U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 No. 333-70589
NEW COMMERCE BANCORP
----------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
South Carolina 58-2403844
-------------- ----------
(State of Incorporation) (I.R.S. Employer Identification No.)
501 New Commerce Court, Greenville, South Carolina 29607
-------------------------------------------------
(Address of Principal Executive Offices)
(864) 297-6333
-----------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Not Applicable
--------------------------------------------------------------------------------
(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 the latest practicable date: 1,000,000 shares of common
stock, par value $.01 per share, outstanding as of October 31, 2000.
Transitional Small Business Disclosure Format (check one): Yes No X
-- --
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
-------------------------------
ITEM 1. FINANCIAL STATEMENTS
----------------------------
NEW COMMERCE BANCORP
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
2000 1999
(UNAUDITED) (AUDITED)
------------- ------------
ASSETS
<S> <C> <C>
Cash and due from banks $ 1,614,989 $ 1,608,350
Federal funds sold 1,631,168 5,838,023
Securities, available for sale 9,817,760 3,019,557
Securities, held to maturity 857,585 965,005
Federal Reserve Bank stock 237,250 237,250
Federal Home Loan Bank stock 38,200 38,200
Loans - net 17,470,983 12,855,083
Property and equipment - at cost, less accumulated
depreciation 4,488,116 2,585,116
Other assets 686,299 400,758
------------- --------------
Total assets $36,842,350 $27,547,342
============= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $27,833,401 $18,390,695
Accrued expenses and other liabilities 231,711 144,548
------------- --------------
Total liabilities 28,065,112 18,535,243
------------- --------------
Shareholders' Equity
Common stock - $.01par value, authorized
10,000,000 shares, 1,000,000 shares issued
And outstanding at September 30, 2000 and
December 31, 1999 10,000 10,000
Additional paid-in capital 9,741,658 9,741,658
Retained earnings (deficit) (966,304) (714,544)
Net unrealized holding loss on securities
Available for sale (8,116) (25,015)
------------- --------------
Total shareholders' equity 8,777,238 9,012,099
------------- --------------
Total liabilities and shareholders' equity $36,842,350 $27,547,342
============= ==============
</TABLE>
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
<PAGE>
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION (CONTINUED)
-----------------------------------------
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------
NEW COMMERCE BANCORP
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE FOR THE THREE FOR THE NINE FOR THE NINE
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans (including fees) $ 422,055 $ 205,757 $1,081,594 $ 216,193
Investment securities 161,995 35,500 411,758 76,679
Federal funds sold 23,459 47,279 112,399 73,228
------------ ----------- ------------- -------------
Total interest income 607,509 288,536 1,605,751 366,100
------------ ----------- ------------- -------------
INTEREST EXPENSE
Deposits 287,269 82,257 714,969 91,718
------------ ----------- ------------- -------------
NET INTEREST INCOME 320,240 206,279 890,782 274,382
Provision for Possible Loan Losses 34,680 83,561 89,850 106,190
------------ ----------- ------------- -------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 285,560 122,718 800,932 168,192
NONINTEREST INCOME
Service charges 10,438 2,454 29,878 3,038
Other 26,736 51,217 58,127 54,434
------------ ----------- ------------- ------------
Total noninterest income 37,174 53,671 88,005 57,472
------------ ----------- ------------- ------------
TOTAL INCOME 322,734 176,389 888,937 225,664
NONINTEREST EXPENSES
Salaries and employee benefits 246,483 228,946 659,918 559,851
Occupancy, office and equipment 15,448 27,433 174,671 59,943
Data processing 84,630 41,106 110,193 55,836
Postage and supplies 13,105 11,340 47,741 48,810
Marketing 18,229 43,481 91,013 106,967
Legal 3,077 ----- 23,472 -----
Contract services 15,378 ----- 45,510 -----
Other 28,817 30,214 79,253 181,798
------------ ----------- -------------- ------------
Total noninterest expense 425,167 382,520 1,231,771 1,013,205
------------ ----------- -------------- ------------
LOSS BEFORE INCOME TAX BENEFIT 102,433 206,131 342,834 787,541
INCOME TAX BENEFIT 24,391 60,447 91,074 245,286
------------ ----------- -------------- ------------
NET LOSS 78,042 145,684 $ 251,760 $ 542,255
============ =========== ============= ============
Net loss Per Common Share $ .08 $ .15 $ .25 $ .54
============ =========== ============= ============
</TABLE>
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION (CONTINUED)
------------------------------------------
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------
NEW COMMERCE BANCORP
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2000
(UNAUDITED)
Accumulated
Additional Retained Other Total
Common Stock paid-in Earnings comprehensive Shareholder's
Shares Amount capital (Deficit) Loss Equity
------ ------ -------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 1,000,000 $10,000 $9,741,658 $(714,544) $ (25,015) $9,012,099
Net loss -- -- -- (251,760) -- (251,760)
Other comprehensive income (loss), net of tax:
Net change in unrealized holding losses
on securities available for sale -- -- -- -- 16,899 16,899
Comprehensive income -- -- -- -- (234,861)
Balance, September 30, 2000 1,000,000 $10,000 $9,741,658 $(966,304) $ (8,116) $8,777,238
---------- -------- ------------ --------- ---------- ------------
</TABLE>
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION (CONTINUED)
------------------------------------------
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------
NEW COMMERCE BANCORP
UNAUDITED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDING SEPTEMBER 30
2000 1999
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (251,760) $ (542,255)
Adjustments to reconcile net loss to net cash
Used for operating activities
Depreciation 70,067 12,000
Provision for possible loan losses 89,850 106,190
Deferred income tax benefit (91,074) (245,286)
Increase in other assets (194,467) (97,409)
Increase in accrued expenses and other liabilities 87,163 115,368
----------- --------------
Net cash used for operating activities (290,221) (651,392)
----------- --------------
INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold 4,206,855 (5,398,120)
Purchase of investment securities (6,673,884) (3,209,258)
Net increase in loans (4,705,750) (12,034,219)
Capital expenditures for property (1,973,067) (1,891,110)
Increase in Federal Reserve Bank capital stock (210,000)
Increase in Federal Home Loan Bank capital stock (38,200)
Decrease in real estate options --- 39,800
----------- --------------
Net cash used for investing activities (9,145,846) (22,741,107)
----------- --------------
FINANCING ACTIVITIES
Net increase in deposits 9,442,706 14,232,095
Issuance of capital stock, net of stock offering expenses --- 7,917,977
----------- --------------
Net cash provided by financing activities 9,442,706 22,150,072
----------- --------------
NET INCREASE (DECREASE) IN CASH AND DUE FROM 6,639 (1,242,427)
BANKS
Cash and Due From Banks, Beginning of Period 1,608,350 1,762,031
----------- --------------
Cash and Due From Banks, End of Period $ 1,614,989 $ 519,604
=========== ==============
CASH PAID FOR
Interest $ 697,784 $ 66,891
=========== ==============
Income Taxes $ --- $ ---
=========== ==============
</TABLE>
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
<PAGE>
PART I - FINANCIAL INFORMATION (CONTINUED)
---------------------------------------------
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
---------------------------------------------
NEW COMMERCE BANCORP
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Business activity and organization
New Commerce Bancorp was incorporated to operate as a bank holding
company pursuant to the Federal Bank Holding Company Act of 1956 and the South
Carolina Bank Holding Company Act, and to purchase 100% of the issued and
outstanding stock of New Commerce Bank, an association organized under the laws
of the United States, to conduct a general banking business in Simpsonville,
South Carolina. The bank opened for business on May 17, 1999. The bank is
primarily engaged in the business of accepting demand deposits and savings
insured by the Federal Deposit Insurance Corporation, and providing commercial,
consumer and mortgage loans to the general public.
We sold 1,000,000 shares of common stock at $10 per share. We
capitalized the bank with $8,250,000 of the net proceeds of the offering and the
sale of shares to the organizers. The remaining net offering proceeds were used
to pay our organization expenses and to provide general working capital,
including additional future capital for investment in the bank, if needed. We
believe this amount will be sufficient to fund our activities and the bank in
its initial stages of operations, and that the bank will generate sufficient
income from operations to fund its activities on an ongoing basis. However, we
cannot be sure that either the bank or the company will achieve any particular
level of profitability or that we will not need additional capital in the
future.
Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
nine months ended September 30, 2000 are not necessarily indicative of the
results for the year ending December 31, 2000. For further information, refer to
the consolidated financial statements and footnotes thereto included in our Form
10-KSB for the period ended December 31, 1999 (Registration Number 333-70589) as
filed with the Securities and Exchange Commission.
Until the bank opened for business on May 17, 1999, we were accounted
for as a development stage enterprise as defined by Statement of Financial
Accounting Standards No. 7, "Accounting and Reporting by Development Stage
Enterprises," as we devoted substantially all of our efforts to establishing a
new business. When the bank opened, certain reclassifications and adjustments
were made to the financial statements to reflect that we are now accounted for
as an operating company.
<PAGE>
PART I - FINANCIAL INFORMATION (CONTINUED)
--------------------------------------------
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------
NOTE 2 - STOCK OPTION PLAN
On August 26, 1999, we adopted a stock incentive plan for the benefit
of directors, officers, and employees of the company or the bank. Under the
plan, we may grant up to 150,000 options at an option price per share not less
than the fair market value on the date of grant. On August 26, 1999, we granted
135,000 stock options that expire 10 years from the grant date and are subject
to various vesting schedules to directors, officers, and employees. On August
21, 2000, we granted an additional 22,000 stock options that expire 10 years
from the grant date and are subject to various vesting schedules to officers and
employees. Since January 1, 2000, 19,000 stock options have been forfeited due
to employment terminations. We account for stock options under APB 25 and meet
the disclosure requirements of Financial Accounting Standards Bulletin No. 123,
"Accounting for Stock-Based Compensation".
NOTE 3 - NET LOSS PER COMMON SHARE
SFAS No. 128, "Earnings Per Share" requires that we present basic and
diluted net income per share. Net loss per common share is calculated by
dividing net loss by the weighted average number of common shares outstanding
for each period presented. The weighted average number of common shares
outstanding for basic net loss per common share was 1,000,000 for the nine
months ended September 30, 2000. We did not have any common stock equivalents
during the nine months ended September 30, 1999. Stock options outstanding were
anti-dilutive and had no effect on the computation of weighted average shares
outstanding.
NOTE 4 - FASB ACCOUNTING STANDARDS
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities." All derivatives are to be measured at fair
value and recognized in the balance sheet as assets or liabilities. SFAS No.
138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities" was issued in June 2000 and amends the accounting and reporting
standards of SFAS No. 133 for certain derivative instruments and hedging
activities. The two statements are to be adopted concurrently and are effective
for fiscal years and quarters beginning after June 15, 2000. We do not expect
that the adoption of SFAS No. 133 and SFAS No. 138 will have a material impact
on the presentation of our financial results or financial position.
Other accounting standards that have been issued or proposed by the Financial
Accounting Standards Board that do not require adoption until a future date are
not expected to have a material impact on the consolidated financial statements
upon adoption.
<PAGE>
PART 1 - FINANCIAL INFORMATION
------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-------------------------------------------------------------------
The following is a discussion of our financial condition as of
September 30, 2000 compared to December 31, 1999 and the results of operations
for the three months and nine months ended September 30, 2000. The bank
commenced operations on May 17, 1999. Consequently, results of operations for
the three months and nine months ended September 30, 1999 reflect holding
company activity prior to the opening of the bank and limited bank operating
history, and therefore, a comparison with September 30, 1999 is not meaningful.
The discussion should be read in conjunction with our condensed consolidated
financial statements and accompanying footnotes appearing in this report.
This report contains "forward-looking statements" relating to, without
limitation, future economic performance, plans and objectives of management for
future operations, and projections of revenues and other financial items that
are based on the beliefs of our management, as well as assumptions made by and
information currently available to our management. The words "expect,"
"anticipate," and "believe," as well as similar expressions, are intended to
identify forward-looking statements. Our actual results may differ materially
from the results discussed in the forward-looking statements, and our operating
performance each quarter is subject to various risks and uncertainties that are
discussed in detail in our filings with the Securities and Exchange Commission,
including the "Risk Factors" section in our Registration Statement on Form SB-2
(Registration Number 333-70589) as filed with and declared effective by the
Securities and Exchange Commission.
RESULTS OF OPERATIONS FOR THE PERIOD ENDED SEPTEMBER 30, 2000 COMPARED TO THE
PERIOD ENDED SEPTEMBER 30, 1999:
Our net loss for the three months ended September 30, 2000 was $78,042 compared
to a net loss of $145,684 for the three months ended September 30, 1999. Our net
loss for the nine months ended September 30, 2000 was $251,760, compared to a
net loss of $542,255 for the nine months ended September 30, 1999. We expect to
experience losses until the bank's assets reach a point where the assets
generate income from operations that exceed the bank's fixed costs.
Net Interest Income
The largest component of our net income is net interest income, the difference
between the income earned on assets and the interest paid on deposits and
borrowings used to support such assets. Net interest margin is determined by
dividing the net interest income by average earning assets. Net interest spread
is derived from determining the rates and mix of interest paid on deposits and
borrowings and subtracting them from the yields and mix of earning assets. Net
interest income for the nine month period ended September 30, 2000 was $890,782.
The annualized interest rate margin was 4.10% at September 30, 2000. Loans, the
highest yielding component of earning assets, represented 58.5% of earning
assets at September 30, 2000. Since loans often provide a higher yield than
other types of earning assets, one of our goals is to maintain our loan
portfolio as the highest percentage of total earning assets. Loan interest
income for the nine month period ended September 30, 2000 totaled $1,081,594
while interest earned on investment securities and federal funds sold amounted
to $411,758 and $112,399 respectively.
For the nine months ended September 30, 1999, net interest income totaled
$274,382 and represented interest earned on our escrow account maintained prior
to the opening of the bank as well as net interest earned by the bank from the
May 17, 1999 opening date.
<PAGE>
PART I - FINANCIAL INFORMATION(CONTINUED)
----------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION (CONTINUED)
------------------------------------------------------------------------------
Provision and Allowance for Loan Losses
The provision for loan losses is the charge to operating earnings that our
management feels is necessary to maintain the allowance for possible loan losses
at an adequate level. For the nine months ended September 30, 2000, the
provision for loan losses was $89,850. The loan loss reserve was $266,100 as of
September 30, 2000, or 1.50% of gross loans as compared to $195,800 as of
December 31, 1999, or 1.50% of gross loans. The loan portfolio is periodically
reviewed to evaluate the outstanding loans and to measure both the performance
of the portfolio and the adequacy of the allowance for loan losses. This
analysis includes a review of delinquency trends, actual losses, and internal
credit ratings. Our Management's judgment as to the adequacy of the allowance is
based upon a number of assumptions about future events which it believes to be
reasonable, but which may or may not be accurate. Because of the inherent
uncertainty of assumptions made during the evaluation process, there can be no
assurance that loan losses in future periods will not exceed the allowance for
loan losses or that additional allocations will not be required.
Non-Interest Income
Non-interest income for the nine month period ended September 30, 2000 was
$88,005. Deposit account service charges represented $29,878, while brokered
mortgage loan origination fees totaled $25,617. Fees on ATM and cash dispenser
machines amounted to $15,879. We recorded non-interest income of $57,472 for the
nine months ended September 30, 1999.
Non-Interest Expense
Non-interest expense for the nine month period ended September 30, 2000 was
$1,231,771. Of this amount, salaries and employee benefits comprised $659,918.
Occupancy, office and equipment, including depreciation of furniture and
equipment accounted for $174,671 for the nine month period ended September 30,
2000, and marketing expenses totaled $91,013. Non-interest expense for the nine
month period ended September 30, 1999 amounted to $1,013,205 and consisted
primarily of salaries and benefits of $559,851, marketing of $106,967 and
planning costs of $181,798 incurred during the preopening phase of the Bank.
BALANCE SHEET REVIEW
During the first nine months of 2000, total assets increased by $9,295,008 to
$36,842,350. Net loans increased by $4,615,900 to $17,470,983. Since December
31, 1999, we shifted funds from federal funds sold to higher earning investment
securities. Investment securities including Federal Reserve Bank and Federal
Home Loan Bank stock increased by $6,690,783 to $10,950,795. Deposits increased
by $9,442,706 to $27,833,401. Our management closely monitors and seeks to
maintain appropriate levels of interest earning assets and interest bearing
liabilities so that maturities of assets are such that adequate funds are
provided to meet customer withdrawals and demand. We expect asset and liability
growth to continue during the coming months, with the growth tapering off to a
more deliberate and controllable pace over the longer term, and we believe
capital should continue to be adequate for the next 12 months.
<PAGE>
PART I - FINANCIAL INFORMATION (CONTINUED)
-----------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION (CONTINUED)
------------------------------------------------------------------------------
Loan Portfolio
Balances within the major loan categories as of September 30, 2000 and December
31, 1999 are as follows:
September 30, 2000 December 31, 1999
------------------ -----------------
Commercial and Industrial $ 6,320,150 $ 5,870,988
Real Estate - 1-4 Family 2,340,220 2,182,255
Real Estate - Commercial 8,113,029 4,014,790
Installment and consumer credit lines 963,684 982,850
---------- ----------
$17,737,083 13,050,883
========== ==========
Allowance for loan loss, December 31, 1999 $ 195,800
Provision 89,850
Charge-offs 19,550
----------
Allowance for loan loss, September 30, 2000 $ 266,100
----------
Allowance for loan losses to loans outstanding, December 31, 1999 1.50 %
------
Allowance for loan losses to loans outstanding, September 30, 2000 1.50 %
------
Investment Portfolio
At September 30, 2000, the investment securities portfolio represented 36.1% of
earning assets. We primarily invest in U. S. Government agencies or
government-sponsored agencies, mortgage-backed securities and collateralized
mortgage obligations. We also own stock in the Federal Reserve Bank and The
Federal Home Loan Bank. The following is a table of investment securities by
category at September 30, 2000 and December 31, 1999:
September 30, 2000 December 31, 1999
------------------ -----------------
U. S. Government agencies and U. S.
Government sponsored agencies $ 4,663,580 $ 1,455,216
Agency mortgage-backed securities 2,303,601 486,806
Agency collateralized mortgage obligations 2,739,464 2,042,540
Corporate bonds 968,700 ----------
FRB stock 237,250 237,250
FHLB stock 38,200 38,200
---------- ----------
Total $10,950,795 $ 4,260,012
========== ==========
Deposits
Balances within the major deposit categories as of September 30, 2000 and
December 31, 1999 are as follows:
September 30, 2000 December 31, 1999
------------------ -----------------
Non-interest bearing demand deposits $ 6,461,997 $ 2,824,668
Interest-bearing checking 4,688,550 6,654,818
Savings deposits 285,961 178,404
Money market accounts 6,051,953 3,951,492
Time deposits less than $100,000 5,510,973 2,415,499
Time deposits of $100,000 or more 4,833,967 2,365,814
---------- -----------
$ 27,833,401 $ 18,390,695
========== ===========
<PAGE>
PART I - FINANCIAL INFORMATION (CONTINUED)
-----------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION (CONTINUED)
-------------------------------------------------------------------------------
Liquidity Management
At September 30, 2000, our liquid assets, consisting of cash and due from banks
and federal funds sold, amounted to $3,246,157 and represented 8.81% of total
assets. Investment securities totaled $10,950,795. These securities provide a
secondary source of liquidity since they can be converted to cash in a timely
manner. Our ability to maintain and expand our deposit base and borrowing
capabilities also serves as a source of liquidity. Our loan to deposit ratio at
September 30, 2000 was 63.7%. We plan to meet our future cash needs through the
liquidation of temporary investments, maturities of loans and investment
securities, and generation of deposits. In addition, we maintain lines of credit
with correspondent banks in the amount of $3,500,000 and we are a member of the
Federal Home Loan Bank from which application for borrowings can be made for
leverage purposes.
Our main office has been open since May 8, 2000. Land and construction costs for
the main office totaled approximately $2,321,000. Our permanent branch has been
open for business since June 19, 2000. Land and construction costs incurred
through September 30, 2000 amounted to approximately $1,172,000.
Management believes that our existing stable base of core deposits along with
continued growth in this deposit base, will enable us to successfully meet our
long-term liquidity needs.
Capital Adequacy
Bank holding companies and their banking subsidiaries are required by banking
regulators to meet certain minimum levels of capital adequacy which are
expressed in the form of certain ratios. The Federal Reserve guidelines also
contain an exemption from the capital requirements for bank holding companies
with less than $150 million in consolidated assets. Because we have less than
$150 million in assets, we are not currently subject to these guidelines.
However, the bank falls under these rules as set by bank regulatory agencies.
Capital is separated into Tier 1 capital (essentially common shareholders'
equity less intangible assets) and Tier 2 capital (essentially the allowance for
loan losses limited to 1.25% of risk weighted assets). The first two ratios,
which are based on the degree of credit risk in our assets, require the
weighting of assets based on assigned risk factors and include off-balance sheet
items such as loan commitments and stand-by letters of credit. The ratio of Tier
1 capital to risk-weighted assets must be at least 4% and the ratio of total
capital (Tier 1 capital plus Tier 2) to risk-weighted assets must be at least
8%. The capital leverage ratio supplements the risk-based capital guidelines.
The leverage ratio is Tier 1 capital divided by the adjusted quarterly average
total assets. Banks and bank holding companies are required to maintain a
minimum leverage ratio of 4.0%.
The following table summarizes the bank's risk-based capital at June 30, 2000
(in thousands):
Required Actual
Required amount Percent Actual amount Percent
--------------- -------- ------------- --------
Tier 1 capital $ 1,011 4.0 % $ 7,365 29.14%
Total capital 2,022 8.0 7,631 30.20
Tier 1 leverage ratio 1,322 4.0 7,365 22.28
<PAGE>
PART I - FINANCIAL INFORMATION (CONTINUED)
-----------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION (CONTINUED)
-------------------------------------------------------------------------------
IMPACT OF INFLATION
The assets and liabilities of financial institutions such as ours and the bank
are primarily monetary in nature. Therefore, interest rates have a more
significant effect on our performance than do the effects of changes in the
general rate of inflation and changing prices. In addition, interest rates do
not necessarily move in the same direction or in the same magnitude as the
prices of goods and services. Our management seeks to manage the relationships
between interest-sensitive assets and liabilities in order to protect against
wide interest rate fluctuations, including those, which may result from
inflation.
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
-------------------------
There are no material pending legal proceedings to which we or any of our
subsidiaries is party or of which any of their property is the subject.
ITEM 2. CHANGES IN SECURITIES
-----------------------------
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
---------------------------------------
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------
There were no matters submitted to a vote of security holders during the period
ended September 30, 2000.
ITEM 5. OTHER INFORMATION
-------------------------
None.
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
---------------------------------------
(a) Exhibits.
See Exhibit Index attached hereto.
(b) Reports on Form 8-K.
We did not file any reports on Form 8-K during the quarter ended September 30,
2000.
<PAGE>
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.
NEW COMMERCE BANCORP
(Registrant)
Date: November 10, 2000 By: /s/ James D. Stewart
-----------------------------------------
James D. Stewart
President and Chief Executive Officer
By: /s/ Paula S. King
-----------------------------------------
Paula S. King
Principal Accounting and Chief
Financial Officer
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
27.1. Financial Data Schedule for period ended September 30, 2000
(for electronic filing purposes)
