SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
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(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 2000
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-24135
PCB Holding Company
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(Exact name of registrant as specified in its charter)
Indiana 35-2040715
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
819 Main Street, Tell City, Indiana 47586
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 1-812-547-7094
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Former name, former address and former fiscal year, if changed since last report
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
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; Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date: 399,820 shares of common stock were outstanding as of April
30, 2000.
PCB HOLDING COMPANY
INDEX
Part I Financial Information Page
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Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999 3
Consolidated Statements of Income for the three months
ended March 31, 2000 and 1999 4
Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 and 1999 5
Notes to consolidated financial statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
Part II. Other Information 12
Signatures 13
2
PART I - FINANCIAL INFORMATION
PCB HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
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2000 1999
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(Unaudited) *
(In thousands)
ASSETS
Cash and due from banks $ 114 $ 230
Interest bearing deposits with banks 2,348 2,309
Securities available for sale, at fair value 1,109 1,113
Loans receivable, net 24,791 24,054
Federal Home Loan Bank stock, at cost 196 196
Premises and equipment 259 228
Other assets 266 244
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Total Assets $ 29,083 $ 28,374
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LIABILITIES
Deposits $ 21,245 $ 20,464
Federal Home Loan Bank advances 2,000 2,000
Accrued expenses and other liabilities 56 76
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Total Liabilities 23,301 22,540
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STOCKHOLDERS' EQUITY
Preferred stock of $.01 per share
Authorized 1,000,000 shares; none issued - -
Common stock of $.01 per share
Authorized 4,000,000 shares; issued and
outstanding 412,620 shares 4 4
Additional paid-in capital 3,814 3,814
Retained earnings-substantially restricted 2,289 2,260
Accumulated other comprehensive income -
net unrealized loss on securities available
for sale (54) (51)
Unearned stock compensation (136) (144)
Less treasury stock, at cost - 12,800 shares (135) (49)
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5,782 5,834
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Total Liabilities and Stockholders' Equity $ 29,083 $ 28,374
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* Derived from audited financial statements.
See accompanying notes to consolidated financial statements.
3
PCB HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
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2000 1999
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(In thousands, except per share data)
INTEREST INCOME
Loans $ 461 $ 400
Securities 18 20
Federal Home Loan Bank dividends 4 4
Interest bearing deposits with banks 25 25
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Total interest income 508 449
INTEREST EXPENSE
Deposits 251 250
Federal Home Loan Bank advances 34 -
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Total interest expense 285 250
Net interest income 223 199
Provision for loan losses 2 2
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Net interest income after provision for loan losses 221 197
NON-INTEREST INCOME
Service charges on deposit accounts 5 3
Other income 4 2
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Total non-interest income 9 5
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NON-INTEREST EXPENSE
Compensation and benefits 106 88
Occupancy and equipment 11 10
Deposit insurance premiums 1 3
Other operating expenses 65 61
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Total non-interest expense 183 162
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Income before income taxes 47 40
Income tax expense 18 14
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Net Income 29 26
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Unrealized losses on securities:
Unrealized holding losses arising during the period (3) (12)
Less: reclassification adjustment - -
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Other comprehensive loss (3) (12)
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Comprehensive Income $ 26 $ 14
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Net income per common share, basic $ 0.07 $ 0.07
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Net income per common share, diluted $ 0.07 $ 0.07
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See accompanying notes to consolidated financial statements.
4
PCB HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
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2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 29 $ 26
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of premiums and accretion of
discounts on securities, net - (1)
Provision for loan losses 2 2
Depreciation expense 5 4
Stock compensation expense 8 -
Net change in other assets/liabilities (41) 17
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Net Cash Provided By Operating Activities 3 48
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CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in interest bearing deposits with banks (39) (537)
Proceeds from maturity of securities available for sale - 350
(615)
Net increase in loans receivable (739)
Purchase of premises and equipment (36) (3)
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Net Cash Used in Investing Activities (814) (805)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposit accounts 781 757
Purchase of treasury stock (86) -
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Net Cash Provided By Financing Activities 695 757
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Net Decrease in Cash and Due From Banks (116) -
Cash and due from banks at beginning of period 230 43
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Cash and Due From Banks at End of Period $ 114 $ 43
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See accompanying notes to consolidated financial statements.
5
PCB HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Presentation of Interim Information
PCB Holding Company ("Company") was incorporated by Peoples Building and
Loan Association, F.A. ("Association") (now known as Peoples Community
Bank) (the "Bank") in connection with the conversion of the Association
from a federally chartered mutual savings and loan association to a
federally chartered stock savings bank. Upon consummation of the
conversion on July 1, 1998, the Company became the holding company for the
Bank.
In the opinion of the management, the unaudited consolidated financial
statements include all normal adjustments considered necessary to present
fairly the financial position as of March 31, 2000, and the results of
operations for the three months ended March 31, 2000 and 1999 and cash
flows for the three months ended March 31, 2000 and 1999. Interim results
are not necessarily indicative of results that may be expected for a full
year.
The consolidated financial statements and notes are presented as permitted
by Form 10-QSB, and do not contain certain information included in the
Company's audited consolidated financial statements and notes for the year
ended December 31, 1999.
The consolidated financial statements include the accounts of the Company,
the Bank and its wholly-owned subsidiary, Peoples Building and Loan Service
Corp. All material intercompany balances and transactions have been
eliminated in consolidation.
2. Supplemental Disclosures of Cash Flow Information
Three Months Ended
March 31,
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2000 1999
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(In thousands)
Cash payments for:
Interest $ 287 $ 243
Taxes 30 38
6
PCB HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
3. Comprehensive Income
Comprehensive income is defined as "the change in equity (net assets) of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources. It includes all changes in equity
during a period except those resulting from investments by owners and
distributions to owners." Comprehensive income for the Company includes
net income and unrealized gains and losses on securities available for
sale. The following tables set forth the components of other comprehensive
income and the allocated income tax amounts for the three months ended
March 31, 2000 and 1999:
Three Months Ended
March 31,
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2000 1999
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(In thousands)
Unrealized gains on securities:
Unrealized holding losses
arising during the period $ (5) $ (20)
Income tax benefit 2 8
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Net of tax amount (3) (12)
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Less: reclassification
adjustment for (gains)
losses included in net
income - -
Income tax expense (benefit) - -
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Other comprehensive
income (loss) $ (3) $ (12)
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4. Net Income Per Common Share
Three Months Ended
March 31,
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2000 1999
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(In thousands,
except per share data)
Basic:
Net income $ 29 $ 26
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Shares:
Weighted average common shares outstanding 390,980 396,750
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Net income per common share, basic $0.07 $ 0.07
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Diluted:
Net income $ 29 $ 26
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Shares:
Weighted average common shares outstanding 390,980 396,750
Add: Dilutive effect of options and restricted
share awards 2,932 -
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Weighted average common shares outstanding,
as adjusted 393,912 396,750
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Net income per common share, diluted $0.07 $ 0.07
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7
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PCB HOLDING COMPANY AND SUBSIDIARY
Safe Harbor Statement for Forward Looking Statements
This report may contain forward-looking statements within the meaning of the
federal securities laws. These statements are not historical facts, rather
statements based on the Company's current expectations regarding its business
strategies and their intended results and its future performance. Forward-
looking statements are preceded by terms such as "expects," "believes,"
"anticipates," "intends" and similar expressions.
Forward-looking statements are not guarantees of future performance. Numerous
risks and uncertainties could cause or contribute to the Company's actual
results, performance and achievements to be materially different from those
expressed or implied by the forward-looking statements. Factors that may cause
or contribute to these differences include, without limitation, general economic
conditions, including changes in market interest rates and changes in monetary
and fiscal policies of the federal government; legislative and regulatory
changes; the Company's ability to remedy any computer malfunctions that may
result from the advent of the Year 2000; and other factors disclosed
periodically in the Company's filings with the Securities and Exchange
Commission.
Because of the risks and uncertainties inherent in forward-looking statements,
readers are cautioned not to place undue reliance on them, whether included in
this report or made elsewhere from time to time by the Company or on its behalf.
The Company assumes no obligation to update any forward-looking statements.
Financial Condition
Total assets increased 2.5% from $28.4 million at December 31, 1999 to
$29.1 million at March 21, 2000, primarily as a result of increases in loans
receivable, net, which was funded primarily by growth in deposits.
Loans receivable, net, were $24.8 million at March 31, 2000, compared to
$24.1 million at December 31, 1999, a 3.1% increase.
Other debt securities available for sale (U.S. government agency
obligations) were $1.1 million at December 31, 1999 and March 31, 2000.
Cash and interest bearing deposits with banks were $2.5 million at December
31, 1999 and March 31, 2000.
Total deposits increased from $20.5 million at December 31, 1999 to $21.2
million at March 31, 2000 primarily as a result of growth in time accounts.
8
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PCB HOLDING COMPANY AND SUBSIDIARY
Results of Operations
Net income. Net income was $29,000 for the three months ended March 31,
2000, compared to $26,000 for the three months ended March 31, 1999. The
increase in net income for 2000 compared to 1999 resulted primarily from an
increase in net interest income, offset by an increase in non-interest expenses.
Net interest income. Net interest income increased 12.1% from $199,000 in
1999 to $223,000 for 2000 as a result of an increase in total interest income
offset by an increase in interest expense. The average yield on interest-
earning assets increased from 7.06% for 1999 to 7.26% for 2000. The average
balance of total interest-earning assets was $25.5 million for 1999 compared to
$28.0 million for 2000. The average cost of interest-bearing liabilities
increased from 5.10% for 1999 to 5.17% for 2000 while the average balance of
interest-bearing liabilities was $19.6 million for 1999 compared to $22.1
million for 2000. The interest rate spread for 1999 was 1.96% compared to 2.09%
for 2000. The increase in average interest-earning assets and average interest-
bearing liabilities for 2000 compared to 1999 relates primarily to the growth in
the loan portfolio and time deposits, respectively.
Provision for loan losses. The provision for loan losses was $2,000 for
both the three month periods ended March 31, 2000 and 1999. Provision for loan
losses are charges to earnings to bring the total allowance for loan losses to a
level considered adequate by management to provide for probable known and
inherent loan losses based on management's evaluation of the collectability of
the loan portfolio, including the nature of the portfolio, credit
concentrations, trends in historical loss experience, specific impaired loans,
and economic conditions. In determining the adequacy of the allowance for loan
losses, the Company reviews all loans quarterly, and loans are assigned a risk
weighting based on asset classification. The allowance for loan losses was
$56,000 at March 31, 2000 and $54,000 at December 31, 1999. Management has
deemed these amounts as adequate on those dates based on its best estimate of
probable known and inherent loan losses. At March 31, 2000, non-performing
loans totaled $258,000.
Non-interest income. Non-interest income was $9,000 for the three months
ended March 31, 2000 and $5,000 for the three months ended March 31, 1999. The
increase is primarily a result of an increase in service charges on deposit
accounts due to increased activity.
Non-interest expenses. Non-interest expenses totaled $183,000 for the
three months ended March 31, 2000 compared to $162,000 for the same period in
1999. The increase for 2000 compared to 1999 resulted primarily from increases
in compensation and benefits of $18,000 and an increase in other operating
expenses of $4,000. Compensation and benefits have increased due to normal pay
raises and the adoption in July 1999 of a restricted stock compensation plan.
Other operating expenses increased in 2000 as compared to the same period in
1999 primarily as a result of increases in data processing fees related to
additional loan and deposit accounts, advertising expenses, supervisory
examination expenses and other expenses of operating as a public company.
9
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PCB HOLDING COMPANY AND SUBSIDIARY
Income tax expense. Income tax expense for the three month period ended
March 31, 2000 was $18,000, compared to $14,000 for the same period in 1999.
The effective tax rate for 2000 is 38.7% compared to 35.3% for 1999 due to the
effect of the graduated federal tax rates.
Liquidity and Capital Resources
The Bank's primary sources of funds are customer deposits, proceeds from
loan repayments, maturing securities and FHLB advances. While loan repayments
and maturities are a predictable source of funds, deposit flows and mortgage
prepayments are greatly influenced by market interest rates, general economic
conditions and competition. At March 31, 2000, the Bank had cash and interest-
bearing deposits with banks of $2.5 million and securities available-for-sale
with a fair value of $1.1 million. At March 31, 2000, the Bank also had an
available, but undrawn, credit line of $1.9 million from the FHLB-Indianapolis.
The Bank's primary investing activity is the origination of one-to-four
family mortgage loans and, to a lesser extent, consumer, multi-family,
commercial real estate and residential construction loans. The Bank also
invests in U.S. Government and agency securities, corporate notes and, to a
lesser extent, mortgage-backed securities.
The Bank must maintain an adequate level of liquidity to ensure the
availability of sufficient funds to support loan growth and deposit withdrawals,
to satisfy financial commitments and to take advantage of investment
opportunities. At March 31, 2000, the Bank had total commitments to extend
credit of $390,000. Historically, the Bank has been able to retain a
significant amount of its deposits as they mature.
Current OTS regulations require savings institutions to maintain an average
daily balance of liquid assets (cash and eligible investments) equal to at least
4.0% of the average daily balance of its net withdrawable deposits and short-
term borrowings. Historically, the Bank has maintained liquidity levels in
excess of regulatory requirements.
The Bank is required to maintain specific amounts of capital pursuant to
OTS requirements. As of March 31, 2000, the Bank was in compliance with all
regulatory capital requirements which were effective as of such date with
tangible, core and risk-based capital ratios of 14.5%, 14.5% and 26.0%,
respectively.
Year 2000 Update
The year 2000 issue exists because many computer systems and applications
use two-digit date fields to designate a year. Date-sensitive systems may
recognize the year 2000 as 1900, or not at all. This inability to recognize or
properly treat the year 2000 may cause erroneous results, ranging from system
malfunctions to incorrect or incomplete processing. As a user of computers,
computer software and equipment utilizing embedded microprocessors, failure to
resolve year 2000 issues could cause substantial disruption of the Bank's
business and could have a material adverse effect on the Bank's business,
financial condition or results of operations.
10
The Bank established a year 2000 committee in 1997. The committee developed
and implemented a comprehensive plan to make all information and non-information
technology assets year 2000 compliant. The committee provides periodic reports
to the Board of Directors in order to assist the directors in their year 2000
readiness oversight role.
While there can be no assurances that the Bank's year 2000 plan has
effectively addressed the year 2000 issue, the Bank has not been notified, and
is unaware of, any vendor or service provider problems related to year 2000 and
all systems have performed properly since January 1, 2000. Likewise, the Bank is
unaware of any year 2000 issues that have impaired the ability of the Bank's
borrowers to repay their debt.
11
PART II
OTHER INFORMATION
PCB HOLDING COMPANY
Item 1. Legal Proceedings
Periodically, there have been various claims and lawsuits involving the
Bank, mainly as a plaintiff, such as claims to enforce liens,
condemnation proceedings on properties in which the Bank holds security
interests, claims involving the making and servicing of real property
loans and other issues incident to the Bank's business. The Bank is not
a party to any pending legal proceedings that it believes would have a
material adverse affect on it's financial condition or operations.
Item 2. Changes in Securities and Use of Proceeds
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
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27 Financial Data Schedule
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
PCB HOLDING COMPANY
(Registrant)
Dated May 9, 2000 BY: /s/ Carl D. Smith
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Carl D. Smith
President and CEO
Dated May 9, 2000 BY: /s/ Clarke A. Blackford
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Clarke A. Blackford
Vice President
13