<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 2000
--------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
COMMISSION FILE NUMBER: 333-19081
GBC Bancorp, Inc.
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(Exact name of small business issuer as specified in its charter)
Georgia 58-2265327
------------------------------- ----------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
165 NASH STREET, LAWRENCEVILLE, GEORGIA 30045
---------------------------------------------
(Address of principal executive offices)
(770) 995-0000
---------------------------
(Issuer's telephone number)
N/A
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(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 [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of August 1, 2000: 951,580; $1 par value
Transitional Small Business Disclosure Format Yes [ ] No [X]
<PAGE> 2
GBC BANCORP, INC. AND SUBSIDIARY
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INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet - June 30, 2000...........................................................3
Consolidated Statements of Income and
Comprehensive Income - Three Months Ended June 30, 2000 and 1999
and Six Months Ended June 30, 2000 and 1999.........................................................4
Consolidated Statements of Cash Flows - Six
Months Ended June 30, 2000 and 1999.................................................................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...........................................14
Item 6 - Exhibits and Reports on Form 8-K..............................................................14
Signatures.............................................................................................15
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
FINANCIAL STATEMENTS
GBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and due from banks $ 4,657,368
Federal funds sold 5,900,000
Securities available-for-sale, at fair value 8,749,256
Loans 58,770,049
Less allowance for loan losses 884,289
------------
Loans, net 57,885,760
Equipment 496,803
Other assets 1,835,292
------------
TOTAL ASSETS $ 79,524,479
============
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS
Demand $ 10,780,203
Interest-bearing demand 11,838,348
Savings 5,773,918
Time 42,146,114
------------
TOTAL DEPOSITS 70,538,583
Other liabilities 362,740
------------
TOTAL LIABILITIES 70,901,323
------------
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY
Common stock, par value $1; 3,000,000 shares authorized;
951,580 shares issued and outstanding 951,580
Capital surplus 8,540,327
Accumulated deficit (574,022)
Accumulated other comprehensive loss (294,729)
------------
TOTAL STOCKHOLDERS' EQUITY 8,623,156
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 79,524,479
============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE> 4
GBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
THREE MONTHS ENDED JUNE 30, 2000 AND 1999 AND
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ ------------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 1,686,806 $ 934,385 $ 3,014,329 $ 1,741,149
Taxable securities 147,972 63,971 285,985 124,995
Federal funds sold 30,194 56,182 137,685 83,600
----------- ----------- ----------- -----------
TOTAL INTEREST INCOME 1,864,972 1,054,538 3,437,999 1,949,744
----------- ----------- ----------- -----------
INTEREST EXPENSE
Deposits 752,295 320,138 1,405,694 573,430
Federal funds purchased 4,692 -- 4,692 --
----------- ----------- ----------- -----------
TOTAL INTEREST EXPENSE 756,987 320,138 1,410,386 573,430
----------- ----------- ----------- -----------
NET INTEREST INCOME 1,107,985 734,400 2,027,613 1,376,314
PROVISION FOR LOAN LOSSES 179,020 52,075 258,069 124,421
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 928,965 682,325 1,769,544 1,251,893
----------- ----------- ----------- -----------
OTHER INCOME
Service charges on deposit accounts 29,604 14,802 55,935 28,653
Other operating income 70,456 36,291 105,106 70,406
----------- ----------- ----------- -----------
100,060 51,093 161,041 99,059
----------- ----------- ----------- -----------
OTHER EXPENSES
Salaries and employee benefits 434,529 318,191 850,506 648,568
Equipment and occupancy expenses 178,890 145,916 350,755 287,813
Other operating expenses 168,715 149,656 314,136 266,575
----------- ----------- ----------- -----------
782,134 613,763 1,515,397 1,202,956
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 246,891 119,655 415,188 147,996
INCOME TAX EXPENSE -- -- -- --
----------- ----------- ----------- -----------
NET INCOME 246,891 119,655 415,188 147,996
----------- ----------- ----------- -----------
OTHER COMPREHENSIVE INCOME (LOSS):
Unrealized gains (losses) on securities
available-for-sale arising during period (5,111) (83,936) (35,939) (145,595)
----------- ----------- ----------- -----------
COMPREHENSIVE INCOME $ 241,780 $ 35,719 $ 379,249 $ 2,401
=========== =========== =========== ===========
BASIC AND DILUTED EARNINGS PER COMMON SHARE $ 0.26 $ 0.13 $ 0.44 $ 0.16
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING
(BASIC AND DILUTED) $ 951,580 $ 950,080 $ 951,580 $ 950,080
=========== =========== =========== ===========
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 FLOWS
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 415,188 $ 147,996
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 117,513 103,952
Provision for loan losses 258,069 124,421
Gain on sales of other real estate owned (12,387) --
Increase in interest receivable (240,039) (50,263)
Increase (decrease) in interest payable 65,530 (60,234)
Other operating activities (11,211) (23,599)
------------ ------------
Net cash provided by operating activities 592,663 242,273
------------ ------------
INVESTING ACTIVITIES
Purchases of securities available-for-sale (1,948,202) (5,598,300)
Proceeds from maturities of securities available-for-sale -- 3,500,000
Net (increase) decrease in Federal funds sold 750,000 (1,220,000)
Net increase in loans (15,654,089) (7,853,395)
Proceeds from sales of other real estate owned 1,092,296 --
Purchase of premises and equipment (122,688) (50,735)
------------ ------------
Net cash used in investing activities (15,882,683) (11,222,430)
------------ ------------
FINANCING ACTIVITIES
Net increase in deposits 16,754,741 10,809,469
------------ ------------
Net cash provided by financing activities 16,754,741 10,809,469
------------ ------------
Net increase (decrease) in cash and due from banks 1,464,721 (170,688)
Cash and due from banks at beginning of period 3,192,647 1,600,046
------------ ------------
Cash and due from banks at end of period $ 4,657,368 $ 1,429,358
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 1,344,856 $ 633,666
Income taxes $ -- $ --
NONCASH TRANSACTIONS
Unrealized losses on securities available-for-sale $ 35,939 $ 145,595
Principal balances of loans transferred to other real estate $ 1,121,909 $ --
</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 for GBC Bancorp, Inc. (the
"Company") 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 and six month periods ended
June 30, 2000 are 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".
The effective date of this statement has been deferred by SFAS No. 137
until fiscal years beginning after June 15, 2000. 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, 2001. 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 recent 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 June 30, 2000, the liquidity ratio of the Company, as determined
under guidelines established by regulatory authorities, was
satisfactory. Management considers the Company's liquidity to be
adequate to meet operating and loan funding requirements. The liquidity
ratio (i.e. cash, short-term assets and marketable assets divided by
deposits) for the Company was approximately 27%. As the Company grows,
management will continue to monitor liquidity and make adjustments as
deemed necessary.
7
<PAGE> 8
At June 30, 2000, 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
--------------------------------
GWINNETT REGULATORY
GBC BANKING MINIMUM
BANCORP, INC. COMPANY REQUIREMENT
--------------- ------------- ---------------
<S> <C> <C> <C>
Leverage capital ratios 12.70% 11.00% 4.00%
Risk-based capital ratios:
Core capital 12.60 10.91 4.00
Total capital 13.85 12.16 8.00
</TABLE>
As the Company continues to grow and the loan portfolio increases, the
capital ratios will decrease to levels closer to, but still in excess
of regulatory minimum requirements.
8
<PAGE> 9
FINANCIAL CONDITION
Following is a summary of the Company's balance sheets for the periods
indicated:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999 INCREASE (DECREASE)
-------------- ---------------- --------------------------------
(DOLLARS IN THOUSANDS) AMOUNT PERCENT
----------------------------------- -------------- --------------
<S> <C> <C> <C> <C>
Cash and due from banks $ 4,657 $ 3,193 $ 1,464 45.85%
Federal funds sold 5,900 6,650 (750) (11.28)
Securities 8,749 6,837 1,912 27.97
Loans, net 57,886 43,612 14,274 32.73
Equipment 497 491 6 1.22
Other assets 1,835 1,549 286 18.46
-------------- ---------------- --------------
$ 79,524 $ 62,332 $ 17,192 27.58
============== ================ ==============
Deposits $ 70,538 $ 53,784 $ 16,754 31.15%
Other liabilities 363 304 59 19.41
Stockholders' equity 8,623 8,244 379 4.60
-------------- ---------------- --------------
$ 79,524 $ 62,332 $ 17,192 27.58
============== ================ ==============
</TABLE>
As indicated in the above table, the Company's total assets grew at a rate of
27.58%. Deposit growth of 16,754,000 and reduced levels of Federal funds sold
were invested in loans and securities. The Company's loan to deposit ratio has
increased from 82.34% at December 31, 1999 to 83.32% at June 30, 2000,
indicating continued strong loan demand and deposit growth in the Company's
primary market area of Gwinnett County, Georgia.
9
<PAGE> 10
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999 AND FOR
THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
Following is a summary of the Company's operations for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
------------------------
2000 1999 INCREASE (DECREASE)
------- ------- ------------------------
(DOLLARS IN THOUSANDS) AMOUNT PERCENT
------------------------ ------- -------
Interest income $ 1,865 $ 1,055 $ 810 76.78%
Interest expense 757 320 437 136.56
------- ------- ------- -------
Net interest income 1,108 735 373 50.75
Provision for loan losses 179 52 127 244.23
Other income 100 51 49 96.08
Other expense 782 614 168 27.36
------- ------- ------- -------
Net income $ 247 $ 120 $ 127 105.83%
======= ======= ======= =======
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------
2000 1999 INCREASE (DECREASE)
------- ------- ------------------------
(DOLLARS IN THOUSANDS) AMOUNT PERCENT
------------------------ ------- -------
<S> <C> <C> <C> <C>
Interest income $ 3,437 $ 1,949 $ 1,488 76.34%
Interest expense 1,410 573 837 146.07
------ ------ ------ -------
Net interest income 2,027 1,376 651 47.31
Provision for loan losses 258 124 134 108.06
Other income 161 99 62 62.63
Other expense 1,515 1,203 312 25.94
------ ------ ------ -------
Net income $ 415 $ 148 $ 267 180.41%
====== ====== ====== =======
</TABLE>
The Company's net interest income increased by $373,000 and $651,000 for the
second quarter and first six months of 2000 as compared to the same periods in
1999. The Company's net interest margin decreased to 6.34% during the first six
months of 2000 as compared to 7.62% for the first six months of 1999 and 7.21%
for the entire year of 1999. The increase in the net interest income is due
primarily to the increased volume of average loans and related loan fees. The
decrease in the net interest margin is due to the increase of securities as a
component of total interest-earning assets which yield less than loans, coupled
with the increase in rates paid on deposits. The average rate paid on deposits
was 5.43% for the first six months of 2000 as compared to 4.82% for the first
six months of 1999 and 4.96% for the entire year of 1999.
10
<PAGE> 11
The provision for loan losses increased by $127,000 and $134,000 for the second
quarter and first six months of 2000 as compared to the same periods in 1999.
The increase is due to a combination of increased net charge-offs of $40,000 and
overall loan growth, as well as inherent risk in the loan portfolio. Management
does not believe the increases in net charge-offs indicate any significant
negative trend in the overall credit quality of the loan portfolio. The
Company's allowance for loan losses as a percentage of total loans amounted to
1.50% at June 30, 2000 as compared to 1.52% at December 31, 1999. 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.
Information with respect to nonaccrual, past due and restructured loans is as
follows:
<TABLE>
<CAPTION>
JUNE 30,
---------------------------------
2000 1999
----------- ------------
(DOLLARS IN THOUSANDS)
---------------------------------
<S> <C> <C>
Nonaccrual loans $ 0 $ 0
Loans contractually past due ninety days or more as to interest
or principal payments and still accruing 0 0
Restructured loans 0 0
Loans, now current about which there are serious doubts as to the
ability of the borrower to comply with loan repayment terms 0 0
Interest income that would have been recorded on nonaccrual
and restructured loans under original terms 2 0
Interest income that was recorded on nonaccrual and restructured loans 0 0
</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.
11
<PAGE> 12
Information regarding certain loans and allowance for loan loss data is as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------------
2000 1999
--------- ---------
(DOLLARS IN THOUSANDS)
------------------------------
<S> <C> <C>
Average amount of loans outstanding $ 50,600 $ 28,130
========= =========
Balance of allowance for loan losses at beginning of period $ 674 $ 373
--------- ---------
Loans charged off
Commercial and financial $ 38 $ 0
Real estate construction 10 0
Instalment 0 0
Other 0 8
--------- ---------
48 8
--------- ---------
Loans recovered
Commercial and financial 0 0
Real estate construction 0 0
Instalment 0 0
--------- ---------
0 0
--------- ---------
Net charge-offs 48 8
--------- ---------
Additions to allowance charged to
operating expense during period 258 124
--------- ---------
Balance of allowance for loan losses at end of period $ 884 $ 489
========= =========
Ratio of net loans charged off during the period to
average loans outstanding .09% .03%
========= =========
</TABLE>
Other income increased by $49,000 and $62,000 for the second quarter and first
six months of 2000 as compared to the same periods in 1999, due to increased
service charges on deposit accounts associated with the overall deposit growth
and other miscellaneous fees.
Other expenses increased by $168,000 and $312,000 for the second quarter and
first six months of 2000. Salaries and employee benefits have increased by
$116,000 and $202,000 during these periods due to an increase in the number of
full time equivalent employees to 24 as of June 30, 2000 from 20 as of June 30,
1999 and to normal salary increases. Equipment and occupancy expenses have
increased by $33,000 and $63,000 during these periods due to increased building
lease expense, equipment depreciation, and service contracts. Other operating
expenses have increased by $19,000 and $48,000 during these periods due to the
overall growth of the Company.
12
<PAGE> 13
The Company has recorded no provision for income taxes due to cumulative net
operating losses.
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.
13
<PAGE> 14
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.
27. Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K.
None.
14
<PAGE> 15
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: August 11, 2000 BY: /s/ Larry D. Key
-----------------------------------------
Larry D. Key, President and Chief
Executive Officer
DATE: August 11, 2000 BY: /s/ John Hopkins
------------------------------------------
John Hopkins, Chief Financial Officer
15
