<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 AND EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 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.
-----------------------------------------
(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
-----------------------------------------------------------
(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 May 1, 2000: 951,580; $1 par value
Transitional Small Business Disclosure Format 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, 2000..........................................................3
CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME (LOSS) - THREE MONTHS ENDED
MARCH 31, 2000 AND 1999.............................................................................4
CONSOLIDATED STATEMENTS OF CASH FLOWS - THREE
MONTHS ENDED MARCH 31, 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...........................................12
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K..............................................................12
SIGNATURES.............................................................................................13
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and due from banks $ 2,367,892
Federal funds sold 3,740,000
Securities available-for-sale, at fair value 8,751,189
Loans 48,988,643
Less allowance for loan losses 753,192
------------
Loans, net 48,235,451
------------
Equipment 477,242
Other assets 1,572,711
------------
$ 65,144,485
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing demand $ 8,815,843
Interest-bearing demand 9,733,522
Savings 2,810,986
Time 35,120,903
------------
Total deposits 56,481,254
Other liabilities 281,855
------------
Total liabilities 56,763,109
------------
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 (820,913)
Accumulated other comprehensive loss (289,618)
------------
Total stockholders' equity 8,381,376
------------
$ 65,144,485
============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE> 4
GBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED MARCH 31, 2000 and 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
INTEREST INCOME
Loans $ 1,327,523 $ 806,764
Taxable securities 138,013 61,024
Federal funds sold 107,491 27,418
------------ ------------
TOTAL INTEREST INCOME 1,573,027 895,206
------------ ------------
INTEREST EXPENSE ON DEPOSITS 653,399 253,292
------------ ------------
Net interest income 919,628 641,914
PROVISION FOR LOAN LOSSES 79,049 72,346
------------ ------------
Net interest income after provision for loan losses 840,579 569,568
------------ ------------
OTHER INCOME
Service charges on deposit accounts 26,331 13,851
Other operating income 34,649 34,115
------------ ------------
60,980 47,966
------------ ------------
OTHER EXPENSES
Salaries and employee benefits 415,977 330,377
Equipment and occupancy expenses 171,865 141,897
Other operating expenses 145,420 116,919
------------ ------------
733,262 589,193
------------ ------------
Income before income taxes 168,297 28,341
INCOME TAX EXPENSE -- --
------------ ------------
Net income 168,297 28,341
------------ ------------
OTHER COMPREHENSIVE LOSS
Unrealized losses on securities available-for-sale
arising during period (36,093) (61,659)
------------ ------------
Comprehensive income (loss) $ 132,204 $ (33,318)
============ ============
BASIC AND DILUTED EARNINGS PER COMMON SHARE $ 0.18 $ 0.03
============ ============
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
THREE MONTHS ENDED MARCH 31, 2000 and 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 168,297 $ 28,341
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 56,715 51,562
Provision for loan losses 79,049 72,346
Gain on sales of other real estate owned (13,778) --
(Increase) decrease in interest receivable (14,248) 10,263
Increase (decrease) in interest payable 10,656 (107,002)
Other operating activities (42,432) 3,513
------------ ------------
Net cash provided by operating activities 244,259 59,023
------------ ------------
INVESTING ACTIVITIES
Purchases of securities available-for-sale (1,945,024) (3,598,022)
Proceeds from maturities of securities available-for-sale -- 3,500,000
Net (increase) decrease in Federal funds sold 2,910,000 (1,530,000)
Net increase in loans (5,782,760) (4,053,835)
Proceeds from sales of other real estate owned 1,093,687 --
Purchase of equipment (42,329) (35,720)
------------ ------------
Net cash used in investing activities (3,766,426) (5,717,577)
------------ ------------
FINANCING ACTIVITIES
Net increase in deposits 2,697,412 5,813,490
------------ ------------
Net cash provided by financing activities 2,697,412 5,813,490
------------ ------------
Net increase (decrease) in cash and due from banks (824,755) 154,936
Cash and due from banks at beginning of period 3,192,647 1,600,046
------------ ------------
Cash and due from banks at end of period $ 2,367,892 $ 1,754,982
============ ============
CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 642,743 $ 360,294
Income taxes $ -- $ --
NONCASH TRANSACTIONS
Unrealized losses on securities available-for-sale $ 30,828 $ 61,659
Principal balances of loans transferred to other real estate owned $ 1,079,909 $ --
</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 month period ended March 31,
2000 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". 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 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, 2000, the liquidity ratio of the Bank, as determined
under guidelines established by regulatory authorities, was
satisfactory.
7
<PAGE> 8
At March 31, 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
---------------------
GBC GWINNETT
BANCORP, BANKING REGULATORY
INC. COMPANY REQUIREMENT
---------- --------- ------------
<S> <C> <C> <C>
Leverage capital ratios 13.46% 12.99% 4.00%
Risk-based capital ratios:
Core capital 16.77 16.18 4.00
Total capital 18.02 17.43 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,
2000 1999 INCREASE (DECREASE)
-------- -------- --------------------------
(DOLLARS IN THOUSANDS) AMOUNT PERCENT
--------------------- ---------- -----------
<S> <C> <C> <C> <C>
Cash and due from banks $ 2,368 $ 3,193 $ (825) (25.84)%
Federal funds sold 3,740 6,650 (2,910) (43.76)
Securities 8,751 6,837 1,914 27.99
Loans, net 48,235 43,612 4,623 10.60
Equipment 477 491 (14) (2.85)
Other assets 1,573 1,549 24 1.55
-------- -------- --------
$ 65,144 $ 62,332 $ 2,812 4.51
======== ======== ========
Deposits $ 56,481 $ 53,784 $ 2,697 5.01%
Other liabilities 282 304 (22) (7.24)
Stockholders' equity 8,381 8,244 137 1.66
-------- -------- --------
$ 65,144 $ 62,332 $ 2,812 4.51
======== ======== ========
</TABLE>
As indicated in the above table, the Company's total assets grew at a rate of
4.51%. Deposit growth of $2,697,000 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 86.73% at March 31, 2000,
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, 2000 AND 1999
Following is a summary of the Company's operations for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, INCREASE (DECREASE)
--------------------- -------------------------
2000 1999 AMOUNT PERCENT
-------- -------- -------- ---------
(DOLLARS IN THOUSANDS)
---------------------------------------------------
<S> <C> <C> <C> <C>
Interest income $ 1,573 $ 895 $ 678 75.72%
Interest expense 653 253 400 157.96
-------- -------- --------
Net interest income 920 642 278 43.26
Provision for loan losses 79 72 7 9.27
Other income 61 47 14 27.13
Other expense 734 589 145 24.45
-------- -------- --------
Net income $ 168 $ 28 $ 140 493.83
======== ======== ========
</TABLE>
As indicated in the above table, the Company's net interest income has
increased by $278,000 during the first quarter of 2000 as compared to the same
period in 1999. The Company's net interest margin decreased to 6.02% during the
first quarter of 2000 as compared to 7.76% for the first quarter of 1999 and
7.21% for the entire year of 1999. The increase in net interest income is due
primarily to the increased volume of average loans and related loan fees. The
decrease in net interest margin is due primarily to the increase in the average
balance of securities as a component of total interest-earning assets which
yield less than loans.
The provision for loan losses increased by $7,000 during the first quarter of
2000 as compared to the same period in 1999. The amounts provided are due
primarily to loan growth and inherent risk in the loan portfolio. The Company's
allowance for loan losses amounted to 1.54% at March 31, 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.
9
<PAGE> 10
Information with respect to nonaccrual, past due and restructured loans at
March 31, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
MARCH 31,
--------------
2000 1999
------ ------
<S> <C> <C>
Nonaccrual loans $ 52 $ --
Loans contractually past due ninety days or more as to interest
or principal payments and still accruing -- 8
Restructured loans 4 --
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 2 --
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, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
2000 1999
------------ ------------
(DOLLARS IN THOUSANDS)
------------------------------
<S> <C> <C>
Average amount of loans outstanding $ 45,256 $ 27,261
============ ============
Balance of allowance for loan losses at beginning of period $ 674 373
------------ ------------
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 79 72
------------ ------------
Balance of allowance for loan losses at end of period $ 753 $ 445
============ ============
Ratio of net loans charged off during the period to
average loans outstanding --% --%
============ ============
</TABLE>
Other income increased during the first quarter of 2000 as compared to the same
period in 1999 by $14,000 due primarily to increased service charges on deposit
accounts of $12,000.
Other expenses increased during the first quarter of 2000 as compared to the
same period in 1999 by $145,000 due to increased salaries and employee benefits
of $86,000, occupancy and equipment expenses of $30,000, and other operating
expenses of $29,000. Salaries and employee benefits have increased due to an
increase in the number of full time equivalent employees to 24 at March 31,
2000 from 20 at March 31, 1999 and to normal salary increases. Occupancy and
equipment expenses have increased due primarily to an increase of building
lease expense of $12,000. Other operating expenses have increased due to the
overall growth of the Company.
The Company has recorded no provision for income taxes due to cumulative net
operating losses.
11
<PAGE> 12
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.
12
<PAGE> 13
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 12, 2000 BY: /s/ Larry D. Key
-------------------------------------------------
Larry D. Key, President and Chief Executive Officer
DATE: May 12, 2000 BY: /s/ John Hopkins
-------------------------------------------------
John Hopkins, Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,367,892
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,740,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 8,751,189
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 48,988,643
<ALLOWANCE> 753,192
<TOTAL-ASSETS> 65,144,485
<DEPOSITS> 56,481,254
<SHORT-TERM> 0
<LIABILITIES-OTHER> 281,855
<LONG-TERM> 0
0
0
<COMMON> 951,580
<OTHER-SE> 7,429,796
<TOTAL-LIABILITIES-AND-EQUITY> 65,144,485
<INTEREST-LOAN> 1,327,523
<INTEREST-INVEST> 138,013
<INTEREST-OTHER> 107,491
<INTEREST-TOTAL> 1,573,027
<INTEREST-DEPOSIT> 653,399
<INTEREST-EXPENSE> 653,399
<INTEREST-INCOME-NET> 919,628
<LOAN-LOSSES> 79,049
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 145,420
<INCOME-PRETAX> 168,297
<INCOME-PRE-EXTRAORDINARY> 168,297
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 168,297
<EPS-BASIC> .18
<EPS-DILUTED> .18
<YIELD-ACTUAL> 6.02
<LOANS-NON> 52,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 674,000
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 753,000
<ALLOWANCE-DOMESTIC> 753,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
