SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended March 31, 1998 Commission File No. 000-29640
COMMUNITY FIRST BANCORPORATION
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
SOUTH CAROLINA 58-2322486
- --------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3685 BLUE RIDGE BOULEVARD
WALHALLA, SOUTH CAROLINA 29691
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(Address of principal executive offices)
(864) 638-2105
- --------------------------------------------------------------------------------
(Issuer's telephone number)
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 such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: Common Stock, no par or stated
value, 888,010 Shares Outstanding on April 30, 1998
Transitional Small Business Format (Check one): Yes No X
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<PAGE>
COMMUNITY FIRST BANCORPORATION
FORM 10-QSB
Index
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet .................................. 3
Consolidated Statement of Income ............................ 4
Consolidated Statement of Comprehensive Income .............. 5
Consolidated Statement of Changes in Shareholders' Equity ... 6
Consolidated Statement of Cash Flows ........................ 7
Notes to Unaudited Consolidated Financial Statements ........ 8-9
Item 2. Management's Discussion and Analysis ........................ 10-12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ............................ 12
SIGNATURE ................................................................. 13
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
COMMUNITY FIRST BANCORPORATION
Consolidated Balance Sheet
(Unaudited)
March 31, December 31,
1998 1997
------------ -----------
(Dollars in thousands)
Assets
Cash and due from banks ........................ $ 3,394 $ 4,834
Federal funds sold ............................. 24,945 6,510
Available-for-sale securities .................. 21,301 25,510
Other investments .............................. 346 335
Loans .......................................... 67,703 65,838
Less allowance for loan losses ................. (943) (890)
--------- ---------
Loans - net .................................... 66,760 64,948
Premises and equipment - net ................... 1,643 1,675
Accrued interest receivable .................... 703 793
Other assets ................................... 345 363
--------- ---------
Total assets ................................... $ 119,437 $ 104,968
========= =========
Liabilities
Deposits
Noninterest bearing demand ..................... $ 20,451 $ 16,501
Interest bearing transaction accounts .......... 11,754 10,106
Savings ........................................ 23,970 16,191
Time deposits $100M and over ................... 21,490 23,046
Other time deposits ............................ 28,502 26,446
--------- ---------
Total deposits ................................. 106,167 92,290
Accrued interest payable ....................... 668 772
Other liabilities .............................. 283 56
--------- ---------
Total liabilities .............................. 107,118 93,118
--------- ---------
Shareholders' equity
Common stock - no par value; 5,000,000
shares authorized; shares issued and
outstanding 888,010 for 1998 and
886,140 for 1997 ............................... 10,498 10,479
Retained earnings .............................. 1,815 1,387
Accumulated other comprehensive
income (loss) .................................. 6 (16)
--------- ---------
Total shareholders' equity ..................... 12,319 11,850
--------- ---------
Total liabilities and
shareholders' equity ........................... $ 119,437 $ 104,968
========= =========
See notes to consolidated financial statements.
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<PAGE>
COMMUNITY FIRST BANCORPORATION
Consolidated Statement of Income
(Unaudited)
Three Months Ended
March 31,
1998 1997
---- ----
(Dollars in thousands,
except per share)
Interest income
Loans, including fees ............................ $1,481 $1,237
Securities - taxable
U.S. Treasury .................................. 23 73
U.S. Government agencies ....................... 360 357
Other investments ................................ 2 -
Federal funds sold ............................... 284 237
------ ------
Total interest income .................... 2,150 1,904
------ ------
Interest expense
Time deposits $100M and over ..................... 315 279
Other deposits ................................... 751 694
------ ------
Total interest expense ................... 1,066 973
------ ------
Net interest income ................................ 1,084 931
Provision for loan losses .......................... 65 65
------ ------
Net interest income after provision ................ 1,019 866
------ ------
Other income
Service charges on deposit accounts .............. 84 66
Credit life insurance commissions ................ 8 7
Other income ..................................... 38 34
------ ------
Total other income ....................... 130 107
------ ------
Other expenses
Salaries and employee benefits ................... 252 219
Net occupancy expense ............................ 23 29
Furniture and equipment expense .................. 53 35
Other expense .................................... 156 140
------ ------
Total other expenses ..................... 484 423
------ ------
Income before income taxes ......................... 665 550
Income tax expense ................................. 237 191
------ ------
Net income ......................................... $ 428 $ 359
====== ======
Per share*
Net income ....................................... $ .48 $ .41
Net income, assuming dilution .................... .46 40
*Per share information has been retroactively adjusted to reflect a 15% stock
dividend effective December 30, 1997.
See notes to consolidated financial statements.
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<PAGE>
COMMUNITY FIRST BANCORPORATION
Consolidated Statement of Comprehensive Income
(Unaudited)
Three Months Ended
March 31,
1998 1997
---- ----
(Dollars in thousands)
Net income ......................................... $ 428 $ 359
------ ------
Other comprehensive income (loss)
Change in unrealized holding gains and
losses on available-for-sale securities ........ 35 (106)
Income tax expense (benefit) on other
comprehensive income ........................... 13 (38)
------ ------
Total other comprehensive income (loss) .... 22 (68)
------ ------
Comprehensive income ............................... $ 450 $ 291
====== ======
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<PAGE>
COMMUNITY FIRST BANCORPORATION
Consolidated Statement of Changes in Shareholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
------------ Accumulated
Number Other
of Capital Retained Comprehensive
Shares Amount Surplus Earnings Income Total
------ ------ ------- -------- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1997 ............ 764,554 $ 3,823 $ 4,659 $ 1,932 $ (79) $ 10,335
Net income for period 359 359
Unrealized net holding losses on
available-for-sale securities,
net of taxes ..................... (68) (68)
---------- ---------- ---------- ---------- ---------- ----------
Balance March 31, 1997 ............. 764,554 $ 3,823 $ 4,659 $ 2,291 $ (147) $ 10,626
========== ========== ========== ========== ========== ==========
Balance January 1, 1998 ............ 886,140 $ 10,479 $ $ 1,387 $ (16) $ 11,850
Exercise of employee stock options . 1,870 19 19
Net income for period 428 428
Unrealized net holding gains on
available-for-sale securities,
net of taxes ..................... 22 22
---------- ---------- ---------- ---------- ---------- ----------
Balance March 31, 1998 ............. 888,010 $ 10,498 $ $ 1,815 $ 6 $ 12,319
========== ========== ========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
COMMUNITY FIRST BANCORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
March 31,
1998 1997
---- ----
(Dollars in thousands)
Operating activities
Net income ........................................ $ 428 $ 359
Adjustments to reconcile net income to
net cash provided by operating activities
Provision for loan losses ..................... 65 65
Depreciation .................................. 40 24
Amortization of net loan fees and costs ....... 10 (2)
Accretion and premium amortization ............ (8) (4)
Decrease in interest receivable ............... 90 16
Decrease in interest payable .................. (104) (246)
Decrease (increase) in prepaid expenses ....... 5 (100)
Increase in other accrued expenses ............ 227 121
---------- ----------
Net cash provided by operating activities . 753 233
---------- ----------
Investing activities
Maturities of available-for-sale securities ....... 11,229 606
Purchases of available-for-sale securities ........ (6,977) (2,500)
Purchase of other investments ..................... (11)
Net increase in loans made to customers ........... (1,887) (3,066)
Purchases of premises and equipment ............... (8) (20)
---------- ----------
Net cash provided (used) by
investing activities .................... 2,346 (4,980)
---------- ----------
Financing activities
Net increase in demand deposits,
interest bearing transaction accounts
and savings accounts ............................ 13,377 3,891
Net increase in certificates of
deposit and other time deposits ................. 500 1,320
Exercise of employee stock options ................ 19
---------- ----------
Net cash provided by financing activities . 13,896 5,211
---------- ----------
Increase in cash and cash equivalents ............... 16,995 464
Cash and cash equivalents, beginning ................ 11,344 15,417
---------- ----------
Cash and cash equivalents, ending ................... $ 28,339 $ 15,881
========== ==========
See notes to consolidated financial statements.
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<PAGE>
COMMUNITY FIRST BANCORPORATION
Notes to Unaudited Consolidated Financial Statements
Accounting Policies - A summary of significant accounting policies is included
in the Company's Annual Report for the year ended December 31, 1997 on Form
10-KSB filed with the Securities and Exchange Commission.
Management Opinion - In the opinion of management, the accompanying unaudited
consolidated financial statements of Community First Bancorporation reflect all
adjustments which are necessary for a fair presentation of the results of the
periods presented. Such adjustments were of a normal, recurring nature.
Statement of Cash Flows - Interest paid on deposits and other borrowings
amounted to $1,170,000 for the three months ended March 31, 1998, and was
$1,219,000 for the three months ended March 31, 1997. Income tax payments of
$22,000 were made during the first three months of 1998, and income tax payments
of $216,000 were made in the 1997 period. Non-cash investment security valuation
adjustments totaling $35,000 were made in the 1998 period increasing
available-for-sale securities, and a related shareholders' equity account
increased by $22,000 and the associated deferred income taxes changed $13,000.
During the 1997 period, non-cash valuation adjustments decreased securities by
$106,000, decreased shareholders' equity $68,000 and changed deferred income
taxes by $38,000.
Nonperforming Loans - As of March 31, 1998, there were $82,000 in nonaccrual
loans and $4,000 in loans 90 days or more past due as to principal or interest
payments still accruing.
Earnings Per Share - The Company adopted the provisions of Statement of
Accounting Standards No, 128, "Earnings per Share" during 1997, as required. All
prior years' figures are restated on a comparable basis.
Basic earnings per common share is computed by dividing net income applicable to
common shares by the weighted average number of common shares outstanding.
Diluted earnings per share are based on dividing applicable net income by the
weighted average number of common shares outstanding and any dilutive potential
common shares and dilutive stock options. It is assumed that all dilutive stock
options are exercised at the beginning of each period and that the proceeds are
used to purchase shares of the Company's common stock at the average market
price during the period. All per share information has been retroactively
adjusted to give effect to stock dividends. Net income per share and net income
per share, assuming dilution, were computed as follows:
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<PAGE>
(Unaudited)
Three Months Ended
March 31,
1998 1997
---- ----
(Dollars in thousands,
except per share amounts)
Net income per share (basic)
Numerator - net income ........................ $ 428 $ 359
============ ============
Denominator
Weighted average common shares issued
and outstanding ........................... 887,662 879,237
============ ============
Net income per share (basic) .......... $ .48 $ .41
============ ============
Net income per share, assuming dilution
Numerator - net income ........................ $ 428 $ 359
============ ============
Denominator
Weighted average common shares issued
and outstanding ........................... 887,662 879,237
Effect of dilutive stock options ............ 37,761 28,491
------------ ------------
Total ..................................... 925,423 907,728
============ ============
Net income per share, assuming dilution $ .46 $ .40
============ ============
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<PAGE>
Item 2. - Management's Discussion and Analysis
Results of Operations
Community First Bancorporation (the "Company") recorded consolidated net
income of $428,000 or $.48 per share for the first quarter of 1998. These
results compare favorably with net income of $359,000 or $.41 per share for the
first quarter of 1997. Per share net income, assuming dilution, for the 1998
period was $.46, and the comparable figure for the 1997 figure was $.40 per
share. The net income per share figures for 1997 have been retroactively
adjusted to reflect a 15% stock dividend effective December 30, 1997.
Net interest income is the principal source of the Company's earnings. For
the first quarter of 1998, net interest income was $1,084,000, an increase of
$153,000 or 16.4% over the first quarter of 1997. The increase in net interest
income resulted primarily from larger volumes of earning assets, principally
loans. During the first quarter of 1998, average interest earning assets were
$113,552,000, an increase of $11,336,000 or 11.1% over the same 1997 period.
Average interest bearing liabilities during the first quarter of 1998 were
$87,396,000, representing an increase of $6,702,000 or 8.3% over the comparable
1997 period. The average interest rate spread (average yield on interest earning
assets less the average rate paid on interest bearing liabilities) for the first
quarter of 1998 was 2.73%, an increase of 7 basis points from the 2.66% noted
for the same 1997 period. Net yield on earning assets (net interest income
divided by average interest earning assets) for the first three months of 1998
increased by 18 basis points to 3.87%, compared with 3.69% for the 1997 three
month period.
The increases in interest earning assets and interest bearing liabilities
resulted from the Company's continuing marketing strategies to increase its
market share in its local service area within Oconee County, South Carolina.
Management expects to continue to utilize such strategies during the remainder
of 1998.
Provision and Allowance for Loan Losses
The provision for loan losses totaled $65,000 for each of the first
quarters of 1998 and 1997. At March 31, 1998, the allowance for loan losses was
1.39% of loans, compared with 1.35% of loans at December 31, 1997. During the
1998 three month period, net loan charge-offs totaled $12,000, compared with
$12,000 charged-off during the same period of 1997. As of March 31, 1998, there
were $82,000 in nonaccrual loans and $4,000 in loans over 90 days past due and
still accruing interest.
Management believes that the allowance for loan losses is adequate to
absorb all estimated future risk of loss inherent in the loan portfolio as of
March 31, 1998.
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<PAGE>
Noninterest Income
Noninterest income totaled $130,000 for the first quarter of 1998
compared with $107,000 for the 1997 quarter. Service charges on deposit accounts
increased by $18,000 for the 1998 period to $84,000 due to increased chargeable
account activity. There were no realized securities gains or losses in either
the 1998 or 1997 periods.
Noninterest Expenses
Noninterest expenses totaled $484,000 for the first quarter of 1998,
compared with $423,000 for 1997. Salaries and employee benefits increased by
$33,000 or 15.1% to $252,000 for the 1998 period mainly as the result of
accruing $40,000 toward year-end incentive bonuses. The incentive bonus plan was
new in 1997, therefore no comparable accruals were made in the 1997 period.
Occupancy and furniture and equipment expenses for 1998 increased by $12,000
compared with 1997 due to increased depreciation and other expenses associated
with new data processing and other computer equipment which was placed in
service during the second quarter of 1997. Other expenses for the 1998 period
increased by $16,000 over the amount for the first quarter of 1997 due to higher
levels of charitable contributions, increased spending for employee training and
travel expense, and increased amortization of software costs. Professional fees
for the first quarter of 1998 decreased by $9,000 compared with the same 1997
period because of nonrecurring expenses in 1997 related to the formation of the
holding company. Management will continue to emphasize cost control.
Liquidity
Liquidity is the ability to meet current and future obligations through
liquidation or maturity of existing assets or the acquisition of additional
liabilities. The Company manages both assets and liabilities to achieve
appropriate levels of liquidity. Cash and short-term investments are the
Company's primary sources of asset liquidity. These funds provide a cushion
against short-term fluctuations in cash flow from both deposits and loans.
Securities available-for-sale are the Company's principal source of secondary
asset liquidity. However, the availability of this source is influenced by
market conditions. Individual and commercial deposits are the Company's primary
source of funds for credit activities.
As of March 31, 1998, the ratio of loans to total deposits was 63.8%. Management
believes that the Company's liquidity sources are adequate to meet its operating
needs.
Capital Resources
The capital base for the Company increased by $469,000 since December 31,
1997 as the result of the $428,000 net income for the first three months of
1998, plus $22,000 for the change in unrealized holding gains and losses on
available-for-sale securities, and $19,000 from the exercise of employees' stock
options.
The Company and its banking subsidiary (the "Bank") are each subject to
regulatory risk-based capital adequacy standards. Under these standards, bank
holding companies and banks are required to maintain certain minimum ratios of
capital to risk-weighted assets and average total assets. Under the provisions
of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA),
federal bank regulatory authorities are required to implement prescribed "prompt
corrective actions" upon the deterioration of the capital position of a bank. If
the capital
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<PAGE>
position of an affected institution were to fall below certain levels,
increasingly stringent regulatory corrective actions are mandated.
The March 31, 1998 risk-based capital ratios for the Company and the
Bank are presented in the following table, compared with the "well capitalized"
and minimum ratios under the regulatory definitions and guidelines:
Total
Tier 1 Capital Leverage
------ ------- --------
Community First Bancorporation 18.3% 19.5% 10.4%
Community First Bank 17.9% 19.1% 10.2%
Minimum "well capitalized" requirement 6.0% 10.0% 5.0%
Minimum requirement 4.0% 8.0% 3.0%
PART II - OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit No.
from Item 601 of
Regulation S-B Description
-------------- -----------
27 Financial Data Schedule
(b) Reports on Form 8-K. None.
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<PAGE>
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.
COMMUNITY FIRST BANCORPORATION
May 8, 1998 /s/Frederick D. Shepherd, Jr.
- --------------------- ----------------------------------------------------
Date Frederick D. Shepherd, Jr., President and Chief
Executive Officer (also principal accounting officer)
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<PAGE>
EXHIBIT INDEX
Exhibit No.
from Item 601 of
Regulation S-B Description
-------------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at March 31, 1998, (unaudited) and the Consolidated
Statement of Income for the three months ended March 31, 1998, (unaudited) and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,394
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 24,945
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 21,301
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 67,703
<ALLOWANCE> 943
<TOTAL-ASSETS> 119,437
<DEPOSITS> 106,167
<SHORT-TERM> 0
<LIABILITIES-OTHER> 951
<LONG-TERM> 0
0
0
<COMMON> 10,498
<OTHER-SE> 1,821
<TOTAL-LIABILITIES-AND-EQUITY> 119,437
<INTEREST-LOAN> 1,481
<INTEREST-INVEST> 383
<INTEREST-OTHER> 286
<INTEREST-TOTAL> 2,150
<INTEREST-DEPOSIT> 1,066
<INTEREST-EXPENSE> 1,066
<INTEREST-INCOME-NET> 1,084
<LOAN-LOSSES> 65
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 484
<INCOME-PRETAX> 665
<INCOME-PRE-EXTRAORDINARY> 428
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 428
<EPS-PRIMARY> .48
<EPS-DILUTED> .46
<YIELD-ACTUAL> 3.87
<LOANS-NON> 82
<LOANS-PAST> 4
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 484
<ALLOWANCE-OPEN> 890
<CHARGE-OFFS> 16
<RECOVERIES> 4
<ALLOWANCE-CLOSE> 943
<ALLOWANCE-DOMESTIC> 943
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
