Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission File Number 333-12305
SVB Financial Services, Inc.
(Exact name of registrant as specified in its charter)
New Jersey 22-3438058
(State or Other Jurisdiction of Incorporation (I.R.S. Employer
or Organization) Identification Number)
103 West End Avenue, Somerville, NJ 08876
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (908) 704-1188
Securities registered pursuant to Section 12 (b) of the Act:
None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, no par value
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant as of February 28, 1998, was $10,557,945.
The number of shares of the Registrant's Common Stock, no par value,
outstanding as of February 28, 1998, was 1,376,630.
PART I
ITEM 1. BUSINESS.
General
SVB Financial Services, Inc. (the "Company") is a New Jersey business
company and a bank holding company. The Company was incorporated on February 7,
1996 for the purpose of acquiring Somerset Valley Bank (the "Bank") and thereby
enabling the Bank to operate within a holding company structure. On May 30,
1996, the shareholders of the Bank approved the acquisition by the Company. On
September 3, 1996, the shares of the Company were exchanged for those of the
Bank. The Bank is the Company's only subsidiary.
The Bank is a New Jersey commercial bank and was granted a charter by
the New Jersey Department of Banking on February 21, 1990. The Bank opened for
business on December 20, 1991 at its Somerville facility after obtaining the
necessary capital in its initial offering and the approval of the Federal
Deposit Insurance Corporation (FDIC). At December 31, 1997, the Bank had total
assets of $148.5 million and is considered a small bank relative to other banks
in New Jersey. In 1996, the Bank opened its first full service branch office in
Hillsborough Township, New Jersey. During 1997, the Bank opened a full service
branch in Bridgewater Township, New Jersey and a mini branch with a drive
through on Gaston Avenue in Somerville. The Bank also received approval to put a
mini branch facility in the Arbor Glen Retirement Community in Bridgewater
Township.
The Bank provides a wide range of commercial and consumer banking
services.
Deposit services include business and personal checking accounts,
interest-bearing NOW accounts, Money Market Deposit Accounts, Savings Accounts
and Certificates of Deposit. In order to compete with the larger banks for
deposit accounts, the Bank gives favorable terms (interest rates, minimum
balances, service charges, etc.). As of December 31, 1997, the Bank had $133.9
million in deposits and approximately 9,800 deposit accounts.
The Bank makes secured and unsecured loans to small and mid-sized
businesses and professionals in its market area. Because Somerville is the
county seat of Somerset County and home to Somerset Medical Center, the Bank is
uniquely positioned to provide loans and other services to the medical,
accounting and legal professionals. Bridgewater and Hillsborough Townships are
also areas of significant small and mid-size business activity. Small and medium
sized businesses and professionals make up the primary focus of the Bank's
lending efforts. It is also a preferred SBA lender and as such it originates SBA
loans and sells the government guaranteed portion in the secondary market while
retaining the servicing of such loans.
Secured and unsecured personal loans to finance the purchase of
consumer goods are also available. Through its relationship with nine local
automobile dealerships, the Bank indirectly finances automobile loans.
Residential and commercial mortgages are also provided by the Bank.
Residential mortgages are currently written by the Bank with a three or
five-year fixed rate which adjusts annually thereafter for the life of the loan
which may be up to 30 years. The Bank is an approved Federal National Mortgage
Association (FNMA) lender for origination and servicing of mortgages, long term
fixed rate mortgages are originated and sold in the secondary market with
servicing retained.
As of December 31, 1997, the Bank had approximately 2,700 loans of all
types totaling $105.3 million.
Other services provided by the Bank include wire transfers, safe
deposit boxes, money orders, travelers cheques, direct deposit of payroll and
social security checks, ACH origination and Visa/MasterCard processing. The Bank
has two ATM machines and the Bank is a member of the MAC network. The Bank
currently employs three licensed agents to sell annuities.
During 1997, the Bank began offering customers access to their accounts
through a telephone or personal computer. These products known as PC Plus and
TelePlus also offer a bill payment feature. A Debit Card is also offered
allowing customers to access funds anywhere MasterCard is accepted.
The Bank's data processing services are provided by Fiserv, which is
one of the leading data processing service providers to financial institutions
in the United States. As such, the Bank has access to many banking products and
services that are technologically competitive with other Banks. Not all of these
services, however, are economically feasible to the Bank at this time.
The Company is aware of the issues associated with the programming code
in existing computer systems as the millennium (year 2000) approaches. The "year
2000" problem is pervasive and complex as virtually every computer operation
will be affected in some way by the rollover of the two digit year value to 00.
The issue is whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail.
The Company is utilizing both internal and external resources to
identify, correct or reprogram, and test the systems for the year 2000
compliance. It is anticipated that all reprogramming efforts will be complete by
December 31, 1998, allowing adequate time for testing. To date, confirmations
have been received from the Company's primary processing vendors that plans are
being developed to address processing of transactions in the year 2000.
Management has not yet assessed the year 2000 compliance expense and related
potential effect on the Company's earnings.
Market Area
The Bank's market area is primarily Somerset County which is located
midway between New York and Philadelphia. Somerset County is considered an
affluent suburban area with significant commercial and residential activity. A
number of large national firms such as ATT, Metropolitan Life and Johnson and
Johnson companies locate their offices in Somerset County. The county is
crisscrossed by five major highways including interstate Routes 78 and 287 and
U.S. Routes 22, 202 and 206, adding to its desirability as a commercial center.
A large regional shopping mall is located in Bridgewater Township with several
small shopping centers located throughout the county.
Although the Bank serves primarily Somerset County, it also draws
business from the counties of Hunterdon, Middlesex, Union, Mercer, Morris and
Monmouth.
Competition
All phases of the Bank's business are highly competitive. As of June
30, 1997 (the latest date for which figures are available), Somerset County had
23 banks and saving banks with 99 offices. In just 5 1/2 years and having only
two locations, the Bank was ranked 10 of 23 in terms of total deposits. Somerset
County has experienced significant merger activity in recent years. These
mergers will result in the closing of several branch locations throughout the
Bank's market area. A possibility exists that there will be competition for
acquisition of one or more of these existing branches. Such competition could
come from not only New Jersey financial institutions but, under recent
amendments to New Jersey banking statutes, also from out-of-state and foreign
banks as well.
Management of the Bank believes that loans to small and mid-size
businesses and professionals are not always of primary importance to the larger
banking institutions, whereas they represent the main commercial loan business
of the Bank. The Bank can compete for this segment of the market because it
provides responsive personalized services, local decision-making and knowledge
of its customers and their businesses.
By virtue of their greater total capital, certain commercial banks have
substantially higher lending limits. These banks can also finance broad
advertising campaigns and with lower average overhead ratios can be very
competitive in pricing. Accordingly, there are certain borrowers that the Bank
will not be able to service and others who will be reached by the more extensive
advertising of larger competing banks.
Employees
At December 31, 1997, the Company employed 49 full time and 3 part time
employees. None of these employees is covered by a collective bargaining
agreement and the Company believes that its employees' relations are good. The
Company offers its employees health, life, dental benefits, as well as a 401(k)
Plan.
ITEM 2. PROPERTIES.
The Company presently owns no properties. The Bank leases its banking
facilities at 103 West End Avenue and its back-office facility at 117 West End
Avenue in Somerville from a partnership consisting of all but one of the members
of its Board of Directors and one non director. The lease for 103 West End
Avenue expires in July of 2001, but contains four five-year renewal options
allowing the Bank to extend the lease. The lease for 117 West End Avenue expires
in 2003. The Bank also leases property from the partnership described above
located at 48 North Middaugh Street, Somerville on a month-to-month basis for
possible future expansion. The lease for 103 West End Avenue, was reviewed by
both the FDIC and the Department of Banking prior to the Bank's opening to
determine that the terms of the lease are comparable to those the Bank would
receive in an arms length transaction with an unaffiliated third party. Neither
the FDIC nor the Department of Banking objected to the terms of the lease. The
office space at 117 West End Avenue is also leased at such comparable terms.
The Hillsborough office located at 649 Route 206, Belle Mead, New
Jersey, is leased from an unaffiliated partnership and the lease expires in 2004
with two five-year renewal options.
The Bridgewater office located at 481 North Bridge Street, Bridgewater,
New Jersey, is leased from an unaffiliated partnership and the lease expires in
2027, with an initial five-year term lease with five five-year renewal options.
The Gaston Avenue office is located at 91 North Gaston Avenue,
Somerville, New Jersey. The Company owns the building and the land is leased
with a forty-two-month lease expiring in 2001 with one five-year renewal at the
landlord's option.
The Arbor Glen office located at 100 Monroe Street, Bridgewater, New
Jersey, has a lease with an original term of three years expiring in 2001, with
three five-year renewal options.
ITEM 3. LEGAL PROCEEDINGS.
The Company is periodically a party to or otherwise involved in legal
proceedings arising in the normal course of business, such as claims to enforce
liens, claims involving the making and servicing of real property loans, and
other issues incident to the Company's business. There are no pending legal
proceedings to which the Company is a party nor has it been threatened with any
litigation. Management does not believe that there is any pending or threatened
proceeding against the Company which, if determined adversely, would have a
material effect on the business or financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
No matters were submitted for a vote of the Registrant's shareholders
during the fourth quarter of 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
There is no established public trading market for the shares of common
stock of the Company. The shares are neither listed on any exchange nor quoted
on the NASDAQ system. During the fourth quarter of 1996, the Company offered for
sale 200,000 shares of common stock at a price of $13.00 per share. All of the
shares were sold.
Prior to the acquisition of the Bank by the Company, on an exchange
basis of six shares for five, there were a limited number of privately
negotiated transfers of the Bank's stock, the price of which was not always made
known to management. In those instances where the price was disclosed, the
consideration was $10.00 per share.
There are approximately 481 shareholders of the Company's common stock
as of December 31, 1997.
The Company has never paid a dividend and there are no plans to pay
cash dividends at this time.
ITEM 6. SELECTED FINANCIAL DATA.
This information is incorporated by reference from the Company's 1997
Annual Report to Shareholders at page 1 under the caption "Selected Consolidated
Financial Information."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
This information is incorporated by reference from the Company's 1997
Annual Report to Shareholders at pages 18-31 under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Financial Statements, Notes to Consolidated Financial
Statements and Independent Auditors Report thereon is incorporated by reference
from pages 3-16 of the 1997 Annual Report to Shareholders.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item is incorporated by reference from
page 5-13 under the caption "Directors/Principal Shareholders/Executive Officers
and Director Committees" of the Company's Proxy Statement for its 1998 Annual
Meeting of Shareholders.
ITEM 11. EXECUTIVE COMPENSATION.
This information required by this item is incorporated by reference
from page 5-6 under the caption "Executive Compensation" of the Company's Proxy
Statement for its 1998 Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is incorporated by reference from
page 2-4 under the caption "Directors/Principal Shareholders/Executive Officers"
of the Company's Proxy Statement for its 1998 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
This information required by this item is incorporated by reference
from page 13 under the caption "Transactions with Related Persons" of the
Company's Proxy Statement for its 1998 Annual Meeting of Shareholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND
REPORTS ON FORM 8-K.
(a) Financial Statements and Financial Statement Schedules
The following documents are filed as part of this report:
1 Financial Statements of SVB Financial Services, Inc.
Consolidated Balance Sheets - December 31, 1997 and 1996
Consolidated Statements of Income - Years Ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Changes in Shareholders' Equity -
Years Ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows - Years Ended December
31, 1997, 1996 and 1995
Reports of Independent Accountants
These statements are incorporated by reference to the Company's Annual
Report to Shareholders for the year ended December 31, 1997.
2 All schedules are omitted because either they are inapplicable
or not required, or because the information required therein
is included in the Consolidated Financial Statements and Notes
thereto.
3 Exhibits
Exhibit
Number Description
------ -----------
3(i) Certificate of Incorporation (1)
3(ii) By-Laws(1)
4.1 Specimen Stock Certificate (1)
4.2 Pages 3, 4, 5, 6, 7, 8, 9, 10 and 11
from the Certificate of Incorporation of
SVB Financial Services, Inc. (1)
4.3 Pages 1, 2, 3, 9, 10, 11, 14 and 15
from the By-Laws of SVB Financial Services, Inc. (1)
10.1 Employment Agreements (1)
10.2 SVB Financial Services, Inc.
Nonstatutory Stock Option Plan
10.3 SVB Financial Services, Inc. Restated Incentive
Stock Option Plan
13 Annual Report to Security-Holders
20 Proxy Statement for the 1998 Annual Meeting of
Shareholders
27 Financial Data Schedule
(1) Incorporated by reference to the Company's Registration Statement
on SB-2. Registration Number 333-12305.
SVB FINANCIAL SERVICES, INC.
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
13 Annual Report to Security-Holders
20 Proxy Statement for the 1998 Annual Meeting of Shareholders
27 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
/s/Keith B. McCarthy
--------------------
Keith B. McCarthy
Principal Financial Officer and
Principal Accounting Officer
March 26, 1998
Signature Capacity Date
--------- -------- ----
/s/John K. Kitchen
- ------------------- Director and Chairman of the Board March 26, 1998
John K. Kitchen
/s/Robert P. Corcoran
- ---------------------- President and Chief Executive Officer March 26, 1998
Robert P. Corcoran and Director
/s/Keith B. McCarthy
- -------------------- Chief Financial Officer/Chief March 26, 1998
Keith B. McCarthy Accounting Officer
/s/Bernard Bernstein
- -------------------- Director March 26, 1998
Bernard Bernstein
- --------------- Director March 26, 1998
Mark S. Gold, MD
- -------------------- Director March 26, 1998
Raymond L. Hughes
/s/S. Tucker S. Johnson
- ----------------------- Director March 26, 1998
S. Tucker S. Johnson
- ----------------- Director March 26, 1998
Willem Kooyker
/s/Frank Orlando
- ---------------- Director March 26, 1998
Frank Orlando
/s/Gilbert E. Pittenger
- ----------------------- Director March 26, 1998
Gilbert E. Pittenger
/s/Frederick D. Quick
- --------------------- Director March 26, 1998
Frederick D. Quick
/s/Anthony J.Santye, Jr.
- ------------------------ Director March 26, 1998
Anthony J. Santye, Jr.
/s/G. Robert Santye
- ------------------- Director March 26, 1998
G. Robert Santye
/s/Donald Sciaretta
- ------------------- Director March 26, 1998
Donald Sciaretta
/s/Herman C. Simonse
- -------------------- Director March 26, 1998
Herman C. Simonse
- ---------------------- Director March 26, 1998
Donald R. Tourville