-----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, NQItq+ybMK04sOsl/b/ktkWlfGLI1iYIwbpcLtPgJqBjU9aJbuFLR12/7OyGnF1D nIuKguhIIR2UJEQv9BFYgQ== 0001002105-01-500093.txt : 20020410 0001002105-01-500093.hdr.sgml : 20020410 ACCESSION NUMBER: 0001002105-01-500093 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 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: 1934 Act SEC FILE NUMBER: 000-24159 FILM NUMBER: 1790953 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 er503.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 September 30, 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: 1,752,258 shares of common stock, par value $5.00 per share, outstanding as of October 31, 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 Operations and Financial Condition 11 Part II. Other Information Item 1. Legal Proceedings 14 Item 2. Change in Securities 14 Item 3. Defaults upon Senior Securities 14 Item 4. Submission of Matters to a Vote of Security Holders 14 Item 5. Other Information 14 Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15
2 PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS INDEPENDENT COMMUNITY BANKSHARES, INC. Consolidated Balance Sheets (In Thousands, Except Share Data)
Unaudited) September 30, December 31, 2001 2000 ------------- ------------- Assets: Cash and due from banks $ 10,565 $ 7,352 Interest-bearing balances in banks 184 79 Temporary investments: Federal funds sold 2,675 8,600 Other money market investments 722 1,116 Securities (fair value: September 30, 2001, $98,192, December 31, 2000, $81,718) 97,944 81,577 Loans held for sale 10,810 2,131 Loans, net 193,028 175,794 Bank premises and equipment, net 7,361 6,349 Other assets 8,725 6,463 ------------- ------------- Total assets $ 332,014 $ 289,461 ============= ============= Liabilities and Shareholders' Equity Liabilities: Deposits: Non-interest bearing demand deposits $ 65,816 $ 56,980 Savings and interest-bearing demand deposits 106,945 96,275 Time deposits 85,179 71,385 ------------- ------------- Total deposits $ 257,940 $ 224,640 Securities sold under agreements to repurchase $ 13,764 $ 14,321 Long-term debt 25,870 21,300 Other liabilities 3,683 1,929 ------------- ------------- Total liabilities $ 301,257 $ 262,190 ------------- ------------- Shareholders' Equity: Common stock par value $5.00 per share, authorized 10,000,000 shares; issued and outstanding at September 30, 2001 - 1,752,258 issued and outstanding at December 31, 2000 - 1,739,247 $ 8,761 $ 8,696 Capital surplus 741 556 Retained earnings 20,185 17,616 Accumulated other comprehensive income 1,070 403 ------------- ------------- Total shareholders' equity $ 30,757 $ 27,271 ------------- ------------- Total liabilities and shareholders' equity $ 332,014 $ 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 Unaudited ----------------------------------------------------- For the Nine Months For the Quarter Ended September 30, Ended September 30, 2001 2000 2001 2000 ---------- ---------- ---------- ---------- Interest Income Interest and fees on loans $ 12,197 $ 10,192 $ 4,149 $ 3,640 Interest on investment securities Taxable 17 18 5 6 Exempt from federal income taxes 226 269 72 87 Interest on securities available for sale Taxable 2,157 2,294 784 816 Exempt from federal income taxes 1,199 852 407 289 Dividends 208 165 65 25 Interest on federal funds sold and other 169 142 37 33 ---------- ---------- ---------- ---------- Total interest income $ 16,173 $ 13,932 $ 5,519 $ 4,896 Interest Expense Interest on deposits $ 4,519 $ 3,838 $ 1,479 $ 1,368 Interest on long-term debt 759 671 294 318 Interest on short-term borrowings 798 464 192 180 ---------- ---------- ---------- ---------- Total interest expense $ 6,076 $ 4,973 $ 1,965 $ 1,866 Net interest income $ 10,097 $ 8,959 $ 3,554 $ 3,030 Provision for loan losses 225 325 75 125 ---------- ---------- ---------- ---------- Net interest income after provision for loan losses $ 9,872 $ 8,634 $ 3,479 $ 2,905 Other Income Trust fee income $ 976 $ 1,172 $ 319 $ 417 Service charges on deposit accounts 1,063 886 352 274 Net gains (losses) on securities available for sale 312 (1) 66 - Fees on loans held for resale 1,028 475 454 155 Other operating income 451 137 129 72 ---------- ---------- ---------- ---------- Total other income $ 3,830 $ 2,669 $ 1,320 $ 918 Other Expense Advertising $ 224 $ 247 $ 54 $ 25 Salaries and employee benefits 5,189 4,083 1,761 1,477 Net occupancy expense of premises 872 874 291 273 Other operating expenses 2,215 1,842 823 687 ---------- ---------- ---------- ---------- Total other expense $ 8,500 $ 7,046 $ 2,929 $ 2,462 ---------- ---------- ---------- ---------- Income before income taxes $ 5,202 $ 4,257 $ 1,870 $ 1,361 Income taxes 1,322 1,052 481 321 ---------- ---------- ---------- ---------- Net income $ 3,880 $ 3,205 $ 1,389 $ 1,040 ========== ========== ========== ========== Earnings per weighted average share: Net income per share, basic $ 2.22 $ 1.84 $ 0.79 $ 0.60 Net income per share, diluted $ 2.18 $ 1.83 $ 0.77 $ 0.60 Dividends per share $ 0.75 $ 0.63 $ 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 Nine Months ended September 30, 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 3,205 3,205 3,205 Purchase of common shares (57,785 shares) (289) (1,038) (1,327) Issuance of common shares in stock option plan (2,000 shares) 10 24 34 Issuance of common shares (16,038 shares) 80 277 357 Other comprehensive income net of tax: Unrealized gain on available for sale securities (net of tax $476) 924 924 924 ------------- Total comprehensive income $ 4,129 ============= Cash dividends declared (1,096) (1,096) ------ ------- ------------- -------- -------- Balances - September 30, 2000 $8,696 $ 556 $ (1,041) $ 16,961 $ 25,172 ====== ======= ============= ======== ======== Balances - December 31, 2000 $8,696 $ 556 $ 403 $ 17,616 $ - $ 27,271 Comprehensive Income Net income 3,880 3,880 3,880 Issuance of common shares in stock option plan (13,011 shares) 65 185 250 Other comprehensive income net of tax: Unrealized gain on available for sale securities (net of tax $452) 873 Reclassification adjustment for gains realized in net income (net of tax $106) (206) ------------- Other comprehensive income (net of tax $346) 667 667 667 ------------- Total comprehensive income $4,547 ============= Cash dividends declared (1,311) (1,311) ------ ------- ------------- -------- -------- Balances - September 30, 2001 $8,761 $ 741 $ 1,070 $ 20,185 $ 30,757 ====== ======= ============= ======== ========
See Accompanying Notes to Consolidated Financial Statements. 5 INDEPENDENT COMMUNITY BANKSHARES, INC. Consolidated Statements of Cash Flows (In Thousands)
Unaudited For the Nine Months Ended ------------------------------- September 30, September 30, 2001 2000 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 3,880 $ 3,205 Adjustments to reconcile net income to net cash provided by (used in) operating activities Provision for loan losses 225 325 Depreciation and amortization 564 530 Net (gains) losses on securities available for sale (312) 1 Net losses on sales of equipment 3 - Discount accretion and premium amortization on securities, net (105) (9) Originations of loans held for sale (64,035) (25,935) Proceeds from sales of loans held for sale 55,356 25,923 (Increase) in other assets (2,136) (941) Increase in other liabilities 1,149 1,832 ------------ ------------ Net cash provided by (used in) operating activities $ (5,411) $ 4,931 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from maturity, principal paydowns and calls on investment securities $ 987 $ 542 Proceeds from maturity, principal paydowns and calls of securities available for sale 5,984 3,248 Proceeds from sale of securities available for sale 20,426 490 Purchase of securities available for sale (42,335) (15,584) Net (increase) in loans (17,459) (22,603) Proceeds from sale of bank premises and equipment 34 - Purchases of bank premises and equipment (1,552) (524) ------------ ------------ Net cash (used in) investing activities $ (33,915) $ (34,431) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Net increase in demand deposits, NOW accounts, and savings accounts $ 19,506 $ 2,147 Net increase in certificates of deposits 13,794 6,831 Proceeds from Federal Home Loan Bank advances 49,100 31,900 Payment on Federal Home Loan Bank advances (44,100) (16,900) Payments on long-term debt (430) - Cash dividends paid (1,238) (1,096) Acquisition of common stock - (1,327) Issuance of common stock 250 34 Increase (decrease) in securities sold under agreement to repurchase (557) 2,374 ------------ ------------ Net cash provided by financing activities $ 36,325 $ 23,963 ------------ ------------ Decrease in cash and cash equivalents $ (3,001) $ (5,537) CASH AND CASH EQUIVALENTS Beginning $ 17,147 $ 20,557 ============ ============ Ending $ 14,146 $ 15,020 ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest paid to depositors 4,596 3,745 Income taxes 1,567 1,252 SUPPLEMENTAL DISCLOSURES FOR NON-CASH INVESTING AND FINANCING ACTIVITIES Unrealized gain on securities available for sale 1,013 1,400 Stock issued under merger agreement (16,038 shares) - 357
See Accompanying Notes to Consolidated Financial Statements. 6 INDEPENDENT COMMUNITY BANKSHARES, INC. Notes to Consolidated Financial Statements For the Nine Months Ended September 30, 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 September 30, 2001 and the results of operations and changes in cash flows for the nine months ended September 30, 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 nine month periods ended September 30, 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 September 30, 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 $ - $ 2 $ 252 Obligations of states and political subdivisions 5,695 246 - 5,941 Mortgaged backed securities 66 - - 66 ---------- ---------- ---------- ---------- $ 6,011 $ 246 $ 2 $ 6,259 ========== ========== ========== ==========
7 Securities available for sale as of September 30, 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 $ 1,099 $ 25 $ - $ 1,124 Corporate securities 2,094 39 (78) 2,055 Obligations of states and political subdivisions 33,454 908 (83) 34,279 Mortgaged backed securities 42,440 554 (30) 42,964 Other 11,225 286 - 11,511 ------------ ------------ ------------ ------------ $ 90,312 $ 1,812 $ (191) $ 91,933 ============ ============ ============ ============
Note 3. The consolidated loan portfolio is composed of the following: ----------------------------- September 30, December 31, 2001 2000 ----------------------------- (In Thousands) Commercial, financial and agricultural $ 22,355 $ 22,555 Real estate construction 24,816 17,693 Real estate mortgage 136,030 126,676 Installment loans to individuals 11,857 10,674 ------------- ------------- Total loans 195,058 177,598 Less: Allowance for loan losses 2,030 1,804 ------------- ------------- Loans, net $ 193,028 $ 175,794 ============= ============= The Company had $105,727 in non-performing assets at September 30, 2001. 8 Note 4. Reserve for Loan Losses The following is a summary of transactions in the reserve for loan losses: ------------------------------ September 30, December 31, 2001 2000 ------------------------------ (In Thousands) Balance at January 1 $ 1,804 $ 1,453 Provision charged to operating expense 225 400 Recoveries added to the reserve 29 47 Loan losses charged to the reserve (28) (96) ------------- ------------- Balance at the end of the period $ 2,030 $ 1,804 ============= ============= 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 69,825 shares of common stock were not included in the calculation for September 30, 2000. There were no anti-dilutive effects from options at September 30, 2001. September 30, 2001 September 30, 2000 Per share Per share Shares Amount Shares Amount ---------- ----------- ----------- ---------- Basic EPS 1,744,013 $ 2.22 1,741,000 $ 1.84 =========== ========== Effect of dilutive securities: stock options 36,075 13,639 ---------- ----------- Diluted EPS 1,780,088 $ 2.18 1,754,639 $ 1.83 ========== =========== =========== ========== 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 September 30, 2001. The original term to maturity was 24 months. The weighted-average fixed payment rate was 7.0% at September 30, 2001. Variable interest payments received are based on three-month LIBOR. At September 30, 2001, the weighted average rate of variable market-indexed interest payment obligations to the Company was 3.23%. The effect of these agreements was to transform fixed rate liabilities to variable rate liabilities. The net income from these agreements was $153,727 for the nine month period ended September 30, 2001, which is charged to income as it accrues. 9 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 September 30, 2001, the fair value of interest rate swaps in an asset position was $280,120. Note 7. Recent Accounting Pronouncements In July 2001, the Financial Accounting Standards Board Issued two statements - Statement 141, Business Combinations, and Statement 142, Goodwill and Other Intangible Assets, which will potentially impact the accounting for goodwill and other intangible assets. Statement 141 eliminates the pooling method of accounting for business combinations and requires that intangible assets that meet certain criteria be reported separately from goodwill. The Statement also requires negative goodwill arising from a business combination to be recorded as an extraordinary gain. Statement 142 eliminates the amortization of goodwill and other intangibles that are determined to have an indefinite life. The Statement requires, at a minimum, annual impairment tests for goodwill and other intangible assets that are determined to have an indefinite life. Upon adoption of these Statements, an organization is required to re-evaluate goodwill and other intangible assets that arose from business combinations entered into before July 1, 2001. If the recorded other intangible assets do not meet the criteria for recognition, they should be classified as goodwill. Similarly, if there are other intangible assets that meet criteria for recognition but were not separately recorded from goodwill, they should be reclassified from goodwill. An organization also must reassess the useful lives of intangible assets and adjust the remaining amortization periods accordingly. Any negative goodwill must be written-off. The standards generally are required to be implemented by the Company in its 2002 financial statements. The adoption of these standards will not have a material impact on the financial statements. Note 8. Subsequent Event On October 19, 2001, the Board of Directors approved the issuance of $10 million in trust preferred debt through participation by the Company in a trust preferred pool. Under the terms of the pool, the trust preferred debt would mature in 30 years and be non-callable for the first five years. After five years, the trust preferred debt would be callable at each interest reset date. The stated interest rate, which would reset semi-annually, would be variable and tied to six month LIBOR plus approximately 3.75%. Interest payments on the trust preferred debt may be deferred for the first five years. The Company expects to issue the trust preferred debt in late November 2001. 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, 2001 increased 21.1% to $3.9 million or $2.18 per diluted share compared to $3.2 million or $1.83 per diluted share for the first nine months of 2000. Annualized returns on average assets and equity for the nine months ended September 30, 2001 were 1.7% and 17.5%, respectively, compared to 1.7% and 18.2% for the same period in 2000. Total assets for Independent Community Bankshares, Inc. (the "Company") increased to $332.0 million at September 30, 2001 compared to $289.5 million at December 31, 2000, representing an increase of $42.5 million or 14.7%. Total loans at September 30, 2001 were $193.0 million, an increase of $17.2 million from the December 31, 2000 balance of $175.8 million. The Company is located in one of the fastest growing counties and metropolitan areas in the United States. In addition, the Company has increased its customer base as a result of increased advertising and consolidation in the banking industry within its local market. These factors have contributed to the solid loan and deposit growth experienced over the past year. The declining interest rate environment continued to provide a strong market for mortgage refinancings and, as a result, loans held for sale increased $8.7 million to $10.8 million at September 30, 2001. The investment portfolio increased 20.1% to $97.9 million at September 30, 2001 compared to $81.6 million at December 31, 2000. Deposits increased $33.3 million to $257.9 million at September 30, 2001 from $224.6 million at December 31, 2000. Growth in the transactional accounts and time deposits account for $8.8 million and $13.8 million, respectively, of the increase during the first nine months of 2001. Securities sold under agreements to repurchase with commercial checking accounts decreased $557,000 from $14.3 million at December 31, 2000 to $13.8 million at September 30, 2001. Shareholders' equity was $30.8 million at September 30, 2001. This amount represents an increase of 12.8% from the December 31, 2000 balance of $27.3 million. The book value per common share was $17.55 at September 30, 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 $10.1 million for the first nine months of 2001 compared to $9.0 million for the same period in 2000. The increase is largely due to growth in the average earning assets. Average earning assets increased $45.6 million from $237.0 million at September 30, 2000 to $282.7 million at September 30, 2001. During the latter half of 2000, the funding mix for the growth in the earning assets changed to more reliance on borrowed money rather than low cost deposits causing a decrease in the margin. The effect of this change in the funding mix was largely recognized in the latter half of 2000 and deposit growth has largely funded asset growth during the first nine months of 2001. Noninterest Income Noninterest income consisting of fees from deposit accounts, fiduciary activities and mortgage banking increased 43.5% to $3.8 million for the first nine months of 2001 compared to $2.7 million for the same period in 2000. Current market conditions have spurred a refinance boom that has provided significant volume increases in mortgage fees on loans held for sale as well as enabled the Company to recognize gains in its investment portfolio. Service charges on deposit accounts for the first nine months 11 of 2001 totaled $1.1 million compared to $886,000 for the same period in 2000, an increase of 20.0%. The Company realized $312,000 in net gains on the investment portfolio for the nine months ended September 30, 2001. Commissions and fees from fiduciary activities were $976,000 for the nine month period ended September 30, 2001 compared to $1.2 million for the same period in 2000. Fees on loans held for sale increased $553,000 or 116.4% to $1.0 million at September 30, 2001 from the September 30, 2000 balance of $475,000. Other operating income increased $314,000 to $451,000 for the nine months ended September 30, 2001 compared to $137,000 for the same period in 2000. Additional staff in the non-deposit investment sales area has contributed to the increase in other operating income. Noninterest Expense Total noninterest expense includes employee-related costs, occupancy and equipment expense and other overhead. Total noninterest expense was $8.5 million for the first nine months of 2001 compared to $7.0 million for the same period in 2000. This is a 20.6% increase from the nine months ended September 30, 2000 to the nine months ended September 30, 2001. Salary and benefit expense increased 27.1% from $4.1 million for the nine months ended September 30, 2000 to $5.2 million for the nine months ended September 30, 2001. The Company has increased its staffing in both the business development and operations areas to support the significant asset growth. Commissions paid to employees for fee related business, such as mortgage originations and investment sales have increased by $405,000 to $535,000 as a result in the increase in sales volume. Net occupancy expense of premises decreased $2,000 from $874,000 for the nine months ended September 30, 2000 to $872,000 for the nine months ended September 30, 2001. Allowance for Loan Losses The allowance for loan losses at September 30, 2001 was $2.0 million compared to $1.7 million at September 30, 2000. The provision for loan losses decreased $100,000 from the September 30, 2000, $325,000 balance to $225,000 at September 30, 2001. The allowance for loan losses was 1.04% of total loans outstanding at both September 30, 2001 and September 30, 2000. At September 30, 2001, net loan recoveries were $1,000. There were no loans past due 90 days or more at September 30, 2001. Non-performing loans decreased to .05% of total loans outstanding at September 30, 2001 compared to .11% at September 30, 2000. Management believes the allowance for loan losses is adequate to cover credit losses inherent in the loan portfolio at September 30, 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 September 30, 2001 and September 30, 2000 was $30.8 million and $25.2 million, respectively. Total common shares outstanding at September 30, 2001 were 1,752,258. At September 30, 2001 the Company's tier 1 and total risk-based capital ratios were 12.3% and 13.1%, respectively, compared to 12.7% and 13.6% at December 31, 2000. The Company's leverage ratio was 9.3% at September 30, 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 12 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 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. 13 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 14 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: November 14, 2001 /s/ Joseph L. Boling -------------------------------------- Joseph L. Boling Chairman of the Board & CEO Date: November 14, 2001 /s/ Alice P. Frazier -------------------------------------- Alice P. Frazier Senior Vice President & CFO 15 -----END PRIVACY-ENHANCED MESSAGE-----