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 September 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 offices) (Zip Code)
(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 September 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
September 30, 1995 and December 31, 1994
Unaudited Consolidated Statements of Operations 2
Three Months and Nine Months Ended September 30,
1995 and September 30, 1994
Unaudited Consolidated Statements of Changes in 3
Shareholders' Equity -- Nine Months Ended
September 30, 1995 and September 30, 1994
Unaudited Consolidated Statements of Cash Flows 4
Nine Months Ended September 30, 1995 and
September 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
September December
30, 31,
(Dollars in 000's) 1995 1994
(UNAUDITED)
ASSETS
LOANS (net of allowance for loan $54,575 $59,070
losses: 1995, $2,027; 1994,
$2,637):
INVESTMENT SECURITIES
Held to Maturity -- 6,909
Held for Sale 6,055 7,280
FEDERAL FUNDS SOLD 4,750 5,700
TOTAL EARNING ASSETS 65,380 78,959
CASH AND DUE FROM BANKS 3,404 3,130
ACCRUED INTEREST RECEIVABLE 684 858
PROPERTY AND EQUIPMENT - NET 819 973
OTHER ASSETS HELD FOR LEASE 7,573 3,894
PREPAID AND OTHER ASSETS 817 595
OTHER REAL ESTATE OWNED 3,819 4,313
TOTAL ASSETS $82,496 $92,722
LIABILITIES AND SHAREHOLDERS'
EQUITY
DEPOSITS:
Demand $8,322 $9,248
Savings and NOW 13,017 14,979
Money market 2,921 5,090
Time deposits under $100 49,717 52,584
Time deposits of $100 or 4,861 5,573
more
TOTAL DEPOSITS $78,838 $87,474
ACCRUED INTEREST PAYABLE 446 941
DIVIDENDS PAYABLE 1,179 649
OTHER LIABILITIES 423 743
SENIOR NOTES 148 148
CAPITAL NOTES 220 220
MANDATORY CONVERTIBLE CAPITAL 1,090 1,090
NOTES
TOTAL LIABILITIES $82,344 $91,265
COMMITMENTS AND CONTINGENT
LIABILITIES
SHAREHOLDERS' EQUITY:
Preferred Stock $10,220 $9,830
Common Stock 20 20
Additional paid-in capital 10,113 11,032
Unrealized gain (loss) on (24) (218)
marketable equity securities
Accumulated deficit (20,177) (19,207)
TOTAL SHAREHOLDERS' EQUITY 152 1,457
TOTAL LIABILITIES AND $82,496 $92,722
SHAREHOLDERS' EQUITY
The accompanying notes are an integral part of these consolidated
financial statements.
CBC BANCORP, INC. AND
SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Nine Months
Ended Ended
September 30, September 30,
(Dollars in 000's except per 1995 1994 1995 1994
share data) (UNAUDITED)
INTEREST INCOME:
Interest and fees on loans $1,368 $1,631 $3,930 $5,290
Interest and dividends on
investments:
U.S. Treasury securities 72 80 318 280
U.S. Government agency -- -- -- 33
securities
Other securities 11 14 53 48
Interest on federal funds 56 39 180 115
sold
TOTAL INTEREST INCOME $1,507 $1,764 $4,481 $5,766
INTEREST EXPENSE:
Interest on deposits:
Savings and time deposits $745 $679 $2,097 $2,301
under $100
Time deposits of $100 or 73 53 238 145
more
Total Interest on Deposits 818 732 2,335 2,446
Interest on borrowed money:
Long-term borrowings 44 79 130 155
Treasury demand note -- -- -- 4
accounts
Other 7 8 21 17
Total Interest on borrowed 51 87 151 176
money
TOTAL INTEREST EXPENSE 869 819 2,486 2,622
NET INTEREST INCOME 638 945 1,995 3,144
Provision for loan losses -- -- 350 1,641
NET INTEREST INCOME (LOSS)
AFTER PROVISION
FOR LOAN LOSSES $638 $945 $1,645 $1,503
OTHER OPERATING INCOME:
Service fees on deposits $87 $158 $319 $500
Processing and transfer fees 21 18 73 50
Net gain (loss) on sale of (15) -- (16) (822)
securities
Gain on sale of lease -- -- -- 227
Lease asset income 161 294 477 404
Gain on sale of loans 0 112 62 180
Other 35 55 106 173
TOTAL OTHER OPERATING INCOME $289 $637 $1,021 $712
OTHER OPERATING EXPENSES:
Salaries and employee $534 $609 $1,650 $1,800
benefits
Occupancy 81 121 242 378
Supplies and communications 46 58 130 157
Professional services 120 338 358 1,016
Furniture and equipment 20 20 59 59
maintenance
Depreciation and amortization 52 59 154 171
FDIC insurance 61 78 198 267
Other insurance 19 22 63 81
Other real estate owned 135 208 575 818
Other 120 36 207 197
TOTAL OTHER OPERATING $1,188 $1,549 $3,636 $4,944
EXPENSES
INCOME (LOSS) BEFORE INCOME
TAX AND
EXTRAORDINARY ITEM (261) 33 (970) (2,729)
Income tax -- -- -- 2
INCOME BEFORE EXTRAORDINARY (261) 33 (970) (2,731)
ITEM
Extraordinary item - Tax
benefit from net operating
loss carryforward -- -- -- --
NET INCOME (LOSS) ($261) $33 ($970) ($2,731)
Less preferred stock (315) (148) (919) (307)
dividends
Loss applicable to common ($576) ($115) ($1,889) ($3,038)
stock
Income (loss) per common ($ .29) ($ .06) ($ .94) ($1.51)
share before
extraordinary item
Extraordinary item -- -- -- --
Net income (loss) per common ($ .29) ($ .06) ($ .94) ($1.51)
share (Primary)
Weighted Average Common 2,012,514 2,012,514 2,012,514 2,012,514
Shares (Primary)
The accompanying notes are an integral part of these consolidated
financial statements.
CBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
($ and shares in 000's) (UNAUDITED)
Common Unrealized
----Stock------ Loss on Retained
Number Additional Marketable Earnings
of Preferred Paid-in Equity (Accum.
Shares Amount Stock Capital Securities Deficit) Total
BALANCE, DECEMBER 31, 2,013 $20 $9,830 $11,032 ($218) ($19,207) $1,457
1994
Preferred dividends (152) (152)
accrued Series I
Preferred dividends (356) (356)
accrued Series II
Preferred dividends (411) (411)
accrued Series
III
Change in unrealized 194 194
loss on
marketable equity
securities
Issuance of Preferred 390 390
Stock
Net income (loss) (970) (970)
BALANCE, SEPTEMBER 30, 2,013 $20 $10,220 $10,113 ($24) ($20,177) $152
1995
BALANCE, DECEMBER 31, 10,061 $100 $1,000 $11,421 $170 ($15,318) ($2,627)
1993
Reverse Stock Split (8,048) (80) 80 --
(one for five)
Preferred dividends (100) (100)
accrued Series I
Preferred dividends (277) (277)
accrued Series II
Preferred dividends (2) (2)
accrued Series
III
Change in unrealized
loss on
marketable equity (291) (291)
securities
Issuance of Preferred 5,260 5,260
Stock
Net income (loss) (2,731) (2,731)
BALANCE, SEPTEMBER 30, 2,013 $20 $6,260 $11,122 ($121) ($18,049) ($768)
1994
The accompanying notes are an integral part of these consolidated
financial statements.
CBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
($ IN 000's) (UNAUDITED) 1995 1994
OPERATING ACTIVITIES:
Net Income (Loss) ($970) ($2,731)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Provision for losses on loans 350 1,641
Provision for depreciation and amortization 154 171
Increase (decrease) in deferred loan fees (25) (151)
and costs - net
Amortization of loan purchase premiums -- 378
Amortization (accretion) of net investment 83 136
security premiums (discounts)
Loss (gain) on sale of securities 16 822
Loss (gain) on sale and provision for write- 404 408
downs of other real estate owned
Decrease in accrued interest receivables 174 268
Decrease (increase) in prepaid and other (183) (263)
assets
Decrease (increase) in accrued interest (495) (974)
payable
Increase (decrease) in deferred revenue (23) (223)
Increase (decrease) in other liabilities (22) 37
Net cash used by operating activities ($537) ($481)
INVESTING ACTIVITIES:
Net decrease (increase) in federal funds $950 $5,125
sold
Proceeds from sales and maturities of 9,217 11,330
investment securities
Purchases of investment securities (988) (1,995)
Principal payments on mortgage-backed -- 491
securities
Decrease (increase) in loans 2,757 11,384
Proceeds from sales of OREO 1,331 2,759
Purchases of property and equipment (142) (32)
Purchase of other assets held for lease (7,959) (4,334)
Proceeds from sales of other assets held for 4,280 --
lease
Net cash provided by investing activities $9,446 $24,728
FINANCING ACTIVITIES:
Net decrease in demand, savings and money ($5,056) ($14,689)
market deposit accounts
Net decrease in time deposits (3,579) (13,996)
Net decrease in treasury demand note account -- (442)
Proceeds from issuance of Senior Notes -- 3,378
Proceeds from issuance of Preferred Stock -- 260
Net cash used in financing activities ($8,635) ($25,489)
INCREASE (DECREASE) IN CASH AND CASH 274 (1,242)
EQUIVALENTS
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR 3,130 4,305
CASH AND DUE FROM BANKS AT END OF QUARTER $3,404 $3,063
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the quarter for:
Interest on deposits and borrowed money 2,830 3,599
Income taxes -- 2
NONCASH INVESTING AND FINANCING ACTIVITIES:
Transfers of loans to Other Real Estate 1,413 2,411
Owned
Issuance of preferred stock in exchange for -- 5,000
marketable securities
Preferred stock dividend declared and unpaid 529 379
Unrealized gain (loss) on valuation of 194 (291)
instruments available for sale
Issuance of preferred stock dividend 390 --
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
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
called 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 provided that the
Company's majority shareholder would acquire such number of
unsold securities in the offering as needed to achieve minimum
net proceeds of $1,200,000. On September 29, 1995, the Bank
requested a modification to the Capital Plan which called for the
injection of $400,000 of capital by the majority shareholder in
October 1995 and the injection of the remaining amount necessary
for the Bank to achieve the $1.2 million of new equity by
November 30, 1995. On October 20, 1995, the Company issued
$400,000 of Short-Term Senior Notes, which were offered pursuant
to the Company's August 14, 1995 Prospectus, to a company
controlled by the majority shareholder in exchange for equity
securities with a market value of $400,000. The equity
securities were immediately sold by the Company and the proceeds
contributed to the Bank. The Bank is awaiting a response from
the FDIC to its request. 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.
The FRB and the State of Connecticut Banking Department conducted
a joint examination of the Company using financial data as of
March 31, 1995. The report of inspection was issued September
22, 1995 and had no financial adjustments, and the Company was
found to be in general compliance with the Written Agreement.
As of June 22, 1995, 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. 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.
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
and the holder agreed to pay stock dividends in lieu of cash
dividends in the amount of 39 shares of Preferred Series III
Stock with a stated value of $390,000 to the majority shareholder
as satisfaction of the same amount of dividends payable to him
through September 30, 1995. This action was taken in an effort
to preserve the capital surplus of the Company.
Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL HIGHLIGHTS
CBC BANCORP, INC. AND SUBSIDIARY Nine Months Ended
CONDENSED STATEMENTS OF INCOME September 30,
($ In thousands, except per share data) 1995 1994
Net interest income 1,995 3,144
Provision for loan losses 350 1,641
Net interest income after provision for loan 1,645 1,503
losses
Investment securities gains (losses) (16) (822)
Other non-interest income 1,037 1,534
Other real estate owned expense 575 818
Other non-interest expense 3,061 4,128
NET INCOME (LOSS) (970) (2,731)
Common Per share data<F1>
Book value (5.00) (3.49)
Net income (.94) (1.51)
Cash dividends -- --
Financial Ratios
Yield on interest-bearing assets 8.29 8.03
Cost of funds 4.44 3.67
Interest rate spread 3.85 4.36
Net interest margin 3.69 4.38
Return on average assets(annualized) -- --
Return on average equity(annualized) -- --
Average equity to average assets .76 (.76)
At end of quarter:
Loans to deposits 69.22 76.79
Nonperforming loans to total loans 11.06 10.83
Nonperforming assets to total loans and OREO 17.27 19.19
Allowance for loan losses to nonperforming 32.56 44.56
loans
Capital ratios of bank subsidiary:
Total risk-based 6.01 7.08
Tier 1 risk-based 4.74 5.79
Tier 1 leverage 3.62 4.60
At end of period September 30,
1995 1994
Total assets 82,496 98,693
Net loans 54,575 70,951
Allowance for loan losses (2,027) (3,572)
Securities 6,055 7,126
Deposits 78,838 92,395
Stockholders' equity 152 (768)
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 before preferred stock dividends for the
nine months ending September 30, 1995 was $970,000 or $.48 per
share of common stock, a reduction in loss of $1,761,000 from the
loss of $2,731,000 or $1.36 per share of common stock for the
prior year period. The large loss in 1994 was due primarily to a
charge to earnings of $1,752,000 to increase the loan provision
and reduce carrying values of foreclosed assets as the result of
the June 30, 1994 FDIC exam. In addition, a $852,000 loss was
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 nine months ended September 30,
1995 decreased $1,285,000 or 22% from the nine month period
ended September 30, 1994. This was due primarily to a 28%
decrease in the average loans outstanding during the nine month
period, which was offset by a slight increase in average interest
rates charged for loans. The Bank also reallocated some funds
from investment securities to financial lease transactions which
generate other non-interest income.
Total interest expense on deposits for the nine months ended
September 30, 1995 decreased $111,000 or 5% from the nine month
period ended September 30, 1994. This reflects a 22% decrease
in interest bearing deposits combined with a 22% increase in
average interest rates paid.
Non-interest income increased $309,000 in the first nine months
of 1995 over the comparable period in 1994. The increase is
largely attributable to the net charges of $575,000 taken in 1994
as mentioned above. The increase is tempered by a decrease in
service charges of $181,000 and a decrease in premiums from SBA
loan sales of $118,000.
Non-interest expense decreased $1,358,000 or 27% for the first
nine months ended September 30, 1995 compared to the same period
in 1994. The reduction of non-interest expense reflects
management's efforts to significantly reduce professional fees
which decreased $658,000 or 65% and expenses relating to other
real estate owned which decreased $243,000 or 30% over the
comparable period in 1994 , despite the Bank increasing its other
real estate owned reserve by approximately $300,000 as required
by the Connecticut State Banking Department based on their
examination of the Bank as of March 31, 1995.
The year-to-date provision for loan losses was $350,000 for 1995
and $1,641,000 for 1994.
The Company's net loss for the third quarter of 1995 was $261,000
or $.13 per common share, a reduction in income of $294,000 from
the net income of $33,000 or $.02 per common share for the
second quarter of 1994. The loss can be attributed to a decrease
in net interest income of $307,000 or 32%, a decrease in other
income of $348,000 or 55% which was offset by a decrease in other
operating expenses of $361,000 or 23%.
FINANCIAL CONDITION
Gross loans decreased by $17,364,000 or 23% in the aggregate for
the nine months ended September 30, 1995. Investment securities
and federal funds sold decreased $1,846,000 or 14.6%. The
decrease is primarily the result of a reallocation of assets to
the leasing program and a decrease in deposits of $13,557,000 or
14.7%.
At September 30, 1995, the Bank had $12,699,000 outstanding from
leasing-related transactions. The leasing business includes
short term financing of leases which are subsequently placed with
permanent lenders, accounts receivable purchases resulting from
leasing transactions and equipment purchased for prospective
lessees. Most transactions are short term in nature.
The decrease in deposits is partially attributed to the closing
of the Bank's Greenwich Branch on March 1, 1995 as well as the
migration of customer funds to other markets.
CAPITAL ADEQUACY
The following table summarizes the minimum capital requirements
and capital positions at September 30, 1995 and December 31,
1994:
($ in thousands) September 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 8.00% 6.01% 8.00% 7.26%
percentage
Total risk based capital 4,994 3,755 5,059 4,590
Tier 1 risk based 4.00% 4.74% 4.00% 5.97%
capital percentage
Tier 1 risk based 2,497 2,959 2,530 3,777
capital
Leverage (per order) 6.00% 3.62% 6.00% 3.95%
percentage
Leverage (per order) 4,903 2,959 5,725 3,799
At September 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.
LOANS
($ in thousands) September 30, December 31,
1995 1994
% of % of
Amount Total Amount Total
Commercial collateralized by $26,309 46% $34,044 55%
real estate
Commercial other 12,387 22% 12,757 21%
Residential real estate 11,131 20% 12,663 21%
mortgage
Consumer 1,825 3% 2,331 3%
Lease financing 5,012 9% -- --
Total loans - gross $56,664 100% $61,795 100%
Unearned income ($25) ($49)
Deferred loan fees (37) (39)
Allowance for loan losses (2,027) (2,637)
Total Loans - net $54,575 $59,070
Average outstanding loans - $59,120 $74,283
net
NONPERFORMING ASSETS
($ in thousands) September 30, December 31,
1995 1994
Loans past due 90 days or more:
Non-accrual $5,688 $7,885
Accrual 578 1,305
Total loans past due 90 days or 6,266 9,190
more
Other real estate owned ("OREO"):
Foreclosed properties 3,037 3,088
In-substance foreclosures 782 1,225
Total OREO 3,819 4,313
TOTAL NONPERFORMING ASSETS $10,085 $13,503
Nonperforming assets to total 17.27% 21.30%
loans (net) and OREO (net)
Allowance for loan losses to total 32.35% 28.69%
loans past due 90 days or more
As a percentage of total loans:
Loans past due 90 days or more 11.06% 14.89%
Allowance for loan losses 3.58% 4.27%
Non-accrual loans consisted of the following:
($ in thousands) September 30, December 31,
1995 1994
Non-accrual loans:
Real estate loans $5,626 $7,354
Commercial other 62 530
TOTAL NON-ACCRUAL LOANS $5,688 $7,884
OREO consisted of the following:
($ in thousands) September 30, December 31,
1995 1994
1 - 4 family residential $1,477 $1,233
properties
Multifamily residential 245 331
properties
Commercial real estate 1,363 1,846
Construction & Land 734 903
Development
TOTAL OREO $3,819 $4,313
The Company, in most cases, discontinues the accrual of interest
income whenever reasonable doubt exists as to its ultimate
collectibility or when the loan is 90 days or more past due.
When the accrual of interest income is discontinued, all
previously accrued interest income is generally reversed against
the current period's income. A non-accrual loan is restored to
an accrual status when it is no longer delinquent and
collectibility of interest and principal is no longer in doubt.
The Company's ability to reduce nonperforming assets is dependent
on conditions in the real estate market and general economy.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through charges
against income and maintained at a level that management
considers adequate to absorb potential losses in the loan
portfolio. Management's estimate of the adequacy of the
allowance for loan losses is based on evaluations of individual
loans, estimates of current collateral values and the results of
the most recent regulatory examination. Management also
evaluates the general risk characteristics inherent in the loan
portfolio, prevailing and anticipated conditions in the real
estate market and general economy, and historical loan loss
experience. Loans are charged against the allowance for loan
losses when management believes that collection is unlikely. Any
subsequent recoveries are credited back to the allowance for loan
losses when received.
The changes in the allowance for loan losses were as follows:
Nine months ended September 30, 1995 1994
($ in thousands)
Beginning balance $2,637 $5,012
Loans charged-off ($1,319) (731)
Recoveries 359 292
Net loan recoveries (charge-offs) (960) (438)
Provision for loan losses 350 74
Ending balance $2,027 $4,648
Net loan charge-offs to 3.43% 0.54%
average loans outstanding
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 Federal Deposit Insurance Corporation
completed its regulatory examination of the Bank on October 31,
1995 and determined that the Bank's allowance for loan losses was
adequate after the Bank agreed to increase the provision by
$225,000 which was reflected in the October 31, 1995 allowance
for loan losses.
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 September 30, 1995 the
Bank's impaired loans amounted to $5,688,000. The Bank has
allocated $790,000 of the general loan loss reserve to this
portfolio.
SECURITIES
All of the Company's investment securities were available for
sale as of September 30, 1995 in accordance with the requirements
of Statement of Financial Accounting Standards No. 115 (SFAS No.
115) "Accounting for Certain Investments in Debt and Equity
Securities." The specific accounting policies pertaining to SFAS
No. 115 are detailed in the Summary of Accounting Policies to the
Company's Consolidated Statements included in Item 14 of the
December 31, 1994 Form 10-K.
At September 30, 1995 Gross Estimated
Amortized Unrealized Market
($ in thousands) Cost Gains Losses Value
U.S. Treasury Securities $5,579 -- ($24) $5,555
Other 500 -- -- 500
TOTAL INVESTMENT SECURITIES $6,079 -- ($24) $6,055
At December 31, 1994 Gross Estimated
Amortized Unrealized Market
($ in thousands) Cost Gains Losses 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) $7,280
In March 1995 the Bank made a business decision to sell the
investments held-to-maturity as a result of a comparable decrease
in deposits. The Bank has been advised by the Connecticut
Department of Banking that it must request prior regulatory
approval to establish a held-to-maturity portfolio in the future.
NET INTEREST INCOME
The following table presents condensed average statements of
condition, including non-accrual loans, the components of net
interest income and selected statistical data:
Nine months ended
September 30, --------1995------------------- --------1994-------------------
Average Average Average Average
($ in thousands) Balance Interest Rate Balance Interest Rate
Assets:
Loans $59,120 $3,930 8.86% $82,250 $5,290 8.58%
Securities 8,665 371 5.70% 9,183 362 5.26%
Federal Funds 4,259 180 5.63% 4,354 115 3.52%
Sold
Total Earning 72,044 4,481 8.29% 95,787 5,767 8.03%
Assets
Cash and due from 2,243 3,319
banks
Other assets 11,113 7,417
Total Assets $85,400 $106,523
Liabilities and
Stockholder's
equity:
Interest-bearing
deposits:
Time certificates $55,536 $2,075 4.98% $66,993 $2,012 4.00%
Savings deposits 17,325 260 2.00% 26,137 434 2.21%
Total interest- 72,861 2,335 4.27% 93,130 2,446 3.50%
bearing deposits
Other borrowings 1,747 151 11.51% 1,993 175 11.71%
Total interest- 74,608 2,486 4.44% 95,123 2,621 3.67%
bearing liabilities
Demand deposits 8,137 10,312
Other liabilities 2,002 1,896
Stockholders' 653 (808)
equity
Total liabilities $85,400 $106,523
and stockholders'
equity
Net interest 1,995 3.85% 3,146 4.36%
income/rate spread
Net interest margin 3.69% 4.38%
The following table presents the changes in interest income and
expense for each major category of interest-bearing assets and
interest-bearing liabilities, and the amount of the change
attributable to changes in average balances (volume) and rates.
Changes attributable to both volume and rate changes have been
allocated in proportion to the relationship of the absolute
dollar amount of the changes in volume and rate.
Change from September 30, 1994
to September 30, 1995
attributable to:
($ in thousands) Volume Rate Total
Interest income:
Loans ($1,545 $185 ($1,360)
Investment securities (16) 25 9
Short-term investments (2) 67 65
Total interest income ($1,563) $277 ($1,286)
Interest expense:
Deposits:
Time certificates (147) 210 63
Savings deposits (135) (39) (174)
Total interest expense on (282) 171 (197)
deposits
Other interest-bearing (21) (3) (24)
liabilities
Total interest expense ($303) $168 ($135)
NET INTEREST INCOME ($1,260) $109 ($1,151)
COMMITMENTS AND CONTINGENCIES
The Company and certain of its former directors and former
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 Date Filed
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: November 14, 1995
/S/ Charles Pignatelli
Charles Pignatelli
President and Chief Executive Officer
/S/
Barbara Van Bergen
Chief Accounting Officer
EXHIBIT 27 FINANCIAL DATA SCHEDULE