- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended September 30, 1998
Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ___________ to ___________
Commission file number 333-19201
THE COMMERCIAL BANCORP, INC.
-----------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Florida 59-3396236
- ---------------------------- ----------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
258 North Nova Road
Ormond Beach, Florida 32174
----------------------------------------
(Address of Principal Executive Offices)
(904) 672-3003
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
---------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by Section
12, 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;
Common stock, par value $.01 per share 464,791 shares outstanding
- -------------------------------------- --------------------------
(class) at October 29, 1998
- --------------------------------------------------------------------------------
<PAGE>
THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY
INDEX
Part I. Financial Information
Item 1. Financial Statements Page
Condensed Consolidated Balance Sheets -
At September 30, 1998 (unaudited) and At December 31, 1997 . . . . . . . . 2
Condensed Consolidated Statements of Operations -
Three and Nine Months ended September 30, 1998 and 1997 (unaudited). . . . 3
Condensed Consolidated Statement of Stockholders' Equity -
Nine Months ended September 30, 1998 (unaudited) . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows -
Nine months ended September 30, 1998 and 1997 (unaudited). . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements (unaudited). . . . ..6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . .8-11
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . .12
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . .12
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
<PAGE>
THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
At
-----------------------------
September 30, December 31,
------------- ------------
Assets 1998 1997
------ ---- ----
(unaudited)
<S> <C> <C>
Cash and due from banks .......................................... $ 774,841 1,065,817
Federal funds sold ............................................... 2,326,260 1,400,000
---------- ---------
Total cash and cash equivalents ............................ 3,101,101 2,465,817
Securities available for sale .................................... 4,553,178 --
Loans receivable, net of allowance for loan losses of
$280,000 in 1998 and $35,000 in 1997 ........................... 9,626,118 3,745,577
Premises and equipment, net ...................................... 806,987 462,784
Accrued interest receivable and other assets ..................... 394,306 220,588
Deferred income taxes ............................................ 414,894 183,161
---------- ---------
Total assets ............................................... $ 18,896,584 7,077,927
============ =========
Liabilities and Stockholders' Equity
Liabilities:
Demand deposits ................................................. 522,620 832,396
Savings and NOW deposits ........................................ 3,900,484 1,040,454
Money-market deposits ........................................... 252,963 65,777
Time deposits ................................................... 9,911,024 739,433
---------- ---------
Total deposits ............................................. 14,587,091 2,678,060
Official checks ................................................. 173,473 54,138
Accrued interest payable and other liabilities .................. 270,713 11,944
---------- ---------
Total liabilities .......................................... 15,031,277 2,744,142
---------- ---------
Stockholders' equity:
Common stock, $.01 par value, 10,000,000 shares authorized,
464,791 shares issued and outstanding ......................... 4,648 4,648
Additional paid-in capital ...................................... 4,628,542 4,628,542
Accumulated deficit ............................................. (778,271) (299,405)
Accumulated other comprehensive income .......................... 10,388 --
---------- ---------
Total stockholders' equity ................................. 3,865,307 4,333,785
---------- ---------
Total liabilities and stockholders' equity ................. $ 18,896,584 7,077,927
============ =========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C>
Interest income:
Loans ........................................... $ 211,856 -- 499,295 --
Securities available for sale ................... 51,158 -- 82,638 --
Other interest-earning assets ................... 24,842 37,139 131,841 37,139
--------- ------- -------- --------
Total interest income ...................... 287,856 37,139 713,774 37,139
--------- ------- -------- --------
Interest expense:
Deposits ........................................ 180,280 -- 415,410 --
Other ........................................... 7,566 18,901 9,358 33,515
--------- ------- -------- --------
Total interest expense ..................... 187,846 18,901 424,768 33,515
--------- ------- -------- --------
Net interest income ........................ 100,010 18,238 289,006 3,624
Provision for loan losses ........................ 190,000 -- 245,000 --
--------- ------- -------- --------
Net interest (expense) income after
provision for loan losses ................ (89,990) 18,238 44,006 3,624
--------- ------- -------- --------
Noninterest income-
Service charges and fees ........................ 17,407 -- 36,178 --
--------- ------- -------- --------
Noninterest expense:
Salaries and employee benefits .................. 154,141 81,699 367,187 169,577
Occupancy expense ............................... 65,356 28,682 153,787 41,969
Advertising ..................................... 17,498 -- 66,698 --
Other ........................................... 83,256 65,526 209,478 107,255
--------- ------- -------- --------
Total noninterest expense .................. 320,251 175,907 797,150 318,801
--------- ------- -------- --------
Loss before income tax benefit ................... (392,834) (157,669) (716,966) (315,177)
Income tax benefit ......................... (134,900) (60,461) (238,100) (120,361)
--------- ------- -------- --------
Net loss ......................................... $(257,934) (97,208) (478,866) (194,816)
========= ======= ======== ========
Loss per share, basic ............................ $ (.55) (5.84) (1.03) (20.11)
========= ======= ======== ========
Dividends per share .............................. $ -- -- -- --
========= ======= ======== ========
Weighted-average number of shares outstanding
for basic ....................................... 464,791 16,652* 464,791 9,884*
========= ======= ======== ========
</TABLE>
* Represents shares issued to organizers during development stage.
See Accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statement of Stockholders' Equity
Nine Months Ended September 30, 1998
<TABLE>
<CAPTION>
Accumulated
Other
Additional Compre- Total
Common Paid-In Accumulated hensive Stockholders'
Stock Capital Deficit Income Equity
----- ------- ------- ------ ------
<S> <C> <C> <C> <C>
Balance at December 31, 1997 ............................. $ 4,648 4,628,542 (299,405) -- 4,333,785
---------
Comprehensive income:
Net loss (unaudited) ................................... -- -- (478,866) -- (478,866)
Net change in unrealized gain on
securities available for sale,
net of tax benefit of $ 6,367
(unaudited) ......................................... -- -- -- 10,388 10,388
---------
Comprehensive income (unaudited) ......................... -- -- -- -- (468,478)
---------- --------- -------- ------ ---------
Balance at September 30, 1998 (unaudited)................. $ 4,648 4,628,542 (778,271) 10,388 3,865,307
========== ========= ======== ====== =========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------
1998 1997
---- ----
(unaudited)
Cash flows from operating activities:
<S> <C> <C>
Net loss ................................................. $ (478,866) (194,816)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation ........................................... 38,737 --
Provision for loan losses .............................. 245,000 --
Credit for deferred income taxes ....................... (238,100) (120,361)
Increase in accrued interest receivable and other assets (173,718) (59,869)
Increase in accrued interest payable and
other liabilities .................................... 258,769 --
------------ ---------
Net cash used in operating activities .................. (348,178) (375,046)
------------ ---------
Cash flows from investing activities:
Net increase in loans .................................... (6,125,541) --
Purchases of securities available for sale ............... (6,187,015) --
Principal repayments on securities available for sale .... 1,650,592 --
Purchases of premises and equipment ...................... (382,940) (331,524)
------------ ---------
Net cash used in investing activities .................. (11,044,904) (331,524)
------------ ---------
Cash flows from financing activities:
Net increase in demand, savings, money-market and
NOW deposits ........................................... 2,737,440 --
Net increase in time deposits ............................ 9,171,591 --
Net increase in official checks .......................... 119,335 --
Net repayment of advances from organizers ................ -- (134,204)
Retire common stock ...................................... -- (65,000)
Sale of common stock ..................................... -- 4,633,190
------------ ---------
Net cash provided by financing activities .............. 12,028,366 4,433,986
------------ ---------
Net increase in cash and cash equivalents ....................... 635,284 3,727,416
Cash and cash equivalents at beginning of period ................ 2,465,817 11,959
------------ ---------
Cash and cash equivalents at end of period ...................... $ 3,101,101 3,739,375
============ =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ............................................... $ 399,329 33,515
============ =========
Income taxes ........................................... $ -- --
============ =========
Noncash transactions-
Accumulated other comprehensive income, change in
unrealized gain on securities available for sale ..... $ 10,388 --
============ =========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited)
(1) Basis of Presentation. In the opinion of the management of The
Commercial Bancorp, Inc., the accompanying condensed consolidated
financial statements contain all adjustments (consisting of normal
recurring accruals) necessary to present fairly the financial position
at September 30, 1998 and the results of operations for the three- and
nine-month periods ended September 30, 1998 and cash flows for the nine
months ended September 30, 1998 and 1997. The results of operations and
other data for the three- and nine-month periods ended September 30,
1998, are not necessarily indicative of results that may be expected
for the year ending December 31, 1998.
The condensed consolidated financial statements include the accounts of
The Commercial Bancorp, Inc. (the "Holding Company") and its
wholly-owned subsidiary, The Commercial Bank of Volusia County (the
"Bank") (together, the "Company"). All significant intercompany
accounts and transactions have been eliminated in consolidation.
(2) Loan Impairment and Loan Losses. The average net investment in impaired
loans and interest income recognized and received on impaired loans is
as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average investment in impaired loans .............................. $597,275 -- 199,092 --
Interest income recognized on impaired loans ...................... $ 14,185 -- 44,366 --
Interest income received on impaired loans ........................ $ -- -- 21,689 --
</TABLE>
The activity in the allowance for loan losses was as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C>
Balance at beginning of period .................................... $ 90,000 -- 35,000 --
Provision for loan losses ......................................... 190,000 -- 245,000 --
-------- ------- ------- -------
Balance at end of period .......................................... $280,000 -- 280,000 --
======== ======= ======= =======
</TABLE>
(3) Loss Per Share. Basic loss per share ("EPS") of common stock has been
computed on the basis of the weighted-average number of shares of
common stock outstanding. Diluted EPS is not computed due to the net
losses incurred by the Company during the three and nine months ended
September 30, 1998 or 1997.
(continued)
6
<PAGE>
THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
(4) Regulatory Matters. The Holding Company and the Bank are subject to
various regulatory capital requirements administered by various
regulatory 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 financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that
involve quantitative measures of the Bank's assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are
also subject to qualitative judgements by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier I capital (as defined in
the regulations) to risk-weighted assets (as defined), and of Tier I
capital (as defined) to average assets (as defined). Management
believes, at September 30, 1998, that the Company meets all capital
adequacy requirements to which it is subject.
As of September 30, 1998, 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, the Bank must maintain minimum total
risk-based, Tier I risk-based, and Tier I leverage ratios as set forth
in the table. There are no conditions or events since that notification
that management believes have changed the Bank's category. The Bank's
actual capital amounts and ratios are also presented in the table
(dollars in thousands).
<TABLE>
<CAPTION>
To Be Well
Minimum Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes: Action Provisions:
--------------------- ------------------ ------------------
Amount % Amount % Amount %
------ --- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C>
At September 30, 1998:
Total capital (to Risk-
Weighted Assets) ............. $3,376 30.8% $ 876 8.0% $1,096 10.0%
Tier I Capital (to Risk-
Weighted Assets) ............. 3,237 29.5 438 4.0 657 6.0
Tier I Capital
(to Average Assets) ......... 3,237 18.2 711 4.0 889 5.0
</TABLE>
7
<PAGE>
THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Comparison of September 30, 1998 (Unaudited) and December 31, 1997
General
The Commercial Bancorp, Inc. (the "Holding Company") was incorporated on
August 15, 1996. The Holding Company owns 100% of the outstanding common stock
of The Commercial Bank of Volusia County (the "Bank") (collectively, the
"Company"). The Holding Company was organized simultaneously with the Bank and
its only business is the ownership and operation of the Bank. The Bank is a
Florida state-chartered commercial bank and is insured by the Federal Deposit
Insurance Corporation. The Bank opened for business on October 14, 1997, and
provides community banking services to businesses and individuals in Volusia
County, Florida.
New Bank Charter
Management intends to organize and open a new state-chartered commercial bank
in Sebring, Highlands County, Florida. The new Bank will become a wholly-owned
subsidiary of the Holding Company. Management expects to raise the required
capital for the new bank from a public offering of the Company's common stock.
Liquidity and Capital Resources
The Company's primary source of cash during the nine months ended September
30, 1998 was from net deposit inflows of $11.9 million. Cash was used
primarily for loan originations net of repayments of $6.1 million and to
purchase securities available for sale of $6.2 million. At September 30, 1998,
the Company had unfunded lines of credit of approximately $517,000. At
September 30, 1998, the Bank exceeded its regulatory liquidity requirements.
The following table shows selected ratios for the periods ended or at the
dates indicated:
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Average equity as a percentage
of average assets ............................................. 26.46% 77.02%
Total equity to total assets at end of period .................... 20.46% 61.23%
Return on average assets (1) .................................... (4.12%) (9.18%)
Return on average equity (1) .................................... (15.57%) (11.91%)
Noninterest expense to average assets (1) ........................ 6.86% 16.85%
Nonperforming loans and foreclosed real estate
as a percentage of total assets at end of period .............. NIL NIL
Allowance for loan losses as a percentage of
total loans at end of period .................................. 2.79% .93%
</TABLE>
- ----------------------------------
(1) Annualized for the nine months ended September 30, 1998.
8
<PAGE>
THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations, Continued
Changes in Financial Condition
Total assets increased $11.8 million from $7.1 million at December 31, 1997 to
$18.9 million at September 30, 1998, primarily as a result of increases in
securities available for sale of $4.6 million and loans receivable of $5.9
million. Deposits increased $11.9 million from $2.7 million at December 31,
1997 to $14.6 million at September 30, 1998.
Results of Operations
Comparison of the Three-Month Periods Ended September 30, 1998 and 1997
General. Net loss for the three months ended September 30, 1998 was
$257,934, or $.55 per basic share compared to a net loss for the three
months ended September 30, 1997 of $97,208. At September 30, 1997, the
Bank had not commenced operations and at September 30, 1998, the Bank
had not achieved the asset size to operate profitably.
Interest Income and Expense. Interest income totaled $287,856 for the three
months ended September 30, 1998. Interest income earned on loans was
$211,856. The average loan portfolio balance for the three months ended
September 30, 1998 was $9.3 million with a weighted-average yield of
9.08%. Interest on securities was $51,158. The average balance of these
securities was $5.3 million and the weighted average yield was 3.86%
for the three months ended September 30, 1998. Interest on other
interest-earning assets totaled $24,842. The average balance of these
assets for the three months ended September 30, 1998 was $1.7 million
with a weighted-average yield of 5.74%.
Interest expense on deposits amounted to $180,280 for the three months
ended September 30, 1998. The average balance for interest-bearing
deposits for the three months ended September 30, 1998 was $13.8
million and the weighted-average rate was 5.06%.
Provision for Loan Losses. The provision for loan losses is charged to
earnings to increase the total allowance to a level deemed appropriate
by management and is based upon the volume and type of lending
conducted by the Company, industry standards, the amount of
nonperforming loans and general economic conditions, particularly as
they relate to the Company's market areas, and other factors related to
the collectibility of the Company's loan portfolio. The provision for
loan losses for the three months ended September 30, 1998 was $190,000
and the allowance for loan losses was $280,000 at September 30, 1998.
The provision and the allowance increased primarily due to the
classification of two commercial loans during the 1998 period.
Management has identified certain weaknesses in these borrowers, but
believes with this addition, that the allowance is adequate at
September 30, 1998.
Noninterest Expense. Noninterest expense totaled $320,251 for the three
months ended September 30, 1998 compared to $175,907 for the three
months ended September 30, 1997. Salaries and employee and benefits was
the largest noninterest expense during 1998, amounting to $154,141. The
Bank had not commenced operations during the three months ended
September 30, 1997.
Income Tax Benefit. The income tax benefit for the three months ended
September 30, 1998 was $134,900 (an effective rate of 34.3%) compared
to $60,461 (an effective rate of 38.3%) for the three months ended
September 30, 1997.
9
<PAGE>
THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations, Continued
Results of Operations
Comparison of the Nine-Month Periods Ended September 30, 1998 and 1997
General. Net loss for the nine months ended September 30, 1998 was $478,866,
or $1.03 per basic share compared to a net loss for the nine months
ended September 30, 1997 of $194,816. At September 30, 1997, the Bank
had not commenced operations and at September 30, 1998, the Bank had
not achieved the asset size to operate profitably.
Interest Income and Expense. Interest income totaled $713,774 for the nine
months ended September 30, 1998. Interest income earned on loans was
$499,295. The average loan portfolio balance for the nine months ended
September 30, 1998 was $7.6 million with a weighted-average yield of
8.80%. Interest on securities was $82,638 for the nine months ended
September 30, 1998. The average balance of securities was $2.7 million
and the yield was 4.16% for the nine months ended September 30, 1998.
Interest on other interest-earning assets totaled $131,841. The average
balance of these assets for the nine months ended September 30, 1998
was $3.2 million with a weighted-average yield of 5.55%.
Interest expense on deposits amounted to $415,410 for the nine months
ended September 30, 1998. The average balance for interest-bearing
deposits for the nine months ended September 30, 1998 was $10.8 million
and the weighted-average rate was 5.15%.
Provision for Loan Losses. The provision for loan losses is charged to
earnings to increase the total allowance to a level deemed appropriate
by management and is based upon the volume and type of lending
conducted by the Company, industry standards, the amount of
nonperforming loans and general economic conditions, particularly as
they relate to the Company's market areas, and other factors related to
the collectibility of the Company's loan portfolio. The provision for
loan losses for the nine months ended September 30, 1998 was $245,000
and the allowance for loan losses was $280,000 at September 30, 1998.
The provision and the allowance increased primarily due to the
classification of two commercial loans during the 1998 period.
Management has identified certain weaknesses in these borrowers, but
believes with this addition, that the allowance is adequate at
September 30, 1998.
Noninterest Expense. Noninterest expense totaled $797,150 for the nine
months ended September 30, 1998 compared to $318,801 for the nine
months ended September 30, 1997. Salaries and employee and benefits was
the largest noninterest expense during 1998, amounting to $367,187. The
Bank had not commenced operations during the nine months ended
September 30, 1997.
Income Tax Benefit. The income tax benefit for the nine months ended
September 30, 1998 was $238,100 (an effective rate of 33.2%) compared
to $120,361 (an effective rate of 38.2%) for the nine months ended
September 30, 1997.
10
<PAGE>
THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY
Year 2000
The Company is acutely aware of the many areas affected by the Year 2000
computer issue as addressed by the Federal Financial Institutions Examination
Council ("FFIEC") in its interagency statement which provided an outline for
institutions to effectively manage the Year 2000 challenges. A Year 2000 plan
has been approved by the Board of Directors which includes multiple phases,
tasks to be completed, and target dates for completion. Issues addressed therein
include awareness, assessment, renovation, validation, implementation, testing
and contingency planning.
The Bank has formed a Year 2000 committee that is charged with the oversight of
completing the project on a timely basis. The Bank has completed its awareness,
assessment and renovation phases and is actively involved in validating and
implementing its plan. At the present time, the Bank is well into its testing
phase and anticipates that this phase will be substantially completed by
December 31, 1998. Since it routinely upgrades and purchases technologically
advanced software and hardware on a continual bases, the Company has determined
that the costs of making modifications to correct any Year 2000 issues will not
materially affect reported results from operation.
The Company's vendors and suppliers have been contacted for written confirmation
of their product's readiness for the Year 2000 compliance. Negative or deficient
responses are analyzed and periodically reviewed to prescribe timely actions
with the Company's contingency planning. The Company's main service provider has
completed testing of its mission critical application software; the test
results, which have been documented and validated, are deemed to be Year 2000
compliant. FFIEC guidance on testing Year 2000 compliance of service providers
states that proxy tests are acceptable compliance tests. In proxy testing, the
service provider tests with a representative sample of financial institutions
that use a particular service, with the results of such testing shared with all
similarly situated clients of the service provider. The Company has authorized
the acceptance of proxy testing since the proxy tests have been conducted with
financial institutions that are similar in type and complexity to its own, using
the same version of Year 2000 ready software and the same hardware and operating
systems.
The Company also recognizes the importance of determining that its borrowers are
facing the Year 2000 problem in a timely manner to avoid deterioration of the
loan portfolio solely due to this issue. All material relationships have been
identified and questionnaires have been completed to assess the inherent risks.
The Company plans to work on a one-on-one basis with any borrower who has been
identified as having high Year 2000 risk exposure.
Although management believes that the Bank's system will be Year 2000 compliant,
a written contingency plan has been developed to address problems that might be
caused from Year 2000 system failures.
11
<PAGE>
THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings to which The Commercial
Bancorp, Inc. or its subsidiary is a party or to which any of their property
is subject.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit Number Description of Exhibit
-------------- ----------------------
3.1* Amended and Restated Articles of Incorporation of the
Company (Registration Statement)
3.2* By-laws of the Company (Registration Statement)
4.1* Specimen Common Stock Certificate (Registration
Statement)
4.2* Specimen Warrant Certificate (Registration Statement)
4.4* Company's Warrant Plan (Registration Statement)
10.1** 1997 Employee Stock Option and Limited Rights Plan
27 Financial Data Schedule (for SEC use only)
* Incorporated by reference to the exhibits included in the Company's Form
SB-2 Registration Statement, as filed with the Securities and Exchange
Commission on April 28, 1997 (Registration Number: 333-19201).
** Incorporated by reference to the exhibits included in the Company's Form
10-QSB for the quarter ended June 30, 1998, as filed with the Securities and
Exchange Commission on August 4, 1998.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed for the three
months ended September 30, 1998.
12
<PAGE>
THE COMMERCIAL BANCORP, INC. AND SUBSIDIARY
PART II. OTHER INFORMATION
SIGNATURES
Pursuant to the requirements 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.
THE COMMERCIAL BANCORP, INC.
(Registrant)
Date: , 1998 By: /s/Gary G. Campbell
----------------- ---------------------------
Gary G. Campbell, President
and Chief Executive Officer
Date: , 1998 By: /s/Harvey E. Buckmaster
----------------- ---------------------------
Harvey E. Buckmaster,
Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial informaiton extracted from Form 10-QSB
for the period ended September 30, 1998 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 775
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,326
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,553
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 9,906
<ALLOWANCE> 280
<TOTAL-ASSETS> 18,897
<DEPOSITS> 14,587
<SHORT-TERM> 0
<LIABILITIES-OTHER> 444
<LONG-TERM> 0
0
0
<COMMON> 5
<OTHER-SE> 3,860
<TOTAL-LIABILITIES-AND-EQUITY> 18,897
<INTEREST-LOAN> 499
<INTEREST-INVEST> 83
<INTEREST-OTHER> 132
<INTEREST-TOTAL> 714
<INTEREST-DEPOSIT> 415
<INTEREST-EXPENSE> 425
<INTEREST-INCOME-NET> 289
<LOAN-LOSSES> 245
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 797<F1>
<INCOME-PRETAX> (717)
<INCOME-PRE-EXTRAORDINARY> (717)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (479)
<EPS-PRIMARY> (1.03)
<EPS-DILUTED> (1.03)
<YIELD-ACTUAL> 2.88
<LOANS-NON> 0<F2>
<LOANS-PAST> 0<F2>
<LOANS-TROUBLED> 0<F2>
<LOANS-PROBLEM> 0<F2>
<ALLOWANCE-OPEN> 35
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 280
<ALLOWANCE-DOMESTIC> 280
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Other expense includes: salaries and employee benefits of $367, occupancy of
$154, advertising of $67 and other expenses which totaled $209.
<F2>Items are only disclosed on an annual basis in the Company's Form 10-KSB, and
are, therefore, not included in this Financial Data Schedule.
</FN>
</TABLE>
