-----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, Ej47cPGZFxWAHrHGlxBSxi3HY4+qAPOspDqb86kZ4PMF55LNg7ogin9TIrr11H0I bAAj6+3cWjUBRFD6vwlH4Q== 0000804563-98-000002.txt : 19980514 0000804563-98-000002.hdr.sgml : 19980514 ACCESSION NUMBER: 0000804563-98-000002 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980513 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: SEC FILE NUMBER: 000-18445 FILM NUMBER: 98618313 BUSINESS ADDRESS: STREET 1: 100 S BROAD ST CITY: KENBRIDGE STATE: VA ZIP: 23944 BUSINESS PHONE: 8046768444 MAIL ADDRESS: STREET 1: 100 S BROAD ST CITY: KENBRIDGE STATE: VA ZIP: 23944 10QSB 1 FIRST QUARTER 1998 10QSB 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, 1998. [ ] 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 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: 2,942,811.048 Page 2 of 13 Form 10-QSB Benchmark Bankshares, Inc. Part I - Table of Contents March 31, 1998 Part I Financial Information Item 1 Consolidated Balance Sheet Consolidated Statement of Income and Comprehensive 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, 1998 1997 ---- ---- Assets Cash and due from banks $ 4,712,051 $ 4,595,094 Securities Federal Agency obligations 9,944,985 9,007,268 State and municipal obligations 9,203,663 8,915,548 Other securities 137,000 137,000 Federal funds sold 10,712,000 5,353,000 Loans 128,353,265 127,110,962 Less Unearned interest income (287,305) (297,097) Allowance for loan losses (1,448,651) (1,391,424) ------------- ------------- Net Loans 126,617,309 125,422,441 Premises and equipment - net 3,064,505 2,997,866 Accrued interest receivable 1,383,100 1,236,384 Deferred income taxes 301,051 266,401 Other real estate 531,234 533,234 Other assets 299,242 270,659 ------------- ------------- Total Assets $166,906,140 $158,734,895 ============= ============= Page 4 of 13 Form 10-QSB Benchmark Bankshares, Inc. Consolidated Balance Sheet (Unaudited) (Audited) March 31, December 31, 1998 1997 ---- ---- Liabilities and Stockholders' Equity Deposits Demand (noninterest-bearing) $ 14,779,131 $ 13,859,115 NOW accounts 17,466,231 15,707,189 Money market accounts 6,593,529 6,564,365 Savings 9,524,936 8,320,696 Time, $100,000 and over 13,096,432 12,370,092 Other time 86,607,464 83,920,648 ------------- ------------- Total Deposits 148,067,723 140,742,105 Accrued interest payable 715,965 708,315 Accrued income tax payable 323,427 49,867 Dividends payable - 440,824 Other liabilities 218,545 141,512 ------------- ------------- Total Liabilities 149,325,660 142,082,623 Stockholders' Equity Common stock, par value $.21 per share, authorized 4,000,000 shares; issued and outstanding 03-31-98 2,969,501.675, issued and outstanding 12-31-97 2,942,811.048 shares 623,595 617,990 Capital surplus 3,966,181 3,667,557 Retained earnings 12,842,409 12,189,180 Accumulated other comprehensive income 148,295 177,545 ------------- ------------- Total Stockholders' Equity 17,580,480 16,652,272 ------------- ------------- Total Liabilities and Stockholders' Equity $166,906,140 $158,734,895 ============= ============= Note: The balance sheet at December 31, 1997 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 and Comprehensive Income (Unaudited) Three Months Ended March 31, 1998 1997 ---- ---- Interest Income Interest and fees on loans $3,088,246 $2,978,038 Interest on U. S. Government obligations 164,299 131,379 Interest on State and municipal obligations 117,161 135,284 Interest on Federal funds sold 84,326 59,069 ----------- ----------- Total Interest Income 3,454,032 3,303,770 Interest Expense Interest on deposits 1,647,614 1,578,970 ----------- ----------- Net Interest Income 1,806,418 1,724,800 Provision for Loan Losses 77,458 58,806 ----------- ----------- Net Interest Income after Provision 1,728,960 1,665,994 Noninterest Income Service charges, commissions, and fees on deposits 100,683 94,722 Other operating income 36,772 48,821 (Losses) on sale of securities (214) (572) ----------- ----------- Total Noninterest Income 137,241 142,971 Noninterest Expense Salaries and wages 503,646 468,093 Employee benefits 121,982 108,564 Occupancy expenses 49,297 54,449 Furniture and equipment expense 31,207 35,321 Other operating expenses 202,121 205,264 ----------- ----------- Total Noninterest Expense 908,253 871,691 ----------- ----------- Net Income before Taxes 957,948 937,274 Income Taxes 303,845 287,307 ----------- ----------- Net Income 654,103 649,967 Other Comprehensive Income, Net of Tax Unrealized holding gains arising during period 148,295 (39,340) ----------- ----------- Comprehensive Income $ 802,398 $ 610,627 =========== =========== Net Income per Share $ 0.22 $ 0.22(1) =========== =========== (1) Adjusted for a 2 for 1 stock split on October 2, 1997. 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, 1998 1997 ---- ---- Cash Provided by Operations $ 907,815 $1,063,238 Cash Provided by Financing Activities Net increase in demand deposits and interest-bearing transaction accounts 2,679,058 1,153,465 Net increase in savings and money market deposits 1,233,404 1,215,868 Net increase in certificates of deposit 3,413,156 2,055,662 Decrease in dividends payable (440,824) (391,510) Sale of stock 304,229 180,086 ----------- ----------- Total Cash Provided by Financing Activities 7,189,023 4,213,571 Cash Used in Investing Activities Purchase of securities (3,540,000) - Sale of securities 35,169 823,870 Maturity of securities 2,249,749 412,580 Net increase in loans (1,252,095) (2,232,495) Purchase of premises and equipment (113,704) (49,840) ----------- ----------- Total Cash Used by Investing Activities (2,620,881) (1,045,885) ----------- ----------- Increase in Cash and Cash Equivalents $5,475,957 $4,230,924 =========== =========== See notes to consolidated financial statements. Page 7 of 13 Form 10-QSB Benchmark Bankshares, Inc. Notes to Consolidated Financial Statements March 31, 1998 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 stockholders' 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 1998 average shares have been adjusted to reflect the sale of 12,096.807 shares of the Company's common stock through the dividend reinvestment plan on January 26, 1998, as well as the sale of 14,600 shares through the employee stock option plan at various dates during the period. 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 average shares of outstanding stock for the first quarter of 1998 and 1997 were 2,957,702.001 and 2,914,100, respectively, as adjusted for the 2 for 1 stock split on October 2, 1997. 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, 1998: Deferred tax assets resulting from loan loss reserves $443,287 Deferred tax asset resulting from deferred compensation 22,976 Deferred tax liabilities resulting from depreciation (92,221) Unrealized securities losses (76,395) Net Deferred Tax Asset $297,647 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations FIRST QUARTER 1998 Earnings Summary Net income of $654,103 for the first quarter of 1998 increased $4,136 or .64% as compared to net income of $649,967 earned during the first quarter of 1997. Earnings per share of $.22 as of March 31, 1998 remained the same as the March 31, 1997 level. The annualized return on average assets of 1.6% decreased 5.89% while the annualized return on average equity of 15.29% decreased 12.58% when comparing first quarter 1998 results with those of first quarter 1997. While the steady return on assets indicates that loans and deposits are being garnered at favorable interest rates, the decline in return on average assets and return on equity is indicative of a strengthening capital position rather than a decline in earnings. The Bank experienced a significant level of growth in deposits that was not matched with loan growth. This resulted in a decline in the loan to deposit ratio to a level of 86.69%. Interest Income and Interest Expense Total interest income of $3,454,032 for the first quarter of 1998 increased $150,262 or 4.55% over interest income of $3,303,770 recorded during the first quarter of 1997. 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 has changed as investments in short-term instruments began to reflect larger investment balances. These short-term investments typically earn at a lesser rate than loans. Total interest expense in the first quarter of 1998 increased to a level of $1,647,614. This amounted to an increase of $68,644 or 4.35% over the level reached during the first quarter of 1997. This increase in interest expense resulted from deposit growth. 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 1998, the Bank increased the loan loss reserve by $57,227 to a level of $1,448,651 or 1.13% of the outstanding loan balance. Page 10 of 13 At year end 1997, the reserve level amounted to $1,246,545 or 1.02% 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, 1998, the Bank had $1,033,000 in non-performing loans or .80% of the loan portfolio. The amount of non-secured loans in this category amounted to $250,417. Noninterest Income and Noninterest Expense Noninterest income of $137,241 decreased $5,730 or 4.01% for the first quarter of 1998 as compared to the level of $142,971 reached during the first quarter of 1997. The decrease results from the addition of the full-service branch office in Crewe, Virginia. Noninterest expense of $908,253 increased $36,562 or 4.19% for the first quarter of 1998 as compared to the level of $871,691 reached during the first quarter of 1997, as all areas of operation had additional expense related to the staffing and support required for an expanding customer base. 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, 1998, the Bank had $1,770,471 outstanding letters of credit. This represents a $185,478 or 9.48% 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: 1998 $ 591,500 1999 1,000 2000 1,177,971 Liquidity As of the end of the first quarter of 1998, $53,183,000 or 41.43% of gross loans will mature or are subject to repricing within one year. These loans are funded in part by $13,096,432 in certificates of deposit of $100,000 or more of which $5,364,890 mature in one year or less. Currently, the Bank has a maturity average ratio for the next twelve months of 137.20% when comparing asset and certificates of deposit maturities. Page 11 of 13 At year end 1997, $51,667,363, or 42.16% of gross loans, were scheduled to mature or were subject to repricing within one year and $13,195,785 in certificates of deposit were scheduled to mature during 1998. Capital Adequacy Total stockholder equity was $17,580,480 or 10.53% of total assets as of March 31, 1998. This compared to $16,652,272 or 10.49% of total assets as of December 31, 1997. Primary capital (stockholders' equity plus loan loss reserves) of $19,029,131 represents 11.40% of total assets as of March 31, 1998 as compared to $18,043,696 or 11.37% of total assets as of December 31, 1997. The increase in the equity position resulted from steady earnings with no dividends payable in the first quarter plus the sale of additional stock through the dividend reinvestment and incentive stock option plan. Page 12 of 13 Form 10-QSB Benchmark Bankshares, Inc. March 31, 1998 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, 1998. Page 13 of 13 Form 10-QSB Benchmark Bankshares, Inc. March 31, 1998 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: May 12, 1998 Ben L. Watson, III President & CEO Date: May 12, 1998 Janice C. Whitlow Cashier and Treasurer EX-27 2 FDS --
9 (Replace this text with the legend) 1000 $ 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 1.000 4,712 0 10,712 0 15,420 3,729 3,864 128,353 1,449 166,906 148,068 0 1,257 0 0 0 624 16,957 166,906 3,088 282 84 3,454 1,648 1,648 1,806 77 0 908 958 654 0 0 654 .22 .22 5.77 376 3,637 0 8,669 1,391 46 26 1,449 1,449 0 1,249
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