010.
For the second quarter ended June 30, 2010, Potomac Bancshares, Inc. had earnings of 13 cents per basic and diluted share compared to a loss of 19 cents per share for the quarter ended June 30, 2009. The improvement in performance is largely attributable to a reduction in the loan loss provision. The provision for second quarter of 2010 was $461 thousand compared to $1,560 thousand for the second quarter of 2009, a reduction of some 70%.
This is the third consecutive profitable quarter for Potomac Bancshares as it continues its efforts to work out problem assets. The loan loss reserve of nearly $5.6 million is 2.46% of total loans and covers 180% of non-performing loans. Efforts continue to increase the net interest margin, improve non-interest income, and control overhead expenses. Real estate sales activity, median prices, and inventories in the company’s market have seen some improvement in the last several months. Although the economy in general is by no means “out of the woods” yet, there are encouraging signs internally at the bank and in the local market area.
Potomac Bancshares suspended the dividend in the fourth quarter of 2009 as one of its primary objectives is to maintain the long term health and well capitalized status of the company. The bank’s actual capital and in comparison to regulatory minimum levels are outlined below:
| Actual | Ratio | Minimum Capital Requirement |
Ratio | |||||||
| Total Capital (to risk weighted assets) |
30,326 | 13.64 | % | 17,791 | 8.00 | % | ||||
| Tier 1 Capital (to risk weighted assets) |
27,512 | 12.37 | % | 8,895 | 4.00 | % | ||||
| Tier 1 Capital (to average assets) |
27,512 | 8.99 | % | 12,238 | 4.00 | % |
The company returned to profitability in 2010 and will resume the dividend when there are more concrete signs the economy is on the mend. Baronner commented, “Like many businesses, it is difficult to plan for the future based on the uncertainty of government policy toward business. It is also problematic to assess the economic impact to the banking industry of the financial regulation bill recently signed into law. Therefore, management and the Board of Directors will continue to assess payment of cash dividends on a quarter to quarter basis going forward.”
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POTOMAC BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
| (Unaudited) June 30 2010 |
December 31 2009 |
|||||||
| Assets: |
||||||||
| Cash and due from banks |
$ | 13 278 | $ | 6 620 | ||||
| Interest-bearing deposits in other financial institutions |
— | 53 | ||||||
| Federal funds sold |
1 875 | 5 950 | ||||||
| Securities available for sale, at fair value |
39 680 | 34 313 | ||||||
| Loans held for sale |
— | 97 | ||||||
| Loans, net of allowance for loan losses of $5,577 and $5,718, respectively |
221 460 | 228 993 | ||||||
| Premises and equipment, net |
8 485 | 8 726 | ||||||
| Other real estate owned, net of valuation allowance of $258 and $303, respectively |
6 647 | 5 632 | ||||||
| Accrued interest receivable |
991 | 952 | ||||||
| Federal Home Loan Bank of Pittsburgh stock |
805 | 805 | ||||||
| Other assets |
10 703 | 11 048 | ||||||
| Total Assets |
$ | 303 924 | $ | 303 189 | ||||
| Liabilities and Stockholders’ Equity: |
||||||||
| Liabilities: |
||||||||
| Deposits |
||||||||
| Noninterest-bearing |
$ | 27 650 | $ | 27 953 | ||||
| Interest-bearing |
235 427 | 236 514 | ||||||
| Total Deposits |
263 077 | 264 467 | ||||||
| Securities sold under agreements to repurchase |
7 609 | 7 340 | ||||||
| Federal Home Loan Bank advances |
3 307 | 3 856 | ||||||
| Accrued interest payable |
393 | 405 | ||||||
| Other liabilities |
3 011 | 1 549 | ||||||
| Total Liabilities |
$ | 277 397 | $ | 277 617 | ||||
| Stockholders’ Equity: |
||||||||
| Common stock, $1 per share par value; 5,000,000 shares authorized; 3,671,691 shares issued |
$ | 3 672 | $ | 3 672 | ||||
| Surplus |
3 915 | 3 898 | ||||||
| Undivided profits |
22 791 | 21 931 | ||||||
| Accumulated other comprehensive (loss), net |
(985 | ) | (1 063 | ) | ||||
| $ | 29 393 | $ | 28 438 | |||||
| Less cost of shares acquired for the treasury 281,513 shares |
2 866 | 2 866 | ||||||
| Total Stockholders’ Equity |
$ | 26 527 | $ | 25 572 | ||||
| Total Liabilities and Stockholders’ Equity |
$ | 303 924 | $ | 303 189 | ||||
See Notes to Consolidated Financial Statements
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POTOMAC BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
(Unaudited)
| For the Three
Months Ended June 30 |
For the Six Months Ended June 30 | ||||||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||||||
| Interest and Dividend Income: |
|||||||||||||
| Interest and fees on loans |
$ | 3 269 | $ | 3 509 | $ | 6 546 | $ | 7 031 | |||||
| Interest on securities available for sale - taxable |
216 | 254 | 412 | 497 | |||||||||
| Interest on securities available for sale – nontaxable |
49 | 37 | 98 | 71 | |||||||||
| Interest on federal funds sold |
1 | 1 | 2 | 3 | |||||||||
| Other interest and dividends |
4 | 4 | 7 | 13 | |||||||||
| Total Interest and Dividend Income |
$ | 3 539 | $ | 3 805 | $ | 7 065 | $ | 7 615 | |||||
| Interest Expense: |
|||||||||||||
| Interest on deposits |
$ | 1 023 | $ | 1 210 | $ | 2 101 | $ | 2 503 | |||||
| Interest on securities sold under agreements to repurchase and federal funds purchased |
20 | 38 | 40 | 76 | |||||||||
| Federal Home Loan Bank advances |
15 | 52 | 61 | 106 | |||||||||
| Total Interest Expense |
$ | 1 058 | $ | 1 300 | $ | 2 202 | $ | 2 685 | |||||
| Net Interest Income |
$ | 2 481 | $ | 2 505 | $ | 4 863 | $ | 4 930 | |||||
| Provision for Loan Losses |
461 | 1 560 | 771 | 3 137 | |||||||||
| Net Interest Income after Provision for Loan Losses |
$ | 2 020 | $ | 945 | $ | 4 092 | $ | 1 793 | |||||
| Noninterest Income: |
|||||||||||||
| Trust and financial services |
$ | 227 | $ | 189 | $ | 437 | $ | 364 | |||||
| Service charges on deposit accounts |
478 | 539 | 914 | 1 034 | |||||||||
| Fee income on secondary market loans |
18 | 56 | 24 | 108 | |||||||||
| Gain (loss) on sale of other real estate |
30 | (18 | ) | 142 | 36 | ||||||||
| Visa/MC Fees |
178 | 140 | 329 | 267 | |||||||||
| Cash surrender value of life insurance |
59 | 60 | 118 | 118 | |||||||||
| Other operating income |
103 | 81 | 181 | 142 | |||||||||
| Total Noninterest Income |
$ | 1 093 | $ | 1 047 | $ | 2 145 | $ | 2 069 | |||||
| Noninterest Expenses: |
|||||||||||||
| Salaries and employee benefits |
$ | 1 142 | $ | 1 293 | $ | 2 402 | $ | 2 544 | |||||
| Net occupancy expense of premises |
144 | 141 | 334 | 273 | |||||||||
| Furniture and equipment expenses |
227 | 247 | 437 | 467 | |||||||||
| Impairment loss on CFSI stock |
— | — | — | 117 | |||||||||
| FDIC assessment |
154 | 190 | 274 | 234 | |||||||||
| Printing, stationery and supplies |
67 | 45 | 102 | 120 | |||||||||
| ATM and check card expenses |
71 | 89 | 135 | 184 | |||||||||
| Foreclosed property expense |
110 | 539 | 291 | 718 | |||||||||
| Other operating expenses |
546 | 590 | 995 | 1 103 | |||||||||
| Total Noninterest Expenses |
$ | 2 461 | $ | 3 134 | $ | 4 970 | $ | 5 760 | |||||
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| Income (Loss) before Income Tax Expense (Benefit) |
$ | 652 | $ | (1 142 | ) | $ | 1 267 | $ | (1 898 | ) | ||||
| Income Tax Expense (Benefit) |
214 | (508 | ) | 407 | (846 | ) | ||||||||
| Net Income (Loss) |
$ | 438 | $ | (634 | ) | $ | 860 | $ | (1 052 | ) | ||||
| Earnings (Loss) Per Share, basic and diluted |
$ | .13 | $ | (.19 | ) | $ | .25 | $ | (.31 | ) | ||||
See Notes to Consolidated Financial Statements.
Potomac Bancshares Inc. is the one bank holding company for Bank of Charles Town, based in Charles Town, West Virginia.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| POTOMAC BANCSHARES, INC. |
| /s/ Robert F. Baronner, Jr. |
| Robert F. Baronner, Jr., President and CEO |
| July 30, 2010 |
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