<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, 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)
(423) 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 JUNE 30,
2000.
Transitional Small Business Disclosure Format (check one);
Yes [ ] No [X]
<PAGE> 2
Item 1. Financial Statements
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 June 30, 2000 and 1999, and the
related condensed consolidated statements of earnings and comprehensive income
for the three and six months then ended and the condensed consolidated
statements 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 20, 2000
Nashville, Tennessee
<PAGE> 3
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
June 30, 2000 and 1999
(Unaudited- See Accountants' Review Report)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
------------- -------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 3,434,870 $ 2,944,509
Federal fund sold 975,000 2,039,916
------------- -------------
Total cash and cash equivalents 4,409,870 4,984,425
Investment securities available for sale (amortized cost of
$26,238,251 and $28,523,725, respectively) 24,701,248 27,732,369
Investment securities held to maturity (estimated market
$994,634 value of and $1,069,757) 1,071,313 1,104,254
Loans, less allowances for loan losses of $964,601 and
$864,726, respectively 71,476,509 62,449,085
Accrued interest receivable 1,085,257 968,747
Premises and equipment, net 4,151,205 4,002,254
Deferred income taxes 686,735 344,823
Other real estate 492,298 159,624
Goodwill 158,084 175,967
Other assets 113,884 145,396
------------- -------------
Total assets $ 108,346,403 $ 102,066,944
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 11,382,147 $ 9,916,374
Interest bearing 88,180,347 82,726,838
------------- -------------
Total deposits 99,562,494 92,643,212
Interest payable 941,680 867,555
Securities sold under repurchase agreements 1,050,288 1,692,073
Note payable 2,495,000 2,790,000
Other accrued taxes, expenses and liabilities 53,988 11,659
------------- -------------
Total liabilities 104,103,450 98,004,499
------------- -------------
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 3,296,325 2,631,196
Accumulated other comprehensive income (975,262) (490,641)
------------- -------------
Total stockholders' equity 4,242,953 4,062,445
------------- -------------
Total liabilities and stockholders' equity $ 108,346,403 $ 102,066,944
============= =============
</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 and Comprehensive Income
For The Three and Six Months Ended June 30, 2000 and 1999
(Unaudited - See Accountants' Review Report)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
-------------------------- --------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $ 1,760,987 $ 1,488,634 $ 3,412,495 $ 2,907,396
Interest on federal funds 37,490 36,203 62,590 76,378
Interest on investment securities:
Taxable 363,688 392,191 736,093 752,175
Exempt from Federal income taxes 44,999 44,622 93,879 90,760
----------- ----------- ----------- -----------
Total interest income 2,207,164 1,961,650 4,305,057 3,826,709
----------- ----------- ----------- -----------
Interest Expense:
Interest on deposits 1,149,082 982,387 2,208,207 1,948,505
Other borrowed funds 67,672 71,910 148,375 143,883
----------- ----------- ----------- -----------
Total interest expense 1,216,754 1,054,297 2,356,582 2,092,388
----------- ----------- ----------- -----------
Net interest income 990,410 907,353 1,948,475 1,734,321
Provision for possible loan losses 60,000 60,000 120,000 120,000
----------- ----------- ----------- -----------
Net interest income after provision for possible
loan losses 930,410 847,353 1,828,475 1,614,321
----------- ----------- ----------- -----------
Non-interest income:
Service charges on deposits 60,298 44,007 115,452 94,368
Other service charges and fees 38,910 32,363 57,179 54,818
Securities gains -- 12,123 -- 40,747
Other non-interest income 1,741 3,377 14,606 13,979
----------- ----------- ----------- -----------
Total non-interest income 100,949 91,870 187,237 203,912
----------- ----------- ----------- -----------
Non-interest expense:
Salaries and employee benefits 395,216 347,195 814,349 701,985
Occupancy expense 65,381 62,164 122,176 115,146
Furniture and equipment expense 78,276 66,839 158,273 138,106
Other non-interest expense 197,657 171,799 391,712 364,239
----------- ----------- ----------- -----------
Total non-interest expense 736,530 647,997 1,486,510 1,319,476
----------- ----------- ----------- -----------
Earnings before income taxes 294,829 291,226 529,202 498,757
Income tax expense 100,056 98,719 176,123 165,234
----------- ----------- ----------- -----------
Net income $ 194,773 $ 192,507 $ 353,079 $ 333,523
=========== =========== =========== ===========
Other comprehensive income:
Unrealized (loss) on securities available
for sale, before tax $ (5,476) $ (709,102) $ (218,358) $(1,037,102)
Reclassification for gains included in net income -- (12,123) -- (40,747)
Income taxes related to other comprehensive
income 2,081 264,852 82,976 378,615
----------- ----------- ----------- -----------
(3,395) (432,127) (135,382) (617,740)
----------- ----------- ----------- -----------
Total comprehensive income (loss) $ 191,378 $ (239,620) $ 217,697 $ (284,217)
=========== =========== =========== ===========
Net income per common share $ 0.37 $ 0.36 $ 0.66 $ 0.62
=========== =========== =========== ===========
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 Six Months Ended June 30, 2000 and 1999
(Unaudited - See Accountants' Review Report)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
----------- ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 353,079 $ 333,523
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred income taxes 4,101 56,996
Provision for possible loan losses 120,000 120,000
Provision for depreciation and amortization 123,625 123,661
FHLB stock dividends (11,000) (9,700)
(Gain) on securities -- (40,747)
(Increase) in interest receivable (56,897) (63,510)
(Increase) in other assets (141,488) (161,298)
Increase (decrease) in other liabilities 51,012 (389,154)
----------- ------------
Net cash provided (used) by operating activities 442,432 (30,229)
----------- ------------
Cash Flows from Investing Activities:
Purchase of investment securities held to maturity -- --
Proceeds from calls and maturity of held to maturity securities 26,316 258,223
Purchase of investment securities available for sale -- (10,914,064)
Proceeds from calls and maturity of securities available for sale 782,535 2,575,000
Proceeds from sale of securities available for sale -- 5,748,887
Net (increase) in loans (4,864,081) (4,355,040)
Capital expenditures (191,639) (123)
----------- ------------
Net cash (used) in investing activities (4,246,869) (6,687,117)
----------- ------------
Cash Flows from Financing Activities:
Net increase in demand deposits, NOW accounts, IRA
and savings accounts 3,661,419 1,889,661
Net increase in certificates of deposit 1,077,028 3,088,419
Net (decrease) increase in securities sold under
repurchase agreements (270,802) 229,943
Repayment of long-term borrowing (295,000) (255,000)
Repayment of FHLB advances (4,500,000) --
Payment of dividends (64,683) (53,903)
----------- ------------
Net cash (used) provided by financing activities (392,038) 4,899,120
----------- ------------
(Decrease) in cash and cash equivalents (4,196,475) (1,818,226)
Cash and cash equivalents beginning of period 8,606,345 6,802,651
----------- ------------
Cash and cash equivalents end of period $ 4,409,870 $ 4,984,425
=========== ============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ 2,266,296 $ 2,164,732
=========== ============
Income taxes $ 227,053 $ 330,145
=========== ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE> 6
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Condensed Consolidated Financial Statements
Six Months Ended June 30, 2000 and 1999
--------------------------------------------------------------------------------
1. Management Opinion
In the opinion of management, the accompanying unaudited condensed
consolidated 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. Adoption of Recently Issued Statements of Financial Accounting
Standards (SFAS)
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." Statement No. 130 requires the reporting of
comprehensive income in addition to net income from operations.
Comprehensive income is a more inclusive financial reporting
methodology that includes disclosure of certain financial information
that historically has not been recognized in the calculation of net
income.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", as amended by SFAS No. 137 and SFAS No. 138, is generally
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> 7
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Condensed Consolidated Financial Statements
Six Months Ended June 30, 2000 and 1999
--------------------------------------------------------------------------------
3. Long-term debt
The Company's long-term debt consists of a single note payable in the
amount of $2,790,000 and $2,495,000 at June 30, 1999 and 2000,
respectively, 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 June 30, 2000 the rate on the
note was 8.4525% per annum. Principal is payable annually on January
31, 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> 8
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
FINANCIAL HIGHLIGHTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ---------------------
2000 1999 2000 1999
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Net income $ 194,773 $ 192,507 $ 353,079 $ 333,523
Per common share data:
Net income per weighted average
common share $ 0.37 $ 0.36 $ 0.66 $ 0.62
Book value $ 7.87 $ 7.54 $ 7.87 $ 7.54
Ratios:
Return on average assets 0.72% 0.76% 0.66% 0.67%
Return on average common equity 18.79% 18.41% 16.95% 15.76%
Net interest margin (taxable equivalent basis) 4.00% 3.94% 4.03% 3.82%
Expense ratio 2.71% 2.57% 2.77% 2.64%
Allowance for loan losses / loans 1.33% 1.37% 1.33% 1.37%
Non-performing loans / loans 1.30% 0.56% 1.30% 0.56%
Non-performing assets / loans and
foreclosed properties 1.96% 0.81% 1.96% 0.81%
Shareholder's equity / total assets 3.92% 3.98% 3.92% 3.98%
Leverage ratio (tangible capital /
tangible average assets) 4.70% 4.34% 4.64% 4.38%
</TABLE>
<PAGE> 9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
OPERATING RESULTS
The Company reported net income for the second quarter of $194,773, or $0.37 per
common share, compared to income of $192,507, or $0.36 for the same period a
year ago. Our returns on average assets and average common equity were 0.72% and
18.79%, respectively, for the quarter compared to 0.76% and 18.41% for the same
period last year.
Net interest income for the first six months of 2000 increased $214,154 versus
the first six months of 1999 to $1,948,475. The increase is attributable to
growth in interest earning assets of 5.25%. Average loans grew 13.35% over the
second quarter of 1999. Total Company assets were $108,346,403 at June 30, 2000
compared to $102,066,944 as of June 30, 1999.
The net interest margin (taxable equivalent basis) was 4.00% for the second
quarter of 2000 compared to 3.94% for the second quarter of 1999. The yield on
the investment portfolio was 5.90% for the second quarter of 2000 compared to
6.42% for the same quarter of 1999. The higher level of interest income from
loans and securities was accompanied by an increase in the cost of
interest-bearing deposits and securities sold under repurchase agreements.
Non-interest income for the second quarter of 2000 increased $9,079 over the
second quarter of 1999. The growth is attributable to service charges on deposit
accounts and other fees. Non-interest expenses for the second quarter of 2000
increased $88,533 compared to the second quarter of 1999 primarily for costs
(including salaries and employee compensation) associated with overall growth.
ASSET QUALITY
Non-performing assets at June 30, 2000 were $1,432,000 or 1.96% of loans and
foreclosed properties, compared to $517,000, or 0.81% of loans and foreclosed
properties at June 30, 1999. The provision for losses on loans was $60,000 for
the second quarter of 2000 and 1999. At June 30, 2000, the allowance for losses
on loans was 1.33% of loans and approximately 67% of non-performing assets. The
increase in non-performing assets is primarily attributable to a real estate
development loan in which no loss is anticipated.
<PAGE> 10
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
At the Annual Meeting on May 18, 2000, the shareholders voted on the
following proposals with the results as indicated:
1. Elected its current directors to continue in office for
a three-year term as follows:
FOR WITHHOLD AUTHORITY
H. Lyons Price 393,374 0
G. Douglas Price 393,374 0
Gary Varnell 393,374 0
Truett H. Pierce 393,374 0
George Brooks 393,374 0
2. Ratified the appointment of Welch & Associates as the Company's
independent accountants and auditors for 2000 as follows:
FOR AGAINST ABSTAIN
393,374 0 0
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 June 30, 2000.
11
<PAGE> 11
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 8, 2000 /s/ Reed D. Matney
---------------------------------------
Reed D. Matney, President
(principal executive officer)
Date: August 8, 2000 /s/ H. Lyons Price
---------------------------------------
H. Lyons Price (principal financial and
accounting officer)
12
