-----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, GbY68mLnK+fUZl6G3VKoRCs0c67N4nlht0XXI02v+wpVEYK5omUYS4EW7H86y6Ja ol2Cn5WSh2Dyrw67eWi9qw== 0001002105-01-500019.txt : 20010516 0001002105-01-500019.hdr.sgml : 20010516 ACCESSION NUMBER: 0001002105-01-500019 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 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: 10QSB SEC ACT: SEC FILE NUMBER: 000-24159 FILM NUMBER: 1639365 BUSINESS ADDRESS: STREET 1: 111 W WASHINGTON ST 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 10QSB 1 er437.txt FORM 10-QSB 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 March 31, 2001 [ ] Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ____________ to _____________ Commission file number: 0-24159 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 20117 (Address of Principal Executive Offices) (703) 777-6327 (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: 1,739,247 shares of common stock, par value $5.00 per share, outstanding as of May 11, 2001 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 Shareholders' Equity 5 Consolidated Statements of Cash Flows 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Results of Operation and Financial Condition 10 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 Signatures 14
2 PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS INDEPENDENT COMMUNITY BANKSHARES, INC. Consolidated Balance Sheets (In Thousands)
(Unaudited) March 31, December 31, 2001 2000 ------------ ------------ Assets: Cash and due from banks $ 10,795 $ 7,352 Interest-bearing balances in banks 101 79 Temporary investments: Federal funds sold 4,350 8,600 Other money market investments 1,804 1,116 Securities (fair value: March 31, 2001, $81,479 , December 31, 2000, $ 81,718 81,262 81,577 Loans held for sale 8,530 2,131 Loans, net 177,631 175,794 Bank premises and equipment, net 6,542 6,349 Other assets 6,802 6,463 ------------ ------------ Total assets $ 297,817 $ 289,461 ============ ============ Liabilities and Shareholders' Equity Liabilities: Deposits: Non-interest bearing demand deposits $ 60,338 $ 56,980 Savings and interest-bearing demand deposits 98,126 96,275 Time deposits 74,185 71,385 ------------ ------------ Total deposits $ 232,649 $ 224,640 Securities sold under agreements to repurchase $ 12,957 $ 14,321 Long-term debt 21,000 21,300 Other liabilities 2,561 1,929 ------------ ------------ Total liabilities $ 269,167 $ 262,190 ------------ ------------ Shareholders' Equity: Common stock par value $5.00 per share, authorized 10,000,000 shares; issued and outstanding at March 31, 2001 - 1,739,247 issued and outstanding at December 31, 2000 - 1,739,247 $ 8,696 $ 8,696 Capital surplus 556 556 Retained earnings 18,473 17,616 Accumulated other comprehensive income 925 403 ------------ ------------ Total shareholders' equity $ 28,650 $ 27,271 ------------ ------------ Total liabilities and shareholders' equity $ 297,817 $ 289,461 ============ ============
See Accompanying Notes to Consolidated Financial Statements. 3 INDEPENDENT COMMUNITY BANKSHARES, INC. Consolidated Statements of Income (In Thousands, Except Per Share Data)
Unaudited -------------------------------- For the Three Months Ended March 31, 2001 2000 -------------------------------- Interest Income Interest and fees on loans $ 3,976 $ 3,148 Interest on investment securities Taxable 6 6 Exempt from federal income taxes 80 93 Interest on securities available for sale Taxable 688 488 Exempt from federal income taxes 381 367 Dividends 71 73 Interest on federal funds sold and other 47 151 ------------ ------------ Total interest income $ 5,249 $ 4,326 Interest expense Interest on deposits $ 1,521 $ 1,234 Interest on long-term debt 244 70 Interest on short-term borrowings 364 130 ------------ ------------ Total interest expense $ 2,129 $ 1,434 Net interest income $ 3,120 $ 2,892 Provision for loan losses 75 75 ------------ ------------ Net interest income after provision for loan losses $ 3,045 $ 2,817 Other Income Trust fee income $ 358 $ 366 Service charges on deposit accounts 312 321 Net gains on securities available for sale 252 - Fees on loans held for resale 299 142 Other operating income 199 25 ------------ ------------ Total other income $ 1,420 $ 854 Other Expense Advertising $ 69 $ 73 Salaries and employee benefits 1,740 1,314 Net occupancy expense of premises 273 285 Other operating expenses 659 530 ------------ ------------ Total other expense $ 2,741 $ 2,202 ------------ ------------ Income before income taxes $ 1,724 $ 1,469 Income taxes 432 381 ------------ ------------ Net income $ 1,292 $ 1,088 ============ ============ Earnings per weighted average share: (2001 - 1,739,247, 2000 - 1,777,972) Net income per share, basic $ 0.74 $ 0.61 Net income per share, diluted $ 0.73 $ 0.61 Dividends per share $ 0.25 $ 0.21
See Accompanying Notes to Consolidated Financial Statements. 4 INDEPENDENT COMMUNITY BANKSHARES, INC. Consolidated Statement of Changes in Shareholders' Equity For the Three Months ended March 31, 2001 and 2000 (In Thousands) (Unaudited)
Accumulated Other Common Capital Comprehensive Retained Comprehensive Stock Surplus Income (Loss) Earnings Income Total --------- --------- ------------- ---------- ------------- --------- Balances - December 31, 1999 $ 8,895 $ 1,293 $ (1,965) $ 14,852 $ - $ 23,075 Comprehensive Income Net income 1,088 1,088 1,088 Other comprehensive income net of tax: Unrealized gain on available for sale securities (net of tax $52) 101 ------------- Other comprehensive income (net of tax $52) 101 101 101 ------------- Total comprehensive income $ 1,189 ============= Cash dividends declared (373) (373) Purchase of common stock (57,785 shares) (289) (1,038) (1,327) --------- --------- ------------- ---------- --------- Balances - March 31, 2000 $ 8,606 $ 255 $ (1,864) $ 15,567 $ 22,564 ========= ========= ============= ========== ========= Balances - December 31, 2000 $ 8,696 $ 556 $ 403 $ 17,616 $ - $ 27,271 Comprehensive Income Net income 1,292 1,292 1,292 Other comprehensive income net of tax: Unrealized gain on available for sale securities (net of tax $356) 688 Reclassification adjustment for gains realized in net income (net of tax $86) (166) ------------- Other comprehensive income (net of tax $270) 522 522 522 ------------- Total comprehensive income $ 1,814 ============= Cash dividends declared (435) (435) --------- --------- ------------- ---------- --------- Balances - March 31, 2001 $ 8,696 $ 556 $ 925 $ 18,473 $ 28,650 ========= ========= ============= ========== =========
See Accompanying Notes to Consolidated Financial Statements. 5 INDEPENDENT COMMUNITY BANKSHARES, INC. Consolidated Statements of Cash Flows (In Thousands)
Unaudited --------------------------------- For the Three Months Ended March 31, 2001 2000 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 1,292 $ 1,088 Adjustments to reconcile net income to net cash provided by operating activities Provision for loan losses 75 75 Depreciation and amortization 183 178 Net (gains) losses on securities available for sale (252) - Discount accretion and premium amortization on securities, net (30) - Originations of loans held for sale (16,343) (7,794) Proceeds from sales of loans held for sale 9,944 7,667 (Increase) in other assets (1,360) (1,365) Increase in other liabilities 293 1,682 ------------ ------------ Net cash provided by (used in) operating activities $ (6,198) $ 1,531 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from maturity, principal paydowns and calls on investment securities $ 687 $ 14 Proceeds from maturity, principal paydowns and calls of securities available for sale 2,297 838 Proceeds from sale of securities available for sale 12,654 490 Proceeds from sale of bank premises and equipment 16 - Purchase of securities available for sale (14,249) (15,137) Net (increase) in loans (912) (4,387) Purchases of bank premises and equipment (372) (114) ------------ ------------ Net cash provided by (used in) investing activities $ 121 $ (18,296) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Net increase in demand deposits, NOW accounts, and savings accounts $ 5,209 $ 5,792 Net (decrease) increase in certificates of deposits 2,800 (4,851) Proceeds from Federal Home Loan Bank advances 15,600 9,000 Payment on Federal Home Loan Bank advances (15,600) (2,000) Payments on long-term debt (300) - Cash dividends paid (365) (373) Acquisition of common stock - (1,327) (Decrease) in securities sold under agreement to repurchase (1,364) (72) ------------ ------------ Net cash provided by financing activities $ 5,980 $ 6,169 ------------ ------------ Increase in cash and cash equivalents $ (97) $ (10,596) CASH AND CASH EQUIVALENTS Beginning $ 17,147 $ 20,556 ============ ============ Ending $ 17,050 $ 9,960 ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest paid to depositors 1,652 1,381 Income taxes 85 2 SUPPLEMENTAL DISCLOSURES FOR NON-CASH INVESTING AND FINANCING ACTIVITIES Unrealized gain (loss) on securities available for sale 792 153
See Accompanying Notes to Consolidated Financial Statements. 6 INDEPENDENT COMMUNITY BANKSHARES, INC. Notes to Consolidated Financial Statements For the Three Months Ended March 31, 2001 and 2000 (Unaudited) 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 March 31, 2001 and the results of operations and changes in cash flows for the three months ended March 31, 2001 and 2000. The statements should be read in conjunction with the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2000. The results of operations for the three month periods ended March 31, 2001 and 2000 are not necessarily indicative of the results to be expected for the full year. Note 2. Securities Securities being held to maturity as of March 31, 2001 are summarized as follows:
--------------------------------------------------- Gross Gross Amortized Unrealized Unrealized Market Cost Gains (Losses) Value --------------------------------------------------- (In Thousands) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 250 $ - $ (1) $ 249 Obligations of states and political subdivisions 5,971 218 - 6,189 Mortgaged backed securities 91 - - 91 ---------- ---------- ---------- ---------- $ 6,312 $ 218 $ (1) $ 6,529 ========== ========== ========== ==========
Securities available for sale as of March 31, 2001 are summarized below:
--------------------------------------------------- Gross Gross Amortized Unrealized Unrealized Market Cost Gains (Losses) Value --------------------------------------------------- (In Thousands) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 2,134 $ 43 $ (10) $ 2,167 Corporate securities 2,246 38 (77) 2,207 Obligations of states and political subdivisions 33,965 834 (141) 34,658 Mortgaged backed securities 26,272 549 (26) 26,795 Other 8,933 190 - 9,123 ---------- ---------- ---------- ---------- $ 73,550 $ 1,654 $ (254) $ 74,950 ========== ========== ========== ==========
7 Note 3. The consolidated loan portfolio is composed of the following: --------------------------- March 31, December 31, 2001 2000 --------------------------- (In Thousands) Commercial, financial and agricultural $ 20,968 $ 22,555 Real estate construction 20,352 17,693 Real estate mortgage 127,702 126,676 Installment loans to individuals 10,475 10,674 ------------ ------------ Total loans 179,497 177,598 Less: Allowance for loan losses 1,866 1,804 ------------ ------------ Loans, net $ 177,631 $ 175,794 ============ ============ The Company had $89,925 in non-performing assets at March 31, 2001. Note 4. Reserve for Loan Losses The following is a summary of transactions in the reserve for loan losses: --------------------------- March 31, December 31, 2001 2000 --------------------------- (In Thousands) Balance at January 1 $ 1,804 $ 1,453 Provision charged to operating expense 75 400 Recoveries added to the reserve 7 47 Loan losses charged to the reserve (20) (96) ------------ ------------ Balance at the end of the period $ 1,866 $ 1,804 ============ ============ 8 Note 5. Earnings Per Share The following table shows the weighted average number of shares used in computing earnings per share and the effect on the weighted average number of shares of potential dilutive common stock. Potential dilutive common stock has no effect on income available to common shareholders. The anti-dilutive effects of options covering 1,000 and 31,000 shares of common stock were not included in the calculation for March 31, 2001 and March 31, 2000, respectively.
March 31, 2001 March 31, 2000 Per share Per share Shares Amount Shares Amount ----------- ----------- ----------- ----------- Basic EPS 1,739,247 $ 0.74 1,777,972 $ 0.61 =========== =========== Effect of dilutive securities: stock options 28,744 15,048 ----------- ----------- Diluted EPS 1,767,991 $ 0.73 1,793,020 $ 0.61 =========== =========== =========== ===========
Note 6. Derivative Financial Instruments Interest rate swap agreements: During May 2000, the Company entered into two agreements to assume variable market-indexed interest payments in exchange for fixed-rate interest payments (interest rate swaps). The notional principal amount of interest rate swaps outstanding was $8,525,000 at March 31, 2001. The original term to maturity was 24 months. The weighted-average fixed payment rate was 7.0% at March 31, 2001. Variable interest payments received are based on three-month LIBOR. At March 31, 2001, the weighted average rate of variable market-indexed interest payment obligations to the Company was 5.39%. The effect of these agreements was to transform fixed rate liabilities to variable rate liabilities. The net income from these agreements was $21,361 for the three month period ended March 31, 2001, which is charged to income as it accrues. The Company's current credit exposure on swaps is limited to the value of interest rate swaps that have become assets to the Company. At March 31, 2001, the fair value of interest rate swaps in an asset position was $272,575. 9 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financial Summary Net income for the three months ended March 31, 2001 increased 18.8% to $1.3 million or $.73 per diluted share compared to $1.1 million or $.61 per diluted share for the first three months of 2000. Annualized returns on average assets and equity for the three months ended March 31, 2001 were 1.7% and 17.1%, respectively, compared to 1.8% and 19.0% for the same period in 2000. Total assets for Independent Community Bankshares, Inc. (the "Company") increased to $297.8 million at March 31, 2001 compared to $289.5 million at December 31, 2000, representing an increase of $8.4 million or 2.9%. Total loans at March 31, 2001 were $177.6 million, an increase of $1.8 million from the December 31, 2000 balance of $175.8 million. The driving forces behind the loan growth include a good local economy as well as customers' desire to seek a local financial institution that has the ability to make decisions locally regarding credit. The declining interest rate environment provided a strong market for mortgage refinancings and, as a result, loans held for sale increased $6.4 million to $8.5 million at March 31, 2001. The investment portfolio decreased 0.4% to $81.3 million at March 31, 2001 compared to $81.6 million at December 31, 2000. Deposits increased $8.0 million to $232.6 million at March 31, 2001 from $224.6 million at December 31, 2000. Growth in the transactional accounts and time deposits account for $3.4 million and $2.8 million, respectively, of the increase during the first three months of 2001. Securities sold under agreements to repurchase with commercial checking accounts decreased $1.3 million from $14.3 million at December 31, 2000 to $13.0 million at March 31, 2001. Branch expansion and increased advertising have promoted awareness of the Company and resulted in additional business. Shareholders' equity was $28.7 million at March 31, 2001. This amount represents an increase of 5.1% from the December 31, 2000 balance of $27.3 million. The book value per common share was $16.47 at March 31, 2001 and $15.68 at December 31, 2000. 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 $3.1 million for the first three months of 2001 compared to $2.9 million for the same period in 2000. The increase is largely due to growth in the average earning assets. Noninterest Income Noninterest income consisting of fees from deposit accounts, fiduciary activities and mortgage banking increased 66.3% to $1.4 million for the first three months of 2001 compared to $854,000 for the same period in 2000. Service charges on deposit accounts for the first three months of 2001 totaled $312,000 compared to $321,000 for the same period in 2000, a decrease of 2.8%. The Company realized $252,000 in net gains on the investment portfolio for the three months ended March 31, 2001. Commissions and fees from fiduciary activities were $358,000 for the three month period ended March 31, 2001 compared to $366,000 for the same period in 2000. Fees on loans held for sale increased $157,000 or 110.6% to $299,000 at March 31, 2001 from the March 31, 2000 balance of $142,000. Other operating income increased $174,000 to $199,000 for the three months ended March 31, 2001 compared to $25,000 for the same period in 2000. The increase in other operating income is mostly attributed to commissions earned on sales of non-deposit investments. 10 Noninterest Expense Total noninterest expense includes employee-related costs, occupancy and equipment expense and other overhead. Total noninterest expense was $2.7 million for the first three months of 2001 compared to $2.2 million for the same period in 2000. This is a 24.5% increase from the three months ended March 31, 2000 to the three months ended March 31, 2001. Salary and benefit expense increased 32.4% from $1.3 million for the three months ended March 31, 2000 to $1.7 million for the three months ended March 31, 2001. Continued growth throughout the organization and in the investment sales department drives the increase in salary and employee benefit expenses. Net occupancy expense of premises decreased 4.2% from $285,000 for the three months ended March 31, 2000 to $273,000 for the three months ended March 31, 2001. Allowance for Loan Losses The allowance for loan losses at March 31, 2001 was $1.9 million compared to $1.5 million at March 31, 2000. The provision for loan losses for the first three months of 2001 was $75,000, unchanged compared to the same period of 2000. The allowance for loan losses was 1.04% of total loans outstanding at March 31, 2001. Net charge-offs as a percentage of loans was .01% for the three months ended March 31, 2001, and loans that were past due 90 days or more totaled $4,300 at March 31, 2001. Non-performing loans decreased to .05% of total loans outstanding at March 31, 2001 compared to .27% at March 31, 2000. Management believes the allowance for loan losses is adequate to cover credit losses inherent in the loan portfolio at March 31, 2001. 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 March 31, 2001 and March 31, 2000 was $28.7 million and $27.3 million, respectively. During the first quarter of 2000, the Company completed two privately negotiated stock repurchases totaling 57,785 shares of common stock at a weighted average price of $22.46 per share. The stock repurchase was 3.3% of the total stock outstanding prior to the transaction. During the third quarter of 2000 the Company issued 16,038 shares of common stock, a value of $358,000 to the original shareholders of The Tredegar Trust Company ("Tredegar") under the contingent merger consideration agreement within the terms of the acquisition of Tredegar in 1997. Total common shares outstanding at March 31, 2001 were 1,739,247. At March 31, 2001 the Company's tier 1 and total risk-based capital ratios were 12.6% and 13.5%, respectively, compared to 12.7% and 13.6% at December 31, 2000. The Company's leverage ratio was 9.1% at March 31, 2001 compared to 9.7% at December 31, 2000. The Company's capital structure places it above the regulatory guidelines, which affords the Company the opportunity to take advantage of business opportunities while ensuring that it has the resources to protect against risk inherent in its business. Forward-Looking Statements Certain information contained in this discussion may include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are generally identified by phrases such as "the Company expects," "the Company believes" or words of similar import. Such forward-looking statements involve known and unknown risks including, but not limited to, changes in general economic and business conditions, interest rate fluctuations, competition within and from outside 11 the banking industry, new products and services in the banking industry, risk inherent in making loans such as repayment risks and fluctuating collateral values, problems with technology utilized by the Company, changing trends in customer profiles and changes in laws and regulations applicable to the Company. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. 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. a) Exhibits - None b) Reports on Form 8-K - None 13 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INDEPENDENT COMMUNITY BANKSHARES, INC. (Registrant) Date: May 15, 2001 /s/ Joseph L. Boling -------------------------------------- Joseph L. Boling Chairman of the Board & CEO Date: May 15, 2001 /s/ Alice P. Frazier -------------------------------------- Alice P. Frazier Senior Vice President & CFO 14 -----END PRIVACY-ENHANCED MESSAGE-----