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, 1999
[ ] Transition Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from ____________ to _____________
Commission file number: 0-24159
INDEPENDENT COMMUNITY BANKSHARES, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Virginia 54-1696103
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
111 West Washington Street
Middleburg, Virginia 22117
(Address of Principle Executive Offices)
(540) 687-6377
(Issuer's Telephone Number, Including Area Code)
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.
Yes __X__ No _____
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
1,778,994 shares of common stock, par value $5.00 per share,
outstanding as of May 10, 1999
* This Form 10-QSB also covers 276,600 Contractual Rights to Contingent
Merger Consideration, which are registered under the Securities Act of 1933, as
amended, pursuant to a registration statement declared effective on June 27,
1997.
<PAGE>
INDEPENDENT COMMUNITY BANKSHARES, INC.
INDEX
<TABLE>
<CAPTION>
<S> <C>
Part I. Financial Information Page No.
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Changes in Shareholders' Equity 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Results of
Operation and Financial Condition 10
Part II. Other Information
Item 1. Legal Proceedings 14
Item 2. Change in securities 14
Item 3. Defaults upon senior securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
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<PAGE>
Part 1. Financial Information
Item 1. FINANCIAL STATEMENTS
Independent Community Bankshares, Inc.
Consolidated Balance Sheets
(In Thousands)
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1999 1998
------------------- -------------------
<S> <C> <C>
Assets:
Cash and due from banks $ 6,577 $ 8,161
Interest-bearing balances in banks
4 109
Temporary investments:
Federal funds sold 6,286 1,421
Other money market investments 1,947 3,122
Securities (fair value: March 31, 1999,
$ 60,989, December 31, 1998, $ 58,159) 60,637 57,786
Loans, net 126,817 124,932
Bank premises and equipment, net 6,023 5,852
Other assets 4,161 4,020
------------------- -------------------
Total assets $ 212,452 $ 205,403
=================== ===================
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Non-interest bearing $ 35,893 $ 36,883
Interest bearing 141,999 135,797
------------------- -------------------
Total deposits $ 177,892 $ 172,680
Federal funds purchased $ - $ -
Securities sold under agreements to
Repurchase 4,943 2,530
Federal Home Loan Bank advances 5,000 6,000
Other liabilities 1,534 1,330
------------------- -------------------
Total liabilities $ 189,369 $ 182,540
Shareholders' Equity
Common stock par value $5.00 per
share, authorized 10,000,000 shares;
issued and outstanding at March 31, 1999 - 1,778,994
issued and outstanding at December 31, 1998 - 1,778,994 $ 8,895 $ 8,895
Capital surplus 1,293 1,293
Retained earnings 12,916 12,495
Unrealized gain (loss) on securities
available for sale, net (21) 180
------------------- -------------------
Total shareholders' equity $ 23,083 $ 22,863
Total liabilities and shareholders' equity $ 212,452 $ 205,403
=================== ===================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
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<PAGE>
Independent Community Bankshares, Inc.
Consolidated Statements of Income
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Unaudited Unaudited
----------------------------------------------------------------------
For the Three Months For the Quarter
Ended March 31, Ended March 31,
1999 1998 1999 1998
--------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $ 2,672 $ 2,422 $ 2,672 $ 2,422
Interest on investment securities
Taxable 8 27 8 27
Exempt from federal income taxes 145 163 145 163
Interest on securities available for sale
Taxable 352 484 352 484
Exempt from federal income taxes 216 156 216 156
Dividends 42 46 42 46
Interest on federal funds sold and other 76 17 76 17
--------------- --------------- ---------------- ---------------
Total interest income $ 3,511 $ 3,315 $ 3,511 $ 3,315
Interest expense
Interest on deposits $ 1,181 $ 1,244 $ 1,181 $ 1,244
Interest on FHLB advances 71 38 71 38
Interest on short-term borrowings 32 5 32 5
--------------- --------------- ---------------- ---------------
Total interest expense $ 1,284 $ 1,287 $ 1,284 $ 1,287
Net interest income $ 2,227 $ 2,028 $ 2,227 $ 2,028
Provision for loan losses 81 45 81 45
--------------- --------------- ---------------- ---------------
Net interest income after provision
for loan losses $ 2,146 $ 1,983 $ 2,146 $ 1,983
Other Income
Commissions and fees from fiduciary
Activities $ 248 $ 220 $ 248 $ 220
Service charges on deposit accounts 246 214 246 214
Net gains (losses) on securities
available for sale (8) (12) (8) (12)
Other operating income 177 38 177 38
--------------- --------------- ---------------- ---------------
Total other income $ 663 $ 460 $ 663 $ 460
Other Expense
Advertising $ 82 $ 32 $ 82 $ 32
Salaries and employee benefits 1,072 871 1,072 871
Net occupancy expense of premises 203 164 203 164
Other operating expenses 535 428 535 428
--------------- --------------- ---------------- ---------------
Total other expense $ 1,892 $ 1,495 $ 1,892 $ 1,495
--------------- --------------- ---------------- ---------------
Income before income taxes $ 917 $ 948 $ 917 $ 948
Income taxes 195 236 195 236
--------------- --------------- ---------------- ---------------
Net income $ 722 $ 712 $ 722 $ 712
=============== =============== ================ ===============
Earnings per weighted average share:
(1999 - 1,778,994
1998 - 1,812,594 shares) $ 0.40 $ 0.39 $ 0.40 $ 0.39
Net income per diluted share $ 0.17 $ 0.15 $ 0.17 $ 0.15
Dividends per share
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
-4-
<PAGE>
Independent Community Bankshares, Inc.
Consolidated Statement of Changes in Shareholders' Equity
For the Three Months Ended March 31, 1999 and 1998
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Other
Common Capital Comprehensive Retained Comprehensive
Stock Surplus Income Earnings Income Total
----------- ----------- ----------------- ------------ ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balances - December 31, 1997 $ 9,063 $ 1,948 $ (199) $ 10,873 $ - $ 21,685
Comprehensive Income
Net income 712 712 712
Other comprehensive income
net of tax -
Unrealized loss on available for
sale securities 150
Less: Reclassification adjustment for
gains realized in net income -
----------------
Other comprehensive income, net of tax 150 150 150
----------------
Total comprehensive income $ 862
================
Cash dividends (273) (273)
----------- ----------- ----------------- ------------ -----------
Balances - March 31, 1998 $ 9,063 $ 1,948 $ (49) $ 11,312 $ 22,274
=========== =========== ================= ============ ===========
Balances - December 31, 1998 $ 8,895 $ 1,293 $ 180 $ 12,495 $ - $ 22,863
Comprehensive Income
Net income 722 722 722
Other comprehensive income
net of tax (201)
Unrealized loss on available for
sale securities
Less: Reclassification adjustment for
gains realized in net income
----------------
Other comprehensive income, net of tax (201) (201) (201)
----------------
Total comprehensive income $ 521
================
Cash dividends declared (301) (301)
----------- ----------- ----------------- ------------ -----------
Balances - March 31, 1999 $ 8,895 $ 1,293 $ (21) $ 12,916 $ 23,083
=========== =========== ================= ============ ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
-5-
<PAGE>
Independent Community Bankshares, Inc.
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
----------------------------------------
March 31, March 31,
1999 1998
----------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 722 $ 712
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 81 45
Depreciation and amortization 151 134
Net (gains) losses on securities available for sale 7 -
Discount accretion and premium amortization
on securities, net 29 39
Deferred taxes - -
Net (gains) losses on sale of assets (7) -
Net loss on sale of other real estate 5
(Increase) decrease in accrued interest receivable (357) (64)
Decrease in prepaid income taxes - 99
(Increase) in other assets - (95)
Increase in accrued interest payable 307 (10)
Increase in other liabilities - (102)
----------------- -----------------
Net cash provided by operating activities $ 938 $ 758
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity, principal paydowns and
calls of investment securities $ - $ 249
Proceeds from maturity, principal paydowns and
calls of securities available for sale 1,528 1,553
Proceeds from sale of securities available
for sale 1,735 354
Proceeds from sale of bank premises and equipment 75 -
Purchase of investment securities - -
Purchase of securities available for sale (6,453) (1,068)
Net (increase) in loans (1,966) (3,800)
Proceeds from sale of other real estate 195 -
Purchases of bank premises and equipment (375) (156)
----------------- -----------------
Net cash (used in) investing activities $ (5,261) $ (2,868)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts,
and savings accounts $ 4,809 $ 133
Net (decrease) increase in certificates of deposits 403 319
Proceeds from Federal Home Loan Bank advances - -
Dividends declared (301) (273)
Acquisition of common stock - -
Issuance of common stock - -
Payment on Federal Home Loan Bank advances (1,000) -
New borrowings for Federal Home Loan Bank Advances - 1,200
Increase (decrease) in securities sold under agreement to
Repurchase 2,413 (1,236)
----------------- -----------------
Net cash provided by financing activities $ 6,324 $ 143
Increase in cash and cash equivalents $ 2,001 $ (1,967)
CASH AND CASH EQUIVALENTS
Beginning $ 12,813 $ 8,609
================= =================
Ending $ 14,814 $ 6,642
================= =================
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash payments for:
Interest paid to depositors 1,188 1,225
Income taxes - 135
SUPPLEMENTAL DISCLOSURES FOR NON-CASH
INVESTING AND FINANCING ACTIVITIES
Unrealized gain (loss) on securities available for sale (303) (74)
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
-6-
<PAGE>
Independent Community Bankshares, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
For the Three Months Ended March 31, 1999 and 1998
Note 1.
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of March 31,
1999, and the results of operations and changes in cash flows for the three
months ended March 31, 1999 and 1998. The statements should be read in
conjunction with the Notes to Consolidated Financial Statements included in the
Company's Annual Report for the year ended December 31, 1998. The results of
operations for the three month periods ended March 31, 1999 and 1998, are not
necessarily indicative of the results to be expected for the full year.
Note 2. Securities
Securities being held to maturity as of March 31, 1999 are summarized
as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains (Losses) Value
---------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
U.S. Treasury securities
and obligations of U.S.
Government corporations
and agencies $ 502 $ 1 $ - $ 503
Obligations of states and
Political subdivisions 11,911 352 (1) 12,262
Mortgaged backed securities 149 - - 149
================ ============== ============ ============
$ 12,562 $ 353 $ (1) $ 12,914
================ ============== ============ ============
</TABLE>
-7-
<PAGE>
Securities available for sale as of March 31, 1999 are summarized
below:
<TABLE>
<CAPTION>
-----------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains (Losses) Value
-----------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
U.S. Treasury securities
and obligations of U.S.
Government corporations
and agencies $ 3,767 $ 1 $ (28) $ 3,740
Corporate securities 2,500 22 (29) 2,493
Obligations of states and
Political subdivisions 18,583 310 (180) 18,713
Mortgaged backed securities 22,336 54 (176) 22,214
Other 915 - - 915
---------------- -------------- -------------- -----------
$ 48,101 $ 387 $ (413) $ 48,075
================ ============== ============== ===========
</TABLE>
Note 3. The consolidated loan portfolio is composed of the following:
<TABLE>
<CAPTION>
------------------------------------
March 31, December 31,
1999 1998
------------------------------------
(In Thousands)
<S> <C> <C>
Commercial, financial and agricultural $ 19,821 $ 18,880
Real estate construction 6,553 5,436
Real estate mortgage 93,792 93,584
Installment loans to individuals 7,803 8,095
---------------- ---------------
Total loans 127,969 125,995
Allowance for loan losses (1,152) (1,063)
---------------- ----------------
$ 126,817 $ 124,932
Loans, net ================ ================
</TABLE>
The Company had $462,000 in non-performing assets at March 31, 1999.
<PAGE>
Note 4. The following is a summary of transactions in the reserve for loan
losses:
-----------------------------------
March 31, December 31,
1999 1998
-----------------------------------
(In Thousands)
Balance at January 1 $ 1,063 $ 974
Provision charged to operating expense 81 135
Recoveries added to the reserve 9 40
Loan losses charged to the reserve (1) (86)
----------------- ----------------
Balance at the end of the period $ 1,152 $ 1,063
================= ================
Note 5. Earnings Per Share
The following table shows the weighted average number of shares used in
computing earnings per share and the effect on the weighted average number of
shares of diluted potential common stock. Potential dilutive common stock has no
effect on income available to common shareholders. Earnings per share amounts
for prior periods have been restated to give effect to the application of
Statement 128 that was adopted by the Company in 1997.
March 31, 1999 March 31, 1998
Per share Per share
Shares Amount Shares Amount
------------ ------------ ------------ ------------
Basic EPS 1,778,994 $ 0.41 1,812,594 $ 0.39
============ ============
Effect of dilutive
securities:
stock options (1) 13,825 -
------------ ------------
Diluted EPS 1,792,819 $ 0.40 1,812,594 $ 0.39
============ ============ ============ ============
(1) The anti-dilutive effects of 32,000 options were not included in the
calculation.
Note 6. New Accounting Pronouncements
FASB Statement No. 133, "Accounting for Derivative Instruments and
Hedging Activities", was issued in June 1998. This statement requires companies
to record derivatives on the balance sheet as assets and liabilities, measured
at fair value. Gains and losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivative and
whether it qualifies for hedge accounting. This statement is not expected to
have a material impact on the Company's financial statements. This statement is
effective for fiscal years beginning after June 15, 1999, with earlier adoption
encouraged. The Company will adopt this accounting standard as required by
January 1, 2000.
-9-
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Summary
Net income for the three months ended March 31, 1999 increased 1.4% to
$722 thousand or $.40 per diluted share for the first quarter of 1999 compared
to $712 thousand or $.39 per diluted share for the first three months of 1998.
Annualized returns on average assets and equity for the period ended March 31,
1999 were 1.40% and 12.75%, respectively, compared to 1.54% and 13.66% for the
same period in 1998.
The total assets of Independent Community Bankshares, Inc. (the
"Company") increased to $212.5 million at March 31, 1999 compared to $205.4
million at December 31, 1998 representing an increase of $7.1 million or 3%.
Total loans at March 31, 1999, were $126.8 million, an increase of $1.9 million
from the December 31, 1998 balance of $124.9 million. Continued loan demand
fueled the loan growth experienced for the first three months of 1999. The
investment portfolio increased 4.8% to $60.6 million at March 31, 1999 compared
to the $57.8 million balance at December 31, 1998. Funds from deposit growth
were used to purchase both obligations of U.S. Government Agencies and
obligations of States and Political Subdivisions. Deposits increased to $177.9
million at March 31, 1999, from the $172.3 million balance at December 31, 1998,
representing an increase of $5.6 million or 3.4%.
Shareholders' equity at March 31, 1999 totaled $23.1 million compared
to $22.9 million at December 31, 1998. The book value per common share on March
31,1999 was $12.98 per share compared to $12.85 at December 31, 1998.
Net Interest Income
Net interest income is the Company's primary source of earnings and
represents the difference between interest and fees earned on earning assets and
the interest expense paid on deposits and other interest bearing liabilities.
Net interest income totaled $2.2 million for the first three months of 1999
compared to $2.0 million for the same period in 1998. Net interest income has
been positively affected by a 5.58% increase in average earning assets during
the first quarter of 1999.
Noninterest Income
Service charges on deposit accounts for the first three months of 1999
totaled $246 thousand compared to $214 thousand for the same period in 1998, an
increase of 15%. Commission and fees from fiduciary activities were $248
thousand at March 31, 1999 compared to $220 thousand at March 31, 1998. Other
Operating Income increased to $177 thousand at March 31, 1999 from the $38
thousand balance at March 31, 1998. Non-deposit investment sales commissions and
loan fees from the mortgage banking department within The Middleburg Bank, the
Company's banking subsidiary, account for a majority of the increase in other
operating income. The Middleburg Bank opened its mortgage banking department in
April 1998.
-10-
<PAGE>
Noninterest Expense
In support of the Company's continued growth, total noninterest expense
consisting of employee related costs, occupancy and other overhead totaled $1.9
million for the first three months of 1999 compared to $1.5 million for the same
period of 1998. This represents a 26.6% increase or $397 thousand. Branch
expansion and mortgage banking has increased salary and benefit expense by
20.32% from $871 thousand in the first quarter of 1998 to $1.0 million for the
same period in 1999. Increased marketing and Year 2000 expenses further added to
the increase in non-interest expense.
Allowance for Loan Losses
The allowance for loan losses at March 31, 1999 was $1.2 million. This
is an increase of $100 thousand or 8.4% from December 31, 1998. The ratio of the
allowance for loan losses to gross loans is .90%. Management believes the
allowance for loan losses is adequate to cover credit losses inherent in the
loan portfolio at March 31, 1999. Loans classified as loss, doubtful,
substandard or special mention are adequately reserved for and are not expected
to have a material impact beyond what has been reserved.
Capital Resources
Shareholder's equity at March 31, 1999 was $23.1 million compared to
$22.9 million at December 31, 1998. The retention of net income is the major
contributing factor to the growth in shareholders' equity.
At March 31, 1999 the Company's tier 1 and total risked-based capital
ratios were 15.34% and 16.15%, respectively, compared to 17.1% and 17.9% at
December 31, 1998. The Company's leverage ratio was 10.69% at March 31, 1999
compared to a ratio of 11.17% at December 31, 1998. The Company's capital
structure places it above the regulatory guidelines which affords the Company
the opportunity to take advantage of business opportunities while ensuring that
it has resources to protect against the risks inherent in its business.
Year 2000
In recent months, there has been increasing public awareness and
attention paid to the year 2000 problem, which stems from the inability of
certain computerized devices (hardware, software and equipment) to process
year-dates properly after 1999. Leap years and other dates may be included as
related to the year 2000 problem. Affected devices may fail or malfunction
unless repaired or replaced. Although the actual magnitude and effect of the
issue cannot be reasonably determined in advance, the Company has given it high
priority by appointing a Year 2000 team.
In 1997 the Year 2000 team began its analysis of the possible
implications to the Company of the year 2000 problem and the development of a
plan to prevent the problem from adversely affecting its operations. The
Company's year 2000 plans are subject to guidelines promulgated by the Federal
Financial Institutions Examination Council ("FFIEC"). The Federal Reserve Bank
of Richmond periodically measures the status of the Company's plans and
progress, as outlined in the FFIEC guidelines.
The plan as adopted and refined by the Company to handle year 2000
issues can be divided into two principal areas:
-11-
<PAGE>
(1) Resolution of the internal aspects of the year 2000 problem.
The focus of this area includes the effects of the year 2000
problem on the Company's technology, including computer
hardware and software systems. The Company's internal
technology plan includes (a) locating, listing and
prioritizing the specific technology that is potentially
subject to the year 2000 problem (referred to as the
"inventory" phase), (b) assessing the actual exposure of such
technology to the year 2000 problem by inquiry, research,
testing and other means (the "assessment" phase), (c)
selecting the method necessary to resolve the year 2000
problems that were identified, including replacement, upgrade,
repair or abandonment and implementing the selected resolution
method (the "remediation" phase), and (d) testing the
remediated or converted technology to determine the efficacy
of the resolutions (the "testing" phase).
(2) Determination and control of the external aspects of the year
2000 problem. The focus of this area includes (a) assessing
the potential for credit and liquidity problems within the
Company as a result of the investments in, loans to and
deposits from our significant customers as well as the risk of
possible business interruption by relying on vendors of goods
and services due to year 2000 problems affecting their
technology or business, and (b) developing contingency plans
to address failures by external parties to remediate fully any
year 2000 problems that are material to the Company.
Assessment of external parties is accomplished by written and
verbal inquiry, and by research to the extent that reliable
information is available.
The Company had substantially completed both the internal and external
testing by December 31, 1998 and plans to further test its computer systems
during 1999 to confirm compliance with year 2000 data processing standards. The
Company considers its current state of readiness in addressing the year 2000
problem to be adequate and expects to meet the timetable. The total cost of
remediation and testing is estimated to be between $250 thousand and $350
thousand, with a majority of the costs being incurred during 1998. This estimate
includes some costs, such as the purchase of computer hardware and software that
qualifies as a depreciable or amortizable assets for accounting purposes, with
the related depreciation or amortization recognized over the estimated lives of
the related assets. However, the majority of the costs will be expensed as
incurred. Through December 31, 1998, the Company had incurred approximately $175
thousand in noninterest expense associated with the year 2000 problem.
The Company has concluded that customer awareness about year 2000 and
banking is the key factor in minimizing customer concerns about the Company's
progress in planning for the year 2000. During 1999, the Company plans to inform
its customers about its progress through question and answer brochures, seminars
and direct mailings.
The Year 2000 team of has developed a preliminary contingency plan for
areas deemed "mission critical" for continual operation. The preliminary
contingency plan considers the likelihood of problem occurrences based on test
results. The Company's preliminary and final contingency plan addresses
operational issues, including communication links with other entities and the
utility and availability of alternative sources among key vendor relationships.
The Year 2000 team anticipates presenting its preliminary contingency plan to
the Board of Directors early in 1999 with final contingency plan tested and
complete by mid 1999. The Year 2000 team will monitor the status of each item as
well.
At this time, the Company believes that the most likely worst case year
2000 scenario would not have a material effect on the Company's results of
operations, liquidity and financial condition for the year ending December 31,
2000. The Company does not foresee a material loss of revenue due to the year
2000 problem. The Company's contingency plan, however, is based on assessments
of the likelihood of a problematic occurrence; the Company believes that no
entity can address the virtually
-12-
<PAGE>
unlimited possible circumstances relating to year 2000 issues, including risks
outside of the Company's primary marketplace of Loudoun County, Virginia. While
considered unlikely, the failure of the Company to successfully implement its
year 2000 plan, including modifications and conversions, or to adequately assess
the likelihood of various events relating to the year 2000 issue, could have a
material adverse effect on the Company's results of operations and financial
condition.
Additionally, there can be no assurances that the federal regulators
will not issue new regulatory requirements that require additional work by the
Company and, if issued, that new regulatory requirements will not increase the
cost or delay the completion of the Company's year 2000 plan.
The cost of the project and the date on which the Company plans to
complete the year 2000 modifications are based on management's best estimates,
which are based on numerous assumptions of future events including the continued
availability of certain resources, third party modification plans and other
factors. There can be no guarantee that these estimates will be achieved and
actual results could differ materially from our plans. Specific factors that
might cause such material differences include, but are not limited to, the
availability of personnel trained in this area, the ability of third party
vendors to correct their software and hardware, the ability of significant
customers to remedy their year 2000 issues and similar uncertainties.
Forward-Looking Statements
Certain information contained in this discussion may include
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934,
as amended. These forward-looking statements are generally identified by phrases
such as "the Company expects," "the Company believes" or words of similar
import. Such forward-looking statements involve known and unknown risks
including, but not limited to, changes in general economic and business
conditions, interest rate fluctuations, competition within and from outside the
banking industry, new products and services in the banking industry, risk
inherent in making loans such as repayment risks and fluctuating collateral
values, problems with technology utilized by the Company, changing trends in
customer profiles and changes in laws and regulations applicable to the Company.
Although the Company believes that its expectations with respect to the
forward-looking statements are based upon reliable assumptions within the bounds
of its knowledge of its business and operations, there can be no assurance that
actual results, performance or achievements of the Company will not differ
materially from any future results, performance or achievements expressed or
implied by such forward-looking statements.
-13-
<PAGE>
Part II. Other Information
Item 1. Legal proceedings
None
Item 2. Change 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.
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
27 Financial Data Schedule (filed electronically only)
b) Reports on Form 8-K -- None
-14-
<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.
INDEPENDENT COMMUNITY BANKSHARES, INC.
(Registrant)
Date: May 10, 1999 /s/ Joseph L. Boling
--------------------------------------
Joseph L. Boling
Chairman of the Board & CEO
Date: May 10, 1999 /s/ Alice P. Frazier
--------------------------------------
Alice P. Frazier
Senior Vice President & CFO
-15-
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-QSB FOR INDEPENDENT COMMUNITY BANKSHARES, INC. FOR
THE QUARTER ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 6,577,769
<INT-BEARING-DEPOSITS> 1,950,727
<FED-FUNDS-SOLD> 6,286,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 48,074,048
<INVESTMENTS-CARRYING> 12,562,561
<INVESTMENTS-MARKET> 12,914,699
<LOANS> 127,696,324
<ALLOWANCE> 1,151,944
<TOTAL-ASSETS> 212,452,370
<DEPOSITS> 177,891,830
<SHORT-TERM> 4,943,350
<LIABILITIES-OTHER> 1,534,139
<LONG-TERM> 5,000,000
0
0
<COMMON> 8,894,970
<OTHER-SE> 14,188,081
<TOTAL-LIABILITIES-AND-EQUITY> 212,452,370
<INTEREST-LOAN> 2,671,570
<INTEREST-INVEST> 763,693
<INTEREST-OTHER> 75,556
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<INTEREST-DEPOSIT> 1,180,499
<INTEREST-EXPENSE> 1,283,637
<INTEREST-INCOME-NET> 2,227,180
<LOAN-LOSSES> 81,249
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,892,336
<INCOME-PRETAX> 916,760
<INCOME-PRE-EXTRAORDINARY> 916,760
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 721,984
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.40
<YIELD-ACTUAL> 4.73
<LOANS-NON> 462,246
<LOANS-PAST> 0
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<ALLOWANCE-CLOSE> 1,151,944
<ALLOWANCE-DOMESTIC> 1,151,944
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 736,210
</TABLE>
