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, 1996
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, 1996, there were 1,961,761 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, 1996 and December 31, 1995
Unaudited Consolidated Statements of Operations 2
Three Months and Nine Months Ended September 30, 1996 and
September 30, 1995
Unaudited Consolidated Statements of Changes in
Shareholders' 3 Equity --Nine Months Ended September 30,
1996 and September 30, 1995
Unaudited Consolidated Statements of Cash Flows 4
Nine Months Ended September 30, 1996 and September 30, 1995
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 30, December 31,
(Dollars in 000's) (UNAUDITED) 1996
1995
ASSETS
LOANS (net of allowance for loan losses: 1996, $2,298;
1995, $2,070): $57,187 $56,382
INVESTMENT SECURITIES HELD FOR SALE 7,035
7,582
FEDERAL FUNDS SOLD 5,677 5,000
TOTAL EARNING ASSETS 69,899 68,964
CASH AND DUE FROM BANKS 2,205 1,937
ACCRUED INTEREST RECEIVABLE 765
782
PROPERTY AND EQUIPMENT - NET 755
789
ASSETS HELD FOR LEASE 6,363
7,573
PREPAID AND OTHER ASSETS 517
522
OTHER REAL ESTATE OWNED 1,619
2,713
TOTAL ASSETS $82,123
$83,280
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS:
Demand $ 9,005 $ 8,672
Savings and NOW 11,788
13,319
Money market 2,721 2,546
Time deposits under $100 47,023
49,342
Time deposits of $100 or more 5,924
5,166
TOTAL DEPOSITS
$76,461
$79,045
ACCRUED INTEREST PAYABLE 676 532
DIVIDENDS PAYABLE 154
1,330
OTHER LIABILITIES 481 459
SENIOR NOTES 548 548
CAPITAL NOTES 220 220
MANDATORY CONVERTIBLE CAPITAL NOTES 1,090
1,090
TOTAL LIABILITIES $79,630 $83,224
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY:
Preferred Stock $15,240 $11,240
Common Stock 19 19
Additional paid-in capital 8,512 9,604
Unrealized gain (loss) on marketable equity
securities (3) (2)
Accumulated deficit (21,275)
(20,805)
TOTAL SHAREHOLDERS' EQUITY $2,493
$56
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$82,123 $83,280
The accompanying notes are an integral part of these
consolidated financial statements.
CBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months
Ended
September 30, September 30,
(Dollars in 000's except per share data) (UNAUDITED)
1996 1995 1996 1995
INTEREST INCOME:
Interest and fees on loans $1,307 $1,368 $3,755
$3,930
Interest and dividends on investments:
US Treasury and Government agency securities 75 72
239
318
Other securities 10 11 24 53
Interest on federal funds sold 88 56 260 180
TOTAL INTEREST INCOME $1,480 $1,507 $4,278 $4,481
INTEREST EXPENSE:
Interest on deposits:
Savings and time deposits under $100 $704 $745 $2,122
$2,097 Time deposits of $100 or more 79 73 228 238
Total Interest on Deposits 783 818 2,350
2,335
Interest on borrowed money:
Long-term borrowings 59 44 176 130
Other 6 7 20 21
Total Interest on borrowed money 65 51 196 151
TOTAL INTEREST EXPENSE 848 869 2,546
2,486
NET INTEREST INCOME 632 638 1,732 1,995
Provision for loan losses 140 --- 240 350
NET INTEREST INCOME (LOSS) AFTER PROVISION
FOR LOAN LOSSES $492 $638 $1,492
$1,645
OTHER OPERATING INCOME:
Service fees on deposits $101 $108 $619 $392
Net gain (loss) on sale of securities -- (15)
10
(16)
Lease asset income 173 161 503 477
Gain on sale of loans -- -- -- 62
Other 32 35 105 106
TOTAL OTHER OPERATING INCOME $306 $289 $1,237
$1,021
OTHER OPERATING EXPENSES:
Salaries and employee benefits 503 $534 $1,442
$1,650
Occupancy 89 81 266 242
Supplies and communications 40 46 114 130
Professional services 93 120 296 358
Furniture and equipment maintenance 14 20
38
59
Depreciation and amortization 49 52 128 154
FDIC insurance 50 61 154 198
Other insurance 18 19 66 63
Other real estate owned 169 135 364 575
Other 136 120 331 207
TOTAL OTHER OPERATING EXPENSES $1,161 $1,188
$3,199
$3,636
INCOME (LOSS) BEFORE INCOME TAX AND
EXTRAORDINARY ITEM (363) (261) (470)
(970)
Income tax -- -- -- --
INCOME BEFORE EXTRAORDINARY ITEM (363) (261)
(470)
(970)
Extraordinary item - Tax benefit from net operating
loss carryforward -- -- --
Net income (loss) ($ 363) ($261) ($470)
($970)
Less preferred stock dividends
(380) (315) (1,091) (919)
Loss applicable to common stock
($743) ($576) ($1,561) ($1,889)
Net loss per common share
($ .38) ($ .29) ($ .80) ($ .94)
Weighted Average Common Shares (Primary)
1,961,761 2,012,5141,961,761 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 NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
1995
($ 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, 1995 1,962 $19
$11,240 $9,604 ($2)
($20,805) $56
Preferred dividends accrued Series 1 (144)
(144)
Preferred dividends accrued Series 2 (342)
(342)
Preferred dividends accrued Series 3 (606)
(606)
Issuance of Preferred Stock 4,000
4,000
Change in unrealized loss on
marketable equity securities (1)
(1)
Net income (loss) (470)
(470)
BALANCE, SEPTEMBER 30, 1996 1,962 $19
$15,240 $8,512 ($3) ($21,275) $2,493
BALANCE, DECEMBER 31, 1994 2,013 $20 $9,830
$11,032 ($218) ($19,207) $ 1,457
Preferred dividends accrued Series 1 (152)
(152)
Preferred dividends accrued Series 2 (356)
(356)
Preferred dividends accrued Series 3 (411)
(411)
Change in unrealized loss on
marketable equity securities 194
194
Issuance of Preferred Stock 390
390
Net income (loss) (970)
(970)
BALANCE, SEPTEMBER 30, 1995 2,013 $20 $10,220
$10,113 ($24) ($20,177) $152
CBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
($ IN 000's) (UNAUDITED) 1996 1995
OPERATING ACTIVITIES:
Net Income (Loss) ($470) ($970)
Adjustments to reconcile net income (loss)
to net
cash provided by operating activities:
Provision for losses on loans 240 350
Provision for OREO reserves 259 --
Provision for depreciation and amortization 128 154
Increase (decrease) in deferred loan fees and costs - net
9 (25)
Amortization (accretion) of net investment security
premiums (discounts) 23 83
(Gain) on sale of securities (10) 16
Loss (gain) on sale and provision for write-downs of other
real estate owned 321 404
Decrease in accrued interest receivables 16 174
Decrease (increase) in prepaid and other assets (5)
(183)
Increase (decrease) in accrued interest payable 144
(495)
Increase (decrease) in deferred revenue -- (23)
Increase (decrease) in other liabilities 22 (22)
Net cash provided (used) by operating activities $677
($537)
INVESTING ACTIVITIES:
Net decrease (increase) in federal funds sold ($ 677)
$950
Proceeds from sales and maturities of investment securities
6,572 9,217
Purchases of investment securities (4,307) (988)
Decrease (increase) in loans (1,401)
2,757 Proceeds from sales of OREO 956 1,331
Purchases of OREO/Cap Exp. (85) -
Purchases of property and equipment
(93) (142)
Purchase of assets held for lease -- (7,959)
Proceeds from sales of assets held for lease
1,210 4,280
Net cash provided by investing activities
$2,175
$9,446
FINANCING ACTIVITIES:
Net increase (decrease) in demand, savings and money
market deposit accounts ($1,023) ($5,056)
Net decrease in time deposits (1,561) (3,579)
Net cash used in financing activities ($2,584)
($8,635)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 268
274 CASH AND DUE FROM BANKS AT BEGINNING OF YEAR 1,937
3,130
CASH AND DUE FROM BANKS AT END OF QUARTER 2,205
3,404
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the quarter for:
Interest on deposits and borrowed money 2,401
2,830
Income taxes -- --
NONCASH INVESTING AND FINANCING ACTIVITIES:
Transfers of loans to Other Real Estate Owned
262
1,413
Transfer of Other Real Estate Owned to loans 221 -
Mortgage Recorded as Loan Recovery 300 --
Preferred stock dividend declared 1,094 529
Unrealized gain (loss) on valuation of instruments
available for sale (1) 194
Issuance of preferred stock dividend 2,270 390
Issuance of preferred stock for marketable equity
securities 1,733 --
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, 1996. 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, 1995.
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. Under the
Bank's approved 1996 Capital Restoration Plan (the "1996
Capital Plan"), which was approved by the FDIC and the Banking
Commissioner on March 21, 1996, the Bank has until December
31, 1997 to achieve the 6 percent Tier 1 leverage capital
ratio originally mandated by the 1991 Order. On September 27,
1996, The Company and the Bank entered into a subscription
agreement with the majority shareholder to issue 170 shares of
Preferred Series III stock in exchange for $1.7 million. The
transaction was closed on September 30, 1996 at which time the
Company contributed the new capital, which consisted of
marketable equity securities, to the Bank. The Bank's Tier 1
leverage capital ratio at September 30, 1996 was 6.41%. The
Bank and its Board of Directors believe that the Bank is in
full compliance with each of the terms of the 1991 Order.
As a consequence of the September 30, 1996 capital
transaction, the Bank and its Board of Directors believe that
the Bank is in full compliance with all applicable regulatory
capital requirements and as such should be deemed "adequately
capitalized" as defined by the FDIC Improvement Act.
Under the terms of a written agreement (the "Agreement")
between the Company and the Federal Reserve Bank of Boston
(the "FRB")
effective November 2, 1994, the holding company is required to
obtain the written approval of the Reserve Bank prior to the
declaration or payment of cash dividends on its outstanding
common or preferred stock, increasing its outstanding
borrowings or incurring additional holding company
indebtedness, engaging in material transactions with the Bank
(other than capital contributions), or making cash
disbursements in excess of agreed upon amounts. All such
actions required by the Written Agreement have been taken by
the Company.
NOTE C:PREFERRED STOCK DIVIDEND.
In accordance with the dividend payment provisions of the
Series III Preferred Stock offering, the Board of Directors
voted to pay stock dividends in the amount of 23 shares of
Series III Preferred Stock with a stated value of $230,000 to
the shareholders as satisfaction of the same amount of
dividends payable to them as of September 30, 1996. In
addition, the majority shareholder accepted a stock dividend
in the amount of 5,300 shares of Preferred Series I Stock with
a stated value of $530,000 as satisfaction of the same amount
of Series I Preferred Stock dividends payable and a stock
dividend in the amount of 13 shares of Preferred Series III
with a stated value of $130,000 as satisfaction of the same
amount of Series II Preferred Stock dividends payabe to him as
of September 30, 1996.
Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL HIGHLIGHTS
CBC BANCORP, INC. AND SUBSIDIARY Nine Months
Ended CONDENSED STATEMENTS OF INCOME
September 30,
($ In thousands, except per share data) 1996 1995
Net interest income $1,732 $1,995
Provision for loan losses 240 350
Net interest income after provision for loan losses
1,492 1,645
Investment securities gains (losses) 10 (16)
Other non-interest income 1227 1,037
Other real estate owned expense 364 575
Other non-interest expense 2,835
3,061
NET INCOME (LOSS) ($470) ($970)
Common Per share data
Book value ($6.49) ($5.00)
Net income and Preferred Stock Dividends
(.80) (.94) Cash dividends -- --
Financial Ratios
Yield on interest-bearing assets 8.46% 8.29%
Cost of funds 4.91% 4.44%
Interest rate spread 3.55% 3.85%
Net interest margin 3.43% 3.69%
Return on average assets(annualized) --
-Return on average equity(annualized) --
-Average equity to average assets .91% .76%
At end of quarter:
Loans to deposits 74.79% 69.22%
Nonperforming loans to total loans 8.36%
11.06%
Nonperforming assets to total loans and OREO
11.22% 17.27%
Allowance for loan losses to nonperforming
loans 46.14% 32.56%
Capital ratios of bank subsidiary:
Total risk-based 9.27% 6.01%
Tier 1 risk-based 7.99% 4.74%
Tier 1 leverage 6.41% 3.62%
At end of period September 30,
1996 1995
Total assets $82,123 $82,496
Net loans 57,187 54,575
Allowance for loan losses (2,298)
(2,027)
Securities 7,035 6,055
Deposits 76,461 78,838
Stockholders' equity 2,493
152 Outstanding shares 1,961,761
2,012,514
RESULTS OF OPERATIONS
The Company's net loss for the nine months ending September
30, 1996 was $470,000 or $.24 per share of common stock , an
improvement from the loss of $970,000 or $.48 per share of
common stock for the prior year period. The Bank's
improvement for the first nine months of 1996 is due primarily
to: 1) a net increase in other income of $216,000 from the
prior period which was primarily due to the recovery of
service charges in 1996 of approximately $266,000 from dormant
accounts. In 1995, the Bank realized other income of $62,000
from SBA loan sales. No SBA loans were originated during the
same period in 1996; and 2) a decrease in other operating
expenses of $437,000. These improvements were tempered by a
decrease in net interest income of $153,000.
Total interest income for the nine months ended September 30,
1996 decreased $203,000 or 4.5% from the nine month period
ended September 30, 1995. This was due primarily to a 6%
decrease in the average earning assets during the nine month
period, which was offset by a slight increase in average
interest rates earned.
Total interest expense on interest-bearing liabilities for the
nine months ended September 30, 1996 increased $60,000 or 2.5%
from the nine month period ended September 30, 1995. This
reflects a 37 basis point increase on the average rate paid
for interest-bearing deposits and a 82 basis point increase on
the average rate paid on other borrowings. The impact of
these rate increases was minimized by a decrease in average
interestbearing liabilities of $5,274,000 or 7% from the nine
month period ended September 30, 1995.
Non-interest expense decreased $437,000 or 12% for the first
nine months ended September 30, 1996 compared to the same
period in 1995. The reduction of non-interest expense
reflects management's efforts to significantly reduce salary
expense, professional fees and other real estate owned
expenses, as well as overall cost containment measures in all
other general and administrative expenses.
The year-to-date provision for loan losses was $240,000 for
1996 and $350,000 for 1995.
The company's net loss for the third quarter of 1996 was
$363,000 or $.18 per common share, an increase in loss of
$102,000 from the net loss of $261,000 or $.13 per common
share for the third quarter of 1995. The increase was
primarily due to a loan loss provision of $140,000 in the
third quarter of 1996 while no loan loss provision was made
during the third quarter of 1995.
FINANCIAL CONDITION
Gross loans increased by $1,042,000 or 1.8% in the aggregate
for the nine months ended September 30, 1996. This amount
includes the reduction of nonperfoming loans by $1,758,000 or
26% for the period. This reflects management continued focus
on improving the overall asset quality of the portfolio.
Investment securities and federal funds sold remained level.
Assets held for lease decreased $1,210,000 or 16%.
Deposits decreased by $2,584,000 or 3.27% for the nine
months ended September 30, 1996. This can be attributed to a
combination of management's efforts to control the size of the
Bank and the migration of dollars to other markets.
On September 30, 1996, the Company contributed $1,732,750 of
marketable equity securities to the Bank. The securities were
payment for the issuance of 173 shares of Preferred Series III
stock to the majority shareholder. After this capital
contribution the Tier 1 leverage capital of the Bank was at
6.41%, Tier 1 and Total risked-based capital ratios were 7.99%
and 9.27% respectively. These ratios are in excess of minimum
regulatory capital requirements. The Bank and its Board of
Directors believe that the Bank is in compliance with all
regulatory capital requirements, and as such should be deemed
"adequately capitalized" as defined by the FDIC Improvement
Act.
In the nine months ended September 30, 1996, the Bank
disbursed funds of $11.7 million of new financial leasing-
related transactions and had paydowns of $11.6 million from
funds previously deployed. The financial lease program
includes the following types of transactions: 1)full pay-out
leases which are subsequently placed with permanent lenders:
2) accounts receivable purchases resulting from leasing
transactions; and 3)equipment purchased for financial lease
transactions both available for lease and subject to existing
leases. Most transactions are short term in nature.
CAPITAL ADEQUACY
The following table summarizes the minimum capital
requirements and capital positions at September 30, 1996 and
December 31, 1995:
($ in thousands) September 30, 1996 December 31, 1995
Minimum Capital Actual Capital Minimum Capital
Actual Capital
Required - Bank Bank Required - Bank
Bank
Regulatory Capital Requirements
Total risk based capital percentage 8.00% 9.27%
8.00% 6.94%
Total risk based capital 5,043 5,845 5,080
4,409 Tier 1 risk based capital percentage 4.00%
7.99% 4.00% 5.67%
Tier 1 risk based capital 2,522 5,038 2,540
3,599
Leverage (per order) percentage 6.00% 6.41%
6.00% 4.38%
Leverage (per order) 4,713 5,038 4,927
3,599
LOANS
($ in thousands) September 30, 1996 December 31, 1995
% of % of
Amount Total Amount Total
Commercial collateralized by real estate $26,546 45%
$30,083 51%
Commercial other 11,457 19% 9,021 15%
Residential real estate mortgage 13,028 22% 10,797
19%
Lease financing 6,807 11% 6,860 12%
Consumer 1,708 3% 1,743 3%
Total loans - gross $59,546 100% $58,504 100%
Unearned income ($13) ($22)
Deferred loan fees (48) (30)
Allowance for loan losses (2,298)
(2,070) Total Loans - net $57,187
$56,382
Average outstanding loans - net $53,008
$58,610
</TALBE>
NONPERFORMING ASSETS
($ in thousands) September 30, December 31,
1996 1995
Loans past due 90 days or more:
Non-accrual $4,448 $6,383
Accrual 533 356
Total loans past due 90 days or more 4,981
6,739
Other real estate owned ("OREO"):
Foreclosed properties 1,899 3,054 OREO allowance
(280) (341)
Total OREO (net) 1,619 2,713
TOTAL NONPERFORMING ASSETS $6,600 $9,452
Nonperforming assets to total loans (net) and OREO (net)
11.22% 16.00%
Allowance for loan losses to total loans past due 90 days
or more 46.14% 30.72%
As a percentage of total loans:
Loans past due 90 days or more 8.36% 11.51%
Allowance for loan losses 3.86% 3.54%
Non-accrual loans consisted of the following:
($ in thousands) September 30, December 31,
1996 1995
Non-accrual loans:
Real estate loans $2,581 $3,557
Commercial other 1,867 2,826
TOTAL NON-ACCRUAL LOANS $4,448 $6,383
OREO consisted of the following:
($ in thousands) September 30, December
31,
1996 1995
1 - 4 family residential properties $598
$569
Multifamily residential properties -- 272
Commercial real estate 681 1,151 Construction & Land
Development 340 721 TOTAL OREO $1,619
$2,713
The Company discontinues the accrual of interest income
whenever reasonable doubt exists as to its ultimate
collectability or when the loan is 90 days or more past due.
When the accrual of interest income is discontinued, all
previously accrued interest income is generally reversed
against the current period's income. A non-accrual loan is
generally restored to an accrual status when it is no longer
delinquent and/or collectability of interest and principal is
no longer in doubt.
The Company's ability to reduce nonperforming assets is
dependent on conditions in the real estate market and general
economy.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through charges
against income and maintained at a level that management
considers adequate to absorb potential losses in the loan
portfolio. Management's estimate of the adequacy of the
allowance for loan losses is based on evaluations of
individual loans, estimates of current collateral values and
the results of the most recent regulatory examination.
Management also evaluates the general risk characteristics
inherent in the loan portfolio, prevailing and anticipated
conditions in the real estate market and general economy, and
historical loan loss experience. Loans are charged against
the allowance for loan losses when management believes that
collection is unlikely. Any subsequent recoveries are credited
back to the allowance for loan losses when received.
The changes in the allowance for loan losses were as follows:
Nine months ended September 30, 1996 1995
($ in thousands)
Beginning balance $2,070 $2,637
Loans charged off (464) (1,319)
Recoveries 452 359
Net loan recoveries (charge-offs) (12) (960)
Provision for loan losses 240 350
Ending balance $2,298 $2,027
Net loan charge-offs to average loans outstanding 0.02%
3.43%
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 15, 1996. No adjustments to the loan loss
or OREO reserves were required as a result of the examination.
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,
1996 the Bank's impaired loans amounted to $4,448,000. The
Bank has allocated $1,086,000 of the general loan loss reserve
to this portfolio.
SECURITIES
All of the Company's investment securities were available for
sale as of September 30, 1996 and December 31, 1995 in
accordance with the requirements of Statement of Financial
Accounting Standards No. 115 (SFAS No. 115) "Accounting for
Certain Investments in Debt and Equity Securities." The
specific accounting policies pertaining to SFAS No. 115 are
detailed in the Summary of Accounting Policies to the
Company's Consolidated Statements included in Item 14 of the
December 31, 1995 Form 10-K.
At September 30, 1996 Amortized Gross Unrealized
Estimated
($ in thousands) Cost Gains Losses Market
Value
US Treasury Securities $4,005 -- $2 $4,007
US Government Agency Security 1,000 -- (5) 995
Certificate of Deposit 300 -- -- 300
Equity Securities 1,733 -- -- 1,733
TOTAL INVESTMENT SECURITIES $7,038 -- ($3)
$7,035
At December 31, 1995 Amortized Gross Unrealized
Estimated
($ in thousands) Cost Gains Losses Market
Value
US 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)
$7,280
NET INTEREST INCOME
The following table presents condensed average statements
of condition, including non-accrual loans, the components
of net interest income and selected statistical data:
Nine months ended September 30, 1996 1995
Average Average Average Average
($ in thousands) Balance Interest Rate Balance
Interest Rate
Assets:
Loans $55,006 3,755 9.12% $59,120 $3,930
8.86%
Securities 5,919 263 5.94% 8,665 371 5.70%
Federal Funds Sold 6,583 260 5.28% 4,259
180
5.63%
Total Earning Assets 67,508 4,278 8.46% 72,044
4,481 8.29%
Cash and due from banks 1,836 2,243
Other assets 9,902
11,113
Total Assets $79,246
$85,400
Liabilities & Stockholder's equity:
Interest-bearing deposits:
Time certificates 52,744 2,151 5.45% $55,536
$2,075 4.98%
Savings deposits 14,467 199 1.84% 17,325 260
2.00%
Total interest-bearing deposits 67,211 2,350 4.66%
72,861 2,335 4.27%
Other borrowings 2,123 196 12.33% 1,747 151
11.51%
Total interest-bearing liabilities 69,334 2,546 4.91%
74,608 2,486 4.44%
Demand deposits 7,889 8,137
Other liabilities 1,305
2,002
Stockholders' equity 718 653
Total liabilities and stockholders' equity $79,246
$85,400
Net interest income/rate spread 1,732 3.55%
1,995 3.85%
Net interest margin 3.43% 3.69%
The following table presents the changes in interest income
and expense for each major category of interest-bearing
assets and interest-bearing liabilities, and the amount of
the change attributable to changes in average balances
(volume) and rates. Changes attributable to both volume and
rate changes have been allocated in proportion to the
relationship of the absolute dollar amount of the changes in
volume and rate.
Change from September 30, 1995
to September 30, 1996 attributable to:
($ in thousands) Volume Rate Total
Interest income:
Loans (280) 105 (175)
Investment securities (122) 14 (108)
Short-term investments 91 (11)
80
Total interest income (311)
108
(203)
Interest expense:
Deposits:
Time certificates (95) 171 76
Savings deposits (40) (21)
(61)
Total interest expense on deposits (135) 150 15
Other interest-bearing liabilities 34 11 45 Total
interest expense (101) 161 60
NET INTEREST INCOME (210) (53) (263)
COMMITMENTS AND CONTINGENCIES
The Company and certain of its then directors and officers
were defendants in a suit alleging violations under the
Securities Exchange Act of 1934. On September 30, 1996 the
suit was settled for an immaterial amount to the Company. 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, 1995.
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.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation." SFAS No. 123 allows companies to
continue to account for their stock option plans in accordance
with APB Opinion 25 but encourages the adoption of a new
accounting method based on the estimated fair market value of
employee stock options. Companies electing not to follow the
new fair value based method are required to provide expanded
footnote disclosures, including pro forma net income and
earnings per share, determined as if the company had applied
the new method. SFAS No. 123 is required to be adopted
prospectively beginning January 1, 1996. Management intends
to continue to account for its stock option plans in
accordance with APB Opinion 25 and provide supplemental
disclosures as required by SFAS No. 123, beginning in 1996.
PART II. OTHER INFORMATION
Item 6. Exhibits and Report on Form 8-K
(a) Exhibit 27: Financial Data Schedule
(b) None
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, 1996
Dennis Pollack
President and Chief Executive
Officer
Barbara Van Bergen
Chief Accounting Officer
EXHIBIT 27 FINANCIAL DATA SCHEDULE