-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LRgpfSN/O+54ZFSQONdUXhVHLaYDTLVGIUOV4vLGDVaAem39F+18fh++gReUulbh 52UCteHAYx5sPrsW+p4+Cw== 0000950144-99-005781.txt : 19990514 0000950144-99-005781.hdr.sgml : 19990514 ACCESSION NUMBER: 0000950144-99-005781 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOLUNTEER BANCORP INC CENTRAL INDEX KEY: 0000947440 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 621271025 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-22473 FILM NUMBER: 99619236 BUSINESS ADDRESS: STREET 1: 161 W MAIN ST CITY: SNEEDVILLE STATE: TN ZIP: 37879 BUSINESS PHONE: 4239219900 MAIL ADDRESS: STREET 1: 161 W MAIN ST CITY: SNEEDVILLE STATE: TN ZIP: 37879 10QSB 1 VOLUNTEER BANCORP INC 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, 1999 [ ] 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, 1999. Transitional Small Business Disclosure Format (check one); Yes No X ----- ------ 2 PART I -- FINANCIAL INFORMATION 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 sheet of Volunteer Bancorp, Inc. and subsidiary as of March 31, 1999 and 1998, and the related condensed consolidated statement of earnings, condensed consolidated statement 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 26, 1999 1 3 VOLUNTEER BANCORP, INC. AND SUBSIDIARY Condensed Consolidated Balance Sheets March 31, 1999 and 1998 (Unaudited- See Accountants' Review Report) - --------------------------------------------------------------------------------
ASSETS 1999 1998 ------ ---- ---- Cash and due from banks $ 2,323,277 $ 2,482,964 Federal fund sold 3,120,172 6,344,776 ----------------------------------- Total cash and cash equivalents 5,443,449 8,827,740 Investment securities available for sale (amortized cost of $26,735,961 and $17,458,235, respectively) 26,641,584 17,546,510 Investment securities held to maturity (estimated market value of $1,359,551 and $3,075,384) 1,358,594 3,079,420 Loans, less allowances for loan losses of $840,974 and $693,589, respectively 60,815,308 49,467,187 Accrued interest receivable 908,806 751,756 Premises and equipment, net 4,081,830 3,595,789 Deferred income taxes 79,971 20,522 Other real estate 51,923 60,917 Goodwill 180,438 198,321 Other assets 144,098 65,447 ----------------------------------- Total assets $ 99,706,001 $ 83,613,609 =================================== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Non-interest bearing $ 9,942,673 $ 8,028,054 Interest bearing 80,086,821 65,957,183 ----------------------------------- Total deposits 90,029,494 73,985,237 Note payable 2,790,000 3,045,000 Interest payable 710,143 664,304 Securities sold under repurchase agreements 1,655,888 1,790,341 Other accrued taxes, expenses and liabilities 218,411 195,363 ----------------------------------- Total liabilities 95,403,936 79,680,245 ----------------------------------- 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 2,438,689 1,956,744 Accumulated other comprehensive (loss) income (58,514) 54,730 ----------------------------------- Total stockholders' equity 4,302,065 3,933,364 ----------------------------------- Total liabilities and stockholders' equity $ 99,706,001 $ 83,613,609 ===================================
The accompanying notes are an integral part of these condensed consolidated financial statements. 2 4 VOLUNTEER BANCORP, INC. AND SUBSIDIARY Condensed Consolidated Statements of Earnings For The Three Months Ended March 31, 1999 and 1998 (Unaudited - See Accountants' Review Report) - --------------------------------------------------------------------------------
1999 1998 ---- ---- Interest Income: Interest and fees on loans $ 1,418,762 $ 1,188,013 Interest on federal funds 40,175 99,099 Interest on investment securities: Taxable 359,984 295,489 Exempt from Federal income taxes 46,138 3,933 ---------------------------------- Total interest income 1,865,059 1,586,534 ---------------------------------- Interest Expense: Interest on deposits 966,118 832,285 Other borrowed funds 71,973 84,693 ---------------------------------- Total interest expense 1,038,091 916,978 ---------------------------------- Net interest income 826,968 669,556 Provision for possible loan losses 60,000 60,000 ---------------------------------- Net interest income after provision for possible loan losses 766,968 609,556 ---------------------------------- Non-interest income: Service charges on deposits 50,361 28,319 Other service charges and fees 22,455 17,955 Securities gains 28,624 12,035 Other non-interest income 10,602 6,153 ---------------------------------- Total non-interest income 112,042 64,462 ---------------------------------- Non-interest expense: Salaries and employee benefits 354,790 310,794 Occupancy expense 52,982 40,506 Furniture and equipment expense 71,267 58,059 Other non-interest expense 192,440 161,103 ---------------------------------- Total non-interest expense 671,479 570,462 ---------------------------------- Income before income taxes 207,531 103,556 Income tax expense 66,515 43,547 ---------------------------------- Net income $ 141,016 $ 60,009 ================================== Income per common share $ 0.26 0.11 ================================== Common shares outstanding 539,027 539,027 ==================================
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 5 VOLUNTEER BANCORP, INC. AND SUBSIDIARY Condensed Consolidated Statements of Cash Flows For The Three Months Ended March 31, 1999 and 1998 (Unaudited - See Accountants' Review Report) - --------------------------------------------------------------------------------
1999 1998 ---------- -------- Cash Flows from Operating Activities: Net income $ 141,016 $ 60,009 Adjustments to reconcile net income to net cash provided by operating activities: Deferred income taxes 56,996 (44,149) Provision for possible loan losses 60,000 60,000 Provision for depreciation and amortization 61,748 60,725 FHLB stock dividends (4,600) -- (Gain) on securities (28,624) (12,035) (Increase) decrease in interest receivable (3,569) 67,754 (Increase) decrease other assets (52,299) 21,315 (Decrease) increase in other liabilities (339,814) 74,607 ------------------------------------- Net cash (used) provided by operating activities (109,146) 288,226 ------------------------------------- Cash Flows from Investing Activities: Purchase of investment securities held to maturity -- (1,994,316) Proceeds from calls and maturity of held to maturity securities 3,883 -- Purchase of investment securities available for sale (4,539,661) (4,419,674) Proceeds from calls and maturity of investments available for sale 1,675,000 3,998,582 Proceeds from sale of investments available for sale 2,045,025 -- Net (increase) in loans (2,661,263) (1,717,317) Capital expenditures (22,257) (4,853) ------------------------------------- Net cash (used) in investing activities (3,499,273) (4,137,578) ------------------------------------- Cash Flows from Financing Activities: Net increase in demand deposits, NOW accounts, IRA and savings accounts 6,175,918 3,646,859 Net (decrease) increase in certificates of deposit (3,811,556) 1,250,989 Repayment of long-term debt (255,000) (220,000) Net increase in securities sold under repurchase agreements 193,758 573,662 Dividends paid (53,903) -- ------------------------------------- Net cash provided by financing activities 2,249,217 5,251,510 ------------------------------------- Increase (decrease) in cash and cash equivalents (1,359,202) 1,402,158 Cash and cash equivalents beginning of period 6,802,651 7,425,582 ------------------------------------- Cash and cash equivalents end of period $ 5,443,449 8,827,740 ===================================== Supplemental Disclosure of Cash Flow Information: Cash paid during the period for: Interest $ 992,252 $ 973,516 ===================================== Income taxes $ 172,645 $ 49,984 =====================================
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 6 VOLUNTEER BANCORP, INC. AND SUBSIDIARY Condensed Consolidated Statements of Comprehensive Income For The Three Months Ended March 31, 1999 and 1998 (Unaudited - See Accountants' Review Report) - --------------------------------------------------------------------------------
1999 1998 ---- ---- Net income $ 141,016 $ 60,009 ------------------------------ Other comprehensive income, before tax: Unrealized (loss) gain on securities available for sale: Unrealized holding (losses) gains arising during the period (270,752) 16,311 Less: reclassification adjustment for (gains) included in net income (28,624) (12,035) ------------------------------ Other comprehensive (loss) income (299,376) 4,276 Income taxes related to other comprehensive (loss) income (113,763) 1,625 ------------------------------ (185,613) 2,651 ------------------------------ Total comprehensive income $ (44,597) $ 62,660 ==============================
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 7 VOLUNTEER BANCORP, INC. AND SUBSIDIARY Notes to Unaudited Condensed Consolidated Financial Statements Three Months Ended March, 1999 and 1998 - -------------------------------------------------------------------------------- 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. Prior periods have been restated to conform to the presentation for the current period. SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and the Extinguishment of Liabilities," establishes, among other things, new criteria for determining whether a transfer of financial assets for cash or other considerations should be accounted for as a sale or as a pledge of collateral in a secured borrowing. SFAS No. 125 also establishes new accounting requirements for pledged collateral. As issued, SFAS No. 125 is generally effective for transactions occurring after December 31, 1996 and should be applied on a prospective basis. This statement supersedes SFAS No. 122 and itself amends various previous pronouncements of the Financial Accounting Standards Board. Adoption by the Company on January 1, 1997 did not have a material impact upon the Company's financial position or results of operation. SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" is effective for fiscal quarters beginning after June 15, 1999 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. 6 8 VOLUNTEER BANCORP, INC. AND SUBSIDIARY Notes to Unaudited Condensed Consolidated Financial Statements Three Months Ended March, 1999 and 1998 - -------------------------------------------------------------------------------- 3. Long-term debt The Company's long-term debt consists of a single note payable in the amount of $2,790,000 and $3,045,000 at March 31. 1999 and 1998, 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. 1999 the rate on the note was 6.92% per annum. Principal is payable annually on January 31, as follows:
January 31, Principal Due ----------- ------------- 2000 295,000 2001 325,000 2002 360,000 2003 395,000 2004 435,000 2005 470,000 2006 (Final Maturity) 510,000 -------------- $ 2,790,000 ==============
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. 7 9 VOLUNTEER BANCORP, INC. AND SUBSIDIARY FINANCIAL HIGHLIGHTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
1999 1998 ---- ---- Net earnings $141,016 $60,009 Per common share data: Net earnings per common share $0.26 $0.11 Book value $7.98 $7.30 Ratios: Return on average assets 0.14% 0.07% Return on average common equity 3.24% 1.53% Net interest margin (taxable equivalent basis) 3.71% 3.55% Expense ratio 2.72% 2.79% Allowance for loan losses/loans 1.36% 1.38% Non-performing loans/loans 0.73% 0.41% Non-performing assets/loans and foreclosed properties 0.81% 0.53% Shareholders' equity/total assets 4.31% 4.70% Leverage ratio (tangible capital/tangible assets) 4.24% 4.51%
8 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 VOLUNTEER BANCORP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS AS OF AND FOR THE THREE AND MONTHS ENDED MARCH 31, 1999 AND 1998 OPERATING RESULTS The Company reported net income for the first quarter of $141,016, or $0.26 per common share, compared to net income of $60,009, or $0.11 for the same period a year ago. Our returns on average assets and average common equity were 0.14% and 3.24%, respectively, for the quarter compared to 0.07% and 1.53% for the same period last year. Net interest income for the first three months of 1999 increased $157,412 versus the first three months of 1998 to $826,968. The increase is attributable to growth in interest earning assets of 26.71%. Average loans grew 22.82% over the first quarter of 1998. Total Company assets were $99,706,001 at March 31, 1999 compared to $86,313,609 as of March 31, 1998. The net interest margin was 3.71% for the first quarter of 1999 compared to 3.55% for the first quarter of 1998. The yield on the investment portfolio was 6.13% for the first quarter of 1999 compared to 6.36% for the same quarter of 1998. The higher level of interest income from loans and securities was offset by an increase in the cost of interest-bearing deposits and securities sold under repurchase agreements. Non-interest income for the first quarter of 1999 increased $47,580 over the first quarter of 1998. The growth is attributable to service charges on deposit accounts and gains on securities transactions. Non-interest expenses for the first quarter of 1998 increased $101,017 compared to the first quarter of 1998 primarily for costs (including salaries and employee compensation) associated with overall growth. ASSET QUALITY Non-performing assets at March 31, 1999 were $497,000 or 0.81% of loans and foreclosed properties, which is an increase from $266,000, or 0.53% of loans and foreclosed properties at March 31, 1998. The provision for losses on loans was $60,000 for the first quarter of 1999 and 1998. At March 31, 1999, the allowance for losses on loans was 1.36% of loans and approximately 169% of non-performing assets. 9 11 VOLUNTEER BANCORP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS AS OF AND FOR THE THREE AND MONTHS ENDED MARCH 31, 1999 AND 1998 YEAR 2000 COMPLIANCE The Year 2000 poses serious challenges to the banking industry. Many experts believe that even the most prepared organizations may encounter some implementation problems. The federal banking agencies are concerned that financial institutions avoid major disruptions to service and operations. All banks are required to have an action plan to address Year 2000 issues which must include an indication of management awareness of the problems and the commitment to solutions; identification of external risks; and operational issues that are relevant to a bank's Year 2000 planning. The Federal Financial Institutions Examination Council ("FFIEC") has issued guidelines and target time frames to accomplish critical actions concerning Year 2000 compliance: * By September 30, 1997, all banks should have identified affected applications and databases. Mission critical applications should be identified and an action plan set for Year 2000 work. * By December 31, 1998, code enhancements and revisions, hardware upgrades, and other associated changes should have been largely completed by all banks. In addition, for mission critical applications, programming changes should have been largely completed and testing should have been well underway. * Between January 1, 1999 and December 31, 1999, banks should be testing and implementing their Year 2000 conversion programs. External factors which may adversely affect the Company include reliance on vendors, such as third-party data processing services and software and hardware vendors; electronic data-sensitive exchange among other financial institutions which may not be Year 2000 compliant; corporate customers of the Company and other debtors. The Company has been assessing its state of readiness by evaluating its information technology ("IT") and non-IT systems. IT systems commonly include data processing, accounting and telephone systems. With respect to its IT systems, the Company estimates that its Year 2000 identification, assessment and remediation efforts are substantially complete. During 1998, the Company's need for additional computing capacity led it to purchase a new IT system for approximately $200,000. This system is certified to be Year 2000 compliant. During the remainder of 1999, further testing will be carried out in order to ensure that all systems are working properly. The Company has assessed its Year 2000 status in regard to non-IT systems and has determined that no material risk exists. The Company has communicated with its significant vendors in order to determine the extent to which interfaces with such entities are vulnerable to Year 2000 issues and whether the products and services purchased from such entities are Year 2000 compliant. The Company has received either verbal or written assurance from these vendors that they expect to address all their significant Year 2000 issues on a timely basis. With respect to significant borrowers and depositors, the Company does not anticipate any material Year 2000 issues. The Company believes the cost of its further Year 2000 identification, assessment, remediation and testing efforts will not exceed $10,000. 10 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 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, 1999. 11 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 12, 1999 /s/ Reed D. Matney ------------------------------------------ Reed D. Matney, President (principal executive officer) Date: May 12, 1999 /s/ H. Lyons Price ------------------------------------------ H. Lyons Price (principal financial and accounting officer) 12 EX-23.1 2 CONSENT OF WELCH & ASSOCIATES 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report dated April 26, 1999 included in this Quarterly Report on Form 10-Q for the Quarter Ended March 31, 1999. Welch & Associates Nashville, Tennessee May 12, 1999 EX-27 3 FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF VOLUNTEER BANCORP, INC. FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 2,323,277 0 3,120,172 0 26,641,584 1,358,594 1,359,551 61,656,282 840,974 99,706,001 90,029,494 1,655,888 928,554 2,790,000 0 0 5,390 4,296,675 99,706,001 1,418,762 406,122 40,175 1,865,059 966,118 1,038,091 826,968 60,000 28,624 671,479 207,531 141,016 0 0 141,016 0.26 0.26 8.12 15,661 433,000 0 0 810,563 30,216 627 840,974 840,974 0 0
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