U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 333-00724
VALLEY RIDGE FINANCIAL CORP.
(Exact Name of Small Business Issuer as Specified in its Charter)
MICHIGAN 38-2888214
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
6 NORTH MAIN STREET (616) 678-5911
KENT CITY, MICHIGAN 49330 (Issuer's Telephone Number,
(Address of Principal Executive Offices) Including Area Code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 of 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the issuer was required to file such reports),
and (2) has been subject to such filing requirements for the past
90 days. Yes ___X___ No______.
There were 496,089 shares of Common Stock ($10 par value) outstanding as
of March 31, 1997.
Transitional Small Business Disclosure Format (check one):
Yes_____ No___X___.
VALLEY RIDGE FINANCIAL CORP.
INDEX
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PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 1997 (Unaudited) and December 31, 1996 . . . . . . . 3
Condensed Consolidated Statements of Income -
Three Months Ended March 31, 1997 and
March 31, 1996 (Unaudited) . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1997 and
March 31, 1996 (Unaudited) . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements (Unaudited). . . . . . 6
Item 2. Management's Discussion and Analysis or Plan of
Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 10
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VALLEY RIDGE FINANCIAL CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
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MARCH 31, DECEMBER 31,
1997 1996
--------- ------------
(Unaudited)
ASSETS
Cash and due from banks $ 6,658,219 $ 4,916,367
Federal funds sold 4,000,000 2,600,000
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Total cash and cash equivalents 10,658,219 7,516,367
Securities 17,682,753 19,912,913
Total loans 88,144,456 84,487,001
Allowance for loan losses (1,208,525) (1,182,154)
------------- ------------
86,935,931 83,304,847
Premises and equipment - net 2,240,351 2,249,164
Other assets 2,767,828 2,663,645
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Total assets $ 120,285,082 $115,646,936
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 14,380,799 $ 14,889,481
Interest-bearing 84,863,931 80,046,968
------------- ------------
99,244,730 94,936,449
Other borrowings 8,000,000 8,000,000
Accrued expenses and other liabilities 879,712 688,119
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Total liabilities 108,124,442 103,624,568
Shareholders' equity
Common stock, $10 par value: 1,000,000 shares
authorized; 496,089 shares outstanding
at March 31, 1997 and December 31, 1996,
respectively 4,960,890 4,960,890
Surplus 1,396,736 1,396,736
Retained earnings 5,446,304 5,196,705
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Net unrealized gain on securities available for sale,
net of tax of $183,760 at March 31, 1997 and
$241,110 at December 31, 1996 356,710 468,037
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Total shareholders' equity 12,160,640 12,022,368
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Total liabilities and shareholders' equity $ 120,285,082 $ 115,646,936
============= ============
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See accompanying notes to condensed consolidated financial statements.
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VALLEY RIDGE FINANCIAL CORP.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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------- THREE MONTHS ENDED ---------
MARCH 31, 1997 MARCH 31, 1996
-------------- --------------
Interest income
Loans, including fees $ 2,025,655 $ 1,935,594
Federal funds sold 36,455 39,369
Investment securities 277,743 277,016
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2,339,853 2,251,979
Interest expense
Deposits 825,609 788,442
Other 116,864 81,899
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942,473 870,341
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NET INTEREST INCOME 1,397,380 1,381,638
Provision for loan losses 30,000 45,600
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NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,367,380 1,336,038
Other income
Service charges and other income 253,223 240,926
Gain on sales of investment securities 18,077 10,476
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271,300 251,402
Other expense
Salaries and benefits 610,897 573,147
Occupancy 79,078 73,978
Furniture and fixtures 65,613 62,996
FDIC insurance premium 4,644 1,500
Supplies 67,466 42,502
Other 387,628 433,145
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1,215,326 1,187,268
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INCOME BEFORE FEDERAL INCOME TAX 423,354 400,172
Federal income tax expense 74,539 103,450
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NET INCOME $ 348,815 $ 296,722
============= ============
Net income per share $ .70 $ .60
============= ============
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See accompanying notes to condensed consolidated financial statements.
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VALLEY RIDGE FINANCIAL CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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------- THREE MONTHS ENDED ---------
MARCH 31, 1997 MARCH 31, 1996
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 348,815 $ 296,722
Adjustments to reconcile net income
to net cash from operating activities
Depreciation 55,901 53,082
Amortization of:
Premiums and discounts on securities, net 13,056 20,839
Goodwill and core deposit intangibles 8,747 7,762
Provision for loan losses 30,000 45,600
Gain on sale of securities (18,077) (10,476)
Gain on sale of loans (5,398) (8,873)
Loans originated for sale (822,800) (1,403,000)
Proceeds from loans sold 828,198 1,411,873
Net change in:
Accrued interest receivable (104,521) (27,092)
Other assets (8,409) (227,861)
Accrued expenses and other liabilities 248,944 (1,011,713)
------------- ------------
Net cash from (used in) operating
activities 574,456 (853,137)
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in loans (3,661,084) 2,010,762
Proceeds from:
Sales of securities available for sale 2,611,198 2,926,735
Repayments and maturities of securities
available for sale 884,525 784,562
Purchase of:
Securities available for sale (1,429,219) (2,706,023)
Premises and equipment, net (47,088) (48,116)
------------- ------------
Net cash from (used in) investing
activities (1,641,668) 2,967,920
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock $ 22,550
Net increase (decrease) in deposits $ 4,308,281 (2,901,387)
Advances from Federal Home Loan Bank 3,000,000
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Payment on Federal Home Loan Bank advance (2,000,000)
Dividends paid (99,217) (88,096)
------------- ------------
Net cash from (used in) financing
activities 4,209,064 (1,966,933)
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Net change in cash and cash equivalents 3,141,852 147,850
Cash and cash equivalents at beginning of period 7,516,367 10,083,451
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CASH AND CASH EQUIVALENTS AT END OF YEAR $ 10,658,219 $ 10,231,301
============= ============
Supplemental disclosures of cash flow information
Cash paid during the period for
Interest $ 918,840 $ 865,054
Income taxes 35,160
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See accompanying notes to condensed consolidated financial statements.
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VALLEY RIDGE FINANCIAL CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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1. BASIS OF PRESENTATION
The unaudited financial statements for the three months ended March 31,
1997 and March 31, 1996 include the consolidated results of operations
of Valley Ridge Financial Corp. (the "Corporation") and its wholly-owned
subsidiary, Valley Ridge Bank (the "Bank"). These consolidated financial
statements have been prepared in accordance with the Instructions for
Form 10-QSB and Item 310(b) of Regulation S-B and do not include all
disclosures required by generally accepted accounting principles for a
complete presentation of the Corporation s financial condition and
results of operations. In the opinion of management, the information
reflects all adjustments (consisting only of normal recurring
adjustments) which are necessary in order to make the financial
statements not misleading and for a fair presentation of the results of
operations for such periods. The results for the period ended March 31,
1997 should not be considered as indicative of results for the year
ending December 31, 1997. For further information, refer to the
consolidated financial statements and footnotes included in the
Corporation's Annual Report on Form 10-KSB for the year ended December
31, 1996.
2. ALLOWANCE FOR LOAN LOSSES
The following is a summary of the activity in the allowance for loan
losses account for the three months ended March 31, 1997:
Balance at January 1, 1997 $ 1,182,154
Provision for loan losses charged
to operating expense 30,000
Recoveries on loans previously charged
to the allowance 7,031
Losses charged off (10,660)
-------------
Balance at March 31, 1997 $ 1,208,525
=============
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VALLEY RIDGE FINANCIAL CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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3. OTHER BORROWINGS
At March 31, 1997, the Corporation had the following advances from the
Federal Home Loan Bank (the "FHLB"):
TYPE INTEREST RATE MATURITY DATE AMOUNT
---- ------------- ------------- ------
Fixed 5.730% July 21, 1997 $ 2,000,000
Adjustable 5.533 October 8, 1997 3,000,000
Fixed 5.260 February 1, 1999 1,000,000
Fixed 5.230 February 1, 1999 2,000,000
-----------
$ 8,000,000
===========
Each advance requires monthly interest payments at either fixed or
adjustable rates. The variable rate is based on the FHLB overnight rate
and adjusts quarterly. These borrowings are collateralized by
nonspecific loans within the mortgage portfolio up to the principal
outstanding. The adjustable rate note has no prepayment penalties while
the fixed rate notes carry a minimum prepayment penalty of $5,000.
4. EARNINGS PER COMMON SHARE
Earnings per share are calculated on the basis of the weighted average
number of shares outstanding. Earnings per share amounts are based on
496,089 and 495,133 shares outstanding for the three months ended March
31, 1997 and 1996, respectively. All share amounts have been restated
to reflect stock dividends and splits.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion is designed to provide a review of the
consolidated financial condition and results of operations of Valley Ridge
Financial Corp. ("Valley Ridge"). This discussion should be read in
conjunction with the consolidated financial statements and related notes.
Valley Ridge merged with Community Bank Corporation in 1996 in a business
combination accounted for under the pooling-of-interests method of
accounting and, accordingly, Valley Ridge s consolidated financial
statements have been restated for all periods presented.
RESULTS OF OPERATIONS:
NET INCOME: Valley Ridge reported net income of $348,815 or $0.70 per
share for the first quarter of 1997 compared to $296,722 or $0.60 per share
for the same period in 1996. The improvement was primarily a result of
improved net interest income and other income, partially offset by
increased other expenses. Management is not aware of any existing trends,
events, uncertainties or current recommendations by regulatory authorities
that are expected to have a material impact on Valley Ridge s future
operating results.
NET INTEREST INCOME: Net interest income increased $15,742, or 1.1%, to
$1,397,380 for the three month period ended March 31, 1997 compared to the
same period in 1996. The increase in net interest income is primarily
attributable to an increase in net loans of $3,631,084, or 4.4%, from March
31, 1996 to March 31, 1997.
PROVISION FOR LOAN LOSSES: The provision for loan losses represents the
adjustment to the allowance for loan losses needed to maintain the
allowance at a level determined by management to cover inherent losses
within Valley Ridge s loan portfolio. The provision declined to $30,000
for the three months ended March 31, 1997 from $45,600 for the same period
in 1996. This decrease occurred as a result of management's assessment
of the quality of loans in Valley Ridge s portfolio and management s
assessment of the allowance for loan loss balance. Net charge-offs were
approximately $3,600 for the first quarter of 1997 compared to net
recoveries of $27,000 for the same period in 1996. Management will
continue to monitor the allowance for loan losses and make additions to the
allowance through the provision for loan losses as economic conditions
dictate.
NON-INTEREST INCOME: Non-interest income for the three months ended
March 31, 1997 was approximately $271,000 as compared to $251,000 for the
same period in 1996. Approximately 38% ($7,600) of the increase is
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attributable to increased gains on sales of investment securities during
1997 compared to 1996.
NON-INTEREST EXPENSE: The increase in non-interest income was offset by
an increase in non-interest expense to approximately $1,215,000 for the
three months ended March 31, 1997 compared to $1,187,000 for the same
period in 1996. Salaries and benefits, the largest component of non-
interest expense, increased 6.6% from $573,147 for the three months ended
March 31, 1996 to $610,897 for the same period in 1997. Supplies expense
increased 26.5% from $42,502 to $67,466 for the same periods. This
increase in supplies expense is primarily attributable to the changing of
the Bank's name and logo in late 1996. The decrease in other expenses from
$433,145 for the three months ended March 31, 1996 to $387,628 for the same
period in 1997 is due to legal and professional fees charged in 1996
related to the acquisition of Community Bank Corporation.
FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES:
Total assets increased approximately 4% or $4.6 million to $120.2 million
at March 31, 1997 compared to $115.6 million at March 31, 1996. Total
liabilities increased by 4% or $4.5 million to $108.1 million at March 31,
1997 compared to $103.6 million at March 31, 1996. Total shareholders'
equity increased by approximately $138,000 to $12.2 million at March 31,
1997. The increase in shareholders' equity is primarily related to the
retention of earnings after dividend payouts, partially offset by the
decline in unrealized gain on securities available for sale.
Total loans increased by approximately $3.7 million or 4.3% to $88.1
million Deposits increased by approximately $4.3 million or 4.5% to
$99.2 million The net loan to deposit ratio has remained constant at
approximately 87% for both periods presented. The allowance for loan
losses increased by approximately $26,000 while maintaining a reserve of
1.37% of outstanding loans.
Valley Ridge paid a dividend of $99,218 in the first quarter of 1997,
compared to $88,096 paid during the first quarter of 1996.
Shareholders' equity as a percent of total assets was 10.1% at March 31,
1997 compared to 10.4% at March 31, 1996. Valley Ridge s capital ratios
continue to exceed the minimum regulatory levels prescribed by the Board
of Governors of the Federal Reserve System.
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Total cash and cash equivalents and investment securities totaled
approximately $28.3 million at March 31, 1997, or approximately 24% of
total assets. Management believes that the current level of liquidity is
sufficient to meet the normal operating needs of the Bank.
The principal source of funding for Valley Ridge continues to come from its
deposit customers. As previously noted, deposits increased 4.5% during the
first quarter of 1997 and management believes its deposit base will remain
a stable source of funds for the remainder of 1997.
Other sources of funding include normal loan repayments, sales and
maturities of securities, federal funds available from correspondent banks,
and additional advances available from the Federal Home Loan Bank (the
"FHLB"). As of March 31, 1997, Valley Ridge had outstanding advances from
the FHLB totaling $8,000,000.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this report:
EXHIBIT NO. DOCUMENT
3.1 Articles of Incorporation. Previously filed as an exhibit
to the Registrant's Registration Statement on Form S-4
(Registration Statement No. 333-00724). Here incorporated
by reference.
3.2 Bylaws. Previously filed as an exhibit to the Registrant's
Registration Statement on Form S-4 (Registration Statement
No. 333-00724). Here incorporated by reference.
4.1 Form of Stock Certificate. Previously filed as an exhibit
to the Registrant's Registration Statement on Form S-4
(Registration Statement No. 333-00724). Here incorporated
by reference.
4.2 Excerpts from Articles of Incorporation. Previously filed
as an exhibit to the Registrant's Registration Statement
on Form S-4 (Registration Statement No. 333-00724). Here
incorporated by reference.
4.3 Excerpts from Bylaws. Previously filed as an exhibit to the
Registrant's Registration Statement on Form S-4
(Registration Statement No. 333-00724). Here incorporated
by reference.
27 Financial Data Schedule.
(b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during
the quarter covered by this report.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
VALLEY RIDGE FINANCIAL CORP.
Registrant
Date: May 15, 1997 /S/RICHARD L. EDGAR
Richard L. Edgar, President/Chief
Executive Officer
Date: May 15, 1997 /S/MICHAEL MCHUGH
Michael McHugh, Secretary/Treasurer
(Principal Financial and Accounting
Officer)
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EXHIBIT INDEX
EXHIBIT NO. DOCUMENT
3.1 Articles of Incorporation. Previously filed as an exhibit
to the Registrant's Registration Statement on Form S-4
(Registration Statement No. 333-00724). Here incorporated
by reference.
3.2 Bylaws. Previously filed as an exhibit to the Registrant's
Registration Statement on Form S-4 (Registration Statement
No. 333-00724). Here incorporated by reference.
4.1 Form of Stock Certificate. Previously filed as an exhibit
to the Registrant's Registration Statement on Form S-4
(Registration Statement No. 333-00724). Here incorporated
by reference.
4.2 Excerpts from Articles of Incorporation. Previously filed
as an exhibit to the Registrant's Registration Statement
on Form S-4 (Registration Statement No. 333-00724). Here
incorporated by reference.
4.3 Excerpts from Bylaws. Previously filed as an exhibit to the
Registrant's Registration Statement on Form S-4
(Registration Statement No. 333-00724). Here incorporated
by reference.
27 Financial Data Schedule.