<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1999
[ ] Transition Report Under Section 13 or 15(d) of the Exchange Act
For the transition period from ________________ to ____________________
Commission File Number : 0-28394
MOUNTAIN BANK HOLDING COMPANY
(Exact Name of Small Business Issuer as Specified in Its Charter)
WASHINGTON 91-1602736
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
501 ROOSEVELT AVENUE
ENUMCLAW, WASHINGTON 98022
(Address of Principal Executive Offices)
(360) 825-0100
(Issuer's Telephone Number, Including Area Code)
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:
916,680 (September 30, 1999)
----------------------------
Transitional Small Business Disclosure Format: Yes X No
------------- --------
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following Consolidated Financial Statements are presented for the
Registrant, Mountain Bank Holding Company, and its wholly owned subsidiary, Mt.
Rainier National Bank.
PAGE:
1. Consolidated Balance Sheets for September 30, 1999, and December 31,
1998
2. Consolidated Statements of Income for the three months and nine months
ended September 30, 1999 and 1998
3. Consolidated Statements of Shareholders' Equity for the nine months
ended September 30, 1999 and 1998
4. Consolidated Statements of Cash Flows for the nine months ended
September 30, 1999 and 1998.
5. Notes to consolidated financial statements.
PART II - OTHER INFORMATION
8. Item 6 Exhibits and Reports on Form 8-K
8. Signatures
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<TABLE>
<CAPTION>
MOUNTAIN BANK HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------
SEPT. 30 DECEMBER 31,
1999 1998
--------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Assets
Cash and due from banks $ 3,979 $ 3,369
Federal funds sold and interest bearing deposits in banks 6,077 10,546
Securities available for sale 28,775 24,995
Loans held for sale 118 675
Loans 49,193 44,785
Less allowance for possible credit losses (606) (618)
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Loans, net 48,587 44,167
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Premises and equipment 3,407 3,323
Accrued interest receivable 546 357
Other assets 205 303
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Total assets $ 91,694 $ 87,735
======================================
Liabilities
Deposits:
Non-interest bearing $ 15,171 $ 11,717
Savings and interest-bearing demand 38,083 38,587
Time 28,028 27,289
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Total deposits 81,282 77,593
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Note payable 42 43
Accrued interest payable 194 215
Other liabilities 143 193
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Total liabilities 81,661 78,044
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Shareholders' Equity
Common stock (par value $1); authorized 5,000,000
shares; issued and outstanding: 1999 - 916,680 shares;
1998 - 907,482 shares 917 907
Paid-in capital 6,745 6,694
Retained earnings 2,498 1,999
Accumulated other comprehensive income (127) 91
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Total shareholders' equity 10,033 9,691
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Total liabilities and shareholders' equity $ 91,694 $ 87,735
======================================
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<CAPTION>
MOUNTAIN BANK HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-----------------------------------------------------------------------
1999 1998 1999 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest Income
Loans $ 1,175 $ 1,169 $ 3,428 $ 3,333
Federal funds sold and interest bearing deposits in banks 91 44 237 178
Investment taxable income 383 374 1,132 1,065
Investment tax exempt income 4 4 11 12
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Total interest income 1,653 1,591 4,808 4,588
Interest Expense
Deposits 590 634 1,754 1,872
Note payable 1 1 3 3
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Total interest expense 591 635 1,757 1,875
Net interest income 1,062 956 3,051 2,713
Provision for credit losses - - - (78)
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Net interest income after provision for credit losses 1,062 956 3,051 2,635
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Noninterest income
Service charges on deposit accounts 125 112 360 302
Origination fees and gains on loans sold 20 88 86 238
Commission income on sale of non-deposit products 8 - 14 -
Gain on sales of securities available for sale - 6 1 19
Other 43 33 126 117
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Total noninterest income 196 239 587 676
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Noninterest expense
Salaries 436 361 1,308 1,039
Employee benefits 83 60 241 185
Occupancy 61 45 148 112
Equipment 113 69 316 233
Other 299 224 918 838
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Total noninterest expenses 992 759 2,931 2,407
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Income before income taxes 266 436 707 904
Income taxes (93) (157) (208) (328)
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Net income $ 173 $ 279 $ 499 $ 576
=======================================================================
Per share data:
Basic earnings per share $ 0.19 $ 0.35 $ 0.55 $ 0.71
Diluted earnings per share $ 0.18 $ 0.33 $ 0.51 $ 0.67
Weighted average number of common shares outstanding,
including dilutive stock options 976,074 856,349 972,786 856,217
Return on average assets 0.79% 1.44% 0.76% 0.99%
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<TABLE>
<CAPTION>
MOUNTAIN BANK HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
ACCUMULATED
OTHER
COMMON PAID-IN RETAINED COMPREHENSIVE
STOCK CAPITAL EARNINGS INCOME TOTAL
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1997 $ 803 $ 5,058 $ 1,227 $ 63 $ 7,151
Sale of common stock under employee
stock purchase plan 1 14 - - 15
Sale of common stock 3 23 - - 26
Comprehensive income:
Net income - - 576 - 576
Other comprehensive income,
net of tax:
Unrealized gain on securities,
net of reclassification adjustment 131 131
COMPREHENSIVE INCOME 707
BALANCE AT SEPTEMBER 30, 1998 $ 807 $ 5,095 $ 1,803 $ 194 $ 7,899
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMMON PAID-IN RETAINED COMPREHENSIVE
STOCK CAPITAL EARNINGS INCOME TOTAL
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1998 $ 907 $ 6,694 $ 1,999 $ 91 $ 9,691
Sale of common stock under employee
stock purchase plan 2 17 - - 19
Sale of common stock 8 34 - - 42
Comprehensive income:
Net income - - 499 499
Other comprehensive income,
net of tax:
Unrealized loss on securities,
net of reclassification adjustment (218) (218)
COMPREHENSIVE INCOME 281
BALANCE AT SEPTEMBER 30, 1999 $ 917 $ 6,745 $ 2,498 $ (127) $ 10,033
</TABLE>
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<TABLE>
<CAPTION>
MOUNTAIN BANK HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------------------
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Net income $ 499 $ 576
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible credit losses - 78
Depreciation 295 209
Gain on sales of securities available for sale (1) (19)
Securities amortization, net of accretion 87 32
Gain on loans sold (86) (238)
Originations of loans held for sale (4,758) (10,295)
Proceeds from sales of loans 5,401 10,322
Other (50) (227)
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Net cash provided by operating activities 1,387 438
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Cash Flows from Investing Activities
Net (increase) decrease in Federal funds sold and interest bearing deposits 4,469 (1,902)
Purchase of securities available for sale (13,405) (10,440)
Proceeds from maturities and sales of securities available for sale 9,209 8,155
Increase in loans, net of principal collections (4,420) (2,071)
Additions to premises and equipment (393) (810)
Proceeds from disposition of premises and/or equipment 14 4
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Net cash used in investing activities (4,526) (7,064)
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Cash Flows from Financing
Net increase in deposits 3,689 6,871
Repayment of note payable (1) (1)
Common stock sold 61 41
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Net cash provided by (used in) financing activities 3,749 6,911
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Net increase in cash 610 285
Cash and due from Banks
Beginning of period 3,369 2,827
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End of period $ 3,979 $ 3,112
======================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 1,778 $ 1,868
Income taxes paid $ 259 $ 415
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Fair value adjustment of securities available for sale, net of tax (218) 131
</TABLE>
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1 - BASIS OF PRESENTATION
The unaudited consolidated financial statements include the accounts of
Mountain Bank Holding Company (the Company) and its wholly owned subsidiary, Mt.
Rainier National Bank (the Bank). The consolidated financial statements have
been prepared in conformity with generally accepted accounting principles for
interim financial information and with general practice within the banking
industry. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. Significant intercompany transactions and amounts have been
eliminated. In the opinion of management, all adjustments (consisting only of
recurring accruals) necessary for a fair presentation are reflected in the
financial statements. Reference is hereby made to the notes to consolidated
financial statements contained in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1998. The results of operations for the nine months
ended September 30, 1999, are not necessarily indicative of the results which
may be obtained for the full year ending December 31, 1999.
NOTE 2 - EARNINGS PER COMMON SHARE
Basic earnings per share are based on the average number of common
shares outstanding, assuming no dilution. Diluted earnings per common share are
computed assuming the exercise of stock options.
<TABLE>
<CAPTION>
Net Income Shares Per Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
NINE MONTHS ENDED SEPTEMBER 30,
1999
Basic earnings per share:
Net Income $ 499 911,392 $ 0.55
Effect of dilutive securities:
Options -- 61,394 (.04)
Diluted earnings per share:
Net Income $ 499 972,786 $ 0.51
NINE MONTHS ENDED SEPTEMBER 30,
1998
Basic earnings per share:
Net Income $ 576 806,955 $ 0.71
Effect of dilutive securities:
Options -- 49,262 (.04)
Diluted earnings per share:
Net Income $ 576 856,217 $ 0.67
</TABLE>
NOTE 3 - YEAR 2000
The century date change for the year 2000 is a serious issue that may
impact virtually every organization, including the Company. Many software
programs are not able to recognize the year 2000, since most programs and
systems were designed to store calendar years in the 1900s by assuming the "19"
and storing only the last two digits of the year. The problem is especially
important to financial institutions since many transactions, such as interest
accruals and payments, are date sensitive, and because the Bank interacts with
numerous customers, vendors and third party service providers who must also
address the year 2000 issue. The problem is not limited
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to computer systems. Year 2000 issues will potentially affect every system
that has an embedded microchip, such as automated teller machines, elevators
and vaults.
THE COMPANY'S STATE OF READINESS
The Company and the Bank are committed to addressing these Year 2000
issues in a prompt and responsible manner, and they have dedicated the
resources to do so. The Company is confident that it has implemented and
completed an effective program to mitigate the impact of the year 2000 issue.
PROJECT MANAGEMENT. The Company has formed a Year 2000 compliance
committee consisting of senior management and departmental representatives.
The committee has met regularly since September 1997. A Year 2000 compliance
plan was developed and regular meetings have been held to discuss the
process, assign tasks, determine priorities and monitor progress. The
committee regularly reports to the Company's Board.
PROJECT STATUS. Within a program consistent with applicable
regulatory guidelines, management has completed an assessment of its
automated systems, has updated and tested its automated systems, and has
obtained and implemented renovated software applications provided by the
Company's vendors. A moratorium on changes of vendors, installation of
hardware, software, applications and equipment (except in response to
regulatory changes or production problems) is in effect. The Company has also
identified, and continues to work with, the Bank's significant borrowers to
lessen the extent to which they may be affected by year 2000 issues.
ESTIMATED COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES
Based on its assessment to date, the Company does not believe that
expenses related to meeting Year 2000 challenges will have a material effect
on the operations or financial condition of the Company or the Bank.
Anticipated direct expenses for 1999 that can be attributed to year 2000
readiness efforts total approximately $30,000. Capital expenditures total
approximately $100,000. Year 2000 challenges facing vendors of
mission-critical software and systems, and facing Bank customers, could have
a material effect on the operations or financial condition of the Company and
the Bank, to the extent such parties are materially affected by such
challenges. The success of the Company's efforts will not be known until the
year 2000 actually arrives.
RISKS RELATED TO YEAR 2000 ISSUES
The year 2000 poses certain risks to the Company and the Bank and
their operations. Some of these risks are present because the Company
purchases technology and information systems applications from other parties
who face year 2000 challenges. Other risks are inherent in the business of
banking or are risks faced by many companies. Although it is impossible to
identify all possible risks that the Company may face moving into the
millennium, management has identified the following significant potential
risks:
Commercial banks may experience a contraction in their deposit base,
if a significant amount of deposited funds are withdrawn by customers prior
to the year 2000, and interest rates may increase as the millennium
approaches. This potential deposit contraction could make it necessary for
the Bank to change its sources of funding and could impact future earnings.
The Company established a contingency plan for addressing this situation,
should it arise, into its asset and liability management policies. The plan
includes maintaining the ability to borrow funds from correspondent banks,
the Federal Home Loan Bank of Seattle and the Federal Reserve Bank of San
Francisco. Significant demand for funds from other banks could reduce the
amount of funds available for the Bank to borrow. If insufficient funds are
available from these sources, the Bank may also sell investment securities or
other liquid assets to meet liquidity needs.
The Bank lends significant amounts to businesses in its marketing
area. If these businesses are adversely affected by year 2000 problems, their
ability to repay loans could be impaired. This increased credit risk could
adversely affect the Bank's financial performance. During the assessment
phase of the Company's Year 2000
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program, each of the Bank's substantial borrowers were identified, and the
Bank has worked with such borrowers to ascertain their levels of exposure to
year 2000 problems. The Bank was able to assure itself of the year 2000
readiness of such borrowers and found it unnecessary to adjust the Bank's
provision for credit losses.
The Company's and the Bank's operations, like those of many other
companies, can be adversely affected by the year 2000 triggered failures of
other companies upon whom the Company and the Bank depend for the functioning
of their automated systems. Accordingly, the Company's and the Bank's
operations could be materially affected, if the operations of
mission-critical third party service providers are adversely affected.
THE COMPANY'S CONTINGENCY PLANS
The Company has developed a specific contingency plan related to
year 2000 issues to be implemented in conjunction with the Disaster Recovery
Plan. The plan was tested in late June. Independent third party validation of
the testing has also been completed. Certain circumstances, as described
above in "Risks", may occur for which there are no completely satisfactory
contingency plans.
FORWARD LOOKING STATEMENTS
The discussion above regarding the century date change for the year
2000 includes certain "forward looking statements" concerning the future
operations of the Company. The Company desires to take advantage of the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995 as
they apply to forward looking statements. This statement is for the express
purpose of availing the Company of the protections of such safe harbor with
respect to all "forward looking statements". Management's ability to predict
results of the effect of future plans is inherently uncertain and is subject
to factors that may cause actual results to differ materially from those
projected. Factors that could affect the actual results include the Company's
success in identifying systems and programs that are not Year 2000 compliant;
the possibility that systems modifications will not operate as intended;
unexpected costs associated with remediation, including labor and consulting
costs; the uncertainty associated with the impact of the century change on
the Company's customers, vendors and third party service providers; and the
economy generally.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOUNTAIN BANK HOLDING COMPANY
(Registrant)
Dated: October 27, 1999
---------------------------------------
Roy T. Brooks, President and Chief
Executive Officer
Dated: October 27, 1999
---------------------------------------
Sheila Brumley, Chief Financial Officer
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,979
<INT-BEARING-DEPOSITS> 6,077
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 28,775
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 49,193
<ALLOWANCE> 606
<TOTAL-ASSETS> 91,694
<DEPOSITS> 81,282
<SHORT-TERM> 0
<LIABILITIES-OTHER> 337
<LONG-TERM> 42
0
0
<COMMON> 917
<OTHER-SE> 9,243
<TOTAL-LIABILITIES-AND-EQUITY> 91,694
<INTEREST-LOAN> 3,428
<INTEREST-INVEST> 1,143
<INTEREST-OTHER> 237
<INTEREST-TOTAL> 4,808
<INTEREST-DEPOSIT> 1,754
<INTEREST-EXPENSE> 1,757
<INTEREST-INCOME-NET> 3,051
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 1
<EXPENSE-OTHER> 2,931
<INCOME-PRETAX> 707
<INCOME-PRE-EXTRAORDINARY> 707
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 499
<EPS-BASIC> 0.55
<EPS-DILUTED> 0.51
<YIELD-ACTUAL> 5.09
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 618
<CHARGE-OFFS> 16
<RECOVERIES> 4
<ALLOWANCE-CLOSE> 606
<ALLOWANCE-DOMESTIC> 606
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
