Page 1 of 16
Form 10-Q
U. S. Securities and Exchange Commission
Washington, DC 20549
[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 ______________
Commission File No. 000-18445
Benchmark Bankshares, Inc.
(Name of Small Business Issuer in its Charter)
Virginia 54-1460991
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
Incorporation or Organization)
100 South Broad Street
Kenbridge, Virginia 23944
(Address of Principal Executive Offices)
Issuer's Telephone Number: (804)676-8444
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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.
(1) Yes [X] No [ ] (2) Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest applicable date:
3,006,225.559
<PAGE>
Page 2 of 16
Form 10-Q
Benchmark Bankshares, Inc.
Part I - Table of Contents
March 31, 2000
Part I Financial Information
Item 1 Consolidated Balance Sheet
Consolidated Statement of Income and Comprehensive Income
Condensed Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3 Quantitative and Qualitative Disclosures about Market Risk
<PAGE>
Page 3 of 16
Form 10-Q
Benchmark Bankshares, Inc.
Consolidated Balance Sheet
(Unaudited) (Audited)
March 31, December 31,
2000 1999
---- ----
Assets
Cash and due from banks $ 7,135,057 $ 7,533,280
Securities
Federal Agency obligations 13,352,527 13,322,152
State and municipal obligations 8,764,063 12,590,401
Mortgage backed securities 1,712,360 2,267,912
Other securities 195,490 137,000
Federal funds sold 2,903,000 -
Loans 154,607,992 152,262,727
Less
Unearned interest income (44,054) (64,643)
Allowance for loan losses (1,547,024) (1,522,632)
------------- -------------
Net Loans 153,016,914 150,675,452
Premises and equipment - net 3,750,862 3,423,779
Accrued interest receivable 1,592,265 1,390,010
Deferred income taxes 656,264 642,481
Other real estate 807,808 667,808
Other assets 840,518 674,670
------------- -------------
Total Assets $194,727,128 $193,324,945
============= =============
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Form 10-Q
Benchmark Bankshares, Inc.
Consolidated Balance Sheet
(Unaudited) (Audited)
March 31, December 31,
2000 1999
---- ----
Liabilities and Stockholders' Equity
Deposits
Demand (noninterest-bearing) $ 18,804,874 $ 16,213,541
NOW accounts 18,474,528 19,905,599
Money market accounts 7,022,264 8,046,212
Savings 10,144,608 9,763,624
Time, $100,000 and over 15,458,221 16,560,926
Other time 102,712,547 94,250,638
------------- -------------
Total Deposits 172,617,042 164,740,540
Federal funds purchased - 7,035,000
Accrued interest payable 794,757 766,964
Accrued income tax payable 305,137 23,005
Dividends payable - 482,493
Other liabilities 315,124 229,197
------------- -------------
Total Liabilities 174,032,060 173,277,199
Stockholders' Equity
Common stock, par value $.21 per share,
authorized 4,000,000 shares; issued
and outstanding 03-31-00 3,016,658.418,
issued and outstanding 12-31-99
3,015,577.591 shares 633,499 633,272
Capital surplus 4,490,590 4,501,508
Retained earnings 16,124,268 15,455,510
Unrealized security gains net of tax effect (553,289) (542,544)
------------- -------------
Total Stockholders' Equity 20,695,068 20,047,746
------------- -------------
Total Liabilities and
Stockholders' Equity $194,727,128 $193,324,945
============= =============
Note: The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date.
See notes to consolidated financial statements.
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Page 5 of 16
Form 10-Q
Benchmark Bankshares, Inc.
Consolidated Statement of Income and Comprehensive Income
(Unaudited)
Three Months Ended March 31,
2000 1999
---- ----
Interest Income
Interest and fees on loans $3,422,120 $3,139,622
Interest on U. S. Government obligations 250,126 197,679
Interest on State and municipal obligations 124,098 147,476
Interest on Federal funds sold 11,912 190,151
----------- -----------
Total Interest Income 3,808,256 3,674,928
Interest Expense
Interest on deposits 1,793,669 1,857,038
Interest on Federal funds purchased 54,727 -
----------- -----------
Total Interest Expense 1,848,396 1,857,038
----------- -----------
Net Interest Income 1,959,860 1,817,890
Provision for Loan Losses 35,687 28,897
----------- -----------
Net Interest Income after Provision 1,924,173 1,788,993
Noninterest Income
Service charges, commissions, and fees on
deposits 110,145 104,006
Other operating income 113,059 36,509
(Losses) on sale of securities (3,308) (547)
----------- -----------
Total Noninterest Income 219,896 139,968
Noninterest Expense
Salaries and wages 626,170 553,104
Employee benefits 142,220 130,024
Occupancy expenses 70,206 51,563
Furniture and equipment expense 46,838 46,596
Other operating expenses 295,699 250,807
----------- -----------
Total Noninterest Expense 1,181,133 1,032,094
----------- -----------
Net Income before Taxes 962,936 896,867
Income Taxes 296,889 270,173
----------- -----------
Net Income 666,047 626,694
Other Comprehensive Income, Net of Tax
Unrealized holding gain (loss)
arising during period (10,745) (47,679)
----------- -----------
Comprehensive Income $ 655,302 $ 579,015
=========== ===========
Net Income per Share $ 0.22 $ 0.21
=========== ===========
See notes to consolidated financial statements.
<PAGE>
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Form 10-Q
Benchmark Bankshares, Inc.
Condensed Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended March 31,
2000 1999
---- ----
Cash Provided by Operating Activities $ 624,047 $ 896,367
Cash Provided by Financing Activities
Decrease in Federal funds purchased (7,035,000) -
Net increase in demand deposits
and interest-bearing transaction accounts 1,160,262 1,733,891
Net increase (decrease) in savings and money
market deposits (642,964) 1,580,674
Net increase in certificates of deposit 7,359,204 2,514,884
Decrease in dividends payable (482,433) (479,594)
Sale of stock 55,934 159,851
Purchase of stock (66,625) -
----------- ------------
Total Cash Provided by Financing
Activities 348,378 5,509,706
Cash Used in Investing Activities
Purchase of securities (465,458) (4,995,750)
Sale of securities 4,750,389 58,282
Maturity of securities - 2,295,000
Net increase in loans (2,365,854) (4,989,415)
Purchase of premises and equipment (386,725) (34,568)
----------- ------------
Total Cash Provided (Used) by
Investing Activities 1,532,352 (7,666,451)
----------- ------------
Increase (Decrease) in Cash and Cash Equivalents $2,504,777 $(1,260,378)
=========== ============
See notes to consolidated financial statements.
<PAGE>
Page 7 of 16
Form 10-Q
Benchmark Bankshares, Inc.
Notes to Consolidated Financial Statements
March 31, 2000
1. Basis of Presentation
The accompanying consolidated financial statements and related
notes of Benchmark Bankshares, Inc. and its subsidiary, Benchmark
Community Bank, were prepared by management, which has the primary
responsibility for the integrity of the financial information. The
statements have been prepared in conformity with generally accepted
accounting principles appropriate in the circumstances and include
amounts that are based on management's best estimates and judgments.
In meeting its responsibilities for the accuracy of its
financial statements, management relies on the Company's internal
accounting controls. The system provides reasonable assurances that
assets are safeguarded and transactions are recorded to permit the
preparation of appropriate financial information.
The interim period financial information included herein is
unaudited; however, such information reflects all adjustments
(consisting solely of normal recurring adjustments), which are, in the
opinion of management, necessary to a fair presentation of financial
position, results of operation, and changes in financial position for
the interim periods herein reported.
2. Significant Accounting Policies and Practices
The accounting policies and practices of Benchmark Bankshares,
Inc. conform to generally accepted accounting principles and general
practice within the banking industry. Certain of the more significant
policies and practices follow:
(a) The consolidated financial statements of Benchmark Bankshares,
Inc. and its wholly owned subsidiary, Benchmark Community
Bank, include the accounts of both companies. All material
inter-company balances and transactions have been eliminated
in consolidation.
(b) Use of Estimates in Preparation of Financial Statements. The
preparation of the accompanying combined financial statements
in conformity with generally accepted accounting principles
requires management to make certain estimates and assumptions
that directly affect the results of reported assets,
liabilities, revenue, and expenses. Actual results may differ
from these estimates.
(c) Cash and Cash Equivalents. The term cash as used in the
Condensed Consolidated Statement of Cash Flows refers to all
cash and cash equivalent investments. For purposes of the
statement, Federal funds sold, which have a one day maturity,
are classified as cash equivalents.
(d) Investment Securities. Pursuant to guidelines established in
FAS 115, the Company has elected to classify a portion of its
current portfolio as securities available-for-sale. This
category refers to investments that are not actively traded
but are not anticipated by management to be held-to-maturity.
Typically, these types of investments will be utilized by
management to meet short-term asset/liability management
needs. The remainder of the portfolio is classified as
held-to-maturity. This category refers to investments that are
anticipated by management to be held until they mature.
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Page 8 of 16
For purposes of financial statement reporting, securities
classified as available-for-sale are to be reported at fair
market value (net of any tax effect) as of the date of the
statements; however, unrealized holding gains or losses are to
be excluded from earnings and reported as a net amount in a
separate component of stockholders' equity until realized.
Securities classified as held-to-maturity are recorded at
cost. The resulting book value ignores the impact of current
market trends.
(e) Loans. Interest on loans is computed by methods which
generally result in level rates of return on principal amounts
outstanding (simple interest). Unearned interest on certain
installment loans is recognized as income using the Rule of
78ths Method, which materially approximates the effective
interest method. Loan fees and related costs are recognized as
income and expense in the year the fees are charged and costs
incurred.
(f) Allowance for Loan Losses. The allowance for loan losses is
increased by provisions charged to expense and decreased by
loan losses net of recoveries. The provision for loan losses
is based on the Bank's loan loss experience and management's
detailed review of the loan portfolio which considers economic
conditions, prior loan loss experience, and other factors
affecting the collectivity of loans. Accrual of interest is
discontinued on loans past due 90 days or more when collateral
is inadequate to cover principal and interest or, immediately,
if management believes, after considering economic and
business conditions and collection efforts, that the
borrower's financial condition is such that collection is
doubtful.
(g) Premises and Equipment. Premises and equipment are stated at
cost less accumulated depreciation. Depreciation is computed
generally by the straight line basis over the estimated useful
lives of the assets. Additions to premises and equipment and
major betterments and replacements are added to the accounts
at cost. Maintenance and repairs and minor replacements are
expensed as incurred. Gains and losses on dispositions are
reflected in current earnings.
(h) Other Real Estate. As a normal course of business, the Bank
periodically has to foreclose on property used as collateral
on nonperforming loans. The assets are recorded at cost plus
capital improvement cost.
(i) Depreciation. For financial reporting, property and equipment
are depreciated using the straight line method; for income tax
reporting, depreciation is computed using statutory
accelerated methods. Leasehold improvements are amortized on
the straight line method over the estimated useful lives of
the improvements. Income taxes in the accompanying financial
statements reflect the depreciation method used for financial
reporting and, accordingly, include a provision for the
deferred income tax effect of depreciation which will be
recognized in different periods for income tax reporting.
(j) Earnings Per Share
Earnings per share were computed by using the average shares
outstanding for each period presented. The 2000 average shares
have been adjusted to reflect the sale of 7,586 shares through
the employee stock option plan at various dates during the
period and the retirement of 6,500 shares on January 17, 2000.
The 1999 average shares have been adjusted to reflect the sale
of 13,833.651 shares of the Company's common stock through the
dividend reinvestment plan on January 31, 1999, as well as the
sale of 4,105 shares through the employee stock option plan at
various dates during the period. The average shares of
outstanding stock for the first quarter of 2000 and 1999 were
3,013,782.370 and 3,011,304.017, respectively.
<PAGE>
Page 9 of 16
(k) Income Taxes. Deferred income taxes are reported for temporary
differences between items of income or expense reported in the
financial statements and those reported for income tax
purposes. Deferred taxes also reflect the impact of the
unrealized security losses which are reflected on the balance
sheet only, pursuant to FAS 115 guidelines. The differences
relate principally to the provision for loan losses,
depreciation, and unrealized security losses.
The table below reflects the components of the Net Deferred
Tax Asset account as of March 31, 2000:
Deferred tax assets resulting
from loan loss reserves $436,175
Deferred tax asset resulting from
deferred compensation 58,914
Deferred tax liabilities resulting
from depreciation (123,852)
Unrealized securities losses 285,027
---------
Net Deferred Tax Asset $656,264
=========
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
FIRST QUARTER 2000
Earnings Summary
Net income of $666,047 for the first quarter of 2000
increased $39,353 or 6.28% as compared to net income of
$626,694 earned during the first quarter of 1999. Earnings per
share of $.22 as of March 31, 2000 increased by $.01 or 4.76%
over the same period in 1999. The annualized return on average
assets of 1.35% increased 1.50% while the annualized return on
average equity of 12.87% decreased .46% when comparing first
quarter 2000 results with those of first quarter 1999.
The Bank experienced growth in the first quarter of
2000 in both loans and deposits, but deposit growth rebounded
somewhat from the slow growth performance record experienced
in 1999. When comparing the results of the first quarter loan
growth for the years 2000 and 1999, there was a significant
increase in loans.
The Bank experienced a significant level of growth in
loans that was not matched with deposit growth. This activity
resulted in an increase in the loan to deposit ratio to a
level of 89.54% from 81.89% in the same quarter of the prior
year.
Interest Income and Interest Expense
Total interest income of $3,808,256 for the first
quarter of 2000 increased $133,328 or 3.63% over interest
income of $3,674,928 recorded during the first quarter of
1999. The major area of increase was in interest and fees on
loans, which was a direct result from the growth of the loan
portfolio. Due to greater loan growth than deposit growth, the
investment portfolio has changed as investments in short-term
instruments began to reflect smaller investment balances.
These short-term investments typically earn at a lesser rate
than loans.
<PAGE>
Page 10 of 16
Total interest expense in the first quarter of 2000
decreased to a level of $1,848,396. This amounted to a
decrease of $8,642 or .47% over the level reached during the
first quarter of 1999. This decrease in interest expense
resulted from lower cost in the marketplace.
Provision for Loan Losses
While the Bank's loan loss experience ratio remains
low, management continues to set aside provisions to the loan
loss reserve. During the first quarter of 2000, the Bank
increased the loan loss reserve by $24,392 to a level of
$1,547,024 or 1.00% of the outstanding loan balance.
At year end 1999, the reserve level amounted to
$1,522,632 or 1.00% of the outstanding loan balance net of
unearned interest.
Nonperforming Loans
Nonperforming loans consist of loans accounted for on
a non-accrual basis and loans which are contractually past due
90 days or more as to interest and/or principal payments
regardless of the amount of collateral held. As of March 31,
2000, the Bank had $1,195,754 in nonperforming loans or .77%
of the loan portfolio. The amount of non-secured loans in this
category amounted to $3,484.
Noninterest Income and Noninterest Expense
Noninterest income of $219,896 increased $79,928 or
57.10% for the first quarter of 2000 as compared to the level
of $139,968 reached during the first quarter of 1999. The
increase results from an expanded customer base as the
existing branches continue to grow in trade area business, and
the three new offices start to see a measurable increase in
customers served.
Noninterest expense of $1,181,133 increased $149,039
or 14.41% for the first quarter of 2000 as compared to the
level of $1,032,094 reached during the first quarter of 1999,
as all areas of operation had additional expense related to
the staffing and support required for an expanding customer
base and the start-up of two new loan origination offices and
a full-service branch.
Off-Balance-Sheet Instruments/Credit Concentrations
The Bank is a party to financial instruments with
off-balance-sheet risk in the normal course of business to
meet the financing needs of its customers. Unless noted
otherwise, the Bank does not require collateral or other
security to support these financial instruments. Standby
letters of credit are conditional commitments issued by the
Bank to guarantee the performance of a customer to a third
party. Those guarantees are primarily issued to facilitate the
transaction of business between these parties where the exact
financial amount of the transaction is unknown, but a limit
can be projected. The credit risk involved in issuing letters
of credit is essentially the same as that involved in
extending loan facilities to customers. There is a fee charged
for this service.
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Page 11 of 16
As of March 31, 2000, the Bank had $1,897,489
outstanding letters of credit. This represents a $71,500 or
3.92% increase over the year end level. These instruments are
based on the financial strength of the customer and the
existing relationship between the Bank and the customer. The
maturities of these letters are as follows:
March 31,
2000 $1,289,171
2001 607,318
2002 3,000
Liquidity
As of the end of the first quarter of 2000,
$54,895,587 or 35.51% of gross loans will mature or are
subject to repricing within one year. These loans are funded
in part by $28,216,807 in certificates of deposit of $100,000
or more of which $15,458,221 mature in one year or less.
Currently, the Bank has a maturity average ratio for
the next twelve months of 114.31% when comparing earning asset
and certificates of deposit maturities.
At year end 1999, $55,137,045, or 39.44% of gross
loans, were scheduled to mature or were subject to repricing
within one year and $13,285,923 in certificates of deposit
were scheduled to mature during 2000.
Capital Adequacy
Total stockholder equity was $20,695,068 or 10.63% of
total assets as of March 31, 2000. This compared to
$20,047,746 or 10.37% of total assets as of December 31, 1999.
Primary capital (stockholders' equity plus loan loss
reserves) of $22,242,092 represents 11.42% of total assets as
of March 31, 2000 as compared to $21,570,378 or 11.16% of
total assets as of December 31, 1999.
The increase in the equity position resulted from
steady earnings with no dividends payable in the first quarter
plus the sale of additional stock through the dividend
reinvestment and the incentive stock option plans.
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Page 12 of 16
Item 3 Quantitative and Qualitative Disclosures about Market Risk
Through the nature of the banking industry, market risk is
inherent in the Company's operation. A majority of the business is
built around financial products, which are sensitive to changes in
market rates. Such products, categorized as loans, investments, and
deposits are utilized to transfer financial resources. These products
have varying maturities, however, and this provides an opportunity to
match assets and liabilities so as to offset a portion of the market
risk.
Management follows an operating strategy that limits the
interest rate risk by offering only shorter-term products that
typically have a term of no more than five years. By effectively
matching the maturities of inflows and outflows, management feels it
can effectively limit the amount of exposure that is inherent in its
financial portfolio.
As a separate issue, there is also the inherent risk of loss
related to loans and investments. The impact of loss through default
has been considered by management through the utilization of an
aggressive loan loss reserve policy and a conservative investment
policy that limits investments to higher quality issues; therefore,
only the risk of interest rate variations is considered in the
following analysis.
The Company does not currently utilize derivatives as part of
its investment strategy.
The tables below present principal amounts of cash flow as it
relates to the major financial components of the Company's balance
sheet. The cash flow totals represent the amount that will be generated
over the life of the product at its stated interest rate. The present
value discount is then applied to the cash flow stream at the current
market rate for the instrument to determine the current value of the
individual category. Through this two-tiered analysis, management has
attempted to measure the impact not only of a rate change, but also the
value at risk in each financial product category. Only financial
instruments that do not have price adjustment capabilities are herein
presented.
In Table One, the cash flows are spread over the life of the
financial products in annual increments as of March 30 each year with
the final column detailing the present value discounting of the cash
flows at current market rates.
Fair Value of Financial Assets
Benchmark Bankshares, Inc.
March 31, 2000
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Current
Categories 2001 2002 2003 2004 2005 Thereafter Value
---------- ---- ---- ---- ---- ---- ---------- -----
Loans
Commercial $23,946,612 $ - $ - $ - $ - $ - $23,946,612
Mortgage 26,317,541 19,098,121 19,330,781 22,977,222 20,541,955 6,424,102 91,826,960
Simple Interest I/L 12,438,020 8,740,558 5,187,637 2,734,731 1,336,066 66,659 25,047,772
Rule of 78ths I/L 450,137 166,402 43,646 6,043 - - 569,469
Investments
U. S. Government Agencies 863,810 863,810 1,363,810 2,820,410 3,645,273 7,849,218 13,087,802
Municipals
Nontaxable 568,586 934,101 472,179 1,556,745 265,436 5,341,528 7,795,089
Taxable 61,693 63,693 61,693 61,693 556,572 157,250 936,371
Mortgage Backed Securities 279,202 254,750 233,068 213,761 196,493 807,882 1,712,360
</TABLE>
<PAGE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Current
Categories 2001 2002 2003 2004 2005 Thereafter Value
---------- ---- ---- ---- ---- ---- ---------- -----
Certificates of Deposits
< 182 days 2,246,139 - - - - - 2,207,797
182 - 364 days 5,058,205 - - - - - 4,874,133
1 year - 2 years 32,765,485 12,244,107 - - - - 43,896,888
2 years - 3 years 7,305,114 3,703,837 4,623,171 - - - 14,122,050
3 years - 4 years 1,294,038 1,963,900 1,119,342 2,972,965 - - 5,209,125
4 years - 5 years 1,125,865 964,443 648,254 937,917 9,046 - 3,199,814
5 years 11,126,780 5,692,704 6,386,914 12,408,320 12,671,292 207,940 39,687,511
7 years 1,232 4,943 216 216 216 8,719 11,219
</TABLE>
In Table Two, the cash flows are present value discounted by predetermined
factors to measure the impact on the financial products portfolio at six and
twelve month intervals.
Variable Interest Rate Disclosure
Benchmark Bankshares, Inc.
March 31, 2000
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Valuation of Securities No Valuation of Securities
Given an Interest Rate Change In Given an Interest Rate
Decrease of (x) Basis Points Interest Increase of (x) Basis Points
Categories (200 BPS) (100 BPS) Rate 100 BPS 200 BPS
---------- --------- --------- ---- ------- -------
Loans
Commercial $ - $ - $23,946,612 $ - $ -
Mortgage 96,821,271 94,266,665 91,826,960 89,495,328 87,265,378
Simple Interest I/L 25,966,790 25,499,709 25,047,772 24,610,297 24,186,643
Rule of 78ths I/L 583,657 576,479 569,469 562,624 555,936
Investments
U. S. Government Securities 13,836,008 13,524,328 13,087,802 12,480,802 11,927,190
Municipals
Nontaxable 8,571,395 8,214,839 7,795,089 7,309,501 6,844,286
Taxable - - 936,371 - -
Mortgage Backed Securities 1,885,680 1,799,020 1,712,360 1,625,699 1,539,039
Certificates of Deposit
< 182 days 2,224,258 2,216,000 2,207,797 2,199,647 2,191,551
182 - 364 days 4,946,164 4,909,913 4,874,133 4,838,814 4,803,949
1 year - 2 years 44,998,088 44,441,020 43,896,888 43,365,261 42,845,727
2 years - 3 years 14,614,152 14,364,347 14,122,050 13,886,953 13,658,762
3 years - 4 years 5,520,799 5,361,734 5,209,125 5,062,645 4,921,983
4 years - 5 years 3,343,944 3,270,543 3,199,814 3,131,628 3,065,865
5 years 42,077,522 40,855,044 39,687,511 38,571,813 37,505,049
7 years 12,203 11,694 11,219 10,774 10,356
</TABLE>
Only financial instruments that do not have daily price adjustment capabilities
are herein presented.
<PAGE>
Page 14 of 16
Form 10-Q
Benchmark Bankshares, Inc.
March 31, 2000
Part II Other Information
Item 1 Legal Proceedings
None
Item 2 Changes in Securities
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
Independent Accountant's Review Report
Item 6 Report on Form 8-K
No reports on Form 8-K have been filed
during the quarter ended March 31, 2000.
<PAGE>
Page 15 of 16
INDEPENDENT ACCOUNTANT'S REVIEW REPORT
Board of Directors
Benchmark Bankshares, Inc.
Kenbridge, Virginia
We have reviewed the accompanying 10Q filing including the balance
sheet of Benchmark Bankshares, Inc. (a corporation) as of March 31, 2000 and the
related statements of income and cash flows for the three month period then
ended, in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants. All
information included in these financial statements is the representation of the
management of Benchmark Bankshares, Inc.
A review consists principally of inquiries of Company personnel and
analytical procedures applied to financial data. It is substantially less in
scope than an audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements in order for them
to be in conformity with generally accepted accounting principles.
Our review was made for the purpose of expressing limited assurance
that there are no material modifications that should be made to the financial
statements in order for them to be in conformity with generally accepted
accounting principles. The additional required information included in the 10Q
filing for March 31, 2000 is presented only for supplementary analysis purposes.
Such information has been subjected to the inquiry and analytical procedures
applied in the review of the basic financial statements, and we are not aware of
any material modifications that should be made thereto.
Creedle, Jones, and Alga, P. C.
Certified Public Accountants
May 8, 2000
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Page 16 of 16
Form 10-Q
Benchmark Bankshares, Inc.
March 31, 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.
Benchmark Bankshares, Inc.
(Registrant)
Date: May 8, 2000 Ben L. Watson, III
President & CEO
Date: May 8, 2000 Janice W. Pernell
Cashier and Treasurer
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(Replace this text with the legend)
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<CIK> 0000804563
<NAME> Benchmark Bankshares, Inc.
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