-----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, Bsl3ZLAiyjcchCQMLon7FHKfOML7HG15gzzOXOswugIE9wh/J4Ebs4WIUgFGDMVM o8G92hfQ2XNg9K5+Q3vUEA== 0000950144-99-010155.txt : 19990816 0000950144-99-010155.hdr.sgml : 19990816 ACCESSION NUMBER: 0000950144-99-010155 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 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: 99689090 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 June 30, 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 June 30, 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 sheets of Volunteer Bancorp, Inc. and subsidiary as of June 30, 1999 and 1998, 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, 1999 Nashville, Tennessee 3 VOLUNTEER BANCORP, INC. AND SUBSIDIARY Condensed Consolidated Balance Sheets June 30, 1999 and 1998 (Unaudited - See Accountants' Review Report) - --------------------------------------------------------------------------------
ASSETS 1999 1998 ------ -------- ------- Cash and due from banks $ 2,944,509 $ 2,332,207 Federal fund sold 2,039,916 3,921,513 --------------------------------- Total cash and cash equivalents 4,984,425 6,253,720 Investment securities available for sale (amortized cost of $28,523,725 and $18,462,425, respectively) 27,732,369 18,540,124 Investment securities held to maturity (estimated market $1,069,757 value of $ and $3,075,455) 1,104,254 3,073,785 Loans, less allowances for loan losses of $864,726 and $737,027, respectively 62,449,085 54,653,612 Accrued interest receivable 968,747 883,778 Premises and equipment, net 4,002,254 3,608,810 Deferred income taxes 344,823 1,062 Other real estate 159,624 153,420 Goodwill 175,967 193,850 Other assets 145,396 97,794 --------------------------------- Total assets $ 102,066,944 $ 87,459,955 ================================= LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Non-interest bearing $ 9,916,374 $ 8,611,284 Interest bearing 82,726,838 69,169,503 --------------------------------- Total deposits 92,643,212 77,780,787 Interest payable 867,555 819,598 Securities sold under repurchase agreements 1,692,073 1,733,089 Note payable 2,790,000 3,045,000 Other accrued taxes, expenses and liabilities 11,659 53,419 --------------------------------- Total liabilities 98,004,499 83,431,893 --------------------------------- 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 2,631,196 2,057,999 Accumulated other comprehensive income (490,641) 48,173 --------------------------------- Total stockholders' equity 4,062,445 4,028,062 --------------------------------- Total liabilities and stockholders' equity $ 102,066,944 $ 87,459,955 =================================
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 VOLUNTEER BANCORP, INC. AND SUBSIDIARY Condensed Consolidated Statements of Earnings and Comprehensive Income For The Three and Six Months Ended June 30, 1999 and 1998 (Unaudited - See Accountants' Review Report) - --------------------------------------------------------------------------------
Three months ended Six months ended June 30, June 30, -------- -------- 1999 1998 1999 1998 ---- ---- ---- ---- Interest Income: Interest and fees on loans $ 1,488,634 $ 1,321,390 $ 2,907,396 $ 2,509,403 Interest on federal funds 36,203 72,789 76,378 171,888 Interest on investment securities: Taxable 392,191 317,946 752,175 613,435 Exempt from Federal income taxes 44,622 11,301 90,760 15,234 -------------------------------------------------------------- Total interest income 1,961,650 1,723,426 3,826,709 3,309,960 -------------------------------------------------------------- Interest Expense: Interest on deposits 982,387 897,716 1,948,505 1,730,001 Other borrowed funds 71,910 84,971 143,883 169,664 -------------------------------------------------------------- Total interest expense 1,054,297 982,687 2,092,388 1,899,665 -------------------------------------------------------------- Net interest income 907,353 740,739 1,734,321 1,410,295 Provision for possible loan losses 60,000 60,000 120,000 120,000 -------------------------------------------------------------- Net interest income after provision for possible loan losses 847,353 680,739 1,614,321 1,290,295 -------------------------------------------------------------- Non-interest income: Service charges on deposits 44,007 37,385 94,368 65,704 Other service charges and fees 32,363 27,183 54,818 45,138 Securities gains 12,123 3,138 40,747 15,173 Other non-interest income 3,377 6,765 13,979 12,918 -------------------------------------------------------------- Total non-interest income 91,870 74,471 203,912 138,933 -------------------------------------------------------------- Non-interest expense: Salaries and employee benefits 347,195 310,586 701,985 621,380 Occupancy expense 62,164 56,050 115,146 96,556 Furniture and equipment expense 66,839 57,889 138,106 115,948 Other non-interest expense 171,799 176,303 364,239 337,406 -------------------------------------------------------------- Total non-interest expense 647,997 600,828 1,319,476 1,171,290 -------------------------------------------------------------- Earnings before income taxes 291,226 154,382 498,757 257,938 Income tax expense 98,719 53,127 165,234 96,674 -------------------------------------------------------------- Net income $ 192,507 $ 101,255 $ 333,523 $ 161,264 ============================================================== Other comprehensive income: Unrealized (loss) on securities available for sale, before tax $ (709,102) $ (13,714) $ (1,037,102) $ (21,472) Reclassification for gains included in net income (12,123) (3,138) (40,747) (15,173) Income taxes related to other comprehensive income 264,852 4,019 378,615 2,393 -------------------------------------------------------------- (432,127) (6,557) (617,740) (3,906) -------------------------------------------------------------- Total comprehensive income $ (239,620) $ 94,698 $ (284,217) $ 157,358 ============================================================== Net income per common share $ 0.36 $ 0.19 $ 0.62 $ 0.30 ============================================================== Common shares outstanding 539,027 539,027 539,027 539,027 ==============================================================
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 VOLUNTEER BANCORP, INC. AND SUBSIDIARY Condensed Consolidated Statements of Cash Flows For The Six Months Ended June 30, 1999 and 1998 (Unaudited - See Accountants' Review Report) - --------------------------------------------------------------------------------
1999 1998 ---- ---- Cash Flows from Operating Activities: Net income $ 333,523 $ 161,264 Adjustments to reconcile net income to net cash provided by operating activities: Deferred income taxes 56,996 (20,220) Provision for possible loan losses 120,000 120,000 Provision for depreciation and amortization 123,661 120,311 FHLB stock dividends (9,700) -- (Gain) on securities (40,747) (15,173) (Increase) in interest receivable (63,510) (64,268) (Increase) in other assets (161,298) (103,535) Increase (decrease) in other liabilities (389,154) 87,957 -------------------------------- Net cash provided by operating activities (30,229) 286,336 -------------------------------- Cash Flows from Investing Activities: Purchase of investment securities held to maturity -- (1,988,681) Proceeds from calls and maturity of held to maturity securities 258,223 -- Purchase of investment securities available for sale (10,914,064) (6,911,801) Proceeds from calls and maturity of securities available for sale 2,575,000 4,498,582 Proceeds from sale of securities available for sale 5,748,887 990,625 Net (increase) in loans (4,355,040) (6,963,742) Capital expenditures (123) (72,989) -------------------------------- Net cash (used) in investing activities (6,687,117) (10,448,006) -------------------------------- Cash Flows from Financing Activities: Net increase in demand deposits, NOW accounts and savings accounts 1,889,661 777,843 Net increase in certificates of deposit 3,088,419 7,915,555 Net increase in securities sold under repurchase agreements 229,943 516,410 Repayment of long-term borrowing (255,000) (220,000) Payment of dividends (53,903) -- -------------------------------- Net cash provided by financing activities 4,899,120 8,989,808 -------------------------------- (Decrease) in cash and cash equivalents (1,818,226) (1,171,862) Cash and cash equivalents beginning of period 6,802,651 7,425,582 -------------------------------- Cash and cash equivalents end of period $ 4,984,425 $ 6,253,720 ================================ Supplemental Disclosure of Cash Flow Information: Cash paid during the period for: Interest $ 2,164,732 $ 1,800,909 ================================ Income taxes $ 330,145 $ 149,351 ================================
The accompanying notes are an integral part of these condensed consolidated financial statements. 6 VOLUNTEER BANCORP, INC. AND SUBSIDIARY Notes to Unaudited Condensed Consolidated Financial Statements Six Months Ended June 30, 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. 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. 7 VOLUNTEER BANCORP, INC. AND SUBSIDIARY Notes to Unaudited Condensed Consolidated Financial Statements Six Months Ended June 30, 1999 and 1998 - -------------------------------------------------------------------------------- 3. Long-term debt The Company's long-term debt consists of a single note payable in the amount of $3,045,000 and $2,790,000 at June 30, 1998 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 June 30, 1999 the rate on the note was 6.938% 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. 8 VOLUNTEER BANCORP, INC. AND SUBSIDIARY FINANCIAL HIGHLIGHTS AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED)
Three Months Ended Six Months Ended June 30, June 30, 1999 1998 1999 1998 ---- ---- ---- ---- Net income $ 192,507 $ 101,255 $ 333,523 $ 161,264 Per common share data: Net income per weighted average common share $ 0.36 $ 0.19 $ 0.62 $ 0.30 Book value $ 7.54 $ 7.47 $ 7.54 $ 7.47 Ratios: Return on average assets 0.19% 0.12% 0.33% 0.19% Return on average common equity 4.60% 2.57% 7.88% 4.08% Net interest margin (taxable equivalent basis) 3.94% 3.61% 3.82% 3.62% Expense ratio 2.57% 2.89% 2.64% 2.77% Allowance for loan losses/loans 1.37% 1.33% 1.37% 1.33% Non-performing loans/loans 0.56% 0.04% 0.56% 0.04% Non-performing assets/loans and foreclosed properties 0.81% 0.31% 0.81% 0.31% Shareholder's equity/total assets 3.98% 4.61% 3.98% 4.61% Leverage ratio (tangible capital/ tangible average assets) 4.34% 4.77% 4.38% 4.70%
9 VOLUNTEER BANCORP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998 OPERATING RESULTS The Company reported net income for the second quarter of $192,507, or $0.36 per weighted average common share, compared to income of $101,255, or $0.19 for the same period a year ago. Our returns on average assets and average common equity were 0.19% and 4.60%, respectively, for the quarter compared to 0.12% and 2.57% for the same period last year. Net interest income for the first six months of 1999 increased $324,026 versus the first six months of 1998 to $1,734,321. The increase is attributable to growth in interest earning assets of 16.38%. Average loans grew 19.57% over the second quarter of 1998. Total Company assets were $102,066,944 at June 30, 1999 compared to $87,459,955 as of June 30, 1998. The net interest margin (taxable equivalent basis) was 3.94% for the second quarter of 1999 compared to 3.61% for the second quarter of 1998. The yield on the investment portfolio was 6.42% for the second quarter of 1999 compared to 6.40% for the same quarter of 1998. The higher level of interest income from loans and securities was accompanied by a decrease in the cost of interest-bearing deposits and securities sold under repurchase agreements. Non-interest income for the second quarter of 1999 increased $17,399 over the second quarter of 1998. The growth is attributable to service charges on deposit accounts, gains on securities transactions, and other fees. Non-interest expenses for the second quarter of 1999 increased $47,169 compared to the second quarter of 1998 primarily for costs (including salaries and employee compensation) associated with overall growth. ASSET QUALITY Non-performing assets at June 30, 1999 were $517,000 or 0.81% of loans and foreclosed properties, compared to $174,000, or 0.31% of loans and foreclosed properties at June 30, 1998. The provision for losses on loans was $60,000 for the second quarter of 1999 and 1998. At June 30, 1999, the allowance for losses on loans was 1.37% of loans and approximately 167% of non-performing assets. 10 VOLUNTEER BANCORP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 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 data bases. 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 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 factor 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 lease a new IT system for a period of five years at annual rent of approximately $75,000. This system is certified to be Year 2000 compliant and the Company has tested the system to ensure that it is 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. 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) 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, 1999. 11 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: August 12, 1999 /s/ Reed D. Matney ------------------------------------------ Reed D. Matney, President (principal executive officer) Date: August 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 July 20, 1999 included in this Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1999. Welch & Associates Nashville, Tennessee August 12, 1999 EX-27 3 FINANCIAL DATA SCHEDULE
9 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 2,944,509 0 2,039,916 0 27,732,369 1,104,254 1,069,757 63,313,811 864,726 102,066,944 92,643,212 1,692,073 879,214 2,790,000 0 0 5,390 4,057,055 102,066,944 2,907,396 842,935 76,378 3,826,709 1,948,505 2,092,388 1,734,321 120,000 40,747 1,319,476 498,757 333,523 0 0 333,523 0.62 0.62 8.20 20,000 337,000 0 0 810,563 67,347 1,510 864,726 864,726 0 0
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