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 September 30, 2000
Commission File Number 00-22246
COMMERCIAL BANKSHARES, INC.
----------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
FLORIDA 65-0050176
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(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 November 10, 2000
----- --------------------------------
COMMON STOCK, $.08 PAR VALUE 3,608,123 SHARES
TABLE OF CONTENTS
PART I Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 11
PART II Item 6. Exhibits and Reports on Form 8-K 13
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
COMMERCIAL BANKSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2000 and December 31, 1999
(Dollars in thousands except share data)
<CAPTION>
9/30/2000 12/31/1999
--------- ----------
<S> <C> <C>
Assets: (Unaudited)
Cash and due from banks $ 22,008 $ 19,086
Federal funds sold 22,095 19,999
-------- --------
Total cash and cash equivalents 44,103 39,085
Investment securities available for sale,
at fair value (cost of $131,777 in 2000
and $128,454 in 1999) 130,457 125,236
Investment securities held to maturity, at cost
(aggregate fair value of $39,254 in 2000
and $43,859 in 1999) 38,751 43,392
Loans, net 271,466 244,016
Premises and equipment, net 13,031 13,590
Accrued interest receivable 3,934 3,282
Goodwill, net 465 614
Other Assets 4,572 5,955
-------- --------
Total Assets $506,779 $475,170
======== ========
Liabilities and stockholders' equity:
Deposits:
Demand $ 92,920 $ 80,059
Interest-bearing checking 54,710 60,032
Money market accounts 40,978 42,432
Savings 22,277 22,316
Time 203,505 183,608
-------- --------
Total deposits 414,390 388,447
Securities sold under agreements to repurchase 46,930 40,794
Accrued interest payable 739 632
Accounts payable and accrued liabilities 2,744 2,516
-------- --------
Total liabilities 464,803 432,389
-------- --------
Stockholders' equity:
Common stock, $.08 par value, 6,250,000
authorized shares, 3,945,303 issued
(3,931,375 in 1999) 314 313
Additional paid-in capital 43,858 43,738
Retained earnings 4,795 2,111
Accumulated other comprehensive loss (659) (1,855)
Treasury stock, 332,930 shares
(78,746 in 1999), at cost (6,332) (1,526)
-------- --------
Total stockholders' equity 41,976 42,781
-------- --------
Total liabilities and stockholders' equity $506,779 $475,170
======== ========
<FN>
The accompanying notes are an integral part of these
condensed consolidated financial statements
</TABLE>
<TABLE>
COMMERCIAL BANKSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the three months ended September 30, 2000 and 1999
(In thousands except per share data)
(Unaudited)
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Interest income:
Interest and fees on loans $6,061 $4,783
Interest on investment securities 2,756 2,791
Interest on federal funds sold 261 128
------ ------
Total interest income 9,078 7,702
------ ------
Interest expense:
Interest on deposits 3,547 2,582
Interest on securities sold under
agreements to repurchase 699 525
------ ------
Total interest expense 4,246 3,107
------ ------
Net interest income 4,832 4,595
Provision for loan losses 90 70
------ ------
Net interest income after provision 4,742 4,525
------ ------
Non-interest income:
Service charges on deposit accounts 600 505
Other fees and service charges 133 140
Securities losses - (7)
------ ------
Total non-interest income 733 638
------ ------
Non-interest expense:
Salaries and employee benefits 1,895 1,852
Occupancy 320 309
Furniture and equipment 205 250
Data processing 235 233
Stationery and supplies 61 59
Insurance 54 57
Professional fees 57 66
Telephone and fax 58 57
Administrative service charges 51 42
Amortization 50 45
Other 226 263
------ ------
Total non-interest expense 3,212 3,233
------ ------
Income before income taxes 2,263 1,930
Provision for income taxes 693 537
------ ------
Net income $1,570 $1,393
====== ======
Earnings per common and common equivalent share:
Basic $.43 $.36
Diluted $.42 $.35
Weighted average number of shares and common equivalent shares:
Basic 3,619 3,846
Diluted 3,704 3,964
<FN>
The accompanying notes are an integral part of these
condensed consolidated financial statements
</TABLE>
<TABLE>
COMMERCIAL BANKSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the nine months ended September 30, 2000 and 1999
(In thousands except per share data)
(Unaudited)
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Interest income:
Interest and fees on loans $17,063 $13,664
Interest on investment securities 8,442 7,923
Interest on federal funds sold 463 555
------- -------
Total interest income 25,968 22,142
------- -------
Interest expense:
Interest on deposits 9,654 7,320
Interest on securities sold under
agreements to repurchase 1,841 1,297
------- -------
Total interest expense 11,495 8,617
------- -------
Net interest income 14,473 13,525
Provision for loan losses 240 390
------- -------
Net interest income after provision 14,233 13,135
------- -------
Non-interest income:
Service charges on deposit accounts 1,758 1,581
Other fees and service charges 419 627
Securities losses (108) (7)
------- -------
Total non-interest income 2,069 2,201
------- -------
Non-interest expense:
Salaries and employee benefit 5,676 5,565
Occupancy 903 927
Furniture and equipment 666 757
Data processing 652 754
Stationery and supplies 187 199
Insurance 160 138
Professional fees 175 230
Telephone and fax 177 151
Administrative service charges 137 121
Amortization 149 134
Other 727 824
------- -------
Total non-interest expense 9,609 9,800
------- -------
Income before income taxes 6,693 5,536
Provision for income taxes 2,030 1,526
------- -------
Net income $4,663 $4,010
======= =======
Earnings per common and common equivalent share:
Basic $1.27 $1.04
Diluted $1.24 $1.01
Weighted average number of shares and common equivalent shares:
Basic 3,686 3,859
Diluted 3,775 3,973
<FN>
The accompanying notes are an integral part of these
condensed consolidated financial statements
</TABLE>
<TABLE>
COMMERCIAL BANKSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the three and nine months ended September 30, 2000 and 1999
(Dollars in thousands)
(Unaudited)
<CAPTION>
Three months ended
September 30,
2000 1999
---- ----
<S> <C> <C>
Net income $1,570 $1,393
Other comprehensive income(loss), net of tax:
Unrealized holding gains(losses) arising
during the period 1,905 (232)
Reclassification adjustment for losses
realized in net income - 18
------ ------
Other comprehensive income(loss) 1,905 (214)
------ ------
Comprehensive income $3,475 $1,179
====== ======
Nine months ended
September 30,
2000 1999
---- ----
Net income $4,663 $4,010
Other comprehensive income(loss), net of tax:
Unrealized holding gains(losses) arising
during the period 1,128 (2,851)
Reclassification adjustment for losses
realized in net income 68 18
------ ------
Other comprehensive income(loss) 1,196 (2,833)
------ ------
Comprehensive income $5,859 $1,177
====== ======
<FN>
The accompanying notes are an integral part of these
condensed consolidated financial statements
</TABLE>
<TABLE>
COMMERCIAL BANKSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2000 and 1999
(In thousands)
(Unaudited)
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $4,663 $4,010
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for loan losses 240 390
Depreciation, amortization and accretion, net 912 1,154
Loss on sale of investment securities 108 7
Gain on sale of premises and equipment (7) (220)
Change in accrued interest receivable (652) (456)
Change in other assets 1,383 (24)
Change in accounts payable and accrued liabilities (431) 633
Change in accrued interest payable 107 (60)
------- -------
Net cash provided by operating activities 6,323 5,434
------- -------
Cash flows from investing activities:
Proceeds from maturities of investment securities
held to maturity 4,640 10,864
Proceeds from maturities of investment securities
available for sale 6,568 27,165
Proceeds from sales of investment securities
held to maturity - 540
Proceeds from sales of investment securities
available for sale 7,881 2,971
Purchases of investment securities
available for sale (18,011) (50,859)
Net increase in loans (27,690) (38,412)
Purchases of premises and equipment (304) (412)
Sales of premises and equipment 239 287
------- -------
Net cash used in investing activities (26,677) (47,856)
Cash flows from financing activities:
Net change in deposits 25,943 20,817
Net change in securities sold under agreements
to repurchase 6,136 8,245
Dividends paid (2,022) (1,736)
Proceeds from issuance of stock 121 104
Purchase of treasury stock (4,806) (788)
------- -------
Net cash provided by financing activities 25,372 26,642
------- -------
Increase/(decrease) in cash and cash equivalents 5,018 (15,780)
Cash and cash equivalents at beginning of period 39,085 35,233
------- -------
Cash and cash equivalents at end of period $44,103 $19,453
======= =======
Supplemental disclosures:
Interest paid (net of amounts
credited to deposit accounts) $ 1,847 $ 1,514
======= =======
Income taxes paid $ 2,082 $ 1,569
======= =======
<FN>
The accompanying notes are an integral part of these
condensed consolidated financial statements
</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
consolidated financial statements for the years ended December 31, 1999,
1998, and 1997, 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 necessary for a
fair presentation of the financial statements. Those adjustments are of a
normal recurring nature. The results of operations for the nine month
period ended September 30, 2000, are not necessarily indicative of the
results to be expected for the full year.
2. PER SHARE DATA
Earnings per share have been computed in accordance with Statement of
Financial Accounting Standard No. 128, "Earnings per Share" (SFAS 128) by
dividing net income by the weighted average number of common shares (basic
earnings per share) and by the weighted average number of common shares plus
dilutive common share equivalents outstanding (diluted earnings per share).
Common stock equivalents include the effect of all outstanding stock options,
using the treasury stock method. The weighted average number of shares and
equivalent shares include the effect of the one-for-twenty (five per cent)
stock dividends effective on January 4, 2000, January 4, 1999 and January 2,
1998.
The following tables reconcile the weighted average shares (denominator)
used to calculate basic and diluted earnings per share (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 2000 September 30, 1999
Income Shares Per-Share Income Shares Per-Share
(Numerator)(Denominator) Amount (Numerator)(Denominator) Amount
--------- ----------- ------ --------- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $1,570 3,619 $.43 $1,393 3,846 $.36
Effect of
Dilutive
Options - 85 (.01) - 118 (.01)
------ ----- ---- ------ ----- ----
Diluted EPS $1,570 3,704 $.42 $1,393 3,964 $.35
====== ===== ==== ====== ===== ====
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 2000 September 30, 1999
Income Shares Per-Share Income Shares Per-Share
(Numerator)(Denominator) Amount (Numerator)(Denominator) Amount
--------- ----------- ------ --------- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $4,663 3,686 $1.27 $4,010 3,859 $1.04
Effect of
Dilutive
Options - 89 (.03) - 114 (.03)
------ ----- ----- ------ ----- -----
Diluted EPS $4,663 3,775 $1.24 $4,010 3,973 $1.01
====== ===== ===== ====== ===== =====
</TABLE>
3. NEW ACCOUNTING PRONOUNCEMENTS
In June 2000, the Financial Accounting Standards Board issued Statement of
Financial Accounting standards No. 138 ("Statement No. 138"), "Accounting
for Certain Derivative Instruments and Certain Hedging Activities - an
amendment of Financial Accounting Standards Board Statement No. 133".
Statement No. 138 expands the normal purchases and sales exception,
redefines identified specific risks, recognizes that foreign-currency-
denominated assets and liabilities may be the hedged item in fair value
or cash flow hedges, and allows the designation of inter-company derivatives
as hedging instruments in certain cash flow hedges. The implementation of
this statement is not expected to have a material effect on the Company's
consolidated financial statements.
In September 2000, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 140 ("Statement No. 140"),
"Accounting for a replacement of FASB No. 125". Statement No. 140 revises
the standards for accounting and reporting of securitizations, other
transfers of financial assets and extinguishments of liabilities. The
standards are based on a consistent application of a financial components
approach which focuses on control. Under that approach, after a transfer
of financial assets, an entity recognizes financial and servicing assets it
controls and the liabilities it has incurred. Derecognition of financial
assets occurs when control has been surrendered and liabilities are
derecognized when extinguished. Statement No. 140 is effective for
transfers and servicing of financial assets and extinguishments of
liabilities occurring after March 31, 2001. Other provisions of Statement
No. 140 relating to recognition and reclassification of collateral and
disclosures of securitization transactions are effective for fiscal years
ending after December 15, 2000. The implementation of this statement is
not expected to have a material effect on the Company's consolidated
financial statements.
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 September 30, 2000,
was $1.57 million, a 13% increase over the quarter ended September 30, 1999
of $1.39 million. Basic and diluted earnings per share were $.43 and $.42,
respectively, for the third quarter of 2000, as compared to $.36 and $.35,
respectively, for the third quarter of 1999.
For the nine months ended September 30, 2000, the Company's net income was
$4.66 million, a 16% increase over the nine months ended September 30, 1999
of $4.01 million. Basic and diluted earnings per share were $1.27 and
$1.24, respectively, for the nine months ended September 30, 2000 as
compared to $1.04 and $1.01, respectively, for the nine months ended
September 30, 1999.
The Company's third quarter tax-equivalent net interest income increased by
$210,000, or 4%, to $5.06 million, from $4.85 million in the corresponding
quarter in 1999. For the nine months ended September 30, 2000, the
Company's tax-equivalent net interest income increased by $921,000, or
6%, to $15.17 million, from $14.25 million in the corresponding period in
1999. The quarter increase is due primarily to an increase in earning
assets of 8%, to $456 million for the third quarter of 2000, from $422
million for the same period in 1999, and 9%, to $444 million for the first
nine months in 2000, from $409 million for the same period in 1999.
The annualized net interest margin for the quarter and nine months ended
September 30, 2000 was 4.41% and 4.56%, respectively. This compares to
4.56% and 4.66% for the quarter and nine months ended September 30, 1999.
The decrease of fifteen basis points for the quarter and ten basis points
for the nine months ending September 30, 2000, is the result of an
increasing interest rate environment. The net interest margin has been
calculated on a tax-equivalent basis, which includes an adjustment for
interest on tax-exempt securities.
Non-interest income for the third quarter of 2000 increased by $95,000,
or 15%, and decreased by $132,000, or 6% for the first nine months of 2000,
from the corresponding periods of 1999. The third quarter increase is the
result of an increase in account activity charges. The decrease in the
first nine months is due to a gain on sale of premises and equipment in
1999 of $220,000, and a loss on sale of investments in 2000 of $108,000,
partially offset by an increase in account activity charges of $178,000.
Salaries and employee benefits expense increased by $43,000, or 2%, for
the third quarter of 2000, and by $111,000, or 2% for the first nine
months of 2000, from the corresponding periods of 1999. The increase
is attributable to normal payroll increases.
Furniture and equipment expense decreased by $45,000 or 18% for the third
quarter in 2000 and by $91,000 or 12% for the first nine months of 2000
as compared to the corresponding periods in 1999. The decrease is due to
a decrease in furniture and equipment depreciation.
Data processing expense decreased by $102,000 or 14% for the first nine
months of 2000 as compared to the corresponding period in 1999. The
decrease is due to expenses incurred in 1999 related to the year 2000
date change.
Company management continually reviews and evaluates the allowance for
loan losses. 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 $3.59 million at September 30, 2000, as
compared with $2.76 million at September 30, 1999. For the nine months
ended September 30, 2000, the allowance for loan losses was increased
by the provision for loan losses of $240,000, and increased by approximately
$75,000 in net recoveries. For the nine months ended September 30, 1999,
the allowance was credited with a provision for loan losses of $390,000 and
decreased by approximately $57,000 in net charge-offs. The allowance as a
percentage of total loans has increased to 1.31% at September 30, 2000,
from 1.15% at September 30, 1999. Based on the nature of the loan portfolio
and prevailing economic factors, management believes that the current level
of the allowance for loan losses is sufficient to absorb potential losses
inherent in the loan portfolio.
Approximately $162.5 million, or 59% of total loans was secured by
nonresidential real estate and $57.4 million, or 21% of total loans was
secured by residential real estate as of September 30, 2000. Virtually all
loans are within the Company's markets in Miami-Dade and Broward counties.
The Company had no non-accrual loans at September 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
The objective of liquidity management is to maintain cash flow requirements
to meet immediate and ongoing future needs for loan demand, deposit
withdrawals, maturing liabilities, and expenses. In evaluating actual and
anticipated needs, management seeks to obtain funds at the most economical
cost. Management believes that the level of liquidity is sufficient to meet
future funding requirements.
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. Commercial Bank of Florida's (the Bank) principal sources
of funds are deposits, repurchase agreements, payments on loans, paydowns,
maturities and sales of investments. As an additional source of funds, the
Bank has credit availability with the Federal Home Loan Bank amounting to
$76 million, and Federal Funds purchased lines available at correspondent
banks amounting to $11 million as of September 30, 2000.
The Bank's primary use of funds is to originate loans and purchase
investment securities. The net change in loans during the first nine months
of 2000 was an increase of $27.7 million, and the Bank purchased $18.0
million of investment securities. Additionally, funds were used to purchase
$4.8 million in treasury stock and to pay $2.0 million in cash dividends.
Funding for the above came primarily from increases in deposits of $25.9
million, increases in securities sold under agreements to repurchase of
$6.1 million, proceeds from maturities and sales of investment securities
of $19.1 million, and cash provided from operations of $5.0 million.
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 CAMELS
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 13.12%, 14.51%, and 8.28%, respectively, as of
September 30, 2000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ASSET/LIABILITY MANAGEMENT AND INTEREST RATE RISK
Changes in interest rates can substantially impact the Company's long-term
profitability and current income. An important part of management's efforts
to maintain long-term profitability is the management of interest rate risk.
The goal is to maximize net interest income within acceptable levels of
interest rate risk and liquidity. Interest rate exposure is managed by
monitoring the relationship between interest-earning assets and interest-
bearing liabilities, focusing on the size, maturity or repricing date, rate
of return and degree of risk. The Asset/Liability Management Committee of
the Bank oversees the interest rate risk management and reviews the Bank's
asset/liability structure on a quarterly basis.
The Bank uses interest rate sensitivity, or GAP analysis to monitor the
amount and timing of balances exposed to changes in interest rates. The GAP
analysis is not relied upon solely to determine future reactions to interest
rate changes because it is presented at one point in time and could change
significantly from day-to-day. Other methods such as simulation analysis are
utilized in evaluating the Bank's interest rate risk position. The table
presented below shows the Bank's GAP analysis at September 30, 2000.
<TABLE>
INTEREST RATE SENSITIVITY ANALYSIS
(Dollars in Thousands)
<CAPTION>
Term to Repricing
-------------------------------------------------
Over 1 Year
90 Days 91-181 182-365 & Non-rate
or Less Days Days Sensitive Total
-------- ------- ------- --------- --------
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold $ 22,095 $ - $ - $ - $ 22,095
Investment securities 3,663 2,353 8,573 152,652 167,241
Gross loans
(excluding non-accrual) 64,330 27,957 59,163 123,610 275,060
-------- ------- ------- -------- --------
Total interest-earning
assets $ 90,088 $30,310 $67,736 $276,262 $464,396
-------- ------- ------- -------- --------
Interest-bearing liabilities:
Interest-bearing checking $ - $ - $ - $ 54,710 $ 54,710
Money market - 10,245 10,245 20,488 40,978
Savings - - - 22,277 22,277
Time deposits 57,558 40,416 83,412 22,119 203,505
Borrowed funds 47,766 - - - 47,766
-------- ------- ------- -------- --------
Total interest-bearing
liabilities $105,324 $50,661 $93,657 $119,594 $369,236
-------- ------- ------- -------- --------
Interest sensitivity gap ($ 15,236) ($20,351) ($25,921) $156,668 $ 95,160
Cumulative gap ($ 15,236) ($35,587) ($61,508) $ 95,160
Cumulative ratio of interest-earning
assets to interest-bearing
liabilities 86% 77% 75% 126%
Cumulative gap as a percentage of
total interest-earning assets (3.3%) (7.7%) (13.2%) 20.5%
<FN>
Management's assumptions reflect the Bank's estimate of the
anticipated repricing sensitivity of non-maturity deposit
products. Interest-bearing checking and savings accounts have
been allocated to the "over 1 year" category, and money market
accounts 25% to the "91-181 days" category, 25% to the "182-365
days" category, and 50% to the "over 1 year" category.
</TABLE>
The Bank uses simulation analysis to quantify the effects of various
immediate parallel shifts in interest rates on net interest income over the
next 12 month period. Such a "rate shock" analysis requires key assumptions
which are inherently uncertain, such as deposit sensitivity, cash flows from
investments and loans, reinvestment options, management's capital plans,
market conditions, and the timing, magnitude and frequency of interest rate
changes. As a result, the simulation is only a best-estimate and cannot
accurately predict the impact of the future interest rate changes on net
income. As of September 30, 2000, the Bank's simulation analysis projects an
increase to net interest income of .36%, assuming an immediate parallel shift
downward in interest rates by 200 basis points. If rates rise by 200 basis
points, the simulation analysis projects net interest income would decrease
by 3.88%. These projected levels are within the Bank's policy limits.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
All 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 September 30, 2000.
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 &
Chief Financial Officer
Date: November 10, 2000
--------------------
