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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1998
Commission File No. 33-4984
PCB BANCORP, INC.
(Exact Name of Registrant as Specified in its Charter)
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Tennessee 62-1641671
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(State or other jurisdiction of incorporation) (I.R.S. Employer Identification Number)
300 Sunset Dr : Johnson City, Tennessee 37604
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(Address of Principal Executive Office) (Zip Code)
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(423) 915-2222
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(Issuer's Telephone Number Including Area Code)
Securities Registered Pursuant to Section 12(b) or 12(g) of the Act:
None
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Indicate by the check mark whether the Issuer: (1) has filed all reports
required by Section 13 or 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.
Yes X No
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800,000
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(Outstanding shares of the issuer's common stock as of September 30, 1998)
Transitional Small Business Disclosure Format
Yes No X
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PCB BANCORP, INC.
INDEX
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Number Page
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 1998 (Unaudited) and December 31, 1997 3
Consolidated Statements of Income
Three Months and Nine Months Ended September 30, 1998
and 1997 (Unaudited) 4
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1998 and 1997 (Unaudited)
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7 - 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Default Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-k 9
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PCB BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
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(In Thousands)
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September 30, December 31,
ASSETS 1998 1997
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Cash and due from Banks $ 3,005 $ 2,151
Federal funds sold 6,278 2,123
Securities held to maturity 500 2,717
Securities available-for-sale, at fair value 7,955 1,443
Other Investments 266 81
Loans 64,002 58,208
Allowance for loan losses (800) (728)
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Loans, net 63,202 57,480
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Premises and equipment 3,270 2,299
Accrued income receivable 429 369
Deferred income taxes, net -- 108
Other assets 133 104
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$ 85,038 $ 68,875
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LIABILITIES AND STOCKHOLDER'S EQUITY
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Liabilities:
Deposits:
Non-interest bearing $ 8,763 $ 7,326
Interest bearing 67,325 53,197
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Total deposits 76,088 60,523
Accrued interest payable 449 495
Other Liabilities 235 55
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Total Liabilities 76,772 61,073
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Shareholder's equity:
Preferred stock, no par value, 1,000,000 shares authorized;
none issued 0 0
Common stock, $1 par value, 3,000,000 shares authorized;
800,000 shares issued and outstanding 800 800
Additional paid-in capital 7,200 7,200
Retained Earnings 218 (202)
Unrealized Holding Gain/Loss-Equity 48 4
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Total shareholder's equity 8,266 7,802
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$ 85,038 $ 68,875
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PCB BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
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(In Thousands) (In Thousands)
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Three Months Ended Nine Months Ended
1998 1997 1998 1997
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INTEREST INCOME:
Loans, including fees $ 1,499 $ 1,160 $ 4,328 $ 3,048
Securities:
Taxable 70 68 180 261
Tax exempt 33 1 57 1
Federal funds sold 84 30 202 58
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Total interest income 1,686 1,259 4,767 3,368
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INTEREST EXPENSE:
Deposits 889 627 2,493 1,647
Other borrowings - - - 7
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Total interest expense 889 627 2,493 1,654
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Net interest income 797 632 2,274 1,714
PROVISION FOR LOAN LOSSES 11 54 85 259
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Net interest income after provision for loan losses 786 578 2,189 1,455
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OTHER INCOME:
Service charges on deposit accounts 41 29 111 73
Other service charges, commissions and fees 5 8 17 28
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Total other income 46 37 128 101
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OTHER EXPENSES:
Salaries and employee benefits 320 261 929 735
Occupancy expense 53 31 140 94
Other operating expenses 221 166 582 457
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Total other expenses 594 458 1,651 1,286
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Income before income taxes 238 157 666 270
INCOME TAXES 95 63 270 109
TAX-EXEMPT SECURITIES ADJUSTMENT 13 23
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Net income 156 94 419 161
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Earnings per share 0.20 0.12 0.52 0.20
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Weighted average shares outstanding 800,000 800,000 800,000 800,000
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PCB BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
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(In Thousands)
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Nine Months Ended
1998 1997
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INCREASE (DECREASE) IN CASH AND DUE FROM BANKS
Cash flows from operating activities:
Net Income $ 419 $ 161
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and Amortization 172 95
Provision for loan losses 85 259
Increase in accrued income receivable (70) (86)
Other, net 192 404
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Net cash provided (used) by operating activities 798 833
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Cash flows from investing activities:
Increase in federal funds sold (4,155) 2,067
Purchases of held to maturity securities 2,180 1,978
Purchases of securities available-for-sale (6,444) (1,192)
Net increase in loans (5,794) (20,688)
Purchases of premises and equipment (1,112) (981)
Purchases of Federal Home Loan Bank stock (185)
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Net cash used by investing activities (15,510) (18,816)
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Cash flows from financing activities:
Increase in deposits 15,566 18,456
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Net cash provided by financing activities 15,566 18,456
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Net increase in cash 854 473
Cash and due from banks at beginning of period 2,151 1,167
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Cash and due from banks at end of period $ 3,005 $ 1,640
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Cash payments for interest $ 2,539 $ 1,267
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Cash payments for income taxes $ - $ -
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PCB BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (Unaudited)
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 the instructions to Form 10-QSB. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine month period ended September 30, 1998 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1998. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1997.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
FINANCIAL CONDITION
People's Community Bank (the "Bank") represents virtually all of the assets of
PCB Bancorp, Inc. (the "Company"). The Company's consolidated results of
operations are dependent primarily on net interest income, which is the
difference between the interest income earned on interest-earning assets, such
as loans and investments, and the interest expense incurred on interest-bearing
liabilities, such as deposits and other borrowings. The Bank, which was opened
December 15, 1995, has continued to experience growth during the third quarter
of 1998. Total assets have grown $5.3 million since June 30, 1998, and $16.2
million or 23.5% since December 31, 1997. Growth in total assets was funded by
an increase in deposits of $4.8 million or 6.7% since June 30, 1998 and $15.6
million or 25.7% since December 31, 1997. This growth and anticipated future
growth will allow the Bank to satisfy its cash requirements.
Loans have increased $347 thousand or .55% since June 30, 1998 and $5.8 million
or 9.95% since December 31, 1998. Investment securities have increased $2.3
million or 38.3% since June 30, 1998 and $4.3 million or 103.2% since December
31, 1998.
NONPERFORMING ASSETS AND RISK ELEMENTS. The Bank had nonperforming assets of
$122,000 at September 30, 1998. Diversification within the loan portfolio is an
important means of reducing inherent lending risks. At September 30, 1998, the
Bank had no concentrations of ten percent or more of total loans in any single
industry nor any geographical area outside of the immediate market area of the
Bank.
The Bank discontinues the accrual of interest on loans which become ninety days
past due (principal and/or interest), unless the loans are adequately secured
and in the process of collection. Other real estate owned is carried at fair
value, determined by an appraisal. A loan is classified as a restructured loan
when the interest rate is materially reduced or the term is extended beyond the
original maturity date because of the inability of the borrower to service the
debt under the original terms. The Bank has no restructured loans or other real
estate at September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is adequate with cash and due from banks of $3.0 million and federal
funds sold of $6.28 million as of September 30, 1998. In addition, loans and
investing securities repricing or maturing in one year or less exceed $26.8
million at September 30, 1998. The Bank has approximately $5.9 million in
unfunded loan commitments. It is not known how much of this will be funded
within the next six months. Other commitments, primarily stand-by letters of
credit, are approximately $360,000 at September 30, 1998. In order to
collateralize public unit deposits as required by the State of Tennessee
Collateral Pool Board, the Bank has an advance of $1.35 million on a $2 million
line of credit with the Federal Home Loan Bank of Cincinnati at September 30,
1998. The Bank has established a federal fund line of credit with a
correspondent bank totaling $2 million to meet unexpected liquidity demands.
With the exception of unfunded loan commitments, there are no known trends or
any known commitments or uncertainties that will result in the Bank's liquidity
increasing or decreasing in a material way. In addition, the Company is not
aware of any recommendations by any regulatory authorities which would have a
material effect on the company's liquidity, capital resources, or results of
operations.
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Total equity capital at September 30, 1998 is $8.27 million or 9.72% of total
assets. The Bank's capital position is adequate to meet the minimum capital
requirements as of September 30, 1998 for all regulatory agencies. The Bank's
capital ratios as of September 30, 1998, are as follows:
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Tier 1 capital: 9.59%
Tier 2 capital: .94%
Total risk-based capital: 10.53%
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RESULTS OF OPERATIONS
The company had net income of $156,000 in the third quarter of 1998 compared to
net income of $94,000 in the second quarter of 1997. Net interest income was up
$165,000 or 26.1% over the third quarter of 1998 compared to 1997.
Interest income and interest expense both increased from 1997 to 1998 because
of the increase in earning assets and deposits from September 30, 1997 to
September 30, 1998. The growth in non-interest income for the third quarter of
1998 reflects the increase in deposits during 1997 and 1998.
The provision for loan losses was $11,000 in the third quarter of 1998 compared
to $54,000 in the third quarter of 1997. The allowance for loan losses of
$800,000 at September 30, 1998 (approximately 1.25% of total loans) is
considered adequate to cover losses inherent in the loan portfolio. Management
evaluates the adequacy of the allowance for loan losses monthly and makes
provisions for loan losses based on this evaluation.
YEAR 2000 REPORT
People's Community Bank, like all other banks and financial institutions, is
currently in the process of addressing the Year 2000. The issue arises from the
fact that many existing computer programs use only a two-digit field to
identify the year. These programs were designed without considering the impact
once the calendar year rolls over to "00". If not corrected computer
applications could fail or create inaccurate results by or at the Year 2000.
Because we rely on computer systems, we are placing great emphasis on accessing
our Year 2000 risk, correcting any Year 2000 problems, and providing ample time
to adequately test our systems for Year 2000 readiness. The main phases
involved in the Year 2000 project are assessment, renovation, validation, and
implementation. A comprehensive review to assess the systems affected by this
issue has been completed, estimated cost projections have been determined and
an implementation plan has been compiled. Our Management and Board of Directors
are involved in our business strategy. We're working with our regulators to
ensure that we take into consideration all pertinent guidance on Year 2000
issues and stay within the timelines established for dealing with Year 2000
issues. We're also working with outside vendors to verify that their systems
will be ready. People's Community Bank must not only evaluate and test its own
Year 2000 readiness, it must also coordinate with other entities with which it
routinely interacts such as suppliers, creditors, borrowers, customers, and
other financial service organizations. Regulations require People's Community
Bank to accomplish specific Year 2000 actions by specific dates.
People's Community Bank has initiated an implementation plan providing for Year
2000 readiness by the end of 1998. Management believes the plan is on target
with the goals established by its regulators. We have completed the awareness
and assessment phases and have substantially completed the remediation phase of
the plan. People's data processing software has been updated to ensure Year
2000 compliance. The Bank has substantially completed the testing phase of our
implementation plan, with completion scheduled for year-end 1998. A contingency
plan for Year 2000
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is in the development process to address mission critical systems. Our
contingency plans will be adapted to include such items as utilization of our
back-up data processing site, business resumption plans, identifying
alternative sources of liquidity, and evaluating alternative manual processes.
The adaptation and testing of these contingency plans should be finalized early
in 1999.
People's Community Bank has determined that the Year 2000 issue may be critical
to its operations; however, Management does not believe customer readiness is
or will be material to its overall performance. Management also believes that
the total costs of becoming Year 2000 compliant will not be significant.
Through 1997, expenditures for Year 2000 were immaterial, and as of this date,
Year 2000 related expenditures for 1998 are projected to be approximately
$10,000.00.
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PART II. OTHER INFORMATION
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Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) None
b) The Company did not file any reports on Form 8-K
during the quarter ended September 30, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PCB BANCORP, INC.
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(Registrant)
3/3/99 /s/ Phillip R. Carriger
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(Date) Phillip R. Carriger, Chairman and Chief Executive
Officer
(Principle Executive Officer)
3/3/99 /s/ Larry E. Parks
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(Date) Larry E. Parks, Vice President
(Principal Accounting Officer)
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