U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1998
[ ] TRANSMISSION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
____________ TO ________________
Commission File No. 333-65101
FLORIDA BUSINESS BANCGROUP, INC.
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(Name of small business issuer in its charter)
Florida 59-3517595
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(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2202 North West Shore Boulevard, Suite 150, Tampa, Florida 33607
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(Address of principal executive offices) Zip Code
Issuer's telephone number: (813) 281-0009
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Securities registered under Section 12(b) of the Securities Exchange
Act of 1934: None.
Securities registered under Section 12(g) of the Securities Exchange
Act of 1934: Common Stock and Warrants for Common Stock.
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is 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. [ ]
Issuer's revenues for its most recent fiscal year: $361,000
There were 1,320,700 shares of common stock outstanding at December 31,
1999.
There were 1,320,700 warrants outstanding at December 31, 1999.
There were no shares of preferred stock outstanding at December 31,
1999.
Documents incorporated by reference: None.
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TABLE OF CONTENTS
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Description Page Number
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PART I
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ITEM 1. BUSINESS..................................................................................................... 1
Forward-Looking Statements................................................................................... 1
General...................................................................................................... 1
Market Area and Competition.................................................................................. 1
Deposits..................................................................................................... 1
Loan Portfolio .............................................................................................. 2
Loan Loss Allowance ......................................................................................... 3
Investments.................................................................................................. 3
Data Processing.............................................................................................. 3
Employees.................................................................................................... 3
Monetary Policies............................................................................................ 4
Supervision and Regulation................................................................................... 4
ITEM 2. PROPERTIES................................................................................................... 7
ITEM 3. LEGAL PROCEEDINGS............................................................................................ 7
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......................................................... 7
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS..................................................... 7
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.................................................... 8
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA................................................................... 20
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE......................................................................................... 39
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT........................................................... 39
ITEM 10. EXECUTIVE COMPENSATION....................................................................................... 39
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................................... 39
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................................................... 39
Transactions with Affiliates................................................................................. 39
Banking Transactions......................................................................................... 40
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K............................................................................. 40
SIGNATURES................................................................................................................. 41
EXHIBITS
27.0 Financial Data Schedule
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PART I
ITEM 1. BUSINESS
Forward-Looking Statements
This report may contain certain "forward-looking" statements, as such
term is defined in the Private Securities Litigation Reform Act of 1995
or by the Securities and Exchange Commission in its rules, regulations
and releases, which represent Florida Business BancGroup, Inc.'s (the
"Company" or "FBBI") expectations or beliefs, including but not limited
to statements concerning the Company's operations, economic
performance, financial condition, growth and acquisition strategies,
investments, and future operational plans. For this purpose, any
statements contained herein that are not statements of historical fact
may be deemed to be forward-looking statements. Without limiting the
generality of the foregoing, words such as "may," "will," "expect,"
"relieve," "anticipate," "intent," "could," "estimate," "might," or
"continue" or the negative or other variations thereof or comparable
terminology are intended to identify forward-looking statements. These
statements by their nature involve substantial risks and uncertainties,
certain of which are beyond our control, and actual results may differ
materially depending on a variety of important factors, including
uncertainty related to our operations, mergers or acquisitions,
governmental regulation, the value of the assets and any other factors
discussed in this and other Company filings with the Securities and
Exchange Commission.
General
The Company was incorporated under the laws of the State of Florida on
May 18, 1998, for the purpose of operating as a bank holding company
pursuant to the Federal Bank Holding Company Act of 1956, as amended.
On September 20, 1999, the Company acquired all of the outstanding
common stock of Bay Cities Bank (the "Bank"). As of December 31, 1999,
the Bank was the sole subsidiary of the Company.
The Company successfully completed its initial public offering
("Offering") on August 7, 1999, raising $13.2 million through the sale
of 1,320,700 units, consisting of one share of common stock and one
stock warrant, at $10 per unit. The capital raised in the Offering was
used to redeem the 900 shares of preferred stock issued to the
Organizers, to repay the organizers for advances used for
organizational and preopening expenses, and to the purchase of 100% of
the newly issued shares of the Bank. The balance of the proceeds of
approximately $4.5 million is being held for general corporate purposes
by the Company. The Company's fiscal year ends December 31. The main
office of the Company and the Bank is located at 2202 North West Shore
Boulevard, Suite 150, Tampa, Hillsborough County, Florida.
Bay Cities Bank opened for business on November 10, 1999. The Bank is
engaged in a general commercial and retail banking business with
primary emphasis upon high quality service to meet the financial needs
of the individuals and businesses residing and located in and around
Tampa, Florida. The Bank offers a full compliment of loans, including
commercial, consumer/installment and real estate loans. Commercial
loans will account for approximately one-half of the Bank's estimated
total loan portfolio.
Market Area and Competition
According to the Tampa Tribune Market Guide - 1998, the Tampa Bay MSA
is a growth market, where year after year the population size is among
the top 25 MSAs nationally. The Tampa Bay MSA ranks second in
population size and total number of households among Southeastern
metropolitan areas. Only Atlanta has a larger population. The Tampa Bay
MSA has the largest population and the most households in Florida,
ahead of Miami, Ft. Lauderdale and Orlando. Tampa Bay also ranks high
in other vital statistics such as effective buying income and retail
activity, not only in Florida, but in the Southeast and the United
States.
Competition among financial institutions for deposits and loans in our
primary market is intense. Competitors include existing area financial
institutions, including insurance companies, consumer finance
companies, brokerage houses, credit unions and other business entities
which target traditional banking markets. Due to the growth of the
Tampa area, it can be anticipated that additional competition will
continue from existing, as well, new entrants to the market.
Deposits
Bay Cities Bank offers a wide range of interest-bearing and
noninterest-bearing deposit accounts, including commercial and retail
checking accounts, money market accounts, individual retirement
accounts, regular interest-bearing statement savings accounts
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and certificates of deposit with fixed rates and a range of maturity
date options. The sources of deposits are residents, businesses and
employees of businesses within our market area, obtained through the
personal solicitation of our officers and directors, direct mail
solicitation and advertisements published in the local media. We pay
competitive interest rates on time and savings deposits up to the
maximum permitted by law or regulation. Our service charge fee schedule
is competitive with other financial institutions in our market area
covering such matters as maintenance fees on checking accounts, per
item processing fees on checking accounts and returned check charges.
Loan Portfolio
General. - Through Bay Cities Bank, the Company provides for the
financing needs of the community by offering a variety of loans.
Commercial loans will include both collateralized and uncollateralized
loans for working capital (including inventory and receivables),
business expansion (including real estate acquisitions and
improvements), and purchase of equipment and machinery. A variety of
residential real estate loans will be generated, including conventional
mortgages collateralized by first mortgages liens to enable borrowers
to purchase, refinance, construct upon or improve real property.
Consumer loans will include collateralized and uncollateralized loans
for financing automobiles, boats, home improvements, and personal
investments. We will primarily enter into lending arrangements for our
portfolio loans with individuals who are familiar to us and are
residents of our PSA and surrounding area. It is anticipated that up to
20% of the loans will come from outside our market area.
We recognize that the risk of loss will vary with, among other things,
the type of loan being made, the creditworthiness of the borrower over
the term of the loan and, in the case of a collateralized loan, the
quality of the collateral for the loan as well as the general economic
conditions. The Bank will maintain an adequate allowance for loan
losses based on, among other things, industry standards, management's
experience, our historical loan loss experience, evaluation of economic
conditions and regular reviews of delinquencies and loan portfolio
quality.
We are following a conservative lending policy, but one which permits
prudent risks to assist businesses and consumers in the market area.
Our lending area is generally the immediate Hillsborough County and the
counties contiguous to Hillsborough County. We do expect that loan
participations will be purchased from correspondent banks. However,
participations will likely be sold, particularly with regard to real
estate lending. Interest rates will vary depending on our cost of
funds, the loan maturity, and the degree of risk. Whenever possible,
interest rates will be adjustable with fluctuations in the "prime"
rate. The long-term target loan-to-deposit ratio will be approximately
75%. This ratio is expected to meet the credit needs of customers while
allowing prudent liquidity through the investment portfolio. Our
Directors believe that this positive, community-oriented lending
philosophy will be translated into a sustainable volume of quality
loans into the foreseeable future.
Commercial Loans - will primarily be underwritten in our market area on
the basis of the borrowers' ability to service such debt from income.
As a general practice, the Bank will take as collateral a security
interest in any available real estate, equipment, or other chattel.
Such loans, however, may also be made on an uncollateralized basis.
Collateralized working capital loans will be primarily collateralized
by short term assets whereas term loans will be primarily
collateralized by long term assets. Unlike residential mortgage loans,
which generally are made on the basis of the borrowers' ability to make
repayment from his employment and other income, and which are
collateralized by real property whose value tends to be easily
ascertainable, commercial loans typically will be underwritten on the
basis of the borrower's ability to make repayment from the cash flow of
the business and generally will be collateralized by business assets,
such as accounts receivable, equipment and inventory.
Mortgage Construction Loans - will be offered to finance the
construction of single family dwellings. Most of the residential
construction loans, however, will be made to individuals who intend to
erect owner-occupied housing on a purchased parcel of real estate. The
size of the construction loans to individuals will typically range from
$50,000 to $200,000. Construction loans to contractors will be
generally offered on the same basis as other residential real estate
loans, except that a larger percentage down payment will typically be
required. Construction loans will be structured either to be converted
to permanent loans with the Bank at the end of the construction phase
or to be paid off upon receiving financing from another financial
institution. Construction loans on residential properties will be
generally made in amounts up to 95% (along with mortgage insurance) of
appraised value. Construction loans to contractors will generally have
terms of up to 12 months. The maximum loan amounts for construction
loans will be based on the lessor of the current appraised value or the
purchase price.
Consumer Loans - will include the financing of automobiles, recreation
vehicles, boats, second mortgages, home improvement loans, home equity
lines of credit, personal (collateralized and uncollateralized) and
deposit account collateralized loans. Consumer loans will be made at
fixed and variable interest rates and may be made based on up to a
10-year amortization schedule, but which become due and payable in full
and are generally refinanced in 36 to 60 months. Consumer loans will be
attractive to the Bank because they typically have a shorter term and
carry higher interest rates than that charged on other types of loans.
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Residential Mortgage Loans - will be a part of our lending activities
which will consist of the origination of single family residential
mortgage loans collateralized by owner-occupied property located in our
market area and surrounding areas. We will also offer adjustable rate
mortgages (ARMs) and will maintain these ARMs in our portfolio or we
may sell the ARMs in the secondary market. Fixed and adjustable rate
mortgage loans collateralized by single family residential real estate
generally will be generated in amounts of no more than 85% of appraised
value. The Bank may, however, lend up to 95% of the value of the
property collateralizing the loan, but if such loans are required to be
made in excess of 85% of the value of the property, they must be
insured by private or federally guaranteed mortgage insurance.
Mortgagee's title insurance will be required to protect against defects
in our lien on the property which may collateralize the loan. We will
maintain our errors and omissions insurance policy to protect against
loss in the event of failure of a mortgagor to pay premiums on fire and
other hazard insurance policies.
Loan Loss Allowance
In considering the adequacy of our allowance for loan losses,
management has considered that as of December 31, 1999, approximately
99% of outstanding loans are in the commercial real estate loan
category. Commercial loans are generally considered by management as
having greater risk than other categories of loans in our loan
portfolio. We believe that the real estate collateral securing our
commercial real estate loans reduces the risk of loss inherently
present in commercial loans.
At December 31, 1999, our consumer loan portfolio consisted primarily
of lines of credit and installment loans secured by automobiles, boats
and other consumer goods. We believe that the risk associated with
these types of loans has been adequately provided for in the loan loss
allowance.
Our Board of Directors monitors the loan portfolio monthly in order to
evaluate the adequacy of the allowance for loan losses. In addition to
reviews by regulatory agencies, the bank intends to engage the services
of outside consultants to assist in the evaluation of credit quality
and loan administration. These professionals will complement our
internal system, which identifies potential problem credits as early as
possible, categorizes the credits as to risk and includes a reporting
process to monitor the progress of the credits.
The allowance for loan losses is established through a provision for
loan losses charged to expense. Loans will be charged off against the
allowance when management believes the collectibility of principal is
unlikely. The monthly provision for loan losses is based on
management's judgment, after considering known and inherent risks in
the portfolio, our past loss experience, adverse situations that may
affect the borrower's ability to repay, assumed values of the
underlying collateral securing the loans, the current and prospective
financial condition of the borrower, and the prevailing and anticipated
economic condition of the local market. During the year ended December
31, 1999, no loans were charged off against the allowance for loan
losses.
Investments
As of December 31, 1999, federal funds sold and investment securities
comprised approximately 76% of the Company's total assets and net loans
comprised approximately 11% of the Company's total assets.
Our primary objective is to construct an investment portfolio comprised
of a mixture of investments which will earn an acceptable rate of
return while meeting the Bank's liquidity requirements. This will be
accomplished by matching the maturity of assets with liabilities to the
greatest extent possible.
The Bank intends to invest primarily in U.S. obligations guaranteed as
to principal and interest. The Bank will also enter into federal funds
transactions with our principal correspondent banks and anticipate that
we will be a net seller of funds. All investments with a maturity in
excess of one year will be readily salable on the open market.
Data Processing
Bay Cities Bank has a data processing servicing agreement with M&I.
This servicing agreement provides us with a full range of data
processing services, including an automated general ledger, deposit
accounting, commercial, real estate and installment lending data
processing, central information file ("CIF") and ATM processing. For
this service, we pay a monthly fee based on the type, kind and volume
of data processing services provided priced at a stipulated rate
schedule.
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Employees
We currently employ 10 full time persons, including 3 executive
officers. Employees are hired as needed to meet company-wide personnel
demands.
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Monetary Policies
The results of our operations are affected by credit policies of
monetary authorities, particularly the Federal Reserve Board. The
instruments of monetary policy employed by the Federal Reserve Board
include open market operations in U.S. Government securities, changes
in the discount rate on member bank borrowings, changes in reserve
requirements against member bank deposits and limitations on interest
rates which member banks may pay on time and savings deposits. In view
of changing conditions in the national economy and in the money market,
as well as the effect of action by monetary and fiscal authorities,
including the Federal Reserve Board, no prediction can be made as to
our possible future changes in interest rates, deposit levels, loan
demand, or our business earnings.
Supervision and Regulation
FBBI and the Bank operate in a highly regulated environment. Our
business activities, which are governed by statute, regulation and
administrative policies, are supervised by a number of federal
regulatory agencies, including the Federal Reserve Board, the Florida
Department of Banking and Finance ("Department") and the Federal
Deposit Insurance Corporation ("FDIC").
The banking industry is highly regulated, with numerous federal and
state laws and regulations governing its activities. The following is a
brief summary of the more recent legislation which affects FBBI and our
subsidiaries:
In 1999 the financial services regulation was significantly reformed
with the adoption of the Gramm-Leach-Bliley Act ("GLA"). The GLA
provides for the streamlining of the regulatory oversight functions of
the various federal banking regulators. Of significance, the GLA
permits Bank Holding Companies ("BHC") that are well managed, well
capitalized and that have at least a satisfactory Community
Reinvestment Act rating to operate as Financial Holding Companies
("FHC"). In addition to activities that are permissible for BHCs and
their subsidiaries, the GLA permits FHCs and their subsidiaries to
engage in a wide variety of other activities that are "financial in
nature" or are incidental to financial activities. These new activities
will enable FBBI and its subsidiaries to consider and engage in new
lines of business.
The GLA also requires financial institutions to permit, with few
exceptions, their customers to "opt out" of having their personal
financial information shared with nonaffiliated third parties. The GLA
bars financial institutions from disclosing customer account numbers to
direct marketers and mandates that institutions provide annual
disclosure to their customers regarding the institution's privacy
policies and procedures.
FBBI is regulated by the Federal Reserve Board under the Bank Holding
Company Act of 1956, which requires every bank holding company to
obtain the prior approval of the Federal Reserve Board before acquiring
more than 5% of the voting shares of any bank or all or substantially
all of the assets of a bank, and before merging or consolidating with
another bank holding company. The Federal Reserve Board (pursuant to
regulation and published policy statements) has maintained that a bank
holding company must serve as a source of financial strength to its
subsidiary banks. In adhering to the Federal Reserve Board policy, FBBI
may be required to provide financial support for a subsidiary bank at a
time when, absent such Federal Reserve Board policy, the Company may
not deem it advisable to provide such assistance.
A bank holding company is generally prohibited from acquiring control
of any company which is not a bank and from engaging in any business
other than the business of banking or managing and controlling banks.
However, there are certain activities which have been identified by the
Federal Reserve Board to be so closely related to banking as to be a
proper incident thereto and thus permissible for bank holding
companies.
As a bank holding company, FBBI is required to file with the Federal
Reserve Board an annual report of its operations at the end of each
fiscal year and such additional information as the Federal Reserve
Board may require pursuant to the Act. The Federal Reserve Board may
also make examinations of FBBI and each of its subsidiaries.
Having completed a public offering with its shares of common stock
registered under the Securities Act of 1933, FBBI has chosen to file
periodic public disclosure reports with the Securities and Exchange
Commission pursuant to the Securities and Exchange Act of 1934, and the
regulations promulgated thereunder.
Form 10-KSB is a required annual report that must contain a complete
overview of the Company's business, financial, management, regulatory,
legal, ownership and organizational status. FBBI must file Form 10-KSB
by March 31 of each year.
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Similarly, Form 10-QSB, must contain information concerning FBBI on a
quarterly basis. Although Form 10-KSB requires the inclusion of audited
financial statements, unaudited statements are sufficient for inclusion
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on Form 10-QSB. Additionally, any significant non-recurring events that
occur during the subject quarter, as well as changes in securities, any
defaults and the submission of any maters to a vote of security
holders, must also be reported on Form 10-QSB.
Additionally, if any of six significant events (a change in control, an
acquisition or disposition of significant assets, bankruptcy or
receivership, a change in certifying accountant, any resignation of
directors or a change in fiscal year end) occurs in a period between
the filing of Form 10-KSB or a Form 10-QSB, such event must be reported
on a Form 8-KSB within 15 days of the event.
When communicating with shareholders, FBBI's proxy solicitations for
its Annual Meetings of Shareholders must contain certain detailed
disclosures regarding the current status of the Company. In addition,
FBBI's Annual Report must contain certain information, including
audited financial statements, similar to what is found on Form 10-KSB.
Individual directors, officers and owners of more than 10% of the
Company's common stock, must also file individual disclosures of the
amount of FBBI securities (stock, options or warrants) they
beneficially own and of any transactions in such securities to which
they are parties. The initial status of all such individuals was
reported on Form 3, securities transactions are reported on Form 4 as
they occur, and an annual report of ownership is filed on Form 5. In
certain instances, the filing of a Form 4 or a Form 5 can relieve the
reporting individual of their duty to file the other.
Recently, the National Association of Securities Dealers adopted a rule
requiring the audit committees of Boards of Directors of reporting
corporations such as FBBI to undertake certain organizational and
operational steps. The Securities and Exchange Commission is
considering adopting a similar rule. These standards will require our
audit committee to be comprised solely of independent, non-employee
directors who are financially literate. Furthermore, the audit
committee will need to adopt a formal charter defining the scope for
its operations. The Securities and Exchange Commission's proposed rule
will also require our auditors to review the financial statements
contained in our Form 10-QSBs, in addition to our Form 10-KSBs.
As a state-chartered bank, the Bank is subject to the supervision of
the Department, the FDIC and the Federal Reserve Board. With respect to
expansion, the Bank may establish branch offices anywhere within the
State of Florida. The Bank is also subject to the Florida banking and
usury laws restricting the amount of interest which it may charge in
making loans or other extensions of credit. In addition, the Bank, as a
subsidiary of FBBI, is subject to restrictions under federal law in
dealing with FBBI and other affiliates, if any. These restrictions
apply to extensions of credit to an affiliate, investments in the
securities of an affiliate and the purchase of assets from an
affiliate.
Loans and extensions of credit by state banks are subject to legal
lending limitations. Under state law, a state bank may grant unsecured
loans and extensions of credit in an amount up to 15% of its unimpaired
capital and surplus to any person. In addition, a state bank may grant
additional loans and extensions of credit to the same person up to 10%
of its unimpaired capital and surplus, provided that the transactions
are fully secured. This 10% limitation is separate from, and in
addition to, the 15% limitation for unsecured loans. Loans and
extensions of credit may exceed the general lending limit if they
qualify under one of several exceptions.
Both FBBI and the Bank are subject to regulatory capital requirements
imposed by the Federal Reserve Board, the FDIC and the Department. Both
the Federal Reserve Board and the FDIC have established risk-based
capital guidelines for bank holding companies and banks which make
regulatory capital requirements more sensitive to differences in risk
profiles of various banking organizations. The capital adequacy
guidelines issued by the Federal Reserve Board are applied to bank
holding companies on a consolidated basis with the banks owned by the
holding company. The FDIC's risk capital guidelines apply directly to
state banks regardless of whether they are a subsidiary of a bank
holding company. Both agencies' requirements (which are substantially
similar) provide that banking organizations must have capital
equivalent to 8% of weighted risk assets. The risk weights assigned to
assets are based primarily on credit risks. Depending upon the
riskiness of a particular asset, it is assigned to a risk category. For
example, securities with an unconditional guarantee by the United
States government are assigned to the lowest risk category. A risk
weight of 50% is assigned to loans secured by owner-occupied one to
four family residential mortgages. The aggregate amount of assets
assigned to each risk category is multiplied by the risk weight
assigned to that category to determine the weighted values, which are
added together to determine total risk-weighted assets. At December 31,
1999, our total risk-based capital and Tier I capital ratio were 12.2%
and 8.25%, respectively. Both the Federal Reserve Board and the FDIC
have also implemented minimum capital leverage ratios to be used in
tandem with the risk-based guidelines in assessing the overall capital
adequacy of bank and bank holding companies. Under these rules, banking
institutions are required to maintain a ratio of 3% "Tier I"capital to
total assets (net of goodwill). Tier I capital includes common
stockholders equity, noncumulative perpetual preferred stock and
minority interests in the equity accounts of consolidated subsidiaries.
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Both the risk-based capital guidelines and the leverage ratio are
minimum requirements, applicable only to top-rated banking
institutions. Institutions operating at or near these levels are
expected to have well-diversified risk, excellent asset quality, high
liquidity, good earnings and in general, have to be considered strong
banking organizations, rated composite 1 under the CAMELS rating system
for banks or the BOPEC rating system for bank holding companies.
Institutions with lower ratings and institutions with high levels of
risk or experiencing or anticipating significant growth would be
expected to maintain ratios 100 to 200 basis points above the stated
minimums.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), created five "capital categories" ("well capitalized,"
(adequately capitalized," "undercapitalized," "significantly
undercapitalized" and "critically undercapitalized") which are defined
in the Act and which are used to determine the severity of corrective
action the appropriate regulator may take in the event an institution
reaches a given level of undercapitalization. For example, an
institution which becomes "undercapitalized" must submit a capital
restoration plan to the appropriate regulator outlining the steps it
will take to become adequately capitalized. Upon approving the plan,
the regulator will monitor the institution's compliance. Before a
capital restoration plan will be approved, any entity controlling a
bank (i.e., a holding company) must guarantee compliance with the plan
until the institution has been adequately capitalized for four
consecutive calendar quarters. The liability of the holding company is
limited to the lesser of 5% of the institution's total assets or the
amount which is necessary to bring the institution into compliance with
all capital standards. In addition, "undercapitalized" institutions
will be restricted from paying management fees, dividends and other
capital distributions, will be subject to certain asset growth
restrictions and will be required to obtain prior approval from the
appropriate regulator to open new branches or expand into new lines of
business. As an institution drops to lower capital levels, the extent
of action to be taken by the appropriate regulator increases,
restricting the types of transactions in which the institution may
engage and ultimately providing for the appointment of a receiver for
certain institutions deemed to be critically undercapitalized.
The FDICIA required each federal banking agency to prescribe for all
insured depository institutions and their holding companies standards
relating to internal controls, information systems and audit systems,
loan documentation, credit underwriting, interest rate risk exposure,
asset growth, and compensation, fees and benefits and such other
operational and managerial standards as the agency deems appropriate.
In addition, the federal banking regulatory agencies were required to
prescribe by regulation standards specifying: (i) maximum classified
assets to capital ratios; (ii) minimum earnings sufficient to absorb
losses without impairing capital; (iii) to the extent feasible, a
minimum ratio of market value to book value for publicly traded shares
of depository institutions or the depository institution holding
companies; and (iv) such other standards relating to asset quality,
earnings and valuation as the agency deems appropriate. Finally, each
federal banking agency was required to prescribe standards for
employment contracts and other compensation arrangements of executive
officers, employees, directors and principal stockholders of insured
depository institutions that would prohibit compensation and benefits
and other arrangements that are excessive or that could lead to a
material financial loss for the institution. If an insured depository
institution or its holding company fails to meet any of its standards
described above, it will be required to submit to the appropriate
federal banking agency a plan specifying the steps that will be taken
to cure the deficiency. If an institution fails to submit an acceptable
plan or fails to implement the plan, the appropriate federal banking
agency will require the institution or holding company, to correct the
deficiency and until corrected, may impose restrictions on the
institution or the holding company including any of the restrictions
applicable under the prompt corrective action provisions of the FDICIA.
The Federal banking agencies final rule implementing the safety and
soundness provisions of the FDICIA was effective on August 9, 1995.
In response to the directive issued under the Act, the regulators have
adopted regulations which, among other things, prescribe the capital
thresholds for each of the five capital categories established by the
Act. The following table reflects the capital thresholds:
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Total Risk - Tier I Risk - Tier I
Based Capital Based Capital Leverage
Ratio Ratio Ratio
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Well capitalized (1) 10% 6% 5%
Adequately capitalized (1) 8% 4% 4% (2)
Undercapitalized (3) less than 8% less than 4% less than 4%
Significantly Undercapitalized (3) less than 6% less than 3% less than 3%
Critically Undercapitalized - - less than 2%
<FN>
(1) An institution must meet all three minimums.
(2) 3% for composite 1-rated institutions, subject to appropriate federal
banking agency guidelines.
(3) An institution falls into this category if it is below the specified
capital level for any of the three capital measures.
</FN>
</TABLE>
-6-
<PAGE>
Based upon the above regulatory ratios, the Bank is considered to be
well capitalized.
The Act also provided that banks must meet new safety and soundness
standards. In order to comply with the Act, the Federal Reserve Board
and the FDIC adopted a final Rule which institutes guidelines defining
operational and managerial standards relating to internal controls,
loan documentation, credit underwriting, interest rate exposure, asset
growth, director and officer compensation, asset quality, earnings and
stock valuation. Both the capital standards and the safety and
soundness standards which the Act implements were designed to bolster
and protect the deposit insurance fund.
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994, restrictions on interstate acquisitions of banks by bank
holding companies were repealed, such that FBBI and any other bank
holding company are able to acquire any Florida- based bank, subject to
certain deposit percentage and other restrictions. The legislation also
provides that, unless an individual state elects beforehand either (i)
to accelerate the effective date or (ii) to prohibit out-of-state banks
from operating interstate branches within its territory, on or after
June 1, 1997, adequately capitalized and managed bank holding companies
will be able to consolidate. De novo branching by an out-of-state bank
is permitted only if it is expressly permitted by the laws of the host
state. The authority of a bank to establish and operate branches within
a state will continue to be subject to applicable state branching laws.
Florida permits interstate branching through acquisition, but does not
allow de novo branching.
The scope of regulation and permissible activities of FBBI and our
subsidiaries is subject to change by future federal and state
legislation.
ITEM 2. PROPERTIES
The Company's permanent headquarters are located at 2202 North West Shore
Boulevard, Tampa, Florida, in a new 6-story office building developed by
Crescent Resources (a subsidiary of Duke Power). The commercial office
building is known as the International Plaza. The Bank occupies 8,056
square feet on the ground floor (including ATM access).
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or the
Bank is a party or which any of their properties are subject. We are not
aware of any material proceedings being contemplated by any governmental
authority, nor are we aware of any material proceedings, pending or
contemplated, in which any director, officer, affiliate or any principal
security holder of the Company, or any associate of the foregoing is a
party or has an interest to the Company or the Bank.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
No market exists for the common shares of the Company. It is not
anticipated that an active public market will develop for the common shares
of the Company because, at this time, the Company does not intend to seek a
listing for the common stock on a national securities exchange or to
qualify such common stock for quotation on the National Association of
Securities Dealers Automated Quotation System.
[Left Intentionally Blank]
-7-
<PAGE>
<TABLE>
<CAPTION>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(INCLUDING SELECTED FINANCIAL DATA)
SELECTED FINANCIAL DATA
At December 31, or for the Year then Ended
(Dollars in thousands, except per share figures)
1999 1998
---- ----
<S> <C> <C>
At Year End:
Cash and cash equivalents................................................................. $ 7,913 16
Securities................................................................................ 3,412 -
Loans, net................................................................................ 1,581 -
All other assets.......................................................................... 1,106 92
------ ----
Total assets..................................................................... $ 14,012 108
====== ====
Deposit accounts.......................................................................... 1,114 -
All other liabilities..................................................................... 166 100
Stockholders' equity (deficit)............................................................ 12,732 8
------ ----
Total liabilities and stockholders' equity....................................... $ 14,012 108
====== ====
For the Year:
Total interest income..................................................................... 177 -
Total interest expense.................................................................... 3 -
------ ----
Net interest income....................................................................... 174 -
Provision for loan losses................................................................. 24 -
------ ----
Net interest income after provision for loan losses....................................... 150 -
------ ----
Noninterest income........................................................................ 187 -
Noninterest expenses...................................................................... 816 132
------ ----
Earnings (loss) before income tax credit.................................................. (479) (132)
Income taxes (benefit).................................................................... (180) (50)
------ ----
Net loss ................................................................................. $ (299) (82)
====== ====
Basic loss per share...................................................................... $ (.57) -
====== ====
Diluted loss per share.................................................................... (.57) -
====== ====
Ratios and Other Data:
Return on average assets.................................................................. (7.56%) *
Return on average equity.................................................................. (7.78%) *
Average equity to average assets.......................................................... 97.16% *
Interest-rate spread during the period.................................................... 1.76% *
Net yield on average interest-earning assets.............................................. 4.96% *
Ratio of average interest-earning assets to average
interest-bearing liabilities..................................................... 36.14 *
Nonperforming loans and foreclosed real estate as a percentage of
total assets at end of year...................................................... - *
Allowance for loan losses as a percentage
of total loans at end of year.................................................... 1.49% *
Total number of banking offices........................................................... 1 -
Total shares outstanding at end of year................................................... 1,320,700 -
Book value per share at end of year....................................................... $ 9.64 -
<FN>
* Not meaningful, Company was in organizational stage.
</FN>
</TABLE>
-8-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
Year Ended December 31, 1999 and 1998
General
Florida Business BancGroup, Inc. (the "Holding Company") was incorporated on May
18, 1998 in the State of Florida for the purpose of operating as a one bank
holding company and owns 100% of the outstanding shares of Bay Cities Bank (the
"Bank"). The Holding Company's only business is the ownership and operations of
the Bank. The Bank is a Florida-chartered commercial bank which opened for
business November 10, 1999 (collectively, the "Company"). The Bank's deposits
are insured by the Federal Deposit Insurance Corporation. The Bank provides
community banking services to business and individuals in Hillsborough County,
Florida.
The Holding Company completed its public offering of 1,320,700 units, consisting
of one common share and one warrant, at $10 per unit on August 7, 1999. The
Company incurred offering costs of $62,872 which were deducted from the
proceeds.
Liquidity and Capital Resources
A state-chartered commercial bank is required under Florida Law to maintain a
liquidity reserve of at least 15% of its total transaction accounts and 8% of
its total nontransaction accounts subject to certain restrictions. The reserve
may consist of cash-on-hand, demand deposits due from correspondent banks, and
other investments and short-term marketable securities. At December 31, 1999,
the Bank exceeded its regulatory liquidity requirements.
The Company's primary source of cash during the year ended December 31, 1999 was
from the proceeds from the sale of its common stock of $13.2 million and from
net deposit inflows of $1.1 million. Cash was used primarily to purchase federal
funds sold, to originate loans, purchase securities and purchase premises and
equipment. At December 31, 1999, the Company had outstanding commitments to
originate loans totaling $2.7 million and commitments to borrowers for available
lines of credit totaling $.4 million.
Regulation and Legislation
As a state-chartered commercial bank, the Bank is subject to extensive
regulation by the Florida Department of Banking and Finance ("Florida DBF") and
the Federal Deposit Insurance Corporation ("FDIC"). The Bank files reports with
the Florida DBF and the FDIC concerning its activities and financial condition,
in addition to obtaining regulatory approvals prior to entering into certain
transactions such as mergers with or acquisitions of other financial
institutions. Periodic examinations are performed by the Florida DBF and the
FDIC to monitor the Bank's compliance with the various regulatory requirements.
The Holding Company and the Bank are also subject to regulation and examination
by the Federal Reserve Board of Governors.
Year 2000 Compliance
The Company's operating and financial systems have been found to be compliant;
the "Y2K Problem" has not adversely affected the Company's operations nor does
management expect that it will.
Credit Risk
The Company's primary business is making commercial, business, consumer, and
real estate loans. That activity entails potential loan losses, the magnitude of
which depend on a variety of economic factors affecting borrowers which are
beyond the control of the Company. While the Company has instituted underwriting
guidelines and credit review procedures to protect the Company from avoidable
credit losses, some losses will inevitably occur. At December 31, 1999, the
Company had no nonperforming assets on loans delinquent ninety days or more, and
had no charge-off experience.
-9-
<PAGE>
The following table presents information regarding the Company's total allowance
for losses as well as the allocation of such amounts to the various categories
of loans (dollars in thousands):
<TABLE>
<CAPTION>
At December 31,
---------------
1999
---------------
Loans
To
Total
Amount Loans
------ -----
<S> <C> <C>
Commercial real estate loans..................................................... $ 21 89.16%
Commercial loans................................................................. - 9.91
Consumer loans................................................................... 3 .93
---- ------
Total allowance for loan losses.................................................. $ 24 100.00%
==== ======
Allowance for credit losses as a percentage
of the total loans outstanding................................................ 1.49%
====
</TABLE>
Loan Portfolio Composition
Commercial real estate loans and land loans comprise the largest group of loans
in the Company's portfolio amounting to $1.4 million, or 89.16% of the total
loan portfolio as of December 31, 1999. Commercial real estate loans consist of
$.99 million of loans secured by other nonresidential property and $.45 million
of loans secured by undeveloped land.
Commercial loans comprise the second largest group of loans in the Company's
loan portfolio, amounting to $160,000 or 9.91% of the total loan portfolio as of
December 31, 1999.
The following table sets forth the composition of the Company's loan portfolio:
<TABLE>
<CAPTION>
At December 31,
---------------
1999
---------------
% of
Amount Total
------ -----
(in thousands)
<S> <C> <C>
Commercial real estate............................................................. $ 1,440 89.16%
Commercial......................................................................... 160 9.91
Consumer........................................................................... 15 .93
------- -------
Loans, gross....................................................................... 1,615 100.00%
====== ======
Add (Subtract):
Deferred costs (fees) net........................................................ (10)
Allowance for credit losses...................................................... (24)
-------
Loans, net......................................................................... $ 1,581
=======
</TABLE>
-10-
<PAGE>
Securities
The securities portfolio is comprised primarily of U.S. Government agency
securities. According to Financial Accounting Standards No. 115, the securities
portfolio is categorized as either "held to maturity", "available for sale" or
"trading." Securities held to maturity represent those securities which the
Company has the positive intent and ability to hold to maturity. These
securities are carried at amortized cost. Securities available for sale
represent those investments which may be sold for various reasons including
changes in interest rates and liquidity considerations. These securities are
reported at fair market value with unrealized gains and losses being reported as
a separate component of stockholders equity, net of income taxes and were
comprised of U.S. Government agency securities and equity securities at December
31, 1999. Trading securities are held primarily for resale and are recorded at
their fair values. Unrealized gains or losses on trading securities are included
immediately in earnings. At December 31, 1999, the Company had no securities
categorized as held to maturity or trading.
The following table sets forth the amortized cost and fair value of the
Company's securities portfolio:
<TABLE>
<CAPTION>
At December 31, 1999
--------------------
Amortized Fair
Cost Value
--------- -----
(in thousands)
Securities available for sale:
<S> <C> <C>
U.S. Government agency securities...................................... $ 3,461 3,412
U.S. Equity securities................................................. 125 125
----- -----
$ 3,586 3,537
===== =====
</TABLE>
The following table sets forth, by maturity distribution, certain information
pertaining to the securities available for sale portfolio as follows (dollars in
thousands):
<TABLE>
<CAPTION>
After One Year
Less Than One Year to Five Years Total
------------------ ------------------- -----
Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield
----- ----- ----- ----- ----- -----
December 31, 1999:
<S> <C> <C> <C> <C> <C> <C>
U.S. Government agency securities....... $ 884 6.23% $ 2,528 6.23% $ 3,412 6.23%
=== ==== ===== ==== ===== ====
</TABLE>
-11-
<PAGE>
Regulatory Capital Requirements
Under FDIC regulations, the Bank is required to meet certain minimum regulatory
capital requirements. This is not a valuation allowance and has not been created
by charges against earnings. It represents a restriction on stockholders'
equity.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1999, that the Bank
meets all capital adequacy requirements to which it is subject.
<TABLE>
<CAPTION>
To Be Well
Capitalized
Minimum for Purposes
For Capital of Prompt and
Actual Adequacy Purposes: Corrective Action
------ ------------------ -----------------
Amount % Amount % Amount %
------ ----- ------ ----- ------ -----
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1999:
Total capital (to Risk-
Weighted Assets) ....... $7,934 191.35% $ 332 8.00% $ 415 10.00%
Tier I Capital (to Risk-
Weighted Assets) ....... 7,910 190.76 166 4.00 248 6.00
Tier I Capital
(to Average Assets) .... 7,910 56.45 560 4.00 701 5.00
</TABLE>
Market Risk
Market risk is the risk of loss from adverse changes in market prices and rates.
The Company's market risk arises primarily from interest-rate risk inherent in
its lending and deposit taking activities. To that end, management actively
monitors and manages its interest-rate risk exposure. The measurement of market
risk associated with financial instruments is meaningful only when all related
and offsetting on- and off-balance-sheet transactions are aggregated, and the
resulting net positions are identified. Disclosures about the fair value of
financial instruments, which reflect changes in market prices and rates, can be
found in Note 6 of Notes to Consolidated Financial Statements.
The Company's primary objective in managing interest-rate risk is to minimize
the adverse impact of changes in interest rates on the Banks net interest income
and capital, while adjusting the Company's asset-liability structure to obtain
the maximum yield-cost spread on that structure. The Company relies primarily on
its asset-liability structure to control interest-rate risk. However, a sudden
and substantial increase in interest rates may adversely impact the Company's
earnings, to the extent that the interest rates borne by assets and liabilities
do not change at the same speed, to the same extent, or on the same basis. The
Company does not engage in trading activities.
-12-
<PAGE>
Asset - Liability Structure
As part of its asset and liability management, the Company has emphasized
establishing and implementing internal asset-liability decision processes, as
well as communications and control procedures to aid in managing the Company's
earnings. Management believes that these processes and procedures provide the
Company with better capital planning, asset mix and volume controls,
loan-pricing guidelines, and deposit interest-rate guidelines which should
result in tighter controls and less exposure to interest-rate risk.
The matching of assets and liabilities may be analyzed by examining the extent
to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap." An asset or
liability is said to be interest rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest-rate sensitivity
gap is defined as the difference between interest-earning assets and
interest-bearing liabilities maturing or repricing within a given time period.
The gap ratio is computed as rate sensitive assets/rate sensitive liabilities. A
gap ratio of 1.0% represents perfect matching. A gap is considered positive when
the amount of interest-rate sensitive assets exceeds interest-rate sensitive
liabilities. A gap is considered negative when the amount of interest-rate
sensitive liabilities exceeds interest-rate sensitive assets. During a period of
rising interest rates, a negative gap would adversely affect net interest
income, while a positive gap would result in an increase in net interest income.
During a period of falling interest rates, a negative gap would result in an
increase in net interest income, while a positive gap would adversely affect net
interest income.
In order to minimize the potential for adverse effects of material and prolonged
increases in interest rates on the results of operations, the Company's
management continues to monitor asset and liability management policies to
better match the maturities and repricing terms of its interest-earning assets
and interest-bearing liabilities. Such policies have consisted primarily of: (i)
emphasizing the origination of adjustable-rate loans; (ii) maintaining a stable
core deposit base; and (iii) maintaining a significant portion of liquid assets
(cash and short-term securities).
-13-
<PAGE>
The following table sets forth certain information relating to the Company's
interest-earning assets and interest-bearing liabilities at December 31, 1999
that are estimated to mature or are scheduled to reprice within the period shown
(dollars in thousands):
<TABLE>
<CAPTION>
More
Than More
Three Than Six More
Months Months Than One Over
Three to Six to One Year to More Than Ten
Months Months Year Five Years Five Years Years Total
------ ------ ---- ---------- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Mortgage and commercial loans (1):
Variable rate .................... $ 475 - - - - - 475
Fixed rate .................... 150 - - 990 - - 1,140
----- ------- ------- ------- ------ ------ ------
Total loans.................. 625 - - 990 - - 1,615
Federal funds sold.................... 7,783 - - - - - 7,783
Securities (2)........................ - 592 292 2,528 - 125 3,537
----- ------- ------- ------- ------ ------ ------
Total rate-sensitive assets.. 8,408 592 292 3,518 - 125 12,935
----- ------- ------- ------- ------ ------ ------
Deposit accounts (3):
Money-market deposits............. 362 - - - - - 362
Savings and NOW deposits.......... 453 - - - - - 453
Certificates of deposit........... 10 - - 201 - - 211
----- ------- ------- ------- ------ ------ ------
Total rate-sensitive
liabilities.............. 825 - - 201 - - 1,026
===== ======= ======= ======= ====== ====== ======
GAP repricing differences............. $ 7,583 592 292 3,317 - 125 11,909
===== ======= ======= ======= ====== ====== ======
Cumulative GAP .................... 7,583 8,175 8,467 11,784 11,784 11,909
===== ======= ======= ======= ====== ======
Cumulative GAP/total assets........... 54.12% 58.34% 60.43% 84.10% 84.10% 84.99%
===== ======= ======== ======== ======= =======
<FN>
(1) In preparing the table above, adjustable-rate loans are included in the
period in which the interest rates are next scheduled to adjust rather
than in the period in which the loans mature. Fixed-rate loans are
scheduled, including repayment, according to their maturities.
(2) Securities are scheduled through the maturity dates.
(3) Money-market, NOW, and savings deposits are regarded as ready
accessible withdrawable accounts. Time deposits are scheduled through
the maturity dates.
</FN>
</TABLE>
-14-
<PAGE>
The following table reflects the contractual principal repayments by period of
the Company's loan portfolio at December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
Commercial
Residential Real
Years Ending Commercial Mortgage Estate Consumer
December 31, Loans Loans Loans Loans Total
------------ ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
2000............................. $ 160 - 450 15 625
2001............................. - - - - -
2002............................. - - - - -
2003-2004........................ - - 990 - 990
2005-2006........................ - - - - -
2007 and beyond.................. - - - - -
----- --------- ----- ----- -----
Total............................ $ 160 - 1,440 15 1,615
===== ========= ===== ===== =====
</TABLE>
Of the $1 million of loans due after 2000, 100% of such loans have
fixed-interest rates.
Scheduled contractual principal repayments of loans do not reflect the actual
life of such assets. The average life of loans is substantially less than their
average contractual terms due to prepayments. In addition, due-on-sale clauses
on loans generally give the Company the right to declare a conventional loan
immediately due and payable in the event, among other things, that the borrower
sells the real property subject to the mortgage and the loan is not repaid. The
average life of mortgage loans tends to increase, however, when current mortgage
loan rates are substantially higher than rates on existing mortgage loans and,
conversely, decrease when rates on existing mortgages are substantially higher
than current mortgage loan rates.
Origination, Sale and Repayment of Loans. The Company generally originates loans
on real estate located in its primary geographical lending area in Southwest
Florida. Residential mortgage loan originations by the Company are attributable
to depositors, other existing customers, advertising and referrals from real
estate brokers and developers. The Company's residential mortgage loans
generally are originated to ensure compliance with documentation and
underwriting standards which permit their sale to the Federal National Mortgage
Association ("Fannie Mae") and other investors in the secondary market.
The following table sets forth total loans originated, repaid and sold:
<TABLE>
<CAPTION>
Year Ended
December 31,
------------
1999
------------
(in thousands)
<S> <C>
Originations:
Commercial loans....................................................................... $ 160
Commercial real estate loans........................................................... 1,440
Consumer loans......................................................................... 15
-----
Total loans originated............................................................. 1,615
Less:
Principal reductions................................................................... -
Loans sold............................................................................. -
-----
Increase in total loans................................................................ $ 1,615
=====
</TABLE>
-15-
<PAGE>
Deposits and Other Sources of Funds
General. In addition to deposits, the sources of funds available for lending and
other business purposes include loan repayments, loan sales, and securities sold
under agreements to repurchase. Loan repayments are a relatively stable source
of funds, while deposit inflows and outflows are influenced significantly by
general interest rates and money market conditions. Borrowings may be used on a
short-term basis to compensate for reductions in other sources, such as deposits
at less than projected levels and are also used to fund the origination of
mortgage loans designated to be sold in the secondary markets.
Deposits. Deposits are attracted principally from the Companys primary
geographic market area in Hillsborough County, Florida. The Company offers a
broad selection of deposit instruments including demand deposit accounts, NOW
accounts, money market accounts, regular savings accounts, term certificate
accounts and retirement savings plans (such as IRA accounts). Certificate of
deposit rates are set to encourage longer maturities as cost and market
conditions will allow. Deposit account terms vary, with the primary differences
being the minimum balance required, the time period the funds must remain on
deposit and the interest rate.
The Company has emphasized commercial banking relationships in an effort to
increase demand deposits as a percentage of total deposits. The Company's
courier service will serve the Company's business customers in Tampa.
Management sets the deposit interest rates weekly based on a review of deposit
flows for the previous week, a survey of rates among competitors and other
financial institutions in Florida.
The following table shows the distribution of, and certain other information
relating to, the Company's deposit accounts by type (dollars in thousands):
<TABLE>
<CAPTION>
At December 31,
---------------
1999
---------------
% of
Amount Deposits
------ --------
<S> <C> <C>
Noninterest-bearing deposits................................................... $ 88 7.90%
Savings and NOW deposits....................................................... 453 40.66
Money-market deposits.......................................................... 362 32.50
------ ------
Subtotal.............................................................. 903 81.06
Certificate of deposits:
4.00% - 4.99%......................................................... 10 .90
6.00% - 6.99%......................................................... 201 18.04
------ ------
Total certificates of deposit (1).............................................. 211 18.94
------ ------
Total deposit.................................................................. $ 1,114 100.00%
===== ======
<FN>
(1) On December 31, 1999 there were no individual retirement accounts
("IRAs").
</FN>
Jumbo certificates ($100,000 and over) mature as follows (in thousands):
At December 31,
1999
Due over one year.................................................................. $ 201
===
</TABLE>
-16-
<PAGE>
Results of Operations
The operating results of the Company depend primarily on its net interest
income, which is the difference between interest income on interest-earning
assets and interest expense on interest-bearing liabilities, consisting
primarily of deposits. Net interest income is determined by the difference
between yields earned on interest-earning assets and rates paid on
interest-bearing liabilities ("interest-rate spread") and the relative amounts
of interest-earning assets and interest-bearing liabilities. The Company's
interest-rate spread is affected by regulatory, economic, and competitive
factors that influence interest rates, loan demand, and deposit flows. In
addition, the Company's net earnings are also affected by the level of
nonperforming loans and foreclosed real estate, as well as the level of its
noninterest income, and its noninterest expenses, such as salaries and employee
benefits, occupancy and equipment costs and income taxes.
The following table sets forth, for the periods indicated, information regarding
(i) the total dollar amount of interest and dividend income of the Company from
interest-earning assets and the resultant average yield; (ii) the total dollar
amount of interest expense on interest-bearing liabilities and the resultant
average costs; (iii) net interest/dividend income; (iv) interest rate spread;
(v) net interest margin. Average balances are based on average monthly balances.
<TABLE>
<CAPTION>
1999
-------------------------------
Interest Average
Average and Yield/
Balance Dividends Rate
------- --------- ----
Interest-earning assets:
<S> <C> <C> <C>
Loans...................................................................... $ 58 5 8.62%
Securities................................................................. 355 22 6.20
Other interest-earning assets (1).......................................... 3,095 150 4.85
------ ---
Total interest-earning assets.......................................... 3,508 177 5.05
---
Noninterest-earning assets...................................................... 446
------
Total assets........................................................... $ 3,954
======
Interest-bearing liabilities:
Demand, money market and NOW deposits...................................... 40 1 2.50
Savings.................................................................... 18 - -
Certificates of deposit.................................................... 34 2 5.88
------ ---
Total interest-bearing liabilities..................................... 92 3 3.26
---
Noninterest-bearing liabilities................................................. 20
Stockholders' equity............................................................ 3,842
------
Total liabilities and stockholders' equity............................. $ 3,954
======
Net interest/dividend income.................................................... $ 174
===
Interest-rate spread (2)........................................................ 1.79%
====
Net interest margin (3)......................................................... 4.96%
====
Ratio of average interest-earning assets to
average interest-bearing liabilities....................................... 36.14
=====
<FN>
(1) Includes interest-bearing deposits and federal funds sold.
(2) Interest-rate spread represents the difference between the average
yield on interest-earning assets and the average cost of
interest-bearing liabilities.
(3) Net interest margin is net interest income dividend by average
interest-earning assets.
</FN>
</TABLE>
-17-
<PAGE>
Results of Operations
Years Ended December 31, 1999
General. Net loss for the year ended December 31, 1999 was $(298,904) or
$(.57) per share. During the year ended December 31, 1999 the Company
had not achieved the average asset size necessary to operate
profitably.
Interest Income and Expense. Interest income totaled $177,385 for the year
ended December 31, 1999. Interest income earned on loans was $4,994.
The average loan portfolio balance for the year ended December 31, 1999
was $58,000 and the weighted average yield was 8.62%.
Interest on securities was $22,069. The average investment securities
portfolio was $.3 million with a weighted average yield of 6.2%.
Interest on federal funds sold and deposits in banks totaled $150,322.
The average balance of these assets was $3.1 million with a weighted
average yield of 4.85%.
Interest expense on deposit accounts amounted to $3,048 for the year ended
December 31, 1999. The weighted average cost of deposits was 3.26%.
Provision for Loan Losses. The provision for loan losses is charged to
earnings to bring the total allowance to a level deemed appropriate by
management and is based upon the volume and type of lending conducted
by the Company, industry standards, the amount of nonperforming loans
and general economic conditions, particularly as they relate to the
Company's market areas, and other factors related to the collectibility
of the Company's loan portfolio. The provision for the year ended
December 31, 1999 was $24,300.
Other Expense. Other expense totaled $815,527 for the year ended December
31, 1999. Compensation and benefits was the largest, amounting to
$282,591.
Income Taxes. The Company recognized a credit for income taxes as well as a
deferred tax asset because management believes it is more likely than
not the Company will be able to generate taxable income in the future
to offset these amounts.
-18-
<PAGE>
Impact of Inflation and Changing Prices
The financial statements and related data presented herein have been prepared in
accordance with GAAP, which requires the measurement of financial position and
operating results in terms of historical dollars, without considering changes in
the relative purchasing power of money over time due to inflation. Unlike most
industrial companies, substantially all of the assets and liabilities of the
Company are monetary in nature. As a result, interest rates have a more
significant impact on the Bank's performance than the effects of general levels
of inflation. Interest rates do not necessarily move in the same direction or in
the same magnitude as the prices of goods and services, since such prices are
affected by inflation to a larger extent than interest rates.
Future Accounting Requirements
Financial Accounting Standards 133 - Accounting for Derivative Investments and
Hedging Activities requires companies to record derivatives on the balance sheet
as assets or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending on
the use of the derivatives and whether they qualify for hedge accounting. The
key criterion for hedge accounting is that the hedging relationship must be
highly effective in achieving offsetting changes in fair value or cash flows.
The Company will be required to adopt this Statement January 1, 2001. Management
does not anticipate that this Statement will have a material impact on the
Company.
-19-
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
FLORIDA BUSINESS BANCGROUP, INC.
Index to Financial Statements
at December 31, 1999
Page
Independent Auditors' Report.................................................21
Consolidated Balance Sheets..................................................22
Consolidated Statement of Operations.........................................23
Consolidated Statements of Changes in Stockholders' Equity...................24
Consolidated Statements of Cash Flows........................................25
Notes to Consolidated Financial Statements................................26-38
-20-
<PAGE>
Independent Auditors' Report
Board of Directors
Florida Business BancGroup, Inc.
Tampa, Florida:
We have audited the accompanying consolidated balance sheets of Florida
Business BancGroup, Inc. (the "Company") at December 31, 1999 and 1998, and the
related consolidated statements of operations, stockholders' equity and cash
flows for year ended December 31, 1999 and for the period from May 18, 1998
(Date of Incorporation) to December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
at December 31, 1999 and 1998, and the results of its operations and its cash
flows for the year ended December 31, 1999 and for the period from May 18, 1998
(Date of Incorporation) to December 31, 1998, in conformity with generally
accepted accounting principles.
HACKER, JOHNSON, COHEN & GRIEB PA
Tampa, Florida
January 26, 2000
-21-
<PAGE>
FLORIDA BUSINESS BANCGROUP, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
At December 31,
---------------
1999 1998
---- ----
Assets
<S> <C> <C>
Cash and due from banks ................................................. $ 129,671 16,272
Federal funds sold ...................................................... 7,783,000 --
------------ ------------
Total cash and cash equivalents ........................... 7,912,671 16,272
Securities available for sale ........................................... 3,411,722 --
Loans, net of allowance for loan losses of $24,300 ...................... 1,580,625 --
Premises and equipment, net ............................................. 560,201 --
Deferred income taxes ................................................... 248,041 49,597
Accrued interest receivable and other assets ............................ 298,325 41,928
------------ ------------
Total assets .............................................. $ 14,011,585 107,797
============ ============
Liabilities and Stockholders' Equity
Liabilities:
Noninterest-bearing demand deposits ................................. 87,800 --
Savings and NOW deposits ....................................... 453,484 --
Money market deposits ............................................... 361,573 --
Time deposits .................................................. 211,069 --
------------ ------------
Total deposits ............................................ 1,113,926 --
Official checks ..................................................... 34,705 --
Advances from Organizers ............................................ -- 100,000
Accrued interest payable and other liabilities ...................... 130,545 --
------------ ------------
Total liabilities ......................................... 1,279,176 100,000
------------ ------------
Commitments (Notes 4, 6 and 15)
Stockholders' equity:
Preferred stock:
Designated Series A, $0.01 par value, redeemable at $100 per
share, 10,000 shares so designated, 900 issued and outstanding -- 90,000
Nondesignated, no par value, 1,999,100 shares authorized,
none issued or outstanding ................................... -- --
Common stock, $.01 par value 10,000,000 shares authorized;
1,320,700 shares issued and outstanding in 1999 and none in 1998 13,207 --
Additional paid-in capital ......................................... 13,130,921 --
Accumulated deficit ................................................ (381,107) (82,203)
Accumulated other comprehensive income (loss) ...................... (30,612) --
------------ ------------
Total stockholders' equity ..................................... 12,732,409 7,797
------------ ------------
Total liabilities and stockholders' equity ................ $ 14,011,585 107,797
============ ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
-22-
<PAGE>
FLORIDA BUSINESS BANCGROUP, INC.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Period from
May 18, 1998
(Date of
Incorporation)
Year Ended to
December 31, December 31,
------------ ------------
1999 1998
---- ----
<S> <C> <C>
Interest income:
Loans .......................................................................... $ 4,994 --
Securities ..................................................................... 22,069 --
Federal funds sold and securities sold under agreements to repurchase .......... 150,322 --
--------- ---------
Total interest income ................................................ 177,385 --
Interest expense, deposits ......................................................... 3,048 --
--------- ---------
Net interest income ................................................................ 174,337 --
Provision for loan losses .......................................................... 24,300 --
--------- ---------
Net interest income after provision for loan losses .................. 150,037 --
--------- ---------
Noninterest income:
Income from stock proceeds held in escrow ...................................... 183,798 --
Other service charges and fees ................................................. 258 --
Other ......................................................................... 2,555 --
--------- ---------
Total noninterest income ............................................. 186,611 --
--------- ---------
Noninterest expense:
Compensation and benefits ..................................................... 282,591 61,077
Occupancy and equipment ........................................................ 163,760 10,116
Advertising .................................................................... 42,781 --
Professional fees .............................................................. 130,929 40,307
Data processing ................................................................ 34,474 --
Other .......................................................................... 160,992 20,300
--------- ---------
Total noninterest expense ............................................ 815,527 131,800
--------- ---------
Loss before income tax benefit ..................................................... (478,879) (131,800)
Income tax benefit ................................................... (179,975) (49,597)
--------- ---------
Net loss ........................................................................... $(298,904) (82,203)
========= =========
Basic and diluted loss per share..................................... $ (.57) --
========= =========
Weighted-average number of common shares outstanding ............................... 528,280 --
========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
-23-
<PAGE>
FLORIDA BUSINESS BANCGROUP, INC.
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Accumulated
Other
Designated Series A Additional Comprehensive Total
Preferred Stock Common Stock Paid-In Accumulated Income Stockholders'
Shares Amount Shares Amount Capital Deficit (Loss) Equity
--------- ------- -------- ---------------------------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at May 18, 1998 (date
of incorporation) .......... -- $ -- -- $ -- -- -- -- --
Conversion of advances from
organizers into 900 shares
of preferred stock .......... 900 90,000 -- -- -- -- -- 90,000
Net loss for the period ended
December 31, 1998 ........... -- -- -- -- -- (82,203) -- (82,203)
---- ---- --------- ------- ---------- -------- ------- ----------
Balance at December 31,
1998 ........................ 900 90,000 -- -- -- (82,203) -- 7,797
-----------
Sale of common stock
net of issuance cost ........ -- -- 1,320,700 13,207 13,130,921 -- -- 13,144,128
-----------
Retirement of Series
A preferred stock ........... (900) (90,000) -- -- -- -- -- (90,000)
-----------
Comprehensive income (loss):
Net loss .................... -- -- -- -- -- (298,904) -- (298,904)
Net change in unrealized loss
on securities available
for sale, net of tax of
$18,469 ................... -- -- -- -- -- -- (30,612) (30,612)
-----------
Comprehensive
income (loss) ............. -- -- -- -- -- -- -- (329,516)
---- ---- --------- ------- ---------- -------- ------- ----------
Balance at December 31,
1999 ........................ -- $ -- 1,320,700 $13,207 13,130,921 (381,107) (30,612) 12,732,409
==== ==== ========= ======= ========== ======== ======= ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
-24-
<PAGE>
FLORIDA BUSINESS BANCGROUP, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Period From
May 18, 1998
(Incorporation)
Year Ended to
December 31, December 31,
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss ......................................................................... $ (298,904) (82,203)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation ................................................................ 42,418 --
Provision for loan losses ................................................... 24,300 --
Deferred income tax benefit ................................................. (179,975) (49,597)
Amortization of loan fees, premiums and discounts ........................... 9,310 --
Increase in accrued interest receivable and other assets .................... (256,397) (41,928)
Increase in accrued interest payable and other liabilities .................. 130,545 --
------------ --------
Net cash used in operating activities .............................. (528,703) (173,728)
------------ --------
Cash flows from investing activities:
Purchase of securities available for sale ........................................ (3,459,778) --
Net increase in loans ............................................................ (1,615,260) --
Purchase of premises and equipment ............................................... (602,619) --
------------ --------
Net cash used in investing activities .............................. (5,677,657) --
------------ --------
Cash flows from financing activities:
Net increase in deposits ......................................................... 1,113,926 --
Net increase in official checks .................................................. 34,705 --
Redemption of Preferred Stock .................................................... (90,000) --
Stock offering costs ............................................................. (62,872) --
Sale of common stock ............................................................. 13,207,000 --
Advances from organizers ......................................................... 717,269 190,000
Repayment of advances from organizers ............................................ (817,269) --
------------ --------
Net cash provided by financing activities .......................... 14,102,759 190,000
------------ --------
Net increase in cash and cash equivalents ............................................ 7,896,399 16,272
Cash and cash equivalents at beginning of period ..................................... 16,272 --
------------ --------
Cash and cash equivalents at end of period ........................................... $ 7,912,671 16,272
============ ========
Supplemental disclosure of cash flow information: Cash paid during the year for:
Interest ...................................................................$ 2,374 --
============ ========
Income taxes................................................................$ -- --
============ ========
Noncash items:
Change in accumulated other comprehensive income (loss), net of tax.........$ 30,612 --
============ ========
Conversion of advances from organizers into preferred stock.................$ 90,000 --
============ ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
-25-
<PAGE>
FLORIDA BUSINESS BANCGROUP, INC.
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(1) Summary of Significant Accounting Policies
General. Florida Business BancGroup, Inc. (the "Holding Company") was
incorporated on May 18, 1998 in the State of Florida for the purpose of
operating as a one-bank holding company and owns 100% of the
outstanding shares of Bay Cities Bank (the "Bank"). The Holding
Company's only business is the ownership and operations of the Bank.
The Bank is a Florida-chartered commercial bank which opened for
business November 10, 1999 (collectively, the "Company"). The Bank's
deposits are insured by the Federal Deposit Insurance Corporation. The
Bank provides community banking services to business and individuals in
Hillsborough County, Florida.
The Holding Company completed its public offering of 1,320,700 units,
consisting of one common share and one warrant, at $10 per unit on
August 7, 1999. The Company incurred offering costs of $47,426 which
were deducted from the proceeds.
Basis of Presentation. The accompanying consolidated financial statements
include the accounts of the Holding Company and the Bank. All
significant intercompany accounts and transactions have been eliminated
in consolidation. The accounting and reporting practices of the Company
conform to generally accepted accounting principles and to general
practices within the banking industry.
Use of Estimates. In preparing consolidated financial statements in
conformity with generally accepted accounting principles, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the balance sheet
and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Material
estimates that are particularly susceptible to significant change in
the near term relate to the determination of the allowance for loan
losses and deferred tax assets.
Securities. Securities may be classified as either trading, held to
maturity or available for sale. Trading securities are held principally
for resale and recorded at their fair values. Unrealized gains and
losses on trading securities are included immediately in earnings.
Held-to-maturity securities are those which the Company has the
positive intent and ability to hold to maturity and are reported at
amortized cost. Available-for-sale securities consist of securities not
classified as trading securities nor as held-to-maturity securities.
Unrealized holding gains and losses, net of tax, on available-for-sale
securities are reported as a net amount in other comprehensive income.
Gains and losses on the sale of available-for-sale securities are
determined using the specific-identification method. Premiums and
discounts on securities available for sale and held to maturity are
recognized in interest income using the interest method over the period
to maturity.
Cash and Cash Equivalents. For purposes of the consolidated statements of
cash flows, cash and cash equivalents include cash and balances due
from banks and federal funds sold, all of which mature within ninety
days.
(continued)
-26-
<PAGE>
FLORIDA BUSINESS BANCGROUP, INC.
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
Loans Receivable. Loans receivable that management has the intent and
ability to hold for the foreseeable future or until maturity or pay-off
are reported at their outstanding principal adjusted for any
charge-offs, the allowance for loan losses, and any deferred fees or
costs on originated loans and unamortized premiums or discounts on
purchased loans.
Loan origination fees and certain direct origination costs are
capitalized and recognized as an adjustment of the yield of the related
loan.
The accrual of interest on loans is discontinued at the time the loan
is ninety days delinquent unless the credit is well-secured and in
process of collection. In all cases, loans are placed on nonaccrual or
charged-off at an earlier date if collection of principal or interest
is considered doubtful.
All interest accrued but not collected for loans that are placed on
nonaccrual or charged-off is reversed against interest income. The
interest on these loans is accounted for on the cash-basis or
cost-recovery method, until qualifying for return to accrual. Loans are
returned to accrual status when all the principal and interest amounts
contractually due are brought current and future payments are
reasonably assured.
Allowance for Loan Losses. The allowance for loan losses is established as
losses are estimated to have occurred through a provision for loan
losses charged to earnings. Loan losses are charged against the
allowance when management believes the uncollectibility of a loan
balance is confirmed. Subsequent recoveries, if any, are credited to
the allowance.
The allowance for loan losses is evaluated on a regular basis by
management and is based upon management's periodic review of the
collectibility of the loans in light of historical experience, the
nature and volume of the loan portfolio, adverse situations that may
affect the borrower's ability to repay, estimated value of any
underlying collateral and prevailing economic conditions. This
evaluation is inherently subjective as it requires estimates that are
susceptible to significant revision as more information becomes
available.
A loan is considered impaired when, based on current information and
events, it is probable that the Company will be unable to collect the
scheduled payments of principal or interest when due according to the
contractual terms of the loan agreement. Factors considered by
management in determining impairment include payment status, collateral
value, and the probability of collecting scheduled principal and
interest payments when due. Loans that experience insignificant payment
delays and payment shortfalls generally are not classified as impaired.
Management determines the significance of payment delays and payment
shortfalls on a case-by-case basis, taking into consideration all of
the circumstances surrounding the loan and the borrower, including the
length of the delay, the reasons for the delay, the borrower's prior
payment record, and the amount of the shortfall in relation to the
principal and interest owed. Impairment is measured on a loan by loan
basis for commercial loans by either the present value of expected
future cash flows discounted at the loan's effective interest rate, the
loan's obtainable market price, or the fair value of the collateral if
the loan is collateral dependent.
Large groups of smaller balance homogeneous loans are collectively
evaluated for impairment. Accordingly, the Company does not separately
identify individual consumer and residential loans for impairment
disclosures.
(continued)
-27-
<PAGE>
FLORIDA BUSINESS BANCGROUP, INC.
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
Income Taxes. Deferred income tax assets and liabilities are recorded to
reflect the tax consequences on future years of temporary differences
between revenues and expenses reported for financial statement and
those reported for income tax purposes. Deferred tax assets and
liabilities are measured using the enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are
expected to be realized or settled. Valuation allowances are provided
against assets which are not likely to be realized.
Premises and Equipment. Premises, leasehold improvements and equipment are
stated at cost less accumulated depreciation. Depreciation expense is
computed on the straight-line basis over the estimated useful life of
each type of asset.
Transfer of Financial Assets. Transfers of financial assets are accounted
for as sales, when control over the assets has been surrendered.
Control over transferred assets is deemed to be surrendered when (1)
the assets have been isolated from the Company, (2) the transferee
obtains the right (free of conditions that constrain it from taking
advantage of that right) to pledge or exchange the transferred assets,
and (3) the Company does not maintain effective control over the
transferred assets through an agreement to repurchase them before their
maturity.
Advances from Organizers. To provide an initial source of funds with which
to pay organizational and preopening expenses, organizers have made
contributions aggregating $817,269 and $190,000, respectively, during
1999 and 1998, respectively. Advances of $717,269 were repaid to
organizers on September 22, 1999 from the proceeds of the Company's
Common Stock offering. On September 29, 1998, $90,000 of these advances
were converted into 900 shares of the Company's Series A preferred
stock.
Off-Balance-Sheet Instruments. In the ordinary course of business the
Company has entered into off-balance-sheet financial instruments
consisting of commitments to extend credit. Such financial instruments
are recorded in the financial statements when they are funded.
Fair Values of Financial Instruments. The fair value of a financial
instrument is the current amount that would be exchanged between
willing parties, other than in a forced liquidation. Fair value is best
determined based upon quoted market prices. However, in many instances,
there are no quoted market prices for the Company's various financial
instruments. In cases where quoted market prices are not available,
fair values are based on estimates using present value or other
valuation techniques. Those techniques are significantly affected by
the assumptions used, including the discount rate and estimates of
future cash flows. Accordingly, the fair value estimates may not be
realized in an immediate settlement of the instrument. SFAS 107
excludes certain financial instruments and all nonfinancial instruments
from its disclosure requirements. Accordingly, the aggregate fair value
amounts presented may not necessarily represent the underlying fair
value of the Company. The following methods and assumptions were used
by the Company in estimating fair values of financial instruments:
Cash and Cash Equivalents. The carrying amounts of cash and cash
equivalents approximate their fair value.
(continued)
-28-
<PAGE>
FLORIDA BUSINESS BANCGROUP, INC.
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
Fair Values of Financial Instruments, Continued.
Securities. Fair values for securities available for sale are based on
quoted market prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of comparable
instruments.
Loans. For variable-rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying
values. Fair values for fixed-rate mortgage (e.g. one-to-four family
residential), commercial real estate and commercial loans are estimated
using discounted cash flow analyses, using interest rates currently
being offered for loans with similar terms to borrowers of similar
credit quality. Fair values for nonperforming loans are estimated using
discounted cash flow analysis or underlying collateral values, where
applicable.
Accrued Interest Receivable. Book value approximates fair value.
Deposit Liabilities. The fair values disclosed for demand, NOW,
money-market and savings deposits are, by definition, equal to the
amount payable on demand at the reporting date (that is, their carrying
amounts). Fair values for fixed-rate certificates of deposit are
estimated using a discounted cash flow calculation that applies
interest rates currently being offered on certificates to a schedule of
aggregated expected monthly maturities on time deposits.
Off-Balance-Sheet Instruments. Fair values for off-balance-sheet
lending commitments are based on fees currently charged to enter into
similar agreements, taking into account the remaining terms of the
agreements and the counterparties' credit standing.
Advertising. The Company expenses all media advertising as incurred.
Loss Per Share. Loss per share is calculated by dividing net loss by the
weighted average number of shares of common stock outstanding during
the year.
Future Accounting Requirements. Statement of Financial Accounting Standards
133 - Accounting for Derivative Investments and Hedging Activities
requires companies to record derivatives on the balance sheet as assets
or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for
depending on the use of the derivatives and whether they qualify for
hedge accounting. The key criterion for hedge accounting is that the
hedging relationship must be highly effective in achieving offsetting
changes in fair value or cash flows. The Company will be required to
adopt this Statement January 1, 2001. Management does not anticipate
that this Statement will have a material impact on the Company.
(continued)
-29-
<PAGE>
FLORIDA BUSINESS BANCGROUP, INC.
Notes to Consolidated Financial Statements, Continued
(2) Securities
Securities have been classified according to management's intent. The
carrying amount of securities and their approximate fair values at
December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C>
U.S. Government agencies.................... $ 3,460,803 - 49,081 3,411,722
========= =========== ====== =========
There were no sales of securities in 1999.
The scheduled maturities of securities at December 31, 1999 are as
follows:
Available for Sale
------------------
Amortized Fair
Cost Value
---- -----
<S> <C> <C>
Due after one through five years............................................. $ 3,460,803 3,411,722
========= =========
(3) Loans
The components of loans are as follows:
At
December 31,
------------
1999
----
<S> <C>
Commercial real estate.................................................................. $ 1,440,000
Commercial.............................................................................. 160,260
Consumer................................................................................ 15,000
------------
1,615,260
Less:
Deferred fees......................................................................... (10,335)
Allowance for loan losses............................................................. (24,300)
----------
Loans, net.............................................................................. $ 1,580,625
=========
</TABLE>
(continued)
-30-
<PAGE>
FLORIDA BUSINESS BANCGROUP, INC.
Notes to Consolidated Financial Statements, Continued
(3) Loans, Continued
An analysis of the change in the allowance for loan losses follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
------------
1999
----
<S> <C>
Beginning balance......................................................................... $ -
Provision for credit losses............................................................... 24,300
Charge-offs............................................................................... -
Recoveries................................................................................ -
-------
$24,300
=======
The Company had no impaired loans in 1999 or 1998.
(4) Premises and Equipment
A summary of premises and equipment follows:
At December 31,
---------------
1999 1998
---- ----
<S> <C> <C>
Leasehold improvements........................................................ $ 69,915 -
Software..................................................................... 217,354 -
Furniture, fixtures and equipment............................................. 315,350 -
-------- -----
Total, at cost............................................................ 602,619 -
Less accumulated depreciation............................................. (42,418) -
------- ------
Premises and equipment, net................................................... $ 560,201 -
======= ======
</TABLE>
The Company leases its facilities under an operating lease agreement
with a term of approximately 5 years. The lease requires the Company to
pay certain insurance, maintenance and real estate taxes also and
contains renewal options. Rental payments are subject to an annual
adjustment set forth in the lease agreement. Rent expense was $71,461
and $8,109 for the years ended December 31, 1999 and 1998,
respectively.
Future minimum rental commitments under this noncancelable lease are
approximately as follows:
Minimum
Year Ending Annual
December 31, Rental
------------ ------
2000.............................$ 182,000
2001............................. 216,000
2002............................. 221,000
2003............................. 226,000
Thereafter....................... 197,000
-------
$ 1,042,000
===========
(continued)
-31-
<PAGE>
FLORIDA BUSINESS BANCGROUP, INC.
Notes to Consolidated Financial Statements, Continued
(5) Deposits
Time deposits included the following amounts:
<TABLE>
<CAPTION>
At December 31,
---------------
1999
----
<S> <C> <C>
Certificates of Deposit $100,000 and over.................................................... $ 200,989
Certificates of Deposit under $100,000....................................................... 10,080
--------
$ 211,069
========
A schedule of maturities of certificates of deposit follows:
Year Ending
December 31, Amount
------------ ------
<S> <C>
2000.............................................................. $ 10,080
2001.............................................................. -
2002.............................................................. -
2003.............................................................. -
2004.............................................................. 200,989
-------
$ 211,069
=========
</TABLE>
(6) Financial Instruments
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its
customers. These financial instruments are commitments to extend credit
and may involve, to varying degrees, elements of credit and
interest-rate risk in excess of the amount recognized in the balance
sheet. The contract amounts of these instruments reflect the extent of
involvement the Company has in these financial instruments.
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit is represented by the contractual amount of those instruments.
The Company uses the same credit policies in making commitments as it
does for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since some of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash
requirements. The Company evaluates each customer's credit worthiness
on a case-by-case basis. The amount of collateral obtained if deemed
necessary by the Company upon extension of credit is based on
management's credit evaluation of the counterparty.
(continued)
-32-
<PAGE>
FLORIDA BUSINESS BANCGROUP, INC.
Notes to Consolidated Financial Statements, Continued
(6) Financial Instruments, Continued
The estimated fair values of the Company's financial instruments were as follows
(in thousands):
<TABLE>
<CAPTION>
At December 31, 1999 At December 31, 1998
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
Financial assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents................... $ 7,913 7,913 16 16
Securities available for sale............... 3,412 3,412 - -
Loans....................................... 1,581 1,581 - -
Accrued interest receivable................. 50 50 - -
Financial liabilities:
Deposit liabilities......................... 1,114 1,114 - -
Advances from Organizers.................... - - 100 100
A summary of the notional amounts of the Company's financial
instruments, with off balance sheet risk at December 31, 1999 follows
(in thousands):
<S> <C>
Unfunded loan commitments at variable rates............................. $ 2,682
=====
Available lines of credit............................................... $ 400
=====
(7) Credit Risk
The Company grants the majority of its loans through out Hillsborough
County, Florida. A significant portion of its borrowers ability to
honor their contracts is dependent upon the economy of Hillsborough
County, Florida.
(8) Income Taxes
The income tax benefit consisted of the following:
Year Ended December 31,
-----------------------
1999 1998
---- ----
Deferred:
<S> <C> <C>
Federal............................................................ $(153,670) (42,348)
State.............................................................. (26,305) (7,249)
-------- -------
Total deferred benefit.......................................... $(179,975) (49,597)
======== =======
(continued)
</TABLE>
-33-
<PAGE>
FLORIDA BUSINESS BANCGROUP, INC.
Notes to Consolidated Financial Statements, Continued
(8) Income Taxes, Continued
The income tax benefit is different than that computed by applying the
federal statutory rate as indicated in the following analysis:
<TABLE>
<CAPTION>
1999 1998
--------------------------------------------
% of % of
Pretax Pretax
Amount Loss Amount Loss
<S> <C> <C> <C> <C>
Income tax benefit at statutory Federal
income tax rate...................................... $(162,819) (34.0)% $(44,812) (34.0)%
Increase (decreases) resulting from
State taxes, net of federal tax benefit.............. (17,361) (3.6) (4,785) (3.6)
Other................................................ 205 - - -
--------- ----- --------- -----
Total deferred benefit............................... $(179,975) (37.6)% $(49,597) (37.6)%
========= ===== ======== =====
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are
presented below.
At December 31,
---------------
1999 1998
---- ----
Deferred tax assets:
<S> <C> <C>
Organization and start-up costs........................................ $ 228,897 49,438
Unrealized loss on securities available for sale....................... 18,469 -
Accumulated depreciation............................................... 19,009 -
Net operating loss carryforwards....................................... 1,615 159
------- -------
Deferred tax assets.................................................. 267,990 49,597
------- -------
Deferred tax liabilities:
Accrual to cash conversion............................................. 15,549 -
Allowance for loan losses.............................................. 4,400 -
------- -------
Deferred tax liabilities............................................. 19,949 -
------- -------
Net deferred tax asset............................................... $ 248,041 49,597
======= =======
At December 31, 1999, the Company had net operating loss carryforwards for
Federal and state income tax purposes as follows:
Year Expires
<S> <C>
2018............................................... $ 423
2019............................................... 3,870
-----
$ 4,293
=====
</TABLE>
(continued)
-34-
<PAGE>
FLORIDA BUSINESS BANCGROUP, INC.
Notes to Consolidated Financial Statements, Continued
(9) Warrants
The Company adopted a warrant plan providing for warrants to be issued
in conjunction with the sale of the Company's common stock. One warrant
and one share of common stock were sold as a unit in the Company's
recently completed public offering. At December 31, 1999, 1,320,700
warrants were outstanding. Each warrant entitles the holder to purchase
one share of common stock for $10 anytime during a thirty-six month
period, however, the Company has the option to accelerate the warrant
exercise period.
(10) Preferred Stock
The Board of Directors has the authority to provide for the issuance of
Preferred Stock in series and to determine the number of shares of each
series and the designation, powers, preferences and rights of each
series. The Board of Directors has provided for the issuance of Class A
preferred stock for the purpose of funding pre-opening expenses. Class
A Preferred Stock is nonvoting stock which pay no mandatory dividend.
The Company issued 900 shares of redeemable preferred stock to
organizers at a price of $100 per share during 1999. The preferred
stock was retired by the Company on September 22, 1999 for $90,000.
(11) Stockholders' Equity
As of December 31, 1999, the Company has sold 1,320,700 units
(consisting of one share of common stock and one warrant) for an
aggregate of $13,207,000. The Company incurred $62,872 in offering
expenses relating to their public offering of the Company's common
stock and warrants. Offering expenses were deducted from the proceeds
received from the sale of common stock and warrants.
(12) Related Party Transactions
In the ordinary course of business, the Bank has granted loans to
directors amounting to $100,260 at December 31, 1999. During the year
ended December 31, 1999 total principal additions were $100,260. There
was no principal payments during 1999. Deposit from these related
parties at December 31, 1999 amounted to $80,988.
(continued)
-35-
<PAGE>
FLORIDA BUSINESS BANCGROUP, INC.
Notes to Consolidated Financial Statements, Continued
(13) Regulatory Matters
Banking regulations place certain restrictions on dividends and loans or
advances made by the Bank to the Company.
The Bank is subject to various regulatory capital requirements
administered by the regulatory banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and
possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Company's and
the Bank's financial statements. Under capital adequacy guidelines and
the regulatory framework for prompt corrective action, the Bank must
meet specific capital guidelines that involve quantitative measures of
their assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The capital amounts
and classification are also subject to qualitative judgements by the
regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and percentages
(set forth in the following table) of total and Tier 1 capital (as
defined in the regulations) to risk-weighted assets (as defined) and of
Tier 1 capital (as defined) to average assets (as defined). Management
believes, as of December 31, 1999, the Bank met all capital adequacy
requirements to which they are subject.
To be categorized as well capitalized, an institution must maintain
minimum total risk-based, Tier I risk-based, and Tier I leverage
percentages as set forth in the following tables. There are no
conditions or events since that notification that management believes
have changed the Bank's category. The Bank's actual capital amounts and
percentages as of December 31, 1999 are also presented in the table
(dollars in thousands).
<TABLE>
<CAPTION>
Minimum
To Be Well
Capitalized Under
For Capital Adequacy Prompt Corrective
Actual Purposes: Action Provisions:
------ --------- ------------------
Amount % Amount % Amount %
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1999:
Total capital to Risk-
Weighted assets.. $ 7,934 191.35% $ 332 8.00% $ 415 10.00%
Tier I Capital to Risk-
Weighted Assets........... 7,910 190.76 166 4.00 249 6.00
Tier I Capital
to Total Assets........... 7,910 56.45 560 4.00 701 5.00
</TABLE>
(continued)
-36-
<PAGE>
FLORIDA BUSINESS BANCGROUP, INC.
Notes to Consolidated Financial Statements, Continued
(14) Parent Company Only Financial Information
The Holding Company's financial information at December 31, 1999 and 1998
and for the year ended December 31, 1999 and for the period from May
18, 1998 (Date of Incorporation) to December 31, 1998 is as follows:
Condensed Balance Sheets
(In thousands)
At December 31,
---------------
1999 1998
---- ----
Assets
Cash ......................................................... $ 4,505 16
Investment in subsidiary ..................................... 8,214 --
Other assets ................................................. 100 42
Deferred income taxes ........................................ -- 50
-------- ----
Total assets ............................................. $ 12,819 108
======== ====
Liabilities and Stockholders' Equity
Liabilities .................................................. 87 100
Stockholders' equity ......................................... 12,732 8
-------- ----
Total liabilities and stockholders' equity ............... $ 12,819 108
======== ====
Condensed Statements of Operations
(In thousands)
1999 1998
-------- ----
Revenues ..................................................... $ 248 --
Expenses ..................................................... (3) (132)
-------- ----
Income (loss) before loss of subsidiary .................. 245 (132)
Loss of subsidiary ........................................... (724) --
-------- ----
Loss before income tax benefit ............................... (479) (132)
Income tax benefit ....................................... (180) (50)
-------- ----
Net loss ................................................. $ (299) (82)
======== ====
(continued)
-37-
<PAGE>
FLORIDA BUSINESS BANCGROUP, INC.
Notes to Consolidated Financial Statements, Continued
(14) Parent Company Only Financial Information, Continued
<TABLE>
<CAPTION>
Condensed Statements of Cash Flows
(In thousands)
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss ................................................ $ (299) (82)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Equity in undistributed loss of subsidiaries ........ 724 --
Net increase in other assets ........................ (58) (42)
Increase in other liabilities ....................... (13) --
Provision (credit) in deferred tax assets ........... 50 (50)
----
Net cash provided by (used in) operating activities . 404 (174)
-------- ----
Cash flows from financing activities:
Net proceeds from issuance of common stock .............. 13,192 --
Retirement of preferred stock ........................... (90) --
Advances from organizers ................................ 717 190
Stock offering costs .................................... (47) --
Repayment of advances from organizers ................... (817) --
Investment in subsidiary ................................ (8,870) --
-------- ----
Net cash provided by financing activities ........... 4,085 190
-------- ----
Net increase in cash and cash equivalents .................... 4,489 16
Cash and cash equivalents at beginning of the year ........... 16 --
-------- ----
Cash and cash equivalents at end of year ..................... $ 4,505 16
======== ====
</TABLE>
(15) Year 2000 Issues
The Company's operating and financial systems have been found to be
compliant; the "Y2K Problem" has not adversely affected the Company's
operations nor does management expect that it will.
-38-
<PAGE>
All schedules have been omitted because of the absence of the conditions under
which they are required or because the required information is included in the
financial statements and related notes.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE MATTERS
None.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
FBBI hereby incorporates by reference the section entitled "Election
of Directors" contained in pages 3 through 6 of the Proxy Statement
filed electronically with the Securities and Exchange Commission on
March 13, 2000.
ITEM 10. EXECUTIVE COMPENSATION
FBBI hereby incorporates by reference the section entitled "Report of
the Board of Directors on Executive Compensation" contained at pages
7 through 9 of the Proxy Statement.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
FBBI hereby incorporates by reference the section entitled
"Certain Shareholders" on page 2 through 3 of the Proxy
Statement.
(b) Security Ownership of Management
FBBI hereby incorporates by reference the section entitled
"Election of Directors" contained at pages 3 through 6 of the
Proxy Statement.
(c) Changes in Control
There was no change in control during the period covered by
this report.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Affiliates
Mr. Timothy A. McGuire is the only Organizer or proposed director of
the Company that has received any cash compensation for services
rendered on behalf of the Company during the period covered by this
report. Once the Bank opens for business, it is anticipated that it
will extend loans to the Bank's and/or the Company's Directors, their
associates or members of the immediate families of the Directors of
the Bank or the Company. Such loans will be made on substantially the
same terms and conditions, including interest rates, collateral and
credit underwriting procedures as those prevailing at the time for
comparable transactions by the Bank with other similarly qualified
persons.
The Organizers were issued 900 shares of Series A Preferred Stock at
$100 per share for an aggregate of $90,000, which was advanced to
cover the initial organizational expenses. The preferred stock was
redeemed prior to the Bank's commencement of operations. See Note (6)
to Notes to Financial Statements.
-39-
<PAGE>
Banking Transactions
It is anticipated that the Directors and officers of the Company and
the Bank and the companies with which they are associated will have
banking transactions with the Bank in the ordinary course of
business. All transactions between the Bank and affiliated persons,
including 5% shareholders, will be on terms no less favorable to the
Bank than could be obtained from independent third parties. Any loans
and commitments to lend to such affiliated persons or entities
included in such transaction will be made in accordance with all
applicable laws and regulations and on substantially the same terms,
including interest rates and collateral, as those prevailing at the
time for comparable transactions with unaffiliated persons of similar
creditworthiness.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits were filed with or
incorporated by reference into this report. The exhibits which
are marked by a single asterisk (*) were previously filed as
part of Registrant's Form SB-2, as effective with the
Securities and Exchange Commission, Registration No.
333-62101. The exhibit numbers correspond to the exhibit
numbers in the referenced documents.
Exhibit No. Description of Exhibit
- --------------------------------------------------------------------------------
*3.1 Articles of Incorporation of Registrant filed as Exhibit
3.1 to the Form SB-2 Registration Statement is hereby
incorporated by reference.
*3.2 Bylaws of Registrant filed as Exhibit 3.2 to the Form SB-2
Registration Statement is hereby incorporated by
reference.
*4.1 Specimen Common Stock Certificate of Registrant filed as
Exhibit 4.0 to the Form SB-2 Registration Statement is
hereby incorporated by reference.
*4.2 Specimen Warrant Certificate of Registrant filed as
Exhibit 4.2 to the Form SB- 2 Registration Statement is
hereby incorporated by reference.
*4.4 Warrant Plan
*10.1 Employment Agreement between the Company and Timothy A.
McGuire
*10.2 Lease Agreement for Temporary Quarters
*10.3 Outsourcing Agreement between Bay Cities Bank and M&I Data
Services
*10.4 Lease Agreement for Permanent Office
27.0 Financial Data Schedule (SEC Use Only)
(b) Reports on Form 8-K. Registrant did not file a Form 8-K during
the last quarter of 1999.
-40-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Florida Business BancGroup, Inc.
Dated: February 24, 2000 By: /s/ A. Bronson Thayer
------------------------- ----------------------
A. Bronson Thayer
Chairman of the Board
and Chief Executive Officer
Dated: February 24, 2000 By: /s/ Marti J. Warren
------------------------- --------------------
Marti J. Warren
Principal Accounting Officer
Pursuant to the requirements of the Securities Act of 1934, this Form 10-KSB has
been signed by the following persons in the capacities and as of the dates
indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Monroe E. Berman Director February 24, 2000
- -------------------------------
Monroe E. Berkman
- ------------------------------- Director
John C. Bierley
/s/ Troy A. Brown, Jr. Director February 24, 2000
- -------------------------------
Troy A. Brown, Jr.
/s/ Frank G. Cisneros Director February 24, 2000
- -------------------------------
Frank G. Cisneros
/s/ Lawrence H. Dimmitt, III Director February 24, 2000
- -------------------------------
Lawrence H. Dimmitt, III
/s/ Timothy A. McGuire President and Director February 24, 2000
- -------------------------------
Timothy A. McGuire
/s/ Eric M. Newman Director February 24, 2000
- -------------------------------
Eric M. Newman
/s/ Chris A. Peifer Director February 24, 2000
- -------------------------------
Chris A. Peifer
/s/ A. Bronson Thayer Chairman of the Board of Directors February 24, 2000
- -------------------------------
A. Bronson Thayer
</TABLE>
-41-
<PAGE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
-42-
<PAGE>
EXHIBIT 27.0
Financial Data Schedule
-43-
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from Form
10-KSB for the period ended December 31, 1999 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 130
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 7,783
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,412
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,605
<ALLOWANCE> 24
<TOTAL-ASSETS> 14,012
<DEPOSITS> 1,114
<SHORT-TERM> 0
<LIABILITIES-OTHER> 166
<LONG-TERM> 0
0
0
<COMMON> 13
<OTHER-SE> 12,719
<TOTAL-LIABILITIES-AND-EQUITY> 14,012
<INTEREST-LOAN> 5
<INTEREST-INVEST> 22
<INTEREST-OTHER> 150
<INTEREST-TOTAL> 177
<INTEREST-DEPOSIT> 3
<INTEREST-EXPENSE> 3
<INTEREST-INCOME-NET> 174
<LOAN-LOSSES> 24
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> (816)
<INCOME-PRETAX> (479)
<INCOME-PRE-EXTRAORDINARY> (479)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (299)
<EPS-BASIC> (.57)
<EPS-DILUTED> (.57)
<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> 24
<ALLOWANCE-DOMESTIC> 24
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
