SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
0-25932
(Commission File Number)
VRB BANCORP
(Exact name of registrant as specified in its charter)
OREGON 93-0892559
(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
110 PINE STREET, ROGUE RIVER, OREGON 97537
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code (541) 582-3216
Indicated by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) to 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.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at September 30, 1996
COMMON STOCK, NO PAR VALUE 2,360,101
VRB BANCORP
Form 10-Q
September 30, 1996
Table of Contents
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at
September 30, 1996 and December 31, 1995.....................1
Consolidated Statements of Income
For the Nine Months Ended September 30, 1996 and 1995........2
Consolidated Statements of Income
For the Three Months Ended September 30, 1996 and 1995.......3
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1996 and 1995........4
Consolidated Statements of Changes in Shareholders' Equity
For the Period December 31, 1994 through September 30, 1996..5
Notes to Consolidated Financial Statements...................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................8
PART II OTHER INFORMATION
Item 1. Legal Proceedings...........................................15
Changes in Securities.......................................15
Defaults Upon Senior Securities.............................15
Submission of Matter to a Vote of Security Holders..........15
Other Information...........................................15
Exhibits and Reports on Form 8-K............................15
SIGNATURES..............................................................16
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
VRB Bancorp
Consolidated Balance Sheets
September 30, December 31,
1996 1995
(Unaudited) (Audited)
ASSETS
Cash and due from banks $ 9,853,620 $ 13,599,620
Federal funds sold 8,000,000 4,500,000
Total cash and cash equivalents 17,853,620 18,099,620
Investments
U.S. Treasury and agencies 23,725,313 19,554,343
States and political subdivision 19,590,196 15,843,744
Corporate and other investments 1,562,297 1,682,712
Federal Home Loan Bank stock 1,097,500 1,036,200
Loans, net of allowance for loan
losses and unearned income 96,525,463 88,972,481
Premises and equipment, net 4,008,687 3,881,683
Other real estate owned 0 0
Accrued interest and other assets 2,586,086 2,414,668
TOTAL ASSETS $ 166,949,161 $ 151,485,451
LIABILITIES
Deposits
Demand deposits $ 41,150,857 $ 38,098,267
Interest bearing demand deposits 64,487,903 53,308,110
Savings deposits 15,627,981 17,507,901
Time deposits 24,889,697 23,830,269
Total deposits 146,156,437 132,744,547
Accrued interest and other liabilities 1,068,971 1,271,159
Total liabilities 147,225,408 134,015,706
SHAREHOLDERS' EQUITY
Preferred stock, voting, $5 par value;
5,000,000 shares authorized and
unissued
Preferred stock, nonvoting, $5 par
value; 5,000,000 shares authorized and
unissued
Common stock, no par value, 10,000,000
shares authorized with 2,360,101 and
2,333,019 issued and outstanding at
September 30, 1996 and
December 31, 1995, respectively 9,238,479 9,085,013
Unrealized gain (loss) on available
for sale securities (315,587) 29,619
Retained earnings 10,800,860 8,355,113
Total shareholders' equity 19,723,753 17,469,745
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 166,949,161 $151,485,451
VRB Bancorp
Consolidated Statements of Income
For the Nine Months Ended September 30,
1996 1995
(Unaudited) (Unaudited)
INTEREST INCOME
Interest and fees on loans $ 7,481,408 $ 7,433,235
Interest on investment securities:
U.S. Treasury and agencies 884,350 693,833
States and political subdivisions 717,931 451,024
Corporate and other investments 135,944 117,696
Federal funds sold 464,259 166,177
Total interest income 9,683,892 8,861,965
INTEREST EXPENSE
Interest bearing demand deposits 1,463,141 1,056,659
Savings deposits 285,396 360,103
Time deposits 934,149 632,026
Borrowed funds 0 68,658
Total interest expense 2,682,687 2,117,446
Net interest income 7,001,205 6,744,519
PROVISION FOR LOAN LOSSES 0 0
Net interest income after
provision for loan losses 7,001,205 6,744,519
NONINTEREST INCOME
Service charges on deposit accounts 736,847 763,528
Other operating income 303,458 282,032
Securities transactions 0 1,209
Total noninterest income 1,040,305 1,046,769
NONINTEREST EXPENSES
Salaries and benefits 2,727,833 2,789,017
Net occupancy 474,711 442,956
Communications 168,573 153,385
Data processing 105,536 72,994
FDIC insurance premium 1,500 131,234
Supplies 124,896 114,894
Professional fees 108,523 138,741
Other real estate expense 0 0
Other expenses 664,189 663,853
Total noninterest expenses 4,375,760 4,507,074
INCOME BEFORE INCOME TAXES 3,665,750 3,284,214
PROVISION FOR INCOME TAXES 1,220,000 1,125,000
NET INCOME $ 2,445,750 $ 2,159,214
NET INCOME PER SHARE OF COMMON STOCK $ 1.04 $ 0.93
VRB Bancorp
Consolidated Statements of Income
For the Three Months Ended September 30,
1996 1995
(Unaudited) (Unaudited)
INTEREST INCOME
Interest and fees on loans $ 2,607,236 $ 2,511,799
Interest on investment securities:
U.S. Treasury and agencies 315,275 169,162
States and political subdivisions 253,693 151,065
Corporate and other investments 44,607 43,234
Federal funds sold 165,725 149,828
Total interest income 3,386,535 3,025,088
INTEREST EXPENSE
Interest bearing demand deposits 508,743 413,874
Savings deposits 93,756 109,975
Time deposits 302,691 274,662
Borrowed funds 0 0
Total interest expense 905,190 798,511
Net interest income 2,481,345 2,226,577
PROVISION FOR LOAN LOSSES 0 0
Net interest income after
provision for loan losses 2,481,345 2,226,577
NONINTEREST INCOME
Service charges on deposit accounts 247,827 240,347
Other operating income 94,632 102,164
Securities transactions 0 0
Total noninterest income 342,459 342,511
NONINTEREST EXPENSES
Salaries and benefits 926,179 920,246
Net occupancy 155,398 153,106
Communications 55,610 53,686
Data processing 34,027 24,401
FDIC insurance premium 500 (8,679)
Supplies 41,653 40,767
Professional fees 32,517 56,258
Other real estate expense 0 0
Other expenses 251,182 218,402
Total noninterest expenses 1,497,066 1,458,187
INCOME BEFORE INCOME TAXES 1,326,737 1,110,901
PROVISION FOR INCOME TAXES 448,000 387,500
NET INCOME $ 878,737 $ 723,401
NET INCOME PER SHARE OF COMMON STOCK $ 0.37 $ 0.31
VRB Bancorp
Consolidated Statement of Cash Flows
For the Nine Months Ended September 30,
1996 1995
(Unaudited) (Unaudited)
CASH FLOWS RELATING TO OPERATING ACTIVIES
Net Income $ 2,445,750 $ 2,159,214
Adjustments to reconcile net income to
net cash provided by operating
activities
Depreciation and amortization 345,935 355,519
FHLB stock dividend (63,264) (36,531)
Change in cash due to changes in certain
assets:
Increase (decrease) in accrued interest
and other assets (254,142) 85,694
Increase (decrease) in accrued interest
and other liabilities (202,188) 41,055
Net cash provided by operating
activities 2,272,091 2,604,951
CASH FLOWS RELATING TO INVESTING ACTIVIES
Proceeds from the sale of available-for-
sale securities 0 1,994,375
Proceeds from the maturity and principal
payments of available-for-sale
securities 5,597,287 7,478,960
Proceeds from the maturity and principal
payments of held-to-maturity securities 940,000 62,000
Purchases of available-for-sale
securities (9,990,625) 0
Purchases of held-to-maturity securities (4,704,586) 0
Purchases of FHLB stock 1,963 (544,569)
Net increase in loans (7,552,982) (1,933,173)
Purchase of premises and equipment (374,504) (230,262)
Net cash provided by (used in)
investing activities (16,083,447) 6,827,331
CASH FLOWS RELATING TO FINANCING ACTIVITIES
Net increase (decrease) in deposits 13,411,890 4,873,965
Cash received from exercise of common
stock options 153,466 3,344
Net cash provided by (used in)
financing activities 13,565,356 4,877,309
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (246,000) 14,309,591
CASH AND CASH EQUIVALENTS,
beginning of period 18,099,620 12,105,897
CASH AND CASH EQUIVALENTS, end of period $ 17,853,620 $ 26,415,488
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid for interest $ 2,714,469 $ 2,001,495
Cash paid for taxes $ 1,029,018 $ 1,011,455
SCHEDULE OF NONCASH ACTIVITIES
Changes in unrealized gain (loss) on
available-for-sale securities,
net of tax $ (345,206) $ 20,906
VRB Bancorp
Consolidated Statements of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
Net Unrealized
Gain (Loss) on Total
Common Stock Retained Available-for- Shareholders'
Shares Amount Earnings sale Securities- Equity
<S> <C> <C> <C> <C> <C>
BALANCE, December 31,
1994 (Audited) 2,235,686 $ 7,916,059 $ 7,146,252 $ (61,706) $15,000,605
Stock options exercised
(August 11, 1995) 143 581 0 0 581
Cash dividend
($ .25 per share, paid
November 10, 1995) 0 0 (558,957) 0 (558,957)
4% stock dividend
(89,190 shares issued,
dated November 10,
1995) 89,190 1,137,173 (1,137,173) 0 0
Payments for fractional
shares related to
stock dividend
($12.75 per share) 0 0 (3,100) 0 (3,100)
Stock options exercised
(December 18, 1995) 8,000 31,200 0 0 31,200
Net income 0 0 2,908,091 0 2,908,091
Changes in net unrealized
gain on available-for-
sale securities,
net of taxes 0 0 0 91,325 91,325
Balance, December 31,
1995 (audited) 2,333,019 9,085,013 8,355,113 29,619 17,469,745
Stock options exercised
(January 1 to
September 30, 1996) 27,082 153,466 0 0 153,466
Net income 0 0 2,445,750 0 2,445,750
Changes in net unrealized
(loss) on
available-for-sale
securities,
net of taxes 0 0 0 (345,206) (345,206)
Balance, September 30, 1996
(unaudited) 2,360,101 $ 9,238,479 $10,800,863 $ (315,587) $19,723,753
</TABLE>
VRB BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information, and with instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. All adjustments made to the
unaudited interim financial statements were of a normal recurring nature.
In the opinion of management, all adjustments considered necessary for a
fair presentation have been included. Operating results for the nine months
ended September 30, 1996, are not necessarily indicative of the results that
may be expected for year-end December 31, 1996. For further information,
refer to the consolidated financial statements and footnotes thereto included
in the Corporation Annual Report on 10-K for the year ended December 31, 1995.
NOTE 2- ACCOUNTING CHANGES
The Financial Accounting Standards Board has issued Statement No. 119
(SFAS 119) "Disclosure about Derivative Financial Instruments and Fair Value
of Financial Instruments", Statement No. 121 (SFAS 121), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
and Statement No. 123 (SFAS 123), "Accounting for Stock-Based Compensation"
which will become effective for the Bank in 1996.
SFAS 119 requires disclosures about amounts, nature, and terms of derivative
financial instruments that do not result in off-balance-sheet risk of
accounting loss. It requires a distinction be made between financial
instruments held or issued for trading purposes and those held or issued for
purposes other than trading. It also amends other accounting pronouncements
by requiring modifications to disclosures regarding instruments with
off-balance-sheet risk of accounting loss and the disclosure regarding fair
values of financial instruments.
SFAS 121 establishes accounting standards for the impairment of long-lived
assets, including certain identifiable intangibles. This statement requires
that long-lived assets and identified intangible assets be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If the sum of future
cash flows from use of the assets is less than the carrying amount of the
assets, an impairment loss is recognized. Otherwise, an impairment loss is
not recognized.
SFAS 123 establishes financial accounting and reporting standards for stock-
based employee compensation plans. The statement defines a fair value based
method for an employee stock option or similar equity instrument and
encourages all entities to adopt that method of accounting for all their
employee stock compensation plans. However, it also allows an entity to
continue to measure compensation cost for those plans using the intrinsic
value based method of accounting. Under the fair value based method,
compensation cost is measured at the grant date based on the value of the
award and is recognized over the service period, which is usually the vesting
period. Under the intrinsic value base method, compensation cost is the
excess, if any, of the quoted market price of the stock at grant date or
other measurement date over the amount an employee must pay to acquire the
stock. Entities electing to account for employee stock based compensation
using this method must make pro forma disclosures of net income and, if
presented, earnings per share as if the fair value method of accounting has
been applied.
The implementation of those accounting pronouncements is not expected to
have a material effect on VRB Bancorp's unaudited consolidated financial
position as of September 30, 1996, or net income for the nine months then
ended.
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANLYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Assets:
Total assets of VRB Bancorp and its wholly owned subsidiary, Valley of the
Rogue Bank, increased when comparing September 30, 1996 balances to balances
at December 31, 1995 and September 30, 1995. At the end of the third quarter
of 1996, total assets amounted to $166,949,161, an $18,314,088 or 12.32%
increase when compared to the third quarter of 1995, and a $15,463,710 or
10.20% increase when compared to December 31, 1995 balances of $151,485,451.
<TABLE>
The table below provides abbreviated balance sheets at the end of the
respective quarters indicating the changes that have occurred in the major
portfolios of VRB Bancorp and subsidiary over the past year:
<CAPTION>
September 30,
1996 1995 $ Change % Change
<S> <C> <C> <C> <C>
ASSETS
Loans $ 96,525,463 $ 90,374,658 $ 6,150,805 6.81%
Investments 44,877,806 24,637,536 20,240,270 82.15%
Federal funds sold 8,000,000 17,500,000 (9,500,000) (54.29%)
Total assets 166,949,161 148,635,073 18,314,088 12.32%
LIABILITIES AND EQUITY
Noninterest bearing deposits $ 41,150,857 35,774,892 5,375,965 15.03%
Interest bearing deposits 105,005,580 94,571,389 10,434,191 11.03%
Total Deposits $ 146,156,437 $ 130,346,281 $ 15,810,156 12.13%
Total Liabilities $ 147,225,408 $ 131,453,767 $ 15,771,641 12.00%
Total Capital $ 19,723,753 $ 17,181,306 $ 2,542,447 14.80%
</TABLE>
Loans:
Outstanding loan balances totaled $96,525,463 at September 30, 1996,
representing a $6,150,805 or 6.81% increase when compared to September 30,
1995, and a $7,552,982 or a 8.49% increase when compared to 1995 year end
balances of $88,972,481. The Bank recently introduced a "Home Equity Line
of Credit" and is in the process of introducing an accounts receivable
financing product. It is expected that these new products, along with
the Bank's increased marketing efforts will have a positive influence on
the Bank's ability to increase market share during the next several quarters.
The composition of the Bank's loan portfolio remains strong when compared to
1995 year end balances. The Bank's real estate construction and mortgage
loan portfolio represents 75.89%, a slight decrease from 1995 year end when
this portion of the portfolio totaled 76.46%. Commercial loans increased
from 10.61% of the portfolio at December 31, 1995 to 12.91% at June 30,
1996, and 12.57% at September 30, 1996.
The quality of VRB's loan portfolio remains strong. For the nine months
ending September 30, 1996 and for the previous two fiscal years, management's
analysis of the portfolio has indicated that no provision for loan losses
was warranted. At September 30, 1996 the allowance of $1,392,808 for loan
losses was considered sufficient to absorb possible losses on loans which may
become uncollectable, based on an evaluation of the portfolio by management.
Loans considered losses charged to the reserve during the first nine months
of 1996 and 1995 amounted to $25,000 and $17,000, respectively. Recoveries
during those same periods amounted to $11,000 and $35,000, respectively.
<TABLE>
The following table presents the composition of the Bank's loan portfolio at
the date indicated:
<CAPTION>
September 30, 1996 December 31, 1995
Amount Percentage Amount Percentage
<S> <C> <C> <C> <C>
Commercial $ 12,135,899 12.57% $ 9,440,715 10.61%
Real estate construction 9,822,470 10.18% 8,225,456 9.24%
Real estate mortgage 63,425,326 65.71% 59,804,159 67.22%
Consumer and other 12,534,575 12,99% 12,909,235 14.51%
97,918,270 101.44% 90,379,565 101.58%
Allowance for loan losses (1,392,808) (1.44%) (1,407,084) (1.58%)
Net loans $ 96,525,462 100.00% $ 88,972,481 100.00%
</TABLE>
<TABLE>
The following table presents information with respect to nonperforming
assets:
<CAPTION>
September 30, 1996 December 31, 1995
<S> <C> <C>
Loans on nonaccrual status $ 14,218 $ 53,000
Loans past due greater than 90 days but not on nonaccrual status 0 48,000
Other real estate owned 0 0
Total nonperforming assets $ 14,218 $ 101,000
Percentage of nonperforming assets to total assets 0.01% 0.07%
</TABLE>
Investment Portfolio:
At September 30, 1996 the Bank's portfolio of investment securities totaled
$44,877,806, representing an increase of $20,240,270 or 82.15% when compared
to the balance of the portfolio of September 30, 1995 and a $10,934,442 or
32.21% increase when compared to a December 31, 1995 securities portfolio of
$33,943,364. Investments in Federal Funds sold (an overnight investment),
were $8,000,000, at September 30, 1996, compared to $17,500,000 at
September 30, 1995. The balance of Federal Funds sold is influenced by cash
demands, customer deposit levels, loan activity, and other investment
transactions.
<TABLE>
The following table provides the book value of the Bank's portfolio of
investment securities as of September 30, 1996 and December 31, 1995:
<CAPTION>
September 30, 1996 December 31, 1995
<S> <C> <C>
Investments available-for-sale
U.S. Treasury and agencies $ 23,725,313 $ 19,554,343
States and political subdivisions 0 0
Corporate and other investments 1,562,297 1,682,712
$ 25,287,610 $ 21,237,055
Investments held-to-maturity
U.S. Treasury and agencies $ 0 $ 0
States and political subdivisions 19,590,196 15,843,744
Corporate and other investments 0 0
$ 19,590,196 $ 15,843,744
</TABLE>
Deposits:
From September 30, 1995 to September 30, 1996 deposits have increased
$15,810,156 or 12.13%. When compared to December 31, 1995 deposits have
increased $13,411,890 or 10.10%. The increase experienced in deposits when
compared to both December 31, 1995 and September 1995 is a result of
management's decision to become more competitive in pricing deposits,
increased marketing, and increased emphasis on implementing a sales culture.
The growth in deposit accounts has primarily been in Money Market Checking
accounts and Time Certificates of Deposits with maturities of less than one
year. Non-interest bearing checking accounts have increased 15.03% when
compared to September 1995 and continue to be a reliable and substantial
portion of our deposit base. These deposits comprised 28.15% of total
deposits at September 30, 1996.
Shareholders' Equity:
Shareholder equity increased $2,254,008 during the first nine months of
1996. Shareholder equity at September 30, 1996 amounted to $19,723,753
compared to $17,469,745 at December 31, 1995. The increase in equity is
directly attributable to earnings generated ($2,445,750) and the exercise of
stock options (27,082 shares for a combined total of $153,466). These
additions to equity were partially offset by a change in the value of the
"available for sale" portion of our investment portfolio. The "unrealized
gain/loss" on this portion of the portfolio is reflected in shareholder
equity. The value of this section of the investment portfolio declined
$436,441 when comparing December 31, 1995 to September 30, 1996.
Valley of the Rogue Bank is required to maintain minimum amounts of capital
to "risk weighted" assets, as defined by banking regulators. At September 30,
1996, the Bank was required to have Tier 1 and Total Capital ratios at 4.0%
and 8.0%, respectively. VRB's actual ratios at that date were 15.96% and
17.18%, respectively.
RESULTS OF OPERATIONS
Earnings:
For the nine months ending September 30, 1996, VRB achieved net earnings of
$2,445,750, representing a 17.37% annualized return on average shareholder
equity and a 2.03% annualized return on average outstanding assets. These
returns compare to a 18.01% return on average equity and 2.05% return on
average assets for the same period in 1995. For the year ended December 31,
1995, VRB Bancorp achieved a 2.02% return on average assets and a 17.75%
return on average equity.
Interest Income and Expenses:
The following table shows the amount of the increase (decrease) in VRB
Bancorp's consolidated interest income and expense and attributes such
amounts to changes in volume as well as changes in rates. Rate/volume
variances have been allocated proportionally between rate and volume
changes:
<TABLE>
<CAPTION>
For the Nine Months Ended September 30, 1996
Increase (Decrease) Due To
Volume Rate Net Change
<S> <C> <C> <C>
Interest-earning assets
Loans $ 62,111 $ (13,938) $ 48,173
Investment securities
Taxable securities 99,950 (193,548) (93,598)
Nontaxable securities** 527,724 334,806 862,530
Federal funds sold 311,203 (13,121) 298,082
Total 1,000,987 114,200 1,115,187
Interest-bearing liabilities
Interest bearing checking and savings accounts 176,225 155,550 331,775
Time deposits 264,411 37,713 302,124
Borrowed funds 0 (68,658) (68,658)
Total 440,636 124,605 565,241
Net increase (decrease) in net interest income $ 560,351 $ (10,405) $ 549,946
<FN>
<F1>
**Tax-exempt income has been adjusted to a tax equivalent basis at 34%.
</FN>
</TABLE>
Interest income for the first nine months of 1996 amounted to $9,683,892, an
increase of $821,927 or 9.27% when compared to the $8,861,965 in interest
generated during the first nine months of 1995. Interest expense increased
$565,241 or 26.69% when comparing the $2,117,446 incurred for the first nine
months of 1995 to 1996's comparable period of $2,682,687.
Interest Margin:
The Bank's net interest margin after adjusting tax exempt income to reflect
a tax equivalent basis, increased $549,946 or 7.88% when comparing the first
nine months of 1996 with 1995. The margin expressed as a percentage declined
from 7.19% to 6.76% when comparing the periods ending September 30, 1995, and
1996, respectively.
Total earning assets averaged $146,408,044 and $128,185,228 for the nine
month periods ending September 30, 1996 and 1995, respectively. The average
yield on earning assets, when adjusted to reflect the tax benefits on certain
types of investments, decreased slightly to 9.30% in 1996, compared to 9.46%
in 1995.
Interest bearing liabilities averaged $101,867,602 and $88,516,402 during
the first nine months of 1996 and 1995, respectively. The average cost of
these liabilities increased from 3.19% in 1995 to 3.51% in 1996. The
average cost of total interest bearing liabilities and non-interest bearing
deposits climbed from 2.27% during 1995 to 2.54% during 1996.
<TABLE>
The following table presents average balances and interest income or
interest expense with the resulting average yield or rates by category of
average earning asset or interest bearing liability:
<CAPTION>
For the nine months ended For the nine months ended
September 30, 1996 September 30, 1995
Average Inc/Exp Rate Average Inc/Exp Rate
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets
Loans* $ 93,624,538 $ 7,481,408 10.65% $ 92,847,265 $ 7,433,235 10.67%
Investment securities
Taxable securities 21,984,156 717,931 4.35% 18,923,540 811,529 5.72%
Nontaxable securities** 19,031,826 1,545,900 10.83% 12,534,936 683,370 7.27%
Federal funds sold 11,767,524 464,259 5.26% 3,879,487 166,177 5.71%
Total interest earning assets 146,408,044 10,209,498 9.30% 128,185,228 9,094,311 9.46%
Cash and due from banks 8,998,029 8,499,836
Fixed assets 3,921,797 3,903,957
Loan loss allowance (1,397,194) (1,422,320)
Other assets 2,390,012 2,341,702
Total Assets $160,320,688 $141,508,403
Interest-bearing liabilities
Interest-bearing checking
and savings accounts $ 76,943,525 $ 1,748,537 3.03% $ 69,188,851 $ 1,416,762 2.73%
Time deposits 24,924,077 934,150 5.00% 17,869,309 632,026 4.72%
Borrowed funds 0 0 0.00% 1,458,242 68,658 6.28%
Total interest-bearing liabilities 100,867,602 2,682,687 3.51% 88,516,402 2,117,446 3.19%
Noninterest bearing deposits 38,814,828 0 0.00% 35,873,132 0 0.00%
Total deposits and borrowed funds 140,682,430 2,682,687 2.54% 124,389,534 2,117,446 2.27%
Other liabilities 1,116,151 1,046,469
Total Liabilities 141,798,581 125,436,003
Shareholders' equity 18,522,107 16,072,400
Total liabilities and shareholders' equity $160,320,688 $141,508,403
Net interest income $ 7,526,811 $ 6,976,865
Net interest margin 6.76% 7.19%
<FN>
<F1>
*Nonaccrual loans are included in the average balance.
<F2>
**Tax-exempt income has been adjusted to a tax equivalent basis at 34%.
</FN>
</TABLE>
Non-Interest Income:
Non-interest income declined $6,464 or .6% when comparing the first nine
months of 1996 and 1995. The decline was a result of reduced income from
service charges on deposit accounts, which was partially offset by increased
fee income generated from our real estate loan department. Service charge
income from deposit accounts declined from $763,528 for the first nine months
of 1995 to $736,847 for the same period in 1996. The decline was a result of
the restructuring of deposit products, specifically the introduction of
and conversion of existing deposit accounts to a service charge free
deposit account geared towards attracting deposit relationships with senior
citizens.
Non-Interest Expense:
Non-interest expenses declined $131,314 or 2.91% when comparing the first
nine months of 1996 to the same period in 1995. Non-interest expense totaled
$4,375,760 for the first nine months of 1996 compared to $4,507,074 for the
same period in 1995. The decline in expenses was a direct result of
reduced FDIC insurance costs and a decline in employee staffing costs.
Income Taxes:
The provision for income taxes amounted to $1,220,000 and $1,125,000 for the
periods ending September 30, 1996 and 1995, respectively. The provision
resulted in effective combined federal and state tax rates of 33.28% and
34.25% for 1996 and 1995 respectively. The slight reduction in effective
tax rates when comparing the two periods is a result of Bancorp's increased
investment in tax exempt municipal securities.
LIQUIDITY MANAGEMENT
Management has always placed a high priority on maintaining a high liquidity
ratio through a moderate loan to deposit ratio and a conservative investment
portfolio. At September 30, 1996 the Bank's loan to deposit ratio was
66.04%. Approximately $15,313,481 or 33.30% of the Bank's investment
securities mature within twelve months. Additionally, there was at
September 30, 1996 $8,000,000 invested in Federal Funds sold, an overnight
investment, to meet potential liquidity needs.
ASSET-LIABILITY MANAGEMENT
The principal purpose of asset-liability management is to manage the Bank's
sources and uses of funds to maximize net interest income under different
interest rate conditions with minimal risk. On a monthly basis, the Bank
calculates the "GAP", the difference between repricing assets and repricing
liabilities in specific time periods. This analysis provides an indication
of the Bank's earnings risks due to future interest rate changes. As of
September 30, 1996, management's analysis indicated that the Bank's earnings
risk was within acceptable guidelines.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any pending legal proceedings that it believes
would have a material adverse effect on the financial condition or
operations of the Company.
Item 2. Changes in Securities: The Board of Directors approved a $ .40 per
share cash dividend and a fifty percent stock dividend at its regular
September meeting. Both dividends will be paid to shareholders of record
October 20, 1996 and will be paid on November 20, 1996.
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: None
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.
VRB BANCORP
(Registrant)
Date: November 1, 1996 William A. Haden
(Signature)
William A. Haden
President
Date: November 1, 1996 Tom Anderson
(Signature)
Tom Anderson
Executive Vice President
Chief Operating Officer and Secretary
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 9,853,620
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 8,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 25,287,610
<INVESTMENTS-CARRYING> 19,590,196
<INVESTMENTS-MARKET> 19,444,066
<LOANS> 97,918,270
<ALLOWANCE> 1,392,808
<TOTAL-ASSETS> 166,949,161
<DEPOSITS> 146,156,437
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,068,971
<LONG-TERM> 0
0
0
<COMMON> 9,238,479
<OTHER-SE> 10,800,860
<TOTAL-LIABILITIES-AND-EQUITY> 166,949,161
<INTEREST-LOAN> 7,481,408
<INTEREST-INVEST> 1,738,225
<INTEREST-OTHER> 464,259
<INTEREST-TOTAL> 9,683,892
<INTEREST-DEPOSIT> 2,682,687
<INTEREST-EXPENSE> 2,682,687
<INTEREST-INCOME-NET> 7,001,205
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,375,760
<INCOME-PRETAX> 3,665,750
<INCOME-PRE-EXTRAORDINARY> 2,445,750
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,445,750
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.04
<YIELD-ACTUAL> 9.30
<LOANS-NON> 14,218
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,407,084
<CHARGE-OFFS> 25,543
<RECOVERIES> 11,267
<ALLOWANCE-CLOSE> 1,392,808
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
