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, 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 March 31, 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
March 31, 1997 and December 31, 1996 . . . . . . . . . 1
Consolidated Statements of Income
For the Three Months Ended March 31, 1997 and 1996 . . 2
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1997 and 1996 . . 3
Consolidated Statements of Stockholders' Equity
For the Three Months Ended March 31, 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
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, 1997 and December 31, 1996
March 31,
1997 December 31,
(Unaudited) 1996
ASSETS
Cash and due from banks $ 1,177,859 $ 1,494,244
Federal funds sold 10,306,000 13,259,000
Interest-earning deposits 200,018 184,637
----------- -----------
Total cash and cash equivalents 11,683,877 14,937,881
----------- -----------
Investments-Held to Maturity 4,999,463 5,005,606
(fair value Mar 31, 1997: $4,997,312 and
Dec 31, 1996: $5,041,826)
Investments-Available for Sale 1,118,043 1,051,813
Loans receivable 26,178,498 19,386,097
Less: Allowance for estimated loan losses (334,740) (334,740)
----------- -----------
Net loans receivable 25,843,758 19,051,357
----------- -----------
Office building and equipment, net 1,510,721 1,511,221
Accrued interest & other assets 293,149 247,656
----------- -----------
Total assets $45,449,011 $41,805,534
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing $ 4,025,004 $ 3,365,496
Interest-bearing 35,344,770 32,303,164
----------- -----------
Total deposits 39,369,774 35,668,660
----------- -----------
Other liabilities 234,807 268,869
----------- -----------
Total liabilities 39,604,581 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) (1,876,969) (1,879,126)
Unrealized gain on AFS securities --- 25,732
----------- -----------
Total stockholders' equity 5,844,430 5,868,005
----------- -----------
Total liabilities and
stockholders' equity $45,449,011 $41,805,534
=========== ===========
<PAGE>
RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 1997 and 1996
(Unaudited)
Three Months Ended
March 31, March 31,
1997 1996
Interest income:
Interest and fees on loans $498,970 $ 55,290
Interest on securities 189,896 0
Interest on federal funds sold 63,391 93,225
Interest on deposits in banks 4,092 15,284
-------- --------
Total interest income 756,349 163,799
-------- --------
Interest expense:
Interest on deposits 459,575 65,105
-------- --------
Total interest expense 459,575 65,105
-------- --------
Net interest income 296,774 98,694
Provision for loan losses 0 4,640
-------- --------
Net interest income after
provision for loan losses 296,774 94,054
Non-interest income:
Gain on sale AFS securities 76,354 0
Service charges on deposit accounts 5,362 1,186
Miscellaneous 24,800 9,482
-------- --------
Total operating income 106,516 10,668
-------- --------
Non-interest expense:
Salaries and employee benefits 230,444 178,282
Occupancy and equipment expense 81,664 56,814
Other expense 87,774 125,227
Pre-opening expense 0 0
-------- --------
Total operating expense 399,882 360,323
-------- --------
Income (loss) before income taxes 3,408 (255,601)
-------- --------
Income taxes 1,251 909
-------- --------
Net income (loss) $ 2,157 $(256,510)
======== =========
Earnings (loss) per share $ 0.00 $ (0.31)
======== =========
Average shares outstanding 834,340 834,340
<PAGE>
RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1997 and 1996
(Unaudited)
Three Months Ended March 31,
1997 1996
Cash Flows From Operating Activities:
Net income (loss) $ 2,157 $ (256,510)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation 42,809 32,770
Gain on sale of investment securities (76,354) 0
Provision for loan losses 0 4,640
Amortization of organizational costs 0 0
(Increase)decrease in assets:
Interest receivable (45,691) (13,067)
Other assets 198 8,508
Increase(decrease) in liabilities:
Accrued interest (37,107) 0
Other liabilities 3,045 38,141
----------- -----------
Total adjustments (113,100) 70,992
----------- -----------
Net cash used in operating activities (110,943) (185,518)
----------- -----------
Cash Flows From Investing Activities:
Proceeds from sales of available for
sale securities 725,211 0
Purchase of available for sale securities (739,378) 0
Proceeds from maturities of held to
maturity securities 4,702 0
Purchase of held to maturity securities 0 0
Purchases of premises and equipment (42,309) (79,426)
Net increase in loans (6,792,401) (2,144,087)
----------- -----------
Net cash (used in) investing activities (6,844,175) (2,223,513)
----------- -----------
Cash Flows From Financing Activities:
Net increase in deposits 3,701,114 7,384,961
Proceeds from notes payable 0 0
----------- -----------
Net cash provided by financing activities 3,701,114 7,384,961
----------- -----------
Net increase in cash and cash equivalents (3,254,004) 4,975,930
Cash and cash equivalents, beginning 14,937,881 8,598,163
----------- -----------
Cash and cash equivalents, ending $11,683,877 $13,574,093
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 423,282 $ 52,039
=========== ===========
Income taxes $ 1,276 $ 909
=========== ===========
Supplemental schedule of noncash
investing activities:
Net changes in unrealized gain (loss)
on securities available for sale $ (25,732) $ 0
=========== ===========
<PAGE>
RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three Months Ended March 31, 1997 and 1996
Available
Common Retained For Sale
Stock Earnings Securities
Balances
December 31, 1995 $7,721,399 $ (608,056) $ 0
Net loss-YTD 1995 (256,510)
---------- ----------- --------
Balances
March 31, 1996 $7,721,399 $ (864,566) $ 0
========== =========== ========
Balances
December 31, 1996 $7,721,399 $(1,879,126) $ 25,732
Net gain-YTD 1997 2,157
Changes in unrealized gain (loss) on
available for sale securities (25,732)
---------- ----------- --------
Balances
March 31, 1997 $7,721,399 $(1,876,969) $ 0
========== =========== ========
<PAGE>
RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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
three-months ended March 31, 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 consolidated financial statements include the accounts of
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.
Comparative statements of income and cash flows for the three months ended
March 31, 1997 and March 31, 1996 have been presented.
Item 2. Management's Discussion and Analysis
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.
The following is a discussion of the Company's Financial Condition and
Results of Operations for the quarter ended March 31, 1997.
Financial Condition
Total Assets. Total assets of the Company as of March 31, 1997 were
$45,449,011 compared to $41,805,534 as of December 31, 1996, an increase
of 8.7%.
Loans. Loans prior to the allowance for estimated loan losses were
$26,178,498 as of March 31, 1997, an increase of $6,792,401 or 35% from
December 31, 1996. At March 31, 1997, the mix of the loan portfolio
included Commercial loans of $10,520,796 or 40.2% of total loans;
Commercial Real Estate loans of $9,234,562 or 35.3% of total loans;
Residential Real Estate Loans of $5,920,758 or 22.6% of total loans; and
Consumer Loans of $502,383 or 1.9% of total loans. In addition to the
Bank's outstanding loan balances, the Bank had unfunded loan commitments
of $10,979,000 as of March 31, 1997.
Allowance for Loan Losses. The allowance for estimated loan losses was
$334,740 or 1.28% of gross loans on March 31, 1997. There were no loan
charge-offs or recoveries during 1996 or for the quarter ended March 31,
1997. The Bank evaluates the adequacy of the reserve for 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
reserve for 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 loan losses, see
"Results of Operations - Provision for Loan Losses" below.
Cash and Cash Equivalents. Cash and cash equivalents were $11,683,877 as
of March 31, 1997 compared to $14,937,881 as of December 31, 1996, a
decrease of $3,254,004. 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 $4,999,463 at March 31, 1997
compared to $5,005,606 at December 31, 1996.
The securities available-for-sale portfolio was $1,118,043 at March 31,
1997 compared to $1,051,813 at December 31, 1996.
Deposits. As of March 31, 1997, total deposits were $39,369,774, an
increase of $3,701,114 or 10.4% from December 31, 1996. Each category of
deposits increased during the first quarter of 1997. Demand Deposits
increased by $659,508 or 19.6% while Interest-Bearing Demand Deposits
increased by $2,202,191 or 13.6% and Time Deposits increased by $839,415
or 5.2% since December 31, 1996. The increase in deposits is primarily
the result of the Bank's success in 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.
Interest-sensitive assets and liabilities are those that are subject to
repricing within a specific relevant time horizon. The Company measures
interest-sensitive assets and liabilities, and their relationship with
each other, in terms of immediate, quarterly intervals up to one year and
over one year.
Changes in net interest income, other than volume related changes, arise
when interest rates on assets reprice in a time frame or interest rate
environment that is different from the repricing period for liabilities.
Changes in net interest income also arise from changes in the mix of
earning assets and interest-bearing liabilities.
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. Management believes that current
liquidity levels are sufficient to meet future demands. As of March 31,
1997, cash and cash equivalents and securities available for sale
represented 116% of unfunded loan commitments.
Results of Operations
For the three-month period ended March 31, 1997, the Company reported net
income of $2,157, marking the Company's first profitable quarter. This
compares favorably to losses of $256,510 and $467,664 in the first and
fourth quarters of 1996, respectively.
Net Interest Income. Net interest income for the quarter ended March 31,
1997 was $296,774 compared to $98,694 for the first quarter of 1996, an
improvement of 201%. The increase was due primarily to greater average
outstanding balances in interest bearing assets, primarily loans. Total
interest income for the quarter ended March 31, 1997 increased by $592,550
as compared with the first quarter of 1996, while total interest expense
rose by $394,470.
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.
During the three-month period ended March 31, 1997, no provision for loan
losses was made, as management considered the current reserve of $334,740
or 1.28% of outstanding loans to be adequate. Loan growth for the first
quarter was not at the rate that management had anticipated, and therefore
no additional provision for estimated loan losses was made. Subsequent to
March 31, 1997, management classified a commercial real estate loan as a
problem loan. The loan, which has an original aggregate principal amount
of $650,000, was made to a developer for the construction of single family
residences. Management does not currently expect that the Bank will incur
a material loss with respect to this loan nor need to increase the loan
loss provision as a result of such loan.
The Bank has allocated $105,208 or 31.4% of the reserve for estimated
loan losses to Commercial Loans, $13,852 or 4.1% to Commercial Real
Estate, $5,921 or 1.8% to Residential Real Estate and $5,024 or 1.5% to
Consumer Loans. The balance of the reserve for estimated loan losses of
$204,736 is unallocated.
Non-Interest Income and Expense. Other operating income was $106,516 for
the first three months of 1997 compared to $10,668 for the same period in
1996, an increase of $95,848. The increase was due primarily to a $76,354
gain on the sale of securities and a $15,318 increase in miscellaneous
income.
Operating expenses were $399,882 for the quarter ended March 31, 1997
compared to $360,323 for the first three months of 1996. For the first
quarter of 1997, payroll expense was $230,444 or 58% of total operating
expenses and occupancy and equipment expense was $81,664 or 20% or of
total operating expenses. Payroll and occupancy expense increased by
$77,012 over the same period in 1996. Payroll expense increased primarily
due to the growth of the Bank and occupancy expense increased with the
opening of a new branch facility in January 1997. Other expense decreased
by $37,453 from the first quarter of 1996 due primarily to start up
expenses incurred in the first quarter of 1996.
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, 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 May 14, 1997 /s/ Paul E. Menzel
Paul E. Menzel
President
Date May 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 RIDGESTONE FINANCIAL
SERVICES, INC. AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,177,859
<INT-BEARING-DEPOSITS> 200,018
<FED-FUNDS-SOLD> 10,306,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,118,043
<INVESTMENTS-CARRYING> 4,999,463
<INVESTMENTS-MARKET> 4,997,312
<LOANS> 26,178,498
<ALLOWANCE> 334,740
<TOTAL-ASSETS> 45,449,011
<DEPOSITS> 39,369,774
<SHORT-TERM> 0
<LIABILITIES-OTHER> 293,149
<LONG-TERM> 0
0
0
<COMMON> 7,721,399
<OTHER-SE> (1,876,969)
<TOTAL-LIABILITIES-AND-EQUITY> 5,844,430
<INTEREST-LOAN> 498,970
<INTEREST-INVEST> 189,896
<INTEREST-OTHER> 67,483
<INTEREST-TOTAL> 756,349
<INTEREST-DEPOSIT> 459,575
<INTEREST-EXPENSE> 459,575
<INTEREST-INCOME-NET> 296,774
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 76,354
<EXPENSE-OTHER> 399,882
<INCOME-PRETAX> 3,408
<INCOME-PRE-EXTRAORDINARY> 3,408
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,408
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
<YIELD-ACTUAL> 7.30
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 334,740
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 334,740
<ALLOWANCE-DOMESTIC> 135,494
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 199,246
</TABLE>
