-----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, AAsfzsUaNcd5EBy6mj2kFwAXFrIN7VQd8b+jiIgzw7u/mclT5+0uXUO0UHgnI+o7 KHDTJxOvfILHx1PiSKCw3g== 0000804563-97-000002.txt : 19970509 0000804563-97-000002.hdr.sgml : 19970509 ACCESSION NUMBER: 0000804563-97-000002 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970508 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: 97597820 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 MARCH 31, 1997 10QSB Form 10-QSB Benchmark Bankshares, Inc. March 31, 1997 Page 1 of 13 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, 1997. [ ] 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 Jurisdiction of (I.R.S. Employer 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: 1,460,071.804 Page 2 of 13 Form 10-QSB Benchmark Bankshares, Inc. Part I - Table of Contents March 31, 1997 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 Page 3 of 13 Form 10-QSB Benchmark Bankshares, Inc. Consolidated Balance Sheet (Unaudited) (Audited) March 31, December 31, 1997 1996 ---- ---- Assets Cash and due from banks $ 4,552,825 $ 4,624,901 Securities Federal Agency obligations 7,485,643 7,639,371 State and municipal obligations 9,472,563 10,676,977 Other securities 137,000 137,000 Federal funds sold 8,161,000 3,858,000 Loans 122,559,049 120,356,859 Less Unearned interest and fees (288,083) (288,678) Loan loss reserve (1,246,545) (1,203,866) --------------- --------------- Net Loans 121,024,421 118,864,315 Premises and equipment - net 3,123,466 3,121,734 Accrued interest receivable 1,369,559 1,254,441 Deferred income taxes 322,600 267,642 Refundable income taxes - 33,681 Other assets 409,018 429,760 ------------- ------------- Total Assets $156,058,095 $150,907,822 ============= ============= Page 4 of 13 Form 10-QSB Benchmark Bankshares, Inc. Consolidated Balance Sheet (Unaudited) (Audited) March 31, December 31, 1997 1996 ---- ---- Liabilities and Shareholders' Equity Deposits Demand (non-interest bearing) $ 13,195,785 $ 12,215,657 NOW accounts 14,897,893 14,724,556 Money market accounts 7,519,600 6,776,695 Savings 8,580,177 8,107,214 Time, $100,000 and over 13,139,352 14,293,648 Other time 82,452,006 79,242,048 -------------- -------------- Total Deposits 139,784,813 135,359,818 Accrued interest payable 686,260 691,945 Dividends payable - 391,510 Other liabilities 475,613 102,876 --------------- -------------- Total Liabilities 140,946,686 136,546,149 Shareholders' Equity Common stock, par value $.21 per share, authorized 4,000,000 shares; issued and outstanding 03-31-97 1,460,071.804, issued and outstanding 12-31-96 1,449,895.852 306,615 304,478 Capital surplus 3,440,248 3,262,299 Retained earnings 11,403,886 10,753,919 Unrealized security gains (losses) net of tax effect (39,340) 40,977 ------------- -------------- Total Shareholders' Equity 15,111,409 14,361,673 ------------- -------------- Total Liabilities and Shareholders' Equity $156,058,095 $150,907,822 ============= ============= Note: The balance sheet at December 31, 1996 has been derived from the audited financial statements at that date. See notes to consolidated financial statements. Page 5 of 13 Form 10-QSB Benchmark Bankshares, Inc. Consolidated Statement of Income (Unaudited) Three Months Ended March 31, 1997 1996 ---- ---- Interest Income Interest and fees on loans $2,978,038 $2,676,281 Interest on U. S. Government obligations 131,379 140,868 Interest on State and municipal obligations 135,284 145,442 Interest on Federal funds sold 59,069 75,065 ------------ ----------- Total Interest Income 3,303,770 3,037,656 Interest Expense Interest on deposits 1,578,970 1,485,971 ------------ ----------- Net Interest Income 1,724,800 1,551,685 Provision for Loan Losses 58,806 67,988 ------------ ----------- Net Interest Income after Provision 1,665,994 1,483,697 Non-Interest Income Service charges, commissions, and fees on deposits 94,722 84,481 Other operating income 48,821 51,131 (Losses) on sale of securities (572) (7,700) Rental income - 1,800 ------------ ----------- Total Non-Interest Income 142,971 129,712 Non-Interest Expense Salaries and wages 468,093 426,906 Employee benefits 108,564 84,553 Occupancy expenses 54,449 37,202 Furniture and equipment expense 35,321 34,067 Other operating expenses 205,264 182,726 ------------ ----------- Total Non-Interest Expense 871,691 765,454 ------------ ----------- Net Income before Taxes 937,274 847,955 Income Taxes 287,307 253,469 ------------ ----------- Net Income $ 649,967 $ 594,486 ============ ============ Net Income per Share $ 0.45 $ 0.41 ============ ============ See notes to consolidated financial statements. Page 6 of 13 Form 10-QSB Benchmark Bankshares, Inc. Condensed Consolidated Statement of Cash Flows (Unaudited) Three Months Ended March 31, 1997 1996 ---- ---- Cash Provided by Operations $1,063,238 $ 655,237 Cash Provided by Financing Activities Net increase in demand deposits and interest bearing transaction accounts 1,153,465 1,261,182 Net increase in savings and money market deposits 1,215,868 1,201,470 Net increase in certificates of deposit 2,055,662 2,722,017 Decrease in dividends payable (391,510) (286,709) Sale of stock 180,086 127,301 ----------- ----------- Total Cash Provided by Financing Activities 4,213,571 5,025,261 Cash Used in Investing Activities Purchase of securities - (1,345,000) Sale of securities 823,870 509,747 Maturity of securities 412,580 1,037,436 Net increase in loans (2,232,495) (4,705,610) Purchase of premises and equipment (49,840) (376,747) ----------- ----------- Total Cash Used by Investing Activities (1,045,885) (4,880,174) ----------- ----------- Increase in Cash and Cash Equivalents $4,230,924 $ 800,324 =========== =========== See notes to consolidated financial statements. Page 7 of 13 Form 10-QSB Benchmark Bankshares, Inc. Notes to Consolidated Financial Statements March 31, 1997 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 Company'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. Page 8 of 13 (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 1997 average shares have been adjusted to reflect the sale of 10,000 shares of the Company's common stock through the dividend reinvestment plan on January 27, 1997, as well as the sale of 175 shares through the employee stock option plan at various dates during the period. The 1996 average shares have been adjusted to reflect the sale of 8,631 shares through the dividend reinvestment program on January 25, 1996. The average shares of outstanding stock for the first quarter of 1997 and 1996 were 1,457,050 and 1,439,848, respectively. The Company has granted options to purchase 70,000 shares of Benchmark Bankshares, Inc. 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. Page 9 of 13 (h) The table below reflects the components of the Net Deferred Tax Asset account as of March 31, 1997: Deferred tax assets resulting from loan loss reserves $371,903 Deferred tax liabilities resulting from Depreciation (69,569) Unrealized securities losses 20,266 Net Deferred Tax Asset $322,600 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations FIRST QUARTER 1997 Earnings Summary Net income of $649,967 for the first quarter of 1997 increased $55,481 or 9.33% as compared to net income of $594,486 earned during the first quarter of 1996. Earnings per share of $.45 as of March 31, 1997 increased $.04 over the March 31, 1996 level of $.41. The annualized return on average assets of 1.70% decreased 2.29% while the annualized return on average equity of 17.49% decreased 5.97% when comparing first quarter 1997 results with those of first quarter 1996. While the steady return on assets indicates that loans and deposits are being garnered at favorable interest rates, the decline in return on equity is indicative of a strengthening capital position rather than a decline in earnings. Interest Income and Interest Expense Total interest income of $3,303,770 for the first quarter of 1997 increased $266,114 or 8.76% over interest income of $3,037,656 recorded during the first quarter of 1996. 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-term instruments are beginning to reflect larger investment balances. Total interest expense in the first quarter of 1997 increased to a level of $1,578,970. This amounted to an increase of $92,999 or 6.26% over the level reached during the first quarter of 1996. 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 Bank's loan loss experience ratio remains low, management continues to set aside increasing provisions to the loan loss reserve. During the first quarter of 1997, the Bank increased the loan loss reserve by $42,679 to a level of $1,246,545 or 1.02% of the outstanding loan balance. At year end 1996, the reserve level amounted to $1,203,866 or 1.0% of the outstanding loan balance net of unearned interest. Page 10 of 13 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, 1997, the Bank had $1,488,000 in non-performing loans or 1.22% of the loan portfolio. The amount of non-secured loans in this category amounted to $744,100. Non-Interest Income and Non-Interest Expense Non-interest income of $142,971 increased $13,259 or 10.22% for the first quarter of 1997 as compared to the level of $129,712 reached during the first quarter of 1996. The increase results from the addition of the full-service branch office in Crewe, Virginia. Non-interest expense of $871,691 increased $106,237 or 13.88% for the first quarter of 1997 as compared to the level of $765,454 reached during the first quarter of 1996, as all areas of operation had additional expense related to the staffing and support provided to the new branch office. Off-Balance-Sheet Instruments/Credit Concentrations The Bank 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 Bank does not require collateral or other security to support these financial instruments. Standby letters of credit are conditional commitments issued by the Bank 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, 1997, the Bank had $854,500 outstanding letters of credit. This represents a $40,711 or 4.55% decrease over the year end level. These instruments are based on the financial strength of the customer and the existing relationship between the Bank and the customer. The maturities of these letters are as follows: 1997 $281,500 1998 7,500 2000 565,500 Liquidity As of the end of the first quarter of 1997, $51,667,363 or 42.16% of gross loans will mature or are subject to repricing within one year. These loans are funded in part by $13,195,785 in certificates of deposit of $100,000 or more of which $6,356,025 mature in one year or less. Currently, the Bank has a maturity average ratio for the next twelve months of 58.75% when comparing asset and certificates of deposit maturities. Page 11 of 13 At year end 1996, $51,246,488, or 47.24% of gross loans, were scheduled to mature or were subject to repricing within one year and $13,829,055 in certificates of deposit were scheduled to mature during 1997. Capital Adequacy Total shareholder equity was $15,111,409 or 9.68% of total assets as of March 31, 1997. This compared to $14,361,673 or 9.52% of total assets as of December 31, 1996. Primary capital (shareholders' equity plus loan loss reserves) of $16,357,954 represents 10.48% of total assets as of March 31, 1997 as compared to $15,565,539 or 10.31% of total assets as of December 31, 1996. The increase in the equity position resulted from a significant increase in earnings in the first quarter of 1997 versus the first quarter of 1996; however, this gain was somewhat offset by a decline in the market value of securities classified as available-for-sale. Additionally, $180,086 was added to capital as a result of the sale of stock. Refer to Note 2(g). Page 12 of 13 Form 10-QSB Benchmark Bankshares, Inc. March 31, 1997 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, 1997. Page 13 of 13 Form 10-QSB Benchmark Bankshares, Inc. March 31, 1997 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 21, 1997 Ben L. Watson, III President & CEO Date: April 21, 1997 Janice C. Whitlow Cashier and Treasurer EX-27 2 ARTICLE 9 FDS FOR 10-QSB MARCH 31, 1997
9 1 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 4,552,825 0 8,161,000 0 13,990,931 2,967,275 2,873,094 122,559,049 1,246,545 156,058,095 139,784,813 0 1,161,873 0 0 0 306,615 14,804,794 156,058,095 2,978,038 266,663 59,069 3,303,770 1,578,970 1,578,970 1,724,800 58,806 (572) 871,691 937,274 649,967 0 0 649,967 .45 .45 4.77 1,191,817 296,211 0 8,393,464 1,203,866 58,295 42,168 1,246,545 1,246,545 0 1,216,545
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