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. 000-24749
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, 1,020,212 shares Outstanding on April 30, 2000.
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 Changes in Shareholders' Equity 5
Consolidated Statement of Cash Flows 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis 8-10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
CLOVER COMMUNITY BANKSHARES, INC.
Consolidated Balance Sheet
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
2000 1999
---- ----
(Dollars in thousands)
Assets
<S> <C> <C>
Cash and due from banks ................................................................... $ 1,551 $ 1,198
Interest bearing deposits in other banks .................................................. 77 35
Federal funds sold ........................................................................ 3,180 2,440
Securities available-for-sale ............................................................. 17,276 17,554
Other investments ......................................................................... 250 250
Loans ..................................................................................... 29,610 29,519
Allowance for loan losses ............................................................. (257) (259)
-------- --------
Loans - net ...................................................................... 29,353 29,260
Premises and equipment - net .............................................................. 867 874
Accrued interest receivable ............................................................... 275 361
Other assets .............................................................................. 417 368
-------- --------
Total assets ..................................................................... $ 53,246 $ 52,340
======== ========
Liabilities
Deposits
Noninterest bearing demand ............................................................ $ 3,149 $ 3,084
Interest bearing transaction accounts ................................................. 14,331 12,889
Savings ............................................................................... 2,685 2,360
Certificates of deposit $100M and over ................................................ 4,090 4,095
Other time deposits ................................................................... 17,818 18,430
-------- --------
Total deposits ................................................................... 42,073 40,858
Long-term debt ............................................................................ 4,000 4,000
Accrued interest payable .................................................................. 303 319
Other liabilities ......................................................................... 60 1
-------- --------
Total liabilities ................................................................ 46,436 45,178
-------- --------
Shareholders' equity
Common stock - $.01 par value, 10,000,000 shares authorized, 1,020,014
shares issued and outstanding for 2000 and 1,014,096 shares issued and
outstanding for 1999 .................................................................. 10 10
Capital surplus ........................................................................... 3,564 3,390
Retained earnings ......................................................................... 3,442 3,877
Accumulated other comprehensive income .................................................... (206) (115)
-------- --------
Total shareholders' equity ....................................................... 6,810 7,162
-------- --------
Total liabilities and shareholders' equity ....................................... $ 53,246 $ 52,340
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
CLOVER COMMUNITY BANKSHARES, INC.
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 ..................................................... $ 740 $ 701
Interest bearing deposits in other banks .................................. 1 4
Securities
Taxable ............................................................... 218 189
Tax-exempt ............................................................ 50 48
Federal funds sold ........................................................ 31 92
Other investments ......................................................... 5 6
---------- ----------
Total interest income ................................................. 1,045 1,040
---------- ----------
Interest expense
Time deposits $100,000 and over ........................................... 41 54
Other deposits ............................................................ 280 315
Federal funds purchased ................................................... 1 -
Long-term debt ............................................................ 62 53
---------- ----------
Total interest expense ................................................ 384 422
---------- ----------
Net interest income ............................................................ 661 618
Provision for loan losses ...................................................... - -
---------- ----------
Net interest income after provision ............................................ 661 618
---------- ----------
Other income
Service charges on deposit accounts ....................................... 97 91
Credit life insurance commissions ......................................... 4 4
Other income .............................................................. 19 15
---------- ----------
Total other income .................................................... 120 110
---------- ----------
Other expenses
Salaries and employee benefits ............................................ 213 202
Net occupancy expense ..................................................... 16 15
Furniture and equipment expense ........................................... 55 51
Other expense ............................................................. 108 98
---------- ----------
Total other expenses .................................................. 392 366
---------- ----------
Income before income taxes ..................................................... 389 362
Income tax expense ............................................................. 114 115
---------- ----------
Net income ..................................................................... $ 275 $ 247
========== ==========
Per share
Average shares outstanding ................................................ 1,016,180 1,012,294
Net income ................................................................ $ 0.27 $ 0.24
Cash dividends declared ................................................... 0.70 0.60
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
CLOVER COMMUNITY BANKSHARES, INC.
Consolidated Statement of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
(Unaudited)
Common Stock Accumulated
--------------------- 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, 1999 .......................... 1,011,020 $ 10 $ 3,324 $ 3,464 $ 124 $ 6,922
---------
Comprehensive income:
Net income .................................... - - - 247 - 247
Change in unrealized holding
gains and losses on
available-for-sale
securities, net of income taxes ............... - - - - (28) (28)
---------
Total comprehensive income .................... 219
---------
Sales of common stock under
dividend reinvestment plan .................... 4,778 - 132 - - 132
Cash dividends declared - $.50 per share .......... - - - (607) - (607)
--------- --------- --------- --------- --------- ---------
Balance, March 31, 1999 ........................... 1,015,798 $ 10 $ 3,456 $ 3,104 $ 96 $ 6,666
========= ========= ========= ========= ========= =========
Balance, January 1, 2000 .......................... 1,014,096 $ 10 $ 3,390 $ 3,877 $ (115) $ 7,162
---------
Comprehensive income:
Net income .................................... - - - 275 - 275
Change in unrealized holding
gains and losses on
available-for-sale
securities, net of income taxes ............... - - - - (91) (91)
---------
Total comprehensive income ................... 184
---------
Sales of common stock under
dividend reinvestment plan .................... 6,118 - 174 - - 174
Cash dividends declared - $.70 per share .......... - - - (710) - (710)
--------- --------- --------- --------- --------- ---------
Balance, March 31, 2000 ........................... 1,020,214 $ 10 $ 3,564 $ 3,442 $ (206) $ 6,810
========= ========= ========= ========= ========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE>
CLOVER COMMUNITY BANKSHARES, INC.
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 .......................................................................... $ 275 $ 247
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation ................................................................. 31 29
Securities accretion and premium amortization ................................ 1 (14)
Amortization of net loan fees and costs ...................................... (11) -
Decrease in interest receivable .............................................. 86 72
Decrease in interest payable ................................................. (16) (24)
Decrease (increase) in prepaid expenses ...................................... 33 (68)
Increase in other accrued expenses ........................................... 59 71
Proceeds of sales of other assets ............................................ 5 -
------- -------
Net cash provided by operating activities ................................ 463 313
------- -------
Investing activities
Purchases of available-for-sale securities .......................................... (500) (5,028)
Maturities of available-for-sale securities ......................................... 629 4,383
Net increase in loans made to customers ............................................. (112) (656)
Purchases of premises and equipment ................................................. (24) -
------- -------
Net cash used by investing activities .................................... (7) (1,301)
------- -------
Financing activities
Net increase in demand deposits, interest
bearing transaction accounts and savings accounts ............................... 1,832 1,861
Net decrease in certificates of deposit and other
time deposits ................................................................... (617) (1,633)
Cash dividends paid ................................................................. (710) (607)
Common stock sold under dividend reinvestment plan .................................. 174 132
------- -------
Net cash provided (used) by financing activities ......................... 679 (247)
------- -------
Increase (decrease) in cash and cash equivalents ......................................... 1,135 (1,235)
Cash and cash equivalents, beginning ..................................................... 3,673 9,823
------- -------
Cash and cash equivalents, ending ........................................................ $ 4,808 $ 8,588
======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE>
CLOVER COMMUNITY BANKSHARES, INC.
Notes to Unaudited Consolidated Financial Statements
Organization - Clover Community Bankshares, Inc. (the "Company"), a bank holding
company, and its wholly-owned subsidiary, Clover Community Bank, are engaged in
providing domestic commercial banking services from their headquarters office in
Clover, South Carolina. The Company is a South Carolina corporation and its
banking subsidiary is a state chartered commercial bank with its deposits
insured by the Federal Deposit Insurance Corporation ("FDIC"). Therefore, the
Company and its subsidiary operate under the supervision, rules and regulations
of the Board of Governors of the Federal Reserve System, the FDIC and South
Carolina State Board of Financial Institutions. The holding company was
incorporated on March 4, 1998, pursuant to a plan of reorganization. Clover
Community Bank was organized in September, 1986, and received its charter and
commenced operations on October 1, 1987.
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 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.
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 .......................................... $ 275 $ 247
----- -----
Other comprehensive income (loss)
Change in unrealized holding gains and
losses on available-for-sale ............... (148) (45)
securities
Income tax expense (benefit) on other
comprehensive income (loss) ................ (57) (17)
----- -----
Total other comprehensive income (loss) . (91) (28)
----- -----
Comprehensive income ................................ $ 184 $ 219
===== =====
Statement of Cash Flows - Interest paid on deposits and other borrowings
amounted to $400,000 for the three months ended March 31, 2000, and was $446,000
for the three months ended March 31, 1999. Income tax payments of $14,000 were
made during the first three months of 2000, and income tax payments of $11,000
were made in the 1999 period. Non-cash investment security valuation adjustments
decreased available-for-sale securities by $148,000 during the 2000 period,
accumulated other comprehensive income decreased by $91,000 and the associated
deferred income taxes changed by $57,000. During the 1999 period, non-cash
valuation adjustments decreased available-for-sale securities by $45,000,
decreased accumulated other comprehensive income by $28,000, and the associated
deferred income taxes changed by $17,000.
In 2000, a non-cash transfer of $30,000 was made from loans to other assets for
the repossession of loan collateral.
Nonperforming Loans - As of March 31, 2000, nonaccrual loans totaled $8,000 and
there were no loans 90 days or more past due and still accruing interest income.
Earnings Per Share - Net income per share is calculated by dividing net income
by the weighted average number of shares of the Company's common stock
outstanding during the period. The Company has no potentially dilutive common
shares, stock options or warrants outstanding.
7
<PAGE>
Item 2. - Management's Discussion and Analysis
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 consolidated financial statements and
the related notes contained elsewhere in this report.
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 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
The Company recorded consolidated net income of $275,000 or $.27 per
share for the first quarter of 2000. These results are $28,000, or $.03 per
share, more than net income of $247,000 or $.24 per share for the first quarter
of 1999.
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. This adjusted amount is referred to as fully
taxable equivalent ("FTE") interest income.
For the first quarter of 2000, FTE net interest income was $689,000, an
increase of $44,000 or 6.8% over the first quarter of 1999. This increase was
achieved through lower interest expenses resulting primarily from lower average
amounts of interest bearing liabilities. Average interest bearing liabilities
during the 2000 period were $42,301,000, representing a decrease of $3,626,000
or 7.9% from the amount for the same period of 1999. Average deposit liabilities
were lower in all categories during the 2000 quarter, compared with the same
period of 1999. The average rate paid for such liabilities was 3.65% for the
2000 period, and 3.73% for the 1999 period. Average interest earning assets
during the 2000 period were $50,327,000, a decrease of $3,923,000 or 7.2% from
the comparable period of 1999. The average rate earned on earning assets
increased to 8.58% for the 2000 period, compared with 7.98% for the 1999 period.
The lower average amounts of interest earning assets in the 2000 period
effectively negated the beneficial effects of the increased yield. 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
4.93%, an increase of 68 basis points over the 4.25% average interest rate
spread recorded for the same period of 1999. Net yield on earning assets (net
interest income divided by average interest earning assets) was 5.51% for the
first quarter of 2000, an increase of 69 basis points over the 4.82% for the
first three months of 1999.
8
<PAGE>
Provision and Allowance for Loan Losses
No provisions for loan losses were made during the first three months
of 2000 and 1999. At March 31, 2000, the allowance for loan losses was .87% of
loans, compared with .88% of loans at December 31, 1999. During the 2000 three
month period, net charge-offs totaled $2,000, compared with net recoveries of
$1,000 during the same period of 1999. As of March 31, 2000, there were $8,000
in nonaccrual loans and no loans over 90 days past due and still accruing
interest. As of March 31, 1999 there were no nonaccrual loans and 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
March 31, 2000.
Noninterest Income
Noninterest income totaled $120,000 for the first quarter of 2000,
compared with $110,000 for the 1999 quarter. The higher noninterest income in
2000 was mostly attributable to higher 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 $392,000 for the first quarter of 2000,
compared with $366,000 for 1999. Salaries and employee benefits increased by
$11,000, or 5.4%, to $213,000 for the 2000 period. This increase resulted
primarily from normal salary increases, which are granted from time to time.
Occupancy and furniture and equipment expenses for 2000 increased by $5,000
compared with 1999, primarily resulting from higher depreciation and equipment
maintenance and repair costs. Other expenses for the 2000 period were $10,000
more than in 1999 primarily due to higher expenses associated with credit cards
and other card-based services.
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 70.4%,
compared with 72.2% as of December 31, 1999 and 65.0% as of March 31, 1999.
Deposits as of March 31, 2000 were $1,215,000 or 3.0% greater than at December
31, 1999.
Management believes that the Company's liquidity sources are adequate
to meet its operating needs.
Capital Resources
The Company's capital base decreased by $352,000 since December 31,
1999 as the result of net income of $275,000 for the first three months of 2000,
less dividends declared totaling $710,000, $174,000 added from the sale of 6,118
shares of stock under the Company's dividend reinvestment plan, less the $91,000
change in unrealized 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 are mandated.
9
<PAGE>
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
------ ------- --------
Clover Community Bankshares, Inc. 21.4% 22.2% 13.2%
Clover Community Bank 19.5% 20.2% 11.9%
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>
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.
May 5, 2000 /s/ James C. Harris, Jr.
- ---------------------- -------------------------
Date James C. Harris, Jr., President and Chief
Executive Officer
May 5, 2000 /s/ Gwen M. Thompson
- ---------------------- --------------------
Date Gwen M. Thompson, Senior Vice President,
Cashier, and Secretary (Principal
accounting officer)
12
<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> 1,551
<INT-BEARING-DEPOSITS> 77
<FED-FUNDS-SOLD> 3,180
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 17,276
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 29,610
<ALLOWANCE> 257
<TOTAL-ASSETS> 53,246
<DEPOSITS> 42,073
<SHORT-TERM> 0
<LIABILITIES-OTHER> 363
<LONG-TERM> 4,000
0
0
<COMMON> 10
<OTHER-SE> 6,800
<TOTAL-LIABILITIES-AND-EQUITY> 53,246
<INTEREST-LOAN> 740
<INTEREST-INVEST> 268
<INTEREST-OTHER> 37
<INTEREST-TOTAL> 1,045
<INTEREST-DEPOSIT> 321
<INTEREST-EXPENSE> 384
<INTEREST-INCOME-NET> 661
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 392
<INCOME-PRETAX> 389
<INCOME-PRE-EXTRAORDINARY> 275
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 275
<EPS-BASIC> .27
<EPS-DILUTED> .27
<YIELD-ACTUAL> 5.51
<LOANS-NON> 8
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 26
<ALLOWANCE-OPEN> 259
<CHARGE-OFFS> 3
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 257
<ALLOWANCE-DOMESTIC> 257
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
