U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE) FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended June 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _________to_________
Commission File No. 000-32493
REGIONAL BANKSHARES, INC.
(Exact name of registrant as specified in its charter)
South Carolina 57-1108717
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
206 South Fifth Street
Hartsville, SC 29551
(Address of principal executive
offices, including zip code)
(843) 383-4333
(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 Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
560,270 shares of common stock, $1.00 par value, on August 10, 2001
Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ]
REGIONAL BANKSHARES, INC.
Index
PART I. FINANCIAL INFORMATION Page No.
- -----------------------------
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -- June 30, 2001 and December 31, 2000..............................................3
Condensed Consolidated Statements of Income -- Six months
ended June 30, 2001 and 2000 and Three months ended June 30, 2001 and 2000..............................................4
Condensed Consolidated Statements of Shareholders' Equity and Comprehensive Income --
Six months ended June 30, 2001..........................................................................................5
Condensed Consolidated Statements of Cash Flows -- Six months ended June 30, 2001 and 2000................................6
Notes to Condensed Consolidated Financial Statements....................................................................7-8
Item 2. Management's Discussion and Analysis or Plan of Operation...............................................................9-14
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.......................................................................15
Item 6. Exhibits and Reports on Form 8-K..........................................................................................15
(a) Exhibits.............................................................................................................15
(b) Reports on Form 8-K..................................................................................................15
Signatures........................................................................................................................16
2
REGIONAL BANKSHARES, INC.
Condensed Consolidated Balance Sheets
June 30, December 31,
-------- ------------
2001 2000
---- ----
Assets: (Unaudited)
Cash and cash equivalents:
Cash and due from banks ..................................................... $ 1,590,980 $ 1,408,628
Federal funds sold .......................................................... 762,100 4,610,000
------------ ------------
Total cash and cash equivalents ........................................... 2,353,080 6,018,628
------------ ------------
Securities available-for-sale .................................................. 353,848 346,709
Nonmarketable equity securities ................................................ 94,353 238,603
------------ ------------
Total investment securities ............................................... 448,201 585,312
------------ ------------
Loans receivable ............................................................... 20,592,311 15,157,361
Less allowance for loan losses ............................................. (206,000) (159,000)
------------ ------------
Loans, net ............................................................... 20,386,311 14,998,361
Accrued interest receivable .................................................... 122,559 89,540
Premises and equipment, net .................................................... 2,131,083 1,051,941
Other assets ................................................................... 634,485 560,275
------------ ------------
Total assets .............................................................. $ 26,075,719 $ 23,304,057
============ ============
Liabilities
Deposits:
Noninterest-bearing ......................................................... $ 2,566,126 $ 2,304,641
Interest-bearing ............................................................ 2,208,804 2,726,322
Savings ..................................................................... 5,102,111 3,411,490
Time deposits $100,000 and over ............................................. 3,888,190 3,902,384
Other time deposits ......................................................... 7,455,858 6,119,382
------------ ------------
Total deposits ............................................................ 21,221,089 18,464,219
Accrued interest payable ....................................................... 301,478 245,113
Other liabilities .............................................................. 85,991 24,005
------------
Total liabilities ......................................................... 21,608,558 18,733,337
------------ ------------
Shareholders' Equity
Preferred stock, $1.00 par value, 1,000,000 shares
authorized, none issued ...................................................... - -
Common stock, $1.00 par value; 10,000,000 shares
authorized, 560,270 shares issued and outstanding ........................... 560,270 560,270
Capital surplus ................................................................ 4,973,271 4,973,271
Retained earnings (deficit) .................................................... (1,072,492) (963,212)
Accumulated other comprehensive income (loss) .................................. 6,112 391
------------ ------------
Total shareholders' equity ................................................ 4,467,161 4,570,720
------------ ------------
Total liabilities and shareholders' equity ................................ $ 26,075,719 $ 23,304,057
============ ============
See notes to condensed consolidated financial statements.
3
REGIONAL BANKSHARES, INC.
Condensed Consolidated Statements of Income
(Unaudited)
Six Months Ended June 30, Three Months Ended June 30,
------------------------- ---------------------------
2001 2000 2001 2000
---- ---- ---- ----
Interest income:
Loans, including fees .................................. $ 822,097 $ 373,103 413,847 $ 218,250
Investment Securities:
Taxable ................................................ 11,150 15,916 5,575 10,423
Nonmarketable equity securities ........................ 3,652 - 726 -
Federal funds sold ..................................... 108,841 125,166 40,718 61,286
--------- --------- --------- ---------
Total .................................................. 945,740 514,185 460,866 289,959
--------- --------- --------- ---------
Interest expense:
Time deposits $100,000 and over ........................ 121,807 35,565 59,764 19,895
Other deposits ......................................... 303,186 152,106 160,220 88,408
Other interest expense ................................. 1,960 - - -
--------- --------- --------- ---------
Total .................................................. 426,953 187,671 219,984 108,303
--------- --------- --------- ---------
Net interest income .................................... 518,787 326,514 240,882 181,656
Provision for loan losses .............................. 47,769 49,834 26,937 23,094
--------- --------- --------- ---------
Net interest income after
provision for loan losses.............................. 471,018 276,680 213,945 158,562
--------- --------- --------- ---------
Other income:
Service charges on deposit accounts .................... 52,565 19,753 31,619 11,705
Residential mortgage origination fees .................. 26,275 10,819 16,191 7,478
Credit life insurance commissions ...................... 6,099 8,282 4,392 3,915
Other income ........................................... 13,949 9,966 5,112 5,023
--------- --------- --------- ---------
Total .............................................. 98,888 48,820 57,314 28,121
--------- --------- --------- ---------
Other expense:
Salaries and benefits ............................... 360,730 341,855 184,132 172,457
Net occupancy expense ............................... 33,957 31,504 21,529 14,937
Furniture and fixture expense ....................... 51,485 47,039 26,696 22,767
Other operating expense ............................. 295,408 236,154 161,982 132,622
--------- --------- --------- ---------
Total .............................................. 741,580 656,552 394,339 342,783
--------- --------- --------- ---------
Income (loss) before income taxes ...................... (171,674) (331,052) (123,080) (156,100)
Income tax expense (benefit) ........................... (62,394) (122,751) (45,547) (58,019)
--------- --------- --------- ---------
Net income (loss) ...................................... $(109,280) $(208,301) $ (77,533) $ (98,081)
========= ========= ========= =========
Earnings (loss) per share
Average shares outstanding .......................... 560,270 560,270 560,270 560,270
Net income (loss) ................................... $ (0.20) $ (0.37) $ (0.14) $ (0.18)
4
REGIONAL BANKSHARES, INC.
Condensed Consolidated Statement of Shareholders'
Equity and Comprehensive Income
for the six months ended June 30, 2001
(Unaudited)
Accumulated
Common Stock Retained Other
------------ Capital Earnings Comprehensive
Shares Amount Surplus (Deficit) Income Total
------ ------ ------- --------- ------ -----
Balance,
December 31, 2000 ................... 560,270 $ 560,270 $ 4,973,271 $ (963,212) $ 391 $ 4,570,720
Net income (loss)
for the period ..................... (109,280) (109,280)
Other comprehensive
income, net of tax
benefit of $2,947.................... 5,721 5,721
-----------
Comprehensive income (loss) ........... (103,559)
----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 2001 ................ 560,270 $ 560,270 $ 4,973,271 $(1,072,492) $ 6,112 $ 4,467,161
=========== =========== =========== =========== =========== ===========
5
REGIONAL BANKSHARES, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30,
-------------------------
2001 2000
---- ----
Cash flows from operating activities:
Net income (loss) .................................................................... (109,280) $ (208,301)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization .................................................... 47,195 43,230
Provision for possible loan losses ............................................... 47,769 49,834
Accretion and premium amortization ............................................... (1,617) (1,486)
Deferred income tax provision (benefit) .......................................... (52,764) (122,751)
Increase in interest receivable .................................................. (33,019) (27,182)
Increase in interest payable ..................................................... 56,365 82,960
Decrease (increase) in other assets .............................................. (21,247) 12,232
Increase (decrease) in other liabilities ......................................... 61,986 (10,834)
----------- -----------
Net cash used by operating activities ......................................... (4,612) (182,298)
----------- -----------
Cash flows from investing activities:
Purchase of nonmarketable equity securities ........................................ (23,900) -
Sale of nonmarkeable equity securities ............................................. 168,150 -
Net increase in loans made to customers ............................................ (5,435,719) (4,567,982)
Purchases of premises and equipment ................................................ (1,126,337) (53,898)
----------- -----------
Net cash used by investing activities ............................................ (6,417,806) (4,621,880)
----------- -----------
Cash flows from financing activities:
Net increase in demand deposits, interest bearing
transaction accounts and savings accounts ......................................... 1,434,588 1,580,425
Net increase in certificates of deposit and other time deposits .................... 1,322,282 3,090,675
----------- -----------
Net cash provided by financing activities ........................................ 2,756,870 4,671,100
----------- -----------
Net increase (decrease) in cash and cash equivalents ................................ (3,665,548) (133,078)
Cash and cash equivalents, beginning ................................................. 6,018,628 4,364,020
----------- -----------
Cash and cash equivalents, ending .................................................... $ 2,353,080 $ 4,230,942
=========== ===========
Cash paid during the period for:
Income taxes ..................................................................... - $ -
Interest ......................................................................... 370,588 $ 104,711
6
REGIONAL BANKSHARES, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
The accompanying financial statements have been prepared in accordance with the
requirements for interim financial statements and, accordingly, they are
condensed and omit disclosures, which would substantially duplicate those
contained in the most recent annual report to shareholders. The financial
statements, as of June 30, 2001 and for the interim periods ended June 30, 2001
and 2000, are unaudited and, in the opinion of management, include all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation. The financial information as of December 31, 2000 has been
derived from the audited financial statements as of that date. For further
information, refer to the financial statements and the notes included in
Hartsville Community Bank's Annual Report on Form 10-KSB for the year ended
December 31, 2000.
Note 2 - Comprehensive Income
Comprehensive income includes net income and other comprehensive income, which
is defined as nonowner related transactions in equity. The following table sets
forth the amounts of other comprehensive income included in equity along with
the related tax effect for the three and six month periods ended June 30, 2001
and 2000:
Pre-tax (Expense) Net-of-tax
Amount Benefit Amount
------ ------- ------
For the Six-Months Ended June 30, 2001:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period .................. $ 8,668 $(2,947) $ 5,721
Plus: reclassification adjustment for gains (losses)
realized in net income ...................................................... - - -
------- ------- -------
Net unrealized gains (losses) on securities ................................ 8,668 (2,947) 5,721
------- ------- -------
Other comprehensive income ..................................................... $ 8,668 $(2,947) $ 5,721
======= ======= =======
Pre-tax (Expense) Net-of-tax
Amount Benefit Amount
------ ------- ------
For the Six-Months Ended June 30, 2000:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period .................... $(7,185) $ 2,443 $(4,742)
Plus: reclassification adjustment for gains (losses)
realized in net income ........................................................ - - -
------- ------- -------
Net unrealized gains (losses) on securities .................................. (7,185) 2,443 (4,742)
------- ------- -------
Other comprehensive income ....................................................... $(7,185) $ 2,443 $(4,742)
======= ======= =======
7
REGIONAL BANKSHARES, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 2 - Comprehensive Income (continued)
Pre-tax (Expense) Net-of-tax
Amount Benefit Amount
------ ------- ------
For the Three-Months Ended June 30, 2001:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period ..................... $ 918 $(312) $ 606
Plus: reclassification adjustment for gains (losses)
realized in net income ......................................................... - - -
----- ----- -----
Net unrealized gains (losses) on securities ................................... 918 (312) 606
----- ----- -----
Other comprehensive income ........................................................ $ 918 $(312) $ 606
===== ===== =====
Pre-tax (Expense) Net-of-tax
Amount Benefit Amount
------ ------- ------
For the Three-Months Ended June 30, 2000:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period .................... $(5,562) $ 1,891 $(3,671)
Plus: reclassification adjustment for gains (losses)
realized in net income ........................................................ - - -
------- ------- -------
Net unrealized gains (losses) on securities .................................. (5,562) 1,891 (3,671)
------- ------- -------
Other comprehensive income ....................................................... $(5,562) $ 1,891 $(3,671)
======= ======= =======
Accumulated other comprehensive income consists solely of the unrealized gain
(loss) on securities available-for-sale, net of the deferred tax effects.
8
REGIONAL BANKSHARES, INC.
Item 2. Management's Discussion and Analysis or Plan of Operation
The following is a discussion of our financial condition as of June 30, 2001
compared to December 31, 2000, and the results of operations for the three and
six months ended June 30, 2001, compared to the three and six months ended June
30, 2000. These comments should be read in conjunction with our condensed
financial statements and accompanying footnotes appearing in this report. This
report contains "forward-looking statements" relating to, without limitation,
future economic performance, plans and objectives of management for future
operations, and projections of revenues and other financial items that are based
on the beliefs of our management, as well as assumptions made by and information
currently available to our management. The words "expect," "estimate,"
"anticipate" and "believe," as well as similar expressions, are intended to
identify forward-looking statements. Our actual results may differ materially
from the results discussed in the forward-looking statements, and our operating
performance each quarter is subject to various risks and uncertainties that are
discussed in detail in our filings with the Securities and Exchange Commission.
Results of Operations
Net Interest Income
For the six months ended June 30, 2001, net interest income increased $192,273,
or 58.87%, to $518,787 as compared to $326,514 for the same period in 2000.
Interest income from loans, including fees, increased $448,994, or 120.34%, from
the six months ended June 30, 2000 to the comparable period in 2001, as we
continued to experience growth in our loan portfolio. Interest expense for the
six months ended June 30, 2001 was $426,953 as compared to $187,671 for the same
period in 2000. The increase in interest-bearing deposits between the two
periods resulted in increased interest expense. The net interest margin realized
on earning assets decreased from 5.62% for the six months ended June 30, 2000 to
4.72% for the same period in 2001. The interest rate spread increased by 3 basis
points from 3.77% at June 30, 2000 to 3.80% at June 30, 2001.
For the quarter ended June 30, 2001, net interest income totaled $240,882, an
increase of $59,226, or 32.60%, when compared to the same quarter ended June 30,
2000. Interest income totaling $413,847 was generated from loans, including
fees, during the quarter ended June 30, 2001, as compared to $218,250 during the
comparable period in 2000. Interest expense on deposit accounts was $219,984 for
the quarter ended June 30, 2001, as compared to $108,303 for the same period in
2000. The net interest margin realized on earning assets was 4.27% for the
quarter ended June 30, 2001, as compared to 5.81% during the same period in
2000. The interest rate spread was 3.43% for the quarter ended June 30, 2001, as
compared to 4.00% for the quarter ended June 30, 2000.
Provision and Allowance for Loan Losses
The provision for loan losses is the charge to operating earnings that
management believes is necessary to maintain the allowance for possible loan
losses at an adequate level to reflect the losses inherent in the loan
portfolio. For the six months ended June 30, 2001, the provision charged to
expense was $47,769, as compared to $49,834 in the same period a year earlier.
Management continues to fund the allowance for loan losses at a level believed
to be adequate to match the growth in the loan portfolio. For the quarter ended
June 30, 2001, the provision charged to expense was $26,937, as compared to
$23,094 for the same period in 2000. The allowance represents 1.00% of gross
loans at each of June 30, 2001 and 2000. There are risks inherent in making all
loans, including risks with respect to the period of time over which loans may
be repaid, risks resulting from changes in economic and industry conditions,
risks inherent in dealing with individual borrowers, and, in the case of a
collateralized loan, risks resulting from uncertainties about the future value
of the collateral. We maintain an allowance for loan losses based on, among
other things, historical experience, an evaluation of economic conditions, and
regular reviews of delinquencies and loan portfolio quality. Our judgment about
the adequacy of the allowance is based upon a number of assumptions about future
events, which we believe to be reasonable, but which may not prove to be
accurate. Thus, there is a risk that charge-offs in future periods could exceed
the allowance for loan losses or that substantial additional increases in the
allowance for loan losses could be required. Additions to the allowance for loan
losses would result in a decrease of our net income and, possibly, our capital.
9
REGIONAL BANKSHARES, INC.
Item 2. Management's Discussion and Analysis or Plan of Operation -- continued
Noninterest Income
Noninterest income increased $50,068, or 102.56% to $98,888 for the six months
ended June 30, 2001 as compared to the same period ended June 30, 2000. The
primary source of this income was the increase in service charges on deposit
accounts of $32,812, or 166.11%, to $52,565 for the period ended June 30, 2001,
when compared to the same period in 2000. In addition, income from residential
mortgage origination fees increased $15,456 to $26,275 for the period ended June
30, 2001 as compared to the same period in 2000.
For the quarter ended June 30, 2001, noninterest income was $57,314, an increase
of $29,193, or 103.81% from the same period ended June 30, 2000. The largest
component of noninterest income was service charges on deposit accounts, which
totaled $31,619 for the quarter ended June 30, 2001, as compared to $11,705 for
the quarter ended June 30, 2000. Income from residential mortgage origination
fees totaled $16,191 for the quarter ended June 30, 2001, as compared to $7,478
for the same period in 2000.
Noninterest Expense
For the period ended June 30, 2001, noninterest expense was $741,580, an
increase of $85,028, or 12.95% when compared to the same period ended June 30,
2000. The largest increase was in other operating expense, which increased from
$236,154 for the six months ended June 30, 2000 to $295,408 for the six months
ended June 30, 2001. The increase is attributable to the costs associated with
forming the holding company during the first quarter of the year and to certain
costs associated with moving into the new building on May 7, 2001. Salaries and
employee benefits also increased from $341,855 for the six months ended June 30,
2000 to $360,730 for the six months ended June 30, 2001. This increase is
primarily attributable to annual pay raises.
For the quarter ended June 30, 2001, noninterest expense increased $51,556, or
15.04% as compared to the same period ended June 30, 2000. The largest increase,
other operating expense, increased from $132,622 for the quarter ended June 30,
2000 to $161,982 for the quarter ended June 30, 2001. This increase is
attributable primarily to certain one-time costs related to the move into our
new building on May 7, 2001. Salaries and employee benefits increased $11,675
from the quarter ended June 30, 2000 to $184,132 for the quarter ended June 30,
2001.
Income Taxes
The income tax benefit for the six months ended June 30, 2001 was $62,394 as
compared to $122,751 for the same period in 2000. The loss before income taxes
decreased from $331,052 for the six months ended June 30, 2000 to $171,674 for
the same period in 2001. The effective tax rate was 36% for the six months ended
June 30, 2001, as compared to an effective tax rate of 37% for the six months
ended June 30, 2000. The effective tax rate was 37% for the quarters ended June
30, 2001 and 2000.
Net Income (Loss)
The combination of the above factors resulted in a net loss for the six months
ended June 30, 2001 of $109,280 as compared to $208,301 for the same period in
2000. The net loss before taxes of $171,674 was partially offset by the income
tax benefit of $62,394 during the six months ended June 30, 2001. The net loss
before taxes for the same period in 2000 was $331,052, which was partially
offset by the income tax benefit of $122,751. For the quarter ended June 30,
2001, the net loss was $77,533, as compared to $98,081 for the same period in
2000.
10
REGIONAL BANKSHARES, INC.
Item 2. Management's Discussion and Analysis or Plan of Operation -- continued
Assets and Liabilities
During the first six months of 2001, total assets increased $2,771,662, or
11.89%, when compared to December 31, 2000. The primary source of growth in
assets was in loans, which increased $5,434,950, or 35.86%, during the first six
months of 2001. Premises and equipment, net of accumulated depreciation,
increased $1,079,142, or 102.59%, from December 31, 2000 to $2,131,083 at June
30, 2001. This increase was primarily attributable to the construction of the
new corporate headquarters. These increases were partially offset by a decrease
in federal funds sold from $4,610,000 at December 31, 2000 to $762,100 at June
30, 2001. Federal funds were shifted to loans as the demand for loans increased
during the period. Total deposits also increased $2,756,870, or 14.93%, from
$18,464,219 at December 31, 2000 to $21,221,089 at June 30, 2001. Within the
deposit area, savings accounts increased $1,690,621, or 49.56% from December 31,
2000 to $5,102,111 at June 30, 2001. This increase was primarily attributable to
one customer that placed additional funds in money market accounts during the
first six months of 2001.
Investment Securities
Investment securities decreased from $585,312 at December 31, 2000 to $448,201
at June 30, 2001. Because of the withdrawal of the Bank's membership in the
Federal Reserve Bank of Richmond and the corresponding redemption of its stock
in the Federal Reserve Bank of Richmond upon the Bank's conversion to a state
charter, nonmarketable equity securities decreased from $238,603 at December 31,
2000 to $94,353 at June 30, 2001. All of the Bank's marketable investment
securities were designated as available-for-sale at June 30, 2001.
Loans
We continued our trend of growth during the first six months of 2001, especially
in the loan area. Net loans increased $5,387,950, or 35.92%, during the period.
As shown below, the main component of growth in the loan portfolio was real
estate - mortgage loans which increased 63.73%, or $4,051,557, from December 31,
2000 to June 30, 2001. Balances within the major loans receivable categories as
of June 30, 2001 and December 31, 2000 are as follows:
June 30, December 31,
2001 2000
---- ----
Real estate - construction ............... $ 1,609,497 $ 1,439,247
Real estate - mortgage ................... 10,409,368 6,357,811
Commercial and industrial ................ 3,923,783 3,329,040
Consumer and other ....................... 4,649,663 4,031,263
----------- -----------
$20,592,311 $15,157,361
=========== ===========
11
REGIONAL BANKSHARES, INC.
Item 2. Management's Discussion and Analysis or Plan of Operation -- continued
Risk Elements in the Loan Portfolio
The following is a summary of risk elements in the loan portfolio:
June 30, 2001 December 31, 2000
------------- -----------------
Loans: Nonaccrual loans .......................................................... $ 10,789 $10,789
Accruing loans more than 90 days past due ........................................ $ - $ -
Loans identified by the internal
review mechanism:
Criticized .................................................................... $36,687 $39,597
Classified .................................................................... $10,919 $12,766
Criticized loans have potential weaknesses that deserve close attention and
could, if uncorrected, result in deterioration of the prospects for repayment or
the Bank's credit position at a future date. Classified loans are inadequately
protected by the sound worth and paying capacity of the borrower or any
collateral and there is a distinct possibility or probability that the Bank will
sustain a loss if the deficiencies are not corrected.
Allowance for Loan Losses
Activity in the Allowance for Loan Losses is as follows:
Six Months Ended June 30,
-------------------------
2001 2000
---- ----
Balance, January 1, .......................................................... $ 159,000 $ 54,629
Provision for loan losses for the period ..................................... 47,769 49,834
Net loans (charged-off) recovered for the period ............................. (769) (3,363)
------------ ------------
Balance, end of period ....................................................... $ 206,000 $ 101,100
============ ============
Gross loans outstanding, end of period ....................................... $ 20,592,311 $ 10,101,107
Allowance for loan losses to loans outstanding ............................... 1.00% 1.00%
Premises and Equipment
Premises and equipment, net of accumulated depreciation, increased from
$1,051,941 at December 31, 2000 to $2,131,083 at June 30, 2001. The increase of
$1,079,142 was attributable to the construction of our new corporate
headquarters at 206 South Fifth Street. We moved into the new building on May 7,
2001.
12
REGIONAL BANKSHARES, INC.
Item 2. Management's Discussion and Analysis or Plan of Operation -- continued
Deposits
During the first six months of 2001, total deposits increased by $2,756,870, or
14.93% from December 31, 2000. The largest increase was in savings accounts,
which increased $1,690,621, or 49.56% from December 31, 2000. This increase was
attributable to one customer that placed additional funds in money market
accounts during the period. Expressed in percentages, noninterest bearing
deposits increased 11.35% and interest bearing deposits increased 15.44%.
Balances within the major deposit categories as of June 30, 2001 and December
31, 2000 are as follows:
June 30, December 31,
2001 2000
---- ----
Noninterest-bearing demand deposits .......... $ 2,566,126 $ 2,304,641
Interest-bearing demand deposits ............. 2,208,804 2,726,322
Savings deposits ............................. 5,102,111 3,411,490
Time deposits $100,000 and over .............. 3,888,190 3,902,384
Other time deposits .......................... 7,455,858 6,119,382
----------- -----------
$21,221,089 $18,464,219
=========== ===========
Liquidity
Liquidity needs are met by us through scheduled maturities of loans and
investments on the asset side and through pricing policies on the liability side
for interest-bearing deposit accounts. The level of liquidity is measured by the
loan-to-total borrowed funds ratio, which was at 97.04% at June 30, 2001 and
82.09% at December 31, 2000.
Securities available-for-sale, which totaled $353,848 at June 30, 2001, serve as
a ready source of liquidity. The Bank also has lines of credit available with
correspondent banks to purchase federal funds for periods from one to seven
days. At June 30, 2001, unused lines of credit totaled $2,650,000.
Capital Resources
Total shareholders' equity decreased from $4,570,720 at December 31, 2000 to
$4,467,161 at June 30, 2001. The decrease is due to the net loss for the period
of $109,280. The decrease was offset partially by a positive change of $5,721 in
the fair value of securities available-for-sale.
The Federal Reserve Board and bank regulatory agencies require bank holding
companies and financial institutions to maintain capital at adequate levels
based on a percentage of assets and off-balance sheet exposures, adjusted for
risk-weights ranging from 0% to 100%. Under the risk-based standard, capital is
classified into two tiers. Tier 1 capital consists of common shareholders'
equity, excluding the unrealized gain (loss) on available-for-sale securities,
minus certain intangible assets. Tier 2 capital consists of the general reserve
for loan losses subject to certain limitations. An institution's qualifying
capital base for purposes of its risk-based capital ratio consists of the sum of
its Tier 1 and Tier 2 capital. The regulatory minimum requirements are 4% for
Tier 1 and 8% for total risk-based capital.
Banks and bank holding companies are also required to maintain capital at a
minimum level based on total assets, which is known as the leverage ratio. The
minimum requirement for the leverage ratio is 3%; however all but the highest
rated institutions are required to maintain ratios 100 to 200 basis point above
the minimum. Both the Company and the Bank exceeded their minimum regulatory
capital ratios as of June 30, 2001 as well as the ratios to be considered "well
capitalized."
13
REGIONAL BANKSHARES, INC.
Item 2. Management's Discussion and Analysis or Plan of Operation -- continued
Capital Resources -- continued
The following table summarizes the Company's risk-based capital at June 30,
2001:
Shareholders' equity ....................................... $ 4,461,049
Less: intangibles ......................................... -
-----------
Tier 1 capital ............................................ 4,461,049
Plus: allowance for loan losses (1) ....................... 206,000
-----------
Total capital ............................................. $ 4,667,049
===========
Risk-weighted assets ...................................... $22,335,482
===========
Risk-based capital ratios
Tier 1 capital (to risk-weighted assets) ................ 19.97%
Total capital (to risk-weighted assets) ................. 20.90%
Tier 1 capital (to total average assets) ................ 16.87%
(1) limited to 1.25% of risk-weighted assets
14
REGIONAL BANKSHARES, INC.
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
On May 10, 2001, we held our Annual Meeting of Shareholders for the purpose of
electing four directors to each serve a three-year term and to adopt the
Regional Bankshares, Inc. 2001 Stock Option Plan.
Of the 560,270 outstanding shareholders of the Company, the four nominees for
directors received the number of affirmative votes of shareholders required for
such nominee's election in accordance with the Bylaws of the Company as follows:
Votes For Votes Against Votes Withheld
Colon M. Abraham .............. 374,162 0 200
Francine P. Bachman ........... 374,162 0 200
Thomas James Bell, Jr. ........ 374,162 0 200
Peter C. Coggeshall, Jr. ...... 374,162 0 200
Of the 560,270 outstanding shareholders of the Company, 364,212 shareholders
voted in favor for the adoption of the Regional Bankshares, Inc. 2001 Stock
Option Plan, 6,400 shareholders voted against the resolution, and 3,750
shareholders abstained from voting on the Stock Option Plan.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Regional Bankshares, Inc. 2001 Stock Option Plan (Incorporated by
reference to the Company's Proxy Statement relating to the May
10, 2001 Annual Meeting of Shareholders)
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the quarter
ended June 30, 2001.
Items 1, 2, 3, and 5 are not applicable.
15
REGIONAL BANKSHARES, INC.
SIGNATURE
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Date: August 10, 2001 By: s/Curtis A. Tyner
------------------------------------
Curtis A. Tyner
President, Chief Executive
Officer and Chief Financial Officer
16
REGIONAL BANKSHARES, INC.
EXHIBIT INDEX
Item No. from
Item 601 of
Regulation S-B Description
10.1 Regional Bankshares, Inc. 2001 Stock Option Plan
(Incorporated by reference to the Company's Proxy Statement
relating to the May 10, 2001 Annual Meeting of Shareholders)
17