<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
X Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
- --- of 1934
For the Quarterly Period ended June 30, 1997
-------------
Transition report under Section 13 or 15(d) of the Exchange Act
- --- For the transition period from to
---- ----
Commission file number 0-28360
--------
IBW Financial Corporation
----------------------------------------------
(Name of Small Business Issuer in its Charter)
District of Columbia 52-1943477
--------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
4812 Georgia Avenue, NW, Washington, DC 20011
---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(202) 722-2000
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
N/A
-----------------------------------------------------
(Former Name, Former Address, and Former Fiscal Year,
If Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file reports), and (2) has
been subject to such filing requirements for the past 90 days. X Yes No
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date: As of July 31, 1997, there
were 637,160 shares of the common stock $1.00 par value of IBW Financial
Corporation outstanding.
Transitional Small Business Disclosure Format (check one) Yes X No
--- ---
<PAGE>
PART I FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
IBW FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
------------- -----------------
(dollars in thousands)
<S> <C> <C>
ASSETS
Cash and cash equivalents
Cash and due from banks $ 11,751 $ 13,692
Federal funds sold 3,600 8,300
------------- -----------------
Total cash and cash equivalents 15,351 21,992
Interest-bearing deposits in banks 3,000 3,000
Securities available-for-sale, at
fair value (amortized cost,
$106,961 and $94,298) 107,817 94,824
Trading Securities 2,146 --
Loans receivable, net of allowance
for loan losses of $1,807 and $1,266 109,047 108,611
Other real estate owned, net 816 1,310
Bank premises and equipment, net 2,466 2,452
Other assets 3,696 3,599
------------- -----------------
TOTAL $244,339 $235,788
============= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Demand deposits $ 50,015 $ 50,840
Time and savings deposits 157,086 155,244
------------- -----------------
Total deposits 207,101 206,084
Securities sold under repurchase agreements 16,709 10,466
Other liabilities 1,552 920
Note payable 1,000 1,000
------------- -----------------
Total liabilities 226,362 218,470
------------- -----------------
SHAREHOLDERS' EQUITY
Preferred stock - $1 par value; 1,000,000 authorized;
none issued
Common stock - $1 par value; 1,000,000 authorized;
637,160 shares issued and outstanding 637 637
Capital surplus 4,329 4,329
Retained earnings 12,446 12,005
Unrealized gain on available-for-sale securities,
net of taxes of $291 and $179 565 347
------------- -----------------
Total shareholders' equity 17,977 17,318
------------- -----------------
TOTAL $244,339 $235,788
============= =================
</TABLE>
- 1 -
<PAGE>
IBW FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------------
1997 1996
------------- -------------
(dollars in thousands, except per share data)
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $5,057 $4,512
U.S. treasury securities 532 782
Obligations of U.S. government agencies and corporations 2,207 1,745
Obligations of states and political subdivisions 447 309
Bank balances and other securities purchased
under agreements to resell 302 496
------------- -------------
Total interest income 8,545 7,844
------------- -------------
INTEREST EXPENSE
Time certificates over $100,000 363 328
Other savings and time deposits 2,168 2,331
Securities sold under repurchase agreements 312 5
Note payable 27 27
------------- -------------
Total interest expense 2,870 2,691
------------- -------------
NET INTEREST INCOME 5,675 5,153
PROVISION FOR LOAN LOSSES 735 150
------------- -------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 4,940 5,003
------------- -------------
NONINTEREST INCOME
Service charges on deposit and checking accounts 1,409 1,026
Gain on sale of trading securities 22 -
Gain on sale of available-for-sale securities - 62
Other operating income 73 104
------------- -------------
Total noninterest income 1,504 1,192
------------- -------------
NONINTEREST EXPENSE
Salaries and employee benefits 3,014 3,127
Occupancy 341 347
Furniture and equipment 288 270
Data processing 298 258
Other 1,648 1,315
------------- -------------
Total noninterest expense 5,589 5,317
------------- -------------
INCOME BEFORE INCOME TAXES 855 878
PROVISION FOR INCOME TAXES 225 230
------------- -------------
NET INCOME $ 630 $ 648
============= =============
NET INCOME PER COMMON SHARE $0.99 $1.02
============= =============
</TABLE>
- 2 -
<PAGE>
IBW FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
QUARTER ENDED JUNE 30, 1997 AND JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended June 30,
----------------------------
1997 1996
---------- ----------
(dollars in thousands, except per share data)
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $2,605 $2,272
U.S. treasury securities 215 435
Obligations of U.S. government agencies and corporations 1,230 880
Obligations of states and political subdivisions 231 160
Bank balances and other securities purchased
under agreements to resell 98 201
---------- ----------
Total interest income 4,379 3,948
---------- ----------
INTEREST EXPENSE
Time certificates over $100,000 188 168
Other savings and time deposits 1,092 1,153
Securities sold under repurchase agreements 171 5
Note payable 14 14
---------- ----------
Total interest expense 1,465 1,340
---------- ---------
NET INTEREST INCOME 2,914 2,608
PROVISION FOR LOAN LOSSES 310 100
---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 2,604 2,508
---------- ----------
NONINTEREST INCOME
Service charges on deposit and checking accounts 748 521
Gain on sale of trading securities 22 -
Gain on sale of available-for-sale securities - 21
---------- ----------
Other operating income 69 75
---------- ----------
Total noninterest income 839 617
---------- ----------
NONINTEREST EXPENSE
Salaries and employee benefits 1,600 1,673
Occupancy 169 176
Furniture and equipment 121 140
Data processing 149 125
Other 877 682
---------- ----------
Total noninterest expense 2,916 2,796
---------- ----------
INCOME BEFORE INCOME TAXES 527 329
PROVISION FOR INCOME TAXES 137 54
---------- ----------
NET INCOME $ 390 $ 275
========== ==========
NET INCOME PER COMMON SHARE $ 0.61 $ 0.43
========== ==========
</TABLE>
- 3 -
<PAGE>
IBW FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30
------------------------
1997 1996
---------- -----------
<S> <C> <C>
(dollars in thousands)
OPERATING ACTIVITIES
Net income $ 630 $ 648
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 277 159
Amortization of premiums and accretion of discounts, net 441 312
Other gains and losses, net (48) -
Interest capitalized on securities (462) -
(Gain) on sale of securities available-for-sale - (62)
Proceeds from sale of trading securities 1,018 -
Provision for losses on other real estate owned 33 -
Provision for loan losses 735 150
Decrease (increase) in other assets (316) 290
Increase (decrease) in accrued expenses and other liabilities 632 (197)
---------- -----------
Net cash provided by operating activities 2,940 1,300
---------- -----------
INVESTING ACTIVITIES
Net increase in loans 4,913 (5,849)
Proceeds from sale of loans 476 -
Additions to bank premises and equipment (182) (230)
Net proceeds on sale of other real estate owned 717 -
Proceeds from sale of securities available-for-sale - 14,043
Proceeds from maturities of securities available-for-sale 3,500 15,732
Purchase of securities available-for-sale (21,201) (53,981)
Principal collected on securities available-for-sale 4,953 3,111
---------- -----------
Net cash used in investing activities (16,650) (27,174)
---------- -----------
FINANCING ACTIVITIES
Dividends paid (191) (191)
Net increase in deposits 1,017 4,388
Net increase in securities sold under repurchase agreements 6,243 2,628
---------- -----------
Net cash provided by financing activities 7,069 6,825
---------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (6,641) (19,049)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 21,992 34,886
---------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 15,351 $ 15,837
========== ===========
Supplemental disclosures of cash flow information
Cash paid during the year for
Interest $ 2,259 $ 2,645
Taxes 110 230
Non-Cash Transactions:
Transfers of loans to Other real estate owned $ 268 $ 222
Securitization of mortgage loans 3,102 -
</TABLE>
- 4 -
<PAGE>
IBW FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of IBW Financial
Corporation and Subsidiary (the Company) have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB. Accordingly, they do not include all the
information and footnotes required for complete financial statements. In the
opinion of management, all adjustments and reclassifications consistently, of a
normal and recurring nature, considered necessary for a fair presentation have
been included. Operating results for the six month period ended June 30, 1997,
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1997. These unaudited consolidated financial statements
should be read in conjunction with the consolidated financial statements and
footnotes included in the Company's Annual Report to Shareholders for the year
ended December 31, 1996.
Note B ACCOUNTING CHANGES
Effective January 1,1997, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 125, Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities, except for the provisions that were
delayed by SFAS No. 127, Deferral of the Effective Date of Certain Provisions of
Certain Provisions of FASB Statement No. 125, an Amendment of FASB Statement No.
125. The adoption of this new accounting standard did not have a material
impact on the financial statements of the Company.
Note C NEW ACCOUNTING PRONOUNCEMENT
In March 1997, the Financial Accounting standards Board issued SFAS No. 128,
Earnings Per Share ("EPS"), which simplifies the standards for computing EPS
previously found in Accounting Board Principals Opinion No. 15, Earnings Per
Share. SFAS No. 128 is effective for financial statements issued for periods
ending after December 15, 1997. If SFAS No. 128 had been effective for the six
months ended June 30, 1997 and 1996, earnings per share would have been
presented as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30,
1997 1996
----- -----
<S> <C> <C>
Net income per common share $0.99 $1.02
</TABLE>
- 5 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1997 (DOLLARS IN THOUSANDS)
Forward looking statements. This discussion contains forward looking
statements within the meaning of the Securities Exchange Act of 1934, as
amended, including statements of goals, intentions, and expectations as to
future trends, plans, events or results of Company operations and policies and
regarding general economic conditions. These statements are based upon current
and anticipated economic conditions, nationally and in the Company's market,
interest rates and interest rate policy, competitive factors and other
conditions which, by their nature, are not susceptible to accurate forecast, and
are subject to significant uncertainty. Because of these uncertainties and the
assumptions on which this discussion and the forward looking statements are
based, actual future operations and results in the future may differ materially
from those indicated herein. Readers are cautioned against placing undue
reliance on any such forward looking statement. The Company does not undertake
to update any forward looking statement to reflect occurrences or events which
may not have been anticipated as of the date of such statements.
Overview
IBW Financial Corporation's net income for the first half of 1997
totaled $630, a decrease of $18, or 2.8% from the comparable period of 1996.
This decrease is primarily attributed to an increase of $585 in the provision
for loan losses, an increase of $272 in noninterest expenses, offset by an
increase in net interest income of $522 and an increase of $312 in noninterest
income. Return on average assets (ROAA), and return on average shareholder's
equity (ROAE) through the first half of 1997 and 1996 were .52% and 7.28%, .57%
and 7.98%, respectively.
NET INTEREST INCOME
Net interest income increased $522, or 10.1% over 1996 comparable
period. Interest on loans increased by $545, or 12.1%, reflecting higher levels
of loans. Interest on securities increased $350, or 12.3%, reflecting higher
levels of mortgage backed securities, and obligations of states and political
subdivisions, and lower levels of U.S. Treasury securities. Interest on federal
funds sold and other interest earning assets declined $194, or 39.1%, from the
1996 comparable period, reflecting lower levels of federal funds sold. Interest
expense increased $179, or 6.7%, attributed primarily to a higher volume of
repurchase agreements which were initiated late in the first quarter of 1996.
Interest expense related to deposits declined $128, while interest expense
related to repurchase agreements increased $307. On a tax-equivalent basis, net
interest income for the six months ended June 30, 1997 increased $594, or 11.2%,
over the comparable period in 1996. The increase was primarily attributable to
an increase in average interest-earning assets, an increase in the net interest
spread and partially offset by an increase in average interest-bearing
liabilities. Average interest-earning assets increased by $13.3 million, or
6.3%, comprised principally of growth in loans of $14.4 million and nontaxable
securities of $4.7 million, partially offset by a decrease in the level of
federal funds sold of $9.1 million.
The interest average rate spread increased .24% from 4.30% for June
1996 to 4.54% for June 1997. This increase is primarily attributed to an
increase in the average rate earned on interest-earning assets, except for
loans, partially offset by the decrease in the average rate on loans.
Average interest-bearing liabilities increased $10.5 million, or 6.5%,
due to an increase in time deposits and borrowings, partially offset by a
decrease in average interest-bearing demand and savings deposits. Average
borrowings (comprised of repurchase agreements and the note payable) increased
$13.4 million.
- 6 -
<PAGE>
PROVISION FOR LOAN LOSSES
The Company maintains an allowance for loan losses to absorb losses on
existing loans and commitments that may become uncollectible. The provision for
loan losses increased $585 in the first half of 1997, to $735, from $150 for the
six months ended June 30, 1996. The increase in the provision for loan losses
is attributable primarily to the continued large level of nonperforming assets
and loans with possible credit problems. Overall, nonperforming assets declined
to $4.0 million compared to $4.6 million at year end 1996, due principally to
the disposal of a large OREO with a net carrying cost of $460. Nonperforming
assets to gross loans and foreclosed properties and nonperforming assets to
total assets declined from 4.1% and 1.9%, respectively at year-end 1996 to 3.6%
and 1.6%, respectively at June 30, 1997.
NONINTEREST INCOME
Noninterest income increased $312, or 26.2%, to $1,504 for June 1997
compared to $1,192 for June 1996. The increase is attributed to service charges
on deposit and checking accounts which increased $383. Gain on the sale of
trading securities totaled $22 for the first half of 1997. Additionally, $64 in
unrealized gains on trading securities were recognized during the second
quarter. Gain on the sale of securities was $62 during the first half of 1996.
NONINTEREST EXPENSE
Noninterest expense for the first half of 1997 increased $272, or
5.1%, over comparable period of 1996. This increase is attributed primarily to
an increase of $333 in other expenses, an increase of $18 in furniture and
equipment expenses, and an increase of $40 in data processing costs, partially
offset by a $113 decrease in salaries and benefits. The increase in other
expenses were principally attributed to an increase of $142 in professional
service fees, an increase of $105 in advertising expenses, and an increase of
$123 in loan collection expenses including a $33 increase in provision for OREO.
The decrease in salaries and benefits was attributed largely to the reduction in
pension cost of $298 compared to the first half of 1996, resulting from the
planned termination of the Company's defined benefit pension plan during the
second quarter of 1996. The company subsequently implemented a 401(k) plan
during the second quarter of 1997.
PROVISION FOR INCOME TAXES
The provision for income taxes for the first half of 1997 decreased $5
to $225, or 2.2%, from the comparable period of 1996, due primarily to lower
earnings and an increase in tax-exempt income.
FINANCIAL OVERVIEW
Total assets increased $8.6 million, or 3.6%, from December 31, 1996
to June 30, 1997, mainly due to an increase in securities of $15.1 million,
partially offset by a decrease in cash and cash equivalents of $6.6 million, and
other real estate owned of $494. The increase in assets was primarily funded by
deposit growth of $1.0 million and repurchase agreements growth of $6.2 million.
Total shareholders' equity increased $659 due primarily to the in increase
retained earnings of $441 and an increase in the unrealized gain (loss) on
available-for-sale securities going from a gain of $347 at year-end 1996 to a
gain of $565 at June 30, 1997. Dividends of $191 were paid during the second
quarter of 1997.
The carrying value of the Company's securities portfolio increased
16.0% from $94.8 million at December 31, 1996 to $110 million at June 30, 1997.
This growth was centered specifically in mortgage-backed securities, which
increased from $50.4 million to $60.5 million. The mortgage-backed securities
portfolio had a weighted-average remaining maturity of 2.95 years at June 30,
1997 compared to 2.73 years at December 31, 1996. The collateral underlying all
the mortgage-backed securities is guaranteed by one of the "Quasi-
- 7 -
<PAGE>
Governmental" agencies, and therefore maintains a risk weight of 20% for risk-
based capital purposes. Management's analysis of mortgage-related securities
includes, but is not limited to, the average lives, seasonality, coupon and
historic behavior (including prepayment history) of each particular security
over its life, as affected by various interest rate environments. Stress tests
are performed on each security on a quarterly basis as part of management's
ongoing analysis. There are no issuers of securities held by the Company the
securities of which have a book value in excess of 10% of shareholders' equity.
The allowance for loan losses was $1.8 million at June 30, 1997
compared to $1.3 million at December 31, 1996. The ratio of allowance for
possible loan losses to total loans increased to 1.65% at June 30, 1997 from
1.15% at year-end 1996. The increase in the level of the allowance for loan
losses as a percentage of ending loans reflects the increase in potential
problem loans. At June 30, 1997, non-performing assets to total assets
decreased to 1.63% compared to 1.94% at December 31, 1996.
- 8 -
<PAGE>
AVERAGE BALANCES AND NET INTEREST INCOME ANALYSIS/(1)/
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
Six Months Ended Six Months Ended Year Ended
June 30, 1997 June 30, 1996 December 31, 1996
--------------------------- --------------------------- ---------------------------
Amount Amount Amount
Average Average Paid or Average Average Paid or Average Average Paid or
Balance Rate Earned Balance Rate Earned Balance Rate Earned
-------- ------- ------- ------- ------- ------- -------- ------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Loans, net $108,842 9.37% $5,057 $ 94,485 9.63% $4,512 $ 99,879 9.41% $ 9,401
Taxable securities 87,538 6.32% 2,744 86,833 5.97% 2570 86,305 6.06% 5,232
Non-taxable securities/(2)/ 16,585 8.23% 677 11,840 7.97% 468 12,747 8.31% 1,059
Federal funds sold 7,522 5.58% 208 16,608 5.37% 442 11,279 5.51% 622
Interest-bearing deposits held 3,000 5.98% 89 386 5.75% 11 1,661 6.44% 107
-------- ------- ------- -------- ------- ------- -------- ------ -------
Total interest-earning assets 223,487 7.92% 8,775 210,152 7.68% 8,003 211,871 7.75% 16,421
Cash and due from banks 11,360 10,804 10,841
Bank premises and
equipment, net 2,462 2,399 2,424
Other assets 4,990 5,294 5,423
-------- -------- --------
Total assets $242,299 $228,649 $230,559
======== ======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing demand deposits $ 29,204 1.98% $ 288 $ 31,237 2.22% $ 344 $ 30,718 2.10% 644
Savings deposits 68,047 2.76% 930 75,188 2.97% 1,107 72,856 2.87% 2,087
Time deposits 59,381 4.46% 1,313 52,052 4.59% 1,208 55,548 4.44% 2,468
-------- ------- ------- -------- ------- ------- -------- ------ -------
Total interest-bearing deposits 156,632 3.26% 2,531 159,477 3.36% 2,659 159,122 3.27% 5,199
Borrowed funds 1,000 5.44% 27 1,000 5.44% 27 1,000 5.30% 53
Repurchase agreements 13,555 4.64% 312 199 5.07% 5 3,376 4.53% 153
-------- ------- ------- -------- ------- ------- -------- ------ -------
Total interest-bearing deposits 171,187 3.38% 2,870 160,676 3.38% 2,691 163,498 3.31% 5,405
Noninterest-bearing liabilities 51,680 49,903 48,930
Other liabilities 2,128 1,836 1,841
Shareholders' equity 17,304 16,234 16,290
-------- -------- --------
Total liabilities and
shareholders' equity $242,299 $228,649 $230,559
======== ======== ========
NET INTEREST INCOME AND NET
YIELD ON INTEREST-EARNING ASSETS
Net interest income $5,905 $5,311 $11,016
====== ====== =======
Interest rate spread 4.54% 4.30% 4.44%
Net yield on average interest- 5.20%
earning assets 5.33% 5.10%
Average interest-earning assets
to average interest-bearing
liabilities 130.55% 130.79% 129.58%
</TABLE>
(1) Yields on securities have been computed based upon the historical cost of
such securities. Nonaccruing loans are included in average balances.
(2) Yields on non-taxable securities are presented on a tax-equivalent basis
using a 34% tax rate. Interest income and net interest income reported in
the Company's consolidated statements of income were $8,545 and $5,675 for
June 30, 1997, $7,844 and $5,153 for June 30, 1996 and $16,061 and $10,656
for 1996.
- 9 -
<PAGE>
LOAN LOSS AND RECOVERY EXPERIENCE
<TABLE>
<CAPTION>
------------------------------------
Six Months Ended Year Ended
June 30, 1997 December 31,1996
----------------- ----------------
(dollars in thousands)
<S> <C> <C>
Total outstanding loans at period end $109,556 $110,242
Average amount of loans outstanding 110,247 100,950
Allowance for loan losses
at beginning of year 1,266 1,177
Loans charged off:
Commercial 169 637
Real estate mortgage 34 52
Installment loans to individuals 52 69
-------- --------
Total charge-offs 255 758
-------- --------
Recoveries of loans previously charged-off:
Commercial 40 286
Real estate mortgage - 25
Installment loans to individuals 21 26
-------- --------
Total recoveries 61 337
-------- --------
Net charge-offs 194 421
Additions to allowance charged to
operations 735 510
-------- --------
Allowance for loan losses at end of year $ 1,807 $ 1,266
======== ========
Ratio of net charge-offs during year
to average outstanding loans during year 0.35% 0.42%
Ratio of allowance for possible loan
losses at period to total loans 1.65% 1.15%
</TABLE>
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
---------------------------------------------------
June 30, 1997 Percent December 31, 1996 Percent
------------- ------- ----------------- -------
(dollars in thousands)
<S> <C> <C> <C> <C>
Commercial $1,552 85.89% $1,075 84.91%
Real estate mortgage/(1)/ 120 6.64% 89 7.03%
Consumer 75 4.15% 92 7.27%
Unallocated 60 3.32% 10 0.79%
------------- ------- ----------------- -------
Total $1,807 100.00% $1,266 100.00%
============= ======= ================= =======
</TABLE>
The level of the allowance for loan losses is determined by management on
the basis of various assumptions and judgements. These include levels and trends
of past due and non-accrual loans, trends in volume and changes in terms,
effects of policy changes, experience and depth of management, anticipated
economic conditions in the Washington, DC metropolitan area, concentrations of
credit, the composition of the loan portfolio, prior loan loss experience, and
the ongoing and periodic reviews of the loan portfolio by the Company's internal
and external loan review function. For impaired loans, the Company establishes
reserves in accordance with SFAS 114 and SFAS 118, and for non-impaired loans
uses an allocation approach which relies on historical loan loss experience,
adjusted to reflect current conditions and trends.
- 10 -
<PAGE>
Although management believes that it uses the best information available to
make such determinations that the allowance for loan losses is adequate as of
the dates shown, future adjustments to the allowance may be necessary, and net
income could be significantly affected, if circumstances and/or economic
conditions differ substantially from the assumptions used in making the initial
determinations. Any downturn in the real estate market or general economic
conditions in the Washington, DC metropolitan area could result in the Company
experiencing increased levels of non-performing assets and charge-offs,
significant provisions for loan losses, and significant reductions in net
income. Additionally, various regulatory agencies periodically review the
Company's allowance for loan losses. Such agencies may require the recognition
of additions to the allowance based on their judgments of information available
to them at the time of their examination. In light of the foregoing, there can
be no assurance that management's determinations as to the future adequacy of
the allowance for loan losses will prove accurate, or that additional provisions
or charge-offs will not be required.
The following table sets forth information concerning non-performing
assets.
NON-PERFORMING ASSETS
<TABLE>
<CAPTION>
---------------------------------
June 30, 1997 December 31, 1996
------------- -----------------
(dollars in thousands)
<S> <C> <C>
Non-accrual loans/(1)/ $1,851 $2,006
Loans past due 90 days or more
and still accruing 1,319 1,267
Foreclosed properties 816 1,310
------ ------
Total $3,986 $4,583
====== ======
Non-performing assets to gross loans
and foreclosed properties at period
end 3.57% 4.11%
Non-performing assets to total
assets at period end 1.63% 1.94%
</TABLE>
1. Loans are placed on non-accrual status when in the opinion of management
the collection of additional interest is unlikely or a specific loan meets
the criteria for non-accrual status established by regulatory authorities.
No interest is taken into income on non-accrual loans unless received in
cash. A loan remains on non-accrual status until the loan is current to
both principal and interest and the borrower demonstrates the ability to
pay and remain current, or the loan becomes well secured and is in the
process of collection. The gross interest income that would have been
recorded in the six months ended June 30, 1997 and the year ended December
31, 1996 for non-accrual loans at June 30, 1997 and December 31, 1996 had
the loans been current in accordance with their original terms was $115 and
$101, respectively.
2. The Bank charges loans against the allowance for loan losses when it
determines that principal and interest or portions thereof become
uncollectible. This is determined through an analysis of each individual
credit, including the financial condition and repayment capacity of the
borrower, and of the sufficiency of the collateral, if any.
At June 30, 1997, there were $9,402 of loans not reflected in the table
above, where known information about possible credit problems of borrowers
caused management to have doubts as to the ability of the borrower to comply
with present loan repayment terms and that may result in disclosure of such
loans in the future. Included in the total are eighteen loans totalling $4,845
fully collateralized by real estate, four of which represent $3,136 of the
total. The remaining $4,557 consists of fifteen commercial loans, three which
represents $2,498, secured primarily by accounts receivable and various business
equipment.
- 11 -
<PAGE>
PART II OTHER INFORMATION
-----------------
ITEM 1 LEGAL PROCEEDINGS
None.
ITEM 2 CHANGES IN SECURITIES
None.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's annual meeting of shareholders held on April 22,
1997, the shareholders elected 10 persons as directors, to serve until the next
annual meeting of shareholders and until their successors shall have been duly
elected and qualified. The persons elected as director are: Clinton W. Chapman,
Esquire, George H. Windsor, Esquire, Benjamin L. King, CPA, B. Doyle Mitchell,
Jr., Massie S. Fleming, Cynthia T. Mitchell, Marjorie H. Parker, Ph.D., Margaret
B. Stewart, Robert L. White, Emerson A. Williams, M.D.
ITEM 5. OTHER INFORMATION
None.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(11) Statement Regarding Computation of Per Share Earnings
(27) Financial Data Schedule
(b) Reports on Form 8-K
None.
- 12 -
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
IBW FINANCIAL CORPORATION
August 12, 1997 /s/ B. Doyle Mitchell, Jr.
-------------------------------------------
B. Doyle Mitchell, Jr., President
August 12, 1997 /s/ Thomas A Wilson, Jr.
-------------------------------------------
Thomas A. Wilson, Jr. Senior Vice President
and Chief Financial and Accounting Officer
- 13 -
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
11 Statement regarding Computation of Per Share Earnings
27 Financial Data Schedule
- 14 -
<PAGE>
Exhibit 11
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1997 1996
----------- ------------
<S> <C> <C>
Earnings per common share
Primary $ 0.99 $ 1.02
Average shares outstanding 637,160 637,160
Fully diluted $ 0.99 $ 1.02
Average shares outstanding 637,160 637,160
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the Form
10-QSB and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 11,751
<INT-BEARING-DEPOSITS> 3,000
<FED-FUNDS-SOLD> 3,600
<TRADING-ASSETS> 2,146
<INVESTMENTS-HELD-FOR-SALE> 107,817
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 109,047
<ALLOWANCE> 1,807
<TOTAL-ASSETS> 244,339
<DEPOSITS> 207,101
<SHORT-TERM> 16,709
<LIABILITIES-OTHER> 1,552
<LONG-TERM> 1,000
0
0
<COMMON> 637
<OTHER-SE> 17,340
<TOTAL-LIABILITIES-AND-EQUITY> 244,339
<INTEREST-LOAN> 5,057
<INTEREST-INVEST> 3,186
<INTEREST-OTHER> 302
<INTEREST-TOTAL> 8,545
<INTEREST-DEPOSIT> 2,531
<INTEREST-EXPENSE> 2,870
<INTEREST-INCOME-NET> 5,675
<LOAN-LOSSES> 735
<SECURITIES-GAINS> 22
<EXPENSE-OTHER> 5,589
<INCOME-PRETAX> 855
<INCOME-PRE-EXTRAORDINARY> 855
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 630
<EPS-PRIMARY> 0.99
<EPS-DILUTED> 0.99
<YIELD-ACTUAL> 5.33
<LOANS-NON> 1,851
<LOANS-PAST> 1,319
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 9,402
<ALLOWANCE-OPEN> 1,266
<CHARGE-OFFS> 255
<RECOVERIES> 61
<ALLOWANCE-CLOSE> 1,807
<ALLOWANCE-DOMESTIC> 1,807
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 60
</TABLE>
