SECURITIES & EXCHANGE COMMISSION
WASHINGTON D.C. 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, 2003
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _________
COMMISSION FILE NUMBER 33-10149
SVB&T Corporation
1500 Main Street
Jasper, IN 47546
Telephone (812) 634-1010
State of Incorporation - Indiana
I.R.S. Employer Identification No. 35-1539978
NOT APPLICABLE
Former name, former address and fiscal year, if changed since last report.
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, and (2) has been subject to the
filing requirements for at least the past 90 days. Yes _X__ No ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock. The Registrant has one class of common stock (no par value)
with approximately 597,527 shares outstanding at October 31, 2003. The
Registrant holds 202,473 shares in the form of Treasury Stock.
SVB&T CORPORATION
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page No.
Consolidated Balance Sheet
September 30, 2003 and 2002 and December 31, 2002 3
Consolidated Statement of Income
Three and nine months ended September 30, 2003 and 2002 4
Consolidated Statement of Cash Flows
Nine months ended September 30, 2003 and 2002 5
Consolidated Statement of Changes in Shareholders' Equity
Nine months ended September 30, 2003 and 2002 6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-10
Item 3 Quantitative and Qualitative Disclosures About Market Risk 10
Item 4. Controls and Procedures 10
PART II. OTHER INFORMATION 11
Item 1. Legal Proceedings 11
Item 2. Changes in Securities and Use of Proceeds 11
Item 4. Submission of Matters to a Vote of Securities Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
Certifications 12-14
SVB&T CORPORATION CONSOLIDATED BALANCE SHEET
Sept. 30, Sept. 30, Dec. 31,
(unaudited) 2003 2002 2002
ASSETS:
Cash and due from banks 6,154 4,290 6,728
Federal funds sold 7,875 0 4,607
Interest bearing deposits in other banks 2,936 46 1,615
Total cash and cash equivalents 16,965 4,336 12,950
Investment securities, available for
sale (carried at market value) 34,220 28,047 27,912
Loans held for sale 1,558 1,760 2,588
Loans
Loans, net of unearned interest 173,102 200,194 185,537
Allowance for loan losses 2,039 (2,111) (2,176)
Net loans 171,063 198,083 183,361
Buildings and equipment 3,926 4,180 4,196
Other real estate 3,051 399 1,111
Interest receivable 1,176 1,578 1,383
Other assets 8,709 8,328 8,682
Total Assets 240,668 246,711 242,183
LIABILITIES:
Deposits
Non-interest bearing demand 13,337 12,851 12,371
Interest bearing 166,545 171,304 168,949
Total deposits 179,882 184,155 181,320
Federal funds purchased 0 1,000 0
Interest payable 1,034 1,145 1,189
Long-term borrowings 40,042 40,400 40,042
Deferred income taxes 207 429 345
Other liabilities 477 577 519
Total Liabilities 221,642 227,706 223,415
SHAREHOLDERS' EQUITY:
Common stock 200 200 200
Capital surplus 6,353 6,309 6,308
Retained earnings 19,328 18,858 18,793
Net unrealized gain on
investment securities 336 662 546
Treasury stock at cost (202,473 shares) (7,191) (7,024) (7,079)
Total Shareholders' Equity 19,026 19,005 18,768
Total Liabilities and
Shareholders' Equity 240,668 246,711 242,183
The accompanying notes are an integral part of this statement.
SVB&T CORPORATION CONSOLIDATED STATEMENT OF INCOME
Three Months Nine Months
Ended Sept. 30, Ended Sept. 30,
(unaudited) 2003 2002 2003 2002
_____________________________________________________________________________
INTEREST INCOME:
Loans and fees on loans 2,872 3,320 8,888 10,721
Investment securities:
Taxable 139 139 349 327
Non-taxable 183 172 570 597
Federal funds sold and
securities purchased under
agreements to resell 29 23 97 80
Deposits with banks 1 10 7 18
Other interest income 25 28 80 79
Total Interest Income 3,249 3,692 9,991 11,822
INTEREST EXPENSE:
Deposits 1,238 1,453 3,833 4,378
Other Short term Funds Borrowed 54 1 54 1
Long-Term Borrowings 513 579 1,636 1,703
Total interest expense 1,805 2,033 5,523 6,082
Net interest income 1,444 1,659 4,468 5,740
Provision for loan losses 105 105 315 280
Net interest income after
provision for loan losses 1,339 1,554 4,153 5,460
NON-INTEREST INCOME:
Trust fees 196 113 446 323
Service charges on
deposit accounts 334 159 821 426
Insurance & Claims Processing 22 0 114 0
Securities gains, net 4 8 108 8
Other Income 220 410 833 678
Total Non-interest Income 776 690 2,322 1,435
NON-INTEREST EXPENSE:
Salaries and employee benefits 999 1,093 3,055 3,163
Premises and equipment expense 458 262 1,013 820
FDIC deposit insurance 19 8 36 25
Other expenses 435 464 1,344 1,353
Total non-interest expense 1,911 1,827 5,448 5,361
Income before income taxes 204 417 1,027 1,534
Provision for income tax 33 99 169 458
Net Income 171 318 858 1,076
NET INCOME PER COMMON SHARE:
Primary $ .29 $.53 $1.43 $1.79
Weighted average common shares
outstanding 600,003 600,261 600,003 600,261
DIVIDENDS DECLARED:
Cash Dividends $.18 $.18 $.54 $.54
The accompanying notes are an integral part of this statement.
SVB&T CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended Sept 30,
(unaudited) 2003 2002
___________________________________________________________________________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income 858 1,076
ADJUSTMENTS TO RECONCILE NET INCOME TO CASH
PROVIDED FROM OPERATING ACTIVITIES:
Depreciation 332 310
Net premium amortization (discount
accretion) of investment securities 116 67
Provision for loan losses 315 280
Proceeds from sales of mortgage loans 14,635 11,717
(Increase)decrease in interest receivable 207 (68)
(Increase) decrease in other assets 947 (5,058)
Increase (decrease) in accrued expenses and
other liabilities (197) (61)
Net cash flows provided by operating
activities 17,213 8,263
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities available
for sale (30,793) (13,893)
Proceeds from maturities and pay downs of
investment securities available for sale 24,021 6,744
Net (increase) decrease in loans (4,536) (5,774)
Purchase of premises and equipment (62) (208)
Net cash flows used in investing
activities (11,370) (13,131)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits,
Federal funds and short-term borrowings
Non-interest bearing demand 966 1,882
Total interest-bearing deposits (2,404) 534
Other short-term borrowings and fed
funds purchased 0 ( 3,100)
Long-term borrowings 0 11,300
Cash dividends paid (324) (325)
Treasury stock sold 77 92
Treasury stock purchased (143) (6,030)
Net cash flows provided by (used in)
financing activities (1,828) 4,353
Net increase (decrease) in cash equivalents 4,015 (515)
Cash and cash equivalents at beginning of
period 12,950 4,851
Cash and cash equivalents at end of period 16,965 4,336
Total interest paid 5,678 6,026
Total taxes paid 110 536
The accompanying notes are an integral part of this statement.
SVB&T CORPORATION CONSOLIDATED STATEMENT
OF CHANGES IN SHAREHOLDERS' EQUITY
Nine Months Ended Sept. 30,
(unaudited) 2003 2002
_______________________________________________________________________________
Balance, beginning of period 18,768 23,653
Net income 858 1,076
Net unrealized gain (loss) on investment
securities (210) 539
Cash dividends (324) (325)
Sale of treasury stock 77 92
Purchase of treasury stock (143) (6,030)
Balance, end of period 19,026 19,005
The accompanying notes are an integral part of this statement.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
Principles of Consolidation - The consolidated financial statements include the
accounts of SVB&T Corporation and its wholly owned subsidiary, Springs Valley
Bank & Trust Company. All significant intercompany balances and transactions
have been eliminated.
All adjustments which are, in the opinion of management, necessary for a fair
presentation of the results for the periods reported, consisting only of normal
adjustments, have been included in the accompanying unaudited consolidated
condensed financial statements. The results of operations for nine month period
ended Sept. 30, 2003 is not necessarily indicative of those expected for the
remainder of the year.
Note 2
Sept. 30, 2003 Sept. 30, 2002 Dec. 31, 2002
________________________________________________________________________________
INVESTMENT SECURITIES (at Market Value):
U.S. treasury securities 0 0 0
U.S. Government corporations
& agencies 18,593 10,824 11,029
States and political subdivisions 14,633 17,156 16,818
Mortgage - backed securities 994 67 65
Total Investment Securities 34,220 28,047 27,912
Note 3
Sept. 30, 2003 Sept. 30, 2002 Dec. 31, 2002
________________________________________________________________________________
LOANS:
Commercial and industrial loans 52,035 54,137 49,977
Real estate loans 87,931 103,299 97,183
Construction loans 11,932 10,610 10,350
Agricultural production financing
and other loans to farmers 1,484 2,400 2,186
Individual loans for household
and other personal expense 16,538 26,457 24,496
Lease financing receivable 264 642 397
Other Loans excluding consumer 4,559 4,533 3,650
Less: Unearned income on loans (84) (124) (114)
Total loans 174,659 201,954 188,125
The accompanying notes are an integral part of this statement.
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SUMMARY OF OPERATING RESULTS
EARNINGS ANALYSIS
Net income for the first nine months of $858,000 represents a decrease of
$218,000 or 20% from the $1,076,000 reported for the same period last year. The
third quarter earnings of $171,000 represents a decrease of $147,000 or 46%
from the $318,000 reported for the third quarter of 2002. The decreases
are a direct result of an increase in the amounts of nonaccrual loans,
adjustable rate loans repricing downward and a decrease in loan volume.
NET INTEREST INCOME
SVB&T Corporation's primary source of earnings is net interest income, which is
the difference between interest earned on loans and other investments and
The interest incurred for deposits and other sources of funds. In the first
nine months of 2003, net interest income of $4,468,000, decreased $1,292,000
compared to the same period in 2002. The decreasing interest rates have
shrunk the interest margins due to interest earning assets repricing more
frequently than interest-bearing deposits. Additional borrowings by the
Holding Company have increased interest expense. As noted before, non-
accrual loans have also reduced the net interest income.
OTHER INCOME
Other income of $2,322,000 for the first three quarters of 2003 is $887,000 or
62% greater than the same period for 2002. The increase is due to the servicing
of fixed rate mortgages and gains on the sale of these mortgages. Also
Tax-Free securities were sold with capital gains and overdraft fees are
Increased due to our overdraft priviledge program. Other non-interest income
is an important part of the profitability of the bank and all avenues of
additional income are reviewed.
NON-INTEREST EXPENSES
For the first nine months of 2003 other expenses increased by $87,000 or 2%
compared to the same period of 2002. The three months ended September 30,
2003 total other expense increase was $84,000 over that same period for 2002.
All aspects of overhead expenses have been reduced or maintained at
last years levels.
ANALYSIS OF FINANCIAL CONDITION
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The Corporation's allowance for loan losses Is $2,039,000 at September 30,
2003 compared to $2,111,000 at September 30, 2002 and $2,176,000 as of
December 31, 2002.
At September 30, 2003 the allowance for possible loan losses was 1.17% of total
loans, net for unearned interest. This compares to an allowance of 1.05%
At September 30, 2002. Net charge offs for the first nine months of 2003
were $452,000 compared to $266,000 for the same period last year. Management
reviews the loan portfolio and assess the risk and believes that the allowance
of $2,039,000 is adequate.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
The Corporation's objective in liquidity management is to manage the assets
and liabilities to meet the needs of borrowers while allowing for the
possibility of deposit withdrawals. The primary purpose of asset/liability
management is to minimize the effect on net income of changes in interest
rates and to maintain a prudent match within specified same periods of
rate-sensitive assets and rate-sensitive liabilities.
As of September 30, 2003 the rate-sensitive assets were 85% of liabilities in
the 1-180 day maturity category and 105% in the 181-365 day range. These
positions are within acceptable ranges as determined by fundsmanagement policy.
The Corporation's Funds Management committee meets weekly to monitor and effect
changes necessary in the liquidity and rate-sensitivity
positions.
CAPITAL
Total shareholders' equity as of September 30, 2003 was $19,026,000 compared to
$19,005,000 for the same period last year. The shareholder's equity has
increased by $21,000 or less than 1% from September 30, 2002 to September 30,
2003. This small increase is attributed to weaker earnings and the reduction of
marked value of the available for sale securities. The Bank and
Holding Company remain highly capitalized.
(ANALYSIS OF FINANCIAL CONDITIONS CONTINUED)
As of September 30, 2003 the leverage capital ratio was 7.70% which compared to
7.34% at September 30, 2002.
As of September 30, 2003 the total risk-based capital ratio was 11.87%
compared to 11.01% at September 30, 2002.
These ratios are in excess of regulatory requirements of 3% for leverage capital
and 8% for total risk-based capital.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Corporation's exposure to market risk is primarily related to changes in
interest rates.Quantitative and qualitative disclosures about the
Corporation's market risk resulting from changes in interest rates are
included in Item 7A. in the Corporation's 2002 Annual Report on Form 10-K.
There have been no material changes in such risks or in the Corporation's
asset/liability management program during the quarter ended September 30, 2003,
Liquidity and interest rate sensitivity disclosures for the quarter
ended September 30, 2003 are found on page 9 of this report.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures. The Corporation's
principal executive officer and principal financial officer have concluded
that the Corporation's disclosure controls and procedures (as defined in Rule
13a-14(c) under the Securities Exchange Act of 1934, as amended), based on
their evaluation of these controls and procedures as of a date within ninety
(90) days prior to the filing date of this Form 10-Q, are effective.
(b) Changes in Internal Controls. There have been no significant changes in
the Corporation's internal controls or in other factors that could
significantly affect these controls subsequent to the date of the evaluation
thereof, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Part II
Other Information
Item 1. Legal Proceedings
Neither the Corporation nor its subsidiaries are involved in any
pending legal proceedings at this time, other than routine
litigation incidental to its business.
Item 2. Changes in Securities
(a) Not applicable
(b) Not applicable
(c) Not applicable
(d) Not applicable
Item 3. Defaults Upon Senior Securities - Not applicable
Item 4. Submission of Matters to a Vote of Security Holders -Not applicable
Item 5. Other Information - Not applicable
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
3(i) Articles of Incorporation of the Corporation, filed as
Exhibit 3A to the Corporation's Form 10-K for the fiscal year
ended December 31, 1996, filed March 31, 1997.
3(ii) Bylaws of the Corporation, filed as Exhibit 3B to the
Corporation's Form 10-K for the fiscal year ended December 31,
1996, filed March 31, 1997.
10(a) 1996 Key Employees' Stock Option and Stock Appreciation
Rights Plan of the Corporation.
10(b) 1997 Directors' Stock Option Plan of the Corporation.
99.1 Chief Executive Officer Certification pursuant to 18 U.S.C.
Section 1350
99.2 Chief Financial Officer Certification pursuant to 18 U.S.C.
Section 1350
(b) No reports on Form 8-K were filed during the quarter of the
fiscal year for which this report is filed.
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.
Date: November 12, 2003
SVB&T CORPORATION
Ronald G. Seals, President and Chief Executive Officer
David Rees, Principal Financial Officer
CERTIFICATIONS
I, David Rees, certify that:
1. I have reviewed this quarterly report on Form 10-Q of SVB&T Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 12, 2003
David Rees, Principal Financial Officer
I, Ronald G. Seals, certify that:
1. I have reviewed this quarterly report on Form 10-Q of SVB&T Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 12, 2003
Ronald G. Seals, President and Chief Executive Officer