''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
or
[_] TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________ to _____________
Commission file number 0-24891
ADMIRALTY BANCORP, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 22-3543338
------------------------------ --------------------
State or Other Jurisdiction of ( I.R.S. Employer
Incorporation or Organization) Identification No.)
4400 PGA BOULEVARD, PALM BEACH GARDENS, FLORIDA 33410
----------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(561) 624-4100
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
---------------------------------------------------
Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15 (d) of the Securities and Exchange Act of 1934
during the preceding 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 No X
--- ---
As of October 30, 1998 there were 2,216,640 shares of common stock, including
both Class A and Class B shares of Common Stock, outstanding.
'''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''
<PAGE>
ADMIRALTY BANCORP, INC. AND SUBSIDIARY
AND PREDECESSOR COMPANY
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
Admiralty Bancorp, Inc. |
and Subsidiary | Predecessor Company
------------------------------- | -------------------
September 30, December 31, |
ASSETS 1998 1997 | December 31, 1997
------------- ------------ | ------------------
(Unaudited) |
<S> <C> <C> <C>
Cash and cash equivalents |
Cash and due from banks $ 2,757,508 $7,845,550 | $ 1,974,169
Federal funds sold 12,023,000 -- | 100,000
----------- ---------- | -----------
Total cash and cash equivalents 14,780,508 7,845,550 | 2,074,169
Investment securities available for sale, at fair market value 10,814,385 -- | 3,619,550
Investment securities held to maturity, at cost (fair market |
value of $16,606,373 at December 31, 1997) -- -- | 16,560,956
Loans held for sale -- | 994,182
Loans, net 32,944,735 -- | 22,853,777
Accrued interest receivable 278,007 36,781 | 308,210
Federal Reserve Bank and FHLB stock 283,100 -- | 127,300
Premises and equipment, net 880,267 -- | 631,208
Deferred tax asset 438,643 -- | 438,600
Goodwill 3,609,027 -- | --
Other assets 931,552 162,526 | 597,829
----------- ---------- | -----------
Total assets $64,960,224 $8,044,857 | $48,205,781
''''''''''' '''''''''' | '''''''''''
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
Liabilities |
Deposits $44,995,464 $ -- | $42,776,197
Accrued interest payable 46,317 -- | 57,405
Due under purchase contract 616,368 -- | --
Other liabilities 945,109 40,356 | 750,646
----------- ---------- | -----------
Total liabilities $46,603,258 40,356 | 43,584,248
----------- ---------- | -----------
Minority interest -- -- | 376,049
----------- ---------- | -----------
Stockholders' equity |
Preferred stock, no par value, 2,000,000 shares authorized, |
no shares issued or outstanding -- -- | --
Common stock, $0.01 par value, 325,000 shares authorized, |
323,533 shares issued and outstanding in 1997 -- -- | 3,235
Common stock, Class A, no par value, 1,000,000 shares |
authorized, 888,881 shares issued and outstanding at |
September 30, 1998 and December 31, 1997 7,490,283 8,060,440 | --
Common stock, Class B, no par value, 4,000,000 shares |
authorized, 1,327,759 and 177,759 shares issued and |
outstanding at September 30, 1998 and December 31, |
1997, respectively 11,219,350 89,560 | --
Subscriptions receivable -- (205,000) | --
Additional paid--in capital -- -- | 3,138,345
Retained earnings (accumulated deficit) (366,283) 59,501 | 1,096,280
Net unrealized (loss) gain on securities available for sale 13,616 -- | 7,624
----------- ---------- | -----------
Total stockholders' equity 18,356,966 8,004,501 | 4,245,484
----------- ---------- | -----------
Total liabilities and stockholders' equity $64,960,224 $8,044,857 | $48,205,781
''''''''''' '''''''''' | '''''''''''
The accompanying notes are an integral part of these statements.
</TABLE>
1
<PAGE>
ADMIRALTY BANCORP, INC. AND SUBSIDIARY
AND PREDECESSOR COMPANY
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
Admiralty Bancorp, Inc. |
and Subsidiary | Predecessor Company
------------------------------- | ---------------------------------------------
| For the period
| January 1,
Three months Nine months | 1998 Three months Nine months
ended ended | through ended ended
September 30, September 30, | January 21, September 30, September 30,
1998 1998 | 1998 1997 1997
------------- ------------- | -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Interest income |
Loans $ 784,130 $1,907,667 | $147,401 $472,742 $1,608,730
Securities 190,723 664,011 | 68,133 309,548 878,686
Federal funds sold 52,167 94,996 | 388 25,042 102,843
---------- ---------- | -------- -------- ----------
Total interest income 1,027,020 2,666,674 | 215,922 807,332 2,590,259
---------- ---------- | -------- -------- ----------
Interest expense |
Deposits 277,423 751,387 | 71,006 303,237 893,998
Borrowings -- 10,268 | 5,034 3,299 3,299
---------- ---------- | -------- -------- ----------
Total interest expense 277,423 761,655 | 76,040 306,536 897,297
---------- ---------- | -------- -------- ----------
Net interest income 749,597 1,905,019 | 139,882 500,796 1,692,962
|
Provision for loan losses 65,000 120,000 | -- 98,740 386,000
---------- ---------- | -------- -------- ----------
Net interest income after |
provision for loan losses 684,597 1,785,019 | 139,882 402,056 1,306,962
|
Non-interest income |
Service charges and fees 53,164 188,047 | 13,169 180,022 504,673
Net gain (loss) on sale of securities -- (39,349) | -- -- 86,712
Gain on sale of loans 112,405 313,986 | -- 203,186 692,527
Other income 107,102 234,428 | 27,238 7,004 46,333
---------- ---------- | -------- -------- ----------
Total non-interest income 272,671 697,112 | 40,407 390,212 1,330,245
---------- ---------- | -------- -------- ----------
Non-interest expense |
Salaries and employee benefits 481,142 916,468 | 38,792 217,997 662,541
Occupancy 126,988 301,865 | 29,699 100,196 304,325
Furniture and equipment 61,596 160,592 | 10,828 42,718 163,973
Amortization of goodwill 37,951 102,118 | -- -- --
Other expense 354,299 897,790 | 51,784 302,896 894,733
---------- ---------- | -------- -------- ----------
Total non-interest expense 1,061,976 2,378,833 | 131,103 663,807 2,025,572
---------- ---------- | -------- -------- ----------
Income before income tax |
(benefit) expense and |
minority interest (104,708) 103,298 | 49,186 128,461 611,635
Income tax (benefit) expense (11,500) 81,000 | -- (104,000) (171,000)
---------- ---------- | -------- -------- ----------
Income before minority interest (93,208) 22,298 | 49,186 232,461 782,635
Minority interest 2,380 (3,692) | (2,020) (8,828) (31,305)
---------- ---------- | -------- -------- ----------
Net income $ (90,828) $ 18,606 | $ 47,166 $223,633 $ 751,330
'''''''''' '''''''''' | '''''''' '''''''' ''''''''''
Per share data |
Net income per share - basic and diluted $ (0.08) $ 0.02 |
'''''''''' '''''''''' |
Weighted average shares outstanding 1,128,597 1,116,823 |
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
ADMIRALTY BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Stock Common stock
Preferred subscription ----------------------- Retained
stock receivable Class A Class B earnings
--------- ------------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 $ -- $(205,000) $8,060,440 $ 89,560 $ 59,501
Issuance of class B common stock -- -- -- 10,685,400 --
Cost of issuance of class A common stock -- -- (570,157) -- --
Collection of subscription receivable -- 205,000 -- -- --
Class A common stock dividend -- -- -- 444,390 (444,390)
Net income for the nine months
ended September 30, 1998 -- -- -- -- 18,606
Change in net unrealized gain on
securities available for sale -- -- -- -- --
Comprehensive income, September 30, 1998 -- -- -- -- --
---------- --------- ---------- ----------- ---------
Balance, September 30, 1998 (unaudited) $ -- $ -- $7,490,283 $11,219,350 $(366,283)
'''''''''' ''''''''' '''''''''' ''''''''''' '''''''''
Net
unrealized gain Total Other
on securities stockholders' comprehensive
available for sale equity income
------------------ ------------- -------------
<S> <C> <C> <C>
Balance, December 31, 1997 $ -- $ 8,004,501 $ --
Issuance of class B common stock -- 10,685,400 --
Cost of issuance of class A common stock -- (570,157) --
Collection of subscription receivable -- 205,000 --
Class A common stock dividend -- -- --
Net income for the nine months
ended September 30, 1998 -- 18,606 18,606
Change in net unrealized gain on
securities available for sale $13,616 13,616 13,616
Comprehensive income, September 30, 1998 -- -- $32,222
------- ----------- '''''''
Balance, September 30, 1998 (unaudited) $13,616 $18,356,966
''''''' '''''''''''
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE>
ADMIRALTY BANCORP, INC. AND SUBSIDIARY
AND PREDECESSOR COMPANY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30,
Admiralty Bancorp | Predecessor
and Subsidiary | Company
----------------- | -----------
1998 | 1997
---- | ----
<S> <C> <C>
Operating activities |
Net income $ 18,606 $ 751,330
Adjustments to reconcile net income to net cash provided by |
(used in) operating activities |
Minority interest in net income 3,692 | 31,305
Provision for loan losses 120,000 | 386,000
Depreciation and amortization 222,160 | 136,050
Gain (loss) on sale of securities 39,349 | (86,712)
Gains on sales of mortgage loans (313,986) | (692,527)
Decrease (increase) in other assets (463,718) | 441,950
Decrease (increase) in other liabilities 687,493 | (159,677)
------------ | ----------
Net cash provided by operating activities 313,596 | 807,719
------------ | ----------
|
Investing activities |
Proceeds from maturities and principle paydowns of investment |
securities available for sale 10,746,892 | --
Purchases of investment securities available for sale (5,171,497) | (4,901,851)
Proceeds from sales of investment securities available for sale 2,915,848 | 1,800,000
Net purchase of Federal Reserve Bank and FHLB stock (169,550) | (19,350)
Net loan originations and principal collections on loans (12,150,880) | (7,134,248)
Proceeds from mortgage loan sales 2,513,416 | 4,226,825
Purchase of premises and equipment (44,511) | --
Payment for purchase of Company, net of cash acquired (2,881,831) | --
------------ | ----------
Net cash used in investing activities (4,242,113) | (6,028,624)
------------ | ----------
|
Financing activities |
Net increase in deposits 5,483,397 | 1,561,549
Net increase in securities sold under agreements to repurchase |
and other borrowings (4,582,000) | 564,000
Collection of subscription receivable 205,000 | --
Payment to purchase minority interest (358,165) | --
Proceeds from issuance of common stock - net of costs 10,115,243 | --
------------ | ----------
Net cash provided by financing activities 10,863,475 | 2,125,549
------------ | ----------
|
Net (decrease) increase in cash and cash equivalents 6,934,958 | (3,095,356)
|
Cash and cash equivalents, beginning of year 7,845,550 | 4,677,056
------------ | ----------
Cash and cash equivalents, end of period $ 14,780,508 | $1,581,700
------------ | ----------
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
ADMIRALTY BANCORP, INC. AND SUBSIDIARY
AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
September 30, 1998
NOTE A - SUMMARY OF ACCOUNTING POLICIES
Admiralty Bancorp, Inc. (formerly White Eagle Financial Group, Inc.), is a
bank holding company incorporated in the state of Delaware. The consolidated
financial statements include the accounts of Admiralty Bancorp, Inc. "the
Parent", and its wholly-owned subsidiary, Admiralty Bank "the Bank",
collectively referred to as "the Company". The Bank is a state-chartered
independent community bank with its main office in Palm Beach Gardens,
Florida, and branches in Juno Beach, Jupiter and Boca Raton.
Basis of financial statement presentation
The consolidated financial statements as of September 30, 1998, and for the
nine months ended September 30, 1998 and 1997, are unaudited. In the opinion
of management, all adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of the financial position and results of
operations have been included. The results of operations for the nine months
ended September 30, 1998 and 1997, are not necessarily indicative of the
results that may be attained for an entire year.
The Company adopted the Financial Accounting Standards Board's (FASB)
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," which is effective for periods beginning after December
15, 1997. This new standard requires entities presenting a complete set of
financial statements to include details of comprehensive income. Comprehensive
income consists of net income or loss for the current period and income,
expenses, gains and losses that bypass the income statement and are reported
directly in a separate component of equity. The adoption of SFAS No. 130 did
not have a material effect on the presentation of the Bank's financial
position or results of operations.
The FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," which is effective for all periods beginning after
December 15, 1997. SFAS No. 131 requires that public business enterprises
report certain information about operating segments in complete sets of
financial statements of the enterprise and in condensed financial statements
of interim periods issued to shareholders. It also requires that public
business enterprises report certain information about their products and
services, the geographic areas in which they operate, and their major
customers. The adoption of SFAS No. 131 will not have a material effect on the
presentation of the Bank's financial position or results of operations.
Earnings per common share
The Company adopted the provisions of SFAS No. 128, "Earnings Per Share,"
which eliminates primary and fully diluted earnings per share (EPS) and
requires presentation of basic and diluted EPS in conjunction with the
disclosure of the methodology used in computing such EPS. Basic EPS excludes
dilution and is computed by dividing income available to common shareholders
by the weighted average common shares outstanding during the period. Diluted
EPS takes into account the potential dilution that could occur if securities
or other contracts to issue common stock were exercised and converted into
common stock. Prior period EPS calculations for the nine and three months
ended September 30, 1998, and the period August 11, 1997 (date of inception),
through December 31, 1997, have been restated to reflect the adoption of SFAS
No. 128. EPS for the predecessor company has not been presented because the
presentation is not meaningful.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three and Nine Months Ended September 30, 1998 and September 30, 1997.
OVERVIEW
The current management team and board of directors of the Company acquired the
Company on January 22, 1998 (the "Change In Control"). Prior to the Change In
Control and the Company's public offering, the Company was a privately held
institution (the "Predecessor Company"). The Company's historic financial
statements included in this filing for the nine (9) months ended September 30,
1998 do not include the first 21 days of operations in January of 1998, prior to
the Change In Control. However, to ensure comparability with prior year periods,
the income statement data discussed for the nine months ended September 30, 1998
are based upon pro forma data for the Company after the Change In Control and
the Predecessor Company during 1998 prior to the Change In Control.
All data for 1997 are from the Predecessor Company.
For the quarter ended September 30, 1998, the Company incurred a net loss of $91
thousand or $0.08 per share, a decrease from earnings of $224 thousand for the
third quarter of 1997. For the nine months ended September 30, 1998 the Company
had net income of $66 thousand, or $0.06 per share, a decrease from net income
of $751 thousand for the 1997 period.
At September 30, 1998, the Company's total assets reached $65.0 million, an
increase of 34.8% over total assets at December 31, 1997, the Company's net
loans totaled $32.9 million, an increase of 44.2% over net loans at December 31,
1997 and the Company's deposits totaled $45.0 million, an increase of 5.2% over
total deposits at December 31, 1997.
RESULTS OF OPERATIONS
Interest Income. Total interest income increased $220 thousand, or 27.2%, to
$1.0 million for the quarter ended September 30, 1998 from $807 thousand for
the same period of 1997. This increase was attributable to the increase in the
average balance of loans during the 1998 period.
For the nine months ended September 30, 1998, interest income increased $292
thousand, or 11.3%, to $2.9 million from the $2.6 million reported for the same
period of 1997. The increase in interest income is attributable to an increase
of $5.6 million in the average balance of loans, while the average yield on the
loan portfolio remained relatively unchanged at 10.6%. During the nine months
ended September 30, 1998, as the Company's asset mix began to shift toward a
greater percentage of loans, the average yield on the Company's interest earning
assets increased
6
<PAGE>
to 8.70% from the 8.54% earned during the nine months ended September 30, 1997.
Interest Expense. The Company's interest expense for the third quarter of 1998
decreased $29 thousand, or 9.5% to $277 thousand from $307 thousand for the same
period last year. For the nine months ended September 30, 1998 interest expense
declined $60 thousand to $838 thousand from $897 thousand for the nine months
ended September 30, 1997. The decrease in interest expense reflects a change in
the Company's deposit gathering philosophy, away from time deposits and toward
lower rate transactional accounts. The average balance of time deposits declined
by $2.7 million for the nine months ended September 30, 1998 compared to the
nine months ended September 30, 1997, while the average balance of money market
deposits increased $1.3 million and the average balance of NOW deposits
increased by $1.5 million. In addition, the average balance of the Company's
non-interest bearing demand deposits increased by $1.6 million, to $11.3 million
for the nine months ended September 30, 1998 from $9.7 million for the nine
months ended September 30, 1997. The changes to the Company's deposit portfolio
reduced the Company's average cost of funds for the nine months ended September
30, 1998 to 2.68%, compare to an average cost of funds for the prior nine month
period of 3.00%.
Table 1 following presents a summary of the Company's interest-earning assets
and their average yields, and interest-bearing liabilities and their average
costs and shareholders' equity for the nine months ended September 30, 1998 and
1997. The average balance of loans includes non-accrual loans, and associated
yields include loan fees which are considered adjustment to yields.
7
<PAGE>
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEET
Nine Months Ended September 30, 1998 Nine Months Ended September 30, 1997
------------------------------------------ -----------------------------------------
Average Average
Average Interest Rates Average Interest Rates
Balance Income/Expense Earned/Paid Balance Income/Expense Earned/Paid
------------ --------------- ------------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-Earning Assets
Taxable loans, net of
unearned income $25,882,000 $ 2,055,000 10.59% $20,275,000 $ 1,609,000 10.58%
Taxable investment
securities 15,986,000 732,000 6.11% 17,653,000 878,000 6.63%
Federal funds sold 2,316,000 95,000 5.47% 2,528,000 103,000 5.43%
----------- ----------- ----------- -----------
Total Interest earning 44,184,000 2,882,000 8.70% 40,456,000 2,590,000 8.54%
assets
Non interest earning 7,708,000 3,590,000
assets
Allowance for possible
loan losses (425,000) (368,000)
Total Assets $51,467,000 $43,678,000
''''''''''' '''''''''''
LIABILITIES and
Shareholder's Equity
Interest Beairng
liabilities
Borrowings $ 322,000 $ 15,000 6.21% $ 76,000 $ 3,000 5.26%
NOW deposits 6,495,000 60,000 1.23% 5,030,000 56,000 1.48%
Savings deposits 2,425,000 32,000 1.76% 2,276,000 32,000 1.87%
Money market deposits 7,270,000 161,000 2.95% 5,990,000 124,000 2.76%
Time deposits 14,167,000 569,000 5.36% 16,897,000 682,000 5.38%
Total interest bearing
liabilities $30,679,000 $ 837,000 3.64% $30,269,000 $ 897,000 3.95%
Demand deposits $11,295,000 $ 9,676,000
Other liabilities 915,000 276,000
----------- -----------
Total non interest
bearing liabilities $12,210,000 $ 9,952,000
----------- -----------
Shareholder's equity $ 8,578,000 $ 3,457,000
----------- -----------
Total liabilities and
shareholder's equity $51,467,000 $43,678,000
''''''''''' '''''''''''
Net interest
differential 5.06% 4.58%
Net yield on interest
bearing assets $ 2,045,000 6.17% $1,693,000 5.58%
''''''''''' ''''''''''
</TABLE>
8
<PAGE>
Net-Interest Income. The net effect of the changes in interest income and
interest expense for the third quarter of 1998 was an increase of $249 thousand,
or 49.7% over net interest income for the third quarter of 1997.
Net interest income for the nine months ended September 30, 1998, increased by
$352 thousand, or 20.8%, over the same period of last year. The Company's net
interest spread increased 48 basis points to 5.06% for the nine months ended
September 30, 1998 from 4.58% for the comparable period of 1997.
Provision for Loan Losses. For the nine months ended September 30, 1998, the
provision for possible loan losses was $120 thousand compared to the $386
thousand for the comparable period of last year. The provision for possible loan
losses was $65 thousand for the three months ended September 30, 1998, as
compared to $99 thousand for the same period of last year. During the past
several years, the Bank's operations were subject to a cease and desist order
with the Federal Reserve Bank of Atlanta and the Florida Department of Banking
and Finance. Among other things, the cease and desist order required the Bank to
maintain a designated level of allowance for loan losses, and to expense
provisions necessary to maintain the allowance at the required level. The cease
and desist order was lifted in early 1998. The reduction in the provision for
loan losses for the nine months ended September 30, 1998 compared to the
comparable period of 1997 reflects the lifting of the cease and desist order and
the ability of management to set the Company's expense for provision for loan
losses at a level management believes appropriate in light of the Company's
lending activities.
Non-Interest Income. For the third quarter of 1998, total non-interest income
decreased by $118 thousand, or 30.4%, over the same period of last year. For the
nine months ended September 30, 1998, non-interest income decreased $593
thousand from the same period in 1997. The three and nine month decreases
reflect lower service charges and fees and reduced gains from the sale of loans
and securities during the 1998 period. The reduction in fees and service charges
primarily reflects a reduction in overdraft charges as the Company's customers
overdrew their accounts less frequently.
Non-Interest Expense. For the three and nine month periods of 1998, the Company
experienced increases in its non-interest expenses over non-interest expense for
comparable periods of 1997. For the three months ended September 30, 1998, the
Company's total non-interest expense was $1.1 million, compared to total
non-interest expense of $664 thousand for the 1997 period. For the nine months
ended September 30, 1998, the Company's non-interest expense totaled $2.5
million compared to total non-interest expense of $2.0 million for the 1997
period. The increase in non-interest expense in the nine and three month periods
of 1998 are reflected in increased compensation and employee benefit expense as
the Company hired a new senior management team, including Ward Kellogg, the
Company's new president and his team of community bankers. In addition, the
Company incurred an increase in occupancy expense as the Company prepared to
open its fourth office in Boca Raton, Florida and to relocate its Jupiter office
to larger, more modern quarters. Finally, during the three and nine month
periods ended
9
<PAGE>
September 30, 1998, the Company recognized expense through the amortization of
goodwill created in the Change In Control. Goodwill amortization totaled $102
thousand and $38 thousand for the nine and three month periods of 1998.
Income Taxes. Income taxes expense increased $252 thousand for the nine months
ended September 30, 1998 as compared to the same period in 1997. During the 1997
period, the Company had available unrestricted net operating loss carry-forwards
to offset income tax expense. These net operating loss carry-forwards were
exhausted in 1997, and during the 1998 period the Company has been required to
pay taxes on income.
FINANCIAL CONDITION
September 30, 1998 compared to December 31, 1997
Total assets increased to $65.0 million, an increase of $16.8 million, or 34.8%,
from total assets of $48.2 million at December 31, 1997. Increases in total
assets included increases of $10.1 million in loans, net, and $11.9 million in
Federal Funds sold. In addition, in connection with the Change In Control, the
Company recognized $3.7 million in goodwill.
Total loans at September 30, 1998 increased $10.1 million or 43.5% to $33.4
million from year-end 1997. Within the portfolio, residential loans increased
$1.4 million and construction loans increased $836 thousand.
The following schedule presents the components of loans, net of unearned income,
by type, for each periods presented.
10
<PAGE>
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
------------------------- ---------------------
Amount Percent Amount Percent
------------ --------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial and Industrial $ 6,954 21% $ 6074 26%
Real Estate
Non-Residential Properties $21,506 64% $14,301 61%
Residential Properties $ 3,023 9% $ 1,613 7%
Construction $ 1,211 4% $ 375 2%
Consumer $ 695 2% $ 910 4%
------- -------
TOTAL LOANS $33,389 100% $23,273 100%
''''''' '''''''
</TABLE>
At September 30, 1998, federal funds sold increased by $11.9 million over
December 31, 1997. The increase is attributable primarily to the Company's short
term investment of the proceeds of its initial public offering, which were
received by the Company on September 30, 1998.
Total average deposits increased $1.8 million for the nine months ended
September 30, 1998 over the comparable period of 1997. Within the deposit
portfolio, the Company has sought to de-emphasize higher rate time deposits and
emphasize business related deposit accounts. As a result of this strategy, the
average balance of time deposits declined by $2.7 million while the average rate
paid declined from 5.38% to 5.36%. In addition, the average balance of
non-interest bearing demand deposits increased by $1.6 million.
The following schedule presents the components of deposits, for each of the
periods presented.
11
<PAGE>
September 30, December 31,
1998 1997
--------------------- --------------------
Average Average
Amount Yield Amount Yield
------- -------- ------ -------
(DOLLARS IN THOUSANDS)
Non-interest bearing demand $ 11,295 0.00% $ 10,091 0.00%
Interest-bearing demand 6,495 1.23% 5,149 1.43%
Savings deposits 9,695 2.65% 8,353 2.49%
Time deposits 14,167 5.36% 16,859 5.40%
------- -------
TOTAL DEPOSITS $ 41,652 2.68% $40,452 2.96%
ASSET QUALITY
At September 30, 1998, non-performing loans increased by $546 thousand as
compared to December 31, 1997. The increase in non-accrual loans is
substantially attributable to the placement of a single loan with a balance of
$516 thousand on non-accrual status. This loan is subject to workout agreement,
and is currently performing in compliance with the restructured terms.
Non-performing loans at September 30, 1998 were a reduction from non-performing
loans of $707 thousand at June 30, 1998. The following table provides
information on risk elements in the Company's loan portfolio.
12
<PAGE>
September 30 December 31
----------------- ------------
1998 1997 1997
---- ---- -----------
Non-accrual loans $ 642 $ 197 $ 96
Other real estate owned 24 0 24
----- ----- -----
Total non-performing assets (1) $ 666 $ 197 $ 120
Non-accrual loans to total loans 1.92% 0.87% 0.41%
Non-performing assets to total assets 1.03% 0.43% 0.25%
Allowance for possible loan losses
as a percentage of non-performing
assets 66.67% 186.29% 315.00%
- - ------------
(1) Excludes loans past due 90 days or more and still accruing interest of
approximately $0, $201,000, $213,000, and $48,000 at September 30, 1998
and 1997 and December 31, 1997 and 1996 respectively.
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses is maintained at a level deemed adequate
by management to provide for potential loan loses. The level of the allowance is
based on management's evaluation of potential losses in the portfolio, after
consideration of risk characteristics of the loans and prevailing and
anticipated economic conditions, among other factors. Although management
strives to maintain an allowance it deems adequate, future economic changes,
deterioration of borrowers' credit worthiness, and the impact of examination by
regulatory agencies all could cause changes to the Company' allowance for
possible loan loses.
At September 30, 1998, the allowance for possible loan losses was $444, an
increase of $66 thousand or 17.6% from the $378 thousand at year-end 1997. There
were charge-offs of $54 thousand for the nine months ended September 30, 1998.
The following table sets forth information regarding the Company's allowance for
loan losses for the periods indicated:
13
<PAGE>
Nine Months Ended Year Ended
------------------- ----------
1998 1997 1997
------- ------- ----------
(DOLLARS IN THOUSANDS)
Balance at Beginning of Period $ 378 $ 365 $ 365
Charge-Offs:
Commercial and Industrial 60 281 340
Real Estate 10 104 104
Consumer -- 3 3
----- ------ -----
Total Charge-Offs $ 70 $ 388 $ 447
Recoveries $ 16 $ 5 $ 25
----- ------ -----
Net Charge Offs $ 54 $ 383 $ 422
Provision Charged to Expense $ 120 $ 385 $ 435
Balance of Allowance at End of Period $ 444 $ 367 $ 378
''''' ''''' '''''
Ratio of Net Charge-Offs to Average
Loans Outstanding 0.21% 1.89% 2.02%
Balance of Allowance at Period-End as
a % of Loans at Period end 1.33% 1.49% 1.63%
INVESTMENT SECURITIES
At September 30, 1998, the Company's investment securities portfolio totaled
$11.1 million, a decline from total investment securities, both held to maturity
and available for sale, of $20.3 million at December 31, 1997. At September 30,
1998, all of the Company's investment securities were classified as available
for sale. The decline in investment securities from December 31, 1997 to
September 30, 1998 reflects prepayment and maturities of investment securities,
with the proceeds invested in new loan originations. In addition, as part of the
Company restructuring of its securities portfolio, the Company sold
approximately $2.9 million of investment securities in early 1998 and incurred a
net loss of $39 thousand.
The following table sets forth the carrying value of the Company's securities
portfolio as of the dates indicated:
14
<PAGE>
<TABLE>
<CAPTION>
GROSS UNREALIZED GROSS UNREALIZED
AMORTIZED COST GAINS LOSSES MARKET VALUE
-------------- ---------------- ---------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
September 30, 1998:
U.S. Government and Agency
Obligations $ 3,500 $ 6 $ (2) $ 3,504
Mortgaged Backed Securities 7,279 22 (4) 7,297
Other 297 -- -- 297
TOTAL $11,076 $28 $ (6) $11,098
December 31, 1997:
U.S. Government and Agency
Obligations $ 3,608 $16 $ (4) $ 3,620
HELD TO MATURITY:
December 31, 1997
U.S. Government and Agency $16,561 $73 $(28) $16,606
Obligations
The following table sets forth as of September 30, 1998 the maturity
distribution of the Company's investment portfolio:
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
MATURITY SCHEDULE OF INVESTMENT SECURITIES
--------------------------------------------------------------------------------------------------
One Year or Less One to Five Years Five to Ten Years More than Ten Years Total
-------------------- ---------------- ------------------ ----------------- ------------------
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield Value Yield Value Yield
--------- ------- -------- ------- ------- ------- -------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government
and Agency Obligations 0 0% $3,504 5.86% $ 0 0% $ 0 0% $ 3,504 5.86%
Mortgaged Backed Securities $4,683 6.70% $2,310 6.39% $ 304 6.69% $ 0 0% $ 7,297 6.60%
Other $ 297 6.42% $ 297 6.42%
</TABLE>
16
<PAGE>
LIQUIDITY MANAGEMENT
At September 30, 1998, the amount of liquid assets remain at a level management
deemed adequate to ensure that contractual liabilities, depositors' withdrawal
requirements, and other operational and customer credit needs could be
satisfied.
At September 30, 1998, liquid investments, including Federal funds and
securities available for sale, totaled $25.4 million.
CAPITAL RESOURCES
Total Stockholders' equity increased $10.4 million to $18.4 million at September
30, 1998 from $8.0 million at year-end 1997. The increase was due primarily to
the receipt of $10.1 in net proceeds from the Company's initial public offering.
As of October 1997, the most recent notification of the FRB categorized the Bank
as adequately capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized, the Bank must maintain minimum
total risk-based, Tier 1 risk-based and tier 1 leverage as set forth in the
table. There are no conditions or events since that notification that management
believes have changed the institution's category.
<TABLE>
<CAPTION>
To be well capitalized
For capital under prompt corrective
Actual adequacy purposes action provisions
------------------- --------------------- ------------------------
Amount Ratio Amount Ratio Amount Ratio
---------- ------ --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
As of September 30, 1998
Total capital (to risk-weighted assets) $14,682,000 33.56% $3,500,000 >8.00% $4,375,000 >10.00%
Tier I capital (to risk-weighted
assets) 14,238,000 32.55 1,750,000 >4.00 2,625,000 > 6.00
Tier I capital (to average assets) 14,238,000 43.17 1,319,000 >4.00 1,649,000 > 5.00
</TABLE>
17
<PAGE>
PART II OTHER INFORMATION
Item 1 Legal Proceedings
The Company and the Bank are periodically involved in various legal
proceedings as a normal incident to their businesses. In the opinion of
management, no material loss is expected from any such pending lawsuit.
Item 2 Changes in Securities
The following information is provided pursuant to Item 701 of Regulation
S-B. In connection with its public offering, the Company received net proceeds
of $10.1 million. Of this amount, $484,000 was used to pay the deferred payment
owed to former shareholders of White Eagle Financial Group, Inc. Of the
remaining proceeds, $9.7 million was used by the Company as an equity investment
in the Bank.
Item 3 Defaults Upon Served Securities
Not applicable
Item 4 Submission of Matters to a Vote of Security Holders
On August 25, 1998, the Company held a special meeting of its shareholders.
At this meeting, the shareholders were asked to vote in favor of an Amended and
Restated Certificate of Incorporation of the Company. The proposal was adopted
with the following votes:
In Favor of the Proposal: 511,381 Shares of Class A Common Stock
158,885 Shares of Class B Common Stock
Opposed to the Proposal: None.
The Proposal was therefore approved.
Item 5 Other Information
Not applicable
Item 6 Exhibits and Report on form 8-K
(a) Exhibits
Number Description
------ -----------
27 Financial Data Schedule
(b) Reports on Form 8-K
None
18
<PAGE>
SIGNATURE
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 hereunto duly authorized.
ADMIRALTY BANCORP, INC.
Date: November 16, 1998 By:/s/ WARD KELLOGG
--------------------------
Ward Kellogg, President
19
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,758
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 12,023
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 10,940
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 33,389
<ALLOWANCE> 444
<TOTAL-ASSETS> 64,960
<DEPOSITS> 44,994
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,607
<LONG-TERM> 0
0
0
<COMMON> 18,710
<OTHER-SE> 14
<TOTAL-LIABILITIES-AND-EQUITY> 64,960
<INTEREST-LOAN> 1,908
<INTEREST-INVEST> 664
<INTEREST-OTHER> 95
<INTEREST-TOTAL> 2,667
<INTEREST-DEPOSIT> 751
<INTEREST-EXPENSE> 762
<INTEREST-INCOME-NET> 1,905
<LOAN-LOSSES> 120
<SECURITIES-GAINS> (39)
<EXPENSE-OTHER> 2,379
<INCOME-PRETAX> 103
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
<YIELD-ACTUAL> 0
<LOANS-NON> 642
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 378
<CHARGE-OFFS> 70
<RECOVERIES> 16
<ALLOWANCE-CLOSE> 444
<ALLOWANCE-DOMESTIC> 444
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
