UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
{ X } Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Quarterly Period Ended March 31, 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 Number: 0-23605
CAVALRY BANCORP, INC.
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(exact name of registrant as specified in its charter)
Tennessee 62-1721072
--------- --------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) I.D. Number)
114 West College Street, Murfreesboro, Tennessee 37130
- ----------------------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
(615) 893-1234
---------------------
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 13or 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 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.
Common Stock Issued and Outstanding: 7,104,801 as of May 9, 2001.
CAVALRY BANCORP, INC.
Table of Contents
Part I Financial Information Page
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 2001 (unaudited)
and December 31, 2000 1
Consolidated Statements of Income (unaudited) for the Three Months
Ended March 31, 2001 and 2000 2
Consolidated Statements of Comprehensive Income (unaudited)
for the Three Months Ended March 31, 2001 and 2000 3
Consolidated Statements of Cash Flows (unaudited) for the
Three Months Ended March 31, 2001 and 2000 4
Notes to Consolidated Financial Statements (unaudited) 5-6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 9-10
Part II Other Information 11
Signatures 12
Part I. Financial Information
ITEM 1. FINANCIAL STATEMENTS
CAVALRY BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2001 (UNAUDITED) AND DECEMBER 31, 2000
(DOLLARS IN THOUSANDS)
March 31 December 31
ASSETS 2001 2000
- -------------------------------------------------------------------------- -------- -----------
(Unaudited)
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,977 $ 18,025
Interest-bearing deposits with other financial institutions . . . . . . . . . 35,121 27,000
--------- ---------
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . 55,098 45,025
Investment securities available-for-sale at fair value (amortized cost: . . . 40,628 32,247
$40,274 and $32,096 at March 31, 2001 and December 31, 2000, respectively)
Mortgage-backed securities held to maturity - at amortized cost (fair value:. 582 594
$576 and $589 at March 31, 2001 and December 31, 2000, respectively)
Loans held for sale, at estimated fair value. . . . . . . . . . . . . . . . . 11,490 4,183
Loans receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278,277 279,478
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . 2,582 2,559
Office properties and equipment, net. . . . . . . . . . . . . . . . . . . . . 15,524 15,255
Federal Home Loan Bank of Cincinnati stock - at cost. . . . . . . . . . . . . 2,056 2,020
Real estate and other assets acquired in settlement of loans. . . . . . . . . 73 86
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,423 2,838
--------- ---------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $408,733 $384,285
========= =========
LIABILITIES AND EQUITY
- -----------------------------------------------------------------------------
Liabilities:
Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $359,704 $336,534
Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,039 1,578
Accounts payable and other liabilities. . . . . . . . . . . . . . . . . . . . 2,738 2,202
--------- ---------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . 363,481 340,314
--------- ---------
Equity:
Preferred stock, no par value
Authorized- 250,000 shares; none issued or outstanding at
March 31, 2001 and December 31, 2000 . . . . . . . . . . . . . . . . . . - -
Common stock, no par value
Authorized- 49,750,000 shares; issued and outstanding
7,104,801 at March 31, 2001 and December 31, 2000. . . . . . . . . . . . 11,599 11,489
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,639 39,991
Unearned restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . (2,982) (3,224)
Unallocated ESOP Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,223) (4,380)
Accumulated other comprehensive income, net of tax. . . . . . . . . . . . . . 219 95
--------- ---------
Total equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,252 43,971
--------- ---------
Total liabilities and equity. . . . . . . . . . . . . . . . . . . . . . . . . $408,733 $384,285
========= =========
Note: The balance sheet at December 31, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes to consolidated financial statements.
1
CAVALRY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended
March 31,
2001 2000
---- ----
Interest and dividend income:
Loans . . . . . . . . . . . . . . . . . . . $ 6,492 $ 6,128
Investment securities . . . . . . . . . . . 574 292
Deposits with other financial institutions. 424 549
Mortgage-backed securities held to maturity 10 10
---------- ----------
Total interest and dividend income. . 7,500 6,979
---------- ----------
Interest expense - deposits. . . . . . . . . 3,628 2,978
Interest expense - borrowings. . . . . . . . 14 130
---------- ----------
Total interest expense . . . . . . . . 3,642 3,108
---------- ----------
Net interest income . . . . . . . . . . . . 3,858 3,871
Provision for loan losses . . . . . . . . . 103 74
---------- ----------
Net interest income after provision
for loan losses . . . . . . . . . . . . 3,755 3,797
---------- ----------
Non-interest income:
Servicing income . . . . . . . . . . . . . 75 64
Gain on sale of loans, net . . . . . . . . 403 314
Deposit servicing fees and charges . . . . 822 561
Trust service fees . . . . . . . . . . . . 293 267
Other operating income . . . . . . . . . . 169 138
---------- ----------
Total non-interest income. . . . . . . . 1,762 1,344
---------- ----------
Non-interest expenses:
Compensation, payroll taxes and
fringe benefits . . . . . . . . . . . . 2,345 2,338
Occupancy expense . . . . . . . . . . . . 239 156
Supplies, communications and other
office expenses . . . . . . . . . . . . 229 211
Federal insurance premiums. . . . . . . . 16 15
Advertising expense . . . . . . . . . . . 96 90
Equipment and service bureau expense. . . 552 498
Other operating expenses. . . . . . . . . 379 378
---------- ----------
Total non-interest expenses. . . . . . 3,856 3,686
---------- ----------
Earnings before income tax expense . . . . 1,661 1,455
Income tax expense . . . . . . . . . . . . 704 627
---------- ----------
Net income. . . . . . . . . . . . . . . $ 957 $ 828
========== ==========
Basic and diluted earnings per share . . . . $ 0.15 $ 0.13
========== ==========
Weighted average shares outstanding-Basic. . 6,444,654 6,340,984
========== ==========
Weighted average shares outstanding-Diluted. 6,458,994 6,340,984
========== ==========
Dividends declared $0.05 per share payable April 13, 2001 for shareholders of
record date March 31, 2001.
See accompanying notes to consolidated financial statements.
2
CAVALRY BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Three
Months Ended
March 31,
2001 2000
---- ----
Net income. . . . . . . . . . . . . . . $ 957 $828
Other comprehensive income, net of tax
Unrealized gains (losses) on securities
available for sale . . . . . . . . . . 124 (26)
------ -----
Comprehensive income. . . . . . . . . . $1,081 $802
====== =====
See accompanying notes to consolidated financial statements.
3
CAVALRY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(UNAUDITED)
2001 2000
---- ----
Operating activities:
Net cash used by operating activities. . . ($4,958) ($1,601)
--------- ---------
Investing activities:
Decrease (increase) in loans receivable, net. . . 1,191 (1,132)
Principal payments on mortgage
backed securities held to maturity . . . . . 11 15
Purchase of investment securities
available for sale. . . . . . . . . . . . . . . (14,496) (21,843)
Proceeds from maturities of investment securities. 6,350 5,000
Purchase of office properties and equipment . . . (553) (2,636)
--------- ---------
Net cash used in investing activities. . . (7,497) (20,596)
--------- ---------
Financing activities:
Net increase in deposits . . . . . . . . . . . . . 23,170 12,040
Dividends paid . . . . . . . . . . . . . . . . . . (310) (355)
Net decrease in borrowings . . . . . . . . . . . . (539) (43,385)
Payments by borrowers for
property taxes and insurance . . . . . . . . . . . 207 226
--------- ---------
Net cash provided by (used in)
financing activities . . . . . . . . . . . 22,528 (31,474)
--------- ---------
Increase (decrease) in cash and cash equivalents . . 10,073 (53,671)
Cash and equivalents, beginning of period. . . . . . 45,025 94,422
--------- ---------
Cash and cash equivalents, end of period. . . . . . $ 55,098 $ 40,751
========= =========
SUPPLEMENT DISCLOSURES OF CASH
FLOW INFORMATION:
Payments during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . $ 3,553 $ 3,045
========= =========
Income taxes . . . . . . . . . . . . . . . . . . . . $ - $ 981
========= =========
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Interest credited to deposits . . . . . . . . . . . $ 1,270 $ 1,045
========= =========
Increase (decrease) in deferred tax asset related
to unrealized loss on investments . . . . . . . . $ 77 $ 17
========= =========
Net unrealized gain (losses) on investment
securities available for sale. . . . . . . . . . $ 201 $ (43)
========= =========
Dividends declared and payable . . . . . . . . . . . $ 355 $ 355
========= =========
See accompanying notes to consolidated financial statements.
4
CAVALRY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
Cavalry Bancorp, Inc. (the "Company"), a Tennessee corporation, is the holding
company for Cavalry Banking (the "Bank") which is a federally chartered stock
savings bank.
The accompanying consolidated financial statements of the Company have been
prepared in accordance with Instructions to Form 10-Q. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. However, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim periods.
The results of operations for the three months ended March 31, 2001, are not
necessarily indicative of the results to be expected for the year ending
December 31, 2001. The consolidated financial statements and notes thereto
should be read in conjunction with the audited financial statements and notes
thereto for the year ended December 31, 2000.
2. Earnings Per Share
The following schedule reconciles the numerators and denominators of the basic
and diluted earnings per share ("EPS") computations for the three-months ended
March 31, 2001 and 2000. Diluted common shares arise from the potentially
dilutive effect of the Company's stock options outstanding.
Quarter Ended March 31
-------------------------
2001 2000
---- ----
Basic EPS:
Net income. . . . . . . . . . . . . $ 957,000 $ 828,000
Average common shares outstanding . 6,444,654 6,340,984
---------- ----------
Earnings per share. . . . . . . . . $ 0.15 $ 0.13
========== ==========
Diluted EPS:
Net income. . . . . . . . . . . . . $ 957,000 $ 828,000
---------- ----------
Average common shares outstanding . 6,444,654 6,340,984
Dilutive effect of stock options. . 14,340 -
---------- ----------
Average dilutive shares outstanding 6,458,994 6,340,984
---------- ----------
Earnings per share. . . . . . . . . $ 0.15 $ 0.13
========== ==========
5
3. Business Segments
The Company and its subsidiaries provide community oriented banking services to
individuals and businesses primarily within Rutherford and Bedford counties in
Middle Tennessee.
The Company's segments are identified by the products and services offered,
principally distinguished as banking, trust and mortgage banking operations.
The majority of loans originated for sale are sold with the servicing rights
attached. One unrelated entity purchased approximately 50% of mortgage loans
sold in 2000 and 2001.
Segment information is derived from the internal reporting system utilized by
management with accounting policies and procedures consistent with those
described in Note 1 of the 2000 Annual Report to Shareholders. Segment
performance is evaluated by the Company based on profit or loss before income
taxes. Revenue, expense, and asset levels reflect those which can be
specifically identified and those assigned based on internally developed
allocation methods. These methods have been consistently applied.
Mortgage
Banking Banking Trust Consolidated
For the quarter ended
March 31, 2001
Interest revenue . . . . . . . . . $ 7,500 $ - $ - $ 7,500
Other income-external customers. . 991 75 293 1,359
Interest expense . . . . . . . . . 3,642 - - 3,642
Depreciation and amortization. . . 224 41 8 273
Other significant items:
Provision for loan losses. . . 103 - - 103
Gain (loss) on sales of assets - 403 - 403
Segment profit . . . . . . . . . . 1,593 (6) 74 1,661
Segment assets . . . . . . . . . . 396,860 11,490 383 408,733
Mortgage
Banking Banking Trust Consolidated
For the quarter ended
March 31, 2000
Interest revenue. . . . . . . . $ 6,979 $ - $ - $ 6,979
Other income-external customers 699 64 267 1,030
Interest expense. . . . . . . . 3,108 - - 3,108
Depreciation and amortization . 172 33 9 214
Other significant items:
Provision for loan losses. . 74 - - 74
Gain on sales of assets. . . - 314 - 314
Segment profit. . . . . . . . . 1,440 (52) 67 1,455
Segment assets. . . . . . . . . 357,634 6,496 397 364,527
6
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Private Securities Litigation Reform Act Safe Harbor Statement
This Quarterly Report contains forward-looking statements within the meaning of
the federal securities laws. These statements are not historical facts, rather
statements based on the Company's current expectations regarding its business
strategies and their intended results and its future performance.
Forward-looking statements are preceded by terms such as "expects," "believes,"
"anticipates," "intends," and similar expressions.
Forward-looking statements are not guarantees of future performance. Numerous
risks and uncertainties could cause the Company's actual results, performance,
and achievements to be materially different from those expressed or implied by
the forward-looking statements. Factors that may cause or contribute to these
differences include, without limitation, general economic conditions, including
changes in market interest rates and changes in monetary and fiscal policies of
the federal government; legislative and regulatory changes; and other factors
disclosed periodically in the Company's filings with the Securities and Exchange
Commission.
Because of the risks and uncertainties inherent in forward-looking statements,
readers are cautioned not to place undue reliance on them, whether included in
this report or made elsewhere from time to time by the Company or on its behalf.
The Company assumes no obligation to update any forward-looking statements.
Comparison of Financial Condition at March 31, 2001 and December 31, 2000
Total assets were $408.7 million at March 31, 2001, compared to $384.3 million
at December 31, 2000, an increase of $24.4 million or 6.35%. This increase in
assets was funded by increased deposits and equity. Cash and cash equivalents
increased from $45.0 million at December 31, 2000, to $55.1 million at March 31,
2001. Investments available for sale increased from $32.2 million at December
31, 2000, to $40.6 million at March 31, 2001. Loans receivable net decreased
$1.2 million from $279.5 million at December 31, 2000, to $278.3 million at
March 31, 2001. Office properties and equipment increased from $15.3 million at
December 31, 2000 to $15.5 million at March 31, 2001.
Deposit accounts increased $23.2 million from $336.5 million at December 31,
2000, to $359.7 million at March 31, 2001. Certificates of deposit increased
$4.8 million from $162.5 million at December 31, 2000, to $167.3 million at
March 31, 2001. Savings deposits increased $1.0 million from $13.2 million at
December 31, 2000, to $14.2 million at March 31, 2001. Money market accounts
increased $10.0 million from $69.8 million at December 31, 2000, to $79.8
million at March 31, 2001. NOW accounts declined slightly from $52.3 million at
December 31, 2000, to $51.7 million at March 31, 2001. Non interest-bearing
accounts increased $8.2 million from $38.6 million at December 31, 2000, to
$46.8 million at March 31, 2001. These increases were primarily a result of an
ongoing effort to raise the deposit base for the Bank.
Equity increased by $1.3 million from $44.0 million at December 31, 2000, to
$45.3 million at March 31, 2001, as a result of net income of $957,000 for the
three months ended March 31, 2001, release of ESOP shares of $267,000 and
release of Management Recognition Plan (MRP) shares of $242,000 and an
unrealized gain on available for sale securities of $124,000 net of taxes.
These increases were offset by dividends declared of $310,000.
Non-performing assets were $209,000 at December 31, 2000 and $243,000 at March
31, 2001.
7
Comparison of Operating Results for the Three Months Ended March 31, 2001 and
March 31, 2000.
Net Income. Net income was $957,000 for the three months ended March 31, 2001
compared to $828,000 for the three months ended March 31, 2000. This increase
was primarily a result of higher interest income and higher non-interest income.
These increases were partially offset by higher interest expense, higher
non-interest expenses and a larger provision for loan losses. The Company
expects to see downward pressure on earnings as a result of interest rate cuts
by the Federal Reserve Board. As a result of these Fed rate cuts, banks have
cut the prime rate in a similar manner. The majority of the Bank's construction
loan portfolio is tied to this prime rate and adjusts immediately with changes
in the prime rate. These declines have a short-term negative impact on interest
income.
Net Interest Income. Net interest income remained constant at $3.8 million for
the quarters ended March 31, 2000 and 2001. The ratio of average
interest-earning assets to average interest-bearing liabilities decreased from
116.41% for the three months ended March 31, 2000, to 116.15% for the three
months ended March 31, 2001.
Interest income increased 7.14% to $7.5 million for the three months ended March
31, 2001, from $7.0 million for the same period in 2000. Interest on loans
increased from $6.1 million for the three months ended March 31, 2000, to $6.5
million for the same period in 2001. This was a result of average loans
outstanding increasing from $274.7 million for the three months ended March 31,
2000, to $283.4 million for the same period in 2001. The average yield
increased from 8.92% for the three months ended March 31, 2000, to 9.29% for the
same period in 2001 as a result of increased amortization of deferred fees.
Income on all other investments consisting of mortgage backed securities,
investments, FHLB stock, bank deposits and federal funds increased from $851,000
for the three months ended March 31, 2000, to $1.0 million for the same period
in 2001. Average investments increased from $56.4 million for the three months
ended March 31, 2000, to $67.8 million for the same period in 2001. The average
yield decreased from 6.06% for the three months ended March 31, 2000, to 6.03%
for the same period in 2001.
Interest expense increased from $3.1 million for the three months ended March
31, 2000, to $3.9 million for the same period in 2001. Average deposits
increased from $275.6 million for the three months ended March 31, 2000, to
$300.9 million for the same period in 2001. This increase was a result of
continuing efforts to increase market share of deposits. The average cost of
deposits increased from 4.35% for the three months ended March 31, 2000, to
4.89% for the same period in 2001. Average borrowings decreased from $8.9
million at an average cost of 5.90% for the three months ended March 31, 2000 to
$1.5 million at an average cost of 3.70% for the three months ended March 31,
2001. The total cost of funds increased from 4.43% for the three months ended
March 31, 2000, to 4.88% for the three months ended March 31, 2001. Average
interest-bearing liabilities increased from $284.5 million for the three months
ended March 31, 2000, to $302.4 million for the same period in 2001. Interest
rate spread decreased from 4.00% for the three months ended March 31, 2000, to
3.78% for the same period in 2001. Net interest margin decreased from 4.68% for
the three months ended March 31, 2000, to 4.45% for the same period in 2001.
Provision for Loan Losses. Provision for loan losses are charges to earnings to
bring the total allowance for loan losses to a level considered by management as
adequate to provide for estimated loan losses based on management's evaluation
of the collectibility of the loan portfolio, including the nature of the
portfolio, credit concentrations, trends in historical loss experience, specific
impaired loans and economic conditions. Management also considers the level of
problem assets, giving greater weight to the level of classified assets than to
the level of nonperforming assets because classified assets include not only
nonperforming assets but also performing assets that otherwise exhibit, in
management's judgment, potential credit weaknesses.
The provision for loan losses increased from $74,000 for the three months ended
March 31, 2000 to $103,000 for the three months ended March 31, 2001. The
increase in the provision was primarily a result of increases in total loans
outstanding between the two periods. Management deemed the allowance for loan
losses adequate at March 31, 2001.
Non-interest Income. Non-interest income increased from $1.3 million for the
three months ended March 31, 2000, to $1.8 million for the same period in 2001.
In the mortgage banking segment, net gain on sale of loans increased from
$314,000 for the three months ended March 31, 2000, to $403,000 for the same
period in 2001. The higher gain in 2001 was a result of increased production
and mortgage refinancing activity. Loan servicing fees increased slightly from
$64,000 for the three months ended March 31, 2000, to $75,000 for the same
period in 2001. In the banking segment, deposit fees and other operating
incomes increased from $699,000 for the three months ended March 31, 2000, to
$991,000 for the same period in 2001. This increase was a result of growth in
the number of transaction accounts and increased charges. The Bank also
implemented an overdraft privilege program coupled with a new free checking
account program. These factors also helped to increase deposit and overdraft
fees. In the trust segment, trust fees increased from $267,000 for the three
months ended March 31, 2000, to $293,000 for the same period in 2001 as a result
of increased trust assets under management.
8
Non-interest Expense. Non-interest expense increased from $3.7 million for the
three months ended March 31, 2000, to $3.9 million for the same period in 2001.
Compensation and other employee benefits were constant at $2.3 million for the
three months ended March 31, 2000 and 2001. The increase in occupancy expense
was primarily a result of the opening of the new operations building and
increases in the cost of utilities. The increases in other expenses were
primarily due to increased loan and deposit activity.
Income taxes. The provision for income taxes was $704,000 for the three months
ended March 31, 2001, compared to $627,000 for the same period in 2000. This
increase was primarily a result of higher income before taxes.
Liquidity and Capital Resources
The Company's primary sources of funds are customer deposits, proceeds from loan
principal and interest payments, sale of loans, maturing securities and Federal
Home Loan Bank (FHLB) of Cincinnati advances. While maturities and scheduled
amortization of loans are a predictable source of funds, deposit flows and
mortgage prepayments are influenced greatly by general interest rates, other
economic conditions, and competition. Regulations of the Office of Thrift
Supervision ("OTS"), the Bank's primary regulator, require the Bank to maintain
an adequate level of liquidity to ensure the availability of sufficient
liquidity to fund loan originations, deposit withdrawals and to satisfy other
financial commitments. Currently, the OTS regulatory liquidity for the Bank is
the maintenance of an average daily balance of liquid assets (cash and eligible
investments) equal to at least 4% of the daily balance of net withdrawal
deposits and short-term borrowings. This liquidity requirement is subject to
periodic change. The Company and the Bank generally maintain sufficient cash
and short-term investments to meet short-term liquidity needs. At March 31,
2001, cash and cash equivalents totaled $55.1 million or 13.48% of total assets,
and investments available-for-sale totaled $40.6 million. At March 31, 2001,
the Bank also maintained, but did not draw upon, a line of credit with the FHLB
of Cincinnati in the amount of $10.0 million.
As of March 31, 2001, the Bank's regulatory capital was in excess of all
applicable regulatory requirements. At March 31, 2001, under regulations of the
OTS, the Bank's actual tangible, core and risk-based capital ratios were 10.45%,
10.45% and 12.35%, respectively, compared to requirements of 1.5%, 3.0% and
8.0%, respectively.
At March 31, 2001, the Bank had loan commitments of approximately $33.0 million.
In addition, at March 31, 2001, the unused portion of lines of credit extended
by the Bank was approximately $9.7 million for consumer loans and $25.4 million
for commercial loans. Standby letters of credit and financial guarantees are
conditional commitments issued by the Bank to guarantee the performance of a
customer to a third party. Those guarantees are primarily issued to support
public and private borrowing arrangements, including commercial paper, bond
financing, and similar transactions. Most guarantees extend from one to two
years. The credit risk involved in issuing letters of credit is essentially the
same as that involved in extending loan facilities to customers. At March 31,
2001, the Bank had $6.8 million of letters of credit outstanding.
Impact of Inflation and Changing Prices
The consolidated financial statements of the Company and notes thereto,
presented elsewhere herein, have been prepared in accordance with GAAP, which
require the measurement of financial condition and operating results in terms of
historical dollars without considering the change in relative purchasing power
of money over time due to inflation. The impact of inflation is reflected in
the increased cost of the Company's operations. Unlike most industrial
companies, nearly all the assets and liabilities of the Company are financial.
As a result, interest rates have a greater impact on the Company's performance
than do the effects of general levels of inflation. Interest rates do not
necessarily move in the same direction or to the same extent as the prices of
goods and services.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's interest rate sensitivity is monitored by management through
selected interest rate risk measures produced internally and by the OTS. Based
on internal reviews, management does not believe that there has been a material
change in the Company's interest rate sensitivity from December 31, 2000, to
March 31, 2001. However, the OTS results are not yet available for the quarter
ended March 31, 2001. All methods used to measure interest rate sensitivity
involve the use of assumptions. Management cannot predict what assumptions are
made by the OTS, which can vary from management's assumptions. Therefore, the
results of the OTS calculations can differ from management's internal
calculations. The Company's interest rate sensitivity should be reviewed in
conjunction with the financial statements and notes thereto contained in the
Company's Annual Report for the year ended December 31, 2000.
9
The following table presents the Company's maturity gap at March 31, 2001 (In
thousands).
Six After After
Within Months One to Three Over
Six To One Three to Five Ten
Months Year Years Years Years Total
------ ------ ------ ------ ------ --------
Interest-earning assets:
Loans receivable, net. . . $ 62,928 $ 46,332 $67,439 $ 48,815 $ 64,253 $289,767
Mortgage-backed
securities . . . . . . . 17 17 70 70 408 582
FHLB Stock . . . . . . . . 2,056 - - - - 2,056
Investment securities. . . 9,083 9,050 22,495 - - 40,628
Federal funds sold
overnight and other
interest-bearing
deposits . . . . . . . . 35,121 - - - - 35,121
--------- --------- -------- ---------- ---------- ---------
Total rate
sensitive assets. . . $109,205 $ 55,399 $90,004 $ 48,885 $ 64,661 $368,154
========= ========= ======== ========== ========== =========
Interest-bearing
liabilities:
Deposits:
NOW accounts . . . . . . . $ 5,167 $ 5,167 $20,669 $ 20,669 $ - $ 51,672
Passbook savings
accounts . . . . . . . . 1,420 1,420 5,681 5,681 - 14,202
Money market
deposit accounts . . . . 7,979 7,979 31,916 31,916 - 79,790
Certificates of
deposit. . . . . . . . . 92,683 47,895 23,354 3,346 - 167,278
Borrowings. . . . . . . . . . 27 27 109 109 767 1,039
--------- --------- -------- ---------- ---------- ---------
Total rate
sensitive liabilities $107,276 $ 62,488 $81,729 $ 61,721 $ 767 $313,981
========= ========= ======== ========== ========== =========
Excess (deficiency) of
interest sensitive
assets over interest
sensitive liabilities . . $ 1,929 ($7,089) $ 8,275 ($12,836) $ 63,894 $ 54,173
Cumulative excess
(deficiency) of
interest sensitive
assets. . . . . . . . . . $ 1,929 ($5,160) $ 3,115 ($9,721) $ 54,173 $ 54,173
Cumulative ratio of
interest-earning
assets to interest-
bearing liabilities . . . 101.80% 96.96% 101.24% 96.90% 117.25% 117.25%
Interest sensitivity
gap to total rate
sensitive assets . . . . . 0.52% (1.93)% 2.25% (3.49)% 17.36% 14.71%
Ratio of interest-
earning assets to
interest -bearing
liabilities. . . . . . . . 101.80% 88.66% 110.12% 79.20% 8,430.38% 117.25%
Ratio of cumulative gap
to total rate
sensitive assets . . . . . 0.52% (1.40)% 0.85% (2.64)% 14.71% 14.71%
10
Part II. Other Information
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities and use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
None
Item 6. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Exhibits
3.1 Charter of the Registrant*
3.2 Bylaws of the Registrant*
10.1 Employment Agreement with Ed C. Loughry, Jr.**
10.2 Employment Agreement with Ronald F. Knight **
10.3 Severance Agreement with Hillard C. Gardner**
10.4 Severance Agreement with Ira B. Lewis , Jr.**
10.5 Severance Agreement with R. Dale Floyd **
10.6 Severance Agreement with M. Glenn Layne **
10.7 Severance Agreement with Joy B. Jobe**
10.8 Severance Agreement with William S. Jones**
10.9 Severance Agreement with David W. Hopper**
10.10 Cavalry Banking Key Personnel Severance Compensation Plan**
10.11 Cavalry Banking Employee Stock Ownership Plan**
10.12 Management Recognition Plan with William H. Huddleston III***
10.13 Management Recognition Plan with Gary Brown ***
10.14 Management Recognition Plan with Ed Elam ***
10.15 Management Recognition Plan with Frank E. Crosslin, Jr. ***
10.16 Management Recognition Plan with Tim J. Durham ***
10.17 Management Recognition Plan with James C. Cope ***
10.18 Management Recognition Plan with Terry G. Haynes ***
10.19 Management Recognition Plan with Ed C. Loughry, Jr. ***
10.20 Management Recognition Plan with Ronald F. Knight ***
10.21 Management Recognition Plan with William S. Jones ***
10.22 Management Recognition Plan with Hillard C. Gardner ***
10.23 Management Recognition Plan with R. Dale Floyd ***
10.24 Management Recognition Plan with David W. Hopper ***
10.25 Management Recognition Plan with Joe W. Townsend ***
10.26 Management Recognition Plan with M. Glenn Layne ***
10.27 Management Recognition Plan with Joy B. Jobe ***
10.28 Management Recognition Plan with Ira B. Lewis, Jr. ***
10.29 Management Recognition Plan with Elizabeth L. Green ***
10.30 Management Recognition Plan with James O. Sweeney, III ***
13 Annual Report to Stockholders****
21 Subsidiaries of the Registrant****
* Incorporated herein by reference to the Registrant's Registration
Statement on Form S-1, as amended (333-40057).
** Incorporated herein by reference to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1997, as filed with the
Securities and Exchange Commission on March 30, 1998.
*** Incorporated herein by reference to the Registrant's Annual Meeting
Proxy Statement dated March 15, 1999, as filed with the Securities and
Exchange Commission on March 15, 1999.
**** Incorporated herein by reference to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 2000, as filed with the
Securities and Exchange Commission on March 26, 2001.
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the quarter ended March 31, 2001.
11
Pursuant to the requirements of section 13 or 15(d) of the Securities Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
CAVALRY BANCORP, INC.
Date: May 9, 2001 by: /s/ Ed C. Loughry,Jr.
-----------------------------
Ed C. Loughry, Jr.
Chairman of the Board of Directors
Chief Executive Officer
Date: May 9, 2001 by: /s/ Hillard C. Gardner
----------------------------
Hillard C. Gardner
Senior Vice President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
12