U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
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Commission File Number: 000-24561
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RESOURCE BANKSHARES CORPORATION
(Exact name of Registrant as specified in its charter)
Virginia 54-1904386
-------- ----------
(State or other jurisdiction of ( I.R.S. Employer Identification No.)
incorporation or organization)
3720 Virginia Beach Blvd., Virginia Beach, VA 23452
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(Address of principal executive offices) (Zip Code)
(757) 463-2265
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(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act 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 ___
---
At March 31, 2001, 2,615,214 shares of Resource Bankshares Corporation's common
stock, $1.50 par value, were outstanding.
RESOURCE BANKSHARES CORPORATION
FORM 10-Q
MARCH 31, 2001
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2001 and
December 31, 2000 3
Consolidated Statements of Income for the periods ended
March 31, 2001 and 2000 4
Consolidated Statements of Stockholders' Equity for the period
ended March 31, 2001 5
Consolidated Statements of Cash Flows for the periods ended
March 31, 2001 and 2000 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition 10
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risks 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
RESOURCE BANKSHARES CORPORATION
CONSOLIDATED BALANCE SHEETS March 31 December 31
2001 2000
(Unaudited)
(Dollars in thousands)
ASSETS
Cash and due from banks $ 5,716 $ 7,147
Interest bearing deposits 3,150 2,195
Federal funds sold - -
--------- ---------
8,866 9,342
Funds advanced in settlement of mortgage loans 42,406 15,445
Securities available for sale (amortized cost of $21,628 and $18,631, respectively) 21,626 18,317
Securities held to maturity (fair value of $65,317 and $64,024, respectively) 63,393 63,804
Loans, net
Commercial 69,230 68,274
Real estate - construction 78,403 72,395
Commercial real estate 98,601 98,844
Residential real estate 44,763 44,817
Installment and consumer loans 4,476 4,183
--------- ---------
TOTAL LOANS 295,473 288,513
Allowance for loan losses (3,742) (3,521)
--------- ---------
NET LOANS 291,731 284,992
Other real estate owned - -
Premises and equipment, net 4,957 3,761
Other assets 7,870 5,822
Accrued interest 2,992 3,011
--------- ---------
$ 443,841 $ 404,494
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 12,953 $ 13,511
Interest bearing 362,519 317,133
--------- ---------
TOTAL DEPOSITS 375,472 330,644
Federal funds purchased 3,000 7,546
FHLB advances 30,300 30,300
Other liabilities 3,345 4,321
Accrued interest 2,112 2,811
Capital debt securities 9,200 9,200
--------- ---------
TOTAL LIABILITIES 423,429 384,822
STOCKHOLDERS' EQUITY
Preferred stock, par value $10 per share,
Shares authorized: 500,000; none issued and outstanding - -
Common stock, par value $1.50 a share
Shares authorized: 6,666,666
Shares issued and outstanding:
2001 - 2,615,214; 2000 - 2,623,861 3,923 3,936
Additional paid-in capital 10,900 10,989
Retained earnings 5,639 5,005
Accumulated other comprehensive income (loss) (50) (258)
--------- ---------
20,412 19,672
--------- ---------
$ 443,841 $ 404,494
========= =========
3
See notes to consolidated financial statements.
RESOURCE BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS Three months ended
(UNAUDITED) March 31
2001 2000
(Dollars in Thousands)
Interest and dividend income
Interest and fees on loans $ 6,000 $ 5,353
--------------------------
Interest on investment securities:
Interest and dividends on securities available for sale 215 143
Interest on securities held to maturity 1,436 470
--------------------------
1,651 613
--------------------------
Interest on federal funds sold - 75
Interest on funds advanced in settlement of mortgage loans 333 212
--------------------------
Total interest income 7,984 6,253
--------------------------
Interest expense
Interest on deposits 4,724 3,559
Interest on short term borrowings 137 203
Interest on long term borrowings 627 268
--------------------------
Total interest expense 5,488 4,030
--------------------------
Net interest income 2,496 2,223
Provision for loan losses (45) (100)
--------------------------
Net interest income after provision for loan losses 2,451 2,123
Noninterest income
Mortgage banking income 2,520 1,507
Service charges 301 177
Gain on sale of assets - 291
Other 197 202
--------------------------
3,018 2,177
--------------------------
Noninterest expense
Salaries and employee benefits 2,695 1,833
Occupancy expenses 311 321
Depreciation and equipment maintenance 248 225
Stationery and supplies 118 107
Marketing and business development 107 93
Professional fees 34 89
Outside computer services 128 138
FDIC insurance 16 12
Other 474 340
--------------------------
4,131 3,158
--------------------------
Income before income tax 1,338 1,142
Income tax expense 388 348
--------------------------
Net income $ 950 $ 794
==========================
Cash dividends declared per common share $ 0.12 $ 0.10
==========================
4
Basic earnings per common share $ 0.36 $ 0.31
==========================
Diluted earnings per common share $ 0.34 $ 0.30
==========================
See notes to consolidated financial statements.
5
RESOURCE BANKSHARES CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
Three Months Ended March 31, 2001 (Dollars in thousands)
Accumulated
Other
Additional Comprehensive
Common Stock Paid-in Retained Income
Shares Amount Capital Earnings (Loss) Total
-------------------------------------------------------------------------------
Balance, December 31, 2000 2,623,861 $3,936 $10,989 $5,005 ($258) $19,672
Comprehensive income:
Net income - - - 950 - 950
Changes in unrealized appreciation
(depreciation) on securities available
for sale, net of reclassification
adjustment and tax effect - - - - 208 208
---
Total comprehensive income 1,158
-----
Reacquisition of common stock (8,647) (13) (89) - - (102)
Cash dividends declared - $.12 per share - - - (316) - (316)
-------------------------------------------------------------------------------
Balance, March 31, 2001 2,615,214 $3,923 $10,900 $5,639 ($50) $20,412
===============================================================================
See notes to consolidated financial statements.
6
RESOURCE BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three months ended
March 31, 2001 March 31, 2000
Operating activities
(Dollars in thousands)
----------------------
Net income $ 950 $ 794
Adjustments to reconcile to net cash provided
(used) by operating activities:
Provision for losses on loans and other real estate owned 45 100
Provision for losses on funds advanced in settlement of
mortgage loans - 25
Depreciation and amortization 163 161
Amortization of investment securities premiums, net of
discounts (886) (12)
Gain on sale of loans or other real estate owned (179) (152)
Gain on disposition of premises and equipment - (7)
Gain on sale of assets - (291)
Deferred loan origination fees, net of costs 87 336
Changes in:
Funds advanced in settlement of mortgage loans (26,961) (2,663)
Interest receivable 19 (216)
Interest payable (698) 552
Other assets (922) (759)
Other liabilities (976) 478
--------- ---------
Net cash used by operating activities (29,358) (1,654)
--------- ---------
Investing activities:
Proceeds from sales and maturities of available-for-sale securities 744 250
Proceeds from maturities of held-to-maturity securities 965 22
Purchases of available-for-sale securities (3,512) (165)
Purchases of held-to-maturity securities - (12,437)
Loan originations, net of principal repayments (6,693) (1,265)
Net cash used for acquisitions (1,125) -
Purchases of premises, equipment and other assets (1,360) (178)
--------- ---------
Net cash used by investing activities (10,981) (13,773)
--------- ---------
Financing activities:
Proceeds from exercise of stock options and warrants - 50
Payments to reacquire common stock (102) -
Cash dividends paid (316) (257)
Repayments of federal funds purchased (4,546) -
Net repayments on FHLB advances - (2,000)
Net (decrease) increase in demand deposits,
NOW accounts and savings accounts (4,127) 18,827
Net increase in certificates of deposit 48,954 4,356
--------- ---------
Net cash provided by financing activities 39,863 20,976
--------- ---------
Increase (decrease) in cash and cash equivalents (476) 5,549
Cash and cash equivalents at beginning of period 9,342 7,065
--------- ---------
Cash and cash equivalents at end of period $ 8,866 $ 12,614
========= =========
Supplemental schedules and disclosures of
cash flow information:
Cash paid for:
Interest on deposits and other borrowings $ 6,186 $ 3,479
--------- ---------
See notes to consolidated financial statements.
7
RESOURCE BANKSHARES CORPORATION
Notes to Consolidated Financial Statements
March 31, 2001
(UNAUDITED)
(Dollars in thousands, except per share data)
Organization and Summary of Significant Accounting Policies
(1) GENERAL
Resource Bankshares Corporation, a Virginia Corporation (the "Company"),
was incorporated under the laws of the Commonwealth of Virginia on February 4,
1998, primarily to serve as a holding company for Resource Bank (the "Bank").
The consolidated financial statements of the Company include the accounts
of its wholly owned subsidiary, Resource Bank and the Bank's wholly owned
subsidiaries, CW and Company of Virginia and Resource Service Corporation. All
significant inter-company balances and transactions have been eliminated in
consolidation.
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q, and therefore, do not include all
of the disclosures and notes required by generally accepted accounting
principles. In the opinion of management, all adjustments in the normal
recurring nature which are necessary for a fair presentation of the financial
statements included herein have been reflected in the financial statements. The
results of operations for the interim periods are not necessarily indicative of
the results to be expected for the full year.
(2) CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include
cash and due from banks, interest-bearing deposits with banks, and federal funds
sold.
(3) ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses are as follows:
Balance as of January 1, 2001 $3,521
Provision for loan losses 45
Loans charged off (3)
Recoveries 179
------
Balance at March 31, 2001 $3,742
======
(4) NET INCOME PER SHARE
Basic EPS excludes dilution and is computed by dividing income available to
common shareholders by the weighted-average number of shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised, converted
into common stock or resulted in the issuance of common stock that then shares
in the earnings of the entity. The weighted average number of basic shares
outstanding for the
8
three months ended March 31, 2001 and 2000 were 2,616,543 and 2,555,213,
respectively. The diluted weighted average number of shares for the three months
ended March 31, 2001 and 2000 were 2,800,120 and 2,690,696, respectively.
(5) COMPREHENSIVE INCOME
The components of other comprehensive income and related tax effects for the
three months ended March 31, 2001 and 2000 are as follows:
Three months ended
March 31, 2001 March 31, 2000
Unrealized holding gains (losses) arising during the
period on available-for-sale
securities $ 312 ($210)
Tax effect ($104) 76
--------- ------
Net-of-tax amount $ 208 ($134)
======== ======
No reclassification adjustment was necessary as no realized gains or losses
were included in net income for the period.
(6) SUBSEQUENT EVENTS
In April 2001, the Board of Directors of the Company declared a $0.12 per
common share dividend to shareholders of record as of April 12, 2001. The
dividend was paid on April 26, 2001.
-9-
(7) SEGMENT REPORTING
The Company has one reportable segment, its mortgage banking operations.
This segment originates residential loans and subsequently sells them to
investors. The commercial banking and other banking operations provide a broad
range of lending and deposit services to individual and commercial customers,
including such products as commercial and construction loans, as well as other
business financing arrangements.
The Company's reportable segment is a strategic business unit that offers
different products and services. It is managed separately because the segment
appeals to different markets and, accordingly, requires different technology and
marketing strategies.
The mortgage banking segment's most significant revenue and expense are
non-interest income and non-interest expense, respectively. The Company's
segments are reported below for the periods ended March 31, 2001 and March 31,
2000.
Selected Financial Information
Commercial and Mortgage Banking
Other Operations Operations Total
--------------------------------------------------------
Three Months Ended March 31, 2001:
Net interest income after provision for loan losses $ 2,350 $ 101 $ 2,451
Noninterest income 508 2,510 3,018
Noninterest expense (1,949) (2,182) (4,131)
-------- -------- --------
Net income before income taxes $ 909 $ 429 $ 1,338
======== ======== ========
Three Months Ended March 31, 2000:
Net interest income after provision for loan losses $ 2,051 $ 72 $ 2,123
Noninterest income 670 1,507 2,177
Noninterest expense (1,701) (1,457) (3,158)
-------- -------- --------
Net income before income taxes $ 1,020 $ 122 $ 1,142
======== ======== ========
Segment Assets
Commercial Mortgage
and Other Banking
Operations Operations Total
--------------------------------------------
March 31, 2001 $441,812 $ 2,029 $443,841
======== ========= ========
March 31, 2000 $328,416 $ 648 $329,064
======== ========= ========
-10-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(Dollars in thousands, except per share data)
In addition to historical information, the following discussion contains
forward looking statements that are subject to risks and uncertainties that
could cause the Company's actual results to differ materially from those
anticipated. These forward looking statements include, but are not limited to,
the effect of increasing interest rates on the Company's profitability and the
adequacy of the Company's allowance for future loan losses. Several factors,
including the local and national economy and the demand for residential mortgage
loans may adversely affect the Company's ability to achieve the expected
results. Readers are cautioned not to place undue reliance on these forward
looking statements, which reflect management's analysis only as of the date of
this report.
Resource Bankshares Corporation, a Virginia Corporation (the "Company"),
was incorporated under the laws of the Commonwealth of Virginia on February 4,
1998, primarily to serve as a holding company for Resource Bank (the "Bank").
Total assets at March 31, 2001 were $443,841, up 9.7% from $404,494 at
December 31, 2000, reflecting growth in securities and loans. The Company
purchased $3,500 of securities during the first three months of 2001, net loans
increased by $6,739, and funds advanced in settlement of mortgage loans
increased by $26,961 during the same period. The principal components of the
Company's assets at the end of the period were $85,019 in securities, $8,866 in
cash and cash equivalents, $42,406 in funds advanced in settlement of mortgage
loans and $291,731 in net loans. The Company's lending activities are a
principal source of income.
Total liabilities at March 31, 2001 were $423,429, up from $384,822 at
December 31, 2000, with the increase represented by $44,828 (13.6%) growth in
deposits offset by a decrease of $4,546 (12.0%) in borrowed funds. Non-interest
bearing demand deposits decreased $558 or 4.1%, while interest bearing deposits
increased by $45,386 or 14.3%. The Company's deposits are provided by
individuals and businesses located within the communities served as well as the
national market.
The Bank purchased a commercial mortgage company during the first quarter
of 2001. Atlantic Mortgage & Investment Company ("Atlantic Mortgage") was
purchased from Progress Realty Advisors, Inc., a Pennsylvania corporation and
operates as a division of Resource Bank. Atlantic Mortgage specializes in
commercial mortgage originations, placements and servicing primarily along the
Atlantic coast, with offices in Richmond and Chesapeake, Virginia and Raleigh,
North Carolina.
During the first quarter of 2001 the Bank purchased First Jefferson
Mortgage Corporation ("First Jefferson"), a Virginia based mortgage loan
origination company. First Jefferson's business and operations have been
integrated into Resource Mortgage, a division of Resource Bank. The purchase of
First Jefferson added offices in Fort Lauderdale and Jacksonville, Florida and
Roanoke, Virginia, as well as in the Hampton Roads and Richmond areas. First
Jefferson closed over $250 million mortgage loans in 2000.
Total stockholders' equity at March 31, 2001 was $20,412, compared to
$19,672 at December 31, 2000. The Company had net income of $950 for the three
months ended March 31, 2001 compared with net income of $794 for the comparable
period in 2000, an increase of 19.7%. This increase is attributable to the
growth in interest bearing assets and increases in mortgage banking income.
-11-
Profitability as measured by the Company's return on average assets (ROA)
was 0.9% for the three months ended March 31, 2001, down 0.1% from the same
period of 2000. A key indicator of performance, the return on average equity
(ROE) was 19.5% and 19.8% for the three months ended March 31, 2001 and 2000,
respectively.
Net interest income represents a principal source of earnings for the
Company. The first component is the loan portfolio. Making sound loans that will
increase the Company's net interest margin is the first priority of management.
The second component is gathering core deposits to match and fund the loan
production. The Company also utilizes national markets to generate deposits and
Federal Home Loan Bank ("FHLB") advances to fund loan growth either for asset
and liability management purposes or for a less expensive source of funds.
Net interest income on a tax equivalent basis, before provision for loan
losses, increased to $2,623 for the three months ended March 31, 2001 versus
$2,223 for the same period in 2000, an increase of 18.0%. Average interest
earning assets increased $90,623 from March 31, 2000 to the current period with
the largest increase being the result of significant purchases of higher
yielding investment securities during 2000. The first quarter of 2001 reflects
the impact of this increase in both volume and yield compared to the three month
period ended March 31, 2000. Average interest bearing liabilities increased
$87,395 during the same comparative period. The yield on average interest
earning assets increased 10 basis points to 8.3% at March 31, 2001, compared to
8.2% at March 31, 2000. The rate on interest bearing liabilities increased 30
basis points to 6.0% at March 31, 2001, compared to 5.7% at March 31, 2000.
-12-
Average Balances, Income and Expenses, Yields and Rates
The following table sets forth average balances of total interest earning assets
and total interest bearing liabilities for the periods indicated, showing the
average distribution of assets, liabilities, stockholders' equity and the
related income, expense and corresponding weighted average yields and costs.
Three months ended Three months ended
March 31, 2001 March 31, 2000
Average Yield/ Average Yield/
Balance Interest Rate (2) Balance Interest Rate (2)
(Dollars in thousands)
-------------------------------------------------------------------
Assets
Interest-earning assets:
Securities (1) $ 82,591 $1,708 8.39% $ 34,393 $ 592 6.89%
Loans (3) 290,511 6,000 8.38% 255,949 5,353 8.37%
Interest-bearing deposits 7,153 70 3.97% 6,718 96 5.72%
Other interest-earning assets (4) 16,302 333 8.28% 9,234 212 9.18%
-------------------------------------------------------------------
Total interest-earning assets 396,557 8,111 8.30% 306,294 6,253 8.17%
Noninterest earning assets:
Cash and due from banks 4,935 4,036
Premises and equipment 4,136 3,846
Other assets 8,726 7,626
Less: Allowance for loan losses (3,659) (2,730)
-------- --------
Total noninterest earning assets 14,138 12,778
-------- --------
Total assets $410,695 $319,072
-------- --------
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing deposits:
Demand/Money Market Accounts $128,713 $1,766 5.56% $ 19,653 $ 233 4.74%
Savings 5,514 47 3.46% 21,045 249 4.73%
Certificates of deposit 189,952 2,910 6.21% 216,594 3,077 5.68%
-------------------------------------------------------------------
Total interest-bearing deposits 324,179 4,723 5.91% 257,292 3,559 5.53%
FHLB advances and other borrowings 39,106 552 5.72% 18,598 270 5.81%
Capital debt securities 9,200 213 9.26% 9,200 201 8.74%
-------------------------------------------------------------------
Total liabilities interest-bearing 372,485 5,488 5.98% 285,090 4,030 5.65%
Non-interest-bearing liabilities:
Demand deposits 13,928 15,022
Other liabilities 4,800 2,864
-------- --------
Total liabilities non-interest-bearing 18,728 17,886
Stockholders' equity 19,482 16,096
-------- --------
Total liabilities and stockholders' equity $410,695 $319,072
-------- --------
Interest rate spread (1) (5) 2.32% 2.52%
Net interest income/net interest margin (1) (6) $2,623 2.68% $2,223 2.90%
(1) Tax equivalent basis. The tax equivalent adjustment to net interest income
was $127 thousand and $0 for the three months ended March 31, 2001 and
2000, respectively.
(2) Yield and rate percentages are all computed through the annualization of
interest income and expenses based on 365 days, divided by average daily
balances based on amortized cost.
(3) Non-accrual loans are included in the average loan balances, and income on
such loans is recognized on a cash basis.
(4) Consists of funds advanced in settlement of loans.
(5) Interest spread is the average yield earned on earning assets, less the
average rate incurred on interest bearing liabilities. (6) Net interest
margin is net interest income annualized, expressed as a percentage of
average earning assets.
-13-
(6) Net interest margin is net interest income annuslized, expressed as a
percentage of average earning assets.
Non-interest income increased from $2,177 for the three months ended
March 31, 2000 to $3,018 for the same period in 2001. This increase was
primarily attributable to increased activity in the Company's mortgage
banking operations. Mortgage banking made a significant contribution to the
Company's results in the first three months of 2001. For the three months
ended March 31, 2001, mortgage banking income increased by 67.2% or $1,013
to $2,520 versus the same period of 2000. Because of the uncertainty of
future loan origination volume and the future level of interest rates,
there can be no assurance that the Company will realize the same level of
mortgage banking income in future periods. Other non-interest income
decreased by $172 to $498 for the three months ending March 31, 2001
compared to the same period in 2000. Service charges increased (70.1%)
while other non-interest income decreased (60.0%). The gain on sale of
assets of $291 was due to the full recognition of a deferred gain on the
sale of a building during the three months ended March 31, 2000.
For the three months ended March 31, 2001, the Company's non-
interest expense totaled $4,131 or 30.8% higher than the same period in
2000. This increase was the result of adding Atlantic Mortgage & Investment
to the Company's commercial mortgage division and First Jefferson Mortgage
Corporation to the residential mortgage group. The largest component of
non-interest expense, salaries and employee benefits, which represents
65.2% of total non-interest expense, increased 47.0% to $2,695 for the
three months ended March 31, 2001 over the same period in 2000, and was
primarily attributed to the aforementioned additions. Occupancy expense
decreased by 3.1% to $311, depreciation and equipment maintenance increased
by 10.2% to $248, marketing and business development increased 15.1% to
$107, and outside computer services decreased by 7.3% to $128 for the three
months ended March 31, 2001 over the same period in 2000.
In establishing the allowance for loan losses, management considers
a number of factors, including loan asset quality, related collateral and
economic conditions prevailing during the loan's repayment. In its loan
policies, management emphasizes the borrower's ability to service the debt,
the borrower's general creditworthiness and the quality of collateral. The
allowance for loan losses as a percentage of period-end loans was 1.3% and
1.1% at March 31, 2001 and 2000, respectively. The provisions for loan
losses were $45 and $100 for the three months ended March 31, 2001 and
2000, respectively.
While the Company believes it has sufficient allowance for its
existing portfolio, there can be no assurances that an additional allowance
for losses on existing loans may not be necessary in the future,
particularly if the economy worsens.
-14-
Summary of Loan Loss Experience
The following table presents the Company's loan loss experience and selected
loan loss ratios for the six months ended March 31, 2001 and 2000.
Three months ended
March 31
2001 2000
---- ----
(Dollars in thousands)
Balance of allowance for loan losses
at beginning of year $ 3,521 $ 2,686
Loans charged-off:
Commercial - (78)
Installment - -
Real Estate (3) -
Credit Cards and Other Consumer - -
-------- --------
Total loans charged-off (3) (78)
-------- --------
Recoveries of loans previously charged off:
Commercial 83 99
Installment - -
Real Estate 96 3
Credit Cards and Other Consumer - -
-------- --------
Total recoveries 179 102
-------- --------
Net loan (charge-offs) recoveries 176 24
Additions to allowance charged to expense 45 100
Balance at end of period $ 3,742 $ 2,810
======== ========
Average loans $290,511 $255,949
Loans at end of period $295,473 $256,775
Selected Loan Loss Ratios:
Net charge-offs (recoveries) during the period to average loans -0.06% -0.01%
Provision for loan losses to average loans 0.02% 0.04%
Provision for loan losses to net charge-offs (recoveries) during
the period -26% -417%
Allowance for loan losses to loans at end of period 1.27% 1.09%
Non-performing assets at end of period $ 1,040 $ 689
Non-performing assets to total loans at end of period 0.35% 0.27%
Allowance for loan losses to non-performing assets at end
of period 360% 408%
-15-
Non Performing Assets
The following table presents the Company's non performing assets for the periods
set forth.
March 31 December 31
2001 2000
---- ----
(Dollars in thousands)
Non accrual loans $ 734 $ 1,015
Other real estate - -
Loans 90 days or more past due and still
accruing interest 306 320
-------- --------
Total non performing assets $ 1,040 $ 1,335
======== ========
Total assets $443,841 $404,494
======== ========
Total non performing assets to total assets 0.23% 0.33%
======== ========
Management believes that losses on these assets, if any, will be
minimal, although no assurance can be given in this regard. Loans are generally
placed in nonaccrual status when the collection of principal and interest is 90
days or more past due, unless the obligation is both well-secured and in the
process of collection.
Interest Rate Sensitivity and Liquidity
Management evaluates interest sensitivity through the use of an
asset/liability management reporting gap model on a quarterly basis and then
formulates strategies regarding asset generation and pricing, funding sources
and pricing, and off-balance sheet commitments in order to decrease sensitivity
risk. These strategies are based on management's outlook regarding interest rate
movements, the state of the regional and national economies and other financial
and business risk factors. In addition, the Company establishes prices for
deposits and loans based on local market conditions and manages its securities
portfolio under policies that take interest risk into account.
Liquidity represents the institution's ability to meet present and
future financial obligations. Liquid assets include cash, interest bearing
deposits with banks, federal funds sold, investments and loans maturing within
one year. The Company's funding requirements are supplied from a range of
traditional sources, including various types of demand deposits, money market
accounts, certificates of deposit and short-term borrowings. Federal Home Loan
Bank ("FHLB") advances are utilized as funding sources by the Company. At March
31, 2001, there were $30,300 in FHLB advances outstanding. The Company has an
available warehouse line of credit collateralized by first mortgage loans
amounting to $75,000, which expires December 4, 2001. The Company has no reason
to believe this arrangement will not be renewed. The Bank had no outstanding
warehouse advances at March 31, 2001 and 2000, respectively.
The Company purchased Federal Funds from correspondent institutions in
the amount of $3,000 and $0 at March 31, 2001 and 2000, respectively. The
Company has unused lines of credit with other correspondent banks of $10,000 and
$3,000.
Management seeks to ensure adequate liquidity to fund loans and meet
the Company's financial requirements and opportunities. To provide liquidity for
current, ongoing and unanticipated needs, the Company maintains short-term
interest bearing certificates of deposits, federal funds sold, and a
-16-
portfolio of debt securities. The Company also structures and monitors the flow
of funds from debt securities and from maturing loans. Securities are generally
purchased to provide a source of liquidity. Unrealized holding gains and losses
for available-for-sale securities are excluded from earnings and reported as a
net amount in a separate component of stockholders' equity until realized.
Securities are composed of governmental or quasi-governmental agencies,
municipal bonds, preferred stocks and bonds of corporations with investment
grade ratings.
The Company's financial position at March 31, 2001 reflects liquidity
and capital levels that management believes are currently adequate to fund
anticipated future business expansion. Capital ratios are in excess of required
regulatory minimums. The assessment of capital adequacy depends on a number of
factors such as asset quality, liquidity, earnings performance, and changing
competitive conditions and economic forces. The adequacy of the Company's
capital is reviewed by management on an ongoing basis. Management seeks to
maintain a capital structure that will assure an adequate level of capital to
support anticipated asset growth and to absorb potential losses.
The following table presents the amounts of the Company's interest
sensitive assets and liabilities that mature or reprice in the periods
indicated.
March 31,2001
Maturing or
Repricing
---------------------------------------------------------------------
Within 4-12 1 - 5 Over
------ ---- ----- ----
3 months Months Years 5 Years Total
--------- ------ ----- ------- -----
(Dollars in thousands)
Interest-Earning Assets:
Investment securities $ 29,377 $23,225 $13,352 $19,065 $85,019
Loans 163,458 19,770 90,004 22,241 295,473
Interest bearing deposits 3,150 - - - 3,150
Other interest-earning assets 42,406 - - - 42,406
---------------------------------------------------------------------
Total interest-earning assets 238,391 42,995 103,356 41,306 426,048
---------------------------------------------------------------------
Interest-Bearing Liabilities:
Deposits
Demand and savings (1) 117,585 - 17,929 - 135,514
Time deposits, $100,000 and over 1,528 5,078 685 - 7,291
Other time deposits 45,511 133,021 41,132 50 219,714
Other interest-bearing liabilities 3,000 300 - 30,000 33,300
Capital debt securities - - - 9,200 9,200
---------------------------------------------------------------------
Total interest-earning liabilities 167,624 138,399 59,746 39,250 405,019
---------------------------------------------------------------------
Period Gap $ 70,767 ($95,404) $43,610 $2,056 $21,029
---------------------------------------------------------------------
Cumulative Gap $ 70,767 ($24,637) $18,973 $21,029
------------------------------------------------------
Ratio cumulative gap to total
interest-earning assets 16.61% -5.78% 4.45% 4.94%
------------------------------------------------------
(1) Management has determined that interest checking, money market (except
those generated by e-banking) and savings accounts are not sensitive to changes
in related market rates and, therefore, have been placed in the 1-5 years
category.
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The capital adequacy standards are based on an established minimum for
Tier 1 Risk-Based Capital, Risk-Based Capital and the Tier 1 Leverage Ratio. The
following table summarizes regulatory capital ratios for the Company and its
subsidiary at March 31, 2001.
Resource Resource
Required Ratio Bankshares Bank
-------------- ---------- -----------
Tier 1 risk-based 4.00% 8.38% 8.85%
TTotal risk-based 8.00% 9.56% 10.04%
Tier 1 leverage 4.00 to 5.00% 6.46% 6.86%
The Company and the Bank are in full compliance with all relevant
regulatory capital requirements and is categorized by regulatory authorities as
well capitalized.
The effect of changing prices on financial institutions is typically
different from other industries as the Company's assets and liabilities are
monetary in nature. Interest rates are significantly impacted by inflation, but
neither the timing nor the magnitude of the changes are directly related to
price level indices. Impacts of inflation on interest rates, loan demand and
deposits are reflected in the Company's financial statements. Management
believes that the mortgage banking operations provide somewhat of a natural
interest rate hedge, in that the Company is interest rate sensitive in the six-
month period. When interest rates decline, the Company's earnings will be
negatively impacted in the six-month period but the mortgage operation's volume
should increase. The reverse should occur in rising interest rate markets.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market Risk Management
The Company's primary market risk exposure is interest rate risk.
Fluctuations in interest rates will impact both the level of interest income and
interest expense and the market value of the Company's interest earning assets
and interest bearing liabilities. There were no material changes in the
Company's market risk management strategy, as stated in the Company's 2000
annual report, during the first three months of 2001.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings to which the Company is a
party or of which the property of the Company is subject. The Company is party
to certain nonmaterial legal proceedings occurring in the normal course of
business.
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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 under-signed, thereunto
duly authorized.
RESOURCE BANKSHARES CORPORATION
/s/ Lawrence N. Smith
-----------------------
Lawrence N. Smith
President & Chief Executive Officer
Date: May 11, 2001
/s/ Eleanor J. Whitehurst
----------------------------
Eleanor J. Whitehurst
Senior Vice President & Chief Financial Officer
Date: May 11, 2001
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