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, 2000 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, 1,901,446 Shares Outstanding on April 30, 2000.
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 Changes in Shareholders' Equity ... 5
Consolidated Statement of Cash Flows ........................ 6
Notes to Unaudited Consolidated Financial Statements ........ 7-8
Item 2. Management's Discussion and Analysis ........................ 9-10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ............................ 11
SIGNATURE ................................................................ 12
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
COMMUNITY FIRST BANCORPORATION
Consolidated Balance Sheet
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
2000 1999
---- ----
(Dollars in thousands)
Assets
<S> <C> <C>
Cash and due from banks ........................................................... $ 2,910 $ 4,555
Federal funds sold ................................................................ 18,440 12,410
Securities available-for-sale ..................................................... 55,842 54,178
Other investments ................................................................. 386 382
Loans ............................................................................. 81,244 76,158
Allowance for loan losses ..................................................... (995) (943)
--------- ---------
Loans - net ................................................................ 80,249 75,215
Premises and equipment - net ...................................................... 4,263 4,263
Accrued interest receivable ....................................................... 1,357 1,192
Other assets ...................................................................... 1,449 1,388
--------- ---------
Total assets ............................................................... $ 164,896 $ 153,583
========= =========
Liabilities
Deposits
Noninterest bearing ........................................................... $ 19,128 $ 16,908
Interest bearing .............................................................. 130,316 121,710
--------- ---------
Total deposits ............................................................. 149,444 138,618
Accrued interest payable .......................................................... 1,073 1,180
Other liabilities ................................................................. 222 49
--------- ---------
Total liabilities .......................................................... 150,739 139,847
--------- ---------
Shareholders' equity
Common stock - no par value: 10,000,000 shares authorized;
issued and outstanding - 2,004,210 for 2000 and 2,002,699
for 1999 ...................................................................... 14,262 14,255
Retained earnings ................................................................. 1,553 1,110
Accumulated other comprehensive income ............................................ (1,658) (1,629)
--------- ---------
Total shareholders' equity ................................................. 14,157 13,736
--------- ---------
Total liabilities and shareholders' equity ................................. $ 164,896 $ 153,583
========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
COMMUNITY FIRST BANCORPORATION
Consolidated Statement of Income
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
2000 1999
---- ----
(Dollars in thousands,
except per share)
Interest Income
<S> <C> <C>
Loans, including fees ....................................................... $1,674 $1,531
Securities
Taxable ................................................................... 887 649
Tax-exempt ................................................................ 2 -
Other investments ........................................................... 8 7
Federal funds sold .......................................................... 364 271
------ ------
Total interest income ................................................... 2,935 2,458
------ ------
Interest expense
Time deposits $100,000 and over ............................................. 558 435
Other deposits .............................................................. 1,103 926
------ ------
Total interest expense .................................................. 1,661 1,361
------ ------
Net interest income .............................................................. 1,274 1,097
Provision for loan losses ........................................................ 77 25
------ ------
Net interest income after provision .............................................. 1,197 1,072
------ ------
Other income
Service charges on deposit accounts ......................................... 108 83
Credit life insurance commissions ........................................... 12 10
Other income ................................................................ 51 44
------ ------
Total other income ...................................................... 171 137
------ ------
Other expenses
Salaries and employee benefits .............................................. 354 310
Net occupancy expense ....................................................... 43 27
Furniture and equipment expense ............................................. 62 58
Other expense ............................................................... 226 209
------ ------
Total other expenses .................................................... 685 604
------ ------
Income before income taxes ....................................................... 683 605
Income tax expense ............................................................... 240 215
------ ------
Net income ....................................................................... $ 443 $ 390
====== ======
Per share*
Net income .................................................................. $ 0.22 $ 0.20
Net income, assuming dilution ............................................... 0.21 0.18
</TABLE>
- ------------------
* Per share information has been retroactively adjusted to reflect a 10% stock
dividend effective December 15, 1999.
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
COMMUNITY FIRST BANCORPORATION
Consolidated Statement of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
(Unaudited)
Common Stock
------------------------ Accumulated
Number of Retained Other Comprehensive
Shares Amount Earnings Income Total
------ ------ -------- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1999 ......................... 1,793,792 $ 10,569 $ 3,051 $ (17) $ 13,603
---------
Comprehensive income:
Net income ................................... - - 390 - 390
Change in unrealized holding gains
and losses on available-for-sale
securities, net of income taxes ............ - - - (275) (275)
---------
Total comprehensive income ................... - - - - 115
---------
Exercise of employee stock options ............... 404 3 - - 3
--------- --------- --------- --------- ---------
Balance, March 31, 1999 .......................... 1,794,196 $ 10,572 $ 3,441 $ (292) $ 13,721
========= ========= ========= ========= =========
Balance, January 1, 2000 ......................... 2,002,699 $ 14,255 $ 1,110 $ (1,629) $ 13,736
---------
Comprehensive income:
Net income ................................... - - 443 - 443
Change in unrealized holding gains
and losses on available-for-sale
securities, net of income taxes ............ - - - (29) (29)
---------
Total comprehensive income ................... - - - - 414
---------
Exercise of employee stock options ............... 1,511 7 - - 7
--------- --------- --------- --------- ---------
Balance, March 31, 2000 .......................... 2,004,210 $ 14,262 $ 1,553 $ (1,658) $ 14,157
========= ========= ========= ========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE>
COMMUNITY FIRST BANCORPORATION
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
2000 1999
---- ----
(Dollars in thousands)
Operating Activities
<S> <C> <C>
Net income .......................................................................... $ 443 $ 390
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for loan losses .................................................... 77 25
Depreciation ................................................................. 54 42
Amortization of net loan fees and costs ...................................... 22 15
Securities accretion and premium amortization ................................ - (6)
Increase in interest receivable .............................................. (165) (271)
Decrease in interest payable ................................................. (107) (16)
Decrease in prepaid expenses ................................................. 2 44
Increase in other accrued expenses ........................................... 173 128
Disposals of premises and equipment .......................................... - 9
-------- --------
Net cash provided by operating activities ................................ 499 360
-------- --------
Investing activities
Purchases of available-for-sale securities .......................................... (1,974) (6,000)
Maturities of available-for-sale securities ......................................... 264 685
Purchases of other investments ...................................................... (4) (37)
Net increase in loans made to customers ............................................. (5,179) (3,340)
Purchases of premises and equipment ................................................. (54) (132)
-------- --------
Net cash used by investing activities .................................... (6,947) (8,824)
-------- --------
Financing activities
Net increase in demand deposits, interest
bearing transaction accounts and savings accounts ............................... 16,323 7,916
Net (decrease) increase in certificates of deposit and other
time deposits ................................................................... (5,497) 8,689
Exercise of employee stock options .................................................. 7 3
-------- --------
Net cash provided by financing activities ................................ 10,833 16,608
-------- --------
Increase in cash and cash equivalents .................................................... 4,385 8,144
Cash and cash equivalents, beginning ..................................................... 16,965 17,470
-------- --------
Cash and cash equivalents, ending ........................................................ $ 21,350 $ 25,614
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
<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, 1999 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.
Comprehensive Income - The components of other comprehensive income or loss and
related tax effects are as follows:
(Unaudited)
Three Months Ended
March 31,
2000 1999
---- ----
(Dollars in thousands)
Net income ............................................... $ 443 $ 390
----- -----
Other comprehensive income (loss)
Change in unrealized holding gains and
losses on available-for-sale .................... (46) (430)
securities
Income tax expense (benefit) on other
comprehensive income (loss) ..................... (17) (155)
----- -----
Total other comprehensive income (loss) ...... (29) (275)
----- -----
Comprehensive income ..................................... $ 414 $ 115
===== =====
Statement of Cash Flows - Interest paid on deposits and other borrowings
amounted to $1,768,000 for the three months ended March 31, 2000, and was
$1,377,000 for the three months ended March 31, 1999. Income tax payments of
$21,000 were made during the first three months of 2000, and income tax payments
of $20,000 were made in the 1999 period. Non-cash investment security valuation
adjustments decreased available-for-sale securities by $46,000 during the 2000
period, a related shareholders' equity account decreased by $29,000 and the
associated deferred income taxes changed by $17,000. During the 1999 period,
non-cash valuation adjustments decreased available-for-sale securities by
$430,000, decreased shareholders' equity by $275,000 and changed deferred income
taxes by $155,000. A non-cash transfer of $46,000 was made from loans to other
real estate owned during the first quarter of 2000.
Nonperforming Loans - As of March 31, 2000, there were $276,000 in nonaccrual
loans and no loans 90 days or more past due and still accruing interest.
Earnings Per Share - 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 a 10% stock
dividend effective December 15, 1999. Net income per share and net income per
share, assuming dilution, were computed as follows:
7
<PAGE>
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
2000 1999
---- ----
(Dollars in thousands,
except per share amounts)
Net income per share, basic
<S> <C> <C>
Numerator - net income ............................................................. $ 443 $ 390
========== ==========
Denominator
Weighted average common shares issued and outstanding .......................... 2,003,347 1,973,255
========== ==========
Net income per share, basic ......................................... $ .22 $ .20
========== ==========
Net income per share, assuming dilution
Numerator - net income ........................................................... $ 443 $ 390
========== ==========
Denominator
Weighted average common shares issued and outstanding .......................... 2,003,347 1,973,255
Effect of dilutive stock options ............................................... 146,438 163,745
---------- ----------
Total shares ........................................................ 2,149,785 2,137,000
========== ==========
Net income per share, assuming dilution ............................. $ .21 $ .18
========== ==========
</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 offices, 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 $443,000 or $.22 per share for the first quarter of 2000. These
results are $53,000, or $.02 per share, more than net income of $390,000 or $.20
per share for the first quarter of 1999. Net income per share, assuming dilution
was $.21 for the 2000 period and $.18 for the comparable period of 1999. Net
income per share figures for 1999 have been retroactively adjusted to reflect a
ten percent stock dividend effective December 15, 1999.
Net interest income is the principal source of the Company's earnings.
For the first quarter of 2000, net interest income was $1,274,000, an increase
of $177,000 or 16.1% over the first quarter of 1999. The increase in net
interest income is attributable primarily to the positive effects of higher
volumes of interest earning assets in 2000, offset somewhat by the effects of
increased amounts of interest bearing liabilities and higher rates paid for such
liabilities in the 2000 period. Average interest earning assets during the 2000
period were $162,516,000, an increase of $25,372,000 or 18.5% over the
comparable period of 1999. Average interest bearing liabilities during the 2000
period were $136,493,000, representing an increase of $22,097,000 or 19.3% over
the amount for the same period of 1999. 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 2000 was 2.37%, a decrease of 5
basis points from the 2.42% noted for the same period of 1999. Net yield on
earning assets (net interest income divided by average interest earning assets)
was 3.15% for the first quarter of 2000, a decrease of 9 basis points from the
3.24% for the first three months of 1999.
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 areas in Anderson and Oconee
Counties of South Carolina. The Anderson County, South Carolina market
represents a relatively new undertaking by the Company. A branch office opened
in a temporary facility in the City of Anderson on January 4, 1999 with the
permanent office opening November 30, 1999. The Company has secured a site for a
second branch office in Anderson County in the Town of Williamston. Management
expects to begin operating in Williamston late in the second quarter of 2000.
Provision and Allowance for Loan Losses
The provision for loan losses was $77,000 for the first three months of
2000, compared with $25,000 for the comparable period of 1999. At March 31,
2000, the allowance for loan losses was 1.22% of loans, compared with 1.24% of
loans at December 31, 1999. During the 2000 three month period, net charge-offs
totaled $25,000, compared with $14,000 in net charge offs during the same period
of 1999. As of March 31, 1999, there were $276,000 in nonaccrual loans and no
loans 90 days or more past due and still accruing interest. The amount of
nonaccrual loans at March 31, 2000 is $66,000 less than the amount at March 31,
1999 and $67,000 more than the amount of nonaccrual loans as of December 31,
1999.
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, 2000.
Noninterest Income
Noninterest income totaled $171,000 for the first quarter of 2000,
compared with $137,000 for the 1999 quarter. The higher noninterest income in
9
<PAGE>
2000 was attributable primarily to increased service charges on deposit
accounts. There were no realized securities gains or losses in either the 2000
or 1999 periods.
Noninterest Expenses
Noninterest expenses totaled $685,000 for the first quarter of 2000,
compared with $604,000 for 1999, representing an increase of $81,000 or 13.4%.
Salaries and employee benefits increased by $44,000, or 14.2%, to $354,000 for
the 2000 period. This increase resulted from normal salary increases, which are
granted from time to time and increases in the number of employees (40 in 2000
compared with 38 in 1999) associated with the Company's growth. Occupancy and
furniture and equipment expenses for 2000 increased by $20,000 compared with
1999 primarily as a result of higher depreciation, equipment maintenance and
repair costs resulting from the Anderson County expansion and occupancy of the
permanent facility. Other expenses for the 2000 period were $17,000 greater than
in 1999 primarily due to higher expenses for correspondent bank services and
card-based services transaction costs.
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 March 31, 2000, the ratio of loans to total deposits was 54.4%,
compared with 54.9% as of December 31, 1999 and 55.2% as of March 31, 1999.
Deposits as of March 31, 2000 were $10,826,000 or 7.8% greater than at December
31, 1999 and $20,343,000 or 15.8% greater than their levels of March 31, 1999.
The growth in deposit liabilities is attributable to the Company's aggressive
marketing strategies, particularly in the relatively new Anderson County market.
Management believes that the Company's liquidity sources are adequate
to meet its operating needs.
Capital Resources
The Company's capital base increased by $421,000 since December 31,
1999 as the result of net income of $443,000 for the first three months of 2000,
$7,000 added from the exercise of employee stock options, less a $29,000 change
in unrealized 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 are mandated.
The March 31, 2000 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 ................. 17.6% 18.7% 9.2%
Community First Bank ........................... 17.1% 18.2% 9.0%
Minimum "well-capitalized" requirement ......... 6.0% 10.0% 5.0%
Minimum requirement ............................ 4.0% 8.0% 3.0%
10
<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.
11
<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
May 10, 2000 /s/ Frederick D. Shepherd, Jr.
- ----------------- ----------------------------------------------
Date Frederick D. Shepherd, Jr., President and Chief
Executive Officer (also principal accounting officer)
<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 March 31, 2000 and the unaudited
Consolidated Statement of Income for the three months ended March 31, 2000 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-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,910
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 18,440
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 55,842
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 81,244
<ALLOWANCE> 995
<TOTAL-ASSETS> 164,896
<DEPOSITS> 149,444
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,295
<LONG-TERM> 0
0
0
<COMMON> 14,262
<OTHER-SE> (105)
<TOTAL-LIABILITIES-AND-EQUITY> 164,896
<INTEREST-LOAN> 1,674
<INTEREST-INVEST> 889
<INTEREST-OTHER> 372
<INTEREST-TOTAL> 2,935
<INTEREST-DEPOSIT> 1,661
<INTEREST-EXPENSE> 1,661
<INTEREST-INCOME-NET> 1,274
<LOAN-LOSSES> 77
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 685
<INCOME-PRETAX> 683
<INCOME-PRE-EXTRAORDINARY> 443
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 443
<EPS-BASIC> .22
<EPS-DILUTED> .21
<YIELD-ACTUAL> 3.15
<LOANS-NON> 276
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 145
<ALLOWANCE-OPEN> 943
<CHARGE-OFFS> 27
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 995
<ALLOWANCE-DOMESTIC> 995
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
