U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2001
------------------------------
SALEM COMMUNITY BANKSHARES, INC.
---------------------------------------
(Exact name of small business issuer as specified in its charter)
Virginia 31-1736845
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
220 East Main Street
Salem, Virginia 24153
- --------------- ---------
(Address of principal executive offices) (Zip Code)
(Issuer's telephone number, including area code) (540) 387-0223
---------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
-
State the number of shares outstanding of each of the issuer's class of common
equity, as of the latest practicable date.
Class Outstanding at May 14, 2001
- -------------------------- --------------------------
COMMON STOCK, NO PAR VALUE 1,596,955
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (Check One): Yes No X
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(This report contains 16 pages)
SALEM COMMUNITY BANKSHARES, INC. AND SUBSIDIARY
FORM 10-QSB
MARCH 31, 2001
INDEX
PART I FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements 3
Consolidated Balance Sheets as of March 31, 2001
and December 31, 2000. 4
Consolidated Statements of Income and Comprehensive Income for the
three month periods ended March 31, 2001 and 2000. 5
Consolidated Statements of Changes In Stockholders'
Equity for the three month periods ended March 31, 2001 and 2000. 6
Consolidated Statements of Cash Flows for the
three month periods ended March 31, 2001 and 2000. 7
Notes to Consolidated Financial Statements. 8 - 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Result of Operations 11 - 15
PART II OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes In Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
2
SALEM COMMUNITY BANKSHARES, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The following is the unaudited consolidated balance sheet of Salem Community
Bankshares, Inc. and subsidiary (the Company) as of March 31, 2001 and the
related unaudited consolidated statements of income and comprehensive income for
the three month periods ended March 31, 2001 and 2000, and the unaudited
consolidated statements of changes in stockholders' equity, and cash flows, for
the three month periods ended March 31, 2001 and 2000. The consolidated balance
sheet presented as of December 31, 2000 has been derived from the consolidated
financial statements that have been audited by the Company's independent
auditors.
3
SALEM COMMUNITY BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands, except shares and per share data)
3/31/01 12/31/00
Assets (Unaudited) (Audited)
---------- ---------
Cash and due from banks $8,729 $8,283
Federal funds sold and securities purchased
under resale agreements 20,200 12,310
Securities:
Available-for-sale, at fair value 8,132 9,019
Held-to-maturity, at amortized cost
(fair value of $36,683 at March 31, 2001
and $38,634 at December 31, 2000) 36,719 39,434
Mortgage loans held for sale 1,094 139
Loans, less unearned income 145,944 139,577
Less allowance for loan losses -1,558 -1,529
---------- ----------
Loans, net 144,386 138,048
---------- ----------
Premises and equipment, net 2,062 2,107
Accrued interest receivable 1,702 1,805
Foreclosed properties 27 160
Other assets 1,782 1,077
---------- ----------
Total assets $224,833 $212,382
========== ==========
Liabilities and Stockholders' Equity
Noninterest-bearing demand deposits $21,990 $21,680
Interest-bearing demand deposits 42,622 41,429
Savings deposits 6,206 6,170
Time deposits 121,286 111,704
---------- ----------
Total deposits 192,104 180,983
Federal Home Loan Bank long-term debt 10,000 10,000
Accrued interest payable 1,513 1,486
Other liabilities 676 154
---------- ----------
Total liabilities 204,293 192,623
---------- ----------
Stockholders' equity:
Common stock and surplus, no par value. Authorized
10,000,000 shares; issued and outstanding 1,596,955 shares
in 2001 and 1,596,873 shares in 2000. 17,080 17,079
Retained earnings 3,470 2,766
Accumulated other comprehensive loss -10 -86
---------- ----------
Total stockholders' equity 20,540 19,759
---------- ----------
Commitments and contingent liabilities
Total liabilities and stockholders' equity $224,833 $212,382
========== ==========
See accompanying notes to unaudited consolidated financial statements.
4
SALEM COMMUNITY BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
(In thousands, except per share data)
Three Month Periods Ended March 31, 2001 and 2000
2001 2000
---- ----
Interest income:
Interest and fees on loans $3,470 $2,810
Interest on federal funds sold and securities
purchased under resale agreements 192 6
Interest on deposit with banks 39 2
Interest on securities - taxable 739 796
Interest on securities - nontaxable 48 58
-------- --------
Total interest income 4,488 3,672
-------- --------
Interest expense:
Interest on certificates of deposit
of $100 or more 352 237
Interest on other deposits 1,853 1,468
Interest on federal funds purchased and securities sold
under repurchase agreements 5
Interest on Federal Home Loan Bank borrowings 169 -
-------- --------
Total interest expense 2,374 1,710
-------- --------
Net interest income 2,114 1,962
Provision for loan losses 55 77
-------- --------
Net interest income after provision
for loan losses 2,059 1,885
-------- --------
Noninterest income:
Service charges on deposit accounts 151 126
Other service charges, commissions and fees 96 85
Other income 20 14
Realized securities losses, net -7 -
-------- --------
Total noninterest income 260 225
-------- --------
Noninterest expense:
Salaries and employee benefits 756 690
Occupancy expense of bank premises 80 68
Furniture, fixtures and equipment 124 115
Stationery, printing and supplies 22 31
Write-downs and losses, net, on foreclosed properties - 6
Other expenses 290 274
-------- --------
Total noninterest expense 1,272 1,184
-------- --------
Income before income tax expense 1,047 926
Income tax expense 343 299
-------- --------
Net income 704 627
Other comprehensive income (loss), net of income tax expense (benefit):
Net unrealized gains (losses) on available-for-sale securities 76 -12
-------- --------
Comprehensive income $780 $615
======== ========
Net income per share
Basic net income per share $0.44 $0.40
======== ========
Diluted net income per share $0.44 $0.39
======== ========
See accompanying notes to unaudited consolidated financial statements.
5
SALEM COMMUNITY BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(In thousands, except shares and per share data)
Three Month Periods Ended March 31, 2001 and 2000
Accumulated
Common Other
Stock Retained Comprehensive
and Surplus Earnings Loss Total
------------------------------------------------------------
Balances at December 31, 1999 $16,077 1,970 (210) 17,837
Net income - 627 - 627
Change in net unrealized
losses on available-for-sale securities,
net of income tax benefit of $6 - - (12) -12
------------------------------------------------------------
Balances at March 31, 2000 16,077 2,597 -222 18,452
====== ====== ====== ======
Balances at December 31, 2000 17,079 2,766 (86) 19,759
Net income - 704 - 704
Issuance of common stock (82 shares) 1 - - 1
Change in net unrealized
losses on available-for-sale securities,
net of income tax expense of $39 - - 76 76
------------------------------------------------------------
Balances at March 31, 2001 $17,080 3,470 (10) 20,540
====== ====== ====== ======
See accompanying notes to unaudited consolidated financial statements.
6
SALEM COMMUNITY BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Month Periods Ended March 31, 2001 and 2000
2001 2000
---- ----
Cash flows from operating activities:
Net income $704 627
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Provision for loan losses 55 77
Depreciation and amortization of bank premises and equipment 81 71
Loss on sale of securities 7 -
Amortization of premiums and accretion
of discounts, net 8 -
Write-downs and losses on sales
of foreclosed properties, net - 6
(Increase) decrease in:
Mortage loans held for sale -955 20
Accrued interest receivable 103 -230
Other assets -744 -366
Increase (decrease) in:
Accrued interest payable 27 -69
Other liabilities 523 33
--------- ---------
Net cash provided by (used in) operating activities -191 169
--------- ---------
Cash flows from investing activities:
Net increase in federal funds sold and
securities purchased under resale agreements -7,890 -2,315
Proceeds from maturities and calls of securities 4,702 542
Purchase of securities -1,000 -
Net increase in loans made to customers -6,416 -7,861
Recoveries on loans previously charged off 23 16
Proceeds from sales of foreclosed properties 133 54
Purchases of bank premises and equipment -36 -71
--------- ---------
Net cash used in investing activities -10,484 -9,635
--------- ---------
Cash flows from financing activities:
Net increase in time deposits 9,582 1,028
Net increase in demand and savings deposits 1,539 3,696
Net decrease in federal funds purchased and securities
sold under resale agreements - -145
Proceeds from notes payable from Federal Home Loan Bank - 900
Principle payments on capital lease obligations - -13
--------- ---------
Net cash provided by financing activities 11,121 5,466
--------- ---------
Net increase (decrease) in cash and due from banks 446 -4,000
Cash and due from banks at beginning of period 8,283 8,959
--------- ---------
Cash and due from banks at end of period $8,729 4,959
========= =========
For the quarters ended March 31, 2001 and 2000, the Company
paid interest expense of $2,347 and $1,779, respectively. For the
quarters ended March 31, 2001 and 2000, the Company paid
income taxes of $0.
See accompanying notes to unaudited consolidated financial statements.
7
SALEM COMMUNITY BANKSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Three Months Ended March 31, 2001
(Unaudited)
(In thousands, except shares and per share data)
(1) General
The consolidated financial statements include the accounts of Salem Community
Bankshares, Inc. and its wholly-owned subsidiary, Salem Bank and Trust, N.A.
(the Bank), (collectively the Company). All material intercompany accounts and
transactions have been eliminated. The consolidated financial statements
conform to accounting principles generally accepted in the United States of
America and to general banking industry practices. In the opinion of the
Company's management, the accompanying unaudited consolidated financial
statements contain all adjustments of a normal recurring nature, necessary to
present fairly the financial position as of March 31, 2001 and the results of
operations and cash flows for the three month periods ended March 31, 2001 and
2000.
These interim period consolidated financial statements and financial information
should be read in conjunction with the consolidated financial statements and
notes thereto included in Salem Community Bankshares, Inc. 2000 Annual Report
and additional information supplied in the 2000 Form 10-KSB.
The results of operations for the interim periods are not necessarily indicative
of the results to be expected for the full year ending December 31, 2001.
(2) Securities
The amortized costs, gross unrealized holding gains, gross unrealized holding
losses, and fair values for available-for-sale and held-to-maturity securities
by major security type are as follows:
March 31, 2001
----------------------------------------------
Gross Gross
Unrealized Unrealized
Amortized Holding Holding Fair
Costs Gains Losses Values
-----------------------------------------------
Available-for-sale
- ------------------
U.S. Government agencies
and corporations $ 6,000 11 - 6,011
Mortgage-backed securities 1,114 - (26) 1,088
Other securities 1,033 - - 1,033
------- -- ------ ------
Totals $ 8,147 11 (26) 8,132
======= == ====== ======
Held-to-maturity
- ----------------------------
U.S. Government agencies
and corporations $33,397 - (115) 33,282
Mortgage-backed securities 237 2 - 239
Obligations of state and
political subdivisions 3,085 77 - 3,162
------- -- ------ ------
Totals $36,719 79 (115) 36,683
======= == ====== ======
As of March 31, 2001, securities with amortized costs of $31,083 were pledged to
secure public deposits and for other purposes required by law.
8
SALEM COMMUNITY BANKSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Three Months Ended March 31, 2001
(Unaudited)
(In thousands, except shares and per share data)
(3) Loans
A summary of loans outstanding is as follows:
March 31, 2001 December 31, 2000
-------------- -----------------
Commercial $ 13,044 13,527
Consumer, principally installment 36,863 34,520
Real estate - mortgage 81,052 76,481
Real estate - construction 16,179 16,285
------- -------
Total loans 147,138 140,813
Less unearned income (1,194) (1,236)
--------- -------
Total loans, less unearned income $145,944 139,577
======== =======
(4) Nonperforming Assets, Impaired Loans and Allowance for Loan Losses
Nonperforming assets consist of the following:
March 31, 2001 December 31, 2000
-------------- -----------------
Nonaccrual loans $672 $583
Foreclosed properties 27 160
---- ----
Total nonperforming assets $699 $743
==== ====
There were no commitments to lend additional funds to customers whose loans were
classified as nonperforming at March 31, 2001. Included in nonaccrual loans as
of March 31, 2001 is a restructured loan, restructed during 2000, approximating
$295.
The following table shows the interest that would have been earned on nonaccrual
loans if they had been current in accordance with their original terms and the
recorded interest that was earned and included in income on these loans:
Three Month Period Ended March 31,
---------------------------------
2001 2000
---- ----
Interest contractually due on nonaccrual loans $ 16 20
===== ==
Recorded interest on nonaccrual loans $ 9 24
===== ==
9
SALEM COMMUNITY BANKSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Three Months Ended March 31, 2001
(Unaudited)
(In thousands, except shares and per share data)
At March 31, 2001, the recorded investment in loans that have been identified as
impaired loans, in accordance with Statement 114 and which includes nonaccrual,
restructured and certain watch list loans, totaled $793. Of this amount $268
related to loans with no valuation allowance, and $525 related to loans with a
corresponding valuation allowance of $191.
A summary of the activity in the allowance for loan losses follows:
Three Month Period Ended March 31,
----------------------------------
2001 2000
------ -----
Balances, beginning of period $1,529 1,404
Provision for loan losses 55 77
Loans charged off (49) (78)
Loan recoveries 23 16
------ -----
Balances, end of period $1,558 1,419
====== =====
(5) Time Deposits and Other Deposits
Included in time deposits are certificates of deposit and other time deposits of
$100 or more in the aggregate amount of $28,611 at March 31, 2001.
(6) Net Income Per Share
Basic net income per share excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted net income per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or vested into common stock or resulted in the issuance of common
stock that they shared in the earnings of the entity.
The following is a reconciliation of the numerators and denominators of basic
net income per share and diluted net income per share computations for the
periods indicated:
Net Income Shares Per Share
Three Month period Ended March 31, 2001 (Numerator) (Denominator) Amount
- ----------------------------------------- ----------- ------------- ---------
Basic net income per share $704 1,596,910 $.44
Effect of dilutive stock options - 8,241 =======
---- ---------
Diluted net income per share $704 1,605,151 $.44
==== ========= ====
Net Income Shares Per Share
Three Month Period Ended March 31, 2000 (Numerator) (Denominator) Amount
- ----------------------------------------- ---------- ------------ ---------
Basic net income per share $627 1,587,110 $.40
Effect of dilutive stock options - 14,950 ====
---- ---------
Diluted net income per share $627 1,602,060 $.39
==== ========= ====
10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(Amounts in thousands, except per share data and ratios)
The following is a discussion of the factors which significantly affected the
financial condition and results of operations of Salem Community Banshares, Inc.
and subsidiary at March 31, 2001 and for the three-month period ended March 31,
2001. This discussion should be read in conjunction with the unaudited
consolidated financial statements and notes presented herein, and with the
Company's audited consolidated financial statements and notes thereto for the
year ended December 31, 2000.
This Quarterly Report on Form 10-QSB contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The Company's actual results could differ
materially from those set forth in the forward-looking statements.
On May 31, 2000, shareholders approved the proposed reorganization of the Bank
into a holding company structure. On September 11, 2000, this proposed
reorganization was completed with 1,535,986 shares of Salem Bank and Trust, N.A.
common stock being exchanged one-for-one for 1,535,986 shares of Salem Community
Bankshares, Inc. common stock. As a result of this reorganization, the Bank
became a wholly-owned subsidiary of Salem Community Bankshares, Inc.
BALANCE SHEET
Total assets of the Company at March 31, 2001 exceeded total assets at December
31, 2000 by $12,451 or 5.9 percent. This increase was due primarily to an
increase of $7,890 in federal funds sold and securities purchased under resale
agreements and loan portfolio growth. The increase in fed funds sold resulted
from the Company not investing in long-term security products during the current
national environment of declining interest rates. Loans, net of unearned, at
March 31, 2001 compared to December 31, 2000 showed an increase of $6,367, or
4.6 percent. Higher loan volumes resulted from increased customer demand,
especially in indirect dealer loan products.
Total deposits increased by $11,121, or 6.1 percent, due mostly to increases in
time deposits. Time deposits increased $9,582, or 8.6 percent, due to the
Company offering more attractive depository products than area competition.
ALLOWANCE FOR LOAN LOSSES, NONPERFORMING ASSETS AND IMPAIRED LOANS
The provision for loan losses was $55 for the three month period ended March 31,
2001 compared to $77 for the same period in 2000, a decrease of $22. The
Company considers the allowance to be adequate based on the current loan
portfolio. An ongoing evaluation of the allowance for loan losses is made to
ensure that the allowance for loan losses is at a sufficient level to absorb
estimated losses in the Bank's loan portfolio. As of March 31, 2001, the ratio
of the allowance for loan losses to loans, net of unearned income, was 1.07
percent. While management uses available information to recognize loan losses,
future additions to the allowance may be necessary based on changes in economic
conditions. In addition, regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowance for loan losses.
The agencies may require the Bank to recognize additions to the allowance based
on their judgments about information available at the time of their examination.
Foreclosed properties decreased to $27 at March 31, 2001 from $160 at December
31, 2000. This decrease resulted from the sale of two properties during the
quarter as well as increased efforts by management to minimize the amount of
such properties held.
Nonaccrual loans were $672 and $583 at March 31, 2001 and at December 31, 2000,
respectively. Loans are generally placed in nonaccrual status when the
collection of principal and interest is 90 days or more past due, unless the
11
obligation is both well-secured and in the process of collection. Impaired
loans approximated $793 at March 31, 2001 and $707 at December 31, 2000.
See note 4 to the Company's unaudited consolidated financial statements for a
summary of the changes in the Company's allowance for loan losses and a summary
of nonperforming assets.
12
CAPITAL RESOURCES
Stockholders' equity increased $781, or 4.0 percent, as of March 31, 2001 to
$20,540 compared to stockholders' equity of $19,759 as of December 31, 2000.
The increase was primarily due to net earnings which were retained.
Stockholders' equity at March 31, 2001 has been reduced by $10 which represents
the excess of amortized costs over the fair value of available-for-sale
securities, net of taxes, held by the Company. This sole component of
comprehensive income has been recorded as a separate component of stockholders'
equity and will continue to be subject to change in future periods due to
fluctuations in market value, sales, purchases, maturities and calls of
securities classified as available-for-sale.
The Company and Bank are in compliance with minimum Tier 1 and total capital
ratios of 4 percent and 8 percent, respectively, as of March 31, 2001 and
December 31, 2000. The Company and Bank's leverage ratios at March 31, 2001 and
December 31, 2000 were also in excess of the 3 percent minimum.
There are no material commitments for capital expenditures as of March 31, 2001.
In addition, there are no expected material changes in the mix or relative cost
of capital resources.
NET INTEREST INCOME
The principal source of earnings for the Company is net interest income. Net
interest income is the net amount of interest earned on the Company's interest-
bearing assets less the amount of interest paid on the Company's deposits and
other interest-bearing liabilities. Net interest income before the provision
for loan losses was $2,114 for the three month period ended March 31, 2001
compared with $1,962 for the three month period ended March 31, 2000, an
increase of $152 or 7.8 percent. Total interest income increased from $3,672
for the three month period ended March 31, 2000 to $4,488 for the same period in
2001, a 22.2 percent increase. This increase was mostly due to increased
interest and fees on loans which resulted from a larger loan portfolio.
Interest expense increased from $1,710 for three month period ended March 31,
2000 to $2,374 for the same period in 2001, a 38.8 percent increase. This
increase in interest expense was due mainly to an increase in interest-bearing
demand and time deposit volumes.
NONINTEREST INCOME
Noninterest income consists of earnings generated primarily from service charges
on deposit accounts, securities gains and other service charges, commissions and
fees. The Company's noninterest income increased from $225 for the first three
months in 2000 to $260 for the same period in 2001, an increase of 15.6 percent.
This trend resulted from increases in service charges on deposit accounts and
other services charges and fees which resulted from a greater volume of deposits
and fewer such fees and charges being waived by management. The increase also
resulted from the opening of a new location, the Brandon Oaks branch, in April
2000.
NONINTEREST EXPENSE
The Company's noninterest expense increased 7.4 percent from $1,184 for the
first three months in 2000 to $1,272 for the same period in 2001. The overall
increase was due primarily to an increase in salaries and employee benefits
along with increases in occupancy expense and other expenses. A portion of
these increases resulted from the opening of the Brandon Oaks branch in April
2000.
13
INCOME TAXES
The reported income tax expense for the three month period ended March 31, 2001
was $343 (effective tax rate of 32.8 percent) compared to $299 (effective tax
rate of 32.3 percent) for the same period in 2000. This increase in income tax
expense was due to an increase in net taxable income and a slight decrease in
interest on securities-nontaxable.
NET INCOME
Net income for the three month period ended March 31, 2001 was $704 compared to
$627 for the same period in 2000. This increase of $77, or 12.3 percent, was
due primarily to the increase in net interest income. The Company achieved a
.33 percent return on average assets, or 1.30 percent annualized, during the
first three months of 2001, compared to a .35 percent, or 1.39 percent
annualized, return on average assets for the same period in 2000.
LIQUIDITY
Liquidity is the ability to generate adequate cash flow to meet financial
commitments and to fund customers' demands for funds, either in terms of loan
requests or deposit withdrawals. Liquidity may be provided by both assets and
liabilities. Asset liquidity is derived from sources such as readily marketable
investments, principal and interest payments on loans, and cash and due from
banks. Liability liquidity is provided by the core deposit growth from the
Company's strong, stable customer base. Management believes the liquidity of
the Company remains adequate, as sufficient assets are maintained on a short-
term basis, as well as certain debt alternatives, to meet the liquidity demands
anticipated. Secondary sources of funds are also available should the need
arise. Management is not aware of any trends, commitments or events that will
result in or that are reasonably likely to result in a material increase or
decrease in liquidity.
Net cash used in operating activities of $191 for the three month period ended
March 31, 2001 represented a decrease in cash provided of $360 from the same
period in 2000. This decrease was primarily attributable to a significant
increase in the amount of mortgage loans held for sale activity which fluctuates
based upon loan demand in the secondary market. Net cash flows provided by
financing activities for the three month period ended March 31, 2001 increased
$5,655 from the same period in 2000 due to increased deposit growth,
particularly in the area of time deposits. Cash flows used in investing
activities were used primarily to fund the net increase in loans of $6,416 and
the purchase of federal funds sold of $7,890 for the three month period ended
March 31, 2001.
GENERAL
- -------
IMPACT OF INFLATION AND CHANGING PRICES
The unaudited consolidated financial statements and related notes presented
herein have been prepared in accordance with accounting principles generally
accepted in the United States of America, which require the measurement of
financial position and operating results in terms of historical dollars, without
considering changes in the relative purchasing power of money over time due to
inflation.
Unlike many industrial companies, substantially all of the assets and virtually
all of the liabilities of the Company are monetary in nature. As a result,
interest rates have a more significant impact on the Company's performance than
the general level of inflation. Over short periods of time, interest rates may
not necessarily move in the same direction or in the same magnitude as
inflation.
14
DERIVATIVES
The Company does not use derivatives or other off-balance sheet transactions
such as future contracts, forward obligations, interest rate swaps, or options.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The
adoption of SFAS No. 133, as amended, as of January 1, 2001, did not have any
effect on the financial position, results of operations or liquidity of the
Company.
SFAS No. 140, Accounting for Transfers and Servicing of Financial Assests and
Extinguishments of Liabilities, a replacement of FASB Statement No. 125,
supercedes and replaces the guidance in SFAS No. 125, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No.
140 revises the standards for accounting for securitizations and other transfers
of financial assets and collateral and requires certain disclosures, but it
carries over most of the provisions of SFAS No. 125 without reconsideration.
SFAS No. 140 is effective for transfers and servicing of financial assets and
extinguishments of liabilities that occur after March 31, 2001, and for
reorganization and reclassification of collateral and for disclosures relating
to securitization transactions and collateral for fiscal years ending after
December 15, 2000. Disclosures about securitization and collateral accepted
need not be reported for periods ending on or before December 15, 2000 for which
financial statements are presented for comparative purposes. Management
believes the adoption of SFAS No. 140 will not have a significant effect on the
Company's consolidated financial statements.
As of March 31, 2001 there are no other new accounting standards issued, but not
yet adopted by the Company, which are expected to be applicable to the Company's
financial position, operating results or financial statement disclosures.
15
SALEM COMMUNITY BANKSHARES, INC. AND SUBSIDIARY
PART II - OTHER INFORMATION
Items 1 - 5. None for the quarter ended March 31, 2001.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required by Item 601 of Regulation S-B:
None.
(b) Reports on Form 8-K filed during the three month period ended March 31,
2001.
None.
16
SALEM COMMUNITY BANKSHARES, INC. AND SUBSIDIARY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Salem Community Bankshares, Inc.
Date: May 15, 2001 By: /s/ Clark Owen, Jr.
-------------------
Clark Owen, Jr., President and
Chief Executive Officer
Date: May 15, 2001 By: /s/ Gill R. Roseberry
---------------------
Gill R. Roseberry, Corporate Secretary
and Chief Financial Officer
17