<PAGE> 1
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, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION REPORT FROM _____ TO _____
Commission file number 0-23619
Tarpon Coast Bancorp, Inc.
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(Exact name of small business issuer as specified in its charter)
Florida 65-0772718
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1490 Tamiami Trail
Port Charlotte, FL 33948
----------------------------------------
(Address of principal executive offices)
941-629-8111
---------------------------
(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, as 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, 1999
------ ------------------------------------
Common Stock, $.01 par value 1,182,151
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE> 2
TARPON COAST BANCORP, INC.
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet as of September 30, 1999 and December 31, 1998 1
Statement of Operations for the Three Months
Ended September 30, 1999 and 1998 2
Statements of Operations for the Nine Months
Ended September 30, 1999 and 1998 3
Statement of Cash Flows for the Nine Months
Ended September 30, 1999 and 1998 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis 6
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 9
EXHIBIT INDEX 9
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
TARPON COAST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,696,037 $ 990,881
Federal funds sold 1,800,000 3,700,000
------------ ------------
Total cash and cash equivalents 3,496,037 4,690,881
Securities available for sale 9,906,179 8,652,487
Loans 23,256,955 7,367,382
Less allowance for loan losses (390,145) (154,000)
------------ ------------
Net loans 22,866,810 7,213,382
Premises and equipment, net 3,004,160 2,149,409
Accrued interest & other assets 384,652 131,355
------------ ------------
Total assets $ 39,657,838 $ 22,837,514
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 5,305,276 $ 2,199,196
Interest bearing 22,019,850 10,003,192
------------ ------------
Total deposits 27,325,126 12,202,388
Customer Repurchase Agreements 2,886,872 --
Accrued interest & other liabilities 71,715 47,089
------------ ------------
Total liabilities 30,283,713 12,696,060
Shareholders' equity:
Common stock, par value $.01 per share,
10,000,000 shares authorized; 1,182,151 shares
issued and outstanding 11,821 11,821
Additional paid-in capital 10,940,915 10,940,915
Deficit (1,484,428) (824,268)
Unrealized loss on securities available for sale (94,183) 12,986
------------ ------------
Total shareholders' equity 9,374,125 10,141,454
------------ ------------
Total liabilities and shareholders' equity $ 39,657,838 $ 22,837,514
============ ============
</TABLE>
See accompanying notes to financial statements.
1
<PAGE> 4
TARPON COAST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended September 30,
---------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 418,176 $ 45,766
Interest on securities 162,413 102,726
Interest on federal funds sold 30,961 57,296
----------- -----------
Total interest income 611,550 205,788
Interest expense:
Interest on deposits 240,358 36,729
Interest on repurchase agreements 28,595 24,725
----------- -----------
Total interest expense 268,953 61,454
----------- -----------
Net interest income 342,597 144,334
Provision for loan losses 87,000 57,000
----------- -----------
Net interest income after
provision for loan losses 255,597 87,334
Non-interest income 24,601 2,388
Non-interest expense:
Salaries and benefits 233,480 160,457
Occupancy and equipment expense 94,558 87,703
Other expense 134,871 81,103
----------- -----------
Total non-interest expense 462,909 329,263
----------- -----------
Net loss (182,711) (239,541)
----------- -----------
Other comprehensive income (loss) 8,752 32,075
----------- -----------
Comprehensive income (loss) $ (173,959) $ (207,466)
=========== ===========
Net loss per share $ (0.15) $ (0.20)
=========== ===========
Average shares outstanding 1,182,151 1,182,151
=========== ===========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 5
TARPON COAST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
---------------------------------
1999 1998
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<S> <C> <C>
Interest income:
Interest and fees on loans $ 887,849 $ 50,484
Interest on securities 428,859 119,626
Interest on federal funds sold 145,799 82,743
Interest on reverse repurchase agreement -- 171,008
----------- -----------
Total interest income 1,462,507 423,861
Interest expense:
Interest on deposits 590,433 39,612
Interest on repurchase agreements 60,849 24,725
----------- -----------
Total interest expense 651,282 64,337
----------- -----------
Net interest income 811,225 359,524
Provision for loan losses 241,000 74,000
----------- -----------
Net interest income after
provision for loan losses 570,225 285,524
Non-interest income 55,960 7,476
Non-interest expense:
Salaries and benefits 652,975 416,127
Occupancy and equipment expense 240,533 135,816
Other expense 392,837 184,886
----------- -----------
Total non-interest expense 1,286,345 736,829
----------- -----------
Net loss (660,160) (443,829)
----------- -----------
Other comprehensive income (loss) (107,169) 27,747
----------- -----------
Comprehensive income (loss) $ (767,329) $ (416,082)
=========== ===========
Net loss per share $ (0.56) $ (0.42)
=========== ===========
Average shares outstanding 1,182,151 1,061,357
=========== ===========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 6
TARPON COAST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
-----------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (660,160) $ (443,829)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 128,391 84,824
Provision for loan losses 241,000 74,000
(Increase) Decrease in accrued interest
and other assets (253,297) (71,034)
Increase (Decrease) in accrued interest
and other liabilities 24,626 (3,948)
------------ ------------
Total adjustments 140,720 83,842
------------ ------------
Net cash used in operating activities (519,440) (359,987)
------------ ------------
Cash flows from investing activities:
Net increase in loans (15,894,428) (3,052,654)
Purchases of securities available for sale (5,609,374) (7,791,977)
Maturities of securities available for sale 4,248,513 846,597
Purchases of premises and equipment (983,142) (1,398,600)
------------ ------------
Net cash used in investing activities (18,238,431) (11,396,634)
------------ ------------
Cash flows from financing activities:
Net proceeds from issuance of common stock -- 10,630,251
Increase in deposits 15,122,738 6,433,628
Increase in customer repurchase agreements 2,440,289 310,606
Repayment of organizer advances -- (44,350)
------------ ------------
Net cash provided by financing activities 17,563,027 17,330,135
------------ ------------
Increase (Decrease) in cash and cash equivalents (1,194,844) 5,573,514
Cash and cash equivalents, beginning of period 4,690,881 74,580
------------ ------------
Cash and cash equivalents, end of period $ 3,496,037 $ 5,648,094
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 688,063 $ 47,119
============ ============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 7
TARPON COAST BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1999
NOTE A - ORGANIZATION AND BASIS OF PRESENTATION
Organization:
Tarpon Coast Bancorp, Inc. (the "Company") was incorporated under the
laws of the state of Florida on August 7, 1997. Effective June 1, 1998, the
Company's new wholly owned subsidiary, Tarpon Coast National Bank (the "Bank")
received federal regulatory approval to commence its banking operations.
Contemporaneously, the Company became a registered bank holding company under
the Bank Holding Company Act of 1956, as amended. Until June 1, 1998, the
Company was in the development stage and its activities were limited to the
organization of the Bank, as well as the offering of $11,500,000 in common
stock (the "Offering"). Approximately $8.2 million of the proceeds of the
Offering have been used by the Company to provide for the capitalization of the
Bank. Also effective June 1, 1998, the Bank received approval from the Federal
Deposit Insurance Corporation (the "FDIC") for deposit insurance.
Basis of Presentation:
The accompanying unaudited consolidated financial statements include
the accounts of the Company and, since its organization on June 1, 1998, the
accounts of the Bank. All intercompany accounts and transactions have been
eliminated in consolidation.
The accompanying unaudited 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 have been made for the fair presentation of the
Company's consolidated financial position and results of operations. Operating
results for the three and nine month periods ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1999.
NOTE B - INITIAL PUBLIC OFFERING
On January 23, 1998, the Company sold 1,150,000 shares of common stock
in a public offering providing net proceeds of approximately $10.7 million
after deducting underwriters discounts and offering costs. In addition, the
Company issued 32,151 shares in exchange for seed money advances from its
organizers at the public offering price of $10 per share. The net proceeds from
the public offering were held in an escrow account until the Bank obtained its
charter on June 1, 1998 and were invested in repurchase agreements secured by
U.S. Treasury and Agency securities.
5
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
GENERAL
Tarpon Coast Bancorp, Inc. was formed in August 1997, but its primary operating
subsidiary, the Bank, did not commence operations until June 1, 1998. Until
that time, its operations were limited to the organization of the Bank, and
raising its initial capital through the offering of its common stock (See Note
B to the financial statements).
The following is a discussion of the Company's financial condition and results
of operations for the period ended September 30, 1999:
FINANCIAL CONDITION
The Company raised approximately $10.7 million in capital as a result of its
initial public offering. This, together with seed money advances from its
organizers of approximately $321,000 comprised the sole source of the Company's
funding during its development stage period. Proceeds from the offering have
been used to fund the capitalization of the Bank at $8.2 million. The remaining
proceeds are invested by the Company in an overnight repurchase agreement with
the Bank secured by U.S. Treasury and Agency securities and are being held by
the Company as working capital for general corporate purposes as well as for
possible future capital contributions to the Bank. At September 30, 1999, the
Company had approximately $27 million in deposits and $2.8 million in customer
repurchase agreements.
At September 30, 1999, the Company had $23.2 million in loans and approximately
$4.1 million in unfunded loan commitments. At that date it also had invested
approximately $9.9 million in investment securities available for sale. At
September 30, 1999, the Company had $3 million in premises and equipment, which
includes $429,000 in land and site engineering for the Bank's branch expansion
into the City of North Port, Sarasota County, Florida. The Company's remaining
liquidity less current operating requirements has been invested in overnight
federal funds of $1.8 million.
RESULTS OF OPERATIONS
While the Company was formed in the second quarter of 1997, it commenced its
banking operations June 1, 1998. Accordingly, operating results for the
nine-month period ended September 30, 1999 are not comparable to those for the
comparable period of 1998.
For the three-month period ended September 30, 1999, the Company reported a net
loss of $182,711. Interest income for the period was $611,550 or a yield on
average earning assets of 7.21%. Net interest income was $342,597 (net interest
margin of 4.04%) after deducting interest expense of $268,953 or an average
rate paid on interest-bearing funds of 4.30%. As the Bank has no historical
loan loss experience, the provision for loan losses of $87,000 for the
three-month period has been established based on peer industry data of
comparable commercial banks with an additional provision of 0.5% set
6
<PAGE> 9
aside for potential Year 2000 credit risks. Non-interest income was $24,601 for
the three-month period comprised principally of service charges on deposit
accounts. Non-interest expenses for the period were $462,909 comprised
principally of salaries and benefits ($233,480) and occupancy costs ($94,558).
At September 30, 1999, the Company and the Bank had 20 full time employees and
one part time employee.
For the nine-month period ended September 30, 1999, the Company reported a net
loss of $660,160. Interest income for the period was $1,462,507 or a yield on
average earning assets of 6.93%. Net interest income was $811,225 (net interest
margin of 3.84%) after deducting interest expense of $651,282 or an average
rate paid on interest-bearing funds of 4.44%. As the Bank has no historical
loan loss experience, the provision for loan losses of $241,000 for the
nine-month period has been established on the same basis as discussed in the
preceding paragraph. Non-interest income was $55,960 for the nine-month period
comprised principally of service charges on deposit accounts. Non-interest
expenses for the period were $1,286,345 comprised principally of salaries and
benefits ($652,975) and occupancy costs ($240,533).
The Bank took occupancy of its permanent banking facility comprised of 7,680
square feet in February 1999. Until then, it operated out of a temporary
modular facility consisting of 1,960 square feet. In addition, on June 1, 1999,
the Bank opened a branch office in the City of North Port, Sarasota County,
Florida comprising approximately 1,100 square feet of rental space at a monthly
rental of $1,700. The Bank is currently constructing a permanent North Port
branch facility comprising approximately 3,300 square feet for occupancy in the
first quarter of 2000.
For the three and nine month periods ended September 30, 1998, the Company had
net losses of $239,000 and $443,000, respectively. Included in the net loss for
the nine month period was $126,000 of net losses incurred during the Company's
development stage period to June 1, 1998. Interest income for the three and
nine-month periods ending September 30, 1998 were $205,788 and $423,861
resulting in net interest income of $144,334 and $359,524, respectively.
Included in the nine-month amounts is $171,008 of escrow account income earned
during the development stage period to June 1, 1998. Interest expense for the
three and nine-month periods were $61,454 and $64,337. Lacking historical
experience, the provision for loan losses for the three and nine-month periods
of $57,000 and $74,000 were established at a rate of 1.5% of outstanding loans
and loan commitments. Non-interest income for the three and nine-month periods
were $2,338 and $7,476, respectively. Non-interest expenses for the three and
nine-month periods were $329,263 and $736,829($297,000 of which were incurred
during the development stage period to June 1, 1998), and included salaries and
benefits expenses of $160,457 and $416,127, respectively. At September 30,
1998, the Company and the Bank had 11 full time employees and one part time
employee.
Management anticipates that the Company will continue to experience losses from
operations until such time as the operations of the Bank achieve profitable
levels.
7
<PAGE> 10
YEAR 2000 MATTERS
The Company has an ongoing process for evaluating its computer systems as well
as those of its data processing vendors to assess compliance with the Year 2000
requirements. The Company's has performed independent testing of its mission
critical systems and has completed the validation phase for all Year 2000
critical dates. Management believes that all mission critical systems are
currently Year 2000 compliant and does not believe that material expenditures
will be required on behalf of the Company to affect compliance. However, there
can be no assurance that all necessary modifications have been identified and
corrected or that unforeseen difficulties or costs will not arise. Further,
there can be no assurances that vendor systems on which the Company relies have
been properly modified or that the failure of others to properly modify their
mission critical systems will not negatively impact the Company's operations.
The Company has implemented an assessment procedure to identify potential
credit and liquidity risks to the Company should there be a failure by its key
customers to identify and remediate their own issues, which process is ongoing.
In this regard, the Company has set aside $116,000 of additional reserves at
September 30, 1999 as an allowance for possible losses stemming from customer
failures.
The Company has developed a contingency plan which would be implemented should
there be a failure in its systems by virtue of the Year 2000 issues. For each
mission critical system, the Company has identified alternative procedures to
achieve a successful resumption of its banking operations in case its systems
or those of its mission critical vendors fail, including developing a manual
process for implementing the system and identifying alternative vendors.
Management cannot currently determine the financial effect on the Company if
significant customer and/or vendor remediation efforts are not completed in a
timely and comprehensive manner.
8
<PAGE> 11
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
During the third quarter, there were no matters submitted to a vote of
security holders.
Item 6. Exhibits and Reports on Form 8-K
1. Exhibits
27.1 Financial Data Schedule
2. Reports on Form 8-K
The Company did not file a Current Report on Form 8-K during the
quarter ended September 30, 1999.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereto duly authorized.
Date: November 2, 1999 /s/ George E. Cline, III
------------------------
George E. Cline, III
Chief Financial Officer
Date: November 2, 1999 /s/ Lewis S. Albert
------------------------
Lewis S. Albert
Chief Executive Officer
EXHIBIT INDEX
Exhibit
Number
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27.1 Financial Data Schedule
9
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,696,037
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,800,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 9,906,179
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 23,256,955
<ALLOWANCE> 390,145
<TOTAL-ASSETS> 39,657,838
<DEPOSITS> 27,325,126
<SHORT-TERM> 2,886,872
<LIABILITIES-OTHER> 71,715
<LONG-TERM> 0
0
0
<COMMON> 11,821
<OTHER-SE> 9,362,304
<TOTAL-LIABILITIES-AND-EQUITY> 39,657,838
<INTEREST-LOAN> 887,849
<INTEREST-INVEST> 428,859
<INTEREST-OTHER> 145,799
<INTEREST-TOTAL> 1,462,507
<INTEREST-DEPOSIT> 590,433
<INTEREST-EXPENSE> 651,282
<INTEREST-INCOME-NET> 811,225
<LOAN-LOSSES> 241,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,286,345
<INCOME-PRETAX> (660,160)
<INCOME-PRE-EXTRAORDINARY> (660,160)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (660,160)
<EPS-BASIC> (0.56)
<EPS-DILUTED> (0.56)
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
