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 March 31, 2000.
( ) Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from ____________ to ____________.
No. 000-29658
------------------------
(Commission File Number)
COMMUNITY INDEPENDENT BANK, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
PENNSYLVANIA 23-2357593
- ------------------------ ------------------------
(State of Incorporation) (IRS Employer ID Number)
201 N. MAIN STREET, BERNVILLE, PA 19506
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (zip code)
(610) 488-1200
(Registrant's Telephone Number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Exchange Act 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
---
Number of Shares Outstanding as of May 5, 2000
COMMON STOCK ($5.00 Par Value) 699,502
- ------------------------------ --------------------
(Title of Class) (Outstanding Shares)
1
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
FORM 10-QSB
For the Quarter Ended March 31, 2000
Contents
PART I FINANCIAL INFORMATION Page No.
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of
March 31, 2000 and December 31, 1999 3
Consolidated Statements of Income
for the Three Month Period
Ended March 31, 2000 and 1999 4
Consolidated Statements of Comprehensive
Income for the Three Month Period Ended
March 31, 2000 and 1999 5
Consolidated Statements of Stockholders'
Equity for the Three Month Period
Ended March 31, 2000 6
Consolidated Statements of Cash Flows
for the Three Month Period Ended
March 31, 2000 and 1999 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8-16
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 16
Part II OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security
Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
2
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS March 31, 2000 December 31, 1999
-------------- -----------------
(Unaudited)
<S> <C> <C>
Cash and due from banks $ 3,104,397 $ 4,139,228
Interest-bearing deposits in other banks 26,002 13,238
Cash and cash equivalents 3,130,399 4,152,466
Securities available for sale 13,849,249 13,383,658
Mortgage loans held for sale 81,300 68,000
Loans receivable, net of allowance for
loan losses March 31, 2000 $1,188,011,
December 31, 1999 $1,211,628 85,129,412 85,668,141
Bank premises and equipment, net 2,851,521 2,828,800
Accrued interest receivable and other assets 3,487,440 3,434,861
TOTAL ASSETS $ 108,529,321 $ 109,535,926
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing $ 10,152,889 $ 10,434,304
Interest bearing 78,396,140 80,161,897
TOTAL DEPOSITS 88,549,029 90,596,201
Securities sold under agreements
to repurchase 878,826 661,092
Other borrowed funds 11,145,762 10,471,037
Other liabilities 656,867 565,694
TOTAL LIABILITIES 101,230,484 102,294,024
Stockholders' equity:
Preferred stock, par value $5.00 per
share; authorized and unissued
1,000,000 shares -- --
Common stock, par value $5.00
per share; authorized 5,000,000
shares; issued and outstanding
March 31, 2000 699,502 shares;
December 31, 1999 698,637 shares 3,497,510 3,493,185
Surplus 159,246 154,268
Retained earnings 3,762,765 3,701,727
Accumulated other comprehensive income (loss) (120,684) (107,278)
TOTAL STOCKHOLDERS' EQUITY 7,298,837 7,241,902
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 108,529,321 $ 109,535,926
</TABLE>
3
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
For the Three Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
Loans receivable, including fees $1,767,438 $1,735,941
Securities:
Taxable 168,924 169,094
Tax-exempt 10,866 5,044
Other 22,995 12,578
Total interest income 1,970,223 1,922,657
Interest expense:
Deposits 842,008 861,024
Other borrowed funds 203,756 30,546
Long-term debt 0 74,309
Total interest expense 1,045,764 965,879
Net interest income 924,459 956,778
Provision for loan losses 30,000 90,000
Net interest income after
provision for loan losses 894,459 866,778
Other income:
Customer service fees 89,179 77,121
Net gains from sale of mortgages 6,914 26,333
Other 57,427 65,247
Total other income 153,520 168,701
Other expenses:
Salaries and employee benefits 443,469 460,314
Occupancy 92,468 93,656
Equipment 103,274 81,945
Marketing and advertising 25,963 15,608
Loan collection and foreclosed real estate 29,220 7,058
Professional fees 41,445 15,250
Stationery and supplies 10,224 27,030
Other 157,272 169,232
Total other expenses 903,335 870,093
Income before income taxes 144,644 165,386
Federal income taxes 34,702 45,353
Net Income $ 109,942 $ 120,033
Basic and diluted earnings per share $ 0.16 $ 0.17
Weighted average number of common
shares outstanding 699,074 696,774
See Notes to Consolidated Financial statements
4
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Net Income $109,942 $120,033
Other Comprehensive Income (Loss)
net of tax
Unrealized holding gains (losses)
arising during the period, net of
tax expense (benefit) 2000 ($6,906);
1999 ($32,622) (13,406) (63,322)
Total comprehensive income $ 96,536 $ 56,711
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Three Months Ended March 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Accumulated
Other
Common Retained Comprehensive
Stock Surplus Earnings Income Total
----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1999 $ 3,493,185 $ 154,268 $ 3,701,727 $ (107,278) $ 7,241,902
Net income -- -- 109,942 -- 109,942
Cash dividends ($.07 per share) (48,904) (48,904)
Net change in unrealized gain (loss)
on securities available for sale,
net of taxes -- -- -- (13,406) (13,406)
Issuance of 865 shares of common
stock under dividend reinvestment
program 4,325 4,978 -- -- 9,303
Balance, March 31, 2000 $ 3,497,510 $ 159,246 $ 3,762,765 $ (120,684) $ 7,298,837
</TABLE>
See Notes to Consolidated Financial Statements
6
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 109,942 120,033
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for loan losses 30,000 90,000
Provision for depreciation 85,436 70,075
Net gains on sale of mortgage loans (6,914) (26,333)
Proceeds from sale of mortgage loans 589,805 1,998,903
Mortgage loans originated for sale (599,100) (1,099,770)
Net amortization of securities premiums and discounts (1,372) 1,818
Amortization of mortgage servicing rights 6,480 25,740
Increase in accrued interest receivable and other assets (52,579) (380,378)
Increase in other liabilities 72,567 255,349
Net cash provided by operating activities 234,265 1,055,437
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from maturities of securities available for sale 549,688 500,000
Purchase of securities available for sale (996,275) (1,000,000)
Net increase in loans 361,552 (4,072,508)
Purchases of bank premises and equipment (108,156) (108,960)
Purchase of life insurance 0 (160,000)
Proceeds from surrender of life insurance 131,174 208,242
Net cash used in investing activities (62,017) (4,633,626)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits (2,047,172) 4,346,479
Net increase in securities sold
under agreements to repurchase 217,734 --
Net increase (decrease) in other borrowed funds 674,724 (668,335)
Dividends paid (48,904) (41,807)
Proceeds from shares issued under dividend
reinvestment program 9,303 --
Net cash provided by financing activities (1,194,315) 3,636,447
Increase (decrease) in cash and cash equivalents (1,022,067) 58,258
Cash and cash equivalents:
Beginning 4,152,466 3,024,192
Ending 3,130,399 3,082,450
Cash payments for:
Interest 1,051,002 971,408
Income taxes 0 78,419
</TABLE>
See Notes To Consolidated Financial Statements
7
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2000
Note A. Basis of Presentation
The unaudited consolidated financial statements include the accounts of
Community Independent Bank, Inc. and its wholly-owned subsidiary, Bernville
Bank, N.A. All significant intercompany accounts and transactions have been
eliminated. The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
considered necessary for fair presentation have been included. Operating results
for the three month period ended March 31, 2000 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2000.
In addition to historical information, this Form 10-QSB Report contains
forward-looking statements. The forward-looking statements contained herein are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those projected in the forward-looking statements.
Important factors that might cause such differences include, but are not limited
to, those discussed in the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations". Readers are
cautioned not to place undue reliance on these forward-looking statements, which
reflect management's analysis only as of the date hereof. The Company undertakes
no obligation to publicly revise or update these forward-looking statements to
reflect events or circumstances that arise after the date hereof. Readers should
carefully review the risk factors described in other documents the Company files
from time to time with the Securities and Exchange Commission.
Note B. New Accounting Standard
The Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities", in June 1998
which was recently amended by Statement No. 137 which delays the effective date.
The Company is required to adopt the Statement on January 1, 2001. The adoption
of the Statement is not expected to have a significant impact on the Company.
Note C. Cash Dividend
On April 13, 2000, the Board of Directors declared a dividend of $.07 per
share to shareholders of record on April 24, 2000. The dividend will be paid on
May 15, 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations analyzes the major elements of the Company's balance sheets and
statements of income. This should be read in conjunction with the Company's
financial statements and accompanying footnotes.
8
<PAGE>
OVERVIEW
The Company's net income for the first quarter of 2000 was $109,942, a
decrease of $10,091, or 8.41% from $120,033 net income for the first quarter of
1999. Total assets decreased to $108,529,321 at March 31, 2000, a decrease of
$1,006,605, or 0.92% from $109,535,926 at December 31, 1999.
During the three months ended March 31, 2000, loans receivable decreased
0.63% to $85,129,412 from $85,668,141 at December 31, 1999, while deposits
decreased 2.26% to $88,549,029 from $90,596,201 at December 31, 1999.
RESULTS OF OPERATIONS
Net Interest Income and Net Interest Margin
Net interest income is the primary source of operating income for the
Company. Net interest income is the difference between interest earned on loans
and securities and interest paid on deposits and other funding sources.
Generally, changes in net interest income are measured by net interest rate
spread and net interest margin. Net interest rate spread is equal to the
difference between the average rate earned on earning assets and the average
rate incurred on interest-bearing liabilities. Net interest margin represents
the difference between interest income (including net loan fees earned) and
interest expense calculated as a percentage of average earning assets. The
factors that influence net interest income include changes in interest rates and
changes in the volume and mix of asset and liability balances.
The Company's net interest income decreased $32,319 or 3.38% to $924,459
during the first quarter of 2000 from $956,778 during the first quarter of 1999.
Interest income increased $47,566 or 2.47%, from $1,922,657 for the first
quarter of 1999 to $1,970,223 for the first quarter of 2000, while interest
expense increased $79,885 or 8.27%, from $965,879 for the first quarter of 1999
to $1,045,764 for the first quarter of 2000.
The increases in interest income are principally due to lower levels of
loans receivable and taxable securities while the increase in interest expense
was due to interest bearing deposits growth and higher levels of borrowed funds
used to fund the growth in earning assets.
9
<PAGE>
Net interest margin decreased 44 basis point from 4.10% in the first
quarter of 1999 to 3.66% in the first quarter of 2000. Net interest margin
decreased primarily due to an increase in non-performing assets to 2.60% of
total assets or $2,826,000, at March 31, 2000 compared to $273,000 or 0.26% of
total assets at March 31, 1999.
For the first quarter of 2000, the average yield on earning assets
decreased 35 basis points to 7.89% from 8.24% for the first quarter of 1999. The
decrease was caused primarily by the increase of $2,307,000 in non-performing
assets at March 31, 2000.
For the first quarter of 2000, the average rate paid on interest-bearing
liabilities increased 8 basis points to 4.68% from 4.60% for the first quarter
of 1999. The increase was caused primarily by an increase in the amount of
borrowings outstanding and that the average rate paid on other borrowed funds
and the introduction of repurchase agreements at a rate higher than deposit
rates.
Provision for Loan Losses
The provision for loan losses was $30,000 for the first quarter of 2000
compared to $90,000 for the first quarter of 1999.
The allowance for loan losses represented 1.37% and 1.39% of total loans
receivable at March 31, 2000 and at December 31, 1999, respectively. Management
performs periodic evaluations of the loan portfolio. These evaluations consider
several factors including, but not limited to, current economic conditions, loan
portfolio composition, prior loan loss experience, trends in portfolio volume,
and management's estimation of potential losses in the portfolio. Management
believes that the allowance for loan losses is adequate for each of the periods
presented.
Other Income
Total other income decreased $15,181 or 9.00% from $168,701 during the
first quarter of 1999 to $153,520 during the first quarter of 2000. The decrease
was due primarily to a $19,419 decrease in net gains from the sale of mortgages
and a decrease in other income of $7,820 which were partially offset by an
increase of $12,058 in customer service fees. The decrease in other income is
primarily attributable to a decrease in mortgage lending activity causing a
decrease in mortgage loan fees. The increase in customer service fees is
primarily due to an increase in insufficient fund fees, ATM convenience fees,
and CD early withdrawal penalty fees of approximately $9,000, $2,000, and
$3,000, respectively. This increase was partially offset by lower deposit
account fees.
Other Expenses
Total other expenses increased $33,242 or 3.82% during the first quarter of
2000 versus the same period in 1999, from $870,093 to $903,335. The increase in
total other expenses was due primarily to an increase in equipment expense of
$21,329, an increase of $26,195 in professional fees, an increase of $22,162 in
loan collection and foreclosed real estate expenses, and an increase of $10,355
in marketing and advertising expense. The increases in these other expenses were
partially offset by a decrease in salary expense, stationery and supplies
expense and other expenses of $16,845, $16,806, and $11,906, respectively.
10
<PAGE>
Salaries and employee benefits, which represent the largest component of
other expenses decreased $16,845 or 3.66%, from $460,314 for the first quarter
of 1999 to $443,469 for the same period in 2000. Salaries and employee benefits
decreased due to a reduction of staff, mainly in the commercial lending area.
Occupancy expense decreased $1,188 or 1.27%, to $92,468 for the first
quarter of 2000 versus $93,656 for the first quarter of 1999.
Equipment expense increased $21,329 or 26.03%, from $81,945 for the first
quarter of 1999 to $103,274 for the first quarter of 2000. The increase in
equipment expense was the result of increases in software support and
depreciation. Equipment purchases of $270,938 during 1999 had an impact on
depreciation expense of approximately $12,000 during the first quarter 2000.
Marketing and advertising expenses increased $10,355 or 66.34% to $25,963
for the first quarter of 2000 versus $15,608 for the first quarter of 1999. The
increase in marketing and advertising expenses for the first quarter of 2000 was
due to increased advertising efforts and advertising agency expenses to develop
the company's new image campaign.
Loan collection and foreclosed real estate expenses increased $22,162 to
$29,220 for the first quarter of 2000 versus $7,058 for the first quarter of
1999. Increases in loan collections and foreclosed real estate expenses were
primarily due to increased efforts in the collection and work-out of
non-performing assets.
Professional fees increased $26,195 to $41,445 for the first quarter of
2000 versus $15,250 for the first quarter of 1999. Professional fees for the
first quarter of 2000 were higher than during the same period in 1999 due
primarily to additional attorney fees for SEC filing issues, additional internal
audits performed by an outside firm, fees related to the collection and work-out
of non-performing assets and fees incurred to initiate profitability studies.
Stationery and supplies expense decreased $16,806 or 62.17% to $10,224 for
the first quarter of 2000 versus $27,030 for the first quarter of 1999. The
decrease in the stationery and supplies expense is primarily a result of the
creation of supply inventory and purchasing software for managing the bank's
purchasing function.
Other operating expenses decreased from $169,232 for the first quarter of
1999 to $157,272 for the same period in 2000, a decrease of $11,960 or 7.07%.
Other operating expenses included in this category that experienced decreases
for the current period include telephone, postage, travel, employee programs due
to increased efforts to control expenses.
Income Taxes
Income tax expense was $34,702 for the first quarter of 2000, for an
effective tax rate of 23.99% versus $45,353 for the first quarter of 1999 and an
effective tax rate of 27.42%. The tax rate for each of the periods was less than
the federal statutory rate of 34% primarily because of tax-exempt securities and
loan income and earnings on the cash surrender value of life insurance policies.
11
<PAGE>
Year 2000
The transition to year 2000 went smoothly with no major problems being
discovered. Cash levels that were increased to accommodate year-end liquidity
needs were reduced to normal levels during the first quarter 2000.
Regulatory Agreement
On January 24, 2000, the Bank entered into a Memorandum of Understanding
("MOU") with the Office of the Comptroller of the Currency ("OCC"), whereby the
Bank has agreed to take certain actions in response to concerns raised by the
OCC. The MOU is not a formal supervisory action by the OCC. The actions which
the Bank agreed to take are generally in the nature of improving the Bank's
internal procedures and policies. The Bank is in the process of implementing the
steps necessary to comply with its obligations under the MOU.
FINANCIAL CONDITION
Securities
Securities increased to $13,849,249 at March 31, 2000, from $13,383,658 at
December 31, 1999. The increase of $465,591 or 3.48% is primarily due to the
purchase of $1,000,000 U.S. Treasury notes replacing a $500,000 maturing U.S.
Treasury note.
Loans
Loans receivable, net of the allowance for loan losses of $1,188,011 at
March 31, 2000 and $1,211,628 at December 31, 1999, decreased to $85,129,412 at
March 31, 2000 from $85,668,141 at December 31, 1999. The decrease of $538,729
or 0.63% was primarily from a decrease in the mortgage loan portfolio which had
less new loan activity than the first quarter 1999 and normal loan pay-downs.
Loan and Asset Quality
Total non-performing loans (comprised of non-accruing loans and loans past
due for more than 90 days and still accruing) as a percentage of average loans
outstanding as of March 31, 2000 was 3.05%, compared with 3.59% at December 31,
1999. Total non-performing loans decreased to $2,649,000 at March 31, 2000, from
$3,040,000 at December 31, 1999. The decrease in total non-performing loans is
primarily attributable to the non-performing loan charge-offs of $53,647 and a
combination of non-performing loans paid off or brought to current status.
The Bank had other real estate owned (OREO) consisting of two properties in
the amount of $177,423 at March 31, 2000 and one property in the amount of
$47,600 at December 31, 1999.
The following schedule displays detailed information about the Bank's
non-performing assets and the allowance for loan losses for the periods ended
March 31, 2000, December 31, 1999 and March 31, 1999.
12
<PAGE>
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999 March 31, 1999
-------------- ----------------- --------------
(In thousands)
<S> <C> <C> <C>
Average loans outstanding $86,937 $84,758 $81,742
Allowance for loan losses 1,188 1,212 803
Non-performing loans:
Non-accruing loans 2,403 2,456 0
Accruing loans past due
90 days or more 246 584 134
Total non-performing loans 2,649 3,040 134
Other real estate 177 48 139
Total non-performing assets $ 2,826 $ 3,088 $ 273
Non-performing loans to average
loans outstanding 3.05% 3.59% 0.16%
Non-performing assets to total assets 2.60% 2.82% 0.26%
Allowance for loan losses to total
non-performing loans 44.85% 39.87% 599.25%
Allowance for loan losses to
average loans outstanding 1.37% 1.43% 0.98%
</TABLE>
Potential Problem Loans
At March 31, 2000, the Bank has $1,009,971 in commercial loans for which
the payments are presently current, but the borrowers are experiencing financial
difficulties. These loans are subject to constant management attention and their
classification is reviewed quarterly.
Deposits
Total deposits at March 31, 2000 were $88,549,029, a decrease of
$2,047,172 or 2.26% over total deposits of $90,596,201 at December 31,1999. The
decrease in deposits was primarily in the certificate of deposit category due to
the bank's pricing strategy.
13
<PAGE>
Other Borrowed Funds and Long-term Debt
Other borrowed funds including securities sold under agreements to
repurchase and long-term debt increased $892,459 from $11,132,129 at December
31, 1999 to $12,024,588 at March 31, 2000. The increase was primarily a result
of the decrease in deposits of $2,047,172, which was partially offset by the
decrease in cash and cash equivalents of $1,022,067 and a decrease in net loans
of $361,552. Cash and cash equivalents levels were reduced from higher levels as
higher liquidity was anticipated during the century date rollover. The need for
higher liquidity for Year 2000 concerns did not materialize and cash and cash
equivalent levels were decreased to normal levels.
Stockholders' Equity and Capital Ratios
Total stockholders' equity at March 31, 2000 was $7,298,837 compared to
$7,241,902 at December 31, 1999. In the third quarter of 1999, the Company
implemented a dividend reinvestment program which resulted in additional capital
during the first quarter of 2000 of $9,303. The retained net earnings of the
Company of $109,942 were partially offset by unrealized losses on securities
available for sale of $13,406. A comparison of the Bank's capital ratios is as
follows:
March 31, 2000 December 31, 1999
-------------- -----------------
Tier 1 Capital 6.74% 6.54%
(to average assets)
Tier 1 Capital 9.31% 8.97%
(to risk-weighted assets)
Total Capital 10.56% 10.22%
(to risk-weighted assets)
The minimum capital requirements imposed by federal regulatory authorities
for Leverage, Tier 1 and Total Capital are 4%, 4% and 8%, respectively. The
consolidated capital ratios are not materially different from the Bank's capital
ratios. At March 31, 2000 and December 31, 1999, the Company and the Bank
exceeded the minimum capital ratio requirements and are considered "well
capitalized".
Interest Rate Sensitivity
The operations of the Bank are subject to risk resulting from interest rate
fluctuations to the extent that there is a difference between the amount of the
Bank's interest earning assets and the amount of interest bearing liabilities
that are prepaid/withdrawn, mature or re-price in specified periods.
The principal objective of the Bank's asset/liability management activities
is to provide consistently higher levels of net interest income while
maintaining acceptable levels of interest rate and liquidity risk and
facilitating the funding needs of the Bank. The Bank utilizes an interest rate
sensitivity model as the primary quantitative tool in measuring the amount of
interest rate risk that is present. The traditional maturity "gap" analysis,
which reflects the volume difference between interest rate sensitive assets and
liabilities during a given time period, is reviewed regularly by management. A
positive gap occurs when the amount of interest sensitive assets exceeds
interest sensitive liabilities. This position would contribute positively to net
income in a rising interest rate environment. Conversely, if the balance sheet
has more liabilities re-pricing than assets, the balance sheet is liability
sensitive or negatively gapped. Management continues to monitor sensitivity
in order to avoid overexposure to changing interest rates.
14
<PAGE>
Another method used by management to review its interest sensitivity
position is through "simulation". In simulation, the Bank projects the future
net interest streams in light of the current gap position. Various interest rate
scenarios are used to measure levels of interest income associated with
potential changes in the Bank's operating environment. Management cannot measure
levels of interest income associated with potential changes in the Bank's
operating environment. Management cannot predict the direction of interest rates
or how the mix of assets and liabilities will change. The use of this
information will help formulate strategies to minimize the unfavorable effect on
net interest income caused by interest rate changes.
The operations of the Bank do not subject it to foreign currency exchange
or commodity price risk. Also, the Bank does not utilize interest rate swaps,
caps or other hedging transactions.
The Bank's overall sensitivity to interest rate risk is low due to its
non-complex balance sheet. The Bank has implemented several strategies to manage
interest rate risk which include selling most newly originated residential
mortgages, increasing the volume of variable rate commercial loans and
maintaining a short maturity in the investment portfolio.
Liquidity
Liquidity management involves meeting the funds flow requirements of
customers who may either be depositors wanting to withdraw funds, or borrowers
needing assurance that sufficient funds will be available to meet their credit
needs. Liquid assets consist of vault cash, securities and maturities of earning
assets.
The Bank's principal source of asset liquidity is the securities portfolio.
The carrying value of securities maturing in less than one year equals
$5,186,000. Another source of funds is maturities in the loan portfolio.
The Bank also has sources of liability liquidity which include core
deposits and borrowing capacity at the Federal Home Loan Bank. The short-term
borrowing capacity from FHLB was in excess of $29 million at March 31, 2000.
Management believes that the Bank's liquidity is sufficient to meet its
anticipated needs.
Future Outlook
A cash dividend of seven cents per share was declared to shareholders of
record on April 24, 2000, payable on May 15, 2000. Community Independent Bank,
Inc. established a dividend reinvestment plan in 1998. The dividend reinvestment
plan was registered with the U.S. Securities and Exchange Commission in July
1999 which enables the holding company to issue authorized shares to satisfy the
needs of the dividend reinvestment program.
15
<PAGE>
Bernville Bank is exploring the formation of joint ventures with insurance
agencies to provide title insurance and general insurance products. Bernville
Bank has introduced lease-financing services to meet the equipment acquisition
needs of the businesses and repurchase agreements as a cash management tool for
individuals and businesses. Management believes that adding these products and
services to the many quality financial services the bank already offers to its
customers will allow the bank to better serve its customers, create new fee
income opportunities and compete more effectively.
Bernville Bank announced the resignation of Arlan J. Werst, effective March
23, 2000. Karl D. Gerhart and Walter J. Potteiger were then designated as the
transition team to manage the day to day affairs of the bank. On April 13, 2000,
Karl D. Gerhart was appointed acting President and CEO until such time as a
permanent President and CEO can be appointed. A search firm has been hired and
an active search is underway.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Bank's exposure to market risk has not changed significantly since
December 31, 1999. The market risk principally includes interest rate risk that
is discussed above.
Part II Other Information
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit
27. Financial Data Schedule
(b) Reports on Form 8-K
None
16
<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.
COMMUNITY INDEPENDENT BANK, INC.
(Registrant)
May 10, 2000 /s/ Karl D. Gerhart
------------ -------------------------------------
Date Karl D. Gerhart, Acting President/CEO
May 10, 2000 /s/ Linda L. Strohmenger
------------ -------------------------------
Date Linda L. Strohmenger, Secretary
(Principal financial officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information derived from the quarterly
report on form 10-QSB and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,104,397
<INT-BEARING-DEPOSITS> 26,002
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 13,849,249
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 85,129,412
<ALLOWANCE> 1,188,011
<TOTAL-ASSETS> 108,529,321
<DEPOSITS> 88,549,029
<SHORT-TERM> 12,024,588
<LIABILITIES-OTHER> 656,867
<LONG-TERM> 0
0
0
<COMMON> 3,497,510
<OTHER-SE> 3,801,327
<TOTAL-LIABILITIES-AND-EQUITY> 108,529,321
<INTEREST-LOAN> 1,767,438
<INTEREST-INVEST> 179,790
<INTEREST-OTHER> 22,995
<INTEREST-TOTAL> 1,970,223
<INTEREST-DEPOSIT> 842,008
<INTEREST-EXPENSE> 1,045,764
<INTEREST-INCOME-NET> 924,459
<LOAN-LOSSES> 30,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 903,335
<INCOME-PRETAX> 144,644
<INCOME-PRE-EXTRAORDINARY> 144,644
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 109,942
<EPS-BASIC> 0.16
<EPS-DILUTED> 0.16
<YIELD-ACTUAL> 3.38
<LOANS-NON> 2,403,000
<LOANS-PAST> 246,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,009,971
<ALLOWANCE-OPEN> 1,211,628
<CHARGE-OFFS> 53,647
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,187,981
<ALLOWANCE-DOMESTIC> 1,187,981
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
