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, 2000
[ ] 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, 2000
----- --------------------------------
Common Stock, no par value 876,492
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, 2000 and December 31, 1999.................................1
Consolidated Statements of Income
For the Three Months Ended March 31, 2000 and 1999 ..................2
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2000 and 1999...................3
Consolidated Statements of Stockholders' Equity
For the Three Months Ended March 31, 2000 and 1999...................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
March 31, 2000 and December 31, 1999
March 31, December 31,
2000 1999
(Unaudited)
----------- ------------
ASSETS
Cash and due from banks $ 2,153,049 $ 2,400,560
Interest-bearing deposits in banks 260,627 264,024
Federal funds sold 2,849,000 4,532,173
Investments - Held to Maturity
(fair value Mar 2000 $494,619
and Dec 1999 $995,203) 499,424 999,381
Investments - Available for Sale 65,125 128,500
Loans receivable 54,405,354 51,692,567
Less: Allowance for estimated loan losses (665,771) (653,270)
----------- -----------
Net loans receivable 53,739,583 51,039,297
----------- -----------
Mortgage loans held for sale 105,450 136,000
Office building and equipment, net 1,458,296 1,352,995
Other real estate owned 802,754 905,938
Cash surrender value of life insurance 1,965,457 1,942,672
Accrued interest & other assets 889,598 1,136,683
----------- -----------
Total assets $64,788,363 $64,838,223
=========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY LIABILITIES
Deposits:
Demand $ 9,982,176 $10,935,647
Savings, NOW and other time deposits 47,405,404 46,528,744
----------- -----------
Total deposits 57,387,580 57,464,391
Accrued interest & other liabilities 715,051 712,424
----------- -----------
Total liabilities 58,102,631 58,176,815
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, no par value:
10,000,000 shares authorized:
876,492 issued and outstanding 8,417,117 8,417,117
Retained (deficit) (1,678,281) (1,717,271)
Accumulated other comprehensive income (loss) (53,104) (38,438)
----------- -----------
Total stockholders' equity 6,685,732 6,661,408
----------- -----------
Total liabilities and stockholders' equity $64,788,363 $64,838,223
=========== ===========
1
<PAGE>
RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 2000 and 1999
(Unaudited)
Three Months Ended
March 31, March 31,
2000 1999
------------ -----------
Interest income
Interest on fees and loans $ 1,126,156 $ 950,153
Interest on securities 28,397 111,251
Interest on federal funds sold 31,854 82,407
Interest on deposits in banks 2,059 142
----------- -----------
Total interest income 1,188,466 1,143,953
----------- -----------
Interest expense
Interest on deposits 591,692 626,686
----------- -----------
Net interest income before
provision for loan losses 596,774 517,267
Provision for loan losses 12,500 7,500
----------- -----------
Net interest income after
provision for loan losses 584,274 509,767
----------- -----------
Non interest income
Secondary market loan fees 5,709 20,174
Service charges on deposit accounts 23,143 13,134
Miscellaneous 49,071 44,979
----------- -----------
Total non interest income 77,923 78,287
----------- -----------
Non interest expense
Salaries and employee benefits 347,105 306,656
Occupancy and equipment expense 116,266 90,840
(Gain) loss on sale of assets (6,211) 32,559
Loss on sale of AFS securities 9,164 15,402
Other expense 146,196 122,466
----------- -----------
Total non interest expense 612,520 567,923
----------- -----------
Income before income taxes 49,677 20,131
Income taxes (benefit) 10,687 (74,950)
----------- -----------
Net income $ 38,990 $ 95,081
=========== ===========
Earnings per share
Basic $ .04 $ .11
Diluted $ .04 $ .11
Weighted average shares outstanding 876,492 876,492
2
<PAGE>
RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2000 and 1999
(Unaudited)
Three Months Ended
March 31, March 31,
2000 1999
---------- -----------
Cash Flows From Operating Activities:
Net Income $ 38,990 $ 95,081
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation 43,595 35,831
Gain on sale of real estate (6,211) 0
Loss on sale of investment securities 9,164 15,402
Provision for loan losses 12,500 7,500
Charges to loan losses 0 (30,000)
Accretion/Amortization of securities - net (43) (67)
(Increase) decrease in assets
Interest receivable 232,869 42,303
Other assets (8,569) (404,386)
Increase (decrease) in liabilities:
Accrued interest 79,816 68,230
Other liabilities (77,189) (152,959)
--------- -----------
Total adjustments 292,143 (418,146)
--------- -----------
Net cash provided by (used in)
operating activities 331,133 (323,065)
--------- -----------
Cash Flows From Investing Activities:
Net (increase) decrease in
interest-bearing deposits 3,397 (5,492)
Net decrease in federal funds and
securities purchased under agreements
to resell 1,683,173 962,000
Net (increase) decrease in loans
available for sale 30,550 (1,318,447)
Proceeds from sales of available for
sale securities 53,088 55,548
Purchase of available for sale securities (13,542) (1,796,860)
Proceeds from maturities of held to
maturity securities 500,000 250,000
Net proceeds on other real estate 109,395 (7,144)
Purchases of premises and equipment (148,896) (2,356)
Net (increase) decrease in loans (2,712,787) 3,008,507
----------- -----------
Net cash provided by (used in)
investing activities (501,833) 1,145,756
----------- -----------
Cash Flows From Financing Activities:
Net increase (decrease) in deposits (76,811) (912,964)
----------- -----------
Net cash provided by (used in)
financing activities (76,811) (912,964)
----------- -----------
Net (decrease) increase in cash and
due from banks (247,511) (90,273)
Cash and due from banks, beginning 2,400,560 2,741,672
Cash and due from banks, ending 2,153,049 2,651,399
=========== ===========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest 511,300 694,916
Income taxes 10,687 (74,950)
Supplemental schedule of noncash investing
actitivies:
Net changes in unrealized gain on securities
available for sale (14,666) 12,790
3
<PAGE>
<TABLE>
RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three Months Ended March 31, 2000 and 1999
(Unaudited)
<CAPTION>
Accumulated
Other
Common Retained Comprehensive
Stock Earnings Income (Loss) Total
------ -------- ------------- -----
<S> <C> <C> <C> <C>
Balances, December 31, 1998 $ 8,417,117 $(2,196,449) $(22,524) $6,198,144
Comprehensive income:
Net income 95,081 95,081
Unrealized gain (loss) on
available for sale securities 8,177 8,177
Reclassification adjustment for gains
(losses) realized in net income 12,790 12,790
Income tax effect (8,177) (8,177)
----------
Total comprehensive income 107,871
----------- ----------- -------- ----------
Balances, March 31, 1999 $ 8,417,117 $(2,101,368) $ (9,734) $6,306,015
=========== =========== ======== ==========
Balances, December 31, 1999 $ 8,417,117 $(1,717,271) $(38,438) $6,661,408
Comprehensive income:
Net income 38,990 38,990
Unrealized gain (loss) on
available for sale securities (9,377) (9,377)
Reclassification adjustment for gains
(losses) realized in net income (14,666) (14,666)
Income tax effect 9,377 9,377
----------
Total comprehensive income 24,324
----------- ----------- -------- ----------
Balances, March 31, 2000 $ 8,417,117 $(1,678,281) $(53,104) $6,685,732
=========== =========== ======== ==========
</TABLE>
4
<PAGE>
RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and 1999
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Ridgestone Financial Services, Inc. (the "Company") 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 adjustments)
considered necessary for the fair presentation have been included. Operating
results for the three months ended March 31, 2000 are not necessarily indicative
of the results that may be expected for the year ended December 31, 2000. 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, 1999.
NOTE 2 - PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, Ridgestone Bank. All significant
intercompany accounts and transactions have been eliminated in consolidation.
NOTE 3 - COMPARATIVE DATA
Comparative statements of income and cash flows for the three months ended March
31, 2000 and March 31, 1999 have been presented.
5
<PAGE>
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 as of and for the three months ended March 31, 2000.
Financial Condition
Total Assets. Total assets of the Company as of March 31, 2000 were $64,788,363
compared to $64,838,223 as of December 31, 1999.
Cash and Cash Equivalents. Cash and interest bearing deposits, which represents
cash maintained at the Bank and funds that the Bank and the Company have
deposited in other financial institutions, was $2,413,676 at March 31, 2000,
compared to $2,664,584 as of December 31, 1999. The Bank reported $2,849,000 of
federal funds sold (which are inter-bank funds with daily liquidity) as of March
31, 2000 compared to $4,532,173 as of December 31, 1999. The $1,683,173 decrease
in federal funds sold is primarily a result of the Bank utilizing the cash to
fund loan growth.
Investment Securities. The Company'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 $499,424 at March 31, 2000 compared to $999,381
at December 31, 1999, a decrease of $499,957. The decrease was primarily a
result of cash from maturing securities being used to fund loan growth. The
securities available-for-sale portfolio was $65,125 at March 31, 2000 compared
to $128,500 at December 31, 1999.
Loans. Total loans prior to the allowance for estimated loan losses were
$54,405,354 as of March 31, 2000, compared to $51,692,567 as of December 31,
1999, an increase of $2,712,787 or 5%.
At March 31, 2000, the mix of the loan portfolio included Commercial loans of
$19,057,000 or 35% of total loans; Commercial Real Estate loans of $13,632,000
or 25% of total loans; Residential Real Estate loans of $18,644,000 or 34% of
total loans; and Consumer loans of $3,072,000 or 6% of total loans.
At December 31, 1999, the mix of the loan portfolio included Commercial loans of
$16,956,230 or 33% of total loans; Commercial Real Estate loans of $17,890,627
or 35% of total loans; Residential Real Estate loans of $12,168,015 or 24% of
total loans; and Consumer loans of $4,677,606 or 9% of total loans.
Allowance for Loan Losses. The allowance for estimated loan losses was $665,771
or 1.22% of gross loans on March 31, 2000, compared to $653,270 or 1.26% of
gross loans at December 31, 1999. In accordance with Financial Accounting
Standards Board Statements No. 5 and 114, the allowance is provided for losses
that have potentially been incurred based on the Bank's outstanding loan balance
as of
6
<PAGE>
the balance sheet date. The Bank evaluates the adequacy of the loan loss reserve
based on past events and current economic conditions, and does not include the
effects of potential losses on specific loans or groups of loans that are
related to future events or expected changes in economic conditions which are
then unknown to the Bank. For additional information regarding the Company's
allowance for loan losses, see "Results of Operations - Provision for Loan
Losses" below.
On March 31, 2000, the Company had $802,754 in Other Real Estate Owned compared
to $905,938 on December 31, 1999. The decrease was the result of the sale of
real estate assets owned by the Bank.
Deposits. As of March 31,2000, total deposits were $57,387,580 compared to
$57,464,391at December 31, 1999.
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. The loan-to-deposit funds ratio prior to loan loss reserve on March
31, 2000 was 95% compared to 90% at December 31, 1999. The Company's strategy
has been to control deposit growth while concentrating on improving asset
quality and growing the loan portfolio to enhance earnings. Loan demand has
exceeded anticipated levels and the Company has begun a marketing effort to
increase deposits in order to match deposit growth with increased loan demand.
Asset/Liability Management. Closely related to liquidity management is the
management of interest-earning assets and interest-bearing liabilities. The
Company manages its rate sensitivity position to avoid wide swings in net
interest margins and to minimize risk due to changes in interest rates.
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 interest-earning assets
and interest-bearing liabilities.
The Company currently does not expect to experience any material fluctuations in
its net interest income in the short term as a consequence of changes in
interest rates.
Results of Operations
Net Income. Net income before income taxes for the three-month period ended
March 31, 2000 increased by $29,546 or 147% to $49,677 as compared to net income
before income taxes of $20,131 in the same period of 1999. For the three-month
period ended March 31, 2000, the Company reported after-tax net income of
$38,990, compared to net after-tax income of $95,081for the three months ended
March 31, 1999. During the first quarter of 1999, the Company recognized an
income tax benefit of $74,950 related to the carryforward of prior year losses.
As of the end of 1999, all of the Company's loss carryforward benefits had been
recognized. As a result, first quarter of 2000 after-tax earnings do not include
a tax benefit, but rather a tax expense of $10,687.
Net Interest Income. Net interest income before provision for loan losses for
the three months ended March 31, 2000 was $596,774 compared to $517,267 for the
same period in 1999, an improvement of 15%. A higher yield on the asset
portfolio and reduced interest expense contributed to the increase. The
Company's net interest margin improved from 3.37% at March 31, 1999 to 4.21% at
March 31, 2000. Total interest income for the three months ended March 31, 2000
increased by $44,513, as compared with the same period in 1999, while total
interest expense decreased by $34,994.
7
<PAGE>
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 risks associated with the loans in the portfolio.
During the three month period ended March 31, 2000, a $12,500 provision was made
to the loan loss reserve to build the reserve to adequate levels in light of the
recent loan growth.
Non-Interest Income. Total non-interest income was $77,923 for the three months
ended March 31, 2000 compared to $78,287 for the same period in 1999. Rising
interest rates slowed mortgage volume, causing a decline in secondary market
loan fees, offset by an increase in service charges.
Non-Interest Expense. Total non-interest expenses (excluding any gains or losses
on the sale of securities and assets) were $609,567 for the three months ended
March 31, 2000 compared to $519,962 for the same period in 1999, an increase of
17%. The majority of the increase in non-interest expenses is attributed to
increased salary expense relating to increased staffing in the loan area.
Special Note Regarding Forward-Looking Statements
Certain matters discussed in this Quarterly Report on Form 10-QSB are
"forward-looking statements" intended to qualify for the safe harbors from
liability established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such because the
context of the statement will include words such as the Company "believes,"
"anticipates," "expects," or other words of similar import. Similarly,
statements that describe the Company's future plans, objectives, or goals are
also forward-looking statements. Such forward-looking statements are subject to
certain risks and uncertainties which could cause actual results to differ
materially from those contemplated in the forward-looking statements. Such risks
include, among others: interest rate trends, the general economic climate in the
Company's market area, loan delinquency rates, and legislative enactments or
regulatory changes which adversely affect the business of the Company and/or the
Bank. Shareholders, potential investors and other readers are urged to consider
these factors in evaluating the forward-looking statements. The forward-looking
statements included herein are only made as of the date of this Form 10-QSB and
the Company undertakes no obligation to publicly update such forward-looking
statements to reflect subsequent events or circumstances.
8
<PAGE>
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, 2000.
9
<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 12, 2000 /s/ Paul E.Menzel
----------------- -----------------------------------
Paul E. Menzel
President
Date: May 12, 2000 /s/ William R. Hayes
----------------- -----------------------------------
William R. Hayes
Vice President and Treasurer
10
<PAGE>
EXHIBIT INDEX
Exhibit Number
- --------------
a. Exhibits
27 Financial Data Schedule
(EDGAR version only)
11
<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, 2000 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001001791
<NAME> e3$desty
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,153,049
<INT-BEARING-DEPOSITS> 260,627
<FED-FUNDS-SOLD> 2,849,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 65,125
<INVESTMENTS-CARRYING> 499,424
<INVESTMENTS-MARKET> 494,619
<LOANS> 54,405,354
<ALLOWANCE> 665,771
<TOTAL-ASSETS> 64,788,363
<DEPOSITS> 57,387,580
<SHORT-TERM> 0
<LIABILITIES-OTHER> 715,051
<LONG-TERM> 0
0
0
<COMMON> 8,417,117
<OTHER-SE> (1,678,281)
<TOTAL-LIABILITIES-AND-EQUITY> 64,788,363
<INTEREST-LOAN> 1,126,156
<INTEREST-INVEST> 28,397
<INTEREST-OTHER> 33,913
<INTEREST-TOTAL> 1,188,466
<INTEREST-DEPOSIT> 591,692
<INTEREST-EXPENSE> 591,692
<INTEREST-INCOME-NET> 596,774
<LOAN-LOSSES> 0
<SECURITIES-GAINS> (9,164)
<EXPENSE-OTHER> 603,356
<INCOME-PRETAX> 49,677
<INCOME-PRE-EXTRAORDINARY> 49,677
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49,677
<EPS-BASIC> .04
<EPS-DILUTED> .04
<YIELD-ACTUAL> 8.38
<LOANS-NON> 5,307
<LOANS-PAST> 1,730,354
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 653,270
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 665,771
<ALLOWANCE-DOMESTIC> 656,826
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 8,945
</TABLE>
