FORM 10-QSB
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission file number 01-17377
COMMONWEALTH BANKSHARES, INC.
(Exact name of small business issuer as specified in its charter)
VIRGINIA 54-1460991
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
403 Boush Street
Norfolk, Virginia 23510
(Address of principal executive offices) (Zip Code)
(757) 446-6900
Issuer's telephone number
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report.)
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
periods 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
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Common Stock, $2.50 Par Value -- 1,664,216 shares as of March 31, 2000
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INDEX
COMMONWEALTH BANKSHARES, INC. AND SUBSIDIARY
NORFOLK, VIRGINIA
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets -- March 31, 2000 and
December 31, 1999.
Condensed consolidated statements of income -- Three months ended
March 31, 2000 and 1999.
Condensed consolidated statements of comprehensive income -- Three months
ended March 31, 2000 and 1999.
Condensed consolidated statements of cash flows -- Three months ended
March 31, 2000 and 1999.
Notes to condensed consolidated financial statements -- March 31, 2000.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on 8-K
SIGNATURES
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PART I. FINANCIAL INFORMATION
COMMONWEALTH BANKSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<CAPTION>
March 31 December 31
2000 1999
ASSETS (Dollars in Thousands)
<S> <C> <C>
Cash and due from banks $ 5,602 $ 6,321
Federal funds sold 6,999 --
Investment securities:
Available for sale 15,268 15,478
Held to maturity 4,628 4,707
Equity securities, restricted 548 548
------ ------
TOTAL INVESTMENT SECURITIES 20,444 20,733
Loans:
Commercial 97,861 91,005
Residential Mortgage 26,974 25,146
Installment loans to individuals 6,606 6,538
Other 2,836 2,817
------- -------
GROSS LOANS 134,272 125,506
Unearned income (483) (461)
Allowance for loan losses (979) (931)
------- -------
NET LOANS 132,810 124,114
Premises and equipment 2,984 2,822
Real estate acquired in settlement of loans 632 601
Other assets 2,736 2,425
------- -------
$172,207 $157,016
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing $18,056 $15,072
Interest bearing 135,486 123,286
------- -------
TOTAL DEPOSITS 153,542 138,358
Short-term borrowings 3,408 4,156
Long-term debt 505 531
Other liabilities 2,155 1,744
------- -------
TOTAL LIABILITIES 159,610 144,789
SHAREHOLDERS' EQUITY
Common stock, par value $2.50 a share
Authorized--5,000,000 shares
Issued and outstanding 1,664,216
shares in 2000 and 1,644,743 shares in 1999 4,161 4,112
Additional paid-in capital 5,331 5,275
Retained earnings 3,602 3,368
Accumulated other comprehensive loss (497) (528)
------- -------
12,597 12,227
------- -------
$172,207 $157,016
======= =======
<FN>
See notes to condensed consolidated financial statements.
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<TABLE>
COMMONWEALTH BANKSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
Three months ended
March 31 March 31
2000 1999
<S> <C> <C>
Interest income: (Dollars in thousands)
Loans, including fees $ 2,934 $ 2,089
Investment securities 309 342
Other 62 28
----- -----
TOTAL INTEREST INCOME 3,305 2,459
Interest expense:
Deposits 1,721 1,241
Federal funds purchased 38 20
Other 8 7
----- -----
TOTAL INTEREST EXPENSE 1,767 1,268
----- -----
NET INTEREST INCOME 1,538 1,191
Provision for loan losses 45 30
----- -----
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,493 1,161
Other income:
Service charges on deposit accounts 163 172
Other service charges and fees 67 47
Realized gain on securities available for sale -- 3
Loss on sale of real estate acquired in
settlement of loans (2) --
Other income 39 53
----- -----
267 275
Other expenses:
Salaries and employee benefits 652 547
Net occupancy 125 108
Furniture and equipment expenses 151 136
Other expenses 428 309
----- -----
1,356 1,100
----- -----
INCOME BEFORE INCOME TAXES 404 336
Applicable income taxes 111 84
----- -----
NET INCOME $293 $252
===== =====
Per share data(1):
Basic $0.18 $0.15
===== =====
Diluted $0.16 $0.14
===== =====
Dividends per share $.035 $0.00
===== =====
Average shares outstanding (1):
Basic 1,651,102 1,626,107
========= =========
Diluted 1,815,198 1,784,319
========= =========
<FN>
(1) Restated to reflect 1999 stock dividend.
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COMMONWEALTH BANKSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
<CAPTION>
Three months ended
March 31 March 31
2000 1999
(Dollars in thousands)
<S> <C> <C>
Net income $ 293 $ 252
Other comprehensive income, net of income tax:
Unrealized gain (loss) on securities
available for sale 31 (54)
----- -----
COMPREHENSIVE INCOME $ 324 $ 198
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COMMONWEALTH BANKSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
Three months ended
March 31 March 31
2000 1999
(Dollars in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 293 $ 252
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Provision for loan losses 45 30
Depreciation and amortization 108 91
Realized loss on securities available for sale -- (3)
Write down of real estate acquired in
settlement of loans 2 --
Increase in interest receivable (158) (106)
Increase in interest payable 55 55
Loss of disposal of fixed assets -- 1
Other 188 414
----- -----
NET CASH PROVIDED BY OPERATING ACTIVITIES 533 734
INVESTING ACTIVITIES
Net decrease (increase) in short term investments (6,999) 7,320
Purchase of investment equities, restricted securities -- (3,587)
Proceeds from:
Maturity of investment securities available for sale 256 1,202
Maturity of investment securities held to maturity 79 300
Sale of investment securities available for sale -- 1,725
Purchase of assets relating to real estate acquired
in settlement of loans (33) (14)
Decrease from net change in loans (8,690) (6,143)
Purchases of premises and equipment (270) (77)
----- -----
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (15,657) 726
FINANCING ACTIVITIES
Increase (decrease) from net change in demand
deposits and savings accounts 5,032 (2,147)
Increase (decrease) from net change in
certificate of deposit 10,152 (559)
Principal payments on long-term debt (26) (26)
Increase (decrease) from net change in
short-term borrowings (748) 1,774
Proceeds from sale of stock 27 --
Cash paid for dividends (32) --
------ ------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 14,405 (958)
------ ------
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS (719) 502
Cash and due from banks at January 1 6,321 5,383
------ ------
CASH AND DUE FROM BANKS AT MARCH 31 $ 5,602 $ 5,885
====== ======
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
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COMMONWEALTH BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2000
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. 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 (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31, 2000 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2000. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-KSB for the year ended December 31, 1999.
NOTE B -- EARNINGS PER SHARE
Basic earnings per common share is calculated by dividing net income by the
weighted average number of common shares outstanding during the period. Diluted
earnings per share is computed by dividing net income by the weighted average of
common and potential dilutive common equivalent shares outstanding during the
period. Average shares outstanding for 1999 and calculation of income per share
is restated to reflect a 50% stock dividend paid on May 27, 1999.
<PAGE>
PART I
ITEM 2. Management's discussion and analysis of financial
conditions and results of operations.
EARNINGS SUMMARY
Net income for the three months ended March 31, 2000 totaled $293,000, as
compared with $252,000 for the first three months of 1999. On a per share
basis, net income equaled 18 cents for 2000 compared to 15 cents for 1999.
Total interest for the first three months of 2000 increased to $3,305,000, an
$846,000 or 34.4% increase over the first three months of 1999. The items are
discussed in more detail later in this report.
NET INTEREST INCOME
Net interest income was $1,538,000 for the quarter ended March 31, 2000, an
increase of 29.1% over the comparable period in 1999.
Total interest income was $3,305,000 for the quarter ended March 31, 2000
representing a 34.4% increase from the comparable period in 1999. This increase
is mainly attributable to a 37.0% increase in total loans when comparing March
31, 2000 to March 31, 1999.
Interest expense of $1,767,000 for the quarter ended March 31, 2000 represents a
39.4% increase from the comparable period in 1999. This increase is
attributable to a 36.1% increase in interest bearing deposits when comparing
March 31, 2000 to March 31, 1999.
PROVISION FOR LOAN LOSSES
The provision for loan losses was $45,000 for the first three months of 2000 as
compared to $30,000 for the first quarter of 1999. At March 31, 2000, Bank of
the Commonwealth had a total allowance for loan losses of $979,000 or .73% of
total loans.
OTHER INCOME
Other income for the quarter ended March 31, 2000 was $267,000, a decrease of
$8,000 from the $275,000 reported for the three months ended March 31, 1999.
OTHER EXPENSES
Other expenses for the quarter ended March 31, 2000 was $1,356,000, an increase
of $256,000 from the $1,100,000, for the quarter ended March 31, 1999.
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INTEREST SENSITIVITY AND LIQUIDITY
Management attempts to match rate sensitive assets to rate sensitive
liabilities, by planning and controlling the mix and maturities of these assets
and liabilities. The purpose of this asset/liability management is to create
and maintain a proper relationship between rate sensitive assets and liabilities
and also to provide adequate liquidity.
Liquidity is the ability to meet customers' demand for funds. These
requirements are met by the sale or maturity of existing assets, loan payments
and increases in deposits.
NONPERFORMING ASSETS
The Bank's nonperforming assets consisted of the following:
March 31, 2000 December 31,1999
Loans past due 90 days or
more and still accruing $ 29,000 $ 73,000
Nonaccrual loans 1,107,000 1,109,000
Other real estate owned 632,000 601,000
--------- ---------
Total nonperforming $1,768,000 $1,783,000
========= =========
CAPITAL POSITION
Shareholders' Equity for the Corporation increased to $12,597,000 from
$12,227,000 or 3.0% from December 31, 1999 to March 31, 2000. Shareholders'
Equity for March 31, 2000 reflects a $497,000 net unrealized loss on securities
available for sale in accordance with FASB115, as compared to a $528,000 net
unrealized loss as of December 31, 1999.
Bank Holding Companies are required to meet a 7.25% risk-based capital
standard.
The Corporation's risk based capital was 9.5% as of March 31, 2000.
STOCK DIVIDEND
The Board of Directors, at their March 2000 meeting declared a 3.5 cent cash
dividend payable on the Company's common shares for stockholders of record as of
March 28, 2000, on March 31, 2000.
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SUMMARY
As of March 31, 2000, 72.9% of the Bank's loan portfolio consists of commercial
loans which are considered to provide higher yields and also generally carry a
greater risk. It should be noted that 74.6% of these commercial loans are
collateralized with real estate, and accordingly do not represent an unfavorable
risk. At March 31, 2000, 74.0% of the Bank's total loan portfolio consists of
loans collateralized with real estate.
The Bank's commitment is to maintain the Corporation's strengths in the markets
it serves during difficult economic cycles, and to act resourcefully when
confronted with new challenges.
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PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during
the three months ended March 31, 2000.
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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.
Commonwealth Bankshares, Inc,
(Registrant)
Date: May 10, 2000 /S/
-------------------------------
E. J. Woodard, Jr., Chairman of
the Board, President & CEO
Date: May 10, 2000 /S/
------------------------------
John H. Gayle
Executive Vice President
and Cashier
[ARTICLE] 9
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<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-31-2000
[PERIOD-END] MAR-31-2000
[CASH] 5404
[INT-BEARING-DEPOSITS] 198
[FED-FUNDS-SOLD] 6999
[TRADING-ASSETS] 0
[INVESTMENTS-HELD-FOR-SALE] 15268
[INVESTMENTS-CARRYING] 4628
[INVESTMENTS-MARKET] 4450
[LOANS] 134272
[ALLOWANCE] 979
[TOTAL-ASSETS] 172207
[DEPOSITS] 153542
[SHORT-TERM] 3408
[LIABILITIES-OTHER] 2155
[LONG-TERM] 505
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 4161
[OTHER-SE] 8436
[TOTAL-LIABILITIES-AND-EQUITY] 172207
[INTEREST-LOAN] 2934
[INTEREST-INVEST] 309
[INTEREST-OTHER] 62
[INTEREST-TOTAL] 3305
[INTEREST-DEPOSIT] 1721
[INTEREST-EXPENSE] 1767
[INTEREST-INCOME-NET] 1538
[LOAN-LOSSES] 45
[SECURITIES-GAINS] 0
[EXPENSE-OTHER] 1356
[INCOME-PRETAX] 404
[INCOME-PRE-EXTRAORDINARY] 293
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 293
[EPS-BASIC] .18
[EPS-DILUTED] .16
[YIELD-ACTUAL] 8.59
[LOANS-NON] 1107
[LOANS-PAST] 29
[LOANS-TROUBLED] 0
[LOANS-PROBLEM] 2250
[ALLOWANCE-OPEN] 931
[CHARGE-OFFS] 0
[RECOVERIES] 3
[ALLOWANCE-CLOSE] 979
[ALLOWANCE-DOMESTIC] 979
[ALLOWANCE-FOREIGN] 0
[ALLOWANCE-UNALLOCATED] 277
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