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 JUNE 30,1998
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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
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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 [ ] No [X]
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: 396,750 shares of common stock were outstanding as of
August 10, 1998.
PCB HOLDING COMPANY
INDEX
Part I Financial Information Page
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Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of June 30, 1998
and December 31, 1997 3
Consolidated Statements of Income for the three months
and six months ended June 30, 1998 and 1997 4
Consolidated Statements of Cash Flows for the six months
ended June 30, 1998 and 1997 5
Notes to consolidated financial statements 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
June 30, December 31,
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1998 1997
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(Unaudited)
(In Thousands)
ASSETS
Cash and due from banks $ 13 $ 18
Interest bearing deposits with banks 7,635 734
Securities available for sale, at fair value 1,216 1,319
Securities-held to maturity:
Mortgage-backed securities 18 21
Loans receivable, net 19,403 19,296
Federal Home Loan Bank stock, at cost 196 196
Premises and equipment 224 198
Accrued interest receivable 140 132
Other assets 240 75
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Total Assets $29,085 $21,989
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LIABILITIES
Deposits $26,913 $19,846
Accrued interest payable on deposits 11 6
Accrued expenses and other liabilities 42 45
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Total Liabilities 26,966 19,897
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RETAINED EARNINGS
Retained earnings-substantially restricted 2,139 2,110
Net unrealized loss on securities available
for sale, net of tax (20) (18)
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Total Retained Earnings 2,119 2,092
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Total Liabilities and Retained Earnings $29,085 $21,989
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See accompanying notes to consolidated financial statements.
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PCB HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
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1998 1997 1998 1997
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(In Thousands, except per share data)
INTEREST INCOME
Loans $ 374 $ 384 $ 742 $ 763
Mortgage-backed securities - - 1 1
Other debt securities 18 25 33 39
Federal Home Loan Bank dividends 4 4 8 8
Interest bearing deposits with banks 24 12 37 18
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Total interest income 420 425 821 829
INTEREST EXPENSE
Deposits 273 274 538 545
Advances from Federal Home Loan Bank - 7 - 7
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Total interest expense 273 281 538 552
Net interest income 147 144 283 277
Provision for loan losses - - - -
Net interest income after ----------------- ---------------
provision for loan losses 147 144 283 277
NON-INTEREST INCOME
Other income 1 2 3 3
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148 146 286 280
NON-INTEREST EXPENSE
Compensation and benefits 72 70 150 144
Occupancy and equipment 12 7 24 25
Deposit insurance premiums 3 4 6 5
Other operating expenses 31 19 70 55
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Total non-interest expense 118 100 250 229
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Income before income taxes 30 46 36 51
Income tax expense 6 12 7 13
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Net Income $ 24 $ 34 $ 29 $ 38
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Net income per common share, basic $ 0.06 $ 0.09 $ 0.07 $ 0.10
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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)
Six Months Ended
June 30,
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1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 29 $ 38
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense 9 9
Increase in accrued interest receivable (8) (23)
Increase (decrease) in accrued interest
payable 5 (4)
Net change in other assets/liabilities (167) 49
Net Cash Provided By (Used In) Operating --------------------
Activities (132) 69
CASH FLOWS FROM INVESTING ACTIVITIES --------------------
Net (increase) decrease in interest bearing
deposits with banks (6,901) (73)
Proceeds from maturity of securities
available for sale 599 -
Purchases of securities available for sale (499) -
Principal collected on mortgage-backed
securities 3 -
Net (increase) decrease in loans receivable (107) 518
Purchase of participation loans - -
Purchase of premises and equipment (35) (17)
Net Cash Provided By (Used in) Investing --------------------
Activities (6,940) 428
CASH FLOWS FROM FINANCING ACTIVITIES --------------------
Net increase (decrease) in deposit accounts 7,067 (247)
Advances From Federal Home Loan Bank - 500
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Net Cash Provided By Financing Activities 7,067 253
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Net Increase (Decrease) in Cash and Due From Banks (5) 750
Cash and due from banks at beginning of period 18 12
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Cash and Due From Banks at End of Period $ 13 $ 762
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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 ("Company") was incorporated by Peoples Building and Loan
Association, F.A. ("Association") (now known as Peoples Community 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 Association. For purposes of this report, the
financial statements and related discussion are presented for the Association
since the Company was not active during any of the periods presented. No pro
forma effect has been given to the sale of Company stock in the conversion.
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 June 30, 1998, and the results of
operations for the three months and six months ended June 30, 1998 and 1997
and cash flows for the six months ended June 30, 1998 and 1997. Interim
results are not necessarily indicative of results 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
Association's audited consolidated financial statements and notes for the year
ended December 31, 1997.
The consolidated financial statements include the accounts of the Association
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
Six Months Ended
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June 30,
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1998 1997
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(In Thousands)
Cash payments for:
Interest $ 533 $ 533
Taxes 29 -
3. Conversion and Stock Offering
On July 1, 1998, the Association completed a conversion and stock offering
whereby the Association converted from mutual to stock form of organization
and changed its name to Peoples Community Bank. As part of the conversion,
the Association became a wholly-owned subsidiary of the Company which offered
common stock to certain current and former depositor and borrower customers of
the Association in a subscription offering. The Company issued 396,750 shares
of common stock with gross proceeds of $3,967,500 as a result of the offering.
Total expenses in connection with the conversion and offering amounted to
$257,000 and were charged against the proceeds from the offering.
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PCB HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
4. Comprehensive Income
The Association adopted FASB Statement No. 130, "Reporting Comprehensive
Income," during the first quarter of 1998. This Statement established
standards for reporting and displaying comprehensive income and its
components. 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 Association includes
net income and unrealized gains and losses on securities available for sale.
The following tables set forth the components of comprehensive income for the
three and six months ended June 30, 1998 and 1997:
Three Months Ended
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June 30,
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1998 1997
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(In Thousands)
Net income $ 24 $ 34
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising
during period - 1
Less: reclassification adjustment for
gains (losses) included in net income - -
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Comprehensive income $ 24 $ 35
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Six Months Ended
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June 30,
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1998 1997
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(In Thousands)
Net income $ 29 $ 38
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising
during period (2) 4
Less: reclassification adjustment for
gains (losses) included in net income - -
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Comprehensive income $ 27 $ 42
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5. Net Income Per Common Share
Basic earnings per share is calculated by dividing net income by the 396,750
common shares outstanding on July 1, 1998 after consummation of the conversion
and offering. Basic per share information is presented for prior periods as
though the shares were outstanding during the earliest period presented. The
Company has no dilutive potential common shares.
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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
Financial Condition
Total assets increased 32.3% from $22.0 million at December 31, 1997 to
$29.1 million at June 30, 1998, primarily as a result of increases in cash and
interest bearing deposits with banks and loans receivable, net, which was
funded primarily by stock subscriptions in the Association's conversion.
Loans receivable, net, were $19.4 million at June 30, 1998, compared to
$19.3 million at December 31, 1997, a 0.6% increase.
Mortgage-backed securities held-to-maturity decreased from $21,000 at
December 31, 1997 to $18,000 at June 30, 1998 as a result of maturities.
Other debt securities available for sale (U.S. government agency
obligations and corporate notes) decreased from $1.3 million at December 31,
1997 to $1.2 million at June 30, 1998. During the six month period ended June
30, 1998, the Association had maturities of other debt securities with a
carrying value of $599,000 and purchases of $499,000.
Cash and interest bearing deposits with banks increased from $752,000 at
December 31, 1997 to $7.7 million at June 30, 1998 as a result of excess
liquidity funded by an increase in deposits.
Total deposits increased 35.6% from $19.8 million at December 31, 1997 to
$26.9 million at June 30, 1998 primarily as a result of funds deposited in a
conversion savings account representing stock subscription proceeds.
Total retained earnings increased $27,000 to $2.1 million as a result of
retained net income of $29,000 and a decrease of $2,000 in the net unrealized
loss on available-for sale securities.
Results of Operations
Net income. Net income was $29,000 for the six months ended June 30,
1998, compared to $38,000 for the six months ended June 30, 1997. The
decrease in net income for 1998 compared to 1997 resulted primarily from an
increase in non-interest expense. Net income for the three months ended June
30, 1998 was $24,000 compared to $34,000 for the three months ended June 30,
1997. The decrease in net income for 1998 compared to 1997 resulted from an
increase in non-interest expense.
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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
Net interest income for the six month periods ended June 30, 1998 and
1997. Net interest income increased 2.2% from $277,000 in 1997 to $283,000
for 1998 as a result of a slight decrease in total interest income, offset by
a larger decrease in interest expense. The average yield on interest-earning
assets decreased from 7.46% for 1997 to 7.20% for 1998. The average balance
of total interest-earning assets was $22.2 million for 1997 compared to $22.8
million for 1998. The average cost of interest-bearing liabilities decreased
from 5.41% for 1997 to 5.19% for 1998 while the average balance of interest-
bearing liabilities was $20.4 million for 1997 compared to $20.7 million for
1998. The interest rate spread for 1997 was 2.05% compared to 2.01% for 1998.
Net interest income for the three month periods ended June 30, 1998 and
1997. Net interest income increased from $144,000 for 1997 to $147,000 for
1998 primarily as a result of a decrease in total interest expense of $8,000,
offset by a decrease in interest income of $5,000. (See -Financial
Condition.)
Provision for loan losses. There was no provision for loan losses for
1998 and 1997. 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 probably 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 Association reviews all loans quarterly,
and loans are assigned a risk weighting based on asset classification. The
allowance for loan losses was $51,000 at June 30, 1998 and December 31, 1997.
Management has deemed this amount as adequate on those dates based on its best
estimate of probable known and inherent loan losses.
Non-interest income. Non-interest income was $3,000 for both the six
months ended June 30, 1998 and 1997. Non-interest income was $1,000 for the
second quarter of 1998 compared to $2,000 for the second quarter of 1997.
Non-interest expenses. Non-interest expenses totaled $250,000 for the
six months ended June 30, 1998 compared to $229,000 for the same period in
1997. The increase for 1998 compared to 1997 resulted primarily from
increases in compensation and benefits of $6,000 and an increase in other
operating expenses of $15,000. Other operating expenses increased in 1998 as
compared to the same period in 1997 primarily as a result of increase service
bureau costs related to new loan products and the addition of one-time
printing and stationery costs related to the name change of the Association.
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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
Income tax expense. Income tax expense for the six month period ended
June 30, 1998 was $7,000, compared to $13,000 for the same period in 1997.
The effective tax rate for 1998 is 20% compared to 25% for 1997 due to the
effect of the graduated federal tax rates.
Liquidity and Capital Resources
The Association'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 June 30, 1998, the
Association had cash and interest-bearing deposits with banks of $7.7 million
and securities available-for-sale with a fair value of $1.2 million. At June
30, 1998, the Association also had an available, but undrawn, credit line of
$3.9 million from the FHLB-Indianapolis.
The Association's primary investing activity is the origination of
one-to-four family mortgage loans. The Association also invests in U.S.
Government and agency securities and mortgage-backed securities issued by U.S.
Government agencies.
The Association 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. Historically, the Association 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 Association has maintained
liquidity levels in excess of regulatory requirements.
The Association is required to maintain specific amounts of capital
pursuant to OTS requirements. As of June 30, 1998, the Association was in
compliance with all regulatory capital requirements which were effective as of
such date with tangible, core and risk-based capital ratios of 7.35%, 7.35%
and 14.94%, respectively.
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PART II
OTHER INFORMATION
PCB HOLDING COMPANY
Item 1. Legal Proceedings
Periodically, there have been various claims and lawsuits involving
the Association, mainly as a defendant, such as claims to enforce
liens, condemnation proceedings on properties in which the Association
holds security interests, claims involving the making and servicing of
real property loans and other issues incident to the association's
business. The Association 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
The following information is provided in connection with the Company's
sale of its common stock as part of the Association's conversion:
a. The effective date of the Registration Statement on Form SB-2
(File No. 333-48191) was May 13, 1998.
b. The offering was consummated on July 1, 1998 with the sale of all
securities registered pursuant to the Registration Statement.
Capital Resources, Inc. acted as marketing agent for the offering.
c. The class of securities registered was common stock, par value
$.01 per share. The aggregate amount of such securities
registered and sold was 396,750 shares for an aggregate amount of
$3,967,500.
d. The Company incurred expenses in connection with the conversion
and offering of $257,181, including expenses paid to or for
underwriters of $113,000, attorney and accounting fees of $115,494
and other expenses of $28,687. The net proceeds to the Company
after deducting expenses was $3,710,319.
e. The net proceeds are temporarily invested in an interest bearing
deposit account with the Federal Home Loan Bank of Indianapolis.
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 August 14, 1998 BY: /s/ Carl D. Smith
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Carl D. Smith
President and CEO
Dated August 14, 1998 BY: /s/ Clarke A. Blackford
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Clarke A. Blackford
Vice President
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