SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000.
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------- ------------
Commission File No. 33-31013-A
COMMUNITY NATIONAL BANCORPORATION
- -----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Georgia 58-1856963
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
561 E. Washington Avenue, P.O. Box 2619, Ashburn, Georgia 31714
- ---------------------------------------------------------------
(Address of Principal Executive Offices)
(912) 567-9686
- ---------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
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 Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the issuer 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: Indicate the number of shares
outstanding of each of the issuer's classes of common equity as of the latest
practicable date.
Common stock, no par value per share, 1,720,593 shares outstanding as of
May 10, 2000.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
- -----------------------------
COMMUNITY NATIONAL BANCORPORATION
ASHBURN, GEORGIA
CONSOLIDATED BALANCE SHEETS
ASSETS
------
March 31, December 31,
2000 1999
(Unaudited) (Unaudited)
----------- -----------
Cash and due from banks $ 4,244,236 $ 2,568,037
Federal funds sold 5,125,000 8,540,000
----------- -----------
Total cash and cash equivalents $ 9,369,236 $ 11,008,037
Securities:
Available for sale, at fair values 11,785,617 9,708,104
Loans, net 123,764,146 98,895,489
Property and equipment, net 6,036,846 4,705,403
Other real estate owned 564,000 580,000
Goodwill, net 1,942,541 - -
Other assets 3,448,199 3,340,482
----------- -----------
Total Assets $156,910,585 $128,337,515
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
Deposits
Non-interest bearing deposits $ 11,602,824 $ 6,411,554
Interest bearing deposits 126,441,126 107,918,532
----------- -----------
Total deposits $138,043,950 $114,330,086
Note payable 1,000,000 - -
Other liabilities 1,831,492 803,448
----------- -----------
Total liabilities $140,875,442 $115,133,534
----------- -----------
Commitments and contingencies
Shareholders' Equity:
Common stock, no par value, 50,000,000
shares authorized, 1,720,593 and 1,534,711
shares issued and outstanding at March 31,
2000 and December 31, 1999, respectively $ 10,490,315 $ 7,702,091
Retained earnings 5,795,108 5,731,110
Unrealized gain (loss) on securities, net (250,280) (229,220)
----------- -----------
Total Shareholders' Equity 16,035,143 $ 13,203,981
----------- -----------
Total liabilities and shareholders' equity $156,910,585 $128,337,515
=========== ===========
Refer to notes to the consolidated financial statements.
COMMUNITY NATIONAL BANCORPORATION
ASHBURN, GEORGIA
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
For the quarter
Ended March 31,
-----------------
2000 1999
---- ----
Interest income $3,433,289 $2,644,720
Interest expense 1,643,929 1,277,864
--------- ---------
Net interest margin 1,789,360 1,366,856
Provision for possible loan losses 245,000 165,000
--------- ---------
Net interest income after provision
for possible loan losses 1,544,360 1,201,856
--------- ---------
Service charges 241,089 131,297
Other fees 74,799 33,101
--------- ---------
Total other income 315,888 164,398
--------- ---------
Salaries and benefits 749,707 399,190
Advertising and business development 38,369 34,104
Repairs and maintenance 50,656 27,103
Depreciation and amortization 113,341 49,260
Legal and professional 96,958 46,031
Data Processing 77,142 39,550
Regulatory fees and assessments 22,529 29,689
Other operating expenses 315,516 156,235
--------- ---------
Total operating expenses 1,464,218 781,162
--------- ---------
Net income (loss) before taxes 396,030 585,092
Provision for income taxes 178,561 257,000
--------- ---------
Net income $ 217,469 $ 328,092
========= =========
Basic income Per Share $ .13 $ .22
========= =========
Diluted income Per Share $ .11 $ .19
========= =========
Refer to notes to the financial statements.
COMMUNITY NATIONAL BANCORPORATION
ASHBURN, GEORGIA
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTER ENDED
March 31,
------------------
2000 1999
---- ----
Cash flows from operating activities $ 1,510,200 $ 1,090,831
----------- -----------
Cash flows from investing activities:
Purchase of goodwill $ (1,953,000) $ - -
Securities, available-for-sale:
Maturities, paydowns, calls 205,000 941,678
Purchase of securities (2,301,636) (1,600,000)
Purchase of fixed assets (1,434,325) (264,176)
Increase in loans (25,113,657) (5,537,481)
----------- -----------
Net cash used in investing activities $(30,597,618) $ (6,459,979)
----------- -----------
Cash flows from financing activities:
Increase in equity $ 2,788,224 $ - -
Increase in customer deposits 23,713,864 (5,855,853)
Increase in borrowings 1,000,000 - -
Payment of cash dividends (153,471) (151,887)
----------- -----------
Net cash provided from financing activities $ 27,348,617) $ (6,007,740)
----------- -----------
Net increase in cash and cash equivalents $ (1,738,801) $(11,376,888)
Cash and cash equivalents,
beginning of period 11,108,037 19,247,203
----------- -----------
Cash and cash equivalents, end of period $ 9,369,236 $ 7,870,315
=========== ===========
Refer to notes to the financial statements.
COMMUNITY NATIONAL BANCORPORATION
ASHBURN, GEORGIA
Consolidated Statements of Changes in Shareholders' Equity (Unaudited)
for the three-month periods ended March 31, 1999 and 2000
Accumulated
Common Stock Other
------------------ Paid in Retained Comprehensive
Shares Par Value Capital Earnings Income Total
------ --------- ------- -------- ------ -----
Balance,
Dec 31,
1998 1,518,871 $ - - $ 7,649,291 $4,829,006 $ 43,197 $12,521,494
--------- ---------- ---------- --------- -------- ----------
Comprehensive Income:
- --------------------
Net income,
three-month
period ended
March 31, 1999 - - - - - - 328,092 - - 328,092
Net unrealized
(losses) on
securities,
three- month
period ended
March 31, 1999 - - - - - - - - (61,278) (61,278)
--------- ---------- ---------- --------- -------- ----------
Less: Distribution
of dividends - - - - - - (151,887) - - (151,887)
--------- ---------- ---------- --------- -------- ----------
Balance,
March 31,
1999 1,518,871 $ - - $ 7,649,291 $5,005,211 $ (18,081) $12,636,421
========= ========== ========== ========= ======== ==========
Balance,
December 31,
1999 1,534,711 $ - - $ 7,702,091 $5,731,110 $(229,220) $13,203,981
--------- ---------- ---------- --------- -------- ----------
Common stock
issued 185,882 - - 2,788,224 - - - - 2,788,224
Comprehensive Income:
- ---------------------
Net income,
three-month
period ended
March 31,
2000 - - - - - - 217,469 - - 217,469
Net unrealized
(losses) on
securities,three-
month period
ended March 31,
2000 - - - - - - - - (21,060) (21,060)
--------- ---------- ---------- --------- -------- ----------
Less: Distribution
of dividends - - - - - - (153,471) - - (153,471)
--------- ---------- ---------- --------- -------- ----------
Balance,
March 31,
2000 1,720,593 $ - - $10,490,315 $5,795,108 $(250,280) $16,035,143
========= ========== ========== ========= ======== ==========
Refer to notes to the consolidated financial statements.
COMMUNITY NATIONAL BANCORPORATION
ASHBURN, GEORGIA
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2000
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form
10-QSB. Accordingly, they do not include all 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-month period ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the
year ending December 31, 2000. These statements should be read in
conjunction with the consolidated financial statements and
footnotes thereto included in Form 10-KSB for the year ended
December 31, 1999.
NOTE 2 - ORGANIZATION OF THE BUSINESS
Community National Bancorporation, Ashburn, Georgia (the
"Company") was organized in August, 1989 to serve as a holding
company for a proposed de novo bank, Community National Bank,
Ashburn, Georgia ("CNB Ashburn"). During 1998, the Company sold
and issued 400,000 shares of its common stock at $10.00 per share.
This public offering yielded approximately $4.0 million, all of
which was invested during 1999 in a de novo bank, Cumberland
National Bank, St. Marys, Georgia ("CNB St. Marys"). On February
24, 2000, the Company acquired Tarpon Financial Corporation and
its 100% owned subsidiary bank, First National Bank, Tarpon
Springs, Florida ("FNB Tarpon Springs"). The above acquisition
was effected through both the exchange of shares and the payment
of cash. CNB Ashburn, CNB St. Marys and FNB Tarpon Springs
(collectively, "the Banks") were chartered by and are currently
regulated by the Office of the Comptroller of the Currency (the
"OCC"). The Banks are primarily engaged in the business of
obtaining deposits and providing commercial, consumer and real
estate loans to the general public. Bank deposits are each
insured up to $100,000 by the Federal Deposit Insurance
Corporation (the "FDIC") subject to certain limitations imposed by
the FDIC.
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
In March, 1998, the American Institute of Certified Public
Accountants issued Statement of Position ("SOP") 98-1, "Accounting
for the Costs of Computer Software Developed or Obtained for
Internal Use. SOP 98-1 provides guidance for capitalizing and
expensing the costs of computer software developed or obtained for
internal use. SOP 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. The adoption of
SOP 98-1 did not have a material impact on the accompanying
consolidated financial statements.
SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued in June, 1998 and is effective for
all calendar-year entities beginning in January, 2000. This
Statement applies to all entities and requires that all
derivatives be recognized as assets or liabilities in the balance
sheet, at fair values. Gains and losses of derivative instruments
not designated as hedges will be recognized in the income
statement. Since the Company does not invest in derivative
instruments, the adoption of SFAS No. 133 does not have a material
impact on the financial statements.
SFAS No. 134, "Accounting for Mortgage-Backed Securities
Retained after the Securitization of Mortgage Loans Held for Sale
by a Mortgage Banking Enterprise" amends prior accounting
standards, primarily SFAS 65, with respect to the classification
of retained interests, such as mortgage-backed securities,
following a securitization of mortgage loans held for sale. This
statement became effective in the first quarter of 1999. Since
the Company does not securitize mortgage loans, no financial
statement impact has resulted from adopting this statement.
Item 2 - Management Discussion and Analysis of Financial Condition
- ------------------------------------------------------------------
and Results of Operation.
- -------------------------
Liquidity and Sources of Capital
- --------------------------------
Community National Bancorporation (the "Company") was
organized in August, 1989 and began banking operations through its
wholly owned subsidiary, Community National Bank ("CNB Ashburn"),
on August 6, 1990. Since then, CNB Ashburn established three
additional branches and has total assets approximating $120.8
million at March 31, 2000. During 1999, the Company sold
additional stock for approximately $4.0 million, utilizing the
proceeds to establish another subsidiary, Cumberland National Bank
in St. Marys, Georgia ("CNB St. Marys"), which began operations in
October of 1999. On March 31, 2000 CNB St. Marys had total
assets amounting to $14.6 million. On February 24, 2000, the
Company acquired Tarpon Financial Corporation and its 100% owned
subsidiary, First National Bank, Tarpon Springs, Florida ("FNB
Tarpon Springs"). As of March 31, 2000, FNB Tarpon Springs had
$19.2 million in total assets.
The Company opened in 1990 with $3.4 million in its capital
accounts. By March 31, 2000, the capital accounts had increased
to $16.3 million through the sale of additional stock and through
retained earnings. As evidenced by the table below, all three
subsidiary banks are well capitalized.
Minimum Risk Minimum
Leverage Regulatory Weighted Regulatory
Bank Ratio Guidelines Ratio Guidelines
- ---- ----- ---------- ----- ----------
CNB Ashburn 8.2% 4.0% 11.0% 8.0%
CNB St. Marys 24.7% 4.0% 28.0% 8.0%
FNB Tarpon Spgs 11.6% 4.0% 20.4% 8.0%
During the three-month period ended March 31, 2000, total
assets increased by $28.6 million to $156.9 million. Of the $28.6
million increase in total assets, approximately $19.2 million is
due to the acquisition of FNB Tarpon Springs. If one discounts
the above acquisition, assets grew by $9.4 million, or by an
annualized rate of 29.3%. During the three-month period ended
march 31, 2000, cash and cash equivalents declined by $1.7
million, securities increased by $2.1 million, loans increased by
$24.8 million, property and equipment increased by $1.3 million,
and other assets, including goodwill, increased by $2.0 million.
To fund the above growth, deposits, borrowings and other
liabilities increased by $23.7 million, $1.0 million and $1.0
million, respectively. In addition, the capital accounts,
including retained earnings, increased by $2.8 million.
Liquidity is the Company's ability to meet all deposit
withdrawals immediately, while also providing for the credit needs
of customers. The March 31, 2000 financial statements evidence a
satisfactory liquidity position as total cash and cash equivalents
amounted to $9.4 million, representing 6.0% of total assets.
Investment securities amounted to $11.8 million, representing 7.5%
of total assets; these securities provide a secondary source of
liquidity since they can be converted into cash in a timely
manner. The subsidiary Bank is a member of the Federal Reserve
System and is maintaining relationships with several correspondent
banks and, thus, could obtain funds on short notice. The
Company's management closely monitors and maintains appropriate
levels of interest earning assets and interest bearing
liabilities, so that maturities of assets are such that adequate
funds are provided to meet customer withdrawals and loan demand.
The Company is not aware of any trends, demands, commitments,
events or uncertainties that will result in or are reasonably
likely to result in its liquidity increasing or decreasing in any
material way.
Results of Operations
- ---------------------
For the three-month periods ended March 31, 2000 and 1999,
net income amounted to $217,469 and $328,092, respectively. For
the three-month periods ended March 31, 2000 and 1999, diluted
earnings per share amounted to $.11 and $.19, respectively. Basic
earnings per share amounted to $.13 and $.22 for the three month
periods ended March 31, 2000 and 1999, respectively. In general,
earnings per share were lower during the three-month period ended
March 31, 2000 when compared to the three-month period ended March
31, 1999. The difference is due to the addition of two new
subsidiary banks. CNB St. Marys opened in October, 1999 and is
expected to negatively impact income until it reaches a point of
critical mass and turns profitable. The acquisition of FNB Tarpon
Springs on February 24, 2000 also negatively impacted income
because of the costs of consummating the transaction. Below is a
more detailed discussion concerning results of operations for the
three-month periods ended March 31, 2000 and 1999.
a. Earning assets have increased from $108.2 million at March
31, 1999 to $140.7 million at March 31, 2000. As a
consequence, net interest income, which represents the
difference between interest received on interest earning
assets and interest paid on interest bearing liabilities,
has increased from $1,366,856 to $1,789,360 for the same
period one year later, representing an increase of $422,504,
or 30.9%.
b. Net yield on earning assets increased from 5.09% as of March
31, 1999 to 5.13% at March 31, 2000. The primary reason for
the increase is attributed to a reduction in the cost of
funds.
c. Other income increased from $164,398 for the three-month
period ended March 31, 1999 to $315,888 for the three-month
period ended March 31, 2000. The above increase of $151,490
represents a 92.1% improvement. This increase is primarily
due to increased activity in transactional accounts due to a
higher deposit base. As a percent of total assets, other
income increased from .57% to .80% for the three-month
periods ended March 31, 1999 and 2000, respectively.
d. Other operating expenses increased from $781,162 for the
three-month period ended March 31, 1999 to $1,464,218 for
the three-month period ended March 31, 2000. The above
increase which amounted to $683,256 represents an increase
of 87.4%. As a percent of total assets, other operating
expenses increased from 2.69% to 3.73% for the three-month
periods ended March 31, 1999 and 2000, respectively. This
significant increase in operating expenses for the three-
month period ended March 31, 2000 when compared to the
three-month period ended March 31, 1999 is primarily due to
the addition of two subsidiary banks along with the costs
and expenses associated with acquiring one of the above
banks.
At December 31, 1999, the allowance for loan losses amounted
to $2,015,645, or 2.00% of gross loans. At March 31, 2000, the
allowance amounted to $2,366,532, or 1.88% of gross loans.
Management considers the allowance for loan losses to be adequate
and sufficient to absorb possible future losses; however, there
can be no assurance that charge-offs in future periods will not
exceed the allowance for loan losses or that additional provisions
to the allowance will not be required.
The Company is not aware of any current recommendation by
the regulatory authorities which, if they were to be implemented,
would have a material effect on the Company's liquidity, capital
resources, or results of operations.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
- ---------------------------
There are no material pending legal proceedings to which the Company or
the Bank is a party or of which any of their property is subject.
Item 2. Changes In Securities.
- -------------------------------
(a) None.
(b) None.
Item 3. Defaults Upon Senior Securities.
- -----------------------------------------
None.
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) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K
Registrant filed a report on Form 8-K on February 29, 2000.
Registrant filed no other reports on Form 8-K during the
quarter ended 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.
COMMUNITY NATIONAL BANCORPORATION, INC.
---------------------------------------
(Registrant)
Date: May 12, 2000 BY: /s/ T. Brinson Brock
--------------- -------------------------------------
T. Brinson Brock
President and Chief Executive Officer
(Principal Executive, Financial and
Accounting Officer)
Financial Data Schedule Submitted Under Item 601(a)(27) of Regulation
S-B
This schedule contains summary financial information extracted from
Community National Bancorporation's unaudited consolidated financial
statements for the period ended March 31, 2000 and 1999 and is
qualified in its entirety by reference to such financial statements.
Item Number Item Description Amount
- ----------- ---------------- ------
March 31,
-----------------
2000 1999
---- ----
9-03(1) Cash and due from banks $ 4,244,236 $ 1,950,315
9-03(2) Interest bearing deposits 0 0
9-03(3) Federal funds sold - purchased
securities for sale 5,125,000 5,920,000
9-03(4) Trading account assets 0 0
9-03(6) Investment and mortgage backed
securities held for sale 11,785,617 8,638,159
9-03(6) Investment and mortgage backed
securities held to maturity -
carrying value 0 0
9-03(6) Investment and mortgage backed
securities held to maturity -
market value 0 0
9-03(7) Loans 126,130,678 95,591,231
9-03(7)(2) Allowance for losses 2,366,532 1,923,690
9-03(11) Total assets 156,910,585 115,989,833
9-03(12) Deposits 138,043,950 102,525,727
9-03(13) Short-term borrowings 0 0
9-03(15) Other liabilities 1,831,492 827,685
9-03(16) Long-term debt 1,000,000 0
9-03(19) Preferred stock -
mandatory redemption 0 0
9-03(20) Preferred stock -
no mandatory redemption 0 0
9-03(21) Common stock 10,490,315 7,649,291
9-03(22) Other stockholders' equity 5,544,828 4,987,130
9-03(23) Total liabilities and
stockholders' equity 156,910,585 115,989,833
9-04(1) Interest and fees on loans 3,112,819 2,423,249
9-04(2) Interest and dividends
on investments 320,470 221,471
9-04(4) Other interest income 0 0
9-04(5) Total interest income 3,433,289 2,644,720
9-04(6) Interest on deposits 1,643,618 1,277,864
9-04(9) Total interest expense 1,643,929 1,277,864
9-04(10) Net interest income 1,789,360 1,366,856
9-04(11) Provision for loan losses 245,000 165,000
9-04(13)(h) Investment securities gains/losses 0 0
9-04(14) Other expenses 1,464,218 781,162
9-04(15) Income/loss before income tax 396,030 585,092
9-04(17) Income/loss before
extraordinary items $ 396,030 $ 585,292
9-04(18) Extraordinary items, less tax 0 0
9-04(19) Cumulative change in
accounting principles 0 0
9-04(20) Net income or loss 217,469 328,092
9-04(21) Earnings per share - basic .13 .22
9-04(21) Earnings per share - diluted .11 .19
I.B.5. Net yield - interest earning
assets - actual 5.13% 5.09%
III.C.1(a) Loans on non-accrual 254,038 397,432
III.C.1(b) Accruing loans past due
90 days or more 0 351,662
III.C.1(c) Troubled debt restructuring 0 0
III.C.2. Potential problem loans 811,253 170,166
IV.A.1 Allowance for loan losses -
beginning of period 2,015,645 1,824,179
IV.A.2 Total chargeoffs 102,383 70,402
IV.A.3 Total recoveries 6,552 4,913
IV.A.4 Allowance for loan losses -
end of period 2,366,532 1,923,690
IV.B.1 Loan loss allowance allocated to
domestic loans 2,350,000 1,890,000
IV.B.2 Loan loss allowance allocated to
foreign loans 0 0
IV.B.3 Loan loss allowance - unallocated 16,532 33,690
