U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1997
Commission File Number 33-67254
COMMERCIAL BANKSHARES, INC.
(Exact name of Registrant as specified in its charter)
FLORIDA 65-0050176
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1550 S.W. 57th Avenue, Miami, Florida 33144
(Address of principal executive offices) (Zip Code)
(305) 267-1200
(Registrant's Telephone Number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 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 .
CLASS OUTSTANDING AT May 9, 1997
COMMON STOCK, $.08 PAR VALUE 3,355,434 SHARES
<PAGE>
T A B L E O F C O N T E N T S
PART I Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 4
PART II Item 6. Exhibits and Reports on Form 8-K 6
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
COMMERCIAL BANKSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 1997, and December 31, 1996
(Dollars in thousands except share data)
(Unaudited)
<CAPTION>
March 31, December 31,
1997 1996
<S> <C> <C>
Assets:
Cash and due from banks $ 16,535 $ 15,544
Federal funds sold 5,636 14,352
Total cash and cash equivalents 22,171 29,896
Investment securities available for sale, at
fair value (cost of $89,046 in 1997
and $83,095 in 1996) 90,532 85,084
Investment securities held to maturity
(aggregate fair value of $102,719
in 1997 and $107,075 in 1996) 101,648 105,629
Loans, net 139,960 128,226
Premises and equipment, net 12,284 12,114
Accrued interest receivable 3,111 2,639
Goodwill, net 1,106 1,150
Other assets 3,342 3,278
Total assets $374,154 $368,016
Liabilities and stockholders' equity:
Deposits:
Demand $ 62,450 $ 58,575
Savings 23,297 23,115
Interest-bearing checking 46,764 47,642
Money market accounts 39,086 37,662
Time 130,581 131,869
Total deposits 302,178 298,863
Securities sold under agreements to repurchase 31,282 29,203
Accounts payable and accrued liabilities 2,123 1,839
Accrued interest payable 618 667
Total liabilities 336,201 330,572
Stockholders' equity:
Common stock, $.08 par value, 6,250,000
authorized shares, 3,353,434 issued and
outstanding 268 268
Additional paid-in capital 30,947 30,947
Retained earnings 5,632 4,808
Unrealized holding gain on securities
available for sale, net of tax 1,173 1,488
Treasury stock, 5,250 shares, at cost (67) (67)
Total stockholders' equity 37,953 37,444
Total liabilities and stockholders' equity $374,154 $368,016
<FN>
The accompanying notes are an integral part of these
condensed consolidated financial statements<PAGE>
</TABLE>
<TABLE>
COMMERCIAL BANKSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the three months ended March 31, 1997 and 1996
(Dollars in thousands except per share data)
(Unaudited)
<CAP[TION>
1997 1996
<S> <C> <C>
Interest income:
Interest and fees on loans $2,999 $2,113
Interest on investment securities 3,000 3,434
Interest on federal funds sold 139 181
Total interest income 6,138 5,728
Interest expense:
Interest on deposits 2,091 2,243
Interest on securities sold under
agreements to repurchase 331 183
Total interest expense 2,422 2,426
Net interest income 3,716 3,302
Provision for loan losses 20 -
Net interest income after provision
for loan losses 3,696 3,302
Non-interest income:
Service charges on deposit accounts 489 375
Other fees and service charges 93 96
Total non-interest income 582 471
Non-interest expense:
Salaries and employee benefits 1,566 1,385
Occupancy expense 254 263
Professional fees 71 69
Furniture and equipment expense 217 202
Data processing 182 191
FDIC Insurance 30 100
Amortization of goodwill 44 156
Other 357 373
Total non-interest expense 2,721 2,739
Income before income taxes 1,557 1,034
Provision for income taxes 465 268
Net income $1,092 $ 766
Earnings per common and common equivalent share $.32 $.23
Weighted average number of shares and common
equivalent shares 3,393,343 3,374,281
<FN>
The accompanying notes are an integral part of these
condensed consolidated financial statements<PAGE>
</TABLE>
<TABLE>
COMMERCIAL BANKSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1997 and 1996
(In thousands)
(Unaudited)
<CAPTION> 1997 1996
Cash flows from operating activities:
<S> <C> <C>
Net income $ 1,092 $ 766
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for loan losses 20 -
Depreciation, amortization, and accretion, net 231 341
Change in accrued interest receivable (472) (181)
Change in other assets (102) (729)
Change in net income tax liability 369 233
Change in accounts payable and accrued liabilities 138 (219)
Change in accrued interest payable (49) (34)
Net cash provided by operating activities 1,227 177
Cash flows from investing activities:
Proceeds from maturities of investment securities
held to maturity 2,367 16,812
Proceeds from maturities of investment securities
available for sale - 4,000
Proceeds from sales of investment securities
held to maturity 1,590 -
Proceeds from sales of investment securities
available for sale 15,000 -
Purchases of investment securities held to maturity - (10,061)
Purchases of investment securities available for sale (20,952) (7,112)
Net change in loans (11,731) (9,041)
Purchases of premises and equipment (352) (84)
Net cash used in investing activities (14,078) (5,486)
Cash flows from financing activities:
Net change in demand, savings, interest-bearing
checking, money market, and time deposit accounts 3,315 (4,116)
Net change in securities sold under agreements
to repurchase 2,079 8,598
Dividends paid (268) -
Proceeds from issuance of stock - 16
Net cash provided by financing activities 5,126 4,498
Decrease in cash and cash equivalents (7,725) (811)
Cash and cash equivalents at beginning of period 29,896 20,547
Cash and cash equivalents at end of period $ 22,171 $ 19,736
Supplemental disclosures:
Interest paid $ 352 $ 434
Income taxes paid $ 96 $ 35
<FN>
The accompanying notes are an integral part of these
condensed consolidated financial statements<PAGE>
</TABLE>
COMMERCIAL BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements, which
are for interim periods, do not include all disclosures provided in the annual
consolidated financial statements. These financial statements and the
footnotes thereto should be read in conjunction with the annual financial
statements for the years ended December 31, 1996, 1995, and 1994, for
Commercial Bankshares, Inc. (the "Company").
All material intercompany balances and transactions have been eliminated.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (which are of a
normal recurring nature) necessary for a fair presentation of the financial
statements. The results of operations for the three-month period ended March
31, 1997, are not necessarily indicative of the results to be expected for the
full year.
2. PER SHARE DATA
Earnings per share have been computed by dividing net income by the weighted
average number of common shares and dilutive common share equivalents
outstanding. Common share equivalents for 1997 and 1996 include the effect of
all outstanding stock options, using the treasury stock method, and the effect
of the one-for-twenty (five per cent) stock dividend effective on January 3,
1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's net income reported for the quarter ended March 31, 1997, was
approximately $1,092,000, or $.32 per share. This compares to net income
reported for the quarter ended March 31, 1996, of approximately $766,000, or
$.23 per share.
The Company's net interest income before the provision for loan losses
increased by $414,000, or 12.5%, in the first quarter from the corresponding
quarter in 1996. Growth in the loan portfolio resulted in an improved
interest spread, thus contributing to the rise in net interest income. The
net interest margin increased from 4.39% for the first quarter of 1996 to
4.72% for the corresponding quarter in 1997, or 33 basis points.
Federal Deposit Insurance Corporation (FDIC) insurance expense decreased by
$70,000, or 70%, for the first quarter of 1997, from the corresponding period
in 1996. FDIC insurance premium rates were reduced in September 1996, when a
one-time assessment for the recapitalization of the Savings Association
Insurance Fund (SAIF) was made. FDIC assessments currently consist only of
Financing Corporation (FICO) debt assessments of 1.3 basis points for the Bank
Insurance Fund and 6.5 basis points for the SAIF.
Company management continually reviews and evaluates the allowance for loan
losses. Based on the nature of the loan portfolio and prevailing economic
factors, the Company believes that the allowance for loan losses at March 31,
1997, was sufficient to absorb potential losses in the loan portfolio. In
evaluating the adequacy of the allowance for loan losses, management considers
the results of its methodology, along with other factors such as the amount of
non-performing loans and the economic conditions affecting the Company's
markets and customers.
The allowance for loan losses was approximately $2,059,000 (or 1.45% of total
loans) at March 31, 1997, as compared with $2,049,000 (or 1.57% of total
loans) at year end 1996. The Company actively pursues collection of past due
loans. There are no known loan industry concentrations. Virtually all loans
are within the Company's markets in Dade and Broward counties.
The Company had one non-accrual loan of approximately $27,000 at March 31,
1997. No interest income was recognized on the non-accrual loans to date in
1997 or in 1996. If non-accrual loans were on full accrual, additional
interest income of approximately $687 and $1,650 would have been recorded
during the first quarter of 1997 and 1996, respectively.
Based on these factors and the status of the loan portfolio, management
believes the allowance for loan losses is adequate.
LIQUIDITY AND CAPITAL RESOURCES
The source of the Company's liquidity is funds generated by the operations of
Commercial Bank of Florida ("Bank"), its wholly owned subsidiary. For banks,
liquidity represents the ability to meet both loan commitments and withdrawals
of deposited funds. Funds to meet these needs can be obtained by converting
liquid assets to cash or by attracting new deposits or other sources of
funding. Many factors affect a bank's ability to meet liquidity needs. The
Bank's principal sources of funds are deposits, repurchase agreements,
payments on loans, paydowns and maturities on investments and investments
available for sale, and capital contributions by the Company.
The Company's liquidity at March 31, 1997, consisted of $22.2 million in cash
and cash equivalents and $90.5 million in available-for-sale investments, for
a total of $112.7 million, compared with a total of $115.0 million at year-end
1996, a decrease of approximately $2.3 million. Sales and maturities of
securities categorized as "held to maturity" exceeded purchases in the same
category by $4.0 million since year-end. The total of deposits and securities
sold under agreements to repurchase, $333.5 million at March 31, 1997,
increased by $5.4 million or 1.6% over the year-end 1996 level, $328.1
million. The funds provided by the changes in those accounts were invested in
loans. Gross loans at March 31, 1997, of $142.0 million increased by $11.7
million, or 9.0% over the year-end 1996 level.
In accordance with risk based capital guidelines issued by the Federal Reserve
Board, the Company and the Bank are each required to maintain a minimum ratio
of total capital to weighted risk assets of 8%. Additionally, all bank
holding companies and member banks must maintain "core" or "Tier 1" capital of
at least 3% of total assets ("leverage ratio"). Member banks operating at or
near the 3% capital level are expected to have well diversified risks,
including no undue interest rate risk exposure, excellent control systems,
good earnings, high asset quality, high liquidity, and well managed on- and
off-balance sheet activities, and in general be considered strong banking
organizations with a composite 1 rating under the CAMEL rating system of
banks. For all but the most highly rated banks meeting the above conditions,
the minimum leverage ratio is to be 3% plus an additional 100 to 200 basis
points. The Tier 1 Capital, Total Capital, and Leverage Ratios of the Company
were 19.54%, 20.67%, and 9.52%, respectively, as of March 31, 1997.<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11. Statement re computation of earnings per share.
All other exhibits are omitted because they are not applicable.
(b) Reports on Form 8-K. No report on Form 8-K was filed during the quarter
ended March 31, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Commercial Bankshares, Inc.
(Registrant)
/s/ Barbara E. Reed
Senior Vice President &
Treasurer
Date: May 9, 1997
<PAGE>
Exhibit 11
<TABLE>
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
The computation of earnings per common and common equivalent share is as follows:
<CAPTION> Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Net income (in thousands) $1,092 $ 766
Weighted average number of shares and
equivalent shares:
Weighted average shares outstanding..... 3,348,184 3,350,080
Common stock equivalents from potential
dilutive exercise of stock options.... 45,159 24,201
Total shares included in computation of
earnings per share.................... 3,393,343 3,374,281
Earnings per common and common equivalent share: $.32 $.23
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 16,285
<INT-BEARING-DEPOSITS> 250
<FED-FUNDS-SOLD> 5,636
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 90,532
<INVESTMENTS-CARRYING> 101,648
<INVESTMENTS-MARKET> 102,719
<LOANS> 142,019
<ALLOWANCE> 2,059
<TOTAL-ASSETS> 374,154
<DEPOSITS> 302,178
<SHORT-TERM> 31,282
<LIABILITIES-OTHER> 2,741
<LONG-TERM> 0
0
0
<COMMON> 268
<OTHER-SE> 37,685
<TOTAL-LIABILITIES-AND-EQUITY> 374,154
<INTEREST-LOAN> 2,999
<INTEREST-INVEST> 3,000
<INTEREST-OTHER> 139
<INTEREST-TOTAL> 6,138
<INTEREST-DEPOSIT> 2,091
<INTEREST-EXPENSE> 2,422
<INTEREST-INCOME-NET> 3,716
<LOAN-LOSSES> 20
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,721
<INCOME-PRETAX> 1,557
<INCOME-PRE-EXTRAORDINARY> 1,557
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,092
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
<YIELD-ACTUAL> 4.72
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,049
<CHARGE-OFFS> 18
<RECOVERIES> 8
<ALLOWANCE-CLOSE> 2,059
<ALLOWANCE-DOMESTIC> 2,059
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
