<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------------- ----------------
Commission File No. 0-25079
MICHIGAN COMMUNITY BANCORP LIMITED
(Exact name of registrant as specified 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, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report(s), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
As of March 31, 2000, the Registrant had 756,000 shares of Common Stock issued
and outstanding.
Transitional Small Business Disclosure Format (check one)
Yes No X
----- -----
<PAGE> 2
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Michigan Community Bancorp Limited (the "Company" or "MCB") completed
an initial public offering of its Common Stock in December 1998,
raising $9,975,000 of gross proceeds before fees and expenses. The
total offering consisted of 665,000 shares which were priced at $15 per
share. The net proceeds to the Company after deducting underwriting
fees were $9.2 million.
During September, 1999, the Company commenced a Private Placement of
91,000 units. Each unit is comprised of one share of common stock and
one common stock purchase warrant which entitles the holder to acquire
1 1/2 Shares of common stock at $11.00 per share. As of October 1, 1999
all units were sold and the common stock and warrants were issued.
<PAGE> 3
Michigan Community Bancorp Limited - Consolidated Balance Sheet
<TABLE>
<CAPTION>
(In thousands, except share data) March 31 December 31
2000 1999
------------ -------------
<S> <C> <C>
Assets
Cash and due from banks $ 2,602 $ 2,078
Federal funds sold 9,850 6,550
----------- ------------
Cash and cash equivalents 12,452 8,628
Securities available for sale, at fair value 4,954 2,974
Federal Home Loan Bank stock, at cost 103 103
Loans 55,628 46,627
Less: allowance for loan losses 772 715
----------- ------------
Net loans 54,856 45,912
Premises and equipment, net 1,523 1,596
Interest receivable and other assets 559 552
----------- ------------
Total Assets $ 74,447 $ 59,765
=========== ============
Liabilities
Deposits
Non-interest-bearing $ 6,887 $ 5,237
Interest-bearing 59,666 46,400
----------- ------------
Total deposits 66,553 51,637
Interest payable and liabilities 390 340
----------- ------------
Total liabilities 66,943 51,977
Shareholders' equity
Preferred stock, no par value, 1,000,000 shares authorized, - -
none issued
Common stock, $5.00 par value, 9,000,000 shares authorized,
shares outstanding: 3/31/00-756,000; 12/31/99-756,000; 3,780 3,780
Capital surplus 6,410 6,410
Accumulated deficit (2,656) (2,392)
Accumulated other comprehensive loss (30) (10)
----------- ------------
Total shareholders' equity 7,504 7,788
Total liabilities and shareholders' equity $ 74,447 $ 59,765
=========== ============
</TABLE>
<PAGE> 4
Michigan Community Bancorp Limited - Consolidated Income Statement
<TABLE>
<CAPTION>
(In thousands, except share data) Quarter Ending
March 31
2000 1999
<S> <C> <C>
Interest income
Loans, including fees $ 1,128 $ 55
Investment securities 54 -
Federal funds sold 156 96
---------- ---------
Total interest income 1,338 151
Interest expense on deposits 761 38
---------- ---------
Net interest income 577 113
Provision for loan losses 57 252
---------- ---------
Net interest income after provision for loan losses 520 (139)
Non-interest income 24 12
Non-interest expense
Salaries and employee benefits 437 378
Premises and equipment 163 95
Advertising 27 32
Legal and professional 66 13
Other 115 82
----------- ---------
Total non-interest expense 808 600
Loss before income taxes (264) (727)
---------- ---------
Income taxes - -
---------- ---------
Net loss $ (264) $ (727)
========== =========
Average shares outstanding 756,000 665,000
Net loss per share $ (0.35) $ (1.09)
</TABLE>
<PAGE> 5
Michigan Community Bancorp Limited
Consolidated Statement of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
Accumulated
Other Total
(In thousands) Common Capital Accumulated Comprehensive Shareholders'
Stock Suplus Deficit Income Equity
------------ ------------ -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Balance January 28, 1998 - Inception $ - $ - $ - $ - $ -
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
Private placement of stock 455 546 1,001
Cost of private placement (16) (16)
Comprehensive loss
Net loss (1,832) (1,832)
Change in unrealized loss on securities
available for sale (10) (10)
------------
Total comprehensive loss (1,842)
----------- ---------- ----------- ------------- ------------
Balance December 31, 1999 3,780 6,410 (2,392) (10) 7,788
Comprehensive loss
Net loss (264) (264)
Change in unrealized loss on securities
available for sale (20) (20)
------------
Total comprehensive loss (284)
----------- ---------- ----------- ------------- ------------
Balance March 31, 2000 $ 3,780 $ 6,410 $ (2,656) $ (30) $ 7,504
=========== ========== =========== ============= ============
</TABLE>
<PAGE> 6
Michigan Community Bancorp Limited
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
Year to date March 31
(In thousands) 2000 1999
<S> <C> <C>
Operating activities
Net loss $ (264) $ (727)
Adjustments to reconcile net loss to net
cash from operating activities:
Depreciation and amortization 62 -
Provision for loan losses 57 252
Net amortization and accretion of securities (3) 21
Increase in interest receivable & other assets (7) (4)
Increase (decrease) in interest payable & other liabilities 50 (79)
---------- ----------
Total adjustments 159 190
Net cash from operating activities (105) (537)
Investing activities
Purchase of available-for-sale securities (1,997) -
Proceeds from sale of available-for-sale securities - -
Net increase in loans (9,001) (3,792)
Premises and equipment expenditures (850)
Proceeds from disposal of premises and equipment 11 -
---------- ----------
Net cash used in investing activities (10,987) (4,642)
Net cash provided fron financing activities - net increase in deposits 14,916 9,618
---------- ----------
Net change in cash and cash equivalents 3,824 4,439
Beginning cash and cash equivalents 8,628 7,906
---------- ----------
Ending cash and cash equivalents 12,452 12,345
========== ==========
- --------------------------------------------------------------------------------------------------------------
Interest paid $ 320 $ 7
Income taxes paid $ - $ -
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 7
MICHIGAN COMMUNITY BANCORP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of the Company include the
accounts of MCB and its subsidiary banks, Lakeside Community Bank (LCB)
and North Oakland Community Bank (NOCB) after elimination of
significant inter-company transactions. These statements reflect all
adjustments and disclosures which are, in the opinion of management,
necessary for a fair presentation of the results for the interim
periods presented.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the
rules and regulations of the Securities and Exchange Commission.
NOTE 2 - SECURITIES
The amortized cost and estimated market value of securities
available-for-sale are as follows:
<TABLE>
<CAPTION>
(in thousands)
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. government and agencies $ 4,984 $ $ (30) $ 4,954
================================================================
</TABLE>
The amortized cost and estimated market value of securities available-for-sale
at March 31,2000, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturity because issuers may have the right to call
or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
(in thousands) Estimated
Amortized Market
Cost Value
------------- -------------
<S> <C> <C>
$ $
Due in one year or less 1,997 1,995
Due after one year through five years 2,987 2,959
Due after five years through ten years - -
Due after ten years - -
------------ ------------
Total $ 4,984 $ 4,954
============ ============
</TABLE>
Investment securities with an amortized cost of $1,994,000 and a market value of
$1,973,000 were pledged to secure the right to participate in the overnight
Federal Funds market.
<PAGE> 8
NOTE 3 - LOANS
MAJOR CLASSIFICATIONS OF LOANS ARE SUMMARIZED AS FOLLOWS:
<TABLE>
<CAPTION>
(in thousands) March 31
2000
-----------
<S> <C>
Commercial $ 46,730
Residential real estate 3,638
Consumer 5,260
-----------
Total loans 55,628
Allowance for loan losses 772
-----------
Net loans $ 54,856
===========
</TABLE>
At March 31, 2000 approximately $2,100,000 of loans were outstanding to
executive officers, bank directors, principal shareholders and their related
interests. During 2000, additions and reductions were $259,000 and $67,000
respectively. It is management's opinion that these loans were made on the same
terms and conditions as those to other borrowers and do not involve more than
the normal risk of collectibility.
Non-Performing Loans
The accrual of interest on loans is discontinued when, in the opinion of
management, there is an indication that the borrower may be unable to meet
payments as they become due. Upon such discontinuance, all unpaid interest
accrued during the current year is reversed.
<TABLE>
<CAPTION>
March 31
(in thousands) 2000 1999
------------- -----------
<S> <C> <C>
Non-accrual loans 1,450 -
------------ -----------
Total non-performing loans 1,450 -
============ ===========
Non-performing loans as a percent of total loans 2.6% -
Accruing loans 90 days or more past due - -
</TABLE>
The increase in non-accrual loans is due to one loan which is considered
impaired under accounting guidance. Management does not anticipate a loss on
this loan due to its collateral value. There are no other non-performing assets.
<PAGE> 9
NOTE 3 - LOANS, CONTINUED
ALLOWANCE FOR LOAN LOSSES
The reserve for possible loan losses is an amount management believes will be
adequate to absorb losses inherent in existing loans based on evaluations of the
anticipated repayment and prior loss experience. The factors taken into
consideration include changes in the nature, volume and quality of the
portfolio, loan concentrations, specific problem loans and current and
anticipated economic conditions that may affect the borrower's ability to pay.
<TABLE>
<CAPTION>
Quarter ending March 31
(in thousands) 2000 1999
------------- ------------
<S> <C> <C>
Balance beginning of period $ 715 $ 0
Charge-offs 0 0
Recoveries
Provision charged to operations 57 252
----------- ----------
Balance March 31 $ 772 $ 252
=========== ==========
</TABLE>
For the current quarter, there were no charged-off loans. The allowance for loan
losses increased $57,000 during the quarter to $772,000 at March 31, and is
1.39% of outstanding loans.
At March 31, 2000 the Company had a loan concentration of approximately
$8,600,000 in non-residential building operators and approximately $9,400,000 in
the combined industries of residential housing construction and land
development.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
FORWARD-LOOKING STATEMENTS
The following discussion contains forward-looking statements that can be
identified by the use of the words "anticipate", "believe", "expect", "plan",
and similar expressions. These forward-looking statements are not guarantees of
future performance and involve substantial risks, uncertainties and assumptions
that are difficult to predict with regard to timing, extent, likeliness and
degree of occurrence. Various factors, including regional and national economic
conditions, substantial changes in levels of market interest rates, credit and
other risks of lending and investment activities and competitive and regulatory
factors could affect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially from those
anticipated or projected. A list of the material risks of the Company may be
found under the caption "Risk Factors That May Effect Future Results" in the
Company's Annual Report on Form 10-KSB for the fiscal year ended December 31,
1999.
(A) PLAN OF OPERATION
ORGANIZATION
The Company was incorporated in 1998 as a bank holding company. The Company
operates two wholly owned subsidiary banks, Lakeside Community Bank (LCB) and
North Oakland Community Bank (NOCB) (collectively the "Banks"). LCB and NOCB are
organized as Michigan banking corporations with depository accounts insured by
the bank insurance fund of the Federal Deposit Insurance Corporation. LCB and
NOCB provide a range of commercial and consumer banking servcices primarily in
the communities of northern Macomb and northern Oakland counties.
<PAGE> 10
MARKET AREA
LCB is located on Schoenherr Road in a rapidly growing area of Macomb County.
NOCB is located on Rochester Road in a renovated former bank building in a
rapidly growing area of Oakland County. The communities that comprise the
Company's primary service area include Sterling Heights, Macomb, Rochester and
Rochester Hills. Management believes these communities have an expanding and
diverse economic base, which includes a wide range of small to medium-sized
businesses engaged in the manufacturing, construction and retail trades.
BANK LINES OF BUSINESS
The Banks' core business activities include attracting deposits from the general
public and using such deposits, along with equity capital, to originate
commercial loans. The Banks also offer installment and home equity loans to
consumers. LCB recently began offering residential mortgage loans which will
primarily be sold to the Federal Home Loan Mortgage Corporation. The Banks'
results of operations are dependent primarily upon net interest income, which is
the difference between interest income from interest-earning assets and interest
expense on interest-bearing liabilities. Results of operation may be positively
influenced by non-interest income such as fees related to loan origination and
service charges associated with customer deposit accounts. The Banks offer a
full array of demand deposit accounts, NOW accounts, money market deposit
accounts, savings accounts, individual retirement accounts, certificates of
deposit and ATM cards.
CASH REQUIREMENTS
On October 1, 1999, MCB sold 91,000 common stock units at a price of $11.00 per
unit. Each unit consists of one share of MCB's common stock and one redeemable
common stock purchase warrant. Each warrant entitles the holder thereof to
purchase one and one half shares of common stock at $11.00 per share subject to
adjustment in certain circumstances for 36 months. The warrants will be
redeemable at five cents per warrant upon 30 days notice mailed within 20 days
after the closing bid price of the common stock has equaled or exceeded $15.00
per share for a period of twenty consecutive trading days. The units constitute
"restricted" securities and cannot be resold or transferred without registration
under the Securities Act of 1933, the Michigan Uniform Securities Act and the
securities law of any other applicable jurisdiction, unless an exception from
registration under each such applicable act is available.
NUMBER OF EMPLOYEES
At March 31, 2000 the Company and the Banks employed 28 full-time and 3
part-time employees. The Company anticipates hiring two full-time and three
part-time staff members within the next twelve months to serve the accounting,
loan and customer service areas.
(B) FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Total assets at March 31, 2000 were $74.4 million compared to $59.8 million at
December 31, 1999, an increase of 25%. The increase in total assets was funded
by a 32% increase in non-interest bearing deposits and a 29% increase in
interest-bearing deposits. Total net loss year-to-date at March 31, 2000 was
$264,000 as compared to the year-to-date March, 1999 loss of $727,000, a 64%
improvement. The return on average assets was -1.52% for the quarter and the
return on average equity was -13.8%. An increase in net interest income, before
the loan loss provision, of 411% in the quarter-to-quarter comparison coupled
with reduction in the loan loss provision, was the primary contributor to the
improved earning results. Non-interest income increased $12,000 or 100% in the
quarter-to-quarter comparison, while non-interest expense increased $208,000 or
35%.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
<PAGE> 11
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Description
27 Financial Data Schedule (EDGAR filing only)
(b) Reports on Form 8-K
No reports on form 8-K have been filed during the quarter for which this
report is filed.
SIGNATURES
In accordance with the requirements of the Exchange Act the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly organized.
May 11, 2000 Michigan Community Bancorp Limited
By: /s/ David A. McKinnon
-------------------------
David A. McKinnon, President and
Chief Executive Officer
By: /s/ Charlotte Cook
----------------------
Chief Financial Officer
<PAGE> 12
EXHIBIT INDEX
Exhibit Description
- ------- -----------
27 Financial Data Schedule (EDGAR filing only)
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,602
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 9,850
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,057
<INVESTMENTS-CARRYING> 5,057
<INVESTMENTS-MARKET> 5,057
<LOANS> 55,628
<ALLOWANCE> 772
<TOTAL-ASSETS> 74,447
<DEPOSITS> 66,553
<SHORT-TERM> 0
<LIABILITIES-OTHER> 390
<LONG-TERM> 0
0
0
<COMMON> 10,190
<OTHER-SE> (2,686)
<TOTAL-LIABILITIES-AND-EQUITY> 74,447
<INTEREST-LOAN> 1,128
<INTEREST-INVEST> 54
<INTEREST-OTHER> 156
<INTEREST-TOTAL> 1,338
<INTEREST-DEPOSIT> 761
<INTEREST-EXPENSE> 761
<INTEREST-INCOME-NET> 577
<LOAN-LOSSES> 57
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 808
<INCOME-PRETAX> (264)
<INCOME-PRE-EXTRAORDINARY> (264)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (264)
<EPS-BASIC> (0.35)
<EPS-DILUTED> (0.35)
<YIELD-ACTUAL> 3.56
<LOANS-NON> 1,450
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 715
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 772
<ALLOWANCE-DOMESTIC> 600
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 172
</TABLE>
