<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 10-QSB
[x] Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
for the quarter ended March 31, 1998
[ ] Transition Report Under Section 13 or 15(d)
of the Securities Act of 1934.
For the transition period from to
--------- ---------
Commission File Number: 333-19081
GBC BANCORP, INC.
-----------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
GEORGIA 58-2265327
- ------------------------------------ ---------------------------
(State Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
318 West Pike Street, Suite 475
Lawrenceville, Georgia 30246
----------------------------------------
(Address of Principal Executive Offices)
(770) 995-0000
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
--------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report
Check whether the Issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
There were 950,080 shares of the Registrant's common stock outstanding
as of May 13, 1998.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [x]
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I
FINANCIAL INFORMATION .................................................................... 1
ITEM 1. FINANCIAL STATEMENTS ........................................................ 1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION ................... 5
PART II
OTHER INFORMATION ........................................................................ 11
ITEM 1. LEGAL PROCEEDINGS ........................................................... 11
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS ................................... 11
ITEM 3. DEFAULTS UPON SENIOR SECURITIES ............................................. 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ......................... 11
ITEM 5. OTHER INFORMATION ........................................................... 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ............................................ 12
SIGNATURE ................................................................................ 13
EXHIBIT INDEX ............................................................................ 13
</TABLE>
(i)
<PAGE> 3
PART I - FINANCIAL INFORMATION
FINANCIAL STATEMENTS
GBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and due from banks $ 526,043
Federal funds sold 13,090,000
Securities available-for-sale, at fair value 2,000,000
Loans 7,023,488
Less allowance for loan losses 107,128
------------
Loans, net 6,916,360
Premises and equipment 311,627
Other assets 253,617
------------
Total assets $ 23,097,647
============
Liabilities and Stockholders' Equity
Deposits
Demand $ 3,964,314
Interest-bearing demand 3,603,786
Savings 2,308,682
Time 4,800,733
------------
Total deposits 14,677,515
Other liabilities 71,024
------------
Total liabilities 14,748,539
------------
Commitments and contingent liabilities
Stockholders' equity
Common stock, par value $1; 3,000,000 shares authorized;
950,080 shares issued and outstanding 950,080
Capital surplus 8,526,827
Accumulated deficit (1,127,799)
Accumulated other comprehensive income --
------------
Total stockholders' equity 8,349,108
------------
Total liabilities and stockholders' equity $ 23,097,647
============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
1
<PAGE> 4
GBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
1998
-----------
<S> <C>
Interest income
Loans $ 188,499
Taxable securities 22,198
Federal funds sold 162,687
-----------
Total interest income 373,384
-----------
Interest expense on deposits 90,485
-----------
Net interest income 282,899
Provision for loan losses 78,432
-----------
Net interest income after provision for loan losses 204,467
-----------
Other operating income 3,811
-----------
Other expenses
Salaries and other employee benefits 260,731
Occupancy and equipment expenses 52,264
Other operating expenses 96,650
-----------
Total other expenses 409,645
-----------
Net loss before income taxes (201,367)
Income tax expense --
-----------
Net loss (201,367)
-----------
Other comprehensive losses:
Unrealized losses on securities available-for-sale
arising during period --
-----------
Comprehensive loss $ (201,367)
===========
Basic and diluted losses per common share $ 0.21
===========
Weighted average shares outstanding (basic and diluted) 950,080
===========
Cash dividends per share of common stock $ --
===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
2
<PAGE> 5
GBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
1998
------------
<S> <C>
OPERATING ACTIVITIES
Net loss $ (201,367)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 27,638
Provision for loan losses 78,432
Increase in interest receivable (50,461)
Increase in interest payable 43,026
Other operating activities (226)
------------
Net cash used in operating activities (102,958)
------------
INVESTING ACTIVITIES
Purchases of securities available-for-sale (2,000,000)
Net increase in Federal funds sold (3,390,000)
Net increase in loans (5,153,019)
Purchase of premises and equipment (192,970)
------------
Net cash used in investing activities (10,735,989)
------------
FINANCING ACTIVITIES
Net increase in deposits 10,405,873
------------
Net cash provided by financing activities 10,405,873
------------
Net decrease in cash and due from banks (433,074)
Cash and due from banks, beginning of period 959,117
------------
Cash and due from banks, end of period $ 526,043
============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for:
Interest $ 47,459
Income taxes $ --
NONCASH TRANSACTION
Unrealized losses on securities available-for-sale $ --
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE> 6
GBC BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
The consolidated financial information included herein is unaudited;
however, such information reflects all adjustments (consisting solely
of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of results for the interim
period.
The results of operations for the three month period ended March 31,
1998 is not necessarily indicative of the results to be expected for
the full year.
NOTE 2. CURRENT ACCOUNTING DEVELOPMENTS
The adoption of the provisions of SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" that became effective on January 1, 1998 did not have a
material effect on the Company's financial statements.
The adoption of SFAS No. 130, "Reporting Comprehensive Income", that
became effective on January 1, 1998 required the Company to report
comprehensive income in the Company's Statements of Operations and
Comprehensive Loss.
There are no other recent accounting pronouncements that have had, or
are expected to have, a material effect on the Company's financial
statements.
4
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following is management's discussion and analysis of certain
significant factors which have affected the financial position and
operating results of the Company and its bank subsidiary, Gwinnett
Banking Company (the "Bank"), during the periods included in the
accompanying consolidated financial statements.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the liquidity ratio of the Bank, as determined
under guidelines established by regulatory authorities, was
satisfactory.
At March 31, 1998, the capital ratios of the Company and the Bank were
adequate based on regulatory minimum capital requirements. The minimum
capital requirements and the actual capital ratios for the Company and
the Bank are as follows:
<TABLE>
<CAPTION>
Actual
----------------------
GBC Gwinnett
Bancorp Banking Regulatory
Inc. Company Requirement
--------- ---------- -----------
<S> <C> <C> <C>
Leverage capital ratios 43.97% 42.06% 4.00%
Risk-based capital ratios:
Core capital 80.80 77.29 4.00
Total capital 81.85 78.34 8.00
</TABLE>
As the Company continues to grow, the capital ratios will decrease
rapidly to levels closer to, but still in excess of regulatory minimum
requirements.
5
<PAGE> 8
FINANCIAL CONDITION
Following is a summary of the Company's balance sheets for the periods
indicated:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997 Increase (Decrease)
------------- ---------------- -------------------------------
(Dollars in Thousands) Amount Percent
---------------------------------- -------------- ---------------
<S> <C> <C> <C> <C>
Cash and due from banks $ 526 $ 959 $ (433) (45.15)%
Securities 2,000 -- 2,000 --
Federal funds sold 13,090 9,700 3,390 34.95
Loans 6,916 1,842 5,074 275.46
Premises and equipment 312 139 173 124.46
Other assets 254 210 44 20.95
------- ------- --------
$23,098 $12,850 $ 10,248 79.75
======= ======= ========
Deposits $14,678 $ 4,272 $ 10,406 243.59 %
Other liabilities 71 28 43 153.57
Stockholders' equity 8,349 8,550 (201) (2.35)
------- ------- --------
$23,098 $12,850 $ 10,248 79.75
======= ======= ========
</TABLE>
As indicated in the above table, the Company's total assets grew at a rate of
79.75%. This high rate of growth is not uncommon for a de novo bank. Significant
deposit growth of $10,406,000 was invested in loans, securities, and Federal
funds sold. The Company's loan to deposit ratio has increased from 43.78% at
December 31, 1997 to 47.85% at March 31, 1998.
6
<PAGE> 9
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998
Following is a summary of the Company's operations for the periods indicated.
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
-----------------
1998
-----------------
(Dollars in
Thousands)
-----------------
<S> <C>
Interest income $ 373
Interest expense 90
Net interest income 283
Provision for loan losses 78
Other income 4
Other expense 410
Net (loss) (201)
</TABLE>
The Company's net interest income was $283,000 during the first quarter of 1998.
The Company's net interest margin increased to 7.93% during the first quarter of
1998 as compared to 5.74% for the previous year. The increase in the net
interest margin is due primarily to the significant loan growth and related loan
fees.
The provision for loan losses was $78,000 during the first quarter of 1998. This
amount is due exclusively to loan growth. The Company's reserve for loan losses
amounted to 1.52% at March 31, 1998 as compared to 1.53% at December 31, 1997.
The allowance for loan losses is maintained at a level that is deemed
appropriate by management to adequately cover all known and inherent risks in
the loan portfolio. Management's evaluation of the loan portfolio includes a
continuing review of loan loss experience, current economic conditions which may
affect the borrower's ability to repay and the underlying collateral value.
7
<PAGE> 10
Information with respect to nonaccrual, past due and restructured loans at March
31, 1998 is as follows:
<TABLE>
<CAPTION>
March 31,
-----------------
1998
-----------------
(Dollars in
Thousands)
-----------------
<S> <C>
Nonaccrual loans $ --
Loans contractually past due ninety days or more as to interest
or principal payments and still accruing --
Restructured loans --
Loans, now current about which there are serious doubts as to the
ability of the borrower to comply with loan repayment terms --
Interest income that would have been recorded on nonaccrual
and restructured loans under original terms --
Interest income that was recorded on nonaccrual and restructured loans --
</TABLE>
It is the policy of the Bank to discontinue the accrual of interest income when,
in the opinion of management, collection of such interest becomes doubtful. This
status is accorded such interest when (1) there is a significant deterioration
in the financial condition of the borrower and full repayment of principal and
interest is not expected and (2) the principal or interest is more than ninety
days past due, unless the loan is both well-secured and in the process of
collection.
Loans classified for regulatory purposes as loss, doubtful, substandard, or
special mention that have not been included in the table above do not represent
or result from trends or uncertainties which management reasonably expects will
materially impact future operating results, liquidity or capital resources.
These classified loans do not represent material credits about which management
is aware of any information which causes management to have serious doubts as to
the ability of such borrowers to comply with the loan repayment terms.
8
<PAGE> 11
Information regarding certain loans and allowance for loan loss data through
March 31, 1998 is as follows:
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
-----------------
1998
-----------------
(Dollars in
Thousands)
-----------------
<S> <C>
Average amount of loans outstanding $ 4,141
============
Balance of allowance for loan losses at beginning of period $ 29
------------
Loans charged off
Commercial and financial $ --
Real estate mortgage --
Instalment --
------------
--
------------
Loans recovered
Commercial and financial --
Real estate mortgage --
Instalment --
------------
--
------------
Net charge-offs --
------------
Additions to allowance charged to operating expense during period 78
------------
Balance of allowance for loan losses at end of period $ 107
============
Ratio of net loans charged off during the period to
average loans outstanding --%
============
</TABLE>
Other income was $3,000 for the first quarter of 1998 consisting of $1,000 of
service charges on deposit accounts and $2,000 of other miscellaneous fees.
Other expenses were $410,000 for the first quarter of 1998. Salaries and
employee benefits of $261,000 was the largest component of total other expenses.
The Company has recorded no provision for income taxes due to cumulative net
operating losses.
The Company was still in its organizational stage as of March 31, 1997.
Therefore, statements of operations and cash flows for the period ended March
31, 1997 and a comparative analysis to March 31, 1998 are not presented.
9
<PAGE> 12
Capability of Data Processing Software to Accommodate the Year 2000
Like many financial institutions, the Company relies upon computers for the
daily conduct of their business and for data processing generally. There is
concern among industry experts that commencing on January 1, 2000, computers
will be unable to "read" the new year and that there may be widespread computer
malfunctions. Management has assessed the electronic systems, programs,
applications, and other electronic components used in operations and believes
that the Company's hardware and software have been programmed to be able to
accurately recognize the year 2000, and that significant additional costs will
not be incurred in connection with the year 2000 issue, although there can be no
assurances in this regard.
The Company is not aware of any known trends, events or uncertainties, other
than the effect of events as described above, that will have or that are
reasonably likely to have a material effect on its liquidity, capital resources
or operations. The Company is also not aware of any current recommendations by
the regulatory authorities which, if they were implemented, would have such an
effect.
10
<PAGE> 13
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES AND USE OR PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
11
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits required by Item 601 of Regulation S-B
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
3.1 Articles of Incorporation of the Company, as amended
(incorporated by reference from Exhibit 3.1 to the
Registration Statement on Form SB-2, as amended
(Registration No. 333-19081)).
3.2 Bylaws of the Company (incorporated by reference from
Exhibit 3.2 to the Registration Statement on Form SB-2, as
amended (Registration No. 333-19081)).
4.1 Specimen Common Stock Certificate (incorporated by reference
from Exhibit 4.2 to the Registration Statement on Form SB-2,
as amended (Registration No. 333-19081)).
10.1 Provesa, Inc. Data Processing Agreement (incorporated by
reference from Exhibit 10.3 to the Registration Statement on
Form SB-2, as amended (Registration No. 333-19081)).
10.2 Real Estate Commercial Lease Contract dated as of March 17,
1998, by and between GBC Properties, LLC and Gwinnett
Banking Company (incorporated by reference from Exhibit 10.4
to the Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1997).
21.1 Subsidiaries of the Registrant (incorporated by reference
from Exhibit 21.1 to the Registration Statement on Form
SB-2, as amended (Registration No. 333-19081)).
27.1 Financial Data Schedule (for SEC use only).
</TABLE>
(b) Reports on Form 8-K filed in the first quarter of 1998: None.
12
<PAGE> 15
SIGNATURE
In accordance with the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GBC BANCORP, INC.
By: /s/ Larry D. Key
-------------------------------------
Larry D. Key, President and Chief
Executive Officer
Date: May 13, 1998
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
3.1 Articles of Incorporation of the Company, as amended
(incorporated by reference from Exhibit 3.1 to the
Registration Statement on Form SB-2, as amended
(Registration No. 333-19081)).
3.2 Bylaws of the Company (incorporated by reference from
Exhibit 3.2 to the Registration Statement on Form SB-2, as
amended (Registration No. 333-19081)).
4.1 Specimen Common Stock Certificate (incorporated by reference
from Exhibit 4.2 to the Registration Statement on Form SB-2,
as amended (Registration No. 333-19081)).
10.1 Provesa, Inc. Data Processing Agreement (incorporated by
reference from Exhibit 10.3 to the Registration Statement on
Form SB-2, as amended (Registration No. 333-19081)).
10.2 Real Estate Commercial Lease Contract dated as of March 17,
1998, by and between GBC Properties, LLC and Gwinnett
Banking Company (incorporated by reference from Exhibit 10.4
to the Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1997).
21.1 Subsidiaries of the Registrant (incorporated by reference
from Exhibit 21.1 to the Registration Statement on Form
SB-2, as amended (Registration No. 333-19081)).
27.1 Financial Data Schedule (for SEC use only).
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 526,043
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 13,090,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,000,000
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 7,023,488
<ALLOWANCE> 107,128
<TOTAL-ASSETS> 23,097,647
<DEPOSITS> 14,677,515
<SHORT-TERM> 0
<LIABILITIES-OTHER> 71,024
<LONG-TERM> 0
0
0
<COMMON> 950,080
<OTHER-SE> 7,399,028
<TOTAL-LIABILITIES-AND-EQUITY> 23,097,647
<INTEREST-LOAN> 188,499
<INTEREST-INVEST> 22,198
<INTEREST-OTHER> 162,687
<INTEREST-TOTAL> 373,384
<INTEREST-DEPOSIT> 90,485
<INTEREST-EXPENSE> 90,485
<INTEREST-INCOME-NET> 282,899
<LOAN-LOSSES> 78,432
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 409,645
<INCOME-PRETAX> (201,367)
<INCOME-PRE-EXTRAORDINARY> (201,367)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (201,367)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> (.21)
<YIELD-ACTUAL> 7.93
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 29
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 107
<ALLOWANCE-DOMESTIC> 107
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
