U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
[ X ] Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2000
[ ] Transition Report Under Section 13
or 15(d) of the Exchange Act
For the transition period ended
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Commission File Number 0-26551
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CATAWBA VALLEY BANCSHARES, INC.
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(Exact name of small business issuer as specified in its charter)
North Carolina 56-2137427
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
1039 SECOND STREET NE, HICKORY, NC 28601
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(Address of principal executive office)
(828) 431-2300
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(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 of 1934 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 [ ]
As of July 31, 2000, 1,495,351 shares of the issuer's common stock, no par
value, were outstanding.
This report contains 10 pages.
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Page No.
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Part I. FINANCIAL INFORMATION
Item 1 - Financial Statements (Unaudited)
Consolidated Statements of Financial Condition
June 30, 2000 and December 31, 1999.............................................. 3
Consolidated Statements of Operations
Three Months and Six Months Ended June 30, 2000 and 1999........................ 4
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2000 and 1999.......................................... 5
Notes to Consolidated Financial Statements....................................... 6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................................. 7
Part II. Other Information
Item 4. Submission of Matters to a Vote of Securities Holders................... 10
Item 6. Exhibits and Reports on Form 8-K........................................ 10
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Part I. Financial Information
Item 1 - Financial Statements
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Catawba Valley Bancshares, Inc. and Subsidiary
Consolidated Statements of Financial Condition
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June 30,
2000 December 31,
ASSETS (Unaudited) 1999*
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Cash and due from banks $ 1,165,189 $ 5,213,121
Interest-bearing deposits with banks 6,789,438 3,026,931
Federal funds sold 1,353,711 1,497,543
Time deposits in banks 1,386,968 2,277,968
Securities available for sale 24,342,211 15,755,543
Securities held to maturity, market value of
$1,505,219 in 2000 and $1,607,909 in 1999 1,544,847 1,650,946
Loans 98,297,902 83,658,838
Allowance for loan losses (1,509,446) (1,341,340)
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NET LOANS 96,788,456 82,317,498
Federal Home Loan Bank 400,000 271,000
Bank premises and equipment 3,085,741 2,801,766
Other assets 2,900,909 3,426,049
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TOTAL ASSETS $ 139,757,470 $ 118,238,365
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LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing demand $ 8,066,999 $ 7,021,108
Money market and NOW accounts 33,347,801 30,665,088
Savings 2,138,466 1,821,626
Time, $100,000 and over 24,007,499 17,648,470
Other time 48,272,859 40,824,592
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TOTAL DEPOSITS 115,833,624 97,980,884
Borrowings 8,000,000 5,000,000
Accrued expenses and other liabilities 256,019 236,710
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TOTAL LIABILITIES 124,089,643 103,217,594
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Stockholders' equity:
Preferred stock, no par value, 1,000,000 shares
authorized; none issued - -
Common stock, $1 par value, 9,000,000 shares
authorized, 1,495,351 shares issued and outstanding 1,495,351 1,495,351
Additional paid-in capital 13,602,333 13,602,333
Retained earnings 917,320 301,140
Accumulated other comprehensive loss (347,177) (378,053)
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TOTAL STOCKHOLDERS' EQUITY 15,667,827 15,020,771
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 139,757,470 $ 118,238,365
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* Derived from audited financial statements
See accompanying notes.
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Catawba Valley Bancshares, Inc. and Subsidiary
Consolidated Statements of Operations (Unaudited)
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Three Months Ended Six Months ended
June 30, June 30,
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2000 1999 2000 1999
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INTEREST INCOME
Loans $ 2,423,562 $ 1,585,928 $ 4,479,647 $ 3,053,375
Investment securities 373,937 196,357 697,596 375,282
Federal funds sold 20,531 29,013 31,995 52,334
Time deposits 22,282 35,258 45,518 69,349
Interest-bearing deposits with banks 61,271 48,239 106,632 91,534
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TOTAL INTEREST INCOME 2,901,583 1,894,795 5,361,388 3,641,874
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INTEREST EXPENSE
Time deposits, $100,000 and over 348,538 198,074 630,142 420,019
Other deposits 1,043,950 767,924 1,992,520 1,427,878
Borrowings 115,176 - 193,032 -
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TOTAL INTEREST EXPENSE 1,507,664 965,998 2,815,694 1,847,897
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NET INTEREST INCOME 1,393,919 928,797 2,545,694 1,793,977
PROVISION FOR LOAN LOSSES 135,000 74,724 221,972 173,987
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,258,919 854,073 2,323,722 1,619,990
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NON-INTEREST INCOME
Service charges on deposit accounts 115,591 69,258 208,769 128,666
Other 77,465 138,550 196,572 274,525
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TOTAL NON-INTEREST INCOME 193,056 207,808 405,341 403,191
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NON-INTEREST EXPENSE
Compensation and employee benefits 424,086 316,081 825,290 613,915
Occupancy and equipment 112,624 96,143 237,805 172,018
Professional fees 27,266 56,349 53,101 89,845
Stationery, printing and supplies 7,907 20,634 32,587 39,730
Advertising and business promotion 47,678 43,598 81,475 76,555
Data processing 83,279 61,085 168,835 121,268
Other 147,328 97,461 243,071 178,876
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TOTAL NON-INTEREST EXPENSE 850,168 691,351 1,642,164 1,292,207
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INCOME BEFORE INCOME TAXES 601,807 370,530 1,086,899 730,974
INCOME TAXES 210,153 138,492 380,998 271,778
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NET INCOME $ 391,654 $ 232,038 $ 705,901 $ 459,196
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BASIC NET INCOME PER COMMON
SHARE $ 0.26 $ 0.16 $ 0.47 $ 0.31
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DILUTED NET INCOME PER COMMON
SHARE $ 0.25 $ 0.14 $ 0.45 $ 0.28
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DIVIDEND PER COMMON SHARE $ - $ - $ .06 $ -
============= ============== ============= ===============
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See accompanying notes.
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Catawba Valley Bancshares, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
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Six Months Ended
June 30,
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2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 705,901 $ 459,196
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Depreciation and amortization 117,729 89,658
Issuance of stock options - 65,025
Provision for loan losses 221,972 173,987
Deferred income taxes (15,906) -
Change in assets and liabilities:
Increase in accrued interest receivable (209,531) (84,200)
(Increase) decrease in other assets 734,671 (422,324)
Increase (decrease) in accrued expenses and other liabilities 19,309 (423,137)
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NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES 1,574,145 (141,795)
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CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in time deposits with other financial institutions 891,000 978
Purchase of securities available for sale (9,330,415) (6,075,000)
Purchase of securities held to maturity (304,122) (360,000)
Purchase of Federal Home Loan Bank stock (129,000) -
Collections and maturities of securities available for sale 416,777 3,314,687
Collections and maturities of securities held to maturity 64,888 93,759
Net increase in loans (14,639,064) (11,209,935)
Proceeds from sale of foreclosed real estate 547,490 -
Purchases of premises and equipment (283,975) (720,186)
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NET CASH USED BY
INVESTING ACTIVITIES (22,766,421) (14,955,697)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 17,852,740 12,494,430
Proceeds from borrowings 3,000,000 -
Cash dividends paid (89,721) -
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NET CASH PROVIDED BY
FINANCING ACTIVITIES 20,763,019 12,494,430
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NET DECREASE IN CASH
AND CASH EQUIVALENTS (429,257) (2,603,062)
CASH AND CASH EQUIVALENTS, BEGINNING 9,737,595 11,595,786
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CASH AND CASH EQUIVALENTS, ENDING $ 9,308,338 $ 8,992,724
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See accompanying notes.
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Catawba Valley Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
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NOTE A - BASIS OF PRESENTATION
In management's opinion, the financial information, which is unaudited, reflects
all adjustments (consisting solely of normal recurring adjustments) necessary
for a fair presentation of the financial information as of and for the three and
six month periods ended June 30, 2000 and 1999, in conformity with generally
accepted accounting principles. The financial statements include the accounts of
Catawba Valley Bancshares, Inc. (the "Company") and its wholly-owned subsidiary,
Catawba Valley Bank. Operating results for the three and six month periods ended
June 30, 2000 and 1999 are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 2000.
The organization and business of the Company, accounting policies followed by
the Company and other information are contained in the notes to the consolidated
financial statements filed as part of the Company's 1999 annual report on Form
10-K. This quarterly report should be read in conjunction with such annual
report.
NOTE B - NET INCOME PER SHARE
Net income per share has been computed by dividing net income by the weighted
average number of common and common equivalent shares outstanding during the
period. In accordance with generally accepted accounting principles, employee
stock ownership plan shares are only considered outstanding for the basic
earnings per share calculations when they are earned or committed to be
released. The weighted average number of shares outstanding or assumed to be
outstanding are summarized below:
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Three months ended Six months ended
June 30, June 30,
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2000 1999 2000 1999
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Weighted average number of common
shares used in computing basic net
income per share 1,495,351 1,495,351 1,495,351 1,491,226
Effect of dilutive stock options 77,733 125,639 74,942 125,494
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Weighted average number of common shares
and dilutive potential common shares
used in computing diluted net
income per share 1,573,084 1,620,990 1,570,293 1,616,720
============ ============ ============= ============
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NOTE C - COMPREHENSIVE INCOME
For the three months ended June 30, 2000 and 1999, total comprehensive income,
consisting of net income and unrealized securities gains and losses, net of
taxes, was $439,059 and $125,817, respectively.
For the six months ended June 30, 2000 and 1999, total comprehensive income,
consisting of net income and unrealized securities gains and losses, net of
taxes, was $736,777 and $183,302, respectively.
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Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Quarterly Report on Form 10-QSB may contain certain forward-looking
statements consisting of estimates with respect to the financial condition,
results of operations and business of the Company that are subject to various
factors which could cause actual results to differ materially from these
estimates. These factors include, but are not limited to, general economic
conditions, changes in interest rates, deposit flows, loan demand, real estate
values, and competition; changes in accounting principles, policies, or
guidelines; changes in legislation or regulation; and other economic,
competitive, governmental, regulatory, and technological factors affecting the
Company's operations, pricing, products and services.
Comparison of Financial Condition at June 30, 2000 and December 31, 1999
Consolidated total assets increased by $21.5 million during the six months ended
June 30, 2000, from $118.2 million at December 31, 1999 to $139.7 million at
June 30, 2000. During the six months, the Company generated strong loan growth,
as net loans increased by $14.5 million to $96.8 million. In addition,
investment securities increased by $8.5 million to $25.9 million. The growth in
these areas was funded by increases in Deposits and Borrowings of $17.8 million
and $3.0 million, respectively, with the balance of the funding provided from
liquid assets.
Total stockholders' equity was $15.7 million at June 30, 2000 as compared with
$15.0 million at December 31, 1999, an increase of $647,000. The increase
resulted principally from the Company's net income for the six months of
$706,000. During the second quarter of 2000, the Company paid a cash dividend
for the first time of $90,000, or $.06 per share. At June 30, 2000, both the
Company and the Bank continued to exceed all applicable regulatory capital
requirements.
Comparison of Results of Operations for the Three Months Ended June 30, 2000 and
1999
Net Income. Net income for the quarter ended June 30, 2000 was $392,000 or $.26
per share, as compared with net income of $232,000, or $.16 per share, for the
three months ended June 30, 1999, an increase of $160,000 or $.10 per share. An
increase of $465,000 in net interest income for the current quarter was offset
by increases of $159,000 in non-interest expenses, $60,000 in the provision for
loan losses, and $72,000 in the provision for income taxes.
Net Interest Income. Net interest income for the quarter ended June 30, 2000 was
$1.4 million as compared with $929,000 during the quarter ended June 30, 1999,
an increase of $465,000, that resulted principally from an increased level of
interest earning assets during the quarter. Average interest earning assets were
approximately $32.4 million higher during the quarter ended June 30, 2000 as
compared with the quarter ended June 30, 1999.
Provision for Loan Losses. The provision for loan losses was $135,000 and
$75,000 for the quarters ended June 30, 2000 and 1999, respectively. There were
net loan charge offs of $12,000 during the quarter ended June 30, 2000 as
compared with the net loan charge offs of $72,000 during the quarter ended June
30, 1999. At June 30, 2000 nonaccrual loans aggregated $6,000.
Non-Interest Income. Non-interest income was $193,000 for the quarter ended June
30, 2000 compared to $208,000 for the quarter ended June 30, 1999, a decrease of
$15,000.
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Non-Interest Expenses. Other expenses increased to $850,000 during the quarter
ended June 30, 2000 as compared with $691,000 for the quarter ended June 30,
1999, an increase of $159,000, resulting principally from increases in salaries
and employee benefits, occupancy and equipment, and data processing aggregating
$147,000. These increases are primarily attributable to the opening of the
Bank's third full service branch late in the first quarter of 1999.
Provision for Income Taxes. The provision for income taxes, as a percentage of
income before income taxes, was 34.9% and 37.4% for the three months ended June
30, 2000 and 1999, respectively.
Comparison of Results of Operations for the Six Months Ended June 30, 2000 and
1999
Net Income. Net income for the six months ended June 30, 2000 was $706,000 or
$.47 per share, as compared with net income of $459,000, or $.31 per share, for
the six months ended June 30, 1999, an increase of $247,000 or $.16 per share.
An increase of $752,000 in net interest income for the current quarter was
offset by increases of $350,000 in non-interest expenses, $48,000 in the
provision for loan losses, and $109,000 in the provision for income taxes.
Net Interest Income. Net interest income was $2.5 million during the six months
ended June 30, 2000 as compared with $1.8 million during the corresponding
period of the previous fiscal year, an increase of $752,000. This increase
resulted principally from an increased level of interest-earning assets during
the six months ended June 30, 2000. Additionally, as interest rates have risen,
the net interest margin has increased by 15 basis points during the current
period.
Provision for Loan Losses. The provision for loan losses was $222,000 and
$174,000 for the six months ended June 30, 2000 and 1999, respectively. There
were net loan charge offs of $54,000 for the six months ended June 30, 2000 as
compared with net loan charge offs of $18,000 during the six months ended June
30, 1999. At June 30, 2000, nonaccrual loans aggregated $6,000.
Non-Interest Income. Non-interest income was $405,000 for the six months ended
June 30, 2000 compared to $403,000 for the six months ended June 30, 1999, an
increase of $2,000.
Non-Interest Expenses. Other expenses increased to $1.6 million during the six
months ended June 30, 2000 as compared with $1.3 million for the six months
ended June 30, 1999, an increase of $350,000, resulting principally from
increases in salaries and employee benefits, occupancy and equipment, and data
processing aggregating $325,000. These increases are primarily attributable to
the opening of the Bank's third full service branch late in the first quarter of
1999.
Provision for Income Taxes. The provision for income taxes, as a percentage of
income before income taxes, was 35.0% and 37.1% for the six months ended June
30, 2000 and 1999, respectively.
Liquidity and Capital Resources
The objective of the Company's liquidity management is to ensure the
availability of sufficient cash flows to meet all financial commitments and to
capitalize on opportunities for expansion. Liquidity management addressees the
Bank's ability to meet deposit withdrawals on demand or at contractual maturity,
and to fund new loans and investments as opportunities arise.
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The primary sources of internally generated funds are principal and interest
payments on loans receivable, cash flows generated from operations and
repayments of mortgage backed securities. External sources of funds consist of
increases in deposits and borrowings.
At June 30, 2000, liquid assets comprised 26% of total assets. Management
believes that it will have sufficient funds available to meet its anticipated
future loan commitments as well as other liquidity needs.
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Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Securities Holders
The Annual Meeting of Stockholders was held on April 25, 2000. Of 1,495,351
shares entitled to vote at the meeting, 1,241,164 shares voted. The following
matters were voted on at the meeting:
1. Election of Directors
Robert P. Huntley, Cloyd Hugh Propst, Jr., and Howard L. Pruitt
were all elected to three-year terms with 99.8% of shares
voted.
2. Dixon Odom PLLC was ratified to serve as independent auditor
for the year ending December 31, 2000 with 99.9% of the shares
voted.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
(27) Financial data schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the
quarter ended June 30, 2000.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CATAWBA VALLEY BANCSHARES, INC.
Date: August 14, 2000 By: /s/ R. Steve Aaron
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R. Steve Aaron
President and Chief Executive Officer
Date: August 14, 2000 By: /s/ G. Marvin Lowder
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G. Marvin Lowder
Chief Financial Officer
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