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 September 30, 2000
[ ] Transition Report Under Section 13
or 15(d) of the Exchange Act
For the transition period ended__________________
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
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As of October 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
<S> <C> <C>
Item 1 - Financial Statements (Unaudited)
Consolidated Statements of Financial Condition
September 30, 2000 and December 31, 1999......................................... 3
Consolidated Statements of Operations
Three Months and Nine Months Ended September 30, 2000 and 1999.................. 4
Consolidated Statements of Cash Flows
Nine Months Ended September 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 6. Exhibits and Reports on Form 8-K........................................ 9
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<PAGE>
Part I. Financial Information
Item 1 - Financial Statements
<TABLE>
<CAPTION>
Catawba Valley Bancshares, Inc. and Subsidiary
Consolidated Statements of Financial Condition
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September 30,
2000 December 31,
ASSETS (Unaudited) 1999*
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<S> <C> <C>
Cash and due from banks $ 874,324 $ 5,213,121
Interest-bearing deposits with banks 2,467,514 3,026,931
Federal funds sold 1,594,687 1,497,543
Time deposits in banks 890,968 2,277,968
Securities available for sale 27,229,297 15,755,543
Securities held to maturity, market value of
$1,512,993 in 2000 and $1,607,909 in 1999 1,522,913 1,650,946
Loans 107,008,730 83,658,838
Allowance for loan losses (1,442,163) (1,341,340)
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NET LOANS 105,566,567 82,317,498
Federal Home Loan Bank 400,000 271,000
Bank premises and equipment 3,143,557 2,801,766
Other assets 2,959,283 3,426,049
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TOTAL ASSETS $ 146,649,110 $ 118,238,365
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing demand $ 9,094,983 $ 7,021,108
Money market and NOW accounts 34,833,272 30,665,088
Savings 2,083,216 1,821,626
Time, $100,000 and over 26,244,922 17,648,470
Other time 49,776,553 40,824,592
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TOTAL DEPOSITS 122,032,946 97,980,884
Borrowings 8,000,000 5,000,000
Accrued expenses and other liabilities 423,411 236,710
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TOTAL LIABILITIES 130,456,357 103,217,594
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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 1,327,017 301,140
Accumulated other comprehensive loss (231,948) (378,053)
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TOTAL STOCKHOLDERS' EQUITY 16,192,753 15,020,771
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 146,649,110 $ 118,238,365
================== ==================
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* Derived from audited financial statements
See accompanying notes.
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<PAGE>
<TABLE>
<CAPTION>
Catawba Valley Bancshares, Inc. and Subsidiary
Consolidated Statements of Operations (Unaudited)
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Three Months Ended Nine Months Ended
September 30, September 30,
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2000 1999 2000 1999
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INTEREST INCOME
<S> <C> <C> <C> <C>
Loans $ 2,549,175 $ 1,781,463 $ 7,028,822 $ 4,834,838
Investment securities 466,442 244,992 1,164,038 620,274
Federal funds sold 24,687 34,313 56,682 86,647
Time deposits 17,727 34,383 63,245 103,732
Interest-bearing deposits with banks 66,080 41,050 172,712 132,584
------------- -------------- ------------- --------------
TOTAL INTEREST INCOME 3,124,111 2,136,201 8,485,499 5,778,075
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INTEREST EXPENSE
Time deposits, $100,000 and over 399,955 234,379 1,030,097 654,398
Other deposits 1,171,602 809,470 3,164,122 2,237,348
Borrowings 131,534 0 324,566 0
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TOTAL INTEREST EXPENSE 1,703,091 1,043,849 4,518,785 2,891,746
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NET INTEREST INCOME 1,421,020 1,092,352 3,966,714 2,886,329
PROVISION FOR LOAN LOSSES 210,000 141,379 431,972 315,366
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,211,020 950,973 3,534,742 2,570,963
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NON-INTEREST INCOME
Service charges on deposit accounts 110,821 71,981 319,590 200,647
Other 112,357 111,956 308,929 386,481
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TOTAL NON-INTEREST INCOME 223,178 183,937 628,519 587,128
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NON-INTEREST EXPENSE
Compensation and employee benefits 411,097 351,079 1,236,387 964,994
Occupancy and equipment 117,878 113,532 355,683 285,550
Professional fees 26,381 48,894 79,482 138,739
Stationery, printing and supplies 15,769 24,161 48,356 63,891
Advertising and business promotion 47,139 40,267 128,614 116,822
Data processing 85,449 58,783 254,284 180,051
Other 113,487 95,662 356,558 274,538
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TOTAL NON-INTEREST EXPENSE 817,200 732,378 2,459,364 2,024,585
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INCOME BEFORE INCOME TAXES 616,998 402,532 1,703,897 1,133,506
INCOME TAXES 207,301 142,615 588,299 414,393
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NET INCOME $ 409,697 $ 259,917 $ 1,115,598 $ 719,113
============= ============== ============= ==============
NET INCOME PER COMMON SHARE
Basic $ 0.27 $ 0.17 $ 0.75 $ 0.48
============= ============= ============= ==============
Diluted $ 0.27 $ 0.16 $ 0.71 $ 0.45
============= ============= ============= ==============
Basic 1,495,351 1,495,351 1,495,351 1,492,057
Effect of stock options 28,517 90,869 70,442 100,026
------------- -------------- ------------- --------------
Diluted 1,523,868 1,586,220 1,565,793 1,592,083
============= ============== ============= ==============
</TABLE>
See accompanying notes.
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<PAGE>
<TABLE>
<CAPTION>
Catawba Valley Bancshares, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
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Nine Months Ended
September 30,
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $1,115,598 $719,113
Adjustments to reconcile net income to net cash
(used) provided by operating activities:
Depreciation and amortization 153,349 146,045
Issuance of stock options 0 65,025
Deferred income taxes 19,689 0
Provision for loan losses 431,972 315,366
Change in assets and liabilities:
Increase in accrued interest receivable (447,994) (309,802)
(Increase) decrease in other assets 914,760 497,004
(Increase) decrease in accrued expenses and other liabilities 186,701 (231,697)
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NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,374,075 1,201,054
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CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in time deposits with other financial institutions 1,387,000 197,978
Purchase of securities available for sale (11,874,195) (7,778,560)
Purchase of securities held to maturity (304,122) (460,000)
Purchase of Federal Home Loan Bank stock (129,000) 0
Collections and maturities of securities available for sale 621,812 2,752,231
Collections and maturities of securities held to maturity 67,965 32,441
Net increase in loans (23,940,321) (19,373,587)
Proceeds from sale of foreclosed real estate 547,490 0
Purchase of premises and equipment (514,115) (845,949)
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NET CASH USED BY
INVESTING ACTIVITIES (34,137,486) (25,475,446)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 24,052,062 22,007,249
Increase in borrowed funds 3,000,000 0
Cash dividends paid (89,721) 0
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NET CASH PROVIDED BY
FINANCING ACTIVITIES 26,962,341 22,007,249
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NET DECREASE IN CASH
AND CASH EQUIVALENTS (4,801,070) (2,267,143)
CASH AND CASH EQUIVALENTS, BEGINNING 9,737,595 11,595,786
CASH AND CASH EQUIVALENTS, ENDING $4,936,525 $9,328,643
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<PAGE>
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
nine month periods ended September 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 nine month
periods ended September 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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<CAPTION>
Three months ended Nine months ended
September 30, September 30
2000 1999 1999 2000
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<S> <C> <C> <C> <C>
Weighted average number of common shares used
in computing basic net Income per share 1,495,351 1,495,351 1,495,351 1,492,057
Effect of dilutive stock options 28,517 90,869 70,442 100,026
--------- --------- --------- ---------
Weighted average number of common shares
and dilutive potential common shares used
in computing diluted net income per share 1,523,868 1,586,220 1,565,793 1,592,083
--------- --------- --------- ---------
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NOTE C - COMPREHENSIVE INCOME
For the nine months ended September 30, 2000 and 1999, total comprehensive
income, consisting of net income and unrealized securities gains and losses, net
of taxes, was $(231,948) and $(305,151), respectively.
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<PAGE>
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 September 30, 2000 and December 31, 1999
During the nine months ended September 30, 2000, total assets increased $28.4
million 24.0% from $118.2 million to $146.6 million. Total loans outstanding
increased $23.3 million or 27.9% for the same period. The growth in these areas
was funded by a $24.1 million or 24.6% increase in deposits, and a $3.0 million
increase in borrowings.
The Bank operates three full service branches and actively solicits loans and
deposits.
Total stockholders' equity increased $1.2 million for the nine month period
ended September 30, 2000. The increase resulted principally from net income of
$1.1 million for the nine months. At September 30, 2000 the Bank continued to
exceed all applicable regulatory capital requirements.
Comparison of Results of Operations for the Three Months Ended September 30,
2000 and 1999
Net Income. Net income for the quarter ended September 30, 2000 was $409,697 or
$.27 per share, as compared with net income of $259,917 for $.17 per share for
the three months ended September 30, 1999, an increase of $149,780 or $.10 per
share. An increase in net interest income for the quarter ended September 30,
2000 of $328,668 and a increase in non interest income of $39,241 was offset by
increase in non interest expense of $84,822.
Net Interest Income. Net interest income for the quarter ended September 30,
2000 was $1,421,020 as compared with $1,092,352 during the quarter ended
September 30, 1999 an increase of $328,668, that resulted principally from an
increased level of interest earning assets during the quarter. Average interest
earning assets were approximately $47.4 million higher during the quarter ended
September 30, 2000 as compared with the quarter ended September 30, 1999.
Provision for Loan Losses. The provision for loan losses was $210,000 and
$141,379 for the quarters ended September 30, 2000 and 1999 respectively. There
were net loan charge offs of $277,283 during the quarter ended September 30,
2000 as compared with the net charge offs of $65,974 during the quarter ended
September 30, 1999. At September 30, 2000 non accrual loans aggregated $250,441.
Non Interest Income. Non interest income was $223,178 for the quarter ended
September 30, 2000 compared to $183,937 for the quarter ended September 30, 1999
an increase of $39,241. This increase resulted principally from an increase of
$38,840 in service charges on deposit accounts and an increase in other non
interest income of $401.
Non Interest Expense. Non interest expense increased to $817,200 during the
quarter ended September 30, 2000 as compared to $732,378 for the quarter ended
September 30, 1999, an increase of $84,822. The Primary facts contributing to
this increase was an increase of $86,684
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<PAGE>
in compensation and data processing, that was attributable to the Bank opening
it's third full service branch late in the first quarter of 1999.
Comparison of Results of Operations for the Nine Months Ended September 30, 2000
and 1999
Net Income. Net income for the nine months ended September 30, 2000 was
$1,115,598 or $.75 per share, as compared with net income of $719,113 or $.48
per share for the nine months ended September 30, 1999 an increase of $396,485
or $.27 per share. An increase in net interest income of $1,080,385 and an
increase in non interest income of $41,391 for the nine month period were off
set by an increase in non interest expense of $434,779.
Net Interest Income. Net interest income was $4.0 million during the nine months
ended September 30, 2000 as compared with 2.9 million during the corresponding
period of the previous fiscal year, an increase of $1.1 million. The yield on
interest earning assets and the cost of funds have increased during this rising
interest rate environment. The net interest margin has decreased by 12 basis
points.
Provision for Loan Losses. The provision for the loan losses was $431,972 and
$315,366 for the nine months ended September 30, 2000 and 1999 respectively.
There were net loan charge offs of $331,148 for the nine months ended September
30, 2000 as compared with net charge offs of $84,442 during the nine months
ended September 30, 1999. At September 30, 2000, non accrual loans aggregated
$250,441.
Non Interest Income. Non interest income was $628,519 for the nine months ended
September 30, 2000 compared to $587,128 for the nine month ended September 30,
1999 an increase of $41,391. This increase resulted principally from an increase
of $118,943 in service charges on deposit accounts that was offset by a decrease
in other non interest income of $77,552.
Non Interest Expense. Non interest expense increased to $2,459,364 during the
nine months ended September 30, 2000 as compared to $2,024,585 for the nine
months ended September 30, 1999, an increase of $434,779. The Primary facts
contributing to this increase was an increase of $415,759 in compensation,
occupancy expense and data processing expense. That was attributable to the Bank
opening it's' third full service branch late in the first quarter of 1999.
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,
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. The external source of funds is an
increase in deposits.
At September 30, 2000, liquid assets comprised 22 % 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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<PAGE>
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 September 30, 2000.
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<PAGE>
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: November 10, 2000 By: /s/ R. Steve Aaron
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R. Steve Aaron
President and Chief Executive Officer
Date: November 10, 2000 By: /s/ G. Marvin Lowder
--------------------
G. Marvin Lowder
Chief Financial Officer
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