-----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, V5b1kXcgoZxcjeISiqPItgWj9oje2+wZH0FEwkWKxTXP5nq8bKmYGQknfITvhNbK FONsgKqnn28wdtpoLG93qQ== 0000804563-96-000006.txt : 19960515 0000804563-96-000006.hdr.sgml : 19960515 ACCESSION NUMBER: 0000804563-96-000006 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BENCHMARK BANKSHARES INC CENTRAL INDEX KEY: 0000804563 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 541460991 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-18445 FILM NUMBER: 96563495 BUSINESS ADDRESS: STREET 1: 100-102 S BROAD ST STREET 2: PO BOX 569 CITY: KENBRIDGE STATE: VA ZIP: 23944 BUSINESS PHONE: 8046768444 10QSB 1 Form 10-QSB U. S. Securities and Exchange Commission Washington, DC 20549 [X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the 3-month period ended March 31, 1996. [ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______________ to ______________ Commission File No. 000-18445 Benchmark Bankshares, Inc. (Name of Small Business Issuer in its Charter) Virginia 54-1460991 (State or Other (I.R.S. Employer Jurisdiction of I.D. No.) Incorporation or Organization) 100-102 South Broad Street Kenbridge, Virginia 23944 (Address of Principal Executive Offices) Issuer's Telephone Number: (804)676-8444 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. (1) Yes [X] No [ ] (2) Yes [X] No [ ] State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest applicable date: 1,442,176.021 Form 10-QSB Benchmark Bankshares, Inc. Part I - Table of Contents March 31, 1996 Part I Financial Information Item 1 Consolidated Balance Sheet Consolidated Statement of Income Condensed Consolidated Statement of Cash Flows Notes to Consolidated Financial Statements Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Form 10-QSB Benchmark Bankshares, Inc. Consolidated Balance Sheet (Unaudited) (Audited) March 31, December 31, 1996 1995 Assets Cash and due from banks 3,788,382 4,397,058 Securities Federal Agency obligations 7,576,511 7,870,567 State and municipal obligations 10,974,991 11,112,356 Other securities 137,000 137,000 Federal funds sold 7,271,000 5,862,000 Loans 108,470,917 103,723,930 Less Unearned interest and fees (270,010) (275,998) Loan loss reserve (1,084,709) (1,037,344) Net Loans 107,116,198 102,410,588 Premises and equipment - net 2,347,281 2,000,241 Accrued interest receivable 1,390,226 1,267,967 Deferred income taxes 245,590 151,931 Other assets 185,777 153,807 Total Assets 141,032,956 135,363,515 Liabilities and Shareholders' Equity Deposits Demand (non-interest bearing) 12,241,244 12,392,332 NOW accounts 13,002,165 11,589,895 Money market accounts 5,990,613 5,542,293 Savings 8,432,463 7,679,313 Time, $100,000 and over 13,829,055 12,734,404 Other time 73,311,768 71,684,402 Total Deposits 126,807,308 121,622,639 Accrued interest payable 650,314 650,822 Accrued income tax payable 366,490 97,302 Divendends payable - 286,709 Other liabilities 137,783 205,473 Total Liabilities 127,961,895 122,862,945 Shareholders' Equity Common stock, par value $.21 per share,authorized 4,000,000 shares; issued and outstanding 03-31-96 1,442,176.021, issued and outstanding 12-31-95 1,433,544.679 302,857 301,044 Capital surplus 3,132,793 3,007,305 Retained earnings 9,581,894 8,987,406 Unrealized security gains net of tax effect 53,517 204,815 Total Shareholders' Equity 13,071,061 12,500,570 Total Liabilities and Shareholders' Equity 141,032,956 135,363,515 Note: The balance sheet at December 31, 1995 has been derived from the audited financial statements at that date. See notes to consolidated financial statements. Form 10-QSB Benchmark Bankshares, Inc. Consolidated Statement of Income (Unaudited) Three Months Ended March 31, 1996 1995 Interest Income Interest and fees on loans 2,676,281 2,247,812 Interest on U. S. Government obligations 140,868 76,748 Interest on State and municipal obligations 145,442 129,853 Interest on Federal funds sold 75,065 80,963 Total Interest Income 3,037,656 2,535,376 Interest Expense Interest on deposits 1,485,971 1,153,668 Net Interest Income 1,551,685 1,381,708 Provision for Loan Losses 67,988 36,975 Net Interest Income after Provision 1,483,697 1,344,733 Non-Interest Income Service charges, commissions, and fees on deposits 84,481 77,608 Other operating income 51,131 51,280 (Losses) on sale of securities (7,700) (359) Rental income 1,800 1,800 Total Non-Interest Income 129,712 130,329 Non-Interest Expense Salaries and wages 426,906 369,247 Employee benefits 84,553 88,179 Occupancy expenses 37,202 34,900 Furniture and equipment expense 34,067 33,446 Other operating expenses 182,726 238,979 Total Non-Interest Expense 765,454 764,751 Net Income before Taxes 847,955 710,311 Income Taxes 253,469 212,748 Net Income 594,486 497,563 Net Income per Share * .41 0.35 * Weighted average reflecting net sale of 8,631 shares on January 25, 1996 and 6,459 shares on January 31, 1995, respectively. See notes to consolidated financial statements. Form 10-QSB Benchmark Bankshares, Inc. Condensed Consolidated Statement of Cash Flows (Unaudited) Three Months Ended March 31, 1996 1995 Cash Provided by Operations 655,237 545,563 Cash Provided by Financing Activities Net increase in demand deposits and interest bearing transaction accounts 1,261,182 878,888 Net increase (decrease) in savings and money market deposits 1,201,470 (128,243) Net increase in certificates of deposit 2,722,017 3,325,569 Decrease in dividends payable (286,709) (213,035) Sale of stock 127,301 93,650 Total Cash Provided by Financing Activities 5,025,261 3,956,829 Cash Used in Investing Activities Purchase of securities (1,345,000) (250,000) Sale of Securities 509,747 - Maturity of securities 1,037,436 65,475 Net increase in loans (4,705,610) (3,053,569) Purchase of premises and equipment (376,747) (30,172) Total Cash Used by Investing Activities (4,880,174) (3,268,266) Increase (Decrease) in Cash and Cash Equivalents 800,324 1,234,126 See notes to consolidated financial statements. Form 10-QSB Benchmark Bankshares, Inc. Notes to Consolidated Financial Statements March 31, 1996 1. Basis of Presentation The accompanying consolidated financial statements and related notes of Benchmark Bankshares, Inc. and its subsidiary Benchmark Community Bank were prepared by management, which has the primary responsibility for the integrity of the financial information. The statements have been prepared in conformity with generally accepted accounting principles appropriate in the circumstances and include amounts that are based on management's best estimates and judgments. In meeting its responsibilities for the accuracy of its financial statements, management relies on the Corporation's internal accounting controls. The system provides reasonable assurances that assets are safeguarded and transactions are recorded to permit the preparation of appropriate financial information. The interim period financial information included herein is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary to a fair presentation of financial position, results of operation, and changes in financial position for the interim periods herein reported. 2. Significant Accounting Policies and Practices The accounting policies and practices of Benchmark Bankshares, Inc. conform to generally accepted accounting principles and general practice within the banking industry. Certain of the more significant policies and practices follow: (a) The consolidated financial statements of Benchmark Bankshares, Inc. and its wholly owned subsidiary, Benchmark Community Bank include the accounts of both companies. All material inter-company balances and transactions have been eliminated in consolidation. (b) Investment Securities. Pursuant to guidelines established in FAS 115, the Company has elected to classify a portion of its current portfolio as securities available-for-sale. This category refers to investments that are not actively traded, but are not anticipated by management to be held to maturity. Typically, these types of investments will be utilized by management to meet short-term asset/liability management needs. The remainder of the portfolio is classified as held to maturity. This category refers to investments that are anticipated by management to be held until they mature. For purposes of financial statement reporting, securities classified as available-for-sale are to be reported at fair market value (net of any tax effect) as of the date of the statements; however, unrealized holding gains or losses are to be excluded from earnings and reported as a net amount in a separate component of shareholders' equity until realized. Securities classified as held to maturity are recorded at cost. The resulting book value ignores the impact of current market trends. (c) Loans. Interest on loans is computed by methods which generally result in level rates of return on principal amounts outstanding (simple interest). Unearned interest on certain installment loans is recognized as income using the rule of 78's method, which materially approximates the effective interest method. Loan fees and related costs are recognized as income and expense in the year the fees are charged and costs incurred. (d) Allowance for Loan Losses. The allowance for loan losses is increased by provisions charged to expense and decreased by loan losses net of recoveries. The provision for loan losses is based on the Bank's loan loss experience and management's detailed review of the loan portfolio which considers economic conditions, prior loan loss experience, and other factors affecting the collectivity of loans. Accrual of interest is discontinued on loans past due 90 days or more when collateral is inadequate to cover principal and interest or immediately if management believes, after considering economic and business conditions and collection efforts, that the borrower's financial condition is such that collection is doubtful. (e) Premises and Equipment. Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed generally by the straight line basis over the estimated useful lives of the assets. Additions to premises and equipment and major betterments and replacements are added to the accounts at cost. Maintenance and repairs and minor replacements are expensed as incurred. Gains and losses on dispositions are reflected in current earnings. (f) Depreciation. For financial reporting, property and equipment are depreciated using the straight line method; for income tax reporting, depreciation is computed using statutory accelerated methods. Leasehold improvements are amortized on the straight line method over the estimated useful lives of the improvements. Income taxes in the accompanying financial statements reflect the depreciation method used for financial reporting and, accordingly, include a provision for the deferred income tax effect of depreciation which will be recognized in different periods for income tax reporting. (g) Earnings Per Share Earnings per share were computed by using the average shares outstanding for each period presented. The 1996 average shares have been adjusted to reflect the sale of 8,631 shares of the Company's common stock through the dividend reinvestment plan on January 25, 1996. The 1995 average shares have been adjusted to reflect the sale of 6,459 shares through the dividend reinvestment program on January 31, 1995. The average shares of outstanding stock for the first quarter of 1996 and 1995 were 1,439,848 shares and 1,424,558, respectively. The Company has granted options to purchase 70,000 shares of Benchmark Bankshares stock to employees and directors under two separate incentive stock plans. Based on current trading values of the stock, the stock options are not considered materially dilutive; therefore, the Company's earnings per share are reported as a simple capital structure. (h) The table below reflects the components of the Net Deferred Tax Asset account as of March 31, 1996: Deferred tax assets resulting from loan loss reserves 330,517 Deferred tax liabilities resulting from depreciation (57,357) Unrealized securities losses (27,570) Net Deferred 245,590 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations FIRST QUARTER 1996 Earnings Summary Net income of $594,486 for the first quarter of 1996 increased $96,923 or 19.48% as compared to net income of $497,563 earned during the first quarter of 1995. Earnings per share of $.41 as of March 31, 1996 increased $.06 over the March 31, 1995 level of $.35. The annualized return on average assets of 1.72% increased .6% while the annualized return on average equity of 18.60% decreased 3.83% when comparing first quarter 1996 results with those of first quarter 1995. The increase in earnings and return on assets reflects a continued growth in loans and deposits with a favorable interest rate spread. Interest Income and Interest Expense Total interest income of $3,037,656 for the first quarter of 1996 increased $502,280 or 19.81% over interest income of $2,535,376 recorded during the first quarter of 1995. The major area of increase was in interest and fees on loans, which was a direct result from the growth of the loan portfolio. Due to greater deposit growth than loan growth, the investment portfolio is changing as investments in short and long-term instruments are beginning to reflect larger investment balances. Additionally, the Company has continued to increase its level of investments in municipal issues to take advantage of a more favorable tax treatment of the investment income. Total interest expense in the first quarter of 1996 increased to a level of $1,485,971. This amounted to an increase of $332,303 or 28.80% over the level reached during the first quarter of 1995. This increase in interest expense resulted from deposit growth, as well as the payment of higher interest rates to meet market competition. Provision for Loan Losses While the Company's loan loss experience ratio remains low, management continues to set aside increasing provisions to the loan loss reserve. During the first quarter of 1996, the Bank increased the loan loss reserve by $47,365 to a level of $1,084,709 or 1.0% of the outstanding loan balance. At year end 1995, the reserve level amounted to $1,037,344 or 1.0% of the outstanding loan balance net of unearned interest. Non-Performing Loans Non-performing loans consist of loans accounted for on a non-accrual basis and loans which are contractually past due 90 days or more as to interest and/or principal payments regardless of the amount of collateral held. As of March 31, 1996, the Company had $836,000 in non- performing loans or .8% of the loan portfolio. All of this amount was fully collateralized. Management feels the risk of loss is minimal. Non-Interest Income and Non-Interest Expense Non-interest income of $129,712 decreased $617 or 4.73% for the first quarter of 1996 as compared to the level of $130,329 reached during the first quarter of 1995. The decrease primarily resulted from a large loss on the sale of securities for the first quarter of 1996. Non-interest expense of $765,454 increased $703 or .1% for the first quarter of 1996 as compared to the level of $764,751 reached during the first quarter of 1995 as increases in salaries were offset by a decrease in other operating expenses. Off Balance Sheet Instruments/Credit Concentrations The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. Unless noted otherwise, the Company does not require collateral or other security to support these financial instruments. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to facilitate the transaction of business between these parties where the exact financial amount of the transaction is unknown, but a limit can be projected. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. There is a fee charged for this service. As of March 31, 1996, the Bank had $105,000 outstanding letters of credit all of which will mature within twelve months. This represents a $7,500 or 6.67% decrease over the year end level. These instruments are based on the financial strength of the customer and the existing relationship between the Company and the customer. Liquidity As of the end of the first quarter of 1996, $51,246,488 or 47.24% of gross loans will mature or are subject to repricing within one year. These loans are funded in part by $13,829,055 in certificates of deposits of $100,000 or more of which $6,681,385 mature in one year or less. Currently, the Bank has a maturity average ratio for the next twelve months of 63.53% when comparing asset and certificate of deposit maturities. At year end 1995, $47,402,000 or 45.7% of gross loans were scheduled to mature or were subject to repricing within one year and $39,480,000 in certificates of deposit were scheduled to mature during 1996. Capital Adequacy Total shareholder equity was $13,071,061 or 9.27% of total assets as of March 31, 1996. This compared to $12,500,570 or 9.23% of total assets as of December 31, 1995. Primary capital (shareholders' equity plus loan loss reserves) of $14,155,770 represents 10.04% of total assets as of March 31, 1996 as compared to $13,537,914 or 10.00% of total assets as of December 31, 1995. The increase in the equity position resulted from a significant increase in earnings in the first quarter of 1996 versus the first quarter of 1995; however, this gain was somewhat offset by a decline in the market value of securities classified as available-for-sale. Form 10-QSB Benchmark Bankshares, Inc. March 31, 1996 Part II Other Information Item 1 Legal Proceedings None Item 2 Changes 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 Report on Form 8-K No reports on Form 8-K have been filed during the quarter ended March 31, 1996. Form 10-QSB Benchmark Bankshares, Inc. March 31, 1996 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. Benchmark Bankshares, Inc. (Registrant) Date: April 18, 1996 Ben L. Watson, III Ben L. Watson, III President CEO Date: April 18, 1996 Janice C. Whitlow Janice C. Whitlow Cashier and Treasurer EX-27 2
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