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, 1997
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 (IRS Employer
incorporation or organization) Identification No.)
612 Bedford Street, Stamford, CT 06901
(Address or principal executive offices) (Zip Code)
(203) 708-8850
(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, 1997 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
June 30, 1997 and December 31, 1996
Unaudited Consolidated Statements of Operations 2
Three Months and Six Months Ended June 30, 1997 and June 30, 1996
Unaudited Consolidated Statements of Changes in Shareholders' 3
Equity --Six Months Ended June 30, 1997 and June 30, 1996
Unaudited Consolidated Statements of Cash Flows 4
Six Months Ended June 30, 1997 and June 30, 1996
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) 1997 1996
ASSETS
LOANS (net of allowance for loan losses:
1997, $1,853; 1996, $1,602):
$64,654 $57,741
INVESTMENT SECURITIES HELD FOR SALE 4,013 6,429
FEDERAL FUNDS SOLD 10,478 6,328
TOTAL EARNING ASSETS 79,145 70,498
CASH AND DUE FROM BANKS 1,984 2,057
ACCRUED INTEREST RECEIVABLE 1,090 727
PROPERTY AND EQUIPMENT - NET 711 715
ASSETS HELD FOR LEASE 6,250 6,250
PREPAID AND OTHER ASSETS 506 478
OTHER REAL ESTATE OWNED 453 1,304
TOTAL ASSETS $90,139 $82,029
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS:
Demand $ 8,612 $ 8,732
Savings and NOW 9,755 11,471
Money market 2,699 2,298
Time deposits under $100 54,814 47,879
Time deposits of $100 or more 7,630 5,916
TOTAL DEPOSITS $83,510 $76,296
ACCRUED INTEREST PAYABLE 938 772
DIVIDENDS PAYABLE 301 161
OTHER LIABILITIES 436 480
SENIOR NOTES 548 548
CAPITAL NOTES 220 220
MANDATORY CONVERTIBLE CAPITAL NOTES 1,090 1,090
TOTAL LIABILITIES $87,043 $79,567
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY:
Preferred Stock $17,260 $16,380
Common Stock 19 19
Additional paid-in capital 7,032 8,052
Unrealized gain (loss) on
marketable equity securities 10 4
Accumulated deficit (21,225) (21,993)
TOTAL SHAREHOLDERS' EQUITY $3,096 $2,462
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $90,139 $82,029
The accompanying notes are an integral part of these
consolidated financial statements.
CBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended Six Months Ended
(UNAUDITED) June 30 June 30,
(Dollars in 000's except per share data) 1997 1996 1997 1996
INTEREST INCOME:
Interest and Fees on Loans $1,648 $1,210 $3,081 $2,448
Interest and dividends on investments:
US Treasury and Government agency securities 60 76 120 163
Other securities 0 9 0 15
Interest on Fed Funds Sold 97 90 190 172
TOTAL INTEREST INCOME $1,805 $1,385 $3,391 $2,798
INTEREST EXPENSE
Interest on deposits:
Savings and Time Deposits under $100 $768 $684 $1,500 $1,418
Time Deposits of $100 or more 97 74 182 149
Total Interest on deposits 865 758 $1,682 1,567
Interest on borrowed money:
Long-term borrowings 14 58 37 117
Other 68 7 115 13
Total Interest on borrowed money 82 65 152 130
TOTAL INTEREST EXPENSE 947 823 1,834 1,697
NET INTEREST INCOME 858 562 1,557 1,101
Provision for loan losses 235 60 340 100
NET INTEREST INCOME (LOSS)
AFTER PROVISION FOR LOAN LOSSES $623 $502 $1,217 $1,001
OTHER OPERATING INCOME
Service fees on deposits $102 $264 202 $518
Net gain (loss) on sale of securities 1,141 (6) 1,134 10
Income from assets held for lease 141 157 270 331
Other 37 37 77 71
TOTAL OTHER OPERATING INCOME $1,421 $452 $1,683 $930
OTHER OPERATING EXPENSE
Salaries and employee benefits $463 $473 $941 $938
Occupancy 81 99 170 177
Professional services 103 106 200 204
FDIC insurance 53 52 105 104
Other insurance 17 23 37 48
Supplies and communications 43 37 87 74
Depreciation and amortization 63 25 118 79
Furniture and equipment maintenance 12 12 24 24
Other real estate owned 100 94 220 195
Other 118 85 230 194
TOTAL OTHER OPERATING EXPENSES $1,053 $1,006 $2,132 $2,037
INCOME(LOSS) BEFORE INCOME TAX
AND EXTRAORDINARY ITEMS 991 (52) 768 (106)
Income tax -- -- -- --
INCOME BEFORE EXTRAORDINARY ITEM 991 (52) 768 (106)
Extraordinary item - Tax benefit from
net operating loss carryforward -- -- -- --
NET INCOME (LOSS) $991 ($ 52) $768 ($106)
Less preferred stock dividends (523) (369) (1,020) (712)
Net Income (loss) applicable to common stock $468 ($421) ($252) ($818)
Net Income (loss) per share (primary) $.24 ($.22) ($.13) ($.42)
Weighted Average Common Shares (primary) 1,961,761 1,961,761 1,961,761 1,961,761
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, 1997 AND 1996
($ and shares in 000's) (UNAUDITED)
Unrealized
Gain(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, 1996 1,962 $19 $16,380 $8,052 $4 ($21,993) $2,462
Preferred dividends
accrued Series 1 (121) (121)
Preferred dividends
accrued Series 2 (229) (229)
Preferred dividends
accrued Series 3 (670) (670)
Issuance of Preferred Stock 880 880
Change in unrealized gain on
marketable equity securities 6 6
Net income (loss) 768 768
BALANCE, JUNE 30, 1997 1,962 $19 $17,260 $7,032 $10 ($21,225) $3,096
BALANCE, DECEMBER 31, 1995 1,962 $19 $11,240 $9,604 ($2) ($20,805) $56
Preferred dividends
accrued Series 1 (97) (97)
Preferred dividends
accrued Series 2 (229) (229)
Preferred dividends
accrued Series 3 (386) (386)
Change in unrealized loss on
marketable equity securities (2) (2)
Issuance of Preferred Stock 1,380 1,380
Net income (loss) (106) (106)
BALANCE, JUNE 30, 1996 1,962 $19 $12,620 $8,892 ($4) ($20,911) $616
CBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
($ IN 000's) (UNAUDITED) 1997 1996
OPERATING ACTIVITIES:
Net Income (Loss) $768 ($106)
Adjustments to reconcile net
income (loss) to net cash provided
by operating activities:
Provision for losses on loans 340 100
Provision for losses on foreclosed real estate 180 115
Provision for depreciation and amortization 118 41
Increase (decrease) in deferred
loan fees and costs - net 128 (6)
Amortization (accretion) of net investment
security premiums (discounts) 2 20
(Gain) loss on sale of securities (1,134) (16)
(Gain) loss on sale other real estate owned (52) 148
Decrease (increase) in accrued interest receivables (363) 149
Decrease (increase) in prepaid and other assets (28) (8)
Increase (decrease) in accrued interest payable 166 (64)
Increase (decrease) in other liabilities (44) (128)
Net cash provided (used) by operating activities $81 $183
INVESTING ACTIVITIES:
Net decrease (increase) in federal funds sold ($4,150) ($4,140)
Proceeds from sales and maturities
of investment securities 3,554 2,297
Purchases of investment securities -- (300)
Decrease (increase) in loans (7,334) 3,621
Proceeds from sales of OREO 683 --
Purchases of OREO/Cap Exp. (12) (51)
Purchases of property and equipment (109) --
Proceeds from sales of assets held for lease -- 1,000
Net cash provided by investing activities ($7,368) $2,427
FINANCING ACTIVITIES:
Net increase (decrease) in demand, savings
and money market deposit accounts ($1,436) ($1,596)
Net increase (decrease) in time deposits 8,648 (1,545)
Net cash, used in financing activities $7,214 ($3,141)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (73) (531)
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR 2,057 1,937
CASH AND DUE FROM BANKS AT END OF QUARTER $1,984 $1,406
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the quarter for:
Interest on deposits and borrowed money 1,669 812
Income taxes -- --
NONCASH INVESTING AND FINANCING ACTIVITIES:
Transfers of loans to Other Real Estate Owned -- 67
Transfer of Other Real Estate Owned to loans -- 221
Preferred stock dividend declared 1,020 341
Unrealized gain (loss) on valuation
of instruments available for sale 6 (1)
Issuance of preferred stock dividend 880 1,080
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, 1997.
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, 1996.
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. In December 1996, the original subscription agreement
was amended to increase the amount of capital infusion to $2.4 million in
exchange for the issuance of an additional 69 shares of Preferred
Series III stock. The increased capitalization was directly
attributed to the appreciation of the marketable equity securities originally
contributed in September 1996. These transactions were entered into
in furtherance of the 1996 Capital Plan. The FDIC has determined that,
for regulatory accounting purposes, the additional $687,000 capital
injection does not qualify as Tier 1 Capital and , as such, the Tier 1
Leverage Ratio at December 31, 1996 was 5.36%. Using generally
accepted accounting principles, the additional $687,000 resulted in a
Leverage Ratio of 6.20% and the Bank would have met the
capital requirements of the 1991 Order. The FDIC completed an
examination of the Bank as of December 31, 1996. For purposes of prompt
corrective action, the Bank was classified as "adequately" capitalized.
The marketable securities were liquidated during the first six months
of 1997 and resulted in additional Tier 1 Capital for regulatory capital
purposes of $1,821,000. The Bank's Tier 1 Leverage Ratio at June 30, 1997
under regulatory and generally accepted accounting principles was 6.87%.
The Board of Directors and Management believe that the Bank is in
compliance with the terms of the 1991 Order.
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 34 shares of Series III Preferred Stock with a
stated value of $340,000 to the shareholders as satisfaction of the same
amount of dividends payable to them as of June 30, 1997. In addition,
the majority shareholder accepted a stock dividend in the amount
of 10 shares of Preferred Series III Stock with a stated value of
$100,000 as satisfaction of the same amount of Series II Preferred
Stock dividends payable to him as of June 30, 1997.
NOTE D: CAPITAL NOTE CONVERSION
The Company's Floating Rate, Mandatory Convertible Capital Notes
due July 1, 1997 having a principal amount of $1,090,000 and $421,590
of accrued and unpaid interest as of June 30, 1997, have matured.
The terms of the Capital Notes call for an exchange of principal and
interest not paid for either common stock or preferred stock of the Company.
The Company's common stock is not currently trading and as
such the Board of Directors has chosen to issue Preferred Series III
stock on a dollar for dollar exchange basis. In connection with
this decision, a fairness letter has been obtained. It is anticipated
that the conversion will be completed by August 31, 1997, with interest
accrued through that date.
NOTE E: CALCULATION OF EARNINGS PER SHARE
The earnings per share calculation as of June 30, 1997 was prepared
in accordance with the provisions of APB Opinion 15. The weighted
average shares outstanding for all periods disclosed did not include
common stock equivalents due to the fact that the Company's common stock
has not publicly traded since June 22, 1995. The amount of shares
to be issued upon the conversion of common stock equivalents is
determined based on the market value of the common stock,
and as such could not be calculated.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL HIGHLIGHTS
CBC BANCORP, INC. AND SUBSIDIARY Six Months Ended
CONDENSED STATEMENTS OF INCOME June 30,
($ In thousands, except per share data) 1997 1996
Net interest income 1,557 1,101
Provision for loan losses 340 100
Net interest income after provision for loan losses 1,217 1,001
Investment securities gains (losses) 1,134 10
Other non-interest income 549 920
Other real estate owned expense 220 195
Other non-interest expense 1,912 1,842
NET INCOME (LOSS) 768 (106)
Common Per share data
Book value (7.22) (7.09)
Net income and Preferred Stock Dividends (.13) (.42)
Cash dividends -- --
Financial Ratios
Yield on interest-bearing assets (%) 9.26 8.35
Cost of funds 5.05 4.90
Interest rate spread 4.21 3.45
Net interest margin 4.31 3.29
Return on average assets(annualized) .02 --
Return on average equity(annualized) .55 --
Average equity to average assets 3.25 .42
At end of quarter:
Loans to deposits 77.42 75.88
Nonperforming loans to total loans 5.53 9.51
Nonperforming assets to total loans and OREO 6.16 12.83
Allowance for loan losses to nonperforming loans 52.08 42.32
Capital ratios of bank subsidiary:
Total risk-based 10.01 7.51
Tier 1 risk-based 8.74 6.23
Tier 1 leverage 6.87 4.61
At end of period June 30, 1997 1996
Total assets 90,139 76,379
Net loans 64,654 52,657
Allowance for loan losses (1,853) (2,209)
Securities 4,013 5,552
Deposits 83,510 72,298
Stockholders' equity 3,096 616
Outstanding shares 1,961,761 1,961,761
RESULTS OF OPERATIONS
The Company's net income for six months ending June 30, 1997 was $768,000,
as compared to a net loss of $106,000 for the six months ending
June 30, 1996. The largest contributing factor to net income was a
$1,134,000 gain recognized on the sale of marketable equity securities.
In addition, net interest income for the first six months of 1997 was
$456,000 more than the same period in 1996. These factors were
tempered by an increase in interest expense of $137,000 and a decrease
in other income excluding security sales of $370,000 for the six months
ending 1997 as compared to the same period in 1996. In 1996, the
bank generated other income of $266,000 from nonrecurring service charges.
The year to date loan provision in 1997 was $240,000 more than 1996 due
primarily to a larger loan portfolio and management's revised reserve
methodology.
Total interest income for the six months ended June 30 1997 increased
$593,000 or 21% from the six month period ended June 30, 1996.
The increase can be attributed to a 15% increase in average loans
outstanding combined with a 89 bp increase in the yield on loans for
the period. The interest income earned on investment securities and
federal funds sold was $40,000 less than the same period in 1996 due
to a reallocation of the bank's funds to support loan growth.
Total interest expense on interest-bearing liabilities for the six months
ended June 30, 1997 increased by approximately 8% or $137,000 from the six
month period ended June 30, 1996. The majority of the increase was due
to an increase in average time deposits outstanding of 10%.
The rates paid on time deposits decreased slightly, however the rates
paid on other borrowings and savings deposits increased by
79bp and 9bp, respectively.
Non-interest expense increased by $95,000 or 4.7% for the six months
ended June 30, 1997 compared to the same period in 1996.
The increase of non-interest expense was largely attributed to the
consolidation of office space during the second quarter which resulted
in the writeoff of approximately $39,000 of leasehold improvements
through accelerated depreciation expense. The costs associated
with Other Real Estate Owned were $25,000 more than the prior period
due to additional provision taken. Other expenses were also higher due
to costs of business development which were not incurred in the same
period last year.
The company's net income for the second quarter of 1997 was $991,000
as compared to a net loss of $52,000 for the second quarter of 1996.
As described above, the increase in net income for the second
quarter of 1997 as compared to the second quarter of 1996 is due almost
entirely to the gain on sale of securities and increase in net
interest income.
FINANCIAL CONDITION
Gross loans increased by $7,300,000 or 12.28% in the aggregate for the
six months ended June 30, 1997. The level of nonperforming assets
continued to trend downward, decreasing by $1,156,000 or 22%
reflecting management's continued focus on improving the overall asset
quality of the portfolio, while growing the bank. Investment securities
decreased by $2,416,000 reflecting the sale of marketable equity
securities. Federal funds sold increased by $4,150,000 in anticipation of
liquidity needs in the next few months due to a branch closing and future
loan growth.
Deposits increased by $7,214,000 or 9.46% for the six months ended
June 30, 1997. This is attributed to management's efforts to grow the Bank.
In the six months ended June 30, 1997, the Bank disbursed funds of
$13.2 million in connection with new financial leasing-related transactions
and had paydowns of $8 million from funds previously deployed.
Under the financial lease program, the Bank provides short term financial
leases which are subsequently placed with permanent lenders, and purchases
interests in pools of financial lease receivables. The Bank also acquires
equipment for creditworthy lessees under fully amortizing financial leases.
During 1996, the Bank established a receivable purchase program.
Under this program, the Bank satisfies the working capital needs of
selected corporations, including Fortune 500 and 1,000 companies as well as
privately-held concerns, through the acquisition of said companies
accounts and contract receivables. The Bank purchases receivables from
companies which provide goods or services located across the US and
Canada. The obligors are typically large to mid-size corporations as
well as the US Government, state and local municipalities.
In the six months ended June 30, 1997, the Bank purchased approximately
$4.4 million of such receivables and received payments of
approximately $3 million.
CAPITAL ADEQUACY
The following table summarizes the minimum capital requirements and capital positions of
the Bank at June 30, 1997 and December 31, 1996:
($ in thousands) June 30, 1997 December 31, 1996
Minimum Actual Actual Minimum Actual Actual
Capital Capital Capital Capital Capital Capital
Required RAP GAAP Required RAP GAAP
Regulatory Capital Requirements
Total risk based capital percentage 8.00% 10.01% 10.01% 8.00% 8.30% 9.31%
Total risk based capital 5,154 6,843 6,843 4,999 5,183 5,879
Tier 1 risk based capital percentage 4.00% 8.74% 8.74% 4.00% 7.03% 8.04%
Tier 1 risk based capital 2,577 5,976 5,976 2,499 4,392 5,079
Leverage (per order) percentage 6.00% 6.87% 6.87% 6.00% 5.36% 6.20%
Leverage (per order) 5,015 5,976 5,976 4,914 4,392 5,079
The regulatory capital requirements are being presented under two scenarios:
(1)RAP which excludes the additional capital infusion made at 12/31/96; and
(2) GAAP which includes the capital infusion and represents the application
of generally accepted accounting principals. As of June 30,1997 all
marketable equity securities relating to the capital infusion had been
liquidated and as such there were no longer any differences between RAP
and GAAP calculations. See "Note B: Regulatory Matters" for further
explanations.
LOANS
($ in thousands) June 30, 1997 December 31, 1996
% of % of
Amount Total Amount Total
Commercial collateralized
by real estate $23,905 36% $25,058 42%
Commercial other 11,899 18% 11,108 19%
Residential real estate mortgage 14,399 21% 13,690 23%
Lease financing 10,280 15% 4,877 8%
Accounts Receivable Purchases 4,450 7% 3,199 5%
Consumer 1,794 3% 1,494 3%
Total loans - gross $66,727 100% $59,427 100%
Unearned income ($6) ($8)
Deferred loan fees (214) (76)
Allowance for loan losses (1,853) (1,602)
Total Loans - net $64,654 $57,741
Average outstanding loans - net $61,113 $54,230
NONPERFORMING ASSETS
($ in thousands) June 30, December 31,
1997 1996
Loans past due 90 days or more:
Non-accrual $3,076 $2,825
Accrual 482 1,038
Total loans past due 90 days or more 3,558 3,863
Other real estate owned ("OREO"):
Foreclosed properties 718 1,517
OREO allowance (265) (213)
Total OREO (net) 453 1,304
TOTAL NONPERFORMING ASSETS $4,011 $5,167
Nonperforming assets to total
loans (net) and OREO (net) 6.16% 8.75%
Allowance for loan losses to total
loans past due 90 days or more 52.08% 41.47%
As a percentage of total loans:
Loans past due 90 days or more 5.33% 6.50%
Allowance for loan losses 2.78% 2.70%
Non-accrual loans consisted of the following:
($ in thousands) June 30, December 31,
1997 1996
Non-accrual loans:
Real estate loans $2,219 $2,121
Commercial other 857 704
TOTAL NON-ACCRUAL LOANS $3,076 $2,825
OREO consisted of the following:
($ in thousands) June 30, December 31,
1997 1996
1-4 family residential properties $60 $386
Commercial real estate 244 575
Construction & Land Development 209 343
TOTAL OREO $453 $1,304
The Company discontinues the accrual of interest income on commercial loans
and leases whenever reasonable doubt exists as to ultimate collectability
or when the loan is 90 days or more past due. When the accrual of interest
income is discontinued, all previously accrued interest income is generally
reversed against the current period's income. A non-accrual loan is
restored to an accrual status when it is no longer delinquent and
collectability of interest and principal is no longer in doubt. Consumer
loans are not placed on nonaccrual status, they are included in loans
90 days or more past due and accruing. Principal and accrued interest
are charged off when and if they become 180 days past due.
The Company's ability to reduce nonperforming assets is dependent on
conditions in the real estate market and the general economy.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through charges against
income and maintained at a level that management considers adequate
to absorb potential losses in the loan portfolio. Management's estimate of
the adequacy of the allowance for loan losses is based on evaluations
of individual loans, estimates of current collateral values and the
results of the most recent regulatory examination. Management also
evaluates the general risk characteristics inherent in the loan portfolio,
prevailing and anticipated conditions in the real estate market and general
economy, and historical loan loss experience. Loans are
charged against the allowance for loan losses when management believes
that collection is unlikely. Any subsequent recoveries are credited
back to the allowance for loan losses when received.
The changes in the allowance for loan losses were as follows:
Six months ended June 30, 1997 1996
($ in thousands)
Beginning balance $1,602 $2,070
Loans charged off (127) (297)
Recoveries 38 36
Net loan recoveries (charge-offs) (89) (261)
Provision for loan losses 340 40
Ending balance $1,853 $1,849
Net loan charge-offs to
average loans outstanding 0.15% 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.
Management reviews the non-accrual loan portfolio, restructured loans and
loans past due 90 days and accruing to determine if there is loan impairment.
At June 30, 1997 the Bank's impaired loans amounted to $3,076,000. The Bank
has allocated $540,000 of the general loan loss reserve to this portfolio.
SECURITIES
All of the Company's investment securities were available for sale as of
June 30, 1997 and December 31,1996.
At June 30, 1997 Amortized Gross Unrealized Estimated
($ in thousands) Cost Gains Losses Market Value
US Treasury Securities $4,003 $10 -- $4,013
Marketable Equity Securities -- -- -- --
TOTAL INVESTMENT SECURITIES $4,003 $10 -- $4,013
At December 31, 1996 Amortized Gross Unrealized Estimated
($ in thousands) Cost Gains Losses Market Value
US Treasury Notes $4,005 $4 -- $4,009
Marketable Equity Securities 2,420 -- -- 2,420
TOTAL INVESTMENT SECURITIES $6,425 $4 -- $6,429
NET INTEREST INCOME
The following table presents condensed average statements of condition,
including non-accrual loans, the components of net interest income and
selected statistical data:
<CAPTION
Six months ended June 30, 1997 1996
Average Average Average Average
($ in thousands) Balance Interest Rate Balance Interest Rate
Assets:
Loans $62,760 $3,081 9.90% $54,633 $2,448 9.01%
Securities 4,010 120 6.03% 6,144 178 5.83%
Federal Funds Sold 7,067 190 5.42% 6,578 172 5.26%
Total Earning Assets 73,837 3,391 9.26% 67,355 2,798 8.35%
Cash and due from banks 1,757 1,888
Other assets 9,649 10,354
Total Assets $85,243 $79,597
Liabilities & Stockholder's equity:
Interest-bearing deposits:
Time certificates $58,202 1,563 5.42% $52,810 $1,435 5.46%
Savings deposits 12,713 119 1.89% 14,721 132 1.80%
Total interest-bearing deposits 70,915 1,682 4.78% 67,531 1,567 4.66%
Other borrowings 2,366 152 12.96% 2,147 130 12.17%
Total interest-bearing liabilities 73,281 1,834 5.05% 69,678 1,697 4.90%
Demand deposits 7,798 7,870
Other liabilities 1,394 1,713
Stockholders' equity 2,770 336
Total liabilities and
stockholders' equity $85,243 $79,597
Net interest income/rate spread $1,577 4.21% $1,101 3.45%
Net interest margin 4.31% 3.29%
The following table presents the changes in interest income and expense for
each major category of interest-bearing assets and interest-bearing
liabilities, and the amount of the change attributable to
changes in average balances (volume) and rates. Changes attributable
to both volume and rate changes have been allocated in proportion to
the relationship of the absolute dollar amount of the changes in
volume and rate.
Change from June 30, 1996
to June 30, 1997 attributable to:
($ in thousands) Volume Rate Total
Interest income:
Loans 380 253 633
Investment securities (64) 6 (58)
Short-term investments 13 5 18
Total interest income 329 264 593
Interest expense:
Deposits:
Time certificates 141 (13) 128
Savings deposits (21) 8 (13)
Total interest expense on deposits 120 (5) 115
Other interest-bearing liabilities 14 8 22
Total interest expense 134 3 137
NET INTEREST INCOME 195 261 456
COMMITMENTS AND CONTINGENCIES
The Company and the Bank in the ordinary course of business are party to
financial instruments with off-balance sheet risk as well as being
party to various legal proceedings. These items are described more
fully in Note 16 of the Company's Consolidated Financial Statements
which are part of the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No.125 ("SFAS No. 125")
"Accounting for Transfer and Servicing of Financial Assets and
Extinguishment of Liabilities". This statement provides accounting
and reporting standards for transfers and servicing of financial assets
and extinguishment of liabilities. Those standards are based
on consistent application of a financial-components approach that
focuses on control. This statement provides implementation guidance
for assessing isolation of transferred assets and for accounting for
transfer of partial interest, servicing of financial assets,
securitizations, transfers of sales-type and direct financing lease
receivables, securities lending transactions, factoring arrangements,
transfers of receivables with recourse and extinguishment of liabilities.
This statement is effective for transfers and servicing of financial
assets and extinguishments of liabilities occurring after December 31, 1996
and is to be applied prospectively. Management does not feel this statement
will have a material impact on the Company's financial statements.
In February 1997 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128 ("SFAS No.128")
"Earnings Per Share". This statement establishes standards for computing
and presenting earnings per share (EPS) and applies to entities with
publicly held common stock or potential common stock. This statement is
effective for financial statements issued for periods ending after
December 15, 1997 with restatement of all prior-period EPS data presented.
This statement will not have a material effect on the Company's financial
statement presentation as losses have been incurred for all years
currently presented.
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: August 14, 1997
/s/ DENNIS POLLACK
Dennis Pollack
President and Chief Executive Officer
/s/ BARBARA VAN BERGEN
Barbara Van Bergen
Chief Financial Officer
EXHIBIT 27 FINANCIAL DATA SCHEDULE