U.S. 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 Exchange Act
---- of 1934
For the quarterly period ended September 30, 2000
---- Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
--------- ---------
Commission file number 333-44161
---------
PSB BANCGROUP, INC.
-------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Florida 59-3454146
------------------------- -----------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
500 South First Street
Lake City, Florida 32025
-------------------------
(Address of Principal Executive Offices)
(904) 754-0002
-------------------------
(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 12, 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 the latest practicable date;
Common stock, par value $.01 per share 515,784 shares
-------------------------------------- -------------------------------
(class) Outstanding at November 1, 2000
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
Condensed Consolidated Balance Sheets -
At September 30, 2000 (Unaudited) and At December 31, 1999..............2
Condensed Consolidated Statements of Operations (Unaudited) -
Three and Nine Months ended September 30, 2000 and 1999.................3
Condensed Consolidated Statement of Changes in Stockholders" Equity
(Unaudited) - Nine Months Ended September 30, 2000......................4
Condensed Consolidated Statements of Cash Flows (Unaudited) -
Nine Months Ended September 30, 2000 and 1999...........................5
Notes to Condensed Consolidated Financial Statements (Unaudited)..........6
Review by Independent Certified Public Accountants........................7
Report on Review by Independent Certified Public Accountants..............8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..............................................9-10
Item 3. Quantitative and Qualitative Disclosure about Market Risk..........11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..................................12
SIGNATURES....................................................................13
1
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
September 30, December 31,
2000 1999
---- ----
Assets (unaudited)
Cash and due from banks $ 763,439 929,837
Interest-bearing deposits with banks 26,836 145,833
Federal funds sold 497,000 2,182,000
---------- ----------
Total cash and cash equivalents 1,287,275 3,257,670
Securities available for sale 3,329,470 1,475,027
Securities held to maturity 500,000 1,000,000
Loans receivable, net of allowance for
loan losses of $113,249 in
2000 and $42,382 in 1999 8,663,400 4,235,120
Accrued interest receivable 99,027 79,439
Premises and equipment, net 1,475,109 366,500
Federal Home Loan Bank stock, at cost 14,400 9,400
Deferred income taxes 373,176 250,095
Other assets 97,097 122,990
---------- ----------
Total assets $ 15,838,954 10,796,241
========== ==========
Liabilities and Stockholders' Equity
Liabilities:
Noninterest-bearing demand deposits 1,265,542 907,021
Savings, NOW and money-market deposits 2,506,347 2,267,127
Time deposits 7,843,341 3,386,261
---------- ----------
Total deposits 11,615,230 6,560,409
Accrued interest payable and other liabilities 236,322 58,562
---------- ----------
Total liabilities 11,851,552 6,618,971
---------- -----------
Stockholders' equity:
Preferred stock - -
Common stock 5,158 5,145
Additional paid-in capital 4,599,398 4,587,657
Accumulated deficit (617,334) (404,244)
Accumulated other comprehensive income (loss) 180 (11,288)
---------- ----------
Total stockholders' equity 3,987,402 4,177,270
---------- ----------
Total liabilities and
stockholders' equity $ 15,838,954 10,796,241
========== ==========
See Accompanying Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations (Unaudited
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- --------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $ 190,183 37,976 457,704 45,521
Securities 59,071 21,604 143,796 22,110
Other interest-earning assets 9,650 48,093 63,145 145,927
------- ------- ------- -------
Total interest income 258,904 107,673 664,645 213,558
------- ------- ------- -------
Interest expense:
Deposits 131,257 23,644 302,101 29,764
Borrowings 458 - 458 12,071
------- ------- ------- -------
Total interest expense 131,715 23,644 302,559 41,835
------- ------- ------- -------
Net interest income 127,189 84,029 362,086 171,723
Provision for loan losses 26,710 10,686 74,843 16,158
------- ------- ------- -------
Net interest income after provision
for loan losses 100,479 73,343 287,243 155,565
------- ------- ------- -------
Noninterest income-
Service charges on deposit accounts
and other fees 23,416 4,554 59,577 5,403
------- ------- ------- -------
Noninterest expense:
Salaries and employee benefits 111,064 87,543 297,812 237,148
Occupancy expense 28,778 20,819 112,332 44,272
Professional fees 23,926 4,352 68,243 19,752
Data processing 26,624 14,518 72,303 32,629
Litigation expense (64,000) - 25,382 -
Other 59,376 27,601 113,838 57,053
------- ------- ------- -------
Total other expense 185,768 154,833 689,910 390,854
------- ------- ------- -------
Loss before income tax benefit (61,873) (76,936) (343,090) (229,886)
Income tax benefit (21,289) (29,185) (130,000) (86,500)
------- ------- ------- -------
Net loss $ (40,584) (47,751) (213,090) (143,386)
======= ======= ======= =======
Loss per share, basic and diluted $ (.08) (.09) (.41) (.37)
======= ======= ======= =======
Weighted-average number of shares
outstanding, basic and diluted 515,711 513,967 515,248 388,253
======= ======= ======= =======
Dividends per share $ - - - -
======= ======= ======= =======
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Condensed Consolidated Statement of Changes in Stockholders" Equity
For the Nine Months Ended September 30, 2000
<TABLE>
Accumulated
Other
Compre-
Common Stock Additional hensive Total
------------------- Paid-In Accumulated Income Stockholders'
Shares Amount Capital Deficit (Loss) Equity
------ ------ ----------- ------------------ --------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 514,478 $ 5,145 4,587,657 (404,244) (11,288) 4,177,270
---------
Comprehensive income (loss):
Net loss (unaudited) - - - (213,090) - (213,090)
Net change in unrealized
loss on securities
available for sale,
net of income taxes
of $6,919 (unaudited) - - - - 11,468 11,468
------
Comprehensive income (loss)
(unaudited) (201,622)
Issuance of common stock upon
exercise of warrants
(unaudited) 1,306 13 11,741 - - 11,754
------- ------ ---------- ----------- -------- ---------
Balance at September 30, 2000
(unaudited) 515,784 $ 5,158 4,599,398 (617,334) 180 3,987,402
======= ====== ========== =========== ======== =========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
Nine Months Ended
September 30,
-----------------
2000 1999
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net loss (213,090) (143,386)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 41,607 8,120
Provision for loan losses 74,843 16,158
Deferred income tax benefit (130,000) (86,500)
Net amortization of fees, costs, premiums and discounts 9,254 1,373
Decrease (increase) in accrued interest receivable and
other assets 6,305 (88,333)
Increase in accrued interest payable and other liabilities 177,760 141,291
---------- -----------
Net cash used in operating activities (33,321) (151,277)
---------- -----------
Cash flows from investing activities:
Purchase of securities available for sale (1,832,447) (525,380)
Purchase of securities held to maturity - (1,000,000)
Proceeds from maturities of securities held to maturity 500,000 -
Purchase of premises and equipment (1,150,216) (110,539)
Net increase in loans (4,515,986) (1,903,269)
Purchase of Federal Home Loan Bank stock (5,000) (9,400)
---------- -----------
Net cash used in investing activities (7,003,649) (3,548,588)
---------- -----------
Cash flows from financing activities:
Net increase in deposits 5,054,821 4,268,046
Net decrease in borrowings - (465,000)
Retirement of common stock - (177,390)
Net proceeds from issuance of common stock 11,754 4,592,802
---------- -----------
Net cash provided by financing activities 5,066,575 8,218,458
---------- ---------
Net (decrease) increase in cash and cash equivalents (1,970,395) 4,518,593
Cash and cash equivalents at beginning of period 3,257,670 44,568
---------- -----------
Cash and cash equivalents at end of period $ 1,287,275 4,563,161
========== ===========
Supplemental disclosure of cash flow information- Cash paid during the period
for:
Interest $ 189,980 23,621
========== ==========
Income taxes $ - -
========== ==========
Noncash transaction-
Accumulated other comprehensive income (loss), change
in unrealized gain (loss) on securities available
for sale, net of tax $ 11,468 (11,288)
========== ==========
See Accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>
5
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited)
(1) Description of Business and Basis of Presentation
General. In the opinion of management, the accompanying condensed
consolidated financial statements contain all adjustments (consisting
principally of normal recurring accruals) necessary to present fairly
the financial position at September 30, 2000, the results of operations
for the three- and nine-month periods ended September 30, 2000 and 1999
and cash flows for the nine-month periods ended September 30, 2000 and
1999. The results of operations for the three and nine months ended
September 30, 2000 are not necessarily indicative of the results to be
expected for the year ending December 31, 2000.
PSB BancGroup, Inc. ("PSB") was incorporated on June 30, 1997. PSB owns
100% of the outstanding common stock of Peoples State Bank ("Bank")
(collectively the "Company"). PSB was organized simultaneously with the
Bank and its only business is the ownership and operation of the Bank.
The Bank is a Florida state-chartered commercial bank and its deposits
are insured by the Federal Deposit Insurance Corporation. The Bank
opened for business on April 28, 1999 and provides community banking
services to businesses and individuals in Lake City, Florida.
(2) Loan Impairment and Loan Losses
No loans were identified as impaired at or during the nine months ended
September 30, 2000 or 1999. The activity in the allowance for loan
losses is as follows:
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------- ---------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C>
Balance at beginning of period $ 90,515 5,472 42,382 -
Provision charged to operations 26,710 10,686 74,843 16,158
Loan charged-off (3,976) - (3,976) -
------- ------- ------- -------
Balance at end of period $ 113,249 16,158 113,249 16,158
======= ======= ======= =======
</TABLE>
(3) Loss Per Share
Basic and diluted loss per share have been computed on the basis of the
weighted-average number of shares of common stock outstanding during
the periods. The Company's common stock equivalents are not dilutive.
(4) Regulatory Matters
The Bank is required to maintain certain minimum regulatory capital
requirements. The following is a summary at September 30, 2000 of the
regulatory capital requirements and the Bank's actual capital on a
percentage basis:
Regulatory
Actual Requirement
------ -----------
Total capital to risk-weighted assets 32.16% 8.00%
Tier I capital to risk-weighted assets 31.14% 4.00%
Tier I capital to total assets -
leverage ratio 21.90% 4.00%
6
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Review by Independent Certified Public Accountants
Hacker, Johnson & Smith PA, the Company's independent certified public
accountants, have made a limited review of the financial data as of September
30, 2000, and for the three- and nine-month periods ended September 30, 2000 and
1999 presented in this document, in accordance with standards established by the
American Institute of Certified Public Accountants.
Their report furnished pursuant to Article 10 of Regulation S-X is included
herein.
7
<PAGE>
Report on Review by Independent Certified Public Accountants
The Board of Directors
PSB BancGroup, Inc.
Lake City, Florida:
We have reviewed the accompanying condensed consolidated balance sheet of
PSB BancGroup, Inc. and Subsidiary (the "Company") as of September 30, 2000, the
related condensed consolidated statements of operations for the three- and
nine-month periods ended September 30, 2000 and 1999, the related condensed
consolidated statements of cash flows for the nine-month periods ended September
30, 2000 and 1999 and the related condensed consolidated statement of
stockholders' equity for the nine-month period ended September 30, 2000. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1999, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the year then ended (not presented herein); and in our report
dated February 8, 2000 we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 1999, is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
HACKER, JOHNSON & SMITH PA
Tampa, Florida
October 30, 2000
8
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Liquidity and Capital Resources
Comparison of September 30, 2000 and December 31, 1999
The Company's primary source of cash during the nine months ended September
30, 2000 was from net deposit inflows of $5.1 million. Cash was used
primarily to originate loans, net of principal repayments, totaling $4.5
million and to purchase securities available for sale of $1.8 million. At
September 30, 2000, the Company had loan commitments totaling $.9 million,
unfunded lines of credit totaling $.5 million and had time deposits of $6.6
million maturing in one year or less. At September 30, 2000, the Bank
exceeded its regulatory liquidity requirements.
Results of Operations
Comparison of Three Months Ended September 30, 2000 and 1999
General. Net loss for the three months ended September 30, 2000 was $40,584 or
$.08 per basic and diluted share compared to a net loss of $47,751 or $.09
per basic and diluted share for the comparable period in 1999. The Bank
commenced operations on April 28, 1999. At September 30, 2000, the Company
had not achieved the asset size to operate profitably.
Interest Income and Expense. Interest income increased by $151,231 from $107,673
for the three months ended September 30, 1999 to $258,904 for the three
months ended September 30, 2000. Interest income on loans increased $152,207
primarily due to an increase in the average loan portfolio balance. Interest
income on securities increased $37,467 primarily due to an increase in the
average securities portfolio balance.
Interest expense on deposits increased $107,613 to $131,257 for the three
months ended September 30, 2000 from $23,644 for the three months ended
September 30, 1999. Interest expense on deposits increased primarily due to
an increase in the average balance of deposits.
Provision for Loan Losses. The provision for loan losses is charged to
operations to increase the total allowance to a level deemed appropriate by
management and is based upon the volume and type of lending conducted by the
Company, industry standards, the amount of nonperforming loans and general
economic conditions, particularly as they relate to the Company's market
areas, and other factors related to the collectibility of the Company's loan
portfolio. The Company recorded a provision for loan losses for the three
months ended September 30, 2000 of $26,710 and the allowance for loan losses
was $113,249 at September 30, 2000. Management believes the allowance is
adequate at September 30, 2000.
Noninterest Expense. Noninterest expense was $185,768 for the three months ended
September 30, 2000 compared to $154,833 for the three months ended September
30, 1999. Noninterest expense increased due to the overall growth of the
Company. The Company recovered $64,000 from its liability insurance carrier
for expenses incurred in the litigation initiated by the Bank's former
President and Chief Executive Officer and the settlement thereof.
Income Tax Benefit. The income tax benefit for the three months ended September
30, 2000 was $21,289 (an effective rate of 34.4%) compared to $29,185 (an
effective tax rate of 37.9%) for the three months ended September 30, 1999.
9
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Nine Months Ended September 30, 2000 and 1999
General. Net loss for the nine months ended September 30, 2000 was $213,090 or
$.41 per basic and diluted share compared to a net loss of $143,386 or $.37
per basic and diluted share for the comparable period in 1999. The Bank
commenced operations on April 28, 1999. At September 30, 2000, the Company
had not achieved the asset size to operate profitably.
Interest Income and Expense. Interest income increased by $451,087 from $213,558
for the nine months ended September 30, 1999 to $664,645 for the nine months
ended September 30, 2000. Interest income on loans increased $412,183,
primarily due to an increase in the average loan portfolio balance. Interest
income on securities increased $121,686 primarily due to an increase in the
average securities portfolio balance.
Interest expense on deposits increased $272,337, from $29,764 for the nine
months ended September 30, 1999 to $302,101 for the nine months ended
September 30, 2000. Interest expense on deposits increased primarily due to
an increase in the average balance of deposit accounts.
Provision for Loan Losses. The provision for loan losses is charged to
operations to increase the total allowance to a level deemed appropriate by
management and is based upon the volume and type of lending conducted by the
Company, industry standards, the amount of nonperforming loans and general
economic conditions, particularly as they relate to the Company's market
areas, and other factors related to the collectibility of the Company's loan
portfolio. The Company recorded a provision for loan losses for the nine
months ended September 30, 2000 of $74,843 and the allowance for loan losses
was $113,249 at September 30, 2000. Management believes the allowance is
adequate at September 30, 2000.
Noninterest Expense. Noninterest expense was $689,910 for the nine months ended
September 30, 2000 compared to $390,854 for the nine months ended September
30, 1999. Noninterest expense increased primarily due to the overall growth
of the Company. The Company recovered $64,000 from its liability insurance
carrier for expenses incurred in the litigation initiated by the Bank's
former President and Chief Executive Officer and the settlement thereof.
Income Tax Benefit. The income tax benefit for the nine months ended September
30, 2000 was $130,000 (an effective rate of 37.9%) compared to $86,500 (an
effective tax rate of 37.6%) for the nine months ended September 30, 1999.
10
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk of loss from adverse changes in market prices and rates.
The Company's market risk arises primarily from interest rate risk inherent in
its lending and deposit taking activities. The Company has little or no risk
related to trading accounts, commodities or foreign exchange.
Management actively monitors and manages its interest rate risk exposure. The
primary objective in managing interest-rate risk is to limit, within established
guidelines, the adverse impact of changes in interest rates on the Company's net
interest income and capital, while adjusting the Company's asset-liability
structure to obtain the maximum yield-cost spread on that structure. Management
relies primarily on its asset-liability structure to control interest rate risk.
However, a sudden and substantial increase in interest rates could adversely
impact the Company's earnings, to the extent that the interest rates borne by
assets and liabilities do not change at the same speed, to the same extent, or
on the same basis. There have been no significant changes in the Company's
market risk exposure since December 31, 1999.
11
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits are filed with or incorporated by
reference into this report. The exhibit(s) marked by a single asterisk (*)
were previously filed as a part of the Holding Company's Registration
Statement on Form SB-2, as effective with the Securities and Exchange
Commission on January 13, 1998, Registration No. 333-44161 and are hereby
incorporated by reference. The exhibits marked by a double asterisk (**)
were previously filed as part of the Holding Company's Amendment No. 3 to
the Registration Statement on Form SB-2 as filed with the Securities and
Exchange Commission on May 18, 1998, Registration No. 333-44161 and hereby
incorporated by reference. The exhibits marked by a triple asterisk (***)
was previously filed as part of the Holding Company's Form 10-QSB as filed
with the Securities and Exchange Commission on May 5, 2000 and are hereby
incorporated by reference. The exhibit marked by the quadruple asterisk
(****) was previously filed as part of the Holding Company's Definitive
Form 14-A, as filed with the Securities and Exchange Commission on March
16, 2000 and is hereby incorporated by reference. The exhibit numbers
correspond to the exhibit numbers in the referenced documents, except for
Exhibit No. 10.7, which was designated Appendix A in the referenced
Definitive Form 14-A.
Exhibit No. Description of Exhibit
*3.1 Articles of Incorporation of PSB
BancGroup, Inc.
*3.2 Bylaws of PSB BancGroup, Inc.
*4.1 Specimen Common Stock Certificate
*4.2 Specimen Warrant Certificate
*4.4 PSB Bancgroup, Inc. Warrant Plan
**4.5 Amended and Restated Warrant Plan
*10.1 Employment Agreement with Robert W.
Woodard
*10.2 Land Purchase Agreement
**10.3 Addendum to Land Purchase Agreement
**10.4 Amended Employment Agreement with
Robert W. Woodard
***10.6 Employment Agreement with Wesley T.
Small
****10.7 Amended 1998 Employee Stock Option
and Limited Rights Plan
27 Financial Data Schedule
(for SEC use only)
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during the
three months ended September 30, 2000.
13
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PSB BANCGROUP, INC.
(Registrant)
Date: November 6, 2000 By: /s/Alton C. Milton, Sr.
--------------------------- -----------------------------
Alton C. Milton, Sr.,
Chairman of the Board
Date: November 6, 2000 By: /s/ Robert W. Woodard
--------------------------- -----------------------------
Robert W. Woodard,
President and Chief Executive
Officer (Principal Financial Officer)
14
