U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2001
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________________ to _______________________
Commission file number 33-94050
VOLUNTEER BANCORP, INC.
(Exact name of small business issuer as specified in its charter)
Tennessee 62-1271025
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
210 East Main Street, Rogersville, Tennessee 37879
(Address of principal executive offices)
(423) 272-2200
(Issuer's telephone number)
(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 12, 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
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 539,027 as of March 31, 2001.
Transitional Small Business Disclosure Format (check one); Yes [ ] No [X]
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
INDEPENDENT AUDITOR'S REVIEW REPORT
To the Board of Directors
Volunteer Bancorp, Inc.
Rogersville, Tennessee
We have reviewed the accompanying condensed consolidated balance sheets of
Volunteer Bancorp, Inc. and subsidiary as of March 31, 2001 and 2000, and the
related condensed consolidated statements of earnings, condensed consolidated
statements of cash flows, and condensed consolidated statements of comprehensive
income for the three months then ended, in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants. All information included in these condensed
consolidated financial statements is the representation of the management of
Volunteer Bancorp, Inc.
A review of interim financial statements consists primarily of inquiries of
company personnel and analytical procedures applied to financial data. It is
substantially less in scope than an audit in accordance with generally accepted
accounting standards, the objective of which is the expression of an opinion
regarding the condensed consolidated financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements in order
for them to be in conformity with generally accepted accounting principles.
April 17, 2001
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
March 31, 2001 and 2000
(Unaudited- See Accountants' Review Report)
- --------------------------------------------------------------------------------
ASSETS 2001 2000
------ ---- ----
Cash and due from banks $ 3,520,499 $ 3,195,860
Federal fund sold 4,837,700 3,077,302
------------------ -------------------
Total cash and cash equivalents 8,358,199 6,273,162
Investment securities available for sale (amortized cost of
$29,288,264and $26,595,593, respectively) 29,351,082 25,028,065
Investment securities held to maturity (estimated market
value of $1,756,688 and $1,028,745) 1,754,204 1,094,976
Loans, less allowances for loan losses of $994,565 and
$911,399, respectively 73,473,694 69,407,705
Accrued interest receivable 1,095,352 988,824
Premises and equipment, net 4,004,126 4,037,336
Deferred income taxes 115,974 684,654
Other real estate 905,382 253,323
Goodwill 144,671 162,554
Other assets 220,992 326,522
------------------ -------------------
Total assets $ 119,423,676 $ 108,257,121
================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits:
Non-interest bearing $ 11,701,570 $ 11,110,788
Interest bearing 97,681,441 88,315,879
------------------ -------------------
Total deposits 109,383,011 99,426,667
Note payable 2,170,000 2,495,000
Interest payable 900,070 720,564
Securities sold under repurchase agreements 996,354 1,335,304
Other accrued taxes, expenses and liabilities 263,348 228,011
------------------ -------------------
Total liabilities 113,712,783 104,205,546
------------------ -------------------
Stockholders' equity:
Common stock, $0.01 par value, 1,000,000 shares
authorized, 539,027 shares issued and outstanding 5,390 5,390
Additional paid-in capital 1,916,500 1,916,500
Retained earnings 3,750,056 3,101,552
Accumulated other comprehensive income 38,947 (971,867)
------------------ -------------------
Total stockholders' equity 5,710,893 4,051,575
------------------ -------------------
Total liabilities and stockholders' equity $ 119,423,676 $ 108,257,121
================== ===================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Earnings
For The Three Months Ended March 31, 2001 and 2000
(Unaudited - See Accountants' Review Report)
- --------------------------------------------------------------------------------
2001 2000
---- ----
Interest Income:
Interest and fees on loans $1,855,561 $1,651,508
Interest on federal funds 100,813 25,100
Interest on investment securities:
Taxable 406,959 372,405
Exempt from Federal income taxes 30,358 48,880
------------------ -------------------
Total interest income 2,393,691 2,097,893
------------------ -------------------
Interest Expense:
Interest on deposits 1,312,973 1,059,125
Other borrowed funds 58,742 80,703
------------------ -------------------
Total interest expense 1,371,715 1,139,828
------------------ -------------------
Net interest income 1,021,976 958,065
Provision for possible loan losses 75,000 60,000
------------------ -------------------
Net interest income after provision for possible loan losses 946,976 898,065
------------------ -------------------
Non-interest income:
Service charges on deposits 51,936 55,154
Other service charges and fees 14,293 18,269
Securities gains 7,927 -
Other non-interest income 17,983 12,865
------------------ -------------------
Total non-interest income 92,139 86,288
------------------ -------------------
Non-interest expense:
Salaries and employee benefits 447,273 419,133
Occupancy expense 70,202 56,795
Furniture and equipment expense 81,585 79,997
Other non-interest expense 203,624 194,055
------------------ -------------------
Total non-interest expense 802,684 749,980
------------------ -------------------
Income before income taxes 236,431 234,373
Income tax expense 84,234 76,067
------------------ -------------------
Net income $152,197 $158,306
================== ===================
Income per common share $ 0.28 $ 0.29
================== ===================
Common shares outstanding 539,027 539,027
================== ===================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
For The Three Months Ended March 31, 2001 and 2000
(Unaudited - See Accountants' Review Report)
- --------------------------------------------------------------------------------
2001 2000
---- ----
Cash Flows from Operating Activities:
Net income $152,197 $158,306
Adjustments to reconcile net income
to net cash provided by operating activities:
Deferred income taxes 12,915 4,101
Provision for possible loan losses 75,000 60,000
Provision for depreciation and amortization 60,707 61,986
FHLB stock dividends (5,900) (5,300)
(Gain) on securities (7,927) -
Decrease in interest receivable 117,967 39,536
(Increase) other assets (363,850) (115,151)
(Decrease) increase in other liabilities (100,641) 3,919
-------------------- --------------------
Net cash provided by operating activities (59,532) 207,397
-------------------- --------------------
Cash Flows from Investing Activities:
Proceeds from calls and maturity of held to maturity securities 17,485 2,653
Purchase of investment securities held to maturity (705,141) -
Purchase of investment securities available for sale (11,165,713) -
Proceeds from calls and maturity of investments available for
sale 2,200,000 455,494
Proceeds from sale of investments available for sale 5,557,623 -
Net (increase) in loans (509,774) (2,735,277)
Capital expenditures (8,318) (20,601)
-------------------- --------------------
Net cash (used) in investing activities (4,613,838) (2,297,731)
-------------------- --------------------
Cash Flows from Financing Activities:
Net increase in demand deposits, NOW accounts, IRA and
savings accounts 2,962,335 3,596,620
Net increase in certificates of deposit 412,990 1,006,000
Repayment of long-term debt (325,000) (295,000)
Net (decrease) increase in securities sold under repurchase
agreements (56,159) 14,214
Repayment of short-term FHLB advances - (4,500,000)
Dividends paid (75,464) (64,683)
-------------------- --------------------
Net cash provided (used) by financing activities 2,918,702 (242,849)
-------------------- --------------------
(Decrease) in cash and cash equivalents (1,754,668) (2,333,183)
Cash and cash equivalents beginning of period 10,112,867 8,606,345
-------------------- --------------------
Cash and cash equivalents end of period $8,358,199 6,273,162
==================== ====================
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $1,611,678 $1,270,658
==================== ====================
Income taxes $73,254 $40,553
==================== ====================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Comprehensive Income
For The Three Months Ended March 31, 2001 and 2000
(Unaudited - See Accountants' Review Report)
- --------------------------------------------------------------------------------
2001 2000
---- ----
Net income $ 152,197 $ 158,306
------------------- -------------------
Other comprehensive income, before tax:
Unrealized gain (loss) on securities available for sale:
Unrealized holding gains (losses) arising during the period 514,423 (212,882)
Less: reclassification adjustment for (gains)
included in net income (7,927) -
------------------- -------------------
Other comprehensive income 506,496 (212,882)
Income taxes related to other comprehensive income 192,469 (80,895)
------------------- -------------------
314,027 (131,987)
------------------- -------------------
Total comprehensive income $ 466,224 $ 26,319
=================== ===================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Condensed Consolidated Financial Statements
Three Months Ended March, 2001 and 2000
- --------------------------------------------------------------------------------
1. Management Opinion
------------------
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements of Volunteer Bancorp, Inc. contain all
adjustments, consisting of only normal, recurring adjustments, necessary to
fairly present the financial results for the interim periods presented. The
results of operations for any interim period is not necessarily indicative
of the results to be expected for an entire year. These interim financial
statements should be read in conjunction with the annual financial
statements and notes thereto.
2. Adoption of Recently Issued Statements of Financial Accounting Standards
(SFAS)
---------------------------------------------------------------------------
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", as amended by SFAS No. 137, is effective for fiscal quarters
beginning after June 15, 2000 unless adopted earlier. This Statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts,
(collectively referred to as derivatives) and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. If certain conditions are met, a derivative may
be specifically designated as (a) a hedge of the exposure to changes in the
fair value of a recognized asset or liability or an unrecognized firm
commitment, (b) a hedge of the exposure to variable cash flows of a
forecasted transaction, or (c) a hedge of the foreign currency exposure of
a net investment in a foreign operation, an unrecognized firm commitment,
an available-for-sale security, or a foreign-currency-denominated
forecasted transaction. Adoption by the Company did not have any material
impact upon financial position or results of operations.
SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities", is effective for transfers and
servicing of financial assets and extinguishment of liabilities occurring
after March 31, 2001. This Statement is effective for recognition and
reclassification of collateral and for disclosures relating to
securitization transactions and collateral for fiscal years ending after
December 15, 2000. This statement replaces SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguisments of
Liabilities". It revises the standards for accounting for securitizations
and other transfers of financial assets and collateral and requires certain
disclosures, but it carries over most of SFAS No. 125's provisions without
reconsideration. This Statement provides accounting and reporting standards
for transfers and servicing of financial assets and extinguishment of
liabilities. Those standards are based on consistent application of a
financial-components approach that focuses on control. Under the approach,
after a transfer of financial assets, an entity recognizes the financial
and servicing assets it controls and the liabilities it has incurred,
derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. This Statement provides
consistent standards for distinguishing transfers of financial assets that
are sales from transfers that are secured borrowings. The adoption of the
provisions of this Statement relating to the recognition and
reclassification of collateral and for disclosures relating to
securitization transactions and collateral did not have any material impact
upon financial position or results of operation. Adoption of the remaining
provisions relating to the transfer and servicing of financial assets and
extinguishment of liabilities is not expected to have any material impact
upon financial position or results of operations.
3. Long-term debt
--------------
The Company's long-term debt consists of a single note payable in the
amount of $2,170,000 and $2,495,000 at March 31. 2001 and 2000,
respectively, due an unaffiliated national bank. The interest rate on the
note adjusts quarterly and is equal to the three-months London Interbank
Offered Rate (Three Month LIBOR) plus 1.95% per annum or at the option of
the Company, the rate on the note is equal to the lender's index rate as
such rate changes from time to time. The Company may change interest rate
options at any time with prior notice to the lender. Interest is payable
quarterly. At March 31. 2001 the rate on the note was 7.34% per annum.
Principal is payable annually on January 31, as follows:
January 31, Principal Due
----------- -------------
2002 360,000
2003 395,000
2004 435,000
2005 470,000
2006 (Final Maturity) 510,000
-------------
$ 2,170,000
=============
The loan is secured by all of the stock of Citizens Bank of East Tennessee
owned by the Company.
4. Contingencies
During the course of business, the Company makes various commitments and
incurs certain contingent liabilities that are not presented in the
accompanying balance sheet. The commitments and contingent liabilities may
include various guarantees, commitments to extend credit, standby letters
of credit, and litigation. In the opinion of management, no material
adverse effect on the financial position, liquidity or operating results of
the Company and its subsidiary is anticipated as a result of these items.
VOLUNTEER BANCORP, INC. AND SUBSIDIARY
FINANCIAL HIGHLIGHTS
As of And For The Three Months Ended
March 31, 2001 and 2000
(Unaudited)
2001 2000
---- ----
Net earnings $ 152,197 $ 158,306
Per common share data:
Net earnings per common share $0.28 $0.29
Book value $10.59 $7.52
Ratios:
Return on average assets 0.51% 0.60%
Return on average common equity 11.04% 15.53%
Net interest margin (taxable equivalent basis) 3.77% 4.06%
Expense ratio 2.71% 2.84%
Allowance for loan losses / loans 1.34% 1.30%
Non-performing loans / loans 0.65% 1.26%
Non-performing assets / loans and foreclosed properties 1.84% 1.61%
Shareholders' equity / total assets 4.78% 3.74%
Leverage ratio (tangible capital / tangible assets) 4.65% 4.56%
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
As Of and for the Three and Months Ended March 31, 2001 and 2000
----------------------------------------------------------------
Operating Results
-----------------
The Company reported net income for the first quarter of $152,197, or $0.28 per
common share, compared to net income of $158,306, or $0.29 for the same period a
year ago. Our returns on average assets and average common equity were 0.51% and
11.04%, respectively, for the quarter compared to 0.60% and 15.53% for the same
period last year.
Net interest income for the first three months of 2001 increased $63,911 versus
the first three months of 2000 to $1,021,976. The increase is attributable to
growth in interest earning assets of 10.96%. Average loans grew 7.90% over the
first quarter of 2000. Total Company assets were $119,423,676 at March 31, 2001
compared to $108,257,121 as of March 31, 2000.
The net interest margin was 3.77% for the first quarter of 2001 compared to
4.06% for the first quarter of 2000. The taxable equivalent yield on the
investment portfolio was 6.36% for the first quarter of 2001 compared to 6.77%
for the same quarter of 2000. The higher level of interest income from loans and
securities was offset by an increase in the cost of interest-bearing deposits.
The cost of securities sold under repurchase agreements, Federal Home Loan Bank
advances, and note payable decreased by $21,961.
Non-interest income for the first quarter of 2001 increased $5,851 over the
first quarter of 2000. The increase is primarily attributable to an increase in
gains on securities transactions. Non-interest expenses for the first quarter of
2001 increased $52,704 compared to the first quarter of 2000 primarily for costs
(including salaries and employee compensation) associated with overall growth.
Asset Quality
-------------
Non-performing assets at March 31, 2001 were $1,139,000 or 1.84% of loans and
foreclosed properties, which is an increase from $1,138,000, or 1.61% of loans
and foreclosed properties at March 31, 2000. The provision for losses on loans
was $75,000 for the first quarter of 2001 and $60,000 for the first quarter of
2000. At March 31, 2001, the allowance for losses on loans was 1.34% of loans
and approximately 72% of non-performing assets. The increase in non-performing
assets is primarily attributable to real estate loans in which no loss is
anticipated.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
Exhibit 23.1 Consent of Welch & Associates
(b) There have been no Current Reports on Form 8-K filed during
the quarter ended March 31, 2001.
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.
VOLUNTEER BANCORP, INC.
(Registrant)
Date: May 2, 2001 /s/ Reed D. Matney
--------------------------
Reed D. Matney, President
(principal executive
officer)
Date: May 2, 2001 /s/ H. Lyons Price
--------------------------
H. Lyons Price (principal
financial and accounting
officer)
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated April 17, 2001 included in this Quarterly Report on Form 10-QSB for
the Quarter Ended March 31, 2001.
Welch & Associates
Nashville, Tennessee
April 17, 2001