<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Mark One
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1999
-----------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
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)
<TABLE>
<S> <C>
Georgia 58-2265327
- ------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
</TABLE>
165 NASH STREET, LAWRENCEVILLE, GEORGIA 30045
---------------------------------------------
(Address of principal executive offices)
(770) 995-0000
---------------------------
(Issuer's telephone number)
N/A
----------------------------------------------------
(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
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of May 1, 1999: 950,080; $1 par value
Transitional Small Business Disclosure Format (Check One) Yes No X
--- ---
<PAGE> 2
GBC BANCORP, INC. AND SUBSIDIARY
- --------------------------------------------------------------------------------
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET - MARCH 31, 1999..........................................................3
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS - THREE MONTHS ENDED
MARCH 31, 1999 AND 1998.............................................................................4
CONSOLIDATED STATEMENTS OF CASH FLOWS - THREE
MONTHS ENDED MARCH 31, 1999 AND 1998................................................................5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...........................................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............................................7
PART II. OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........................................13
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K..............................................................13
SIGNATURES.............................................................................................14
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
(Unaudited)
ASSETS
<TABLE>
<S> <C>
Cash and due from banks $ 1,754,982
Federal funds sold 4,270,000
Securities available-for-sale, at fair value 4,044,883
Loans 28,493,698
Less allowance for loan losses 445,029
-----------
Loans, net 28,048,669
-----------
Equipment 596,324
Other assets 302,995
-----------
$39,017,853
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing demand $ 5,540,939
Interest-bearing demand 7,373,020
Savings 4,302,417
Time 13,604,641
-----------
Total deposits 30,821,017
Other liabilities 175,888
-----------
Total liabilities 30,996,905
-----------
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 (1,405,859)
Accumulated other comprehensive loss (50,100)
-----------
Total stockholders' equity 8,020,948
-----------
$39,017,853
===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE> 4
GBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
INTEREST INCOME
Loans $ 838,378 $ 188,499
Taxable securities 61,024 22,198
Federal funds sold 27,418 162,687
--------- ---------
Total interest income 926,820 373,384
--------- ---------
INTEREST EXPENSE ON DEPOSITS 253,292 90,485
--------- ---------
Net interest income 673,528 282,899
PROVISION FOR LOAN LOSSES 72,346 78,432
--------- ---------
Net interest income after provision for loan losses 601,182 204,467
--------- ---------
OTHER OPERATING INCOME 16,352 3,811
--------- ---------
OTHER EXPENSES
Salaries and employee benefits 322,557 260,731
Equipment and occupancy expenses 153,696 52,264
Other operating expenses 112,940 96,650
--------- ---------
589,193 409,645
--------- ---------
Income (loss) before income taxes 28,341 (201,367)
INCOME TAX EXPENSE -- --
--------- ---------
Net income (loss) 28,341 (201,367)
--------- ---------
OTHER COMPREHENSIVE LOSS
Unrealized losses on securities available-for-sale
arising during period (61,659) --
--------- ---------
Comprehensive loss $ (33,318) $(201,367)
========= =========
BASIC AND DILUTED EARNINGS (LOSSES) PER COMMON SHARE $ 0.03 $ (0.21)
========= =========
CASH DIVIDENDS PER SHARE OF COMMON STOCK $ -- $ --
========= =========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE> 5
GBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
---------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 28,341 $ (201,367)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 51,562 27,638
Provision for loan losses 72,346 78,432
(Increase) decrease in interest receivable 10,263 (50,461)
Increase (decrease) in interest payable (107,002) 43,026
Other operating activities 3,513 (226)
---------- -----------
Net cash provided by (used in) operating activities 59,023 (102,958)
---------- -----------
INVESTING ACTIVITIES
Purchases of securities available-for-sale (3,598,022) (2,000,000)
Proceeds from maturities of securities available-for-sale 3,500,000 --
Net increase in Federal funds sold (1,530,000) (3,390,000)
Net increase in loans (4,053,835) (5,153,019)
Purchase of equipment (35,720) (192,970)
---------- -----------
Net cash used in investing activities (5,717,577) (10,735,989)
---------- -----------
FINANCING ACTIVITIES
Net increase in deposits 5,813,490 10,405,873
---------- -----------
Net cash provided by financing activities 5,813,490 10,405,873
---------- -----------
Net increase (decrease) in cash and due from banks 154,936 (433,074)
Cash and due from banks at beginning of period 1,600,046 959,117
---------- -----------
Cash and due from banks at end of period $1,754,982 $ 526,043
========== ===========
CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 360,294 $ 47,459
Income taxes $ -- $ --
NONCASH TRANSACTIONS
Unrealized losses on securities available-for-sale $ 61,659 $ --
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
<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,
1999 is not necessarily indicative of the results to be expected for
the full year.
NOTE 2. CURRENT ACCOUNTING DEVELOPMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities".
This statement is required to be adopted for fiscal years beginning
after June 15, 1999. However, the statement permits early adoption as
of the beginning of any fiscal quarter after its issuance. The Company
expects to adopt this statement effective January 1, 2000. SFAS No. 133
requires the Company to recognize all derivatives as either assets or
liabilities in the balance sheet at fair value. For derivatives that
are not designated as hedges, the gain or loss must be recognized in
earnings in the period of change. For derivatives that are designated
as hedges, changes in the fair value of the hedged assets, liabilities,
or firm commitments must be recognized in earnings or recognized in
other comprehensive income until the hedged item is recognized in
earnings, depending on the nature of the hedge. The ineffective portion
of a derivative's change in fair value must be recognized in earnings
immediately. Management does not believe the adoption of SFAS No. 133
will have a material effect on the Company's earnings or financial
position.
There are no other accounting pronouncements that have had, or are
expected to have, a material effect on the Company's financial
statements.
6
<PAGE> 7
GBC BANCORP, INC. AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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.
FORWARD-LOOKING STATEMENTS
The Company may from time to time make written or oral forward-looking
statements, including statements contained in the Company's filings
with the Securities and Exchange Commission and its reports to
stockholders. Statements made, other than those concerning historical
information, should be considered forward-looking and subject to
various risks and uncertainties. Such forward-looking statements are
made based upon management's belief as well as assumptions made by, and
information currently available to, management pursuant to "safe
harbor" provisions of the Private Securities Litigation Reform Act of
1995. The Company's actual results may differ materially from the
results anticipated in forward-looking statements due to a variety of
factors, including governmental monetary and fiscal policies, deposit
levels, loan demand, loan collateral values securities portfolio
values, interest rate risk management; the effects of competition in
the banking business from other commercial banks, thrifts, mortgage
banking firms, consumer finance companies, credit unions, securities
brokerage firms, insurance companies, money market funds and other
financial institutions operating in the Company's market area and
elsewhere, including institutions operating through the Internet,
changes in governmental regulation relating to the banking industry,
including regulations relating to branching and acquisitions, failure
of assumptions underlying the establishment of reserves for loan
losses, including the value of collateral underlying delinquent loans
and other factors. The Company cautions that such factors are not
exclusive. The Company does not undertake to update any forward-looking
statement that may be made from time to time by, or on behalf of, the
Company.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1999, the liquidity ratio of the Bank, as determined
under guidelines established by regulatory authorities, was
satisfactory.
7
<PAGE> 8
At March 31, 1999, 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 22.92 % 22.02% 4.00%
Risk-based capital ratios:
Core capital 26.58 25.53 4.00
Total capital 27.84 26.78 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.
FINANCIAL CONDITION
Following is a summary of the Company's balance sheets for the periods
indicated:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998 INCREASE (DECREASE)
--------- ------------ ------------------------
(DOLLARS IN THOUSANDS) AMOUNT PERCENT
------------------------ ------- ----------
<S> <C> <C> <C> <C>
Cash and due from banks $ 1,755 $ 1,600 $ 155 8.83%
Federal funds sold 4,270 2,740 1,530 35.83
Securities 4,045 4,009 36 0.89
Loans, net 28,049 24,067 3,982 14.20
Equipment 596 612 (16) (2.68)
Other assets 303 297 6 1.98
------- ------- ------- -----
$39,018 $33,325 $ 5,693 14.59
======= ======= ======= =====
Deposits $30,821 $25,008 $ 5,813 18.86%
Other liabilities 176 263 (87) (49.43)
Stockholders' equity 8,021 8,054 (33) (0.41)
------- ------- -------
$39,018 $33,325 $ 5,693 14.59
======= ======= =======
</TABLE>
As indicated in the above table, the Company's total assets grew at a rate of
14.59%. This continued high rate of growth is not uncommon for a de novo bank.
Deposit growth of $5,813,000 has been invested in loans and Federal funds sold.
The Company's loan to deposit ratio has decreased from 97.73% at December 31,
1998 to 92.45% at March 31, 1999, indicating continued strong loan demand in the
Company's primary market area of Gwinnett County.
8
<PAGE> 9
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
Following is a summary of the Company's operations for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED Increase
MARCH 31, (Decrease)
-------------------------------- --------------
1999 1998 Amount
------------- ---------------------------------
(DOLLARS IN THOUSANDS)
------------------------------------------------
<S> <C> <C> <C>
Interest income $927 $ 373 $554
Interest expense 254 90 164
Net interest income 673 283 390
Provision for loan losses 72 78 (6)
Other income 16 4 12
Other expense 589 410 179
Net income (loss) 28 (201) 229
</TABLE>
As indicated in the above table, the Company's net interest income has increased
by $390,000 during the first quarter of 1999 as compared to the same period in
1998. The Company's net interest margin increased to 8.14% during the first
quarter of 1999 as compared to 7.76% for the previous year. The increase in net
interest income is due primarily to the increased volume of average loans and
related loan fees.
The provision for loan losses decreased by $6,000 during the first quarter of
1999 as compared to the same period in 1998. This decrease is due primarily to a
slower rate of loan growth. The Company's allowance for loan losses amounted to
1.56% at March 31, 1999 as compared to 1.53% at December 31, 1998. 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.
9
<PAGE> 10
Information with respect to nonaccrual, past due and restructured loans at March
31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
MARCH 31,
------------
1999 1998
---- ----
<S> <C> <C>
Nonaccrual loans $-- $--
Loans contractually past due ninety days or more as to interest
or principal payments and still accruing 8 --
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.
10
<PAGE> 11
Information regarding certain loans and allowance for loan loss data through
March 31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1999 1998
------ -------
(DOLLARS IN THOUSANDS)
--------------------
<S> <C> <C>
Average amount of loans outstanding $27,261 $4,141
======= ======
Balance of allowance for loan losses at beginning of period $ 373 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 72 78
------- ------
Balance of allowance for loan losses at end of period $ 445 $ 107
======= ======
Ratio of net loans charged off during the period to
average loans outstanding --% --%
======= ======
</TABLE>
Other income was $16,000 and $4,000 for the first quarter of 1999 and 1998
consisting of service charges on deposit accounts and other miscellaneous fees.
Other expenses were $589,000 and $410,000 for the first quarter of 1999 and
1998. Salaries and employee benefits have increased by $61,000 due to normal
salary increases and an increase in employees from 17 as of March 31, 1998 to 20
as of March 31, 1999. Equipment and occupancy expenses have increased by
$101,000 due to the occupation of new banking facilities in the latter part of
1998 and the related rental and other occupation costs.
The Company has recorded no provision for income taxes due to cumulative net
operating losses.
11
<PAGE> 12
YEAR 2000 DISCLOSURES
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Systems that do not
properly recognize the Year 2000 could generate erroneous data or cause systems
to fail. The Company is heavily dependent on computer processing and
telecommunication systems in the daily conduct of business activities. In
addition, the Company must rely on intermediaries, vendors, and customers to
appropriately modify their systems in order that all may continue normal
operations and operate without significant disruption.
To address the Year 2000 problems, the Company formed a Year 2000 committee made
up of key employees headed up by the Chief Operations Officer. This committee
has been charged with the responsibility of assessing problems, overseeing
corrective actions, as well as testing the Year 2000 readiness of all equipment,
software, and applications.
Under the directions of the committee, the Company has conducted a comprehensive
review of its computer systems, programs, applications, and other electronic
components. The systems and components which were identified as mission critical
are being currently tested to insure Year 2000 compliance and will continue to
be tested throughout the remainder of 1999. In addition, the Company has
developed a contingency plan to insure Year 2000 risks are minimal. Based on
these reviews and tests, management does not believe the cost of Year 2000
compliance will be material to the Company's financial statements. Management
also believes that the Company is in substantial compliance with regulatory
timetable requirements regarding the Year 2000 issue.
Another area of Year 2000 concern is customer awareness and preparedness. In
particular, loan customers who are not Year 2000 compliant could experience
business interruptions which could affect their ability to repay debts owed to
the Bank. The Company has communicated with its customers in an effort to insure
awareness and understand the potential impact on their business. Loan customers
considered to have Year 2000 exposure are being required to complete a
questionnaire in order to assess their Year 2000 readiness and the Company's
exposure.
The Company realizes that due to many factors, consumers may withdraw extra
amounts of money which could result in a liquidity issue for the Company.
Additional liquidity has been established to accommodate this issue. Cash
balances will be closely monitored throughout 1999, with extra emphasis placed
during the fourth quarter, to insure adequate liquidity.
The foregoing are forward-looking statements reflecting management's current
assessment and estimates with respect to the Company's Year 2000 compliance
efforts and the impact of Year 2000 issues on the Company's business and
operations. Various factors could cause actual plans and results to differ
materially from those contemplated by such assessments, estimates, and
forward-looking statements, many of which are beyond the control of the Company.
Some of these factors include, but are not limited to representations made by
the Company's vendors and counterparties, technological advances, economic
considerations, and consumer perceptions. The Company's Year 2000 compliance
program is an ongoing process involving continual evaluation and may be subject
to change in response to new developments.
12
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
<TABLE>
<S> <C>
27 Financial Data Schedule (for SEC use only).
</TABLE>
(b) Reports on Form 8-K.
None.
13
<PAGE> 14
SIGNATURES
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.
(Registrant)
DATE: May 13, 1999 BY: /s/ Larry D. Key
------------------ -----------------------------------------
Larry D. Key, President and
Chief Executive Officer
DATE: May 13, 1999 BY: /s/ John Hopkins
------------------ -----------------------------------------
John Hopkins, Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,754,982
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,270,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,044,883
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 28,493,698
<ALLOWANCE> 445,029
<TOTAL-ASSETS> 39,017,853
<DEPOSITS> 30,821,017
<SHORT-TERM> 0
<LIABILITIES-OTHER> 175,888
<LONG-TERM> 0
0
0
<COMMON> 950,080
<OTHER-SE> 7,070,868
<TOTAL-LIABILITIES-AND-EQUITY> 39,017,853
<INTEREST-LOAN> 838,378
<INTEREST-INVEST> 61,024
<INTEREST-OTHER> 27,418
<INTEREST-TOTAL> 926,820
<INTEREST-DEPOSIT> 253,292
<INTEREST-EXPENSE> 253,292
<INTEREST-INCOME-NET> 673,528
<LOAN-LOSSES> 72,346
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 589,193
<INCOME-PRETAX> 28,341
<INCOME-PRE-EXTRAORDINARY> 28,341
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,341
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
<YIELD-ACTUAL> 8.14
<LOANS-NON> 0
<LOANS-PAST> 8,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 373,000
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 445,000
<ALLOWANCE-DOMESTIC> 445,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
