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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
Commission File Number 0-24433
POINTE FINANCIAL CORPORATION
----------------------------
(Exact name of Registrant as specified in its charter)
Florida 65-0451402
------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
21845 Powerline Road, Boca Raton, Florida 33433
- ----------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 368-6300
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01
par value
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, 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 the 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.
The aggregate market value of the Common Stock held by non-affiliates
of the Registrant, based upon the average bid and asked prices as quoted on the
NASDAQ Stock Market on March 14, 2001, was $14,824,737*.
The Registrant had 2,030,053 shares of Common Stock outstanding on
March 14, 2001.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's Definitive Proxy Statement for its 2000 Annual Meeting
of Stockholders will be filed with the Securities and Exchange Commission not
later than 120 days after the end of the fiscal year covered by this Form 10-K
pursuant to Rule G(3) of the General Instructions for Form 10-K. Information
from such Definitive Proxy Statement will be incorporated by reference into Part
III, Items 10, 11, 12 and 13 hereof.
* Based on reported beneficial ownership of all directors and executive
officers of the Registrant; this determination does not, however,
constitute an admission of affiliated status for any of these
individual stockholders.
INDEX
PART I Page
----
Item I. Description of Business
Business 3
Investment Banking Joint Venture 4
Pending Acquisition 4
Market Area and Competition 4
Market Risk 4
Employees 5
Year 2000 Complianc 5
Forward-Looking Statements 5
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 7
Item 6. Selected Financial Data 8-9
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10-28
Item 7A. Quantitative and Qualitative Disclosure About Market Risk 29
Item 8. Financial Statements and Supplementary Data
(See Index - Page 29) 29
Item 9. Change In and Disagreements with Accountants on
Accounting and Financial Disclosure 30
PART III
Item 10. Directors and Executive Officers of the Registrant 30
Item 11. Executive Compensation 31
Item 12. Security Ownership of Certain Beneficial Owners and Management 31
Item 13. Certain Relationships and Related Transactions 31
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 32-33
Supplemental Information 34
SIGNATURES 35
2
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business
Pointe Financial Corporation, a Florida corporation, is a bank holding company
headquartered in Boca Raton. Pointe Financial Corporation's ("Pointe" or the
"Company") fundamental business consists of operating its commercial bank
subsidiary, Pointe Bank ("the Bank"), a Florida state chartered commercial bank.
At December 31, 2000, the Company has total assets of $244.508 million and
stockholders equity of $26.730 million.
As a bank holding company registered under the Bank Holding Company Act (BHCA),
the Company was subject to the regulation and supervision of the Board of
Governors of the Federal Reserve System ("FRB"). The Company is required to file
with the FRB annual reports and other information regarding its business
operations and those of its subsidiaries.
There are a number of obligations and restrictions imposed on bank holding
companies and their depository institution subsidiaries by law and regulatory
policy that are designed to minimize potential loss to the depositors of such
depository institutions and the FDIC insurance funds in the event the depository
institution becomes in danger of default. Under a policy of the FRB with respect
to bank holding company operations, a bank holding company is required to serve
as a source of financial strength to its subsidiary depository institutions and
to commit resources to support such institutions in circumstances where it might
not do so absent such policy. The FRB also has the authority under the BHCA to
require a bank holding company to terminate any activity or to relinquish
control of a non-bank subsidiary upon the FRB's determination that such activity
or control constitutes a serious risk to the financial soundness and stability
of any bank subsidiary of the bank holding company.
The BHCA has been substantially amended by the Gramm-Leach-Bliley Financial
Modernization Act of 1999 (the "Modernization Act"). The portion of the
Modernization Act affecting the powers of the Company became effective March 13,
2000. Prior to the Modernization Act, the BHCA prohibited a bank holding
company, with certain limited exceptions, from:
(i) Acquiring or retaining direct or indirect ownership or
control of more than 5% of the outstanding voting stock of any
company which is not a bank or bank holding company;
(ii) Engaging directly or indirectly in activities other than
those of banking, managing or controlling banks, or performing
services for its subsidiaries, unless such non-banking
business is determined by the FRB to be so closely related to
banking or managing or controlling banks as to be properly
incident thereto.
The Modernization Act, among other things:
Allows bank holding companies meeting management, capital and Community
Reinvestment Act standards to elect the status of financial holding
company and thereafter engage in a substantially broader range of
non-banking activities, including insurance underwriting and making
merchant banking investments in commercial and financial companies;
Allows insurers and other financial services companies to acquire banks
or bank holding companies;
Removes various restrictions that currently apply to bank holding
company ownership of securities firms and mutual fund advisory
companies; and
Establishes the overall regulatory structure applicable to bank holding
companies that also engage in insurance and securities operations.
The Company filed a declaration with the Federal Reserve Bank to become a
financial holding company under the Modernization Act. The Board of Governors of
the Federal Reserve System advised Pointe Financial that its election to become
a financial holding company was effective on March 13, 2000.
The Company was incorporated under the laws of the State of Florida on September
29, 1993 for the dual purpose of serving as a holding company for Pointe Federal
Savings Bank, a federally chartered thrift (the "Thrift"), and to facilitate the
acquisition of the Bank, then known as Flamingo Bank, in mid-1994. Both the Bank
and the Thrift were established in the mid-1980's. The Thrift, headquartered in
Boca Raton, had been a mortgage banking thrift highly focused on residential
mortgage lending. The Bank had focused on small business commercial lending,
with emphasis on originating Small Business Administration ("SBA") guaranteed
loans. After the acquisition of the Bank in mid-1994, the Company had been both
a bank holding company (subject to regulation by the FRB and a thrift holding
company (subject to regulation by the Office of Thrift Supervision (the "OTS")).
This was a very complex regulatory environment for the Company. The Company
streamlined its operations through the merger in April 1997 of the Thrift into
the Bank. As a result of the merger of the Thrift into the Bank, the Company is
no longer subject to regulation by the OTS, thus the merger allowed the Company
to alleviate some of its regulatory burdens without negatively impacting its
ability
3
to service its customers. On June 12, 1998 the Company completed an
initial public offering issuing 869,565 shares of its common stock. The proceeds
totaled $12.076 million of which $6.000 million was invested in the Bank; the
remainder was retained by the Company for general corporate purposes.
The Company's principal business, conducted through the Bank, is making
commercial, consumer and real estate loans. Attracting deposits from the general
public, along with utilizing Federal Home Loan Bank advances and other
borrowings, are the primary sources of funds used to make these loans, and to a
lesser extent, purchase security investments. The Bank conducts business through
its five full service facilities located in Palm Beach, Broward and Miami-Dade
counties. The Company derives revenues principally from interest income earned
on loans and securities, fee income associated with loans serviced and
originated, service charges on depository accounts, and the sale of assets
designated as available for sale.
Investment Banking Joint Venture
In July, 2000, the Company formed Pointe Capital, LLC an Investment Banking
Joint Venture with First Integrated Capital. Pointe Capital offers Investment
Banking services to customers who are overlooked by larger investment banking
firms. Pointe Capital had negligible effect on the Company's performance during
2000.
Pending Acquisition
On January 4, 2001, the Company has entered into a definitive agreement with
Republic Bank, headquartered in St. Petersburg, Florida, to acquire their
banking offices located in Miami-Dade County. The branch offices have a combined
deposit base of approximately $57.2 million. In addition, Pointe Bank will
acquire approximately $6.5 million of Consumer Loans related to the Miami-Dade
offices and acquire approximately $25.0 million of Commercial Real Estate Loans
originated by Republic. The acquisition is expected to close in the first half
of 2001 pending regulatory approvals and satisfaction of other customary closing
conditions.
Market Area and Competition
The financial services industry in which the Company operates is highly
competitive. The Bank competes with national and state banks, savings and loan
associations and credit unions for loans and deposits. In addition, the Bank
competes with other providers of financial services, from both inside and
outside Florida, including finance companies, institutional buyers of commercial
paper, money market funds, brokerage firms, investment companies, insurance
companies, insurance agencies and governmental agencies. These competitors are
actively engaged in marketing various types of loans, commercial paper,
short-term obligations, investments, insurance and other products and services.
The Company anticipates that the intensity of competition among financial
institutions will be increased with the provisions in the Modernization Act. The
Modernization Act permits banks, securities firms, and insurance companies to
affiliate which could then serve its customers' varied financial needs through a
single corporate structure. The Company has become a financial holding company
in order to take advantage of the opportunities afforded under the Modernization
Act.
The consolidation of the financial services industry has continued to create
opportunities and challenges for the Company. Mergers among institutions have
disrupted many customer relationships and created opportunities for the Bank to
acquire new customers. The Bank's objective is to compete for deposits and loans
by offering the customers a higher level of personal service, together with a
wide range of products offered at competitive rates. Management continues to
evaluate market needs and products to meet those needs, which would also allow
Pointe to control the growth of its assets and liabilities.
Market Risk
Market risk is the uncertainty of loss from adverse changes in market prices and
rates. The Company's market risk arises primarily from interest-rate risk
inherent in its lending and deposit taking activities. To that end, management
actively monitors and manages its interest-rate risk exposure. The measurement
of market risk associated with financial instruments is meaningful
only when all related and offsetting on- and off-balance-sheet
transactions are aggregated, and the resulting net positions are identified.
Disclosures about the fair value of financial instruments, which reflect changes
in market prices and rates, can be found in Note 9 of Notes to Consolidated
Financial Statements.
The Company's primary objective in managing interest-rate risk is to minimize
the adverse impact of changes in interest rates on the bank's net interest
income and capital, while adjusting the company's asset-liability structure to
obtain the maximum yield-cost spread on that structure. The Company relies
primarily on its asset-liability structure to control interest-rate risk.
However, a sudden and substantial increase or decrease in interest rates may
impact the company's earnings, to the extent that the interest rates borne by
assets and liabilities do not change at the same speed, to the same extent, or
on the same basis. The Company does not engage in trading activities.
4
Employees
As of December 31, 2000, the Company employed 79 employees of which 74 were
full-time and 5 part-time, including 3 executive officers. The company's
employees are not represented by a collective bargaining group, and the Company
considers its relations with its employees to be good. The Company provides
employees with benefits customary in the banking industry, which include major
medical insurance, group term life insurance, dental insurance, long term
disability insurance, a 401(k) plan, and vacation and sick leave.
Year 2000 Compliance
The Company's operating and financial systems have been found to be compliant
with the year 2000 issue. The "Y2K problem" has not adversely affected the
Company's operations nor does management expect that it will. The most
significant vendor to the Bank, which provides the software support for the
in-house system, Information Technology, Inc., has proven compliant.
Forward-Looking Statements
When used in this Form 10-K or future filings by the Company with the Securities
and Exchange Commission, in the Company's press releases or other public or
shareholder communications, or in oral statements made with the approval of an
authorized executive officer, the word or phrases "will likely result",
"expect", "will continue", "anticipate", "estimate", "project", "believe" and
similar expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. The Company
wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made, and to advise
readers that various factors, including general economic factors and conditions,
changes in levels of market interest rates, credit risks of lending activities,
competitive and regulatory factors, and expansion strategies could affect the
Company's financial performance and could cause the Company's actual results for
future periods to differ materially from those anticipated or projected. The
Company does not undertake, and specifically disclaims any obligation, to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
5
ITEM 2. PROPERTIES
The Bank conducts its business through its main office and four branch offices.
The following table sets forth certain information regarding the Bank's office
properties:
Book Value
Of Leasehold
Improvements
Date Book and Furniture
Acquired/ Lease Expiration Value of Land Fixtures and
Leased and and building at Equipment at Square
Location December 31, 2000 Renewal Terms December 31, 2000 December 31, 2000 Footage
- -------- ----------------- ------------- ----------------- ----------------- -------
(Dollars in thousands)
Main Office (1)
21845 Powerline Road 08/31/2002
Boca Raton, Florida 33433 1992 1 - 5 year period $ - $929 18,929
Pembroke Pines (1)
One S.W. 129th Avenue
Pembroke Pines, 02/28/2006
Florida 33027 1994 - - 130 5,719
Aventura (1)
2690 N.E. 203rd Street 07/31/2002
Aventura, Florida 33180 2000 - - 33 3,050
Boca Raton
19645 State Road 7
Boca Raton, Florida 33498 1998 - 541 113 3,200
Ocean Ridge (1) 1999 05/31/2004 - 114 2,500
5112 N. Ocean Boulevard 1 - 5 year period
Ocean Ridge, Florida 33435
Future branch location:
Coral Springs (2)
4697 State Road 7 1999 - 581 401 3,000
Coral Springs, Florida 33067
(1) Leased branch office
(2) During 1999, the Company purchased vacant land for a branch site in Coral
Springs, Florida. Construction will be completed and the branch open by
end of first quarter of 2001.
The branch offices to be acquired from Republic Bank are not reflected in the
above table.
The Bank owns and operates personal computers, teller terminals and associated
equipment. At December 31, 2000, such equipment had a net book value of
$439,019, included above.
ITEM 3. LEGAL PROCEEDINGS
The Company and the Bank are parties to various legal proceedings in the
ordinary course of business. Management does not believe that there is any
pending or threatened proceeding against the Company and the Bank which, if
determined adversely, would have a material adverse effect on the business,
results of operations, or financial position of the Company or the Bank.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the stockholders during the fourth
quarter of the fiscal year ended December 31, 2000, through the solicitation of
proxies or otherwise.
6
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market Price and Dividends
(a) The common stock of the Company, par value $.01 per share, has been traded
on the Nasdaq National Market System under the symbol "PNTE" since June 12,
1998. Prior to June 12, 1998 there was no established public trading market for
the Company's common stock. The following table sets forth the high and low bids
for the common stock for the periods indicated as reported by Nasdaq.
Year Ended
---------------------------------------------------------------------------
December 31, 2000 December 31, 1999 December 31, 1998
---------------------------------------------------------------------------
High Low High Low High Low
Quarter ended March 31 $ 9.500 8.000 $ 12.250 9.750 $ N/A N/A
Quarter ended June 30 9.375 8.750 11.250 9.375 15.875 14.625
Quarter ended September 30 9.500 8.438 11.250 10.313 15.375 11.375
Quarter ended December 31 10.000 8.000 10.563 7.250 11.000 7.625
Currently the Company has five market makers in its common stock:
Keefe, Bruyette & Woods, Inc. McConnell Budd & Downes
Advest, Inc. Instinet Corporation
Spear, Leeds & Kellogg
As of December 31, 2000 there were 2,022,227 common shares issued and
outstanding held by approximately 124 shareholders of record and 338 beneficial
shareholders, not including persons or entities where stock is held in nominee
or "street" name through various brokerage firms or banks.
The following table sets forth cash dividends paid during the years ended 2000
and 1999.
2000 1999
---------------------------- ---------------------------
Quarter Ended Dividend Quarter Ended Dividend
---------------------------- ---------------------------
March 31 $ .05 March 31 $ --
June 30 $ .05 June 30 $ .05
September 30 $ .05 September 30 $ .05
December 31 $ .05 December 31 $ .05
Future payments of dividends are subject to determination and declaration by the
Board of Directors. See Note 18 to the Audited Consolidated Financial Statements
for discussion of restrictions on dividend payments.
7
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
(Dollars in thousands, except per share figures)
At December 31,
----------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
Cash and cash equivalents ..................... $ 7,616 6,909 3,471 2,575 6,663
Securities .................................... 56,631 48,389 52,989 32,079 42,790
Loans ......................................... 173,129 150,852 128,005 105,653 90,973
Loans held for sale ........................... 719 2,696 617 4,443 4,396
All other assets .............................. 6,413 4,810 4,193 3,090 6,436
-------- -------- -------- -------- --------
Total assets .............................. $244,508 213,656 189,275 147,840 151,258
======== ======== ======== ======== ========
Deposits ...................................... $161,136 146,176 141,212 124,995 112,498
Other borrowings .............................. 53,067 40,454 18,446 6,191 23,746
All other liabilities ......................... 3,575 2,443 2,582 2,809 2,593
Stockholders' equity .......................... 26,730 24,583 27,035 13,845 12,421
-------- -------- -------- -------- --------
Total liabilities and stockholders' equity $244,508 213,656 189,275 147,840 151,258
======== ======== ======== ======== ========
Year Ended December 31,
----------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
Total interest income ......................... $ 18,545 15,044 13,113 11,932 12,186
Total interest expense ........................ 9,305 6,904 6,498 6,329 7,616
-------- -------- -------- -------- --------
Net interest income ........................... 9,240 8,140 6,615 5,603 4,570
Provision for loan losses ..................... 685 610 950 80 185
-------- -------- -------- -------- --------
Net interest income after provision
for loan losses ........................... 8,555 7,530 5,665 5,523 4,385
Noninterest income ............................ 1,092 1,131 1,650 1,412 2,434
Noninterest expense ........................... 7,185 6,720 5,631 5,471 6,847
SAIF recapitalization assessment (1) .......... -- -- -- -- 926
-------- -------- -------- -------- --------
Earnings (loss) before income taxes ........... 2,462 1,941 1,684 1,464 (954)
Income taxes (benefit) ........................ 821 718 631 550 (355)
Extraordinary item (4) ........................ 78 -- -- -- --
-------- -------- -------- -------- --------
Net earnings (loss) ........................... $ 1,719 1,223 1,053 914 (599)
======== ======== ======== ======== ========
Earnings (loss) per share (2):
Basic ..................................... $ .85 .56 .56 .68 (.52)
======== ======== ======== ======== ========
Diluted ................................... $ .85 .56 .55 .62 (.52)
======== ======== ======== ======== ========
Without SAIF Assessment (1)
Net earnings (loss) ........................... $ 1,719 1,223 1,053 914 (18)
======== ======== ======== ======== ========
Earnings (loss) per common share - basic (2) .. $ .85 .56 .56 .68 (.01)
======== ======== ======== ======== ========
Earnings (loss) per common share - diluted (2). $ .85 .56 .55 .62 (.01)
======== ======== ======== ======== ========
8
SELECTED FINANCIAL DATA, continued
(Dollars in thousands, except per share figures)
At or For the
Year Ended December 31,
-----------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
For the Period:
Return on average assets........................ 0.73% .60% .61% .60% (.38%)
Return on average equity........................ 6.84% 4.67% 5.02% 7.04% (5.20%)
Average equity to average assets................ 10.73% 12.95% 12.19% 8.59% 7.26%
Interest rate spread during the
period (3).................................. 3.15% 3.30% 3.10% 3.30% 2.83%
Net interest margin............................. 4.14% 4.22% 4.05% 3.93% 3.19%
Noninterest income to average assets............ 0.47% .56% .96% .93% 1.53%
Noninterest expense to average assets........... 3.07% 3.32% 3.27% 3.62% 4.90%
Efficiency ratio................................ 69.55% 72.78% 70.68% 78.31% 112.42%
At the End of the Period:
Ratio of average interest-earning assets to
average interest-bearing liabilities 1.24 1.26 1.24 1.14 1.07
Nonperforming loans, and foreclosed real
estate as a percentage of total assets...... .63% .83% 1.60% 1.76% 1.15%
Allowance for loan losses as a percentage
of total loans.............................. 1.02% .87% .83% .80% .85%
Allowance for loan losses as a percentage
of nonperforming loans 117.37% 87.45% 40.19% 33.97% 52.97%
Total number of offices 5 5 3 3 3
Full-service banking offices.................... 5 5 3 3 3
Total shares outstanding at
end of period (2) 2,022,227 2,013,018 2,266,972 1,247,592 1,219,092
Book value per share (2)........................ $ 13.22 12.21 11.93 10.23 9.54
- -----------------
(1) The Bank was subject to a one-time special assessment that was paid by all
financial institutions insured by the SAIF in 1996. The Bank's pre-tax
assessment was $926,000 ($581,000 after taxes).
(2) All per share information is presented to reflect a three-for-two stock
split effective February 1998. The per share information also reflects the
consummation of an initial public offering issuing 869,565 shares of common
stock on June 12, 1998.
(3) Difference between weighted-average yield on all interest-earning assets
and weighted-average rate on all interest-bearing liabilities.
9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
Pointe Financial Corporation (the "Company") owns 100% of the outstanding stock
of Pointe Bank (the "Bank"). The Bank is a State (Florida) chartered commercial
bank. The Bank, through five banking offices, provides a wide range of banking
services to individuals and businesses located primarily in South Florida. The
Company owns an inactive subsidiary, Pointe Financial Service and also is a 50%
owner of Pointe Capital, LLC, an investment banking joint venture.
On June 12, 1998, the Company consummated an initial public offering (the
"Offering") of 869,565 shares of common stock, par value $.01 per share. The
shares were sold at an offering price of $15.375 per share. Keefe, Bruyette &
Woods, Inc. and McGinn, Smith & Co. acted as the representatives of the
underwriters of the Offering. The net proceeds of the Offering totaled $12.076
million of which $6.000 million was invested in its bank subsidiary, Pointe
Bank. The remaining proceeds retained by the Company will continue to fund
branch expansion and support growth in the loan and security portfolio.
At December 31, 2000, the Company had total consolidated assets of $244.508
million, an increase of $30.852 million or 14.4% over total assets of $213.656
million at December 31, 1999. The majority of asset growth is reflected in the
loans receivable ending December 31, 2000 at $173.848 million, an increase of
$20.300 million or 13.2% over December 31, 1999, $153.548 million. The Company's
portfolio of securities increased $7.513 million or 16.3% to $53.670 million as
of December 31, 2000 from $46.157 million as of December 31, 1999. The Bank's
deposits increased to $161.136 million as of December 31, 2000 from $146.176
million as of December 31, 1999, a 10.2% increase. The Company had consolidated
net earnings of $1.719 million or earnings per basic and diluted share of $.85
for the year ended December 31, 2000 compared to a consolidated net earnings of
$1.223 million or $.56 basic and diluted earnings per share for 1999.
Regulation and Legislation
As a state-chartered commercial bank, the Bank is subject to extensive
regulation by the Florida Department of Banking and Finance ("Florida DBF"), the
Federal Reserve Board and the Federal Deposit Insurance Corporation ("FDIC").
The Bank files reports with the Florida DBF and the FDIC concerning its
activities and financial condition, in addition to obtaining regulatory
approvals prior to entering into certain transactions such as mergers with or
acquisitions of other financial institutions. Periodic examinations and
inspections are performed by the Florida DBF and the Federal Reserve Board to
monitor the Bank's compliance with the various regulatory requirements.
10
Credit Risk
The Bank's primary business is making commercial, business, consumer and real
estate loans. That activity entails potential loan losses, the magnitude of
which depend on a variety of economic factors affecting borrowers which are
beyond the control of the Bank. While management has instituted underwriting
guidelines and credit review procedures to protect the Bank from avoidable
credit losses, some losses will inevitably occur.
The following table sets forth certain information regarding nonaccrual loans
and foreclosed real estate, including the ratio of such loans and foreclosed
real estate to total assets as of the dates indicated, and certain other related
information.
At December 31,
----------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
(Dollars in thousands)
Nonaccrual loans:
Residential real estate .......................... $ 74 294 1,376 1,918 1,282
Commercial real estate ........................... 432 -- -- -- --
Commercial ....................................... 988 1,228 1,306 577 182
Consumer and other ............................... 32 -- -- 1 3
------- ------ ------ ------ ------
Total nonaccrual loans ....................... $ 1,526 1,522 2,682 2,496 1,467
------- ------ ------ ------ ------
Total nonperforming loans .................... 1,526 1,522 2,682 2,496 1,467
------- ------ ------ ------ ------
Total nonperforming loans to total loans ..... 0.88% 1.00% 2.08% 2.34% 1.60%
======= ====== ====== ====== ======
Foreclosed real estate-
Real estate acquired by foreclosure or deed
in lieu of foreclosure ......................... 18 257 353 105 270
------ ------ ------ ------ ------
Total nonperforming loans and foreclosed
real estate .................................. 1,544 1,779 3,035 2,601 1,737
====== ====== ====== ====== ======
Total nonperforming and foreclosed real estate
to total assets .............................. 0.63% .83% 1.60% 1.76% 1.15%
====== ====== ====== ====== ======
Interest income that would have been recorded under the original terms of
nonaccrual loans and the interest income actually recognized are summarized
below:
Year Ended December 31,
----------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
(In thousands)
Interest income that would have been recognized .. $ 158 169 302 343 200
Interest income recognized ....................... 109 42 146 123 3
------ ------ ------ ------ ------
Interest income foregone ......................... $ 49 127 156 220 197
====== ====== ====== ====== ======
11
The following table sets forth information with respect to activity in the
Bank's allowance for loan losses during the periods indicated:
Year Ended December 31,
-----------------------------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
(Dollars in thousands)
Average loans outstanding ..................... $ 163,247 143,882 116,499 102,315 96,307
========= ========= ========= ========= =========
Allowance at beginning of year ................ 1,331 1,078 848 777 840
--------- --------- --------- --------- ---------
Charge-offs:
Residential real estate .................. -- -- -- -- (2)
Commercial ............................... (184) (335) (682) (48) (238)
Consumer and other ....................... (55) (26) (40) (10) (8)
--------- --------- --------- --------- ---------
Total loans charged-off .............. (239) (361) (722) (58) (248)
--------- --------- --------- --------- ---------
Recoveries .................................... 15 4 2 49 --
--------- --------- --------- --------- ---------
Net charge-offs ............................... (224) (357) (720) (9) (248)
--------- --------- --------- --------- ---------
Provision for loan losses charged
to operating expenses .................... 685 610 950 80 185
--------- --------- --------- --------- ---------
Allowance at end of year ...................... $ 1,792 1,331 1,078 848 777
========= ========= ========= ========= =========
Net charge-offs to
average loans outstanding ................ 0.14% .25% .62% .01% .25%
========= ========= ========= ========= =========
Allowance as a percent of total
loans .................................... 1.02% .87% .83% .80% .85%
========= ========= ========= ========= =========
Allowance as a percentage of
nonperforming loans ...................... 117.43% 87.45% 40.19% 33.97% 52.97%
========= ========= ========= ========= =========
Total loans at end of year .................... $ 175,131 152,349 129,156 106,659 91,925
========= ========= ========= ========= =========
In the Company's $1.526 million of non-performing loans $251,000 are partially
guaranteed by the United States Small Business Administration. The guaranteed
portion of such loans totals $195,000. The provision for loan losses for the
year ended December 31, 2000, was $685,000 as compared to $610,000 for the year
ended December 31, 1999. The Company continues to make significant provisions
for loan losses. The Company has historically had strong asset quality as
evidenced by the low percentage of net charge-offs to average loans outstanding
over the last five years of .25%. Management believes that the allowance for
loan losses of $1.792 million is adequate at December 31, 2000.
12
The following table presents information regarding the Bank's total allowance
for loan losses as well as the allocation of such amounts to the various
categories of loans:
At December 31,
-----------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-------------- -------------- --------------- ----------------- ----------------
% of % of % of % of % of
Amount Loans to Amount Loans to Amount Loans to Amount Loans to Amount Loans to
of Total of Total of Total of Total of Total
Allowance Loans Allowance Loans Allowance Loans Allowance Loans Allowance Loans
--------- ------ -------- ----- -------- ----- --------- ------ --------- ------
(Dollars in thousands)
Commercial loans .................... $1,122 23.59% $ 791 22.35% $ 641 16.64% $ 158 18.59% $ 135 18.18%
Commercial real
estate loans ...................... 367 16.96 295 16.84 213 16.19 140 16.53 88 11.85
Residential real
estate loans ...................... 142 50.62 100 53.05 109 59.56 492 57.97 525 66.05
Consumer and other
loans ............................. 161 8.83 145 7.76 115 7.61 58 6.91 29 3.92
------ ------ ------ ------ ------- ------ ----- ------ ------ ------
Total allowance
for loan
losses ...................... $1,792 100.00% $1,331 100.00% $ 1,078 100.00% $ 848 100.00% $ 777 100.00%
====== ====== ====== ====== ======= ====== ===== ====== ====== ======
Management evaluates currently available information in order to establish the
allocation of the allowance for loan losses. Future adjustments to the allowance
may be necessary if conditions change in the portfolio. Among these changes are
risk characteristics of the loan portfolio, the quality of specific loans, the
level of nonaccruing loans, current economic conditions, trends in delinquencies
or charge-offs and the value of underlying collateral, all of which are subject
to change. Management believes that the allowance for loan losses of $1.792
million is adequate at December 31, 2000.
13
Results of Operations
The operating results of the Company depend primarily on its net interest
income, which is the difference between interest income on interest-earning
assets and interest expense on interest-bearing liabilities, consisting
primarily of deposits. Net interest income is determined by the difference
between yields earned on interest-earning assets and rates paid on
interest-bearing liabilities ("interest-rate spread") and the relative amounts
of interest-earning assets and interest-bearing liabilities. The Company's
interest-rate spread is affected by regulatory, economic and competitive factors
that influence interest rates, loan demand and deposit flows. In addition, the
Company's net earnings are also affected by the level of nonperforming loans and
foreclosed real estate, as well as the level of its noninterest income, and its
noninterest expenses, such as salaries and employee benefits, occupancy and
equipment costs and losses on foreclosed real estate and income taxes.
The following table sets forth for the periods indicated, information regarding
(i) the total dollar amount of interest and dividend income of the Company from
interest-earning assets and the resultant average yields; (ii) the total dollar
amount of interest expense on interest-bearing liabilities and the resultant
average cost; (iii) net interest/dividend income; (iv) interest-rate spread; (v)
interest margin; and (vi) ratio of average interest-earning assets to average
interest-bearing liabilities.
Year Ended December 31,
-----------------------------------------------------------------------------------------------
2000 1999 1998
----------------------------- ------------------------------ -----------------------------
Interest Average Interest Average Interest Average
Average and Yield/ Average and Yield/ Average and Yield/
Balance Dividends Rate Balance Dividends Rate Balance Dividends Rate
-------- -------- -------- --------- --------- ------- ------- ---------- -------
(Dollars in thousands)
Interest-earning assets:
Loans ....................... $163,247 14,864 9.11% $143,882 12,361 8.59% $116,499 10,459 8.98%
Securities (1) .............. 56,241 3,439 6.11 46,943 2,581 5.50 45,634 2,581 5.66
Other interest-earning
assets (2) ................ 3,798 242 6.37 1,981 102 5.15 1,313 73 5.56
-------- -------- -------- ------- -------- ------
Total interest-earning
assets ............... 223,286 18,545 8.31 192,806 15,044 7.80 163,446 13,113 8.02
-------- ------ ------
Noninterest-earning
assets (3) ............ 10,903 9,471 8,642
------- -------- ----------
Total assets ............ $234,189 $202,277 $ 172,088
======== ======== ==========
Interest-bearing liabilities:
Savings and NOW deposits .... $ 13,249 195 1.47 $ 12,826 191 1.49 $ 11,147 170 1.53
Money-market deposits ....... 37,317 1,586 4.25 40,103 1,510 3.77 39,822 1,748 4.39
Time deposits ............... 80,037 4,553 5.69 69,447 3,630 5.23 67,135 3,841 5.72
Borrowings .................. 49,713 2,971 5.98 31,086 1,573 5.06 14,055 739 5.26
-------- -------- --------- ------ ---------- ------
Total interest-bearing
liabilities ...... 180,316 9,305 5.16 153,462 6,904 4.50 132,159 6,498 4.92
------
Demand deposits ................ 25,150 19,619 15,730
Noninterest-bearing liabilities 3,583 3,003 3,216
Stockholders' equity ........... 25,140 26,193 20,983
------- ------- -------
Total liabilities and
stockholders'
equity ........... $234,189 $202,277 $ 172,088
======== ======== ==========
Net interest income ............ $ 9,240 $ 8,140 $ 6,615
======== ======= --------
Interest-rate spread (4) ....... 3.15% 3.30% 3.10%
==== ==== ====
Net interest margin (5) ........ 4.14% 4.22% 4.05%
==== ==== ====
Ratio of average interest-
earning assets to
average interest-
bearing liabilities ......... 1.24 1.26 1.24
==== ==== ====
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Does not include the tax equivalent yield on tax exempt municipal bonds
purchased in 2000.
(2) Includes interest-bearing deposits, federal funds sold and securities
purchased under agreements to resell.
(3) Includes nonaccrual loans.
(4) Interest rate spread represents the difference between the weighted-average
yield on interest-earning assets and the weighted-average cost of
interest-bearing liabilities.
(5) Net interest margin is net interest income divided by average
interest-earning assets.
14
Rae/Volume Analysis
The following table sets forth certain information regarding changes in interest
income and interest expense of the Company for the periods indicated. For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (1) changes in rate (change
in rate multiplied by prior volume), (2) changes in volume (change in volume
multiplied by prior rate) and (3) changes in rate-volume (change in rate
multiplied by change in volume).
Year Ended December 31,
2000 vs. 1999
----------------------------------------------------------------
Increase (Decrease) Due to
----------------------------------------------------------------
Rate/
Rate Volume Volume Total
------- ------- ------- -------
(In thousands)
Interest earning assets:
Loans .............................................. $ 748 1,663 92 2,503
Securities ......................................... 286 511 61 858
Other interest-earning assets ...................... 24 94 22 140
------- ------- ------- -------
Total ............................................ 1,058 2,268 175 3,501
------- ------- ------- -------
Interest-bearing liabilities:
Deposits:
Savings and NOW deposits ......................... (3) 6 1 4
Money-market deposits ............................ 192 (105) (11) 76
Time deposits .................................... 319 554 50 923
Other borrowings ................................... 286 943 169 1,398
------- ------- ------- -------
Total ............................................ 794 1,398 209 2,401
------- ------- ------- -------
Net change in net interest income ...................... $ 264 870 (34) 1,100
======= ======= ======= =======
Year Ended December 31,
1999 vs. 1998
----------------------------------------------------------------
Increase (Decrease) Due to
----------------------------------------------------------------
Rate/
Rate Volume Volume Total
------- ------- ------- -------
(In thousands)
Interest earning assets:
Loans .............................................. $ (454) 2,459 (103) 1,902
Securities ......................................... (73) 74 (1) 0
Other interest-earning assets ...................... (5) 37 (3) 29
------- ------- ------- -------
Total ............................................ (532) 2,570 (107) 1,931
------- ------- ------- -------
Interest-bearing liabilities:
Deposits:
Savings and NOW deposits ......................... (4) 26 (1) 21
Money-market deposits ............................ (247) 12 (3) (238)
Time deposits .................................... (329) 132 (14) (211)
Other borrowings ................................... (28) 896 (34) 834
------- ------- ------- -------
Total ............................................ (608) 1,066 (52) 406
------- ------- ------- -------
Net change in net interest income ...................... $ 76 1,504 (55) 1,525
======= ======= ======= =======
15
Liquidity and Capital Resources
A Florida chartered commercial bank is required to maintain a liquidity reserve
of at least 15% of its total transaction accounts and 8% of its total
nontransaction accounts. The liquidity reserve may consist of cash on hand, cash
on demand with other correspondent banks and other investments and short-term
marketable securities as determined by the rules of the Florida DBF, such as
federal funds sold and United States securities or securities guaranteed by the
United States or agencies thereof. As of December 31, 2000 and December 31,
1999, the Bank had liquidity of approximately $38.218 million and $33.551
million, or approximately 24.59% and 24.72%, respectively.
During the year ended December 31, 2000, the Company's primary sources of funds
consisted of principal payments on loans and securities, from sales and
maturities of securities, net increases in deposits, increase in Federal Home
Loan Bank advances and net cash flows from operating activities. The Company
used its capital resources principally to purchase securities and fund existing
and continuing loan commitments. At December 31, 2000, the Company had
commitments to originate loans totaling $16.476 million. Scheduled maturities of
certificates of deposit during the 12 months following December 31, 2000 totaled
$65.770 million. Management believes the Company has adequate resources to fund
all of its commitments, that substantially all of its existing commitments will
be funded within the next twelve months and, if so desired, that it can adjust
the rates on certificates of deposit to attract deposits in a changing
interest-rate environment.
The following table sets forth, by maturity distribution, certain information
pertaining to the securities portfolio (dollars in thousands):
After One Year
One Year or Less to Five Years After Five Years Total
----------------- ------------------- ------------------- ------------------
Carrying Average Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield Value Yield
------- ---- ------- ---- ------- ---- ------- ----
At December 31, 2000:
U.S. Government agency
securities ............................ $ -- --% $21,950 6.29% $ -- --% $21,950 6.29%
U.S. Treasury securities ................ 3,998 5.85 7,068 5.67 -- -- 11,066 5.74
Mortgage-backed securities .............. 122 8.32 6,156 6.94 5,893 5.06 12,171 6.04
Tax-exempt Municipal bonds ................. -- -- -- -- 6,284 5.54 6,284 5.53
Mutual funds ............................... 1,940 5.55 -- -- -- -- 1,940 5.55
Other ...................................... 25 8.00 26 8.50 208 6.94 259 7.20
Total ................................... $ 6,085 5.82% $35,200 6.28% $12,385 5.33% $53,670 6.01%
======= ==== ======= ==== ======= ==== ======= ====
At December 31, 1999:
U.S. Government agency
securities ............................ $ -- --% $14,947 5.95% $ -- --% $14,947 5.95%
U.S. Treasury securities ................ 5,000 5.92 8,851 5.52 -- -- 13,851 5.66
Mortgage-backed securities .............. 252 6.82 2,345 6.70 10,712 6.18 13,309 6.28
Mutual funds ............................ 3,875 5.28 -- -- -- -- 3,875 5.28
Other ................................... 25 7.75 50 7.69 100 6.50 175 7.02
------- ---- ------- ---- ------- ---- ------- ----
Total ................................... $ 9,152 5.68% $26,193 5.87% $10,812 6.19% 46,157 5.90%
======= ==== ======= ==== ======= ==== ======= ====
Regulatory Capital Requirements
Federal and state banking regulations place certain restrictions on dividends
paid and loans or advances made by the Bank to the Holding Company.
The Company (on a consolidated basis) and the Bank are subject to various
regulatory capital requirements administered by the federal and state banking
agencies. Failure to meet minimum capital requirements can initiate certain
mandatory and possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Company's and the Bank's
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective
action, the Company and the Bank must meet specific capital guidelines that
involve quantitative measures of their assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting practices. The
capital amounts and classification are also subject to qualitative judgements by
the regulators about components, risk weightings, and other factors. Prompt
corrective action provisions are not applicable to bank holding companies.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and percentages
(set forth in the following table) of total and Tier 1 capital (as defined in
the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as
defined) to average assets (as defined). Management believes, as of December 31,
2000 and 1999, that the Company and the Bank met all capital adequacy
requirements to which they are subject.
Under FDIC regulations, the Bank is required to meet certain minimum regulatory
capital requirements. This is not a valuation allowance and has not been created
by charges against earnings. It represents a restriction on stockholders'
equity.
As of December 31, 2000, the most recent notification from the regulatory
authorities categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized,
an institution must maintain minimum total risk-based, Tier I risk-based, and
Tier I leverage percentages as set forth in the following tables. There are no
conditions or events since that notification that management believes have
changed the Bank's category. The Company and the Bank's actual capital amounts
and percents as of December 31, 2000 and 1999 are also presented in the table
(dollars in thousands).
Minimum
To Be Well
Capitalized Under
Minimum Capital Prompt Corrective
Actual Requirement Action Provisions:
--------------------- -------------------- ----------------------
Amount % Amount % Amount %
------ ------ ------ ------ ------ ------
As of December 31, 2000:
Total capital to Risk-
Weighted assets:
Consolidated.......... $ 28,842 17.84% $12,933 8.00% N/A N/A
Bank.................. 25,870 15.99 12,941 8.00 $16.176 10.00%
Tier I Capital to Risk-
Weighted Assets:
Consolidated.......... 27,050 16.73 6,467 4.00 N/A N/A
Bank 24,078 14.88 6,470 4.00 9,706 6.00
Tier I Capital
to Average Assets
Consolidated.......... 27,050 11.55 9,368 4.00 N/A N/A
Bank 24,078 10.30 9,354 4.00 11,692 5.00
As of December 31, 1999:
Total capital to Risk-
Weighted assets:
Consolidated.......... $ 26,871 19.42 $ 11,069 8.00 N/A N/A
Bank 23,476 16.68 11,259 8.00 $14,074 10.00
Tier I Capital to Risk-
Weighted Assets:
Consolidated.......... 25,540 18.46 5,534 4.00 N/A N/A
Bank.................. 22,145 15.74 5,627 4.00 8,441 6.00
Tier I Capital
to Average Assets
Consolidated.......... 25,540 12.03 8,492 4.00 N/A N/A
Bank.................. 22,145 10.37 8,542 4.00 10,677 5.00
17
Asset - Liability Structure
As part of its asset and liability management, the Company has emphasized
establishing and implementing internal asset-liability decision processes, as
well as communications and control procedures to aid in managing the Company's
earnings. Management believes that these processes and procedures provide the
Company with better capital planning, asset mix and volume controls,
loan-pricing guidelines, and deposit interest-rate guidelines which should
result in tighter controls and less exposure to interest-rate risk.
The matching of assets and liabilities may be analyzed by examining the extent
to which such assets and liabilities are "interest-rate sensitive" and by
monitoring an institution's interest-rate sensitivity "gap." An asset or
liability is said to be interest-rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest-rate sensitivity
gap is defined as the difference between interest-earning assets and
interest-bearing liabilities maturing or repricing within a given time period.
The gap ratio is computed as dividing rate-sensitive assets by rate-sensitive
liabilities. A gap ratio of 1.0% represents perfect matching. A gap is
considered positive when the amount of interest-rate sensitive assets exceeds
interest-rate sensitive liabilities. A gap is considered negative when the
amount of interest-rate sensitive liabilities exceeds interest-rate sensitive
assets. During a period of rising interest rates, a negative gap would adversely
affect net interest income, while a positive gap would result in an increase in
net interest income. During a period of falling interest rates, a negative gap
would result in an increase in net interest income, while a positive gap would
adversely affect net interest income.
In order to minimize the potential for adverse effects of material and prolonged
increases in interest rates on the results of operations, the Company's
management continues to monitor asset and liability management policies to
better match the maturities and repricing terms of its interest-earning assets
and interest-bearing liabilities. Such policies have consisted primarily of: (i)
emphasizing the origination of adjustable-rate loans; (ii) maintaining a stable
core deposit base; and (iii) maintaining a significant portion of liquid assets
(cash and short-term investments).
18
The following table sets forth certain information relating to the Company's
interest-earning assets and interest-bearing liabilities at December 31, 2000
that are estimated to mature or are scheduled to reprice within the period
shown.
More
Than More
Three Than Six More
Months Months Than One
Three to Six to One Year to More Than
Months Months Year Five Years Five Years Total
-------- -------- -------- -------- -------- --------
($ in thousands)
Loans (1),(2) .............................. $ 62,257 5,823 10,951 49,793 47,026 175,850
Securities (3) ............................. 12,720 3,175 96 31,290 9,350 56,631
Interest bearing deposits .................. 1,134 -- -- -- -- 1,134
-------- -------- -------- -------- -------- --------
Total rate-sensitive assets ........... 76,111 8,998 11,047 81,083 56,376 233,615
-------- -------- -------- -------- -------- --------
Deposit accounts (4):
Savings and NOW .......................... 12,048 -- -- -- -- 12,048
Money market ............................. 33,920 -- -- -- -- 33,920
Time deposits ............................ 15,490 14,566 35,714 19,571 -- 85,341
-------- -------- -------- -------- -------- --------
Total deposit accounts ..................... 61,458 14,566 35,714 19,571 -- 131,309
Borrowings (5) ............................. 33,067 -- -- 10,000 10,000 53,067
-------- -------- -------- -------- -------- --------
Total rate-sensitive
liabilities ....................... 94,525 14,566 35,714 29,571 10,000 184,376
-------- -------- -------- -------- -------- --------
Gap (repricing differences) ................ $(18,414) (5,568) (24,667) 51,512 46,376 $ 49,239
======== ======== ======== ======== ======== ========
Cumulative GAP ............................. $(18,414) (23,982) (48,649) 2,863 49,239
======== ======== ======== ======== ========
Cumulative GAP/total assets ................ -7.53% -9.81 -19.90 1.17 20.14
======== ======== ======== ======== ========
- --------------------------------------------------------------------------------
(1) In preparing the table above, adjustable-rate loans are included in the
period in which the interest rates are next scheduled to adjust rather than
in the period in which the loans mature. Fixed-rate loans are scheduled,
including repayment, according to their contractual maturities.
(2) Includes nonaccrual loans and loans held for sale.
(3) Securities are scheduled according to their respective repricing and
maturity dates, includes Federal Home Loan Bank (FHLB) stock and Federal
Reserve Bank stock.
(4) Savings, NOW and money-market accounts are regarded as readily accessible
withdrawable accounts. All other time accounts are scheduled according to
their respective maturity dates.
(5) Borrowings include FHLB convertible advances which have a call option. For
the purposes of the table above, the advances are categorized at their
contractual maturity dates.
19
The following table reflects the contractual principal repayments of the
Company's loan portfolio at December 31, 2000:
Commercial Residential
Commercial Real Estate Mortgage Consumer
Loans Loans Loans Loans Total
---------- ----------- ----------- -------- -------
(In thousands)
Due within one year .................... $25,138 15,627 7,415 4,800 52,980
Due after one through five years ....... 15,377 13,204 14,741 9,814 53,136
Due after five years ................... 790 868 66,503 854 69,015
------- ------- ------- ------- -------
Total ........................... $41,305 29,699 88,659 15,468 175,131
======= ====== ====== ====== =======
Of the $122.2 million in loans due after one year, 66.8% of such loans have
fixed rates of interest and 33.2% have adjustable rates.
The following table displays loan originations by type of loan and principal
reductions during the periods indicated.
Year Ended December 31,
-----------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(In thousands)
Originations:
Commercial loans..................... $ 13,931 26,960 13,854 19,720 1,085
Commercial real estate loans......... 13,527 12,668 7,020 8,360 3,205
Residential real estate.............. 24,467 20,804 33,498 10,507 7,480
Consumer loans....................... 6,802 4,139 2,959 3,564 1,497
-------- ------ ------ ------ -----
Total loans originated............... 58,728 64,571 57,331 42,151 13,267
Principal reductions................... (35,946) (41,378) (34,834) (27,417) (27,657)
-------- ------- ------- ------- -------
Increase (decrease) in gross
loans............................ $ 22,782 23,193 22,497 14,734 (14,390)
======== ======= ======= ======= =======
The originations noted in the table above exclude originations of loans held for
sale of $7.082 million, $2.496 million, $1.994 million, $9.005 million, and
$51.533 million for periods ended December 31, 2000, 1999, 1998, 1997 and 1996,
respectively.
20
The following table summarizes the loan portfolio of the Company by type of loan
as of December 31, 2000, 1999, 1998, 1997 and 1996.
At December 31,
-------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-------------------- ----------------- ---------------- --------------- ---------------
% of % of % of % of % of
Amount Total Amount Total Amount Total Amount Total Amount Total
------- ----- ------ ----- ------ ----- ------ ----- ------ -----
(Dollars in thousands)
Commercial............. $ 41,305 23.59% $ 34,054 22.35% $ 21,487 16.64% $19,832 18.59% $ 16,711 18.18%
Commercial
real estate.......... 29,699 16.96 25,655 16.84 20,904 16.19 17,628 16.53 10,894 11.85
Residential
real estate.......... 88,659 50.62 80,814 53.05 76,938 59.56 61,827 57.97 60,716 66.05
Consumer.... 15,468 8.83 11,826 7.76 9,827 7.61 7,372 6.91 3,604 3.92
---------- ------ -------- ------ ------- ------ ------- ------ ------ ------
Total loans........ $ 175,131 100.00% 152,349 100.00% 129,156 100.00% 106,659 100.00% 91,925 100.00%
====== ====== ====== ====== ======
Less:
Deferred loan
fees............... (210) (166) (73) (158) (175)
Allowance for
loan losses........ (1,792) (1,331) (1,078) (848) (777)
------ -------- ------ ---- ----
Loans, net......... $ 173,129 $150,852 $ 128,005 $ 105,653 $ 90,973
========== ======== ========= ========= ========
The Bank originates, purchases and participates in loans for its own portfolio
and for sale in the secondary market. The Bank provides commercial business
loans, commercial and residential real estate loans, and consumer loans. Loans
secured by real estate generally include commercial and residential real estate,
loans to refinance or purchase existing properties and home equity loans. The
gradual change in the composition of the loan portfolio is evident by the growth
in the commercial and the commercial real estate categories.
Commercial business loans totaled $41.305 million or 23.59% of the Bank's loan
portfolio, as of December 31, 2000. Commercial business loan underwriting
practices assess the borrower's creditworthiness and ability to repay, including
an evaluation of the value of any collateral securing the proposed loan. While
commercial business loans generally are made for shorter terms and at higher
yields than one-to-four family residential loans, such loans generally involve a
higher level of risk than one-to-four family residential loans. To a lesser
extent, the bank originates and services Small Business Administration (SBA)
loans, which are underwritten in accordance with the guidelines of the SBA.
These loans are made to small businesses and usually require that significant
collateral be assigned to the Bank from the borrower. Typically, the SBA
guarantees 70% to 90% of the loan balance with the remaining portion
unguaranteed. The Bank is permitted to sell the SBA-guaranteed portion of the
loan in secondary markets, with the Bank retaining the portion that is not
guaranteed. The Bank is compensated by the premium derived from the sale into
the secondary market and a 1% servicing fee on the sold guaranteed portion. SBA
loans are similar to commercial business loans in yield and credit risk.
The Bank's commercial real estate loans at December 31, 2000 totaled $29.699
million or 16.96% of the Bank's portfolio. The portfolio primarily consisted of
owner-occupied commercial properties and generally have terms ranging from
fifteen to twenty years and interest rate adjustment periods ranging from
monthly to five years. Amortization periods for commercial mortgage loans
generally do not exceed 25 years. Commercial real estate loans originated by the
Bank are primarily secured by income-producing properties such as office
buildings, warehouse buildings, retail space and to a lessor extent multi-family
property. Generally, in underwriting commercial real estate loans, the Bank
requires the personal guaranty of borrowers, a maximum loan to value ratio of
75%, and a cash flow to debt service ratio of 1.25 to 1.
The Bank's real estate mortgage loans, which totaled $88.659 million or 50.62%
of the Bank's total loan portfolio as of December 31, 2000, consist of
residential mortgage loans secured by existing properties. The Bank's
residential mortgage loans have terms which do not exceed 30 years and are
secured by one-to-four family residences. Loans made for an amount in excess of
80% of the appraised value of the financed residences are generally originated
with private mortgage insurance, which essentially insures that portion of the
loan which is in excess of 80% of the appraised value of the financed
residences. As of December 31, 2000, the residential loan portfolio of the Bank
consisted of approximately 25% in ARMs and 75% in fixed rate loans. Residential
mortgage loans generally are underwritten by the Bank in accordance with
guidelines of the Federal National Mortgage Association (the "FNMA") and the
Federal Home Loan Mortgage Corporation (the "FHLMC").
Consumer loans are extended for a variety of purposes including the purchase of
automobiles, home improvement, lines of credit and unsecured personal loans. As
of December 31, 2000, consumer loans were approximately $15.468 million or 8.83%
of total loans.
21
Consumer loan underwriting standards include an examination of
the applicant's payment history on other debts and an evaluation of the
applicant's ability to meet existing obligations and payments on the proposed
loan. Although creditworthiness of the applicant is of primary importance, the
underwriting process also includes a comparison of the value of the security, if
any, in relation to the proposed loan amount. While consumer loans generally
involve a higher element of credit risk than one-to-four family residential
loans, consumer loans are typically made at higher interest rates and for
shorter terms, or at adjustable rates, and are helpful in maintaining a
profitable spread between the Bank's loan yield and its cost of funds.
The following table shows the distribution of, and certain other information
relating to, deposit accounts by type:
At December 31,
---------------------------------------------------------------------
2000 1999 1998
----------------- ------------------ -------------------
% of % of % of
Balance Total Balance Total Balance Total
------- ----- ------- ----- ------- -----
(Dollars in thousands)
Demand deposits...................... $ 29,827 18.51% $ 21,370 14.62% $ 18,316 12.97%
Savings and NOW deposits............. 12,048 7.48 13,640 9.33 12,940 9.16
Money-market deposits................ 33,920 21.05 38,146 26.10 38,721 27.42
Time deposits........................ 85,341 52.96 73,020 49.95 71,235 50.45
--------- ----- -------- ------ --------- -------
Total deposits....................... $ 161,136 100.00% $146,176 100.00% $ 141,212 100.00%
========= ====== ======== ====== ========= ======
Jumbo certificates ($100,000 and over) included above mature as follows:
At December 31,
---------------
2000
----
(In thousands)
Due three months or less............................................................... $ 4,444
Due over three months to six months..................................................... 3,283
Due over six months to one year......................................................... 19,818
Due over one year....................................................................... 4,040
---------
Total................................................................................ $ 31,585
=========
22
The scheduled maturities of time deposits are as follows:
At December 31,
---------------
2000
----
(In thousands)
Due in one year or less................................................................ $ 65,770
Due in more than one but less than three years......................................... 19,021
Due in more than three but less than five years........................................ 550
---------
Total............................................................................... $ 85,341
=========
The following table sets forth the net deposit flows of the Company during the
period indicated:
Year Ended December 31,
-----------------------
2000 1999 1998
---- ---- ----
(In thousands)
Net increase (decrease) before interest credited.......................... $ 13,310 (548) 10,344
Net interest credited..................................................... 1,650 5,512 5,873
--------- ----- -----
Net deposit increase...................................................... $ 14,960 4,964 16,217
======== ===== ======
The following table indicates the daily average balances and weighted average
interest rates paid on interest bearing deposits for each of the three years
ended December 31, 2000, 1999 and 1998:
Years Ended December 31,
---------------------------------------------------------------------------------------------
2000 1999 1998
--------------------------- -------------------------- --------------------------
Average % of Average Average % of Average Average % of Average
Balance Total Yield Balance Total Yield Balance Total Yield
------- ----- ----- ------- ----- ----- ------- ----- -----
(Dollars in thousands)
Savings and NOW
deposits............... $ 13,249 8.51 1.47% $ 12,826 9.03 1.49% $ 11,147 8.33 1.53%
Money-market
deposits............... 37,317 23.96 4.25 40,103 28.25 3.77 39,822 29.76 4.39
Time deposits............. 80,037 51.39 5.69 69,447 48.91 5.23 67,135 50.16 5.72
-------- ----- -------- ----- -------- ------
Total interest-bearing
deposits............... 130,603 83.86 4.85 122,376 86.19 4.36 118,104 88.25 4.88
Noninterest bearing
deposits............... 25,150 16.14 19,619 13.81 15,730 11.75
-------- ----- -------- ----- -------- ------
Total..................... $155,753 100.00 $141,995 100.00 $133,834 100.00
======== ====== ======== ====== ======== ======
23
Comparison of Year Ended December 31, 2000 and 1999
General
Net earnings for the year ended December 31, 2000 were $1.719 million or $.85
per basic and diluted share compared to net earnings of $1.223 million or $.56
per basic and diluted share for the year ended December 31, 1999. The increase
in income was primarily due to an increase in net interest income partially
offset by increases in noninterest expenses and decreases in noninterest income.
Interest Income and Expense
Interest income increased from $15.044 million for the year ended December 31,
1999 to $18.545 million for the year ended December 31, 2000. Interest income on
loans increased $2.503 million due to an increase in the average loan portfolio
balance from $143.882 million for the year ended December 31, 1999 to $163.247
million for the year ended December 31, 2000, and an increase in the
weighted-average yield earned on the portfolio from 8.59% to 9.11%. Interest on
securities increased to $3.439 million for the year ended December 31, 2000 from
$2.581 million for the year ended December 31, 1999. The average security
portfolio increased to $56.241 million in 2000 from $46.943 million in 1999. The
weighted average yield increased from 5.50% in 1999 to 6.11% in 2000. Interest
on other interest-earning assets increased $140,000 due to an increase in
average other interest-earning assets from $1.981 million in 1999 to $3.798
million in 2000.
Interest expense increased to $9.305 million for the year ended December 31,
2000 from $6.904 million for the year ended December 31, 1999. Interest expense
on deposit accounts increased $1.003 million from $5.331 million in 1999 to
$6.334 million during 2000, primarily attributed to an increase in the weighted
average yield from 4.36% in 1999 to 4.85% in 2000. The average interest-bearing
deposit balances increased from $122.376 million during the year ended December
31, 1999 to $130.603 million for 2000, a $8.227 million increase. Interest
expense on other borrowings increased $1.398 million from $1.573 million in 1999
to $2.971 million in 2000, primarily due to an increase in average borrowings
from $31.086 million during the year ended December 31, 1999 to $49.713 million
in 2000. The average cost of all interest-bearing liabilities increased to 5.16%
for the year ended December 31, 2000 from 4.50% for the year ended December 31,
1999.
Provision for Loan Losses
The provision for loan losses is charged to earnings to bring the total
allowance to a level deemed appropriate by management and is based upon
historical experience, the volume and type of lending conducted by the Bank,
industry standards, the amounts of nonperforming loans, general economic
conditions, particularly as they relate to the Bank's market areas, and other
factors related to the collectability of the Bank's loan portfolio. The
provision increased to $685,000 for the year ended December 31, 2000 from
$610,000 for the year ended December 31, 1999. The increase in the provision is
a result of management's decision to increase reserves as the composition of the
loans continues to shift from residential mortgage dominance to a more
traditional commercial bank portfolio. Net loan charge-offs for the period
ending December 31, 2000 of $224,000 as compared to the $357,000 for the period
ending December 31, 1999. Management believes that the allowance for loan losses
of $1.792 million is adequate at December 31, 2000.
Noninterest Income
Total noninterest income for the period ended December 31, 2000 was $1.092
million as compared to the $1.131 million for the period ended December 31,
1999. The decrease of noninterest income of $39,000, is primarily attributed to
net losses realized on the sale of investments available for sale as the Company
repositioned its earning assets.
Noninterest Expenses
Total noninterest expenses increased $465,000 to $7.185 million for the year
ended December 31, 2000 from $6.720 million for the year ended December 31,
1999. The increases are primarily attributed to the Company's increased staffing
levels as we continue to focus on providing the required service to our
customers.
24
Provision for Income Taxes
The provision for income taxes increased from $718,000 (an effective rate at
37.0%) during the year ended December 31, 1999 to $821,000 (an effective rate at
33.3%) during the year ended December 31, 2000. The decrease in the income tax
is directly related to the purchases of Bank Qualified Municipal Investments
during the year ending December 31, 2000.
Extraordinary Item
During the period ending December 31, 2000, the Bank successfully completed the
sale of a $5.000 million Federal Home Loan Bank advance. The Company recorded a
pre-tax gain of $125,000 on the sale of the liability. The transaction is
considered an extraordinary item - a gain on extinguishment of debt, net of a
$47,000 tax.
Comparison of Year Ended December 31, 1999 and 1998
General
Net earnings for the year ended December 31, 1999 were $1.223 million or $.56
per basic and diluted share compared to net earnings of $1.053 million or $.56
per basic share ($.55 per diluted share) for the year ended December 31, 1998.
The increase in income was primarily due to an increase in net interest income
partially offset by increases in noninterest expenses and decreases in
noninterest income.
Interest Income and Expense
Interest income increased from $13.113 million for the year ended December 31,
1998 to $15.044 million for the year ended December 31, 1999. Interest income on
loans increased $1.902 million due to an increase in the average loan portfolio
balance from $116.499 million for the year ended December 31, 1998 to $143.882
million for the year ended December 31, 1999, partially offset by a decrease in
the weighted-average yield earned on the portfolio from 8.98% to 8.59%. Interest
on securities remained constant for the two years ended December 31 at $2.581
million as the average security portfolio increased to $46.943 million in 1999
from $45.634 million in 1998; however, the weighted average yield decreased from
5.66% in 1998 to 5.50% in 1999. Interest on other interest-earning assets
increased $29,000 due to an increase in average other interest-earning assets
from $1.313 million in 1998 to $1.981 million in 1999.
Interest expense increased to $6.904 million for the year ended December 31,
1999 from $6.498 million for the year ended December 31, 1998. Interest expense
on deposit accounts decreased $428,000 from $5.759 million in 1998 to $5.331
million during 1999, primarily attributed to a decrease in the weighted average
yield from 4.88% in 1998 to 4.36% in 1999. The average interest-bearing deposit
balances increased from $118.104 million during the year ended December 31, 1998
to $122.376 million for 1999, a $4.272 million increase. Interest expense on
other borrowings increased $834,000 from $739,000 in 1998 to $1.573 million in
1999, primarily due to an increase in average borrowings from $14.055 million
during the year ended December 31, 1998 to $31.086 million in 1999. The average
cost of all interest-bearing liabilities decreased from 4.92% for the year ended
December 31, 1998 to 4.50% for the year ended December 31, 1999.
Provision for Loan Losses
The provision for loan losses is charged to earnings to bring the total
allowance to a level deemed appropriate by management and is based upon
historical experience, the volume and type of lending conducted by the Bank,
industry standards, the amounts of nonperforming loans, general economic
conditions, particularly as they relate to the Bank's market areas, and other
factors related to the collectability of the Bank's loan portfolio. The
provision decreased to $610,000 for the year ended December 31, 1999 from the
provision of $950,000 for the year ended December 31, 1998. The decrease is a
result of the Company's improved credit quality and net loan charge-offs for the
period ending December 31, 1999 of $357,000 as compared to the $720,000 for the
period ending December 31, 1998. Management believes that the allowance for loan
losses of $1.331 million is adequate at December 31, 1999.
25
Noninterest Income
Total noninterest income for the period ended December 31, 1999 was $1.131
million as compared to the $1.650 million for the period ended December 31,
1998. The Company continues to focus on core earnings and is less dependent on
non-recurring sources of revenues as illustrated by net gains on asset sales for
the period ending December 31, 1998 of $456,000 as compared to $70,000 for the
period ended December 31, 1999.
Noninterest Expenses
Total noninterest expenses increased $1.089 million to $6.720 million for the
year ended December 31, 1999 from $5.631 million for the year ended December 31,
1998. The increases are primarily attributed to the Company's planned branch
expansions, opening an additional two offices during 1999.
Provision for Income Taxes
The provision for income taxes increased from $631,000 (an effective rate at
37.5%) during the year ended December 31, 1998 to $718,000 (an effective rate at
37.0%) during the year ended December 31, 1999.
Impact of Inflation and Changing Prices
The financial statements and related data presented herein have been prepared in
accordance with GAAP, which requires the measurement of financial position and
operating results in terms of historical dollars, without considering changes in
the relative purchasing power of money over time due to inflation. Unlike most
industrial companies, substantially all of the assets and liabilities of the
Company are monetary in nature. As a result, interest rates have a more
significant impact on the Company's performance than the effects of general
levels of inflation. Interest rates do not necessarily move in the same
direction or in the same magnitude as the prices of goods and services, since
such prices are affected by inflation to a larger extent than interest rates.
Future Accounting Requirements
Financial Accounting Standards 133 - Accounting for Derivative Investments and
Hedging Activities requires companies to record derivatives on the balance sheet
as assets or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending on
the use of the derivatives and whether they qualify for hedge accounting. The
key criterion for hedge accounting is that the hedging relationship must be
highly effective in achieving offsetting changes in fair value or cash flows.
The Company will be required to adopt this Statement effective January 1, 2001.
Management does not anticipate that this Statement will have a material impact
on the Company.
26
The following table presents summarized quarterly data (in thousands, except per
share amounts):
Year Ended December 31, 2000
---------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------ ------ ------ ------
Interest income ................................................ $4,244 4,558 4,813 4,930
Interest expense ............................................... 2,025 2,266 2,431 2,583
------ ------ ------ ------
Net interest income ............................................ 2,219 2,292 2,382 2,347
Provision for loan losses ...................................... 165 165 175 180
------ ------ ------ ------
Net interest income after provision
for loan losses ....................................... 2,054 2,127 2,207 2,167
------ ------ ------ ------
Noninterest income ............................................. 298 189 277 328
Noninterest expense ............................................ 1,776 1,824 1,783 1,802
------ ------ ------ ------
Net earnings before income taxes and extraordinary item ........ 576 492 701 693
Income taxes .......................................... 204 154 232 231
Net earnings before extraordinary item ......................... 372 338 469 462
Extraordinary item .......................................... -- 78 -- --
------ ------ ------ ------
Net Earnings ................................................... $ 372 416 469 462
====== ====== ====== ======
Basic earnings per common share ................................ $ 0.18 $ 0.21 $ 0.23 $ 0.23
====== ====== ====== ======
Diluted earnings per common share .............................. $ 0.18 $ 0.21 $ 0.23 $ 0.23
====== ====== ====== ======
Year Ended December 31, 1999
---------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------ ------ ------ ------
Interest income ................................................ $3,530 3,655 3,868 3,991
Interest expense ............................................... 1,592 1,653 1,801 1,858
------ ------ ------ ------
Net interest income ....................................... 1,938 2,002 2,067 2,133
Provision for loan losses ...................................... 155 155 165 135
------ ------ ------ ------
Net interest income after provision
for loan losses ....................................... 1,783 1,847 1,902 1,998
------ ------ ------ ------
Noninterest income ............................................. 282 329 261 259
Noninterest expense ............................................ 1,585 1,651 1,747 1,737
------ ------ ------ ------
Net earnings before income taxes ............................... 480 525 416 520
Income taxes ................................................... 178 194 154 192
------ ------ ------ ------
27
Net earnings ................................................... $ 302 331 262 328
====== ====== ====== ======
Basic earnings per common share ................................ $ .13 .15 .12 .16
====== ====== ====== ======
Diluted earnings per common share .............................. $ .13 .15 ,12 .16
====== ====== ====== ======
28
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
See Part I, Item 1. DESCRIPTION OF BUSINESS, Market Risk.
Item 8. Financial Statements and Supplementary Data.
Pointe Financial Corporation
INDEX
Audited Consolidated Financial Statement Page(s)
Report of Independent Certified Public Accounts
(Hacker, Johnson & Smith PA) ..................................... F-1
Consolidated Balance Sheets as of December 31, 2000 and 1999 ..... F-2
Consolidated Statements of Earnings for the years ended
December 31, 2000, 1999 and 1998 ................................. F-3, F-4
Consolidated Statements of Stockholder's Equity for the
years ended December 31, 2000, 1999 and 1998 ..................... F-5, F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998 ................................. F-7, F-8
Notes to Consolidated Financial Statements ....................... F-9, F-28
Independent Auditors' Report on Supplementary
Information ...................................................... F-29
Consolidated Balance Sheets as of December 31, 2000 .............. F-30
Consolidated Statements of Operations for the year ended
December 31, 2000 ................................................. F-31
Schedules are omitted because the conditions requiring their filing are not
applicable or because the required information is provided in the Consolidated
Financial Statements, including the Notes thereto.
29
Independent Auditors' Report
Board of Directors
Pointe Financial Corporation
Boca Raton, Florida
We have audited the consolidated balance sheets of Pointe Financial
Corporation and Subsidiaries (the "Company") at December 31, 2000 and 1999, and
the related consolidated statements of earnings, changes in stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
at December 31, 2000 and 1999, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 2000 in
conformity with generally accepted accounting principles.
HACKER, JOHNSON & SMITH PA
Fort Lauderdale, Florida
January 19, 2001
F-1
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
($ in thousands, except share amounts)
At December 31,
----------------------------
Assets 2000 1999
---- ----
Cash and due from banks ......................................................... $ 6,482 6,822
Interest-bearing deposits with banks ............................................ 1,134 87
--------- ---------
Total cash and cash equivalents .......................................... 7,616 6,909
Securities available for sale ................................................... 53,670 46,157
Loans receivable, net of allowance for loan losses of $1,792
in 2000 and $1,331 in 1999 ................................................... 173,129 150,852
Loans held for sale ............................................................. 719 2,696
Accrued interest receivable ..................................................... 2,035 1,375
Premises and equipment, net ..................................................... 2,842 2,225
Federal Home Loan Bank stock, at cost ........................................... 2,482 1,753
Federal Reserve Bank stock, at cost ............................................. 479 479
Foreclosed real estate .......................................................... 18 257
Deferred income tax asset ....................................................... 591 348
Other assets .................................................................... 927 605
--------- ---------
Total .................................................................... $ 244,508 213,656
========= =========
Liabilities and Stockholders' Equity
Liabilities:
Noninterest-bearing demand deposits .......................................... 29,827 21,370
Savings and NOW deposits ..................................................... 12,048 13,640
Money-market deposits ........................................................ 33,920 38,146
Time deposits ................................................................ 85,341 73,020
--------- ---------
Total deposits ........................................................... 161,136 146,176
Official checks .............................................................. 1,660 1,075
Other borrowings ............................................................. 8,067 5,394
Advances from Federal Home Loan Bank ......................................... 45,000 35,060
Accrued interest payable ..................................................... 989 688
Advance payments by borrowers for taxes and insurance ........................ 365 451
Other liabilities ............................................................ 561 229
--------- ---------
Total liabilities ........................................................ 217,778 189,073
--------- ---------
Commitments and contingencies (Notes 4, 8 and 9)
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued .... -- --
Common stock, $.01 par value, 5,000,000 shares authorized; 2,319,227 and
2,310,018 shares issued at December 31, 2000 and 1999, respectively ........ 23 23
Additional paid-in capital ................................................... 23,835 23,753
Retained earnings ............................................................ 6,274 4,959
Accumulated other comprehensive income (loss) ................................ (373) (1,102)
Treasury stock, at cost (297,000 shares at December 31, 2000 and 1999) ....... (3,000) (3,000)
Stock incentive plan ......................................................... (29) (50)
--------- ---------
Total stockholders' equity ............................................... 26,730 24,583
--------- ---------
Total .................................................................... $ 244,508 213,656
========= =========
See Accompanying Notes to Consolidated Financial Statements.
F-2
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
($ in thousands except per share amounts)
Year Ended December 31,
---------------------------------------
2000 1999 1998
---- ---- ----
Interest income:
Loans receivable ............................................................ $ 14,864 12,361 10,459
Securities available for sale ............................................... 3,439 2,581 2,311
Securities held to maturity ................................................. -- -- 270
Other interest earning assets ............................................... 242 102 73
-------- -------- --------
Total interest income ................................................... 18,545 15,044 13,113
-------- -------- --------
Interest expense:
Deposits .................................................................... 6,334 5,331 5,759
Borrowings .................................................................. 2,971 1,573 739
-------- -------- --------
Total interest expense .................................................. 9,305 6,904 6,498
-------- -------- --------
Net interest income ............................................................ 9,240 8,140 6,615
Provision for loan losses ............................................... 685 610 950
-------- -------- --------
Net interest income after provision for loan losses ............................ 8,555 7,530 5,665
-------- -------- --------
Noninterest income:
Service charges on deposit accounts ......................................... 815 663 729
Loan servicing fees ......................................................... 47 55 61
Net gains from sale of loans ................................................ 6 32 158
Net realized gain (loss) on sale of securities .............................. (123) 38 298
Other ....................................................................... 347 343 404
-------- -------- --------
Total noninterest income ................................................ 1,092 1,131 1,650
-------- -------- --------
Noninterest expenses:
Salaries and employee benefits .............................................. 3,831 3,374 2,858
Occupancy expense ........................................................... 1,161 1,133 992
Advertising and promotion ................................................... 263 325 297
Professional fees ........................................................... 207 273 191
Federal deposit insurance premiums .......................................... 31 102 94
Data processing ............................................................. 413 363 287
Other ....................................................................... 1,279 1,150 912
-------- -------- --------
Total noninterest expenses .............................................. 7,185 6,720 5,631
-------- -------- --------
Earnings before income taxes and extraordinary item ..................... 2,462 1,941 1,684
Income taxes ................................................................... 821 718 631
-------- -------- --------
Earnings before extraordinary item ...................................... 1,641 1,223 1,053
Extraordinary item - gain on extinguishment of debt, net of taxes of $47 ....... 78 -- --
-------- -------- --------
Net earnings ............................................................ $ 1,719 1,223 1,053
======== ======== ========
(continued)
F-3
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings, Continued
($ in thousands except per share amounts)
Year Ended December 31,
-------------------------------------------------
2000 1999 1998
----- ---- ----
Net earnings per share - basic:
Earnings before extraordinary item .............................. .81 .56 .56
Extraordinary gain from extinguishment of debt .................. .04 -- --
------------- ------------ ------------
Net earnings per share - basic .............................. $ .85 .56 .56
============= ============ ============
Net earnings per share - diluted:
Earnings before extraordinary item .............................. .81 .56 .55
Extraordinary gain from extinguishment of debt .................. .04 -- --
------------- ------------ ------------
Net earnings per share - diluted ............................ $ .85 .56 .55
============= ============ ============
Weighted-average shares outstanding for basic ................... 2,019,567 2,197,503 1,826,613
============= ============ ============
Weighted-average shares outstanding for diluted ................. 2,019,632 2,204,244 1,854,611
============= ============ ============
Dividends per share ............................................. $ .20 .15 --
============= ============ ============
See Accompanying Notes to Consolidated Financial Statements
F-4
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
($ In thousands)
Accumulated
Other
Compre- Total
Additional Stock hensive Stock-
Preferred Common Paid-In Incentive Treasury Retained Income holders'
Stock Stock Capital Plan Stock Earnings (Loss) Equity
------- ------- ------- ------- ------- ------- ------- -------
Balance at December 31, 1997 ................ $ 1 8 10,935 -- -- 3,039 (138) 13,845
-------
Comprehensive income:
Net earnings ............................. -- -- -- -- -- 1,053 -- 1,053
Net change in unrealized loss on available
for-sale securities, net of taxes ...... -- -- -- -- -- -- (239) (239)
-------
Comprehensive income ..................... -- -- -- -- -- -- -- 814
-------
Three-for-two stock split
(416,626 shares) ......................... -- 4 (4) -- -- -- -- --
Stock dividends on preferred stock
(1,410 shares) ........................... -- -- 27 -- -- (27) -- --
Proceeds from issuance of preferred stock,
net of offering costs (500 shares) ...... -- -- 10 -- -- -- -- 10
Conversion of preferred stock
(56,026 shares) to common
stock (126,026 shares) ................... (1) 1 -- -- -- -- -- --
Proceeds from issuance of
common stock, net of offering
costs (869,565 shares) ................... -- 8 12,068 -- -- -- -- 12,076
Common stock options exercised
(11,982 shares) .......................... -- 1 119 -- -- -- -- 120
Issuance of common stock to directors
as compensation (11,045 shares) .......... -- 1 169 -- -- -- -- 170
------- ------- ------- ------- ------- ------- ------- -------
Balance at December 31, 1998 ................ $ -- 23 23,324 -- -- 4,065 (377) 27,035
------- ------- ------- ------- ------- ------- ------- -------
(continued)
F-5
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
($ In thousands)
Accumulated
Other
Compre- Total
Additional Stock hensive Stock-
Preferred Common Paid-In Incentive Treasury Retained Income holders'
Stock Stock Capital Plan Stock Earnings (Loss) Equity
------- ------- ------- ------- ------- ------- ------- -------
Balance at December 31, 1998 ................ $ -- 23 23,324 -- -- 4,065 (377) 27,035
-------
Comprehensive income:
Net earnings ............................. -- -- -- -- -- 1,223 -- 1,223
Net change in unrealized loss on
available-for-sale
securities, net of taxes ............... -- -- -- -- -- -- (725) (725)
-------
Comprehensive income ..................... -- -- -- -- -- -- -- 498
-------
Cash dividends paid on common stock ......... -- -- -- -- -- (329) -- (329)
Purchase of Treasury Stock
(297,000 shares) ......................... -- -- -- -- (3,000) -- -- (3,000)
Common stock options exercised
(25,458 shares) .......................... -- -- 258 -- -- -- -- 258
Issuance of common stock to directors
as compensation (11,228 shares) .......... -- -- 109 -- -- -- -- 109
Shares issued in stock incentive plan
(6,935 shares) ........................... -- -- 68 (68) -- -- -- --
Shares committed to participants in
stock incentive plan ..................... -- -- -- 12 -- -- -- 12
Shares cancelled in stock incentive
plan (575 shares) ........................ -- -- (6) 6 -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Balance at December 31, 1999 ................ -- 23 23,753 (50) (3,000) 4,959 (1,102) 24,583
-------
Comprehensive income:
Net earnings ............................. -- -- -- -- -- 1,719 -- 1,719
Net change in unrealized loss on
available-for-sale securities,
net of taxes ........................... -- -- -- -- -- -- 729 729
-------
Comprehensive income ..................... -- -- -- -- -- -- -- 2,448
-------
Shares committed to participants in
stock incentive plan ..................... -- -- -- 11 -- -- -- 11
Committed shares cancelled in stock
incentive plan (1,010 shares) ............ -- -- (10) 10 -- -- -- --
Cash dividends paid ......................... -- -- -- -- -- (404) -- (404)
Issuance of common stock to directors
as compensation (12,164 shares) .......... -- -- 109 -- -- -- -- 109
Cancellation of common stock issued to
directors as compensation (1,945 shares).. -- -- (17) -- -- -- -- (17)
------- ------- ------- ------- ------- ------- ------- -------
Balance at December 31, 2000 ................ $ -- 23 23,835 (29) (3,000) 6,274 (373) 26,730
======= ======= ======= ======= ======= ======= ======= =======
See Accompanying Notes to Consolidated Financial Statements
F-6
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
($ in thousands)
Year Ended December 31,
--------------------------------------
2000 1999 1998
---- ---- ----
Cash flows from operating activities:
Net earnings .............................................................. $ 1,719 1,223 1,053
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Provision for loan losses .............................................. 685 610 950
Depreciation ........................................................... 423 447 389
Net amortization of fees, premiums, discounts and other ................ 131 293 101
(Credit) provision for deferred income taxes ........................... (243) (127) 3
Common stock issued as compensation for services ....................... 92 109 170
Shares committed to participants in incentive stock plan ............... 11 12 --
Loss (gain) on sale of securities ...................................... 123 (38) (298)
Gain on sale of loans .................................................. (6) (32) (158)
Originations of loans held for sale .................................... (7,082) (2,496) (1,994)
Proceeds from sale of loans held for sale .............................. 9,065 449 5,978
(Increase) decrease in other assets .................................... (687) 423 64
Increase in accrued interest receivable ................................ (660) (105) (243)
Increase (decrease) in official checks ................................. 585 (173) (72)
Increase (decrease) in accrued interest payable ........................ 301 (7) 22
Increase (decrease) in other liabilities ............................... 332 1 (255)
-------- -------- --------
Net cash provided by operating activities ........................... 4,789 589 5,710
-------- -------- --------
Cash flows from investing activities:
Purchase of securities available for sale ................................. (26,731) (29,952) (61,703)
Proceeds from sale of securities .......................................... 8,955 17,083 34,225
Maturities and calls of securities available for sale ..................... 10,100 14,285 7,950
Purchase of securities held to maturity ................................... -- -- (2,100)
Principal repayments on securities available for sale ..................... 1,123 2,376 632
Principal repayments on securities held to maturity ....................... -- -- 259
Net increase in loans ..................................................... (23,007) (23,560) (24,213)
Purchase of premises and equipment, net ................................... (1,040) (912) (924)
Cash paid for foreclosed real estate ...................................... (99) -- --
Proceeds from sale of foreclosed real estate .............................. 263 106 448
Net increase in other securities .......................................... (729) (518) (144)
-------- -------- --------
Net cash used in investing activities ............................... (31,165) (21,092) (45,570)
-------- -------- --------
Cash flows from financing activities:
Net increase in deposits .................................................. 14,960 4,964 16,217
Net increase in Federal Home Loan Bank advances ........................... 9,940 20,060 10,600
Net increase in other borrowings .......................................... 2,673 1,948 1,655
(Decrease) increase in advance payments for taxes and insurance ........... (86) 40 78
Net proceeds from issuance of preferred stock, net of offering costs ...... -- -- 10
Net proceeds from issuance of common stock, net of offering costs ......... -- -- 12,076
Proceeds from exercise of stock options ................................... -- 258 120
Cash dividends paid on common stock ....................................... (404) (329) --
Purchase of treasury stock ................................................ -- (3,000) --
-------- -------- --------
Net cash provided by financing activities ........................... 27,083 23,941 40,756
-------- -------- --------
F-7
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
($ in thousands)
Year Ended December 31,
--------------------------------------
2000 1999 1998
---- ---- -----
Net increase in cash and cash equivalents ........................... 707 3,438 896
Cash and cash equivalents at beginning of year ................................. 6,909 3,471 2,575
-------- -------- --------
Cash and cash equivalents at end of year ....................................... $ 7,616 6,909 3,471
======== ======== ========
Supplemental disclosure of cash flow information: Cash paid during the year for:
Interest ............................................................... $ 9,004 6,911 6,476
======== ======== ========
Income taxes ........................................................... $ 998 414 650
======== ======== ========
Noncash transactions:
Reclassification of loans receivable to foreclosed real estate ......... $ -- 257 725
======== ======== ========
Reclassification of foreclosed real estate to loans receivable ......... $ -- 247 29
======== ======== ========
Accumulated other comprehensive income (loss), change in unrealized
loss on securities available for sale ............................... $ 729 (725) (239)
======== ======== ========
Stock dividends paid on preferred stock ................................ $ -- -- 27
======== ======== ========
Activity in stock incentive plan, net .................................. $ 21 50 --
======== ======== ========
Transfer of securities from held to maturity to available for sale
category ............................................................ $ -- -- 8,456
======== ======== ========
Reclassification of foreclosed real estate to other assets ............. $ 75 23 --
======== ======== ========
Transfer of loans to loans held for sale ............................... $ 6,736 -- --
======== ======== ========
See Accompanying Notes to Consolidated Financial Statements
F-8
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2000, 1999 and 1998
(1) Description of Business and Summary of Significant Accounting Policies
General. Pointe Financial Corporation (the "Holding Company") is a
Financial Holding Company. The Holding Company owns 100% of Pointe
Bank (the "Bank"), a state-chartered commercial bank and Pointe
Financial Services, Inc., (collectively the "Company"). The Bank
provides a variety of community banking services to small and
middle-market businesses and individuals through its five banking
offices located in Broward, Miami-Dade and Palm Beach counties,
Florida. Pointe Financial Services, Inc. is an inactive subsidiary.
In 2000, the Company formed Pointe Capital, an investment banking
joint venture with First Integrated Capital Corporation, a subsidiary
of McGinn, Smith & Company, Inc., a related party. Pointe Capital
offers investment banking services to small and medium-size businesses
in South Florida. The Company accounts for its investment in Pointe
Capital using the equity method of accounting. Activity was minimal
during the year ended December 31, 2000 and the Company's investment
of approximately $500,000 in Pointe Capital is included in other
assets in the consolidated balance sheet.
On January 4, 2001, the Company entered into an agreement to purchase
four branch offices in Miami-Dade County from another financial
institution. The branches have a combined deposit base of
approximately $57.2 million. The Company will also acquire in this
transaction consumer loans of approximately $6.5 million and $25.0
million of participation interests in existing commercial real estate
loans in the seller's portfolio.
Basis of Presentation. The accompanying consolidated financial statements
include the Holding Company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
The accounting and reporting policies of the Company conform to
generally accepted accounting principles and to general practices
within the banking industry. The following summarizes the more
significant of these policies and practices.
Use of Estimates. In preparing consolidated financial statements in
conformity with generally accepted accounting principles, management
is required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the balance sheet
and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Material
estimates that are particularly susceptible to significant change in
the near term relate to the determination of the allowance for loan
losses and deferred tax assets.
Cash and Cash Equivalents. For purposes of the consolidated statements of
cash flows, cash and cash equivalents include cash and balances due
from banks and interest-bearing deposits with banks.
Securities. The Company may classify its securities as either trading,
held to maturity or available for sale. Trading securities are held
principally for resale and recorded at their fair values. Unrealized
gains and losses on trading securities are included immediately in
earnings. Held-to-maturity securities are those which the Company has
the positive intent and ability to hold to maturity and are reported
at amortized cost. Available-for-sale securities consist of securities
not classified as trading securities nor as held-to-maturity
securities. Unrealized holding gains and losses, net of tax, on
available-for-sale securities are excluded from earnings and reported
in other comprehensive income. Gains and losses on the sale of
available-for-sale securities are recorded on the trade date and are
determined using the specific-identification method. Premiums and
discounts on securities available for sale are recognized in interest
income using the interest method over the period to maturity.
(continued)
F-9
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Description of Business and Summary of Significant Accounting Policies,
Continued
Loans Held for Sale. Loans held for sale are carried at the lower of cost
or estimated market value in the aggregate. Net unrealized losses are
recognized through a valuation allowance by charges to earnings. At
December 31, 2000 and 1999 the book value of loans held for sale
approximated market value in the aggregate.
Loan origination fees and direct loan origination costs are deferred
until the related loan is sold, at which time the net fees are
included in the gain on sale of loans in the consolidated statements
of earnings.
Loans Receivable. Loans receivable that management has the intent and
ability to hold for the foreseeable future or until maturity or
pay-off are reported at their outstanding principal adjusted for any
charge-offs, the allowance for loan losses, and any deferred fees or
costs on originated loans.
Loan origination fees and certain direct origination costs are
capitalized and recognized as an adjustment of the yield of the
related loan.
The accrual of interest on loans is discontinued at the time the loan
is ninety days delinquent unless the credit is well-secured and in
process of collection. In all cases, loans are placed on nonaccrual or
charged-off at an earlier date if collection of principal or interest
is considered doubtful.
All interest accrued but not collected for loans that are placed on
nonaccrual or charged-off is reversed against interest income. The
interest on these loans is accounted for on the cash-basis or
cost-recovery method, until qualifying for return to accrual. Loans
are returned to accrual status when all the principal and interest
amounts contractually due are brought current and future payments are
reasonably assured.
Allowance for Loan Losses. The allowance for loan losses is established as
losses are estimated to have occurred through a provision for loan
losses charged to earnings. Loan losses are charged against the
allowance when management believes the uncollectibility of a loan
balance is confirmed. Subsequent recoveries, if any, are credited to
the allowance.
The allowance for loan losses is evaluated on a regular basis by
management and is based upon management's periodic review of the
collectibility of the loans in light of historical experience, the
nature and volume of the loan portfolio, adverse situations that may
affect the borrower's ability to repay, estimated value of any
underlying collateral and prevailing economic conditions. This
evaluation is inherently subjective as it requires estimates that are
susceptible to significant revision as more information becomes
available.
A loan is considered impaired when, based on current information and
events, it is probable that the Company will be unable to collect the
scheduled payments of principal or interest when due according to the
contractual terms of the loan agreement. Factors considered by
management in determining impairment include payment status,
collateral value, and the probability of collecting scheduled
principal and interest payments when due. Loans that experience
insignificant payment delays and payment shortfalls generally are not
classified as impaired. Management determines the significance of
payment delays and payment shortfalls on a case-by-case basis, taking
into consideration all of the circumstances surrounding the loan and
the borrower, including the length of the delay, the reasons for the
delay, the borrower's prior payment record, and the amount of the
shortfall in relation to the principal and interest owed. Impairment
is measured on a loan by loan basis for commercial and commercial real
estate loans by either the present value of expected future cash flows
discounted at the loan's effective interest rate, the loan's
obtainable market price, or the fair value of the collateral if the
loan is collateral dependent.
(continued)
F-10
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Description of Business and Summary of Significant Accounting Policies,
Continued
Allowance for Loan Losses, Continued. Large groups of smaller balance
homogeneous loans are collectively evaluated for impairment.
Accordingly, the Company does not separately identify individual
consumer and residential loans for impairment disclosures.
Foreclosed Real Estate. Real estate properties acquired through, or in
lieu of, loan foreclosure are to be sold and are initially recorded at
fair value at the date of foreclosure establishing a new cost basis.
After foreclosure, valuations are periodically performed by management
and the real estate is carried at the lower of carrying amount or fair
value less cost to sell. Revenue and expenses from operations and
changes in the valuation allowance are included in the consolidated
statements of earnings.
Premises and Equipment. Premises, furniture, fixtures, equipment and
leasehold improvements are carried at cost, less accumulated
depreciation and amortization computed using the straight-line method.
Transfer of Financial Assets. Transfers of financial assets are accounted
for as sales, when control over the assets has been surrendered.
Control over transferred assets is deemed to be surrendered when (1)
the assets have been isolated from the Company, (2) the transferee
obtains the right (free of conditions that constrain it from taking
advantage of that right) to pledge or exchange the transferred assets,
and (3) the Company does not maintain effective control over the
transferred assets through an agreement to repurchase them before
their maturity.
IncomeTaxes. Deferred tax assets and liabilities are determined using the
liability (or balance sheet) method. Under this method, the net
deferred tax asset or liability is determined based on the tax effects
of the temporary differences between the book and tax bases of the
various balance sheet assets and liabilities and gives current
recognition to changes in tax rates and laws.
Stock Compensation Plans. Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for Stock-Based Compensation, encourages
all entities to adopt a fair value based method of accounting for
employee stock compensation plans, whereby compensation cost is
measured at the grant date based on the value of the award and is
recognized over the service period, which is usually the vesting
period. However, it also allows an entity to continue to measure
compensation cost for those plans using the intrinsic value based
method of accounting prescribed by Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees, whereby compensation
cost is the excess, if any, of the quoted market price of the stock at
the grant date (or other measurement date) over the amount an employee
must pay to acquire the stock. Stock options issued under the
Company's stock option plan have no intrinsic value at the grant date,
and under Opinion No. 25 no compensation cost is recognized for them.
The Company has elected to continue with the accounting methodology in
Opinion No. 25 and, as a result, has provided proforma disclosures of
net earnings and earnings per share and other disclosures, as if the
fair value based method of accounting had been applied. (See Note 15).
Earnings Per Share. Basic earnings per share is computed on the basis of
the weighted-average number of common shares outstanding. Diluted
earnings per share is computed based on the weighted-average number of
shares outstanding plus the effect of outstanding stock options,
computed using the treasury stock method.
Off-Balance-Sheet Financial Instruments. In the ordinary course of
business the Company has entered into off-balance-sheet financial
instruments consisting of commitments to extend credit, unused lines
of credit and stand-by letters of credit. Such financial instruments
are recorded in the consolidated financial statements when they are
funded.
(continued)
F-11
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Description of Business and Summary of Significant Accounting Policies,
Continued
Fair Values of Financial Instruments. The fair value of a financial
instrument is the current amount that would be exchanged between
willing parties, other than in a forced liquidation. Fair value is
best determined based upon quoted market prices. However, in many
instances, there are no quoted market prices for the Company's various
financial instruments. In cases where quoted market prices are not
available, fair values are based on estimates using present value or
other valuation techniques. Those techniques are significantly
affected by the assumptions used, including the discount rate and
estimates of future cash flows. Accordingly, the fair value estimates
may not be realized in an immediate settlement of the instrument. SFAS
107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented may not necessarily represent
the underlying fair value of the Company. The following methods and
assumptions were used by the Company in estimating fair values of
financial instruments:
Cash and Cash Equivalents. The carrying amounts of cash and cash
equivalents approximate their fair value.
Securities. Fair values for securities available for sale are
based on quoted market prices, where available. If quoted market
prices are not available, fair values are based on quoted market
prices of comparable instruments. The carrying value of Federal
Home Loan Bank stock and Federal Reserve Bank stock approximates
fair value.
Loans Held for Sale. Fair values of loans held for sale are based
on commitments on hand from investors or prevailing market
prices.
Loans. For variable-rate loans that reprice frequently and have
no significant change in credit risk, fair values are based on
carrying values. Fair values for fixed-rate mortgage (e.g.
one-to-four family residential), commercial real estate and
commercial loans are estimated using discounted cash flow
analyses, using interest rates currently being offered for loans
with similar terms to borrowers of similar credit quality. Fair
values for nonperforming loans are estimated using discounted
cash flow analysis or underlying collateral values, where
applicable.
Accrued Interest Receivable. Book value approximates fair value.
Deposit Liabilities. The fair values disclosed for demand, NOW,
money-market and savings deposits are, by definition, equal to
the amount payable on demand at the reporting date (that is,
their carrying amounts). Fair values for fixed-rate certificates
of deposit are estimated using a discounted cash flow calculation
that applies interest rates currently being offered on
certificates to a schedule of aggregated expected monthly
maturities of time deposits.
Borrowed Funds. The carrying amounts of other borrowings
approximate their fair values. Fair values of advances from
Federal Home Loan Bank are estimated using discounted cash flow
analysis based on the Company's current incremental borrowing
rates for similar types of borrowings.
Off-Balance-Sheet Instruments. Fair values for off-balance-sheet
lending commitments are based on fees currently charged to enter
into similar agreements, taking into account the remaining terms
of the agreements and the counterparties' credit standing.
Advertising. The Company expenses all advertising as incurred.
(continued)
F-12
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Description of Business and Summary of Significant Accounting Policies,
Continued
Future Accounting Requirements. Financial Accounting Standards 133 -
Accounting for Derivative Investments and Hedging Activities requires
companies to record derivatives on the balance sheet as assets or
liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for
depending on the use of the derivatives and whether they qualify for
hedge accounting. The key criterion for hedge accounting is that the
hedging relationship must be highly effective in achieving offsetting
changes in fair value or cash flows. The Company will be required to
adopt this Statement January 1, 2001. Management does not anticipate
that this Statement will have a material impact on the Company.
(2) Securities Available for Sale
Securities have been classified according to management's intent. The
carrying amount of securities and their approximate fair values are
summarized as follows (in thousands):
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ---------- ---------- -----------
At December 31, 2000:
U.S. Treasury securities............................. $ 11,137 23 (94) 11,066
Mortgage-backed securities........................... 12,771 53 (653) 12,171
Mutual fund.......................................... 2,025 -- (85) 1,940
U.S. Government agency securities.................... 22,049 13 (112) 21,950
Tax exempt securities................................ 6,037 247 -- 6,284
Other................................................ 250 9 -- 259
-------- ---- ------ -------
Total ............................................ $ 54,269 345 (944) 53,670
======== === ====== ======
At December 31, 1999:
U.S. Treasury securities............................. 14,252 -- (401) 13,851
Mortgage-backed securities........................... 13,894 2 (587) 13,309
Mutual fund.......................................... 4,108 -- (233) 3,875
U.S. Government agency securities.................... 15,495 -- (548) 14,947
Other................................................ 175 -- -- 175
-------- --- ------ --------
Total ............................................ $ 47,924 2 (1,769) 46,157
======== === ===== =======
TheCompany currently invests in one mutual fund consisting of a Short U.S.
Government Securities Portfolio. The Short U.S. Government
Securities Portfolio pursues its investment objective by investing in
high-quality assets, primarily in securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalties with remaining
maturities of 5 years or less that qualify as "liquid assets."
During the quarter ended September 30, 1998, the Company sold $1.2 million
of securities from the held to maturity category. As required by
Statement of Financial Accounting Standards No. 115 - Accounting for
Certain Investments in Debt and Equity Securities, all the remaining
securities classified as held to maturity totaling $8.5 million were
transferred to the available for sale category.
At December 31, 2000 and 1999, approximately $505,000 and $492,000
respectively, of securities were pledged for the Company's treasury
tax and loan account, approximately $11,262,000 and $6,251,000 were
pledged as collateral for investment repurchase agreements and
approximately $11,290,000 and $12,736,000 were pledged for public
deposits.
(continued)
F-13
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Securities Available for Sale, Continued
The following summarizes sales of securities (in thousands):
Year Ended December 31,
---------------------------------
2000 1999 1998
---- ---- ----
Proceeds from sale of securities................................... $ 8,955 17,083 34,225
======= ====== ======
Gross gains from sale of securities................................ 12 41 376
Gross losses from sale of securities............................... (135) (3) (78)
------- ------ ------
Net (losses) gains................................................. $ (123) 38 298
======= ====== ======
The scheduled maturities of securities available for sale at December 31,
2000 are as follows (in thousands):
Amortized Fair
Cost Value
--------- -----
Due in less than one year..................................................... $ 4,019 4,023
Due from one to five years.................................................... 29,217 29,045
Due from five to ten years.................................................... 200 207
Due in over ten years......................................................... 6,037 6,284
Mortgage-backed securities.................................................... 12,771 12,171
Mutual fund................................................................... 2,025 1,940
-------- -------
$ 54,269 53,670
======== =======
(3) Loans Receivable
The components of loans are summarized as follows (in thousands):
At December 31,
-----------------------
2000 1999
---- ----
Residential real estate................................................. $ 88,659 80,814
Commercial real estate.................................................. 29,699 25,655
Commercial loans........................................................ 41,305 34,054
Consumer loans.......................................................... 15,468 11,826
--------- --------
175,131 152,349
Deferred loan fees...................................................... (210) (166)
Allowance for loan losses............................................... (1,792) (1,331)
--------- --------
$ 173,129 150,852
========= ========
(continued)
F-14
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(3) Loans Receivable, Continued
An analysis of the change in the allowance for loan losses follows (in
thousands):
Year Ended December 31,
---------------------------------
2000 1999 1998
---- ---- ----
Balance at beginning of year.................................... $ 1,331 1,078 848
------- ----- -----
Loans charged-off............................................... (239) (361) (722)
Recoveries...................................................... 15 4 2
------- ----- ------
Net loans charged-off....................................... (224) (357) (720)
------- ----- -----
Provision for loan losses....................................... 685 610 950
------- ----- -----
Balance at end of year.......................................... $ 1,792 1,331 1,078
======= ===== =====
The following summarizes the amount of impaired loans (in thousands):
At December 31,
----------------
2000 1999
---- ----
Loans identified as impaired:
Gross loans with no related allowance for losses.............................. $ -- --
Gross loans with related allowance for losses recorded........................ 150 440
Less: Allowances on these loans.............................................. (75) (220)
------- ----
Net investment in impaired loans.................................................. $ 75 220
======= ====
The average net investment in impaired loans and interest income recognized
and received on impaired loans is as follows (in thousands):
Year Ended December 31,
----------------------------
2000 1999 1998
---- ---- ----
Average investment in impaired loans.................................. $ 109 220 1,665
======= ====== =====
Interest income recognized on impaired loans.......................... $ -- -- 157
======= ====== ======
Interest income received on impaired loans............................ $ -- -- 157
======= ====== ======
No additional funds are committed to be advanced in connection with
impaired loans.
(continued)
F-15
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Premises and Equipment
Premises and equipment is summarized as follows (in thousands):
At December 31,
------------------
2000 1999
---- ----
Land....................................................................... $ 964 964
Building................................................................... 180 180
Leasehold improvements..................................................... 986 1,052
Furniture, fixtures and equipment.......................................... 2,992 2,433
Construction in process.................................................... 401 --
-------- --------
Total, at cost........................................................... 5,523 4,629
Less accumulated depreciation and amortization............................. (2,681) (2,404)
-------- --------
Net book value........................................................... $ 2,842 2,225
======= ========
The Company leases four of its banking offices. Rental expense was
approximately $534,000, $487,000 and $434,000 for the years ended
December 31, 2000, 1999 and 1998, respectively. Approximate future
minimum annual rental payments under noncancellable leases are as
follows (in thousands):
Year Ending
December 31, Amount
------------ ------
2001................................................................................ $ 741
2002................................................................................ 547
2003................................................................................ 237
2004................................................................................ 169
2005................................................................................ 140
Thereafter.......................................................................... 23
-------
Total............................................................................... $ 1,857
======
(5) Deposits
The aggregate amount of jumbo certificates of deposit with a minimum
denomination of $100,000, was approximately $31.6 million and $28.2
million at December 31, 2000 and 1999, respectively.
At December 31, 2000, the scheduled maturities of certificates of deposit
are as follows (in thousands):
Year Ending
December 31, Amount
------------ ------
2001................................................................................ $ 65,770
2002................................................................................ 16,737
2003................................................................................ 2,284
2004................................................................................ 77
2005 and thereafter................................................................. 473
---------
$ 85,341
========
(6) Other Borrowings
The Company enters into investment repurchase agreements that require the
Company to pledge securities as collateral for the balance in the
accounts. At December 31, 2000 and 1999 the balance totaled $8,067,000
and $5,394,000, respectively and the Company pledged securities as
collateral for these agreements with a carrying value of approximately
$11,262,000 and $6,251,000, respectively.
(continued)
F-16
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Advances from Federal Home Loan Bank
Maturities and interest rates on advances from the Federal Home Loan Bank
("FHLB") were as follows (dollars in thousands):
Year Ending At December 31,
Interest ---------------------
December 31, Rate 2000 1999
------------ --------- ---- ----
2000.............................................. 4.55% $ -- 5,060
2003.............................................. 6.53% 15,000 --
2005.............................................. 6.23% 15,000 --
2007.............................................. 5.47% -- 5,000
2008.............................................. 5.09% 5,000 10,000
2009.............................................. 4.61% -- 5,000
2009.............................................. 4.95% -- 10,000
2010.............................................. 5.98% 10,000 --
--------- ------
Total.............................................. $ 45,000 35,060
========= =======
The FHLB has the option to call the above advances at an earlier date than
the maturity date. At December 31, 2000 and 1999, pursuant to the
collateral agreement with the FHLB, advances are collateralized by the
Company's FHLB stock and a blanket lien on the Company's qualifying
first mortgage, one-to-four family residential loans.
In 2000, the Company successfully completed the sale of a $5.0 million
Federal Home Loan Bank advance. The Company recorded a pre-tax gain of
$125,000 on the sale of the advance. This gain is reported as an
extraordinary item - gain on extinguishment of debt, net of tax of
$47,000.
(8) Commitments and Contingencies
In the ordinary course of business, the Company has various outstanding
commitments and contingent liabilities that are not reflected in the
accompanying consolidated financial statements.
(9) Financial Instruments
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its
customers. These financial instruments are commitments to extend
credit and standby letters of credit and may involve, to varying
degrees, elements of credit and interest-rate risk in excess of the
amount recognized in the consolidated balance sheet. The contract
amounts of these instruments reflect the extent of involvement the
Company has in these financial instruments.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend
credit and standby letters of credit is represented by the contractual
amount of those instruments. The Company uses the same credit policies
in making commitments as it does for on-balance-sheet instruments.
(continued)
F-17
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(9) Financial Instruments, Continued
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since some of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash
requirements. The Company evaluates each customer's credit worthiness
on a case-by-case basis. The amount of collateral obtained if deemed
necessary by the Company upon extension of credit is based on
management's credit evaluation of the counterparty.
Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. The
credit risk involved in issuing letters of credit is essentially the
same as that involved in extending loans to customers.
The estimated fair values of the Company's financial instruments were as
follows (in thousands):
At December 31, 2000 At December 31, 1999
-------------------- --------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
Financial assets:
Cash and cash equivalents.............................. $ 7,616 7,616 6,909 6,909
Securities available for sale.......................... 53,670 53,670 46,157 46,157
Loans receivable, net.................................. 173,129 174,042 150,852 148,214
Loans held for sale.................................... 719 719 2,696 2,696
Accrued interest receivable............................ 2,035 2,035 1,375 1,375
Other securities....................................... 2,961 2,961 2,232 2,232
Financial liabilities:
Deposit liabilities.................................... 161,136 161,380 146,176 149,194
Other borrowings....................................... 8,067 8,067 5,394 5,394
Advances from Federal Home Loan Bank................... 45,000 44,647 35,060 32,545
A summary of the notional amounts of the Company's financial instruments,
which approximate fair value, with off balance sheet risk at December
31, 2000 follows (in thousands):
Unfunded loan commitments at fixed rates.................. $ 3,732
========
Unfunded loan commitments at variable rates............... $ 12,744
========
Available lines of credit................................. $ 18,374
========
Standby letters of credit................................. $ 1,067
========
(10) Credit Risk
The Company grants a majority of its loans to borrowers primarily in Palm
Beach, Broward and Miami-Dade Counties, Florida. Although the Company
has a diversified loan portfolio, a significant portion of its
borrowers' ability to honor their contracts is dependent upon the
economy of these counties in Florida. The contractual amounts of
credit-related financial instruments such as commitments to extend
credit and standby letters of credit represent the amounts of
potential accounting loss should the contract be fully drawn upon, the
customer default and the value of any existing collateral become
worthless.
(continued)
F-18
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(11) Income Taxes
Allocation of Federal and state income taxes between current and deferred
portions is as follows (in thousands):
Year Ended December 31, 2000: Current Deferred Total
----------------------------- ------- -------- -----
Federal ......................... $ 903 (207) 696
State ........................... 161 (36) 125
------ ------ ------
Total ....................... $1,064 (243) 821
====== ====== ======
Year Ended December 31, 1999:
----------------------------- ------
Federal ......................... 756 (108) 648
State ........................... 89 (19) 70
------ ------ ------
Total ....................... $ 845 (127) 718
====== ====== ======
Year Ended December 31, 1998:
------
Federal ......................... 566 3 569
State ........................... 62 -- 62
------ ------ ------
Total ....................... $ 628 3 631
====== ====== ======
The reasons for the differences between the statutory Federal income tax
rate and the effective tax rate are summarized as follows:
Year Ended December 31,
-----------------------
2000 1999 1998
---- ---- ----
Tax provision at statutory Federal rate............................ 34% 34% 34%
Increase (decrease) in taxes resulting from:.......................
State taxes, net of Federal tax benefit........................ 3 3 3
Tax-exempt income, net of disallowed interest expense.......... (3) -- --
-- --- ---
Effective tax rates ............................................... 34% 37% 37%
== == ==
(continued)
F-19
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(11) Income Taxes, Continued
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities relate to the
following (in thousands):
At December 31,
---------------
2000 1999
---- ----
Deferred tax assets:
Allowance for loan losses.................... $ 564 411
Depreciation................................. 156 131
Interest income from impaired loans.......... 25 16
Other........................................ 11 22
----- ----
Total gross deferred tax assets........... 756 580
----- ----
Deferred tax liabilities:
Deferred loan fees........................... 140 210
Accrued dividends............................ 18 12
Other........................................ 7 10
----- ----
Total gross deferred tax liabilities...... 165 232
--- ----
Net deferred tax asset.................... $ 591 348
===== ====
(12) Related Parties
The Company has entered into transactions with officers, directors and
principal stockholders in the ordinary course of business. Loans to
such related parties amounted to approximately $3,343,000 and
$3,483,000 at December 31, 2000 and 1999, respectively. During the
year ended December 31, 2000, total principal additions were
approximately $1,942,000 and total principal payments were
approximately $2,082,000. Deposits from such related parties at
December 31, 2000 and 1999 were approximately $3,708,000 and
$5,176,000, respectively.
(13) Profit Sharing Plan
The Company sponsors a 401(k) profit sharing plan (the "Plan"). The Plan is
available to all employees electing to participate after meeting
certain length-of-service requirements. The Company's contributions to
the Plan are discretionary and are determined annually. Expense
relating to the Company's contributions to the Plan included in the
accompanying consolidated financial statements was $53,000, $26,000
and $19,000 for 2000, 1999 and 1998, respectively.
(14) Deferred Compensation Plans
In 1998 a directors deferred compensation plan was adopted by the Board of
Directors. The plan permits the directors to receive common stock of
the Company in lieu of cash as payment of their annual retainer fee
for being directors and provides the directors the opportunity to
defer portions of these retainers. The total number of shares
available under this plan is 122,500. For the years ended December 31,
2000, 1999 and 1998, a total of 12,164, 11,228 and 6,924 shares,
respectively were paid in lieu of cash of $109,476, $109,500 and
$106,456, respectively to the directors. For the year ended December
31, 2000, 1,945 of these shares were cancelled.
In addition in 1998 certain directors received a total of 1,595 shares of
common stock in payment for director fees totaling $23,821 that were
accrued at December 31, 1997.
Prior to 1998, the Company had deferred compensation plans for certain
directors that allowed for a portion of the participants earned
compensation to be deferred and paid upon retirement, disability,
death or termination of service at which time accrued benefits were
payable in a lump-sum payment or in monthly installments for a period
of 10 years. During 1998, the deferred compensation plans were
terminated and all remaining obligations were paid in cash or through
the issuance of 2,526 shares of common stock in lieu of cash of
$38,837.
(continued)
F-20
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(15) Stock Award Plans
Certain key employees and directors of the Company have options to purchase
shares of the Company's common stock under a nonqualified stock option
plan adopted in 1994. Under the plan, the total number of shares which
may be issued is 300,000. At December 31, 2000, 36,831 shares remain
available for grant. In addition, in 1998 a new Incentive Compensation
and Stock Award Plan was adopted under which both qualified and
nonqualified options can be granted and stock can be awarded to
employees as compensation. A total of 200,000 options or shares can be
granted to directors and employees of the Company under this plan. As
of December 31, 2000, 56,678 options or shares remain available for
grant. A summary of stock option transactions follows ($ in thousands,
except per share amounts):
Range
of Per Weighted-
Share Average Aggregate
Number of Option Per Share Option
Shares Price Price Price
---------- ------------ ---------- ----------
Outstanding at December 31, 1997.................. 205,581 $ 9.55-10.52 9.84 2,022
Options granted................................... 75,551 10.03-15.38 12.21 923
Options exercised................................. (11,982) 9.55-10.52 10.02 (120)
Options forfeited................................. (1,200) 9.55 9.55 (11)
-------- ------
Outstanding at December 31, 1998.................. 267,950 9.55-15.38 10.50 2,814
Options granted................................... 55,250 9.75 9.75 539
Options exercised................................. (25,458) 9.67-10.52 10.15 (258)
Options forfeited................................. (5,580) 10.52 10.52 (59)
-------- ------
Outstanding at December 31, 1999.................. 292,162 9.55-15.38 10.39 3,036
Options granted................................... 89,352 8.62-9.50 9.02 806
Options forfeited................................. (46,313) 9.00-15.38 10.56 (490)
------- -----
Outstanding at December 31, 2000.................. 335,201 $ 8.62-15.38 10.00 3,352
======= ============ ===== =====
(continued)
F-21
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(15) Stock Award Plans, Continued
The weighted-average remaining contractual life of the outstanding stock
options at December 31, 2000, 1999 and 1998 was sixty-two months,
thirty-five months and forty months, respectively.
These options are exercisable as follows:
Number Weighted-Average
Year Ending of Shares Exercise Price
----------- --------- --------------
Currently.............................................. 213,895 $ 10.29
2001 .................................................. 50,328 9.56
2002 .................................................. 45,084 9.56
2003 .................................................. 25,894 9.27
-------- -------
335,201 $ 10.00
======= ========
FASB Statement 123 requires proforma information regarding net earnings and
earnings per share. This proforma information has been determined as if
the Company had accounted for its stock options under the fair value
method of that Statement and is as follows ($ in thousands, except per
share amounts):
Year Ended December 31,
-----------------------
2000 1999 1998
---- ---- ----
Grant date fair value of options issued during the year.......... $ .93 1.32 3.24
======= ====== =======
Net earnings:
As reported................................................ $ 1,719 1,223 1,053
======= ====== =======
Proforma................................................... $ 1,534 1,071 771
======= ====== =======
Basic earnings per share:
As reported................................................ $ .85 .56 .56
======= ====== =======
Proforma .................................................. $ .76 .49 .41
======= ====== =======
Diluted earnings per share:
As reported................................................ $ .85 .56 .55
======= ====== =======
Proforma................................................... $ .76 .49 .40
======= ====== =======
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions:
Year Ended December 31,
-----------------------
2000 1999 1998
---- ---- ----
Risk-free interest rate........................................... 6.0% 6.0% 6.0%
Dividend yield.................................................... 4.0% 4.0% - %
Expected volatility............................................... 15.7% 16.0% 20.0%
Expected life in years............................................ 5 or 10 5 or 10 5 or 10
(continued)
F-22
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(15) Stock Award Plans, Continued
Also in April 1999, the Company awarded 6,935 shares of restricted common
stock to employees under the 1998 Incentive Compensation and Stock
Award Plan. Four years following the date of grant these restricted
stock awards become entirely vested. The Company is amortizing these
restricted stock awards into salaries and employee benefits over the
four-year period. From the date awarded, the employees are entitled to
dividends paid on common stock and may vote these shares. During the
years ended December 31, 2000 and 1999, 1,250 and 575 shares,
respectively were forfeited due to employee termination and zero and
240 shares, respectively became entirely vested.
(16) Preferred Stock
At December 31, 1997, the Company had 54,116 outstanding shares of
convertible, redeemable, cumulative preferred stock Series A, $.01 par
value ("preferred stock"). During the first quarter of 1998 an
additional 500 shares were sold by the Company and 1,410 shares were
issued in the form of a stock dividend. In the second quarter of 1998
all outstanding preferred shares were converted by the shareholders
into 126,026 shares of common stock.
(17) Regulatory Matters
Federal and state banking regulations place certain restrictions on
dividends paid and loans or advances made by the Bank to the Holding
Company.
The Company (on a consolidated basis) and the Bank are subject to various
regulatory capital requirements administered by the Federal and state
banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory and possibly additional discretionary
actions by regulators that, if undertaken, could have a direct
material effect on the Company's and the Bank's financial statements.
Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Company and the Bank must meet specific
capital guidelines that involve quantitative measures of their assets,
liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The capital amounts and
classification are also subject to qualitative judgements by the
regulators about components, risk weightings, and other factors.
Prompt corrective action provisions are not applicable to financial
holding companies.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and
percentages (set forth in the following table) of total and Tier 1
capital (as defined in the regulations) to risk-weighted assets (as
defined) and of Tier 1 capital (as defined) to average assets (as
defined). Management believes, as of December 31, 2000 and 1999, that
the Company and the Bank met all capital adequacy requirements to
which they are subject.
(continued)
F-23
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(17) Regulatory Matters, Continued
As of December 31, 2000, the most recent notification from the regulatory
authorities categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized
as well capitalized, an institution must maintain minimum total
risk-based, Tier I risk-based, and Tier I leverage percentages as set
forth in the following tables. There are no conditions or events since
that notification that management believes have changed the Bank's
category. The Company and the Bank's actual capital amounts and
percentages as of December 31, 2000 and 1999 are also presented in the
table (dollars in thousands).
Minimum
To Be Well
Capitalized Under
Minimum Capital Prompt Corrective
Actual Requirement Action Provisions:
---------------------- ------------------------ -------------------------
Amount % Amount % Amount %
------ ------ ------ ------ ------ ------
As of December 31, 2000:
Total capital to Risk-
Weighted assets:
Consolidated.......... $ 28,842 17.84% $ 12,933 8.00% N/A N/A
Bank.................. 25,870 15.99 12,941 8.00 $ 16,176 10.00%
Tier I Capital to Risk-
Weighted Assets:
Consolidated.......... 27,050 16.73 6,467 4.00 N/A N/A
Bank.................. 24,078 14.88 6,470 4.00 9,706 6.00
Tier I Capital
to Average Assets
Consolidated.......... 27,050 11.55 9,368 4.00 N/A N/A
Bank.................. 24,078 10.30 9,354 4.00 11,692 5.00
As of December 31, 1999:
Total capital to Risk-
Weighted assets:
Consolidated.......... 26,871 19.42 11,069 8.00 N/A N/A
Bank ................. 23,476 16.68 11,259 8.00 14,074 10.00
Tier I Capital to Risk-
Weighted Assets:
Consolidated.......... 25,540 18.46 5,534 4.00 N/A N/A
Bank.................. 22,145 15.74 5,627 4.00 8,441 6.00
Tier I Capital
to Average Assets
Consolidated.......... 25,540 12.03 8,492 4.00 N/A N/A
Bank.................. 22,145 10.37 8,542 4.00 10,677 5.00
(continued)
F-24
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(18) Stockholders' Equity
In 1999, the Company's Board of Directors approved a stock repurchase
program. The program was initially allocated $3.0 million and in the
year 2000, the Board authorized up to an additional $3.0 million to be
used to repurchase Company stock. As of December 31, 1999, the Company
has repurchased 297,000 shares in treasury stock at a net cost of
approximately $3.0 million.
The Company's ability to pay cash dividends on its common stock is limited
to the amount of dividends it could receive from the Bank plus its own
cash and cash equivalents, which amounted to $1,704 at December 31,
2000. The amount of dividends the Bank is permitted to pay to the
Company is restricted to 100% of its calendar year-to-date net
earnings plus retained earnings for the preceding two years. Twenty
percent of the net earnings in the preceding two-year period may not
be paid in dividends, but must be retained to increase capital surplus
until such surplus equals the amount of the Bank's common stock then
outstanding. In addition, no Bank may pay a dividend at any time that
net earnings in the current year when combined with retained earnings
from the preceding two years produce a loss. Under Florida law, a
Florida chartered commercial bank may not pay cash dividends that
would cause the Bank's capital to fall below the minimum amount
required by Federal or Florida law.
(19) Earnings Per Share
Basic earnings per share represents earnings available to common
stockholders divided by the weighted-average number of common shares
outstanding during the period. Diluted earnings per share reflects
additional common shares that would have been outstanding if dilutive
potential common shares had been issued, as well as any adjustment to
earnings that would result from the assumed issuance. Potential common
shares that may be issued by the Company relate solely to outstanding
stock options, and are determined using the treasury stock method.
Earnings per common share have been computed based on the following
(dollars in thousands):
Year Ended December 31,
-----------------------
2000 1999 1998
---- ---- ----
Net earnings before extraordinary item............................ $ 1,641 1,223 1,053
Less: Preferred stock dividends................................... -- -- (27)
----------- --------- ---------
Net earnings before extraordinary item applicable to
common stock.................................................. $ 1,641 1,223 1,026
=========== ========= =========
Weighted-average number of common shares outstanding.............. 2,019,567 2,197,503 1,826,613
Effect of dilutive options........................................ 65 6,741 27,998
------------ --------- ----------
Weighted-average number of common shares outstanding used
to calculate diluted earnings per common share................ 2,019,632 2,204,244 1,854,611
=========== ========= =========
(continued)
F-25
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(20) Comprehensive Income
The Company follows SFAS 130, Reporting Comprehensive Income. Accounting
principles generally require that recognized revenue, expenses, gains
and losses be included in net earnings. Although certain changes in
assets and liabilities, such as unrealized gains and losses on
available-for-sale securities, are reported as a separate component of
the equity section of the balance sheet, such items along with net
earnings, are components of comprehensive income. The adoption of SFAS
130 had no effect on the Company's net earnings or stockholders'
equity. The components of other comprehensive income and related tax
effects are as follows (in thousands):
Before Tax After
Tax Effect Tax
--- ------ ---
For the Year Ended December 31, 2000:
Unrealized holding gains.............................................. $ 1,045 (393) 652
Reclassification adjustment for losses included
in net earnings..................................................... 123 (46) 77
------- --- ---
$ 1,168 (439) 729
======= === ===
For the Year Ended December 31, 1999:
Unrealized holding losses............................................. (1,125) 424 (701)
Reclassification adjustment for gains included
in net earnings..................................................... (38) 14 (24)
------ --- ---
$(1,163) 438 (725)
======= === ===
For the Year Ended December 31, 1998:
Unrealized holding losses............................................. (85) 32 (53)
Reclassification adjustment for gains included
in net earnings..................................................... (298) 112 (186)
----- --- ---
$ (383) 144 (239)
======= === ===
(continued)
F-26
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(21) Holding Company Financial Information
The Holding Company's unconsolidated financial information is as follows
(in thousands):
Condensed Balance Sheets
At December 31,
---------------
2000 1999
---- ----
Assets
Cash and cash equivalents...................................................... $ 1,704 3,214
Investment in subsidiaries..................................................... 23,765 21,195
Other assets................................................................... 1,265 176
------ -------
Total assets............................................................... $ 26,734 24,585
======== ======
Liabilities and Stockholders' Equity
Other liabilities.............................................................. 4 2
Stockholders' equity........................................................... 26,730 24,583
-------- ------
Total liabilities and stockholders' equity................................. $ 26,734 24,585
======== ======
Condensed Statements of Earnings
For the Year Ended December 31,
-------------------------------
2000 1999 1998
---- ---- ----
Revenues........................................................... $ 2 -- 16
Expenses........................................................... (124) (113) (64)
------- ----- ------
Loss before earnings of subsidiaries........................... (122) (113) (48)
Earnings of subsidiaries....................................... 1,841 1,336 1,101
----- ----- -----
Net earnings................................................... $ 1,719 1,223 1,053
======= ===== =====
(continued)
F-27
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(21) Holding Company Financial Information, Continued
Condensed Statements of Cash Flows
For the Year Ended December 31,
-------------------------------
2000 1999 1998
---- ---- ----
Cash flows from operating activities:
Net earnings ...................................................... $ 1,719 1,223 1,053
Adjustments to reconcile net earnings to net cash provided
by (used in) operating activities:
Undistributed earnings of subsidiaries......................... (1,841) (1,336) (1,101)
Common stock issued as compensation for services............... 92 109 170
Shares committed to participants in incentive stock plan....... 11 12 -
Increase in other assets....................................... (1,089) (70) (11)
Increase (decrease) in other liabilities....................... 2 (4) (92)
-------- ------- -------
Net cash (used in) provided by operating activities......... (1,106) (66) 19
-------- ------- -------
Cash flows provided by investing activities-
Net increase in investment in subsidiaries......................... -- -- (6,001)
-------- -------- ------
Cash flows from financing activities:
Proceeds from issuance of preferred stock.......................... -- -- 10
Proceeds from issuance of common stock............................. -- -- 12,076
Cash dividends paid on common stock................................ (404) (329) --
Purchase of Treasury Stock......................................... -- (3,000) --
Proceeds from exercise of stock options............................ -- 258 120
-------- -------- ------
Net cash (used in) provided by financing activities......... (404) (3,071) 12,206
-------- -------- ------
Net (decrease) increase in cash and cash equivalents.................... (1,510) (3,137) 6,224
Cash and cash equivalents at beginning of the year...................... 3,214 6,351 127
----- ----- -------
Cash and cash equivalents at end of year................................ $ 1,704 3,214 6,351
======= ===== =======
Noncash transactions:
Change in investment in subsidiaries due to accumulated other
comprehensive income (loss), change in securities available
for sale....................................................... $ 729 (725) (239)
======== ===== =======
Stock dividends paid on preferred stock............................ $ -- -- 27
======== ===== =======
Activity in stock incentive plan, net.............................. $ 21 50 --
======== ===== =======
F-28
Independent Auditors' Report on Supplementary Information
Board of Directors
Pointe Financial Corporation
Boca Raton, Florida
We have audited the accompanying consolidated financial statements of Pointe
Financial Corporation and Subsidiaries at and for the year ended December 31,
2000, and have issued our report thereon dated January 19, 2001. Our audit was
conducted for the purpose of forming an opinion on the basic consolidated
financial statements taken as a whole. The consolidating information in the
accompanying schedules is presented for purposes of additional analysis of the
consolidated financial statements rather than to present the financial position
and results of operations of the individual companies. The consolidating
information has been subjected to the auditing procedures applied in the audit
of the consolidated financial statements and, in our opinion, is fairly stated
in all material respects in relation to the consolidated financial statements
taken as a whole.
HACKER, JOHNSON & SMITH PA
Fort Lauderdale, Florida
January 19, 2001
F-29
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidating Balance Sheet
December 31, 2000
(In thousands)
Pointe Pointe
Financial Pointe Financial Consolidated
Corporation Bank Services Eliminations Total
----------- -------- --------- ------------ -----------
Assets
Cash and cash equivalents .................................... $ 1,704 7,616 7 (1,711) 7,616
Securities available for sale ................................ -- 53,670 -- -- 53,670
Loans receivable, net ........................................ -- 173,129 -- -- 173,129
Loans held for sale .......................................... -- 719 -- -- 719
Accrued interest receivable .................................. -- 2,035 -- -- 2,035
Premises and equipment, net .................................. -- 2,842 -- -- 2,842
Other securities ............................................. -- 2,961 -- -- 2,961
Foreclosed real estate ....................................... -- 18 -- -- 18
Investment in subsidiaries ................................... 23,765 -- -- (23,765) --
Deferred income tax asset .................................... 4 587 -- -- 591
Other assets ................................................. 1,261 (334) -- -- 927
-------- -------- -------- -------- --------
Total ............................................... $ 26,734 243,243 7 (25,476) 244,508
======== ======== ======== ======== ========
Liabilities and Stockholders' Equity
Liabilities:
Deposits ................................................. -- 162,847 -- (1,711) 161,136
Official checks .......................................... -- 1,660 -- -- 1,660
Other borrowings ......................................... -- 8,067 -- -- 8,067
Advances from the Federal Home
Loan Bank ........................................... -- 45,000 -- -- 45,000
Accrued interest payable ................................. -- 989 -- -- 989
Advance payments for taxes and insurance ................. -- 365 -- -- 365
Other liabilities ........................................ 4 557 -- -- 561
-------- -------- -------- -------- --------
Total liabilities ................................... 4 219,485 -- (1,711) 217,778
-------- -------- -------- -------- --------
Stockholders' equity:
Common stock ............................................. 23 306 1 (307) 23
Additional paid-in capital ............................... 23,835 15,662 220 (15,882) 23,835
Retained earnings ........................................ 6,274 8,163 (214) (7,949) 6,274
Accumulated other comprehensive income (loss) ............ (373) (373) -- 373 (373)
Treasury stock ........................................... (3,000) -- -- -- (3,000)
Stock incentive plan ..................................... (29) -- -- -- (29)
-------- -------- -------- -------- --------
Total stockholders' equity .......................... 26,730 23,758 7 (23,765) 26,730
-------- -------- -------- -------- --------
Total ............................................... $ 26,734 243,243 7 (25,476) 244,508
======== ======== ======== ======== ========
F-30
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidating Statement of Operations
Year Ended December 31, 2000
(In thousands)
Pointe Pointe
Financial Pointe Financial Consolidated
Corporation Bank Services Eliminations Total
----------- -------- --------- ------------ ------------
Interest income:
Loans receivable ........................................... $ -- 14,864 -- -- 14,864
Securities available for sale .............................. 2 3,437 -- -- 3,439
Other interest earning assets .............................. -- 242 -- -- 242
------- ------- --- ------- -------
Total interest income ................................. 2 18,543 -- -- 18,545
------- ------- --- ------- -------
Interest expense:
Deposits ................................................... -- 6,334 -- -- 6,334
Borrowings ................................................. -- 2,971 -- -- 2,971
------- ------- --- ------- -------
Total interest expense ................................ -- 9,305 -- -- 9,305
------- ------- --- ------- -------
Net interest income ............................................ 2 9,238 -- -- 9,240
Provision for loan losses ............................. -- 685 -- -- 685
------- ------- --- ------- -------
Net interest income after provision for loan losses ............ 2 8,553 -- -- 8,555
------- ------- --- ------- -------
Noninterest income:
Service charges on deposit accounts ........................ -- 815 -- -- 815
Loan servicing fees ........................................ -- 47 -- -- 47
Net gains from sale of loans ............................... -- 6 -- -- 6
Net realized loss on sale of securities .................... -- (123) -- -- (123)
Earnings of subsidiaries ................................... 1,841 -- -- (1,841) --
Other ...................................................... -- 347 -- -- 347
------- ------- --- ------- -------
Total noninterest income .............................. 1,841 1,092 -- (1,841) 1,092
------- ------- --- ------- -------
Noninterest expenses:
Salaries and employee benefits ............................. 11 3,820 -- -- 3,831
Occupancy expense .......................................... -- 1,161 -- -- 1,161
Advertising and promotion .................................. 54 209 -- -- 263
Professional fees .......................................... 40 167 -- -- 207
Federal deposit insurance premiums ......................... -- 31 -- -- 31
Data processing ............................................ 6 407 -- -- 413
Other ...................................................... 85 1,194 -- -- 1,279
------- ------- --- ------- -------
Total noninterest expenses ............................ 196 6,989 -- -- 7,185
------- ------- --- ------- -------
Earnings (loss) before income taxes and
extraordinary item ................................ 1,647 2,656 -- (1,841) 2,462
Income tax (benefit) ....................................... (72) 893 -- -- 821
------- ------- --- ------- -------
Earnings before extraordinary item .................... 1,719 1,763 -- (1,841) 1,641
Extraordinary item - gain on extinguishment of
debt, net of taxes of $47 ............................. -- 78 -- -- 78
------- ------- --- ------- -------
Net earnings ..................................... $ 1,719 1,841 -- (1,841) 1,719
======= ======= === ======= =======
F-31
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Company.
The information contained under the caption "Election of Directors" to appear in
the Company's definitive proxy statement relating to the Company's 2000 Annual
Meeting of Stockholders, which definitive proxy statement will be filed with the
Securities and Exchange Commission not later than 120 days after the end of the
Company's fiscal year covered by this report on Form 10-K (hereinafter referred
to as the "Annual Meeting Proxy Statement"), is incorporated herein by
reference. Information concerning the executive officers of the Company is
included in Part I of this Report on Form 10-K.
The following table sets forth information concerning the executive officers of
the Company and the Bank.
Name Position Age
- ---- -------- ---
R. Carl Palmer, Jr. Chairman of Pointe Financial Corporation,
President and Chief Executive Officer of the 60
Company and the Bank
Beverly P. Chambers Senior Vice President of the Company and the Bank 50
Bradley R. Meredith Senior Vice President and Chief Financial Officer of the 47
Company and the Bank
R. Carl Palmer, Jr. Mr. Palmer joined the Company and Bank in 1995 as Chief
Executive Officer, President and director. He was elected to serve as Chairman
of the Company in November 2000. He began his banking career at Chemical Bank in
New York in 1964. In 1979, he moved to South Florida as an Executive Vice
President for Southeast Banking Corporation. During his tenure at that bank with
$17 billion in assets, he had responsibilities for business development,
business banking and community banking. From 1988 to 1991, he was President,
Chief Operating Officer and director of BancFlorida in Naples, Florida. He
became a Senior Associate with Martin W. Taplin & Associates, Inc., a real
estate investment firm, in 1991. Mr. Palmer received a B.A. from Dartmouth
College in 1962, an M.B.A. from Amos Tuck School in 1963 and a J.D. from New
York Law School in 1969. Mr. Palmer resides in Palm Beach County.
Beverly P. Chambers. Ms. Chambers joined the Company in 1995 with twenty-five
years of banking experience and manages marketing and human resources. Prior to
joining the Company, she spent three years as a Senior Vice President and
Manager of Private Banking for NationsBank of Florida. Prior to that position,
Ms. Chambers was a Senior Vice President of Southeast Banking Corporation
managing commercial banking, marketing and private banking departments. Ms.
Chambers received an M.S. from Florida State University in 1973. Ms. Chambers
resides in Broward County.
Bradley R. Meredith. Mr. Meredith joined the Company in 1997, after eight years
as Executive Vice President and Chief Financial Officer for First Family
Financial Corporation in Central Florida. The majority of his eighteen years of
banking experience has been with community banks. Mr. Meredith graduated from
DePaul University with a B.S. in Finance in 1982. Mr. Meredith received a
diploma from the Graduate School of Banking at the University of Wisconsin in
1989. Mr. Meredith resides in Palm Beach County.
30
Item 11. Executive Compensation.
The information contained under the caption "Executive Compensation" to appear
in the Annual Meeting Proxy Statement is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information contained under the caption "Security Ownership of Certain
Beneficial Owners and Management" to appear in the Annual Meeting Proxy
Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
The information contained under the captions "Compensation Committee Interlocks
and Insider Participation" and "Certain Relationships and Related Transactions"
to appear in the Annual Meeting Proxy Statement is incorporated herein by
reference.
31
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The Following Documents Are Filed as Part of this Report:
(1) Financial Statements.
The following consolidated financial statements of the Company
and the report of the independent certified public accountants
thereon filed with this report:
Report of Independent Certified Public Accountants (Hacker,
Johnson & Smith, P.A.)
Consolidated Statements of Financial Condition as of December
31, 2000 and 1999.
Consolidated Statements of Earnings for the years ended
December 31, 2000, 1999 and 1998.
Consolidated Statements of Stockholder"s Equity for the years
ended December 31, 2000, 1999 and 1998.
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998.
Notes to Consolidated Financial Statements.
(2) Financial Statement Schedules.
Schedules are omitted because the conditions requiring their
filing are not applicable or because the required information
is provided in the Consolidated Financial Statements,
including the Notes thereto.
(3) Exhibits.*
2.1 Plan of Merger and Merger Agreement dated February 14, 1997 by
and between Pointe Federal Savings Bank and Pointe Bank
(Exhibit 2.1 to the Registrant's Form SB-2 Registration
Statement, File No. 333-49835, as initially filed with the
Securities and Exchange Commission on April 9, 1998 [the
"Registration Statement"]).
3.1 Articles of Incorporation of the Registrant (Exhibit 3.1 to
the Registration Statement).
3.2 By-Laws of the Registrant (Exhibit 3.2 to the Registration
Statement).
4.1 Specimen Common Stock Certificate (Exhibit 4.1 to the
Registration Statement).*
10.1** 1994 Non-Statutory Stock Option Plan (Exhibit 10.1 to the
Registration Statement).
10.2** Deferred Compensation Plan (Exhibit 10.2 to the Registration
Statement).
10.3 Office Lease Agreement dated October 8, 1986 by and between
Centrum Pembroke, Inc. and Flamingo Bank (Exhibit 10.3 to the
Registration Statement).
10.4 Lease dated as of July 15, 1992 between Konrad Ulmer and
Pointe Savings Bank (Exhibit 10.4 to the Registration
Statement).
10.5 Lease Agreement dated January 23, 1995 by and between
Hollywood Associates VI and Pointe Bank (Exhibit 10.5 to the
Registration Statement).
10.6 Credit Agreement dated August 18, 1997 between Independent
Bankers' Bank of Florida and Pointe Bank (Exhibit 10.6 to the
Registration Statement).
10.7 Credit Agreement dated October 14, 1997 between SunTrust
Bank/Miami, N.A. and Pointe Bank (Exhibit 10.7 to the
Registration Statement).
10.8 Agreement for Advances and Security Agreement with Blanket
Floating Lien dated November 24, 1997 between Pointe Bank and
the Federal Home Loan Bank of Atlanta (Exhibit 10.8 to the
Registration Statement).
10.9 Equipment Sales and Software License Agreements between
Information Technology, Inc. and Pointe Financial Corporation
(Exhibit 10.9 to the Registration Statement).
10.10 Master Equipment Lease Agreement dated May 7, 1997 between
Leasetec Corporation and Pointe Financial Corporation (Exhibit
10.10 to the Registration Statement).
32
10.11*** Letter Agreement dated March 9, 1995 between Pointe Financial
Corporation and R. Carl Palmer, Jr. (Exhibit 10.11 to the
Registration Statement).
10.12** 1998 Incentive Compensation and Stock Award Plan.
(Exhibit 10.12 to the Registration Statement).
10.13*** Employment agreement between the company and R. Carl Palmer,
Jr. (Exhibit 10.13 to the 1999 Form 10-K filed February 23,
2000).
10.14*** Employment agreement between the company and Beverly P.
Chambers (Exhibit 10.14 to the 1999 Form 10-K filed
February 23, 2000).
10.15*** Employment agreement between the company and Bradley R.
Meredith (Exhibit 10.15 to the 1999 Form 10-K filed
February 23, 2000).
11.1 Statement regarding calculation of earnings per common share
(included in the Audited Consolidated Financial Statements in
the 2000 Form 10-K).
12.1 Statement regarding calculation of ratio of earnings to fixed
charges (included in the Management's Discussion and Analysis
of the Financial Condition and Results of Operation in the
2000 Form 10-K).
21.1 Subsidiaries of the Registrant (included in the Audited
Consolidated Financial Statements in the 2000 Form 10-K).
23.1 Consent of Hacker, Johnson & Smith, P.A.
---------------------
* Exhibits followed by a parenthetical reference are incorporated herein by
reference from the documents described therein.
** Exhibits 10.1, 10.2, 10.11 and 10.12 are compensatory plans or
arrangements.
*** Contracts with Management.
(b) Reports of Form 8-K.
During the fourth quarter, no form 8-K's were filed by the Company.
33
Supplemental Information.
As of the date of filing of this report on Form 10-K no annual report or proxy
material has been sent to security holders. Such material will be furnished to
security holders and the Securities and Exchange Commission subsequent to the
filing of this report on Form 10-K.
34
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.
POINTE FINANCIAL CORPORATION
By: /s/ R. Carl Palmer, Jr.
------------------------
R. Carl Palmer, Jr.
Chairman of the Board, Chief Executive Officer
and President
Dated: March 16, 2001
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name Title Date
- ---- ----- ----
/s/ R. Carl Palmer, Jr. Chairman of the Board, Chief Executive Officer March 16, 2001
- ----------------------- and President
R. Carl Palmer, Jr.
/s/ Timothy M. McGinn Vice Chairman of the Board March 16, 2001
- -------------------------
Timothy M. McGinn
/s/Bradley R. Meredith Chief Financial Officer, March 16, 2001
- ---------------------- Senior Vice President
Bradley R Meredith
/s/ Steven A. Elias Director March 16, 2001
- -------------------
Steven A. Elias
/s/ Clarita Kassin Director March 16, 2001
- -------------------
Clarita Kassin
/s/ Morris Massry Director March 16, 2001
- -----------------
Morris Massry
/s/ D. Richard Mead, Jr. Director March 16, 2001
- ------------------------
D. Richard Mead, Jr.
/s/ Parker D. Thomson Director March 16, 2001
- ---------------------
Parker D. Thomson
35