<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 SEPTEMBER 30, 2000
[ ] 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.)
210 EAST MAIN STREET, ROGERSVILLE, TENNESSEE 37879
(Address of principal executive offices)
(615) 272-2200
(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 CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 539,027 AS OF SEPTEMBER 30,
2000.
Transitional Small Business Disclosure Format (check one);
Yes [ ] No [X]
<PAGE> 2
INDEPENDENT AUDITOR'S REVIEW REPORT
To the Board of Directors
Volunteer Bancorp, Inc.
Rogersville, Tennessee
We have reviewed the accompanying condensed consolidated balance sheets of
Volunteer Bancorp, Inc. and subsidiary as of September 30, 2000 and 1999, and
the related condensed consolidated statements of earnings and condensed
consolidated statements of comprehensive income for the three and nine months
then ended and the condensed consolidated statements of cash flows for the nine
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.
Welch & Associates
November 1, 2000
Nashville, Tennessee
<PAGE> 3
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
September 30, 2000 and 1999
(Unaudited- See Accountants' Review Report)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 2000 1999
------ ------------- -------------
<S> <C> <C>
Cash and due from banks $ 2,937,507 $ 4,180,814
Federal fund sold 1,875,000 285,798
------------- -------------
Total cash and cash equivalents 4,812,507 4,466,612
Investment securities available for sale (amortized cost of
$26,196,204 and $28,281,074, respectively) 24,984,386 27,230,678
Investment securities held to maturity (estimated market
value of $1,007,495 and $1,050,666, respectively) 1,068,584 1,101,129
Loans, less allowances for loan losses of $971,210 and
$892,351, respectively 72,810,569 66,114,549
Accrued interest receivable 1,160,161 1,068,926
Premises and equipment, net 4,118,150 4,115,531
Other real estate 552,332 95,689
Deferred income taxes 549,485 422,748
Goodwill 153,613 171,496
Other assets 120,385 131,171
------------- -------------
Total assets $ 110,330,172 104,918,529
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits:
Non-interest bearing $ 11,102,681 $ 10,559,535
Interest bearing 90,017,791 83,289,324
------------- -------------
Total deposits 101,120,472 93,848,859
Interest payable 1,062,098 847,968
Note payable 2,495,000 2,790,000
Federal funds purchased -- 925,000
Federal Home Loan Bank advances -- 500,000
Securities sold under repurchase agreements 925,434 1,861,726
Other accrued taxes, expenses and liabilities 66,641 35,002
------------- -------------
Total liabilities 105,669,645 100,808,555
------------- -------------
Stockholders' equity:
Common stock, $0.01 par value, 1,000,000 shares
authorized, 539,027 shares issued and
outstanding 5,390 5,390
Additional paid-in capital 1,916,500 1,916,500
Retained earnings 3,489,964 2,840,473
Accumulated other comprehensive income (751,327) (652,389)
------------- -------------
Total stockholders' equity 4,660,527 4,109,974
------------- -------------
Total liabilities and stockholders' equity $ 110,330,172 104,918,529
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 4
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Earnings
For The Three and Nine Months Ended September 30, 2000 and 1999
(Unaudited - See Accountants' Review Report)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------------ ---------------------
2000 1999 2000 1999
---------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $1,849,017 $ 1,563,328 5,261,512 4,470,724
Interest on federal funds 27,665 18,437 90,255 94,815
Interest on investment securities:
Taxable 359,299 389,675 1,095,392 1,141,850
Exempt from Federal income taxes 46,983 49,739 140,862 140,499
---------- ----------- --------- ---------
Total interest income 2,282,964 2,021,179 6,588,021 5,847,888
---------- ----------- --------- ---------
Interest Expense:
Interest on deposits 1,225,709 995,167 3,433,916 2,943,672
Other borrowed funds 60,648 77,123 209,023 221,006
---------- ----------- --------- ---------
Total interest expense 1,286,357 1,072,290 3,642,939 3,164,678
---------- ----------- --------- ---------
Net interest income 996,607 948,889 2,945,082 2,683,210
Provision for possible loan losses 60,000 60,000 180,000 180,000
---------- ----------- --------- ---------
Net interest income after provision for
possible loan losses 936,607 888,889 2,765,082 2,503,210
---------- ----------- --------- ---------
Non-interest income:
Service charges on deposits 61,115 53,792 176,567 148,160
Other service charges and fees 24,638 26,826 81,817 81,644
Securities (losses) gain -- (5) -- 40,742
Other non-interest income 4,156 9,481 18,762 23,460
---------- ----------- --------- ---------
Total non-interest income 89,909 90,094 277,146 294,006
---------- ----------- --------- ---------
Non-interest expense:
Salaries and employee benefits 400,653 393,561 1,215,002 1,095,546
Occupancy expense 51,285 60,529 173,461 175,675
Furniture and equipment expense 93,009 89,175 251,282 227,281
Other non-interest expense 186,891 107,749 578,603 471,988
---------- ----------- --------- ---------
Total non-interest expense 731,838 651,014 2,218,348 1,970,490
---------- ----------- --------- ---------
Earnings before income taxes 294,678 327,969 823,880 826,726
Income tax expense 101,039 118,692 277,162 283,926
---------- ----------- --------- ---------
Net income $ 193,639 209,277 546,718 542,800
========== =========== ========= =========
Income per common share $ 0.36 0.39 1.01 1.01
========== =========== ========= =========
Common shares outstanding 539,027 539,027 539,027 539,027
========== =========== ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE> 5
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
For The Nine Months Ended September 30, 2000 and 1999
(Unaudited - See Accountants' Review Report)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
----------- ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 546,718 $ 542,800
Adjustments to reconcile net income
to net cash provided by operating activities:
Deferred income taxes 4,101 76,363
Provision for possible loan losses 180,000 180,000
Provision for depreciation and amortization 182,809 185,738
(Gain) on securities -- (40,742)
Federal Home Loan Bank stock dividends (17,000) (15,100)
(Increase) in interest receivable (131,801) (163,689)
(Increase) in other assets (208,023) (83,138)
Increase (decrease) in other liabilities 184,083 (385,398)
----------- ------------
Net cash provided by operating activities 740,887 296,834
----------- ------------
Cash Flows from Investing Activities:
Proceeds from calls and maturity of held to maturity securities 29,045 261,348
Purchase of investment securities available for sale -- (11,146,417)
Proceeds from calls and maturity of investments available for
sale 866,582 2,797,123
Proceeds from sale of investments available for sale -- 6,007,163
Net (increase) in loans (6,258,141) (8,080,504)
Capital expenditures (213,297) (171,006)
----------- ------------
Net cash (used) in investing activities (5,575,811) (10,332,293)
----------- ------------
Cash Flows from Financing Activities:
Net increase in demand deposits, NOW accounts,
savings accounts, and IRA's 3,938,261 2,499,092
Net increase in certificates of deposit 2,358,164 3,684,635
Repayment of long-term debt (295,000) (255,000)
Net increase in federal funds purchased -- 925,000
Federal Home Loan Bank advances -- 500,000
Repayment of Federal Home Loan Bank Advances (4,500,000) --
Net change in securities sold under repurchase agreements (395,656) 399,596
Dividends paid (64,683) (53,903)
----------- ------------
Net cash provided by financing activities 1,041,086 7,699,420
----------- ------------
(Decrease) in cash and cash equivalents (3,793,838) (2,336,039)
Cash and cash equivalents beginning of period 8,606,345 6,802,651
----------- ------------
Cash and cash equivalents end of period $ 4,812,507 4,466,612
=========== ============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ 3,402,235 $ 3,256,609
=========== ============
Income taxes $ 320,303 $ 416,395
=========== ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE> 6
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Comprehensive Income
For The Three and Nine Months Ended September 30, 2000 and 1999
(Unaudited - See Accountants' Review Report)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
---------------------- ----------------------
2000 1999 2000 1999
--------- --------- -------- ----------
<S> <C> <C> <C> <C>
Net income $ 193,639 $ 209,277 546,718 542,800
--------- --------- -------- ----------
Other comprehensive income, before tax:
Unrealized (losses) gains on securities
available for sale:
Unrealized holding gains (losses) arising
during the period 361,385 (259,035) 142,827 (1,296,137)
Less: reclassification adjustment for
(gains) losses included in net income -- 5 -- (40,742)
--------- --------- -------- ----------
Other comprehensive income 361,385 (259,030) 142,827 (1,336,879)
Income taxes related to other
comprehensive income (137,450) 97,292 (54,274) 475,907
--------- --------- -------- ----------
Other comprehensive income,
net of income taxes 223,935 (161,738) 88,553 (860,972)
--------- --------- -------- ----------
Total comprehensive income (loss) $ 417,574 47,539 635,271 (318,172)
========= ========= ======== ==========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE> 7
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Condensed Consolidated Financial Statements
Nine Months Ended September 30, 2000 and 1999
--------------------------------------------------------------------------------
1. Management Opinion
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements of Volunteer Bancorp, Inc. and
subsidiary 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 condensed consolidated
financial statements should be read in conjunction with the annual
financial statements and notes thereto.
2. Adoption of Recently Issued Statements of Financial Accounting
Standards (SFAS)
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", as amended by SFAS No. 137, is effective for fiscal
quarters beginning after June 15, 2000 unless adopted earlier. This
Statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, (collectively referred to as derivatives) and for hedging
activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and
measure those instruments at fair value. If certain conditions are met,
a derivative may be specifically designated as (a) a hedge of the
exposure to changes in the fair value of a recognized asset or
liability or an unrecognized firm commitment, (b) a hedge of the
exposure to variable cash flows of a forecasted transaction, or (c) a
hedge of the foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale
security, or a foreign-currency-denominated forecasted transaction.
Adoption by the Company did not have any material impact upon financial
position or results of operations.
<PAGE> 8
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Condensed Consolidated Financial Statements
Nine Months Ended September 30, 2000 and 1999
--------------------------------------------------------------------------------
3. Long-term debt
The Company's long-term debt consists of a single note payable in the
amount of $3,050,000 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 1.95% 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 September 30, 2000 the rate
on the note was 7.292% per annum. Principal is payable annually
commencing January 31, 1996 and each January 1 thereafter as follows:
<TABLE>
<CAPTION>
January 31, Principal Due
----------- -------------
<S> <C>
2001 325,000
2002 360,000
2003 395,000
2004 435,000
2005 470,000
2006 (Final Maturity) 510,000
---------
$2,495,000
=========
</TABLE>
The loan is secured by all of the stock of Citizens Bank of East
Tennessee owned by the Company.
4. 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.
<PAGE> 9
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
FINANCIAL HIGHLIGHTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income $ 193,639 $ 209,277 $ 546,718 $ 542,800
Per common share data:
Net income per weighted
average common share $ 0.36 $ 0.39 $ 1.01 $ 1.01
Book value $ 8.65 $ 7.62 $ 8.65 $ 7.62
Ratios:
Return on average assets 0.71% 0.81% 0.67% 0.71%
Return on average common equity 17.40% 20.19% 16.66% 17.01%
Net interest margin (taxable equivalent
basis) 4.13% 4.06% 4.02% 3.91%
Expense ratio 2.68% 2.52% 2.73% 2.59%
Allowance for losses on loans / loans 1.32% 1.33% 1.32% 1.33%
Non-performing loans / loans 0.64% 0.42% 0.64% 0.42%
Non-performing assets / loans and
foreclosed properties 1.38% 0.56% 1.38% 0.56%
Shareholders' equity / total assets 4.22% 3.92% 4.22% 3.92%
Leverage ratio (tangible capital /
tangible average assets) 4.78% 4.99% 4.83% 4.51%
</TABLE>
<PAGE> 10
VOLUNTEER BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
OPERATING RESULTS
The Company reported net income for the third quarter of $193,639, or $0.36 per
common share, compared to net income of $209,277, or $0.39 for the same period a
year ago. Our returns on average assets and average common equity were 0.71% and
17.40%, respectively, for the quarter compared to 0.81% and 20.19% for the same
period last year.
The net income for the first nine months of 2000 was $546,718, or $1.01 per
common share. This compares to net income of $542,800, or $1.01 per common
share, for the same period last year.
Net interest income for the first nine months of 2000 increased $261,872 versus
the first nine months of 1999 to $2,945,082. The increase is attributable to
growth in interest earning assets of 1.85%. Average loans grew 9.17% over the
third quarter of 1999. Total Company assets were $110,330,172 at September 30,
2000 compared to $104,918,529 as of September 30, 1999.
The net interest margin (taxable equivalent basis) was 4.13% for the third
quarter of 2000 compared to 4.06% for the third quarter of 1999. The yield on
the investment portfolio was 5.96% for the third quarter of 2000 compared to
5.97% for the third quarter of 1999. The higher level of interest income from
loans and securities was offset by an increase in the cost of interest-bearing
deposits, securities sold under repurchase agreements, and note payable.
Non-interest income for the first nine months of 2000 decreased $16,860 over the
first nine months of 1999. The increase in service charges on deposit accounts
and other fees was offset by a decrease in gains on securities transactions.
Non-interest expenses for the first nine months of 2000 increased $247,858
compared to the first nine months of 1999 primarily as a result of the growth
the Bank has experienced in the past year.
ASSET QUALITY
Non-performing assets at September 30, 2000 were $1,023,000 or 1.38% of loans
and foreclosed properties, compared to $378,000, or 0.56% of loans and
foreclosed properties at September 30, 1999. The provision for losses on loans
was $60,000 for the third quarter of 2000 and 1999. At September 30, 2000, the
allowance for losses on loans was 1.32% of loans and approximately 95% of
non-performing assets. The increase in non-performing assets is primarily
attributable to a real estate development loan being placed on non-accrual and
three parcels of real estate being placed in other real estate owned. No
material loss, if any, is anticipated as a result of these transactions.
<PAGE> 11
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) Exhibits
Exhibit 23.1 Consent of Welch & Associates
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 September 30, 2000.
<PAGE> 12
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: November 13, 2000 /s/ Reed D. Matney
---------------------------------------
Reed D. Matney, President
(principal executive officer)
Date: November 13, 2000 /s/ H. Lyons Price
---------------------------------------
H. Lyons Price (principal financial and
accounting officer)
