<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
-------------------
For quarter ended June 30, 1999 Commission File Number
------------- ------------
THE PB FINANCIAL SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
-------------------
GEORGIA 58-2466560
------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9570 MEDLOCK BRIDGE ROAD
DULUTH, GEORGIA 30097
---------------------
(Address of Principal Executive
Offices, including Zip Code)
(770) 814-8100
--------------
(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) has filed all reports required to be filed by
Section 13 or Section 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 requirement for the past 90 days.
Yes [ ] No [X]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the last practicable date.
COMMON STOCK, $5.00 PAR VALUE, 775,375 SHARES AS OF AUGUST 9, 1999
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE PEACHTREE BANK
BALANCE SHEET
<TABLE>
<CAPTION>
June 30, 1999 December 31,
(Unaudited) 1998
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 2,137,748 $ 699,291
Federal funds sold 4,430,000 5,490,000
Investment securities
Securities available for sale,
at market value 3,838,881 1,526,078
Loans, net 25,399,367 8,047,909
Property and equipment, net 3,897,017 3,880,737
Accrued interest receivable 176,004 39,349
Other assets 147,725 76,269
------------ ------------
TOTAL ASSETS $ 40,026,742 $ 19,759,633
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits
Noninterest-bearing demand 3,037,600 1,415,664
Interest-bearing demand and money market 18,146,120 5,013,418
Savings 172,315 76,437
Time deposits of $100,000 or more 6,423,163 3,808,375
Other time deposits 5,536,101 2,294,510
------------ ------------
Total deposits 33,315,299 12,608,404
Accrued interest payable 91,066 30,748
Other liabilities 25,793 125,810
------------ ------------
Total liabilities 33,432,158 12,764,962
Stockholders' equity:
Common stock, $5.00 par value,
2,000,000 shares authorized
775,375 shares issued and outstanding 3,876,875 3,876,875
Surplus 3,861,784 3,861,784
Accumulated deficit (1,090,423) (739,337)
Accumulated other comprehensive loss-
market valuation reserve on investment
securities available for sale (53,652) (4,651)
------------ ------------
Total stockholders' equity 6,594,584 6,994,671
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 40,026,742 $ 19,759,633
============ ============
</TABLE>
<PAGE> 3
THE PEACHTREE BANK
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Three Months
Ended Ended
June 30, 1999 June 30, 1999
(Unaudited) (Unaudited)
----------- ---------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 833,622 $ 515,247
Interest on investment securities
U.S. Government Agency 91,101 55,200
Interest on interest-bearing deposits at banks 298 298
Interest on federal funds sold 115,073 48,862
----------- ---------
Total interest income 1,040,094 619,607
INTEREST EXPENSE
Interest-bearing demand and money market 253,744 156,527
Savings 1,124 645
Time deposits of $100,000 or more 129,673 70,879
Other time deposits 97,111 58,345
Other borrowings -- --
----------- ---------
Total interest expense 481,652 286,396
Net interest income 558,442 333,211
PROVISION FOR LOAN LOSSES 176,705 95,238
----------- ---------
Net interest income after provision for loan losses 381,737 237,973
OTHER OPERATING INCOME
Service charges on deposit accounts 12,585 6,343
Other income 149,604 80,969
----------- ---------
Total other income 162,189 87,312
OTHER OPERATING EXPENSE
Salaries and benefits 524,470 261,303
Occupancy expense, net 55,143 20,326
Professional and other outside services 10,434 6,375
Start-up and organization expenses, net -- --
Other expense 304,964 161,557
----------- ---------
Total other operating expense 895,011 449,561
LOSS BEFORE INCOME TAXES (351,085) (124,276)
INCOME TAXES -- --
----------- ---------
NET LOSS $ (351,085) $(124,276)
=========== =========
BASIC LOSS PER COMMON SHARE $ (0.45) $ (0.16)
</TABLE>
<PAGE> 4
THE PEACHTREE BANK
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(Unaudited)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (351,085)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation of premises and equipment 119,491
Provision for loan losses 176,705
Increase in net deferred loan fees 97,029
Increase in accrued interest receivable (136,655)
Increase in other assets (71,456)
Increase in accrued interest payable 60,318
Decrease in other liabilities (100,017)
------------
Net cash used by operating activities (205,670)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities available for sale (2,387,048)
Loans originated, net of principal repayments (17,624,734)
Acquisition of premises and equipment (110,986)
------------
Net cash used by investing activities (20,122,768)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand, money market and savings
deposits 14,850,516
Time deposits accepted, net of repayments 5,856,379
------------
Net cash provided by financing activities 20,706,895
Net increase in cash and cash equivalents 378,457
Cash and cash equivalents at beginning of period 6,189,291
------------
Cash and cash equivalents at end of period $ 6,567,748
============
</TABLE>
<PAGE> 5
NOTE 1 - 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 for Form 10-QSB. Accordingly, they do not include all
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 six-month period
ended June 30, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999. For further information, refer
to the financial statements and footnotes included in the Bank's annual report
included on Form S-4 for the year ended December 31, 1998.
The financial statements presented are those of The Peachtree Bank (the "Bank").
On July 15, 1999, The PB Financial Corporation (the "Company") became a
successor issuer by acquiring 100% of the outstanding stock of the Bank.
NOTE 2 - ORGANIZATION OF THE BUSINESS
The Peachtree Bank was organized under the laws of the State of Georgia as a
state-chartered commercial bank and began its banking operations on October 5,
1998. The PB Financial Service Corporation, a Georgia corporation, was organized
on December 11, 1998, at the direction of The Peachtree Bank to serve as a bank
holding company for and the sole shareholder of The Peachtree Bank.
On June 29, 1999, the shareholders The Peachtree Bank approved the
reorganization of the Bank into a holding company structure, and on July 15,
1999 the Company completed its acquisition of the Bank.
NOTE 3 - LOANS
Loans are reported at the gross amount outstanding, reduced by the net deferred
loan fees and a valuation allowance for loan losses. Interest income is
recognized over the term of the loans based on the unpaid daily principal amount
outstanding. Loan origination fees are deferred and recognized as income over
the actual life of the loan using the interest method. Loans are generally
placed on nonaccrual status when the payment of principal and/or interest is
past due 90 days or more.
<PAGE> 6
Major classifications of loans are as follows:
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
Commercial $ 2,872,076 $4,390,348
Real estate-construction 9,392,930 1,941,946
Real estate-commercial and residential 11,221,687 719,795
Installment loans to individuals 1,760,484 1,060,415
Real estate-home equity 539,622 49,561
- -----------------------------------------------------------------------------------
Total loans 25,786,799 8,162,065
Less: Allowance for loan losses 257,868 81,621
Net deferred loan fees 129,564 32,535
- -----------------------------------------------------------------------------------
Loans, net $25,399,367 $8,047,909
</TABLE>
Through June 30, 1999, loan charge-offs totaled $458, and there were no
nonperforming loans
NOTE 4 - ACCUMULATED OTHER COMPREHENSIVE INCOME
Accumulated other comprehensive income (loss) is comprised of the following:
<TABLE>
<CAPTION>
Unrealized
Gains (Losses)
On Securities
-------------
<S> <C>
Beginning balance - January 1, 1999 $ (4,651)
Current period change ($49,001)
Ending balance - June 30, 1999 ($53,652)
</TABLE>
NOTE 5 - RECENT ACCOUNTING PRONOUNCEMENTS
In October 1998, the Bank adopted Statement of Financial Accounting Standards
No. 130 (SFAS 130). "Reporting Comprehensive Income". SFAS 130 establishes
standards for reporting the components of comprehensive income and requires that
all items which are required to be recognized under accounting standards as
components of comprehensive income be included in a financial statement that is
displayed with the same prominence as other financial statements. Comprehensive
income includes net income as well as certain items that are reported directly
within a separate component of stockholders' equity and bypass net income. The
adoption of Statement 130 had no impact on the Bank's financial condition or
results of operations.
<PAGE> 7
Effective December 31, 1998, the Bank adopted Statement of Financial Accounting
Standards No. 131 (SFAS 131), "Disclosures about Segments of an Enterprise and
Related information about services, geographic areas, and major customers. The
Bank acts as an independent community financial services provider and offers
traditional banking services to individual, commercial, and government
customers. Because management of the Bank views and operates the Bank as one
versus multiple segments for financial reporting purposes, no segmentation of
bank operations between service, types of customers and market areas is
provided.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 133 (SFAS 133) "Accounting for Derivative Instruments
and Hedging Activities". SFAS 133 is effective for fiscal years beginning after
June 15, 1999. Under SFAS 133 a company will recognize all freestanding
derivative instruments in the statement of financial position as either assets
or liabilities and will measure them at fair value. The difference between a
derivative's previous carrying amount and its fair value shall be reported as a
transition adjustment presented in net income or other comprehensive income as
appropriate in a manner similar to the cumulative effect of a change in
accounting principle. This statement also determines the accounting for the
changes in fair value of a derivative, depending on the intended use of the
derivative and resulting designation. The adoption of SFAS 133 is not expected
to have a significant impact on the financial condition or results of operations
of the Bank.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
At June 30, 1999, total assets of the Bank had grown to $40,026,742. Loans, the
primary category of assets, had grown from $8,047,909 at December 31, 1998 to
$25,399,367 at June 30, 1999, funded by deposits. Deposits were $33,315,299 at
June 30, 1999, up from $12,608,404 at December 31, 1998. Growth in investment
securities to $3,838,881 from $1,526,078 during the same period was also funded
with deposits.
The Bank reported net income (loss) for the quarter of ($124,276) and for the
six months ended June 30th of ($351,085). Net interest income for the six months
ended June 30, 1999 was $558,442, attributed to a greater volume of interest
earning assets that earn a higher interest rate than the rate paid on interest
bearing liabilities. The ratio of loans to deposits was 77% at June 30, 1999.
The provision for loan losses for the six months ended June 30, 1999 was
$176,705 and $95,238 for the quarter. The provision for loan losses reflects
management's estimate of potential loan losses inherent in the portfolio and the
creation of an allowance for loan losses adequate to absorb such losses. The
allowance for loan losses represented approximately 1.0% of total loans
outstanding at June 30, 1999. Management believes that the current allowance of
$257,868 is adequate based upon the Bank's loan portfolio and current economic
conditions.
<PAGE> 8
Noninterest income for the six months ended June 30, 1999 was $162,189, and
$87,312 for the quarter, consisting primarily of mortgage referral fees and
service charges on deposit accounts.
Noninterest expense was $895,011 for the first six months of 1999, and $449,561
for the quarter, consisting primarily of salaries and benefits and other
operating expenses.
The Bank's net (loss) for the six months ended June 30, 1999 was ($351,085). The
loss for the quarter was $124,276. Due to the net operating loss carryforward
and the recognition of tax benefits being dependent on future earnings, there
was no tax provision.
INVESTMENTS
The investment portfolio consists of federal funds sold and U.S. Government
agency obligations, which provide the Bank with a source of liquidity and a
long-term and relatively stable source of income. Additionally, the investment
portfolio provides a balance to interest rate and credit risk in other
categories of the balance sheet while providing a vehicle for the investment of
available funds and furnishing liquidity to The Peachtree Bank.
LIQUIDITY
The Peachtree Bank must maintain, on a daily basis, sufficient funds to cover
the withdrawals from depositors' accounts and to supply new borrowers with
funds. To meet these obligations, the Bank keeps cash on hand, maintains account
balances with its correspondent banks, and purchases and sells federal funds and
other short-term investments. Asset and liability maturities are monitored in an
attempt to match these to meet liquidity needs. It is the policy of the Bank to
monitor its liquidity to meet regulatory requirements and the local funding
requirements.
In addition, the Bank has arrangements with correspondent banks for short-term
unsecured advances up to $3,900,000. No amounts were borrowed under these
arrangements in 1999.
CAPITAL RESOURCES
Management is committed to maintaining capital at a level to protect depositors,
provide for reasonable growth, and fully comply with all regulatory
requirements. The following table presents The Peachtree Bank's regulatory
capital position at June 30, 1999:
<PAGE> 9
RISK-BASED CAPITAL RATIOS
<TABLE>
<S> <C>
Tier 1 Capital 14.96%
Tier 1 Capital minimum requirement 4.0%
-----
Excess 10.96%
-----
Total Capital 16.48%
Total Capital minimum requirement 8.0%
-----
Excess 8.48%
-----
</TABLE>
YEAR 2000 ISSUES
The Board and management of The Peachtree Bank consider the Year 2000 ("Y2K")
computer processing risk to be a very serious risk for the banking and financial
services industry in particular and for all businesses which depend on computer
hardware and software to perform the critical functions of their businesses. Y2K
computer processing risk is defined as the risk associated with computer
hardware or software that fails to process data or to operate in the manner for
which it was designed as a result of century date changes. This risk encompasses
hardware and software owned leased, licensed, or otherwise used by the Bank or
by vendors upon which the Bank depends for mission-critical functions. At the
Bank's inception in October 1998, the Board approved a Year 2000 policy and a
Y2K Committee. The Committee is headed by senior management and meets at least
monthly and regularly reports to the Board of Directors.
The Bank does not use proprietary computer hardware or software. Therefore, the
Bank depends upon outsourced data processing services and third party software.
During 1999, the Bank Y2K Committee developed a plan to address the Year 2000
issues, and conducted a comprehensive review of hardware and software
applications, incorporating guidelines set forth by the FFIEC. The Bank believes
that its systems and those of the vendors relied upon for mission-critical
functions are currently Year 2000 compliant and does not anticipate that
material expenditures will be necessary to implement any modifications. As of
June 30, 1999, the Bank had spent approximately $1,225 of the budgeted $3,000
for Year 2000 costs.
<PAGE> 10
As part of its normal business practices, the Bank maintains a disaster recovery
plan in the event of emergency situations, some of which could arise from Y2K
related problems. The Bank has formulated a Y2K contingency plan that
contemplates, among other issues, converting to a manual processing system to
enable its customers to be served in the event of a crisis. Even with
precautions, occasional interruptions in services provided to the Bank may occur
which may affect the Bank's ability to provide its services. For example,
interruptions in electrical service can occur from harsh weather, traffic
accidents and other incidents. It is possible that such interruptions may occur
during the Year 2000 changeover period.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Bank is not aware of any material pending legal
proceedings to which the Bank is a party or to which any of
its property is subject.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS:
Proxy statement for Annual Meeting of Shareholders held June
29, 1999
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EX-27 Financial Data Schedule (for SEC purposes only)
<PAGE> 11
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned, whereunto duly authorized.
THE PB FINANCIAL SERVICES CORPORATION
August 13, 1999 /s/ KELLY J. JOHNSON
-----------------------------
Kelly J. Johnson
(PRINCIPAL FINANCIAL OFFICER)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THE PEACHTREE BANK FOR THE SIX MONTH PERIOD
FROM JANUARY 1, 1999 THROUGH JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 2,137,748
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,430,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,838,881
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 25,786,799
<ALLOWANCE> 257,868
<TOTAL-ASSETS> 40,026,742
<DEPOSITS> 33,315,299
<SHORT-TERM> 0
<LIABILITIES-OTHER> 25,793
<LONG-TERM> 0
0
0
<COMMON> 3,876,875
<OTHER-SE> 2,717,709
<TOTAL-LIABILITIES-AND-EQUITY> 40,026,742
<INTEREST-LOAN> 833,622
<INTEREST-INVEST> 91,101
<INTEREST-OTHER> 115,371
<INTEREST-TOTAL> 1,040,094
<INTEREST-DEPOSIT> 481,652
<INTEREST-EXPENSE> 481,652
<INTEREST-INCOME-NET> 558,442
<LOAN-LOSSES> 176,705
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 895,011
<INCOME-PRETAX> (351,085)
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (351,085)
<EPS-BASIC> (.45)
<EPS-DILUTED> (.45)
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 81,621
<CHARGE-OFFS> 458
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 257,868
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
