<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 September 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 NOVEMBER 12, 1999
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<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE PB FINANCIAL SERVICES CORPORATION
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
The Peachtree
Bank
September 30, 1999 December 31,
(Unaudited) 1998
------------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,711,787 $ 699,291
Federal funds sold 10,770,000 5,490,000
Investment securities
Securities available for sale,
at market value 3,794,479 1,526,078
Loans, net 33,629,292 8,047,909
Property and equipment, net 3,885,278 3,880,737
Accrued interest receivable 211,700 39,349
Other assets 168,439 76,269
------------------ ------------
TOTAL ASSETS $ 54,170,975 $ 19,759,633
================== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits
Noninterest-bearing demand 4,826,246 1,415,664
Interest-bearing demand and money market 17,813,022 5,013,418
Savings 138,878 76,437
Time deposits of $100,000 or more 15,653,847 3,808,375
Other time deposits 9,002,463 2,294,510
------------------ ------------
Total deposits 47,434,456 12,608,404
Accrued interest payable 145,375 30,748
Other liabilities 103,423 125,810
------------------ ------------
Total liabilities 47,683,254 12,764,962
Stockholders' equity:
Common stock, $5.00 par value,
2,000,000 shares authorized at December 31, 1998
10,000,000 shares authorized at September 30, 1999
775,375 shares issued and outstanding 3,876,875 3,876,875
Surplus 3,861,784 3,861,784
Accumulated deficit (1,198,747) (739,337)
Accumulated other comprehensive loss-
market valuation reserve on investment
securities available for sale (52,191) (4,651)
------------------ ------------
Total stockholders' equity 6,487,721 6,994,671
------------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 54,170,975 $ 19,759,633
================== ============
</TABLE>
<PAGE> 3
THE PB FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Three Months
Ended Ended
September 30, 1999 September 30, 1999
(Unaudited) (Unaudited)
------------------ ------------------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 1,581,132 $ 752,510
Interest on investment securities
U.S. Government Agency 145,632 54,531
Interest on interest-bearing deposits at banks 4,471 4,173
Interest on federal funds sold 159,670 44,597
------------------ ------------------
Total interest income 1,890,905 855,811
INTEREST EXPENSE
Interest-bearing demand and money market 449,545 195,802
Savings 1,940 815
Time deposits of $100,000 or more 244,232 114,561
Other time deposits 192,276 95,163
Other borrowings -- --
------------------ ------------------
Total interest expense 887,993 406,341
Net interest income 1,002,912 449,470
PROVISION FOR LOAN LOSSES 256,616 79,911
------------------ ------------------
Net interest income after provision for loan losses 746,296 369,559
OTHER OPERATING INCOME
Service charges on deposit accounts 28,088 15,503
Other income 196,478 46,873
------------------ ------------------
Total other income 224,566 62,376
OTHER OPERATING EXPENSE
Salaries and benefits 785,460 260,989
Occupancy expense, net 251,644 93,143
Professional and other outside services 72,559 62,125
Start-up and organization expenses, net -- --
Other expense 320,609 119,003
------------------ ------------------
Total other operating expense 1,430,272 535,260
LOSS BEFORE INCOME TAXES (459,410) (103,325)
INCOME TAXES -- --
------------------ ------------------
NET LOSS $ (459,410) $ (103,325)
================== ==================
BASIC LOSS PER COMMON SHARE $ (0.59) $ (0.13)
</TABLE>
<PAGE> 4
THE PB FINANCIAL SERVICES CORPORATION
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (459,410)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation of premises and equipment 190,438
Provision for loan losses 256,616
Increase in net deferred loan fees 121,983
Increase in accrued interest receivable (172,351)
Increase in other assets (92,170)
Increase in accrued interest payable 114,627
Decrease in other liabilities (22,387)
------------
Net cash used by operating activities (62,654)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities available for sale (2,261,356)
Loans originated, net of principal repayments (25,959,524)
Acquisition of premises and equipment (250,022)
------------
Net cash used by investing activities (28,470,902)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand, money market and savings
deposits 16,272,627
Time deposits accepted, net of repayments 18,553,425
------------
Net cash provided by financing activities 34,826,052
Net increase in cash and cash equivalents 6,292,496
Cash and cash equivalents at beginning of period 6,189,291
------------
Cash and cash equivalents at end of period $ 12,481,787
============
</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 nine-month
period ended September 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.
On July 15, 1999, The PB Financial Corporation (the "Company") became a
successor issuer by acquiring 100% of the outstanding stock of The Peachtree
Bank (the "Bank"). Therefore, the financial statements presented for the
nine-month period and the three-month period ended September 30, 1999 are
consolidated.
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>
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Commercial $ 3,272,697 $ 4,390,348
Real estate-construction 11,212,141 1,941,946
Real estate-commercial and residential 15,428,699 719,795
Installment loans to individuals 3,382,644 1,060,415
Real estate-home equity 825,408 49,561
------------------ ------------------
Total loans 34,121,589 8,162,065
Less: Allowance for loan losses 337,779 81,621
Net deferred loan fees 154,518 32,535
------------------ ------------------
Loans, net $ 33,629,292 $ 8,047,909
</TABLE>
Through September 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 $ (47,540)
-------------
Ending balance - September 30, 1999 $ (52,191)
</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 September 30, 1999, total assets of the Company had grown to $54,170,975.
Loans, the primary category of the Bank's assets, had grown from $8,047,909 at
December 31, 1998 to $33,629,292 at September 30, 1999, funded by deposits.
Deposits were $47,434,456 at September 30, 1999, up from $12,608,404 at December
31, 1998. Growth in federal funds sold and investment securities during the same
period was also funded with deposits.
The Company reported net income (loss) for the quarter of ($103,325) and for the
nine months ended September 30th of ($459,410). Net interest income for the nine
months ended September 30, 1999 was $1,002,912, 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 71% at
September 30, 1999.
The provision for loan losses for the nine months ended September 30, 1999 was
$256,616 and $79,911 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 September 30, 1999. Management believes that the current
allowance of $337,779 is adequate based upon the Bank's loan portfolio and
current economic conditions.
<PAGE> 8
Noninterest income for the nine months ended September 30, 1999 was $224,566,
and $62,376 for the quarter, consisting primarily of mortgage referral fees and
service charges on deposit accounts.
Noninterest expense was $1,430,272 for the first nine months of 1999, and
$535,260 for the quarter, consisting primarily of salaries and benefits and
other operating expenses.
The Company's net (loss) for the nine months ended September 30, 1999 was
($459,410). The loss for the quarter was $103,325. 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.
<PAGE> 9
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 September 30, 1999:
<TABLE>
RISK-BASED CAPITAL RATIOS
<S> <C>
Tier 1 Capital 12.72%
Tier 1 Capital minimum requirement 4.0%
-----
Excess 8.72%
-----
Total Capital 13.34%
Total Capital minimum requirement 8.0%
-----
Excess 5.34%
-----
</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
September 30, 1999, the Bank had spent approximately $2,700 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.
Even with this uncertainty, the Bank has confidence in our preparedness for the
millenium change and in our ability to continue to successfully operate and
handle customer transactions.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not aware of any material pending legal
proceedings to which the Company 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:
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
27 Financial Data Schedule (for SEC use 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
November 15, 1999 /s/ MONTY G. WATSON.
--------------------------------
Monty G. Watson, President and
Chief Executive Officer
November 15, 1999 /s/ KELLY J. JOHNSON
--------------------------------
Kelly J. Johnson, Senior Vice
President and Chief Financial
Officer
(PRINCIPAL FINANCIAL OFFICER)
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,712
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 10,770
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,794
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 33,967
<ALLOWANCE> 338
<TOTAL-ASSETS> 54,171
<DEPOSITS> 47,434
<SHORT-TERM> 0
<LIABILITIES-OTHER> 103
<LONG-TERM> 0
0
0
<COMMON> 3,877
<OTHER-SE> 2,611
<TOTAL-LIABILITIES-AND-EQUITY> 54,171
<INTEREST-LOAN> 1,581
<INTEREST-INVEST> 146
<INTEREST-OTHER> 164
<INTEREST-TOTAL> 1,891
<INTEREST-DEPOSIT> 888
<INTEREST-EXPENSE> 888
<INTEREST-INCOME-NET> 1,003
<LOAN-LOSSES> 257
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,430
<INCOME-PRETAX> (459)
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (459)
<EPS-BASIC> (.59)
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
