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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 June 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 .
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Commission File No. 33-4984
PCB BANCORP, INC.
(Exact Name of Registrant as Specified in its Charter)
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<S> <C>
Tennessee 62-1641671
- ----------------------------------------------------- ----------------------------------------------
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification Number)
300 Sunset Dr : Johnson City, Tennessee 37604
- ----------------------------------------------------- ----------------------------------------------
(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 [ ]
800,000
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(Outstanding shares of the issuer's common stock as of June 30, 1999)
Transitional Small Business Disclosure Format
Yes [ ] No [X]
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PCB BANCORP, INC.
FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 1999
INDEX
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Number Page
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1999 (Unaudited) and December 31, 1998 3
Consolidated Statements of Income
Three Months and Six Months Ended June 30, 1999
and 1998 (Unaudited) 4
Consolidated Statements of Cash Flows
Six Months Ended June 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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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
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PCB BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
(In Thousands)
----------------------------
June 30, December 31,
ASSETS 1999 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from Banks 4,122 $ 2,048
Federal funds sold 3,800 6,574
Securities held to maturity 500 500
Securities available-for-sale, at fair value 15,361 12,157
Other Investments 270 266
Loans 67,050 67,052
Allowance for loan losses (841) (825)
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Loans, net 66,209 66,227
-------- --------
Premises and equipment 3,235 3,217
Accrued income receivable 564 502
Other assets 280 83
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$ 94,341 $ 91,574
=======================
LIABILITIES AND STOCKHOLDER'S EQUITY
- ----------------------------------------------------------------------------------------------
Liabilities:
Deposits:
Non-interest bearing $ 10,130 $ 9,432
Interest bearing 75,527 72,377
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Total deposits 85,657 81,809
Accrued interest payable 229 405
Other Liabilities 61 981
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Total Liabilities 85,947 83,195
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Shareholder's equity:
Preferred stock, no par value, 1,000,000 shares authorized;
none issued 0 0
Common stock, $1 par value, 3,000,000 shares authorized;
800,000 shares issued and outstanding 800 800
Additional paid-in capital 7,200 7,200
Retained Earnings 605 310
Unrealized Holding Gain/Loss-Equity (211) 69
-------- --------
Total shareholder's equity 8,394 8,379
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$ 94,341 $ 91,574
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PCB BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
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<CAPTION>
(In Thousands) (In Thousands)
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Three Months Ended Six Months Ended
June 30 June 30
1999 1998 1999 1998
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INTEREST INCOME:
Loans, including fees $ 1,447 $ 1,470 $ 2,940 $ 2,829
Securities:
Taxable 174 58 294 110
Tax exempt 64 18 124 23
Federal funds sold 31 56 98 117
-------- -------- -------- --------
Total interest income 1,716 1,602 3,456 3,079
-------- -------- -------- --------
INTEREST EXPENSE:
Deposits 889 827 1,813 1,603
Other borrowings -- -- -- --
-------- -------- -------- --------
Total interest expense 889 827 1,813 1,603
-------- -------- -------- --------
Net interest income 827 775 1,643 1,476
PROVISION FOR LOAN LOSSES 18 41 37 74
-------- -------- -------- --------
Net interest income after provision for loan losses 809 734 1,606 1,402
-------- -------- -------- --------
OTHER INCOME:
Service charges on deposit accounts 19 12 30 23
Other service charges, commissions and fees 65 32 117 60
------ ------ ------ ------
Total other income 84 44 147 83
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OTHER EXPENSES:
Salaries and employee benefits 334 315 696 609
Occupancy expense 55 45 111 86
Other operating expenses 222 199 456 361
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Total other expenses 611 559 1,263 1,056
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Income before income taxes 282 219 490 429
INCOME TAXES 113 89 197 174
TAX-EXEMPT SECURITIES ADJUSTMENT 22 7 42 9
-------- -------- -------- --------
Net income 191 137 335 264
======== ======== ======== ========
Earnings per share 0.24 0.17 0.42 0.33
======== ======== ======== ========
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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<CAPTION>
(In Thousands)
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Six Months Ended
June 30
1999 1998
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INCREASE(DECREASE) IN CASH AND DUE FROM BANKS
Cash flows from operating activities:
Net Income $ 335 $ 264
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and Amortization 142 112
Provision for loan losses 37 74
Increase in accrued income receivable (54) (63)
Other, net (534) (86)
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Net cash provided(used) by operating activities (74) 301
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Cash flows from investing activities:
(Increase)/decrease in federal funds sold 2,774 (1,339)
Purchases of held to maturity securities -- 2,180
Purchases of securities available-for-sale (3,651) (4,166)
Net (increase)/decrease in loans (2) (5,447)
Purchases of premises and equipment (147) (917)
Purchases of Federal Home Loan Bank stock -- (164)
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Net cash used by investing activities (1,026) (9,853)
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Cash flows from financing activities:
Dividends paid-out (40)
Increase in deposits 3,214 10,760
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Net cash provided by financing activities 3,174 10,760
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Net increase in cash 2,074 1,208
Cash and due from banks at beginning of period 2,048 2,151
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Cash and due from banks at end of period $ 4,122 $ 3,359
======== ========
Cash payments for interest $ 1,910 $ 1,283
======== ========
Cash payments for income taxes $ 205 $ --
======== ========
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PCB BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (Unauditied)
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 June 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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Item 2. Management's Discussion and Analysis of Financial Condition and Results
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of Operations
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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 second quarter
of 1999. Total assets have grown $2.77 million or 3.02% since December 31,
1998, and $1.59 million or 1.71% since March 31, 1999. During the period
January 1, 1999 to June 30, 1999, the growth in total assets has been funded by
increases in deposits of $3.85 million or 4.7% 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 decreased $2,000 or, basically, 0% since December 31, 1998. The loan
portfolio, however, has grown $337,000 or .5% since March 31, 1999. Investment
securities have increased $3.20 million or 26.36% since December 31, 1998.
Investment securities have decreased $1.17 million or 7.08% since March 31,
1999.
NONPERFORMING ASSETS AND RISK ELEMENTS. The Bank had $16,000 in nonperforming
assets at June 30, 1999. Diversification within the loan portfolio is an
important means of reducing inherent lending risks. At June 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 no restructured loans or other real
estate at June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is adequate with cash and due from banks of $4.12 million and federal
funds sold of $3.8 million as of June 30, 1999. In addition, loans and
investment securities repricing or maturing in one year or less exceed $29.8
million at June 30, 1999. The Bank has approximately $8.4 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 $1.1 million at June 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 line 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 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 June 30, 1999 is $8.4 million or 8.9% of total assets.
The Bank's capital position is adequate to meet the minimum capital
requirements as of June 30, 1999 for all regulatory agencies. The Bank's
capital ratios as of June 30, 1999, are as follows:
Tier 1 9.88%
Tier 2 1.00%
Total Risk-based capital 10.88%
RESULTS OF OPERATIONS
The Company had net income of $191,000 during the second quarter of 1999
compared to net income of $137,000 during the second quarter of 1998. For the
six months ended June 30, 1999, the Company had net income of $335,000, which
was a 26.9% increase over the same period in 1998. Net interest income was up
$52,000 or 6.71% over the second quarter of 1999 compared to 1998. Net interest
income for the six month period ended June 30, 1999 increased $167,000 or
11.31% 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 June 1998 to June 1999. The
growth in non-interest income for the period ending June 30, 1999 reflects the
increase in deposits during 1998 and 1999.
The provision for loan losses was $18,000 in the second quarter of 1999
compared to $41,000 in the second quarter of 1998. The allowance for loan
losses of $841,000 at June 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
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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) Exhibit 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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PCB BANCORP, INC.
-----------------------------------------
(Registrant)
8/10/99 Phillip R. Carriger
- -------------------------------- ----------------------------------------------------------
(Date) Phillip R. Carriger, Chairman and Chief Executive Officer
(Principle Executive Officer)
8/10/99 Larry E. Parks
- -------------------------------- -----------------------------------------------------------
(Date) Larry E. Parks, Vice President
(Principal Accounting Officer)
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<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 4,122
<INT-BEARING-DEPOSITS> 3
<FED-FUNDS-SOLD> 3,800
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 15,361
<INVESTMENTS-CARRYING> 500
<INVESTMENTS-MARKET> 504
<LOANS> 67,050
<ALLOWANCE> 841
<TOTAL-ASSETS> 94,341
<DEPOSITS> 85,657
<SHORT-TERM> 0
<LIABILITIES-OTHER> 290
<LONG-TERM> 0
0
0
<COMMON> 800
<OTHER-SE> 7,594
<TOTAL-LIABILITIES-AND-EQUITY> 94,341
<INTEREST-LOAN> 2,940
<INTEREST-INVEST> 418
<INTEREST-OTHER> 98
<INTEREST-TOTAL> 3,456
<INTEREST-DEPOSIT> 1,813
<INTEREST-EXPENSE> 1,813
<INTEREST-INCOME-NET> 1,643
<LOAN-LOSSES> 37
<SECURITIES-GAINS> 3
<EXPENSE-OTHER> 1,263
<INCOME-PRETAX> 490
<INCOME-PRE-EXTRAORDINARY> 490
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 335
<EPS-BASIC> .42
<EPS-DILUTED> .42
<YIELD-ACTUAL> 3.49
<LOANS-NON> 16
<LOANS-PAST> 11
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 826
<CHARGE-OFFS> 57
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 841
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 841
</TABLE>
