U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------------
FORM 10-QSB
[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
[ ] 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 0-24476
SOUTH CAROLINA COMMUNITY BANCSHARES, INC.
(Exact name of Registrant as specified in its Charter)
Delaware 22-0999615
- -----------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
110 S. Congress Street, Winnsboro, South Carolina 29180
- -----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(803) 635-5536
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. /X/ Yes / / No
As of September 30, 1997, there were 698,733 shares of the
Registrant's common stock, par value $0.01 per share,
outstanding. The Registrant has no other classes of common equity
outstanding.
Transitional small business disclosure format:
/X/ Yes / / No
SOUTH CAROLINA COMMUNITY BANCSHARES, INC.
AND SUBSIDIARY
Winnsboro, South Carolina
Index
PART I. Page(s)
FINANCIAL INFORMATION
Item 1.
Financial Statements
Consolidated Balance Sheets-(Unaudited) as of
June 30, 1997, and September 30, 1997 3
Consolidated Statements of Income - (Unaudited) for
the three months ended September 30, 1996 and 1997 4
Consolidated Statements of Stockholders' Equity (unaudited) 5
Consolidated Statements of Cash Flows - (Unaudited)
for the three months ended September 30, 1996 and 1997 6-7
Notes to (Unaudited) Consolidated Financial Statements 8-9
Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations 10-12
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security
Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibit 27 Financial Data Schedule 15-16
SOUTH CAROLINA COMMUNITY BANCSHARES, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
(in thousands, except share data)
June 30, September 30,
Assets 1997 1997
Cash and due from banks $ 436 $ 275
Interest earning deposits 5,242 5,442
Investment securities:
Held to maturity (market value of $3,370 and $2,372) 3,352 2,353
Loans receivable, net 35,955 35,946
Mortgage-backed securities:
Held to maturity (market value of $49 and $46) 48 45
Premises and equipment, net 551 539
Federal Home Loan Bank stock 429 429
Interest receivable 340 344
Real estate 96 101
Prepaid expenses and other assets 149 145
-------- --------
Total assets $ 46,598 $ 45,619
-------- --------
-------- --------
Liabilities and Stockholders' Equity
Deposits $ 34,024 $ 33,086
Advance payments for taxes and insurance 42 48
Accrued expenses and other liabilities 374 168
Income taxes:
Current 78 73
Deferred 118 118
-------- --------
Total liabilities 34,636 33,493
-------- --------
-------- --------
Stockholders' equity:
Preferred stock ($.01 par value, 200,000
shares authorized; none outstanding) - -
Common stock ($.01 par value, 1,400,000 shares
authorized; 780,275 shares issued; 699,733
outstanding at June 30, 1997, and 698,733 at
September 30, 1997) 8 8
Paid in capital 7,321 7,338
Retained earnings, substantially restricted 6,801 6,935
Treasury stock, at cost (80,542 shares at
June 30, 1997 and 81,542 at September 30, 1997) (1,352) (1,374)
Unearned compensation:
Employee Stock Ownership Plan (452) (437)
Management Recognition Plan (364) (344)
-------- --------
Total stockholders' equity 11,962 12,126
-------- --------
Total liabilities and stockholders' equity $ 46,598 $ 45,619
-------- --------
-------- --------
The accompanying notes are an integral part of these consolidated
financial statements.
SOUTH CAROLINA COMMUNITY BANCSHARES, INC.
AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
(in thousands, except net income per share)
For Three Months Ended
September 30,
1996 1997
Interest income:
Loans $ 705 $ 760
Mortgage-backed securities 2 1
Investments 77 54
Interest earning deposits 60 72
------- -------
Total interest income 844 887
Interest expense:
Deposits 398 415
------- -------
Net interest income 446 472
Provision for loan losses - -
Net interest income after provision
for loan losses 446 472
------- -------
Noninterest income:
Loan fees and services - 11
Other 13 19
------- -------
Total noninterest income 13 30
------- -------
Noninterest expenses:
Compensation and employee benefits 136 170
Net occupancy expense 12 22
Deposit insurance premiums 211 5
Data processing 11 20
Other 60 84
------- -------
Total noninterest expenses 430 301
------- -------
Income before income taxes 29 201
Income tax expense 13 82
------- -------
Net income $ 16 $ 119
------- -------
------- -------
Weighted average common equivalent
shares outstanding 691 672
Net income per share $.02 $.18
The accompanying notes are an integral part of these consolidated
financial statements.
SOUTH CAROLINA COMMUNITY BANCSHARES, INC.
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
(Unaudited)
(in thousands, except share data)
Common Pain-In Retained Treasury Unearned Compensation
Stock Capital Earnings Stock for ESOP for MRP Total
Balance at June 30, 1996 $ 8 $7,279 $6,769 $ (790) $ (514) $ (443) $12,309
Net income - - 423 - - - 423
Cash dividends ($.60 per share) - - (391) - - - (391)
ESOP and MRP compensation earned - 42 - - 62 79 183
Treasury stock purchased (35,677 shares) - - - (562) - - (562)
----- ------ ------ ------- ------- ------- -------
Balance at June 30, 1997 8 7,321 6,801 (1,352) (452) (364) 11,962
Net income - - 119 - - - 119
ESOP and MRP compensation earned - 17 15 - 15 20 67
Treasury stock purchased (1,000 shares) - - (22) - - (22)
Balance at September 30, 1997 $ 8 $7,338 $6,935 $(1,374) $ (437) $ (344) $12,126
The accompanying notes are an integral part of these consolidated
financial statements.
SOUTH CAROLINA COMMUNITY BANCSHARES, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
For Three Months Ended
September 30,
1996 1997
Operating activities:
Net income $ 16 $ 119
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 7 19
Gain on sale of real estate owned - (6)
Deferred income taxes (benefit) (75) -
Amortization of premium (accretion
of discounts) on investment securities (1) (1)
Amortization of unearned compensation 46 52
Net increase (decrease) in deferred loan fees (9) (9)
(Increase) decrease in accrued interest receivable 12 (4)
(Increase) decrease in prepaid expenses and other assets (16) 4
Increase (decrease) in income taxes payable 41 (5)
Increase (decrease) in accrued expenses and other
liabilities 175 4
------- --------
Net cash provided (used) by operating activities 196 173
Investing activities:
Net (increase) decrease in loans (68) 19
Proceeds from sale of real estate owned - -
Proceeds from maturities of
investment securities held to maturity 1,000 1,000
Principal payments on mortgage-backed securities 4 3
Purchases of premises and equipment (50) -
------- --------
Net cash provided (used) by investing activities 886 1,022
------- --------
(continued)
SOUTH CAROLINA COMMUNITY BANCSHARES, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
For Three Months Ended
September 30,
1996 1997
Financing activities:
Net increase (decrease) in deposits $ (955) $ (945)
Increase (decrease) in advance payments for
taxes and insurance 18 6
Purchase of treasury stock - (22)
Dividends paid (206) (195)
------- --------
Net cash provided (used) by financing activities (1,143) (1,156)
------- --------
Net increase (decrease) in cash and cash equivalents (61) 39
Cash and cash equivalents at beginning of period 4,587 5,678
------- --------
Cash and cash equivalents at end of period $ 4,526 $ 5,717
------- --------
------- --------
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 413 $ 412
------- --------
------- --------
Noncash investing and financing activities:
Real estate acquired in satisfaction of
mortgage loans $ 93 $ -
------- --------
------- --------
The accompanying notes are an integral part of these consolidated
financial statements.
SOUTH CAROLINA COMMUNITY BANCSHARES, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
1. General
South Carolina Community Bancshares, Inc. (the "Company")
was incorporated under the laws of the State of Delaware for the
purpose of becoming the savings and loan holding company of
Community Federal Savings Bank (the "Savings Bank"). Both
companies are headquartered in Winnsboro, South Carolina. The
Company is engaged primarily in the business of directing,
planning and coordinating the business activities of the Savings
Bank. The financial statements of the Savings Bank are presented
on a consolidated basis with those of the Company.
2. Basis of Preparation
The accompanying unaudited consolidated financial statements
were prepared in accordance with instructions for Form 10-QSB and
therefore, do not include all disclosures necessary for a
complete presentation of the consolidated balance sheets,
consolidated statements of income, consolidated statements of
stockholders' equity, and consolidated statements of cash flows
in conformity with generally accepted accounting principles.
However, all adjustments which are, in the opinion of management,
necessary for the fair presentation of the interim financial
statements have been included. All such adjustments are of a
normal recurring nature. The statements of income for the three
month period ended September 30, 1997, are not necessarily
indicative of the results which may be expected for the entire
year.
It is suggested that these unaudited consolidated financial
statements be read in conjunction with the audited consolidated
financial statements and notes thereto for the Company for the
year ended June 30, 1997.
3. Earnings Per Share
Earnings per share amounts for the three month periods ended
September 30, 1996 and 1997, are based on the average number of
shares and equivalents outstanding throughout the period.
Unallocated ESOP shares are not considered as outstanding for
purposes of this calculation.
4. Deposit Insurance Assessment
The Company was required to pay a special assessment to
recapitalize the Savings Association Insurance Fund (SAIF).The
Company recorded the special assessment for deposit insurance
premiums of approximately $193,000 in operations for the three
months ending September 30, 1996, with an after tax impact on net
income of approximately $127,000.
6. Asset Quality
At September 30, 1997, the Company had total nonperforming
loans (i.e., loans which are contractually past due 90 days or
more) of approximately $297,000. Nonperforming loans was .82% of
total loans at September 30, 1997. Total nonperforming assets as
a percent of total assets at September 30, 1997 was .87%.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
The following discussion and analysis is intended to assist in
understanding the financial condition and the results of
operations of the Company. References to the "Company" include
South Carolina Community Bancshares, Inc. and/or Community
Federal Savings Bank as appropriate.
Comparison of Financial Condition at June 30, 1997 and September
30, 1997
The Company's total consolidated assets decreased by
approximately $1.0 million or 2.1% from $46.6 million at June 30,
1997 to $45.6 million at September 30, 1997. The decrease in
assets for the period was primarily attributable to assets used
to fund deposit withdrawals.
The composition of the Company's balance sheet has not been
materially affected by market conditions between June 30, 1997
and September 30, 1997. Net loans remained level while
investments held to maturity decreased by $1 million as a result
of scheduled maturities. The proceeds from these maturities were
used to fund current cash flow needs.
Consistent with its historical lending practices, the Company's
loan portfolio at September 30 1997 consisted primarily of fixed
rate loans with maturities of up to twenty-five (25) years.
Consequently, the Company is exposed to a high degree of interest
rate risk in a rising interest rate environment. The Company has
historically accepted this risk in light of its relatively high
capital levels. See "Liquidity and Capital Resources" discussion
below.
Deposits decreased $938,000 million or 2.8%, from $34.0 million
at June 30, 1997 to $33.0 million at September 30, 1997. The
decrease in deposits was primarily attributable to a $500,000
decline in Now accounts and a $500,000 decline in various
certificates of deposit.
Comparison of Results of Operations for the Three Months Ended
September 30, 1996 and 1997
Net Income. Net income increased $103,000 from $16,000 for the
three months ended September 30, 1996 to $119,000 for the three
months ended September 30, 1997. The return on average assets was
.15% for the three months ended September 30, 1996 compared to
1.04 % for the three months ended September 30, 1997. Net income
for the three months ending September 30, 1996, exclusive of the
special SAIF assessment which had an impacted on net income of
approximately $127,000, would have been $143,000.
Net Interest Income. Net interest income increased $26,000 or
5.8% from $446,000 for the three months ended September 30, 1996
to $472,000 for the three months ended September 30, 1997. The
improvement in net interest income primarily reflects the
Company's ability to obtain Now account deposits which carry a
lower cost of funds.
Interest Income. Total interest income increased $43,000 from
$844,000 for the three months ended September 30, 1996 to
$887,000 for the three months ended September 30, 1997. Interest
on loans increased $55,000, or 7.8%. Interest on investments
decreased $23,000 as the average investment portfolio decreased
with scheduled maturities that were not reinvested.
Interest Expense. Interest expense increased $17,000 from
$398,000 for the three months ended September 30, 1996 to
$415,000 for the three months ended September 30, 1997. The
increase for the three months ending September 30, 1997 was the
result of a $2.3 million increase in the average interest bearing
deposits offset by a 16 basis point decrease in the cost of
funds. The majority of this deposit growth came as a result of
the branch acquisition.
Provision for Loan Losses. The Company did not record any
provision for loan losses for either of the three month periods
ended September 30. Management has reviewed the allowance for
loan losses in relation to the Company's composition of its loan
portfolio and observations of the general economic climate and
loan loss expectations. Based on the loss model, management feels
that the allowance for loan loss is adequate at the end of both
periods. The ratio of the allowance to non-performing loans at
September 30, 1997 was 98.5% and nonperforming loans to total
loans was only .82%.
Non-Interest Income. Non-interest income continues to be an
insignificant source of income for the Company. This income was
$13,000 for the three months ending September 30, 1996 and
$30,000 for the same period in 1997. The increase is the result
of additional banking services being offered to customers in 1997
that were not offered in 1996.
Non-Interest Expense. Non-interest expense, excluding the effect
of the one-time SAIF assessment of $193,000, increased by $64,000
from $237,000 for the three months ending September 30, 1996 to
$301,000 for 1997. The increase was the direct result of a
$34,000 increase in compensation expense primarily from
additional employees added following the branch acquisition and
normal salary increases. Net occupancy expense increased $10,000
and data processing increased $9,000 as a result of increased
operations and the addition of the branch location. Other non-
interest expenses increased by $24,000 as a result of increased
operating expenses.
Liquidity and Capital Resources. The Company's primary sources
of funds are deposits, proceeds from principal and interest
payments on loans, and investment maturities. While maturities
and scheduled amortization of loans are a predictable source of
funds, deposit flows and mortgage prepayments are greatly
influenced by general interest rates, economic conditions and
competition. The Company's primary investing activity is loan
originations. The Company maintains liquidity levels adequate to
fund loan commitments, investment opportunities, deposit
withdrawals and other financial commitments.
At September 30, 1997, there were no material commitments for
capital expenditures. Obligations to fund outstanding loan
commitments at September 30, 1997 were approximately $117,000.
At September 30, 1997, management had no knowledge of any trends,
events or uncertainties that will have or are reasonably likely
to have material effects on the liquidity, capital resources or
operations of
the Company. Furthermore, management was not aware of any current
recommendations by the regulatory authorities which, if
implemented, would have such an effect.
The Savings Bank exceeded all of its capital requirements at
September 30, 1997. The Savings Bank had the following capital
ratios at September 30,1997 and was categorized as "well
capitalized" under the Prompt Corrective Action regulations
adopted by the OTS pursuant to the Federal Deposit Insurance
Corporation Improvement Act of 1991.
For Capital Categorized as
Actual Adequacy Purposes "Well Capitalized"(1)
Amount Ratio Amount Ratio Amount Ratio
As of September 30, 1997:
Adjusted total Capital
(To risk weighted assets) $10,913 49.8% $1,751 8.00% $2,189 10.0%
Tier I Capital
(To risk weighted assets) $10,641 48.6% $ 876 4.00% $1,313 6.0%
Tier I Capital
(To total assets) $10,641 23.7% $1,347 3.00% $2,244 5.0%
Tangible Capital
(To total assets) $10,641 23.7% $ 673 1.50% $2,244 5.0%
(1) As categorized under the Prompt Corrective Action Provisions.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company and any subsidiary may be a
party to various legal proceedings incident to its or their
business. At September 30, 1997, there were no legal proceedings
to which the Company or any subsidiary was a party, or to which
of any of their property was subject, which were expected by
management to result in a material loss.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
27 Financial Data Schedule
No reports on Form 8-K were filed during the quarter ended
September 30, 1997.
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 thereunto duly authorized.
South Carolina Community Bancshares, Inc.
Date: November 13, 1997 By /s/ Alan W. Pullen
------------------------------
Alan W. Pullen
(President and Chief Executive
Officer)
South Carolina Community Bancshares, Inc.
Date: November 13,1997 By /s/ Terri Robinson
------------------------------
Terri Robinson
(Chief Financial Officer)