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 September 30, 1999 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
- --------------------------------------------------------------------------------
(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 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, 1,804,414 Shares Outstanding on October 31, 1999, excluding
approximately 180,441 shares issuable pursuant to a 10% stock dividend declared
October 21, 1999.
Transitional Small Business Format (Check one): Yes [ ] No [X]
<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
Item 2. Management's Discussion and Analysis ........................ 9-12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ............................ 13
SIGNATURE ............................................................... 14
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
COMMUNITY FIRST BANCORPORATION
Consolidated Balance Sheet
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1999 1998
---- ----
(Dollars in thousands)
Assets
<S> <C> <C>
Cash and due from banks ....................................................... $ 2,102 $ 3,320
Federal funds sold ............................................................ 15,850 14,150
Securities available-for-sale ................................................. 54,436 38,284
Other investments ............................................................. 382 345
Loans ......................................................................... 72,897 67,893
Allowance for loan losses ................................................. (940) (955)
--------- ---------
Loans - net ............................................................ 71,957 66,938
Premises and equipment - net .................................................. 3,503 2,871
Accrued interest receivable ................................................... 1,300 830
Other assets .................................................................. 1,033 389
--------- ---------
Total assets ........................................................... $ 150,563 $ 127,127
========= =========
Liabilities
Deposits
Noninterest bearing ....................................................... $ 16,119 $ 14,798
Interest bearing .......................................................... 119,257 97,698
--------- ---------
Total deposits ......................................................... 135,376 112,496
Accrued interest payable ...................................................... 1,182 966
Other liabilities ............................................................. 64 62
--------- ---------
Total liabilities ...................................................... 136,622 113,524
--------- ---------
Shareholders' equity
Common stock - no par value;
10,000,000 shares authorized; issued and
outstanding - 1,804,254 for 1999 and
1,793,792 for 1998 ....................................................... 10,630 10,569
Retained earnings ............................................................. 4,263 3,051
Accumulated other comprehensive income ........................................ (952) (17)
--------- ---------
Total shareholders' equity ............................................. 13,941 13,603
--------- ---------
Total liabilities and shareholders' equity ............................. $ 150,563 $ 127,127
========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
COMMUNITY FIRST BANCORPORATION
Consolidated Statement of Income
<TABLE>
<CAPTION>
(Unaudited)
Period Ended September 30,
--------------------------
Three Months Nine Months
------------ -----------
1999 1998 1999 1998
---- ---- ---- ----
(Dollars in thousands, except per share)
Interest income
<S> <C> <C> <C> <C>
Loans, including fees ..................................... $1,596 $1,567 $4,692 $4,587
Investment securities
Taxable ................................................... 833 501 2,187 1,331
Nontaxable ................................................ 2 - 2 -
Other investments ......................................... 7 6 20 14
Federal funds sold ........................................ 238 194 798 734
------ ------ ------ ------
Total interest income ................................. 2,676 2,268 7,699 6,666
------ ------ ------ ------
Interest expense
Time deposits $100,000 and over ........................... 568 361 1,513 1,013
Other deposits ............................................ 904 801 2,750 2,356
------ ------ ------ ------
Total interest expense ................................ 1,472 1,162 4,263 3,369
------ ------ ------ ------
Net interest income ............................................ 1,204 1,106 3,436 3,297
Provision for loan losses ...................................... 78 65 173 190
------ ------ ------ ------
Net interest income after provision ............................ 1,126 1,041 3,263 3,107
------ ------ ------ ------
Other income
Service charges on deposit accounts ....................... 114 98 303 271
Credit life insurance commissions ......................... 10 10 27 31
Other income .............................................. 48 44 147 121
------ ------ ------ ------
Total other income .................................... 172 152 477 423
------ ------ ------ ------
Other expenses
Salaries and employee benefits ............................ 328 265 992 798
Net occupancy expense ..................................... 34 33 88 79
Furniture and equipment expense ........................... 55 43 168 142
Other expense ............................................. 206 178 602 503
------ ------ ------ ------
Total other expenses .................................. 623 519 1,850 1,522
------ ------ ------ ------
Income before income taxes ..................................... 675 674 1,890 2,008
Income tax expense ............................................. 249 242 678 717
------ ------ ------ ------
Net income ..................................................... $ 426 $ 432 $1,212 $1,291
====== ====== ====== ======
Per share*
Net income ................................................ $ 0.21 $ 0.22 $ 0.61 $ 0.66
Net income, assuming dilution ............................. 0.20 0.21 0.57 0.63
</TABLE>
- ------------------
* Per share information has been retroactively adjusted to reflect a 10% stock
dividend to be effective December 15, 1999 and a two-for-one stock split
effective July 31, 1998.
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
COMMUNITY FIRST BANCORPORATION
Consolidated Statement of Comprehensive Income
<TABLE>
<CAPTION>
(Unaudited)
Period Ended September 30,
--------------------------
Three Months Nine Months
------------ -----------
1999 1998 1999 1998
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net income ........................................................... $426 $432 $ 1,212 $1,291
---- ---- ------- ------
Other comprehensive income (loss):
Change in unrealized holding gains and
losses on available-for-sale securities ..................... 70 207 (1,459) 186
Income tax expense (benefit) on other
comprehensive income (loss) ................................. 60 74 (524) 67
---- ---- ------- ------
Total other comprehensive income (loss) .................. 10 133 (935) 119
---- ---- ------- ------
Comprehensive income (loss) .......................................... $436 $565 $ 277 $1,410
==== ==== ======= ======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE>
COMMUNITY FIRST BANCORPORATION
Consolidated Statement of Changes in Shareholder's Equity
<TABLE>
<CAPTION>
(Unaudited)
Common Stock Accumulated
------------ Other
Number of Retained Comprehensive
Shares* Amount Earnings Income Total
------- ------ -------- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1998 ................................. 1,772,280 $10,479 $1,387 $ (16) $ 11,850
Exercise of employee stock options ....................... 6,116 30 - - 30
Change in unrealized holding gains
and losses on available-for-sale
securities, net of income taxes ...................... - - - 119 119
Net income ............................................... - - 1,291 - 1,291
---------- ------- ------ ----- --------
Balance, September 30, 1998 .............................. 1,778,396 $10,509 $2,678 $ 103 $ 13,290
========== ======= ====== ===== ========
Balance, January 1, 1999 ................................. 1,793,792 $10,569 $3,051 $ (17) $ 13,603
Exercise of employee stock options ....................... 10,462 77 - - 77
Costs associated with new stock option plan .............. (16) - - (16)
Change in unrealized holding gains
and losses on available-for-sale
securities, net of income taxes ...................... - - - (935) (935)
Net income ............................................... - - 1,212 - 1,212
---------- ------- ------ ----- --------
Balance, September 30, 1999 .............................. 1,804,254 $10,630 $4,263 $(952) $ 13,941
========== ======= ====== ===== ========
</TABLE>
* Adjusted for a two-for-one stock split effective July 31, 1998.
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE>
COMMUNITY FIRST BANCORPORATION
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
(Unaudited)
Nine Months Ended
September 30,
1999 1998
---- ----
(Dollars in thousands)
Operating Activities
<S> <C> <C>
Net income .............................................................................. $ 1,212 $ 1,291
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for loan losses ........................................................ 173 190
Depreciation ..................................................................... 123 111
Amortization of net loan fees and costs .......................................... 46 37
Securities accretion and premium amortization .................................... (16) (87)
Increase in interest receivable .................................................. (470) (116)
Increase in interest payable ..................................................... 216 69
Decrease (increase) in prepaid expenses and other receviables .................... 22 (60)
Increase in other accrued expenses ............................................... 2 80
Disposals of premises and equipment .............................................. 9 -
Gain on sale of other real estate ................................................ (10) -
-------- --------
Net cash provided by operating activities .................................... 1,307 1,515
-------- --------
Investing activities
Purchases of available-for-sale securities .............................................. (25,191) (42,913)
Maturities of available-for-sale securities ............................................. 7,596 38,685
Purchases of other investments .......................................................... (37) (10)
Net increase in loans made to customers ................................................. (5,380) (4,131)
Purchases of premises and equipment ..................................................... (764) (1,218)
Proceeds from sale of other real estate ................................................. 10 -
-------- --------
Net cash used by investing activities ........................................ (23,766) (9,587)
-------- --------
Financing activities
Net (decrease) increase in demand deposits, interest
bearing transaction accounts and savings accounts ................................... (1,220) 2,865
Net increase in certificates of deposit and other
time deposits ....................................................................... 24,100 10,090
Exercise of employee stock options, net of costs ........................................ 61 30
-------- --------
Net cash provided by financing activities .................................... 22,941 12,985
-------- --------
Increase in cash and cash equivalents ........................................................ 482 4,913
Cash and cash equivalents, beginning ......................................................... 17,470 11,344
-------- --------
Cash and cash equivalents, ending ............................................................ $ 17,952 $ 16,257
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
7
<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, 1998 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 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 $4,047,000 for the nine months ended September 30, 1999, and was
$3,300,000 for the nine months ended September 30, 1998. Income tax payments of
$616,000 were made during the first nine months of 1999, and income tax payments
of $767,000 were made in the 1998 period. Non-cash investment security valuation
adjustments decreased available-for-sale securities by $1,459,000 during the
1999 period, a related shareholders' equity account decreased by $935,000 and
the associated deferred income taxes changed by $524,000. During the 1998
period, non-cash valuation adjustments increased available-for-sale securities
by $186,000, increased shareholders' equity by $119,000 and changed deferred
income taxes by $67,000.
Nonperforming Loans - As of September 30, 1999, there were $124,000 in
nonaccrual loans and $26,000 in loans 90 days or more past due
and still accruing.
Earnings Per Share - On October 21, 1999, the Company's Board of Directors
declared a 10% stock dividend issuable December 15, 1999 to stockholders of
record on November 1, 1999. Also, a two-for-one stock split was effected on July
31, 1998. All per share amounts have been retroactively adjusted to reflect
these events.
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 is computed by 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 and stock splits. Net income per
share and net income per share, assuming dilution, were computed as follows:
<TABLE>
<CAPTION>
(Unaudited)
Period Ended September 30,
Three Months Nine Months
------------ -----------
1999 1998 1999 1998
---- ---- ---- ----
(Dollars in thousands, except per share amounts)
Net income per share, basic
<S> <C> <C> <C> <C>
Numerator - net income ..................................... $ 426 $ 432 $ 1,212 $ 1,291
========== ========== ========== ==========
Denominator
Weighted average common shares
issued and outstanding ..................................... 1,982,593 1,956,236 1,977,924 1,954,605
========== ========== ========== ==========
Net income per share, basic ................. $ .21 $ .22 $ .61 $ .66
========== ========== ========== ==========
Net income per share, assuming dilution
Numerator - net income ..................................... $ 426 $ 432 $ 1,212 $ 1,291
========== ========== ========== ==========
Denominator
Weighted average common shares
issued and outstanding ..................................... 1,982,593 1,956,236 1,977,924 1,954,605
Effect of dilutive stock options ........................... 157,777 96,661 161,001 87,468
---------- ---------- ---------- ----------
Total shares ................................ 2,140,370 2,052,897 2,138,925 2,042,073
========== ========== ========== ==========
Net income per share,
assuming dilution ........................... $ .20 $ .21 $ .57 $ .63
========== ========== ========== ==========
</TABLE>
8
<PAGE>
Item 2. - Management's Discussion and Analysis
Forward Looking Statements
Statements included in Management's Discussion and Analysis which are
not historical in nature are intended to be, and are hereby identified as
"forward looking statements" for purposes of the safe harbor provided by Section
21E of the Securities Exchange Act of 1934, as amended. The Company cautions
readers that forward looking statements, including without limitation, those
relating to the Company's new office, its response to the Year 2000 problem,
future business prospects, revenues, working capital, liquidity, capital needs,
interest costs, and income, are subject to certain risks and uncertainties that
could cause actual results to differ materially from those indicated in the
forward looking statements, due to several important factors herein identified,
among others, and other risks and factors identified from time to time in the
Company's reports filed with the Securities and Exchange Commission.
Results of Operations
Community First Bancorporation (the "Company") recorded consolidated
net income of $426,000, or $.21 per share, for the third quarter of 1999 and
$1,212,000, or $.61 per share, for the first nine months of 1999. During 1998,
the Company recorded net income of $432,000 or $.22 per share for the third
quarter, and $1,291,000, or $.66 per share, for the first nine months. Net
income per share, assuming dilution, for the three and nine month periods ended
September 30, 1999 was $.20 and $.57, respectively. For the comparable 1998
periods, net income per share, assuming dilution, was $.21 and $.63,
respectively. Net income per share figures have been retroactively adjusted to
reflect a 10% stock dividend declared October 21, 1999, payable December 15,
1999, and a two-for-one stock split effective July 31, 1998.
Comprehensive income or loss incorporates into one measure all changes
in the Company's equity resulting from recognized transactions and other
economic events of the period other than transactions with owners in their
capacities as owners. The major components of the Company's comprehensive income
include net income (amounts stated above) and unrealized gains and losses on
available-for-sale investment securities. Changes in unrealized gains and losses
on investment securities primarily are a function of three variables: the size
of the investment portfolio, fluctuations in the levels of market interest rates
and the remaining maturity structure of the securities held. As the levels of
market interest rates change, the market values of investment securities move in
an inverse direction. If interest rates rise, the market values of securities
would be expected to decline. Conversely, if interest rates fall, market values
of securities would be expected to increase. Generally, the market values of
securities with longer remaining maturities rise or fall more, in absolute
dollar terms, than do securities with shorter remaining terms.
During the first nine months of 1999, the Company invested heavily in
available-for-sale securities, market interest rates increased and the average
remaining maturity of the investment portfolio increased. The Company purchased
longer term instruments during the period in response to significant deposit
growth. As a result, the market values of the Company's investment securities
declined significantly thus far in 1999 and comprehensive income was decreased
by $935,000 during the 1999 nine-month period. More recently, however, interest
rates have been more stable to somewhat lower and the Company slowed its pace of
acquiring available-for-sale securities , Consequently, the Company recorded
other comprehensive income of $10,000 for the three months ended September 30,
1999.
For the nine and three month periods of 1998, other comprehensive
income totaled $119,000 and $133,000, respectively, primarily as a result of
decreasing interest rates and a significant volume of refinancing activity by
the issuers of securities that the Company held in its investment portfolio.
9
<PAGE>
Net Interest Income
Net interest income is the amount of interest income earned on interest
earning assets (loans, securities, federal funds sold and other investments),
less the interest expense incurred on interest bearing liabilities (interest
bearing deposits), and is the principal source of the Company's earnings. Net
interest income is affected by the level of interest rates, volume and mix of
interest earning assets and interest bearing liabilities and the relative
funding of these assets.
For analysis purposes, interest income from tax-exempt investments is
adjusted to an amount that would have to be earned on taxable investments to
produce the same after-tax yield, assuming a 34% Federal income tax rate. This
adjusted amount is referred to as fully taxable equivalent ("FTE") interest
income.
For the first nine months of 1999, FTE net interest income was
$3,437,000, an increase of $140,000 or 4.3% over the results for the same period
of 1998. This increase resulted primarily from a large increase in the average
amount of investment securities held during the 1999 period, a small increase in
the average rate earned on those investments, a slight increase in the average
amount of loans outstanding, and a significant reduction in the interest rates
the Company pays for interest bearing transaction accounts and savings accounts.
These positive factors were offset to a large degree, however, by the effects of
interest incurred on significantly increased amounts of time deposit liabilities
obtained in the 1999 period.
Average investment securities held during the first nine months of 1999
were $47,698,000, representing an increase of $18,497,000, or 63.3%, over the
average amount held during the same 1998 period. The average rate earned
increased to 6.14% for the 1999 period, compared with 6.09% for the 1998 period.
The average rate incurred on interest bearing transaction accounts during the
1999 nine month period was 3.08%, compared with 4.63% for the same period of
1998. The rate incurred for savings deposits decreased in the 1999 period to
3.55%, compared with 3.89% for the 1998 nine month period. Average time deposits
were $77,745,000 for the nine months ended September 30, 1999, compared with an
average amount of such deposits totaling $53,294,000 for the same period of
1998.
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 areas in Anderson and Oconee Counties of South
Carolina. The Anderson County, South Carolina market represents a new
undertaking by the Company, which opened a branch office in a temporary facility
in the City of Anderson on January 4, 1999.
During the first six months of 1999, the majority of business obtained
from the new Anderson County operation has been the acquisition of deposit
liabilities. The Company has invested these deposits primarily in investment
securities until it can make loans using prudent underwriting practices. Growth
in deposits has been much more rapid than has growth in the higher-yielding loan
categories. Management expects to continue to utilize such strategies during the
remainder of 1999. The Company filed applications with regulatory agencies in
October, 1999 seeking approval to construct and open a new branch office in the
Town of Williamston in Anderson County, South Carolina.
Provision and Allowance for Loan Losses
The provision for loan losses charged to expense was $78,000 for the
third quarter of 1999 compared with $65,000 for the third quarter of 1998. The
provision totaled $173,000 for the first nine months of 1999 compared with
$190,000 for the comparable period of 1998. At September 30, 1999, the allowance
for loan losses was 1.29% of loans, compared with 1.41% of loans at December 31,
1998. During the 1999 nine-month period, net charge-offs totaled $188,000,
compared with $35,000 charged off during the same period of 1998. As of
September 30, 1999, there were $124,000 in nonaccrual loans and $26,000 in loans
which were over 90 days past due and still accruing interest. The amount of
nonaccrual loans at September 30, 1999 is $5,000 less than the amount noted at
September 30, 1998 and $242,000 less than the amount of nonaccrual loans noted
as of December 31, 1998. The majority of the nonaccrual loans are secured by
real estate or other collateral. When the estimated realizable value of
collateral associated with nonperforming loans is believed to be insufficient to
satisfy the debt, management generally charges-off the excess amount of the
debt.
10
<PAGE>
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
September 30, 1999.
Noninterest Income
Noninterest income totaled $172,000 for the third quarter of 1999,
compared with $152,000 for the 1998 quarter. Noninterest income was $477,000 for
the first nine months of 1999 and $423,000 for the same 1998 period. The higher
noninterest income in 1999 was attributable primarily to increased fees derived
from charges assessed against deposit accounts, fees for card-based services,
including credit card fees and fees for ATM usage, and a $10,000 gain from the
sale of other real estate. No securities gains or losses were realized in either
the 1999 or 1998 periods.
Noninterest Expenses
Noninterest expenses totaled $623,000 for the third quarter of 1999,
compared with $519,000 for the 1998 period, representing an increase of $104,000
or 20.0%. Noninterest expenses were $1,850,000 for the first nine months of 1999
compared with $1,522,000 for the same period of 1998. Salaries and employee
benefits for the 1999 quarter totaled $328,000, an increase of $63,000 or 23.8%
more than in the 1998 three month period. For the first nine months of 1999,
salaries and employee benefits totaled $992,000 representing an increase of
$194,000 or 24.3% over the same period of 1998. This increase resulted largely
from wages, salaries and employee benefits costs associated with the opening of
the new branch office in Anderson, South Carolina. However, during the 1999
nine-month period, only $10,000 was accrued toward year-end incentive bonuses,
compared with a $90,000 accrual in the same 1998 period. Occupancy and furniture
and equipment expenses for the third quarter of 1999 totaled $89,000, an
increase of $13,000, or 17.1% compared with the same period of 1998, primarily
resulting from higher depreciation, equipment maintenance and repair costs.
Other expenses for the 1999 three-month period totaled $206,000 and were $28,000
more than in 1998. For the 1999 nine-month period, other expenses increased by
$99,000, or 19.7%, over the 1998 amount to $602,000. These expenses also
increased primarily due to expenses incurred to open and operate the new
Anderson branch. In addition, the Company recorded the effects that higher
account volumes have on processing costs including credit card and ATM card fees
paid and costs associated with obtaining internal operating supplies. Other
increased expenses included higher fees paid to the Company's Board of Directors
(increase of $17,000 over the 1998 nine-month expense amount) and expenses for
the Company's Board of Directors and personnel to attend a strategic planning
meeting (increase of $11,000 over the 1998 nine-month amount).
Management anticipates that the opening of the new Anderson Branch
office will continue to result in higher amounts of noninterest expenses during
1999, and thus depress earnings performance as compared with 1998. Furthermore,
if approved by regulatory authorities, the new branch expansion into the Town of
Williamston in Anderson County, South Carolina during the year 2000 is expected
initially to have a negative effect on earnings.
Liquidity
Liquidity is the ability to meet current and future obligations through
the 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 September 30, 1999, the ratio of loans to total deposits was
53.8%, compared with 60.4% as of December 31, 1998 and 66.4% as of September 30,
1998. Deposits as of September 30, 1999 had increased by $22,880,000 or 20.3%
over the amount at December 31, 1998 and $30,131,000 or 28.6% over their levels
of September 30, 1998. Approximately one-half of the amount of the increase in
deposits during the 1999 period was attributable to the new Anderson branch,
which had deposits of $14,000,000 as of September 30, 1999, of which $12,500,000
was in certificates of deposit. The decline in the loan-to-deposit ratio for
1999 is generally the result of the volume of deposits growing faster than
loans, as expected, in the new office.
11
<PAGE>
Management believes that the Company's liquidity sources are adequate
to meet its operating needs.
Capital Resources
The Company's capital base increased by $338,000 since December 31,
1998 as the result of net income of $1,212,000 for the first nine months of
1999, $61,000 added from the exercise of employee stock options, less the
$935,000 change in unrealized holding gains and losses on available-for-sale
securities, net of deferred tax effects.
The Company and its banking subsidiary (the "Bank") are 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 position of an affected institution were to fall below certain
levels, increasingly stringent regulatory corrective actions would be mandated.
The September 30, 1999 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 ............ 18.6% 19.7% 9.8%
Community First Bank ...................... 18.1% 19.3% 9.6%
Minimum "well-capitalized" requirement .... 6.0% 10.0% 5.0%
Minimum requirement ....................... 4.0% 8.0% 3.0%
Year 2000 Readiness Disclosure
The Company was on schedule and had substantially completed its Year
2000 Preparedness Plan as of September 30, 1999. The plan had five phases: (1)
Awareness, (2) Assessment, (3) Renovation, (4) Validation, and (5)
Implementation. These phases included the identification of critical systems and
equipment potentially vulnerable to the Year 2000 problem. This also included
identification of significant loan customers whose businesses could possibly be
adversely affected by the problem and communicating with them about their
progress in addressing the Year 2000 changeover. The renovation phase,
consisting of upgrading or replacing systems and equipment, had been completed
in large part before the end of the third quarter of 1998. The validation
portion of the plan called for the actual testing of systems and equipment as of
certain critical dates. This testing was completed successfully, as scheduled,
by June 30, 1999. Finally, the implementation phase, which requires addressing
any remaining problems encountered in the validation phase, along with continued
review and assessment of the Company's systems and equipment, is presently
underway and will continue until the Year 2000 has arrived.
Through September 30, 1999, the Company's costs to address the Year
2000 Problem, excluding the cost of Company employees' time that may have been
diverted from other activities, have been immaterial. Likewise excluded from the
Company's estimate of costs to address the Year 2000 Problem are the costs of
replacing or upgrading hardware or software items which were otherwise
substantially technologically obsolete.
The most reasonably likely worst case scenarios for the Company are
that customers and some service providers may experience Year 2000 problems that
make it difficult for them to meet their obligations to the Company in a timely
fashion. Management of the Company does not believe that such problems would
result in more than a temporary inconvenience.
Management is of the opinion that the Company's systems and equipment
are ready for the Year 2000 and anticipates no material adverse effect on the
Company's business. Management is not aware of any material expenditures to be
required in connection with its preparedness plan.
Nevertheless, the Company could be adversely affected by problems
encountered by its vendors, customers and providers of services in dealing with
their Year 2000 readiness, by difficulty in identifying all possible effects of
the Year 2000 problem and interrelationships between various mission critical
systems, and by the unavailability of skilled personnel to address Year 2000
problems that may arise.
12
<PAGE>
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.
13
<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
COMMUNITY FIRST BANCORPORATION
November 5, 1999 /s/ Frederick D. Shepherd, Jr.
- ----------------- ----------------------------------------------
Date Frederick D. Shepherd, Jr., President and Chief
Executive Officer (also principal accounting officer)
14
<PAGE>
Exhibit Index
Exhibits
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
unaudited Consolidated Balance Sheet at September 30, 1999 and the unaudited
Consolidated Statement of Income for the nine months ended September 30, 1999
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,102
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 15,850
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 54,436
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 72,897
<ALLOWANCE> 940
<TOTAL-ASSETS> 150,563
<DEPOSITS> 135,376
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,246
<LONG-TERM> 0
0
0
<COMMON> 10,630
<OTHER-SE> 3,311
<TOTAL-LIABILITIES-AND-EQUITY> 150,563
<INTEREST-LOAN> 4,692
<INTEREST-INVEST> 2,189
<INTEREST-OTHER> 818
<INTEREST-TOTAL> 7,699
<INTEREST-DEPOSIT> 4,263
<INTEREST-EXPENSE> 4,263
<INTEREST-INCOME-NET> 3,436
<LOAN-LOSSES> 173
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,850
<INCOME-PRETAX> 1,890
<INCOME-PRE-EXTRAORDINARY> 1,212
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,212
<EPS-BASIC> .61
<EPS-DILUTED> .57
<YIELD-ACTUAL> 3.25
<LOANS-NON> 124
<LOANS-PAST> 26
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 222
<ALLOWANCE-OPEN> 955
<CHARGE-OFFS> 207
<RECOVERIES> 19
<ALLOWANCE-CLOSE> 940
<ALLOWANCE-DOMESTIC> 940
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
