<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1999
TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Transition Period From _________________ to ________________.
Commission File No. 33-4984
PCB BANCORP, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
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)
</TABLE>
(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
------------------
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 [ ]
806,200
------------------
(Outstanding shares of the issuer's common stock as of September 30, 1999)
Transitional Small Business Disclosure Format
Yes [ ] No [ X ]
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PCB BANCORP, INC.
FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
INDEX
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<CAPTION>
Number Page
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<S> <C> <C>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 1999 (Unaudited) and December 31, 1998 3
Consolidated Statements of Income
Three Months and Nine Months Ended September 30, 1999
and 1998 (Unaudited) 4
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1999 and 1998 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7 - 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Default Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-k 10
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2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- ------------------------------------------------------------------------------
PCB BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
(In Thousands)
------------------------------
September 30, December 31,
ASSETS 1999 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from Banks 3,524 $ 2,048
Federal funds sold 9,126 6,574
Securities held to maturity 601 500
Securities available-for-sale, at fair value 18,118 12,157
Other Investments 270 266
Loans 69,574 67,052
Allowance for loan losses (870) (825)
--------- --------
Loans, net 68,704 66,227
--------- --------
Premises and equipment 3,152 3,217
Accrued income receivable 508 487
Other assets 340 98
--------- --------
$ 104,343 $ 91,574
========= ========
LIABILITIES AND STOCKHOLDER'S EQUITY
- ----------------------------------------------------------------------------------------------------
Liabilities:
Deposits:
Non-interest bearing $ 9,782 $ 9,432
Interest bearing 85,689 72,377
--------- --------
Total deposits 95,471 81,809
Accrued interest payable 301 405
Other Liabilities 68 981
--------- --------
Total Liabilities 95,840 83,195
--------- --------
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;
806,200 shares issued and outstanding 806 800
Additional paid-in capital 7,259 7,200
Retained Earnings 741 310
Unrealized Holding Gain/Loss-Equity (303) 69
--------- --------
Total shareholder's equity 8,503 8,379
--------- --------
$ 104,343 $ 91,574
========= ========
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PCB BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
(In Thousands) (In Thousands)
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Three Months Ended Nine Months Ended
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 1,558 $ 1,499 $ 4,498 $ 4,328
Securities:
Taxable 182 70 476 180
Tax exempt 66 33 190 57
Federal funds sold 113 84 211 202
-------- -------- -------- --------
Total interest income 1,919 1,686 5,375 4,767
-------- -------- -------- --------
INTEREST EXPENSE:
Deposits 1,002 889 2,815 2,493
Other borrowings -- -- -- --
-------- -------- -------- --------
Total interest expense 1,002 889 2,815 2,493
-------- -------- -------- --------
Net interest income 917 797 2,560 2,274
PROVISION FOR LOAN LOSSES 34 11 71 85
-------- -------- -------- --------
Net interest income after provision for loan losses 883 786 2,489 2,189
-------- -------- -------- --------
OTHER INCOME:
Service charges on deposit accounts 25 41 55 111
Other service charges, commissions and fees 76 5 193 17
-------- -------- -------- --------
Total other income 101 46 248 128
-------- -------- -------- --------
OTHER EXPENSES:
Salaries and employee benefits 409 320 1,105 929
Occupancy expense 52 53 163 140
Other operating expenses 257 221 713 582
-------- -------- -------- --------
Total other expenses 718 594 1,981 1,651
-------- -------- -------- --------
Income before income taxes 266 238 756 666
INCOME TAXES 114 95 311 270
TAX-EXEMPT SECURITIES ADJUSTMENT 22 13 64 23
-------- -------- -------- --------
Net income 174 156 509 419
======== ======== ======== ========
Earnings per share 0.22 0.20 0.64 0.52
======== ======== ======== ========
Weighted average shares outstanding 804,030 800,000 801,364 800,000
======== ======== ======== ========
</TABLE>
4
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PCB BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
(In Thousands)
----------------------------
Nine Months Ended
1999 1998
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<S> <C> <C>
INCREASE(DECREASE) IN CASH AND DUE FROM BANKS
Cash flows from operating activities:
Net Income $ 509 $ 419
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and Amortization 276 172
Provision for loan losses 71 85
Increase in accrued income receivable (21) (70)
Other, net (1,048) 192
-------- --------
Net cash provided(used) by operating activities (213) 798
-------- --------
Cash flows from investing activities:
(Increase)/decrease in federal funds sold (2,552) (4,155)
Purchases of held to maturity securities (101) 2,180
Purchases of securities available-for-sale (6,546) (6,444)
Net (increase)/decrease in loans (2,522) (5,794)
Purchases of premises and equipment (172) (1,112)
Purchases of Federal Home Loan Bank stock -- (185)
-------- --------
Net cash used by investing activities (11,893) (15,510)
-------- --------
Cash flows from financing activities:
Dividends paid-out (80)
Increase in deposits 13,662 15,566
-------- --------
Net cash provided by financing activities 13,582 15,566
-------- --------
Net increase in cash 1,476 854
Cash and due from banks at beginning of period 2,048 2,151
-------- --------
Cash and due from banks at end of period $ 3,524 $ 3,005
======== ========
Cash payments for interest $ 2,912 $ 2,539
======== ========
Cash payments for income taxes $ 273 $ --
======== ========
</TABLE>
5
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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 financial 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 three month period ended September 30, 1999, are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1999. 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, 1998.
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<PAGE> 7
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 1999. Total assets have grown $12.77 million or 13.94% since December 31,
1998, and $10 million or 10.60% since June 30, 1999. During the period January
1, 1999 to September 30, 1999, the growth in total assets has been funded by
increases in deposits of $13.66 million or 16.7% growth. This growth, and
anticipated future growth, will allow the Bank to satisfy its cash requirements.
It is not anticipated that it will be necessary to raise any additional funds.
Loans have increased $2.5 million or 3.76% since December 31, 1998. The loan
portfolio, however, has grown $ 2.52 million or 3.76% since June 30, 1999.
Investment securities have increased $6.06 million or 47.89% since December 31,
1998. Investment securities have increased $2.86 million or 18.02% since June
30, 1999.
NONPERFORMING ASSETS AND RISK ELEMENTS. The Bank had $306,000 in nonperforming
assets at September 30, 1999. Diversification within the loan portfolio is an
important means of reducing inherent lending risks. At September 30, 1999, the
Bank had no concentrations of ten percent or more in total loans in any single
industry or 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 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 had other real estate owned of $188,000 at
September 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is adequate with cash and due from banks of $3.52 million and federal
funds sold of $9.1 million as of September 30, 1999. In addition, loans and
investment securities repricing or maturing in one year or less exceed $29.6
million at September 30, 1999. The Bank has approximately $7.74 million in
unfunded loan commitments. It is not known how much of this will be funded
within the next six months. Other commitments, primarily financial standby
letters of credit, are approximately $1.2 million at September 30, 1999.
With the exception of unfunded loan commitments, there are no known trends or
uncertainties that will result in the Bank's liquidity increasing or decreasing
in a material way. The Bank has secured additional sources of funds, above and
beyond those supplied
7
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through the normal course of business, should liquidity needs arise. The Bank
has established a federal funds line of credit with its correspondent bank,
First American National Bank, totaling $2.5 million. An additional $2.5 million
Securities Repurchase Agreement has also been arranged between the Bank and
First American National Bank. As a benefit of its Federal Home Loan Bank
membership, the Bank has a $2 million standby letter of credit, with $1.5
million of the line currently pledged toward the State of Tennessee Collateral
Pool Board for the securing of public funds held on deposit. The Bank has
received approval from the Federal Home Loan Bank for a special Y2K line of
credit totaling $9 million. A $2.5 million federal funds line of credit has also
been secured through Columbus Bank and Trust in Columbus, Georgia. The Board of
Directors has also authorized the Bank to apply to the Federal Reserve for the
ability to borrow through the Federal Discount Window in Atlanta, Georgia. The
application with the Federal Reserve is pending as of this report date. The
Federal Discount Window allows participants to borrow funds against pledged
assets of the Bank. In addition, the Company is not aware of any adverse
recommendations by bank regulatory agencies, which would have a material impact
on the Company's liquidity, capital resources, or results of operations.
Total equity capital at September 30, 1999 is $8.5 million or 8.1% of total
assets. The Bank's capital position is adequate to meet the minimum capital
requirements as of September 30, 1999 for all regulatory agencies. The Bank's
capital ratios as of September 30, 1999, are as follows:
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<S> <C>
Tier 1 9.95%
Tier 2 1.00%
Total Risk-based capital 10.95%
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RESULTS OF OPERATIONS
The Company had net income of $174,000 during the third quarter of 1999 compared
to net income of $156,000 during the third quarter of 1998. For the nine months
ended September 30, 1999, the Company had net income of $509,000, which was a
21.5% increase over the same period in 1998. Net interest income was up $120,000
or 15.1% over the third quarter of 1999 compared to 1998. Net interest income
for the nine month period ended September 30, 1999 increased $286,000 or 12.58%
over the same period in 1998.
Interest income and interest expense both increased from 1998 to 1999 because of
the increase in earning assets and deposits from September 1998 to September
1999. The growth in non-interest income for the period ending September 30, 1999
reflects the increase in deposits during 1998 and 1999.
The provision for loan losses was $34,000 in the third quarter of 1999 compared
to $11,000 in the third quarter of 1998. The allowance for loan losses of
$870,000 at September 30, 1999 (approximately 1.25% of total loans) is
considered to be adequate to cover losses inherent in the loan portfolio.
Management evaluates the adequacy of the allowance for loan losses monthly and
makes provisions for the loan losses based on this evaluation.
8
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YEAR 2000 REPORT
People's Community Bank, like all other banks and financial institutions, is
aware of and taking steps to address the Year 2000 issue. Our Year 2000 strategy
is designed to position us for success for the next millennium. We have reviewed
all areas of Year 2000 risk for our Bank. We formed a Project Team and began
building internal awareness. A Steering Committee comprised of senior management
was organized and a senior officer was appointed as Year 2000 Project
Administrator. The Steering Committee is responsible for evaluating Year 2000
impact on systems, and then testing or verifying that readiness. Our project
methodology conforms to guidelines suggested by the Federal Financial
Institutions Examinations Council. The foundation of our approach involves five
phases: Awareness, Assessment, Renovation, Validation, and Implementation. Our
Year 2000 process and progress are reviewed and evaluated by government
regulators. Testing and analyzing hardware and software is a critical element to
addressing the Year 2000 issue. During the first half of 1999, we substantially
completed the remediation and testing of our critical systems. In addition, we
are actively working with our customers in all areas to ensure the Year 2000
readiness of software, hardware, services, and processes used to conduct
business. The Steering Committee has also prepared a Contingency Plan to address
actions to be taken before, during and after January 1, 2000. We have also
prepared a cash and liquidity plan to prepare for additional cash, which might
be needed to respond to customer requests.
For the remainder of 1999, People's Community Bank will continue to validate
readiness for the Year 2000 date change through further systems tests. Detailed
contingency, cash and liquidity plans will be implemented to ensure a smooth
transition into the new century. We believe that our approach is sound,
comprehensive and positions us to be successful in the Year 2000 and beyond.
9
<PAGE> 10
PART II. OTHER INFORMATION
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) Exhibits
27 Financial Data Schedule (for SEC use only)
B) The Company did not file any reports on Form 8-K during
the quarter ended June 30, 1999
10
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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.
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<S> <C>
PCB BANCORP, INC.
--------------------------------------------------------
(Registrant)
11/10/99 /s/ Phillip R. Carriger
- -------------------------------- ---------------------------------------------------------
(Date) Phillip R. Carriger, Chairman and Chief Executive Officer
(Principle Executive Officer)
11/10/99 /s/ Larry E. Parks
- -------------------------------- ---------------------------------------------------------
(Date) Larry E. Parks, Vice President
(Principal Accounting Officer)
</TABLE>
11
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,524
<INT-BEARING-DEPOSITS> 3
<FED-FUNDS-SOLD> 9,126
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 18,118
<INVESTMENTS-CARRYING> 601
<INVESTMENTS-MARKET> 603
<LOANS> 69,574
<ALLOWANCE> 870
<TOTAL-ASSETS> 104,343
<DEPOSITS> 95,471
<SHORT-TERM> 0
<LIABILITIES-OTHER> 68
<LONG-TERM> 0
0
0
<COMMON> 806
<OTHER-SE> 7,697
<TOTAL-LIABILITIES-AND-EQUITY> 104,343
<INTEREST-LOAN> 4,498
<INTEREST-INVEST> 666
<INTEREST-OTHER> 211
<INTEREST-TOTAL> 5,375
<INTEREST-DEPOSIT> 2,815
<INTEREST-EXPENSE> 2,815
<INTEREST-INCOME-NET> 2,560
<LOAN-LOSSES> 71
<SECURITIES-GAINS> 11
<EXPENSE-OTHER> 1,981
<INCOME-PRETAX> 756
<INCOME-PRE-EXTRAORDINARY> 756
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 509
<EPS-BASIC> .64
<EPS-DILUTED> .64
<YIELD-ACTUAL> 3.37
<LOANS-NON> 306
<LOANS-PAST> 6
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 293
<ALLOWANCE-OPEN> 826
<CHARGE-OFFS> 56
<RECOVERIES> 4
<ALLOWANCE-CLOSE> 870
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 870
</TABLE>
