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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the Fiscal Year ended December 31, 1999
Commission File No. 333-4984
PCB BANCORP, INC.
(Exact Name of Registrant as Specified in its Charter)
Tennessee 62-1641671
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation)
300 Sunset Dr : Johnson City, Tennessee 37604
(Address of Principal Executive Office) (Zip Code)
(423) 915-2222
(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
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB
Yes X No
State issuer's revenues for its most recent fiscal year:
$ 7,642,679
The aggregate market value of the issuer's voting stock held by non-affiliates,
computed by reference the price at which the stock was sold as of January 28,
2000, is $14,846,983 for 645,521 shares, at an estimated $23.00 per share.
806,200
(Outstanding shares of the issuer's common stock as of February 9, 2000)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
PCB Bancorp, Inc. (the "Company" or "PCB") is a registered bank holding
company which was incorporated under Tennessee law in May 1996. The Company's
activities are conducted through its wholly-owned subsidiary, People's Community
Bank (the "Bank"), a Tennessee state bank which began business in December 1995.
The Bank was acquired by the Company in a tax-free share exchange in October of
1996, and after four years of operations, on December 31, 1999, the Bank had
grown to total assets of more than $102,496,000.
The Bank's primary trade area is Johnson City, Tennessee, which had a
population of 50,000 according to the 1990 Census. Current population is
estimated to be 54,000.
At the present time, the Bank operates a full service banking business
through it main office and branch locations in Johnson City. The Bank provides
such customary banking services as checking and savings accounts, various other
types of time deposits, safe deposit facilities and money transfers. It also
finances commercial transactions, makes secured and unsecured loans, and
provides other financial services to its customers. The Bank is not authorized
to provide trust services.
The Bank considers its primary market for loans and deposits to be
individuals, small-to-medium size businesses and professionals in Johnson City,
Tennessee. The Bank is actively soliciting business in this target market and
considers the potential growth opportunities to be favorable. No material
portion of the Bank's deposits have been obtained from any single person or
group of persons.
The Bank is subject to the regulatory authority of the Department of
Financial Institutions of the State of Tennessee and the Federal Deposit
Insurance Corporation ("FDIC").
The Bank has approximately 39 full-time employees (excluding
maintenance employees) as of December 31, 1999.
Competition
Competition for consumer demand and savings deposits is quite intense
in Washington County. Such competition is heightened by the fact that Tennessee
law now permits any bank or savings institution located in Tennessee to branch
in any county in Tennessee. The Bank currently competes in the Washington County
area with ten commercial banks and two savings institutions. The Bank also
competes generally with insurance companies, credit unions, and other financial
institutions, and institutions which have expanded into the quasi-financial
market, including some institutions that are much larger than the Bank. Many of
the institutions with which the Bank competes have been located in Washington
County for many years and have much greater resources and deposit strength, as
well as offering services such as securities investing and trust services which
the Bank does not provide to its customers.
Loans
Various types of secured and unsecured commercial, consumer and real
estate loans are offered by the Bank. The Bank's current policy is to make loans
primarily to borrowers who maintain depository relationships with the Bank or
reside or work in the Bank's market areas. Real estate loans usually are made
only when such loans are secured by real property located in Washington County.
In addition, the Bank purchases finance contracts for motor vehicles.
The Bank provides each lending officer with written loan guidelines.
Lending authority is delegated by the Board of Directors to loan officers, each
of whom has limited authority to extend secured and unsecured credit. Any credit
in excess of $500,000 must have the approval of the Loan Committee of the Board
of Directors (the "Loan Committee"), which consists of both management and
non-management directors of the Bank.
Loan Review
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The Bank continually reviews its loan portfolio to determine
deficiencies and the corrective actions to be taken. The Bank grades its loans
with respect to quality and risk and requires each loan officer to assign a
grade when a loan is booked and to review loan grades annually. The Bank
contracts with an experienced loan review officer, who does not have loan
origination responsibilities and who conducts periodic reviews of all borrowers
with aggregate indebtedness in excess of $50,000. During 1999 approximately 54%
of the dollar amount of the Bank's loan portfolio was reviewed by loan review.
All the new loans are reviewed within three months of origin. The Bank's loan
review officer advises as to the quality, structure and renewability of the
loans and assigns each loan grade. Past due loans and technical exceptions are
reviewed at least weekly by an internal loan officer committee, and a summary
report of such loans is reviewed monthly by the Loan Committee.
Investment Policy
The Bank's general investment portfolio policy is to provide maximum
safety of funds invested to insure solvency and to balance risk taken in other
areas of funds management, to provide sufficient liquidity, to provide maximum
return on funds invested, to meet basic pledging requirements and to comply with
all laws and regulations. This policy is reviewed from time to time by both the
Bank's Investment Committee and the Board of Directors. Individual transactions,
portfolio composition and performance are reviewed and approved monthly by the
Board of Directors or a committee thereof. The CEO of the Bank implements the
policy and reports to the full Board of Directors on a monthly basis information
as to maturities, sales, purchases, resultant gains or losses, average maturity,
federal taxable equivalent yields and appreciation or depreciation by investment
category.
Monetary Policies
The result of operations of the Bank and the Company are affected by
credit policies of monetary authorities, particularly the Federal Reserve Board.
The instruments of monetary policy employed by the Federal Reserve Board include
open market operations in U.S. government securities, changes in the discount
rate on bank borrowings and changes in reserve requirements against bank
deposits. In view of changing conditions in the national economy and in the
money markets, as well as the effects of actions by monetary and fiscal
authorities, including the Federal Reserve Board, no prediction can be made as
to possible future changes in interest rates, deposit levels, loan demand or the
effect of such matters on the business and earnings of the Company.
Personnel
At December 31, 1999, the Company had approximately 39 full-time
equivalent employees. The Company is not a party to any collective bargaining
agreement and believes that its employee relations generally are good.
In July of 1999, Michael T. Christian was hired by the Bank to the
position of President. At that time, Phillip Carriger assumed the duties of
Chief Executive Officer and Chairman of the Board. Prior to the hiring of Mr.
Christian, Mr. Carriger was performing the duties of both President and CEO. The
move was intended to free up time for Mr. Carriger to concentrate on the
marketing and long-term growth of the Bank, while Mr. Christian focused the
majority of his time and energies to the day-to-day operations of the Bank.
Supervision and Regulation
The Company and the Bank are subject to extensive regulation under
state and federal statutes and regulations. The discussion in this section,
which briefly summarizes certain of such statutes, does not purport to be
complete, and is qualified in its entirety by reference to such statutes. Other
state and federal legislation and regulations directly and indirectly affecting
banks and other financial institutions likely are to be enacted or implemented
in the future; however, such legislation and regulations and their effect on the
business of the Company and the Bank cannot be predicted.
PCB Bancorp, Inc.
The Company is a bank holding company subject to the supervision of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board")
under the Bank Holding Company Act of 1956, as amended. As a bank holding
company, the Company is required to file annual reports with, and is subject to
examination by the Federal Reserve Board.
People's Community Bank.
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The Bank is incorporated under the banking laws of the State of
Tennessee, and as such, is subject to the provisions of the Tennessee Banking
Act and the supervision of and the regular examination by the Tennessee
Department of Financial Institutions (the "Department"). The Bank is a member of
the FDIC and, therefore, also is subject to the provisions of the Federal
Deposit Insurance Act and to supervision and examination by the FDIC.
Capital. The Federal Reserve Board and the FDIC have adopted final
risk-based capital guidelines for bank holding companies. The minimum guidelines
for the ratio of total capital ("Total Capital") to risk weighted assets
(including certain off-balance sheet activities, such as standby letters of
credit) is 8.00%. At least half of the Total Capital must be composed of "Tier 1
or core capital," which consists of common stockholders' equity, minority
interests in the equity accounts of consolidated subsidiaries non-cumulative
perpetual preferred stock, less goodwill ("Tier 1 Capital"). The remainder, Tier
2 Capital, may consist of subordinated debt, other preferred stock, and a
limited amount of loan loss reserves. At December 31, 1999, the Company's
risk-based Tier 1 Capital and risk-based Total Capital ratios were 10.3% and
11.3%, respectively. At December 31, 1998, the Company's risk-based Tier 1
Capital and risk-based Total Capital ratios were 12.1% and 13.3%, respectively.
In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum leverage ratio (Tier 1 Capital to total assets, less goodwill) of 4% to
5% for most bank holding companies. The Company's leverage ratio at December 31,
1999 was 8.7% and at December 31, 1998 was 9.3%.
Failure to meet FDIC capital requirements can subject an FDIC-insured
state bank to a variety of enforcement remedies, including issuance of a capital
directive, termination of deposit insurance and a prohibition on the taking of
brokered deposits. Substantial additional restrictions cam be imposed under the
"prompt corrective action" regulations, as described below.
Payment of Dividends. The Company is a legal entity separate and
distinct from the Bank. The principal source of the Company's revenues, however,
is from dividends declared by the Bank. Under Tennessee law, the Bank can only
pay dividends out of its undivided profits, which at December 31, 1999 were
approximately $878,421. This amount will be increased by the Bank's net earnings
and decreased by any losses. The Bank's ability to pay dividends also may depend
on its ability to meet minimum capital levels established from time to time by
FDIC. Under such regulations, FDIC-insured state banks are prohibited from
paying dividends, making other distributions or paying any management fee to a
parent if, after such payment, the Bank would fail to have a risk-based Total
Capital ratio of 8% and a Tier 1 leverage capital ratio of 4%. In 1999, the Bank
paid a dividend of $120,310 to the Company to pay stockholder dividends.
Under Tennessee law, the Company may pay common stock dividends if,
after giving effect to the dividends, the Company can pay its debts as they
become due in the ordinary course of business and the Company's total assets
exceed its total liabilities. The payment of dividends by the Company also may
be affected or limited by certain factors, such as the requirements to maintain
adequate capital above regulatory guidelines. In addition, if, in the opinion of
the applicable regulatory authority, a bank holding company or a bank under its
jurisdiction is engaged in or is about to engage in an unsafe or unsound
practice (which, depending on the financial condition of the bank, could include
the payment of dividends), such authority may take supervisory actions to
prevent such action, including a cease and desist order prohibiting such
practice. In 1999, the Company paid quarterly dividends equivalent to $.05 per
outstanding share.
The Company's Support of the Bank. Under the Federal Reserve Board
policy, the Company is expected to act as a source of financial strength and to
commit resources to the Bank. Such support may be required at times when, absent
such Federal Reserve Board policy, the Company may not be inclined to provide
it.
Under the Financial Institutions Reform, Recovery, and Enforcement Act
of 1989 ("FIRREA"), a depository institution insured by the FDIC can be held
liable for any loss incurred by, or reasonably expected to be incurred by, the
FDIC in connection with (I) the default of a commonly controlled FDIC-insured
depository institution or (II) any assistance provided by the FDIC to any
commonly controlled FDIC-insured depository institution "in danger of default."
"Default" is defined generally as the appointment of a conservator or receiver
and "in danger of default" is defined generally as the existence of certain
conditions indicating that a default is likely to occur in the absence of
regulatory assistance.
Any capital loans by a bank holding company to any of its subsidiary
banks are subordinate in right or payment to deposits and to certain other
indebtedness of such subsidiary banks. In the event of a bank holding company's
bankruptcy, any commitment by
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the bank holding company to a federal bank regulatory agency to maintain the
capital of a subsidiary bank must be assumed by the bankruptcy trustee and
entitled to a priority of payment over certain other creditors.
Prompt Corrective Action
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") requires the Federal banking regulators to assign to each insured
institution one of five capital categories ("well-capitalized", "adequately
capitalized" or one of three under-capitalized categories) and to take
progressively more restrictive regulatory actions depending upon the assigned
category. Under the "prompt corrective action" regulations adopted pursuant to
FDICIA, in order to be considered "adequately capitalized", national banks must
have a risk-based Tier 1 Capital ratio of at least 4%, a risk-based Total
Capital ratio of 8% and a Tier 1 leveraged capital ratio of at least 4%.
Well-capitalized institutions are those which have a risk-based Tier 1 Capital
ratio above 6%, a risk-based Total Capital ratio above 10% and a Tier 1
leveraged capital ratio above 5%, and which are not subject to a written
agreement, order or capital directive to maintain capital at a specific level.
The Bank is considered a "well-capitalized" institution under these definitions.
All institutions, regardless of their capital levels, are restricted from making
any capital distribution or paying any management fees that would cause the
institution to fail to satisfy the minimum levels to be considered adequately
capitalized. An institution that fails to meet the minimum level for any
relevant capital measure (an "undercapitalized institution") is: (I) subject to
increased monitoring by the appropriate federal banking regulator, (II) required
to submit an acceptable capital restoration plan within 45 days, (III) subject
to asset growth limits, and (IV) required to obtain prior regulatory approval
for acquisitions, branching, and new lines of business. The capital restoration
plan must include a guarantee by the institution's holding company that the
institution will comply with the plan until it has been adequately capitalized
on average for four consecutive quarters. Pursuant to the guarantee, the
institution's holding company would be liable up to the lesser of 5% of the
institutions total assets or the amount necessary to bring the institution into
capital compliance as of the date it failed to comply with its capital
restoration plan. If the controlling bank holding company fails to fulfill its
obligations under the Federal Bankruptcy Code, the appropriate federal banking
regulator could have a claim as a general creditor of the bank holding company,
and, if the guarantee were deemed to be a commitment to maintain capital under
the Federal Bankruptcy Code, the claim would be entitled to priority in such
bankruptcy proceeding over third-party creditors and shareholders of the bank
holding company.
The bank regulatory agencies have discretionary authority to reclassify
well-capitalized institutions as adequately capitalized or to impose on
adequately capitalized institutions requirements or actions specified for
undercapitalized institutions if the agency determines after notice and an
opportunity for hearing that the institution is in an unsafe or unsound
condition or is engaging in an unsafe or unsound practice, which can consist of
the receipt of an unsatisfactory examination rating if the deficiencies cited
are not corrected. A significantly undercapitalized institution, as well as any
restoration plan, may be subject to regulatory demands for recapitalization,
broader applications of restrictions on transactions with affiliates,
limitations on interest rates paid on deposits, asset growth and other
activities, possible placement of directors and officers, and restrictions on
capital distributions by any bank holding company controlling the institution.
Any company controlling the institution could also be required to divest the
institution or the institution could be required to divest subsidiaries. The
senior executive officers of a significantly undercapitalized institution may
not receive bonuses or increases in compensation without prior approval and the
institution is prohibited from making payments of principal or interest on its
subordinated debt. If an institution's ratio of tangible capital to total assets
falls below a level established by the appropriate federal banking regulator
(the "Critical capital level") , which may not be less than 2% nor more than 65%
of the minimum tangible capital level otherwise required, the institution will
be subject to conservatorship or receivership within 90 days unless periodic
determinations are made that forbearance from such action would better protect
the deposit insurance fund. Unless appropriate findings and certifications are
made by the appropriate federal bank regulatory agencies, a critically
undercapitalized institution must be placed in receivership if it remains
critically undercapitalized on average during the calendar quarter beginning 270
days after the date it became critically undercapitalized.
Acquisition and Expansion. The Bank Holding Company Act requires any
bank holding company to obtain the prior approval of the Federal Reserve Board
before it may acquire substantially all the assets of any bank, or ownership or
control of any voting shares of any bank, if, after acquiring such shares, it
would own or control directly or indirectly, more than 5% of the voting shares
of such bank. Effective September 29, 1995, the Tennessee Bank Structure Act of
1974 was amended to, among other things, prohibit (subject to certain
exceptions) a bank holding company from acquiring a bank for which the home
state is Tennessee if, upon consummation, the company would directly or
indirectly control 30% or more of the total deposits in insured depository
institutions in Tennessee. As of December 31, 1999, the Company estimates it
held less than 1% of such deposits. Subject to certain exceptions, the
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Tennessee Bank Structure Act prohibits a bank holding company from acquiring a
bank in Tennessee, which has been in operation for less than five years.
Tennessee banks may open additional branches in any county in the state.
The Reigle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "IBBEA") authorizes interstate acquisitions of banks and bank holding
companies without geographic limitation beginning one year after enactment. In
addition, beginning June 1, 1997, a bank may merge with a bank in another state
as long as neither of the states has opted out of interstate branching between
the date of enactment of the IBBEA and May 31, 1997. The IBBEA further provides
that states may enact laws permitting interstate merger transactions prior to
June 1, 1997. A bank may establish and operate a de novo branch in a state in
which the bank does not maintain a branch if that state expressly permits de
novo branching. Once a bank has established branches in a state through an
interstate merger transaction, the bank may establish and acquire additional
branches at any location in the state where any bank involved in the interstate
merger transaction could have established or acquired branches under applicable
federal or state law. A bank that has established a branch in a state through de
novo branching may establish and acquire additional branches in such state in
the same manner and to the same extent as a bank having a branch in such state
as a result of an interstate merger. If a state opts out of interstate branching
within the specified time period, no bank in any other state may establish a
branch in the opting out of state, whether through an acquisition or de novo.
Tennessee law allows banks and bank holding companies in any state to acquire
banks and bank holding companies in Tennessee provided that the state in which
such acquiror is headquartered also permits Tennessee banks and bank holding
companies to acquire banks and bank holding companies in that state.
Acquisitions of banks or bank holding companies in Tennessee require the
approval of the Commissioner of Financial Institutions.
The Bank Holding Company Act also prohibits a bank holding company,
with certain exceptions, from acquiring more than 5% of the voting shares of any
company that is not a bank and from engaging in any business other than banking
or managing or controlling banks. The Federal Reserve Board is authorized to
approve ownership of shares by a bank holding company in any company, the
activities of which the Federal Reserve Board has determined to be so closely
related to banking or to managing or controlling banks as to be a proper
incident thereto. Certain activities have been found to be closely related to
banking by Federal Reserve Board regulations, including operating a trust
company, a mortgage company, finance company or factoring company, performing
data processing operations, providing investment advice, and engaging in certain
kinds of credit-related insurance activities.
FDIC Insurance Assessments; DIFA. The FDIC reduced the insurance
premiums it charges on bank deposits insured by the Bank Insurance Fund ("BIF")
to the statutory minimum of $2,000.00 for "well-capitalized" banks, effective
January 1, 1996. Premiums related to deposits assessed by the Savings
Association Insurance Fund ("SAIF"), including savings association deposits
acquired by banks, continued to be assessed at a rate of between 23 cents and 31
cents per $100.00 of deposits. On September 30, 1996, the Deposit Insurance
Funds Act of 1996 ("DIFA") was enacted and signed into law. DIFA provided for a
special assessment to recapitalize the SAIF to bring the SAIF up to statutory
required levels. The assessment imposed a one-time fee to banks that own
previously acquired thrift deposits of $.526 per $100 of thrift deposits they
held at March 31, 1995. This assessment did not apply to the Company. DIFA
further provides for assessments to be imposed on insured depository
institutions with respect to deposits insured by the BIF (in addition to
assessments currently imposed on depository institutions with respect to
SAIF-insured deposits) to pay for the cost of Financing Corporation ("FICO")
bonds. All banks will be assessed to pay the interest due on FICO bonds starting
on January 1, 1997. The Company expects the cost to the Company to be
immaterial.
Under the FDICIA, insurance of deposits may be terminated by the FDIC
upon finding that the institution has engaged in unsafe and unsound practices,
is in unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by a federal bank
regulatory agency.
The Bank Holding Company Act also prohibits a bank holding company,
with certain exceptions, from acquiring more than 5% of the voting shares of any
company that is not a bank and from engaging in any business other than banking
or managing or controlling banks. The Federal Reserve Board is authorized to
approve ownership of shares by a bank holding company in any company, the
activities of which the Federal Reserve Board has determined to be so closely
related to banking or to managing or controlling banks as to be a proper
incident thereto. Certain activities have been found to be closely related to
banking by Federal Reserve Board regulations, including operating a trust
company, mortgage company, finance company or factoring company; performing data
processing operations; providing investment advice; and engaging in certain
kinds of credit-related insurance activities.
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Certain Transactions by the Company with its Affiliates. There also are
various legal restrictions on the extent to which the Company and any nonbank
subsidiary can borrow or otherwise obtain credit from its bank subsidiaries. An
insured bank and its subsidiaries are limited in engaging in "covered
transactions" with its nonbank or nonsavings bank affiliates to the following
amounts: (I) in the case of any such affiliate, the aggregate amount of covered
transactions of the insured bank and its subsidiaries will not exceed 10% of the
capital stock and surplus of the insured bank; and (II) in the case of all
affiliates, the aggregate amount of the covered transactions of the insured bank
and its subsidiaries will not exceed 20% of the capital stock and surplus of the
Bank. "Covered Transactions" are defined by statute to include a loan or
extension of credit, as well as purchase of securities issued by an affiliate, a
purchase of assets (unless otherwise exempted by the Federal Reserve Board), the
acceptance of securities issued by the affiliate as a collateral for a loan and
the issuance of a guarantee, acceptance, or letter of credit on behalf of an
affiliate. Further, a bank holding company and its subsidiaries are prohibited
from engaging in certain tie-in arrangements in connection with any extension of
credit, lease or sale of property or furnishing of services.
Recent Banking Legislation.
The most significant new legislation was the passage of the
Gramm-Leach-Bliley (GLB) Act of 1999. The Act sweeps away large parts of the
regulatory structure established in the 1930's and creates new opportunities for
banks, other depository institutions, insurance companies, and securities firms
to enter into combinations that permit a single financial services organization
to offer customers a complete array of financial services. The 1999 financial
services reforms dramatically increase the ability of eligible banking
organizations to affiliate with insurance, securities, and other financial firms
and insured depository institutions.
Under the GLB Act, two types of banking organizations may engage in
expanded securities activities. The act authorizes a new type of bank holding
company called a financial holding company (FHC) to have a subsidiary company
that engages in securities underwriting and dealing without limitation as to the
types of securities involved. The GLB Act enlarges the activities in which a
bank holding company may engage and authorizes affiliations with a broader range
of nonblank enterprises than the prior provisions of the Bank Holding Company
Act permitted. New regulatory standards must be satisfied for an FHC or a
financial subsidiary to qualify for the new types of securities activities.
Banking institutions will face a new host of challenges, as well as,
opportunities as a result of the GLB Act.
In addition to the matters discussed above, FDICIA made other extensive
changes to the federal banking laws.
Standards for safety and Soundness. FDICIA requires the federal bank
regulatory agencies to prescribe, by regulation, standards for all insured
depository institutions and depository institution holding companies relating
to: (I) internal controls, information systems and audit systems; (II) loan
documentation; (III) credit underwriting; (IV) interest rate risk exposure; (V)
asset growth; and (VI) compensation, fees and benefits. The compensation
standards must prohibit employment contracts, compensation or benefit
arrangements, stock option plans, fee arrangements or other compensatory
arrangements that would provide excessive compensation, fees or benefits that
could lead to material financial loss, but (subject to certain exceptions) may
not prescribe specific compensation levels or ranges for directors, officers or
employees. In addition, the federal banking regulatory agencies would be
required to prescribe by regulation standards specifying: (I) maximum classified
assets to capital ratios; (II) minimum earnings sufficient to absorb losses
without impairing capital; and (III) to the extent feasible, a minimum ratio of
market value to book value for publicly-traded shares of depository institutions
and depository institution holding companies.
Brokered Deposits. FDICIA amends the Federal Deposit Insurance Act to
prohibit insured depository institutions that are not well-capitalized from
accepting brokered deposits unless a waiver has been obtained from the FDIC.
Deposit brokers will be required to register with the FDIC.
Consumer Protection Provisions. FDICIA seeks to encourage enforcement
of existing consumer protection laws and enacts new consumer-oriented
provisions including a requirement of notice to regulators and customers for any
proposed branch closing and provisions intended to encourage the offering of
"lifeline" banking accounts and lending in distressed communities. FDICIA also
requires depository institutions to make additional disclosures to depositors
with respect to the rate of interest and the terms of their deposit accounts.
Miscellaneous. FDICIA extends the deadline for the mandatory use of
state-certified and state-licensed appraisers and authorizes acquisitions of
banks by savings associations on the same terms as savings associations may be
acquired by banks. With certain exceptions, state-chartered banks are limited to
the activities of national banks. Within nine months of the date of enactment of
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FDICIA, the federal bank regulatory agencies are required to biannually review
risk-based capital standards to ensure that they adequately address interest
rate risk, concentration of credit risk and risks from non-traditional
activities.
FDICIA also made extensive changes in the applicable rules regarding
audit, examinations and accounting. FDICIA generally requires annual on-site
full-scope examinations by each bank's primary federal regulator. FDICIA also
imposes new responsibilities on management, the independent audit committee and
outside accountants to develop, approve or attest to reports regarding the
effectiveness of internal controls, legal compliance and off-balance-sheet
liabilities and assets.
Interest Rate Limitations. The maximum permissible rates of interest on
most commercial and consumer loans made by the Bank are governed by Tennessee's
general usury. Certain other usury laws affect limited classes of loans, but the
law referenced above are by far the most significant. Tennessee's general usury
law authorizes a floating rate of base prime rate plus 4% per annum and also
allows certain loan charges, generally on a more liberal basis that does the
general usury law.
Effect of Government Policies. The earnings and business of the Company
are and will be affected by the policies of various regulatory authorities of
the United States, especially by the Federal Reserve Board. The Federal Reserve
Board, among other functions, regulates the supply of credit and deals with
general economic conditions within the United States. The instruments of
monetary policy employed by the Federal Reserve Board for these purposes
influence in various ways the overall level of investments, loans, other
extensions of credit and deposits, and the interest rates paid on liabilities
and received on assets.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's main office is currently located at 300 Sunset Drive in
Johnson City, Tennessee in a two-story brick building owned by the Company. The
Company also operates two branch locations. One branch is located on 202 East
Main Street in Johnson City in a two-story brick building leased by the Company.
A second branch location is located at 2681 Boones Creek Road in Johnson City,
Tennessee in a custom-built, commercial-grade mobile unit.
ITEM 3. LEGAL PROCEEDINGS
From time to time the bank is named as a defendant in suits arising
from the ordinary conduct of its affairs. In the opinion of management, the
ultimate outcome of any litigation to which the Bank is a party as of the date
of this Form 10-KSB will not materially affect its financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of the Company's fiscal ending December 31, 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's common stock is not traded on an exchange nor is there a
known active trading market. Based solely on information made available to the
Company from a limited number of buyers and seller's, management of the Company
believes that the following table sets forth the high and low sales prices for
the Company's common stock during 1998 and 1997:
<TABLE>
<CAPTION>
1999 High Low
----------- -----------
<S> <C> <C>
First Quarter .......... $ 25.00 $ 25.00
Second Quarter ......... $ 25.00 $ 25.00
Third Quarter .......... $ 25.00 $ 25.00
Fourth Quarter ......... $ 25.00 $ 20.00
</TABLE>
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<TABLE>
<CAPTION>
1998 High Low
----------- -----------
<S> <C> <C>
First Quarter .......... $ 16.00 $ 16.00
Second Quarter ......... $ 18.00 $ 16.00
Third Quarter .......... $ 18.00 $ 18.00
Fourth Quarter ......... $ 22.00 $ 20.00
</TABLE>
The most recent trade of the Company's common stock known to the Company
occurred on January 28, 2000 at a price of $23.00 per share (no stock has traded
since that date). These sales are isolated transactions and, given the small
volume of trading in the Company's stock, may not be indicative of its present
value. As of March 6, 2000, there were approximately 418 holders of record of
the Company's common stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
General
The Bank represents virtually all of the assets of 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.
Financial Condition
The Bank, which was opened in December 1995, has experienced substantial growth
during 1998 and 1999. Total assets have grown $10.9 million or more than 11.8%
from December 1998 to December 1999. The growth in total assets has been funded
by an increase in deposits of $21.9 million from December 1997 to December 1998
and $9.0 million from December 1998 to December 1999. Loans have increased $8.8
million during 1998, but decreased $4.3 million in 1999 and investment
securities have increased $8.5 million in 1998 and have increased $7.9 million
in 1999. This growth and the 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.
Nonperforming Assets and Risk Elements
The Bank discontinues the accrual of interest on loans which become ninety days
past due. The Bank had loans totaling $144 thousand which were ninety days past
due as of December 31, 1998 and had loans totaling $299 thousand which were past
due at December 31, 1999. The Bank also had no concentrations of ten percent or
more of total loans in any single industry nor any geographical area outside the
immediate market area of the Bank.
Liquidity and Capital
Liquidity is adequate with cash and due form banks of $2.1 million and $6.1
million at December 31, 1998 and 1999, respectively, and federal funds sold of
$6.6 million and $1.4 million at December 31, 1998 and 1999, respectively.
Additionally, investment securities, which are available-for-sale, at December
31, 1999, had a fair value of $20 million. Loans maturing in one year or less,
from December 31, 1999, are estimated to be $29.3 million. There are no known
trends, demands, commitments, events or uncertainties that will result in or
that are reasonably likely to result in the registrant's liquidity decreasing in
a material way.
Total equity capital at December 31, 1998 was $8.4 million or 9.2% of total
assets and at December 31, 1999 is $8.5 million or 8.3% of total assets, which
represents a strong capital position.
Results of Operations
The Company had net income of $552,556 for the year ended December 31, 1998. For
the year ended December 31, 1998, For the year-ended December 31, 1999, the
Company had net income of $671,022. The improvement resulted largely from growth
in earning
9
<PAGE> 10
assets generated by an increased customer base. The Company anticipates, with
the continued growth it is experiencing, an increased net profit for the
2000 year.
Interest income and interest expense both increased dramatically because of the
increase in earning assets and deposits from December 31, 1998 to December 31,
1999. The growth in noninterest income reflects the increase in loans and
deposits, resulting primarily from the introduction of service charges on
deposit accounts.
The provision for loan losses has increased due to the increase in loans. The
allowance of $825,649 and $863,816 at December 31, 1998 and 1999, respectively,
is considered by management to be adequate to cover losses inherent in the loan
portfolio. Management evaluates the adequacy of the allowance for loan losses
periodically and makes provisions for loan losses based on this evaluation. At
the present time, the Company has impaired loans totaling $293 thousand. In
reference to the impaired loans, the Company has related allowance for credit
losses totaling $158 thousand, leaving a balance classified as substandard of
$134 thousand.
Net Interest Earnings
As depicted in the table below there was a substantial growth in the 1999 year.
Since December 31, 1998, growth was primarily from the volume increase in
business. Any increases due to rate changes would have been insignificant.
<TABLE>
<CAPTION>
Dollar Average Interest
Average Increase Balances Earned
Yield from 1998 1999 or Paid
- -------------- ------------ -------------- -------------
<C> <C> <S> <C> <C>
Interest Earning Assets:
Loans:
8.65% $ 7,705 Commercial $ 34,249 $ 2,956
0.00% 0 Real Estate Construction 0 0
8.25% 105 Commercial Real Estate 151 13
7.78% (696) Residential Real Estate 12,654 994
8.60% 5,193 Installments 18,690 1,640
8.92% 408 Consumer Single Pay 2,091 172
0.00% (135) Loans Held for Sale 23 0
14.16% (8) Other 133 15
- -------------- ------------ -------------- -------------
8.51% $ 5,243 Totals $ 67,991 $ 5,790
============== ============ ============== =============
</TABLE>
<TABLE>
<CAPTION>
Dollar Average Interest
Average Increase Balances Earned
Yield from 1997 1998 or Paid
- -------------- ------------ -------------- -------------
<C> <C> <S> <C> <C>
Interest Earning Assets:
Loans:
8.58% $ 7,705 Commercial $ 33,873 $ 3,000
0.00% -- Real Estate Construction -- --
8.50% (249) Commercial Real Estate 46 13
8.03% 6,168 Residential Real Estate 13,350 1,097
8.93% 3,059 Installments 13,497 1,192
8.53% 116 Consumer Single Pay 1,683 147
</TABLE>
10
<PAGE> 11
<TABLE>
<C> <C> <S> <C> <C>
0.00% 3 Loans Held for Sale 158 --
17.87% 69 Other 141 15
- -------------- ------------ -------------- -------------
8.55% $ 16,871 Totals $ 62,748 $ 5,464
- -------------- ------------ -------------- -------------
</TABLE>
The Bank has $299 thousand of non-accruing loans from the date of inception
through December 31, 1999. The Bank had $144 thousand of non-accruing loans from
the date of inception through December 31, 1998. In the calculation of changes
of interest there are not included in the interest income computations.
Interest Bearing Liabilities:
<TABLE>
<CAPTION>
Dollar Average Interest
Average Increase Balances Earned
Yield from 1998 1999 or Paid
- -------------- ------------ ------------- ------------
<C> <C> <S> <C> <C>
2.03% $ 893 NOW Accounts $ 2,886 $ 59
4.12% 1,068 Money Market Accounts 5,344 221
4.67% 18,331 Savings Accounts 35,929 1,800
5.49% (6,270) Certificates of Deposit 33,721 1,740
- -------------- ------------ ------------- ------------
4.39% $ 14,022 Totals $ 77,880 $ 3,820
- -------------- ------------ ------------- ------------
4.12% Net Yield
</TABLE>
<TABLE>
<CAPTION>
Dollar Average Interest
Average Increase Balances Earned
Yield from 1997 1998 or Paid
- -------------- ------------ ------------- ------------
<C> <C> <S> <C> <C>
2.23% $ 484 NOW Accounts $ 1,993 $ 44
4.27% (4) Money Market Accounts 4,276 193
4.91% 9,820 Savings Accounts 17,598 847
5.64% 10,908 Certificates of Deposit 39,991 2,348
- -------------- ------------ ------------- ------------
4.53% $21,208 Totals $63,858 $ 3,432
- -------------- ------------ ------------- ------------
4.03% Net Yield
</TABLE>
Investment Portfolio
Held-to-Maturity:
<TABLE>
<CAPTION>
December 31, Average December 31, Average
1998 Yield State and Municipal Governments: 1999 Yield
--------------- --------- ------------------------------------------------ -------------- ------------
<C> <C> <S> <C> <C>
0 0.00% Maturity within one year 0 0.00%
0 0.00% Maturity within one to five years 0 0.00%
0 0.00% Maturity within five to ten years 0 0.00%
0 0.00% After Ten Years 97 5.00%
--------- --------- --------- ---------
0 0.00% Total Held-to-Maturity 97 5.00%
--------- --------- --------- ---------
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
December 31, Average December 31, Average
1998 Yield U.S. Government & Government Agency: 1999 Yield
- ------------------- ------------ ------------------------------------------------ ----------------- ------------
<C> <C> <S> <C> <C>
0 0.00% Maturity within one year 0 0.00%
0 0.00% Maturity within one to five years 0 0.00%
500 7.42% Maturity within five to ten years 500 7.42%
- ------------------- ------------ ----------------- ------------
$ 500 7.42% Total Held-to-Maturity 500 7.42%
- ------------------- ------------ ----------------- ------------
</TABLE>
Yields on State and Municipal Government securities do not reflect savings due
to tax-exemption status.
Available-for-Sale:
<TABLE>
<CAPTION>
December 31, Average December 31, Average
1998 Yield U.S. Government & Government Agency: 1999 Yield
- ------------------- ------------ ------------------------------------------------ ----------------- ------------
<C> <C> <S> <C> <C>
0 0 Maturity within one year 0 0.00%
2,210 6.08% Maturity within one to five years 2,938 6.36%
758 6.52% Maturity within five to ten years 3,582 6.69%
899 7.55% After ten years 911 7.56%
State and Municipal Governments:
65 4.00% Maturity within one year 50 4.15%
832 4.19% Maturity within one to five years 1,393 4.20%
2,891 4.35% Maturity within five to ten years 2,785 4.39%
1,318 4.39% After ten years 2,881 4.91%
3,184 6.25% Mortgage-Backed Securities 5,498 6.82%
- ------------------- ------------ ----------------- ------------
12,157 5.53% Total Available-for-Sale 20,042 5.96%
=================== ============ ================= ============
</TABLE>
The Bank had no foreign loans at December 31, 1999.
Summary of Loan Loss Experience
<TABLE>
<CAPTION>
1998 1998
- -------------- ------------
<C> <S> <C>
$ 728 Balance at Beginning of Period $ 826
- -------------- ------------
(22) Charge-Offs (42)
2 Recoveries 6
- -------------- ------------
(20) Net Recoveries (36)
- -------------- ------------
118 Additions Charged to Operations 74
- -------------- ------------
$ 826 Balance at the End of Period $ 864
============== ============
</TABLE>
12
<PAGE> 13
<TABLE>
<C> <S> <C>
Ratio of net charge-offs during the period to
0.03% average Loans outstanding during the period 0.06%
</TABLE>
The allowance for loan loss represents 1.23% of the outstanding loan balance at
year-end. Management believes this amount will be sufficient to cover all loan
losses inherent in the loan portfolio.
Return on Equity and Assets
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Return on Assets 0.69% 0.69%
Return on Equity 8.00% 6.80%
</TABLE>
The Bank had no foreign banking offices.
Interest Sensitivity
The Company monitors and manages the pricing and maturity of its assets and
liabilities in order to diminish the potential adverse impact that changes in
interest rates could have on its net interest income. The principal monitoring
technique employed by the Company is the measurement of the Company's interest
sensitivity "gap", which is the positive or negative dollar difference between
assets and liabilities that are subject to interest rate repricing within a
given period of time. Interest rate sensitivity can be managed by repricing
assets or liabilities, selling available-for-sale securities, replacing an asset
or liability at maturity, or adjusting the interest rate during the life of an
asset or liability. Managing the amount of assets and liabilities repricing in
this same time interval helps to hedge the risk and minimize the impact on net
interest income of rising or falling interest rates.
The Company evaluates interest sensitivity risk and then formulates guidelines
regarding asset generation and repricing, funding sources and pricing, and
off-balance sheet commitments in order to decrease interest sensitivity risk.
Asset/Liability Management
It is the objective of the Bank to manage assets and liabilities to provide a
satisfactory, consistent level of profitability within the framework of
established cash, loan, investment, borrowing and capital policies. Certain
officers of the Bank and the Bank's Investment and Asset/Liability Committees
are charged with the responsibility for developing and monitoring policies and
procedures that are designed to seek an acceptable composition of the
asset/liability mix. It is the overall philosophy of management to support asset
growth primarily through growth of core deposits, which include deposits of all
categories made by individuals, partnerships, and corporations. Management of
the Bank seeks to invest the largest portion of the Bank's assets in
consumer/installment, commercial, real estate and construction loans.
The Bank's asset/liability mix is monitored with a report reflecting the
interest-sensitive assets and interest-sensitive liabilities being prepared and
presented to the Bank's Investment Committee on a monthly basis. The objective
of this policy is to match interest-sensitive assets and liabilities so as to
minimize the impact of substantial movements in interest rates on the Bank's
earnings.
Gap analysis measures how the Bank is positioned for interest rate changes. An
analysis of rate sensitivity assets and liabilities as of December 31, 1999 and
December 31, 1998 are presented on the following pages.
As indicated in this table, the negative gap between rate sensitivity assets and
rate sensitive liabilities during the 0-3 month period would allow the Company
to reprice its liabilities faster than its assets. In a rising interest rate
environment, this could cause the Company to either narrow it's spread between
yields on assets and liabilities, or to use alternative sources of funding such
as lines of credit to fund asset growth. However, the Company's gap analysis is
not a precise indicator of its timing of maturities and repricing opportunities,
without taking into consideration that changes in interest rates do not affect
all assets and liabilities equally. Net interest income may be impacted by other
significant factors in a given interest rate environment, including changes in
the volume and mix of earning assets and interest-bearing liabilities.
13
<PAGE> 14
People's Community Bank
Rate Sensitivity Analysis (in 000)
December 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
3 Months 12 Months 60 Months
Assets RSA1 FRA2 RSA1 FRA2 RSA1 FRA2 NEA3 Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and Due From Banks $ 6,002 $ 6,002
Federal Funds Sold 1,359 1,359 1,359 1,359
U.S. Treasury Securities --
U.S. Government Agencies 500 500 500 500
Available for Sale Securities 12,648 12,648 12,648 12,648
Municipal Securities 7,396 101 7,396 101 7,396 101 7,497
Federal Home Loan Bank Stock 276 276 276 276
Loans & Leases (net unearn disc.) 21,975 49,077 29,294 41,758 69,964 1,088 71,052
Allowance for Loan Losses (864) (864)
Premises, Furn, Fixt, Equip 3,151 3,151
Other Assets 675 675
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 43,654 $ 49,678 $ 50,973 $ 42,359 $ 91,643 $ 1,689 $ 8,964 $102,296
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities & Capital RSL4 FRL5 RSL4 FRL5 RSL4 FRL5 NPL6 Total
- ------------------------------------------------------------------------------------------------------------------------------------
Demand Deposits 9,966 9,966
NOW Accounts 3,520 3,520 3,520 3,520
Invest. Money Market Accounts 4,974 4,974 4,974 4,974
Regular Savings 32,220 32,220 32,220 32,220
Certificates of Deposit 9,628 31,218 35,089 5,757 40,846 40,846
Fed Funds Purch & Securities Repos 2,000 2,000
Other Liabilities 327 327
Common Stock & Surplus 8,000 8,000
Undivided Profits 878 878
Unrealized Holding G/L on AFS Sec (435) (435)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIAB. & CAPITAL $ 50,342 $ 33,218 $ 75,803 $ 5,757 $ 81,560 $ -- $19,171 $102,296
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
3 mo 12 mo 60 mo 3 mo 12 mo 60 mo
------------------------------------ -------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
RSA 43,654 50,973 91,643 RSL 50,342 75,803 81,560
FRA 49,678 42,359 1,689 FRL 33,218 5,757 -
NEA 8,964 8,964 8,964 NPL 10,293 10,293 10,293
EQUITY 8,443 8,443 8,443
------------------------------------ -------------------------------------
TOTAL $102,296 102,296 102,296 $ 102,296 $100,296 $100,296
==================================== =====================================
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
RATE SENSITIVITY MEASURES: 3 mo 12 mo 60 mo 1RSA = RATE SENSITIVE ASSETS
- ------------------------------------------------------------------------ 2FRA = FIXED RATE ASSETS
RSA/RSL 86.71% 67.24% 112.36% 3NEA = NON EARNING ASSETS
RSA-RSL (6,688) (24,830) 10,083 4RSL = RATE SENSITIVE LIABILITIES
GAP/Equity -79.21% -294.09% 119.42% 5FRL = FIXED RATE LIABILITIES
GAP/TA -6.54% -24.27% 9.86% 6NPL = NON PAYING LIABILITIES
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
People's Community Bank
Rate Sensitivity Analysis (in 000)
December 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
3 Months 12 Months 60 Months
Assets RSA1 FRA2 RSA1 FRA2 RSA1 FRA2 NEA3 Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and Due From Banks $ 2,046 $ 2,046
Federal Funds Sold 6,574 6,574 6,574 6,574
U.S. Treasury Securities --
U.S. Government Agencies 500 500 500 500
Available for Sale Securities 7,151 7,151 7,151 7,151
Municipal Securities 5,006 5,006 5,006 5,006
Federal Home Loan Bank Stock 266 266 266 266
Loans & Leases (net unearn disc.) 24,817 42,256 28,171 38,902 64,390 2,683 67,073
Allowance for Loan Losses (825) (825)
Premises, Furn, Fixt, Equip 3,216 3,216
Other Assets 553 553
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 43,814 $ 42,756 $ 47,168 $ 39,402 $ 83,387 $ 3,183 $ 4,990 $ 91,560
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities & Capital RSL4 FRL5 RSL4 FRL5 RSL4 FRL5 NPL6 Total
- ------------------------------------------------------------------------------------------------------------------------------------
Demand Deposits 9,866 9,866
NOW Accounts 2,786 2,786 2,786 2,786
Invest. Money Market Accounts 3,856 3,856 3,856 3,856
Regular Savings 29,535 29,535 29,535 29,535
Certificates of Deposit 9,780 26,619 23,643 12,756 36,399 36,399
Fed Funds Purch & Securities Repos -- --
Other Liabilities 752 752
Common Stock & Surplus 8,000 8,000
Undivided Profits 297 297
Unrealized Holding G/L on AFS Sec. 69 69
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIAB. & CAPITAL $ 16,422 $ 56,154 $ 59,820 $ 12,756 $ 72,576 $ -- $ 18,915 $ 91,560
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
3 mo 12 mo 60 mo 3 mo 12 mo 60 mo
------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
RSA 43,814 47,168 83,387 RSL 16,422 59,820 72,576
FRA 42,756 39,402 3,183 FRL 56,154 12,756 --
NEA 4,990 4,990 4,990 NPL 10,618 10,618 10,618
EQUITY 8,366 8,366 8,366
------------------------------- -------------------------------
TOTAL $ 91,560 91,560 91,560 $ 91,560 $ 91,560 $ 91,560
=============================== ===============================
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
RATE SENSITIVITY MEASURES: 3 mo 12 mo 60 mo 1RSA = RATE SENSITIVE ASSETS
- ----------------------------------------------------------------------- 2FRA = FIXED RATE ASSETS
RSA/RSL 266.80% 78.85% 114.90% 3NEA = NON EARNING ASSETS
RSA-RSL 27,392 (12,652) 10,811 4RSL = RATE SENSITIVE LIABILITIES
GAP/Equity 327.42% -151.23% 129.23% 5FRL = FIXED RATE LIABILITIES
GAP/TA 29.92% -13.82% 11.81% 6NPL = NON PAYING LIABILITIES
</TABLE>
15
<PAGE> 16
Year 2000 Report
People's Community Bank, like all other banks and financial institutions, worked
diligently and comprehensively on the Year 2000 issue. Through the hard work of
many individuals and committees, The Bank and the Company entered the Year 2000
without any set-backs or business interruptions which could be attributed the
Year 2000 issue. Total expenses incurred related to the Year 2000 issue were $41
thousand.
16
<PAGE> 17
PCB BANCORP, INC.
FINANCIAL STATEMENTS
WITH
INDEPENDENT AUDITORS' REPORT
For the Years Ended December 31, 1999 and 1998
17
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Audit Committee
PCB Bancorp, Inc.
Johnson City, Tennessee 37602
We have audited the accompanying consolidated statements of financial condition
of PCB Bancorp, Inc. and wholly-owned subsidiary People's Community Bank as of
December 31, 1999 and 1998, and the related consolidated statements of income,
shareholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of Bancorp's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of PCB Bancorp, Inc.
and wholly-owned subsidiary People's Community Bank at December 31, 1999 and
1998, and the results of its operations and its cash flows for the years then
ended, in conformity with generally accepted accounting principles.
BLACKBURN, CHILDERS AND STEAGALL,
PLC
January 31, 2000
18
<PAGE> 19
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
ASSETS
Cash and Due from Banks $ 6,049,616 2,048,350
Federal Funds Sold 1,359,000 6,574,000
Securities Held-to-Maturity 600,749 500,000
Securities Available-for-Sale 20,043,328 12,157,224
Loans Held for Sale -- 380,250
Loans Receivable, Net of Allowance for Loan Losses of $863,816
and $825,649, respectively 70,146,050 65,846,157
Accrued Interest Receivable 619,196 501,780
Premises and Equipment, Net of Accumulated Depreciation of
$681,627 and $405,602, respectively 3,152,084 3,217,238
Restricted Investments - Stock in Federal Home Loan Bank, Cost 275,500 265,700
Organization Costs, Net of Accumulated Amortization of $127,950
and $75,682, respectively -- 52,268
Deferred Tax Asset 152,612 --
Other Assets 98,340 30,935
------------- -------------
Total Assets $ 102,496,475 91,573,902
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand Deposits $ 9,841,868 9,431,912
Savings and NOW Deposits 40,130,428 35,977,968
Other Time Deposits 40,845,777 36,398,861
Accrued Interest Payable 321,903 404,921
Dividend Payable -- 40,000
Accounts Payable and Other Liabilities 2,865,411 941,206
------------- -------------
Total Liabilities 94,005,387 83,194,868
------------- -------------
SHAREHOLDERS' EQUITY:
Common Stock - $1 par value; 3,000,000 shares authorized;
806,200 shares issued and outstanding 806,200 800,000
Additional Paid-in Capital 7,259,000 7,200,000
Retained Earnings 861,168 310,456
Accumulated Other Comprehensive Income (435,280) 68,578
------------- -------------
Total Shareholders'Equity 8,491,088 8,379,034
------------- -------------
Total Liabilities and Shareholders' Equity $ 102,496,475 91,573,902
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE> 20
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
INTEREST INCOME:
Interest on Loans $5,790,389 5,464,044
Interest on Investments 971,948 362,324
Interest on Federal Funds Sold 258,871 310,390
---------- ----------
Total Interest Income 7,021,208 6,136,758
---------- ----------
INTEREST EXPENSE:
Interest on Interest Bearing Checking Accounts 68,456 44,420
Interest on Money Market Accounts 221,183 194,053
Interest on Passbook Accounts 1,697,987 863,478
Interest on Certificates of Deposit 1,832,145 2,331,038
Interest on Other Borrowed Funds 1,044 432
---------- ----------
Total Interest Expense 3,820,815 3,433,421
---------- ----------
Net Interest Income 3,200,393 2,703,337
Provision for Loan Losses 79,677 118,398
---------- ----------
Net Interest Income after Provision for Loan Losses 3,120,716 2,584,939
---------- ----------
NON-INTEREST INCOME:
Service Charges 327,230 181,262
Loan Origination Fees 263,423 312,812
Net Gains from Sale of Loans 16,612 42,828
Net Realized Gain (Loss) on Sales and Calls of Securities 10,782 (3,150)
Miscellaneous 3,424 3,717
---------- ----------
Total Non-Interest Income 621,471 537,469
---------- ----------
NON-INTEREST EXPENSES:
Salaries 1,287,783 1,104,177
Payroll Taxes 107,105 89,984
Employee Benefits 109,488 71,974
Occupancy Expense 90,427 79,904
Rental Expense 28,800 25,200
</TABLE>
(Continued)
20
<PAGE> 21
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
NON-INTEREST EXPENSES (CONTINUED):
Furniture and Equipment Expense 18,259 33,217
Computer Equipment Expense 143,235 75,990
Stationery, Supplies and Printing 77,350 72,832
Postage, Express and Freight 69,791 54,505
Telephone Expense 57,150 42,904
Vehicle Expense 15,392 10,458
Outside Services 85,790 82,556
Teller Over and Short 344 821
Advertising and Promotion 94,280 93,449
Loan Collection Expense 11,236 12,905
Bank Security and Protection 3,255 2,596
FDIC Assessment 10,240 7,523
Insurance 37,089 31,031
Dues and Subscriptions 20,968 16,837
Franchise Tax Expense 24,000 20,720
Refunds and Reimbursements 13,865 2,599
Travel and Meetings 7,917 2,555
Contributions 5,825 6,372
Depreciation and Amortization 328,294 236,992
Directors' Fees 32,612 28,359
Miscellaneous Expenses 71,414 51,529
---------- ----------
Total Non-Interest Expenses 2,751,909 2,257,989
---------- ----------
Income Before Taxes 990,278 864,419
INCOME TAX PROVISION:
Income Tax Expense 319,256 311,863
---------- ----------
Net Income $ 671,022 552,556
========== ==========
Net Income per Share - Basic $ .84 .69
========== ==========
Net Income per Share - Assuming Dilution $ .76 .64
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE> 22
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Paid-in Retained Comprehensive
Stock Capital Earnings Income Total
---------- ---------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1998 $ 800,000 7,200,000 (202,100) 3,437 7,801,337
COMPREHENSIVE INCOME:
Net Income -- -- 552,556 -- 552,556
Other Comprehensive Income
Net of Tax:
Change In Unrealized
Gain (Loss) on Securities
Available-For-Sale, Net
of Deferred Income Tax
of $43,427 65,141 65,141
----------
Total Comprehensive Income 617,697
Cash Dividends -- -- (40,000) -- (40,000)
---------- --------- ---------- --------- ---------
Balances, December 31, 1998 $ 800,000 7,200,000 310,456 68,578 8,379,034
---------- --------- ---------- --------- ---------
COMPREHENSIVE INCOME:
Net Income -- -- 671,022 -- 671,022
Other Comprehensive Income
Net of Tax:
Change in Unrealized
Gain (Loss) on Securities
Available-For-Sale, Net
of Deferred Income Tax
of $(335,906) (503,858) (503,858)
----------
Total Comprehensive Income 167,164
Stock Option Exercises 6,200 59,000 -- 65,200
Cash Dividends -- -- (120,310) -- (120,310)
---------- --------- ---------- --------- ---------
Balances, December 31, 1999 $ 806,200 7,259,000 861,168 (435,280) 8,491,088
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE> 23
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 671,022 552,556
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation Expense 276,026 211,403
Amortization Expense 52,268 25,589
Provision for Loan Losses 79,677 118,398
Discount Accretion Net of Premium Amortization (53,946) (16,564)
Origination of Mortgage Loans Held for Sale (496,300) (4,168,418)
Proceeds from Mortgage Loans Sold 876,550 4,000,968
Net Realized (Gains) Losses on Sales and Calls of Securities (10,782) 3,150
Deferred Income Tax 8,363 209,847
(Increase) Decrease in Interest Receivable (117,416) (115,890)
(Increase) Decrease in Other Assets (67,405) (5,209)
Increase (Decrease) in Accrued Interest Payable (83,018) (90,414)
Increase (Decrease) in Other Liabilities 2,058,840 245,876
------------ ------------
Net Cash Provided by Operating Activities 3,193,879 971,292
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (Increase) Decrease in Federal Funds Sold 5,215,000 (4,451,000)
Purchases of Held-to-Maturity Securities (100,814) --
Purchases of Available-for-Sale Securities (14,360,228) (2,097,002)
Proceeds from Maturities and Calls of Held-to-Maturity Securities -- 2,220,000
Proceeds from Maturities and Calls of Available-For-Sale Securities 5,739,450 1,504,796
Purchases of Restricted Investments (9,800) (185,100)
Purchases of Premises and Equipment (210,872) (1,129,271)
Loan Participations Bought (880,673) (548,928)
Loan Participations Sold 4,227,511 1,275,216
Net Increase in Loans (7,726,408) (19,440,145)
------------ ------------
Net Cash Used for Investing Activities (8,106,834) (22,851,434)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends Paid (160,310) --
Stock Options Exercised 65,200 --
Net Increase in Deposits 9,009,331 21,777,400
------------ ------------
Net Cash Provided by Financing Activities 8,914,221 21,777,400
------------ ------------
Increase (Decrease) in Cash and Cash Equivalents 4,001,266 (102,742)
------------ ------------
</TABLE>
(Continued)
23
<PAGE> 24
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents 4,001,266 (102,742)
(Brought Forward)
Cash and Cash Equivalents, Beginning of Year 2,048,350 2,151,092
---------- ----------
Cash and Cash Equivalents, End of Year $6,049,616 2,048,350
========== ==========
SUPPLEMENTAL DISCLOSURES:
Cash Paid During the Year for Interest $3,903,008 3,523,835
========== ==========
Cash Paid During the Year for Income Taxes $ 256,526 19,503
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE> 25
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES:
Basis of Consolidation
The consolidated financial statements include the accounts of PCB Bancorp,
Inc. (Company), a one-bank holding company, formed on October 1, 1996 and
its wholly-owned subsidiary People's Community Bank (Bank). All material
intercompany balances and transactions have been eliminated in
consolidation.
Nature of Operations
People's Community Bank is a state-chartered bank formed on December 15,
1995. On October 1, 1996 the Bank became a wholly owned subsidiary of PCB
Bancorp, Inc., a one bank holding company. People's Community Bank provides
a variety of banking services to individuals and businesses in Upper East
Tennessee through its main office on Sunset Drive and branch locations in
Boones Creek and on Main Street in Johnson City. Its primary deposit
products are demand deposits, savings deposits and certificates of deposit;
and its primary lending products are commercial business, real estate
mortgage and installment loans. As a state bank, the Bank is subject to
regulation by the Tennessee State Banking Department and the Federal
Deposit Insurance Corporation.
Financial Reporting
The Company reports on the accrual basis of accounting for financial
purposes.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers cash and
cash equivalents as those amounts included in the statement of financial
condition as captioned "cash and due from banks". Federal funds sold are
not included as cash or cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. Material estimates that are particularly susceptible to
significant change relate to the determination of the allowance for losses
on loans. While management uses available information to recognize losses
on loans, future additions to the allowance may be necessary based on
changes in local economic conditions. In addition, regulatory agencies, as
an integral part of their examination process, periodically review the
Bank's allowances for losses on loans. Such agencies may require the Bank
to recognize additions to the allowances based on their judgements about
information available to them at the time of their examination. Because of
these factors, it is reasonably possible that the allowances for losses on
loans may change materially in the near term. However, the amount of the
change that is reasonably possible cannot be estimated.
25
<PAGE> 26
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Investment Securities
Securities Held-to-Maturity: Debt securities that management has the
positive intent and ability to hold to maturity are reported at cost,
adjusted for amortization of premiums and accretion of discounts that are
recognized in interest income using methods approximating the interest
method over the period to maturity.
Securities Available-for-Sale: Debt securities not classified as
held-to-maturity are classified as available-for-sale. Securities
available-for-sale are carried at fair value with unrealized gains and
losses reported separately net of tax, through a separate component of
stockholder's equity. Gains and losses on sales of securities are
determined using the specific-identification method. The amortization of
premiums and the accretion of discounts are recognized in interest income
using methods approximating the interest method.
Loans Held for Sale
Mortgage loans originated and intended for sale in the secondary market are
carried at the lower of cost or estimated market value in the aggregate.
Net unrealized losses are recognized through a valuation allowance of
charges to income.
Loans
Loans are stated at unpaid principal, less the allowance for loan losses
and net deferred loan fees and unearned discounts.
Unearned discounts on installment loans are recognized as income over the
term of the loans using a method that approximates the interest method.
Loan origination and commitment fees, as well as certain direct origination
costs, are deferred and amortized as a yield adjustment over the lives of
the related loans using a method that approximates the interest method.
Amortization of the deferred loan fees is discontinued when a loan is
placed on nonaccrual status.
Interest income generally is not recognized on specific impaired loans
unless the likelihood of further loss is remote. Interest payments received
on such loans are applied as a reduction of the loan principal balance.
Interest income on other impaired loans is recognized only to the extent of
interest payments received.
26
<PAGE> 27
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Allowance for Loan Losses
The allowance for loan losses is maintained at a level which, in
management's judgement, is adequate to absorb credit losses inherent in the
loan portfolio. The amount of the allowance is based on management's
evaluation of the collectibility of the loan portfolio, including the
nature of the portfolio, credit concentrations, trends in historical loss
experience, specific impaired loans, economic conditions, and other risks
inherent in the portfolio. Allowances for impaired loans are generally
determined based on collateral values or the present value of estimated
cash flows. Although management uses available information to recognize
losses on loans, because of the uncertainties associated with local
economic conditions, collateral values, and future cash flows on impaired
loans, it is reasonably possible that a material change could occur in the
allowance for loan losses in the near term. However, the amount of the
change that is reasonably possible cannot be estimated. The allowance is
increased by a provision for loan losses, which is charged to expense and
reduced by charge-offs, net of recoveries. Changes in the allowance
relating to impaired loans are charged or credited to the provision for
loan losses.
Premises and Equipment
Premises and equipment are stated at cost less any accumulated
depreciation. Depreciation is provided for using the straight-line method
over the useful lives of the assets. Maintenance and repairs are expensed
as incurred while major additions and improvements are capitalized. Gains
and losses on dispositions are included in current operations.
Organization Costs
In 1999 the Bank elected to adopt Statement of Position 98-5 Reporting on
the Costs of Start Up Activities which requires start up costs to be
expensed as incurred. Previously, organization costs were being amortized
over 5 years using the straight-line method. SOP-98-5 does not require
retroactive application, therefore, the bank expensed the unamortized
balance of $52,286 during the year ending December 31, 1999. The effect in
1999 on net income was $.06 per share.
Income Taxes
Income taxes are provided for the tax effects of the transactions reported
in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the depreciation
for financial and income tax reporting. The deferred tax assets and
liabilities represent the future tax consequences of those differences,
which will either be taxable or deductible when the assets and liabilities
are recovered or settled. Deferred tax assets and liabilities are reflected
at income tax rates applicable to the period in which the deferred tax
assets or liabilities are expected to be realized or settled. As changes in
tax laws or rates are enacted, deferred tax assets and liabilities are
adjusted through the provision for income tax.
27
<PAGE> 28
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Fair Values of Financial Instruments
Statement of Financial Accounting Standards (SFAS) No. 107, Disclosures
about Fair Value of Financial Instruments, requires disclosure of fair
value information about financial instruments, whether or not recognized in
the statement of financial condition. In cases where quoted market prices
are not available, fair values are based on estimates using present value
or other valuation techniques. Those techniques are significantly affected
by the assumptions used, including the discount rate and estimates of
future cash flows. In that regard, the derived fair value estimates cannot
be substantiated by comparison to independent markets and, in many cases,
could not be realized in immediate settlement of the instruments. SFAS No.
107 excludes certain financial instruments and all non-financial
instruments from its disclosure requirements. Accordingly, the aggregate
fair value amounts presented do not represent the underlying value of the
Bank.
The following methods and assumptions were used by the Bank in estimating
its fair value disclosures for financial instruments:
Cash and Cash Equivalents: The carrying amounts reported in the
statement of financial condition for cash and cash equivalents
approximate their fair value.
Investment securities: Fair values for investment securities are based
on quoted market prices, where available. If quoted market prices are
not available, fair values are based on quoted market prices of
comparable instruments.
Loans: For variable-rate loans that re-price frequently and with no
significant change in credit risk, fair values are based on carrying
amounts. The fair values for other loans (for example, fixed rate
commercial real estate and rental property mortgage loans and commercial
and industrial loans) are estimated using discounted cash flow analysis,
based on interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality. Loan fair value estimates
include judgments regarding future expected loss experience and risk
characteristics. The carrying amount of accrued interest receivable
approximates its fair value.
Deposits: The fair values disclosed for demand deposits (for example,
interest-bearing checking accounts and passbook accounts) are, by
definition, equal to the amount payable on demand at the reporting date
(that is, their carrying amounts). The carrying amounts of
variable-rate, fixed-term money market accounts and certificates of
deposit approximate their fair values. The fair values for fixed rate
certificates of deposit are estimated using a discounted cash flow
calculation that applies interest rates currently being offered on
certificates to a schedule of aggregated contractual maturities on such
time deposits.
28
<PAGE> 29
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Fair Values of Financial Instruments (continued):
Accrued Interest: The carrying amount of accrued interest approximates
the fair values.
Off-Balance-Sheet Instruments: Fair values for off-balance-sheet lending
commitments are based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements
and the counterparties' credit standings.
Advertising
The Bank expenses advertising costs as they are incurred.
Net Income Per Share
Net income per share of common stock has been computed on the basis of the
weighted-average number of shares of common stock outstanding.
Comprehensive Income
In 1998, the Bank adopted Statement of Financial Accounting Standards
(SFAS) No. 130 - Reporting Comprehensive Income. Under SFAS No. 130,
comprehensive income is defined as the change in equity from transactions
and other events from non-owner sources. It includes all changes in equity
except those resulting from investments by shareholders and distributions
to shareholders. Comprehensive income includes net income and certain
elements of "other comprehensive income" such as foreign currency
transactions, accounting for futures contracts; employers accounting for
pensions; and accounting for certain investments in debt and equity
securities.
The Bank has elected to report its comprehensive income in the Statement of
Shareholders' Equity. The only element of "other comprehensive income" that
the Bank has is the unrealized gains or losses on available for sale
securities.
The component of the change in net unrealized gains (losses) on securities
were as follows:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Unrealized holding gains (losses)
arising during the year $(828,982) 105,419
Reclassification adjustment for (gains)/losses
realized in net income (10,782) 3,150
--------- ---------
Net unrealized holding gains (losses) before taxes (839,764) 108,569
Tax effect 335,906 (43,428)
--------- ---------
Net change $(503,858) 65,141
========= =========
</TABLE>
29
<PAGE> 30
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 2. INVESTMENTS:
The amortized costs of securities and their approximate fair values are as
follows:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
-------------------------------------------------- --------------------------------------------------
Gross Gross Gross Gross
Amortized Unrealized Unrealized Amortized Unrealized Unrealized
Cost Gains Losses Fair Value Cost Gains Losses Fair Value
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available-for-Sale
U.S. Government
Federal Agencies $ 7,720,191 -- 288,194 7,431,997 3,847,337 26,641 5,195 3,868,783
State and Municipal
Governments 7,395,994 204 283,339 7,112,859 5,006,120 98,604 -- 5,104,724
Mortgage-Backed
Securities 5,652,610 2,895 157,033 5,498,472 3,189,469 3,105 8,857 3,183,717
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Available-for-Sale 20,768,795 3,099 728,566 20,043,328 12,042,926 128,350 14,052 12,157,224
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Held-to-Maturity
US Government Agencies 500,000 -- 4,548 495,452 500,000 7,242 -- 507,242
State and Municipal
Governments 100,749 -- 4,442 96,307 -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Held-to-Maturity 600,749 -- 8,990 591,759 500,000 7,242 0 507,242
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Investment
Securities $21,369,544 3,099 737,556 20,635,087 12,542,926 135,592 14,052 12,664,466
=========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
The amortized cost and market value of debt securities at December 31, 1999, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Held-to-Maturity Available-for-Sale
-------------------------- --------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Amounts maturing in:
One year or less $ -- -- 50,000 49,924
After one year through five years -- -- 4,263,672 4,182,011
After five years through ten years 500,000 495,452 6,528,760 6,231,773
After ten years 100,749 96,307 4,273,753 4,081,148
Mortgage-Backed Securities -- -- 5,652,610 5,498,472
---------- ---------- ---------- ----------
$ 600,749 591,759 20,768,795 20,043,328
========== ========== ========== ==========
</TABLE>
Accrued interest on investments at December 31, 1999 and 1998 was $241,885 and
$144,637, respectively. During 1999 and 1998 the bank received $4,711,563 and
$3,724,776 proceeds from sales and calls of securities with a carrying value
based on historical cost and adjusted for amortization of premiums and accretion
of discounts of $4,700,781 and $3,727,946 resulting in a realized gain of
$10,782 and a loss of $3,150 on sales and calls of securities, respectively.
30
<PAGE> 31
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 3. LOANS RECEIVABLE:
Loans at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Commercial $ 35,563,247 34,352,002
Commercial Real Estate 147,015 154,968
Residential Real Estate 11,726,358 14,607,152
Installment 21,768,308 15,088,966
Consumer 1,666,176 2,352,892
Other 181,453 138,682
------------ ------------
71,052,557 66,694,662
Allowance for Loan Losses (863,816) (825,649)
Unearned Discount on Mortgages and
Installment Loans (232) (1,595)
Net Deferred Loan Origination Fees (42,459) (21,261)
------------ ------------
$ 70,146,050 65,846,157
============ ============
</TABLE>
An analysis of the change in the allowance for loan losses follows:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Balance at Beginning of Year $ 825,649 727,598
Provision for Loan Losses 79,677 118,398
Loans Charged Off (47,821) (22,291)
Recoveries on Loans 6,311 1,944
--------- ---------
Balance at End of Year $ 863,816 825,649
========= =========
</TABLE>
A summary of loans by estimated maturity as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Maturity within one year $ 29,296,509
One to five years 40,670,129
Over five years 1,085,919
------------
$ 71,052,557
============
</TABLE>
Accrued interest receivable on loans at December 31, 1999 and 1998 was $377,311
and $357,143, respectively.
At December 31, 1999 and 1998, the total recorded investment in impaired loans
amounted to $292,818 and $0, respectively. The amount of the recorded investment
in impaired loans for which there is a related allowance for credit losses at
December 31, 1999 and 1998, is $158,411 and $0, respectively. The amount of the
recorded investment in impaired loans for which there is no related allowance
for credit loss and is classified as substandard is $134,407 and $0,
respectively. The amount of accrued interest is recognized prior to principal
for any cash receipts on impaired loans. Interest income in the amount of
$17,812 was recognized for cash receipts during 1999.
31
<PAGE> 32
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 3. LOANS RECEIVABLE (CONTINUED):
The Bank has no commitments to loan additional funds to borrowers whose loans
have been modified.
The Bank services loans for others of $8,601,891 and $4,374,379 at December 31,
1999 and 1998 under loan participation agreements. The Bank receives no fees for
servicing these loans and no fees have been received in connection with the
origination of the loan participation agreements.
In the ordinary course of business, the Bank has and expects to continue to have
transactions, including borrowings, with certain of its officers, executive
directors, significant stockholders and their affiliates. In the opinion of
management, such transactions were on substantially the same terms, including
interest rates and collateral, as those prevailing at the time of comparable
transactions with other persons and did not involve more than a normal risk of
collectibility or present any other unfavorable features to the Bank. Loans to
such borrowers at December 31, 1999 and 1998 were $742,529 and $41,862. During
1999, there were additional loans to such related parties in the amount of
$717,500 and repayments amount to $16,833.
NOTE 4. PREMISES AND EQUIPMENT:
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Bank Building $1,307,338 1,420,335
Land 867,625 754,430
Land Improvements 263,058 263,058
Leasehold Improvements 47,210 47,210
Furniture and Equipment 721,411 646,440
Computer Equipment 568,359 454,836
Computer Software 58,710 36,531
---------- ----------
Total 3,833,711 3,622,840
----------
Accumulated Depreciation 681,627 405,602
---------- ----------
Premises and Equipment-Net $3,152,084 3,217,238
========== ==========
</TABLE>
Depreciation expense for the years ended December 31, 1999 and 1998 was
$276,026 and $211,403, respectively.
NOTE 5. OTHER ASSETS:
Other Assets at December 31 consisted of the following:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Other Real Estate Owned $48,128 --
Prepaid Expense 48,034 20,291
Other Receivables 2,178 10,644
------- -------
$98,340 30,935
======= =======
</TABLE>
32
<PAGE> 33
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 6. DEPOSITS:
A summary of deposit account balances at December 31 is as follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Regular Checking $ 2,536,443 2,573,984
Club Checking 17,900 15,533
Discount Checking 81,325 --
Small Business Accounts 3,452,867 3,638,557
Commercial Checking 3,169,821 3,004,434
Primetime Checking 583,512 199,404
NOW Accounts 2,936,344 2,586,531
Money Market Accounts 4,973,571 3,856,406
Saving Accounts 32,220,513 29,535,031
Certificates of Deposit 40,845,777 36,398,861
----------- -----------
Total $90,818,073 81,808,741
=========== ===========
</TABLE>
At December 31, 1999, scheduled maturities of certificates of deposit are as
follows:
<TABLE>
<S> <C>
2000 $ 35,013,479
2001 4,693,174
2002 1,016,024
2003 123,100
2004 and Thereafter --
------------
$ 40,845,777
============
</TABLE>
The aggregate amount of short-term jumbo certificates of deposit with a minimum
denomination of $100,000 was $16,599,069 and $11,033,273 at December 31, 1999
and 1998.
The Bank held deposits of approximately $1,703,422 and $1,208,164 for related
parties at December 31, 1999 and 1998, respectively.
NOTE 7. ACCOUNTS PAYABLE AND OTHER LIABILITIES:
Accounts Payable and Other Liabilities at December 31 consisted of the
following:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Line of Credit $2,000,000 --
Property Tax Payable 5,970 11,016
Payroll Taxes Payable 2,293 2,182
Miscellaneous Payables and Other Liabilities 722,998 660,264
Accrued State Franchise Tax 23,227 20,274
Deferred Income Tax -- 145,454
Current Income Tax 110,923 102,016
---------- ----------
$2,865,411 941,206
========== ==========
</TABLE>
33
<PAGE> 34
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 8. ADVANCES FROM FEDERAL HOME LOAN BANK:
Effective June 13, 1997, People's Community Bank became members of the Federal
Home Loan Bank (FHLB) of Ohio. The Bank has been authorized to borrow up to
$2,000,000 on a line of credit from the FHLB. The Bank's total borrowing
capacity is a component of both capital stock and the member's most recent
Qualified Thrift Lender rating and access to borrowing is dependent upon
submission of advance application. The Bank has outstanding advances of
$2,000,000 and $0 from the FHLB at December 31, 1999 and 1998, respectively. In
addition, the Bank has pledged $1,500,000 of their line of credit with the FHLB
to the State of Tennessee Collateral Pool to secure public funds on deposit with
the Bank at December 31, 1999.
NOTE 9. UNUSED LINES OF CREDIT:
The Bank entered into an open-ended unsecured line of credit with First American
Bank for $2,000,000 for federal fund purchases and daylight overdrafts. Funds
issued under this agreement are at the First American federal funds rate
effective at the time of borrowing. The line matured at May 1, 1999 and was
renewed for $2,500,000 maturing May 1, 2000. The Bank had not drawn on these
funds at December 31, 1999 and 1998.
On November 12, 1999 the Bank also entered into an open-ended unsecured line of
credit with Columbus Bank and Trust for $2,500,000 for Federal Fund purchases.
Funds issued under this agreement are at the Columbus Bank and Trust federal
funds rate effective at the time of borrowing. The Bank had not drawn any of
these funds at December 31, 1999.
NOTE 10. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK:
At December 31, the Bank had outstanding commitments for unused lines and
letters of credit that are not reflected in the accompanying financial
statements as follows:
<TABLE>
<CAPTION>
Variable Rate
----------------------------
1999 1998
---------- ----------
<S> <C> <C>
Lines of Credit $8,822,305 4,176,724
Letters of Credit 672,800 629,900
---------- ----------
Total $9,495,105 4,806,624
========== ==========
</TABLE>
Commitments to extend credit are financial instruments with off-balance sheet
risk entered into by the Bank in the normal course of business to meet the
financing needs of its customers. These commitments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount recognized in
the statement of financial condition. The Bank is at risk from the possible
inability of borrowers to meet the terms of their contracts and from movements
in interest rates. The Bank's exposure to credit loss in the event of
nonperformance by the borrower is represented by the contractual amount of the
financial instruments described above.
34
<PAGE> 35
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 10. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (CONTINUED):
Standby letters of credit written are conditional commitments issued by the Bank
to guarantee the performance of a customer to a third party. Those guarantees
are issued to support public and private borrowing arrangements, bond financing,
and similar transactions. The credit risk involved in issuing a letter of credit
is essentially the same as that involved in extending loan facilities to
customers.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses. Since many
of the commitments may never be drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Bank uses the same credit
policies in making commitments as it does for on-balance sheet instruments. The
Bank evaluates each customer's creditworthiness on a case by case basis.
NOTE 11. COMMITMENTS AND CONTINGENT LIABILITIES:
The Bank is subject to claims and lawsuits, which arise, primarily in the
ordinary course of business. It is the opinion of management that the
disposition or ultimate resolution of such claims and lawsuits will not have a
material adverse effect on the financial position of the Bank.
NOTE 12. SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK:
Most of the Bank's business activity is with customers within the Upper East
Tennessee area.
The Bank evaluates each customer's creditworthiness on a case by case basis. The
amount of collateral obtained if deemed necessary by the Bank upon extension of
credit is based on management's credit evaluation of the customer. Collateral
held varies but generally includes real estate, vehicles, equipment and income
producing commercial properties. As of the completion of the audit, management
is not aware of any such outstanding claims or lawsuits.
35
<PAGE> 36
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The estimated fair values of the Bank's financial instruments at December 31
were as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------- ---------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Financial Assets:
Cash and Due from Banks and
Federal Funds Sold $ 7,361,447 7,361,447 8,620,256 8,620,256
Securities Held-to-Maturity 600,749 591,759 500,000 507,242
Securities Available-for-Sale 20,043,328 20,043,328 12,157,224 12,157,224
Loans Receivable:
Adjustable Rate Loans under 30 years 17,246,876 17,246,876 19,300,225 19,300,225
Fixed Rate Loans with original
maturities of 30 years 163,803 88,243 180,638 192,452
Fixed Rate Loans with original
maturities of 5 to 30 years 35,911,687 27,515,573 2,482,797 2,542,573
Fixed Rate Loans with original
maturities of 1 to 5 years 14,723,306 14,500,371 35,828,463 35,490,710
Fixed Rate Loans with original
maturities of less than one year 3,006,885 3,006,885 8,902,539 8,902,539
Loans Held for Sale -- -- 380,250 380,250
Accrued Interest Receivable 619,196 619,196 501,780 501,780
Financial Liabilities:
Deposit Liabilities 90,818,073 90,818,073 81,808,741 81,808,741
Off Balance Sheet Instruments:
Commitments to Extend Credit -- -- -- --
</TABLE>
NOTE 14. FEDERAL INCOME TAXES:
The provision for income tax for 1999 and 1998 consists of the following:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Income Tax Expense:
Current Tax Expense
Federal $249,608 72,195
State 61,285 29,822
Deferred Tax (Benefit)
Federal 8,363 178,370
State -- 31,476
-------- --------
$319,256 311,863
======== ========
</TABLE>
36
<PAGE> 37
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 14. FEDERAL INCOME TAXES (CONTINUED):
A cumulative net deferred tax asset for 1999 is included in Other Assets. A
cumulative net deferred tax liability for 1998 is included in Other Liabilities.
The components of the asset and liability are as follows:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Differences in Depreciation Methods $(134,634) (96,794)
Net Unrealized Gain/Loss on
Available-For-Sale Securities 287,246 (48,660)
--------- ---------
$ 152,612 (145,454)
========= =========
Deferred Tax Assets $ 287,246 --
Deferred Tax Liabilities (134,634) (145,454)
--------- ---------
Net Deferred Tax Assets (Liabilities) $ 152,612 (145,454)
========= =========
</TABLE>
The following is a reconciliation of the statutory federal income tax rate
applied to pre-tax accounting income, with the income tax provisions in the
statements of income.
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Federal Income Tax Expense at the
Statutory Rate (34%) $ 347,281 300,027
Increases (Decreases) Resulting from:
Nontaxable Interest Income, Net of Non-
deductible Interest Expense (89,310) (41,110)
State Income Taxes, Net of Federal Income
Tax Benefit 61,285 52,946
--------- ---------
Provision for Income Taxes $ 319,256 311,863
========= =========
</TABLE>
NOTE 15. EMPLOYEE BENEFIT PLANS:
Effective May 1, 1998 the Bank adopted a simple IRA plan covering all employees.
Employees may contribute up to $6,000 per year to the plan. The Bank may
contribute up to 3% of the employees annual compensation. Employee contributions
in the amount of $12,000 and $0 were accrued at December 31, 1999 and December
31, 1998, respectively.
37
<PAGE> 38
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 16. REGULATORY MATTERS:
The Bank is subject to various regulatory capital requirements administered by
its primary federal regulator, the Federal Deposit Insurance Corporation (FDIC).
Failure to meet minimum capital requirements can initiate certain mandatory, and
possibly additional discretionary actions by regulators that, if undertaken,
could have a direct material effect on the Bank's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve quantitative
measures of the Bank's assets, liabilities and certain off-balance-sheet items
as calculated under regulatory accounting practices. The Bank's capital amounts
and classification are also subject to qualitative judgements by the regulator
about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of total and Tier I
capital to risk-weighted assets (as defined). Management believes, as of
December 31, 1999, that the Bank meets all capital adequacy requirements to
which it is subject.
As of March 31, 1998 the most recent notification from the FDIC, the Bank was
categorized as well capitalized under the regulatory framework for prompt
corrective action. To remain categorized as well capitalized, the Bank will have
to maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage
ratios as disclosed in the table below. There are no conditions or events since
the most recent notification that management believes have changed the Bank's
prompt corrective action category.
The Bank's actual capital and ratio amounts are presented in the following
table:
<TABLE>
<CAPTION> To Be Well Capitalized
Under the Prompt
For Capital Corrective
Actual Adequacy Purposes Action Provisions
----------------------- -------------------------- ------------------------
Amount Ratio Amount Ratio Amount Ratio
---------- ------- -------------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1999:
Total Risk-Based Capital
(To Risk Weighted Assets) $9,742,237 11.3% $ * 6,865,600 * 8.0% $8,582,000 * 10.0%
Tier I Capital
(To Risk Weighted Assets) 8,878,421 10.3% * 3,432,800 * 4.0% 5,149,200 * 6.0%
Tier I Capital
(To Average Assets) 8,878,421 8.7% * 4,089,640 * 4.0% 5,112,050 * 5.0%
</TABLE>
- ---------
* Greater or equal to
38
<PAGE> 39
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 16. REGULATORY MATTERS (CONTINUED):
<TABLE>
<CAPTION> To Be Well Capitalized
Under the Prompt
For Capital Corrective
Actual Adequacy Purposes Action Provisions
----------------------- -------------------------- ------------------------
Amount Ratio Amount Ratio Amount Ratio
---------- ------- -------------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1998:
Total Risk-Based Capital
(To Risk Weighted Assets) $9,080,577 13.3% * 5,455,120 * 8.0% 6,818,900 * 10.0%
Tier I Capital
(To Risk Weighted Assets) 8,254,928 12.1% * 2,727,560 * 4.0% 4,091,340 * 6.0%
Tier I Capital
(To Average Assets) 8,254,928 9.3% * 3,549,567 * 4.0% 4,436,900 * 5.0%
</TABLE>
- ---------
* Greater or equal to
The Bank received notice from the FDIC that the Bank's deposits are insured up
to $100,000 for each depositor, the FDIC assessment for the years ended December
31, 1999 and 1998 was $10,239 and $7,523, respectively.
NOTE 17. BANK HOLDING COMPANY:
People's Community Bank is a wholly-owned subsidiary of PCB Bancorp, Inc. The
retained earnings of PCB Bancorp, Inc. reflect the accumulated earnings of
People's Community Bank and the consolidated statement of income reflects the
income and expenses of People's Community Bank for the years ended December 31,
1999 and 1998.
The Parent Company's sole source of funds is the receipt of dividends from the
Bank.
Condensed Statements of Financial Condition
(Parent Only)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
Cash On Deposit with Subsidiary $ 47,169 2,093
Investment in Subsidiary 8,443,141 8,365,151
Dividends Receivable -- 40,000
Premises and Equipment, Net of Accumulated Depreciation
of $1,342 and $954, respectively 778 1,166
Organization costs, Net of Accumulated Amortization -- 10,624
---------- ----------
Total Assets $8,491,088 8,419,034
========== ==========
</TABLE>
39
<PAGE> 40
PCB BANCORP, INC
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 17. BANK HOLDING COMPANY (CONTINUED):
Condensed Statements of Financial Condition (Continued)
(Parent Only)
<TABLE>
<CAPTION>
1999 1998
------------ ----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Dividends Payable - 40,000
Common Stock 806,200 800,000
Additional Paid-In Capital 7,259,000 7,200,000
Retained Earnings (Deficit) 861,168 310,456
Net Unrealized Gain (Loss) on Available-for-Sale Securities
Net of Tax of $287,246 and ($48,660) respectively (435,280) 68,578
---------- -----------
Total Liabilities and Shareholders' Equity $8,491,088 8,419,034
========== ===========
Condensed Statements of Income and Retained Earnings
(Parent Only)
OPERATING INCOME
Dividend from Subsidiary $ 120,310 52,000
---------- -----------
Total Operating Income 120,310 52,000
---------- -----------
OPERATING EXPENSES
Amortization of Organization Costs 10,625 3,862
Advertising and Promotion - 2,074
Postage and Printing 3,702 -
Education and Development 1,195 -
Travel 1,457 -
Interest Expense 824 -
Depreciation Expense 388 424
Dues and Membership 20 20
Outside Services 12,926 11,635
---------- -----------
Total Operating Expenses 31,137 18,015
---------- -----------
Income from Operations 89,173 33,985
OTHER INCOME (EXPENSE)
Undistributed Net Income from Investment
in Wholly-Owned Subsidiary 581,849 518,571
---------- -----------
Net Income 671,022 552,556
Beginning Retained Earnings (Deficit) 310,456 (202,100)
Cash Dividends (120,310) (40,000)
---------- -----------
Ending Retained Earnings $ 861,168 310,456
========== ===========
</TABLE>
40
<PAGE> 41
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 17. BANK HOLDING COMPANY (CONTINUED):
Condensed Statements of Cash Flows
(Parent Only)
<TABLE>
<CAPTION>
1999 1998
---------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $ 671,022 552,556
Undistributed Net (Income) Loss of Wholly-Owned
Subsidiary (581,849) (518,571)
Depreciation Expense 388 424
Amortization of Organization Costs 10,625 3,862
(Decrease) in Dividends Payable - (40,000)
---------- -----------
Net Cash Provided by (Used for) Operating Activities 100,186 (1,729)
---------- -----------
Cash Flows from Financing Activities:
Stock Options Exercised 65,200 -
Dividends Paid (120,310) -
---------- -----------
Net Cash Used for Financing Activities (55,110) 0
---------- -----------
Increase (Decrease) in Cash and Cash Equivalents 45,076 (1,729)
Beginning Cash and Cash Equivalents 2,093 3,822
---------- -----------
Ending Cash and Cash Equivalents $ 47,169 2,093
========= ===========
</TABLE>
NOTE 18. STOCK OPTIONS:
During 1996, PCB Bancorp, Inc. adopted a stock option plan for key employees.
The plan is established to provide "Incentive Stock Options" within the meaning
of Section 422 of the Internal Revenue Code of 1986, or "non-statutory" stock
options. The Board of Directors administers the plan.
In addition to the plan for the key employees, PCB Bancorp, Inc. adopted a plan
for non-employee directors. All eligible directors can participate and receive
non-qualified stock options. Directors were granted an initial option to acquire
5,000 shares at an option price of $10, which was the fair value at the date of
the grant. This option was fully vested immediately. Directors are granted an
additional 1,000 shares each year through the year 2000. The shares are granted
at the fair value on the date of grant. Options vest ratably at twenty percent
per year over five years.
41
<PAGE> 42
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 18. STOCK OPTIONS (CONTINUED):
Under both plans, no incentive stock option shall be exercisable after the
expiration of 10 years from the date it is granted and the total number of
shares of the Company's common stock that may be transferred pursuant to the
exercise of stock options under the Plan shall not exceed in the aggregate
100,000 shares for the employee stock option plan and 60,000 shares for the
directors stock option plan.
The Company has elected to account for the stock option plan under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and
related interpretations. Accordingly, no compensation expense has been
recognized for the stock option.
Had compensation expense for the stock option plan been determined based on the
fair value of the options at the grant date consistent with the methodology
prescribed under Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation", the Company's net income in 1999 and
1998 would have been $638,785 and $528,166, respectively. The restated earnings
per share would have been $0.80 and $0.66 in 1999 and 1998, respectively. The
Company calculates a weighted-average fair value for each option. The
weighted-average fair value for the options in 1999 and 1998 were $17.61 and
$14.09, using the following assumptions for both years:
Risk-free interest rate 5%
Expected life (years) 10
Expected volatility 8%
Expected dividends None
42
<PAGE> 43
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 18. STOCK OPTIONS (CONTINUED):
A summary of option transactions during the years ended December 31, 1999 and
1998 is shown below:
<TABLE>
<CAPTION>
Number Weighted-Average
of Shares Exercise Price
--------- --------------
<S> <C> <C>
Outstanding at January 1, 1998 107,500 10.29
Granted: Directors 5,000 20.00
Employees 2,500 20.00
-------
Outstanding at December 31, 1998 115,000 10.50
=======
Exercisable at December 31, 1998 54,000 10.50
=======
Outstanding at January 1, 1999 115,000 10.50
Granted: Employees 5,000 25.00
Directors 10,000 25.00
-------
130,000 12.54
Exercised during 1999 6,200 10.71
-------
Outstanding at December 31, 1999 123,800 12.63
=======
</TABLE>
A summary of options outstanding as of December 31, 1999 is shown below:
<TABLE>
<CAPTION>
Weighted-Average Number of Number of
Exercise Number of Options Remaining Contractual Options Options
Price Outstanding Life Outstanding Exercisable Exercised Remaining
----------- --------------------- -------------------------- --------------- --------- ---------
<S> <C> <C> <C> <C> <C>
$ 10.00 102,500 6.5 years 69,500 6,000 63,500
16.00 5,000 7.5 years 2,000 200 1,800
20.00 2,500 9 years 500 - 500
20.00 5,000 8.5 years 1,000 - 1,000
25.00 5,000 9.5 years - - -
25.00 10,000 10 years - - -
--------- ------- -------- -------
130,000 73,000 6,200 66,800
======= ======== =======
Exercised (6,200)
---------
123,800
=========
</TABLE>
43
<PAGE> 44
PCB BANCORP, INC.
AND WHOLLY-OWNED SUBSIDIARY
PEOPLE'S COMMUNITY BANK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 19. EARNINGS PER SHARE:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
----------------------------------------------------------------------------------------
1999 1998
-------------------------------------------- -----------------------------------------
Weighted-Average Weighted-Average
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
------------ ------------ --------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 671,022 - - 552,556 - -
Basic EPS
Income Available to
Common Stockholders 671,022 802,633 .84 552,556 800,000 .69
Effect of Dilutive Options
Stock Options
(using the Treasury Stock
Method) - 76,563 - - 63,336 -
------------ ------------ -------- ------------ ------------ ---------
Diluted EPS
Income Available to
Common Stockholders plus
Assumed Exercise of Options $ 671,022 879,196 .76 552,556 863,336 .64
============ ============ ======== ============ ============ =========
</TABLE>
44
<PAGE> 45
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The names of the Company's directors and executives officers, together with
certain information regarding them, are as follows:
<TABLE>
<CAPTION>
Name, Age, and Address Company Position Principal Occupation
- ----------------------------- ------------------------- ----------------------------
<S> <C> <C>
Phillip R. Carriger (52) Director and Banker
819 Xanadu Court Chief Executive Officer
Johnson City, TN 37604
Michael T. Christian (57) Director and Banker
President
Thomas J. Garland (65) Director College Professor/Consultant
1208 Christy Court
Greeneville, TN 37743
Timothy P. Jones (57) Director Newspapers
824 E. Myrtle Avenue
Johnson City, TN 37601
C.C. Marshall (66) Director Real Estate Developer
1805 Sherwood Dr.
Johnson City, TN 37601
James D. Swartz (64) Director Newspapers
112 Barberry, Unit 30
Johnson City, TN 37604
James W. Gibson, M.D. (66) Director Radiologist
810 Cloudland Drive
Johnson City, TN 37601
</TABLE>
Biographies of Directors and Officers
Phillip R. Carriger, age 52, has been the Chief Executive Officer of People's
Community in Johnson City since 1995. Prior to that time, he was the Senior Vice
President of Hamilton Bank's Corporate Division. Mr. Carriger has over 26 years
of experience in the banking industry, having worked for the Comptroller of the
Currency as an Assistant National Bank Examiner, C&C Bank of Anderson County as
a Senior Vice President and First American National Bank (in the Knoxville and
Johnson City offices) as a Senior Vice President. Mr. Carriger graduated from
the University of Tennessee with a B.S. Degree in Economics in 1971. Mr.
Carriger is a member of the Kiwanis Club, East Tennessee State University
Foundation Board of Trustees, Economic Development Board, Johnson City
Development Authority Board, United Way and Girl's Inc. Board of Directors and
President of the Johnson City Country Club Board of Directors.
Michael T. Christian, age 57, spent 28 years with NationsBank and its
predecessors. He last served as Executive Vice President in charge of retail
banking for Tennessee and Kentucky. Prior to that, he was Executive Vice
President over all of Tennessee and Kentucky community banks. Mr. Christian
graduated from the University of Tennessee in 1966. He has served on numerous
civic
45
<PAGE> 46
and professional boards of directors including the Tennessee Bankers
Association, the Federal Reserve Bank of Nashville, the Tennessee Manufacturer's
Association and Tusculum College. He is a former Captain, U.S. Army, Armor.
C.C. Marshall, age 66, has been President of Mountcastle Corporation, a real
estate development and construction firm, since 1967. Mr. Marshall was a
director of Hamilton Bank for 17 years. He is a graduate of East Tennessee State
University and a native of Johnson City.
Timothy P. Jones, age 57, is a Vice President, director and stockholder of Press
Holding Corporation, the publisher of the Johnson City Press newspaper and seven
other newspapers. Mr. Jones received his A.B. Degree in Economics from Wofford
College, has a Masters degree in Mass Communications from Texas Tech University
and is a former directors of the Tennessee Press Association. He is also a
former director of Hamilton Bank and a past Chairman of the Board of Directors
of the Johnson City/Jonesborough/Washington County Chamber of Commerce. Mr.
Jones is Past President of the Johnson City Evening Rotary Club, Past President
of the Johnson City Country Club Board of Directors, a member of the East
Tennessee State University Foundation Board of Trustees, Economic Development
Board and Johnson City Development Authority Board.
Thomas J. Garland, age 65, served for 21 years in the Tennessee State Senate (17
years as Senate Minority Leader). He is a former Chancellor of the Tennessee
Board of Regents, former Chairman of the Board of Commerce Union Bank (now
NationsBank) in Greeneville, Tennessee, and also served as Executive Vice
President and a director of First American Bank, Tri-Cities. Mr. Garland, a
graduate of East Tennessee State University, currently serves as Chairman of the
Tusculum Institute for Public Leadership and Policy at Tusculum College. He is a
member of the Board of Directors of Atmos Energy Corporation, Dallas Texas, and
a former director of Tri-State Container, now Inland Container, in Elizabethton,
Tennessee. Mr. Garland is a member of the boards of the Johnson City Medical
Center, the Sequoyah Council Boy Scouts of America, ETSU National Alumni
Association, the Greater Tri-Cities Business Alliance and the East Tennessee
State University Foundation Board of Trustees.
James D. Swartz, age 64, has been a co-owner of Swartz-Morris Media (which owns
two newspapers) and Swart Media Consultants, a company that advises newspapers
in operation systems, since 1988. Prior to that time, Mr. Swartz was President
or Worrell Enterprises, a media company with 33 newspapers and three television
stations. Mr. Swartz was born in Johnson City, Tennessee, and currently serves
on the East Tennessee State University Foundation Board of Trustees and ETSU
College of Business Board of Advisors.
James W. Gibson, M.D., age 66, is currently associated with Mountain Empire
Radiology , P.C. and has practiced his specialty of radiology in Johnson City
since 1965. Dr. Gibson received his undergraduate education from Vanderbilt
University, his Medical Degree from the University of Tennessee Medical School
in Memphis and served his residency in radiology at Duke University Medical
Center, Durham, North Carolina. He presently serves on the National Alumni
Council for the University of Tennessee Medical School and is a member of the
ETSU Foundation. He has served on the Johnson City Medical School Board of
Directors and the Watauga Mental Health Center Board of Directors.
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes the compensation paid or accrued for the
years ended December 31, 1999, 1998, and 1997 to the Chief Executive Officer.
There are no other officers of the Company or Bank whose total annual salary
exceeds $100,000; accordingly, disclosure regarding executive compensation is
provided in the below tables only with respect to the Chief Executive Officer.
46
<PAGE> 47
<TABLE>
<CAPTION>
Annual
Compensation
Fiscal Salary
Name and Current Position Year Salary ($) Bonus ($) Compensation
- -------------------------------- --------- ---------- ----------- ----------------
<S> <C> <C> <C>
Phillip R. Carriger 1999 $114,150 $1,901 (1)
President and Chief Executive 1998 $108,750 $1,304 (1)
Officer, Director 1997 $102,000 $3,800 (1)
</TABLE>
(1) Represents automobile reimbursement.
Option Grants in Preceeding Fiscal Years
The following table sets forth information concerning stock option
grants to the Company's Chief Executive Officer during 1996. There were no
grants prior to that time or after that time.
<TABLE>
<CAPTION>
# OF SECURITIES % OF TOTAL
UNDERLYING OPTIONS OPTIONS GRANTED TO
Name GRANTED EMPLOYEES IN 1996
- -------------------- -------------------- --------------------
<S> <C> <C>
Phillip R. Carriger 40,000 51.61%
</TABLE>
Value of Unexercised Options
This table presents information regarding the value of unexercised
options held at December 31, 1999. No stock options were exercised, and there
were no SARs outstanding during 1999, 1998, 1997, or 1996.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISABLE
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END (#) AT FY-END (1)
Name EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------- ------------------------- -------------------------
<S> <C> <C>
Phillip R. Carriger 24,000/16,000 $360,000/$240,000
</TABLE>
(1) Dollar values were calculated by determining the difference between the
price of common stock on December 31, 1999 of $25.00 per share and the
exercise price of such options
Director Compensation
Members of the Board of Directors have never received any fees for
attending meetings. However, the outside directors of the Company are entitled
to receive options under the PCB Bancorp, Inc. Outside Directors' Stock Option
Plan. See "Stock Incentive Plans."
Stock Incentive Plans
The Company's Board of Directors and its shareholders have adopted and
approved the 1996 Stock Option Plan (the "Employee Plan") and the Outside
Directors' Stock Option Plan (the "Directors' Plan"). The Plans are intended to
promote the interests of the Company and its shareholders, to improve the
long-term financial performance of the Company, and to attract and retain the
Company's management team by providing competitive financial incentives.
1996 Stock Option Plan. The persons to whom options may be granted
under the Employee Plan will be determined from time to time by the Company's
Compensation Committee (the "Committee"). Officers and key employees of the
Company of the Company and its subsidiary, as determined by the Board or the
Committee, are eligible for grants of options.
47
<PAGE> 48
The Employee Plan provides for the granting of incentive stock options
and non-statutory stock options. Incentive stock options offer employees the
possibility of deferring taxes until the underlying shares of stock acquired
upon exercise of the option are sold. For some of the Company's employees, the
benefits of incentive stock options are outweighed by the disadvantages of
certain restrictions imposed by the Internal Revenue Code. In addition, with
non-statutory stock options, the Company receives a tax deduction at the time
the employee recognizes ordinary income in an amount of such income to the
employee. With incentive stock options, the Company does not receive a tax
deduction at any time (assuming that the employee meets the holding period
requirements for capital gain treatment).
The Employee Plan is administered by the Committee. No person while a
member of the Committee is eligible to be granted an option under the Employee
Plan. Members of the Committee are appointed, and vacancies thereon filled, by
the Board of Directors of the Company, and the Board has the power to remove
members of the Committee.
An aggregate of 100,000 shares of the Company's common stock, no par
value, may be issued pursuant to the exercise of stock options by such officers
and key employees of the Company and its subsidiary as the Committee determine.
As of December 31, 1996, options covering a total of 77,500 shares had been
granted under the Employee Plan. There are no limitations on the number of
shares of common stock which may be optioned to any one person, except that the
aggregate fair market value (determined as of the time the option is granted) of
Company Common Stock with respect to which incentive stock options are
exercisable for the first time by an employee during any calendar under the
Employee Plan (and any other incentive stock option plan of the Company or any
subsidiary) may not exceed $100,000.
Outside Directors' Stock Option Plan. The Directors' Plan provides that
each person (except Dr. Gibson) who was a non-employee director of the Company
in April 1996, will receive an option to purchase 5,000 shares of the Company's
common stock, no par value. This option was exercisable immediately. In
addition, on the first business day following the annual meeting of shareholders
of each of the years 1996 through and including 2000, each outside director
immediately following such annual meeting will be granted an option to purchase
1,000 shares of stock. These options will vest at a rate of 20% per year on the
anniversary date of the annual meeting of shareholders. The exercise price of
all options shall equal the fair market of the Company's common stock on the
date of the grant.
An aggregate of 60,000 shares are reserved for grants of options
pursuant to the Directors' Plan. Shares subject to options which terminate or
expire unexercised will be available for future option grants. The total number
of shares subject to the Director's Plan and the number covered under each
individual option is subject to automatic adjustment in the event of stock
dividends, recapitalizations, mergers, consolidations, split-ups, combinations
or exchanges of shares and the like, as determined by the Board of Directors.
If any non-employee director ceases to be a director as a result of
death or total disability while holding an option that has not expired and has
not been fully exercised, such person or such person's executors,
administrators, heirs, personal representative, conservator, or distributees
may, at any time within six months after the date of such death or total
disability, exercise the option in its entirety with respect to all remaining
shares covered by that option.
The options under the Directors' Plan are nonstatutory options intended
not to qualify as incentive stock options under Section 422 of the Internal
Revenue Code. The grant of options will not result in taxable income to the
non-employee director or a tax deduction to the Company. The exercise of an
option by a non-employee director will result in taxable ordinary income to the
non-employee director and a corresponding deduction for the Company, in each
case equal to the difference between the option price and the fair market value
of the shares on the date the option is exercised.
The Director's Plan is administered by the Board of Directors who is
authorized to interpret the Plan but has no authority with respect to the
selection of directors to receive options or the option price for shares subject
to the Directors' Plan. The Board has no authority to materially increase the
benefits under the plan. The Board may amend the Directors' Plan as it shall
deem advisable but may not, without further shareholder approval, increase the
maximum number of shares under the plan or options granted thereunder, reduce
the minimum option price, extend the period during which options may be granted
or exercised, or change the class of persons eligible to receive options.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
48
<PAGE> 49
The following table sets forth as of December 31, 1999 certain
information with respect to the shares of the common stock of the Company
beneficially owned by the shareholders known to the Company to own beneficially
more than 5% of the shares and the shares of common stock beneficially owned by
the Company's directors and executive officers and by all of its executive
officers and directors as a group. The shares listed below and the percentage of
ownership for each person named below have been calculated assuming that all
presently exercisable options and options that will become exercisable within
120 days from the date of this table, that have been issued pursuant to any of
the Company's stock option plans, have been exercised.
<TABLE>
<CAPTION>
Name and Address Number of Shares Beneficially
of Beneficial Owners Owned on 12/31/99 (%)
- ------------------------------------------- -----------------------------------
<S> <C> <C>
Phillip R. Carriger (1) 45,000 (5.29%)
819 Xanadu Court
Johnson City, TN 37604
Thomas J. Garland (2) 13,700 (1.61%)
1208 Christy Court
Greeneville, TN 37743
Timothy P. Jones (2) 16,200 (1.91%)
824 E. Myrtle Avenue
Johnson City, TN 37601
C.C. Marshall (2) 53,989 (6.35%)
1805 Sherwood Dr.
Johnson City, TN 37601
James D. Swartz 51,200 (6.02%)
112 Barberry, Unit 30
Johnson City, TN 37604
James W. Gibson, M.D. (3) 11,200 (1.32%)
810 Cloudland Drive
Johnson City, TN 37601
All Directors and Executive Officers as a group (six persons) (4) 191,289 (22.5%)
</TABLE>
(1) Includes 24,000 shares which Mr. Carriger currently has a right to acquire
under Company stock options.
(2) Includes 6,200 shares which each of these directors currently has a right to
acquire under Company stock options.
(3) Includes 1,200 chares which Dr. Gibson currently has a right to acquire
under Company stock options.
(4) Includes 43,800 shares which all officers and directors as a group currently
have a right to purchase under Company stock options.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's directors and officers, as well as business organizations
and individuals associated with them, are customers of the Bank. All loan
transactions to such individuals and entities are made in the ordinary course of
business and on the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with unrelated
borrowers and do not involve more than the normal risk of collectibility or
present other unfavorable features.
There are no cases in which aggregate extensions of credit outstanding to any
one director or officer and his associates exceeds 10% of the equity capital of
the Bank. At December 31, 1999, the total amount of loans to directors and
executive officers was $91 thousand, or approximately 1.1% of shareholder's
equity.
49
<PAGE> 50
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits Filed
Exhibit
Number Description
3.1 Charter of Registrant (previously filed as Exhibit 3(a) as part of the
Registration Statement on Form S-4 No. 333-4984, filed June 6, 1996,
which incorporated herein by reference).
3.2 Bylaws of Registrant (previously filed as Exhibit 3 (b) as part of the
Registration Statement No. 333-4984, which exhibit is incorporated
herein by reference).
10.1 PCB Bancorp, Inc. 1996 Stock Option Plan (previously filed as
Appendix C to Registration Statement No. 333-4984, which appendix is
incorporated herein by reference).
10.2 PCB Bancorp, Inc. Outside Directors' Stock Option Plan (previously
filed as Appendix D to Registration Statement No. 33-4984, which
appendix is incorporated herein by reference).
21 Subsidiaries of the Registrant - The Registrant's sole subsidiary is
"People's Community Bank", a Tennessee state chartered banking
institution.
27.1 1999 Financial Data Schedule
(b) Reports on Form 8-K. No reports on Form 8-K filed during the fourth
quarter of the Registrant's last fiscal year.
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PCB BANCORP, INC.
(Registrant)
By:/s/ Phillip R. Carriger
---------------------------------------------------------
Phillip R. Carriger, Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: March 27, 2000
---------------------------------------------------------
By:/s/ Larry Parks
---------------------------------------------------------
Larry Parks, Vice President
(Principal Accounting Officer)
Date: March 27, 2000
---------------------------------------------------------
50
<PAGE> 51
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated.
By:/s/ Phillip R. Carriger
---------------------------------------------------------
Phillip R. Carriger, Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: March 27, 2000
---------------------------------------------------------
By:/s/ Michael T. Christian
---------------------------------------------------------
Michael T. Christian, President and Director
Date: March 27, 2000
---------------------------------------------------------
By:/s/ Thomas J. Garland
---------------------------------------------------------
Thomas J. Garland, Director
Date: March 27, 2000
---------------------------------------------------------
By:/s/ Timothy P. Jones
---------------------------------------------------------
Timothy J. Jones, Director
Date: March 27, 2000
---------------------------------------------------------
By:/s/ C.C. Marshall
---------------------------------------------------------
C.C. Marshall, Director
Date: March 27, 2000
---------------------------------------------------------
By:/s/ J.D. Swartz
---------------------------------------------------------
J.D. Swartz, Director
Date: March 27, 2000
---------------------------------------------------------
By:/s/ James W. Gibson
---------------------------------------------------------
James W. Gibson, Director
Date: March 27, 2000
---------------------------------------------------------
51
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 6,050
<INT-BEARING-DEPOSITS> 2
<FED-FUNDS-SOLD> 1,359
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 20,043
<INVESTMENTS-CARRYING> 601
<INVESTMENTS-MARKET> 592
<LOANS> 71,020
<ALLOWANCE> 864
<TOTAL-ASSETS> 102,496
<DEPOSITS> 90,818
<SHORT-TERM> 2,000
<LIABILITIES-OTHER> 1,187
<LONG-TERM> 0
0
0
<COMMON> 806
<OTHER-SE> 7,685
<TOTAL-LIABILITIES-AND-EQUITY> 102,496
<INTEREST-LOAN> 6,054
<INTEREST-INVEST> 972
<INTEREST-OTHER> 259
<INTEREST-TOTAL> 7,021
<INTEREST-DEPOSIT> 3,820
<INTEREST-EXPENSE> 3,821
<INTEREST-INCOME-NET> 3,200
<LOAN-LOSSES> 80
<SECURITIES-GAINS> 11
<EXPENSE-OTHER> 2,752
<INCOME-PRETAX> 990
<INCOME-PRE-EXTRAORDINARY> 990
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 671
<EPS-BASIC> .84
<EPS-DILUTED> .76
<YIELD-ACTUAL> 3.60
<LOANS-NON> 299
<LOANS-PAST> 140
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 292
<ALLOWANCE-OPEN> 826
<CHARGE-OFFS> 75
<RECOVERIES> 8
<ALLOWANCE-CLOSE> 864
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 864
</TABLE>
