UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-15600
CBC BANCORP, INC.
(Exact name of registrant as specified in its charter)
CONNECTICUT 06-1179862
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
128 Amity Road, Woodbridge, CT 06525
(Address or principal executive (Zip Code)
offices)
(203) 389-2800
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year
if changed from last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15 (d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
As of June 30, 1995, there were 2,012,514 shares of CBC Bancorp,
Inc. Common Stock, par value $.01 per share, outstanding.
CBC BANCORP, INC.
PART I. FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets 1
June 30, 1995 and December 31, 1994
Unaudited Consolidated Statements of Operations 2
Three Months and Six Months Ended June 30, 1995 and June 30,
1994
Unaudited Consolidated Statements of Changes in Shareholders' 3
Equity -- Six Months Ended June 30, 1995 and June 30, 1994
Unaudited Consolidated Statements of Cash Flows 4
Six Months Ended June 30, 1995 and June 30, 1994
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of 6
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
CBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30 December 31,
(Dollars in 000's) (UNAUDITED) 1995 1994
ASSETS
LOANS (net of allowance
for loan losses: 1995,
$2,083; 1994, $2,637): $55,085 $59,070
INVESTMENT SECURITIES
Held to Maturity -- 6,909
Held for Sale 6,255 7,280
FEDERAL FUNDS SOLD 5,705 5,700
TOTAL EARNING ASSETS 67,045 78,959
CASH AND DUE FROM BANKS 3,050 3,130
ACCRUED INTEREST RECEIVABLE 762 858
PROPERTY AND EQUIPMENT - NET 848 973
OTHER ASSETS HELD FOR LEASE 8,507 3,894
PREPAID AND OTHER ASSETS 881 595
OTHER REAL ESTATE OWNED 3,484 4,313
TOTAL ASSETS $84,577 $92,722
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS:
Demand $8,544 $9,248
Savings and NOW 13,331 14,979
Money market 3,417 5,090
Time deposits under $100 49,146 52,584
Time deposits of $100 or more 6,380 5,573
TOTAL DEPOSITS $80,818 $87,474
ACCRUED INTEREST PAYABLE 417 941
DIVIDENDS PAYABLE 994 649
OTHER LIABILITIES 330 743
SENIOR NOTES 148 148
CAPITAL NOTES 220 220
MANDATORY CONVERTIBLE CAPITAL NOTES 1,090 1,090
TOTAL LIABILITIES $84,017 $91,265
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY:
Preferred Stock $10,090 $9,830
Common Stock 20 20
Additional paid-in capital 10,428 11,032
Unrealized gain (loss) on
marketable equity securities (62) (218)
Accumulated deficit (19,916) (19,207)
TOTAL SHAREHOLDERS' EQUITY 560 1,457
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $84,577 $92,722
The accompanying notes are an integral part of these consolidated
financial statements.
CBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS
OF OPERATIONS
Three Months Ended Six Months Ended
June 30, June 30,
(Dollars in 000's except
per share data)(UNAUDITED) 1995 1994 1995 1994
INTEREST INCOME:
Interest and fees on loans $1,278 $1,726 $2,562 $3,677
Interest and dividends on
investments:
U.S. Treasury securities 74 102 246 200
U.S. Government agency
securities -- -- -- 33
Other securities 16 16 42 34
Interest on federal funds sold 67 26 124 76
TOTAL INTEREST INCOME $1,435 $1,870 $2,974 $4,020
INTEREST EXPENSE:
Interest on deposits:
Savings and time deposits
under $100 $693 $760 $1,352 $1,622
Time deposits of $100 or
more 106 48 165 92
Total Interest on Deposits 799 808 1,517 1,714
Interest on borrowed money:
Long-term borrowings 44 58 86 76
Treasury demand note
accounts -- 1 -- 4
Other 6 4 14 9
Total Interest on borrowed
money 50 63 100 89
TOTAL INTEREST EXPENSE 849 871 1,617 1,803
NET INTEREST INCOME 586 999 1,357 2,217
Provision for loan losses 275 110 350 184
NET INTEREST INCOME (LOSS)
AFTER PROVISION
FOR LOAN LOSSES $311 $889 $1,007 $2,033
OTHER OPERATING INCOME:
Service fees on deposits $113 $276 $232 $431
Processing and transfer fees 26 16 52 32
Net gain (loss) on sale of
securities 0 (860) (1) (822)
Gain on sale of lease -- -- -- 227
Lease asset income 199 -- 316 --
Gain on sale of loans 45 20 62 69
Other 24 60 71 138
TOTAL OTHER OPERATING INCOME $407 ($488) 732 75
OTHER OPERATING EXPENSES:
Salaries and employee benefits $545 $592 $1,116 $1,191
Occupancy 73 99 161 198
Supplies and communications 43 51 84 99
Professional services 77 325 238 678
Furniture and equipment
maintenance 19 20 39 59
Depreciation and amortization 49 54 102 112
FDIC insurance 69 98 137 189
Other insurance 22 29 44 69
Other real estate owned 365 171 440 400
Other 27 134 87 123
TOTAL OTHER OPERATING EXPENSES $1,289 $1,573 $2,448 $3,118
INCOME (LOSS) BEFORE INCOME
TAX AND EXTRAORDINARY ITEM (571) (1,172) (709) (1,010)
Income tax -- 2 -- 2
INCOME BEFORE EXTRAORDINARY
ITEM (571) (1,174) (709) (1,012)
Extraordinary item - Tax
benefit from net operating
loss carryforward -- -- -- --
NET INCOME (LOSS) ($571) ($1,174) ($709) ($1,012)
Less preferred stock dividends (311) (168) (604) (186)
Loss applicable to common
stock ($882) ($1,342) ($1,313) ($1,198)
Income (loss) per common
share before extraordinary
item ($ .44) $ .67 ($.65) ($.60)
Extraordinary item -- -- -- --
Net income per common share
(Primary) ($ .44) $ .67 ($.65) ($.60)
Weighted Average Common Shares
(Primary) 2,012,514 2,012,514 2,012,514 2,012,514
The accompanying notes are an integral part of these consolidated financial
statements.
CBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
($ and shares in 000's) (UNAUDITED)
Unrealized
Loss on Retained
Common Stock Additional Marketable Earnings
Number of Preferred Paid-in Equity (Accum.
Shares Amount Stock Capital Securities Deficit) Total
BALANCE, DECEMBER 31, 1994 2,013 $20 $9,830 $11,032 ($218) ($19,207) $1,457
Preferred dividends accrued
Series I (100) (100)
Preferred dividends accrued
Series II (236) (236)
Preferred dividends accrued
Series III (268) (268)
Change in unrealized loss on
marketable equity securities 156 156
Issuance of Preferred Stock 260 260
Net income (loss) (709) (709)
BALANCE, JUNE 30, 1995 2,013 $20 $10,090 $10,428 ($62) ($19,916) $560
BALANCE, DECEMBER 31, 1993 10,061 $100 $1,000 $11,421 $170 ($15,318) ($2,627)
Preferred dividends accrued
Series I (58) (58)
Preferred dividends accrued
Series II (128) (128)
Change in unrealized loss on
marketable equity securities (323) (323)
Issuance of Preferred Stock 5,000 5,000
Net income (loss) (1,012) (1,012)
BALANCE, JUNE 30, 1994 10,061 $100 $6,000 $11,235 ($153) ($16,330) $852
The accompanying notes are an integral part of these consolidated financial
statements.
CBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
($ IN 000's) (UNAUDITED) 1995 1994
OPERATING ACTIVITIES:
Net Income (Loss) ($709) ($1,012)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Provision for losses on loans 350 184
Provision for depreciation and amortization 102 112
Increase (decrease) in deferred loan fees
and costs - net (20) (89)
Amortization of loan purchase premiums -- 281
Amortization (accretion) of net investment
security premiums (discounts) 50 100
Loss (gain) on sale of securities 1 822
Loss (gain) on sale and provision for
write-downs of other real estate owned 335 232
Decrease in accrued interest receivables 96 47
Decrease (increase) in prepaid and
other assets (241) (16)
Decrease (increase) in accrued interest
payable (525) (897)
Increase (decrease) in deferred revenue (23) (64)
Increase (decrease) in other liabilities (173) (139)
Net cash used by operating activities ($757) ($439)
INVESTING ACTIVITIES:
Net decrease (increase) in federal funds
sold ($5) $7,950
Proceeds from sales and maturities of
investment securities 9,027 11,329
Purchases of investment securities (988) (1,995)
Principal payments on mortgage-backed
securities -- 491
Decrease (increase) in loans 3,218 6,829
Proceeds from sales of OREO 803 1,776
Purchases of property and equipment (109) (21)
Purchase of other assets held for lease (7,959) (3,171)
Proceeds from sales of other assets
held for lease 3,346 --
Net cash provided by investing activities $7,333 $23,188
FINANCING ACTIVITIES:
Net decrease in demand, savings and money
market deposit accounts ($4,024) ($11,161)
Net decrease in time deposits (2,632) (10,716)
Net decrease in treasury demand note account -- (442)
Net cash used in financing activities ($6,656) ($22,319)
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (80) 430
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR 3,130 4,305
CASH AND DUE FROM BANKS AT END OF QUARTER $3,050 $4,735
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the quarter for:
Interest on deposits and borrowed money 2,141 1,803
Income taxes -- 2
NONCASH INVESTING AND FINANCING ACTIVITIES:
Transfers of loans to Other Real Estate Owned 438 180
Issuance of preferred stock in exchange for
marketable securities -- 5,000
Preferred stock dividend declared and unpaid 344 186
Unrealized gain (loss) on valuation of
instruments available for sale 156 153
Issuance of preferred stock dividend 260 --
CBC BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A: BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
CBC Bancorp, Inc. (the "Company") and its subsidiary, Connecticut Bank of
Commerce (the "Bank"). The consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In preparing such financial
statements, management is required to make estimates and assumptions that
effect the reported amounts of assets and liabilities as of the date of
the consolidated balance sheets and the revenues and expenses for the
period. Actual results could differ significantly from those estimates.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results are not necessarily indicative of the
results that may be expected for the year ending December 31, 1995. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1994.
NOTE B: REGULATORY MATTERS
Under the terms of the July 1991 Cease and Desist Order (the "1991 Order"),
the Bank must obtain the prior approval of the Federal Deposit Insurance
Corporation ("FDIC") and the Connecticut Banking Commissioner (the "Banking
Commissioner") before paying any cash dividends to the Company. The 1991
Order also requires the Bank to maintain a Tier 1 leverage ratio of 6
percent. In connection with the September 1993 FDIC regulatory
examination of the Bank, the FDIC issued an additional order to cease and
desist in December 1993 (the "1993 Order"). Among other things, the 1993
Order required the Bank to correct certain policies, practices and
alleged violations of law. The Bank and its Board of Directors believe
that the Bank has complied fully with each of the terms of the 1991 and
1993 Orders, except for the 6 percent Tier 1 leverage ratio.
In connection with the 1994 FDIC regulatory examination of the Bank, the
Bank was required to submit a Revised Capital Restoration Plan (the
"Capital Plan"); the Capital Plan was approved by the FDIC and the
Banking Commissioner in December 1994. On July 11, 1995, the Bank
received approval from the FDIC for an amendment to its Capital Plan.
The Capital Plan called for a $200,000 capital infusion at December 31,
1994 and a subsequent $1,000,000 infusion at June 30, 1995. The $200,000
infusion was completed; however, the second tranche was delayed due to
certain events beyond the Company's control which delayed the effective
date of the registration of the securities intended to be offered to
raise the necessary capital. The amendment calls for an extension until
September 30, 1995 to complete the securities registration and to raise
a minimum of $1,200,000 million in new capital. The amendment also
provides that the Company's majority shareholder will acquire such
number of unsold securities in the offering as needed to achieve minimum
net proceeds of $1,200,000. Upon completion of this equity offering, the
Bank's Total Capital to risk-weighted assets ratio is projected to be
approximately 8%, the Tier 1 capital to risk-weighted assets ratio will
exceed 5%, and the Bank's Tier 1 Leverage Ratio is projected to be above
5%. This will result in the Bank being deemed "adequately capitalized"
as defined in the FDIC Improvement Act. Thereafter, the Capital Plan
provides for the Bank's attainment of the 6% Tier 1 Leverage Ratio
contained in the 1991 Order by December 31, 1996 through retained
earnings. Notwithstanding the foregoing, the ability of the Company
and the Bank to complete the required equity offering or to otherwise
maintain and increase regulatory capital as projected in the Capital
Plan is dependent upon, among other factors, the market conditions for
the Company's equity securities, the Bank's ongoing profitability, the
future levels of nonperforming assets and the local and the regional
economy in which the Bank and its customers operate.
In an effort to restore and maintain the financial soundness of the
Company, a written agreement (the "Agreement") was entered into with
the Federal Reserve Bank of Boston (the "FRB") effective November 2,
1994. The Agreement requires the Company to seek written approval of
the FRB prior to declaring or paying dividends, increasing borrowings
or incurring debt, engaging in material transactions with the Bank or
other affiliated parties, or making cash disbursements in excess of
agreed upon amounts.
As of June 22, 1995, CBC Bancorp, Inc. (the "Company") is in the process
of completing steps which will enable its common stock to be quoted on
the Over-the-Counter Bulletin Board. The Company was notified by NASDAQ
that the Company's common stock will no longer be listed on the NASDAQ
SmallCap Market due to listing criteria.
NOTE C: PREFERRED STOCK DIVIDEND.
In accordance with the dividend payment provisions of the Series III
Preferred Stock offering, the Board of Directors has voted to pay stock
dividends in the amount of 26 shares of Preferred Series III Stock with
a stated value of $260,000 to the majority shareholder as satisfaction
of the same amount of dividends payable to him as of June 30, 1995.
This action was taken in an effort to preserve the capital surplus of
the Company.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL HIGHLIGHTS
CBC BANCORP, INC. AND SUBSIDIARY
CONDENSED STATEMENTS OF INCOME
Six Months Ended June 30,
($ In thousands, except per share data) 1995 1994
Net interest income 1,357 2,217
Provision for loan losses 350 184
Net interest income after provision for
loan losses 1,007 2,033
Investment securities gains (losses) (1) (822)
Other non-interest income 733 897
Other real estate owned expense 440 400
Other non-interest expense 2,008 2,720
NET INCOME (LOSS) (709) (1,012)
Common Per share data:<F1>
Book value -- --
Net income (.65) (.60)
Cash dividends -- --
Financial Ratios
Yield on interest-bearing assets 8.12 8.49
Cost of funds 4.24 3.68
Interest rate spread 3.88 4.81
Net interest margin 3.70 4.68
Return on average assets(annualized) -- --
Return on average equity(annualized) -- --
Average equity to average assets 1.48 (.75)
At end of quarter:
Loans to deposits 70.74 82.00
Nonperforming loans to total loans 14.41 16.95
Nonperforming assets to total loans
and OREO 20.00 23.20
Allowance for loan losses to nonperforming
loans 35.56 30.90
Capital ratios of bank subsidiary:
Total risk-based 6.27 4.37
Tier 1 risk-based 4.99 3.07
Tier 1 leverage 3.72 2.62
At end of period June 30,
1995 1994
Total assets 84,577 103,604
Net loans 55,085 76,829
Allowance for loan losses (2,083) (4,247)
Securities 6,255 7,131
Deposits 80,818 99,203
Stockholders' equity 560 852
Outstanding shares<F1> 2,012,514 2,012,514
<FN>
<F1> Per share financial data and number of shares outstanding have been
adjusted to reflect the one for five stock split effective July 25, 1994.
</FN>
RESULTS OF OPERATIONS
The Company's net loss for the six months ending June 30, 1995 was $709,000
or $.35 per share of common stock, a reduction in loss of $303,000 from the
loss of $1,012,000 or $.50 per share of common stock for the prior year
period. The large loss in 1994 was due primarily to a $852,000 loss
incurred by the Company on the sale of securities associated with the
equity contribution on March 24, 1994. This was offset by a gain of
$227,000 from the sale of the Bank's leasehold interest in a parcel of
land adjacent to the Bank's main office for cash, resulting in a net
loss of $575,000 due to non-recurring events.
Total interest income for the six months ended June 30, 1995 decreased
$1,046,000 or 26% from the six month period ended June 30, 1994. This
was due primarily to a 23% decrease in the average loans outstanding
during the six month period, combined with a slight decrease in average
interest rates charged for loans and a reallocation of the Bank's assets
from investment securities to financial lease transactions which generate
other non-interest income.
Total interest expense on deposits for the six months ended June 30, 1995
decreased $186,000 or 10% from the six month period ended June 30, 1994.
This reflects a 22% decrease in interest bearing deposits combined with a
15% increase in average interest rates paid.
Non-interest income increased $657,000 in the first six months of 1995
over the comparable period in 1994. The increase is largely attributable
to the combination of $316,000 in income from financial lease transactions
and the net charges of $575,000 taken in 1994 as mentioned above. The
increase in tempered by a decrease in service charges of $199,000.
Non-interest expense decreased $670,000 or 21% for the first six months
ended June 30, 1995 compared to the same period in 1994. The reduction
of non-interest expense reflects management's efforts to significantly
reduce professional fees as well as overall cost containment measures
in all other general and administrative expenses.
The year-to-date provision for loan losses was $350,000 for 1995 and
$184,000 for 1994.
The Company's net loss for the second quarter of 1995 was $571,000 or
$.28 per common share, a reduction in loss of $603,000 from the net
loss of $1,174,000 or $.58 per common share for the second quarter of
1994. As mentioned above the reduction was primarily due to losses
incurred in 1994 relating to the equity contribution. In the second
quarter of 1995 the Bank increased its other real estate owned reserve
by approximately $300,000 as required by the Connecticut State Banking
Department based on the results of their examination of the Bank as of
March 31, 1995. The effect of this was offset by a reduction of other
operating expenses of approximately 34%.
FINANCIAL CONDITION
Gross loans decreased by $4,539,000 or 7.3% in the aggregate for the six
months ended June 30, 1995. Investment securities and federal funds sold
decreased $7,929,000 or 39.8%. The decrease is primarily the result of a
reallocation of assets to the leasing program and a decrease in deposits
of $6,656,000 or 7.6%.
At June 30, 1995, the Bank had $10,590,000 outstanding from leasing-related
transactions. The leasing business includes short term financing of leases
which are subsequently placed with permanent lenders, accounts receivable
purchases resulting from leasing transactions and equipment purchased for
prospective lessees. Most transactions are short term in nature.
The decrease in deposits is partially attributed to the closing of the
Bank's Greenwich Branch on March 1, 1995 as well as the migration of
customer funds to other markets.
CAPITAL ADEQUACY
The following table summarizes the minimum capital requirements and
capital positions at June 30, 1995 and December 31, 1994:
($ in thousands) June 30, 1995 December 31, 1994
Minimum Actual Minimum Actual
Capital Capital Capital Capital
Required Bank Required Bank
- Bank - Bank
Regulatory Capital Requirements
Total risk based capital percentage 8.00% 6.27% 8.00% 7.26%
Total risk based capital 5,058 3,959 5,059 4,590
Tier 1 risk based capital percentage 4.00% 4.99% 4.00% 5.97%
Tier 1 risk based capital 2,529 3,153 2,530 3,777
Leverage (per order) percentage 6.00% 3.72% 6.00% 3.95%
Leverage (per order) 5,091 3,153 5,725 3,799
At June 30, 1995, the Bank's minimum leverage ratio was below 4%, and
therefore the FDIC could issue a prompt corrective action directive which
would impose certain restrictions on the Bank. Based on the July 11, 1995
approval by the FDIC of the Bank's amendment to the Capital Plan, the Bank
does not anticipate any such regulatory action at this time, provided the
Bank achieves the amended Capital Plan.
LOANS
($ in thousands) June 30, 1995 December 31, 1994
% of % of
Amount Total Amount Total
Commercial collateralized
by real estate $24,936 44% $34,044 55%
Commercial other 16,553 29% 12,757 21%
Residential real estate
mortgage 11,825 20% 12,663 21%
Consumer 1,838 3% 2,331 3%
Lease financing 2,083 4% -- --
Total loans - gross $57,235 100% $61,795 100%
Unearned income ($30) ($49)
Deferred loan fees (37) (39)
Allowance for loan losses (2,083) (2,637)
Total Loans - net $55,085 $59,070
Average outstanding loans
- net $59,446 $74,283
NONPERFORMING ASSETS
($ in thousands) June 30, December 31,
1995 1994
Loans past due 90 days or more:
Non-accrual $6,170 $7,885
Accrual 2,067 1,305
Total loans past due 90 days or more 8,237 9,190
Other real estate owned ("OREO"):
Foreclosed properties 2,702 3,088
In-substance foreclosures 782 1,225
Total OREO 3,484 4,313
TOTAL NONPERFORMING ASSETS $11,721 $13,503
Nonperforming assets to total loans
(net) and OREO (net) 20.00% 21.30%
Allowance for loan losses to total
loans past due 90 days or more 35.56% 28.69%
As a percentage of total loans:
Loans past due 90 days or more 14.41% 14.89%
Allowance for loan losses 3.64% 4.27%
Non-accrual loans consisted of the following:
($ in thousands) June 30, December 31,
1995 1994
Non-accrual loans:
Real estate loans $6,024 $7,354
Commercial other 146 530
TOTAL NON-ACCRUAL LOANS $6,170 $7,884
OREO consisted of the following:
($ in thousands) June 30, December 31,
1995 1994
1 - 4 family residential properties $960 $1,233
Multifamily residential properties 265 331
Commercial real estate 1,414 1,846
Construction & Land Development 845 903
TOTAL OREO $3,484 $4,313
The Company, in most cases, discontinues the accrual of interest income
whenever reasonable doubt exists as to its ultimate collectibility or when
the loan is 90 days or more past due. When the accrual of interest income
is discontinued, all previously accrued interest income is generally
reversed against the current period's income. A non-accrual loan is
restored to an accrual status when it is no longer delinquent and
collectibility of interest and principal is no longer in doubt.
The Company's ability to reduce nonperforming assets is dependent on
conditions in the real estate market and general economy.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through charges against
income and maintained at a level that management considers adequate to
absorb potential losses in the loan portfolio. Management's estimate of
the adequacy of the allowance for loan losses is based on evaluations of
individual loans, estimates of current collateral values and the results
of the most recent regulatory examination. Management also evaluates the
general risk characteristics inherent in the loan portfolio, prevailing
and anticipated conditions in the real estate market and general economy,
and historical loan loss experience. Loans are charged against the
allowance for loan losses when management believes that collection is
unlikely. Any subsequent recoveries are credited back to the allowance
for loan losses when received.
The changes in the allowance for loan losses were as follows:
Six months ended June 30, 1995 1994
($ in thousands)
Beginning balance $2,637 $5,012
Loans charged-off ($1,246) (731)
Recoveries 342 292
Net loan recoveries (charge-offs) (904) (438)
Provision for loan losses 350 74
Ending balance $2,083 $4,648
Net loan charge-offs to average loans
outstanding 1.52% 0.54%
While the Company believes its allowance for loan losses is adequate in
light of present economic conditions and the current regulatory
environment, there can be no assurance that the Company's banking
subsidiary will not be required to make future adjustments to its
allowance and charge-off policies in response to changing economic
conditions or future regulatory examinations. The Connecticut Department
of Banking completed its regulatory examination of the Bank as of the
close of business on April 4, 1995. While the Bank was required to make
certain adjustments which reduced the Bank's and the Company's capital as
of June 30, 1995 by approximately $300,000, the adjustments are minimal
in comparison to the results from each of the previous five regulatory
examinations of the Bank conducted by the Connecticut Banking Department
and the FDIC. In addition, the Connecticut Banking Department determined
that the Bank's allowance for loan losses was adequate as of the
examination date.
The Bank has adopted Financial Accounting Standard 114 "Accounting By
Creditors for Impaired Loans" effective January 1, 1995. In connection
therewith, Management reviews the non-accrual loan portfolio and loans
past due 90 days and accruing to determine if there is loan impairment.
At June 30, 1995 the Bank's impaired loans amounted to $__________. The
Bank has allocated $__________ of the general loan loss reserve to this
portfolio.
SECURITIES
All of the Company's investment securities were available for sale as of
June 30, 1995 in accordance with the requirements of Statement of
Financial Accounting Standards No. 115 (SFAS No. 115) "Accounting for
Certain Investments in Debt and Equity Securities." The specific
accounting policies pertaining to SFAS No. 115 are detailed in the
Summary of Accounting Policies to the Company's Consolidated Statements
included in Item 14 of the December 31, 1994 Form 10-K.
At June 30, 1995 Amortized Gross Unrealized Estimated
($ in thousands) Cost Gains Losses Market Value
U.S. Treasury Securities $5,612 -- ($58) $5,574
Marketable equity securities 205 -- (24) 182
Other 500 -- -- 500
TOTAL INVESTMENT SECURITIES $6,317 -- ($62) $6,255
At December 31, 1994 Amortized Gross Unrealized Estimated
($ in thousands) Cost Gains Losses Market Value
(A) HELD-TO-MATURITY
U.S. Treasury Notes $6,909 -- ($39) $6,870
(B) AVAILABLE FOR SALE
U.S. Treasury Notes $6,293 -- ($195) $6,098
Certificate of Deposit 500 -- -- 500
State of Israel Bond 500 -- -- 500
Marketable Equity Securities 205 -- (23) 182
TOTAL INVESTMENT SECURITIES $7,498 -- ($218) $7,280
In March 1995 the Bank made a business decision to sell the investments
held-to-maturity as a result of a comparable decrease in deposits. The
Bank has been advised by the Connecticut Department of Banking that it
must request prior regulatory approval to establish a held-to-maturity
portfolio in the future.
NET INTEREST INCOME
The following table presents condensed average statements of condition,
including non-accrual loans, the components of net interest income and
selected statistical data:
Six months ended June 30, 1995 1994
Average Average Average Average
($ in thousands) Balance Interest Rate Balance Interest Rate
Assets:
Loans $59,446 $2,562 8.69% $80,588 $3,677 9.20%
Securities 9,973 288 5.82% 10,201 267 5.28%
Federal Funds Sold 4,476 124 5.59% 4,724 76 3.24%
Total Earning Assets 73,895 2,974 8.12% 95,513 4,020 8.49%
Cash and due from banks 2,230 3,420
Other assets 11,079 11,195
Total Assets $87,204 $110,128
Liabilities & Stockholder's
equity:
Interest-bearing deposits:
Time certificates $56,363 $1,339 4.79% $69,555 1,391 4.03%
Savings deposits 17,837 178 2.01% 27,523 323 2.37%
Total interest-bearing deposits 74,200 1,517 4.12% 97,078 1,714 3.56%
Other borrowings 1,750 100 11.52% 1,670 89 10.75%
Total interest-bearing
liabilities 75,953 1,617 4.24% 98,748 1,803 3.68%
Demand deposits 8,241 10,468
Other liabilities 1,719 1,741
Stockholders' equity 1,291 (829)
Total liabilities and
stockholders' equity $87,204 $110,128
Net interest income/rate spread 1,357 3.88% 2,217 4.81%
Net interest margin 3.70% 4.68%
The following table presents the changes in interest income and expense for
each major category of interest-bearing assets and interest-bearing
liabilities, and the amount of the change attributable to changes in
average balances (volume) and rates. Changes attributable to both
volume and rate changes have been allocated in proportion to the
relationship of the absolute dollar amount of the changes in volume
and rate.
Change from June 30, 1994
to June 30, 1995 attributable to:
($ in thousands) Volume Rate Total
Interest income:
Loans ($920) ($195) ($1,115)
Investment securities (6) 27 21
Short-term investments (4) 52 48
Total interest income ($930) ($116) ($1,046)
Interest expense:
Deposits:
Time certificates (4,576) 4,524 (52)
Savings deposits (102) (43) (145)
Total interest expense on
deposits (4,678) 4,481 (197)
Other interest-bearing
liabilities 4 7 11
Total interest expense ($4,674) $4,488 ($186)
NET INTEREST INCOME ($286) ($161) ($447)
COMMITMENTS AND CONTINGENCIES
The Company and certain of its former directors and officers are
defendants in a suit alleging violations under the Securities Exchange
Act of 1934. The suit is described more fully in Item 3 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1994.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1994, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard 119 ("SFAS No. 119") "Disclosure About
Derivative Financial Instruments and Fair Value of Financial Instruments"
effective for year ends beginning after December 15, 1994, except for
entities with less than $150 million in total assets in the current
statement of financial position. For these entities, the statement shall
be effective for financial statements issued for fiscal years ending
after December 15, 1995. The Company does not hold or issue any
derivative financial instruments, and accordingly the statement will
not have a material effect on the consolidated financial statements.
PART II. OTHER INFORMATION
Item 6. Exhibits and Report on Form 8-K
(a) Exhibit 27: Financial Data Schedule
(b) Two Form 8-K's were filed since the fourth quarter ended
December 31, 1994 as follows:
Items Reported Financial Statements Filed Date Filed
1. NASDAQ Delisting None June 22, 1995
2. Approval of Modified None July 11, 1995
Capital Restoration Plan
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 duly authorized.
CBC BANCORP, INC.
(Registrant)
Date: August 14, 1995
Charles Pignatelli
President and Chief Executive Officer
Barbara Van Bergen
Chief Accounting Officer