U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO
_________
Commission file number 0-27984
Ridgestone Financial Services, Inc.
(Exact name of the small business issuer as specified in its charter)
Wisconsin 39-1797151
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13925 West North Avenue
Brookfield, Wisconsin 53005
(Address of principal executive offices)
414-789-1011
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date.
Class Outstanding as of March 31, 1996
Common Stock, no par value 834,340
Transitional Small Business Disclosure Format: Yes No X
<PAGE>
RIDGESTONE FINANCIAL SERVICES, INC., AND SUBSIDIARY
QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 1996
INDEX
Page
Part I FINANCIAL INFORMATION Number
Item 1 Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets at
March 31, 1996 and December 31, 1995 2
Consolidated Statement of Income
For the Three Months Ended March 31, 1996 3
Consolidated Statement of Cash Flows
For the Three Months Ended March 31, 1996 4
Notes to Consolidated Financial Statements 5
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 6-9
Part II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 10
SIGNATURES 11
<PAGE>
RIDGESTONE FINANCIAL SERVICES, INC., AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, 1996 and December 31, 1995
(Unaudited)
March 31, December 31,
1996 1995
ASSETS
Cash and due from banks $ 1,457,779 $ 527,132
Federal funds sold 10,607,000 5,627,000
Interest-earning deposits 1,509,314 2,444,031
---------- ----------
Cash and cash equivalents 13,574,093 8,598,163
---------- ----------
Loans receivable 2,873,857 729,770
Less: Allowance for estimated
loan losses 13,640 9,000
--------- --------
Net loans receivable 2,860,217 720,770
--------- --------
Premises and equipment, net 1,103,394 1,056,738
Accrued interest receivable 15,550 2,483
Other assets 40,661 49,169
--------- ---------
Total assets $ 17,593,915 $ 10,427,323
========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY LIABILITIES
Deposits:
Noninterest-bearing $ 2,250,146 $1,492,249
Interest-bearing 8,443,346 1,816,282
---------- ---------
Total deposits 10,693,492 3,308,531
---------- ---------
Other liabilities 43,590 5,449
---------- ---------
Total liabilities 10,737,082 3,313,980
---------- ---------
STOCKHOLDERS' EQUITY
Common stock, no par value: shares
authorized 1,000,000; shares
issued and outstanding 834,340 7,721,399 7,721,399
Retained earnings (deficit) (864,566) (608,056)
---------- ----------
Total stockholders' equity 6,856,833 7,113,343
--------- ----------
Total liabilities and
stockholders' equity $ 17,593,915 $ 10,427,323
========== ==========
<PAGE>
RIDGESTONE FINANCIAL SERVICES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
March 31, 1996
(Unaudited)
Three Months Ended
March 31, 1996
Interest income:
Interest and fees on loans $55,961
Interest on federal funds sold 93,225
-------
Total interest income 149,186
-------
Interest expense:
Interest on deposits 65,105
-------
Total interest expense 65,105
-------
Net interest income 84,081
Provision for loan losses: 4,640
-------
Net interest income after
provision for loan losses 79,441
Non-interest income:
Service charges on deposit accounts 1,186
Other 18,870
-------
Total non-interest income 20,056
-------
Non-interest expense:
Salaries and employee benefits 178,282
Occupancy and equipment expense 56,814
Other expense 120,002
Pre-opening expense 0
-------
Total non-interest expense 355,098
-------
(Loss) before income taxes (255,601)
Income taxes 909
--------
Net (loss) $(256,510)
========
(Loss) per share $(0.31)
======
<PAGE>
RIDGESTONE FINANCIAL SERVICES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
March 31, 1996
(Unaudited)
Three Months Ended
March 31, 1996
Operating activities:
Net (loss) $(256,510)
Depreciation 32,770
Provision for loan losses 4,640
Amortization of organizational costs 0
(Increase) in accrued interest receivable (13,067)
Decrease in other assets 8,508
Increase in other liabilities 38,141
--------
Net cash (used by) operating activities (185,518)
--------
Investing activities:
Net loans originated (2,144,087)
Purchases of premises and equipment (79,426)
---------
Net cash (used in) investing activities (2,223,513)
Financing activities:
Net increase in deposits 7,384,961
Proceeds from the issuance of common stock 0
Proceeds from notes payable 0
Payment of notes payable 0
---------
Net cash provided by financing activities 7,384,961
---------
Net increase in due from banks 4,975,930
Cash and cash equivalents, beginning 8,598,163
---------
Cash and cash equivalents, ending $13,574,093
----------
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest $52,039
-------
Income taxes $909
---
<PAGE>
RIDGESTONE FINANCIAL SERVICES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-QSB. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three-month
period ended March 31, 1996 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1996. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995.
NOTE 2 - PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Ridgestone Financial Services, Inc., (the "Company") and its wholly owned
subsidiary, Ridgestone Bank (the "Bank"). All significant intercompany
accounts and transactions have been eliminated in consolidation.
NOTE 3 - INITIAL PUBLIC OFFERING
On November 30, 1995, the Company completed its initial public offering.
The Company issued 834,340 shares of common stock in the offering.
NOTE 4 - COMPARATIVE DATA
The Company was incorporated in May 1994, but its primary operating
subsidiary, the Bank, did not commence operations until December 7, 1995.
Comparable statements of income and cash flows for the three months ended
March 31, 1995 have not been presented since the Company did not have
operations during that period.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Ridgestone Financial Services, Inc., (the "Company") was formed in
May 1994 under the laws of the state of Wisconsin for the purpose of
becoming the bank holding company of Ridgestone Bank (the "Bank").
The Bank was capitalized on December 6, 1995 and commenced operation
on December 7, 1995. The Bank was organized as a Wisconsin chartered
commercial bank with depository accounts insured by the Federal Deposit
Insurance Corporation. The Bank provides full service commercial and
consumer banking services in Brookfield, Wisconsin and adjacent
communities.
FINANCIAL CONDITION AT MARCH 31, 1996
The Company has experienced significant growth since the Bank opened
December 7, 1995. Total assets of the Company increased by $7,166,592 or
68.7% to $17,593,915 at March 31, 1996 from $10,427,323 at December 31,
1995. The growth primarily resulted from an increase in deposits received
from customers.
Cash and cash equivalents increased $4,975,930 or 57.9% to
$13,574,093 at March 31, 1996 from $8,598,163 at December 31, 1995. The
increase was primarily attributable to excess funds invested in overnight
federal funds sold.
Loans receivable increased by $2,144,087 or 293.8% to $2,873,857 at
March 31, 1996 from $729,770 at December 31, 1995. The increase was a
result of the origination of $3,470,816 of commercial, consumer and real
estate loans in the three months ended March 31, 1996, less loan
repayments of $1,326,728.
The allowance for estimated loan losses at March 31, 1996 was
$13,640, representing 0.5% of gross loans outstanding. Similarly, the
allowance for loan losses at December 31, 1995 was $9,000 representing
1.23% of gross outstanding loans. Although management believes that the
allowance for estimated loan losses at March 31, 1996 was at a level that
is adequate to absorb losses on existing loans, there can be no assurance
that such losses will not exceed the estimated amounts or that the Company
will not be required to make additional contributions to its loan loss
reserve in the future.
Premises and equipment increased by $46,656 or 4.4% to $1,103,394 at
March 31, 1996 from $1,056,738 at December 31, 1995. The increase
resulted from the purchase of property for the future site of a drive-up
facility.
Accrued interest receivable on loans increased by $13,067 or 526.26%
to $15,550 at March 31, 1996 from $2,483 at December 31, 1995. The
increase was primarily due to greater outstanding loan balances.
Other assets decreased by $8,508 or 17.3% to $40,661 at March 31,
1996 from $49,169 at December 31, 1995. Other assets consists mainly of
miscellaneous receivables and prepaid expenses.
Deposits increased by $7,384,961 or 223.21% to $10,693,492 at March
31, 1996 from $3,308,531 at December 31, 1995. The increase resulted from
a $3,997,480 increase in certificates of deposit and an $3,387,481
increase in NOW, money market and other deposit accounts.
Other liabilities increased by $38,141 or 700% to $43,590 at March
31, 1996 from $5,449 at December 31, 1995. Other liabilities was
comprised primarily of unpaid interest on deposits.
The accumulated deficit at December 31, 1995 of $608,056 was
comprised of pre-opening expenses and start-up expenses for the Bank,
consisting primarily of salaries, marketing and supplies and the net loss
incurred. Accumulated deficit increased by $256,510 during the quarter
ended March 31, 1996, which reflects the loss for the three months.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996
The Company's net loss for the three month period ended March 31,
1996 was $256,510. The Company expects losses for sometime as the Bank
builds its business. The Company's goal is to be profitable for the year
ending December 31, 1997.
Interest income was $149,186 for the three month period ended March
31, 1996. Interest income has continued to increase as a result of
greater outstanding balances in interest earning assets.
Interest expense was $65,105 for the three month period ended March
31, 1996. Interest expense has continued to increase as a result of
greater outstanding balances in deposits.
The provision for loan losses at December 31, 1995 was $9,000 or
1.23%. The provision for loan losses for the three months ended March 31,
1996 was $13,640 or 0.5%. The Company's goal is to establish a monthly
accrual to bring the loan loss reserve to 1.25% of outstanding loans by
December 31, 1996.
Other income for the three month period ended March 31, 1996 was
$20,056. Other income consisted of income from depository service fees,
loan fees, credit card fees and other miscellaneous fees.
The main components of other expenses were salaries and benefits,
occupancy, equipment, professional, data processing, insurance and other
miscellaneous expenses. Other expenses for the three month period ended
March 31, 1996 were $355,098.
NEW ACCOUNTING PRONOUNCEMENTS
ACCOUNTING FOR MORTGAGE SERVICING RIGHTS:
The Financial Accounting Standards Board ("FASB") has issued
Statement of Financial Accounting Standards ("SFAS") No. 122, Accounting
for Mortgage Servicing Rights. SFAS No. 122 amends certain provisions of
SFAS No. 65 to eliminate the accounting distinction between rights to
service mortgage loans for others that are acquired through loan
origination activities and those acquired through purchase transactions.
If the Company sells or securitizes mortgage loans and retains the
mortgage servicing rights, the Company should allocate the total cost of
mortgage loans to the mortgage servicing rights and the loans (without the
mortgage servicing rights) based on their relative fair values. Any costs
allocated to mortgage servicing rights should be recognized as a separate
asset. SFAS No. 122 is effective for the Company's year ending December
31, 1996. The Company believes adoption of SFAS No. 122 will not have a
material effect on operations in 1996.
STOCK-BASED COMPENSATION:
The FASB has issued SFAS No. 123, Accounting for Stock-Based
Compensation. SFAS No. 123 encourages, but does not require, the Company
to account for stock-based compensation awards on the basis of fair value
at the date the awards are granted. The fair value of the award would be
shown as an expense on the income statement. However the FASB also allows
the Company to continue to measure compensation cost using the intrinsic
value as prescribed by APB No. 25. If the Company elects to use the
intrinsic value, it will not show an expense on the income statement.
However, it will be required to provide new footnote disclosures about the
stock-based compensation and the Company must make pro forma disclosures
of net income and earnings per share as if the fair value method of
accounting had been applied. SFAS No. 123 is effective for the Company's
year ending December 31, 1996.
<PAGE>
RIDGESTONE FINANCIAL SERVICES, INC., AND SUBSIDIARY
PART II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
a. Exhibits
27 Financial Data Schedule
(EDGAR version only)
b. Reports on Form 8-K.
The Company did not file a Current Report on
Form 8-K during the quarter ended March 31, 1996.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RIDGESTONE FINANCIAL SERVICES, INC.
Date May 15, 1996 /s/ Paul E. Menzel
Paul E. Menzel
President
Date May 15, 1996 /s/ William R. Hayes
William R. Hayes
Vice President and Treasurer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF RIDGESTONE FINANCIAL SERVICES, INC.
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,457,779
<INT-BEARING-DEPOSITS> 1,509,314
<FED-FUNDS-SOLD> 10,607,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 2,873,857
<ALLOWANCE> 13,640
<TOTAL-ASSETS> 17,593,915
<DEPOSITS> 10,693,082
<SHORT-TERM> 0
<LIABILITIES-OTHER> 43,590
<LONG-TERM> 0
0
0
<COMMON> 7,721,399
<OTHER-SE> (864,566)
<TOTAL-LIABILITIES-AND-EQUITY> 17,593,915
<INTEREST-LOAN> 55,961
<INTEREST-INVEST> 93,225
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 149,186
<INTEREST-DEPOSIT> 65,105
<INTEREST-EXPENSE> 65,105
<INTEREST-INCOME-NET> 84,081
<LOAN-LOSSES> 4,640
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 355,098
<INCOME-PRETAX> (255,601)
<INCOME-PRE-EXTRAORDINARY> (255,601)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (256,510)
<EPS-PRIMARY> (.31)
<EPS-DILUTED> (.31)
<YIELD-ACTUAL> 6.01
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 9,000
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 13,640
<ALLOWANCE-DOMESTIC> 13,640
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
