<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, 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 MARCH 31,
2000.
Transitional Small Business Disclosure Format (check one);
Yes [ ] No [X]
<PAGE> 2
PART I
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 March 31, 2000 and 1999, and the
related condensed consolidated statements of earnings, condensed consolidated
statements of cash flows, and condensed consolidated statements of comprehensive
income 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 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.
April 20, 2000
<PAGE> 3
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
March 31, 2000 and 1999
(Unaudited - See Accountants' Review Report)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 2000 1999
------ ---- ----
<S> <C> <C>
Cash and due from banks $ 3,195,860 $ 2,323,277
Federal fund sold 3,077,302 3,120,172
------------------------------
Total cash and cash equivalents 6,273,162 5,443,449
Investment securities available for sale (amortized cost of
$26,595,593 and $26,735,961, respectively) 25,028,065 26,641,584
Investment securities held to maturity (estimated market
value of $1,028,745 and $1,359,551) 1,094,976 1,358,594
Loans, less allowances for loan losses of $911,399 and
$840,974, respectively 69,407,705 60,815,308
Accrued interest receivable 988,824 908,806
Premises and equipment, net 4,037,336 4,081,830
Deferred income taxes 684,654 79,971
Other real estate 253,323 51,923
Goodwill 162,554 180,438
Other assets 326,522 144,098
------------------------------
Total assets $ 108,257,121 $ 99,706,001
==============================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits:
Non-interest bearing $ 11,110,788 $ 9,942,673
Interest bearing 88,315,879 80,086,821
------------------------------
Total deposits 99,426,667 90,029,494
Note payable 2,495,000 2,790,000
Interest payable 720,564 710,143
Securities sold under repurchase agreements 1,335,304 1,655,888
Other accrued taxes, expenses and liabilities 228,011 218,411
------------------------------
Total liabilities 104,205,546 95,403,936
------------------------------
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 3,101,552 2,438,689
Accumulated other comprehensive (loss) income (971,867) (58,514)
------------------------------
Total stockholders' equity 4,051,575 4,302,065
------------------------------
Total liabilities and stockholders' equity $ 108,257,121 $ 99,706,001
==============================
</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 Months Ended March 31, 2000 and 1999
(Unaudited - See Accountants' Review Report)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Interest Income:
Interest and fees on loans $1,651,508 $1,418,762
Interest on federal funds 25,100 40,175
Interest on investment securities:
Taxable 372,405 359,984
Exempt from Federal income taxes 48,880 46,138
------------------------
Total interest income 2,097,893 1,865,059
------------------------
Interest Expense:
Interest on deposits 1,059,125 966,118
Other borrowed funds 80,703 71,973
------------------------
Total interest expense 1,139,828 1,038,091
------------------------
Net interest income 958,065 826,968
Provision for possible loan losses 60,000 60,000
------------------------
Net interest income after provision for possible loan losses 898,065 766,968
------------------------
Non-interest income:
Service charges on deposits 55,154 50,361
Other service charges and fees 18,269 22,455
Securities gains -- 28,624
Other non-interest income 12,865 10,602
------------------------
Total non-interest income 86,288 112,042
------------------------
Non-interest expense:
Salaries and employee benefits 419,133 354,790
Occupancy expense 56,795 52,982
Furniture and equipment expense 79,997 71,267
Other non-interest expense 194,055 192,440
------------------------
Total non-interest expense 749,980 671,479
------------------------
Income before income taxes 234,373 207,531
Income tax expense 76,067 66,515
------------------------
Net income $ 158,306 $ 141,016
========================
Income per common share $ 0.29 $ 0.26
========================
Common shares outstanding 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 Three Months Ended March 31, 2000 and 1999
(Unaudited - See Accountants' Review Report)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 158,306 $ 141,016
Adjustments to reconcile net income
to net cash provided by operating activities:
Deferred income taxes 4,101 56,996
Provision for possible loan losses 60,000 60,000
Provision for depreciation and amortization 61,986 61,748
FHLB stock dividends (5,300) (4,600)
(Gain) on securities -- (28,624)
Decrease (increase) in interest receivable 39,536 (3,569)
(Increase) other assets (115,151) (52,299)
Increase (decrease) in other liabilities 3,919 (339,814)
--------------------------
Net cash provided (used) by operating activities 207,397 (109,146)
--------------------------
Cash Flows from Investing Activities:
Proceeds from calls and maturity of held to maturity securities 2,653 3,883
Purchase of investment securities available for sale -- (4,539,661)
Proceeds from calls and maturity of investments available for
sale 455,494 1,675,000
Proceeds from sale of investments available for sale -- 2,045,025
Net (increase) in loans (2,735,277) (2,661,263)
Capital expenditures (20,601) (22,257)
--------------------------
Net cash (used) in investing activities (2,297,731) (3,499,273)
--------------------------
Cash Flows from Financing Activities:
Net increase in demand deposits, NOW accounts, IRA and
savings accounts 3,596,620 6,175,918
Net increase (decrease) in certificates of deposit 1,006,000 (3,811,556)
Repayment of long-term debt (295,000) (255,000)
Net increase in securities sold under repurchase agreements 14,214 193,758
Repayment of short-term FHLB advances (4,500,000) --
Dividends paid (64,683) (53,903)
--------------------------
Net cash (used) provided by financing activities (242,849) 2,249,217
--------------------------
(Decrease) in cash and cash equivalents (2,333,183) (1,359,202)
Cash and cash equivalents beginning of period 8,606,345 6,802,651
--------------------------
Cash and cash equivalents end of period $ 6,273,162 5,443,449
==========================
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ 1,270,658 $ 992,252
==========================
Income taxes $ 40,553 $ 172,645
==========================
</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 Months Ended March 31, 2000 and 1999
(Unaudited - See Accountants' Review Report)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Net income $ 158,306 $ 141,016
--------- ---------
Other comprehensive income, before tax:
Unrealized (loss) gain on securities available for sale:
Unrealized holding (losses) gains arising during the period (212,882) (270,752)
Less: reclassification adjustment for (gains)
included in net income -- (28,624)
--------- ---------
Other comprehensive (loss) income (212,882) (299,376)
Income taxes related to other comprehensive (loss) income (80,895) (113,763)
--------- ---------
(131,987) (185,613)
--------- ---------
Total comprehensive (loss) income $ 26,319 $ (44,597)
========= =========
</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
Three Months Ended March, 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, 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 is not expected to 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
Three Months Ended March, 2000 and 1999
- --------------------------------------------------------------------------------
3. Long-term debt
The Company's long-term debt consists of a single note payable in the
amount of $2,495,000 and $2,790,000 at March 31. 2000 and 1999,
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 March 31.
2000 the rate on the note was 8.0413% 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> 9
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
FINANCIAL HIGHLIGHTS
AS OF AND FOR THE THREE MONTHS ENDED
MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Net earnings $158,306 $141,016
Per common share data:
Net earnings per common share $0.29 $0.26
Book value $7.52 $7.98
Ratios:
Return on average assets 0.60% 0.57%
Return on average common equity 15.53% 12.96%
Net interest margin (taxable equivalent basis) 4.06% 3.71%
Expense ratio 2.84% 2.72%
Allowance for loan losses / loans 1.30% 1.36%
Non-performing loans / loans 1.26% 0.73%
Non-performing assets / loans and foreclosed properties 1.61% 0.81%
Shareholders' equity / total assets 3.74% 4.31%
Leverage ratio (tangible capital / tangible assets) 4.56% 4.24%
</TABLE>
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
AS OF AND FOR THE THREE AND MONTHS ENDED MARCH 31, 2000 AND 1999
OPERATING RESULTS
The Company reported net income for the first quarter of $158,306, or $0.29 per
common share, compared to net income of $141,016, or $0.26 for the same period a
year ago. Our returns on average assets and average common equity were 0.60% and
15.53%, respectively, for the quarter compared to 0.57% and 12.96% for the same
period last year.
Net interest income for the first three months of 2000 increased $131,097 versus
the first three months of 1999 to $958,065. The increase is attributable to
growth in interest earning assets of 7.26%. Average loans grew 12.37% over the
first quarter of 1999. Total Company assets were $108,257,121 at March 31, 2000
compared to $99,706,001 as of March 31, 1999.
The net interest margin was 4.06% for the first quarter of 2000 compared to
3.71% for the first quarter of 1999. The yield on the investment portfolio was
6.77% for the first quarter of 2000 compared to 6.13% for the same 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, Federal Home Loan Bank advances, and note payable.
Non-interest income for the first quarter of 2000 decreased $25,754 over the
first quarter of 1999. The decrease is primarily attributable to a reduction in
gains on securities transactions. Non-interest expenses for the first quarter of
2000 increased $78,501 compared to the first quarter of 1999 primarily for costs
(including salaries and employee compensation) associated with overall growth.
ASSET QUALITY
Non-performing assets at March 31, 2000 were $1,138,000 or 1.61% of loans and
foreclosed properties, which is an increase from $641,000, or 0.81% of loans and
foreclosed properties at March 31, 1999. The provision for losses on loans was
$60,000 for the first quarter of 2000 and 1999. At March 31, 2000, the allowance
for losses on loans was 1.30% of loans and approximately 80.09% 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> 11
The Company believes it is fully Year 2000 Compliant and has not experienced any
problems that would have a material effect upon the Company's financial
condition or results of operations.
<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) 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 March 31, 2000.
11
<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 9, 2000 /s/ Reed D. Matney
--- ---------------------------------------
Reed D. Matney, President
(principal executive officer)
Date: May 9, 2000 /s/ H. Lyons Price
--- ---------------------------------------
H. Lyons Price (principal financial and
accounting officer)
12
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated April 20, 2000 included in this Quarterly Report on Form 10-Q for
the Quarter Ended March 31, 2000.
Welch & Associates
Nashville, Tennessee
May 8, 2000
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,195,860
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,077,302
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 25,028,065
<INVESTMENTS-CARRYING> 1,094,976
<INVESTMENTS-MARKET> 1,028,745
<LOANS> 70,319,104
<ALLOWANCE> 911,399
<TOTAL-ASSETS> 108,257,121
<DEPOSITS> 99,426,667
<SHORT-TERM> 1,335,304
<LIABILITIES-OTHER> 948,575
<LONG-TERM> 2,945,000
0
0
<COMMON> 5,390
<OTHER-SE> 4,046,185
<TOTAL-LIABILITIES-AND-EQUITY> 108,257,121
<INTEREST-LOAN> 1,651,508
<INTEREST-INVEST> 421,285
<INTEREST-OTHER> 25,100
<INTEREST-TOTAL> 2,097,893
<INTEREST-DEPOSIT> 1,059,125
<INTEREST-EXPENSE> 1,139,828
<INTEREST-INCOME-NET> 958,065
<LOAN-LOSSES> 60,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 749,980
<INCOME-PRETAX> 234,373
<INCOME-PRE-EXTRAORDINARY> 158,306
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 158,306
<EPS-BASIC> 0.29
<EPS-DILUTED> 0.29
<YIELD-ACTUAL> 8.66
<LOANS-NON> 262,000
<LOANS-PAST> 624,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 842,328
<CHARGE-OFFS> 2,303
<RECOVERIES> 11,374
<ALLOWANCE-CLOSE> 911,399
<ALLOWANCE-DOMESTIC> 911,399
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
