<PAGE> 1
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR
15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1996
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________ to ___________________
Commission file number 33-94050
VOLUNTEER BANCORP, INC.
(Exact name of small business issuer as specified in its charter)
TENNESSEE 62-1271025
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
161 MAIN STREET, SNEEDVILLE, TENNESSEE 37879
(Address of principal executive offices)
(615) 733-2213
(Issuer's telephone number)
- --------------------------------------------------------------------------------
(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 12, 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
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 479,012 AS OF JUNE 30,
1996.
Transitional Small Business Disclosure Format (check one);
Yes No
----- -----
<PAGE> 2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<PAGE> 3
VOLUNTEER BANCORP, INC AND SUBSIDIARY
Sneedville, Tennessee
Condensed Consolidated Financial Statements
As of and for the Three and Six Months Ended
June 30, 1996 and 1995
(Unaudited)
<PAGE> 4
INDEPENDENT AUDITOR'S REVIEW REPORT
To the Board of Directors
Volunteer Bancorp, Inc.
Sneedville, Tennessee
We have reviewed the accompanying condensed consolidated balance sheet of
Volunteer Bancorp, Inc. and subsidiary as of June 30, 1996 and 1995, and the
related condensed consolidated statement of earnings for the three and six
months then ended and the condensed consolidated statement of cash flows for
the six months then ended, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants. All information included in these condensed consolidated
financial statements is the representation of the management of Volunteer
Bancorp, Inc.
A review of interim financial statements consists primarily of inquiries of
company personnel and analytical procedures applied to financial data. It is
substantially less in scope than an audit in accordance with generally accepted
accounting standards, the objective of which is the expression of an opinion
regarding the condensed consolidated financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements in
order for them to be in conformity with generally accepted accounting
principles.
July 31, 1996
<PAGE> 5
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
June 30, 1996 and 1995
(Unaudited- See Accountants' Review Report)
<TABLE>
<CAPTION>
ASSETS 1996 1995
------ ----------- ----------
<S> <C> <C>
Cash and due from banks $ 1,865,301 1,064,580
Federal fund sold 2,689,407 2,207,902
Investment securities available for sale (amortized cost of
$13,840,472 and $3,464,360, respectively) 13,512,445 3,753,090
Investment securities held to maturity (estimated market value
of $1,812,309 and $6,854,285) 1,863,987 6,862,558
Loans, less allowances for loan losses of $423,288 and
$405,134, respectively 27,889,474 15,301,583
Accrued interest receivable 613,194 379,359
Premises and equipment, net 2,269,743 1,465,173
Deferred income taxes 41,868 -
Other real estate 67,846 15,160
Goodwill 229,652 249,656
Other assets 100,226 243,432
-------------------------------
Total assets $51,143,143 31,542,493
===============================
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
Deposits:
Non-interest bearing $ 6,157,526 4,908,129
Interest bearing 38,183,694 20,418,809
-------------------------------
Total deposits 44,341,220 25,326,938
Note payable 3,450,000 3,450,000
Interest payable 371,183 146,592
Securities sold under repurchase agreements 293,000 -
Other accrued taxes, expenses and liabilities 69,510 63,496
Deferred income taxes - 146,693
-------------------------------
Total liabilities 48,524,913 29,133,719
-------------------------------
Minority interest - 5,494
-------------------------------
Stockholders' equity:
Common stock, $0.01 par value, 1,000,000 shares authorized,
479,012 and 402,978 shares issued and outstanding at June
30, 1996 and 1995, respectively 4,790 4,030
Additional paid-in capital 1,294,969 692,643
Retained earnings 1,582,133 1,680,385
Net unrealized (loss) gain on securities available for sale (263,662) 26,222
-------------------------------
Total stockholders' equity 2,618,230 2,403,280
-------------------------------
Total liabilities and stockholders' equity $51,143,143 31,542,493
===============================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE> 6
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Consolidated Statement of Earnings
For The Three and Six Months Ended June 30, 1996 and 1995
(Unaudited - See Accountants' Review Report)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------ ---------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $658,625 376,189 1,243,598 688,940
Interest on federal funds 52,588 17,606 117,561 45,768
Interest on investment securities:
Taxable 250,738 154,731 440,444 263,329
Exempt from Federal income taxes 625 5,032 625 9,379
-----------------------------------------------------
Total interest income 962,576 553,558 1,802,228 1,007,416
-----------------------------------------------------
Interest Expense:
Interest on deposits 464,841 218,912 865,227 387,571
Other borrowed funds 71,947 57,223 143,846 57,913
-----------------------------------------------------
Total interest expense 536,788 276,135 1,009,073 445,484
-----------------------------------------------------
Net interest income 425,788 277,423 793,155 561,932
Provision for possible loan losses 15,000 9,000 30,000 18,000
-----------------------------------------------------
Net interest income after provision for possible
loan losses 410,788 268,423 763,155 543,932
-----------------------------------------------------
Non-interest income:
Service charges on deposits 15,605 10,619 29,275 18,257
Other service charges and fees 24,375 12,362 37,172 19,836
Securities gains - - 8,908 -
Other non-interest income 3,056 229 6,428 8,636
-----------------------------------------------------
Total non-interest income 43,036 23,210 81,783 46,729
-----------------------------------------------------
Non-interest expense:
Salaries and employee benefits 240,019 207,326 493,110 372,655
Occupancy expense 31,979 14,711 55,462 29,045
Furniture and equipment expense 26,922 20,264 62,471 40,798
Other non-interest expense 113,863 107,422 253,296 207,549
-----------------------------------------------------
Total non-interest expense 412,783 349,723 864,339 650,047
-----------------------------------------------------
(Loss) earnings before income
taxes, and minority interest 41,041 (58,090) (19,401) (59,386)
Income tax (benefit) expense 15,884 (22,654) (6,094) (24,614)
Minority interest - 48 - (83)
-----------------------------------------------------
Net income (loss) $ 25,157 (35,388) (13,307) (34,855)
=====================================================
Income (loss) per weighted average common share $ 0.05 (0.09) (0.03) (0.09)
=====================================================
Weighted average common shares outstanding 465,980 402,978 457,225 402,978
=====================================================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE> 7
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Consolidated Statement of Cash Flows
For The Six Months Ended June 30, 1996 and 1995
(Unaudited - See Accountants' Review Report)
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net (loss) $ (13,307) (34,855)
Adjustments to reconcile net (loss)
to net cash provided by operating activities:
Minority interest undistributed - 83
Deferred income taxes (20) 49,336
Provision for possible loan losses 30,000 18,000
Provision for depreciation and amortization 63,328 30,655
(Gain) on securities (8,908) -
Decrease (increase) in interest receivable (178,639) (114,002)
(Increase) decrease in other assets 87,767 (213,531)
Increase (decrease) in other liabilities 108,849 128,175
------------------------------
Net cash (used) provided by operating activities 89,070 (136,139)
------------------------------
Cash Flows from Investing Activities:
Purchase of investment securities held to maturity (3,864,329) (250,000)
Proceeds from calls and maturity of held to maturity securities 5,523,140 1,013,526
Purchase of investment securities available for sale (10,828,853) (3,464,671)
Proceeds from calls and maturity of investments available for sale 3,500,000 -
Net (increase) in loans (6,344,871) (2,644,453)
Acquisition of minority interest - (141,196)
Capital expenditures (337,063) (702,756)
------------------------------
Net cash (used) in investing activities (12,351,976) (6,189,550)
------------------------------
Cash Flows from Financing Activities:
Net (decrease) increase in demand deposits, NOW accounts
and savings accounts 2,143,193 (564,489)
Net increase (decrease) in certificates of deposit 7,685,853 3,886,312
Net increase in securities sold under repurchase agreements 293,000 -
Increase in long-term borrowing - 3,450,000
Proceeds from sale of common stock 327,600 -
------------------------------
Net cash provided (used) by financing activities 10,449,646 6,771,823
------------------------------
Increase (decrease) in cash and cash equivalents (1,813,260) 446,134
Cash and cash equivalents beginning of period 6,367,968 2,826,348
------------------------------
Cash and cash equivalents end of period $ 4,554,708 3,272,482
==============================
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ 967,938 367,812
==============================
Income taxes $ - -
==============================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE> 8
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Condensed Consolidated Financial Statements
Six Months Ended June 30, 1996 and 1995
1. Management Opinion
In the opinion of management, the accompanying unaudited financial
statements of Volunteer Bancorp, Inc. contain all adjustments,
consisting of only normal, recurring adjustments, necessary to
fairly present the financial results for the interim periods
presented. The results of operations for any interim period is not
necessarily indicative of the results to be expected for an entire
year. These interim financial statements should be read in
conjunction with the annual financial statements and notes thereto.
2. Weighted average common shares outstanding
Weighted average common shares outstanding for the three and six
months ended June 30, 1995 are calculated after the effect of a
300 for 1 stock split effective June 14, 1995.
3. Adoption of Statements of Financial Accounting Standards (SFAS) on
Impaired Loans
On January 1, 1995 the Company adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan" as amended by SFAS No. 118.
"Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures. SFAS No 114 prescribes a valuation
methodology for impaired loans as defined by the standard.
Generally, a loan is considered impaired if management believes
that it is probable that all amounts due will not be collected
according to the contractual terms as stipulated in the loan
agreement. An impaired loan must be valued using the present value
of expected future cash flows discounted at the loan's effective
interest rate, the loan's observable market price, or fair value of
the loan's underlying collateral.
At June 30, 1995, the Company had not identified any loans which
would be considered impaired under the above provisions and at
June 30, 1996 the amount of impaired loans under these provisions
were not considered material.
4. Premises and Equipment, net
The significant increase in premises and equipment, net at June 30,
1996 is primarily related to completion and equipping of branches
in Church Hill and Rogersville, Tennessee and construction-
in-progress relating to the construction of permanent banking
facilities in Rogersville.
<PAGE> 9
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Condensed Consolidated Financial Statements
Six Months Ended June 30, 1996 and 1995
5. Non-interest Expense
Other non-interest expense increased by $214,292 from June 30, 1995
to June 30, 1996. Salaries and employee benefits for the period
ended June 30, 1996 have increased due to the addition of personnel
associated with opening of branches in Church Hill and Rogersville,
Tennessee. The increase in occupancy and furniture and equipment
expense is also a result of the opening of the new branches. The
increase in other non-interest expense is attributable to costs
associated with changing the name of the Bank, promoting the new
branches and overall growth.
6. Long-term debt
The Company's long-term debt consists of a single note payable in
the amount of $3,450,000 due an unaffiliated national bank. The
interest rate on the note adjusts quarterly and is equal to the
three-months London Interbank Offered Rate (Three Month LIBOR) plus
2.25% per annum or at the option of the Company the rate on the
note is equal to the lender's index rate as such rate changes from
time to time. The Company may change interest rate options at any
time with prior notice to the lender. Interest is payable
quarterly. At June 30 , 1996 the rate on the note was 8.25% per
annum. Principal is payable annually commencing January 31, 1997
and each January 1 thereafter as follows:
<TABLE>
<CAPTION>
January 31, Principal Due
----------- -------------
<S> <C> <C>
1997 $185,000
1998 220,000
1999 255,000
2000 295,000
2001 325,000
2002 360,000
2003 395,000
2004 435,000
2005 470,000
2006 ( (Final Maturity) 510,000
</TABLE>
The loan is secured by all of the stock of Citizens Bank of East Tennessee
owned by the Company.
<PAGE> 10
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Condensed Consolidated Financial Statements
Six Months Ended June 30, 1996 and 1995
7. Contingencies
During the course of business, the Company makes various
commitments and incurs certain contingent liabilities that are not
presented in the accompanying balance sheet. The commitments and
contingent liabilities may include various guarantees, commitments
to extend credit, standby letters of credit, and litigation. In
the opinion of management, no material adverse effect on the
financial position, liquidity or operating results of the Company
and its subsidiary is anticipated as a result of these items.
8. Profit-Sharing Plan
The Company's subsidiary, The Citizens Bank of East Tennessee,
adopted a profit-sharing retirement plan on July 1, 1995. All
employees who meet certain age and length of service requirements
are eligible to participate on a voluntary basis. Benefits, which
become 20% vested after two years, 40% after three years, 60% after
four years, 80% after five years, and 100% after six years, are
paid on death, disability or retirement.
The Board of Directors has discretion in establishing the amount of
the Bank's contributions. Participants may make voluntary,
after-tax contributions up to 20% of their compensation up to
$9,240 per year. The participants are fully vested in any
voluntary contributions they make. The Bank had not made any
contributions to the plan for the six-months ended June 30, 1996
and 1995.
9. Stock Offering
At June 30, 1996 the Company had sold 76,082 shares of its $0.01
par value common stock for an aggregate consideration of $760,820
pursuant to the Company's offering which became effective September
11, 1995. Proceeds of the offering have been used to offset
expenses of the offering, increase the capital of the subsidiary
Bank and pay interest on the Company debt.
<PAGE> 11
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
FINANCIAL HIGHLIGHTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $ 25,157 ($ 35,388) ($ 13,307) ($ 34,855)
Per common share data:
Net income (loss) per weighted
average common share $ 0.05 ($ 0.09) ($ 0.03) ($ 0.09)
Book value $ 5.47 $ 5.96 $ 5.47 $ 5.96
Ratios:
Return on average assets 0.05% (0.12%) (0.03%) (0.12%)
Return on average common equity 0.97% (1.47%) (0.51%) (1.45%)
Net spread (taxable equivalent basis) 3.09% 4.27% 3.04% 3.66%
Net interest margin (taxable equivalent
basis) 3.68% 4.70% 3.65% 4.56%
Expense ratio 3.31% 4.86% 3.75% 4.62%
Allowance for losses on loans / loans 1.50% 2.58% 1.50% 2.58%
Non-performing loans / loans 1.78% 1.90% 1.78% 1.90%
Non-performing assets / loans and
foreclosed properties 2.01% 1.99% 2.01% 1.99%
Shareholders' equity / total assets 5.12% 7.62% 5.12% 7.62%
Leverage ratio (tangible capital /
tangible average assets) 5.31% 7.48% 5.73% 7.67%
</TABLE>
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
<PAGE> 13
VOLUNTEER BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
OPERATING RESULTS
The Company reported net income for the second quarter of $25,157, or $0.05 per
weighted average common share, compared to a net loss of ($35,388), or ($0.09)
for the same period a year ago. Our returns on average assets and average
common equity were 0.05% and 0.97%, respectively, for the quarter compared to
(0.12%) and (1.47%) for the same period last year.
The net (loss) for the first six months of 1996 was ($13,307), or ($0.03) per
weighted average common share. This compares to a net loss of ($34,855), or
($0.09) per weighted average common share, for the same period last year.
Net interest income for the second quarter of 1996 increased $231,223 versus
the second quarter of 1995 to $793,155. The increase is attributable to growth
in interest earning assets of 63.40%. Average loans grew 77.48% over the
second quarter of 1995. The growth in loans from June 30, 1995 to June 30, 1996
is attributable to an increase of approximately $1,400,000 in commercial loans,
approximately $7,980,000 in real estate loans ($4,400,000 secured by 1-4 single
family residences), and approximately $2,970,000 in consumer loans. Total Bank
assets were $50,915,673 at June 30, 1996 compared to $21,990,257 as of June 30,
1995.
The net interest margin was 3.68% for the second quarter of 1996 compared to
4.70% for the second quarter of 1995. The net spread was 3.09% for the second
quarter of 1996 compared to 4.27% for the second quarter of 1995. The yield on
the investment portfolio was 6.42% for the second quarter of 1996 compared to
8.37% for the same quarter of 1995. The higher level of interest income from
loans and securities was offset by an increase in the cost of interest-bearing
deposits and the Company's long-term debt which was utilized to increase the
capital of the Company's subsidiary Bank.
Non-interest income for the second quarter of 1996 increased $22,826 over the
second quarter of 1995. The growth is attributable to service charges on
deposit accounts and other fees. Non-interest expenses for the second quarter
of 1996 increased $63,060 compared to the second quarter of 1995 primarily for
costs (including salaries and employee compensation) associated with opening
and staffing new branches in Rogersville and Church Hill, Tennessee.
ASSET QUALITY
Non-performing assets at June 30, 1996 were $572,000 or 2.01% of loans and
foreclosed properties, which is an increase from $313,000, or 1.99% of loans
and foreclosed properties at June 30, 1995. The provision for losses on loans
was $15,000 for the second quarter of 1996 which is the same amount as the
first quarter of 1996 and an increase of $6,000 over the provision for the
second quarter of 1995. The increase in the provision is primarily attributable
to the increase in loan growth. At June 30, 1996, the allowance for losses on
loans was 1.50% of loans and approximately 74% of non-performing assets.
<PAGE> 14
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 23.1 -- Consent of Welch & Associates
Exhibit 27 -- Financial Data Schedule (For SEC use only)
(b) There have been on Current Reports on Form 8-K filed during the quarter
ended June 30, 1996.
<PAGE> 15
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.
VOLUNTEER BANCORP, INC.
(Registrant)
Date: August 12, 1996 /s/ Reed D. Matney
---------------------------------------
Reed D. Matney, President
(principal executive officer)
Date: August 12, 1996 /s/ H. Lyons Price
---------------------------------------
H. Lyons Price (principal financial and
accounting officer)
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report included in this Quarterly Report on Form 10-Q for the Quarter Ended
June 30, 1996.
Welch & Associates
Nashville, Tennessee
August 12, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VOLUNTEER BANCORP, INC. FOR THE SIX MONTHS ENDED JUNE
30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,865,301
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,689,407
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 13,512,445
<INVESTMENTS-CARRYING> 1,863,987
<INVESTMENTS-MARKET> 1,812,309
<LOANS> 28,312,762
<ALLOWANCE> 423,288
<TOTAL-ASSETS> 51,143,143
<DEPOSITS> 44,341,220
<SHORT-TERM> 0
<LIABILITIES-OTHER> 733,693
<LONG-TERM> 3,450,000
0
0
<COMMON> 4,790
<OTHER-SE> 2,613,440
<TOTAL-LIABILITIES-AND-EQUITY> 51,143,143
<INTEREST-LOAN> 1,243,598
<INTEREST-INVEST> 441,069
<INTEREST-OTHER> 117,561
<INTEREST-TOTAL> 1,802,228
<INTEREST-DEPOSIT> 865,227
<INTEREST-EXPENSE> 1,009,073
<INTEREST-INCOME-NET> 793,155
<LOAN-LOSSES> 30,000
<SECURITIES-GAINS> 8,908
<EXPENSE-OTHER> 864,339
<INCOME-PRETAX> (19,401)
<INCOME-PRE-EXTRAORDINARY> (13,307)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,307)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> 0
<YIELD-ACTUAL> 8.28
<LOANS-NON> 103,000
<LOANS-PAST> 401,000
<LOANS-TROUBLED> 76,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 401,066
<CHARGE-OFFS> 17,036
<RECOVERIES> 9,258
<ALLOWANCE-CLOSE> 423,288
<ALLOWANCE-DOMESTIC> 423,288
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
