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. 000-24749
CLOVER COMMUNITY BANKSHARES, INC.
-------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
South Carolina 58-2381062
- --------------------------- -------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
124 NORTH MAIN STREET
CLOVER, SOUTH CAROLINA 29710
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(803) 222-7660
- --------------------------------------------------------------------------------
(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, $.01 par
value, 1,015,227 shares Outstanding on October 31, 1999.
Transitional Small Business Format (Check one): Yes _______ No X
<PAGE>
CLOVER COMMUNITY BANKSHARES, INC.
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
SIGNATURES ................................................................ 14
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
CLOVER COMMUNITY BANKSHARES, INC.
Consolidated Balance Sheet
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1999 1998
---- ----
(Dollars in thousands)
Assets
<S> <C> <C>
Cash and due from banks ............................................................. $ 1,544 $ 1,727
Interest bearing deposits in other banks ............................................ 184 320
Federal funds sold .................................................................. 6,500 8,070
Securities available-for-sale ....................................................... 17,244 16,300
Other investments ................................................................... 250 377
Loans ............................................................................... 28,297 29,115
Allowance for loan losses ....................................................... (260) (265)
-------- --------
Loans - net .................................................................. 28,037 28,850
Premises and equipment - net ........................................................ 683 716
Accrued interest receivable ......................................................... 259 316
Other assets ........................................................................ 398 245
-------- --------
Total assets ................................................................. $ 55,099 $ 56,921
======== ========
Liabilities
Deposits
Noninterest bearing demand ...................................................... $ 3,746 $ 3,962
Interest bearing transaction accounts ........................................... 13,853 13,845
Savings ......................................................................... 2,683 2,563
Certificates of deposit $100M and over .......................................... 4,551 5,689
Other time deposits ............................................................. 18,851 19,547
-------- --------
Total deposits ............................................................... 43,684 45,606
Long-term debt ...................................................................... 4,000 4,000
Accrued interest payable ............................................................ 380 393
Other liabilities ................................................................... 1 -
-------- --------
Total liabilities ............................................................ 48,065 49,999
-------- --------
Shareholders' equity
Common stock - $.01 par value, 10,000,000 shares authorized,
1,015,227 shares issued and outstanding for 1999 and
1,011,020 shares issued and outstanding for 1998 ................................ 10 10
Capital surplus ..................................................................... 3,423 3,324
Retained earnings ................................................................... 3,682 3,464
Accumulated other comprehensive income .............................................. (81) 124
-------- --------
Total shareholders' equity ................................................... 7,034 6,922
-------- --------
Total liabilities and shareholders' equity ................................... $ 55,099 $ 56,921
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
CLOVER COMMUNITY BANKSHARES, INC.
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 ............................. $ 721 $ 755 $ 2,141 $ 2,316
Time deposits in other banks ...................... 3 5 17 15
Securities
Taxable ........................................ 195 188 585 574
Tax-exempt ..................................... 42 46 132 133
Federal funds sold ................................ 110 79 282 157
Other investments ................................. 4 6 20 21
---------- ---------- ---------- ----------
Total interest income ......................... 1,075 1,079 3,177 3,216
---------- ---------- ---------- ----------
Interest expense
Time deposits $100,000 and over ................... 53 56 157 151
Other deposits .................................... 295 340 918 1,026
Federal funds purchased ........................... - 1 - 3
Long-term debt .................................... 54 59 157 175
---------- ---------- ---------- ----------
Total interest expense ........................ 402 456 1,232 1,355
---------- ---------- ---------- ----------
Net interest income .................................... 673 623 1,945 1,861
Provision for loan losses .............................. - - - -
---------- ---------- ---------- ----------
Net interest income after provision .................... 673 623 1,945 1,861
---------- ---------- ---------- ----------
Other income
Service charges on deposit accounts ............... 102 82 292 257
Credit life insurance commissions ................. 5 3 13 5
Other income ...................................... 16 20 45 34
---------- ---------- ---------- ----------
Total other income ............................ 123 105 350 296
---------- ---------- ---------- ----------
Other expenses
Salaries and employee benefits .................... 198 186 598 555
Net occupancy expense ............................. 17 12 48 49
Furniture and equipment expense ................... 55 53 157 151
Other expense ..................................... 109 106 321 343
---------- ---------- ---------- ----------
Total other expenses .......................... 379 357 1,124 1,098
---------- ---------- ---------- ----------
Income before income taxes ............................. 417 371 1,171 1,059
Income tax expense ..................................... 115 119 346 341
---------- ---------- ---------- ----------
Net income ............................................. $ 302 $ 252 $ 825 $ 718
========== ========== ========== ==========
Per share
Average shares outstanding ........................ 1,015,400 1,011,020 1,014,501 1,011,020
Net income ........................................ $ 0.29 $ 0.25 $ 0.81 $ 0.71
Cash dividends declared ........................... - - 0.60 0.50
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
CLOVER COMMUNITY BANKSHARES, INC.
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 ......................................................... $ 302 $252 $ 825 $718
----- ---- ----- ----
Other comprehensive income (loss)
Change in unrealized holding gains and
losses on available-for-sale securities ................... (33) 9 (319) 32
Income tax expense (benefit) on other
comprehensive income (loss) ............................... (4) 3 (114) 12
----- ---- ----- ----
Total other comprehensive
income (loss) .......................................... (29) 6 (205) 20
----- ---- ----- ----
Comprehensive income ............................................... $ 273 $258 $ 620 $738
===== ==== ===== ====
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE>
CLOVER COMMUNITY BANKSHARES, INC.
Consolidated Statement of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
(Unaudited)
Accumulated
Common Stock Other
Number of Capital Retained Comprehensive
Shares Amount Surplus Earnings Income Total
------ ------ ------- -------- ------ -----
(Dollars in thousands, except per share)
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998 .................................. 1,011,020 $ 1,264 $ 2,070 $ 3,039 $ 168 $ 6,541
Cash dividends declared -
$.50 per share ........................................ - - - (506) - (506)
Exchange of 1,011,020 shares of $.01 par
value common stock of Clover Community
Bankshares, Inc, for all of the 1,011,020
shares of $1.25 par value common stock
of Clover Community Bank .............................. - (1,254) 1,254 - - -
Change in unrealized holding gains
and losses on available-for-sale
securities, net of income taxes ....................... - - - - 20 20
Net income ................................................ - - - 718 - 718
---------- ------- ------- ------- ----- -------
Balance, September 30, 1998 ............................... 1,011,020 $ 10 $ 3,324 $ 3,251 $ 188 $ 6,773
========== ======= ======= ======= ===== =======
Balance, January 1, 1999 .................................. 1,011,020 $ 10 $ 3,324 $ 3,464 $ 124 $ 6,922
Cash dividends declared -
$.60 per share ........................................ - - - (607) - (607)
Sales of common stock under
dividend reinvestment plan,
net of costs to establish plan ........................ 4,778 - 118 - - 118
Repurchase and cancellation of
common stock .......................................... (571) - (19) - - (19)
Change in unrealized holding gains
and losses on available-for-sale
securities, net of income taxes ....................... - - - - (205) (205)
Net income ................................................ - - - 825 - 825
---------- ------- ------- ------- ----- -------
Balance, September 30, 1999 ............................... 1,015,227 $ 10 $ 3,423 $ 3,682 $ (81) $ 7,034
========== ======= ======= ======= ===== =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE>
CLOVER COMMUNITY BANKSHARES, INC.
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 .......................................................................... $ 825 $ 718
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for loan losses .................................................... - -
Depreciation ................................................................. 87 85
Securities accretion and premium amortization ................................ (29) 12
Amortization of net loan fees and costs ...................................... (38) (25)
Decrease in interest receivable .............................................. 57 80
(Decrease) increase in interest payable ...................................... (13) 94
Increase in prepaid expenses ................................................. (14) (22)
Increase in other accrued expenses ........................................... 1 7
------- -------
Net cash provided by operating activities ................................ 876 949
------- -------
Investing activities
Maturities of interest bearing deposits in other banks .............................. 196 -
Purchases of available-for-sale securities .......................................... (7,050) (858)
Maturities of available-for-sale securities ......................................... 5,816 1,318
Proceeds of sales of other investments .............................................. 127 -
Net decrease in loans made to customers ............................................. 826 2,183
Purchases of premises and equipment ................................................. (54) (57)
Proceeds from sales of equipment .................................................... - 14
------- -------
Net cash (used) provided by investing activities ......................... (139) 2,600
------- -------
Financing activities
Net (decrease) increase in demand deposits, interest
bearing transaction accounts and savings accounts ............................... (88) 1,480
Net (decrease) increase in certificates of deposit and other
time deposits ................................................................... (1,834) 646
Cash dividends paid ................................................................. (607) (506)
Common stock sold under dividend reinvestment plan, net of
$14 costs to establish plan ..................................................... 118 -
Common stock repurchased and cancelled .............................................. (19) -
------- -------
Net cash (used) provided by financing activities ......................... (2,430) 1,620
------- -------
(Decrease) increase in cash and cash equivalents ......................................... (1,693) 5,169
Cash and cash equivalents, beginning ..................................................... 9,823 3,132
------- -------
Cash and cash equivalents, ending ........................................................ $ 8,130 $ 8,301
======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
7
<PAGE>
CLOVER COMMUNITY BANKSHARES, INC.
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 Clover Community Bankshares, Inc. 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 $1,245,000 for the nine months ended September 30, 1999, and totaled
$1,261,000 for the nine months ended September 30, 1998. Income tax payments of
$316,000 were made during the first nine months of 1999, and income tax payments
of $405,000 were made in the 1998 period. Non-cash investment security valuation
adjustments decreased available-for-sale securities by $319,000 during the 1999
period, a related shareholders' equity account decreased by $205,000 and the
associated deferred income taxes changed by $114,000. During the 1998 period,
non-cash valuation adjustments increased available-for-sale securities by
$32,000, increased shareholders' equity by $20,000, and deferred income taxes
changed by $12,000.
Nonperforming Loans - As of September 30, 1999, there were no nonaccrual loans
and no loans 90 days or more past due and still accruing.
Earnings Per Share - Earnings per common share is computed on the basis of the
average number of shares outstanding during each period, retroactively adjusted
to give effect to any stock splits and stock dividends. The Company has never
had any dilutive potential common shares or dilutive stock options or warrants.
Dividend Reinvestment Plan - As of February 4, 1999, the Company registered
50,000 shares of its authorized but unissued common stock for sale through its
Dividend Reinvestment Plan (the "Plan"). Under the Plan, which is open only to
residents of South Carolina, shareholders may purchase additional shares by
foregoing the payment in cash of cash dividends declared by the Company and
instead accepting additional stock. Such shares of additional stock will be
issued at a price set arbitrarily by the Company at four times the per share
book value of the Common Stock at the end of the month preceding the purchase.
There are no provisions for other periodic stock purchases under the Plan.
Shares issued under the Plan are newly issued shares.
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 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.
Organization
Clover Community Bankshares, Inc. (the "Company") was incorporated on
March 4, 1998, as a bank holding company to effect a plan of corporate
reorganization under which Clover Community Bank (the "Bank") became its
wholly-owned subsidiary on June 5, 1998. The discussion and figures in this
section present information regarding the Company since the date of
reorganization and figures of the Bank prior to that date. Per share information
prior to the reorganization is presented in terms of the current equivalent of
the number of shares of the Company's common stock outstanding.
This discussion is intended to assist in understanding the consolidated
financial condition and results of operations of Clover Community Bankshares,
Inc. and its wholly-owned subsidiary, Clover Community Bank. The information
should be reviewed in conjunction with the unaudited consolidated financial
statements and the related notes contained elsewhere in this report.
Results of Operations
The Company recorded consolidated net income of $302,000 or $.29 per
share for the third quarter of 1999. These results are $50,000, or $.04 per
share, more than net income of $252,000 or $.25 per share for the third quarter
of 1998. For the first nine months of 1999, the Company recorded consolidated
net income of $825,000 or $.81 per share, compared with $718,000 or $.71 per
share in the same 1998 period.
Comprehensive income incorporates into one measure all changes in the
Company's equity resulting from recognized transactions and economic events of
the period other than transactions with owners acting 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 maturities.
During the first nine months of 1999, market interest rates increased,
particularly in the maturity ranges in which the Company's securities are
invested. These increased rates resulted in decreases in the market values of
the Company's investment securities totaling $319,000 during the first nine
months of 1999. Most of this decline was recorded in the second quarter of 1999
as market values in that three month period decreased $241,000. In computing the
effect of the declines on comprehensive income, changes in deferred taxes are
netted against the gross changes in market values. Therefore, the net changes
from securities valuation adjustments reflected in comprehensive income for the
nine- and three-month periods ended September 30, 1999 were losses of $205,000
and $29,000, respectively. In 1998, a more stable interest rate environment
contributed to these components of other comprehensive income reflecting net
unrealized gains of $20,000 and $6,000 for the nine and three month periods
ended September 30, respectively.
9
<PAGE>
Net Interest Income
Net interest income is the amount of interest income earned on interest
earning assets (loans, securities, interest bearing deposits in other banks,
federal funds sold and other investments), less the interest expense incurred on
interest bearing liabilities (interest bearing deposits and other borrowings),
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 yields, 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
$2,013,000, an increase of $83,000 or 4.3% over the first nine months of 1998.
The increase in FTE net interest income was achieved primarily through the
reduction of interest rates paid on interest bearing liabilities and through
increased average amounts of interest earning assets and interest bearing
liabilities. Average interest earning assets during the 1999 period were
$53,962,000, an increase of $2,924,000 or 5.7% over the comparable period of
1998. Average interest bearing liabilities during the 1999 period were
$45,611,000, representing an increase of $3,269,000 or 7.7% over the amount for
the same period of 1998. The average interest rate spread (average yield on
interest earning assets less the average rate paid on interest bearing
liabilities) for the first nine months of 1999 was 4.43%, an increase of 10
basis points from the 4.33% realized for the same period of 1998. Net yield on
earning assets (net interest income divided by average interest earning assets)
was 4.99% for the first nine months of 1999, a decrease of 7 basis points from
the 5.06% for the first nine months of 1998.
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 in York County of South
Carolina. Management expects to continue to utilize such strategies during the
remainder of 1999. Decreases in yields earned and rates paid resulted from
previous reductions in market rates of interest which have not yet been offset
by the recently increasing rates initiated by the Federal Reserve Bank in the
second and third quarters of 1999, and other competitive pressures.
Provision and Allowance for Loan Losses
No provisions for loan losses were made during the first nine months of
1999 and 1998. At September 30, 1999, the allowance for loan losses was .92% of
loans, compared with .91% of loans at December 31, 1998. During the 1999 nine
month period, net charge-offs totaled $5,000, compared with net charge-offs of
$4,000 during the same period of 1998. As of September 30, 1999, there were no
nonaccrual loans and no loans over 90 days past due and still accruing interest.
The amount of nonaccrual loans at September 30, 1998 was $1,000 and there were
no loans 90 days or more 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
September 30, 1999.
10
<PAGE>
Noninterest Income
Noninterest income totaled $350,000 for the first nine months of 1999,
compared with $296,000 for the same 1998 period. The higher noninterest income
in 1999 was attributable to a $35,000 increase in the amount of service charges
on deposit accounts, increased credit life insurance commissions and higher fees
derived from card-based services, including credit card fees and merchant
discount charges. There were no realized securities gains or losses in the 1999
or 1998 periods.
Noninterest income totaled $123,000 for the three months ended
September 30, 1999, compared with $105,000 for the third quarter of 1998.
Service charges on deposit accounts were $20,000 more in the 1999 period than in
1998 and all other income categories decreased by a total of $2,000.
Noninterest Expenses
Noninterest expenses totaled $1,124,000 for the first nine months of
1999, compared with $1,098,000 for the same period of 1998. Salaries and
employee benefits increased by $43,000, or 7.7%, to $598,000 for the 1999
period. This increase resulted primarily from normal salary increases, which are
granted from time to time. Occupancy and furniture and equipment expenses for
1999 increased by $5,000 compared with 1998. Other expenses for the 1999 period
were $22,000 less than in 1998 due to non-recurring expenses incurred during
1998 to effect the transition into the present bank holding company structure
including the related regulatory filings, legal and other professional services,
and higher shareholders' meeting expenses.
Noninterest expenses for the third quarter of 1999 were $22,000 greater
than for the same period of 1998. Salaries and employee benefits increased
$12,000 and net occupancy and furniture and equipment expenses increased $7,000.
Other expenses increased $3,000. Management expects that noninterest expenses
for the remainder of 1999 will continue to trend above the level of the prior
year.
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
64.8%, compared with 63.8% as of December 31, 1998 and 67.4% as of September 30,
1998. Deposits as of September 30, 1999 were $1,922,000 or 4.2% less than at
December 31, 1998 and $410,000 or .9% less than their levels of September 30,
1998.
Management believes that the Company's liquidity sources are adequate
to meet its operating needs.
Capital Resources
The Company's capital base increased by $112,000 since December 31,
1998 as the result of net income of $825,000 for the first nine months of 1999,
less dividends declared totaling $607,000, plus $118,000 in net proceeds added
from the sale of 4,778 shares of stock under the Company's new dividend
reinvestment plan, less $19,000 paid to reacquire and cancel 571 shares of the
Company's outstanding common stock, less the $205,000 change in unrealized gains
and losses on available-for-sale securities, net of deferred tax effects. The
Company and its subsidiary Bank historically pay an annual dividend in the
first quarter of each year. However, the amount, if any, and frequency of
dividend payments is subject to the discretion of the Board of Directors and
regulatory limitations.
11
<PAGE>
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 September 30, 1999 risk based and average total asset 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
Clover Community Bankshares, Inc. ......... 21.2% 22.0% 12.6%
Clover Community Bank ..................... 19.6% 20.4% 11.6%
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 calls for the actual testing of systems and equipment as of
certain critical dates. This testing was completed successfully, as scheduled,
by September 30, 1999. Finally, the implementation phase, which requires
addressing any 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 totaled approximately $6,000. That amount does not include the cost
of Company employees' time that may have been diverted from other activities. It
also does not include the costs of replacing or upgrading hardware or software
if the items replaced or upgraded were otherwise substantially technologically
obsolete.
<PAGE>
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
will be ready for the Year 2000 in a timely manner without any material adverse
effect on the Company's business. Management is not aware of any material
expenditures to be required to complete 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>
SIGNATURES
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.
CLOVER COMMUNITY BANKSHARES, INC.
November 10, 1999 /s/ James C. Harris, Jr.
- ---------------------------- ----------------------------------------
Date James C. Harris, Jr., President and
Chief Executive Officer
November 10, 1999 /s/ Gwen M. Thompson
- ---------------------------- ----------------------------------------
Date Gwen M. Thompson, Senior Vice President,
Cashier, and Secretary
(Principal accounting officer)
14
<PAGE>
Exhibit Index
Exhibits
Exhibit No.
from Item 601 of
Regulation S-B Description
- --------------- ----------------------
27 Financial Data Schedule
15
<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> 1,544
<INT-BEARING-DEPOSITS> 184
<FED-FUNDS-SOLD> 6,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 17,244
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 28,297
<ALLOWANCE> 260
<TOTAL-ASSETS> 55,099
<DEPOSITS> 43,684
<SHORT-TERM> 0
<LIABILITIES-OTHER> 381
<LONG-TERM> 4,000
0
0
<COMMON> 10
<OTHER-SE> 7,024
<TOTAL-LIABILITIES-AND-EQUITY> 55,099
<INTEREST-LOAN> 2,141
<INTEREST-INVEST> 717
<INTEREST-OTHER> 319
<INTEREST-TOTAL> 3,177
<INTEREST-DEPOSIT> 1,075
<INTEREST-EXPENSE> 1,232
<INTEREST-INCOME-NET> 1,945
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,124
<INCOME-PRETAX> 1,171
<INCOME-PRE-EXTRAORDINARY> 825
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 825
<EPS-BASIC> .81
<EPS-DILUTED> .81
<YIELD-ACTUAL> 4.99
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 23
<ALLOWANCE-OPEN> 265
<CHARGE-OFFS> 5
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 260
<ALLOWANCE-DOMESTIC> 260
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
