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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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For quarter ended September 30, 2000 Commission File Number
------------------ ------------
THE PB FINANCIAL SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
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GEORGIA 58-2466560
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9570 MEDLOCK BRIDGE ROAD
DULUTH, GEORGIA 30097
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(Address of Principal Executive
Offices, including Zip Code)
(770) 814-8100
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(Issuer's telephone number, including area code)
NOT APPLICABLE
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(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 [X] No [ ]
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 10, 2000
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. Financial Information
CONSOLIDATED BALANCE SHEETS
September 30, 2000 (unaudited) and December 31, 1999 3
Consolidated Statements of Income
Three Months Ended September 30, 2000 and 1999
(Unaudited) 4
Consolidated Statements of Income
Nine Months Ended September 30, 2000 and 1999
(Unaudited) 5
Consolidated Statements of Comprehensive Income
Nine Months Ended September 30, 2000 and 1999
(Unaudited) 6
Consolidated Statements of Cash Flow
Nine Months Ended September 30, 2000 and 1999
(Unaudited) 7
Notes to Consolidated Financial Statements 8-9
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-12
Part II. Other Information
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signature 14
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE PB FINANCIAL SERVICES CORPORATION
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
Unaudited Audited
------------------ -----------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,911,258 $ 4,343,721
Federal funds sold 8,140,000 7,476,128
Investment securities available for sale, at market value 11,054,366 6,653,163
Other investments 120,100 120,100
Loans, net of deferred loan fees 62,745,945 40,163,433
Less allowance for loan losses 624,974 399,991
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Loans, net 62,120,971 39,763,442
Property and equipment, net 3,669,495 3,819,279
Accrued interest receivable 605,001 289,671
Other assets 587,207 86,382
------------ ------------
TOTAL ASSETS $ 88,208,398 $ 62,551,886
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits
Noninterest-bearing demand 5,078,289 5,335,482
Interest-bearing demand and money market 24,665,230 18,079,670
Savings 284,851 144,957
Time deposits of $100,000 or more 30,730,542 21,367,001
Other time deposits 16,211,482 9,082,782
------------ ------------
Total deposits 76,970,394 54,009,892
Repurchase agreements 3,330,820 1,797,141
Borrowings 77,902 72,799
Accrued interest payable 333,857 149,045
Other liabilities 117,779 37,211
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Total liabilities 80,830,752 56,066,088
Stockholders' equity:
Common stock, $5.00 par value,
10,000,000 shares authorized,
775,375 shares issued and outstanding 3,876,875 3,876,875
Surplus 3,861,784 3,861,784
Accumulated deficit (294,099) (1,107,406)
Accumulated other comprehensive loss,
net of tax in 2000 (66,914) (145,455)
Total stockholders' equity 7,377,646 6,485,798
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 88,208,398 $ 62,551,886
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
3
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THE PB FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 1,570,142 $ 752,510
Interest on investment securities 182,917 54,531
Interest on interest-bearing deposits at banks -- 4,173
Interest on federal funds sold 84,722 44,597
------------ ----------
Total interest income 1,837,781 855,811
INTEREST EXPENSE
Interest-bearing demand and money market 315,718 195,802
Savings 1,513 815
Time deposits of $100,000 or more 473,602 114,561
Other time deposits 189,627 95,163
Repurchase agreements 46,325 --
Other borrowings 22,810 --
------------ ----------
Total interest expense 1,049,595 406,341
Net interest income 788,186 449,470
PROVISION FOR LOAN LOSSES 96,189 79,911
------------ ----------
Net interest income after provision for loan losses 691,997 369,559
OTHER OPERATING INCOME
Service charges on deposit accounts 43,475 15,503
Mortgage referral commissions 59,944 33,166
Other income 3,953 13,707
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Loss on sale of investment securities (7,588)
------------
Total other income 99,784 62,376
OTHER OPERATING EXPENSE
Salaries and benefits 341,106 260,989
Occupancy expense, net 98,078 93,143
Professional and other outside services 22,338 62,125
Other expense 130,202 119,003
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Total other operating expense 591,724 535,260
INCOME (LOSS) BEFORE INCOME TAXES 200,057 (103,325)
INCOME TAX BENEFIT 198,008 --
------------ ----------
NET INCOME (LOSS) $ 398,065 $ (103,325)
============ ==========
BASIC EARNINGS (LOSS) PER COMMON SHARE $ 0.51 $ (0.13)
DILUTED EARNINGS PER COMMON SHARE $ 0.51 $ --
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 5
THE PB FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 3,979,170 $ 1,581,132
Interest on investment securities 465,720 145,632
Interest on interest-bearing deposits at banks -- 4,471
Interest on federal funds sold 275,778 159,670
------------ ------------
Total interest income 4,720,668 1,890,905
INTEREST EXPENSE
Interest-bearing demand and money market 773,382 449,545
Savings 3,691 1,940
Time deposits of $100,000 or more 1,242,481 244,232
Other time deposits 464,449 192,276
Repurchase agreements 129,771 --
Other borrowings 26,149 --
------------ ------------
Total interest expense 2,639,923 887,993
Net interest income 2,080,745 1,002,912
PROVISION FOR LOAN LOSSES 224,983 256,616
------------ ------------
Net interest income after provision for loan losses 1,855,762 746,296
OTHER OPERATING INCOME
Service charges on deposit accounts 87,916 28,088
Mortgage referral commissions 183,293 145,775
Other income 63,712 50,703
------------
Loss on sale of investment securities (7,588)
------------
Total other income 327,333 224,566
OTHER OPERATING EXPENSE
Salaries and benefits 858,902 785,460
Occupancy expense, net 268,223 251,644
Professional and other outside services 53,941 72,559
Other expense 386,730 320,609
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Total other operating expense 1,567,796 1,430,272
INCOME (LOSS) BEFORE INCOME TAXES 615,299 (459,410)
INCOME TAX BENEFIT 198,008 --
------------ ------------
NET INCOME (LOSS) $ 813,307 $ (459,410)
============ ============
BASIC EARNINGS (LOSS) PER COMMON SHARE $ 1.05 $ (0.59)
DILUTED EARNINGS PER COMMON SHARE $ 1.05 $ --
</TABLE>
See accompanying notes to consolidated financial statements
5
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THE PB FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
Net earnings (losses) $ 813,307 $ (459,410)
Other comprehensive income, net of tax in 2000:
Unrealized gain (loss) on securities available for sale 51,658 (47,540)
Income tax effect on gain (loss) 31,891
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Unrealized gain (loss) arising during the period, net of tax in 2000: 83,549 (47,540)
Less: Reclassification adjustment for (loss)
included in net earnings (7,588) --
Income tax effect of reclassification adjustments (2,580) --
---------- ----------
Reclassification adjustment for gain (loss)
included in net earnings, net of tax (5,008) --
Other comprehensive income 78,541 (47,540)
Comprehensive income $ 891,848 $ (506,950)
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
6
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THE PB FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 813,307 $ (459,410)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization 180,619 190,438
Provision for loan losses 224,983 256,616
Loss on sale of investment securities 7,588 --
Deferred tax benefit (387,626) --
Change in net deferred loan fees 63,228 121,983
Change in accrued interest receivable (315,330) (172,351)
Change in other assets (78,727) (92,170)
Change in accrued interest payable 184,812 114,627
Change in other liabilities 80,568 (22,387)
------------ ------------
Net cash provided (used) by operating activities 773,422 (62,654)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities available for sale (5,698,955) (2,261,356)
Sales of investment securities available for sale 992,266
Principal repayments of investment securities available for sale 355,644 --
Loans originated, net of principal repayments (22,645,740) (25,959,524)
Acquisition of premises and equipment (44,512) (250,022)
------------ ------------
Net cash used by investing activities (27,041,297) (28,470,902)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in borrowings 5,103 --
Increase in repurchase agreements 1,533,679 --
Net increase in demand, money market and savings
deposits 6,468,261 16,272,627
Time deposits accepted, net of repayments 16,492,241 18,553,425
------------ ------------
Net cash provided by financing activities 24,499,284 34,826,052
Net increase (decrease) in cash and cash equivalents (1,768,591) 6,292,496
Cash and cash equivalents at beginning of period 11,819,849 6,189,291
------------ ------------
Cash and cash equivalents at end of period $ 10,051,258 $ 12,481,787
============ ============
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest $ 2,455,111 $ 769,696
Income taxes: $ 134,000 --
Change in accumulated other comprehensive income, net $ 78,541 --
</TABLE>
See accompanying notes to consolidated financial statements
7
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THE PB FINANCIAL SERVICES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements for The PB
Financial Services Corporation 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, 2000 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000. For further information, refer to the financial statements
and footnotes included in the Company's annual report included on Form 10-KSB
for the year ended December 31, 1999.
NOTE 2 - ORGANIZATION OF THE BUSINESS
The Peachtree Bank (the "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. On July 15, 1999, the Bank became a subsidiary of The PB
Financial Services Corporation (the "Company") as a result of a tax-free
reorganization in which the stockholders of the Bank exchanged all outstanding
Bank stock for stock in the Company.
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.
Major classifications of loans are as follows:
8
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<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
------------------ -----------------
<S> <C> <C>
Commercial $ 10,659,511 $ 5,645,589
Real estate-construction 19,794,884 11,910,797
Real estate-commercial and residential 25,942,577 18,453,654
Real estate-home equity 1,741,759 1,331,965
Installment loans to individuals 4,805,128 2,956,114
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Total loans 62,943,859 40,298,119
Less: Net deferred loan fees 197,914 134,686
Allowance for loan losses 624,974 399,991
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Loans, net $ 62,120,971 $ 39,763,442
</TABLE>
Through September 30, 2000, there were no loan charge-offs, and there were no
nonperforming loans. Past due loans were insignificant.
NOTE 4 - EARNINGS PER SHARE
Earnings per share for all periods presented are based on the weighted average
number of common shares outstanding of 775,375. No effect for outstanding
options is included in the diluted computation as the impact would be
antidilutive.
NOTE 5 - RECENT ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 133 (SFAS 133) "Accounting for Derivative Instruments
and Hedging Activities". The effective date of this statement has been deferred
by SFAS No. 137 until fiscal years beginning after June 15, 2000. The Company
expects to adopt this statement effective January 1, 2001. 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 Company.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and operating
results during the periods included in the accompanying consolidated financial
statements.
This discussion contains certain forward-looking statements including statements
relating to present or future trends or factors generally affecting the banking
industry and specifically affecting The PB Financial Corporation's operations,
markets and products. Without limiting the foregoing, the words "anticipates",
"believes", "intends", "expects" or similar expressions are intended to identify
forward-looking statements. These forward-looking statements involve certain
risks and uncertainties. Actual results could differ materially from those
projected for many reasons including, without limitation, changing events and
trends that have influenced the Company's assumptions. These trends and events
include (1) changes in the interest rate environment which may reduce margins,
(2) non-achievement of expected growth, (3) less favorable than anticipated
changes in national and local business environments and securities markets (4)
adverse changes in the regulatory requirements affecting the Company, (5)
greater competitive pressures among financial institutions in the Company's
market, and (6) greater than expected loan losses. Additional information and
other factors that could affect future financial results are included in the
Company's annual report included on Form 10-KSB for the year ended December 31,
1999.
FINANCIAL CONDITION
The Company's total assets have increased $25.7 million or 41% since December
31, 1999. Net loans, the primary category of assets, grew from $39.8 million to
$62.1 million, an increase of $22.3 million, while investment securities
available for sale have increased $4.4 million to $11 million in the first nine
months of 2000. The increases in loans and investments have been funded
primarily with deposits, which increased $22.9 million in the first nine months
of the year, as well as with repurchase agreements, which increased $1.5 million
in the same time period.
INVESTMENTS
The investment portfolio consists of federal funds sold, U.S. Government agency
obligations and Federal Home Loan Bank stock, 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.
10
<PAGE> 11
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. Amounts up to $1,900,000 were borrowed for
a period of nine in 2000, and no amounts were borrowed under these arrangements
in 1999.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Net income for the quarter ended September 30, 2000 was $398,065 compared to a
net loss of ($103,325) for the same period one year ago. Net interest income for
the three months ended September 30, 2000 was $788,186 compared to $449,470 for
the same period in 1999, with the increase 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 78% at
September 30, 2000.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Net income for the nine-month period ended September 30, 2000 was $813,307
compared to a net loss of ($459,410) for the same period in 1999. Net interest
income for the nine month period ended September 30, 2000 was $2,080,745, a 107%
increase over the same period in 1999. Average earning assets increased
$39,092,931 or 133% and related interest income increased by $2,829,763 or 150%.
Average interest-bearing liabilities increased $36,616,684 or 149%, resulting in
an increase in interest expense of $1,751,930 or 197% over the nine months ended
September 30, 1999.
The provision for loan losses for the nine months ended September 30, 2000 was
$224,983 compared to $256,616 for the same period in 1999. 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
1.00% of loans outstanding at
11
<PAGE> 12
September 30, 2000 and approximately .99% of total loans outstanding at December
31, 1999. Management believes that the current allowance of $624,974 is adequate
based upon the Bank's loan portfolio and current economic conditions.
Non-interest income for the nine months ended September 30, 2000 was $327,333,
compared to $224,566 for the same period one year ago. Non-interest income
consists primarily of mortgage referral fees and service charges on deposit
accounts. Service charges on deposit accounts increased $59,828 compared to the
period ended September 30, 1999, reflecting the growth in activity in personal
and commercial checking accounts during 2000.
Non-interest expense was $1,567,796 for the first nine months of 2000, as
compared to $1,430,272 for the same period one year ago. Non-interest expense
consists primarily of salaries and benefits and other operating expenses.
The Company recognized income tax benefits in 2000 due to the utilization of the
net operating loss carryforward. This benefit has been reduced by a provision
for income tax expense on the earnings in 2000, resulting in a net income tax
benefit of $198,008 at September 30, 2000. No income tax provision was recorded
in 1999.
The Company reported net income of $813,307 for the nine months ended September
30, 2000 compared to a loss of ($459,410) for the same period in 1999.
CAPITAL RESOURCES
At September 30, 2000, the capital ratios of the Company and the Bank were
adequate based on regulatory minimum capital requirements. The minimum capital
requirements for banks and bank holding companies require a leverage capital to
total assets ratio of at least 4% and total capital to risk-weighted assets of
8%. The following table presents the Bank's and Company's compliance with
regulatory capital requirements at September 30, 2000:
<TABLE>
<CAPTION>
The Peachtree Bank Consolidated
<S> <C> <C>
Leverage capital ratio: 8.41% 8.34%
Risk-based capital ratios:
Tier 1 capital 10.51% 10.43%
Total capital 11.38% 11.30%
</TABLE>
12
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Employment Agreement between Monty G. Watson and
The Peachtree Bank dated as of August 1, 2000
27 Financial Data Schedule (for SEC use only)
(b) Report on Form 8-K
The Company filed a Form 8-K filed on August 15, 2000
regarding the change in its certifying accountants.
13
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SIGNATURE
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.
THE PB FINANCIAL SERVICES CORPORATION
November 10, 2000 /s/ KELLY J. JOHNSON
--------------------
Kelly J. Johnson
(CHIEF FINANCIAL
OFFICER/PRINCIPAL
FINANCIAL OFFICER)
14
