-----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, NuWh9lDL0/3b5mpVvtC9d5ZATu/xaBGBVF9KY3IpOha2BjobknkxlnYmQSZYlym7 l1fFNly0f7O6RCwaS0MKgw== 0000804563-97-000003.txt : 19970725 0000804563-97-000003.hdr.sgml : 19970725 ACCESSION NUMBER: 0000804563-97-000003 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970724 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: 97644856 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 SECOND QUARTER 1997 10QSB Page 1 of 16 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 6-month period ended June 30, 1997. [ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______________ to ______________ Commission File No. 000-18445 Benchmark Bankshares, Inc. (Name of Small Business Issuer in its Charter) Virginia 54-1380808 (State or Other Jurisdiction of (IRS Employer ID No.) Incorporation or Organization) 100 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: 1,460,096.804 Page 2 of 16 Form 10-QSB Benchmark Bankshares, Inc. Part I - Table of Contents June 30, 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 Part II Other Information Page 3 of 16 Form 10-QSB Benchmark Bankshares, Inc. Consolidated Balance Sheet (Unaudited) (Audited) June 30, December 31, 1997 1996 ---- ---- Assets Cash and due from banks $ 5,134,840 $ 4,624,901 Securities Federal Agency obligations 7,497,245 7,639,371 State and municipal obligations 8,762,385 10,676,977 Other securities 137,000 137,000 Federal funds sold 7,323,000 3,858,000 Loans 124,597,141 120,356,859 Less Unearned interest and fees (291,154) (288,678) Loan loss reserve (1,296,299) (1,203,866) ------------- ------------- Net Loans 123,009,688 118,864,315 Premises and equipment - net 3,079,526 3,121,734 Accrued interest receivable 1,480,159 1,254,441 Deferred income taxes 287,172 267,642 Refundable income taxes - 33,681 Other assets 610,156 429,760 ------------- ------------- Total Assets $157,321,171 $150,907,822 ============= ============= Page 4 of 16 Form 10-QSB Benchmark Bankshares, Inc. Consolidated Balance Sheet (Unaudited) (Audited) June 30, December 31, 1997 1996 ---- ---- Liabilities and Shareholders' Equity Deposits Demand (non-interest bearing) $ 13,785,189 $ 12,215,657 NOW accounts 15,195,804 14,724,556 Money market accounts 7,160,182 6,776,695 Savings 8,574,086 8,107,214 Time, $100,000 and over 12,505,238 14,293,648 Other time 83,337,846 79,242,048 ------------- ------------- Total Deposits 140,558,345 135,359,818 Accrued interest payable 694,789 691,945 Accrued income tax payable 11,837 - Dividends payable 394,226 391,510 Other liabilities 190,965 102,876 ------------- ------------- Total Liabilities 141,850,162 136,546,149 Shareholders' Equity Common stock, par value $.21 per share, authorized 4,000,000 shares; issued and outstanding 06-30-97, 1,460,096.804, issued and outstanding 12-31-96, 1,449,895.852 306,620 304,478 Capital surplus 3,440,590 3,262,299 Retained earnings 11,661,627 10,753,919 Unrealized security gains (losses) net of tax effect 62,172 40,977 ------------- ------------- Total Shareholders' Equity 15,471,009 14,361,673 ------------- ------------- Total Liabilities and Shareholders' Equity $157,321,171 $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 16 Form 10-QSB Benchmark Bankshares, Inc. Consolidated Statement of Income (Unaudited) Six Months Ended June 30, 1997 1996 ---- ---- Interest Income Interest and fees on loans $6,009,540 $5,497,061 Interest on U. S. Government obligations 262,275 272,912 Interest on State and municipal obligations 258,041 289,599 Interest on Federal funds sold 169,021 124,861 Interest on other securities 2,610 2,610 ----------- ----------- Total Interest Income 6,701,487 6,187,043 Interest Expense Interest on deposits 3,207,044 3,000,896 ----------- ----------- Net Interest Income 3,494,443 3,186,147 Provision for Loan Losses 146,195 156,730 ----------- ----------- Net Interest Income after Provision 3,348,248 3,029,417 Non-Interest Income Service charges, commissions, and fees on deposits 192,894 168,458 Other operating income 85,903 109,878 (Losses) on sale of securities (1,234) (8,101) Rental income - 3,600 ----------- ----------- Total Non-Interest Income 277,563 273,835 Non-Interest Expense Salaries and wages 948,228 872,156 Employee benefits 178,426 185,370 Occupancy expenses 103,606 73,911 Furniture and equipment expense 72,633 62,632 Other operating expenses 441,139 401,520 ----------- ----------- Total Non-Interest Expense 1,744,032 1,595,589 ----------- ----------- Net Income before Taxes 1,881,779 1,707,663 Income Taxes 579,836 510,710 ----------- ----------- Net Income $1,301,943 $1,196,953 =========== =========== Net Income per Share $ 0.89 $ 0.83 =========== =========== See notes to consolidated financial statements. Page 6 of 16 Form 10-QSB Benchmark Bankshares, Inc. Consolidated Statement of Income (Unaudited) Three Months Ended June 30, 1997 1996 ---- ---- Interest Income Interest and fees on loans $3,031,502 $2,820,780 Interest on U. S. Government obligations 130,896 132,044 Interest on State and municipal obligations 122,757 144,157 Interest on Federal funds sold 109,952 49,796 Interest on other securities 2,610 2,610 ----------- ----------- Total Interest Income 3,397,717 3,149,387 Interest Expense Interest on deposits 1,628,074 1,514,925 ----------- ----------- Net Interest Income 1,769,643 1,634,462 Provision for Loan Losses 87,389 88,742 ----------- ----------- Net Interest Income after Provision 1,682,254 1,545,720 Non-Interest Income Service charges, commissions, and fees on deposits 98,172 83,977 Other operating income 37,082 58,747 (Losses) on sale of securities (662) (401) Rental income - 1,800 ----------- ----------- Total Non-Interest Income 134,592 144,123 Non-Interest Expense Salaries and wages 480,135 445,250 Employee benefits 69,862 100,817 Occupancy expenses 49,157 36,709 Furniture and equipment expense 37,312 28,565 Other operating expenses 235,875 218,794 ----------- ----------- Total Non-Interest Expense 872,341 830,135 ----------- ----------- Net Income before Taxes 944,505 859,708 Income Taxes 292,529 257,241 ----------- ----------- Net Income $ 651,976 $ 602,467 =========== =========== Net Income per Share $ 0.45 $ 0.42 =========== =========== See notes to consolidated financial statements. Page 7 of 16 Form 10-QSB Benchmark Bankshares, Inc. Condensed Consolidated Statement of Cash Flows (Unaudited) Six Months Ended June 30, 1997 1996 ---- ---- Cash Provided by Operations $1,255,472 $1,020,556 Cash Provided by Financing Activities Net increase in demand deposits and interest bearing transaction accounts 2,040,780 442,211 Net increase in savings and money market deposits 850,359 1,070,580 Net increase in certificates of deposit 2,307,388 5,097,071 Net sale of stock 180,433 127,290 Dividends paid (391,510) (288,435) ----------- ------------ Total Cash Provided by Financing Activities 4,987,450 6,448,717 Cash Used in Investing Activities Purchase of securities (161,860) (1,640,000) Sale of securities 823,870 509,747 Maturity of securities 1,415,903 1,719,260 Increase in loans net of collections (4,291,568) (10,469,457) Purchase of premises and equipment (54,328) (849,291) ----------- ------------ Total Cash (Used) by Investing Activities (2,267,983) (10,729,741) ----------- ------------ Increase (Decrease) in Cash and Cash Equivalents $3,974,939 $(3,260,468) =========== ============ See notes to consolidated financial statements. Page 8 of 16 Form 10-QSB Benchmark Bankshares, Inc. Condensed Consolidated Statement of Cash Flows (Unaudited) Three Months Ended June 30, 1997 1996 ---- ---- Cash Provided by Operations $ 192,928 $ 363,593 Cash Provided by Financing Activities Net increase in demand deposits and interest bearing transaction accounts (887,315) (818,971) Net increase (decrease) in savings and money market deposits (365,509) (130,890) Net increase in certificates of deposit 251,726 2,375,054 Redemption of stock (347) (11) ----------- ------------ Total Cash Provided by Financing Activities 773,185 1,425,182 Cash Used in Investing Activities Purchase of securities (161,860) (295,000) Maturity of securities 1,003,323 681,824 Increase in loans net of collections (2,059,073) (5,763,847) Purchase of premises and equipment (4,488) (472,544) ----------- ------------ Total Cash (Used) by Investing Activities (1,222,098) (5,849,567) ----------- ------------ Increase (Decrease) in Cash and Cash Equivalents $ (255,985) $(4,060,792) =========== ============ See notes to consolidated financial statements. Page 9 of 16 Form 10-QSB Benchmark Bankshares, Inc. Notes to Consolidated Financial Statements June 30, 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 10 of 16 (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. 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 six months of 1997 and 1996 were 1,460,074.254 and 1,441,012.14 shares, 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 11 of 16 (h) The table below reflects the components of the Net Deferred Tax Asset account as of June 30, 1997: Deferred tax assets resulting from loan loss reserves $ 388,769 Deferred tax liabilities resulting from depreciation (69,569) Unrealized securities losses (32,028) ---------- Net Deferred Tax Asset $ 287,172 ========== Page 12 of 16 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Six Months Ending June 30: 1997 Versus 1996 Earnings Summary Net income of $1,301,943 for the first six months of 1997 increased $104,990 or 8.77% as compared to net income of $1,196,953 earned during the first six months of 1996. Earnings per share of $.89 as of June 30, 1997 increased $.06 over the June 30, 1996 level of $.83. The annualized return on average assets of 1.69% decreased 1.74% while the annualized return on average equity of 17.46% decreased 1.80% when comparing first six months 1997 results with those of first six months 1996. The increase in earnings resulted from continued growth in loans; however, the rate of return declined as deposit growth out paced loan growth resulting in the Bank holding more highly liquid investments which earn a lesser rate of income than loans. Interest Income and Interest Expense Total interest income of $6,701,487 for the first six months of 1997 increased $514,444 or 8.31% over interest income of $6,187,043 recorded during the first six months 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. Of the investments, only the return in Federal Funds Sold increased as the Bank held short-term investments to meet anticipated loan demand. Total interest expense in the first six months of 1997 increased to a level of $3,207,044. This amounted to an increase of $206,148 or 6.87% over the level reached during the first six months 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 six months of 1997, the Bank increased the loan loss reserve by $92,433 to a level of $1,296,299 or 1.04% of the outstanding loan balance. At year end 1996, the reserve level amounted to $1,143,482 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 June 30, 1997, the Bank had $2,596,231 in non-performing loans or 2.09% of the loan portfolio. The amount of non-secured loans in this category amounted to $1,606,865. Page 13 of 16 Non-Interest Income and Non-Interest Expense Non-interest income of $277,563 increased $3,728 or 1.36% for the first six months of 1997 as compared to the level of $273,835 reached during the first six months of 1996. The increase resulted from an increase in overdraft fees collected as the Bank changed its fee policy. Non-interest expense of $1,744,032 increased $148,443 or 9.30% for the first six months of 1997 as compared to the level of $1,595,589 reached during the first six months of 1996. The change resulted from increases in salaries due to the expanding staff needs of the Bank's branch offices. 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 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 June 30, 1997, the Bank had $1,148,478 outstanding letters of credit. 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 instruments are as follows: 1997 $276,500 1998 406,478 2000 465,500 Liquidity As of the end of the first six months of 1997, $49,319,432 or 39.58% of gross loans will mature or are subject to repricing within one year. These loans are funded in part by $12,505,238 in certificates of deposit of $100,000 or more of which $5,992,242 mature in one year or less. Currently, the Bank has a maturity average ratio for the next twelve months of 68.70% when comparing current assets and current liabilities. At year end 1996, $51,246,468 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 $15,471,009 or 9.83% of total assets as of June 30, 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 $16,767,308 represents 10.66% of total assets as of June 30, 1997 as compared to $15,565,539 or 10.31% of total assets as of December 31, 1996. Page 14 of 16 The increase in the equity position resulted from an increase in earnings in the first six months of 1997 versus the first six months of 1996 and an increase in capital through the sale of common stock from the dividend reinvestment program. Three Months Ending June 30: 1997 Versus 1996 The same operating policies and philosophies discussed in the six month discussion were prevalent throughout the second quarter and the operating results were predictably similar. Earnings Summary Net income of $651,976 for the second quarter of 1997 increased $49,509 or 8.22% as compared to the $602,467 earned during the second quarter of 1996. Earnings per share of $.45 for the second quarter of 1997 increased $.03 or 7.14% when compared to the corresponding period in 1996. The annualized return on average assets was 1.70% and the return on average equity was 17.70% for the second quarter of 1997. This compares to a return on average assets of 1.70% and a return on average equity of 18.31% for the same period in 1996. The increased earnings is an indication of the growth experienced during the second quarter. The return on average equity reflects the growth in equity through the dividend reinvestment plan. Interest Income and Interest Expense Total interest income of $3,397,717 for the second quarter of 1997 increased $248,330 or 7.89% from the total interest income of $3,149,387 for the corresponding quarter in 1996. The increase resulted primarily from growth in the loan portfolio. Interest and fees on loans amounted to $3,031,502. This represented an increase of $210,722 or 7.47% over the corresponding period in 1996. Interest expense for the second quarter of 1997 increased $113,149 or 7.47% over the same period in 1996. The increase in interest expense reflected the current economic trend of increased interest rates as well as steady deposit growth. Provision for Loan Losses During the second quarter, the demand for loans was strong and the level of quality loans continued to increase. During the period, the Bank provided an additional $87,389 to the reserve through its provision for loan losses. Loans and Deposits During the second quarter of 1997, net loans grew $1,985,267. This growth resulted from the continued strong loan demand experienced throughout the Bank's trade area. Deposits increased by $2,065,349 for the three month period ending June 30, 1997. Management feels that the growth in deposits has resulted from an increase in the size of the trade area as well as further penetration into existing market areas. Page 15 of 16 Form 10-QSB Benchmark Bankshares, Inc. June 30, 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 June 30, 1997. Page 16 of 16 Form 10-QSB Benchmark Bankshares, Inc. June 30, 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: July 23, 1997 Ben L. Watson, III ------------------ President & CEO Date: July 23, 1997 Janice C. Whitlow ----------------- Cashier and Treasurer EX-27 2 ARTICLE 9 FDS FOR 10-QSB JUNE 30, 1997
9 1 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 5,134,840 0 7,323,000 0 13,292,267 3,104,363 2,932,117 124,597,141 1,296,299 157,321,171 140,558,345 0 1,291,817 0 0 0 306,620 15,164,389 157,321,171 6,009,540 522,926 169,021 6,701,487 3,207,044 3,207,044 3,494,443 146,195 (1,234) 1,744,032 1,881,779 1,301,943 0 0 1,301,943 .89 .89 4.85 1,927,594 668,636 0 8,310,387 1,203,866 128,000 75,000 1,296,299 1,296,299 0 1,296,299
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