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, 2001
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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 small business issuer 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: 380,803 shares of common stock were outstanding as of April
30, 2001.
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, 2001
and December 31, 2000 (unaudited) 3
Consolidated Statements of Income for the three months
ended March 31, 2001 and 2000 (unaudited) 4
Consolidated Statements of Cash Flows for the three months
ended March 31, 2001 and 2000 (unaudited) 5
Notes to consolidated financial statements (unaudited) 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-10
Part II. Other Information 11
Signatures 12
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PART I - FINANCIAL INFORMATION
PCB HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
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2001 2000
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(In thousands)
ASSETS
Cash and due from banks $ 178 $ 163
Interest-bearing deposits with banks 2,069 1,613
Securities available for sale, at fair value 943 1,164
Loans receivable, net 27,339 26,459
Federal Home Loan Bank stock, at cost 207 207
Premises and equipment 518 439
Other assets 236 279
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Total Assets $ 31,490 $ 30,324
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LIABILITIES
Deposits $ 22,737 $ 22,098
Federal Home Loan Bank advances 3,000 2,500
Accrued expenses and other liabilities 49 48
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Total Liabilities 25,786 24,646
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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 2,340 2,315
Accumulated other comprehensive income -
net unrealized loss on securities available for sale (4) (21)
Unearned stock compensation (104) (112)
Less treasury stock, at cost - 31,817 shares
(29,710 at December 31, 2000) (346) (322)
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5,704 5,678
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Total Liabilities and Stockholders' Equity $ 31,490 $ 30,324
========= =========
See accompanying notes to consolidated financial statements.
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PCB HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
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2001 2000
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(In thousands, except per share data)
INTEREST INCOME
Loans $ 545 $ 461
Securities 17 18
Federal Home Loan Bank dividends 4 4
Interest-bearing deposits with banks 17 25
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Total interest income 583 508
INTEREST EXPENSE
Deposits 289 251
Federal Home Loan Bank advances 43 34
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Total interest expense 332 285
Net interest income 251 223
Provision for loan losses 5 2
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Net interest income after provision for loan losses 246 221
NONINTEREST INCOME
Service charges on deposit accounts 9 5
Other income 4 4
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Total noninterest income 13 9
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NONINTEREST EXPENSE
Compensation and benefits 120 106
Occupancy and equipment 15 11
Deposit insurance premiums 1 1
Other operating expenses 84 65
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Total noninterest expense 220 183
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Income before income taxes 39 47
Income tax expense 14 18
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Net Income 25 29
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Unrealized losses on securities:
Unrealized holding gains (losses) arising during the period 17 (3)
Less: reclassification adjustment - -
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Other comprehensive income (loss) 17 (3)
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Comprehensive Income $ 42 $ 26
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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.
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PCB HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
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2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 25 $ 29
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of premiums and accretion of
discounts on securities, net - -
Provision for loan losses 5 2
Depreciation expense 7 5
Stock compensation expense 8 8
Net change in other assets/liabilities 32 (41)
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Net Cash Provided By Operating Activities 77 3
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CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in interest bearing deposits with banks (456) (39)
Proceeds from maturity of securities available for sale 250 -
Net increase in loans receivable (885) (739)
Purchase of premises and equipment (86) (36)
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Net Cash Used in Investing Activities (1,177) (814)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposit accounts 639 781
Advances from the Federal Home Loan Bank 1,000 -
Repayment of advances from the Federal Home Loan Bank (500) -
Purchase of treasury stock (24) (86)
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Net Cash Provided By Financing Activities 1,115 695
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Net Decrease in Cash and Due From Banks 15 (116)
Cash and due from banks at beginning of period 163 230
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Cash and Due From Banks at End of Period $ 178 $ 114
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See accompanying notes to consolidated financial statements.
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PCB HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Presentation of Interim Information
PCB Holding Company (the "Company") is the holding company for Peoples
Community Bank) (the "Bank"), a federally chartered stock savings bank
located in Tell City, Indiana.
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, 2001, and the results of
operations for the three months ended March 31, 2001 and 2000 and cash
flows for the three months ended March 31, 2001 and 2000. 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, 2000.
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
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March 31,
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2001 2000
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(In thousands)
Cash payments for:
Interest $ 331 $ 287
Taxes 5 30
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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 other comprehensive income representing the net unrealized gains
and losses on securities available for sale. The following tables set
forth the components of other comprehensive income (loss) and the allocated
tax amounts for the three months ended March 31, 2001 and 2000:
Three Months Ended
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March 31,
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2001 2000
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(In thousands)
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period $ 28 $ (5)
Income tax benefit (expense) (11) 2
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Net of tax amount 17 (3)
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Less: reclassification adjustment for (gains)
losses included in net income - -
Income tax expense (benefit) - -
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- -
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Other comprehensive income (loss) $ 17 $ (3)
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4. Net Income Per Common Share
Three Months Ended
March 31,
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2001 2000
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(In thousands)
Basic:
Net income $ 25 $ 29
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Shares:
Weighted average common shares outstanding 368,832 390,980
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Net income per common share, basic $ 0.07 $ 0.07
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Diluted:
Net income $ 25 $ 29
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Shares:
Weighted average common shares outstanding 368,832 390,980
Add: Dilutive effect of outstanding options 3,501 1,147
Add: Dilutive effect of restricted share awards 1,841 1,785
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Weighted average common shares
outstanding, as adjusted 374,174 393,912
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Net income per common share, diluted $ 0.07 $ 0.07
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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; 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 3.9% from $30.3 million at December 31, 2000 to
$31.5 million at March 31, 2001, primarily as a result of increases in loans
receivable, net, and interest-bearing deposits with banks which were funded
primarily by maturities of securities available for sale, growth in deposits and
advances from the Federal Home Loan Bank of Indianapolis.
Loans receivable, net, were $27.3 million at March 31, 2001, compared to
$26.5 million at December 31, 2000, a 3.3% increase. The increase was
attributable primarily to increases in real estate mortgage loans and consumer
installment loans of $293,000 and $388,000, respectively.
Securities available for sale (U.S. government agency obligations)
decreased from $1.2 million at December 31, 2000 to $943,000 at March 31, 2001
due to a maturity of $250,000 offset by net unrealized gains of $29,000 in 2001.
Cash and interest-bearing deposits with banks increased from $1.8 million at
December 31, 2000 to $2.2 million at March 31, 2001 as a result of deposit
growth and the maturity of a security available for sale.
Total deposits increased from $22.1 million at December 31, 2000 to $22.7
million at March 31, 2001 primarily as a result of the growth in savings and
time deposit accounts.
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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 $25,000 for the three months ended March 31,
2001, compared to $29,000 for the three months ended March 31, 2000. The
decrease in net income for 2001 compared to 2000 resulted primarily from an
increase in noninterest expense offset by an increase in net interest income.
Net interest income for the three months ended March 31, 2001 and 2000.
Net interest income increased 12.6% from $223,000 in 2000 to $251,000 for 2001
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
7.26% for 2000 to 7.80% for 2001. The average balance of total interest-earning
assets was $28.0 million for 2000 compared to $29.9 million for 2001. The
average cost of interest-bearing liabilities increased from 5.17% for 2000 to
5.44% for 2001 while the average balance of interest-bearing liabilities was
$22.1 million for 2000 compared to $24.4 million for 2001. The increase in the
cost of funds resulted primarily from a general increase in deposit rates and an
increase in the use of Federal Home Loan Bank advances to fund loan growth
during 2001. The average cost of borrowings was 6.87% for 2001 compared to
6.80% for 2000. The average cost of deposits was 5.28% for 2001 compared to
5.00% for the same period in 2000. The interest rate spread for 2000 was 2.09%
compared to 2.36% for 2001. The increase in average interest-earning assets and
average interest-bearing liabilities for 2001 compared to 2000 relates primarily
to the growth in the loan portfolio and deposits, respectively.
Provision for loan losses. The provision for loan losses was $5,000 for
2001 and $2,000 for 2000. For 2001 and 2000, the provision was recorded to bring
the allowance for loan losses to the level determined by applying the
methodology for estimating credit losses after reduction for net charge-offs of
consumer loans during the periods. The provision increased from 2000 to 2001 due
to higher net charge-offs during the three months ended March 31, 2001 compared
to the same period in 2000. During the three month period ended March 31, 2001,
the net loan portfolio growth was $800,000. Residential real estate loans and
consumer installment loans increased $293,000 and $388,000, respectively, during
this period. The consistent application of management's allowance methodology
did not result in an increase in the level of the allowance for loan losses
despite the loan portfolio growth due to the decrease in nonperforming loans
during the period. Provisions for loan losses are charged to operations to bring
the total allowance for loan losses to a level considered by management to be
adequate to provide for estimated inherent losses based on management's
evaluation of the collectibility of the loan portfolio, including the nature of
the portfolio, credit concentrations, trends in historical loss experience,
specified impaired loans, and economic conditions. Although management uses the
best information available, future adjustments to the allowance may be necessary
due to changes in economic, operating, regulatory and other conditions that may
be beyond the Company's control. While the Company maintains its allowance for
loan losses at a level which it considers adequate to provide for estimated
losses, there can be no assurance that further additions will not be made to the
allowance for loan losses and that actual losses will not exceed the estimated
amounts.
In determining the adequacy of the allowance for loan losses, the loan
portfolio is evaluated quarterly, and loans are assigned a risk weighting based
on asset classification. The allowance is calculated by applying loss factors
to outstanding loans based on the internal risk grade of each loan. Specific
allowances related to impaired and substandard loans are established in cases
where management has identified significant conditions or circumstances related
to a loan that management believes indicate the probability that a loss has been
incurred. A general allowance is calculated by applying loss factors to
performing loans that have been grouped into homogeneous pools for the purpose
of the calculation. Loss factors are based on our historical loss experience
and industry peer group data and may be adjusted for significant factors that,
in management's judgment, affect the collectibility of the portfolio. The
allowance for loan losses was $60,000 at March 31, 2001 and December 31, 2000.
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, 2001,
nonperforming loans totaled $143,000. Included in nonperforming loans are loans
over 90 days past due secured by one-to-four family residential real estate,
land and automobiles totaling $173,000, $34,000 and $39,000, respectively.
These loans are accruing interest as the estimated value of the collateral and
collection efforts are deemed sufficient to ensure full recovery.
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PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PCB HOLDING COMPANY AND SUBSIDIARY
Noninterest income. Noninterest income was $13,000 for 2001 and $9,000 for
2000. The increase is primarily the result of an increase in service charges on
deposit accounts due to increased activity and growth in these accounts. Also,
fees increased in 2001 on an automated teller machine installed at the Bank's
office in March 2000.
Noninterest expenses. Noninterest expenses totaled $220,000 for 2001
compared to $183,000 for 2000. The increase for 2001 compared to 2000 resulted
primarily from increases in compensation and benefits of $14,000 and other
operating expenses of $19,000. Compensation and benefits have increased due to
normal pay raises and increases in employee benefits expense. Other operating
expenses increased primarily as a result of increased data processing fees
related to additional loan and deposit accounts, consulting expenses and other
expenses of operating as a public company.
Income tax expense. Income tax expense for 2001 was $14,000, compared to
$18,000 for 2000. The effective tax rate for 2001 is 35.9% compared to 38.3% for
2000 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, 2001, the Bank had cash and interest-
bearing deposits with banks of $2.2 million and securities available-for-sale
with a fair value of $943,000. At March 31, 2001, the Bank also had an
available, but undrawn, credit line of $1.0 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.
During the three months ended March 31, 2001, the Company used excess
capital to repurchase common stock, acquiring 2,107 shares for a total cost of
$24,000.
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, 2001, the Bank had total commitments to extend
credit of $334,000. Historically, the Bank has been able to retain a
significant amount of its deposits as they mature.
The Bank is required to maintain specific amounts of capital pursuant to
OTS requirements. As of March 31, 2001, 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 13.9%, 13.9% and 24.2%,
respectively.
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PART II
OTHER INFORMATION
PCB HOLDING COMPANY AND SUBSIDIARY
Item 1. Legal Proceedings
Periodically, there have been various claims and lawsuits involving the
Bank, mainly as a defendant, 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 effect 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
The Annual Meeting of Stockholders of the Company was held on April 23,
2001. There were 382,910 shares entitled to vote at the time of the
annual meeting. Holders of 295,402 shares were represented at the
meeting. The results of the vote on the matters presented at the
meeting is as follows:
1. The following individuals were elected as directors:
Vote Vote Term to
Name For Withheld Expire
---- ---- -------- ------
James G. Tyler 290,690 4,712 2004
Daniel P. Lutgring 290,690 4,712 2004
Broker non-votes totaled 0.
The terms of directors Carl D. Smith, Howard Traphagen, David
Lasher, and Mark Ress continued after the annual meeting.
2. The appointment of Monroe Shine & Co., Inc. as auditors for the
Corporation for the fiscal year ending December 31, 2001 was
ratified by stockholders by the following vote:
For 290,190; Against 500; Abstain 4,712
Broker non-votes totaled 0.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
Not applicable.
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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 14, 2001 BY: /s/ Carl D. Smith
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Carl D. Smith
President and CEO
Dated May 14, 2001 BY: /s/ Clarke A. Blackford
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Clarke A. Blackford
Vice President
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