U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
---- OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2006
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 Number 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 by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
YES [ ] NO [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
701,319 shares of common stock, $1.00 par value as of July 31, 2006
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, 2006 and December 31, 2005......................................3
Condensed Consolidated Statements of Income - Six months ended June 30,
2006 and 2005 and Three months ended June 30, 2006 and 2005....................................................4
Condensed Consolidated Statements of Shareholders' Equity and Comprehensive Income -
Six months ended June 30, 2006 and 2005........................................................................5
Condensed Consolidated Statements of Cash Flows - Six months ended June 30, 2006 and 2005........................6
Notes to Condensed Consolidated Financial Statements..........................................................7-12
Item 2. Management's Discussion and Analysis or Plan of Operation.....................................................13-19
Item 3. Controls and Procedures..........................................................................................19
PART II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds......................................................20
Item 4. Submission of Matters to a Vote of Security Holders..............................................................20
Item 6. Exhibits ........................................................................................................20
2
REGIONAL BANKSHARES, INC.
Condensed Consolidated Balance Sheets
PART I. FINANCIAL STATEMENTS
Item 1. Financial Statements
June 30, December 31,
2006 2005
---- ----
(Unaudited)
Assets:
Cash and cash equivalents:
Cash and due from banks ......................................................... $ 250,109 $ 2,258,817
Federal funds sold .............................................................. 2,611,662 387,955
------------ ------------
Total cash and cash equivalents ............................................... 2,861,771 2,646,772
------------ ------------
Investment securities:
Securities available-for-sale ................................................... 5,915,930 6,078,990
Nonmarketable equity securities ................................................. 507,892 447,792
------------ ------------
Total investment securities ................................................... 6,423,822 6,526,782
------------ ------------
Loans receivable .................................................................. 62,892,870 58,586,129
Less allowance for loan losses .................................................. (736,352) (681,238)
------------ ------------
Loans receivable, net ......................................................... 62,156,518 57,904,891
------------ ------------
Investment in Trust ............................................................... 93,000 -
Accrued interest receivable ....................................................... 339,556 413,002
Premises and equipment, net ....................................................... 3,341,818 3,290,720
Other assets ...................................................................... 1,742,303 322,977
------------ ------------
Total assets .................................................................. $ 76,958,788 $ 71,105,144
============ ============
Liabilities:
Deposits:
Noninterest-bearing ............................................................... $ 7,811,098 $ 9,551,816
Interest-bearing .................................................................. 8,266,107 7,519,826
Savings ........................................................................... 12,973,401 15,083,906
Time deposits $100,000 and over ................................................... 5,585,339 6,077,353
Other time deposits ............................................................... 25,737,584 20,464,994
------------ ------------
Total deposits ................................................................ 60,373,529 58,697,895
------------ ------------
Junior Subordinated Debentures ....................................................... 3,093,000 -
Fed Funds Purchased .................................................................. 611,000 50,000
Note payable ......................................................................... - 1,050,000
Advances from Federal Home Loan Bank ................................................. 6,400,000 5,250,000
Accrued interest payable ............................................................. 261,902 268,415
Other liabilities .................................................................... 288,254 201,252
------------ ------------
Total liabilities ............................................................. 71,027,685 65,517,562
------------ ------------
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,
701,319 and 692,759 shares issued and outstanding at
June 30, 2006 and December 31, 2005, respectively ............................... 701,319 692,759
Capital surplus ................................................................... 5,083,869 5,021,124
Retained earnings (deficit) ....................................................... 241,789 (53,734)
Accumulated other comprehensive income (loss) ..................................... (95,874) (72,567)
------------ ------------
Total shareholders' equity .................................................... 5,931,103 5,587,582
------------ ------------
Total liabilities and shareholders' equity .................................... $ 76,958,788 $ 71,105,144
============ ============
See notes to condensed consolidated financial statements.
3
REGIONAL BANKSHARES, INC.
Condensed Consolidated Statements of Income
(Unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
-------- --------
2006 2005 2006 2005
---- ---- ---- ----
Interest income:
Loans, including fees ............................... $2,381,836 $1,968,956 $1,249,036 $1,010,859
Investment securities
Taxable ........................................... 106,203 104,857 55,723 66,009
Nonmarketable equity securities ................... 14,543 7,881 11,246 4,560
Federal funds sold ................................ 54,205 55,229 23,851 20,026
---------- ---------- ---------- ----------
Total ........................................... 2,556,787 2,136,923 1,339,856 1,101,454
---------- ---------- ---------- ----------
Interest expense:
Time deposits $100,000 and over ..................... 108,406 71,049 54,560 40,905
Other deposits ...................................... 633,770 412,671 336,864 229,139
Other interest expense .............................. 191,993 125,196 116,374 46,204
---------- ---------- ---------- ----------
Total ........................................... 934,169 608,916 507,798 316,248
---------- ---------- ---------- ----------
Net interest income .................................... 1,622,618 1,528,007 832,058 785,206
Provision for loan losses .............................. 72,000 60,000 36,000 24,000
---------- ---------- ---------- ----------
Net interest income after provision for
loan losses ......................................... 1,550,618 1,468,007 796,058 761,206
Other income:
Service charges on deposit accounts ................. 217,438 161,864 106,001 95,762
Residential mortgage origination fees ............... 18,905 29,014 12,239 16,131
Brokerage fee commissions ........................... 38,698 11,567 20,240 11,567
Credit life insurance commissions ................... 2,369 2,552 1,437 2,141
Other income ........................................ 78,824 43,612 42,680 19,364
---------- ---------- ---------- ----------
Total ........................................... 356,234 248,609 182,597 144,965
---------- ---------- ---------- ----------
Other expense:
Salaries and employee benefits ...................... 729,518 713,606 372,398 332,479
Net occupancy expense ............................... 104,398 91,857 51,838 25,292
Furniture and fixture expense ....................... 94,785 86,627 46,350 47,097
Other operating expenses ............................ 509,067 507,708 269,585 252,090
---------- ---------- ---------- ----------
Total ........................................... 1,437,768 1,399,798 740,171 656,958
---------- ---------- ---------- ----------
Income before income taxes ............................. 469,084 316,818 238,484 249,213
Income tax expense ..................................... 173,561 117,222 88,239 92,208
---------- ---------- ---------- ----------
Net income ............................................. $ 295,523 $ 199,596 $ 150,245 $ 157,005
========== ========== ========== ==========
Earnings per share
Average shares outstanding ............................. 696,734 688,413 700,023 690,322
Net income - basic ..................................... $ 0.42 $ 0.29 $ 0.21 $ 0.23
Net income - diluted ................................... $ 0.41 $ 0.29 $ 0.21 $ 0.23
See notes to condensed consolidated financial statements.
4
REGIONAL BANKSHARES, INC.
Condensed Consolidated Statements of Shareholders'
Equity and Comprehensive Income
For the six months ended June 30, 2006 and 2005
(Unaudited)
Accumulated
Retained Other
Common Stock Capital Earnings Comprehensive
Shares Amount Surplus (Deficit) Income Total
------ ------ ------- --------- ------ -----
Balance,
December 31, 2004 ....................... 686,484 $ 572,070 $5,079,471 $ (535,783) $ (22,159) $5,093,599
Net income
for the period .......................... 199,596 199,596
Other comprehensive loss,
net of tax benefit of $15,127 ........... (25,757) (25,757)
----------
Comprehensive
income .................................. 173,839
----------
Options exercised
at $10.83 per share ..................... 4,000 3,334 40,008 43,342
Warrants exercised
at $8.33 per share ...................... 1,080 900 40,008 43,342
---------- ---------- ---------- ---------- ---------- ----------
Balance,
June 30, 2005 ........................... 691,564 $ 576,304 $5,127,579 $ (336,187) $ (47,916) $5,319,780
========== ========== ========== ========== ========== ==========
Balance,
December 31, 2005 ....................... 692,759 $ 692,759 $5,021,124 $ (53,734) $ (72,567) $5,587,582
Net income
for the period .......................... 295,523 295,523
Other comprehensive loss,
net of tax benefit of $13,688 ........... (23,307) (23,307)
Comprehensive
income .................................. 272,216
----------
Warrants exercised
at $8.33 per share ...................... 8,560 8,560 62,745 71,305
---------- ---------- ---------- ---------- ---------- ----------
Balance,
June 30, 2006 ........................... 701,319 $ 701,319 $5,083,869 $ 241,789 $ (95,874) $5,931,103
========== ========== ========== ========== ========== ==========
See notes to condensed consolidated financial statements.
5
REGIONAL BANKSHARES, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
--------
2006 2005
---- ----
Cash flows from operating activities:
Net income ........................................................................ $ 295,523 $ 195,596
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ................................................. 73,446 96,969
Provision for possible loan losses ............................................ 72,000 60,000
Accretion and premium amortization ............................................ 4,833 2,746
Deferred income tax provision ................................................. (90,807) 115,918
(Increase) decrease in interest receivable .................................... 185,965 (62,172)
Increase (decrease) in interest payable ....................................... (6,513) 64,983
(Increase) Decrease in other assets ........................................... (67,623) 43,101
Increase in other liabilities ................................................. 87,002 15,220
Increase in gain on sale/paydown of securities ................................ 1,783 2,325
----------- -----------
Net cash provided by operating activities ................................... 555,609 538,686
----------- -----------
Cash flows from investing activities:
Purchases of securities available-for-sale ........................................ (1,559,082) (5,150,184)
Maturities of securities available-for-sale ....................................... 1,681,323 879,795
Purchase of nonmarketable equity securities ....................................... (60,100) (46,639)
Net increase in loans made to customers ........................................... (4,323,627) (1,880,822)
Purchases of premises and equipment ............................................... (237,063) (447,935)
Investment in trust ............................................................... (93,000) -
Purchase of bank owned life insurance ............................................. (1,250,000) -
----------- -----------
Net cash used by investing activities ....................................... (6,645,785) (6,645,785)
----------- -----------
Cash flows from financing activities:
Net decrease in demand deposits, interest-bearing transaction
accounts and savings accounts ..................................................... (3,104,942) (694,671)
Net increase in certificates of deposit and other time deposits ................... 4,780,576 3,769,561
Proceeds from issuance of Junior Subordinated Debenture ........................... 3,093,000 -
Advances from Federal Home Loan Bank .............................................. 7,550,000 -
Repayments of Federal Home Loan Bank .............................................. (6,400,000) -
Increase in Fed Funds Purchased ................................................... 561,000 -
Advances from Note Payable Bankers Bank ........................................... - 250,000
Repayments of Note Payable Bankers Bank ........................................... (1,050,000) (200,000)
Proceeds from exercise of options ................................................. - 43,342
Proceeds from exercise of warrants ................................................ 71,305 9,000
----------- -----------
Net cash provided by financing activities ................................... 5,500,939 3,177,238
----------- -----------
Net increase (decrease) in cash and cash equivalents ................................. 214,999 (2,929,861)
Cash and cash equivalents, beginning ................................................. 2,646,772 8,597,606
----------- -----------
Cash and cash equivalents, ending .................................................... $ 2,861,771 $ 5,667,745
=========== ===========
Cash paid during the period for:
Income taxes ...................................................................... $ 170,368 $ 7,930
Interest .......................................................................... $ 940,682 $ 543,933
See notes to condensed consolidated financial statements.
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 on Form 10-KSB. The financial
statements, as of June 30, 2006 and for the interim periods ended June 30, 2006
and 2005, are unaudited and, in the opinion of management, include all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation. The financial information as of December 31, 2005 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
Regional Bankshares, Inc.'s Annual Report on Form 10-KSB for the year ended
December 31, 2005.
Note 2 - Recently Issued Accounting Pronouncements
The following is a summary of recent authoritative pronouncements that could
impact the accounting, reporting, and / or disclosure of financial information
by the Company.
In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid
Financial Instruments--an amendment of FASB Statements No. 133 and 140." This
Statement amends SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," and SFAS No. 140, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities." This Statement resolves
issues addressed in SFAS No. 133 Implementation Issue No. D1, "Application of
Statement 133 to Beneficial Interests in Securitized Financial Assets." SFAS No.
155 is effective for all financial instruments acquired or issued after the
beginning of an entity's first fiscal year that begins after September 15, 2006.
The Company does not believe that the adoption of SFAS No. 155 will have a
material impact on its financial position, results of operations and cash flows.
In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of
Financial Assets--an amendment of FASB Statement No. 140." This Statement amends
FASB No. 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," with respect to the accounting for separately
recognized servicing assets and servicing liabilities. SFAS No. 156 requires an
entity to recognize a servicing asset or servicing liability each time it
undertakes an obligation to service a financial asset by entering into a
servicing contract; requires all separately recognized servicing assets and
servicing liabilities to be initially measured at fair value, if practicable;
permits an entity to choose its subsequent measurement methods for each class of
separately recognized servicing assets and servicing liabilities; at its initial
adoption, permits a one-time reclassification of available-for-sale securities
to trading securities by entities with recognized servicing rights, without
calling into question the treatment of other available-for-sale securities under
Statement 115, provided that the available-for-sale securities are identified in
some manner as offsetting the entity's exposure to changes in fair value of
servicing assets or servicing liabilities that a servicer elects to subsequently
measure at fair value; and requires separate presentation of servicing assets
and servicing liabilities subsequently measured at fair value in the statement
of financial position and additional disclosures for all separately recognized
servicing assets and servicing liabilities. An entity should adopt SFAS No. 156
as of the beginning of its first fiscal year that begins after September 15,
2006. The Company does not believe the adoption of SFAS No. 156 will have a
material impact on its financial position, results of operations and cash flows.
Other accounting standards that have been issued or proposed by the FASB or
other standards-setting bodies are not expected to have a material impact on the
Company's financial position, results of operation and cash flows.
7
REGIONAL BANKSHARES, INC.
Notes To Condensed Consolidated Financial Statements
(Unaudited)
Note 3 - Stock-Based Compensation
On January 1, 2006, the Company adopted the fair value recognition provisions of
Financial Accounting Standards Board ("FASB") Statement of Financial Accounting
Standards ("SFAS") No. 123(R), Accounting for Stock-Based Compensation, to
account for compensation costs under its stock option plans. The Company
previously utilized the intrinsic value method under Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees (as amended) ("APB
25"). Under the intrinsic value method prescribed by APB 25, no compensation
costs were recognized for the Company's stock options because the option
exercise price in its plans equals the market price on the date of grant. Prior
to January 1, 2006, the Company only disclosed the pro forma effects on net
income and earnings per share as if the fair value recognition provisions of
SFAS 123(R) had been utilized.
On August 18, 2005, the board of directors approved accelerating the vesting of
132,000 unvested warrants. The accelerated vesting was effective as of August
18, 2005. As a result, no compensation expense has been recognized in 2006.
Six Months Ended June 30,
-------------------------
2006 2005
---- ----
Net income, as reported ........................................................ $ 295,523 $ 199,596
Stock-based employee compensation
expense included in reported net
income, net of related tax effects .......................................... - -
Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects .................................. - (45,638)
-------------- -----------
Pro forma net income ........................................................... $ 295,523 $ 153,958
============== ===========
Earnings per share:
Basic - as reported ......................................................... $ 0.42 $ 0.29
============== ===========
Basic - pro forma ........................................................... $ 0.42 $ 0.22
============== ===========
Diluted - as reported ....................................................... $ 0.41 $ 0.29
============== ===========
Diluted - pro forma ......................................................... $ 0.41 $ 0.22
============== ===========
8
REGIONAL BANKSHARES, INC.
Notes To Condensed Consolidated Financial Statements
(Unaudited)
Note 3 - Stock-Based Compensation - continued
Three Months Ended June 30,
---------------------------
2006 2005
---- ----
Net income, as reported ........................................................ $ 150,245 $ 157,005
Stock-based employee compensation
expense included in reported net
income, net of related tax effects .......................................... - -
Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects .................................. - (22,819)
-------------- -----------
Pro forma net income ........................................................... $ 150,245 $ 134,184
============== ===========
Earnings per share:
Basic - as reported ......................................................... $ 0.21 $ 0.23
============== ===========
Basic - pro forma ........................................................... $ 0.21 $ 0.19
============== ===========
Diluted - as reported ....................................................... $ 0.21 $ 0.23
============== ===========
Diluted - pro forma ......................................................... $ 0.21 $ 0.19
============== ===========
On May 10, 2001, the shareholders approved the Regional Bankshares, Inc. "2001
Stock Option Plan" (the Plan). The Plan provides for grants of "Incentive Stock
Options," within the meaning of section 422 of the Internal Revenue Code and
"Non-qualified Stock Options" that do not so qualify. The Plan provides for the
issuance of up to 60,000 shares of the Company's common stock to officers and
key employees. Options may be granted for a term of up to ten years from the
effective date of grant. Options become exercisable ratably over three years
after being granted. The Board of Directors will determine the per-share
exercise price, but for incentive stock options the price will not be less than
100% of the fair value of a share of common stock on the date the option is
granted. As of June 30, 2006, the Company had 48,000 shares reserved for
issuance upon exercise of options under the Plan.
A summary of the plan and changes during reporting periods are presented below
(all share and per share data has been adjusted for stock dividends):
Six Months Ended June 30,
-------------------------
2006 2005
---- ----
Weighted- Weighted-
Average Average
Shares Exercise Price Shares Exercise Price
------ -------------- ------ --------------
Outstanding at December 31 ........................... 12,000 $ 10.83 18,000 $10.83
Granted .............................................. - -
Exercised ............................................ - 4,000 10.83
Cancelled ............................................ - 2,000 10.83
------ ------
Outstanding at June 30 ............................... 12,000 10.83 12,000 10.83
====== ======
Three Months Ended June 30,
---------------------------
2006 2005
---- ----
Weighted- Weighted-
Average Average
Shares Exercise Price Shares Exercise Price
------ -------------- ------ --------------
Outstanding at March 31 .............................. 12,000 $ 10.83 18,000 $10.83
Granted .............................................. - -
Exercised ............................................ - 4,000 10.83
Cancelled ............................................ - 2,000 10.83
------ ------
Outstanding at June 30 ............................... 12,000 10.83 12,000 10.83
====== ======
At June 30, 2006, 12,000 options were exercisable. The weighted average
remaining life and exercise price for both exercisable and non exercisable
options was 5.75 years and $10.83 per option, respectively
9
REGIONAL BANKSHARES, INC.
Notes To Condensed Consolidated Financial Statements
(Unaudited)
Note 3 - Stock-Based Compensation - continued
In connection with the Company's initial public stock sale, each of the twelve
organizers received 6,000 stock warrants which gives them the right to purchase
6,000 shares of the Company's common stock at a price of $8.33 per share. The
warrants vested equally over a three-year period beginning June 15, 2000 and
expire on June 15, 2010 or ninety days after the warrant holder ceases to serve
as a member of the Board of Directors. On November 18, 2004 the eleven
organizers who are still serving on the Board of Directors, were granted
additional warrants which give them the right to purchase an additional 132,000
shares of the Company's common stock at a price of $11.25 per share. The
warrants became fully vested on August 18, 2005.
A summary of the status of the Company's stock warrants and changes during the
reporting periods are presented below (all shares have been adjusted for stock
dividends):
Six Months Ended June 30,
-------------------------
2006 2005
---- ----
Outstanding at December 31 ................... 181,560 183,840
Granted ...................................... - -
Exercised .................................... 8,560 1,080
Cancelled .................................... - -
------- -------
Outstanding at June 30 ....................... 173,000 182,760
======= =======
Six Months Ended June 30,
-------------------------
2006 2005
---- ----
Outstanding at March 31 ...................... 178,640 183,840
Granted ...................................... - -
Exercised .................................... 5,640 1,080
Cancelled .................................... - -
------- -------
Outstanding at end of year ................... 173,000 182,760
======= =======
At June 30, 2006, 173,000 warrants were exercisable.
Note 4 - Earnings Per Share
A reconciliation of the numerators and denominators used to calculate basic and
diluted earnings per share are as follows:
Six Months Ended June 30, 2006
------------------------------
Income Shares Per Share
(Numerator) (Denominator Amount
----------- ------------ ------
Basic earnings per share
Income available to common shareholders .......................... $295,523 696,734 $ 0.42
========
Effect of dilutive securities
Stock options and warrants ....................................... 45,172
-------- ------
Diluted earnings per share
Income available to common shareholders
plus assumed conversions ....................................... $295,523 741,906 $ 0.40
======== ======= ========
Six Months Ended June 30, 2005
------------------------------
Income Shares Per Share
(Numerator) (Denominator Amount
----------- ------------ ------
Basic earnings per share
Income available to common shareholders .......................... $ 195,596 688,413 $ 0.29
========
Effect of dilutive securities
Stock options and warrants ....................................... (1,389)
--------- -------
Diluted earnings per share
Income available to common shareholders
plus assumed conversions ....................................... $ 195,596 655,459 $ 0.29
========= ======= ========
10
REGIONAL BANKSHARES, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4 - Earnings Per Share - continued
Three Months Ended June 30, 2006
--------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic earnings per share
Income available to common shareholders .......................... $150,245 700,023 $ 0.21
========
Effect of dilutive securities
Stock options and warrants ....................................... 43,069
-------- -------
Diluted earnings per share
Income available to common shareholders
plus assumed conversions ....................................... $150,245 743,093 $ 0.20
======== ======= ========
Three Months Ended June 30, 2005
--------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic earnings per share
Income available to common shareholders .......................... $ 157,005 690,322 $ 0.23
========
Effect of dilutive securities
Stock options and warrants ....................................... (3,800)
--------- -------
Diluted earnings per share
Income available to common shareholders
plus assumed conversions ....................................... $ 157,005 652,723 $ 0.23
========= ======= ========
Note 5 - 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, 2006
and 2005:
Six Months Ended June 30, 2006
------------------------------
Pre-tax (Expense) Net-of-tax
Amount Benefit Amount
------ ------- ------
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period ................ $(34,203) $ 10,896 $(23,307)
Plus: reclassification adjustment for gains (losses)
realized in net income .................................................. - - -
-------- -------- --------
Net unrealized gains (losses) on securities ................................ (34,203) 10,896 (23,307)
-------- -------- --------
Other comprehensive income (loss) ............................................. $(34,203) $ 10,896 $(23,307)
======== ======== ========
11
REGIONAL BANKSHARES, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 5 - Comprehensive Income - continued
Six Months Ended June 30, 2005
------------------------------
Pre-tax (Expense) Net-of-tax
Amount Benefit Amount
------ ------- ------
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period ................ $(40,884) $ 15,127 $(25,757)
Plus: reclassification adjustment for gains (losses)
realized in net income .................................................. - - -
-------- -------- --------
Net unrealized gains (losses) on securities ................................ (40,884) 15,127 (25,757)
-------- -------- --------
Other comprehensive income (loss) ............................................. $(40,884) $ 15,127 $(25,757)
======== ======== ========
Three Months Ended June 30, 2006
--------------------------------
Pre-tax (Expense) Net-of-tax
Amount Benefit Amount
------ ------- ------
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period ................ $(26,787) $ 9,911 $(16,876)
Plus: reclassification adjustment for gains (losses)
realized in net income .................................................. - - -
-------- -------- --------
Net unrealized gains (losses) on securities ................................ (26,787) 9,911 (16,876)
-------- -------- --------
Other comprehensive income (loss) ............................................. $(26,787) $ 9,911 $(16,876)
======== ======== ========
Three Months Ended June 30, 2005
--------------------------------
Pre-tax (Expense) Net-of-tax
Amount Benefit Amount
------ ------- ------
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period .................... $11,881 $(4,396) $ 7,485
Plus: reclassification adjustment for gains (losses)
realized in net income ...................................................... - - -
------- ------- -------
Net unrealized gains (losses) on securities .................................... 11,881 (4,396) 7,485
------- ------- -------
Other comprehensive income (loss) ................................................. $11,881 $(4,396) $ 7,485
======= ======= =======
Accumulated other comprehensive income consists solely of the unrealized gain
(loss) on securities available-for-sale, net of the deferred tax effects.
Note 6 - Junior Subordinated Debentures
On April 18, 2006, the Company sponsored the creation of a Connecticut statutory
trust, Regional Statutory Trust I (the "Trust"), and is the sole owner of the
common securities issued by the Trust. On April 20, 2006, the Trust issued
$3,000,000 in floating rate trust preferred securities. The proceeds of this
issuance, and the amount of the Company's investment in the common securities,
were used to acquire $3,093,000 principal amount of the Company's floating rate
junior subordinated debt securities due 2036 ("Debentures"), which securities,
and the accrued interest thereon, now constitute the Trust's sole assets. The
interest rate associated with the debt securities, and the distribution rate on
the common securities of the Trust, is adjustable quarterly at 3 month LIBOR
plus 177 basis points. The Company may defer interest payments on the Debentures
for up to twenty consecutive quarters, but not beyond the stated maturity date
of the Debentures. In the event that such interest payments are deferred by the
Company, the Trust may defer distributions on the trust preferred securities and
the common securities. In such an event, the Company would be restricted in its
ability to pay dividends on its common stock and perform under other obligations
that are not senior to the junior subordinated Debentures.
The Debentures are redeemable at par at the option of the Company, in whole or
in part, on any interest payment date on or after June 15, 2011. Prior to that
date, the Debentures are redeemable at par plus a premium of up to 3.14% of par
upon the occurrence of certain events that would have a negative tax effect on
the Trust or that would cause it to be required to be registered as an
investment company under the Investment Company Act of 1940 or that would cause
trust preferred securities not to be eligible to be treated as Tier 1 capital by
the Federal Reserve Board. Upon repayment or redemption of the Debentures, the
Trust will use the proceeds of the transaction to redeem an equivalent amount of
TP securities and common securities. The Trust's obligations under the TP
securities are unconditionally guaranteed by the Company.
12
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, 2006
compared to December 31, 2005, and the results of operations for the three and
six months ended June 30, 2006, compared to the three and six months ended June
30, 2005. These comments should be read in conjunction with our condensed
financial statements and accompanying notes appearing in this report and in
conjunction with the financial statements and related notes and disclosures in
our Annual Report on Form 10-KSB for the year ended December 31, 2005.
FORWARD LOOKING STATEMENTS
This report contains "forward-looking statements" within the meaning of the
securities laws. All statements that are not historical facts are
"forward-looking statements." You can identify these forward-looking statements
through our use of words such as "may," "will," "expect," "anticipate,"
"believe," "intend," "estimate," "project," "continue," or other similar words.
Forward-looking statements include, but are not limited to, statements regarding
our future business prospects, revenues, working capital, liquidity, capital
needs, interest costs, income, business operations and proposed services.
These forward-looking statements are based on current expectations, estimates
and projections about our industry, management's beliefs, and assumptions made
by management. Such information includes, without limitation, discussions as to
estimates, expectations, beliefs, plans, strategies, and objectives concerning
our future financial and operating performance. These statements are not
guarantees of future performance and are subject to risks, uncertainties and
assumptions that are difficult to predict, particularly in light of the fact
that we are a relatively new company with a limited operating history.
Therefore, actual results may differ materially from those expressed or
forecasted in such forward-looking statements. The risks and uncertainties
include, but are not limited to:
o Our growth and our ability to maintain growth;
o Governmental monetary and fiscal policies, as well as legislative and
regulatory changes;
o The effect of interest rate changes on our level and composition of
deposits, loan demand and the value of our loan collateral and
securities;
o The effects of competition from other financial institutions operating
in our market area and elsewhere, including institutions operating
locally, regionally, nationally and internationally, together with
competitors that offer banking products and services by mail,
telephone and computer and/or the Internet;
o Repayment of loans by our borrowers;
o Failure of assumptions underlying the establishment of our allowance
for loan losses, including the value of collateral securing loans; and
o Loss of consumer confidence and economic disruptions resulting from
terrorist activities.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties, and assumptions, the forward-looking
events discussed in this report might not occur.
13
REGIONAL BANKSHARES, INC.
Item 2. Management's Discussion and Analysis or Plan of Operation - continued
Results of Operations
Net Interest Income
For the six months ended June 30, 2006, net interest income increased $94,611,
or 6.19%, to $1,622,618 as compared to $1,528,007 for the same period in 2005.
Interest income from loans, including fees, increased $412,880, or 20.97%, from
the six months ended June 30, 2005 to the comparable period in 2006, as we
continued to experience growth in our loan portfolio and a as result of rising
rates. Interest expense for the six months ended June 30, 2006 was $934,169 as
compared to $608,916 for the same period in 2005. The increase in interest
expense was due to rising interest rates and a change in the bank's deposit mix
to include more certificates of deposit. The bank has worked to increase
certificates of deposit to help manage interest rate risk in a rising rate
environment. The net interest margin realized on earning assets increased from
4.68% for the six months ended June 30, 2005 to 5.15% for the same period in
2006. The interest rate spread increased slightly from 4.40% at June 30, 2005 to
4.82% at June 30, 2006.
For the quarter ended June 30, 2006, net interest income totaled $832,058, an
increase of $46,852, or 5.97%, when compared to the same quarter ended June 30,
2005. Interest income from loans, including fees, totaled $1,249,036 during the
quarter ended June 30, 2006, as compared to $1,010,859 during the comparable
period in 2005. These increases in interest income also resulted from growth in
the amount of earning assets as well as supporting liabilities coupled with the
effects of a higher interest rate environment. Interest expense on deposit
accounts was $507,798 for the quarter ended June 30, 2006, as compared to
$316,248 for the same period in 2005. The net interest margin realized on
earning assets was 5.23% for the quarter ended June 30, 2006, as compared to
4.71% during the same period in 2005. The interest rate spread was 4.89% for the
quarter ended June 30, 2006, as compared to 4.43% for the quarter ended June 30,
2005.
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 loan losses at an
adequate level to reflect the losses inherent in the loan portfolio. For the six
months ended June 30, 2006, the provision charged to expense was $72,000, as
compared to $60,000 in the same period a year earlier. For the quarter ended
June 30, 2006, the provision charged to expense was $36,000, as compared to
$24,000 for the same period in 2005. The allowance represented 1.17% and 1.12%
of gross loans at June 30, 2006 and 2005, respectively. Management continues to
fund the allowance for loan losses at a level believed to be adequate to match
the growth in the loan portfolio. 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.
14
REGIONAL BANKSHARES, INC.
Item 2. Management's Discussion and Analysis or Plan of Operation - continued
Noninterest Income
Noninterest income during the six months ended June 30, 2006 was $356,324, an
increase of $107,625 from $248,609 during the comparable period in 2005. Service
charges totaled $217,438 for the six months ended June 30, 2006 as compared to
$161,864 in the same period in 2005. This increase is a result of the
introduction of our Bounce Protection product in September 2005. Residential
mortgage origination fees decreased $10,109 as compared to the six months ended
June 30, 2005. This decrease is attributable to a continued decline in consumer
refinancing activity. Brokerage fee commissions increased from $11,567 for the
six months ended June 30, 2005 to $38,698 for the six months ended June 30,
2006.
For the quarter ended June 30, 2006, noninterest income was $182,597, an
increase of $37,632, or 25.96% from the same period ended June 30, 2005. The
largest component of noninterest income was service charges on deposit accounts,
which totaled $106,001 for the quarter ended June 30, 2006, as compared to
$95,762 for the quarter ended June 30, 2005. Residential mortgage origination
fees were $12,239 for the quarter ended June 30, 2006 as compared with $16,131
for the 2005 quarter. This decline from the previous year is due to a decline in
residential refinancing. Income from brokerage fee commissions totaled $20,240
for the quarter ended June 30, 2006, an increase from $11,567 for the quarter
ended June 30, 2005.
Noninterest Expense
Total noninterest expense for the six months ended June 30, 2006 was $1,437,768,
which was 2.71% higher than the $1,399,798 for the six months ended June 30,
2005. The largest category, salaries and employee benefits, increased from
$713,606 for the six months ended June 30, 2005 to $729,518 for the six months
ended June 30, 2006. The increase is attributable to normal pay increases and
the hiring of additional staff to meet the needs associated with the growth of
the Bank. Net occupancy expense increased from $91,857 to $104,398 for the six
months ended June 30, 2006. There was also an increase of $8,158 in furniture
and fixtures expense when compared to the previous year.
For the quarter ended June 30, 2006, noninterest expense increased $83,213, or
12.67% as compared to the same period ended June 30, 2005. The largest category,
salaries and employee benefits, increased from $332,479 for the quarter ended
June 30, 2005 to $372,398 for the quarter ended June 30, 2006.
Income Taxes
The income tax expense for the six months ended June 30, 2006 was $173,561, an
increase of $56,339 or 48.06% as compared to the same period ended June 30,
2005. This is the result of an increase in income before taxes. The effective
tax rate was 37% for the six months ended June 30, 2006 and 2005 and the
quarters ended June 30, 2006 and 2005.
Net Income
The combination of the above factors resulted in net income for the six months
ended June 30, 2006 of $295,523 as compared to net income of $199,596 for the
same period in 2005. For the quarter ended June 30, 2006, net income was
$150,245, as compared to net income of $157,005 for the same period in 2005.
15
REGIONAL BANKSHARES, INC.
Item 2. Management's Discussion and Analysis or Plan of Operation - continued
Financial Condition
Assets and Liabilities
During the first six months of 2006, total assets increased $5,853,644, or
8.23%, when compared to December 31, 2005. Loans increased $4,306,741, or 7.35%,
during the first six months of 2006. Total deposits increased $1,675,634, or
2.85%, from $58,697,895 at December 31, 2005 to $60,373,529 at June 30, 2006.
Other time deposits increased $5,272,590, or 25.76%, during the first six months
of 2006. Savings deposits decreased $2,110,505 during the first six months of
2006. On April 18, 2006, the Company sponsored the creation of a Connecticut
statutory trust, Regional Statutory Trust I (the "Trust"), and is the sole owner
of the common securities issued by the Trust. On April 20, 2006, the Trust
issued $3,000,000 in floating rate trust preferred securities. The proceeds of
this issuance, and the amount of the Company's investment in the common
securities, were used to acquire $3,093,000 principal amount of the Company's
floating rate junior subordinated debt securities due 2036 ("Debentures"), which
securities, and the accrued interest thereon, now constitute the Trust's sole
assets.
Investment Securities
Investment securities decreased slightly from $6,078,990 at December 31, 2005 to
$5,915,930 at June 30, 2006. The decline is attributable to paydowns in the
bank's mortgage backed securities. All of the Bank's marketable investment
securities were designated as available-for-sale at June 30, 2006.
Loans
We continued our trend of loan growth during the first six months of 2006. The
increase in loans was attributable to the Bank's marketing efforts as well as
growth in the Bank's market areas. Net loans increased $4,251,627, or 7.34%,
during the period. As shown below, the main component of growth in the loan
portfolio was real estate - construction loans which increased 29.93%, or
$2,607,656, from December 31, 2005 to June 30, 2006. Balances within the major
loans receivable categories as of June 30, 2006 and December 31, 2005 are as
follows:
June 30, December 31,
2006 2005
---- ----
Real estate - construction ............... $11,321,556 $ 8,713,900
Real estate - mortgage ................... 39,416,810 38,120,003
Commercial and industrial ................ 6,291,505 6,051,194
Consumer and other ....................... 5,862,999 5,701,033
----------- -----------
$62,892,870 $58,586,130
=========== ===========
Risk Elements in the Loan Portfolio
The following is a summary of risk elements in the loan portfolio:
June 30, December 31,
2006 2005
---- ----
Loans: Nonaccrual loans .............................. $108,876 $ 7,758
Accruing loans more than 90 days past due ............ $ 3,585 $ 520
Loans identified by the internal review mechanism:
Criticized ....................................... $694,190 $368,357
Classified ....................................... $ 16,220 $ 8,989
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. The increase in Nonaccrual
loans was mainly due to a few loans associated with one customer experiencing
financial difficulty. The increase in criticized loans was mostly attributable
to a few real estate loans that demonstrated periods of being past due.
16
REGIONAL BANKSHARES, INC.
Item 2. Management's Discussion and Analysis or Plan of Operation - continued
Allowance for Loan Losses
Activity in the Allowance for Loan Losses is as follows:
Six Months Ended June 30,
-------------------------
2006 2005
---- ----
Balance, January 1, .......................................................... $ 681,238 $ 589,765
Provisions for loan losses for the period .................................... 72,000 60,000
Net loans (charged-off) recovered for the period ............................. (16,886) (13,978)
------------ ------------
Balance, end of period ....................................................... $ 736,352 $ 635,787
============ ============
Gross loans outstanding, end of period ....................................... $ 62,892,870 $ 56,919,221
Allowance for loan losses to loans outstanding ............................... 1.17% 1.12%
Deposits
During the first six months of 2006, total deposits increased by $1,675,634, or
2.85% from December 31, 2005. This increase was due to the normal growth of the
Bank. The largest increase was in other time deposits, which increased
$5,272,590, or 25.76% from December 31, 2005. The increase was attributable to
the opening of new accounts during the period as well as current customers
moving funds from noninterest bearing and savings accounts into higher yielding
time deposits. Expressed in percentages, noninterest bearing deposits decreased
18.22% and interest bearing deposits increased 6.95%.
Balances within the major deposit categories as of June 30, 2006 and December
31, 2005 are as follows:
June 30, December 31,
2006 2005
---- ----
Noninterest-bearing demand deposits ....... $ 7,811,098 $ 9,551,816
Interest-bearing demand deposits .......... 8,266,107 7,519,826
Savings deposits .......................... 12,973,401 15,083,906
Time deposits $100,000 and over ........... 5,585,339 6,077,353
Other time deposits ....................... 25,737,584 20,464,994
----------- -----------
$60,373,529 $58,697,895
=========== ===========
Junior Subordinated Debentures
On April 18, 2006, the Company sponsored the creation of a Connecticut statutory
trust, Regional Statutory Trust I (the "Trust"), and is the sole owner of the
common securities issued by the Trust. On April 20, 2006, the Trust issued
$3,000,000 in floating rate trust preferred securities. The proceeds of this
issuance, and the amount of the Company's investment in the common securities,
were used to acquire $3,093,000 principal amount of the Company's floating rate
junior subordinated debt securities due 2036 ("Debentures"), which securities,
and the accrued interest thereon, now constitute the Trust's sole assets. The
interest rate associated with the debt securities is adjustable quarterly at 3
month LIBOR plus 177 basis points.
Liquidity
We meet our liquidity needs through scheduled maturities of loans and
investments and through pricing policies designed to attract interest-bearing
deposit accounts. The level of liquidity is measured by the loans-to-total
borrowed funds (which includes deposits) ratio, which was at 90.02% at June 30,
2006 and 90.07% at December 31, 2005.
Securities available-for-sale, which totaled $5,915,930 at June 30, 2006, serve
as a ready source of liquidity. We also have lines of credit available with
correspondent banks to purchase federal funds for periods from one to seven
days. At June 30, 2006, unused lines of credit totaled $4,500,000. We also have
a line of credit to borrow funds from the Federal Home Loan Bank up to 10% of
the Bank's total assets, which gave us the ability to borrow up to $7,696,000 as
of June 30, 2006. As of June 30, 2006, we have $6,400,000 in borrowings against
this line.
17
REGIONAL BANKSHARES, INC.
Item 2. Management's Discussion and Analysis or Plan of Operation - continued
Off-Balance Sheet Risk
Through its operations, the Bank has made contractual commitments to extend
credit in the ordinary course of its business activities. These commitments are
legally binding agreements to lend money to the Bank's customers at
predetermined interest rates for a specified period of time. In addition to
commitments to extend credit, the Company also issues standby letters of credit
which are assurances to a third party that it will not suffer a loss if the
customer fails to meet a contractual obligation to the third party. At June 30,
2006, the Bank had issued commitments to extend credit of $8,187,492 and $45,000
in standby letters of credit. Approximately $7,442,507 of these commitments to
extend credit had variable rates.
The following table sets forth the length of time until maturity for unused
commitments to extend credit and standby letters of credit at June 30, 2006.
After One After Three
Within Through Through Greater
One Three Twelve Within Than
Month Months Months One Year One Year Total
----- ------ ------ -------- -------- -----
Unused commitments to extend credit ................. $ 78,921 $ 264,073 $2,833,596 $3,176,590 $5,010,902 $8,187,492
Standby letters of credit ........................... - - 45,000 45,000 - 45,000
---------- ---------- ---------- ---------- ---------- ----------
Total .......................................... $ 78,921 $ 264,073 $2,878,596 $3,221,590 $5,010,902 $8,232,492
========== ========== ========== ========== ========== ==========
Based on historical experience, many of the commitments will expire not fully
funded. Accordingly, the amounts shown in the table above do not necessarily
reflect the Bank's need for funds in the periods shown.
The Bank evaluates each customer's credit worthiness on a case-by-case basis.
The amount of collateral obtained, if deemed necessary by the Bank upon
extension of credit, is based on its credit evaluation of the borrower.
Collateral varies but may include accounts receivable, inventory, property,
plant and equipment, and commercial and residential real estate.
Critical Accounting Policies
We have adopted various accounting policies which govern the application of
accounting principles generally accepted in the United States in the preparation
of our financial statements. Our significant accounting policies are described
in the notes to the consolidated financial statements at December 31, 2005 as
filed on our annual report on Form 10-KSB. Certain accounting policies involve
significant judgments and assumptions which have a material impact on the
carrying value of certain assets and liabilities. We consider these accounting
policies to be critical accounting policies. The judgments and assumptions we
use are based on historical experience and other factors, which we believe to be
reasonable under the circumstances. Because of the nature of the judgments and
assumptions we make, actual results could differ from these judgments and
estimates which could have a material impact on the carrying values of our
assets and liabilities and our results of operations.
We believe the allowance for loan losses is a critical accounting policy that
requires the most significant judgments and estimates used in preparation of our
consolidated financial statements. Refer to the portions of our 2005 Annual
Report on Form 10-KSB and this Form 10-QSB that address our allowance for loan
losses for a description of our processes and methodology for determining our
allowance for loan losses.
18
REGIONAL BANKSHARES, INC.
Item 2. Management's Discussion and Analysis or Plan of Operation - continued
Capital Resources
Total shareholders' equity increased from $5,587,582 at December 31, 2005 to
$5,931,103 at June 30, 2006. The increase is due to net income for the period of
$295,523, a negative change in the fair value of securities available-for-sale
of $23,307, and the exercise of warrants for $71,305.
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. The Bank's Tier 1 capital consists of common
shareholders' equity, excluding the unrealized gain (loss) on available-for-sale
securities, minus certain intangible assets. The Company's Tier 1 capital
consists of the same components as the Bank's plus the amount of the preferred
securities issued by Regional Statutory Trust I. The Bank's 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 points above
the minimum. The Bank exceeded its minimum regulatory capital ratios as of June
30, 2006 as well as the ratios to be considered "well capitalized." The Company
also exceeded all of its regulatory capital requirements at June 30, 2006.
The following table summarizes the Bank's risk-based capital at June 30, 2006:
Shareholders' equity ....................................... $ 8,939,995
Less: intangibles ........................................ -
-----------
Tier 1 capital ........................................... 8,939,995
Plus: allowance for loan losses (1) ...................... 736,352
-----------
Total capital ............................................ $ 9,676,347
===========
Risk-weighted assets ..................................... $67,310,156
===========
Risk-based capital ratios
Tier 1 capital (to risk-weighted assets) ................. 13.28%
Total capital (to risk-weighted assets) .................. 14.38%
Tier 1 capital (to total average assets) ................. 11.98%
(1) Limited to 1.25% of risk-weighted assets
Item 3. Controls and Procedures
Based on the evaluation required by 17 C.F.R. Section 240.13a-15(b) or
240.15d-15(b) of the Company's disclosure controls and procedures (as defined in
17 C.F.R. Sections 240.13a-15(e) and 240.15d-15(e)), the Company's Chief
Executive Officer and Chief Financial Officer concluded that such controls and
procedures, as of the end of the period covered by this quarterly report, were
effective.
There has been no change in the Company's internal control over financial
reporting during the most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, the Company's internal control over
financial reporting.
19
REGIONAL BANKSHARES, INC.
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On April 21, 2006 the Company issued 5,640 shares of the Company's common stock
to a director upon the exercise of stock warrants for an aggregate price of
$46,981. Issuance of the shares was not registered under the Securities Act of
1933 in reliance on the exemption provided by Section 4(2) thereof because no
public offering was involved.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its 2006 Annual Meeting of Shareholders on May 12, 2006. At the
meeting, four directors were elected to each serve a three year term with voting
results as follows:
Name Votes For Votes Withheld Broker Non-Votes
- ---- --------- -------------- ----------------
Randolph G. Rogers 458,511 - -
Howard W. Tucker, Jr. 458,511 - -
Curtis A. Tyner, Jr. 458,511 - -
Patricia M. West 458,511 - -
The following directors' terms continued after the meeting: Francine P. Bachman
(2007), Thomas James Bell, Jr. (2007), Peter C. Coggeshall, Jr. (2007), Franklin
Hines (2008), J. Richard Jones, Jr. (2008), Woodward H. Morgan III (2008), and
Gosnold G. Segars (2008).
Item 6. Exhibits
Exhibit 10.1 - Amended and Restated Delcaration of Trust
Exhibit 10.2 - Guarantee Agreement
Exhibit 10.3 - Indenture
Exhibit 31 - Certification of Principal Executive Officer and Principal
Financial Officer required by Rule 13a-14(a) or Rule 15d - 14(a) of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32 - Certifications of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
20
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 14, 2006 /s/ CURTIS A. TYNER
--------------- ----------------------------------------
Curtis A. Tyner, President,
Chief Executive Officer and Chief
Financial Officer
21
REGIONAL BANKSHARES, INC.
EXHIBIT INDEX
10.1 Amended and Restated Delcaration of Trust
10.2 Guarantee Agreement
10.3 Indenture
31 Certification of Principal Executive Officer and Principal Financial
Officer required by Rule 13a-14(a) or Rule 15d - 14(a) of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This
exhibit is not "filed" for purposes of Section 18 of the Securities
Exchange Act of 1934 but is instead furnished as provided by
applicable rules of the Securities and Exchange Commission.
22