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
0-25932
(Commission File Number)
VRB BANCORP
(Exact name of registrant as specified in its charter)
OREGON 93-0892559
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
110 Pine Street, Rogue River, Oregon 97537
(Address of principal executive (Zip Code)
offices)
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, 1997
Common Stock, No par value 3,583,065
VRB Bancorp
Form 10-Q
June 30, 1997
Table of Contents
________________________
<TABLE>
<CAPTION>
Page
Part I Financial Information Number
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1997 and December 1996 ............................................ 1
Consolidated Statements of Income
For the Six Months Ended June 30, 1997 and 1996 ............................ 2
Consolidated Statements of Income
For the Three Months Ended June 30, 1997 and 1996............................ 3
Consolidated Statements of Changes in Shareholders' Equity
For the Period December 31, 1995 through June 30, 1997....................... 4
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 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 - 11
Part II Other Information
Item 1. Legal proceedings............................................................ 12
Changes in securities........................................................ 12
Defaults upon senior securities.............................................. 12
Submission of matters to a vote of security holders.......................... 12
Other information............................................................ 12
Exhibits and reports on Form 8-K............................................. 12
Signatures................................................................................. 13
</TABLE>
<PAGE>
Part I - Financial Information
Item 1 - Financial Statements
VRB BANCORP
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
(Unaudited) (Audited)
____________ _____________
<S> <C> <C>
ASSETS
Cash and due from banks $ 11,527,435 $ 17,916,909
Federal funds sold 12,400,000 11,300,000
____________ ___________
Total cash and cash equivalents 23,927,435 29,216,909
Investments
U.S. Treasury and agencies 19,965,313 20,092,813
States and political subdivisions 18,468,014 18,635,932
Corporate and other investments 1,375,548 1,555,949
Federal Home Loan Bank stock 1,160,800 1,119,500
Loans, net of allowance for loan losses and unearned income 107,928,891 99,775,802
Premises and equipment, net 4,511,155 4,093,669
Other real estate owned - -
Accrued interest and other assets 2,243,193 2,616,093
____________ ____________
TOTAL ASSETS $179,580,349 $177,106,667
============ ============
LIABILITIES
Deposits
Demand deposits $ 46,448,609 $ 41,746,175
Interest bearing demand deposits 69,637,122 69,082,274
Savings deposits 14,353,673 15,447,644
Time deposits 26,008,352 29,292,364
____________ ____________
Total deposits 156,447,756 155,568,457
Accrued interest and other liabilities 1,252,685 1,350,076
____________ ____________
Total liabilities 157,700,441 156,918,533
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 3,583,065 and 3,574,682, issued and outstanding
at June 30, 1997 and December 31, 1996, respectively 9,516,396 9,480,330
Unrealized gain (loss) on available for sale securities (65,202) 55,789
Retained earnings 12,428,714 10,652,015
____________ ___________
Total shareholders' equity 21,879,908 20,188,134
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $179,580,349 $177,106,667
============ ============
</TABLE>
<PAGE>
VRB BANCORP
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
1997 1996
(Unaudited) (Unaudited)
___________ __________
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 5,520,607 $ 4,874,173
Interest on investment securities:
U.S. Treasury and agencies 663,342 569,075
States and political subdivisions 470,727 464,238
Corporate and other investments 84,168 91,338
Federal funds sold 412,994 298,534
_________ _________
Total interest income 7,151,838 6,297,358
INTEREST EXPENSE
Interest bearing demand deposits 1,104,054 954,398
Savings deposits 166,837 191,641
Time deposits 637,531 631,458
Borrowed funds - -
_________ _________
Total interest expense 1,908,422 1,777,497
Net interest income 5,243,416 4,519,861
PROVISION FOR LOAN LOSSES - -
_________ _________
Net interest income after
provision for loan losses 5,243,416 4,519,861
NONINTEREST INCOME
Service charges on deposit accounts 521,926 489,020
Other operating income 200,213 208,826
Securities transactions 7,139 -
_________ _________
Total noninterest income 729,278 697,846
NONINTEREST EXPENSES
Salaries and benefits 2,031,666 1,801,654
Net occupancy 363,170 319,313
Communications 115,112 112,962
Data processing 87,914 71,508
FDIC insurance premium 8,809 1,000
Supplies 104,837 83,243
Professional fees 76,866 76,006
Other real estate expense 1,166 -
Other expenses 490,455 413,008
_________ _________
Total noninterest expenses 3,279,995 2,878,694
INCOME BEFORE INCOME TAXES 2,692,699 2,339,013
PROVISION FOR INCOME TAXES 916,000 772,000
_________ _________
NET INCOME $ 1,776,699 $ 1,567,013
========= =========
NET INCOME PER SHARE OF COMMON STOCK $ 0.50 $ 0.44
========= =========
</TABLE>
<PAGE>
VRB BANCORP
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Three Months Ended June 30,
1997 1996
(Unaudited) (Unaudited)
_________ _________
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 2,876,993 $ 2,472,334
Interest on investment securities:
U.S. Treasury and agencies 333,278 306,228
States and political subdivisions 235,936 252,727
Corporate and other investments 41,906 46,509
Federal funds sold 192,819 135,655
_________ _________
Total interest income 3,680,933 3,213,453
INTEREST EXPENSE
Interest bearing demand deposits 542,904 481,569
Savings deposits 81,741 94,554
Time deposits 317,652 318,088
Borrowed Funds - -
_________ _________
Total interest expense 942,297 894,211
Net interest income 2,738,636 2,319,242
PROVISION FOR LOAN LOSSES - -
_________ _________
Net interest income after
provision for loan losses 2,738,636 2,319,242
NONINTEREST INCOME
Service charges on deposit accounts 266,701 259,542
Other operating income 114,223 105,060
Securities transactions - -
_________ _________
Total noninterest income 380,924 364,602
NONINTEREST EXPENSES
Salaries and benefits 1,024,115 919,023
Net occupancy 185,577 159,723
Communications 58,600 57,370
Data processing 40,730 34,262
FDIC insurance premium 6,811 -
Supplies 58,100 41,018
Professional fees 42,869 39,774
Other real estate expense 1,166 -
Other expenses 268,176 188,238
_________ _________
Total noninterest expenses 1,686,144 1,439,408
INCOME BEFORE INCOME TAXES 1,433,416 1,244,434
PROVISION FOR INCOME TAXES 491,000 409,000
_________ _________
NET INCOME $ 942,416 $ 835,434
========= =========
NET INCOME PER SHARE OF COMMON STOCK $ .26 $ 0.24
========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VRB BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Net Unrealized
Gain (Loss) on Total
Common Stock Retained Available-for-sale Shareholders'
Shares Amount Earnings Securities Equity
__________ __________ __________ ________ ___________
<S> <C> <C> <C> <C> <C>
BALANCE, December 31,
1995 (Audited) 2,333,019 $9,085,013 $8,355,113 $29,619 $17,469,745
Stock options exercised
(January 1 to
October 30, 1996) 50,180 304,054 - - 304,054
Income tax benefits from
exercise of stock option - 91,263 - - 91,263
Cash dividend ($ .40 per
share, paid November 20,
1996) - - (953,280) - (953,280)
2 for 1 stock split
(November 20, 1996) 1,191,483 - - - -
Payments for fractional
shares related to stock
split - - (1,088) - (1,088)
Net income - - 3,251,270 - 3,251,270
Changes in net unrealzied gain on
available-for-sale securities,
net of taxes - - - 26,170 26,170
__________ __________ __________ ________ ___________
BALANCE, December 31,
1996 (Audited) 3,574,682 9,480,330 10,652,015 55,789 20,188,134
Stock options exercised 8,383 36,066 - - 36,066
Net income - - 1,776,699 - 1,776,699
Changes in net unrealized (loss) on
available-for-sale securities,
net of taxes - - - (120,991) (120,991)
__________ __________ __________ ________ ___________
BALANCE, June 30, 1997
(Unaudited) 3,583,065 $9,516,396 12,428,714 ($65,202) $21,879,908
========== ========== ========== ========= ===========
</TABLE>
<PAGE>
VRB BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
1997 1996
(Unaudited) (Unaudited)
__________ __________
<S> <C> <C>
CASH FLOWS RELATING TO OPERATING ACTIVITIES
Net Income $ 1,776,699 $ 1,567,013
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 243,511 226,806
FHLB stock dividend (41,300) (39,700)
Gain on sale of securities (7,139) -
Change in cash due to changes in certain assets:
Decrease in accrued interest and other assets 321,274 109,746
Decrease in accrued interest and other liabilities (97,391) (324,005)
__________ __________
Net cash provided by operating activities 2,195,654 1,539,860
CASH FLOWS RELATING TO INVESTING ACTIVITIES
Proceeds from the sale of available-for-sale securities 3,008,437 -
Proceeds from the maturity and principal payments of
available-for-sale securities 181,645 3,060,167
Proceeds from the maturity and principal payments of
held-to-maturity securities 165,000 395,000
Purchases of available-for-sale securities (3,000,000) (4,994,375)
Purchases of held-to-maturity securities - (4,704,586)
Net increase in loans (8,153,089) (4,616,299)
Purchase of premises and equipment (602,486) (221,844)
__________ __________
Net cash used in investing activities (8,400,493) (11,081,937)
CASH FLOWS RELATING TO FINANCING ACTIVITIES
Net increase in deposits 879,299 7,892,389
Cash received from exercise of common stock options 36,066 83,957
__________ __________
Net cash provided by financing activities 915,365 7,976,346
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,289,474) (1,565,731)
CASH AND CASH EQUIVALENTS, beginning of period 29,216,909 18,099,620
__________ __________
CASH AND CASH EQUIVALENTS, end of period $ 23,927,435 $ 16,533,889
========== ==========
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid for interest $ 1,919,722 $ 1,804,610
Cash paid for taxes $ 570,994 $ 568,386
SCHEDULE OF NONCASH ACTIVITIES
Changes in unrealized gain (loss) on available-for-sale
securities, net of tax $ (120,991) $ (464,695)
</TABLE>
<PAGE>
VRB BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION
The accompanying financial statements reflect the operations of VRB Bancorp and
its wholly owned subsidiary, Valley of the Rogue Bank.
NOTE 2 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information, and in compliance with instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Adjustments to the interim financial statements are of
a normal recurring nature and include all adjustments that, in the opinion of
management, are necessary to the fair presentation of the financial position and
operating results for the interim periods. The consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto, together with management's discussion and analysis
of financial condition and results of operations, contained in the Bank's 1996
Annual Report to Shareholders. The operating results for the six months ended
June 30,1997, are not necessarily indicative of the results that may be expected
for the entire fiscal year ending December 31, 1997, or any other future
interim period.
<PAGE>
Part I - Financial Information
Item 2 - Management's Discussion and Analysis 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, 1997 balances to December 31, 1996 and
June 30, 1996 balances, respectively. At the end of the second quarter of 1997,
total assets amounted to $179,580,349, a $19,340,243 or 12.07% increase when
compared to the second quarter of 1996, and a $2,473,682 or 1.4% increase when
compared to December 31, 1996 balances of $177,106,667.
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:
<TABLE>
<CAPTION>
June 30,
______________________________
1997 1996 $ Change % Change
___________ ___________ __________ _______
<S> <C> <C> <C> <C>
ASSETS
Loans $ 107,928,891 $ 93,588,780 $ 14,340,111 15.32%
Investments 39,808,875 42,853,237 (3,044,362) (7.10%)
Federal funds sold 12,400,000 7,800,000 4,600,000 58.97%
Total assets $ 179,580,349 $160,240,106 19,340,243 12.07%
LIABILITIES AND EQUITY
Noninterest bearing deposits $ 46,448,609 $ 39,051,007 $ 7,397,602 18.94%
Interest bearing deposits 109,999,147 101,585,929 8,413,218 8.28%
Total Deposits 156,447,756 140,636,936 15,810,820 11.24%
Total Liabilities $ 157,700,441 $ 141,584,089 16,116,352 11.38%
Total Capital $ 21,879,908 $ 18,656,017 $ 3,223,891 17.28%
</TABLE>
Loans:
Outstanding loans totaled $107,928,891 at June 30, 1997, representing a
$14,340,111 or 15.32% increase when compared to June 30, 1996, and a $8,153,089
or 8.17% increase when compared to 1996 year end balances of $99,775,802. Loan
commitments (principally real estate construction notes) grew to $21.8
million at June 30, 1997, representing the highest level of undisbursed loan
funds for the year. These funds amounted to $9.5 million at June 30, 1996
and $16.2 million at December 31, 1996.
Reflective of the Bank's customer base, as well as trends within the local
economy, 77.15% of the Bank's loan portfolio resides in loans secured by real
estate. This is consistent with previous reporting periods such as December 31,
1996 and June 30, 1996 whereby 75.49% and 74.78% of all loans were within this
category.
<PAGE>
The Bank's loan portfolio continues to perform within our expectations. After
considering our previous loss experience, current economic conditions, and
potential problem loans, the current loan loss reserve of $1,601,858 is
considered sufficient to cover the assumed risks when extending credit.
The following table presents the composition of the Bank's loan portfolio at the
date indicated:
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
_____________________________ _____________________________
Amount Percentage Amount Percentage
__________ __________ __________ __________
<S> <C> <C> <C> <C>
Commercial $ 13,510,618 12.52% $ 13,180,518 13.21%
Real estate construction 13,849,535 12.83% 9,112,084 9.13%
Real estate mortgage 69,423,166 64.32% 66,210,178 66.36%
Consumer and other 12,747,430 11.81% 12,905,553 12.93%
___________ _______ ____________ ________
109,530,749 101.48% 101,408,333 101.64%
___________ _______ ____________ ________
Allowance for loan losses (1,601,858) (1.48%) (1,632,531) (1.64%)
Net loans $107,928,891 100.00% $ 99,775,802 100.00%
=========== ======= ============ =======
</TABLE>
The following table presents information with respect to nonperforming assets:
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
<S> <C> <C>
Loans on nonaccrual status $ 46,280 $ 58,166
Loans past due greater than 90 days but not on nonaccrual status 2,549 11,781
Other real estate owned - -
Total nonperforming assets $ 48,829 $ 69,947
Percentage of nonperforming assets to total assets 0.03% 0.04%
</TABLE>
Investment Portfolio:
At June 30, 1997 the Bank's portfolio of investment securities totaled
$39,808,875, representing an increase of $3,044,362 or 7.10% when compared to
the balance of the portfolio at June 30, 1996 and a $475,819 or 1.18% decrease
when compared to a December 31, 1996 securities portfolio of $40,284,694.
Investments in federal funds sold (an overnight investment), were $12,400,000,
at June 30, 1997, compared to $7,800,000 at June 30, 1996. The balance of
federal funds sold is influenced by cash demands, customer deposit levels, loan
activity, and other investment transactions.
<PAGE>
The following table provides the book value of the Bank's portfolio of
investment securities as of June 30, 1997 and December 31, 1996:
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
_____________ _________________
<S> <C> <C>
Investments available-for-sale
U.S. Treasury and agencies $ 19,965,313 $ 20,092,813
States and political subdivisions - -
Corporate and other investments 1,375,548 1,555,949
_____________ _________________
Total $ 21,340,861 $ 21,648,762
Investments held-to-maturity
U.S. Treasury and agencies $ - $ -
States and political subdivisions 18,468,014 18,635,932
Corporate and other investments - -
_____________ _________________
Total $ 18,468,014 $ 18,635,932
</TABLE>
Deposits:
From June 30, 1996 to June 30, 1997 deposits have increased by $15,810,820 or
11.24%. Deposit growth has slowed over the past six months, increasing by
$879,299 or .56% when compared to December 31, 1996. Late 1996 growth was due
to management's decision to promote an attractive pricing strategy, increased
marketing, and increased emphasis on implementing a sales culture within the
branches. The growth in deposit accounts has primarily been in Money Market
Checking accounts and Non-interest bearing checking accounts. These two
categories have increased 18.9% and 16.16%, respectively, when compared to
deposit balances as of June 30, 1996. Non-interest bearing deposits continue to
be a reliable and substantial portion of our deposit base accounting for 29.69%
of total deposits at June 30, 1997.
Shareholders' Equity:
Shareholder equity increased $1,691,774 during the first half of 1997.
Shareholder equity at June 30, 1997 amounted to $21,879,908 compared to
$20,188,134 at December 31, 1996. The increase in equity reflects consolidated
earnings of $1,776,699 and the proceeds from the exercise of stock options
(8,383 shares for a total of $36,066). 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 current value of this segment
of the bank's investment portfolio declined $120,991 when comparing December 31,
1996 to June 30, 1997.
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, 1997, the
Bank was required to have Tier 1 and Total Capital ratios of 4.0% and 8.0%,
respectively. The Bank's actual ratios at that date were 16.23% and 17.48%,
respectively.
<PAGE>
Results of Operations
Earnings:
Bancorp's 1997 second quarter earnings of $942,416 represented a $106,982 or
12.8% increase over the second quarter earnings in the prior fiscal year and was
a 12.9% increase over earnings in the prior quarter. Year to date earnings
totaled $1,776,699 for an annualized return on average shareholder equity 16.89%
and an annualized return on average outstanding assets of 1.99%. These returns
compare to a 17.45% return on average equity and 2.00% return on average assets
for the same period in 1996. For the year ended December 31, 1996, the Bancorp
achieved a 17.26% return on average equity and a 1.99% return on average assets.
Interest Income and Expenses:
The following table shows the increase (decrease) in VRB Bancorp's consolidated
interest income and expense when compared to the same period for the previous
year. The table attributes such amounts to changes in volume as well as changes
in rates:
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1997
Increase (Decrease) Due To
Volume Rate Net Change
________ ________ _________
<S> <C> <C> <C>
Interest-earning assets:
Loans $ 666,867 $ (20,433) $ 646,434
Investment securities
Taxable securities 29,192 57,905 87,097
Nontaxable securities ** (1,177) 11,007 9,830
Federal funds sold 111,961 2,499 114,460
Total 806,844 50,977 857,821
Interest-bearing liabilities:
Interest bearing checking and savings accounts 146,921 (22,069) 124,852
Time deposits 43,283 (37,210) 6,073
Borrowed funds - - -
Total 190,205 (59,280) 130,925
Net increase (decrease) in net interest income $ 616,639 $ 110,257 $ 726,896
** Tax-exempt income has been adjusted to a tax equivalent basis at 34%.
</TABLE>
Increasing loan volume supported the $857,821 or 13.1% increase in interest
income (on a tax equivalent basis) for the first two quarters of 1997 when
compared to the interest generated during the first six months of 1996.
Interest expense increased $130,925 or 7.37% when comparing the $1.9 million
incurred for the first six months of 1997 to 1996's comparable period of $1.8
million.
Interest Margin:
The Bank's net interest margin after adjusting tax exempt income to reflect a
tax equivalent basis, increased $726,896 or 15.27% when comparing the first six
months of 1997 with 1996. The margin expressed as a percentage of net average
earning assets increased to 6.68% from 6.53% when comparing the periods ending
June 30, 1997, and 1996, respectively.
<PAGE>
Total earning assets averaged $161,462,361 and $143,725,468 for the six month
periods ending June 30, 1997 and 1996. The average yield on earning assets,
when adjusted to reflect the tax benefits on certain types of investments,
increased to 9.16% in 1997, compared to 9.10% in 1996.
Interest bearing liabilities averaged $112,326,013 and $100,618,393 during the
first six months of 1997 and 1996, respectively. The average cost of these
liabilities decreased from 3.53% in 1996 to 3.40% in 1997. The average cost of
total interest bearing liabilities and non-interest bearing deposits declined
from 2.57% during 1996 to 2.47% during 1997.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:
<TABLE>
<CAPTION>
For the six months ended June 30,1997 For the six months ended June 30, 1996
_____________________________________ ______________________________________
Average Inc / Exp Rate Average Inc / Exp Rate
____________ __________ _______ __________ __________ _____
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans * $104,815,698 $5,520,607 10.53% $ 92,154,380 $4,874,173 10.58%
Investment securities
Taxable securities 22,521,044 747,510 6.64% 21,641,535 660,413 6.10%
Nontaxable securities ** 18,534,686 713,221 7.70% 18,565,267 703,391 7.58%
Federal funds sold 15,590,933 412,994 5.30% 11,364,286 298,534 5.25%
Total interest earning
assets 161,462,361 7,394,332 9.16% 143,725,468 6,536,511 9.10%
Cash and due from banks 9,785,421 9,033,050
Fixed assets 4,350,041 3,892,739
Loan loss allowance (1,626,805) (1,399,896)
Other assets 2,352,487 2,388,258
Total Assets $176,323,505 $157,639,619
Interest-bearing liabilities:
Interest-bearing checking
and savings accounts $ 85,544,305 $1,270,891 2.97% $ 75,654,947 $1,146,039 3.03%
Time deposits 26,781,708 637,531 4.76% 24,963,446 631,458 5.06%
Borrowed funds - - 0.00% - - 0.00%
Total interest-
bearing liabilities 112,326,013 1,908,422 3.40% 100,618,393 1,777,497 3.53%
Noninterest
bearing deposits 41,936,823 - 0.00% 37,755,087 - 0.00%
Total deposits
and borrowed funds 154,262,836 1,908,422 2.47% 138,373,480 1,777,497 2.57%
Other liabilities 1,199,595 1,091,013
Total Liabilities 155,462,431 139,464,493
Shareholders' equity 20,861,074 18,175,126
Total liabilities
and shareholders' eqity $176,323,505 $157,639,619
Net interest income $5,485,910 $4,759,014
Net interest margin 6.68% 6.53%
* Nonaccrual loans are included in the average balance.
** Tax-exempt income has been adjusted to a tax equivalent basis at 34%.
</TABLE>
Liquidity Management
With the recent growth in loans and loan commitments, management has become
increasingly conscious of the importance of maintaining a strong liquidity
ratio. As of June 30, 1997, the Bank's loan-to-deposit ratio was a moderate
69.63%. Additionally, the Bank has a borrowing agreement with FHLB of Seattle
for cash advances up to approximately $8.8 million, as well as approximately
$12.4 million in federal funds sold to meet potential liquidity needs.
<PAGE>
Asset-Liability Management and Interest Rate Risk
The principal purpose of asset-liability management is to manage the Bank's
sources and uses of funds to maximize net interest income under changing
interest rate conditions. On a monthly basis, the Bank evaluates the stability
of the bank's net interest margins and capital position under meaningful rate
changes. This includes the calculation of the bank's "GAP", the difference
between repricing assets and repricing liabilities in specific time periods. As
of June 30, 1997, management's analysis indicated that the Bank's earnings risk
was within acceptable guidelines and that mismatched positions are short term
in nature.
<PAGE>
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:
Merger with Colonial Banking Company: On July 25th, 1997, Valley of the Rogue
Bank ( "the Bank" ) signed a letter of intent to merge with Colonial Banking
Company ( "CB" ), an Oregon state bank. Subject to the preparation and approval
of a definitive agreement, the Bank has the option to purchase all of the
outstanding shares of CB stock for a cash price of approximately $17.3 million.
The Bank anticipates the merger to take place effective January 1, 1998. As of
June 30, 1997, CB has $109.0 in total assets, of which $91.6 million are
outstanding loans. CB has five full service branches in Southern Oregon, as
well as a loan production office based out of Portland, Oregon.
In conjunction with the merger, the Board of Directors of VRB Bancorp has
authorized a new public offering of shares of its common stock. The offering is
expected to occur in the fourth quarter, with the intent to raise four to eight
million in additional capital.
Item 6. Exhibits and Reports on Form 8-K: None
<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.
Date: August 1, 1997 /s/Tom Anderson
Tom Anderson
Executive Vice President
Chief Operating Officer and
Secretary
Date: August 1, 1997 /s/Felice Belfiore
Felice Belfiore
Vice President
Chief Financial Officer
<PAGE>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
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<INT-BEARING-DEPOSITS> 0
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