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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended Commission File No. 000-33411
--------------
June 30, 2002
NEW PEOPLES BANKSHARES, INC.
Virginia 31-1804543
- --------------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2 Gent Drive
Honaker, Virginia 24260
(276) 873-6288
--------------------------
(Registrant's Telephone Number, Including Area Code)
Check whether the registrant: (1) 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 requirement for
the past 90 days. Yes ...X.. No ....
Transitional Small Business Disclosure Format (check one):
Yes X No
The number of shares of common stock of the registrant outstanding as of
August 1, 2002 was 6,000,000.
1
NEW PEOPLES BANKSHARES, INC.
INDEX
Page
PART I FINANCIAL INFORMATION 2
Item 1. Financial Statements
Consolidated Statements of Income - Six Months
Ended June 30, 2002 and 2001 2
Consolidated Statements of Income - Three Months
Ended June 30, 2002 and 2001 3
Consolidated Balance Sheets - June 30, 2002 and
December 31, 2001 4
Consolidated Statements of Changes in Stockholders' Equity -
Six Months Ended June 30, 2002 and 2001 5
Consolidated Statements of Cash Flows - Six Months
Ended June 30, 2002 and 2001 6
Notes to Financial Statements 7
Item 2. Management Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk 16
PART II OTHER INFORMATION 16
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8K 16
SIGNATURES 17
2
Part I Financial Information
Item 1 Financial Statements
NEW PEOPLES BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
2002 2001
Interest and Dividend Income
Loans (including fees) $7,946,795 $6,908,741
Federal funds sold 57,844 284,487
Other investments 91,152 170,444
--------- ---------
Total Interest Income 8,095,791 7,363,672
--------- ---------
Interest Expense
Interest on deposits 3,004,607 4,200,185
--------- ---------
Net Interest Income 5,091,184 3,163,487
Provision for Loan Losses 278,000 341,000
--------- ---------
Net Interest Income After Provision for Loan Losses 4,813,184 2,822,487
--------- ---------
Noninterest Income
Service charges, fees and commissions 392,453 295,735
Other operating income 273,283 27,338
--------- ---------
Total Noninterest Income 665,736 323,073
--------- ---------
Noninterest Expense
Salaries and employee benefits 1,981,447 1,517,788
Occupancy expense 497,383 361,434
Other operating expenses 1,156,241 654,250
--------- ---------
Total Noninterest Expense 3,635,071 2,533,472
--------- ----------
Income Before Income Taxes 1,843,849 612,088
Income Tax Expense 647,647 204,455
--------- ---------
Net Income $1,196,202 $ 407,633
========= =========
Net Income Per Share (Basic and Diluted) $ 0.20 $ 0.07
======== ========
Weighted Average Shares Outstanding1 6,000,000 6,000,000
Diluted Weighted Average Shares Outstanding 6,068,683
1 Prior year restated to reflect 2 for 1 stock split.
The accompanying notes are an integral part of these statements.
3
Part I Financial Information
Item 1 Financial Statements
NEW PEOPLES BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
2002 2001
Interest Income
Loans (including fees) $4,063,824 $3,594,347
Federal funds sold 15,191 137,914
Other investments 46,646 80,574
--------- ---------
Total Interest Income 4,125,661 3,812,835
--------- ----------
Interest Expense
Interest on deposits 1,429,205 2,146,632
--------- ----------
Net Interest Income 2,696,456 1,666,203
Provision for Loan Losses 148,000 182,000
--------- ----------
Net Interest Income After Provision for Loan Losses 2,548,456 1,484,203
--------- ----------
NonInterest Income
Service charges, fees and commissions 209,748 180,369
Other operating income 157,452 14,634
--------- ----------
Total Noninterest Income 367,200 195,003
--------- ----------
Noninterest Expense
Salaries and employee benefits 1,080,451 813,475
Occupancy expense 261,834 194,434
Other operating expenses 599,088 343,843
--------- ---------
Total Noninterest Expense 1,941,373 1,351,752
--------- ---------
Income Before Income Taxes 974,283 327,454
Income Tax Expense 357,183 109,486
--------- ---------
Net Income $ 617,100 $ 217,968
========= =========
Net Income Per Share (Basic and Diluted) $ 0.10 $ 0.04
======== ========
Weighted Average Shares Outstanding 6,000,000 6,000,000
Diluted Weighted Average Shares Outstanding 6,064,000
1 Prior year restated to reflect 2 for 1 stock split.
The accompanying notes are an integral part of these statements.
4
NEW PEOPLES BANKSHARES, INC.
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2002 2001
(Unaudited) (Audited)
ASSETS
Cash and due from banks $ 7,982,361 $ 8,160,163
Federal funds sold 1,737,000 3,387,000
----------- -----------
Total Cash and Cash Equivalents 9,719,361 11,547,163
Securities held to maturity (fair value
$2,169,250 and $5,704,751) 2,159,417 5,657,937
Loans, net of allowance for loan losses of
$2,026,128 at June 30, 2002, and $1,792,850
at December 31, 2001 200,530,129 177,422,689
Bank premises and equipment net 9,267,875 8,365,639
Federal Reserve Bank stock (restricted) 529,250 529,250
Accrued interest receivable 1,492,722 1,637,979
Investment in life insurance contracts 7,776,130 7,500,000
Other assets 1,934,170 1,592,397
----------- -----------
Total Assets $233,409,054 $214,253,054
=========== ===========
LIABILITIES
Deposits:
Demand deposits:
Noninterest bearing $ 19,535,114 $15,798,126
Interest bearing 8,735,364 7,535,247
Savings deposits 23,668,793 18,646,950
Other time deposits 160,535,906 152,031,073
----------- -----------
Total Deposits 212,475,177 194,011,396
Accrued interest payable 539,713 687,354
Income taxes payable 107,845 459,545
Accrued expenses and other liabilities 199,043 203,685
----------- -----------
Total Liabilities 213,321,778 195,361,980
----------- -----------
STOCKHOLDERS' EQUITY
Common stock - (12,000,000 shares authorized)
6,000,000 shares issued and outstanding,
$2.00 par value 12,000,000 12,000,000
Paid-in-surplus 5,964,331 5,964,331
Retained earnings 2,122,945 926,743
----------- -----------
Total Stockholders' Equity 20,087,276 18,891,074
----------- -----------
Total Liabilities and Stockholders' Equity $233,409,054 $214,253,054
=========== ===========
The accompanying notes are an integral part of these statements.
5
NEW PEOPLES BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
Retained
Common Paid in Earnings/
Stock Capital (Accumulated Deficit) Total
------- ------- ------------------- =====
Balance, December 31, 2000 $12,000,000 $5,964,331 $ (81,922) $17,882,409
Net Income 407,633 407,633
-------- -------- -------- --------
Balance June 30, 2001 12,000,000 5,964,331 325,711 18,290,042
========== ========= ======== ==========
Balance, December 31, 2001 12,000,000 5,964,331 926,743 18,891,074
Net Income 1,196,202 1,196,202
-------- -------- --------- ---------
Balance June 30, 2002 $12,000,000 $5,964,331 $2,122,945 $20,087,276
========== ========= ========= ==========
The accompanying notes are an integral part of these statements.
6
NEW PEOPLES BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
2002 2001
Operating Activities:
Net income $ 1,196,202 $ 407,633
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 278,000 341,000
Depreciation 401,167 261,090
Income from life insurance contracts (276,130)
Net change in:
Interest receivable 145,257 (89,200)
Other assets (341,773) (319,767)
Accrued expense and other liabilities (503,983) 74,919
---------- ----------
Net Cash Provided by Operating Activities 898,740 675,675
---------- ----------
Investing Activities:
Payments for the purchase of property (1,303,403) (1,725,766)
Net change in loans (23,385,440) (29,217,790)
Maturity of securities available for sale 3,498,520 8,913,173
Purchase of securities held to maturity (9,164,945)
---------- ----------
Net Cash Used in Investing Activities (21,190,323) (31,195,328)
----------- -----------
Financing Activities:
Net change in:
Demand and saving deposits 9,958,948 7,388,334
Time deposits 8,504,833 22,988,209
---------- -----------
Net Cash Provided by Financing Activities 18,463,781 30,376,543
---------- ----------
Net Increase (Decrease) in Cash and Cash
Equivalents (1,827,802) (143,110)
Cash and Cash Equivalents, Beginning of Period 11,547,163 7,871,754
---------- ----------
Cash and Cash Equivalents, End of Period $ 9,719,361 $ 7,728,644
========== ==========
Supplemental Disclosure of Cash Paid:
Interest $ 3,152,248 $ 4,143,454
Income taxes $ 620,000 $ 65,000
The accompanying notes are an integral part of these statements.
7
NEW PEOPLES BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 ACCOUNTING PRINCIPLES:
The financial statements conform to U. S. 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 June 30, 2002, and the results of operations
for the six month and three month periods ended June 30, 2002 and
2001. The notes included herein should be read in conjunction with
the notes to financial statements included in the 2001 annual report
to stockholders of New Peoples Bankshares, Inc.
The Company does not expect the anticipated adoption of any newly
issued accounting standards to have a material impact on future
operations or financial position.
NOTE 2 SECURITIES HELDS TO MATURITY:
The amortized cost and estimated fair value of held to maturity
securities as of June 30, 2002, are as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Securities Held to Maturity
June 30, 2002
U.S. Government
Agency $2,057,320 $ 4,880 $ $2,062,200
Municipal Governments 102,097 4,953 107,050
--------- --------- --------- ---------
Total Securities
Held to
Maturity $2,159,417 $ 9,833 $ $2,169,250
========= ========= ========= =========
Securities Held to Maturity
December 31, 2001
U.S. Government
Agencies $5,555,840 $ 43,027 $ $5,598,867
Municipal Governments 102,097 3,787 105,884
--------- --------- --------- ---------
Total Securities
Held
To Maturity $5,657,937 $ 46,814 $ $5,704,751
========= ========= ========= =========
See Accountants' Report.
8
NEW PEOPLES BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 ALLOWANCE FOR LOAN LOSSES:
Transactions in the Bank's allowance for loan losses are shown in
the following schedule:
For the Six Months Ended
June 30, 2002 June 30, 2001
--------------------------
Balance, beginning of period $1,792,850 $1,311,348
Provision for loan losses 278,000 341,000
Charge-offs (71,778) (51,002)
Recoveries 27,056 1,925
--------- ---------
Balance, End of Period $2,026,128 $1,603,271
========= =========
NOTE 4 COMMON STOCK:
On December 12, 2001, the Board of Directors approved a 2 for 1
stock split to shareholders of record on January 1, 2002 by reducing
the par value of common stock from $4 to $2 per share. This split
resulted in an additional 3,000,000 shares of stock outstanding.
NOTE 5 EARNINGS PER SHARE:
The weighted average shares outstanding used for the
calculation of earnings per share has been adjusted to
reflect the 2 for 1 stock split that was effective January 1, 2002.
Diluted earnings per share has been calculated for the current
periods to reflect the dilutive effect of the 256,000 exercisable
outstanding options granted to employees and directors of the Bank.
The dilution calculation assumes that all options were exercised at
the beginning of the period and that the proceeds were used to
purchase common stock at the average market price during the period.
See Accountants' Report.
9
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
We opened for business on October 28, 1998 and have achieved outstanding
growth. As of June 30, 2002, we had total deposits of $212,475,177 and total
loans of $202,556,257.
Our net income for the six months ended June 30, 2002 was $1,196,202, an
increase of $788,569 over net income of $407,633 for the six months ended June
30, 2001.
Our net income for the quarter ended June 30, 2002 was $617,100, an
increase of $399,132 over net income of $217,968 for the three months ended June
30, 2001.
For the foreseeable future, management will continue its strategy of
providing personal and customized financial services to individuals, small to
medium size businesses and the professional community. The Bank will strive to
serve the banking needs of its customers by developing personal, hometown
relationships.
Net Interest Margin
Our interest margin on earning assets was 5.09% for the first six months
of 2002, compared with 3.88% for the first six months of 2001. Interest rates
were lower during the first six months of 2002 compared to the first six months
of 2001. The average yield on earning assets decreased 94 basis points and the
average cost of funds decreased 262 basis points, resulting in the increase in
the net interest margin. Due to strong loan demand, we were able to maintain a
yield on loans of 8.36% during the first six months of 2002, compared to 9.48%
during the first six months of 2001.
Our interest margin was 5.31% for the quarter ended June 30, 2002 and 3.88%
for the same period in 2001. Interest rates were lower during the second quarter
of 2002 compared to the same period in 2001, due to interest rate cuts by the
Federal Reserve. The average yield on earning assets decreased 75 basis points
and the average cost of funds decreased 263 basis points, resulting in the
increase in the net interest margin. Because of a strong loan demand, we were
able to maintain a yield on loans of 8.27% during the current quarter, compared
to 9.36% for the same period in 2001. We continue to offer attractive loan and
deposit rates in order to attract new customers.
Provision for Loan Losses
Our provision for loan losses for the first six months of 2002 was $278,000
compared with $341,000 for the same period of 2001. Net loan charge-offs for the
first six months of 2002 were $44,722 resulting in an allowance for loan losses
of $2,026,128 (approximately 1% of total loans).
Our provision for loan losses for the second quarter of 2002 was $148,000,
compared to $182,000 for the same period of 2001. Net loan charge-offs for the
second quarter of 2002 were $3,256.
We consider the calculation of the allowance for loan losses a critical
accounting policy. Although we have experienced lenders who are familiar with
their customer base, most loans are too new to have exhibited signs of weakness
and the bank does not have an adequate history of loan losses to develop
accurate risk factors. In calculating the amount of the allowance for loan
losses we use guidelines that have been traditionally recommended by the bank
regulatory agencies. At each balance sheet date, we adjust the allowance to
equal the larger of 1% or an amount calculated by multiplying a loss factor
times the amount of loans in each risk classification pool. The pools and loss
factors used in this calculation are as follows: loss - 100%, doubtful - 50%,
substandard - 10%, special mention - 1%, pass - .5%. In addition we consider
current economic conditions, changes in the nature and volume of the loan
portfolio, and known adverse factors that may affect the borrowers ability to
repay. We intend to continue to set the allowance at a minimum of 1% unless
there is a clear indication that a 1% allowance is excessive.
10
Provision for Loan Losses (Continued)
As our loan portfolio matures a loss rate specific to us will emerge and
these loss percentages will be applied to our loan portfolio. This will result
in a more accurate allowance for loan loss calculation that is tailored to
reflect the risk associated with our loan portfolio.
Our allowance for loan losses represents management's best estimate of the
probably loan losses incurred as of each balance sheet date.
Noninterest Income
Noninterest income increased from $323,073 in the first six months of 2001
to $665,736 in the first six months of 2002. Noninterest income as a percentage
(annualized) of average total assets increased from .37% for the first six
months of 2001 to .59% for the first half of 2002. The increase in the dollar
amount is due to a significant increase in overdraft charges and $276,130 of
income produced by Bank Owned Life Insurance "BOLI" purchased during the fourth
quarter of 2001. The increase in fee income is consistent with the growth in
assets and deposits of the Company.
Noninterest income increased from $195,003 in the second quarter of 2001 to
$367,200 in the second quarter of 2002. Noninterest income as a percentage
(annualized) of average total assets increased from .44% for the second quarter
of 2001 to .64% for the second quarter of 2002. The increase is due to a
significant increase in overdraft charges, and $120,742 of income produced by
"BOLI" purchased during the last quarter of 2001. The increase in fee income is
consistent with the growth in assets and deposits of the Company.
Noninterest Expense
Noninterest expense increased from $2,533,472 in the first six months of
2001 to $3,635,071 in the first six months of 2002. The increase was due to
additional staffing and expenses associated with the new branches opened and the
general growth in operations. Noninterest expenses as a percentage (annualized)
of average assets increased from 2.91% for the first six months of 2001 to 3.24%
for the first six months of 2002.
Noninterest expense increased from $1,351,752 in the second quarter of 2001
to $1,941,373 in the second quarter of 2002. The increase was due to additional
staffing and expenses associated with the new branches opened and the general
growth in operations. Noninterest expenses as a percentage (annualized) of
average assets increased from 2.96% for the second quarter of 2001 to 3.41% for
the second three month period of 2002. Noninterest expense in the future will
depend on our growth and the number of new branch locations.
Bank Premises
At December 31, 2001, the Bank had full service branches in Honaker, Weber
City, Castlewood, Haysi, Pounding Mill and Lebanon, Virginia and Princeton, West
Virginia. The Bank also had loan production offices in Norton, Clintwood, and
Abingdon, Virginia.
On January 3, 2002, the bank opened a branch in Gate City, Virginia. The
branch is a 3,600 square foot brick building situated on a one acre lot. It
contains a full service branch with two drive-thru lanes and an ATM. The branch
is located at 326 East Jackson Street, Gate City, Virginia 24251.
On May 16, 2002, the bank opened a branch in Clintwood, Virginia. The
branch is a 3,600 square foot brick building situated on a one acre lot. It
contains a full service branch with two drive-thru lanes and an ATM. The branch
is located at Route 83 Colley Shopping Center, Clintwood, VA 24228.
On August 8, 2002, the bank opened a branch in Big Stone Gap, Virginia. The
branch is a 3,600 square foot brick building situated on a half acre lot. It
contains a full service branch with two drive-thru lanes and an ATM. The branch
is located at 419 Shawnee Avenue East, Big Stone Gap, VA 24219.
Land has been purchased and construction has begun for a full service
branch in Bloomingdale, Tennessee. Estimated costs are $500,000 for premises and
$140,000 for furniture and equipment. The bank plans to open the branch in the
spring of 2003.
11
Bank Premises (Continued)
Property that includes a former bank building has been purchased in
Tazewell, Virginia for a price of $262,500. However, a one year clause
restricting banking operations accompanies the purchase and management plans to
open in September 2002.
The Bank has purchased property within the corporate limits of the Town of
Grundy, Virginia. The construction of a full-service branch is scheduled to
begin on August 19, 2002 with a projected opening date in late 2002.
Management will continue to investigate and consider other possible sites
that would enable the Bank to profitably serve its chosen market area.
Additional purchases of premises and equipment for the year 2002 will depend on
the decision to open additional branches.
Loans
Total loans have increased $23,340,718 during the first six months of 2002
to $202,556,257. Approximately 58% of the loan portfolio is secured by real
estate.
Loans receivable outstanding are summarized as follows:
Loan Portfolio
(in thousands)
June 30, December 31,
2002 2001
Commercial, financial and agricultural $ 40,148 $ 35,168
Real estate - construction 4,584 3,845
Real estate - mortgage 113,270 98,229
Installment loans to individuals 44,554 41,974
------- -------
Total $202,556 $179,216
======= =======
Loan Portfolio Risk Factors
Nonaccrual and past due loans are shown in the following schedule.
Management has not identified any additional loans as "troubled debt
restructurings" or "potential problem loans."
June 30, December 31,
2002 2001
Principal: (In Thousands)
Nonaccrual and past due loans:
Nonaccruing loans $ 591 $ 47
Loans past due 90 days or more
and still accruing 29
----- -----
Total $ 591 $ 76
===== =====
Percent of total loans 0.29% 0.04%
Deposits
Our deposits increased $18,463,781 during the first six months of 2002 to
$212,475,177 at June 30, 2002. A schedule of deposits by type is shown in the
balance sheet. Time deposits of $100,000 or more equaled 19.0% of total deposits
at June 30, 2002 and 20.0% at December 31, 2001. We do not have brokered
deposits and internet accounts are limited to customers in the surrounding
geographical area. A maturity schedule of deposits is included in Table III.
12
Capital
Capital as a percentage of total assets was 8.6% at June 30, 2002, exceeding
regulatory requirements. On January 1, 2002, the Board approved a 2 for 1 stock
split to shareholders on record on that date. Based on the current growth rate
and capital percentage it is likely that we will need to raise additional
capital in the near future.
Liquidity and Interest Sensitivity
At June 30, 2002, we had liquid assets of approximately $9.7 million in the
form of cash, federal funds sold and deposits in other banks. We believe that
our liquid assets are adequate at June 30, 2002. Additional liquidity will be
provided by the growth in deposit accounts and loan repayments. In the event we
would need additional funds, we have the ability to purchase federal funds under
established lines of credit of $3.5 million.
At June 30, 2002, we had a negative cumulative Gap Rate Sensitivity Ratio of
33.59% for the one year repricing period. This generally indicates that earnings
would improve in a declining interest rate environment as liabilities
reprice more quickly than assets. Conversely, earnings would probably decrease
in periods during which interest rates are increasing. Management constantly
monitors the Bank's interest rate risk and has decided that the current position
is an acceptable risk for a growing community bank operating in a rural
environment. Table III shows the Bank's interest sensitivity by year.
Employees
Our full time equivalent employees have increased from 111 at December 31,
2001 to 125 at June 30, 2002. Future increases in the number of employees will
depend on the selection and approval of additional new branches.
New Accounting Pronouncement
We are not aware of any new accounting pronouncements that would have a
significant effect on our financial statements.
Securities and Exchange Commission Web Site
The Securities and Exchange Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission, including Highlands
Bankshares, Inc. and the address is (http://www.sec.gov.).
13
Table I
NEW PEOPLES BANKSHARES, INC.
NET INTEREST MARGIN ANALYSIS
AVERAGE BALANCE SHEET
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(In thousands of dollars)
2002 2001
Average Average Average Average
Balance Income/ Rates Balance Income/ Rates
Sheet Expense Earned/ Sheet Expense Earned/
Paid Paid
ASSETS
Loans including fees $190,106 $ 7,947 8.36% $145,800 $6,909 9.48%
Federal Funds sold 6,870 58 1.69% 11,562 285 4.93%
Other investments 3,070 91 5.93% 5,749 170 5.91%
------- ------- ----- ------- -----
Total Earning Assets 200,046 8,096 8.09% 163,111 7,364 9.03%
------- ---- ----- ----
Allowance for loans
losses (1,890) (1,447)
Non-earning assets 26,483 12,291
------- -------
Total Assets $224,639 $173,955
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand - Interest
bearing $ 12,596 $ 94 1.51% $ 6,889 $ 87 2.53%
Savings 17,265 169 1.96% 7,966 141 3.54%
All other time
deposits 155,508 2,741 3.53% 128,570 3,972 6.18%
-------- ------- ---- ------- ----- ----
Total Deposits 185,369 3,004 3.24% 143,425 4,200 5.86%
------- ---- ----- ----
Federal Funds Purchased 33 1 3.04%
------- ------- ----
Total Interest Bearing
Liabilities 185,402 3,005 3.24% 143,425 4,200 5.86%
------- ------- ---- ------- ----- ----
Non-interest bearing
deposits 18,329 11,235
Other liabilities 1,313 1,158
------- -------
Total Liabilities $205,044 155,818
Stockholders' Equity 19,595 18,137
------- -------
Total Liabilities and
Stockholders' Equity $ 224,639 $173,955
======== =======
Net Interest Income $ 5,091 $3,164
======= =====
Net Yield on Interest
Earning Assets 5.09% 3.88%
==== ====
Net Interest Spread 4.85% 3.17%
==== ====
(1) Non-accrual loans are not significant and have been included in the
average balance of loans outstanding.
(2) Loan fees are not material and have been included in interest income
on loans.
(3) Tax exempt income is not significant and has been treated as fully
taxable.
14
Table II
NEW PEOPLES BANKSHARES, INC.
NET INTEREST MARGIN ANALYSIS
AVERAGE BALANCE SHEET
FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001
(In thousands of dollars)
2002 2001
Average Average Average Average
Balance Income/ Rates Balance Income/ Rates
Sheet Expense Earned/ Sheet Expense Earned/
Paid Paid
ASSETS
Loans including fees $196,625 $ 4,064 8.27% $153,643 $ 3,594 9.36%
Federal Funds sold 3,445 15 1.74% 12,604 138 4.38%
Other investments 2,885 47 6.52% 5,556 81 5.83%
------- ------- ---- ------- ------- ----
Total Earning Assets 202,955 4,126 8.13% 171,803 3,813 8.88%
------- ---- ------- ----
Allowance for loans
losses (1,954) (1,525)
Non-earning assets 27,025 12,842
------- -------
Total Assets $228,026 $183,120
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand - Interest
bearing $ 17,091 $ 69 1.61% $ 8,846 $ 58 2.62%
Savings 14,700 73 1.99% 7,494 65 3.47%
All other time
deposits 155,665 1,287 3.31% 134,968 2,024 6.00%
--------- ----- ---- ------- ----- ----
Total Deposits $ 187,456 1,429 3.05% 151,308 2,147 5.68%
----- ---- ----- ----
Federal Funds Purchased 66 1 3.04%
------- ------ ----
Total Interest Bearing
Liabilities 187,522 1,430 3.05% 2,147 5.68%
------- ------- ---- -------
Non-interest bearing
deposits 19,443 12,398
Other liabilities 1,156 1,178
------- -------
Total Liabilities 208,121 164,884
Stockholders' Equity 19,905 18,236
------- -------
Total Liabilities and
Stockholders' Equity $228,026 $183,120
======= =======
Net Interest Income $ 2,696 $ 1,666
======= =======
Net Yield on Interest
Earning Assets 5.31% 3.88%
==== ====
Net Interest Spread 5.08% 3.20%
==== ====
(1) Non-accrual loans are not significant and have been included in the
average balance of loans outstanding.
(2) Loan fees are not material and have been included in interest income
on loans.
(3) Tax exempt income is not significant and has been treated as fully
taxable.
15
Table III
NEW PEOPLES BANKSHARES, INC.
INTEREST SENSITIVITY ANALYSIS
(In thousands of dollars)
1-90 91-365 Over 5
Uses of Funds Days Days Year 2 Year 3 Year 4 Year 5 Years Total
- ------------- ---- ---- ------ ------ ------ ------ ----- -----
Loans $ 30,136 $ 72,365 $ 39,656 $ 24,389 $ 13,719 $ 9,627 $ 12,664 $202,556
Federal funds
sold 1,737 1,737
Total investments 2,057 102 2,159
------- ------- ------- ------- ------- ------- ------- -------
Total 31,873 74,422 39,656 24,491 13,719 9,627 12,664 206,452
-------- ------- ------- ------- ------- ------ ------- -------
Sources of Funds
Deposits
Demand and
savings 32,404 32,404
Time deposits < $100M 41,943 66,084 5,817 1,936 3,501 824 120,105
Time deposits > $100M 13,671 20,850 3,398 408 2,007 97 40,431
------- ------- ------ ------ ------ ------ ------- ------
Total Deposits 88,018 86,934 9,215 2,344 5,508 921 192,940
------ ------ ------- ------ ------- ------ ------ -------
Discrete Gap (56,145) (12,512) 30,441 22,147 8,211 8,706 12,664 13,512
Cumulative Gap (56,145) (68,657) (38,216) (16,069) (7,858) 848 13,512
Ratio of Cumulative Gap
To Total Earning Assets (27.46%) (33.59%) (18.69%) (7.86%) (3.84%) 0.41% 6.54%
Table II reflects the earlier of the maturity or repricing dates for various
assets and liabilities at June 30, 2002. In preparing the above table, no
assumptions are made with respect to loan prepayments or deposit run offs. Loan
principal payments are included in the earliest period in which the loan matures
or can be repriced. Principal payments on installment loans scheduled prior to
maturity are included in the period of maturity or repricing. Proceeds from the
redemption of deposits in other banks are included in the period of maturity.
16
Item 3 Quantitative and Qualitative Disclosures about Market Risk
Not applicable
Part II Other Information
Item 1. Legal Proceedings - Not Applicable
Item 2. Changes in Securities - 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 8-K -
(a) Exhibits
No. Description
2 Agreement and Plan of Share Exchange dated August 15, 2001 (1)
3.1 Articles of Incorporation of Registrant (1)
3.2 By Laws of Registrant (1)
10.1 Stock Option Plan (2)
(1) Incorporated by reference to Exhibits to Form 8K filed by New
Peoples Bankshares, Inc. on December 12, 2001
(2) Incorporated by reference to Exhibits to
Form 10KSB filed by New Peoples Bankshares, Inc. April 1, 2002.
(b) Reports on Form 8-K filed during the three months ended June 30, 2002
None
17
Signature
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.
NEW PEOPLES BANKSHARES, INC.
By:KENNETH D. HART
---------------------------------------
Kenneth D. Hart
President and Chief Executive Officer
By:FRANK SEXTON, JR.
--------------------
Frank Sexton, Jr.
Executive Vice President and Chief
Financial Officer
August 14, 2002