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 JUNE 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 June 30, 1996
COMMON STOCK, NO PAR VALUE 2,353,305
VRB BANCORP
Form 10-Q
June 30, 1996
Table of Contents
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at
June 30, 1996 and December 31, 1995..........................1
Consolidated Statements of Income
For the Six Months Ended June 30, 1996 and 1995..............2
Consolidated Statements of Income
For the Three Months Ended June 30, 1996 and 1995............3
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1996 and 1995..............4
Consolidated Statements of Changes in Shareholders' Equity
For the Period December 31, 1994 through June 30, 1996.......5
Notes to Consolidated Financial Statements...................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................7
PART II OTHER INFORMATION
Item 1. Legal Proceedings..........................................13
Changes in Securities......................................13
Defaults Upon Senior Securities............................13
Submission of Matter to a Vote of Security Holders.........13
Other Information..........................................13
Exhibits and Reports on Form 8-K...........................13
SIGNATURES.............................................................14
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
VRB Bancorp
Consolidated Balance Sheets
June 30, December 31,
1996 1995
(Unaudited) (Audited)
ASSETS
Cash and due from banks $ 8,733,889 $ 13,599,620
Federal funds sold 7,800,000 4,500,000
Total cash and cash equivalents 16,533,889 18,099,620
Investments
U.S. Treasury and agencies 21,118,736 19,554,343
States and political subdivision 20,141,054 15,843,744
Corporate and other investments 1,593,447 1,682,712
Federal Home Loan Bank stock 1,075,900 1,036,200
Loans, net of allowance for loan
losses and unearned income 93,588,780 88,972,481
Premises and equipment, net 3,938,527 3,881,683
Other real estate owned 0 0
Accrued interest and other assets 2,249,773 2,414,668
TOTAL ASSETS $ 160,240,106 $ 151,485,451
LIABILITIES
Deposits
Demand deposits $ 39,051,007 $ 38,098,267
Interest bearing demand deposits 59,947,120 53,308,110
Savings deposits 16,224,266 17,507,901
Time deposits 25,414,543 23,830,269
Total deposits 140,636,936 132,744,547
Accrued interest and other liabilities 947,154 1,271,159
Total liabilities 141,584,089 134,015,706
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 2,353,305 and
2,333,019 issued and outstanding at
June 30, 1996 and December 31, 1995,
respectively 9,168,970 9,085,013
Unrealized gain (loss) on available
for sale securities (436,076) 29,619
Retained earnings 9,922,123 8,355,113
Total shareholders' equity 18,656,017 17,469,745
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 160,240,106 $151,485,451
VRB Bancorp
Consolidated Statements of Income
For the Six Months Ended June 30,
1996 1995
(Unaudited) (Unaudited)
INTEREST INCOME
Interest and fees on loans $ 4,874,173 $ 4,921,436
Interest on investment securities:
U.S. Treasury and agencies 569,075 524,671
States and political subdivisions 464,238 299,959
Corporate and other investments 91,338 74,462
Federal funds sold 298,534 16,349
Total interest income 6,297,357 5,836,877
INTEREST EXPENSE
Interest bearing demand deposits 954,398 642,785
Savings deposits 191,641 250,128
Time deposits 631,458 357,364
Borrowed funds 0 68,658
Total interest expense 1,777,497 1,318,935
Net interest income 4,519,861 4,517,942
PROVISION FOR LOAN LOSSES 0 0
Net interest income after
provision for loan losses 4,519,861 4,517,942
NONINTEREST INCOME
Service charges on deposit accounts 489,020 523,181
Other operating income 208,826 179,868
Securities transactions 0 1,209
Total noninterest income 697,846 704,258
NONINTEREST EXPENSES
Salaries and benefits 1,801,654 1,868,771
Net occupancy 319,313 289,850
Communications 112,962 99,699
Data processing 71,508 48,593
FDIC insurance premium 1,000 139,913
Supplies 83,243 74,127
Professional fees 76,006 82,483
Other real estate expense 0 0
Other expenses 413,007 445,451
Total noninterest expenses 2,878,694 3,048,887
INCOME BEFORE INCOME TAXES 2,339,013 2,173,313
PROVISION FOR INCOME TAXES 772,000 737,500
NET INCOME $ 1,567,013 $ 1,435,813
NET INCOME PER SHARE OF COMMON STOCK $ 0.67 $ 0.62
VRB Bancorp
Consolidated Statements of Income
For the Three Months Ended June 30,
1996 1995
(Unaudited) (Unaudited)
INTEREST INCOME
Interest and fees on loans $ 2,474,334 $ 2,535,035
Interest on investment securities:
U.S. Treasury and agencies 306,228 246,065
States and political subdivisions 252,727 150,739
Corporate and other investments 46,509 39,791
Federal funds sold 135,655 41
Total interest income 3,213,453 2,971,671
INTEREST EXPENSE
Interest bearing demand deposits 481,569 338,674
Savings deposits 94,554 118,656
Time deposits 318,088 193,883
Borrowed funds 0 65,721
Total interest expense 894,211 716,934
Net interest income 2,319,242 2,254,737
PROVISION FOR LOAN LOSSES 0 0
Net interest income after
provision for loan losses 2,319,242 2,254,737
NONINTEREST INCOME
Service charges on deposit accounts 259,242 263,851
Other operating income 105,060 90,400
Securities transactions 0 0
Total noninterest income 364,602 354,251
NONINTEREST EXPENSES
Salaries and benefits 919,023 930,712
Net occupancy 159,723 145,306
Communications 57,370 49,417
Data processing 34,262 22,431
FDIC insurance premium 0 69,956
Supplies 41,018 37,945
Professional fees 39,774 40,006
Other real estate expense 0 0
Other expenses 188,238 218,159
Total noninterest expenses 1,439,408 1,513,932
INCOME BEFORE INCOME TAXES 1,244,436 1,095,056
PROVISION FOR INCOME TAXES 409,000 365,000
NET INCOME $ 835,436 $ 730,056
NET INCOME PER SHARE OF COMMON STOCK $ 0.36 $ 0.31
VRB Bancorp
Consolidated Statement of Cash Flows
For the Six Months Ended June 30,
1996 1995
(Unaudited) (Unaudited)
CASH FLOWS RELATING TO OPERATING ACTIVIES
Net Income $ 1,567,013 $ 1,435,813
Adjustments to reconcile net income to
net cash provided by operating
activities
Depreciation and amortization 226,806 268,130
FHLB stock dividend (39,700) (18,845)
Change in cash due to changes in certain
assets:
Increase (decrease) in accrued interest
and other assets 109,746 40,263
Increase (decrease) in accrued and
other liabilities (324,005) (178,397)
Net cash provided by operating
actives 1,539,880 1,546,964
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 3,060,167 5,455,326
Proceeds from the maturity and principal
payments of held-to-maturity securities 395,000 15,000
Purchases of available-for-sale
securities (4,994,375) 0
Purchases of held-to-maturity securities (4,704,586) 0
Purchases of FHLB stock 0 (544,655)
Net increase in loans (4,616,299) (5,556,274)
Purchase of premises and equipment (221,844) (112,156)
Net cash provided by (used in)
investing activities (11,081,937) 1,251,616
CASH FLOWS RELATING TO FINANCING ACTIVITIES
Net increase (decrease) in deposits 7,892,389 (5,297,317)
Cash received from exercise of common stock 83,957 2,764
Net cash provided by (used in)
financing activities 7,976,346 (5,294,553)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (1,565,731) (2,495,973)
CASH AND CASH EQUIVALENTS,
beginning of period 18,099,620 12,105,897
CASH AND CASH EQUIVALENTS, end of period $ 16,533,889 $ 9,609,924
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid for interest $ 1,804,610 $ 1,231,432
Cash paid for taxes $ 568,386 $ 632,914
SCHEDULE OF NONCASH ACTIVITIES
Changes in unrealized gain (loss) on
available-for-sale securities,
net of tax $ (464,695) $ 15,781
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 June 30,
1996) 20,286 83,957 0 0 83,957
Net income 0 0 1,567,013 0 1,567,013
Changes in net unrealized
available-for-sale
securities,
net of taxes 0 0 0 (464,698) (464,698)
Balance, June 30, 1996
(unaudited) 2,353,305 $ 9,168,970 $ 9,922,126 $ (435,079) $18,656,017
</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 six months
ended June 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. 114,
"Accounting by Creditors for Impairment of a Loan" and No. 118 "Accounting
by Creditors for Impairment of a Loan - Income Recognition Disclosure, an
amendment to SFAS 114" which will become effective for the Bank for the
years ending December 31, 1994. These pronouncements require that impaired
loans be measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate or at the loan's market
price or the fair value of the collateral if the loan is collateral
dependent. The implementation of these accounting pronouncements did not
have a material effect on VRB Bancorp's unaudited consolidated financial
position as of June 30, 1995, or net income for the six 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 June 30, 1996 balances to balances at
December 31, 1995 and June 30, 1995. At the end of the second quarter of
1996, total assets amounted to $160,240,106, a $22,724,874 or 16.53%
increase when compared to the second quarter of 1995, and a $8,754,655 or
5.77% increase when compared to December 31, 1995 balances. The increase is
a direct result of VRB's strategy of applying a balanced pricing approach to
both deposit and loan products.
<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>
June 30,
1996 1995 $ Change % Change
<S> <C> <C> <C> <C>
ASSETS
Loans $ 93,588,780 $ 93,997,759 $ (408,979) (0.44%)
Investments 42,853,237 26,703,044 16,150,193 60.48%
Federal funds sold 7,800,000 250,000 7,550,000 3020.00%
Total assets 160,240,106 137,515,232 22,724,874 16.53%
LIABILITIES AND EQUITY
Noninterest bearing deposits $ 39,051,007 34,669,346 4,381,661 12.64%
Interest bearing deposits 101,585,929 85,505,652 16,080,277 18.81%
Total Deposits $ 140,636,936 $ 120,174,998 $ 20,461,938 17.03%
Total Liabilities $ 141,584,089 $ 121,063,034 $ 20,521,055 16.95%
Total Capital $ 18,656,017 $ 16,452,198 $ 2,203,819 13.40%
</TABLE>
Loans:
Outstanding loan balances totaled $93,588,780 at June 30, 1996, representing
a ($408,979) or (0.44%) decrease when compared to June 30, 1995, and
$4,616,299 or a 5.18% increase when compared to 1995 year end balances of
$88,972,481. When compared to outstanding loan totals at June 30, 1995 the
bank has experienced a slight decline. The Bank recently introduced a "Home
Equity Line of Credit". It is expected that this new product, along with
the Bank's increased marketing effort will result in an increased market
share during 1996.
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 74.78% 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.
The quality of VRB's loan portfolio remains strong. For the six months
ending June 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 June 30, 1996 the allowance of $1,390,549 for loan losses
was considered sufficient to absorb possible losses on loans which may
become uncollectible, based on an evaluation of the portfolio by management.
Losses on loans charged to the reserve during the first six months of 1996
and 1995 amounted to $22,000 and $45,000, respectively. Recoveries during
those same periods amounted to $6,000 and $38,000, respectively.
<TABLE>
The following table presents the composition of the Bank's loan portfolio at
the date indicated:
<CAPTION>
June 30, 1996 December 31, 1995
Amount Percentage Amount Percentage
<S> <C> <C> <C> <C>
Commercial $ 12,079,414 12.91% $ 9,440,715 10.61%
Real estate construction 9,361,684 10.00% 8,225,456 9.24%
Real estate mortgage 60,625,984 64.78% 59,804,159 67.22%
Consumer and other 12,912,247 13.80% 12,909,235 14.51%
94,979,329 101.49% 90,379,565 101.58%
Allowance for loan losses (1,390,549) (1.49%) (1,407,084) (1.58%)
Net loans $ 93,588,780 100.00% $ 88,972,481 100.00%
</TABLE>
<TABLE>
The following table presents information with respect to nonperforming
assets:
<CAPTION>
June 30, 1996 December 31, 1995
<S> <C> <C>
Loans on nonaccrual status $ 99,932 $ 53,000
Loans past due greater than 90 days but not on nonaccrual status 16,013 48,000
Other real estate owned 0 0
Total nonperforming loans $ 115,945 $ 101,000
Percentage of nonperforming assets to total assets 0.07% 0.07%
</TABLE>
Investment Portfolio:
At June 30, 1996 the Bank's portfolio of investment securities totaled $42.9
million, representing a $16.2 million or 60.48% increase when compared to
the balance of the portfolio of June 30, 1995 ($26.7 million) and a $5.7
million or 15.36% increase when compared to a December 31, 1995 securities
portfolio of $37.1 million. Investments in Federal Funds sold (an
overnight investment), were $7.8 million, $250,000 at June 30, 1996, and
June 30, 1995, respectively. 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 June 30, 1995 and December 31, 1995:
<CAPTION>
June 30, 1996 December 31, 1995
<S> <C> <C>
Investments available-for-sale
U.S. Treasury and agencies $ 21,118,736 $ 19,554,343
States and political subdivisions 0 0
Corporate and other investments 1,593,447 1,682,712
$ 22,712,183 $ 21,237,055
Investments held-to-maturity
U.S. Treasury and agencies $ 0 $ 0
States and political subdivisions 20,141,054 15,843,744
Corporate and other investments 0 0
$ 20,141,054 $ 15,843,744
</TABLE>
Deposits:
From June 30, 1995 to June 30, 1996 deposits have increase $20.5 million or
17.03%. When compared to December 31, 1995 deposits have posted increases
of $7.9 million (5.9%). The increase experienced in deposits when compared
to June 1995 was 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 12.64% compared to June 1995 and continue
to be a reliable and substantial portion of our deposit base. These
deposits comprise 27.07% of total deposits.
Shareholders' Equity:
Shareholder equity increases $1,186,272 during the first six months of
1996. Shareholder equity at June 30, 1996 amounted to $18,656,017
compared to $17,469.745 at December 31, 1995. The increase in equity is
directly attributable to earnings generated ($1,567,013) and the exercise of
stock options (20,286 shares for a combined total of $83,957). 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
$464,698 when comparing December 31, 1995 to June 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 June 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 16.78% and
18.03%, respectively.
RESULTS OF OPERATIONS
Earnings:
For the six months ending June 30, 1996, VRB achieved net earnings of
$1,567,013, representing a 17.45% annualized return on average shareholder
equity and a 2.00% annualized return on average outstanding assets. These
returns compare to a 18.30% return on average equity and 2.06% 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 Six Months Ended June 30, 1996
Increase (Decrease) Due To
Volume Rate Net Change
<S> <C> <C> <C>
Interest-earning assets
Loans $ (8,252) $ 0 $ (8,252)
Investment securities
Taxable securities 22,638 38,642 61,280
Nontaxable securities** 227,741 21,167 248,908
Federal funds sold 282,990 0 282,990
Total 525,117 59,809 584,926
Interest-bearing liabilities
Interest bearing checking and savings accounts 120,321 132,805 253,126
Time deposits 192,700 81,394 274,094
Borrowed funds 0 0 0
Total 313,021 214,199 527,220
Net increase (decrease) in net interest income $ 212,096 $ (154,390) $ 57,706
<FN>
<F1>
**Tax-exempt income has been adjusted to a tax equivalent basis at 34%.
</FN>
</TABLE>
Interest income increased $545,110 or 9.09% over the first six months of
1996 compared to 1995. Total interest income for the six month periods
ending June 30, 1996 and 1995, was $6,297,358 and $5,836,877, respectively.
Interest Margin:
The Bank's net interest margin after adjusting tax exempt income to reflect
a tax equivalent basis, increased $86,548 or 1.85% when comparing the first
six months of 1996 with 1995. The margin expressed as a percentage was 6.53
and 7.33 for the periods ending June 30, 1996, and 1995, respectively.
Total earning assets averaged $143.7 million and $126.4 million for the
periods ending June 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 9.10% in 1996, compared to 9.48% in 1995.
Interest bearing liabilities averaged $100.6 million and $87.3 million during
the first six months of 1996 and 1995, respectively. The average cost of
these liabilities increased from 3.02% in 1995 to 3.53% in 1996. The
average cost of total interest bearing liabilities and non-interest bearing
deposits climbed from 2.15% during 1995 to 2.57% 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 six months ended For the six months ended
June 30, 1996 June 30, 1995
Average Inc/Exp Rate Average Inc/Exp Rate
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets
Loans* $ 92,154,380 $ 4,874,173 10.58% $ 93,310,396 $ 4,921,436 10.66%
Investment securities
Taxable securities 21,641,535 660,413 6.10% 20,899,689 599,133 5.73%
Nontaxable securities** 18,565,267 703,391 7.58% 12,554,294 454,483 7.24%
Federal funds sold 11,364,386 298,534 5.25% 591,713 16,349 5.53%
Total interest earning assets 143,725,468 6,536,511 9.10% 126,356,092 5,991,401 9.48%
Cash and due from banks 9,033,050 7,847,844
Fixed assets 3,892,739 3,903,158
Loan loss allowance (1,399,896) (1,418,134)
Other assets 2,388,258 2,488,317
Total Assets $157,639,619 $139,177,277
Interest-bearing liabilities
Interest-bearing checking
and savings accounts $ 75,654,947 $ 1,146,039 3.03% $ 67,712,058 $ 892,913 2.64%
Time deposits 24,953,446 631,458 5.06% 17,345,437 357,364 4.12%
Borrowed funds 0 0 0.00% 2,199,448 68,658 6.24%
Total interest-bearing liabilities 100,618,393 1,777,497 3.53% 87,246,943 1,318,935 3.02%
Noninterest bearing deposits 37,755,087 0 0.00% 35,210,917 0 0.00%
Total deposits and borrowed funds 138,373,480 1,777,497 2.57% 122,467,860 1,318,935 2.15%
Other liabilities 1,091,013 1,018,343
Total Liabilities 139,464,493 123,486,203
Shareholders' equity 18,175,126 15,691,074
Total liabilities and shareholders' equity $157,639,619 $139,177,277
Net interest income $ 4,759,014 $ 4,672,466
Net interest margin 6.53% 7.33%
<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 $6,412 or .9% when comparing the first six
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 $523,181 for the first six months
of 1995 to $489,020 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 senior citizens.
Non-Interest Expense:
Non-interest expenses declined $170,193 or 5.58% when comparing the first
six months of 1996 to the same period in 1995. Non-interest expense totaled
$2,878,694 for the first six months of 1996 compared to #3,048,887 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 $772,000 and $737,500 for the
periods ending June 30, 1996 and 1995, respectively. The provision resulted
in effective combined federal and state tax rates of 32.95% and 33.87% 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 June 30, 1996 the Bank's loan to deposit ration was 66.55%.
Approximately $18.3 million or 41% of the Bank's investment securities
matures within twelve months. Additionally, there was at June 30, 1996 $7.8
million 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 further interest rate changes. As of
June 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: 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: 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: August 1, 1996 William A. Haden
(Signature)
William A. Haden
President
Date: August 1, 1996 Tom Anderson
(Signature)
Tom Anderson
Executive Vice President
Chief Operating Officer and Secretary
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