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 March 31, 2002.
___ Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from _______________ to ________________
Commission File No. 333-25179
PEOPLE'S COMMUNITY CAPITAL CORPORATION
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(Exact Name of Small Business Issuer as Specified in its Charter)
SOUTH CAROLINA 58-2287073
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(State of Incorporation) (I.R.S. Employer Identification No.)
125 PARK AVENUE, S.W., AIKEN, SOUTH CAROLINA 29801
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(Address of Principal Executive Offices)
(803) 641-0142
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(Issuer's Telephone Number, Including Area Code)
NOT APPLICABLE
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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: 1,042,988 shares of common
stock, par value $.01 per share outstanding at May 4, 2002.
Transitional Small Business Disclosure Format (check one):
Yes No X
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
People's Community Capital Corporation
Consolidated Balance Sheets
March 31, December 31,
2002 2001
---- ----
(Unaudited) (Audited)
Assets
Cash and due from banks $ 2,112,635 $ 3,043,209
Federal funds sold 7,859,000 6,389,000
Short-term investments 1,486,875 971,889
Securities, available for sale 22,602,275 23,807,381
Loans receivable, net 54,090,375 49,600,794
Properties and equipment, net 3,162,257 3,173,338
Accrued interest receivable 532,214 525,800
Deferred income taxes 116,125 124,204
Other assets 94,773 94,871
--------------- ---------------
Total assets $ 92,056,529 $ 87,730,486
=============== ===============
Liabilities and Shareholders' Equity
Liabilities:
Non-interest bearing deposits $ 11,415,933 $ 10,644,655
Interest bearing deposits 68,888,770 65,523,857
--------------- ---------------
Total deposits 80,304,703 76,168,512
Accrued interest payable 64,149 64,283
Accrued expenses and other liabilities 71,445 50,472
Other borrowings 1,000,000 1,000,000
--------------- ---------------
Total liabilities 81,440,297 77,283,267
--------------- ---------------
Shareholders' equity:
Common stock, $.01 par value; 10,000,000 shares authorized,
1,042,988 shares issued at March 31, 2002 and 991,845
at December 31, 2001 10,430 9,918
Additional paid-in-capital 10,381,546 9,699,178
Retained earnings 264,629 741,097
Accumulated other comprehensive loss (40,373) (2,974)
--------------- ---------------
Total shareholders' equity 10,616,232 10,447,219
--------------- ---------------
Total liabilities and shareholders' equity $ 92,056,529 $ 87,730,486
=============== ===============
See accompanying Notes to Consolidated Financial Statements.
2
People's Community Capital Corporation
Consolidated Statements of Income
(Unaudited)
For the three months
ended March 31,
2002 2001
---- ----
Interest income:
Loans, including fees $ 980,850 $ 980,370
Federal funds sold 20,592 64,948
Securities, short-term investments, and cash 265,792 189,841
------------ ------------
Total interest income 1,267,234 1,235,159
------------ ------------
Interest expense:
Deposits 464,381 550,067
Other borrowings 2,339 5,340
------------ ------------
Total interest expense 466,720 555,407
------------ ------------
Net interest income 800,514 679,752
Provision for loan losses 48,248 39,369
------------ ------------
Net interest income after provision 752,266 640,383
------------ ------------
for loan losses
Non-interest income:
Service charges on deposit accounts 136,381 84,397
Other 90,609 39,938
------------ ------------
Total non-interest income 226,990 124,335
------------ ------------
Non-interest expenses:
Salaries and employee benefits 397,514 280,456
Occupancy and equipment 73,189 54,144
Consulting and professional fees 53,502 38,116
Customer related 23,507 20,243
General operating 113,648 86,450
Other 35,190 23,426
------------ ------------
Total non-interest expenses 696,550 502,835
------------ ------------
Income before income taxes 282,706 261,883
Income tax provision 89,413 100,096
------------ ------------
Net income $ 193,293 $ 161,787
============ ============
Weighted average common shares outstanding:
Basic 1,042,224 1,017,363
Diluted 1,248,019 1,017,363
Earnings per share:
Basic $ .19 $ .16
Diluted $ .15 $ .16
See accompanying Notes to Consolidated Financial Statements.
3
People's Community Capital Corporation
Consolidated Statements of Comprehensive Income
(Unaudited)
For the three months
Ended March 31,
2002 2001
---- ----
Net income $ 193,293 $ 161,787
Other comprehensive income (loss), net of tax:
Net change in unrealized gain (loss) on
securities available for sale (37,399) 47,220
----------- ----------
Total other comprehensive income (loss) (37,399) 47,220
Comprehensive income $ 155,894 $ 209,007
============ ===========
See accompanying Notes to Consolidated Financial Statements.
4
People's Community Capital Corporation
Consolidated Statements of Cash Flows
(Unaudited)
For the three months
ended March 31,
---------------
2002 2001
---- ----
Operating activities:
Net income $ 193,293 $ 161,787
Adjustments to reconcile net income to net cash provided by (used for)
operating activities:
Depreciation and amortization 52,141 30,467
Provision for loan losses 48,248 39,369
Deferred income taxes 8,079 18,095
Changes in deferred and accrued amounts:
Other assets and accrued interest receivable (14,911) 26,607
Accrued expenses and other liabilities 20,841 (331,710)
------------- -------------
Net cash provided by (used for) operating activities 307,691 (55,385)
------------- -------------
Investing activities:
Purchase of securities available for sale - (6,330,000)
Maturities and calls of securities available for sale 1,167,707 6,740,959
Net (increase) decrease in short-term investments (514,986) 3,946
Purchase of property and equipment (32,467) (368,880)
Net increase in loans (4,537,829) (4,694,839)
Net (increase) decrease in federal funds sold (1,470,000) 481,000
------------- -------------
Net cash used for investing activities (5,387,575) (4,167,814)
------------- -------------
Financing activities:
Purchase of treasury stock - (72,000)
Issuance of stock 15,999 -
Net increase in deposits 4,136,191 4,602,970
Net increase in other borrowings - 634,896
Payment of dividends (2,880) (263)
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Net cash provided by financing activities 4,149,310 5,165,603
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Net (decrease) increase in cash and due from banks (930,574) 942,404
Cash and due from banks at beginning of period 3,043,209 1,603,996
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Cash and due from banks at end of period $ 2,112,635 $ 2,546,400
============== =============
Supplemental disclosure:
Cash paid during the period for interest $ 466,854 $ 550,832
-------------- -------------
Income taxes paid $ 6,500 $ 329,721
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Unrealized net gain (loss) on securities available for sale, net of income tax $ (37,399) $ 47,220
-------------- -------------
See accompanying Notes to Consolidated Financial Statements.
5
People's Community Capital Corporation
Notes to Consolidated Financial Statements
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B of the Securities and Exchange Commission. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. However, in
the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 2002, are not necessarily
indicative of the results that may be expected for the year ended December 31,
2002. For further information, please refer to the consolidated financial
statements and footnotes thereto for the Company's fiscal year ended December
31, 2001, included in the Company's Form 10-KSB for the year ended December 31,
2001.
Note 2. Summary of organization
People's Community Capital Corporation was incorporated in South
Carolina on February 26, 1997 for the purpose of operating as a bank holding
company. Our wholly-owned subsidiary, People's Community Bank of South Carolina
commenced business on September 22, 1997, and is primarily engaged in the
business of accepting savings and demand deposits and providing mortgage,
consumer and commercial loans to the general public. Our bank operates two
banking centers located in Aiken and one located in North Augusta, South
Carolina.
The second banking center located in Aiken was opened on September 8,
1998 in leased offices that were the headquarters of the holding company. In May
2001, we moved our banking center and holding company headquarters to a newly
constructed building nearby. At this time, the downtown Aiken location of our
bank became the main office.
In December 1999, our bank formed a subsidiary, People's Financial
Services, Inc. for the purpose of providing comprehensive financial planning
services in addition to full service brokerage, including stocks, bonds, mutual
funds, and insurance products.
6
Item 2. Management's Discussion and Analysis or Plan of Operation.
This discussion and analysis is intended to assist the reader in
understanding our financial condition and results of operations. This commentary
should be read in conjunction with the financial statements and the related
notes and other statistical information 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 our management, as well as assumptions made by and
information currently available to our management. The words "expect,"
"anticipate," and "believe," as well as similar expressions, are intended to
identify forward-looking statements. Our actual results may differ materially
from the results discussed in the forward-looking statements, and our operating
performance each quarter is subject to various risks and uncertainties that are
discussed in detail in our filings with the Securities and Exchange Commission,
including the "Risk Factors" section in our registration statement on Form SB-2
(Registration Number 333-25179) as filed with and declared effective by the
Securities and Exchange Commission.
CRITICAL ACCOUNTING POLICIES
We have adopted various accounting policies which govern the
application of accounting principles generally accepted in the United States in
the preparation of our financial statements. The significant accounting policies
of the company are described in the footnotes to the consolidated financial
statements at December 31, 2001 as filed on our 10-KSB for that date.
Certain accounting policies involve significant judgments and
assumptions by management which have a material impact on the carrying value of
certain assets and liabilities; management considers such accounting policies to
be critical accounting policies. The judgments and assumptions used by
management are based on historical experience and other factors, which are
believed to be reasonable under the circumstances. Because of the nature of the
judgments and assumptions made by management, actual results could differ from
these judgments and estimates which could have a material impact on the carrying
values of assets and liabilities and the results of operations of our company.
We believe the allowance for loan losses is a critical accounting
policy that requires the most significant judgments and estimates used in
preparation of our consolidated financial statements. Refer to the discussion
under Allowance for Loan Losses section of this document for a detailed
description of our estimation process and methodology related to the allowance
for loan losses.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EARNINGS REVIEW
Our net income for the first quarter of 2002 was $193,293 compared to
$161,787 for the same period last year, an increase of 19%. The basic income per
share increased to $.19 compared to $.16 for the same period in 2001. Weighted
shares outstanding have been adjusted for the effect of a 5% stock dividend paid
on January 2, 2002 to shareholders of record as of December 15. The improvement
in earnings reflects the continued growth in the level of earning assets since
the bank commenced operations. The level of average earning assets was $80.9
million for the three months ended March 31, 2002 as compared to $59.2 million
for the three months ended March 31, 2001.
7
Net interest income represents the difference between interest received
or accrued on interest earning assets and interest paid or accrued on interest
bearing liabilities. The following presents, in a tabular form, average balance
sheets that highlight the main components of interest earning assets and
interest bearing liabilities, on an annualized basis, for the three month
periods ended March 31, 2002 and 2001. Yields are derived by dividing income or
expense by the average balance of the corresponding assets or liabilities.
Average balances have been derived from daily averages.
Three months ended March 31, 2002 Three months ended March 31, 2001
--------------------------------- ---------------------------------
Average Interest Yield Average Interest Yield
Balance Income/Expense /Rate Balance Income/Expense /Rate
------- -------------- ----- ------- -------------- ------
ASSETS
Cash $ 10,004 $ 34 1.38% $ 9,612 $ 124 5.16%
Federal funds sold 4,931,580 20,592 1.69% 4,673,077 64,948 5.56%
Short-term investments 1,315,213 13,494 4.16% 993,294 16,428 6.62%
Securities 23,106,230 252,264 4.43% 11,058,231 173,289 6.27%
Loans 51,576,921 980,850 7.71% 42,461,340 980,370 9.24%
------------ --------------- ------------ ------------
Total earnings assets 80,939,948 1,267,234 6.35% 59,195,554 1,235,159 8.34%
------------ --------------- ------------ ------------
Cash and due from banks 2,228,401 1,823,357
Premises and equipment 3,167,770 2,288,919
Non-accruing loans 552,867 128,270
Other assets 1,190,049 906,357
Allowance for loan losses (650,360) (596,167)
------------ ------------
Total assets 87,428,675 63,746,290
============ ============
LIABILITIES &
EQUITY
Interest-bearing deposits:
Transaction accounts 9,070,991 12,340 0.55% 6,625,492 20,453 1.23%
Money market accounts 11,919,651 57,013 1.94% 10,772,192 109,181 4.05%
Savings deposits 13,117,772 77,546 2.40% 937,946 5,560 2.37%
Time deposits 31,628,920 317,482 4.01% 26,656,322 414,873 6.23%
------------ --------------- ------------ ------------
Total interest bearing
deposits 65,737,334 464,381 2.86% 44,991,952 550,067 4.89%
Interest-bearing borrowings 682,196 2,339 1.39% 400,244 5,340 5.34%
------------ --------------- ------------ ------------
Total interest bearing
liabilities 66,419,530 466,720 2.85% 45,392,196 555,407 4.89%
------------ --------------- ------------ ------------
Demand deposits 10,251,604 8,029,776
Other liabilities 188,498 404,207
Shareholders' equity 10,569,043 9,920,111
------------ ------------
Total liabilities &
shareholders' equity $ 87,428,675 $ 63,746,290
============ ============
Net interest spread 3.50% 3.45%
Net interest
income/margin $ 800,514 4.01% $ 679,752 4.59%
=============== ============
Net interest income was $800,514 for the three months ended March 31,
2002 as compared to $679,752 for the three months ended March 31, 2001,
representing an 18% increase. The net interest margin (net interest income
divided by average earning assets) was 4.01% for the three months ended March
31, 2002 compared to
8
the net interest margin of 4.59% for the three months ended March 31, 2001. The
decline in net interest margin is the lower yield realized as the prime rate of
interest moved from 9.00% in early 2001 to a current rate of 4.75%. Rates paid
on deposits decreased, also, but the volume of earning assets exceeded the
volume of interest bearing liabilities, having the effect of a net decrease in
margins.
Interest income for the first three months of 2002 was $1,267,234
compared to $1,235,159 for the same period in 2001. The volume of total earnings
assets increased by approximately $22 million between the two periods, however
the average rate earned on assets decreased from 8.34% to 6.35%. The largest
component of interest income was interest and fees on loans amounting to
$980,850 for the three months ended March 31, 2002 compared to $980,370 for the
comparable prior year period. The average loan balance increased by $9.1
million. The overall rate on the loan portfolio decreased from 9.24% for the
three months ended March 31, 2001 to 7.71% for the three-month period ended
March 31, 2002. Interest earned on federal funds sold decreased from $64,948 for
the first quarter of 2001 to $20,592 for the first quarter of 2002. The average
balances of federal funds sold increased only slightly, but the yield fell from
5.56% to 1.69%. The securities, short-term investments portfolio, and
interest-earning cash earned $189,841 for the first three months of 2001 with a
yield of 6.30%. For the first three months of 2002, these investments earned
$265,792 with a yield of 4.35%. The average balance outstanding increased from
$12,061,137 to $24,431,447, an increase of approximately $12 million.
Interest expense decreased from $555,407 for the three months ended
March 31, 2001 to $466,720 for the three months ended March 31, 2002. The
decrease was the direct result of the decrease in rates paid on deposits and
other liabilities, from an average of 4.89% for the first quarter last year to a
rate of 2.85% this year. Actual interest-bearing liabilities, primarily
deposits, increased from $45,392,196 to $66,419,530, an increase of 46%.
Non-interest Income
Non-interest income for the three-month period ended March 31, 2002 was
$226,990 compared to $124,335 for the same period in 2001. Of this total,
$136,381 represented service charges on deposit accounts for the three months
ended March 31, 2002 compared to $84,397 for the comparable period in 2001. The
increase in income from deposit service charges is due to the increase in
deposit customers during the comparable periods. The $90,609 of other
non-interest income for the first three months of 2002 was income generated from
other fees charged, including fees from our financial services' subsidiary. For
the same period in 2001, other income amounted to $39,938, with $5,344 of fees
from non-deposit investment products' activity associated with our bank's
financial services subsidiary. Fees generated by the subsidiary for the first
quarter of 2002 amounted to $34,652. However, other fees in our bank also
increased in the first quarter compared to last year's first quarter. Brokered
mortgage fees increased from $8,772 for the first quarter of 2001 to $26,839 for
the first quarter of 2002, as customers took advantage of lower rates to
refinance their home loans.
Non-interest Expense
Non-interest expense for the three-month periods ended March 31, 2002
and 2001 were $696,550 and $502,835, respectively. The largest component of
non-interest expense was salaries and employee benefits of $397,514 and
$280,456, respectively, representing a 41% increase. This increase is the direct
result of the addition of five new strategic positions within the bank since the
same quarter last year, an accrual for bonuses, and general increases in other
salaries and benefits. Occupancy and equipment expense increased from $54,144
for the three months ended March 31, 2001 to $73,189 for the three months ended
March 31, 2002 largely due to depreciation expense associated with our move to a
new building in May 2001. Consulting and professional
9
fees increased from $38,116 to $53,502 primarily due to services performed by a
vendor in connection with the review and renewal of our data processing
contract. General operating expenses increased from $86,450 to $113,648 due to
increased data processing expenses since the same quarter last year and higher
costs of supplies and services related to our growth. Other expenses increased
from $23,426 to $35,190 due to increased levels of advertising and marketing
costs.
Provision for Loan Losses
The provision for loan losses was $48,248 and $39,369, respectively,
for the first three months of 2002 and 2001, bringing the total reserve balance
to $685,000 and $613,000 at March 31, 2002 and 2001, respectively. This amount
represents 1.25% of gross loans at March 31, 2002, compared to 1.35% at March
31, 2001. It also reflects our estimate of the amounts necessary to maintain the
allowance for loan losses at a level believed to be adequate in relation to the
current size, mix and quality of the loan portfolio. See the description of the
allowance for loan losses below. However, our judgment as to the adequacy of the
allowance is based upon a number of assumptions about future events that we
believe 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 charge-offs in future periods will not exceed the
allowance for loan losses or that additional increases in the loan loss
allowance will not be required. We had $532,478 in loans that were classified as
non-accrual at March 31, 2002 compared to $189,633 in non-accrual loans at March
31, 2001. The non-accrual balance at March 31, 2002 consisted primarily of one
credit relationship that is secured by real estate. We have examined this
relationship and do not believe that our loss exposure would be material due to
the collateral involved. There were net charge-offs of $248 for the period ended
March 31, 2002 and net recoveries of $1,631 for the period ended March 31, 2001.
BALANCE SHEET REVIEW
Total consolidated assets grew by $4,326,043 from $87,730,486 at
December 31, 2001 to $92,056,529 at March 31, 2002. The increase was generated
primarily through a $4,136,191 increase in deposits. This increase in deposits
was the source of funding for an increase in net loans of $4,489,581. Federal
funds sold increased by $1,470,000 with a corresponding decrease in the
securities portfolio of $1,205,106. We purchased $59,200 of stock in the Federal
Home Loan Bank to satisfy minimum stock ownership requirements during the first
quarter of 2002.
Loans
Outstanding loans represent the largest component of earning assets as
of March 31, 2002 at $54,090,375, or approximately 63% of total earning assets.
Net loans increased $4,489,581, or 9%, since December 31, 2001.
The interest rates charged on loans vary with the degree of risk,
maturity and amount of the loan. Competitive pressures, money market rates,
availability of funds, and government regulations also influence interest rates.
The average yield on our loans for the period ended March 31, 2002 was 7.71% as
compared to a yield of 8.77% for the year ended December 31, 2001.
The principal components of our loan portfolio at March 31, 2002 and
December 31, 2001, consisted of real estate loans comprising approximately 85.4%
and 85.7% of total loans, respectively. Real estate loan means any loan secured
by real estate, regardless of the purpose of the loan. It is common practice for
financial
10
institutions in our market area to obtain a security interest in real estate
whenever possible, in addition to any other available collateral. This
collateral is taken to reinforce the likelihood of the ultimate repayment of the
loan and tends to increase the magnitude of the real estate portfolio component.
The following table shows the composition of the loan portfolio by category.
March 31, 2002 December 31, 2001
-------------- -----------------
Amount Percent Amount Percent
------ ------- ------ -------
Commercial and industrial $ 5,718,810 10.4% $ 4,911,737 9.8%
Real estate
Mortgage - residential 14,007,000 25.6% 13,650,406 27.1%
Mortgage - commercial 21,570,997 39.3% 19,859,456 39.5%
Mortgage - construction & other 11,225,328 20.5% 9,640,534 19.1%
Consumer and other 2,318,515 4.2% 2,238,469 4.5%
------------- -------- ------------- --------
Total loans 54,840,650 100.0% 50,300,602 100.0%
Allowance for loan losses (685,000) (637,000)
Unearned fees (65,275) (62,808)
------------- -------------
Total net loans $ 54,090,375 $ 49,600,794
============= =============
Allowance for Loan Losses
The allowance for loan losses at March 31, 2002 was $685,000, or 1.25%
of loans outstanding, compared to an allowance of $637,000, or 1.27% of loans
outstanding, at December 31, 2001. The allowance for loan losses is based upon
our continuing evaluation of the collectibility of loans based somewhat on
historical loan loss experience, but primarily on current economic conditions
affecting the ability of borrowers to repay, the volume of loans, the quality of
collateral securing non-performing and problem loans, and other factors
deserving recognition. The bank's policy has been to review the allowance for
loan losses using a reserve factor for each type of loan since there have been
few delinquencies and little charge-off activity since the Bank's inception. The
overall objective is to apply percentages to the loans based on the relative
inherent risk for that loan type and grade. Reserve factors are based on peer
group data, information from regulatory agencies, and on the experience of our
bank's lenders. The reserve factors will change depending on trends in national
and local economic conditions, the depth of experience of our bank's lenders,
delinquency trends, and other factors. The bank's general strategy is to
maintain a minimum coverage of a certain percentage of gross loans until it has
sufficient historical data and trends available.
Short-Term Investments and Securities
Short-term investments and securities represented 28% of earning assets
at March 31, 2002, or $24,089,150. This represented a decrease of $690,120 from
the December 31, 2001 balance of $24,779,270. The combined yield on short-term
investments and securities was 4.35% for the three months ended March 31, 2002
compared to 5.44% for the year ended December 31, 2001. Short-term investments
at March 31, 2002 and at December 31, 2001 consisted of commercial paper in
another financial institution with balances of $1,486,875 and $971,889,
respectively. Included in available-for-sale securities is $196,300 of stock
purchased in the Federal Home Loan Bank of Atlanta, of which $59,200 was
purchased in the first quarter of 2002. This purchase was a requirement from the
FHLB in order to secure borrowings from them in the future.
11
Deposits
Our primary source of funds for loans and investments is deposits.
Deposits grew $4,136,191, or 5%, since year-end 2001 for a total of $80,304,703
at March 31, 2002. The average rates paid on interest-bearing deposits were
2.86% and 4.89% at March 31, 2002 and December 31, 2001, respectively. In
pricing deposits, we consider our liquidity needs, the direction and levels of
interest rates, and local market conditions. We have seen a decrease in the
price of our deposits due to declining rates in the general economy and in the
local market.
Shareholders' Equity
On November 20, 2001, the Board of Directors declared a 5% stock
dividend which was paid on January 2, 2002 to shareholders of record on December
15, 2001. The number of shares issued was 49,379 with a market value of $13.50
for a total decrease in retained earnings of $666,616. Cash paid in lieu of
stock for fractional shares totaled $2,880. Also, in the first quarter, an
employee exercised stock options for which 1,764 shares of stock were issued.
Liquidity and Sources of Capital
At March 31, 2002, our liquid assets, consisting of cash and due from
banks and Federal funds sold, amounted to $9,971,635, representing 10.8% of
total assets. Short-term investments and securities equaled $24,089,150, or
26.2% of total assets. These securities provide a secondary source of liquidity
because they can be converted into cash in a timely manner. Our ability to
maintain and expand our deposit base and borrowing capabilities also serves as a
source of liquidity. For the three-month period ended March 31, 2002, total
deposits increased by $4,136,191 representing an increase of 5%, or 22% on an
annualized basis. Growth for the first quarter of the year is not necessarily
indicative of expected growth for the remainder of the year. We closely monitor
and seek 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 loan demand. At March 31,
2002, the Company had $11,891,000 in commitments to extend credit and $622,000
in letters of credit issued.
We plan to meet future cash needs through the liquidation of temporary
investments, maturities of loans and investment securities, and generation of
deposits. In addition, the Bank maintains two lines of credit from correspondent
banks in the amount of $1,800,000 each, and is a member of the Federal Home Loan
Bank (FHLB), from which applications may be made for borrowing capabilities, if
needed. In the normal course of business, during April 2002, the Company has
taken advantage of low interest rates and has drawn down an advance from the
FHLB of $2,500,000 that was subsequently invested in our bond portfolio.
The Bank currently maintains a level of capitalization in excess of the
minimum capital requirements set by the regulatory agencies. Despite anticipated
asset growth, we expect capital ratios to continue to be adequate for the next
two to three years. However, no assurances can be given in this regard, as rapid
growth, deterioration in loan quality, and operating losses, or a combination of
these factors, could change our capital position in a relatively short period of
time.
12
Below is a table that reflects the leverage and risk-based regulatory
capital ratios of the Bank at March 31, 2002:
Well-Capitalized Minimum
Ratio Requirement Requirement
----- ----------------- -----------
Tier 1 capital 10.78% 6.00% 4.0%
Total capital 11.84% 10.00% 8.0%
Tier 1 leverage ratio 8.29% 5.00% 4.0%
Recently Issued Accounting Standards
Accounting standards that have been issued or proposed by the Financial
Accounting Standards Board that do not require adoption until a future date are
not expected to have a material impact on the consolidated financial statements
upon adoption.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- -------------------------
Not Applicable
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
- -------------------------
None.
Item 6. Exhibits and Report on Form 8-K
- ----------------------------------------
(a) Exhibits - None.
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the
quarter ended March 31, 2002.
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.
People's Community Capital Corporation
--------------------------------------
(Registrant)
Date: May 8, 2002 By: /s/ Tommy B. Wessinger
--------------------------------------------
Tommy B. Wessinger
Chief Executive Officer
By: /s/ Jean H. Covington
--------------------------------------------
Jean H. Covington
Principal Accounting and Chief
Financial Officer