UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the Quarterly Period Ended September 30, 2010
¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Commission File Number: 0-30541
PIONEER
BANKSHARES, INC.
(Exact name of registrant as specified in its charter)
|
|
|
Virginia
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54-1278721
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
|
263 East Main Street
P. O. Box 10
Stanley, Virginia 22851
(Address of principal executive offices) (Zip
code)
(540) 778-2294
(Registrants 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes
¨
No
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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¨
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Accelerated filer
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¨
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
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x
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES
¨
NO
x
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date:
Common
shares outstanding as of November 15, 2010 were 1,032,418.
PIONEER BANKSHARES, INC.
INDEX
2
Part I -
Financial Information.
Item 1. Financial Statements
PIONEER BANKSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)
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|
|
|
|
|
|
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September 30,
2010
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December 31,
2009
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(Unaudited)
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(Audited)
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ASSETS
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Cash and due from banks
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$
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2,936
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$
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5,252
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Interest bearing deposits in banks
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10,934
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6,724
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Federal funds sold
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500
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1,500
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Securities available for sale, at fair value
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13,355
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12,999
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Restricted securities
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981
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788
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Loans receivable, net of allowance for loan losses of $2,291 and $1,945 respectively
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130,038
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124,660
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Premises and equipment, net
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3,407
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3,582
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Accrued interest receivable
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711
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644
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Other real estate owned
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250
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352
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Other assets
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2,979
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3,402
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Total Assets
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$
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166,091
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$
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159,903
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LIABILITIES
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Deposits
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Noninterest bearing demand
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$
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25,489
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$
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27,316
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Interest bearing
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|
|
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Demand
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20,066
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17,381
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Savings
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16,108
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15,802
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Time deposits over $100,000
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25,457
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21,934
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Other time deposits
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44,534
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49,581
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Total Deposits
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131,654
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132,014
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Accrued expenses and other liabilities
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1,488
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1,473
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Borrowings
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14,000
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8,500
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Total Liabilities
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147,142
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141,987
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|
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STOCKHOLDERS EQUITY
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Common stock; $.50 par value, authorized 5,000,000, 1,032,418 and 1,029,466 shares outstanding, respectively
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516
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515
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Retained earnings
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18,190
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17,300
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Accumulated other comprehensive income, net
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243
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101
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|
|
|
|
|
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Total Stockholders Equity
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18,949
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17,916
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Total Liabilities and Stockholders Equity
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$
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166,091
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$
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159,903
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|
|
|
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|
See Notes to Consolidated Financial Statements
3
PIONEER BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars, except Per
Share Data)
(UNAUDITED)
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Three Months Ended
September 30,
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2010
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2009
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Interest and Dividend Income:
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|
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Loans including fees
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$
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2,212
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$
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2,181
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Interest on securities - taxable
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48
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|
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|
74
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Interest on securities - nontaxable
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35
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35
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Interest on deposits and federal funds sold
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40
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|
|
|
46
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|
Dividends
|
|
|
13
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|
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|
14
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Total Interest and Dividend Income
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|
2,348
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2,350
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Interest Expense:
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Deposits
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|
404
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616
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Long term debt
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|
31
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|
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|
54
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|
|
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|
|
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Total Interest Expense
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|
435
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|
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|
670
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Net Interest Income
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|
1,913
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1,680
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Provision for loan losses
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147
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285
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Net interest income after provision for loan losses
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1,766
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1,395
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Noninterest Income:
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Service charges and fees
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|
223
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254
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Other income
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59
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29
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Total Noninterest Income
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282
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|
283
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|
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Noninterest Expense:
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|
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|
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Salaries and benefits
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|
615
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|
550
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|
Occupancy expenses
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|
92
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|
|
|
83
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|
Equipment expenses
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|
|
86
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|
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|
138
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Other expenses
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|
483
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|
613
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|
|
|
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|
|
|
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Total Noninterest Expenses
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|
1,276
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|
|
|
1,384
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|
|
|
|
|
|
|
|
|
|
|
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|
Income before Income Taxes
|
|
|
772
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|
|
|
294
|
|
Income Tax Expense
|
|
|
256
|
|
|
|
81
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|
|
|
|
|
|
|
|
|
|
|
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|
Net Income
|
|
$
|
516
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|
$
|
212
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Per Share Data
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Net income, basic and diluted
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|
$
|
0.50
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$
|
0.21
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|
|
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|
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Dividends
|
|
$
|
0.14
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|
$
|
0.14
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|
|
|
|
|
|
|
|
|
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|
Weighted Average Shares Outstanding, Basic and Diluted
|
|
|
1,032,418
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|
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|
1,024,289
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|
|
|
|
|
|
|
|
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|
See Notes to Consolidated Financial Statements
4
PIONEER BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars, except Per
Share Data)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
Interest and Dividend Income:
|
|
|
|
|
|
|
|
|
Loans including fees
|
|
$
|
6,585
|
|
|
$
|
6,501
|
|
Interest on securities - taxable
|
|
|
151
|
|
|
|
317
|
|
Interest on securities - nontaxable
|
|
|
105
|
|
|
|
71
|
|
Interest on deposits and federal funds sold
|
|
|
111
|
|
|
|
149
|
|
Dividends
|
|
|
40
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
Total Interest and Dividend Income
|
|
|
6,992
|
|
|
|
7,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense:
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
1,293
|
|
|
|
2,020
|
|
Long term debt
|
|
|
80
|
|
|
|
176
|
|
|
|
|
|
|
|
|
|
|
Total Interest Expense
|
|
|
1,373
|
|
|
|
2,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income
|
|
|
5,619
|
|
|
|
4,868
|
|
Provision for loan losses
|
|
|
645
|
|
|
|
710
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
4,974
|
|
|
|
4,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Income:
|
|
|
|
|
|
|
|
|
Service charges and fees
|
|
|
652
|
|
|
|
723
|
|
Other income
|
|
|
234
|
|
|
|
138
|
|
Gain (Loss) on security transactions
|
|
|
(54
|
)
|
|
|
133
|
|
|
|
|
|
|
|
|
|
|
Total Noninterest Income
|
|
|
832
|
|
|
|
994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Expense:
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
1,819
|
|
|
|
1,652
|
|
Occupancy expenses
|
|
|
276
|
|
|
|
260
|
|
Equipment expenses
|
|
|
351
|
|
|
|
431
|
|
Other expenses
|
|
|
1,456
|
|
|
|
1,450
|
|
|
|
|
|
|
|
|
|
|
Total Noninterest Expenses
|
|
|
3,902
|
|
|
|
3,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before Income Taxes
|
|
|
1,904
|
|
|
|
1,359
|
|
Income Tax Expense
|
|
|
604
|
|
|
|
424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
1,300
|
|
|
$
|
935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data
|
|
|
|
|
|
|
|
|
Net income, basic and diluted
|
|
$
|
1.26
|
|
|
$
|
0.91
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
$
|
0.44
|
|
|
$
|
0.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding, Basic and Diluted
|
|
|
1,030,715
|
|
|
|
1,022,185
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements
5
PIONEER BANKSHARES, INC
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
(In
Thousands)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Retained
Earnings
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
Total
|
|
|
|
|
|
|
BALANCE DECEMBER 31, 2008
|
|
$
|
509
|
|
|
$
|
16,460
|
|
|
$
|
(164
|
)
|
|
$
|
16,805
|
|
Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
|
935
|
|
|
|
|
|
|
|
935
|
|
Changes in unrealized gains (losses) on securities, net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains arising during the period (net of tax effect of $160)
|
|
|
|
|
|
|
|
|
|
|
284
|
|
|
|
|
|
Reclassification adjustment for gains included in net income (net of tax effect of $45)
|
|
|
|
|
|
|
|
|
|
|
(88
|
)
|
|
|
196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,131
|
|
Stock issued for compensation
|
|
|
3
|
|
|
|
128
|
|
|
|
|
|
|
|
131
|
|
Cash Dividends
|
|
|
|
|
|
|
(440
|
)
|
|
|
|
|
|
|
(440
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE SEPTEMBER 30, 2009
|
|
$
|
512
|
|
|
$
|
17,083
|
|
|
$
|
32
|
|
|
$
|
17,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE DECEMBER 31, 2009
|
|
$
|
515
|
|
|
$
|
17,300
|
|
|
$
|
101
|
|
|
$
|
17,916
|
|
|
|
|
|
|
Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
|
1,300
|
|
|
|
|
|
|
|
1,300
|
|
Changes in unrealized gains on securities, net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains arising during the period (net of tax effect of $63)
|
|
|
|
|
|
|
|
|
|
|
106
|
|
|
|
|
|
Reclassification adjustment for losses included in net income (net of tax effect of $18)
|
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,442
|
|
Stock issued for compensation
|
|
|
1
|
|
|
|
44
|
|
|
|
|
|
|
|
45
|
|
Cash Dividends
|
|
|
|
|
|
|
(454
|
)
|
|
|
|
|
|
|
(454
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE SEPTEMBER 30, 2010
|
|
$
|
516
|
|
|
$
|
18,190
|
|
|
$
|
243
|
|
|
$
|
18,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements
6
PIONEER BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,300
|
|
|
$
|
935
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
645
|
|
|
|
710
|
|
Depreciation and amortization
|
|
|
272
|
|
|
|
301
|
|
Loss (Gains) on sale of securities
|
|
|
54
|
|
|
|
(133
|
)
|
Net amortization on securities
|
|
|
21
|
|
|
|
12
|
|
Stock issued for compensation
|
|
|
45
|
|
|
|
131
|
|
Loss (Gains) on sale of other real estate
|
|
|
14
|
|
|
|
(29
|
)
|
Net change in:
|
|
|
|
|
|
|
|
|
Accrued interest receivable
|
|
|
(67
|
)
|
|
|
17
|
|
Other assets
|
|
|
172
|
|
|
|
(628
|
)
|
Accrued expense and other liabilities
|
|
|
15
|
|
|
|
118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities
|
|
|
2,471
|
|
|
|
1,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Net change in federal funds sold
|
|
|
1,000
|
|
|
|
(800
|
)
|
Net change in interest bearing deposits
|
|
|
(4,210
|
)
|
|
|
3,899
|
|
Net change in restricted securities
|
|
|
(193
|
)
|
|
|
4
|
|
Proceeds from maturities and sales of securities available for sale
|
|
|
9,792
|
|
|
|
15,407
|
|
Purchase of securities available for sale
|
|
|
(10,000
|
)
|
|
|
(14,712
|
)
|
Net (increase) in loans
|
|
|
(6,023
|
)
|
|
|
(6,321
|
)
|
Proceeds from sale of other real estate
|
|
|
258
|
|
|
|
150
|
|
Purchase of bank premises and equipment
|
|
|
(97
|
)
|
|
|
(151
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Investing Activities
|
|
|
(9,473
|
)
|
|
|
(2,524
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Net change in:
|
|
|
|
|
|
|
|
|
Demand and savings deposits
|
|
|
1,164
|
|
|
|
5,832
|
|
Time deposits
|
|
|
(1,524
|
)
|
|
|
(1,972
|
)
|
Proceeds from borrowings
|
|
|
20,560
|
|
|
|
6,500
|
|
Curtailments of borrowings
|
|
|
(15,060
|
)
|
|
|
(7,300
|
)
|
Dividends paid
|
|
|
(454
|
)
|
|
|
(440
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Financing Activities
|
|
|
4,686
|
|
|
|
2,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents:
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(2,316
|
)
|
|
|
1,530
|
|
Cash and Cash Equivalents, beginning of year
|
|
|
5,252
|
|
|
|
2,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of Period
|
|
$
|
2,936
|
|
|
$
|
3,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Paid During the Period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
1,458
|
|
|
$
|
2,278
|
|
Income taxes
|
|
$
|
637
|
|
|
$
|
657
|
|
|
|
|
Supplemental Disclosure of non-cash activity:
|
|
|
|
|
|
|
|
|
Unrealized (loss) on securities available for sale
|
|
|
223
|
|
|
|
311
|
|
Loan balances transferred to Other Real Estate
|
|
|
170
|
|
|
|
575
|
|
See Notes to
Consolidated Financial Statements
7
PIONEER BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 ACCOUNTING PRINCIPLES:
The consolidated financial statements conform to generally accepted accounting principles and to general industry practices. In the
opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of September 30, 2010 and the
results of operations for the nine months ended September 30, 2010 and September 30, 2009. The notes included herein should be read in conjunction with the notes to financial statements included in the 2009 annual report to stockholders of
Pioneer Bankshares, Inc. (the Company) and its Form 10-K for the year ended December 31, 2009, as filed with the Securities and Exchange Commission.
The results for the nine months ended September 30, 2010 are not necessarily indicative of the results to be expected for the full year.
Reclassifications
- Certain reclassifications have been made to prior period balances to conform to the current year presentation.
Subsequent Events
-
In preparing these financial statements, management has evaluated subsequent events and transactions for potential recognition or disclosure through the date these
financial statements were issued. Management has concluded there were no material subsequent events to be disclosed at this time.
Stock
Compensation Plans
-The Companys 1998 Stock Incentive Plan (the Plan) was adopted by the Board of Directors on June 11, 1998 and approved by the shareholders on June 11, 1999. This ten year Plan expired in June of
2008 with respect to the issuance of new option grants. However, grants previously issued under this Plan may still be exercised within the original terms.
Generally, the Plan provided for the grants of incentive stock options and non-qualified stock options. The exercise price of an Option could not be less than 100% of the fair market value of the common
stock (or if greater, the book value) on the date of the grant. The option terms applicable to each grant were determined at the grant date, but no Option could be exercisable in any event, after ten years from its grant date.
The accounting standard relating to Stock Compensation requires that costs resulting from all share-based plans be expensed and recognized in the
financial statements over the vesting period of each specific stock option granted. All outstanding shares are fully vested and all compensation expense relating to outstanding stock options under this plan have been previously recorded. There is no
additional compensation expense expected to be recorded relating to this plan.
The fair value of each previously issued stock option grant
was estimated at the grant date using the Black-Scholes option-pricing model. The expected volatility was based on historical volatility. The risk-free interest rates for periods within the contractual life of the awards were based on the U.S.
Treasury yield curve in effect at the time of the grant. The expected life is based on historical exercise experience. The dividend paid assumptions were based on the Companys history and expectation of dividend payments.
The following summarizes the stock options outstanding as of September 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual Term
(In Years)
|
|
|
Intrinsic Value
of
Unexercised
In-the-Money
Options
(In Thousands)
|
|
Options outstanding, 12/31/09
|
|
|
6,400
|
|
|
$
|
16.58
|
|
|
|
4.00
|
|
|
|
|
|
Options Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Exercised
|
|
|
800
|
|
|
|
12.75
|
|
|
|
|
|
|
|
|
|
Options Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, 9/30/10
|
|
|
5,600
|
|
|
$
|
17.13
|
|
|
|
3.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable, 9/30/10
|
|
|
5,600
|
|
|
$
|
17.13
|
|
|
|
3.75
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
NOTE 2 INVESTMENT SECURITIES:
The amounts at which investment securities are carried in the consolidated balance sheets and their approximate market values at
September 30, 2010 and December 31, 2009 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
|
(In Thousands)
|
|
|
|
|
|
|
September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency securities
|
|
$
|
3,500
|
|
|
$
|
8
|
|
|
$
|
|
|
|
$
|
3,508
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
2,668
|
|
|
|
178
|
|
|
|
|
|
|
|
2,846
|
|
|
|
|
|
|
State and municipals
|
|
|
4,278
|
|
|
|
243
|
|
|
|
|
|
|
|
4,521
|
|
|
|
|
|
|
Corporate Securities
|
|
|
480
|
|
|
|
46
|
|
|
|
|
|
|
|
526
|
|
|
|
|
|
|
Equity securities
|
|
|
2,065
|
|
|
|
120
|
|
|
|
(231
|
)
|
|
|
1,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,991
|
|
|
$
|
595
|
|
|
$
|
(231
|
)
|
|
$
|
13,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
|
(In Thousands)
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency securities
|
|
$
|
2,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,000
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
3,778
|
|
|
|
203
|
|
|
|
|
|
|
|
3,981
|
|
|
|
|
|
|
State and municipals
|
|
|
4,294
|
|
|
|
152
|
|
|
|
(7
|
)
|
|
|
4,439
|
|
|
|
|
|
|
Corporate Securities
|
|
|
485
|
|
|
|
33
|
|
|
|
|
|
|
|
518
|
|
|
|
|
|
|
Equity securities
|
|
|
2,301
|
|
|
|
65
|
|
|
|
(305
|
)
|
|
|
2,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,858
|
|
|
$
|
453
|
|
|
$
|
(312
|
)
|
|
$
|
12,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management recognizes that current economic conditions and market trends may result in other than temporary impairment
classifications for certain securities or equity investments. In analyzing an issuers financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating
agencies have occurred, and industry analysts reports. As of September 30, 2010, management has determined that the unrealized losses in the investment portfolio are temporary. Management does not expect to be required to sell these
securities before such time that they recover in value and will continue to monitor the securities in a loss position for future impairment. Securities in an unrealized loss position as of September 30, 2010 and December 31, 2009, by
duration of the unrealized loss are shown in the following table.
9
N
OTE 2 INVESTMENT SECURITIES
(continued)
:
As of September 30, 2010,
there were 4 securities in the portfolio with unrealized losses, which were considered to be temporary. The schedule of losses on these securities is as follows:
Unrealized Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities
|
|
|
Total
|
|
|
|
|
|
Less than 12 Months
|
|
Fair Value
|
|
$
|
|
|
|
$
|
|
|
|
|
Unrealized Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
More than 12 Months
|
|
Fair Value
|
|
|
748
|
|
|
|
748
|
|
|
|
Unrealized Losses
|
|
|
(231
|
)
|
|
|
(231
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Fair Value
|
|
$
|
748
|
|
|
|
748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Losses
|
|
|
(231
|
)
|
|
|
(231
|
)
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009, there were 7 securities in the portfolio that have unrealized losses, which are considered to
be temporary. The schedule of unrealized losses on these securities is as follows:
Unrealized Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal
Securities
|
|
|
Equity
Securities
|
|
|
Total
|
|
|
|
|
|
|
Less than 12 Months
|
|
Fair Value
|
|
$
|
409
|
|
|
$
|
|
|
|
$
|
409
|
|
|
|
Unrealized Losses
|
|
|
(7
|
)
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
More than 12 Months
|
|
Fair Value
|
|
|
|
|
|
|
952
|
|
|
|
952
|
|
|
|
Unrealized Losses
|
|
|
|
|
|
|
(305
|
)
|
|
|
(305
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Fair Value
|
|
|
409
|
|
|
|
952
|
|
|
|
1,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Losses
|
|
|
(7
|
)
|
|
|
(305
|
)
|
|
|
(312
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Bank also holds additional investments in Federal Home Loan Bank of Atlanta (FHLB) in the form of FHLB
stock, which is a membership requirement. Loan advances from FHLB are subject to additional stock purchase requirements, which are generally redeemed as outstanding loan balances are repaid, subject to FHLBs quarterly excess capital evaluation
process. For the third quarter of 2010, FHLB announced that it will repurchase activity-based excess capital stock outstanding, with additional evaluations for the repurchase of excess capital stock to continue on a quarterly basis going forward.
FHLB stock is generally viewed as a long term investment and is considered to be a restricted security, which is carried at cost, because
there is no market for the stock other than FHLB or other member institutions. For the period ended September 30, 2010, the Banks investment in FHLB stock totaled $905,400.
Managements evaluation of FHLB stock for impairment is based on the ultimate recoverability of par value rather than recognizing temporary declines in value. Although FHLBs stock dividends
were temporarily suspended for the fourth quarter of 2008 and the first quarter of 2009, dividend payments were resumed for the period ending June 30, 2009, and have continued to be declared on a quarterly basis through September 30, 2010.
Managements analysis of the FHLB stock as of September 30, 2010 did not consider this investment to be other than temporarily
impaired, and therefore, no impairment has been recognized.
10
NOTE 3 LOANS:
Loans outstanding are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
(In Thousands)
|
|
|
|
September 30,
2010
|
|
|
December 31,
2009
|
|
Mortgage loans on real estate
|
|
|
|
|
|
|
|
|
Construction loans
|
|
$
|
5,457
|
|
|
$
|
7,826
|
|
Agricultural
|
|
|
3,912
|
|
|
|
3,806
|
|
Equity lines of credit
|
|
|
1,603
|
|
|
|
1,788
|
|
Residential 1-4 family
|
|
|
47,849
|
|
|
|
47,400
|
|
Second Mortgages
|
|
|
4,087
|
|
|
|
3,998
|
|
Multifamily
|
|
|
5,476
|
|
|
|
3,571
|
|
Commercial
|
|
|
41,496
|
|
|
|
35,641
|
|
|
|
|
|
|
|
|
|
|
Total real estate loans
|
|
|
109,880
|
|
|
|
104,030
|
|
|
|
|
Commercial and industrial loans
|
|
|
5,488
|
|
|
|
6,426
|
|
|
|
|
Consumer installment loans
|
|
|
|
|
|
|
|
|
Personal
|
|
|
16,395
|
|
|
|
15,669
|
|
Credit cards
|
|
|
654
|
|
|
|
681
|
|
|
|
|
|
|
|
|
|
|
Total consumer installment loans
|
|
|
17,049
|
|
|
|
16,350
|
|
|
|
|
All other loans
|
|
|
288
|
|
|
|
253
|
|
|
|
|
|
|
|
|
|
|
Gross Loans
|
|
|
132,705
|
|
|
|
127,059
|
|
|
|
|
Less unearned income on loans
|
|
|
(376
|
)
|
|
|
(454
|
)
|
|
|
|
|
|
|
|
|
|
Loans, less unearned discount
|
|
|
132,329
|
|
|
|
126,605
|
|
|
|
|
Less allowance for loan losses
|
|
|
(2,291
|
)
|
|
|
(1,945
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loans Receivable
|
|
$
|
130,038
|
|
|
$
|
124,660
|
|
|
|
|
|
|
|
|
|
|
Pioneer Banks loan portfolio is concentrated in real estate loans, including those secured by residential consumer
properties and small business commercial properties. Management has established specific lending criteria relating to real estate lending and considers the risk of loss in these loan categories to be moderate.
NOTE 4 ALLOWANCE FOR LOAN LOSSES:
A
summary of transactions in the allowance for loan losses for the period ended September 30, 2010 and the year ending December 31, 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30,
2010
|
|
|
December 31,
2009
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
(In Thousands)
|
|
|
|
|
Balance, beginning of period
|
|
$
|
1,945
|
|
|
$
|
1,651
|
|
Provision charged to operating expenses
|
|
|
645
|
|
|
|
1,260
|
|
Recoveries of loans charged off
|
|
|
117
|
|
|
|
194
|
|
Loans charged off
|
|
|
(416
|
)
|
|
|
(1,160
|
)
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
2,291
|
|
|
$
|
1,945
|
|
|
|
|
|
|
|
|
|
|
The total amount of impaired loans was $2.3 million as of September 30, 2010 and $2.2 million as of December 31,
2009. As of September 30, 2010 there were specific valuation allowances of approximately $967,000 compared to specific valuation allowances at December 31, 2009 of $624,000.
11
NOTE 5 EARNINGS PER SHARE:
The following shows the weighted average number of shares for the nine month period ended September 30, 2010 and 2009, used in
computing earnings per share and the effect on weighted average number of shares diluted potential common stock. Potential dilutive common stock had no effect on income available to common shareholders.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2010
|
|
|
Nine Months Ended
September 30, 2009
|
|
|
|
Shares
|
|
|
Per Share
Amount
|
|
|
Shares
|
|
|
Per Share
Amount
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
1,030,715
|
|
|
$
|
1.26
|
|
|
|
1,022,185
|
|
|
$
|
0.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
1,030,715
|
|
|
$
|
1.26
|
|
|
|
1,022,185
|
|
|
$
|
0.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average number of shares for the three month period ending September 30, 2010 and 2009, used in computing
earnings per share and the effect on weighted average number of shares diluted potential common stock are shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2010
|
|
|
Three Month Ended
September 30, 2009
|
|
|
|
Shares
|
|
|
Per Share
Amount
|
|
|
Shares
|
|
|
Per Share
Amount
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
1,032,418
|
|
|
$
|
0.50
|
|
|
|
1,024,289
|
|
|
$
|
0.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
1,032,418
|
|
|
$
|
0.50
|
|
|
|
1,024,289
|
|
|
$
|
0.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options representing 5,600 and 6,400 shares were not included in the computation of diluted EPS because their effects
were anti-dilutive as of September 30, 2010 and 2009, respectively.
NOTE 6 BORROWINGS:
The Bank has a line of credit with the Federal Home Loan Bank of Atlanta (the FHLB) upon which credit advances can be made up to 40% of total
assets, subject to certain eligibility requirements. FHLB advances bear interest at a fixed or floating rate depending on the terms and maturity of each advance and numerous renewal options are available. These advances are secured by 1-4 family
residential mortgages. On some fixed rate advances, the FHLB may convert the advance to an indexed floating rate at some set point in time for the remainder of the term. If the advance converts to a floating rate, the Bank may pay back all or part
of the advance without a prepayment penalty.
As of September 30, 2010, the total outstanding borrowings with FHLB were $14.0 million,
which mature through March 1, 2013. Approximately $10.0 million of this total is a fixed-rate loan at 1.14% with scheduled quarterly payments. The remaining outstanding balances as of September 30, 2010 are short-term borrowings of
approximately $4.0 million with a daily variable interest rate. Approximately $3.5 million of the short-term borrowings have been repaid as of the date of this report.
12
NOTE 7 OTHER EXPENSES:
Other expenses in the consolidated statements of income include the following components:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In Thousands)
|
|
ATM Service Fees
|
|
$
|
80
|
|
|
$
|
94
|
|
Director Fees
|
|
|
92
|
|
|
|
92
|
|
FDIC Assessment
|
|
|
166
|
|
|
|
279
|
|
Professional Fees
|
|
|
297
|
|
|
|
244
|
|
Supplies and Printing
|
|
|
114
|
|
|
|
111
|
|
Telephone Expense
|
|
|
86
|
|
|
|
78
|
|
Sales & Franchise Taxes
|
|
|
129
|
|
|
|
89
|
|
Other
|
|
|
492
|
|
|
|
463
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,456
|
|
|
$
|
1,450
|
|
|
|
|
|
|
|
|
|
|
NOTE 8 FAIR VALUE MEASUREMENT:
The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the Fair Value Measurements and
Disclosures topic of FASB ASC, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date. Fair value
is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Companys various financial instruments. In cases where quoted market prices are not available, fair values are
based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value
estimates may not be realized in an immediate settlement of the instrument.
The recent fair value guidance provides a consistent definition
of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant
decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market
participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most
representative of fair value under current market conditions.
Fair Value Hierarchy
In accordance with this guidance, the Company groups financial assets and financial liabilities generally measured at fair value in three levels,
based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine the fair value.
|
|
|
Level 1
|
|
Valuation is based on quoted prices in active markets for identical assets and liabilities.
|
|
|
Level 2
|
|
Valuation is based on observable inputs including quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities
in less active markets, and model-based valuation techniques for which significant assumptions can be derived primarily from or corroborated by observable data in the market.
|
|
|
Level 3
|
|
Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market.
|
13
NOTE
8 FAIR VALUE MEASUREMENT (Continued):
The following describes the
valuation techniques used by the Company to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements:
Securities available for sale
: Securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If
quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data.
Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that considers observable market data (Level 2).
The following table presents the balances of financial assets measured at fair value on a recurring basis as of September 30, 2010 and
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
Balances
Outstanding
(In
Thousands)
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
Description
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
As of September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities
|
|
$
|
13,355
|
|
|
$
|
|
|
|
$
|
13,355
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities
|
|
$
|
12,999
|
|
|
$
|
|
|
|
$
|
12,999
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain assets are measured at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value of
these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets.
The following
describes the valuation techniques used by the Company to measure certain assets recorded at fair value on a nonrecurring basis in the financial statements:
Impaired Loans
: The Fair Value Measurement accounting standard also applies to loans measured for impairment including impaired loans measured at an observable market price (if available), or at
the fair value of the loans collateral (if the loan is collateral dependent). Fair value of the loans collateral, when the loan is dependent on collateral, is determined by appraisals or independent valuation which is then adjusted for
the cost related to liquidation of the collateral.
Loans are designated as impaired when, in the judgment of management based on current
information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. The measurement of loss associated with impaired loans can be based on either the observable market price of
the loan or the fair value of the collateral. Fair value is measured based on the value of the collateral securing the loans. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable.
The vast majority of the collateral is real estate. The value of real estate collateral is determined utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using
observable market data (Level 2). However, if the collateral is a house or building in the process of construction or if an appraisal of the real estate property is over two years old, then the fair value is considered Level 3. The value of business
equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business financial statement if not considered significant using observable market data. Likewise, values for inventory and accounts
receivables collateral are based on financial statement balances or aging reports (Level 3). Impaired loans allocated to the Allowance for Loan Losses are measured at fair value on a nonrecurring basis. Any fair value adjustments are recorded in the
period incurred as provision for loan losses on the Consolidated Statements of Income.
Other Real Estate Owned
: Certain assets such as
other real estate owned (OREO) are measured at the lower of loan balance or fair value less cost to sell.
14
NOTE
8 FAIR VALUE MEASUREMENT (Continued):
The following table summarizes the
Companys assets that were measured at fair value on a nonrecurring basis during the period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Balances
Outstanding
(In Thousands)
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
Assets as of September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Loans,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net of allowance
|
|
$
|
1,344
|
|
|
$
|
|
|
|
$
|
883
|
|
|
$
|
461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Real Estate Owned
|
|
$
|
250
|
|
|
$
|
|
|
|
$
|
250
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets as of December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Loans,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net of allowance
|
|
$
|
1,613
|
|
|
$
|
|
|
|
$
|
936
|
|
|
$
|
677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Real Estate Owned
|
|
$
|
352
|
|
|
$
|
|
|
|
$
|
140
|
|
|
$
|
212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounting guidance defines the fair value of a financial instrument as the amount at which a financial instrument could be
exchanged in a current transaction between willing parties, other than in a forced liquidation sale. As the majority of the Companys financial instruments lack an available trading market; significant estimates, assumptions and present value
calculations are required to determine estimated fair value. The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash and Due From Banks and Federal Funds Sold
For those short-term instruments, the carrying amount is a reasonable estimate of fair
value.
Interest Bearing Deposits in Other Banks
Fair values are based on quoted reinvestment market rates available for similar
deposits accounts as of the date of this report.
Securities
Fair values, excluding restricted stock, are based on quoted market
prices or dealer quotes.
Loans Receivable
For certain homogeneous categories of loans, such as some residential mortgages, and
other consumer loans, fair value is estimated using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics. The fair value of other types of loans is estimated by discounting the future cash
flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.
Deposits and Borrowings
The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of
fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. The fair value of all other deposits and borrowings is determined using the discounted cash flow method. The discount
rate was equal to the rate currently offered on similar products.
Accrued Interest
The carrying amounts of accrued interest
approximates fair value.
Off-Balance-Sheet Financial Instruments
The fair value of commitments to extend credit is estimated
using the fees currently charged to enter similar agreements, taking into account the remaining terms of the agreements and the present credit worthiness of the counter party. For fixed-rate loan commitments, fair value also considers the difference
between current levels of interest rates and the committed rates. The fair value of stand-by letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations
with the counter parties at the reporting date.
15
NOTE
8 FAIR VALUE MEASUREMENT (Continued):
At September 30, 2010 and
December 31, 2009, the fair value of loan commitments and stand-by letters of credit was immaterial. Therefore, they have not been included in the following table.
Estimated fair value and the carrying value of financial instruments at September 30, 2010 and December 31, 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010
|
|
|
December 31, 2009
|
|
|
|
Carrying
Value
|
|
|
Estimated
Fair Value
|
|
|
Carrying
Value
|
|
|
Estimated
Fair Value
|
|
|
|
(In Thousands)
|
|
|
|
|
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
2,936
|
|
|
$
|
2,936
|
|
|
$
|
5,252
|
|
|
$
|
5,252
|
|
|
|
|
|
|
Interest bearing deposits in other banks
|
|
|
10,934
|
|
|
|
10,951
|
|
|
|
6,724
|
|
|
|
6,769
|
|
|
|
|
|
|
Federal funds sold
|
|
|
500
|
|
|
|
500
|
|
|
|
1,500
|
|
|
|
1,500
|
|
|
|
|
|
|
Securities available for sale
|
|
|
13,355
|
|
|
|
13,355
|
|
|
|
12,999
|
|
|
|
12,999
|
|
|
|
|
|
|
Loans, net
|
|
|
130,038
|
|
|
|
131,766
|
|
|
|
124,660
|
|
|
|
126,297
|
|
|
|
|
|
|
Accrued interest receivable
|
|
|
711
|
|
|
|
711
|
|
|
|
644
|
|
|
|
644
|
|
|
|
|
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest bearing
|
|
|
25,489
|
|
|
|
25,489
|
|
|
|
27,316
|
|
|
|
27,316
|
|
|
|
|
|
|
Interest bearing
|
|
|
20,066
|
|
|
|
20,066
|
|
|
|
17,381
|
|
|
|
17,381
|
|
|
|
|
|
|
Savings deposits
|
|
|
16,108
|
|
|
|
16,108
|
|
|
|
15,802
|
|
|
|
15,802
|
|
|
|
|
|
|
Time deposits
|
|
|
69,991
|
|
|
|
71,094
|
|
|
|
71,515
|
|
|
|
73,098
|
|
|
|
|
|
|
Borrowings
|
|
|
14,000
|
|
|
|
14,072
|
|
|
|
8,500
|
|
|
|
8,497
|
|
|
|
|
|
|
Accrued interest payable
|
|
|
327
|
|
|
|
327
|
|
|
|
412
|
|
|
|
412
|
|
The Company, through its bank
subsidiary, assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, the fair value of their financial instruments will change when interest rate levels change and that
change may be either favorable or unfavorable. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk. However, borrowers with fixed rate obligations are less likely to repay
in a rising rate environment and more likely to repay in a falling rate environment. Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk by adjusting terms of new loans and deposits and by
investing in securities with terms that mitigate the Companys overall interest rate risk.
16
Item 2.
|
Managements Discussion and Analysis of Financial Condition and Results of Operations.
|
The discussion covers the consolidated financial condition and operations of Pioneer Bankshares, Inc. (Company) and its subsidiary Pioneer
Bank (Bank).
Forward-Looking Statements
This quarterly report on Form 10-Q contains forward-looking statements with respect to the Companys and the Banks financial condition, results of operations and business. These forward-looking
statements involve certain risks and uncertainties. When used in this quarterly report or future regulatory filings, in press releases or other public shareholder communications, or in oral statements made with the approval of an authorized
executive officer, the words or phrases will likely result, are expected to, will continue, is anticipated, estimate, project, believe, or similar expressions are
intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We caution the readers and users of this information not to place undue reliance on any such forward-looking
statements, which speak only as of the date made, and advise readers that various factors including regional and national economic conditions, changes in the levels of market rates of interest, credit risk and lending activities, and competitive and
regulatory factors could affect the financial performance of the Company and the Bank and could cause actual results for future periods to differ materially from those anticipated or projected.
The Company and the Bank do not undertake and specifically disclaim any obligation to publicly release the result of any revisions, which may be made to
any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
Overview
The Company reported net earnings of $1.3 million for the period ending
September 30, 2010, as compared to $935,000 for the same period of 2009. This represents an increase of 39.04%. Total earnings per share as of September 30, 2010 were $1.26 compared to $0.91 for the same period last year.
The Company had asset growth of approximately $6.2 million through September 30, 2010, with approximately $5.4 million being attributed to increased
loan volume. Investments in securities available for sale increased by approximately $356,000 for the period ending September 30, 2010, as compared to total securities available for sale at December 31, 2009. Investments in interest
bearing deposits also increased by $4.2 million for the period ending September 30, 2010, while investments in Federal Funds sold decreased by $1.0 million for the same period compared to balances as of December 31, 2009.
The Companys deposit portfolio remains relatively stable at approximately $132.0 million as of September 30, 2010. The capital position of the
Company remains above regulatory guidelines and is considered to be strong as of September 30, 2010 at $18.9 million, or 11.41% as a percentage of total assets.
The Companys book value as of September 30, 2010 was $18.35 per share, as compared to a book value of $17.40 per share as of December 31, 2009. This represents an increase of 5.46%.
Shareholder dividend payments for the first three quarters of 2010 totaled $0.44 per share compared to $0.43 per share for the same period last year. This represents a year-to-date increase of 2.33% for the companys shareholders.
Management acknowledges that prevailing economic conditions may have the potential to adversely impact the Companys operational results, including
future earnings, liquidity, and capital resources. Management continually monitors economic factors in an effort to promptly identify specific trends that could have a direct material effect on the Company.
17
Critical Accounting Policies
General
The
Companys consolidated 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.
The Company uses 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. 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 accounting standards: 1) Accounting for Contingencies, which requires that losses be accrued when they are probable of occurring and estimatable, and 2) 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 market and the loan balance.
Management evaluates the loan portfolio in light of national and local economic trends, changes in the nature and value of the portfolio and industry standards. Specific factors considered by management
in determining the adequacy of the level of the allowance include internally generated loan review reports, past due reports, historical loan loss experience and individual borrowers financial condition. This review also considers
concentrations of loans in terms of geography, business type or level of risk. Management evaluates the risk elements involved in loans relative to their collateral value and maintains the allowance for loan losses at a level which is adequate to
absorb credit losses inherent in the loan portfolio. In addition, regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans. Such agencies may require the Bank to recognize additional
losses based on their judgment about information available to them at the time of their examination.
The methodology used to calculate the
allowance for loan losses and the provision for loan losses is a significant accounting principle, which is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions.
Goodwill
Goodwill is evaluated on an
annual basis for impairments in value and adjusted accordingly. The accounting standards for Business Combinations, Goodwill and Other Intangible Assets require that the purchase method of accounting be used for all business combinations initiated
after June 30, 2001. Additionally, it further clarifies the criteria for the initial recognition and measurement of intangible assets separate from goodwill. The provisions of these accounting standards discontinued the amortization of goodwill
and intangible assets with indefinite lives. Instead, these assets are subject to an annual impairment review, which must be performed at least annually or more frequently if certain impairment indicators are in evidence. The accounting standards
relating to Goodwill also require that reporting units be identified for the purpose of assessing potential future impairments.
Goodwill is
included in other assets and totaled $360,000 at September 30, 2010 and December 31, 2009. Goodwill is no longer amortized, but instead is tested for impairment at least annually.
18
Results of Operations
Net Interest Income
Total interest income decreased $72,000 or 1.02% during the nine month period ending September 30, 2010, as compared to the same period for 2009.
Total interest expense decreased $823,000 or 37.48% during the nine month period ending September 30, 2010, as compared to the same period of 2009. The decreases in interest income and interest expense resulted in a net interest income increase
of $751,000 or 15.43% for the period ending September 30, 2010 compared to the period ending September 30, 2009. This net increase is primarily attributed to reduced interest expense on deposits as a result of the current low interest rate
environment. The reduced interest income is also attributed to lower market rates for investments and other earning assets.
The outstanding
loan balances as of September 30, 2010 totaled $130.0 million, as compared to $124.7 million as of December 31, 2009. The average yield on loan balances outstanding has decreased from 7.04% as of September 30, 2009 to 6.77% as of
September 30, 2010. This decrease in interest yield on loans has been largely impacted by lower market interest rates and scheduled loan re-pricing activities. The overall average yield on earning assets decreased from 6.40% as of
September 30, 2009 to 6.08% as of September 30, 2010, and is attributed to the previously mentioned factors.
The Companys
cost of liabilities decreased from 2.64% as of September 30, 2009 to 1.55% as of September 30, 2010. This is attributed to managements proactive re-pricing efforts to reduce interest expense on deposit products in conjunction with
lower market rates.
The Companys overall net interest margin increased to 4.89% as of September 30, 2010 compared to a net
interest margin of 4.42% at September 30, 2009.
Noninterest Income
The Companys non-interest income decreased by $162,000 or 16.30% through September 30, 2010 when compared to the same period last year. This decrease in non-interest income is primarily the
result of losses on the sale of equity securities in the amount of $54,000 compared to gains in the prior year of $133,000. Gains and losses on securities are generally considered to be non-recurring and may fluctuate with market conditions.
Service charge income decreased by approximately $71,000 or 9.82%. This decrease is attributed to managements proactive collection
efforts of overdraft balances resulting in a reduced volume of overdraft fee income. Management anticipates possible further reductions in service charge income for the remainder of 2010 as a result of recent regulatory requirements relating to
overdraft fees on consumer checking accounts.
Noninterest Expense
The Companys non-interest expense increased by $109,000 or 2.87% as of September 30, 2010 when compared to the same period last year. The primary factors contributing to this increase were
professional fees related to increased audit and consulting expenses and increased salary and benefit expenses related to normal pay increases.
The Banks deposits are generally insured by the FDIC for a maximum of $100,000 per depositor. However, in the fourth quarter of 2008, the FDIC insurance limits were raised to $250,000 per depositor
on a temporary basis. However, recent legislation has made this increase in FDIC coverage permanent for bank depositors. The Bank generally pays a quarterly statutory assessment for this insurance coverage and must comply with the rules and
regulations of the FDIC. Each depository institution is assigned to a risk category based upon capital and supervisory measures. Depending upon the risk category to which it is assigned, the depository institution is then assessed insurance premiums
based upon its deposits. During the 4
th
quarter of 2009,
the FDIC required all financial institutions to prepay deposit insurance premiums through December 2012. The total prepaid FDIC premium paid by the bank under this arrangement included quarterly assessments for December 2009, and all of 2010, 2011,
and 2012. The portion of FDIC assessment fee expensed through September 30, 2010 was approximately $166,000 compared to $279,000 for the same period last year. The lower amount of FDIC assessment fees as of September 30, 2010 compared to
the prior year is attributed to the special assessment fees that were charged in 2009. There have been no additional or special assessments for 2010.
19
Financial Condition
Securities
The Companys securities portfolio is held to assist the Company in liquidity and asset liability management as well as capital appreciation. The
securities portfolio generally consists of securities held to maturity and securities available for sale. Securities are classified as held to maturity when management has the intent and ability to hold the securities to maturity. These securities
are carried at amortized cost. Securities available for sale include securities that may be sold in response to general market fluctuations, general liquidity needs and other similar factors. Securities available for sale are recorded at market
value. Unrealized holding gains and losses of available for sale securities are excluded from earnings and reported (net of deferred income taxes) as a separate component of shareholders equity.
As of September 30, 2010, the fair market value of securities available for sale was approximately $364,000 more than the net amortized cost value
as shown in Note 2 of the financial statements included in this report. Management generally has the intent and demonstrated ability to hold securities to scheduled maturity, call dates or until they recover in value and does not expect to be
required to sell these securities for operational cash flow purposes. Management continually monitors any securities in a loss position for possible impairment. At this time, management does not expect the fluctuation in the value of these
securities to have a material impact on earnings.
Investments in securities, including those which were restricted, increased approximately
$549,000 for the period ending September 30, 2010. The Company generally invests in securities with a relatively short-term maturity due to uncertainty in the direction of interest rates. Of the investments in securities available for sale,
14.63% (based on market value) are invested in equities, most of which are dividend producing and subject to the corporate dividend exclusion for taxation purposes. The equity securities generally include common stocks, which are purchased with the
objective of generating additional income. The value of these investments is sensitive to general trends in the stock market and other economic conditions.
Loan Portfolio
The Company operates in a service area in the western portion of
Virginia in the counties of Page, Greene, Rockingham, the City of Harrisonburg, Albemarle County and the City of Charlottesville, Virginia. The Company does not make a significant number of loans to borrowers outside its primary service area. The
Company is active in local residential construction mortgages and consumer lending. Commercial lending includes loans to small and medium sized businesses within its service area.
An inherent risk in the lending of money is that the borrower will not be able to repay the loan under the terms of the original agreement. The allowance for loan losses (see subsequent section) provides
for this risk and is reviewed periodically for adequacy. The risk associated with real estate and installment loans to individuals is based upon employment, the local and national economies, and consumer confidence. All of these affect the ability
of borrowers to repay indebtedness. The risk associated with commercial lending is substantially based on the strength of the local and national economies in addition to the financial strength of the borrower.
While lending is geographically diversified within the service area, the Company does have loan concentrations in commercial and residential real estate
loans, as well as, consumer auto loans. A portion of these loans are made to borrowers who are employed by businesses outside the service area.
For the period ending September 30, 2010, net loans increased by approximately $5.4 million or 4.31%. The increase in loan volume was primarily in
the categories of residential and commercial real estate loans. A schedule of loans by type is shown in Note 3 of the consolidated financial statements included in this report.
The risk elements in lending activities include non-accrual loans, loans 90 days or more past due and still accruing, and restructured loans. Non-accrual loans are loans on which interest accruals have
been suspended or discontinued permanently. Non-accrual loans and loans 90 days or more past due and still accruing were approximately $2.8 million at September 30, 2010 compared to $1.6 million at December 31, 2009. This represents an
increase of approximately $1.0 million and is mainly attributed to certain commercial and residential real estate accounts in which the borrowers are experiencing financial difficulties. Management has evaluated the value of collateral related to
these accounts and has made appropriate specific allocations to the allowance for loan loss account for potential loan losses.
20
Restructured loans are loans on which
the original interest rate or repayment terms have changed due to financial hardship. The total amount of loans classified as restructured as of September 30, 2010 was approximately $1.2 million compared to $777,000 as of December 31,
2009. These restructured loans consist primarily of residential mortgage loans on which the reduced interest rates, although modified, remain at or above current market pricing. The majority of these restructured loans are in compliance with the
modified payment terms and were not delinquent as of September 30, 2010. Management has evaluated the value of collateral related to these accounts and has made appropriate specific allocations to cover potential losses associated with restructured
loans.
Impaired loans are those loans which have been identified by management as problem credits due to various circumstances concerning the
borrowers financial condition and frequent delinquency status. These loans may not be delinquent to the extent that would warrant a non-accrual classification, however, management has classified these accounts as impaired and is monitoring the
circumstances and payment status closely. In most cases, a specific allocation to the Banks allowance for loan loss is made for an impaired loan. The total amount of impaired loans as of September 30, 2010 was $2.3 million, and has
increased by approximately $74,000 from the total of impaired loans at December 31, 2009. Management has placed all of the Banks impaired loans in a nonaccrual status as of September 30, 2010. This amount is also included in the
nonaccrual loan totals discussed previously. Specific allocations have been made to the allowance for loan loss account of approximately $967,000, as of September 30, 2010, to cover potential losses that may occur relating to impaired loans.
Management continually monitors past due, non-accrual, and impaired loans and takes necessary collection actions on a consistent basis to
minimize losses in the portfolio. Management monitors all non-performing assets in order to promptly identify any loss allocations that should be made. Although the potential exists for additional losses, management believes the Bank is generally
well secured and continues to actively work with these customers to effect payment.
Problem loans (serious doubt loans) are loans whereby
information known by management indicates that the borrower may not be able to comply with present payment terms. Management was not aware of any problem loans at September 30, 2010 that are not included in the past due or non-accrual loans
referred to above.
Allowance for Loan Losses
Managements analysis process for evaluating the adequacy of the allowance for loan loss is a continual process, which is monitored at least quarterly, or more frequently, as needed. The evaluation
process consists of regular periodic reviews of the loans outstanding by loan type. Specific reviews and allocations are made for loans that have been identified as potential loss, in which the borrowers financial condition has substantially
weakened or habitual past due payment activity has occurred. Specific reviews and allocations are also made for various sectors of the loan portfolio that have been identified as higher risk categories. Historical loss ratios are applied to the
remaining loan portfolio by loan type, based on the most recent loss trends. Management takes into consideration expected recoveries from prior charge offs as part of its allowance and funding calculation.
Management also evaluates the loan portfolio in light of national and local economic trends, changes in the nature and value of the portfolio and
industry standards. Allocation factors relating to identified loan concentrations and loan growth trends are included in the calculation of the adequacy of the loan loss reserve. The periodic review of the allowance for loan loss and funding
provision considers concentrations of loans in terms of geography, business type or level of risk. Management evaluates the risk elements involved in loans relative to collateral values and maintains the allowance for loan losses at a level which is
adequate to absorb credit losses considered to be inherent in the loan portfolio. Management engages the services of an outside loan review firm periodically to evaluate the loan portfolio, provide an independent analysis of significant borrowers,
and to assist in identifying potential problem credits. The independent loan review report is used by management as an additional tool for monitoring and minimizing risks that may be inherent in the loan portfolio. Management has also implemented an
internal loan review process for the purpose of identifying and monitoring possible loan losses in the portfolio. Other factors considered in managements evaluation process are changes in lending policies, procedures and underwriting criteria;
changes in the nature and volume of the loan portfolio; the experience, ability, and depth of lending management or other lending personnel; the volume and severity of past dues, non-accruals, and classified loans; and other external or regulatory
requirements. Regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans. Such agencies may require the Bank to recognize additional losses based on their judgment about information
available to them at the time of their examination.
21
The methodology used to calculate the
allowance for loan losses and the provision for loan losses is a significant accounting principle which is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. The provision
for loan losses and changes in the allowance for loan losses are shown in note 4 of the financial statements included in this report.
The
allowance for loan loss balance of $2.3 million at September 30, 2010 has increased by approximately $346,000 from its level at December 31, 2009. The increase in the allowance balance is primarily attributed to specific allocations
related to impaired loans, as well as, non-performing assets, including nonaccruals, past dues, and classified loans. The increase in non-performing assets is partially attributed to the deterioration that has occurred in the overall economic
environment during the past two years and the impact this has had on the borrowers ability to pay.
Management has made additional
allocations based on the declining economic trends, concentrations of credit and increases in non-performing assets, as a means of providing sufficient funding for possible losses. The increased allowance allocations noted above have contributed to
an overall increase in the cumulative funding as a percentage of total loans. The cumulative balance in the allowance for loan loss account was equal to 1.73% and 1.54% of total loans at September 30, 2010 and December 31, 2009,
respectively. The increase in the allowance for loan loss as a percentage of total loans is directionally consistent with the changes and trends that have been identified within the loan portfolio as of September 30, 2010.
The allowance is deemed to be within an acceptable range based on managements evaluation of the losses inherent in the loan portfolio at the end of
this reporting period. The evaluation of the allowance for loan loss account as of September 30, 2010 included specific allocations for certain borrowers, in which the payment performance and collateral value assessment indicates possible
future losses. Management exercises the utmost caution and due diligence in allocating for possible loan losses, and follows a conservative methodology in order to protect its investors and to minimize the potential for large fluctuations in future
provision expenses. Managements practice of funding the allowance for loan loss account is to make necessary adjustments on a quarterly basis for the foreseeable period in an attempt to effectively match expenses to loan losses as they are
occurring. Large fluctuations or variances outside of the acceptable range as calculated for the necessary allowance for loan loss reserves are recorded directly to income or expense in the reporting period.
The provision expense related to the allowance for loan loss as of September 30, 2010 was $645,000 as compared to $710,000 for the same period last
year. This decrease of $65,000 is primarily attributed to a lower volume of loan charge off activity during the nine month period ending September 30, 2010, as compared to the same period last year.
Managements evaluation of the allowance for loan losses as of September 30, 2010 and December 31, 2009 concluded that the reserved amount
was adequate to cover potential estimated losses. The allowance for loan loss account is monitored closely by management on an on-going basis, and is periodically adjusted to ensure that an adequate level of loss coverage is maintained.
Premises, Equipment and Software
The Company had purchases relating to premises, equipment and other fixed assets of approximately $97,000 for the period ending September 30, 2010.
These purchases were primarily related to in-house software and equipment upgrades.
The Company continually monitors technological upgrades
in the banking industry, and periodically, in order to achieve higher levels of internal operational efficiency, purchases new or additional equipment relating to such technologies. Management sets specific budget allowances on an annual basis,
which are deemed to be adequate to cover expenditures that may arise throughout the year relating to technological upgrades or enhancements.
The Company executed new contracts with its core data processing vendor during the first quarter of 2010 for various system enhancements relating to
certain daily processing functions and operational software upgrades. One major element of these new contracts will be the institutions change from an in-house daily processing system to an outsourced environment, in which the core vendor will
perform selected back-office operational support functions for the bank. The implementation of these new system functions are expected to provide cost savings and increased internal efficiencies to the Company in future reporting periods.
22
Deposits
The Companys main source of funds is customer deposits received from individuals, governmental entities and businesses located within the
Companys service area. Deposit accounts include demand deposits, savings, money market and certificates of deposit. The Companys total deposit portfolio has historically remained relatively stable; however, these balances fluctuate with
normal daily activity.
For the period ending September 30, 2010, total deposits remained relatively stable at approximately $132 million
with only a slight overall decrease of $360,000 or 0.27% occurring since December 31, 2009. The Company has experienced certain fluctuations in the balances of various deposit types, as is generally expected during the normal course of
business. These fluctuations in specific deposit account types as of September 30, 2010 include a decrease in non-interest bearing demand deposit accounts of $1.8 million, an increase in interest bearing demand deposits of $2.7 million, a
increase in savings accounts of $306,000, and a decrease in time deposits of $1.5 million. The Company monitors its deposits carefully on a continuous basis in order to provide adequate funding for investment and loan opportunities.
Borrowings
The Bank has a line
of credit with the Federal Home Loan Bank of Atlanta (the FHLB) upon which credit advances can be made up to 40% of total assets, subject to certain eligibility requirements. As of September 30, 2010, the total outstanding
borrowings with FHLB were $14.0 million, which mature through March 1, 2013. Approximately $10.0 million of this total is a fixed-rate loan at 1.14% with scheduled quarterly payments. The remaining outstanding balances as of September 30,
2010 are short-term borrowings of approximately $4.0 million with a daily variable interest rate. Approximately $3.5 million of the short-term borrowings have been repaid as of the date of this report. The scheduled repayments and maturities of
outstanding FHLB borrowings as of June 30, 2010 are shown in TABLE II of this report.
Capital
The adequacy of the Companys capital is reviewed by management on an ongoing basis with reference to its size, composition, quality of assets and
liability levels, and consistency with regulatory requirements and industry standards. Management seeks to maintain a capital structure that will assure an adequate level to support asset growth, shareholder dividends, and ongoing operational needs.
As of September 30, 2010 and December 31, 2009, the Companys total capital-to-asset ratios were 11.41% and 11.20%,
respectively. The Companys Tier 1 risk-based capital ratio was 14.07% and the total risk-based capital ratio was 15.32% as of September 30, 2010. The Banks Tier 1 risk-based capital ratio was 12.35% and total risk-based capital
ratio was 13.61% as of September 30, 2010. The capital ratios for both the Company and the Bank exceed the well-capitalized regulatory guidelines as of September 30, 2010 and earnings have historically been sufficient to allow for
consistent dividends to be declared on a quarterly basis.
Liquidity
Liquidity is the ability to meet present and future financial obligations through either the sale or maturity of existing assets or the acquisition of additional funds through liability management. Liquid
assets include cash, interest bearing deposits with banks, federal funds sold, investments and loans maturing within one year. The Companys ability to obtain deposits and purchase funds at favorable rates determines its liquidity exposure. As
a result of the Companys management of liquid assets and the ability to generate liquidity through borrowings, management believes that the Company maintains overall liquidity sufficient to satisfy its depositors requirements and meet
its customers credit needs.
Additional sources of liquidity available to the Company include, but are not limited to, loan repayments,
deposits obtained through the adjustment of interest rates, purchases of federal funds and borrowings. To further meet its liquidity needs, the Company also maintains lines of credit with the FHLB and certain correspondent banks.
There are no off-balance sheet items that should impair future liquidity.
23
Liquidity as of September 30,
2010 is considered to be adequate.
Interest Rate Sensitivity
The Company historically has had a stable core deposit base and, therefore, does not have to rely on volatile funding sources. Because of the stable core deposit base, changes in interest rates should not
have a significant effect on liquidity. The Company also uses loan repayments and maturing investments to meet its liquidity needs. The Banks membership in the Federal Home Loan Bank System provides additionally liquidity. The matching of
long-term receivables and liabilities helps the Company reduce its sensitivity to interest rate changes. The Company reviews its interest rate gap periodically and makes adjustments as needed.
As of September 30, 2010, the Company had a negative cumulative Gap Rate Sensitivity Ratio of 39.12% for the one year re-pricing period, compared
with a negative cumulative Gap Rate Sensitivity of 43.69% at December 31, 2009. This negative gap position generally indicates that earnings would improve in a declining interest rate environment as liabilities re-price more quickly than
assets. Conversely, earnings would probably decrease in periods during which interest rates are increasing. However, in actual practice, this may not be the case as deposits may not re-price concurrently with changes in rates within the general
economy. Management constantly monitors the Companys interest rate risk and has decided the current position is acceptable for a well-capitalized community bank operating in a rural environment.
Table II contains an analysis, which shows the re-pricing opportunities of earning assets and interest bearing liabilities as of September 30, 2010.
Recent Accounting Pronouncements
In June 2009, the FASB issued new guidance relating to the accounting for transfers of financial assets. The new guidance, which was issued as SFAS No. 166, Accounting for Transfers of
Financial Assets, an amendment to SFAS No. 140, was adopted into Codification in December 2009 through the issuance of Accounting Standards Update (ASU) 2009-16. The new standard provides guidance to improve the
relevance, representational faithfulness, and comparability of the information that an entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and
cash flows; and a transferors continuing involvement, if any, in transferred financial assets. The adoption of the new guidance did not have a material impact on the Companys consolidated financial statements.
In June 2009, the FASB issued new guidance relating to the variable interest entities. The new guidance, which was issued as SFAS No. 167,
Amendments to FASB Interpretation No. 46(R)
,
was adopted into Codification in December 2009. The objective of the guidance is to improve financial reporting by enterprises involved with variable interest entities and to
provide more relevant and reliable information to users of financial statements. SFAS No. 167 is effective as of January 1, 2010. The adoption of the new guidance did not have a material impact on the Companys consolidated financial
statements.
In October 2009, the FASB issued Accounting Standards Update No. 2009-15 (ASU 2009-15), Accounting for Own-Share
Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing. ASU 2009-15 amends Subtopic 470-20 to expand accounting and reporting guidance for own-share lending arrangements issued in contemplation of convertible
debt issuance. ASU 2009-15 is effective for fiscal years beginning on or after December 15, 2009 and interim periods within those fiscal years for arrangements outstanding as of the beginning of those fiscal years. The adoption of the new
guidance did not have a material impact on the Companys consolidated financial statements.
In January 2010, the FASB issued ASU
2010-04, Accounting for Various Topics Technical Corrections to SEC Paragraphs. ASU 2010-04 makes technical corrections to existing SEC guidance including the following topics: accounting for subsequent investments, termination of
an interest rate swap, issuance of financial statements - subsequent events, use of residential method to value acquired assets other than goodwill, adjustments in assets and liabilities for holding gains and losses, and selections of discount rate
used for measuring defined benefit obligation. The adoption of the new guidance did not have a material impact on the Companys consolidated financial statements.
24
In January 2010, the FASB issued
Accounting Standards Update No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. ASU 2010-06 amends Subtopic 820-10 to clarify existing disclosures, require new
disclosures, and includes conforming amendments to guidance on employers disclosures about postretirement benefit plan assets. ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for
disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within
those fiscal years. The adoption of the new guidance did not have a material impact on the Companys consolidated financial statements.
In February 2010, the FASB issued Accounting Standards Update No. 2010-09, Subsequent Events (Topic 855): Amendments to Certain Recognition
and Disclosure Requirements. ASU 2010-09 addresses both the interaction of the requirements of Topic 855 with the SECs reporting requirements and the intended breadth of the reissuance disclosures provisions related to subsequent events.
An entity that is an SEC filer is not required to disclose the date through which subsequent events have been evaluated. ASU 2010-09 is effective immediately. The adoption of the new guidance did not have a material impact on the Companys
consolidated financial statements.
In July 2010, the FASB issued ASU 2010-20, Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses. The new disclosure guidance will significantly expand the existing requirements and will lead to greater transparency into a companys exposure to credit losses from lending
arrangements. The extensive new disclosures of information as of the end of a reporting period will become effective for both interim and annual reporting periods ending after December 15, 2010. Specific items regarding activity that
occurred before the issuance of the ASU, such as the allowance rollforward and modification disclosures, will be required for periods beginning after December 15, 2010. The Company is currently assessing the impact that ASU 2010-20 will
have on its consolidated financial statements.
On September 15, 2010, the SEC issued Release No. 33-9142, Internal Control
Over Financial Reporting In Exchange Act Periodic Reports of Non-Accelerated Filers. This release issued a final rule adopting amendments to its rules and forms to conform them to Section 404(c) of the Sarbanes-Oxley Act of 2002 (SOX), as
added by Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act. SOX Section 404(c) provides that Section 404(b) shall not apply with respect to any audit report prepared for an issuer that is neither an
accelerated filer nor a large accelerated filer as defined in Rule 12b-2 under the Securities Exchange Act of 1934. Release No. 33-9142 was effective September 21, 2010.
On September 17, 2010, the SEC issued Release No. 33-9144, Commission Guidance on Presentation of Liquidity and Capital Resources Disclosures in Managements Discussion and
Analysis. This interpretive release is intended to improve discussion of liquidity and capital resources in Managements Discussion and Analysis of Financial Condition and Results of Operations in order to facilitate understanding by
investors of the liquidity and funding risks facing the registrant. This release was issued in conjunction with a proposed rule, Short-Term Borrowings Disclosures, that would require public companies to disclose additional information to
investors about their short-term borrowing arrangements. Release No. 33-9144 was effective on September 28, 2010.
Securities
and Exchange Commission Web Site
The Securities and Exchange Commission maintains a Web site (
http://www.sec.gov
) that contains
reports, proxy and information statements and other information regarding registrants that file electronically with the Commission, including Pioneer Bankshares, Inc.
25
TABLE I
PIONEER BANKSHARES, INC.
NET INTEREST MARGIN ANALYSIS
(On a Fully Tax Equivalent Basis)
(Dollar Amounts in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2010
|
|
|
Nine Months Ended
September 30, 2009
|
|
|
|
Average
Balance
|
|
|
Income/
Expense
|
|
|
Rates
|
|
|
Average
Balance
|
|
|
Income/
Expense
|
|
|
Rates
|
|
|
|
|
|
|
|
|
Interest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
6,684
|
|
|
$
|
332
|
|
|
|
6.62
|
%
|
|
$
|
6,931
|
|
|
$
|
353
|
|
|
|
6.79
|
%
|
Real estate
|
|
|
106,503
|
|
|
|
5,027
|
|
|
|
6.29
|
%
|
|
|
99,686
|
|
|
|
4,853
|
|
|
|
6.49
|
%
|
Installment
|
|
|
15,899
|
|
|
|
1,146
|
|
|
|
9.61
|
%
|
|
|
15,817
|
|
|
|
1,206
|
|
|
|
10.17
|
%
|
Credit Card
|
|
|
612
|
|
|
|
80
|
|
|
|
17.43
|
%
|
|
|
615
|
|
|
|
89
|
|
|
|
19.30
|
%
|
Federal funds sold
|
|
|
2,634
|
|
|
|
5
|
|
|
|
.25
|
%
|
|
|
2,479
|
|
|
|
5
|
|
|
|
0.27
|
%
|
Interest Bearing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
10,479
|
|
|
|
106
|
|
|
|
1.35
|
%
|
|
|
8,714
|
|
|
|
144
|
|
|
|
2.20
|
%
|
Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
5,611
|
|
|
|
156
|
|
|
|
3.71
|
%
|
|
|
9,287
|
|
|
|
310
|
|
|
|
4.45
|
%
|
Nontaxable
2
|
|
|
6,522
|
|
|
|
209
|
|
|
|
4.27
|
%
|
|
|
4,833
|
|
|
|
156
|
|
|
|
4.30
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earning assets
|
|
|
154,944
|
|
|
|
7,061
|
|
|
|
6.08
|
%
|
|
|
148,362
|
|
|
|
7,116
|
|
|
|
6.40
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
|
20,039
|
|
|
|
98
|
|
|
|
0.65
|
%
|
|
|
12,677
|
|
|
|
118
|
|
|
|
1.24
|
%
|
Savings
|
|
|
16,159
|
|
|
|
40
|
|
|
|
0.33
|
%
|
|
|
16,133
|
|
|
|
99
|
|
|
|
0.82
|
%
|
Time deposits
|
|
|
71,189
|
|
|
|
1,155
|
|
|
|
2.16
|
%
|
|
|
74,998
|
|
|
|
1,803
|
|
|
|
3.21
|
%
|
Borrowings
|
|
|
10,425
|
|
|
|
80
|
|
|
|
1.02
|
%
|
|
|
7,038
|
|
|
|
176
|
|
|
|
3.33
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Interest Bearing Liabilities
|
|
$
|
117,812
|
|
|
$
|
1,373
|
|
|
|
1.55
|
%
|
|
$
|
110,846
|
|
|
$
|
2,196
|
|
|
|
2.64
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income
1
|
|
|
|
|
|
|
5,688
|
|
|
|
|
|
|
|
|
|
|
|
4,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Margin
|
|
|
|
|
|
|
|
|
|
|
4.89
|
%
|
|
|
|
|
|
|
|
|
|
|
4.42
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Nonaccrual loans are included in computing the average balances.
|
2
|
An incremental tax rate of 34% and a 70% dividend exclusion was used to calculate the tax equivalent income.
|
26
PIONEER BANKSHARES,
INC.
NET INTEREST MARGIN ANALYSIS
(On a Fully Tax Equivalent Basis)
(Dollar Amounts in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2010
|
|
|
Three Months Ended
September 30, 2009
|
|
|
|
Average
Balance
|
|
|
Income/
Expense
|
|
|
Rates
|
|
|
Average
Balance
|
|
|
Income/
Expense
|
|
|
Rates
|
|
|
|
|
|
|
|
|
Interest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
6,421
|
|
|
$
|
98
|
|
|
|
6.10
|
%
|
|
$
|
7,126
|
|
|
$
|
122
|
|
|
|
6.85
|
%
|
Real estate
|
|
|
108,234
|
|
|
|
1,695
|
|
|
|
6.26
|
%
|
|
|
103,151
|
|
|
|
1,625
|
|
|
|
6.30
|
%
|
Installment
|
|
|
16,246
|
|
|
|
392
|
|
|
|
9.65
|
%
|
|
|
15,953
|
|
|
|
403
|
|
|
|
10.10
|
%
|
Credit card
|
|
|
610
|
|
|
|
27
|
|
|
|
17.70
|
%
|
|
|
622
|
|
|
|
31
|
|
|
|
19.94
|
%
|
Federal funds sold
|
|
|
3,193
|
|
|
|
2
|
|
|
|
0.25
|
%
|
|
|
2,817
|
|
|
|
2
|
|
|
|
0.28
|
%
|
Interest Bearing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
11,361
|
|
|
|
38
|
|
|
|
1.34
|
%
|
|
|
7,725
|
|
|
|
44
|
|
|
|
2.28
|
%
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
5,728
|
|
|
|
50
|
|
|
|
3.49
|
%
|
|
|
6,891
|
|
|
|
77
|
|
|
|
4.47
|
%
|
Nontaxable
2
|
|
|
6,420
|
|
|
|
68
|
|
|
|
4.24
|
%
|
|
|
6,367
|
|
|
|
71
|
|
|
|
4.46
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earning assets
|
|
|
158,213
|
|
|
|
2,370
|
|
|
|
5.99
|
%
|
|
|
150,652
|
|
|
|
2,375
|
|
|
|
6.31
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
|
20,365
|
|
|
|
31
|
|
|
|
0.61
|
%
|
|
|
16,589
|
|
|
|
47
|
|
|
|
1.13
|
%
|
Savings
|
|
|
16,147
|
|
|
|
14
|
|
|
|
0.35
|
%
|
|
|
16,146
|
|
|
|
25
|
|
|
|
0.62
|
%
|
Time deposits
|
|
|
72,877
|
|
|
|
359
|
|
|
|
1.97
|
%
|
|
|
75,881
|
|
|
|
544
|
|
|
|
2.87
|
%
|
Borrowings
|
|
|
11,266
|
|
|
|
31
|
|
|
|
1.10
|
%
|
|
|
6,416
|
|
|
|
54
|
|
|
|
3.37
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Interest Bearing Liabilities
|
|
$
|
120,655
|
|
|
$
|
435
|
|
|
|
1.44
|
%
|
|
$
|
115,032
|
|
|
$
|
670
|
|
|
|
2.33
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income
1
|
|
|
|
|
|
$
|
1,935
|
|
|
|
|
|
|
|
|
|
|
$
|
1,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Margin
|
|
|
|
|
|
|
|
|
|
|
4.89
|
%
|
|
|
|
|
|
|
|
|
|
|
4.53
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Nonaccrual loans are included in computing the average balances.
|
2
|
An incremental tax rate of 34% and a 70% dividend exclusion was used to calculate the tax equivalent income.
|
27
TABLE II
PIONEER BANKSHARES, INC.
INTEREST SENSITIVITY ANALYSIS
SEPTEMBER 30, 2010
(Dollar Amounts in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0-3
Months
|
|
|
4-12
Months
|
|
|
1-5
Years
|
|
|
Over 5
Years
|
|
|
Not
Classified
|
|
|
Total
|
|
Uses of Funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
1
|
|
$
|
8,934
|
|
|
$
|
8,835
|
|
|
$
|
67,571
|
|
|
$
|
46,989
|
|
|
$
|
|
|
|
$
|
132,329
|
|
Interest bearing bank deposits
|
|
|
519
|
|
|
|
5,165
|
|
|
|
5,250
|
|
|
|
|
|
|
|
|
|
|
|
10,934
|
|
Investment securities
2
|
|
|
2,500
|
|
|
|
|
|
|
|
2,840
|
|
|
|
5,535
|
|
|
|
2,480
|
|
|
|
13,355
|
|
Restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
981
|
|
|
|
981
|
|
Federal funds sold
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
12,453
|
|
|
|
14,000
|
|
|
|
75,661
|
|
|
|
52,524
|
|
|
|
3,461
|
|
|
|
158,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sources of Funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing demand deposits
|
|
|
20,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,066
|
|
Regular savings
|
|
|
16,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,108
|
|
Certificates of deposit $100,000 and over
|
|
|
4,759
|
|
|
|
14,105
|
|
|
|
6,593
|
|
|
|
|
|
|
|
|
|
|
|
25,457
|
|
Other certificates of deposit
|
|
|
5,518
|
|
|
|
19,738
|
|
|
|
19,278
|
|
|
|
|
|
|
|
|
|
|
|
44,534
|
|
Borrowings
|
|
|
1,000
|
|
|
|
7,000
|
|
|
|
6,000
|
|
|
|
|
|
|
|
|
|
|
|
14,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
47,451
|
|
|
$
|
40,843
|
|
|
$
|
31,871
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
120,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discrete Gap
|
|
$
|
(34,998
|
)
|
|
$
|
(26,843
|
)
|
|
$
|
43,790
|
|
|
$
|
52,524
|
|
|
$
|
3,461
|
|
|
$
|
37,934
|
|
|
|
|
|
|
|
|
Cumulative Gap
|
|
$
|
(34,998
|
)
|
|
$
|
(61,841
|
)
|
|
$
|
(18,051
|
)
|
|
$
|
34,473
|
|
|
$
|
37,934
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of Cumulative Gap To Total Earning Assets at September 30, 2010
|
|
|
-22.14
|
%
|
|
|
-39.12
|
%
|
|
|
-11.42
|
%
|
|
|
21.80
|
%
|
|
|
23.99
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of Cumulative Gap To Total Earning Assets at December 31, 2009
|
|
|
-28.19
|
%
|
|
|
-43.69
|
%
|
|
|
-14.38
|
%
|
|
|
21.57
|
%
|
|
|
23.83
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Nonaccrual loans are included in the loan totals.
|
2
|
Investment
securities are reflected at fair value.
|
28
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk.
|
Not Applicable
Item 4.
|
Controls and Procedures
|
As a result of
the enactment of the Sarbanes-Oxley Act of 2002, issuers such as Pioneer Bankshares, Inc. that file periodic reports under the Securities Exchange Act of 1934 (the Act) are required to include in those reports certain information
concerning the issuers controls and procedures for complying with the disclosure requirements of the federal securities laws. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by an issuer in the reports it files or submits under the Act, is communicated to the issuers management, including its principal executive officer or officers and principal financial officer or officers,
or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
The Company has established
disclosure controls and procedures to ensure that material information related to Pioneer Bankshares, Inc. is made known to our principal executive officers, and principal financial officer on a regular basis, in particular during the periods in
which our quarterly and annual reports are being prepared. As required, the Company evaluates the effectiveness of these disclosure controls and procedures on a quarterly basis, and has done so as of the end of the period covered by this report.
Based on this evaluation, the Companys Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures are adequate and effective. There were no changes in the Companys internal
control over financial reporting during the quarter ended September 30, 2010, that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
Part II - Other Information
Item 1.
|
Legal Proceedings.
|
In the ordinary
course of its operations, the Company and its subsidiaries are parties to various legal proceedings. Based on the information presently available, and after consultation with legal counsel, management believes that the ultimate outcome in such
proceedings, in the aggregate, will not have a material adverse effect on the business or the financial condition or results of operations of the Company.
Not Applicable
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds.
|
The Company has a stock repurchase program authorized with 5,000 shares remaining available for repurchase. There have been no repurchase transactions during 2010.
Item 3.
|
Defaults Upon Senior Securities.
|
Not
Applicable
Not Applicable
Item 5.
|
Other Information.
|
Not Applicable
29
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) (filed herewith).
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) (filed herewith).
|
|
|
32
|
|
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
|
30
SIGNATURES
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 thereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
PIONEER BANKSHARES, INC.
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ THOMAS R. ROSAZZA
|
Date: November 15, 2010
|
|
|
|
|
|
Thomas R. Rosazza
|
|
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
Date: November 15, 2010
|
|
|
|
By:
|
|
/s/ LORI G. HASSETT
|
|
|
|
|
|
|
Lori G. Hassett
|
|
|
|
|
|
|
Vice President and Chief Financial Officer
|
31
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