<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 MARCH 31, 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 37869
(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: 452,900 AS OF MARCH 31,
1996.
Transitional Small Business Disclosure Format (check one):
Yes No X
----- -----
<PAGE> 2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WELCH & ASSOCIATES, LTD.
Certified Public Accountants
401 UNION STREET - NINTH FLOOR
NASHVILLE, TENNESSEE 37219-1708
615-254-4834
INDEPENDENT AUDITOR'S REVIEW REPORT
To the Board of Directors
Volunteer Bancorp, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Volunteer Bancorp, Inc. and subsidiary as of March 31, 1996 and 1995, and the
related condensed consolidated statement of operations and the condensed
consolidated statement of cash flows for the three 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 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
auditing standards, the objective of which is the expression of an opinion
regarding the 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 consolidated financial statements in order for them
to be in conformity with generally accepted accounting principles.
/s/ Welch & Associates, Ltd.
April 12, 1996
Nashville, Tennessee
<PAGE> 3
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
March 31, 1996 and 1995
(Unaudited - See Accountants' Review Report)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
------------ --------------
ASSETS
------
<S> <C> <C>
Cash and due from banks $ 1,934,984 $ 1,050,254
Federal funds sold 4,115,308 1,463,993
Investment securities available for sale (amortized
cost of $12,849,747 and $500,000, respectively) 12,812,781 498,750
Investment securities held to maturity (estimated market
value of $2,275,951 and $7,696,095, respectively) 2,318,857 7,862,893
Loans, less allowance for possible loan losses of
$408,853 and $419,597, respectively 24,364,113 13,414,478
Accrued interest receivable 533,391 311,505
Premises and equipment, net 2,025,681 981,001
Other real estate 67,846 15,160
Goodwill 234,105 249,286
Other assets 106,228 129,146
-----------------------------
Total assets $48,513,294 $25,976,466
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits:
Non-interest bearing $ 5,918,266 $ 4,500,562
Interest bearing 36,104,241 18,795,966
-----------------------------
Total deposits 42,022,507 23,296,528
Accrued interest payable 310,955 89,804
Other accrued taxes, expenses and liabilities 74,826 6,790
Long-term debt 3,450,000 50,000
Deferred income taxes 82,748 111,604
-----------------------------
Total liabilities 45,941,036 23,554,726
-----------------------------
Minority interest - 10,071
-----------------------------
Stockholders' equity:
Common stock, $0.01 par value, 1,000,000 shares authorized,
452,900 shares issued and outstanding at March 31,
1996; $1 par value, 10,000 shares authorized, 1,343 shares
issued and outstanding, at March 31, 1995 4,529 1,343
Additional paid-in capital 1,033,631 695,330
Retained earnings 1,556,976 1,715,771
Unrealized loss on securities available for sale, net (22,878) (775)
-----------------------------
Total stockholders' equity 2,572,258 2,411,669
-----------------------------
Total liabilities and stockholders' equity $48,513,294 $25,976,466
=============================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 4
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Earnings
Three Months Ended March 31, 1996 and 1995
(Unaudited - See Accountants' Review Report)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Interest income:
Interest and fees on loans $584,973 $312,751
Interest on federal funds 64,973 28,162
Interest on investment securities:
Taxable 189,706 108,598
Exempt from Federal income tax - 4,347
---------------------------
Total interest income 839,652 453,858
---------------------------
Interest expense:
Interest on deposits 400,386 168,659
Interest on other borrowed funds 71,899 690
---------------------------
Total interest expense 472,285 169,349
---------------------------
Net interest income 367,367 284,509
Provisions for possible loan losses 15,000 9,000
---------------------------
Net interest income after provision for possible loan losses 352,367 275,509
---------------------------
Non-interest income:
Service charges on deposits 13,670 7,638
Other fees and commissions 12,797 7,474
Securities gains 8,908 -
Other non-interest income 3,372 8,407
---------------------------
Total non-interest income 38,747 23,519
---------------------------
Non-interest expense:
Salaries and employee benefits 253,091 165,329
Occupancy expenses, net 23,483 14,334
Furniture and equipment expense 35,549 20,534
Other non-interest expense 139,433 100,127
---------------------------
Total non-interest expense 451,556 300,324
---------------------------
Net (loss) before income taxes and minority interest (60,442) (1,296)
Income tax (benefit) (21,978) (1,960)
Minority interest - (131)
Net (loss) income $(38,464) $533
===========================
(Loss) income per weighted average common share $ (0.09) $ 0.00
===========================
Weighted average common shares outstanding 448,565 344,700
===========================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 5
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995
(Unaudited - See Accountants' Review Report)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net (loss) income $ (38,464) $ 533
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Minority interest undistributed - (131)
Deferred income taxes (22,731) 30,782
Provision for loan losses 15,000 9,000
Provision for depreciation and amortization 31,554 12,042
Securities (gains) (8,908) -
(Increase) in interest receivable (98,836) (46,148)
Decrease (increase) in other assets 81,765 (99,245)
Increase in other liabilities 53,937 14,681
-----------------------------
Net cash provided (used) by operating activities 13,317 (78,486)
-----------------------------
Cash Flows from Investing Activities:
Purchase of investment securities held to maturity (2,204,385) -
Proceeds from calls and maturity of held to maturity securities 3,408,326 9,326
Purchase of investment securities available for sale (7,241,078) (500,000)
Proceeds from calls and maturities of available for sale securities 1,000,000 -
Net (increase) in loans (2,804,510) (748,348)
Acquisition of minority interest - (131,380)
Capital expenditures (65,679) (204,626)
-----------------------------
Net cash (used) in investing activities (7,907,326) (1,575,028)
-----------------------------
Cash Flows from Financing Activities:
Net increase (decrease) in demand deposits, NOW
accounts and savings accounts 1,934,569 (563,594)
Net increase in certificates of deposit 5,575,764 1,855,007
Proceeds from long-term debt - 50,000
Issue common stock 66,000 -
-----------------------------
Net cash provided by financing activities 7,576,333 1,341,413
-----------------------------
(Decrease) in cash and cash equivalents (317,676) (312,101)
Cash and cash equivalents beginning of period 6,367,968 2,826,348
-----------------------------
Cash and cash equivalents end of period $6,050,292 $2,514,247
=============================
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ 491,378 $ 148,465
=============================
Income taxes $ - $ -
=============================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 6
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
Three Months Ended March 31, 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 months ended March
31, 1995 are calculated after giving retroactive effect to 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 March 31, 1995 the Company had not identified any loans which would be
considered impaired under the above provisions and at March 31, 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 March 31, 1996
is primarily related to completion and equipping of branches in Church Hill
and Rogersville, Tennessee and construction-in-progress related to the
construction of permanent banking facilities in Rogersville.
5. Non-interest Expense
Other non-interest expense increased by $151,232 from March 31, 1996
compared to March 31, 1995. Salaries and employee benefits for the period
ended September 30, 1995 have increased due to the addition of personnel
associated with the opening of branches in Church Hill and Rogersville,
Tennessee. The increase in occupancy and furniture and equipment expenses
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 and promoting the new branches.
<PAGE> 7
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
Three Months Ended March 31, 1996 and 1995
- --------------------------------------------------------------------------------
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 March 31, 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>
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.
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 addition, the Company has entered into a
construction contract for a permanent office in Rogersville, Tennessee. 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.
<PAGE> 8
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
Three Months Ended March 31, 1996 and 1995
- --------------------------------------------------------------------------------
8. Stock Offering
At March 31, 1996 the Company had sold 49,922 shares of its $0.01 par value
common stock for an aggregate consideration of $449,220 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's
long-term debt.
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
VOLUNTEER BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Operating Results
The Company experienced a net loss for the first quarter of 1996 of ($38,464)
or ($0.09) per common share compared to a net income for the first quarter of
1995 of $533. Our returns on average assets and average common equity for the
first quarter of 1996 were (0.05%) and (1.48%), respectively, compared to 0.00%
and 0.02%, respectively, or negligible returns for the first quarter of 1995.
Net interest income for the first quarter of 1996 increased $82,858 versus the
first quarter of 1995 to $367,367. The increase is attributable to loan growth
and a higher investment portfolio yield. Average loans grew 76.77% over the
first quarter of 1995. The growth in loans from March 31, 1995 to March 31,
1996 is attributable to an increase of approximately $415,000 in commercial
loans, approximately $6,388,000 in real estate loans ($3,118,000 secured by 1-4
single family residences), and approximately $2,831,000 in consumer loans.
Total Bank assets were $48,513,294 at March 31, 1996 compared to $25,976,466 as
of March 31, 1995.
The net interest margin was 2.95% for the first quarter of 1996 compared to
3.4% for the first quarter of 1995. The yield on the investment portfolio was
6.29% for the first quarter of 1996 compared to 5.73% 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 first quarter of 1996 increased $15,228 over the
first quarter of 1995. The growth is attributable to service charges on deposit
accounts and other fees. Non-interest expenses for the first quarter of 1996
increased $151,232 compared to the first 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
Asset quality measures continue to improve. Non-performing assets at March 31,
1996 were $263,000 or 1.07% of loans and foreclosed properties, which is a
decrease from $288,000, or 2.15% of loans and foreclosed properties at March
31, 1995. The provision for losses on loans was $15,000 for the first quarter
of 1996 which is an increase of $6,000 over the provision of $9,000 for the
first quarter of 1995. The increase in the provision is primarily attributable
to the increase in loan growth. At March 31, 1996, the allowance for losses on
loans was 1.65% of loans and approximately 155% of non-performing assets.
OUTLOOK
While not pleased with the Company's results for the first quarter of 1996, we
are essentially where we thought we would be after expanding into new markets
in Rogersville and Church Hill, Tennessee and incurring the costs to staff
these locations and capitalize the Bank at the levels required by regulators.
Common stock sales, to date, are somewhat less than we originally
anticipated. We believe that stock sales will increase during the third quarter
of 1996 as the offering nears its expiration date. The growth in
<PAGE> 10
banking assets continues and we see no reason why such growth trends should not
continue. As banking assets increase, the Company's ability to absorb the
negative impact of interest costs attributable to long-term debt used to
capitalize the Company's subsidiary Bank and other noninterest expenses will be
enhanced and should result in improved performance.
<PAGE> 11
VOLUNTEER BANCORP, INC.
FINANCIAL HIGHLIGHTS
AS OF AND FOR THE THREE MONTHS ENDED
MARCH 31, 1996 and 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net (loss) earnings ($38,464) $ 533
Per Common share data:
Net loss (earnings) per weighted average common share ($0.09) $0.00
Book value $5.68 $5.99
Ratios:
Return on average assets (0.05)% 0.00%
Return on average common equity (1.48)% 0.02%
Net interest margin (taxable equivalent basis) 2.95% 3.40%
Expense ratio 4.04% 4.74%
Allowance for losses on loans/loans 1.65% 3.03%
Non-performing loans/loans 0.80% 2.03%
Non-performing assets/loans and foreclosed properties 1.07% 2.15%
Shareholders' equity/total assets 5.30% 9.28%
Leverage ratio (tangible capital/tangible assets) 4.89% 8.41%
</TABLE>
<PAGE> 12
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 Independent Public Accountants
Exhibit 27 Financial Data Schedule (for SEC use only)
(b) There have been no Current Reports on Form 8-K filed during the quarter
ended March 31, 1996.
<PAGE> 13
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: May 10, 1996 /s/ Reed D. Matney
-------------------------------------------
Reed D. Matney, President
(principal executive officer)
Date: May 10, 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 review report dated April 12, 1996 included in this Quarterly Report on
Form 10-Q for the Quarter Ended March 31, 1996.
Welch & Associates
Nashville, Tennessee
May 10, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VOLUNTEER BANCORP FOR THE THREE MONTHS ENDED MARCH 31,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,934,984
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,115,308
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 12,812,781
<INVESTMENTS-CARRYING> 2,318,857
<INVESTMENTS-MARKET> 2,275,951
<LOANS> 24,772,966
<ALLOWANCE> 408,853
<TOTAL-ASSETS> 48,513,294
<DEPOSITS> 42,022,507
<SHORT-TERM> 0
<LIABILITIES-OTHER> 468,529
<LONG-TERM> 3,450,000
0
0
<COMMON> 4,529
<OTHER-SE> 2,567,729
<TOTAL-LIABILITIES-AND-EQUITY> 48,513,294
<INTEREST-LOAN> 584,973
<INTEREST-INVEST> 189,706
<INTEREST-OTHER> 64,973
<INTEREST-TOTAL> 839,652
<INTEREST-DEPOSIT> 400,386
<INTEREST-EXPENSE> 472,285
<INTEREST-INCOME-NET> 367,367
<LOAN-LOSSES> 15,000
<SECURITIES-GAINS> 8,908
<EXPENSE-OTHER> 451,556
<INCOME-PRETAX> (60,442)
<INCOME-PRE-EXTRAORDINARY> (38,464)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (38,464)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> 0
<YIELD-ACTUAL> 8.24
<LOANS-NON> 76,000
<LOANS-PAST> 119,000
<LOANS-TROUBLED> 76,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 401,066
<CHARGE-OFFS> 13,055
<RECOVERIES> 5,842
<ALLOWANCE-CLOSE> 408,853
<ALLOWANCE-DOMESTIC> 408,853
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
