-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OhODi7bTCsYqZgDyqx/+zgPfgHdViymV7BBrGePdpHDT1QVi/9aZ38S9iJ6AfINH b7ZxJk4J0kHUy4xfWmGLaA== 0001002105-97-000135.txt : 19971117 0001002105-97-000135.hdr.sgml : 19971117 ACCESSION NUMBER: 0001002105-97-000135 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INDEPENDENT COMMUNITY BANKSHARES INC CENTRAL INDEX KEY: 0000914138 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 541696103 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-70920 FILM NUMBER: 97721688 BUSINESS ADDRESS: STREET 1: 111 WEST WASHINGTON STREET STREET 2: C/O MIDDLEBURG BANK CITY: MIDDLEBURG STATE: VA ZIP: 22117 BUSINESS PHONE: 5406876377 MAIL ADDRESS: STREET 1: 111 WEST WASHINGTON STREET STREET 2: C/O MIDDLEBURG BANK CITY: MIDDLEBURG STATE: VA ZIP: 22117 10-Q 1 10-Q FILED BY INDEPENDENT COMMUNITY BANKSHARES U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 1997 [ ] Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ____________ to _____________ Commission file number: 333-24523 INDEPENDENT COMMUNITY BANKSHARES, INC. (Exact Name of Small Business Issuer as Specified in its Charter) Virginia 54-1696103 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 111 West Washington Street Middleburg, Virginia 22117 (Address of Principle Executive Offices) (540) 687-6377 (Issuer's Telephone Number, Including Area Code) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No _____ State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 906,297 shares of common stock, par value $5.00 per share, outstanding as of November 10, 1997 * This Form 10-QSB also covers 276,600 Contractual Rights to Contingent Merger Consideration, which are registered under the Securities Act of 1933, as amended, pursuant to a registration statement declared effective on June 27, 1997. INDEPENDENT COMMUNITY BANKSHARES, INC. INDEX
Part I. Financial Information Page No. Item 1. Financial Statements Consolidated Balance Sheets 3 Consolidated Statements of Income 4 Consolidated Statements of Changes in Shareholder's Equity 5 Consolidated Statements of Cash Flows 6 Notes to Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Results of Operation and Financial Condition 11 Part II. Other Information Item 1. Legal proceedings 13 Item 2. Change in securities 13 Item 3. Defaults upon senior securities 13 Item 4. Submission of matters to a vote of security holders 13 Item 5. Other information 13 Item 6. Exhibits and Reports on Form 8-K 13 Signature 14
2 Independent Community Bankshares, Inc. Consolidated Balance Sheets (000 omitted)
(Unaudited) September 30 December 31, 1997 1996 ------------ ------------ Assets: Cash and due from banks $ 5,681 $ 6,519 Securities (fair value: September 30, 1997, $ 65,602, December 31, 1996, $ 52,376 ) 65,422 52,402 Federal funds sold 1,700 3,400 Loans, net 96,167 93,711 Bank premises and equipment, net 5,506 4,699 Other assets 3,417 2,235 --------- --------- Total assets $ 177,893 $ 162,966 ========= ========= Liabilities and Shareholders' Equity Liabilities: Deposits: Non-interest bearing $ 25,046 $ 23,242 Interest bearing 124,124 115,548 --------- --------- Total deposits $ 149,170 $ 138,790 Securities sold under agreements to repurchase $ 3,043 $ 1,445 Federal Home Loan Bank advances 3,900 4,000 Other liabilities 657 723 --------- --------- Total liabilities $ 156,770 $ 144,958 Shareholders' Equity Common stock par value $5.00 per share, authorized 10,000,000 shares; issued and outstanding at September 30, 1997 - 906,297 issued and outstanding at December 31, 1996 - 859,838 $ 4,531 $ 4,299 Capital surplus 2,480 1,411 Retained earnings 14,356 12,817 Unrealized gain (loss) on securities available for sale, net (244) (519) --------- --------- Total shareholders' equity $ 21,123 $ 18,008 Total liabilities and shareholders' equity $ 177,893 $ 162,966 ========= =========
See Accompanying Notes to Consolidated Financial Statements 3 Independent Community Bankshares, Inc. Consolidated Statements of Income (000 omitted)
Unaudited Unaudited ------------------------------------------------------------------- For the Nine Months For the Quarter Ended September 30, Ended September 30, 1997 1996 1997 1996 --------------- --------------- -------------- ------------- Interest Income Interest and fees on loans $ 6,544 $ 5,974 $ 2,211 $ 2,157 Interest on investment securities Taxable 98 145 31 51 Exempt from federal income taxes 513 431 178 152 Interest on securities available for sale Taxable 1,788 1,313 698 441 Exempt from federal income taxes 5 - - - Dividends 220 198 80 66 Interest on federal funds sold 124 96 27 10 --------------- --------------- -------------- ------------- Total interest income $ 9,292 $ 8,157 $ 3,225 $ 2,877 Interest expense Interest on deposits $ 3,646 $ 3,319 $ 1,272 $ 1,110 Interest on FHLB advances 132 131 37 56 Interest on short-term borrowings 89 - 34 - --------------- --------------- -------------- ------------- Total interest expense $ 3,867 $ 3,450 $ 1,343 $ 1,166 Net interest income $ 5,425 $ 4,707 $ 1,882 $ 1,711 Provision for loan losses 178 - 62 - --------------- --------------- -------------- ------------- Net interest income after provision for loan losses $ 5,247 $ 4,707 $ 1,820 $ 1,711 Other Income Commissions and fees from fiduciary activities $ 172 $ 14 $ 130 $ 5 Service charges on deposit accounts 762 549 280 174 Net gains (losses) on securities available for sale (29) 14 (22) - Other operating income 9 9 9 4 --------------- --------------- -------------- ------------- Total other income $ 914 $ 586 $ 397 $ 183 Other Expense Advertising $ 106 $ 117 $ 22 $ 32 Salaries and employee benefits 2,023 1,769 760 587 Net occupancy expense of premises 407 377 137 105 Other operating expenses 1,013 878 326 275 --------------- --------------- -------------- ------------- Total other expense $ 3,549 $ 3,141 $ 1,245 $ 999 Income before income taxes $ 2,612 $ 2,152 $ 972 $ 895 Income taxes 706 617 260 276 --------------- --------------- -------------- ------------- Net income $ 1,906 $ 1,535 $ 712 $ 619 =============== =============== ============== ============= Earnings per average share: (1997 - 882,994 average shares 1996 - 859,838 average shares) Net income per share $ 2.22 $ 1.78 $ 0.85 $ 0.72 Dividends per share $ 0.44 $ 0.62 $ 0.23 $ 0.22
See Accompanying Notes to Consolidated Financial Statements 4 Independent Community Bankshares, Inc. Consolidated Statement of Changes in Shareholders' Equity For the Nine Months Ended September 30, 1997 and 1996 (000 omitted) (unaudited)
Unrealized Gain (Loss) on Securities Common Capital Retained Available for Stock Surplus Earnings Sale, Net Total ---------- --------- --------- ------------- -------- Balances: January 1, 1996 $ 4,299 $ 1,411 $ 11,508 $ (265) $ 16,953 Net income 1,534 1,534 Cash dividends (520) (520) Change in net unrealized (losses) on securities available for sale (479) (479) -------- -------- -------- -------- -------- Balances: September 30, 1996 $ 4,299 $ 1,411 $ 12,522 $ (744) $ 17,488 ======== ======== ======== ======== ======== Balances: January 1, 1997 $ 4,299 $ 1,411 $ 12,817 $ (519) $ 18,008 Net income 1,906 1,906 Cash dividends (367) (367) Acquisition of common stock (114) (522) (636) Issuance of common stock 346 1,590 1,936 Change in net unrealized (losses) on securities available for sale 275 275 -------- -------- -------- -------- -------- Balances: September 30, 1997 $ 4,531 $ 2,479 $ 14,356 $ (244) $ 21,122 ======== ======== ======== ======== ========
See Accompanying Notes to Consolidated Financial Statements 5 Independent Community Bankshares, Inc. Consolidated Statement of Cash Flows (000 omitted) (unaudited)
For The Nine Months Ended ---------------------------- September 30, September 30, 1997 1996 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 1,906 $ 1,535 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 134 24 Depreciation and amortization 299 220 Net (gains) losses on securities available for sale 29 (14) Discount accretion and premium amortization on securities, net 152 116 Net (gains) losses on sale of assets 15 - Deferred taxes - 12 (Increase) decrease in accrued interest receivable (111) 9 Decrease in prepaid income taxes 78 - (Increase) decrease in other assets (1,298) 21 Increase in accrued interest payable 68 45 Increase (decrease) in other liabilities (135) (121) -------- -------- Net cash provided by operating activities $ 1,137 $ 1,847 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from maturity, principal paydowns and calls of investment securities $ 1,387 $ 1,805 Proceeds from maturity, principal paydowns and calls of securities available for sale 3,381 1,617 Proceeds from sale of securities available for sale 15,313 10,914 Proceeds from sale of assets 37 - Purchase of investment securities (1,889) (2,082) Purchase of securities available for sale (30,977) (15,409) Net (increase) in loans (2,590) (11,197) Purchases of bank premises and equipment (1,148) (1,067) -------- -------- Net cash (used in) investing activities $(16,486) $(15,419) CASH FLOWS FROM FINANCING ACTIVTIES Net increase in demand deposits, NOW accounts, and savings accounts $ 2,969 $ 7,649 Net increase in certificates of deposits 7,411 4,311 Dividends paid (367) (520) Acquisition of common stock (636) - Issuance of common stock for acquisition 1,936 6 Payment on Federal Home Loan Bank advances (2,000) (1,000) New borrowings on Federal Home Loan Bank line of credit 1,900 2,000 Increase in securities sold under agreement to repurchase 1,598 - -------- -------- Net cash provided by financing activities $ 12,811 $ 12,440 Increase in cash and cash equivalents $ (2,538) $ (1,132) CASH AND CASH EQUIVALENTS Beginning $ 9,919 $ 8,386 ======== ======== Ending $ 7,381 $ 7,254 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest paid to depositors 3,577 3,274 Income taxes 684 592 SUPPLEMENTAL DISCLOSURES FOR NON-CASH INVESTING AND FINANCING ACTIVITIES Unrealized gain (loss) on securities available for sale (416) 581
See Accompanying Note to Consolidated Financial Statements 7 INDEPENDENT COMMUNITY BANKSHARES, INC. Notes to Consolidated Financial Statements (Unaudited) For the Nine Months Ended September 30, 1997 and 1996 Note 1. In the opinion of management, the accompanying unaudited financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of September 30, 1997, and the results of operations and changes in cash flows for the nine months ended September 30, 1997 and 1996. The statements should be read in conjunction with the Notes to Consolidated Financial Statements included in the Company's Annual Report for the year ended December 31, 1996. The results of operations for the nine month periods ended September 30, 1997 and 1996, are not necessarily indicative of the results to be expected for the full year. Note 2. Securities Securities being held to maturity as of September 30, 1997 are summarized as follows: (000 omitted) Gross Gross Amortized Unrealized Unrealized Fair Cost Gains (Losses) Value --------- ---------- ---------- -------- U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 3,827 $ 6 $ (32) $ 3,801 Obligations of states and political subdivisions 14,005 227 (21) 14,211 -------- -------- -------- -------- $ 17,832 $ 233 $ (53) $ 18,012 ======== ======== ======== ======== Securities available for sale as of September 30, 1997 are summarized below: 8 (000 omitted) Gross Gross Amortized Unrealized Unrealized Fair Cost Gains (Losses) Value --------- ---------- ---------- -------- U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 1,657 $ 8 $ (6) $ 1,659 Corporate securities 2,512 19 (56) 2,475 Obligations of states and political subdivisions 5,068 - (40) 5,028 Mortgaged backed securities 38,022 86 (388) 37,720 Other 708 - - 708 -------- -------- -------- -------- $ 47,967 113 $ (490) $ 47,590 ======== ======== ======== ======== Note 3. The consolidated loan portfolio is composed of the following:
September 30, December 31, 1997 1996 --------------------- -------------------- (000 omitted) Commercial, financial and agricultural $ 12,935 $ 11,648 Real estate construction 3,475 4,182 Real estate mortgage 73,033 70,739 Installment loans to individuals 7,761 8,061 --------------------- -------------------- Total loans 97,204 94,630 Less: Unearned income (19) (35) Allowance for loan losses (1,018) (884) --------------------- -------------------- Loans, net $ 96,167 $ 93,711 ===================== ====================
Note 4. The following is a summary of transactions in the reserve for loan losses: September 30, December 31, 1997 1996 ------------- ------------ (000 omitted) Balance at January 1 $ 884 $ 866 Provision charged to operating expense 178 65 Recoveries added to the reserve 32 78 Loan losses charged to the reserve (76) (125) ------- ------- Balance at the end of the period $ 1,018 884 ======= ======= The Company had no impaired loans at September 30, 1997 and December 31, 1996. 9 Nonaccrual loans excluded from impaired loan disclosure under FASB 114 amounted to $262,189 at September 30, 1997 and $ 76,227 at December 31, 1996. If interest on these loans had been accrued, such income would have approximated $ 9,216 for the first nine months of 1997 and $1,993 in 1996. Note 5. New Accounting Pronouncements FASB Statement No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities", was issued in June 1996 and establishes, among other things, new criteria for determining whether a transfer of financial assets in exchange for cash or other consideration should be accounted for as a sale or as a pledge of collateral in a secured borrowing. Statement 125 also establishes new accounting requirements for pledged collateral. As issued, Statement 125 is effective for all transfers and servicing of financial assets and extinguishments of liabilities occurring after December 1996. FASB Statement No. 127, "Deferral of the Effective Date of Certain Provisions of FASB Statement No. 125", defers for one year the effective date (a) of paragraph 15 of Statement 125 and (b) for repurchase agreement, dollar-roll, securities lending, or similar transactions, of paragraph 9-12 and 237(b) of Statement 125. FASB Statement No. 128, "Earnings per Share", was issued in February 1997 and establishes standards for computing and presenting earnings per share (EPS) and applies to entities with publicly held common stock or potential common stock. This Statement simplifies the standards for computing earnings per share previously found in APB Opinion No. 15, "Earnings Per Share", and makes them comparable to international EPS standards. It replaces the presentation of primary EPS with a presentation of basic EPS. It also requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. This Statement is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. FASB Statement No. 129, "Disclosure of Information About Capital Structure", was issued in February 1997 and establishes standards for disclosing information about an entity's capital structure. It applies to all entities. This Statement continues the previous requirements to disclose certain information about an entity's capital structure found in APB Opinion No. 10, "Omnibus Opinion - 1966, and No. 15, Earnings per Share", and FASB Statement No. 47, "Disclosure of Long-Term Obligations", for entities that were subject to the requirements of those standards. This Statement is effective for financial statements for periods ending after December 15, 1997. FASB Statement No. 130, "Reporting Comprehensive Income", was issued in June 1997 and establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. This Statement requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. This Statement requires that an enterprise (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. This Statement is effective for fiscal years beginning after December 15, 1997. The effects of these Statements on the Company's financial statements are not expected to be material. 10 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financial Summary Net income for the nine months ended September 30, 1997, increased 24.2% to $1,906,000 or $2.22 per share compared to $1,535,000 or $1.78 per share for the first nine months of 1996. Annualized returns on average assets and equity for the period ended September 30, 1997, were 1.47% and 13.52%, respectively, compared to 1.39% and 11.89% for the same period in 1996. The total assets of the Company increased to $177,893,000 at September 30, 1997, compared to $162,966,000 at December 31, 1996, representing an increase of $14,927,000 or 9.2%. Loan demand has been sluggish with $96,167,000 at September 30. 1997, up slightly from $93,711,000 at December 31, 1996. The investment portfolio has grown 24.8% to $65,422,000 at September 30, 1997 compared to $52,402,000 at December 31, 1996. Shareholders' equity at September 30, 1997, totaled $21,123,000, compared to $18,008,000 at December 31, 1996. Book value per share of common stock on September 30, 1997 was $23.21 per share compared to $20.94 at December 31, 1996. On August 1, 1997 the Company finalized its acquisition of The Tredegar Trust Company (TTTC). TTTC became a wholly owned subsidiary of Independent Community Bankshares, Inc. and was accounted for under the purchase method. TTTC is an independent trust company located in Richmond, Virginia. TTTC had $2.1 million in assets at September 30, 1997 of which $1.2 million was goodwill associated with the transaction. Net Interest Income Net interest income is the Company's primary source of earnings and represents the difference between interest and fees earned on earning assets and the interest expense paid on deposits and other interest bearing liabilities. Net interest income totaled $5,425,000 for the first nine months of 1997 compared to $4,707,000 for the same period in 1996. The improvement in net interest income was attributable to a higher volume of earning assets as well as management's conscientious effort to improve the margin through asset/liability management. Noninterest Income Service charges on deposit accounts for the first nine months of 1997 totaled $762,000 compared $549,000 for the same period in 1996, an increase of 38.8%. Commission and fees from fiduciary activities was $172,000 at September 30, 1997 compared to $14,000 at September 30, 1996. The acquisition of The Tredegar Trust Company on August 1, 1997 has solely contributed to this increase. Otherwise the Company currently derives most of its other noninterest income from fees on deposit related products. Noninterest Expense In support of the Company's continued growth, total noninterest expenses consisting of employee related costs, occupancy and other overhead totaled $3,549,000 for the first nine months of 1997, compared to $3,141,000 for the same period in 1996, representing an increase of $406,000 or 12.1%. The increase in expenses are attributable to the acquisition of The Tredegar Trust Company as well as the opening of a new branch building in Leesburg, Virginia opened in April 1997. 11 Allowance for Loan Losses The allowance for loan losses at September 30, 1997 was $1,018,000. This is a $134,000 increase from December 31, 1996. The current ratio of the allowance for loan losses to gross loans is 1.05%. The provision taken during the first nine months of 1997 has been an attempt to keep the growth of the allowance in accordance with loan growth. Management believes the allowance for loan losses is adequate to cover credit losses inherent in the loan portfolio at September 30, 1997. Loans classified as loss, doubtful, substandard or special mention are adequately reserved for and are not expected to have a material impact beyond what has been reserved. Capital Resources Shareholders' equity at September 30, 1997 was $21,123,000 compared to $18,008,000 on December 31, 1996. Factors contributing to the change in shareholders' equity include the acquisition of The Tredegar Trust Company on August 1, 1997 which resulted in issuance of 69,148 shares on common stock for a total increase in capital of $1,936,144. The retention of net income as well as the decrease in allowance for unrealized loss on securities available for sale have also been contributing factors to growth in shareholders' equity. During the first quarter, the Company did purchase and retire 22,689 shares at a cost of $635,292. At September 30, 1997, the Company's tier 1 and total risk-based capital ratios were 20.5% and 21.5%, respectively, compared to 19.3% and 20.2% at December 31, 1996. The Company's leverage ratio was 12.4% at September 30, 1997, compared to a ratio of 11.7% at December 31, 1996. The Company's capital structure places it above the regulatory guidelines, as the Company maintains a strong capital base to take advantage of business opportunities while ensuring that it has the resources to protect against the risks inherent in its business. 12 Part II. Other information Item 1. Legal proceedings None Item 2. Change in securities. None Item 3. Defaults upon senior securities None Item 4. Submission of matters to a vote of security holders. None Item 5. Other Information. None Item 6. Exhibits and Reports on Form 8-K None 13 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. Independent Community Bankshares, Inc. ----------------------------------------- (Registrant) Date: 11/14/97 /s/ Joseph L. Boling ---------------- ----------------------------------------- Joseph L. Boling, Chairman of the Board & CEO Date: 11/14/97 /s/ Alice P. Frazier ---------------- ----------------------------------------- Alice P. Frazier, Senior Vice President & CFO 14 EX-27 2
9 1,000 9-MOS DEC-31-1997 SEP-30-1997 5,681 0 1,700 0 47,590 17,832 18,012 97,204 1,018 177,893 149,170 6,943 657 0 0 0 4,531 16,592 177,893 6,544 2,748 0 9,292 3,646 3,867 5,425 178 (29) 3,549 2,612 0 0 0 1,906 2.22 2.22 4.85 262 0 0 384 884 (76) 32 1,018 564 0 454
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