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 SEPTEMBER 30, 1997
[ ] 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 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 September 30, 1997
Common Stock, no par value 834,340
Transitional Small Business Disclosure Format: Yes___ No X
<PAGE>
RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . . . 1
Consolidated Statements of Financial Condition
at September 30, 1997 and December 31, 1996 . . . . . . 1
Consolidated Statements of Income
For the Three and Nine Months Ended
September 30, 1997 and 1996 . . . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows
For the Nine Months Ended
September 30, 1997 and 1996 . . . . . . . . . . . . . . 3
Consolidated Statements of Stockholders' Equity
For the Nine Months Ended
September 30, 1997 and 1996 . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements . . . . . . 5
Item 2. Management's Discussion and Analysis . . . . . . . . . 6
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 9
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . 11
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, 1997 and December 31, 1996
September 30, 1997 December 31,
(Unaudited) 1996
ASSETS
Cash and due from banks $ 1,445,332 $ 1,494,244
Federal funds sold 4,056,000 13,259,000
Interest-earning deposits 29,195 184,637
------------ ------------
Total cash and cash equivalents 5,530,527 14,937,881
------------ ------------
Investments-Held to Maturity 4,799,394 5,005,606
(fair value Sep 30,
1997:$4,753,781 and Dec 31,
1996:$5,041,826)
Investments-Available for Sale 1,878,594 1,051,813
Loans receivable 40,351,115 19,386,097
Less: Allowance for estimated
loan losses (334,740) (334,740)
------------ ------------
Net loans receivable 40,016,375 19,051,357
------------ ------------
Office building and equipment, net 1,450,765 1,511,221
Accrued interest & other assets 453,544 247,656
------------ ------------
Total assets $ 54,129,199 $ 41,805,534
============ ============
LIABILITIES AND STOCKHOLDERS'
EQUITY LIABILITIES
Deposits:
Noninterest-bearing $ 5,686,235 $ 3,365,496
Interest-bearing 41,855,365 32,303,164
------------ ------------
Total deposits 47,541,600 35,668,660
------------ ------------
Other liabilities 395,664 268,869
------------ ------------
Total liabilities 47,937,264 35,937,529
------------ ------------
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) (1,843,390) (1,879,126)
Unrealized gain on AFS securities 313,926 25,732
------------ ------------
Total stockholder's equity 6,191,935 5,868,005
------------ ------------
Total liabilities and
stockholders' equity $ 54,129,199 $ 41,805,534
============ ============
<PAGE>
RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Three and Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Three Months Ended Nine Months Ended
Sept 30 Sept 30 Sept 30 Sept 30
1997 1996 1997 1996
Interest income:
Interest and fees
on loans $810,390 $ 124,159 $1,922,499 $ 290,686
Interest on
securities 95,045 84,519 458,926 115,325
Interest on
federal funds sold 62,939 216,677 151,255 468,485
Interest on
deposits in banks 3,970 3,885 11,107 26,342
-------- -------- --------- ---------
Total interest income 972,344 429,240 2,543,788 900,838
-------- -------- --------- ---------
Interest expense:
Interest on deposits 542,853 329,631 1,495,304 586,680
-------- -------- --------- ---------
Total interest
expense 542,853 329,631 1,495,304 586,680
-------- -------- --------- ---------
Net interest income 429,491 99,609 1,048,484 314,158
Provision for loan losses 0 30,000 0 60,740
-------- -------- --------- ---------
Net interest income
after provision for
loan losses 429,491 69,609 1,048,484 253,418
Non-interest income:
Gain on sale AFS
securities 7,587 0 167,659 0
Service charges
on deposit accounts 4,594 2,621 15,749 6,004
Miscellaneous 49,991 43,359 115,760 56,026
-------- -------- --------- ---------
Total operating
income 62,172 45,980 299,168 62,030
-------- -------- --------- ---------
Non-interest expense:
Salaries and
employee benefits 240,631 165,348 704,515 504,541
Occupancy and
equipment expense 100,149 71,437 260,548 211,264
Other expense 147,992 126,007 345,603 402,140
Pre-opening expense 0 0 0 0
-------- -------- --------- ---------
Total operating
expense 488,772 362,792 1,310,666 1,117,945
-------- -------- --------- ---------
Income (loss)
before income taxes 2,891 (247,203) 36,986 (802,497)
-------- -------- --------- ---------
Income taxes 0 0 1,251 909
-------- -------- --------- ---------
Net income (loss) $ 2,891 $(247,203) $ 35,735 $ (803,406)
======== ========= ========= =========
Earnings(loss) per share $ 0.00 $ (0.30) $ 0.04 $ (0.96)
======== ========= ========= =========
Average shares
outstanding 834,340 834,340 834,340 834,340
<PAGE>
RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Nine Months Ended
Sept 30, Sept 30,
1997 1996
Cash flows from operating activities:
Net income (loss) $ 35,735 $ (803,406)
Adjustments to reconcile net income
(loss) to net cash used in operating
activities:
Depreciation 133,730 134,751
Gain on sale of investment securities (167,659) 0
Provision for loan losses 0 60,740
Amortization of organizational costs 0 1,590
(Increase) decrease in assets:
Interest receivable (137,083) (130,082)
Other assets (68,805) 3,122
Increase in liabilities:
Accrued interest 126,793 209,436
Other liabilities 0 6,124
---------- ----------
Total adjustments (113,024) 285,681
---------- ----------
Net cash used in operating activities (77,289) (517,725)
---------- ----------
Cash flows from investing activities:
Proceeds from sales of securities
available for sale 1,161,046 1,242,917
Purchase of available for sale securities (1,531,971) (2,310,936)
Proceeds from maturities of securities
held to maturity 309,664 0
Purchase of securities held to maturity (250,000) (5,255,361)
Purchases of premises and equipment 73,274 (227,345)
Net increase in loans (20,965,018) (7,604,883)
---------- ----------
Net cash used in investing activities (21,203,005) (14,155,608)
---------- ----------
Cash flows from financing activities:
Net increase in deposits 11,872,940 25,734,360
Proceeds from notes payable 0 0
---------- ----------
Net cash provided by financing activities 11,872,940 25,734,360
---------- ----------
Net increase (decrease) in cash and
cash equivalents (9,407,354) 11,061,027
Cash and cash equivalents, beginning 14,937,881 8,598,163
---------- ----------
Cash and cash equivalents, ending $ 5,530,527 $19,659,190
=========== ===========
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest $ 1,335,361 $ 377,534
=========== ===========
Income taxes $ 1,276 $ 25
=========== ===========
Supplemental schedule of noncash
investing activities:
Net changes in unrealized gain on
securities available for sale $ 288,194 $ 6,227
=========== ===========
<PAGE>
RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Nine Months Ended September 30, 1997 and 1996
Available
Common Retained For Sale
Stock Earnings Securities
Balances $ 7,721,399 $ (608,056) $ 0
December 31, 1995
Net loss-YTD 1996 (803,406)
----------- ---------- ---------
Balances $ 7,721,399 $(1,411,462) $ 0
=========== ============ =========
September 30, 1996
Balances $ 7,721,399 $(1,879,126) $ 25,732
December 31, 1996
Net gain-YTD 1997 35,735
Changes in unrealized gain
(loss) on available for sale
securities 288,194
___________ ___________ _________
Balances $ 7,721,399 $(1,843,391) $ 313,926
=========== =========== =========
September 30, 1997
<PAGE>
RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 and 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 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 the fair presentation have been included. Operating results for the
nine months ended September 30, 1997 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1997. 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, 1996.
NOTE 2 - PRINCIPLES OF CONSOLIDATION
The accompanying unaudited condensed 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 of 1994, but its primary operating
subsidiary, the Bank, did not commence operations until December 7, 1995.
The following financial statements are presented herein: (i) comparative
statements of financial condition at September 30, 1997 and December 31,
1996; (ii) comparative statements of income for the three and nine months
ended September 30, 1997 and September 30, 1996; (iii) comparative
statements of cash flows for the nine months ended September 30, 1997 and
September 30, 1996 and; (iv) an analysis of the statements of stockholder's
equity for the nine months ended September 30, 1997 and September 30,
1996.
Item 2. Management's Discussion and Analysis
General
Ridgestone Financial Services, Inc. (the "Company") was incorporated 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.
The following is a discussion of the Company's Financial Condition and
Results of Operations for the three and nine months ended September 30,
1997.
Financial Condition
Total Assets. Total assets of the Company as of September 30, 1997 were
$54,129,199 compared to $41,805,534 as of December 31, 1996, an increase
of 29.5%. This increase was primarily the result of loan growth at the
Bank.
Loans. Loans prior to the allowance for estimated loan losses were
$40,351,115 as of September 30, 1997, an increase of $20,965,018 or 108.1%
from December 31, 1996. At September 30, 1997, the mix of the loan
portfolio included Commercial Loans of $15,819,214 or 39.2% of total
loans; Commercial Real Estate Loans of $10,935,051 or 27.1% of total
loans; Residential Real Estate Loans of $10,882,144 or 27.0% of total
loans; and Consumer Loans of $2,714,706 or 6.7% of total loans.
Allowance for Estimated Loan Losses. The allowance for estimated loan
losses was $334,740 or .83% of gross loans on September 30, 1997. There
were no loan charge-offs or recoveries during 1996 or for the nine months
ended September 30, 1997. On a regular basis, management evaluates the
adequacy of the allowance for estimated loan losses based on factors such
as the local and national economy as well as an analysis of specific
problem loans and loans on an aggregate basis. The allowance for
estimated loan losses is maintained at a level management considers
adequate to provide for potential future losses. For additional
information regarding the Company's allowance for estimated loan losses,
see "Results of Operations - Provision for Loan Losses" below.
Cash and Cash Equivalents. Cash and cash equivalents were $5,530,527 as
of September 30, 1997 compared to $14,937,881 as of December 31, 1996, a
decrease of $9,407,354. Cash and cash equivalents represent cash
maintained at the Bank and funds that the Bank and the Company have
deposited in other financial institutions. The decrease was primarily in
federal funds sold, which are inter-bank funds with daily liquidity, and
was the result of the funding of loan growth at the Bank.
Investment Securities. The Bank's investment portfolio consists of (i)
securities purchased with the intent to hold the securities until they
mature and (ii) securities placed in the available for sale category which
may be liquidated to provide cash for operating or financing purposes.
The securities held-to-maturity portfolio was $4,799,394 at September 30,
1997 compared to $5,005,606 at December 31, 1996. The securities
available-for-sale portfolio was $1,878,594 at September 30, 1997 compared
to $1,051,813 at December 31, 1996.
Deposits. As of September 30, 1997, total deposits were $47,541,600, an
increase of $11,872,940 or 33.3% from December 31, 1996. Each category of
deposits increased during the first nine months of 1997. Demand Deposits
increased by $2,320,739 or 69.0%, while Interest-Bearing Demand Deposits
and Savings increased by $3,127,596 or 18.6% and Time Deposits increased
by $6,424,605 or 29.3% since December 31, 1996. The increase in deposits
was primarily the result of the Bank expanding relationships with its
existing customers and the continued emphasis on attracting targeted new
customers.
Asset/Liability Management. The principal function of asset/liability
management is to manage the balance sheet mix, maturities, repricing
characteristics and pricing components to provide an adequate and stable
net interest margin with an acceptable level of risk over time and through
interest rate cycles.
Liquidity. For banks, liquidity generally represents the ability to meet
withdrawals from deposits and the funding of loans. The assets that
provide liquidity are cash, federal funds sold and short-term loans and
securities. Liquidity needs are influenced by economic conditions,
interest rates and competition. Although loan growth can negatively
affect short-term liquidity, management believes the Bank will be able to
meet liquidity demands as the Bank's loan growth continues.
Results of Operations
For the quarter ended September 30, 1997, the Company reported net income
of $2,891 as compared to a loss of $247,203 for the same period in 1996.
For the nine month period ended September 30, 1997, the Company reported
net income of $35,735 which compared to a loss $803,406 for the nine
months ended September 30, 1996.
Net Interest Income. Net interest income for the three months ended
September 30, 1997 was $429,491, an increase of $329,882 from the same
period in 1996. Net interest income for the nine months ended
September 30, 1997 was $1,048,484 compared to $314,158 for the same period
in 1996, an increase of 233.7%. The increase was due primarily to greater
average outstanding balances in interest bearing assets, primarily loans.
Total interest income for the three months ended September 30, 1997 was
$972,344 and $2,543,788 for the nine months ended September 30, 1997, an
increase of $543,104 and $1,642,950 over the same periods in 1996,
respectively. Total interest expense rose by $908,624 for the nine months
ended September 30, 1997 and $213,222 for the three months ended September
30, 1997 over the same periods in 1996. The increase in interest expense
was primarily due to greater average balances in interest-bearing
deposits.
Provision for Loan Losses. The provision for loan losses is based on
management's evaluation of factors such as the local and national economy
and the risk associated with the loans in the portfolio. Management
considers the adequacy of the allowance for estimated loan losses on a
regular basis. During the nine month period ended September 30, 1997, no
provision for loan losses was made, as management considered the current
reserve of $334,740 or .83% of outstanding loans to be adequate.
A real estate loan with an original principal amount of $650,000 which was
secured by certain real estate assets was placed in non-accrual in the
second quarter of 1997. The entity owning the underlying real estate
assets securing this loan filed for bankruptcy in the third quarter of
1997. The Bank purchased these real estate assets from the bankruptcy
court on October 27, 1997 for an additional $953,790. The Bank's fourth
quarter financial statements will reflect the new status of the loan as
other real estate owned. The real estate assets are presently being
liquidated and management does not currently anticipate that the Bank will
incur a material loss as a result of the original loan.
Non-Interest Income and Expense. Other operating income was $62,172 for
the three months ended September 30, 1997 compared to $45,980 for the same
period in 1996. Other operating income was $299,168 for the first nine
months of 1997 compared to $62,030 for the same period in 1996, an
increase of $237,138. These increases were due primarily to gains on the
sale of securities and increased fee income.
Operating expenses were $488,772 for the three months ended September 30,
1997 compared to $362,792 for the same period in 1996. For the three
months ended September 30, 1997, salaries and employee benefit expense was
$240,631 or 49.2% of total operating expenses, and occupancy and equipment
expense was $100,149 or 20.5 % of total operating expenses. Payroll and
occupancy expense increased by $103,995 over the same period in 1996.
Operating expenses were $1,310,666 for the nine months ended September 30,
1997 compared to $1,117,945 for the same period in 1996. For the nine
month period ended September 30, 1997, salaries and employee benefit
expense was $704,515 or 53.8% of total operating expenses, and occupancy
and equipment expense was $260,548 or 19.9% of total operating expenses.
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 September 30, 1997.
<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: November 14, 1997 /s/ Paul E. Menzel
Paul E. Menzel
President
Date: November 14, 1997 /s/ William R. Hayes
William R. Hayes
Vice President and Treasurer
<PAGE>
EXHIBIT INDEX
Exhibit Number
27 Financial Data Schedule
(EDGAR version only)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF RIDGESTEON FINANCIAL
SERVICES, INC. AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,445,332
<INT-BEARING-DEPOSITS> 29,195
<FED-FUNDS-SOLD> 4,056,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,878,594
<INVESTMENTS-CARRYING> 4,799,394
<INVESTMENTS-MARKET> 4,753,781
<LOANS> 40,351,115
<ALLOWANCE> 334,740
<TOTAL-ASSETS> 54,129,199
<DEPOSITS> 47,541,600
<SHORT-TERM> 0
<LIABILITIES-OTHER> 395,662
<LONG-TERM> 0
0
0
<COMMON> 7,721,399
<OTHER-SE> (1,529,464)
<TOTAL-LIABILITIES-AND-EQUITY> 6,191,935
<INTEREST-LOAN> 1,922,499
<INTEREST-INVEST> 458,926
<INTEREST-OTHER> 162,362
<INTEREST-TOTAL> 2,543,788
<INTEREST-DEPOSIT> 1,495,304
<INTEREST-EXPENSE> 1,495,304
<INTEREST-INCOME-NET> 1,048,484
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 167,659
<EXPENSE-OTHER> 1,310,666
<INCOME-PRETAX> 36,986
<INCOME-PRE-EXTRAORDINARY> 36,986
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,986
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
<YIELD-ACTUAL> 7.72
<LOANS-NON> 448,699
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 334,740
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 334,740
<ALLOWANCE-DOMESTIC> 482,959
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> (148,219)
</TABLE>
