COOPERATIVE BANKSHARES INC
10-Q, 1997-05-13
SAVINGS INSTITUTIONS, NOT FEDERALLY CHARTERED
Previous: CNL AMERICAN PROPERTIES FUND INC, 424B3, 1997-05-13
Next: WACKENHUT CORRECTIONS CORP, 10-Q, 1997-05-13


<PAGE>
<PAGE>
                             FORM 10-Q

                SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C. 20549

                -----------------------------------
(Mark One)

  [X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
        OF THE SECURITIES EXCHANGE ACT OF 1934

        For the quarterly period ended March 31, 1997
or

  [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
        OF THE SECURITIES EXCHANGE ACT OF 1934

        For the transition period from __________ to _______

Commission File Number: No. 0-24626

COOPERATIVE BANKSHARES, INC.
______________________________________________________
(Exact name of registrant as specified in its charter)
 

    North Carolina                            56-1886527
- -----------------------                   -------------------
(State of other jurisdiction of            (I.R.S. Employer
of incorporation or organization          Identification No.)


201 Market Street, Wilmingon, North Carolina        28401
- --------------------------------------------     -----------
(Address of principal executive offices)          (Zip Code)


Registrant's telephone number, including area code:(910) 343-0181
                                                   --------------

- -----------------------------------------------------------------
       Former name, former address and former fiscal year,
                if changed since last report.

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 of 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that 
the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
   [X]  Yes    [ ]  No

APPLICABLE ONLY TO CORPORATE ISSUERS:  Indicate the number of
shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.  

1,491,698 shares at April 30, 1997
- ----------------------------------<PAGE>
<PAGE>

                      TABLE OF CONTENTS

                                                           Page

PART I  - FINANCIAL INFORMATION

  Item 1  Financial Statements (Unaudited)

          Consolidated Statements of Financial Condition, 
          March 31, 1997 and December 31, 1996              3

          Consolidated Statements of Operations for the
          three months ended March 31, 1997 and 1996        4

          Consolidated Statements of Cash Flows, for 
          the three months ended March 31, 1997 and 1996    5

          Notes to Consolidated Financial Statements        6

  Item 2  Management's Discussion and Analysis of 
          Financial Condition and Results of Operations    7-14

Part II   Other Information                                 15

Signatures                                                  16
<PAGE>
PART 1-FINANCIAL INFORMATION-ITEM 1-FINANCIAL STATEMENTS              
COOPERATIVE BANKSHARES, INC.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                                           March 31      December 31
                                                             1997            1996
                                                        ------------     -----------
<S>                                                     <C>              <C>
ASSETS
  Cash and cash equivalents (including interest-
    bearing deposits:              
  March 1997 - $3,674,666;  December 1996 - $9,084,216) $  7,529,585  $ 11,507,283 
  Securities:
    Available for sale                                     5,865,000     5,946,250 
    Held to maturity (market value March 1997-$19,272,189;            
      December 1996 - $19,705,700)                        21,051,207    21,053,628 
    Mortgage-backed and related securities available 
      for sale                                            28,318,922    28,824,918 
  Other investments                                        2,688,200     2,435,000 
  Loans receivable, net                                  275,149,585   263,312,730 
  Foreclosed real estate owned                               257,324        42,146 
  Accrued interest receivable                              2,080,642     1,917,447 
  Premises and equipment, net                              4,703,678     4,786,292 
  Prepaid expenses and other assets                          853,488     1,474,164
                                                        ------------  ------------ 
       Total assets                                     $348,497,631  $341,299,858 
                                                        ============  ============
LIABILITIES
  Deposits                                              $280,189,579  $278,138,909 
  Borrowed funds                                          40,144,294    35,145,362 
  ESOP note payable                                           84,824       289,160 
  Escrow deposits                                            680,345       620,808 
  Accrued interest payable on deposits                       220,266       351,295 
  Deferred income taxes, net                                 875,618     1,075,883 
  Accrued expenses and other liabilities                     207,586       208,891 
                                                        ------------  ------------ 
       Total liabilities                                 322,402,512   315,830,308

Stockholders' Equity
  Preferred stock, $1 par value, 3,000,000 shares           
    authorized, none issued and outstanding                        -             -
  Common stock, $1 par value, 7,000,000 shares
    authorized, 1,491,698 issued and outstanding           1,491,698     1,491,698 
  Additional paid-in capital                               6,014,775     6,003,111 
  Unearned ESOP shares                                       (84,824)     (289,160)
  Net unrealized gain (loss) on securities available 
    for sale                                                (546,116)     (372,265)
  Retained earnings                                       19,219,586    18,636,166
                                                        ------------  ------------ 
       Total stockholders' equity                         26,095,119    25,469,550 
                                                        ------------  ------------ 
       Total liabilities and stockholders' equity       $348,497,631  $341,299,858 
                                                        ============  ============
</TABLE>

The accompanying notes are an integral part of the consolidated
financial statements.
                             3<PAGE>
<PAGE>
COOPERATIVE BANKSHARES, INC.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS

                                                             Three Months Ended
                                                                   March 31,
                                                             1997            1996
                                                        ------------     -----------
<S>                                                     <C>              <C>
INTEREST INCOME
  Loans receivable                                       $5,194,103      $4,501,592 
  Mortgage-backed and related securities                    497,989         527,478 
  Securities                                                502,759         443,835
                                                         ----------      ---------- 
       Total interest income                              6,194,851       5,472,905 
                                                         ----------      ---------- 
INTEREST EXPENSE              
  Deposits                                                3,118,870       3,202,708 
  Borrowed funds                                            570,342         163,379
                                                         ----------      ---------- 
       Total interest expense                             3,689,212       3,366,087 

NET INTEREST INCOME                                       2,505,639       2,106,818 
  Provision for  loan losses                                 30,000          10,000 
                                                         ----------      ---------- 
       Net interest income after provision for 
        loan losses                                       2,475,639       2,096,818
                                                         ----------      ---------- 
NONINTEREST INCOME            
  Gain on sale of securities                                      -               -
  Gain on sale of loans and mortgage-backed
    and related securities                                        -               -
  Loss on real estate owned                                    (600)        (24,532)
  Other income, net                                         133,783         141,693
                                                         ----------      ---------- 
       Total noninterest income                             133,183         117,161 
                                                         ----------      ---------- 
NONINTEREST EXPENSES
  Compensation and fringe benefits                          989,292         930,129 
  Occupancy and equipment                                   337,595         295,417 
  Federal insurance premiums                                 65,244         175,265 
  Advertising                                                67,988          63,556 
  Amortization of goodwill                                        -          73,017 
  Other operating expense                                   223,112         247,492
                                                         ----------      ---------- 
       Total noninterest expenses                         1,683,231       1,784,876 
                                                         ----------      ---------- 
Income before income taxes                                  925,591         429,103 
Income tax expense                                          342,170         169,247
                                                         ----------      ---------- 
Net Income                                               $  583,421      $  259,856
                                                         ==========      ==========
EARNINGS PER:
  Common and common share equivalent                     $     0.37      $     0.16 
  Common share - assuming full dilution                  $     0.37      $     0.16
</TABLE> 
The accompanying notes are an integral part of the consolidated
financial statements.
                           4<PAGE>
<PAGE>
COOPERATIVE BANKSHARES,  INC.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                             Three Months Ended
                                                                   March 31,
                                                             1997            1996
                                                        ------------     -----------
<S>                                                     <C>              <C>
OPERATING ACTIVITIES:
  Net income                                              $   583,421   $   259,856 
  Adjustments to reconcile net income to net 
    cash provided by operating activities:
  Net accretion, amortization, and depreciation               143,020       201,143 
  Provision for deferred income taxes                         (75,661)      (32,000)
  Gain (loss) on sale of property, plant and equipment           (982)            0
  Loss on sales of foreclosed real estate                           0         6,149 
  Provision for loan losses                                    30,000        10,000
  Changes in assets and liabilities:
    Accrued interest receivable                              (163,195)      (72,546)
    Prepaid expenses and other assets                         626,400      (158,721)
    Escrow deposits                                            59,537       285,518 
    Accrued interest payable on deposits                     (131,029)      430,465 
    Accrued expenses and other liabilities                     (1,305)      207,515 
                                                         ------------  ------------
    Net cash provided by operating activities               1,070,206     1,137,379
                                                         ------------  ------------
INVESTING ACTIVITIES:
  Proceeds from principal repayments of mortgage-backed 
   and related securities available for sale                  273,450       481,969 
  Loan originations, net of principal repayments          (12,071,791)   (3,174,163)
  Change in foreclosed real estate                            (10,242)      166,617 
  Purchases of property, plant and equipment                  (38,455)      (15,664)
  Proceeds from sale of property, plant and equipment           2,732             0 
  Purchases of other investments                             (253,200)            0
  Proceeds from sales of other investments                          0        96,700
                                                         ------------  ------------
    Net cash provided by (used in) investing activities   (12,097,506)   (2,444,541)
                                                         ------------  ------------
FINANCING ACTIVITIES:
  Net increase (decrease) in deposits                       2,050,670       869,469 
  Net increase (decrease) in borrowings                     4,998,932          (477)
                                                         ------------  ------------
     Net cash provided by (used in) financing activities    7,049,602       868,992 
                                                         ------------  ------------
          
INCREASE IN CASH AND CASH EQUIVALENTS                      (3,977,698)     (438,170)

CASH AND CASH EQUIVALENTS,  BEGINNING OF PERIOD            11,507,283    11,889,473
                                                         ------------  ------------
CASH AND CASH EQUIVALENTS,  END OF PERIOD                $  7,529,585  $ 11,451,303
                                                         ============  ============
SUPPLEMENTAL DISCLOSURES:
  Net change in market value-securities available 
    for sale                                             $    298,455  $     42,012 
  Transfer from loans to foreclosed real estate          $    204,936  $    239,729 
  Loans to facilitate the sale of foreclosed real estate $          0  $          0
</TABLE> 

The accompanying notes are an integral part of the consolidated
financial statements.
                             5
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Accounting Policies:  The significant accounting policies
followed by Cooperative Bankshares, Inc. (the "Company") for
interim financial reporting are consistent with the accounting
policies followed for annual financial reporting.  These
unaudited consolidated financial statements have been prepared in
accordance with Rule 10-01 of Regulation S-X, and in management's
opinion, all adjustments of a normal recurring nature necessary
for a fair presentation have been included.  The accompanying
financial statements do not purport to contain all the necessary
financial disclosures that might otherwise be necessary in the
circumstances and should be read in conjunction with the
consolidated financial statements and notes thereto in the
Company's annual report for the year ended December 31, 1996. 
The results of operations for the three month period ended March
31, 1997 are not necessarily indicative of the results to be
expected for the full year.

2.  Basis of Presentation:  The accompanying unaudited
consolidated financial statements include the accounts of
Cooperative Bankshares, Inc., Cooperative Bank For Savings, Inc.,
SSB and its wholly owned subsidiary, CS&L Services, Inc.  All
significant intercompany items have been eliminated.

3.  Earnings Per Share:  Earnings per share are calculated by
dividing net income by the weighted average number of common and
dilutive common equivalent shares outstanding.  Common equivalent
shares consist of stock options issued and outstanding.  In
determining the number of equivalent shares outstanding, the
treasury stock method was applied.  This method assumes that the
number of shares issuable upon exercise of the stock options is
reduced by the number of common shares assumed purchased at
market prices with a portion of the proceeds from the assumed
exercise of the common stock options.

     The company will adopt Statement of Financial Accounting
Standards (SFAS) No. 128 "Earnings Per Share" on December 31,
1997.  SFAS No. 128 requires the Company to change its method for
computing, presenting and disclosing earnings per share
information.  Upon adoption, all prior period data presented will
be restated to conform to the provisions of SFAS No. 128.

     If the Company had adopted SFAS No. 128 for the period ended
March 31, 1997, the following computation would have been
presented on the consolidated statements of income:
<TABLE>
<CAPTION>

                                                   Three Months Ended
                                                         March 31,
                                                   1997            1996
                                               ------------     -----------
<S>                                             <C>              <C>
Basic income per common share:
  Net Income                                    $  583,421       $  259,856 
  Weighted average common shares outstanding     1,483,364        1,491,698
  Basic income per common share                      $0.39            $0.17

Diluted income per common share:
  Net Income                                    $  583,421       $  259,856
  Weighted average common shares outstanding:    1,483,364        1,491,698
  Dilutive effect of stock options                 100,223           97,450
                                                ----------       ----------
      Total shares                               1,583,587        1,589,148 
  Dilutive income per common share                   $0.37            $0.16
</TABLE> 
                             6
<PAGE>
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION      AND RESULTS OF OPERATIONS

GENERAL     

     Cooperative Bankshares, Inc. (the "Company") is a registered
savings bank holding company incorporated in North Carolina in
1994.  The Company was formed for the purpose of serving as the
holding company of Cooperative Bank For Savings, Inc., SSB,
("Cooperative Bank" or the "Bank") a North Carolina chartered
stock savings bank.  The Company's primary activities consist of
holding the stock of Cooperative Bank and operating the business
of the Bank.  Accordingly, the information set forth in this
report, including financial statements and related data, relates
primarily to Cooperative Bank.

     Cooperative Bank is chartered under the laws of the state of
North Carolina to engage in general banking business.  The Bank
offers a wide range of retail banking services including deposit
services, banking cards and alternative investment products. 
These funds are used for the extension of credit through mortgage
loans, savings account loans and other installment credit such as
home equity, auto and boat loans and check reserve.

     The Company conducts its operations through its main office
in Wilmington, North Carolina and 16 offices throughout eastern
North Carolina.  The Company considers its primary market for
savings and lending activities to be the communities of eastern
North Carolina extending from the Virginia to the South Carolina
borders.

     The following management's discussion and analysis is
presented to assist in understanding the Company's financial
condition and results of operations.  This discussion should be
read in conjunction with the consolidated financial statements
and accompanying notes presented in this report.

MANAGEMENT STRATEGY

     It is the mission of the Company to provide the maximum in
safety and security for our depositors, an equitable rate of
return for our stockholders, excellent service for our customers,
and to do so while operating in a fiscally sound and conservative
manner, with fair pricing of our products and services, good
working conditions, outstanding training and opportunities for
our staff, along with a high level of corporate citizenship.

     Cooperative Bank's lending activities are concentrated on
the origination of conventional mortgage loans for the purpose of
constructing, financing or refinancing one- to four-family
residential properties.  As of March 31, 1997, $258.5 million, or
93.2%, of the Bank's loan portfolio consisted of loans secured by
one- to four family residential properties.  Also at that date,
approximately 96.0% of the Bank's total loan portfolio consisted
of loans secured by residential real estate.  To a lesser extent,
the Bank originates multi-family, nonresidential real estate
loans, home equity line of credit loans, secured and unsecured
consumer and business loans.  While continuing to place primary
emphasis on residential mortgage loans, the Bank is taking a more
aggressive position in pursuing business lending, and
nonresidential real estate lending involving loans secured by
small commercial properties with balances generally ranging from
$100,000 to $500,000.  The Bank's primary emphasis is to
originate adjustable rate loans with the fixed rate loan as an
option.  Adjustable rate loans at March 31, 1997, were 68.6%, and
fixed rate loans were 31.4% of the Bank's total loan portfolio.

INTEREST RATE SENSITIVITY ANALYSIS

     Interest rate sensitivity refers to the change in interest
spread resulting from changes in interest rates.  To the extent
that interest income and interest expense do not respond equally
to changes in interest rates, or
                             7
<PAGE>
<PAGE>
that all rates do not change uniformly, earnings will be
affected.  Interest rate sensitivity, at a point in time, can be
analyzed using a static gap analysis that measures the match in
balances subject to repricing between interest-earning assets and
interest-bearing liabilities. Gap is considered positive when the
amount of interest rate sensitive assets exceed the amount of
interest rate sensitive liabilities. Gap is considered negative
when the amount of interest rate sensitive liabilities exceed the
amount of interest rate sensitive assets.  At March 31, 1997,
Cooperative had a one-year negative gap position of 2.4%.  During
a period of rising interest rates, a negative gap would tend to
adversely affect net interest income, while a positive gap would
tend to result in an increase in net interest income.  During a
period of falling interest rates, a negative gap would tend to
result in an increase in net interest income while a positive gap
would tend to adversely affect net interest income.  It is
important to note that certain shortcomings are inherent in
static gap analysis.  Although certain assets and liabilities may
have similar maturities or periods of repricing, they may react
in different degrees to changes in market interest rates.  For
example, most of the Company's adjustable-rate mortgage loans are
indexed to the National Monthly Median Cost of Funds to SAIF-
insured institutions.  This index is considered a lagging index
that may lag behind changes in market rates. The one-year or less
interest-bearing liabilities also include checking, savings, and
money market deposit accounts.  Experience has shown that the
Company sees relatively modest repricing of these transaction
accounts.  Management takes this into consideration in
determining acceptable levels of interest rate risk.

LIQUIDITY

     The Company's goal is to maintain adequate liquidity to meet
potential funding needs of loan and deposit customers, pay
operating expenses, and meet regulatory liquidity requirements. 
Maturing securities, principal repayments of loans and
securities, deposits, income from operations and borrowings are
the main sources of liquidity. Scheduled loan repayments are a
relatively predictable source of funds, unlike deposits and loan
prepayments that are significantly influenced by general interest
rates, economic conditions and competition.

     At March 31, 1997, the estimated market value of liquid
assets (cash, cash equivalents, and marketable securities) was
approximately $63.7 million, which represents 19.9% of deposits
and borrowed funds as compared to $68.4 million or 21.8% of
deposits and borrowed funds at December 31, 1996.  The decrease
in liquid assets during the three months ended March 31, 1997,
was primarily due to the funding of new mortgage loans.

     The Company's security portfolio consists of U.S. Government
agency, mortgage-backed and other permissible securities.  The
mortgage-backed securities are guaranteed by the following
agencies: Federal Home Loan Mortgage Corporation ("FHLMC"),
Federal National Mortgage Association  ("FNMA"), and the
Government National Mortgage Association ("GNMA").  Mortgage-
backed securities entitle the Company to receive a pro rata
portion of the cash flows from an identified pool of mortgages. 
Although mortgage-backed securities generally offer lesser yields
than the loans for which they are exchanged, they present
substantially lower credit risk by virtue of the guarantees that
back them.  Mortgage-backed securities are more liquid than
individual mortgage loans, and may be used to collateralize
borrowings or other obligations of the Company.

     The Company's investment in mortgage-related securities
includes collateralized mortgage obligations ("CMO").  CMOs are
securities derived by reallocating the cash flows from mortgage-
backed securities or pools of mortgage loans in order to create
multiple classes, or tranches, of securities with coupon rates
and average lives that differ from the underlying collateral as a
whole.  At March 31, 1997, the Company's investment in CMOs
totaled $15 million, or 26.8% of the securities portfolio.  Of
the $15 million, a $10 million CMO is guaranteed either directly
or indirectly through mortgage-backed securities underlying the
obligations of FNMA.  This FNMA CMO has a 30 year term, floats at
155 basis points over
                             8
<PAGE>
<PAGE>
the 30 day London Interbank Offered Rate ("LIBOR") on a monthly
basis and has a lifetime interest rate cap of 8%.  The remaining
$5 million CMO securities were issued by Chase Mortgage Finance
Corporation and represent a beneficial interest in a pool of
fixed-rate one- to four-family mortgage loans.  The Chase CMO has
a 30 year term, floats at 180 basis points over the 30 day LIBOR
on a monthly basis and has a lifetime interest rate cap of 8%.

     The Company's investment in U. S. Government agency bonds
includes $5 million in Federal Home Loan Banks' Dual Indexed
Consolidated Bonds maturing August 4, 2003.  These bonds had an
8% interest rate from August 4, 1993, through August 3, 1995, at
which time the rate was adjusted to 3.485% based on an indexing
formula.  Subsequent interest rates will also be based on an
indexing formula and will adjust annually on February 4 and
August 4.  The indexing formula states that the interest rate per
annum will be equal to a rate determined by the 10-Year CMT less
the 6 month LIBOR plus a margin of 2.9% for August 4, 1995,
increasing 30 basis points annually to 5.0% for August 4, 2005.

     The mortgage-backed and related securities owned by the
Company are subject to repayment by the mortgagors of  the
underlying collateral at any time.  These repayments may be
affected by a rising or declining interest rate environment. 
During a rising or declining interest rate environment,
repayments and the interest rate caps may subject the Company's
mortgage-backed and related securities to yield and/or price
volatility.

     The Company's primary uses of liquidity are to fund loans
and to make investments.  At March 31, 1997, outstanding off-
balance sheet commitments to extend credit totaled $12.5 million,
and the undisbursed portion of construction loans was $14.8
million.  Management considers current liquidity levels adequate
to meet the Company's cash flow requirements.

CAPITAL

     Stockholders' equity at March 31, 1997, was $26.1 million,
up 1.6% from $25.5 million at December 31, 1996.  The total at
March 31, 1997, and December 31, 1996, includes $546 thousand and
$372 thousand respectively, net of tax, of unrealized losses on
securities available for sale marked to estimated fair market
value under Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities 
("SFAS 115").

     Under the capital regulations of the FDIC, the Bank must
satisfy minimum leverage ratio requirements and risk-based
capital requirements.  Banks, supervised by the FDIC, must
maintain a minimum leverage ratio of core (Tier I) capital to
average adjusted assets ranging from 3% to 5%.  At March 31,
1997, the Bank's ratio of Tier I capital was 7.6%.  The FDIC's
risk-based capital rules require banks supervised by the FDIC to
maintain risk-based capital to risk-weighted assets of at least
8.00%.  Risk-based capital for the Bank is defined as Tier 1
capital plus the balance of allowance for loan losses.  At March
31, 1997, the Bank had a ratio of qualifying total capital to
risk-weighted assets of 14.9%.

     The Company, as a bank holding company, is also subject, on
a consolidated basis, to the capital adequacy guidelines of the
Board of Governors of the Federal Reserve (the "Federal Reserve
Board").  The capital requirements of  the Federal Reserve Board
are similar to those of the FDIC governing the Bank.

     The Company currently exceeds all of its capital
requirements.  Management expects the Company to continue to
exceed these capital requirements without altering current
operations or strategies.

                             9
<PAGE>
<PAGE>
FINANCIAL CONDITION AT MARCH 31, 1997 COMPARED TO DECEMBER 31,
1996

     The Company's total assets increased 2.1% to $348.5 million
at March 31, 1997, as compared to $341.3 million at December 31,
1996.  The major change in the assets was a $11.8 million (4.5%)
increase in loans receivable.  The increase in loans during the
current period were funded by retail deposits, borrowed funds,
and liquid assets.  The Company concentrates its lending
activities on the origination of conventional mortgage loans for
the purpose of the construction, financing or refinancing of one-
to four-family residential properties.  At March 31, 1997, over
93% of the Company's loan portfolio consisted of loans secured by
one- to four-family residential properties.

     The $2.1 million (0.7%) increase in retail deposits with an
addition of $5 million in borrowed funds from the Federal Home
Loan Bank ("FHLB") was used in part to fund the increase in loans
receivable. Borrowed funds, collateralized through an agreement
with the FHLB for advances, are secured by the Company's
investment in FHLB stock and qualifying first mortgage loans.
Borrowed funds at March 31, 1997, in the amount of $10.0 million,
mature in May 1997 with the remaining amount maturing in 1 to 5
years.

     The Company's non-performing assets (loans 90 days or more
delinquent and foreclosed real estate) were $1.6 million, or
0.45% of assets, at March 31, 1997, compared to $1.5 million, or
0.44% of assets, at December 31, 1996.  An increase in delinquent
single family loans caused non-performing assets to be higher for
the period ended March 31, 1997, as compared to December 31,
1996.  The Company takes an aggressive position in collecting
delinquent loans to keep non-performing assets down and continues
to evaluate the loan and real estate portfolios to provide loss
reserves as considered necessary.  In the opinion of management,
the allowance for loan losses of $837 thousand at March 31, 1997,
is adequate to cover potential losses.

COMPARISON OF OPERATION RESULTS FOR QUARTER ENDED MARCH 31, 1997,
VS. 1996

OVERVIEW

     The net income of the Company depends primarily upon net
interest income.  Net interest income is the difference between
the interest earned on loans and securities portfolios and the
cost of funds, consisting principally of the interest paid on
deposits and borrowings.  The Company's operations are materially
affected by general economic conditions, the monetary and fiscal
policies of the Federal government, and the policies of
regulatory authorities.

NET INCOME 

     Net income for the three month period ended March 31, 1997,
increased 125% to $583.4 thousand as compared to $259.9 thousand
for the same period last year.  Several factors contributed to
the increase in net income.  Interest earning assets grew 10.9%
and the net interest margin increased to 3.01% for the three
month period ended March 31, 1997, as compared to 2.81% for the
same period last year.  In addition to the above, noninterest
expense decreased due to a reduction in the Federal insurance
premium and the elimination of goodwill amortization.  The
impaired goodwill was charged-off during September 1996
eliminating a $73 thousand quarterly charge to income.  Charges
in September 1996, by the Federal Deposit Assurance Corporation
Fund ("FDIC"), to capitalize the Savings Association Assurance
Fund ("SAIF"), resulted in an approximate decrease of 62% in the
current quarterly Federal insurance premium.
                             10 
<PAGE>
<PAGE>
INTEREST INCOME

     Interest income increased 13.2% for the three month period
ended March 31, 1997, as compared to the same period a year ago. 
The increase in income can be principally attributed to an
increase in yield and the average balance of interest-earning
assets as compared to the same period last year.  The yield on
average interest-earning assets increased to 7.45% as compared to
7.30% for the same period a year ago, and the average balance
increased by 10.9%.

INTEREST EXPENSE

     Interest expense increased 9.6% for the three month period
ended March 31, 1997, as compared to the same period a year ago. 
The 11.4% increase in average interest-bearing liabilities was
the major factor in causing interest expense to increase.  In
addition, the 254% increase in borrowed funds, used to fund the
major part of the 11.4% increase in interest bearing assets
carries a higher cost than retail deposits.  This higher cost of
borrowed funds at 6.37% as compared to 4.54% cost of retail
deposits adversely affects the overall cost of interest-bearing
liabilities.  The cost of interest-bearing liabilities decreased
only 8 basis points to 4.75% as compared to 4.83% for the same
period last year.

NET INTEREST INCOME

Net interest income for the three month period ended March 31,
1997, as compared to the same period a year ago, increased 18.9%. 
A reduction in the Company's one-year negative gap position in
which interest-bearing liabilities reprice faster than interest-
earning assets had a positive effect on increasing the interest
rate margin.  The one-year negative gap has been reduced to 2.4%
at March 31, 1997, as compared to 15.1% for the same period last
year. During the three month period ended March 31, 1997, the
yield on average interest-earning assets increased 15 basis
points, while the cost of average interest-bearing liabilities
decreased 8 basis points, causing net interest income to
increase.  The percentage of average interest-earning assets to
average interest-bearing liabilities decreased to 107.1% for the
three month period ended March 31, 1997, as compared to 107.7%
for the same period in 1996.
                             11
<PAGE>
<PAGE>
                     AVERAGE YIELD/COST ANALYSIS

The following table contains information relating to the
Company's average balance sheet and reflects the average yield on
assets and average cost of liabilities for the periods indicated. 
Such annualized yields and costs are derived by dividing income
or expense by the average balances of asset or liabilities,
respectively, for the periods presented.
<TABLE>
<CAPTION>
                                                  For the Quarter Ended
                                      March 31, 1997             March 31, 1996     
                               --------------------------  -------------------------
(Dollars in thousands)                            Average                    Average
                               Average             Yield/  Average            Yield/
                               Balance   Interest  Cost    Balance  Interest  Cost   
                               -------   -------- ------   -------  -------- ------- 
<S>                            <C>       <C>      <C>      <C>      <C>      <C>
Interest-earning assets:
   Securities and other
     interest-earning assets  $ 35,133   $  503    5.73%   $ 32,744  $  444   5.42%
Mortgage-backed and related 
  securities                    29,284      498    6.80%     31,188     527   6.76%
Loan portfolio                 268,366    5,194    7.74%    236,128   4,502   7.63%
    Total interest-earning    --------   ------            --------  ------
      assets                   332,783   $6,195    7.45%    300,060  $5,473   7.30%
                                         ------                      ------
Non-interest earning assets     10,123                       13,145
                              --------                     --------
Total assets                  $342,906                     $313,205
                              ========                     ========

Interest-bearing liabilities:
   Deposits                    274,849    3,119    4.54%    268,638   3,203   4.77%
   Borrowed funds               35,790      570    6.37%     10,089     163     6.46%
    Total interest-bearing    --------   ------            --------  ------
       liabilities             310,639   $3,689    4.75%    278,727   3,366   4.83%
                                         ------                      ------
Non-interest bearing 
  liabilities                   6,244                         5,280
                             --------                      --------
    Total liabilities         316,883                       284,007
    Stockholders' equity       26,023                        29,198
Total liabilities and        --------                      --------
  stockholders' equity       $342,906                      $313,205
                             ========                      ========
Net interest income                      $2,506                      $2,107
                                         ======                      ======
Interest rate spread                               2.70%                      2.47%
                                                   ====                       ==== 
Net yield on interest-
  earning assets                                   3.01%                      2.81%
                                                   ====                       ==== 
Percentage of average interest-
   earning assets to average 
   interest-bearing
   liabilities                                    107.1%                    107.7%
                                                  =====                     =====
</TABLE>
                             12

<PAGE>
<PAGE>
RATE/VOLUME ANALYSIS

The table below provides information regarding changes in
interest income and interest expense for the period indicated. 
For each category of interest-earning asset and interest-bearing
liabilities, information is provided on changes attributable to
(i) changes in volume (changes in volume multiplied by old rate);
(ii) changes in rates (change in rate multiplied by old volume);
and (iii) changes in rate-volume (changes in rate multiplied by
changes in volume).

<TABLE>
<CAPTION>
                                          For the Three Months Ended
                                       March 31, 1996 vs. March 31, 1997
                                                Increase (Decrease)
                                                     Due to
                                   --------------------------------------
(Dollars in thousand)              Volume     Rate   Rate/Volume    Total
                                   --------------------------------------
<S>                                <C>        <C>       <C>        <C>
Interest income:
   Securities and other
     interest-earning assets         32         25        2          59
Mortgage-backed and related 
  securities                        (32)         3       (0)        (29)
Loan portfolio                      615         68        9         692
                                    ---       ----      ---         --- 
    Total interest-earning assets   615         96       11         722
                                    ---       ----      ---         ---
Interest expense:
   Deposits                          74       (154)      (4)        (84)
   Borrowed funds                   415         (2)      (6)        407 
                                    ---       ----      ---         --- 

    Total interest-bearing 
      liabilities                   489       (156)     (10)        323 
                                    ---       ----      ---         --- 
                                   
Net interest income                 126        252       21         399
                                    ===       ====      ===         ===  
                                   
</TABLE>
                             13

<PAGE>
<PAGE>
RESERVE FOR LOAN LOSSES

     At March 31, 1997, the recorded investment in loans for
which impairment has been recognized in accordance with SFAS 114
totaled $791 thousand with a valuation allowance of $66 thousand. 
The Bank uses several factors in determining if a loan is
impaired.  The internal asset classification procedures include a
through review of significant loans and lending relationships and
includes the accumulation of related data.  This data includes
loan payment status, borrowers' financial data and borrowers'
operating factors such as cash flows and operating income or
loss.

     With no charge-offs required during the three month period
ended March 31,1997, the Company added $30 thousand to the
reserve for loan losses, bringing the balance up to $837
thousand.  Management considers this level to be appropriate
based on lending volume, the current level of delinquencies and
other non-performing assets, overall economic conditions and
other factors.  Future increases to the allowance may be
necessary,  however, due to changes in loan composition or loan
volume, changes in economic or market area conditions and other
factors.

NONINTEREST INCOME

     For the three month period ended March 31, 1997, real estate
owned expense was minimal as compared to the same period last
year due to a low volume of foreclosed real estate owned.  Loan
fees for the three month period ended March 31, 1997, as compared
to last year decreased by 15.0% due to a decrease in servicing
fees on sold loans.  Scheduled payments and prepayments decreased
sold loans.  Fee income from deposit operations increased 8.1%
due to a more aggressive position in offering checking accounts.

NONINTEREST EXPENSES

     For the three month period ended March 31, 1997, noninterest
expense decreased by 5.7% as compared to the same period last
year.  The changes in noninterest expense are listed as follows. 
Compensation and related cost increased 6.4%.  This 6.4% can be
broken down to 2.4% for normal cost of living increases for
existing employees and 4.0% for a payment to a retiring Bank
Board Of Director member.  Occupancy and equipment expense
increased 14.3%.  This increase can be attributed to additional
maintenance necessary to keep the buildings in good repair.  The
decrease in Federal insurance premium can be attributed to the
enacted legislation in September 1996 that resulted in a
reduction in the premium.  Advertising increased 7.0% due to a
more aggressive advertising campaign. The impaired goodwill was
charged-off during September 1996 eliminating a $73 thousand
quarterly charge to noninterest expense.  A reduction in
professional services (consultant fees, attorney fees and
accounting fees) was the major component  that reduced other
operating expense by 9.9%.

INCOME TAXES

     The effective tax rates for the three month periods ended
March 31, 1997 and 1996 approximate the statutory rate after
giving effect to nontaxable interest, amortization of goodwill,
other permanent tax differences,and adjustments to certain
deferred tax liabilities. 
                             14

<PAGE>
<PAGE>
PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         Not applicable

ITEM 2.  CHANGES IN SECURITIES

     (a)  Not applicable

     (b)  Not applicable

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

     (a)  Not applicable

     (b)  Not applicable

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

     (a)  Annual Meeting of Stockholders, April 25, 1997
          Election of Directors
<TABLE>
<CAPTION>
                          Votes For   Votes Against   Votes Withheld   Abstentions
                          ---------   -------------   --------------   -----------
<S>                       <C>           <C>             <C>             <C>
Frederick Willetts, III   1,182,559     37,585           0              271,554
F. Peter Fensel           1,183,221     36,923           0              271,554
William H. Wagoner        1,182,221     37,923           0              271,554
R. Allen Rippy            1,183,109     37,035           0              271,554
</TABLE>

ITEM 5.  OTHER INFORMATION

         None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Exhibits
              Exhibit 11.  Computation of Earnings Per Share
              Exhibit 27.  Financial Data Schedule

         (b)  Reports on Form 8-K.

              No reports on Form 8-K were filed during the
              quarter ended March 31, 1997.
                             15

<PAGE>
<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.

                           COOPERATIVE BANKSHARES, INC. 

Dated: May 12, 1997        /s/ Frederick Willetts, III
                           -------------------------------------
                           President and Chief Executive Officer



Dated: May 12, 1997        /s/ Edward E. Maready
                           -------------------------------------
                           Treasurer and Chief Financial Officer

                             16

EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>

                                                            Three Months Ended
                                                                  March 31,
                                                           1997            1996
                                                       ------------     -----------
<S>                                                     <C>              <C>
NET INCOME (LOSS)                                      $  583,421       $  259,856
                                                       ==========       ==========

PRIMARY
Average shares outstanding                              1,483,364        1,491,698     
                 
Net effect of dilutive stock options -- based on the
treasury stock method using average market price          100,223           97,450     
                                                       ----------       ----------
TOTAL                                                   1,583,587        1,589,148
                                                       ==========       ==========
PER SHARE AMOUNT                                            $0.37            $0.16
                                                       ==========       ==========
FULLY DILUTED
Average shares outstanding                              1,483,364        1,491,698

Net effect of dilutive stock options--based on the                 
treasury stock method using the period-end market                  
price, if it is dilutive more than 3%.                    101,083           97,450
                                                       ----------       ----------
TOTAL                                                   1,584,447        1,589,148     
                                                       ==========       ==========
PER SHARE AMOUNT                                       $     0.37                 $     0.16
                                                       ==========       ==========     
</TABLE>

<TABLE> <S> <C>

<ARTICLE> 9
<MULTIPLIER>  1
       
<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          DEC-31-1997
<PERIOD-END>                               MAR-31-1997
<CASH>                                       3,854,919
<INT-BEARING-DEPOSITS>                       3,674,666
<FED-FUNDS-SOLD>                                     0
<TRADING-ASSETS>                                     0
<INVESTMENTS-HELD-FOR-SALE>                 34,183,922
<INVESTMENTS-CARRYING>                      21,051,207
<INVESTMENTS-MARKET>                        19,272,189
<LOANS>                                    275,987,124
<ALLOWANCE>                                    837,539
<TOTAL-ASSETS>                             348,497,631
<DEPOSITS>                                 280,189,579
<SHORT-TERM>                                40,144,294
<LIABILITIES-OTHER>                          2,068,639
<LONG-TERM>                                          0
<COMMON>                                     1,491,698
                                0
                                          0
<OTHER-SE>                                  24,603,421
<TOTAL-LIABILITIES-AND-EQUITY>             348,497,631
<INTEREST-LOAN>                              5,194,103
<INTEREST-INVEST>                            1,000,748
<INTEREST-OTHER>                                     0
<INTEREST-TOTAL>                             6,194,851
<INTEREST-DEPOSIT>                           3,118,870
<INTEREST-EXPENSE>                           3,689,212
<INTEREST-INCOME-NET>                        2,505,639
<LOAN-LOSSES>                                   30,000
<SECURITIES-GAINS>                                   0
<EXPENSE-OTHER>                              1,683,231  
<INCOME-PRETAX>                                925,591
<INCOME-PRE-EXTRAORDINARY>                     925,591
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                   583,421
<EPS-PRIMARY>                                     0.37
<EPS-DILUTED>                                     0.37
<YIELD-ACTUAL>                                    3.01
<LOANS-NON>                                    791,141
<LOANS-PAST>                                   518,320
<LOANS-TROUBLED>                                     0
<LOANS-PROBLEM>                                      0
<ALLOWANCE-OPEN>                               807,539
<CHARGE-OFFS>                                        0
<RECOVERIES>                                         0
<ALLOWANCE-CLOSE>                              837,539
<ALLOWANCE-DOMESTIC>                           837,539
<ALLOWANCE-FOREIGN>                                  0
<ALLOWANCE-UNALLOCATED>                              0
        

</TABLE>


© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission