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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Commission file number 0-25079
MICHIGAN COMMUNITY BANCORP LIMITED
(Name of small business issuer in its charter)
Michigan 38-3390193
(State of Incorporation) I.R.S. Employer Identification No.
43850 Schoenherr Road
Sterling Heights, MI 48313
(Address of principal executive offices)
(810) 532-8000
(Registrant's Telephone Number)
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Securities registered under Section 12(g) of the Exchange Act:
Title of each class Name of each exchange on which registered
Common Stock, no par value OTC Bulletin Board
Check whether the issuer (1) filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements or the past 90 days. Yes [x] No [_]
Check if there is no disclosure or delinquent filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [x]
Registrant's revenues for its most recent fiscal year. $27,000
The aggregate market value of the voting stock held by non-affiliates was
approximately $7,546,966 as of March 29, 1999 based on the closing bid and ask
prices ($14.00) on that date.
As of March 29, 1999, 665,000 share of Common Stock of the Registrant
were outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
Portions of the registrant's Proxy Statement for its 1999 Annual Meeting of
Shareholders to the extent expressly so stated herein, are incorporated by
reference into Part III of this Report.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Michigan Community Bancorp Limited ("MCB") was incorporated in January,
1998 and organized to own and operate Lakeside Community Bank and North Oakland
Community Bank ("Lakeside", "North Oakland", or the "Banks", collectively). MCB
is the sole stockholder of the Banks which are organized as Michigan banking
corporations with depository accounts insured by the Bank Insurance Fund of the
Federal Deposit Insurance Corporation (the "FDIC"). The Banks opened for
business on January 5, 1999 and did not have any loan or deposit activity prior
to January 5, 1999.
MCB's activities are primarily focused on providing customers with
superior service and convenience by offering a core of commercial and consumer
banking services, primarily to small to medium-sized businesses, as well as
individuals through its wholly-owned subsidiary banks. Our lending activities
focus primarily on commercial real estate loans and commercial term loans to
businesses secured by the assets of the borrower and, to a lesser extent, on
commercial equipment financing. We anticipate that a significant majority of our
loan portfolio will eventually be comprised of commercial loans and commercial
real estate loans.
MCB's consumer service strategy focuses on providing single-family
mortgage loans, home equity loans, and other forms of consumer lending. Lakeside
intends to offer its banking services throughout Macomb County, Michigan, but
primarily in Clinton Township, Macomb Township, Ray Township, Shelby Township,
Washington Township, Mt. Clemens, Sterling Heights and Utica. North Oakland
intends to offer its banking services throughout Oakland County, Michigan, but
primarily in Rochester, Rochester Hills, Pontiac, Troy, Auburn Hills, Oakland
Township, Orion Township and Lake Orion Village.
Lakeside and North Oakland have each received the approval of the
Financial Institutions Bureau of the State of Michigan ("FIB"). In January, 1999
Lakeside received an initial capitalization of $4,550,000 and North Oakland
received an initial capitalization of $4,600,000 from the proceeds of the
initial public offering which we completed in December, 1998. MCB and the Banks
have also received the approval of the FDIC and the Board of Governors of the
Federal Reserve System.
Reasons for Starting MCB
Management believes that the liberalization of Michigan's branch
banking laws, together with the expansion of interstate banking, has led to
substantial consolidation of the banking industry in Michigan, including the
market areas to be served by Lakeside and North Oakland. In many cases, when
these consolidations occurred, local boards of directors were dissolved and
local management relocated or in some cases terminated. Management believes that
a locally owned and managed bank in Macomb and Oakland County dedicated to the
needs of local
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businesses and residents will fill a need for service and convenience that is
currently not being satisfied by the existing financial institutions in Macomb
and Oakland County.
Management also believes that a favorable opportunity exists in the
targeted market areas for a true community bank, a commercial bank which has
local management and local directors. Management believes that such a bank can
be successful in attracting small to medium-sized businesses and individuals who
wish to conduct business with a locally owned and managed institution that
demonstrates an active interest in their business and financial affairs.
Lakeside and North Oakland have attempted to take advantage of this opportunity
by emphasizing local management, strong ties and active commitment to the
community.
Business Strategy
MCB emphasizes experienced local management with a strong commitment to
the communities located within the primary market areas served by our Banks. Our
strategy is to locate our Banks in communities that are growing quickly and
where there has been a significant impact from the consolidation in the banking
industry. We seek communities that have a history of community banking but which
no longer have as many community banks. We believe that the small and
medium-sized industrial and commercial businesses that are our target customers
are not being adequately served by existing banks. We also believe that we have
chosen communities where the officers and directors of MCB, Lakeside and North
Oakland are active in the community and where community and business leaders are
anxious to welcome a locally owned and managed financial institution. MCB is
committed to providing outstanding customer service and banking products and
intends to compete aggressively for banking business through a systematic
program of directly calling on both customers and referral sources such as
attorneys, accountants, mortgage brokers, insurance agents and other business
people, many of whom are already known to its officers and directors.
We have hired and will continue to hire, if needed, experienced staff
to provide personalized service and believe that our experienced staff will be
able to generate competitively priced loans and deposits. Our staff is provided
with access to current software and database systems so that they can deliver
high-quality products and provide responsive service to clients. Lakeside and
North Oakland have entered into agreements with third-party service providers
which enable customers to have convenient electronic access to their accounts
and other bank products through debit cards, voice response and home banking. We
use these third-party service providers to deliver the most up to date services
so that we can be at the forefront of technology while minimizing the costs of
delivering services to our clients.
Market Area
Lakeside provides banking services to Macomb County, primarily Clinton
Township, Shelby Township, Washington Township, Sterling Heights, Ray Township,
Mt. Clemens and Utica. Macomb County is comprised of 27 cities, villages or
townships, ranks third in population out of Michigan's 83 counties and covers
482 square miles. North Oakland provides banking services to Oakland County,
primarily Rochester, Rochester Hills, Troy, Auburn Hills, Pontiac,
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Oakland Township, Orion Township and Lake Orion Village. Oakland County is
comprised of 61 cities, villages, and townships, ranks second in population out
of Michigan's 83 counties and covers 910 square miles.
MCB's office and the office of Lakeside is located at 43850 Schoenherr
Road, Sterling Heights, Michigan 48313. The main office of North Oakland is
located at 1467 North Rochester Road, Rochester Hills, Michigan 48307.
ITEM 2. DESCRIPTION OF PROPERTY
MCB has a ten year lease for approximately 6,000 square feet in a one
story building located at 43850 Schoenherr, Sterling Heights, Michigan. Of the
6,000 square feet leased, 4,000 are used as the main office of Lakeside. MCB
utilizes the remaining 2,000 square feet for its headquarters. Monthly rent is
approximately $8,400 for the first five years and $8,900 for the remaining five
years. The facility is equipped with an automated teller machine ("ATM"), a
drive through teller window and teller stations inside the building. We expect
that the space provided by this building will be adequate for the needs of MCB
and Lakeside for the foreseeable future.
MCB also leases a building with approximately 3,100 square feet of
office space located at 1467 North Rochester Road, Rochester Hills, Michigan
until December 31, 2004 which serves as the main office of North Oakland. MCB
prepaid the entire amount of the lease by making a single payment of $250,000 in
August 1998. MCB is also obligated to make monthly ground lease payments of $600
until December 31, 2004. The facility is equipped with an ATM, a drive through
teller window and teller stations inside the building. The Company expects that
the space provided by this building will be adequate for the needs of North
Oakland for the foreseeable future
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
MCB common stock is traded under the symbol "MCBP" in the
over-the-counter market and transactions are reported in the National
Association of Securities Dealers reporting system known as the "OTC Bulletin
Board". As of March 29, 1999, the were approximately 623 record holders of the
Company's Common Stock according to the records maintained by MCB's
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stock transfer agent. The following table sets forth, for the periods indicated,
the range of sales prices as reported on the OTC Bulletin Board for each
quarter since the completing of the Company's initial public offering on
December 4, 1998.
High Low
Fiscal Year Ended December 31, 1998:
Fourth Quarter ended December 31 $15.50 $14.50
Since the completion of its initial public offering, MCB has not paid
or declared cash dividends with respect to its Common Stock, and does not expect
to pay any cash dividends in the foreseeable future. The Company's ability to
pay cash dividends in the future will depend upon the future earnings, results
of operations, capital requirements and financial condition of Lakeside and
North Oakland and such other factors as MCB's Board of Directors may deem
relevant.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION.
Forward-looking Statements
The following discussion contains forward-looking statements that
involve substantial risks and uncertainties. These forward-looking statements
can be identified by the use of the words "anticipate", "believe", "estimate",
"expect", "plan" and similar expressions. They are not guarantees of future
performance and involve certain risks, uncertainties and assumptions that are
difficult to predict with regard to timing, extent, likeliness and degree of
occurrence. To help you evaluate the risk and uncertainty surrounding the
statements, you should review the factors listed under the caption "Factors that
May Effect Future Results" which begin on page 7. Actual results and outcomes
may materially differ from what is expressed or forecasted in these
forward-looking statements.
Plan of Operation
MCB's plan of operation for 1999 does not anticipate the need to raise
additional capital funds. Current cash projections indicate adequate cash
balances and over the next twelve months, MCB does not anticipate making any
substantial additional commitments to purchase fixtures, equipment or leasehold
improvements. MCB does not anticipate any significant changes in staffing
levels over the next twelve months.
Lakeside and North Oakland both obtained the necessary regulatory
authorizations to open for business in January 1999. Over the next twelve
months, they will continue to develop financial service product offerings. It is
anticipated that product offerings will include traditional deposit and loan
banking products and that the services offered will enable customers to have 24
hour a day access from any point and will include telephone banking, courier
service and automated bill paying. MCB believes that by offering these services,
Lakeside and North Oakland will be able to attract new deposits and loans
without the necessity of incurring the
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expense for additional brick and mortar branch operations. MCB is committed
using third-party service providers to remain at the forefront of technology
while minimizing the associated costs.
Financial Review
The following discussion addresses the material factors affecting the
financial condition and results of operations of MCB. The discussion should be
read in conjunction with the audited financial statements, footnotes and
supplemental financial data presented elsewhere in this report.
MCB, from its inception on January 28, 1998, until the completion of
its initial public offering of common stock on December 4, 1998, was a
development stage company. On December 4, 1998, MCB received $9.975 million
(before deducting offering costs) from its initial public offering. Lakeside and
North Oakland did not receive final regulatory approvals to begin business until
January 1999 and therefore, the financial results presented are solely
attributable to the activities related to MCB.
The net loss for the period from inception through December 31, 1998 is
primarily attributable to pre-opening and organizational activities. Salaries
and benefits were $270 thousand and organizational expenses were $153 thousand.
Interest income from short term investments was $27 thousand and interest
expense from a line of credit that was outstanding prior to the completion of
the initial public offering was $16 thousand.
Since Lakeside and North Oakland did not open until 1999 and had no
business activity during 1998, traditional financial measurements and
disclosures appropriate for a commercial bank holding company are either not
applicable or not meaningful for this report. Beginning in 1999, Lakeside and
North Oakland will take in deposits and make loans and investments in
securities. In addition, they will provide for adequate reserves in the event
there are possible loan losses. The amount of any loan loss reserve will be
established by management based upon consideration of factors including, but not
limited to, regulatory requirements, prior loss experience, evaluation of
impaired or problem credits, overall portfolio quality, loan concentration,
overall economic conditions, changes in the nature and volume of the loan
portfolio and any other conditions that may affect the ability of a borrower to
repay their loan.
Net loss per weighted average share of common stock outstanding for the
period from inception through December 31, 1998 was $10.16. This computation is
significantly impacted by the time period from inception through the date of the
initial public offering on December 4, 1998, during which only one share of
common stock was outstanding. If the shares outstanding after the initial
public offering had been outstanding for the entire year, the loss per share
would have been $0.84.
Total assets as of December 31, 1998 amounted to $8.963 million. The
majority of assets were derived from the funds raised in the initial public
offering. Proceeds from the initial public offering were invested in short term
eurodollar fund investments with another financial
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institution and totaled $7.839 million at December 31, 1998. The average yield
on these investments totaled 4.36% for the period ending December 31, 1998.
Year 2000 Readiness
As a new enterprise, MCB does not have older computer systems to
update. When systems are acquired, MCB's procurement policy requires a
representation from the vendor that the system is compliant for the Year 2000.
For example, MCB's, mission critical, data processing service vendor has
represented that it is fully compliant for the Year 2000. As a result, costs to
date to become Year 2000 compliant have not been material. Management further
believes that any remaining costs of becoming compliant for the Year 2000 will
not be material.
MCB has also investigated the state of readiness of the local electric,
gas and telephone systems and has received a representation that they are Year
2000 compliant. In addition, MCB has asked for and received a representation
from its correspondent banks concerning their compliance level and evaluated the
state of readiness of the other commercial banks with which it does business. In
both cases, MCB received a representation that these other banks are Year 2000
compliant.
FACTORS THAT MAY EFFECT FUTURE RESULTS
Lack of Operating History
Prior to December 4, 1998, neither MCB nor the Banks had an operating
history and were Development Stage Companies. MCB and the Banks are subject to
the risks inherent in the establishment of a new business enterprise. MCB was
only recently formed and the Banks have only operated since January 5, 1999. It
will be a period of time before shareholders have access to all of the
information that, in assessing their investment, would be available to owners of
securities issued by a financial institution with a history of operations.
Significant Losses Expected
As a result of start-up expenditures and the time it will take to
develop a deposit base and loan portfolio, it is expected that the Banks, and
thus MCB, will operate at a loss during the start-up period of the Banks. MCB
does not expect the Banks to be profitable for at least the first two years of
operation. Cumulative losses during the first two years of operation are
projected to exceed $1.6 million. There can be no assurance that the Banks or
MCB will ever operate profitably.
Exposure to Local Economy
MCB's success and profitability is directly dependent on the success
and profitability of the Banks. The operations of Lakeside and North Oakland are
materially dependent upon and sensitive to the economy of their market areas in
southeastern Michigan. Adverse economic
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developments can impact the collectibility of loans and have a negative effect
on earnings and financial condition. The economies of Macomb and Oakland County
include many businesses that manufacture products for, or provide goods or
services to, the automobile industry. No assurance can be made that future
economic changes will not have a significant adverse effect on MCB.
Government Regulation and Monetary Policy
MCB and the Banks have received all regulatory approvals and satisfied
all conditions necessary to organize and establish the Banks. These conditions
included, among other things, that: (i) beginning paid-in capital of North
Oakland not be less than $4.6 million and beginning paid-in-capital of LCB not
be less than $4.55 million; (ii) each Bank maintains a ratio of Tier 1 leverage
capital to total assets for the first three years after commencing business of
at least 8.0% and an adequate valuation reserve; (iii) each Bank has its
financial statements audited by a public accountant for at least the first three
years; (iv) each Bank file its Certificate of Paid in Capital and Surplus with
the FIB; and (v) any changes in executive management of each Bank be submitted
to the bank regulatory agencies in advance for their approval. Regulatory
capital requirements imposed on the Banks may have the effect of constraining
future growth, absent the infusion of additional capital.
MCB and each of the Banks is subject to extensive state and federal
government supervision and regulation. State and federal banking laws subject
the Banks to substantial limitations with respect to loans, purchase of
securities, payment of dividends and many other aspects of their banking
business. Applicable laws, regulations, interpretations and enforcement policies
have been subject to significant and sometimes retroactively applied changes and
may be subject to significant future changes. Many of these regulations are
intended to protect depositors, the public, and the FDIC, not shareholders.
There can be no assurance that future legislation or government policy will not
adversely affect the banking industry, the operations of the Banks, or
shareholders. The burden imposed by federal and state regulations may place
banks in general, and MCB and the Banks specifically, at a competitive
disadvantage compared to less regulated competitors. Federal economic and
monetary policy may affect the Banks' ability to attract deposits, make loans
and achieve satisfactory interest rate spreads.
Lack of Dividends
MCB anticipates that no dividends will be paid on the Common Stock for
the foreseeable future. MCB will be largely dependent upon the dividends paid by
Lakeside and North Oakland to provide funds to pay cash dividends if and when
such dividends are declared. No assurance can be given that future earnings of
the Banks, and resulting dividends to MCB will be sufficient to permit the legal
payment of dividends to shareholders at any time in the future. Even if MCB may
legally declare dividends, the amount and timing of such dividends will be at
the discretion of MCB's Board of Directors. The Board may in its sole discretion
decide not to declare dividends.
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Dependence Upon Subsidiary Operations
MCB is a bank holding company and substantially dependent upon
dividends from Lakeside and North Oakland, for funds to pay its expenses,
including debt repayment, and to pay cash dividends to shareholders. Lakeside
and North Oakland are subject to regulatory limitations upon the payment of
dividends. No cash dividends are anticipated from the Banks during the initial
years of operation.
Competition
MCB faces strong competition for deposits, loans and other financial
services from other community banks, regional banks, out-of-state national
banks, savings banks, thrifts, credit unions and other financial institutions as
well as other entities which provide financial services, including consumer
finance companies, securities brokerage firms, mortgage brokers, insurance
companies, mutual funds, and other lending sources and investment alternatives.
Some of these financial institutions and financial services organizations are
not subject to the same degree of regulation as the Banks. Many financial
institutions aggressively compete for business in the market areas of the Banks.
Most of these competitors have been in business for many years, have established
customer bases, are larger, have substantially higher lending limits than the
Banks will have in the foreseeable future, and will be able to offer certain
services that the Banks do not expect to provide in the foreseeable future,
including multiple branches, trust services, and international banking services.
In addition, most of these entities have greater capital resources than the
Banks, which among other things, may allow them to price their services at
levels more favorable to the customer and to provide larger credit facilities
than will be available from the Banks.
Dependence on Management
MCB and the Banks are dependent primarily upon the services of David A.
McKinnon, the Chairman of the Board, Chief Executive Officer and President of
the Company, Frank D. Blowers, Chief Executive Officer and President of
Lakeside, James T. Polson, Chief Executive Officer and President of North
Oakland, William L. Carley, Vice President and Chief Financial Officer of MCB,
Kim Schauer, Secretary and Vice President of Administration of MCB and Gail L.M.
DiFranco, Vice President - Operations of MCB. If the services of these
individuals were to become unavailable to MCB or the Banks for any reason, or if
MCB or the Banks were unable to hire highly qualified and experienced personnel
either to replace Mr. McKinnon, Mr. Blowers, Mr. Polson, Mr. Carley,
Ms. DiFranco or Ms. Schauer or to adequately staff for the anticipated growth,
the operating results of MCB and the Banks could be adversely affected. Neither
MCB or the Banks have employment agreements with, or key man life insurance
for, these or any other officers.
Lending Risks and Lending Limits
The risk of nonpayment of loans is inherent in commercial banking, and
nonpayment, if it occurs, would likely have a material adverse effect on MCB's
earnings and overall financial condition as well as the value of the Common
Stock. Because Lakeside and North Oakland do
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not have an operating history, none of their customers have an established
credit history with the Banks. Management attempts to minimize credit exposure
by carefully monitoring the concentration of loans within specific industries
and through prudent loan application and approval procedures, but there can be
no assurance that such monitoring and procedures will reduce such lending risks.
Credit losses can cause insolvency and failure of a financial institution, and
in such event, shareholders could lose their entire investment. The general per
customer lending limit of each Bank is approximately $882,000, subject to a
higher lending limit of $1.051 million in specific cases with approval by
two-thirds of the respective Banks' Board of Directors. Accordingly, the size of
the loans which the Banks can offer to potential customers is less than the size
of loans which most of the Banks' competitors with larger lending limits are
able to offer. This limit initially may affect the ability of the Banks to seek
relationships with the area's larger businesses. The Banks expects to
accommodate loan volumes in excess of its lending limit through the sale of
participations in such loans to other banks. However, there can be no assurance
that the Banks will be successful in attracting or maintaining customers seeking
larger loans or that the Banks will be able to engage in participations of such
loans on terms favorable to the Banks.
Impact of Interest Rates and Economic Conditions
The results of operations for financial institutions, including the
Banks, may be materially and adversely affected by changes in prevailing
economic conditions, including declines in real estate market values, rapid
changes in interest rates and the monetary and fiscal policies of the federal
government. Profitability is partly a function of the spread between the
interest rates earned on investments and loans and the interest rates paid on
deposits and other interest-bearing liabilities. In the early 1990s, many
banking organizations experienced historically high interest rate spreads. More
recently, interest rate spreads have generally narrowed due to changing market
conditions and competitive pricing pressure. There can be no assurance that such
factors will not continue to exert such pressure or that high interest rate
spreads will return. Although economic conditions in the Banks' target market
areas have been generally favorable, there can be no assurance that such
conditions will continue to prevail. Like most banking institutions, the net
interest spread and margin are affected by general economic conditions and other
factors that influence market interest rates and the Banks' ability to respond
to changes in such rates. At any given time, the Banks' assets and liabilities
will be such that they are affected differently by a given change in interest
rates. As a result, an increase or decrease in rates could have a material
adverse effect on the Banks' net income, capital and liquidity. While management
takes measures to guard against interest rate risk, there can be no assurance
that such measures will be effective in minimizing the exposure to interest rate
risk.
Need for Technological Change
The banking industry is undergoing rapid technological changes with
frequent introductions of new technology-driven products and services. In
addition to providing better service to customers, the effective use of
technology increases efficiency and enables financial institutions to reduce
costs. MCB's future success depends in part on its ability to address the needs
of its customers by using technology to provide products and services that will
satisfy
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customer demands for convenience as well as to create additional efficiencies in
the operation of the Banks. Many of MCB's competitors have substantially greater
resources to invest in technological improvements. Such technology may permit
competitors to perform certain functions at a lower cost than the Banks. There
can be no assurance that the Banks will be able to effectively implement new
technology-driven products and services or be successful in marketing such
products and services to its customers.
Reliance on Technology, Need to be Year 2000 Compliant
MCB is dependent on technology to operate efficiently and profitably.
In the event that any of its internal information technology or the external
information technology of its clients, suppliers and vendors is not Year 2000
compliant, MCB's business and results of operations could be adversely effected.
MCB may not be able to properly service or maintain customer records or
adequately conduct business operations. In an attempt to minimize the risk of
the Year 2000 issue, MCB has established a procurement policy to only purchase
technological equipment that is represented by the vendor to be Year 2000
compliant. However, there can be no assurance that MCB will be able to enforce
or prevail in litigation concerning these representations.
Anti-Takeover Provisions
Chapters 7A and 7B of the Michigan Business Corporation Act (the
"MBCA") provide for super majority voting and impose other requirements on
certain business combinations with interested shareholders and limit voting
rights of certain acquirers of control shares. Federal law requires the approval
of the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board") prior to acquisition of "control" of a bank holding company. MCB's
Articles of Incorporation (i) provide for a Board of Directors that is divided
into three classes of directors, (ii) require MCB's Board of Directors to
consider a variety of factors when evaluating any proposal involving a potential
merger or business combination, including the social and economic impact of such
a proposal on its employees, customers, vendors and the communities in which MCB
and the Banks operate or are located and (iii) require the affirmative vote of
holders of at least two-thirds of the voting stock to change any of provisions
of the Articles of Incorporation. These provisions may have the effect of
delaying or preventing a change in control of MCB. As a result, these provisions
could adversely affect the price of the Common Stock by, among other things,
preventing a shareholder from realizing a premium which might be paid as a
result of a change in control of MCB.
Limited Trading Market
Fifth Third/The Ohio Company, the managing underwriter of the initial
public offering, provides quotations of the Common Stock on the NASD OTC
Bulletin Board and acts as a market maker of the Common Stock, subject to
applicable laws and regulatory requirements, although it is not obligated to do
so. Making a market in securities involves maintaining bid and ask quotations
and being able, as principal, to effect transactions in reasonable quantities at
those quoted prices, subject to various securities laws and other regulatory
requirements. The
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development of a public trading market depends, however, upon the existence of
willing buyers and sellers, the presence of which is not within the control of
MCB or any market maker. Market makers on the NASD OTC Bulletin Board are not
required to maintain a continuous two sided market, are required to honor firm
quotations for only a limited number of shares, and are free to withdraw firm
quotations at any time. Even with a market maker, factors such as the limited
number of shares outstanding, the lack of earnings history and the absence of a
reasonable expectation of dividends within the near future mean that there is no
assurance of an active and liquid market for the Common Stock.
ITEM 7. FINANCIAL STATEMENTS.
The financial statements of MCB together with the report of Plante and
Moran, LLP, included in this report under this Item are listed under Item 13 of
this report and can be found beginning on page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The information required by this Item is included in the Proxy
Statement under the captions "Information About Directors and Nominees as
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance". As
permitted by the rules of the Securities and Exchange Commission it is
incorporated into this document by reference.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this Item is included in the Proxy
Statement under the caption "Compensation of Executive Officers". As permitted
by the rules of the Securities and Exchange Commission it is incorporated into
this document by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item is included in the Proxy
Statement under the caption "Stock Ownership of Certain Beneficial Owners and
Management". As permitted by the rules of the Securities and Exchange Commission
it is incorporated into this document by reference.
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is included in the Proxy
Statement under the caption "Related Party Transactions". As permitted by the
rules of the Securities and Exchange Commission it is incorporated into this
document by reference.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
EXHIBIT NUMBER EXHIBIT DESCRIPTION
3.1 Restated Articles of Incorporation as amended to date
(previously filed as Exhibit No. 3.1 to MCB's Registration
Statement on Form SB-2, File No. 333-17317, and incorporated
herein by reference).
3.2 Bylaws (previously filed as Exhibit No. 3.1 to MCB's
Registration Statement on Form SB-2, File No. 333-17317, and
incorporated herein by reference).
10.5 1998 Non-Employee Director Stock Option Plan (previously filed
as Exhibit 10.5 to MCB's Registration Statement on Form SB-2,
File No. 333-17317, and incorporated herein by reference).
10.6 1998 Employee Stock Option Plan (previously filed as Exhibit
10.6 to MCB's Registration Statement on Form SB-2, File No.
333-17317, and incorporated herein by reference).
11 Statement re: Computation of Per Share Earnings (filed
herewith).
22 Subsidiaries of MCB (previously filed as Exhibit 22 to MCB's
Registration Statement on Form SB-2, File No. 333-17317, and
incorporated herein by reference).
27 Financial Data Schedule (EDGAR filing only, filed herewith).
(b) Reports on Form 8-K
MCB has not filed any reports on Form 8-K during the last quarter of
the period covered by this Report.
13
<PAGE> 14
Michigan Community
Bancorp Limited
FINANCIAL REPORT
DECEMBER 31, 1998
<PAGE> 15
MICHIGAN COMMUNITY BANCORP LIMITED
CONTENTS
REPORT LETTER F-1
FINANCIAL STATEMENTS
Balance Sheet F-2
Statement of Operations F-3
Statement of Changes in Stockholders' Equity F-4
Statement of Cash Flows F-5
Notes to Financial Statements F6-12
Plante & Moran, LLP
<PAGE> 16
[LETTERHEAD OF PLANTE & MORAN, LLP]
Independent Auditor's Report
To the Board of Directors and Stockholders
Michigan Community Bancorp Limited
We have audited the accompanying balance sheet of Michigan Community Bancorp
Limited as of December 31, 1998 and the related statements of operations,
changes in stockholders' equity and cash flows for the period from January 28,
1998 (inception) through December 31, 1998. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Michigan Community Bancorp
Limited as of December 31, 1998 and the results of its operations and its cash
flows for the period from January 28, 1998 (inception) through December 31,
1998, in conformity with generally accepted accounting principles.
/s/ Plante & Moran, LLP
Bloomfield Hills, Michigan
February 22, 1999
F-1
<PAGE> 17
MICHIGAN COMMUNITY BANCORP LIMITED
<TABLE>
<CAPTION>
BALANCE SHEET
DECEMBER 31, 1998
(000s omitted, except per share data)
<S> <C>
Assets
Cash and cash equivalents:
Cash and due from banks $ 67
Interest-bearing deposits in other banks 7,839
-------
Total cash and cash equivalents 7,906
Premises and equipment - Net (Note 2) 767
Other assets:
Prepaid building lease 235
Other 55
-------
Total other assets 290
-------
Total assets $ 8,963
=======
Liabilities and Stockholders' Equity
Liabilities - Accounts payable $ 318
Stockholders' Equity (Note 8)
Preferred stock, no par value, 1,000,000 shares authorized, none issued -
Common stock - $5 stated value:
Authorized - 9,000,000 shares
Issued and outstanding - 665,000 shares 3,325
Capital surplus 5,880
Accumulated deficit (560)
-------
Total stockholders' equity 8,645
-------
Total liabilities and stockholders' equity $ 8,963
=======
</TABLE>
See Notes to Financial Statements.
F-2 Plante & Moran, LLP
<PAGE> 18
MICHIGAN COMMUNITY BANCORP LIMITED
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
PERIOD FROM JANUARY 28, 1998 (INCEPTION)
THROUGH DECEMBER 31, 1998
(000s omitted, except per share data)
<S> <C>
Interest Income - Interest-bearing deposits with other banks $ 27
Interest Expense - Line of credit 16
-------
Net Interest Income 11
Other Operating Expenses
Salaries and employee benefits 270
Occupancy (Note 3) 45
Equipment expense 14
Advertising 6
Organizational expenses 153
Contract labor 18
Miscellaneous expense 65
-------
Total other operating expenses 571
-------
Loss - Before income taxes (560)
Provision for Income Taxes (Note 4) -
-------
Net Loss $ (560)
=======
Net Loss per Common Share - Basic and fully diluted (Note 8) $ 10.16
=======
</TABLE>
See Notes to Financial Statements.
F-3 Plante & Moran, LLP
<PAGE> 19
MICHIGAN COMMUNITY BANCORP LIMITED
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
PERIOD FROM JANUARY 28, 1998 (INCEPTION)
THROUGH DECEMBER 31, 1998
(000s omitted, except per share data)
Total
Common Capital Accumulated Stockholders'
Stock Surplus Deficit Equity
----- ------- ------- ------
<S> <C> <C> <C> <C>
Balance - January 28, 1998 $ - $ - $ - $ -
Public stock offering 3,325 6,102 - 9,427
Cost of stock offering - (222) - (222)
Net loss - - (560) (560)
-------- ------- ------ -------
Balance - December 31, 1998 $ 3,325 $ 5,880 $ (560) $ 8,645
======== ======= ====== =======
</TABLE>
See Notes to Financial Statements.
F-4 Plante & Moran, LLP
<PAGE> 20
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
PERIOD FROM JANUARY 28, 1998 (INCEPTION)
THROUGH DECEMBER 31, 1998
(000s omitted, except per share data)
<S> <C>
Cash Flows from Operating Activities
Net loss $ (560)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation 10
Increase in prepaid building lease (235)
Increase in other assets (55)
Increase in accounts payable 117
---------
Net cash used in operating activities (723)
Cash Flows from Investing Activities - Additions to premises and equipment (576)
Cash Flows from Financing Activities - Net proceeds from public stock offering 9,205
---------
Net Increase in Cash and Cash Equivalents 7,906
Cash and Cash Equivalents - January 28, 1998 -
---------
Cash and Cash Equivalents - December 31, 1998 $ 7,906
=========
Supplemental Disclosure of Cash Flow Information - Cash paid during the
period for interest $ 16
Supplemental Disclosure of Noncash Investing and Financing Activities -
Liability incurred for the aquisition of premises and equipment 201
</TABLE>
See Notes to Financial Statements.
F-5 Plante & Moran, LLP
<PAGE> 21
MICHIGAN COMMUNITY BANCORP LIMITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Michigan Community Bancorp
Limited (the "Company") conform to generally accepted accounting
principles. Management is required to make estimates and assumptions
that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates
and assumptions.
NATURE OF OPERATIONS - Michigan Community Bancorp Limited was
incorporated on January 28, 1998 as a bank holding company to establish
and operate two new banks, Lakeside Community Bank (LCB) in Sterling
Heights, Michigan and North Oakland Community Bank (NOCB) in Rochester
Hills, Michigan. In December 1998, the Company completed an initial
public offering for the sale of 665,000 shares of common stock, raising
$9.2 million, net of offering costs. LCB and NOCB were opened
subsequent to year end.
PREMISES AND EQUIPMENT - Premises and equipment are stated at cost.
Depreciation is computed on the straight-line method and charged to
operations over the estimated useful lives of the properties.
OFFERING COSTS - Costs related to the offering of common stock have
been netted against the offering proceeds from the sale of the
Company's stock.
EARNINGS PER SHARE - Basic earnings per share is based on the weighted
average number of shares outstanding during the period.
STOCK OPTIONS - The Company has two stock option plans (see Note 5).
Options granted to directors and key employees under both plans are
accounted for using the intrinsic value method, under which
compensation expense is recorded at the amount by which the market
price of the underlying stock at grant date exceeds the exercise price
of an option. Under the Company's plans, the exercise price on all
options granted equals or exceeds the fair value of the stock at the
grant date. Accordingly, no compensation cost is recorded as a result
of stock option awards under the plan.
F-6 Plante & Moran, LLP
<PAGE> 22
MICHIGAN COMMUNITY BANCORP LIMITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 2 - PREMISES AND EQUIPMENT
A summary of premises and equipment as of December 31, 1998 is as
follows (000s omitted):
<TABLE>
<S> <C>
Leasehold improvements $ 65
Construction in process 545
Furniture 3
Equipment 164
------
Total premises and equipment 777
Less accumulated depreciation 10
------
Net carrying amount $ 767
======
</TABLE>
The Company has made commitments in 1998 to purchase approximately
$662,000 of additional premises and equipment that will be placed in
service in 1999.
NOTE 3 - OPERATING LEASE
The Company has entered into an assignment of a lease for a building to
be utilized for NOCB's branch operations. The assignment required the
prepayment of the lease totaling $250,000 and an ongoing monthly rental
payment of $600. The prepayment of rent will be expensed over the lease
assignment term that expires on December 31, 2004.
The Company has entered into a lease for a building to be utilized for
LCB's branch operations and the Company's headquarters. During the
first five-year period, the lease requires an $8,392 monthly payment. A
credit of $4,196 for the first 16 months will be given for tenant
improvements. The last five-year period of the lease requires an $8,890
monthly payment. The lease expires December 1, 2008.
The annual future minimum lease payments required under these
noncancelable operating leases as of December 31, 1998 are as follows:
<TABLE>
<S> <C>
1999 $ 57,552
2000 95,316
2001 107,904
2002 107,904
2003 108,402
Thereafter 535,310
-----------
Total $ 1,012,388
===========
</TABLE>
F-7 Plante & Moran, LLP
<PAGE> 23
MICHIGAN COMMUNITY BANCORP LIMITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 4 - INCOME TAXES
No tax benefit has been provided for the future benefit of deferred tax
assets during the period from January 28, 1998 (inception) to December
31, 1998. Since the Company does not have a history of earnings, a
valuation allowance has been recognized for the full amount of the net
deferred tax asset.
Deferred income taxes are provided for the temporary differences
between the financial reporting basis and the tax basis of the
Company's assets and liabilities. The sources of such temporary
differences and the resulting net deferred tax expense for the period
ended December 31, 1998 are as follows (000s omitted):
<TABLE>
<S> <C>
Capitalized preopening and organizational expenses $ (145)
Net operating loss carryforward (51)
Depreciation 6
Increase in valuation allowance 190
------
Net deferred tax expense $ -
======
</TABLE>
The temporary differences and carryforwards that comprise deferred tax
assets and liabilities at December 31, 1998 are as follows (000s
omitted):
<TABLE>
<S> <C>
Deferred tax assets:
Capitalized preopening and organizational expenses $ 145
Net operating loss 51
------
Total deferred tax assets 196
Valuation allowance (190)
Deferred tax liabilities - Depreciation (6)
------
Net deferred tax asset $ -
======
</TABLE>
F-8 Plante & Moran, LLP
<PAGE> 24
MICHIGAN COMMUNITY BANCORP LIMITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 5 - STOCK-BASED COMPENSATION
The Company has two stock-based compensation plans. Under the 1998
Employee Stock Compensation Plan ("Employee Plan"), the Company may
grant options to key employees for up to 29,000 shares of common stock.
Under the 1998 Nonemployee Director Plan ("Nonemployee Plan"), the
Company may grant options for up to 73,000 shares of common stock.
Options granted under the Nonemployee Plan totaled 26,664 during the
period ended December 31, 1998. There were 14,667 stock options granted
under the Employee Plan during 1998. Under both plans, there is a
minimum vesting period of between one to three years before the options
may be exercised, and all options expire 10 years after the date of
their grant. Under both plans, the exercise price of each option equals
the market price of the Company's common stock on the date of grant.
The options vest as follows: 70 percent on the effective date of the
stock offering, 15 percent on the first anniversary of the stock
offering, 5 percent on the second anniversary and 10 percent on the
third anniversary.
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards (SFAS) No.123, Accounting for
Stock-Based Compensation, but applies APB 25 and related
interpretations in accounting for its plan. The Company has estimated
the fair value of the options at $4.00 per share, using the
Black-Scholes option pricing model. If the Company had elected to
recognize compensation costs for the plans based on the fair value of
awards at the grant date, net loss per share on a pro forma basis would
have been as follows (000s omitted except per share data):
<TABLE>
<CAPTION>
As Reported Pro Forma
----------- ---------
<S> <C> <C>
Net loss $ (560) $ (675)
Net loss per common share (10.16) (12.22)
</TABLE>
The following table summarizes stock option transactions for both plans
and the related average exercise prices for the period from January 28,
1998 (inception) through December 31, 1998:
<TABLE>
<CAPTION>
Weighted
Number of Average
Shares Exercise Price
------ --------------
<S> <C> <C>
Options outstanding at beginning of period - $ -
Options granted 41,331 15.00
Options exercised - -
Options expired - -
------ --------
Options outstanding at end of period 41,331 $ 15.00
====== ========
</TABLE>
F-9 Plante & Moran, LLP
<PAGE> 25
MICHIGAN COMMUNITY BANCORP LIMITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 5 - STOCK-BASED COMPENSATION (CONTINUED)
The following table shows summary information about fixed stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
Stock Options Outstanding Stock Options Exercisable
------------------------- -------------------------
Weighted
Average Weighted Weighted
Range of Number of Remaining Average Number of Average
Exercise Prices Shares Contractual Life Exercise Price Shares Exercise Price
--------------- ------ ---------------- -------------- ------ --------------
<S> <C> <C> <C> <C> <C>
$ 15.00 26,664 9.9 years $ 15.00 18,665 $ 15.00
15.00 14,667 9.9 years 15.00 10,267 15.00
</TABLE>
NOTE 6 - FINANCIAL INSTRUMENTS
FAIR VALUES OF FINANCIAL INSTRUMENTS - The carrying amounts and
estimated fair values of the Company's financial instruments consist
exclusively of due from banks and interest-bearing deposits with other
banks as of December 31, 1998. Due to the short-term nature of these
assets, the carrying amount approximates its fair value. Certain
assets, the most significant being premises and equipment, do not meet
the definition of a financial instrument and are excluded from this
disclosure. Accordingly, this fair value information is not intended
to, and does not, represent Michigan Community Bancorp Limited's
underlying value.
NOTE 7 - REGULATORY MATTERS
The Company is subject to various regulatory capital requirements
administered by federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory and discretionary
actions by regulators that could have a direct material effect on the
Company's financial statements. Under capital adequacy guidelines and
the regulatory framework, the Company must meet specific capital
guidelines that involve quantitative measures of the Company's assets,
liabilities and certain off-balance-sheet items as calculated under
regulatory accounting practices.
F-10 Plante & Moran, LLP
<PAGE> 26
MICHIGAN COMMUNITY BANCORP LIMITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 7 - REGULATORY MATTERS (CONTINUED)
Quantitative measures established by regulation to ensure capital
adequacy require the Company to maintain minimum amounts and ratios,
which are shown in the table below:
<TABLE>
<CAPTION>
For Capital Adequacy
Actual Purposes To Be Well-capitalized
----------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1998:
Total capital
(to risk-weighted assets) $ 8,645 263.00% $ 263 8.00% $ 329 10.00%
Tier I capital
(to risk-weighted assets) $ 8,645 263.00% $ 131 4.00% $ 197 6.00%
Tier I capital
(to average assets) $ 8,645 737.63% $ 47 4.00% $ 59 5.00%
</TABLE>
NOTE 8 - EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is calculated in accordance with SFAS 128.
Accordingly, for basic earnings per share, the weighted average number
of shares outstanding is based on the actual number of shares issued
and outstanding during the period. For fully diluted earnings per
share, dilutive potential common shares from the Company's stock option
plan would be added to the weighted average shares using the treasury
stock method. Those potential shares have not been included in 1998
because the effect would be antidilutive.
For the period from January 28, 1998 (inception) through the Company's
initial public offering on December 3, 1998, there was one share of
stock outstanding. As a result, the weighted average calculation that
includes the nonpublic time period when only one share was outstanding
is significantly lower, resulting in a significantly higher per share
effect, than will occur in future years. The pro forma per share
amounts presented below reflect the loss per share for the period ended
December 31, 1998, assuming the shares issued in the public offering
were outstanding for the entire period.
<TABLE>
<CAPTION>
Actual Pro Forma
------ ---------
<S> <C> <C>
Weighted average shares - Basic 55,089 665,000
Effect of stock options - -
-------- -------
Weighted average shares - Fully diluted 55,089 665,000
======== =======
Net loss per share $ (10.16) $ (0.84)
======== =======
</TABLE>
F-11 Plante & Moran, LLP
<PAGE> 27
MICHIGAN COMMUNITY BANCORP LIMITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 9 - RELATED PARTY TRANSACTIONS
The Company utilizes the legal services of one of its board members.
Total legal expenses incurred for the period ended December 31, 1998
totaled $81,000. Additionally, the Company purchased furniture and
equipment from that individual in the amount of $6,000.
F-12 Plante & Moran, LLP
<PAGE> 28
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on March 31, 1999.
MICHIGAN COMMUNITY BANCORP LIMITED
By: /s/ David A. McKinnon
_____________________________________
David A. McKinnon, Chairman and Chief
Executive Officer
In accordance with the Securities Exchange Act of 1934, this report has
been signed by the following persons on behalf of MCB in the capacities
indicated on March 31, 1999.
Signature Capacity
/s/ David A. McKinnon Chairman, Chief Executive Officer and Director
_________________________ (Principal Executive and Operating Officer)
David A. McKinnon
/s/ William L. Carley Chief Financial Officer
_________________________ (Principal Financial and Accounting Officer)
William L. Carley
/s/ Paul E. Baltzer Director
_________________________
Paul E. Baltzer
/s/ Frank D. Blowers Director
________________________
Frank D. Blowers
/s/ Anthony J. Ferlito Director
_________________________
Anthony J. Ferlito
/s/ Phillip T. Hernandez Director
_________________________
Phillip T. Hernandez
/s/ Joseph S. Lentine Director
_________________________
Joseph S. Lentine
/s/ John W. Melstrom Director
_________________________
John W. Melstrom
/s/ Robert R. Peleman Director
_________________________
Robert R. Peleman
/s/ Russell M. Shelton Director
_________________________
Russell M. Shelton
<PAGE> 29
/s/ David F. Shellenbarger Director
__________________________
David F. Shellenbarger
/s/ William Sumner Director
__________________________
William Sumner
/s/ Gerald A. Tarquinio Director
__________________________
Gerald A. Tarquinio
<PAGE> 30
EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT DESCRIPTION
3.1 Restated Articles of Incorporation as amended to date
(previously filed as Exhibit No. 3.1 to MCB's Registration
Statement on Form SB-2, File No. 333-17317, and incorporated
herein by reference).
3.2 Bylaws (previously filed as Exhibit No. 3.1 to MCB's
Registration Statement on Form SB-2, File No. 333-17317, and
incorporated herein by reference).
10.5 1998 Non-Employee Director Stock Option Plan (previously filed
as Exhibit 10.5 to MCB's Registration Statement on Form SB-2,
File No. 333-17317, and incorporated herein by reference).
10.6 1998 Employee Stock Option Plan (previously filed as Exhibit
10.6 to MCB's Registration Statement on Form SB-2, File No.
333-17317, and incorporated herein by reference).
11 Statement re: Computation of Per Share Earnings (filed
herewith).
22 Subsidiaries of MCB (previously filed as Exhibit 22 to MCB's
Registration Statement on Form SB-2, File No. 333-17317, and
incorporated herein by reference).
27 Financial Data Schedule (EDGAR filing only, filed herewith).
<PAGE> 1
Exhibit 11 - Computation of Earnings Per Share
FISCAL YEAR ENDED DECEMBER 31, 1998
BASIC
Average shares outstanding ............. 55,089.
Net loss per share amount .............. (10.16)
FULLY-DILUTED
Average shares outstanding(a) .......... n/a
- ------------
(a) Based on the net loss for the period, there was no dilutive effect.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 67
<INT-BEARING-DEPOSITS> 7,839
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 8,963
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 318
<LONG-TERM> 0
0
0
<COMMON> 3,325
<OTHER-SE> 5,320
<TOTAL-LIABILITIES-AND-EQUITY> 8,963
<INTEREST-LOAN> 0
<INTEREST-INVEST> 0
<INTEREST-OTHER> 27
<INTEREST-TOTAL> 27
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 16
<INTEREST-INCOME-NET> 11
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 571
<INCOME-PRETAX> (560)
<INCOME-PRE-EXTRAORDINARY> (560)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (560)
<EPS-PRIMARY> (10.16)
<EPS-DILUTED> (10.16)
<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>
