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, 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 September 30, 1997 there were 1,962,161 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, 1997 and December 31, 1996
Unaudited Consolidated Statements of Operations 2
Three Months and Nine Months Ended September 30, 1997 and September 30, 1996
Unaudited Consolidated Statements of Changes in Shareholders' 3
Equity --Nine Months Ended September 30, 1997 and September 30, 1996
Unaudited Consolidated Statements of Cash Flows 4
Nine Months Ended September 30, 1997 and September 30, 1996
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
CBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
(Dollars in 000's) (UNAUDITED) 1997 1996
ASSETS
LOANS (net of allowance for loan
losses: 1997, $1,838; 1996, $1,602): $58,288 $57,741
INVESTMENT SECURITIES HELD FOR SALE 4,014 6,429
FEDERAL FUNDS SOLD 13,054 6,328
TOTAL EARNING ASSETS 75,356 70,498
CASH AND DUE FROM BANKS 1,759 2,057
ACCRUED INTEREST RECEIVABLE 920 727
PROPERTY AND EQUIPMENT - NET 590 715
ASSETS HELD FOR LEASE 4,732 6,250
PREPAID AND OTHER ASSETS 886 478
OTHER REAL ESTATE OWNED 749 1,304
TOTAL ASSETS $84,992 $82,029
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS:
Demand $ 7,605 $ 8,732
Savings and NOW 10,631 11,471
Money market 2,635 2,298
Time deposits under $100 49,538 47,879
Time deposits of $100 or more 7,554 5,916
TOTAL DEPOSITS $77,963 $76,296
ACCRUED INTEREST PAYABLE 537 772
DIVIDENDS PAYABLE 855 161
OTHER LIABILITIES 523 480
SENIOR NOTES 548 548
CAPITAL NOTES 220 220
MANDATORY CONVERTIBLE CAPITAL NOTES - 1,090
TOTAL LIABILITIES $80,646 $79,567
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY:
Preferred Stock $18,793 $16,380
Common Stock 19 19
Additional paid-in capital 6,478 8,052
Unrealized gain(loss) on marketable equity securities 12 4
Accumulated deficit (20,956) (21,993)
TOTAL SHAREHOLDERS' EQUITY $4,346 $2,462
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $84,992 $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 Nine Months Ended
(UNAUDITED) September 30 September
(Dollars in 000's except per share data) 1997 1996 1997 1996
INTEREST INCOME:
Interest and Fees on Loans $1,650 $1,307 $4,730 $3,755
Interest and dividends on investments:
US Treasury and Government
agency securities 60 75 181 239
Other securities 0 10 0 24
Interest on Fed Funds Sold 157 88 347 260
TOTAL INTEREST INCOME $1,867 $1,480 $5,258 $4,278
INTEREST EXPENSE
Interest on deposits:
Savings and Time Deposits under $100 $698 $704 $2,283 $2,122
Time Deposits of $100 or more 188 79 285 228
Total Interest on deposits 886 783 2,568 2,350
Interest on borrowed money:
Long-term borrowings 21 59 62 176
Other 40 6 151 20
Total Interest on borrowed money 61 65 213 196
TOTAL INTEREST EXPENSE 947 848 2,781 2,546
NET INTEREST INCOME 920 632 2,477 1,732
Provision for loan losses 60 140 400 240
NET INTEREST INCOME (LOSS) AFTER
PROVISION FOR LOAN LOSSES $860 $492 $2,077 $1,492
OTHER OPERATING INCOME
Service fees on deposits $99 $101 301 $619
Net gain (loss) on sale of securities 0 - 1,134 10
Net gain (loss) on sale of assets (59) - (59) -
Income from assets held for lease 110 173 380 503
Other 327 32 405 105
TOTAL OTHER OPERATING INCOME $477 $306 $2,161 $1,237
OTHER OPERATING EXPENSE
Salaries and employee benefits $428 $503 $1,399 $1,442
Occupancy 71 89 241 266
Professional services 171 93 341 296
FDIC insurance 48 50 153 154
Other insurance 20 18 57 66
Supplies and communications 38 40 125 114
Depreciation and amortization 47 49 165 128
Furniture and equipment maintenance 11 14 35 38
Other real estate owned 67 169 287 364
Other 168 136 398 331
TOTAL OTHER OPERATING EXPENSES $1,069 $1,161 $3,201 $3,199
INCOME(LOSS) BEFORE INCOME TAX 268 (363) 1,037 (470)
Income tax -- -- -- --
NET INCOME (LOSS) $268 ($363) $1,037 ($470)
Less preferred stock dividends (554) (380) (1,574) (1,091)
Net Income (loss) applicable to common stock ($286) ($743) ($537) ($1,561)
Net Income (loss) per share (primary) ($.15) ($.38) ($.27) ($.80)
Weighted Average Common Shares (primary) 1,962,161 1,961,761 1,962,161 1,961,761
The accompanying notes are an integral part of these consolidated financial
statements
CBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
($ 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 (182) (182)
Preferred dividends accrued Series 2 (345) (345)
Preferred dividends accrued Series 3 (1,047) (1,047)
Issuance of Preferred Stock 2,413 2,413
Change in unrealized gain (loss) on
marketable equity securities 8 8
Net income (loss) 1,037 1,037
BALANCE, SEPTEMBER 30, 1997 1,962 $19 $18,793 $6,478 $12 ($20,956) $4,346
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) $2,493
CBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,
($ IN 000's) (UNAUDITED) 1997 1996
OPERATING ACTIVITIES:
Net Income (Loss) $1,037 ($470)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Provision for losses on loans 400 240
Provision for losses on foreclosed real estate 250 259
Provision for depreciation and amortization 165 128
Increase (decrease) in deferred loan fees and costs - net 107 9
Amortization (accretion) of net investment
security premiums (discounts) 3 23
(Gain) loss on sale of securities (1,134) (10)
(Gain) loss on sale other real estate owned (107) 321
(Gain) loss on sale of fixed assets 70 --
Decrease (increase) in accrued interest receivables (192) 16
Decrease (increase) in prepaid and other assets (408) (5)
Increase (decrease) in accrued interest payable 208 144
Increase (decrease) in other liabilities 42 22
Net cash provided (used) by operating activities $441 $677
INVESTING ACTIVITIES:
Net decrease (increase) in federal funds sold ($6,726) ($677)
Proceeds from sales and maturities of investment securities 3,554 6,572
Purchases of investment securities - (4,307)
Decrease (increase) in loans (1,408) (1,401)
Proceeds from sales of OREO 778 956
Purchases of OREO/Cap Exp. (12) (85)
Purchases of property and equipment (144) (93)
Proceeds from sale of fixed assets 34 --
Proceeds from sales of assets held for lease 1,518 1,210
Net cash provided by investing activities ($2,406) $2,175
FINANCING ACTIVITIES:
Net increase (decrease) in demand, savings and
money market deposit accounts ($1,631) ($1,023)
Net increase (decrease) in time deposits 3,298 (1,561)
Net cash, used in financing activities $1,667 ($2,584)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (298) 268
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR 2,057 1,937
CASH AND DUE FROM BANKS AT END OF QUARTER $1,759 $2,205
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the quarter for:
Interest on deposits and borrowed money 2,574 2,401
Income taxes -- --
NONCASH INVESTING AND FINANCING ACTIVITIES:
Transfers of loans to Other Real Estate Owned 460 262
Transfer of Other Real Estate Owned to loans -- 221
Mortgage recorded as Loan Recovery -- 300
Preferred stock dividend declared 1,574 1,092
Unrealized gain (loss) on valuation of instruments available for sale 8 (1)
Issuance of preferred stock dividend 880 2,270
Issuance of preferred stock for marketable equity securities -- 1,730
Exchange of Capital Notes and accrued interest payable
thereon for Preferred Stock 1,533 --
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 September 30, 1997 under
regulatory and generally accepted accounting principles was 7.25%. 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: 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 $443,163 of accrued and
unpaid interest through August 31, 1997, were converted
into Preferred Series III stock
on a dollar for dollar exchange basis. In connection with this decision, a
fairness letter has been obtained. The conversion was completed as of August
31, 1997.
NOTE D: CALCULATION OF EARNINGS PER SHARE
The earnings per share calculation as of September 30, 1997 was prepared in
accordance with the provisions of APB Opinion 15. The weighted average shares
outstanding for all periods disclosed did not include common stock equivalents
due to the fact that the Company's common stock has not publicly traded since
June 22, 1995. The amount of shares to be issued upon the conversion of common
stock equivalents is determined based on the market value of the common stock,
and as such could not be calculated.
NOTE E: LIQUIDATION OF CBC BANCORP, INC.
In furtherance of the Company's objective to maximize values realized by its
Shareholders, the Board of Directors is proposing a Plan of Liquidation and
Dissolution of CBC Bancorp, Inc. (the "Plan") for approval by the shareholders
at a Special Meeting to be held on November 19, 1997. If the Plan is approved
by
the shareholders, the Company will be liquidated through a distribution of the
assets of the Company on a pro-rata basis to the
Preferred Stock shareholders of
the Company. The assets of the Company consists primarily of the Company's
investment in the stock of its only operating subsidiary, the Connecticut Bank
of Commerce. The Plan was adopted by the Board of Directors, subject to
shareholder approval, on October 1, 1997.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL HIGHLIGHTS
CBC BANCORP, INC. AND SUBSIDIARY Nine Months Ended
CONDENSED STATEMENTS OF INCOME September 30,
($ In thousands, except per share data) 1997 1996
Net interest income $2,477 $1,732
Provision for loan losses 400 240
Net interest income after provision for loan losses 2,077 1,492
Investment securities gains (losses) 1,134 10
Other non-interest income 1,027 1,227
Other real estate owned expense 287 364
Other non-interest expense 2,914 2,835
NET INCOME (LOSS) $1,037 ($470)
Common Per share data
Book value ($7.36) ($6.49)
Net income and Preferred Stock Dividends (.27) (.80)
Cash dividends -- --
Financial Ratios
Yield on interest-bearing assets (%) 9.31 8.46
Cost of funds 5.05 4.91
Interest rate spread 4.26 3.55
Net interest margin 4.38 3.43
Return on average assets(annualized) .02 --
Return on average equity(annualized) .41 --
Average equity to average assets 3.96 .91
At end of quarter:
Loans to deposits 74.76 74.79
Nonperforming loans to total loans 4.53 8.36
Nonperforming assets to total loans and OREO 5.90 11.22
Allowance for loan losses to nonperforming loans 67.20 46.14
Capital ratios of bank subsidiary:
Total risk-based 11.43 9.27
Tier 1 risk-based 10.16 7.99
Tier 1 leverage 7.25 6.41
At end of period September 30, 1997 1996
Total assets $84,992 $82,123
Net loans 58,288 57,187
Allowance for loan losses (1,838) (2,298)
Securities 4,014 7,035
Deposits 77,963 76,461
Stockholders' equity 4,346 2,493
Outstanding shares 1,962,161 1,961,761
RESULTS OF OPERATIONS
The Company's net income for the nine months ending September 30, 1997 was
$1,037,000, as compared to a net loss of $470,000 for the nine months ending
September 30, 1996. The largest contributing factor to the $1,507,000 increase
between periods, was a $1,134,000 gain recognized on the sale of marketable
equity securities. Another major contributing factor was an
increase of $745,000
in net interest income before provision for loan losses for the nine month
period over the same period in 1996. This was tempered by an increase in the
year to date loan provision of $160,000 over the same period in 1996. The
increase was due primarily to anticipated loan growth and management"s revised
reserve methodology. Other Income, excluding the sale of
marketable securities,
decreased by $200,000 over the nine month period in 1996. Non-interest expense
remained level with the nine months ending September 30, 1996.
Total interest income for the nine months ended September 30, 1997 increased
$980,000 or 23% from the nine month period ended September 30, 1996. The
increase can be attributed to a 15% increase in average loans outstanding
combined with a 92 bp increase in the yield on loans for the period. The
interest income earned on investment securities and federal funds sold was
$5,000 more than the same period in 1996.
Total interest expense on interest-bearing liabilities for the
nine months ended
September 30, 1997 increased by approximately 9% or $235,000 from the
nine month
period ended September 30, 1996. The majority of the increase was due to an
increase in average time deposits outstanding of 11%. The rates paid on time
deposits remained level, however the rates paid on other borrowings and savings
deposits increased by 20bp and 7bp, respectively.
Non-interest income, excluding the gain on sale of securities decreased by
$200,000 for the nine months ended September 30, 1997 as compared to the same
period in 1996. The net decrease is due to primarily to the following factors:
1) service charges from deposits were $318,000 less than the same period in
1996. During 1996 the Bank recovered services charges on dormant
accounts in the
amount of $266,000; 2) the Bank closed the Norwalk branch in the third quarter
of 1997 and incurred a loss from the sale of leasehold improvements, furniture
and equipment of approximately $72,000; and 3) income from
assets held for lease
decreased by $123,000 from the same period in 1996 due to the sale of several
assets held for lease. These decreases were offset by $295,000 realized from
the sale of stock rights the bank had earned in connection with the purchase of
accounts receivables. The Bank sold the stock rights to an affiliated party of
the major stockholder. The Board of Directors has received an opinion from an
independent financial advisor that the price paid by the
affiliated party was no
less than the market value of the rights to receive
the stock on the date of the
transaction.
Non-interest expense has remained level with the nine month period in 1996.
Notable variances from the same period in 1996 were as follows: professional
fees increased by $45,000 due to temporary labor costs;
salary expense decreased
by $43,000; a loss of $64,000 incurred on the assignment of a lease associated
with the Norwalk branch closing; and the consolidation of
office space resulted
in higher depreciation expense due to the write-off
of leasehold improvements on
an accelerated basis during the second quarter. Overall occupancy expense has
decreased by approximately 10%. OREO expense has decreased by 21% as the
portfolio continues to be liquidated.
The Company's net income for the third quarter of 1997 was $268,000 as compared
to a net loss of $363,000 for the third quarter of 1996. The increase of
$631,000 can be attributed to the increase in net interest income described
above, the income from the sale of stock rights, and an overall decrease in non-
operating expenses from the third quarter of 1996.
FINANCIAL CONDITION
Gross loans increased by $898,000 or 1.5 % in the
aggregate for the nine months
ended September 30, 1997. The composition of the loan portfolio continues to
change, reflecting management's efforts to diversify risk and continue with the
new programs mentioned below. The level of nonperforming assets continued to
trend downward, decreasing by $1,683,000 or 32.5 % reflecting management's
continued focus on improving the overall asset quality of the portfolio, while
growing the bank. Investment securities
decreased by $2,415,000 reflecting the
sale of marketable equity securities. Federal funds sold
increased by $6,726,000
in anticipation of liquidity needs in the next few months due to a branch
closing and future loan growth.
Deposits increased by $1,667,000 or 2.2 % for the nine months ended September
30, 1997. This is attributed to management's efforts to grow the Bank.
In the nine months ended September 30, 1997, the Bank disbursed funds of $16.1
million in connection with new financial leasing-related transactions and had
paydowns of $11.1 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 nine months ended September 30, 1997, the Bank purchased approximately $7.5
million of such receivables and received payments of approximately $3.3
million.
CAPITAL ADEQUACY
The following table summarizes the minimum capital requirements and capital
positions of the Bank at September 30, 1997 and December 31, 1996:
($ in thousands) September 30, 1997 December 31, 1996
Minimum Actual Actual Minimum Actual Actual
Capital Capital Capital Captial Capital Capital
Required Under RAP Under GAAP Required Under RAP Under GAAP
Regulatory Capital Requirements
Total risk based capital percentage 8.00% 11.43% 11.43% 8.00% 8.30% 9.31%
Total risk based capital 4,961 7,087 7,087 4,999 5,183 5,879
Tier 1 risk based capital percentage 4.00% 10.16% 10.16% 4.00% 7.03% 8.04%
Tier 1 risk based capital 2,480 6,299 6,299 2,499 4,392 5,079
Leverage (per order) percentage 6.00% 7.25% 7.25% 6.00% 5.36% 6.20%
Leverage (per order) 5,215 6,299 6,299 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. All marketable equity
securities relating to the capital infusion had
been liquidated by June 30, 1997
and as such there were no longer any differences between RAP and GAAP
calculations. See" Note B: Regulatory Matters" for further explanations.
LOANS
September 30, 1997 December 31, 1996
% of % of
Amount Total Amount Total
Commercial collateralized by real estate $22,913 38% $25,059 42%
Commercial other 11,745 19% 11,108 19%
Residential real estate mortgage 11,121 18% 13,690 23%
Lease financing 7,454 13% 4,877 8%
Accounts Receivable Purchases 5,316 9% 3,199 5%
Consumer 1,776 3% 1,494 3%
Total loans - gross 60,325 100% 59,427 100%
Unearned income ($5) ($8)
Deferred loan fees (194) (76)
Allowance for loan losses (1,838) (1,602)
Total Loans - net $58,288 $57,741
Average outstanding loans - net $61,271 $54,230
NONPERFORMING ASSETS
September 30, December 31
($ in thousands) 1997 1996
Loans past due 90 days or more:
Non-accrual $2,398 $2,825
Accrual 337 1,038
Total loans past due 90 days or more 2,735 3,863
Other real estate owned ("OREO")
Foreclosed properties 855 1,517
OREO allowance (106) (213)
Total OREO (net) 749 1,304
TOTAL NONPERFORMING ASSETS $3,484 $5,167
Nonperforming assets to total
loans (net) and OREO (net) 5.90% 8.75%
Allowance for loans losses
past due 90 days or more 67.20% 41.47%
As a percentage of total loans:
Loans past due 90 days or more 4.53% 6.50%
Allowance for loan losses 3.04% 2.70%
Non-accrual loans consisted of the following:
September 30, December 31,
($ in thousands) 1997 1996
Non-accrual loans:
Real estate loans $1,374 $2,121
Commercial other 1,024 704
TOTAL NON-ACCRUAL LOANS $2,398 $2,825
OREO consisted of the following
September 30, December 31,
($ in thousands) 1997 1996
1 - 4 family residential properties $222 $386
Commercial real estate 321 575
Construction & Land Development 206 343
TOTAL OREO $749 $1,304
The Company discontinues the accrual of interest income on commercial loans
and leases whenever reasonable doubt exists as to ultimate collectibility or
when the loan is 90 days or more past due. When the accrual of interest
income is discontinued, all previously accrued interest income is generally
reversed against the current period's income. A non-accrual loan is restored
to an accrual status when it is no longer delinquent and collectibility of
interest and principal is no longer in doubt. Consumer loans are not placed
on nonaccrual status, they are included in loans 90 days or more past due and
accruing. Principal and accrued interest are charged off when and if they
become 180 days past due.
The Company's ability to reduce nonperforming assets is dependent on
conditions in the real estate market and the general economy.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through charges against income
and maintained at a level that management considers adequate to absorb
potential losses in the loan portfolio. Management's estimate of the adequacy
of the allowance for loan losses is based on evaluations of individual loans,
estimates of current collateral values and the results of the most recent
regulatory examination. Management also evaluates the general risk
characteristics inherent in the loan portfolio, prevailing and anticipated
conditions in the real estate market and general economy, and historical loan
loss experience. Loans are charged against the allowance for loan losses when
management believes that collection is unlikely. Any subsequent recoveries
are credited back to the allowance for loan losses when received.
The changes in the allowance for loan losses were as follows:
Nine months ended September 30,
($ in thousands) 1997 1996
Beginning balance $1,602 $2,070
Loans charged off (220) (464)
Recoveries 56 452
Net loan recoveries (charge-offs) (164) (12)
Provision for loan losses 400 240
Ending balance $1,838 $2,298
Net loan charge-offs to average loans outstanding 0.26% 0.02%
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 September 30, 1997 the Bank's impaired loans amounted to $2,398,000. The
Bank has allocated $468,000 of the general loan loss reserve to this
portfolio.
SECURITIES
All of the Company's investment securities were available for sale as of
September 30, 1997 and December 31, 1996.
At September 30, 1997
($ in thousands) Amortized Gross Unrealized Estimated
Cost Gains Losses Market Value
US Treasury Securities $4,002 $12 - $4,014
Marketable Equity Securities - - - -
TOTAL INVESTMENT SECURITIES $4,002 $12 - $4,014
At December 31, 1996
($ in thousands) Amortized Gross Unrealized Estimated
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 - $6,429
NET INTEREST INCOME
The following table represents condensed average statements of condition,
including non-accrual loans, the components of net interest income and selected
statistical data:
Nine months ended September 30, 1997 1996
Average Average Average Average
($ in thousands) Balance Interest Rate Balance Interest Rate
Assets:
Loans $62,993 $4,730 10.04% $55,006 $3,755 9.12%
Securities 4,010 181 6.03% 5,919 263 5.94%
Federal Funds Sold 8,484 347 5.47% 6,583 260 5.28%
Total Earning Assets $75,487 $5,258 9.31% $67,508 $4,278 8.46%
Cash and due from banks 1,763 1,836
Other assets 8,596 9,902
Total Assets $85,846 $79,246
Liabilities &
Stockholder's equity
Interest-bearing deposits:
Time certificates $58,544 $2,386 5.45% 52,744 $2,151 5.45%
Savings deposits 12,757 182 1.91% 14,467 199 1.84%
Total interest-
bearing deposits 71,301 2,568 4.80% 67,211 2,350 4.66%
Other borrowings 2,273 213 12.53% 2,123 196 12.33%
Total interest-bearing
liabilities 73,574 $2,781 5.05% 69,334 $2,546 4.91%
Demand deposits 7,874 7,889
Other liabilities 994 1,305
Stockholder's equity 3,404 718
Total liabilities
and stockholder's equity $85,846 $79,246
Net interest income/rate spread $2,477 4.26% $1,732 3.55%
Net interest margin 4.38% 3.43%
The following table presents the changes in interest income and expense for each
major category of interest-bearing assets and interest -bearing liabilities, and
the amount of the change attributable to changes in average balances (volume)
and rates. Changes attributable to both volume and rate changes have been
allocated in proportion to the relationship of the absolute dollar amount of the
changes in volume and rate.
Change from September 30, 1996
to September 30, 1997
($ in thousands) Volume Rate Total
Interest Income:
Loans 575 400 975
Investment securities (87) 5 (82)
Short-term investments 78 9 87
Total interest income 566 414 980
Interest expense:
Deposits:
Time certificates 235 0 235
Savings deposits (25) 8 (17)
Total interest expense on deposits 210 8 218
Other interest-bearing liabilities 14 3 17
Total interest expense 224 11 235
NET INTEREST INCOME 342 403 745
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.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"), which establishes standards for reporting and
display of comprehensive income, its components and accumulated
balances. Comprehensive income is defined to include all changes in
equity except those resulting from investments by owners and
distributions to owners. Among other disclosures, SFAS 130 requires
that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as
other financial statements. SFAS 130 is effective for financial
statements for periods beginning after December 15, 1997 and requires
comparative information for earlier years to be restated. Because of
the recent issuance of this standard, management has been unable to
fully evaluate the impact, if any, the standard may have on future
financial statement disclosures. results of operations and financial
position, however, will be unaffected by implementation of this
standard.
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 13, 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