U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended June 30, 2000
___ Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from _______________ to ________________
Commission File No. 333-70589
NEW COMMERCE BANCORP
(Exact Name of Small Business Issuer as Specified in its Charter)
South Carolina 58-2403844
-------------- ----------
(State of Incorporation) (I.R.S. Employer Identification No.)
501 New Commerce Court, Greenville, South Carolina 29607
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(New Address of Principal Executive Offices)
(864) 297-6333
---------------------------------------------
(Issuer's Telephone Number, Including Area Code)
One Five Forks Plaza Court, Simpsonville, South Carolina 29681
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(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 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
-- --
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 1,000,000 shares of common
stock, par value $.01 per share, outstanding as of July 31, 2000.
Transitional Small Business Disclosure Format (check one): Yes No X
-- --
PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
- ----------------------------
New Commerce BanCorp
Consolidated Balance Sheets
June 30, December 31,
2000 1999
(Unaudited) (Audited)
---------- -----------
Assets
Cash and due from banks $ 3,425,160 $ 1,608,350
Federal funds sold ----- 5,838,023
Securities, available for sale 7,005,987 3,019,557
Securities, held to maturity 914,401 965,005
Federal Reserve Bank stock 237,250 237,250
Federal Home Loan Bank stock 38,200 38,200
Loans - net 15,983,274 12,855,083
Property and equipment - at cost, less accumulated
depreciation 4,369,921 2,585,116
Other assets 665,552 400,758
------------ ------------
Total assets $32,639,745 $27,547,342
============ ============
Liabilities and Shareholders' Equity
Deposits $23,372,567 $18,390,695
Federal funds purchased 307,120 -----
Accrued expenses and other liabilities 159,881 144,548
------------ -------------
Total liabilities 23,839,568 18,535,243
------------ -------------
Shareholders' Equity
Common stock - $.01par value, authorized
10,000,000 shares, 1,000,000 shares issued
and outstanding at June 30, 2000 and
December 31, 1999 10,000 10,000
Additional paid-in capital 9,741,658 9,741,658
Retained earnings (deficit) (888,262) (714,544)
Net unrealized holding loss on securities
available for sale (63,219) (25,015)
------------ -------------
Total shareholders' equity 8,800,177 9,012,099
------------ -------------
Total liabilities and shareholders' equity $32,639,745 $27,547,342
============ ==============
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
PART I FINANCIAL INFORMATION (continued)
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Item 1. Financial Statements (continued)
- -----------------------------------------
New Commerce BanCorp
Consolidated Statements of Operations
(Unaudited)
For the three For the three For the six For the six
months ended months ended months ended months ended
June 30,2000 June 30, 1999 June 30, 2000 June 30, 1999
------------- ------------- ------------- -------------
INTEREST INCOME
Loans (including fees) $ 343,110 $ 13,000 $ 659,539 $ 13,000
Investment securities 138,594 15,476 249,763 15,476
Federal funds sold 41,801 45,468 88,940 51,652
----------- ----------- -------------- -----------
Total interest income 523,505 73,944 998,242 80,128
----------- ----------- -------------- -----------
INTEREST EXPENSE
Deposits 227,193 9,462 427,700 9,462
----------- ----------- ------------- -----------
NET INTEREST INCOME 296,312 64,482 570,542 70,666
Provision for Possible Loan Losses 34,866 22,629 55,170 22,629
----------- ---------- ------------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 261,446 41,853 515,372 48,037
NONINTEREST INCOME
Service charges 12,503 1,820 21,763 1,820
Other 15,477 ----- 29,068 -----
----------- ---------- ------------- ----------
Total noninterest income 27,980 1,820 50,831 1,820
----------- ---------- ------------- ----------
TOTAL INCOME 289,426 43,673 566,203 49,857
NONINTEREST EXPENSES
Salaries and employee benefits 211,560 277,274 413,435 331,204
Occupancy, office and equipment 81,665 37,082 147,813 37,082
Data processing 10,093 8,596 25,563 8,596
Postage and supplies 21,374 37,202 34,636 37,202
Marketing 41,254 61,761 72,784 61,761
Legal 11,021 ----- 26,555 ----
Other 51,136 92,187 85,818 155,421
----------- ---------- --------------- ----------
Total noninterest expense 428,103 514,102 806,604 631,266
----------- ---------- --------------- ----------
LOSS BEFORE INCOME TAX BENEFIT (138,677) (470,429) (240,401) (581,409)
INCOME TAX BENEFIT (37,356) (148,434) (66,683) (186,885)
----------- ---------- -------------- ----------
NET LOSS (101,321) (321,995) $ (173,718) $ (394,524)
=========== ========== ============== ==========
Net loss Per Common Share $ (.10) $ (.32) $ (.17) $ (.39)
=========== ========== ============== ==========
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
PART I - FINANCIAL INFORMATION (continued)
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Item 1. Financial Statements (continued)
- -----------------------------------------
New Commerce BanCorp
Consolidated Statements of Shareholders' Equity
for the six month period ended June 30, 2000
(Unaudited)
Accumulated
Common Stock Additional Retained Other Total
Shares Amount paid-in Earnings comprehensive Shareholder's
capital (Deficit) Loss Equity
------- ------ ---------- --------- ------------ -------------
Balance, December 31, 1999 1,000,000 $10,000 $9,741,658 $(714,544) $ (25,015) $9,012,099
Net loss -- -- -- (173,718) -- (173,718)
Other comprehensive income (loss),
net of tax:
Net change in unrealized holding losses
on securities available for sale -- -- -- -- (38,204) (38,204)
Comprehensive income -- -- -- -- -- (211,922)
-----------
Balance, June 30, 2000 1,000,000 $10,000 $9,741,658 $(888,262) $ (63,219) $8,800,177
--------- ------- ---------- ---------- --------- -----------
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
PART I - FINANCIAL INFORMATION (continued)
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Item 1. Financial Statements (continued)
- ----------------------------------------
New Commerce BanCorp
Unaudited Statements of Cash Flows
From December 31 to June 30
2000 1999
---- ----
OPERATING ACTIVITIES
Net loss $(173,718) $ (394,524)
Adjustments to reconcile net loss to net cash
used for operating activities
Depreciation 44,830 3,000
Provision for possible loan losses 55,170 22,629
Deferred income tax benefit (66,683) (186,885)
Increase in other assets (198,111) (11,117)
Increase in accrued expenses and other liabilities 15,333 30,595
------------- --------------
Net cash used for operating activities (323,179) (536,302)
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INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold 5,838,023 (8,585,000)
Purchase of investment securities (3,974,030) (210,000)
Net increase in loans (3,183,361) (2,629,671)
Capital expenditures for property (1,829,635) (1,733,718)
Decrease in real estate options ---- 39,800
------------ --------------
Net cash used for investing activities (3,149,003) (13,118,589)
------------ --------------
FINANCING ACTIVITIES
Net increase in federal funds purchased 307,120 -----
Net increase in deposits 4,981,872 4,714,939
Issuance of capital stock, net of stock offering expenses ----- 7,930,175
------------ --------------
Net cash provided by financing activities 5,288,992 12,645,114
------------ --------------
NET INCREASE (DECREASE) IN CASH AND DUE FROM 1,816,810 (1,009,777)
BANKS
Cash and Due From Banks, Beginning of Period 1,608,350 1,762,031
------------ --------------
Cash and Due From Banks, End of Period $ 3,425,160 $ 752,254
============ ==============
CASH PAID FOR
Interest $ 418,436 $ 5,664
=========== =============
Income Taxes $ -- $ --
=========== =============
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
PART I - FINANCIAL INFORMATION (continued)
- ------------------------------------------
Item 1. Financial Statements (continued)
- ----------------------------------------
New Commerce BanCorp
Notes to Financial Statements
(Unaudited)
Note 1 - Organization and Basis of Presentation
- -----------------------------------------------
Business activity and organization
New Commerce Bancorp (the "Company") was incorporated to operate as a
bank holding company pursuant to the Federal Bank Holding Company Act of 1956
and the South Carolina Bank Holding Company Act, and to purchase 100% of the
issued and outstanding stock of New Commerce Bank (the "Bank"), an association
organized under the laws of the United States, to conduct a general banking
business in Simpsonville, South Carolina.
Since inception through May 17, 1999, the Company had engaged in
organizational and pre-opening activities necessary to obtain regulatory
approvals and to prepare its subsidiary, the Bank, to commence business as a
financial institution. The Bank opened for business on May 17, 1999. The Bank is
primarily engaged in the business of accepting demand deposits and savings
insured by the Federal Deposit Insurance Corporation, and providing commercial,
consumer and mortgage loans to the general public.
The Company sold 1,000,000 at $10 per share. The Company capitalized
the Bank with $8,250,000 of the net proceeds of the offering and the sale of
shares to the organizers. The remaining net offering proceeds were used to pay
organization expenses of the Company and to provide general working capital,
including additional future capital for investment in the Bank, if needed. We
believe this amount will be sufficient to fund the activities of the Company and
the Bank in their initial stages of operations, and that the Bank will generate
sufficient income from operations to fund its activities on an ongoing basis.
However, we cannot be sure that either the Bank or the Company will achieve any
particular level of profitability or that we will not need additional capital in
the future.
Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
six months ended June 30, 2000 are not necessarily indicative of the results for
the year ending December 31, 2000. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Form 10-KSB for the period ended December 31, 1999 (Registration
Number 333-70589) as filed with the Securities and Exchange Commission.
Until the Bank opened for business on May 17, 1999, the Company was
accounted for as a development stage enterprise as defined by Statement of
Financial Accounting Standards No. 7, "Accounting and Reporting by Development
Stage Enterprises," as the Company devoted substantially all of its efforts to
establishing a new business. When the Bank opened, certain reclassifications and
adjustments were made to the financial statements to reflect that the Company is
now accounted for as an operating company.
Note 2 - Stock Option Plan
On August 26, 1999, the Company adopted a stock incentive plan for the
benefit of the directors, officers, and employees of the Company and the Bank.
Under the plan, the Company may grant up to 150,000 options at an option price
per share not less than the fair market value on the date of grant. On August
26, 1999, the Company granted 135,000 stock options that expire 10 years from
the grant date and are subject to various vesting schedules to directors,
officers and employees. The Company has adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation".
Note 3 - Net Loss Per Common Share
SFAS No. 128, "Earnings Per Share" requires that the Company present
basic and diluted net income per share. Net loss per common share is calculated
by dividing net loss by the weighted average number of common shares outstanding
for each period presented. The weighted average number of common shares
outstanding for basic net loss per common share was 1,000,000 for the six months
ended June 30, 2000. The Company did not have any common stock equivalents
during the six months ended June 30, 1999. Stock options outstanding had no
effect on the computation of weighted average shares outstanding.
Note 4 - FASB Accounting Standards
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities." All derivatives are to be measured at fair
value and recognized in the balance sheet as assets or liabilities. This
statement's effective date was delayed by the issuance of SFAS 137 ("Accounting
for Derivative Instruments and Hedging Activities-Deferral of the Effective Date
of SFAS 133"), and is effective for fiscal years and quarters beginning after
June 15, 2000. The Company does not expect that the adoption of SFAS 133 will
have a material impact on the presentation of the Company's financial results or
financial position.
Part 1 - Financial Information
- ------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition
- -------------------------------------------------------------------
The following is a discussion of the Company's financial condition as
of June 30, 2000 compared to December 31, 1999 and the results of operations for
the three months and six months ended June 30, 2000. The Bank commenced
operations on May 17, 1999. Consequently, results of operations for the three
months and six months ended June 30, 1999 reflect holding company activity prior
to the opening of the Bank and limited Bank operating history, and therefore, a
comparison with June 30, 1999 is not meaningful. The discussion should be read
in conjunction with the Company's condensed consolidated financial statements
and accompanying footnotes appearing in this report.
This report contains "forward-looking statements" relating to, without
limitation, future economic performance, plans and objectives of management for
future operations, and projections of revenues and other financial items that
are based on the beliefs of the Company's management, as well as assumptions
made by and information currently available to the Company's management. The
words "expect," "anticipate," and "believe," as well as similar expressions, are
intended to identify forward-looking statements. The Company's actual results
may differ materially from the results discussed in the forward-looking
statements, and the Company's operating performance each quarter is subject to
various risks and uncertainties that are discussed in detail in the Company's
filings with the Securities and Exchange Commission, including the "Risk
Factors" section in the Company's Registration Statement on Form SB-2
(Registration Number 333-70589) as filed with and declared effective by the
Securities and Exchange Commission.
Results of Operations for the period ended June 30, 2000 compared to the period
ended June 30, 1999:
The Company's net loss for the three months ended June 30, 2000 was $101,321
compared to a net loss of $321,995 for the three months ended June 30, 1999. The
Company's net loss for the six months ended June 30, 2000 was $173,718, compared
to a net loss of $394,524 for the six months ended June 30, 1999. The Company
expects to experience losses until the Bank's assets reach a point where the
assets generate income from operations that exceed the Bank's fixed costs.
Net Interest Income
- -------------------
The largest component of the Company's net income is its net interest income,
the difference between the income earned on assets and the interest paid on
deposits and borrowings used to support such assets. Net interest margin is
determined by dividing the net interest income by average earning assets. Net
interest spread is derived from determining the rates and mix of interest paid
on deposits and borrowings and subtracting them from the yields and mix of
earning assets. Net interest income for the six-month period ended June 30, 2000
was $570,542. The annualized interest rate margin was 4.65% at June 30, 2000.
Loans, the highest yielding component of earning assets, represented 66.4% of
earning assets at June 30, 2000. Since loans often provide a higher yield than
other types of earning assets, one of the Company's goals is to maintain its
loan portfolio as the highest percentage of total earning assets. Loan interest
income for the six month period ended June 30, 2000 totaled $659,539 while
interest earned on investment securities and federal funds sold amounted to
$249,763 and $88,940, respectively.
For the six months ended June 30, 1999, net interest income totaled $70,666 and
represented interest earned on the Company's escrow account maintained prior to
the opening of the Bank as well as net interest earned by the Bank from the May
17, 1999 opening date.
PART I - FINANCIAL INFORMATION(continued)
- -----------------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition (continued)
- -------------------------------------------------------------------------------
Provision and Allowance for Loan Losses
- ---------------------------------------
The provision for loan losses is the charge to operating earnings that
management feels is necessary to maintain the allowance for possible loan losses
at an adequate level. For the six months ended June 30, 2000, the provision
charged to expense was $55,170. The loan loss reserve was $241,370 as of June
30, 2000, or 1.49% of gross loans as compared to $195,800 as of December 31,
1999, or 1.50% of gross loans. The loan portfolio is periodically reviewed to
evaluate the outstanding loans and to measure both the performance of the
portfolio and the adequacy of the allowance for loan losses. This analysis
includes a review of delinquency trends, actual losses, and internal credit
ratings. Management's judgment as to the adequacy of the allowance is based upon
a number of assumptions about future events which it believes to be reasonable,
but which may or may not be accurate. Because of the inherent uncertainty of
assumptions made during the evaluation process, there can be no assurance that
loan losses in future periods will not exceed the allowance for loan losses or
that additional allocations will not be required.
Non-Interest Income
- -------------------
Non-interest income for the six-month period ended June 30, 2000 was $50,831.
Deposit account service charges represented $21,763, while brokered mortgage
loan origination fees totaled $9,062. Fees on ATM and cash dispenser machines
amounted to $11,148. The Company recorded non-interest income of $1,820 for the
six months ended June 30, 1999.
Non-Interest Expense
- --------------------
Non-interest expense for the six-month period ended June 30, 2000 was $806,604.
Of this amount, salaries and employee benefits comprised $413,435. Occupancy,
office and equipment, including depreciation of furniture and equipment
accounted for $147,813 for the six month period ended June 30, 2000, and
marketing expenses totaled $72,784. Non-interest expense for the six month
period ended June 30, 1999 amounted to $631,266 and consisted primarily of
salaries and benefits of $331,204, marketing of $61,761 and planning costs
incurred during the preopening phase of the Bank.
Balance Sheet Review
During the first six months of 2000, total assets increased by $5,092,403 to
$32,639,745. Net loans increased by $3,128,191 to $15,983,274. Since December
31, 1999, the Company shifted funds from federal funds sold to higher earning
investment securities. Investment securities including Federal Reserve Bank and
Federal Home Loan Bank stock increased by $3,935,826 to $8,195,838. Deposits
increased by $4,981,872 to $23,372,567. The Company's management closely
monitors and seeks to maintain appropriate levels of interest earning assets and
interest bearing liabilities so that maturities of assets are such that adequate
funds are provided to meet customer withdrawals and demand. Management expects
asset and liability growth to continue during the coming months, with the growth
tapering off to a more deliberate and controllable pace over the longer term,
and believes capital should continue to be adequate for the next 12 months.
PART I - FINANCIAL INFORMATION (continued)
- ------------------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition (continued)
- --------------------------------------------------------------------------------
Loan Portfolio
- --------------
Balances within the major loan categories as of June 30, 2000 and December 31,
1999 are as follows:
June 30, 2000 December 31, 1999
------------- -----------------
Commercial and Industrial $ 6,410,130 $ 5,870,988
Real Estate - 1-4 Family 2,007,495 2,182,255
Real Estate - Commercial 6,723,656 4,014,790
Installment and consumer credit lines 1,083,363 982,850
--------- -------
$ 16,224,644 $ 13,050,883
========== ==========
Allowance for loan loss, December 31, 1999 $ 195,800
Provision 55,170
Charge-offs 9,600
-----------
Allowance for loan loss, June 30, 2000 $ 241,370
-----------
Gross loans outstanding, December 31, 1999 $13,050,883
-----------
Gross loans outstanding, June 30, 2000 $16,224,644
-----------
Allowance for loan losses to loans outstanding, December 31, 1999 1.50 %
------
Allowance for loan losses to loans outstanding, June 30, 2000 1.49 %
------
Investment Portfolio
At June 30, 2000, the investment securities portfolio represented 33.6% of
earning assets. The Company primarily invests in U. S. Government agencies or
government-sponsored agencies, mortgage-backed securities and collateralized
mortgage obligations. The Company also owns stock in the Federal Reserve Bank
and The Federal Home Loan Bank. The following is a table of investment
securities by category at June 30, 2000 and December 31, 1999:
June 30, 2000 December 31, 1999
-------------- -----------------
U.S. Government agencies and U.S.
Government sponsored agencies $ 3,402,940 $ 1,455,216
Agency mortgage-backed securities 1,650,112 486,806
Agency collateralized mortgage obligations 2,867,336 2,042,540
FRB stock 237,250 237,250
FHLB stock 38,200 38,200
---------- ----------
Total $ 8,195,838 $ 4,260,012
========== ===========
Deposits
Balances within the major deposit categories as of June 30, 2000 and December
31, 1999 are as follows:
June 30, 2000 December 31, 1999
-------------- -----------------
Non-interest bearing demand deposits $ 4,732,055 $ 2,824,668
Interest-bearing checking 5,754,913 6,654,818
Savings deposits 213,086 178,404
Money market accounts 6,553,955 3,951,492
Time deposits less than $100,000 2,810,970 2,415,499
Time deposits of $100,000 or more 3,307,588 2,365,814
---------- -----------
$ 23,372,567 $ 18,390,695
========== ===========
PART I - FINANCIAL INFORMATION (continued)
- ------------------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition (continued)
- -------------------------------------------------------------------------------
Liquidity Management
- --------------------
At June 30, 2000, the Company's liquid assets, consisting of cash and due from
banks and federal funds sold, amounted to $3,425,160 and represented 10.49% of
total assets. Investment securities totaled $8,195,838. These securities provide
a secondary source of liquidity since they can be converted to cash in a timely
manner. The Company's ability to maintain and expand its deposit base and
borrowing capabilities also serves as a source of liquidity. The Company's loan
to deposit ratio at June 30, 2000 was 69.4%. The Company plans to meet its
future cash needs through the liquidation of temporary investments, maturities
of loans and investment securities and generation of deposits. In addition, the
Company maintains lines of credit with correspondent banks in the amount of
$3,500,000 and is a member of the Federal Home Loan Bank from which application
for borrowings can be made for leverage purposes.
The Company completed construction of its main office and opened on May 8, 2000.
As of June 30, 2000 construction costs for the main office totaled approximately
$1,542,000. Our permanent branch was completed in June and opened for business
on June 19, 2000. Construction costs incurred through June 30, 2000 amounted to
approximately $584,000. As of June 30, 2000, all major furniture and equipment
costs associated with these two buildings have been paid.
Management believes that its existing stable base of core deposits along with
continued growth in this deposit base, will enable the Company to successfully
meet its long-term liquidity needs.
Capital Adequacy
- ----------------
Bank holding companies and their banking subsidiaries are required by banking
regulators to meet certain minimum levels of capital adequacy which are
expressed in the form of certain ratios. The Federal Reserve guidelines also
contain an exemption from the capital requirements for bank holding companies
with less than $150 million in consolidated assets. Because the Company has less
than $150 million in assets, it is not currently subject to these guidelines.
However, the Bank falls under these rules as set by bank regulatory agencies.
Capital is separated into Tier 1 capital (essentially common shareholders'
equity less intangible assets) and Tier 2 capital (essentially the allowance for
loan losses limited to 1.25% of risk weighted assets). The first two ratios,
which are based on the degree of credit risk in the Company's assets, require
the weighting of assets based on assigned risk factors and include off-balance
sheet items such as loan commitments and stand-by letters of credit. The ratio
of Tier 1 capital to risk-weighted assets must be at least 4% and the ratio of
total capital (Tier 1 capital plus Tier 2) to risk-weighted assets must be at
least 8%. The capital leverage ratio supplements the risk-based capital
guidelines. The leverage ratio is Tier 1 capital divided by the adjusted
quarterly average total assets. Banks and bank holding companies are required to
maintain a minimum leverage ratio of 4.0%.
The following table summarizes the Bank's risk-based capital at June 30, 2000
(in thousands):
Required amount Percent Actual amount Percent
-------------- ------- ------------- ------
Tier 1 capital $ 766 4.0 % $ 7,449 38.92%
Total capital 1,531 8.0 7,688 40.17
Tier 1 leverage ratio 1,180 4.0 7,449 25.26
PART I - FINANCIAL INFORMATION (continued)
- ------------------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition (continued)
- --------------------------------------------------------------------------------
IMPACT OF INFLATION
The assets and liabilities of financial institutions such as the Company and the
Bank are primarily monetary in nature. Therefore, interest rates have a more
significant effect on the Company's performance than do the effects of changes
in the general rate of inflation and changing prices. In addition, interest
rates do not necessarily move in the same direction or in the same magnitude as
the prices of goods and services. Management seeks to manage the relationships
between interest-sensitive assets and liabilities in order to protect against
wide interest rate fluctuations, including those, which may result from
inflation.
THE YEAR 2000
Like many financial institutions, we rely upon computers for conducting our
business and for information systems processing. Industry experts were concerned
that on January 1, 2000, some computers would not be able to interpret the new
year properly, causing computer malfunctions. While we have not experienced any
material computer malfunctions to date, there remains a risk that our computers
will be unable to read or interpret data on Year 2000-sensitive dates, including
October 10, 2000. Our regulators have issued guidelines to require compliance
with Year 2000 issues. In accordance with these guidelines, we have developed
and executed a plan to ensure that our computer and telecommunication systems do
not have these Year 2000 problems. We generally rely on software and hardware
developed by independent third parties for our information systems. We believe
that our internal systems and software, including our network connections, are
programmed to comply with Year 2000 requirements, although there is a risk they
may not be. We incurred approximately $10,000 in expenses in 1999 to implement
our Year 2000 plan. Under our plan, we are continuing to monitor the situation
throughout 2000. Based on information currently available, we believe that we
will not incur significant additional expenses in connection with the Year 2000
issue.
The Year 2000 issue may also negatively affect the business of our customers,
but to date we are not aware of any material Year 2000 issues affecting them. We
include Year 2000 readiness in our lending criteria to minimize risk. However,
this will not eliminate the issue, and any financial difficulties that our
customers experience caused by Year 2000 issues could impair their ability to
repay loans to us.
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
- -------------------------
There are no material pending legal proceedings to which the Company or any of
its subsidiaries is party or of which any of their property is the subject.
Item 2. Changes in Securities
- -----------------------------
Not Applicable
Item 3. Defaults Upon Senior Securities
- ---------------------------------------
Not Applicable
Item 4. Submission of matters to a vote of security holders
- -----------------------------------------------------------
There were two matters submitted to a vote of security holders during the six
months ended June 30, 2000 at the Company's annual meeting of shareholders held
on April 28, 2000.
1. The election of three members of the Board of Directors as Class I
directors for a three year term.
The Company's Bylaws provides that the Board of Directors shall be
divided into three classes with each class to be nearly equal in
number as possible. The Bylaws also provide that the three classes of
directors are to have staggered terms, so that the terms of only
approximately one-third of the board members will expire at each
annual meeting of shareholders. The current Class I directors are
Marshall J. Collins, Jr., Tommy D. Greer, and Curran A. Smith. The
current Class II directors are Ralph S. Crawley, Bobby L. Johnson,
Robert T. Kellett, and Dennis O. Raines. The current Class III
directors are Richard W. Bailey, Timothy A. Brett, G. Mitchell Gault,
and James D. Stewart. The current terms of the Class I directors
expired at the Annual Meeting. Each of the three current Class I
directors was nominated for election and stood for election at the
Annual Meeting on April 28, 2000 for a three year term. The number of
votes for the election of the Class I directors was as follows: For
Mr. Collins - 804,930; for Mr. Greer - 804,930; and for Mr. Gault -
804,930. The number of votes which withheld authority for Mr. Collins
- 2,500; withheld authority for Mr. Greer - 2,500; and withheld
authority for Mr. Gault - 2,500. The number of votes against the
election of directors was as follows: against Mr. Collins --- 0;
against Mr. Greer - 0; and against Mr. Gault - 0. The terms of the
Class II directors will expire at the 2001 Annual Meeting of
Shareholders, and the terms of the Class III directors will expire at
the 2002 Annual Meeting of Shareholders.
2. A proposal to approve the Company's 1999 Stock Incentive Plan.
The shareholders of the Company approved the 1999 Stock Incentive
Plan which was approved by our Board of Directors of the Company in
August 1999. The Plan authorizes the grant to our employees and
directors of stock options for up to 150,000 shares of common stock
from time to time during the term of the plan, subject to adjustment
upon changes in capitalization. Under the plan, we may grant either
incentive stock options (which qualify for certain favorable tax
consequences, as described in the Company's 1999 Proxy Statement) or
nonqualified stock options. We may grant up to all 150,000 shares
available under the plan as incentive stock options. The number of
votes for the approval of the Plan was 572,425. The number of votes
against the Plan was 16,400, and 7,600 abstained from voting.
A majority vote was attained for each matter and therefore approved and recorded
in the Company's minute book from the annual meeting of shareholders. There were
no other matters voted on by the Company's shareholders at our annual meeting
held on April 28, 2000.
Item 5. Other Information
- -------------------------
None.
Item 6. Exhibits and Report on Form 8-K
- ---------------------------------------
(a) Exhibits.
See Exhibit Index attached hereto.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed by the Company during the
quarter ended June 30, 2000.
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.
NEW COMMERCE BANCORP
--------------------
(Registrant)
Date: August 10, 2000 By: /s/ James D. Stewart
----------------------------------------
James D. Stewart
President and Chief Executive Officer
By: /s/ Paula S. King
----------------------------------------
Paula S. King
Principal Accounting and Chief
Financial Officer
EXHIBIT INDEX
Exhibit Description
- ------- -----------
27.1. Financial Data Schedule for period ended June 30, 2000
(for electronic filing purposes)