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. 001-14853
JACKSONVILLE BANCORP, INC.
----------------------------------------------
(Name of small business issuer in its charter)
Florida 59-3472981
------------------------------ -------------------
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10325 San Jose Boulevard, Jacksonville, Florida 32257
- ---------------------------------------- --------
(Address of principal executive offices) Zip Code
Issuer's telephone number: (904) 288-0793
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.
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. [X]
Issuer's revenues for its most recent fiscal year: $1,928.
The aggregate market value, calculated on the basis of the closing price of such
stock on the National Association of Securities Dealers Automated Quotation
System, of the voting stock held by non-affiliates of the Registrant at of the
common stock of the Registrant held by nonaffiliates of the Registrant at
December 31, 1998 was approximately $0.00.
There were 905,716 shares of common stock outstanding at June 30, 1999.
Documents incorporated by reference: None.
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Description Page Number
- --------------------------------------------------------------------------------
PART I
---------------------
ITEM 1. BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.0 Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . 1
1.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Regulation and Supervision. . . . . . . . . . . . . . . . . . . . . . 2
1.4 Market Area and Competition . . . . . . . . . . . . . . . . . . . . . 4
1.5 Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.6 Loan Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.7 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ITEM 2. PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
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 PLAN OF OPERATION . . . . . . . . . . . . . . . . . . . . 7
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . . . . . . . . . . 8
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
PART III
---------------------
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. . . . . . . .. . 18
9.1 Initial Directors . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.2 Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.3 Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . 20
ITEM 10. EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . 21
10.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
10.2 Stock Option Plans . . . . . . . . . . . . . . . . . . . . . . . . 21
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. . . 21
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . . . . . . . 21
12.1 Organizational Advances. . . . . . . . . . . . . . . . . . . . . . 21
12.2 Banking Transactions . . . . . . . . . . . . . . . . . . . . . . . 22
12.3 Financial Advisors . . . . . . . . . . . . . . . . . . . . . . . . 22
i
<PAGE>
PART IV
---------------------
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . . . . . . . 23
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
EXHIBITS
27.0 Financial Data Schedule
ii
<PAGE>
PART I
---------------------
ITEM 1. BUSINESS
1.0 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 the Company's 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 the Company's control, and
actual results may differ materially depending on a variety of important
factors, including uncertainty related to the Company's operations,
mergers or acquisitions, governmental regulation, the value of the
Company's assets and any other factors discussed in this and other
Company filings with the Securities and Exchange Commission.
1.1 General
The Company was incorporated under the laws of the State of Florida on
October 24, 1997, for the purpose of organizing The Jacksonville Bank and
purchasing 100% of the outstanding capital stock of The Jacksonville
Bank.
The Company received conditional approval of the Bank's charter from the
Florida Department of Banking and Finance ("Department") on October 1,
1998, FDIC conditional approval of its application for deposit insurance
on December 3, 1998, and conditional approval of application with the
Federal Reserve Bank of Atlanta ("Federal Reserve") to become a one-bank
holding company on December 6, 1998. The only nonstandard condition was
issued by the FDIC requiring that the Bank select a Chief Financial
Officer acceptable to the FDIC prior to the Bank opening for business.
The Company has hired an experienced Chief Financial Officer whom the
FDIC has indicated is acceptable.
The Jacksonville Bank is in organization and has not been incorporated at
this time. The formation of the Bank and its acquisition by the Company
are subject to the completion of an offering of the Company's common
stock and conditions of all regulatory approval have been satisfied.
The Company has initially funded its organizational expenses through a
loan dated October 10, 1997, from one of the Organizers, R. C. Mills, in
the amount of $150,000. In March, 1998, the Company obtained a line of
credit of $450,000 from a financial institution at an interest rate of
Prime minus 1%. The line is guaranteed by the Company's Board of
Directors. At September 30, 1998, there was $350,000 outstanding under
this line of credit. As of December 31, 1998, the Company has incurred
$458,000 for organizational and pre-opening expenses including attorney
fees, employee compensation and filing fees. The remaining funds will be
used to fund costs and expenses during the Offering Period. On December
17, 1998, an unsecured line of credit from Columbus Bank & Trust Company
for $135,000 to cover any additional pre-opening expenses. The line of
credit has been guaranteed by Director John C. Kowkabany.
The Company has obtained a loan commitment from Columbus Bank & Trust
Company for up to $1.8 million in loans for the purchase and renovation
of the main office, as well as the purchase of furniture, fixtures and
equipment. This loan commitment permits the Company to make a series of
unsecured loans with an interest rate of the Prime rate less 1/2% and
permits the execution of a separate six-month note, renewable up to one
year. Pursuant to this loan commitment, the Company has borrowed $625,000
on June 11, 1998, for the acquisition of the Bank's main office; $450,000
on December 1, 1998, to renovate the main office, and $250,000 on October
5, 1998, for the purpose of purchasing equipment, furniture and fixtures.
These loans mature March 24, 1999, March 24, 1999, and February 16, 1999,
respectively, and require interest-only payments until maturity. The
loans are guaranteed by the Organizers and Directors. The Bank will take
title to the main office and repay these loans incurred in connection
with the purchase and renovation of the main office.
-1-
<PAGE>
The Bank intends to provide a full range of competitive banking services.
In order to compete with the financial institutions in the market, the
Bank intends to use its independent status to the fullest extent
possible. This will include an emphasis on specialized services for the
small business owner and professional, personal contacts by the officers,
directors and employees of the Bank. Loan participations will be arranged
for customers whose loan demands exceed the Bank's lending limits.
The Bank intends to concentrate its marketing effort on the advantages of
local ownership and management, as well as, fiscal responsibility,
personal service and customer relations at the local level. The marketing
program will be directed toward all sizes of businesses, as well as all
types of consumers. Particular emphasis will be placed on newspaper and
radio advertising, and direct mail on a selective basis.
1.2 Subsequent Events
The Holding Company raised its minimum capital through a public offering
and broke escrow on May 18, 1999, and subsequently acquired 100% of the
stock of the Bank. As of the June 30, 1997, the Company had sold 905,716
shares for an aggregate of $8.7 million. The price per share was $10. The
Company incurred offering costs of $394,693 which were deducted from the
proceeds received from the sale of common stock. The Bank opened for
business on May 28, 1999 and provides community banking services to
businesses and individuals in Jacksonville, Florida. As of August 23,
1999, the Holding Company's only business is the ownership and operation
of the Bank. The Company's fiscal year ends December 31.
1.3 Regulation and Supervision
The Bank and the Company operate in a highly regulated environment, and
their business activities are governed by statute, regulation and
administrative policies. The business activities of the Bank and the
Company 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 Company is regulated by the Federal Reserve Board under the Federal
Bank Holding Company act, 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 statement) 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, the Company 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 state 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 the Company, is subject to restrictions under federal law
in dealing with the Company 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 the Bank and the Company 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, 1998, the Bank's total risk-based capital and Tier 1
ratio were 15.34% and 14.36%, 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
1" capital total assets (net of goodwill). Tier 1 capital includes common
stockholders equity, noncumulative perpetual preferred stock and minority
interests in the equity accounts of consolidated subsidiaries.
-2-
<PAGE>
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 (or
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, an entity controlling a bank (i.e., holding companies)
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 five percent
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 standard 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 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.
-3-
<PAGE>
In response to the directive insured 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:
<TABLE>
<CAPTION>
Total Risk- Tier 1 Risk- Tier 1
Based Capital Based Capital Leverage
Ratio Ratio Ratio
------------- ------------- --------
<S> <C> <C> <C>
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%
</TABLE>
-----------------
(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.
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.
As a state bank, the Bank is subject to examination and review by the
Department. The Bank submits to the Department quarterly reports of
condition, as well as such additional reports as may be required by the
state banking laws.
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, existing restrictions on interstate acquisitions of banks by bank
holding companies were repealed on September 29, 1995, such that the Bank
and any other bank holding company located in Florida would be 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 would be permitted
only if 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 by acquisition, but not by de novo
branching.
As a bank holding company, the Company 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 the Bank and each of its subsidiaries.
The scope of regulation and permissible activities of the Bank and the
Company is subject to change by future federal and state legislation.
1.4 Market Area and Competition
The Bank's primary market area is all of Duval County (including
primarily the Southside, Arlington, Mandarin and Beaches areas of
Jacksonville). Jacksonville is the largest city in the United States as
measured by land area according to the 1997 Florida Statistical Abstract.
Jacksonville is home to the Jacksonville Jaguars, one of the newest NFL
franchises and is the corporate headquarters to a number of regional and
national companies. Duval County has a strong commercial and industrial
base which has been steadily expanding in recent years. The largest
employers in the county are: Naval Air Station Jax (16,845 employees),
Naval Station Mayport (12,156 employees), Duval County School System
(11,591 employees), State of Florida (10,465 employees), Duval County
Government (8,860), City of Jacksonville (8,180), and AT&T (8,000
employees).
-4-
<PAGE>
According to the 1997 Florida Statistical Abstract, the population of
Duval County increased from 672,971 in 1990 to 730,258 in 1997,
representing a compound annual growth rate of 1.2% (slightly faster than
the U.S. average of 1.1% per year). The population is projected to
increase to 769,775 by 2002. In 1997, the median age in Duval County was
33.3 years (nearly five years younger than the state's average), and the
median household income in 1996 was $35,506 (the state median was
$32,489). In 1997, the unemployment rate in the County was 3.3%, as
compared to a national average of 4.9%.
Competition among financial institutions within the Bank's market area is
intense. According to the Florida Bankers Association, as of June 1997,
there were 47 financial institutions in the market with deposits of
nearly $12.9 billion. Deposits in the market increased about $3.8 billion
from 1995 to 1997, an annual rate of 19.2%.
Financial institutions primarily compete with one another for deposits.
In turn, a bank's deposit base directly affects such bank's loan
activities and general growth. Primary methods of competition include
interest rates on deposits and loans, service charges on deposit accounts
and the availability of unique financial services products. The Bank will
be competing with financial institutions which have much greater
financial resources than the Bank, and which may be able to offer more
services and unique services and possibly better terms to their
customers. The Directors and management, however, believe that the Bank
will be able to attract sufficient deposits to enable the Bank to compete
effectively with other area financial institutions.
The Bank will be in competition with existing area financial institutions
other than commercial banks and thrift 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 Jacksonville area, it can be anticipated that
significant competition will continue from existing, as well as, new
entrants to the market.
1.5 Deposits
The Bank intends to offer 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 and certificates of
deposit with fixed and variable rates and a range of maturity date
options. The sources of deposits will primarily be residents, businesses
and employees of businesses within the Bank's primary market areas,
obtained through the personal solicitation of the Bank's officers and
directors, direct mail solicitation and advertisements published in the
local media. The Bank intends to pay competitive interest rates on time
and savings deposits up to the maximum permitted by law or regulation. In
addition, the Bank will implement a service charge fee schedule
competitive with other financial institutions in the Bank's primary
market areas covering such matters as maintenance fees on checking
accounts, per item processing fees on checking accounts and returned
check charges.
1.6 Loan Portfolio
The Bank intends to serve the financing needs of the Jacksonville
community by offering a variety of different loan products. 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. The Bank expects to originate a variety of
residential real estate loans, including conventional mortgages
collateralized by first mortgage liens to enable borrowers to purchase,
refinance, construction upon or improve real property. Consumer loans
will include collateralized and uncollateralized loans for financing
automobiles, boats, home improvements, and personal investments. The Bank
will primarily enter into lending arrangements for its portfolio loans
with individuals who are familiar to management and who are residents of
the Bank's primary market areas. It is anticipated that 20% to 25% of the
loans will come from outside the Bank's immediate primary market areas.
Management recognizes that credit losses will be experienced and 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. Management will
maintain an adequate allowance for loan losses based on, among other
things, industry standards, management's experience, the Bank's
historical loan loss experience, evaluation of economic conditions and
regular reviews of delinquencies and loan portfolio quality. The Bank
intends to follow a conservative lending policy, but one which permits
prudent risks to assist businesses and consumers primarily in the Bank's
primary market areas. Interest rates will vary depending on the cost of
funds to the Bank, 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.
-5-
<PAGE>
The Bank's commercial loans will primarily be underwritten 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 although such loans
may also be made on an uncollateralized basis. Collateralized working
capital loans will be primarily collateralized by short term assets
whereas long-term loans will be primarily collateralized by long-term
assets.
Fixed and adjustable rate mortgage loans collateralized by single family
residential real estate generally will be generated in amounts of no more
than 80% 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 80% of the value of the property, they
must be insured by private or federally guaranteed mortgage insurance. In
the case of mortgage loans, the Bank will require mortgagees title
insurance to protect against defects in its lien on the property which
may collateralize the loan. The Bank in most cases will require title,
fire and extended casualty insurance to be obtained by the borrower, and,
where required by applicable regulations, flood insurance. The Bank will
maintain its own 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. Residential mortgage loans typically
represent a bank's lowest degree of risk, but provide the lowest
earnings.
The Bank will finance the construction of individual, owner-occupied
houses on the basis of written underwriting and construction loan
management guidelines. 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 lesser of the current appraised value or the
purchase.
The Bank will originate residential construction contractor loans to
finance the construction of single family dwellings. Most of the
residential construction loans will be made to individuals who intend to
erect owner-occupied housing on a purchased parcel of real estate. The
Bank's construction loans to individuals will typically range in size
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.
Unlike residential mortgage loans, which typically 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 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. As such, commercial
loans are made at a higher interest rate than residential mortgage loans,
but have a higher risk of default because business cash flow is dependent
on economic conditions and the ability of the business' management.
Consumer loans made by the Bank will include automobiles, recreation
vehicles, boats, second mortgages, home improvements, 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 ten-year
amortization schedule but which become due and payable in full and are
generally refinanced in 36 to 60 months.
1.7 Investments
The primary objective of the Bank's investment portfolio will be to
develop a mixture of investments with maturities and compositions so as
to earn an acceptable rate of return while meeting the liquidity
requirements of the Bank. 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 its principal correspondent banks and anticipates that
it 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.
ITEM 2. PROPERTIES
2.1 General
On June 11, 1998, the Company purchased the main office quarters, a
former Kenny Rodgers restaurant, from Florida's Finest Chicken, Inc. The
main office is located at 10325 San Jose Boulevard, Jacksonville,
Florida. The main office will be expanded from 2,777 square feet to 3,015
square feet, with three drive-through teller stations.
The purchase price was $587,500. the site and building are presently
undergoing extensive renovations, including the addition of three
drive-through lanes. The cost of renovation is under contract for
$379,500, plus change orders of approximately $15,000. This facility, is
expected to be complete prior to opening the Bank in March, 1999.
-6-
<PAGE>
On April 23, 1998, the Company entered into a lease agreement with Joandy
Road Partnership Corporation to lease the Bank's temporary quarters at
13245 Atlantic Boulevard, Suite 5, Jacksonville, Florida 32225. The five
year lease calls for rent of $1,864 per month plus common area
maintenance fees.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Bank or the
Company is a party of which any of their properties are subject; nor are
there material proceedings known to the Bank to be contemplated by any
governmental authority; nor are there material proceedings known to the
Bank, pending or contemplated, in which any director, officer, affiliate
or any principal security holder of the Bank, or any associate of any of
the foregoing is a party or has an interest adverse to the Bank or the
Company.
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 stock was outstanding during the period covered by this report.
ITEM 6. MANAGEMENT'S PLAN OF OPERATION
The Company had no operations during the period of time covered by this
report. The Company expects to complete this stock offering and receive
final regulatory approval to commence the Bank's operations and open for
business during the next three months. The strategy is for the Bank to
conduct traditional community banking activities, including the gathering
of deposits and investing those proceeds into loans and investment
securities. The Company does not expect to undertake any product research
and development activities, purchase any additional branch sites or make
any significant equipment purchases during the next 12 months. While
certain support employees will be added to the staff after the Bank opens
for business, no significant increase is expected during the next 12
months. Management of the Bank expects that the proceeds from this
Offering, as well as cash flows from its deposit gathering activities,
will be sufficient to meet the Bank's cash flow and liquidity needs over
the next few years.
The initial activity of the Company will be to act as the sole
shareholder of the Bank. The profitability of the Company will be
dependent upon the successful operations of the Bank. New banks are
typically not profitable in the first year of operation and sometimes are
not profitable for several years. As of December 31, 1998, the Company's
accumulated deficit was $325,082. The Company will continue to incur
pre-opening expenses until the Bank commences operations. Based upon
industry standards, management's experience and current market demand,
management believes that the Bank will begin to be profitable in the
fourth quarter of the second year of operations.
-7-
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Page
Independent Auditors' Report. . . . . . . . . . . . . . . . . . . . . . . . . 9
Balance Sheets at December 31, 1998 and 1997. . . . . . . . . . . . . . . . 10
Statements of Loss for the Year Ended December 31, 1998 and
the Period from October 24, 1997 (Date of Incorporation)
to December 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . 11
Statements of Changes in Deficit for the Year Ended December 31, 1998 and
the Period from October 24, 1997 (Date of Incorporation)
to December 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . 12
Statements of Cash Flows for the Year Ended December 31, 1998 and
the Period from October 24, 1997 (Date of Incorporation)
to December 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . 13
Notes to Financial Statements as of December 31, 1998 and 1997 and for
the Year Ended December 31, 1998 and the Period
from October 24, 1997 (Date of Incorporation) to December 31, 1997 . 14-17
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.
-8-
<PAGE>
Independent Auditors' Report
Board of Directors
Jacksonville Bancorp, Inc.
Jacksonville, Florida:
We have audited the accompanying balance sheets of Jacksonville Bancorp, Inc. (a
Development Stage Company) (the "Company") at December 31, 1998 and 1997, and
the related statements of loss, changes in deficit, and cash flows for the year
ended December 31, 1998 and for the period from October 24, 1997 (Date of
Incorporation) to December 31, 1997. 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 audits 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 financial statements referred to above present fairly, in
all material respects, the financial position of the Company at December 31,
1998 and 1997, and the results of its development stage administrative
activities and its cash flows for the year ended December 31, 1998 for the
period from October 24, 1997 (Date of Incorporation) to December 31, 1997, in
conformity with generally accepted accounting principles.
HACKER, JOHNSON, COHEN & GRIEB PA
Orlando, Florida
August 23, 1999
-9-
<PAGE>
JACKSONVILLE BANCORP, INC.
(A Development Stage Company)
Balance Sheets
<TABLE>
<CAPTION>
December 31,
------------
1998 1997
---- ----
<S> <C> <C>
Assets
Cash .................................................................. $ 8,600 --
Interest-bearing deposits ............................................. 20,586 114,533
----------- -------
Total cash and cash equivalents .................................. 29,186 114,533
Premises and equipment ................................................ 1,334,288 --
Deferred tax asset .................................................... 172,494 --
Other assets .......................................................... 95,293 --
----------- -------
Total ............................................................ $ 1,631,261 114,533
=========== =======
Liabilities and Deficit
Borrowings ............................................................ 1,465,000 --
Note payable to related party ......................................... 150,000 150,000
Accrued interest payable and other liabilities ........................ 341,343 2,125
----------- -------
Total liabilities ................................................ 1,956,343 152,125
----------- -------
Commitments and contingencies (Notes 3 and 7)
Deficit:
Preferred stock, $.01 par value, 2,000,000 shares authorized, none
issued and outstanding ...................................... -- --
Common stock, $.01 par value, 8,000,000 shares
authorized, none issued and outstanding ..................... -- --
Accumulated deficit .............................................. (325,082) (37,592)
----------- -------
Total deficit ............................................... (325,082) (37,592)
----------- -------
Total ....................................................... $ 1,631,261 114,533
=========== =======
</TABLE>
See Accompanying Notes to Financial Statements.
-10-
<PAGE>
JACKSONVILLE BANCORP, INC.
(A Development Stage Company)
Statements of Loss
<TABLE>
<CAPTION>
Period from
October 24, 1997
(Date of
Year Ended Incorporation) to
December 31, December 31,
------------ ------------
1998 1997
---- ----
<S> <C> <C>
Interest income ................................................... $ 1,928 1,054
Interest expense .................................................. 29,582 2,125
--------- -------
Net interest expense .............................................. (27,654) (1,071)
--------- -------
Other income ...................................................... 25,750 --
--------- -------
Organizational and pre-opening expenses:
Salaries and employee benefits ............................... 291,850 25,847
Occupancy expense ............................................ 37,195 500
Professional fees ............................................ 38,017 10,000
Other ........................................................ 91,018 174
--------- -------
Total organizational and pre-opening expenses ................ 458,080 36,521
--------- -------
Loss before income tax benefit .................................... (459,984) (37,592)
Income tax benefit ........................................... (172,494) --
--------- -------
Net loss .......................................................... $(287,490) (37,592)
========= =======
See Accompanying Notes to Financial Statements.
-11-
<PAGE>
JACKSONVILLE BANCORP, INC.
(A Development Stage Company)
Statements of Changes in Deficit
For the Period from October 24, 1997 (Date of Incorporation) to December
31, 1997 and for the Year Ended December 31, 1998
</TABLE>
<TABLE>
<CAPTION>
Preferred Common Accumulated Total
Stock Stock Deficit Deficit
----- ----- ------- -------
<S> <C> <C> <C> <C>
Balance at October 24, 1997
(Date of Incorporation) ................. $ -- -- -- --
Net loss ...................................... -- -- (37,592) (37,592)
---- ---- -------- --------
Balance at December 31, 1997 .................. -- -- (37,592) (37,592)
Net loss ...................................... -- -- (287,490) (287,490)
---- ---- -------- --------
Balance at December 31, 1998 .................. $ -- -- (325,082) (325,082)
==== ==== ======== ========
</TABLE>
See Accompanying Notes to Financial Statements.
-12-
<PAGE>
JACKSONVILLE BANCORP, INC.
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
Period from
October 24, 1997
(Date of
Year Ended Incorporation) to
December 31, December 31,
------------ ------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from administrative activities during the development stage:
Net loss .................................................................... $ (287,490) (37,592)
Adjustments to reconcile net loss to net cash used in administrative
activities during the development stage:
Credit for deferred income taxes ....................................... (172,494) --
Increase in other assets ............................................... (95,293) --
Increase in accrued interest payable and other liabilities ............. 339,218 2,125
----------- -------
Net cash used in administrative activities
during the development stage ................................................. (216,059) (35,467)
Cash flows from investing activities-
Acquisition of premises and equipment ......................................... (1,334,288) --
Cash flows from financing activities:
Net increase in borrowings .................................................... 1,465,000 150,000
----------- -------
Net (decrease) increase in cash and cash equivalents ............................. (85,347) 114,533
Cash and cash equivalents at beginning of period ................................. 114,533 --
----------- -------
Cash and cash equivalents at end of period ....................................... $ 29,186 114,533
=========== =======
Supplemental disclosures of cash flow information-
Cash paid during period for:
Interest ................................................................... $ 34,933 --
=========== =======
Income taxes .................................................................. $ -- --
=========== =======
See Accompanying Notes to Financial Statements.
-13-
<PAGE>
JACKSONVILLE BANCORP, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1998 and 1997
(1) Summary of Significant Accounting Policies
General and Subsequent Events. Jacksonville Bancorp, Inc. (the "Holding
Company") was incorporated on October 24, 1997 in the State of Florida.
The Holding Company applied to the Board of Governors of the Federal
Reserve System ("Board of Governors") to become a one-bank holding
company and with plans to acquire 100% of the outstanding shares of The
Jacksonville Bank (the "Bank"), a planned Florida chartered commercial
bank to be located in Jacksonville, Florida (collectively, the
"Company"). At December 31, 1998, the operations of the Company, had not
commenced.
The Holding Company raised its minimum capital through a public offering
and broke escrow on May 18, 1999, and subsequently acquired 100% of the
stock of the Bank. As of June 30, 1999, the Company sold 905,716 shares
for an aggregate of $8.7 million. The price per share was $10. The
Company incurred offering costs of $394,693 which were deducted from the
proceeds received from the sale of common stock. The Bank opened for
business on May 28, 1999 and provides community banking services to
businesses and individuals in Jacksonville, Florida. As of August 23,
1999, the Holding Company's only business is the ownership and operation
of the Bank. The Company's fiscal year ends December 31.
Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Premises and Equipment. Premises and equipment are stated at cost.
Depreciation has not been recorded because the assets were not put in
service as of December 31, 1998. Depreciation expense will be computed on
the straight-line basis over the estimated useful life of each type of
asset.
Income Taxes. Deferred tax assets and liabilities are reflected at
currently enacted income tax rates applicable to the period in which the
deferred tax assets or liabilities are expected to be realized or
settled. As changes in tax laws or rates are enacted, deferred tax assets
and liabilities are adjusted through the provision for income taxes.
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.
(2) Related Parties
The Company has a $150,000 note payable to one of its Organizers; the
note, dated October 10, 1997, bears interest at an annual rate of 8.5%,
and was repaid from the proceeds of the stock offering during 1999.
(3) Premises and Equipment
In June 1998, the Company purchased a building to be renovated and used
as the Bank's main office. The purchase price was $587,500, and the
Company expected to spend an additional $390,000 for renovations of the
existing building. This facility opened in early 1999.
(continued)
-14-
<PAGE>
JACKSONVILLE BANCORP, INC.
(A Development Stage Company)
Notes to Financial Statements, Continued
A summary of premises and equipment at December 31, 1998 follows:
Land.............................................................$ 475,000
Building and leasehold improvements ............................. 432,752
Furniture, fixtures and equipment ............................... 426,536
-------
Total, at cost...................................................$ 1,334,288
===========
The premises and equipment set forth above are pledged to collateralize
the note payable discussed in Note 5.
Office facilities, which served as the main office until the main office
renovation was complete, have been leased under an operating lease which
commenced in July 1998. The leased office facilities began serving as a
branch office once the main office renovation was completed.
The lease, which provides for a term of sixty months, requires the
Company to pay utilities, insurance, taxes and other operating expenses.
As of December 31, 1998, future minimum rental commitments under the
noncancelable lease are as follows:
Year Ending December 31,
------------------------
1999 .................................................. $ 21,840
2000 .................................................. 22,716
2001 .................................................. 23,628
2002 .................................................. 24,096
Thereafter ............................................. 12,282
------
$104,562
========
(4) Stock Option Plans
The Board of Directors intends to present, for shareholder approval, at
the Company's first annual meeting of shareholders, a Directors' Stock
Option Plan and a Key Employee Stock Option Plan (collectively the
"Plans"), which will be designed to provide incentive compensation to
Directors and key employees of the Company. The detail of the Plans have
not yet been determined, but such details would be disclosed to
shareholders in the Company's Proxy Statement issued in connection with
solicitation of shareholder approval of such Plans. It is anticipated
that 15% of the shares of the outstanding shares resulting from this
Offering will be set aside for stock options under the Plans, 7.0% to the
Employees of the Company, and 8.0% to the directors of the Company, based
pro-rata on the number of shares of the Company that each director
purchased. Such options will not be granted at less than fair market
value of the Company's Common Stock on the date of grant. Under the Chief
Executive Officer's employment agreement, he was entitled to a stock
option for 50,000 shares, subject to adoption and approval by the
Company's shareholders of the Key Employee Stock Option Plan. No stock
options were granted as of December 31.
(5) Borrowings
In April 1998, the Company obtained a line of credit of $450,000 from a
financial institution at an interest rate of Prime minus 1%. The line is
guaranteed by the Company's Board of Directors. At December 31, 1998,
$450,000 was outstanding under this line of credit. These amounts were
used to fund organizational and other costs incurred by the Company.
Amounts outstanding under this line of credit were repaid from the
proceeds of the Company's common stock offering during 1999.
In May 1998, the Company obtained credit availability from another
financial institution, which provides for a short-term line of credit, a
loan for the acquisition of the Bank's main office, and a loan for the
purchase of furniture, fixtures and equipment. Each of these loans are
guaranteed by certain directors of the Company. The arrangement provided
for: (i) a $250,000 line of credit which bears interest at prime minus
2%, with an additional $500,000 letter of credit, with a term of 180
days; (ii) a loan of up to $850,000 for the purchase and renovation of
the Bank's main office, with provisions for a first lien on the
underlying real estate and an interest rate of prime minus 2%; and,
(iii), a loan of up to $250,000 to purchase furniture, fixtures and
equipment, bearing interest at prime minus 1/2% and a term of 180 days.
At December 31, 1998, $1,015,000 was outstanding under this credit
facility. Each of these loans were repaid from the proceeds of the
Company's common stock offering during 1999.
(continued)
-15-
<PAGE>
JACKSONVILLE BANCORP, INC.
(A Development Stage Company)
Notes to Financial Statements, Continued
(6) Income Taxes
The income tax benefit consisted of the following:
Year Ended
December 31,
------------
1998
----
Deferred:
Federal ........... $(147,283)
State ............. (25,211)
-------
Total deferred $(172,494)
=========
The reasons for the differences between the statutory federal income tax
rate and the effective tax rate are summarized as follows:
% of
Pretax
Amount Loss
Income tax benefit at statutory rate ................. $(156,395) (34.0)%
Increase resulting from:
State taxes, net of federal tax benefit ......... (16,099) (3.5)
------- ----
$(172,494) (37.5)%
========= =====
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,
---------------
1998
----
Deferred tax assets:
Organizational and pre-opening costs ....................... $135,494
Net operating loss carryforwards ........................... 18,750
Accrual to cash adjustment ................................. 18,250
--------
Deferred tax assets ................................... $172,494
========
At December 31, 1998, the Bank has the following net operating loss
carryforwards available to offset future taxable income:
Expiration
----------
2012 .................................... $ 1,500
2018 .................................... 48,500
--------
$ 50,000
========
continued)
-16-
<PAGE>
JACKSONVILLE BANCORP, INC.
(A Development Stage Company)
Notes to Financial Statements, Continued
(7) Year 2000 Issues
The Company is acutely aware of the many areas affected by the Year 2000
computer issue and has given the Executive Committee of the Board of
Directors the responsibility for oversight of the Year 2000 issue. The
Company is actively involved in managing the Year 2000 computer
challenges, following the guidance provided by its regulatory bodies and
documented in the interagency statements issued by the Federal Financial
Institutions Examination Council ("AFFIEC"). The Company has a Year 2000
Technology Plan, approved by the Board of Directors, which includes
multiple phases, tasks to be completed and target dates for completion.
Issues addressed therein include awareness, assessment, renovation,
validation, implementation, testing and contingency planning.
The Company has received a certification from its main service provider
that they are Year 2000 compliant. The Company routinely upgrades and
purchases technology advanced software and hardware on a continual basis.
All future purchases and upgrades will be Year 2000 compliant. The
Company has determined that the cost of making modifications to correct
any Year 2000 issues will not substantially affect reported operating
results.
The Company also recognizes the importance of determining if its
customers are preparing for the Year 2000 problem. Questionnaires are
completed to assess the inherent risks. Customers will receive statement
stuffers and informational material in this regard. The Company plans to
be prepared on a one-on-one basis with significant borrowers who have
been identified as having high Year 2000 risk exposure. The Company plans
to continue in its efforts to be active in informing its customers of the
Year 2000 issue.
The Company has developed a Contingency Plan relative to the Year 2000
issue which addresses a "worst case" scenario. The plan covers various
options for handling interruptions of the internal and external mission
critical systems and services. The Company, for example, has developed
plans for meeting unusually high demands for cash generated by the
publicity surrounding the Year 2000 issue. The Contingency Plan will be
continuously monitored to incorporate and address various operational
elements as needed. Furthermore, the Company's Contingency Plan covers
systems which can be handled manually on an interim basis. Should outside
service providers not be able to provide compliant systems, the Company
will terminate those relationships and transfer to other vendors.
-17-
<PAGE>
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
9.1 Initial Directors
The following is a brief description of the experience of the initial
Directors:
D. Michael Carter, age 45, is a Certified Public Accountant and a
graduate of Florida State University. Mr. Carter has lived in
Jacksonville, Florida since 1975 and has an active accounting practice
under Carter, Merolle & Company, P.A. Tax and audit clients include
businesses, business owners and executives, as well as professionals.
Prior to forming his firm in 1980, Mr. Carter had been a public
accountant with two national accounting firms.
Victor M. George, age 57, will be the President and CEO of the Company
and the Bank. He will serve as the Company's Interim Chairman of the
Board until the first annual meeting of shareholders. Mr. George has over
30 years of experience in the banking industry which began in 1971 with
The Fifth Third Bank in Cincinnati, Ohio. Mr. George was the Vice
President and Senior Commercial Regional Lender when he left Fifth Third
Bank in 1980 to form VMG & Associates, Inc., an international financial
firm. Mr. George moved to Orlando, Florida in 1983 to join Barnett Bank
of Central Florida, N.A., where he served as Senior Vice President,
Corporate Banking. Mr. George left Barnett Bank of Central Florida in
1988 to join First Florida Bank, N.A., Orange County, Florida. After a
series of promotions he became the President for First Florida Bank of
Orange County, Florida. In 1993, after First Florida Banks, Inc. was
acquired by Barnett Banks, Inc., Mr. George joined Community First Bank,
Jacksonville, Florida. He was Executive Vice President responsible for
commercial lending and consumer lending and the oversight of 10 branches.
In August 1996, Mr. George became the President of Fields Motor Cars of
Florida, Inc. He resigned his position in October 1997 to form the
Company and organize the Bank. Mr. George received his B.A. degree in
Economics from Georgetown University in Washington, D.C. He also attended
George Washington University for graduate study and has attended numerous
banking and management courses with the American Institute of Banking and
the American Management Association, respectively. Mr. George has lived
in the Jacksonville area for five years.
George H. Groves, age 58, has over 25 years experience in the financial
services industry. He has served at the executive level for both
community and regional commercial banks. In these capacities, he was
responsible for all aspects of business development and operations,
including strategic planning, profit/loss analysis, product development,
marketing, sales and staff development. Mr. Groves was most recently
Senior Executive Vice President and Chief Banking Officer of Keystone
Financial, Inc., where he directed the banks growth efforts, including
the acquisition of 14 banks, two non-bank companies and start-up of three
banking related businesses. Mr. Groves prior financial institutions
experience include: President/CEO, Northern Central Bank; Senior Vice
President, Irwin Union Bank & Irwin Union Corporation; and Commercial
Lender, First National Bank of Chicago. Mr. Groves received his bachelor
of science, engineering, from the United States Military Academy at West
Point. He served in the United States Army achieving the rank of Captain.
He has an M.B.A. from the University of Virginia's Darden Graduate School
of Business. He has served on the board of directors of Pennsylvania
Bankers Association.
James M. Healey, age 41, is the Vice President of the Jacksonville Mint,
Inc., a direct-mailed advertising firm. Prior to his association with the
Jacksonville Mint, Mr. Healey worked with Carnation Food Products, Inc.
and International Harvester. Mr. Healey attended Purdue University where
he received a B.A. degree from Purdue's Business School with special
studies in Marketing and Personnel. Mr. Healey has been a resident and an
active member of the Jacksonville community since 1984.
John C. Kowkabany, age 56, is a Jacksonville based real estate investor
and consultant. Mr. Kowkabany has significant private and public sector
experience. A resident of the Neptune Beach community, he has been active
in local government, serving as the City's Councilman from 1985 to 1989
and then two four-years terms as Mayor from 1989 to 1997. Mr. Kowkabany's
public sector experience has provided him with experience and knowledge
regarding the local business and civic community, as well as close
working relationships with various appointed officials on the local,
state and federal levels. Mr. Kowkabany graduated with a Bachelor of Arts
from Jacksonville University.
-18
<PAGE>
Rudolph A. Kraft, age 63, is the President and Chief Executive Officer of
Kraft Holdings, Inc., a real estate investment and rental company from
November 1988 until June 1998 he was part owner of Kraft Motorcar
Company, Inc., Jacksonville, Florida, a Mercedes-Benz, Jeep, Eagle and
Buick Dealership. Mr. Kraft has served on the board of a number of civic
organizations. He currently sits on the President's Council for Kettering
University in Flint, Michigan.
R. C. Mills, age 61, is Executive Vice President and Chief Operating
Officer of Heritage Holdings, Inc., a national distributor of propane
gas. Mr. Mills is a graduate of the University of Sarasota. Mr. Mills has
an extensive business background and is experienced in business mergers
and acquisitions, corporate finance and personnel management. Mr. Mills
resides in the Jacksonville area.
John W. Rose, age 49, has been a financial services executive, advisor,
and investor for over 25 years. Mr. Rose is the Founder/President of
McAllen Capital Partners, Inc., a boutique firm providing a select range
of financial, economic and management services, as well as capital
resources exclusively to the financial services industry. Mr. Rose
continues to serve as a special advisor to F.N.B. Corporation (Hermitage,
Pennsylvania). Mr. Rose is also a general partner and chairman of the
investment committee of Castle Creek Capital (California), a series of
funds that invests in financial service companies. Prior to forming
McAllen Capital Partners, Inc., Mr. Rose served in various capacities
with the following Chicago-based firms: President, Livingston Financial
Group; Senior Vice President, ABN/LaSalle National Bank; Associate,
William Blair & Co.; Principal, Dwyer, Rose & Associates; and Vice
President, First National Bank. He currently serves on the Board of
Directors of Regent Bancshares, Philadelphia, Pennsylvania, and First
County Bank, Chardon, Ohio. Mr. Rose earned his undergraduate degree from
Case Western Reserve University. He received his M.B.A. degree from
Columbia University.
John R. Schultz, age 34, is a fourth generation native of Jacksonville,
Florida. Mr. Schultz is Chief Executive Officer of the Schultz Companies.
He is the Founder and Chairman of Schultz Construction, Inc., a
commercial/residential contractor and is Co-owner of Schultz Properties,
Inc., a commercial real estate brokerage firm. Mr. Schultz is a graduate
of The Bolles School and attended the University of Florida. Mr. Schultz
is a director of numerous companies and community organizations,
including First Coast Venture Capital Corp., Southeast-Atlantic Corp.
(Canada Dry bottler/distributor for Florida and Georgia), Junior
Achievement of Jacksonville, St. Vincent's Foundation, Museum of Science
and History, Jacksonville Museum of Contemporary Art, Volunteer
Jacksonville and Visador Company.
Charles F. Spencer, age 55, is President of the International
Longshoremen's Association, Local 1408 in Jacksonville, Florida. In
addition, Mr. Spencer is Vice President of the South Atlantic and Gulf
Coast District of I.L.A. and Vice President at Large of the Florida
AFL-CIO. Mr. Spencer is a member of the Jacksonville Sports Development
Authority appointed by the Mayor. He also serves as Secretary-Treasurer,
elected by board members of the J.S.D.A. Mr. Spencer is a board member of
Edward Waters College where he attended school and is a former board
member of the Florida Community College at Jacksonville Foundation, which
he also attended.
Bennett A. Tavar, age 41, is owner and President of Logical Business
Systems, Inc., a computer hardware sales firm located in Jacksonville,
Florida. Mr. Tavar has been a resident of Jacksonville since 1982 and is
active in a number of local civic organizations.
Gary L. Winfield, M.D., age 41, is a physician. Dr. Winfield has had an
active family practice in Jacksonville, Florida since 1989, operating
under Sandcastle Family Practice, P.A. From 1986 to 1989, Dr. Winfield
completed his residency requirements at St. Vincent's Hospital in
Jacksonville. Dr. Winfield is also Vice President of Medical Affairs for
Anthem Health Plans of Florida, a provider of health insurance. Dr.
Winfield received his undergraduate degree from the University of
Oklahoma and is a graduate of the College of Medicine of the University
of Oklahoma.
9.2 Officers
The following is a brief description of the business experience of the
initial Officers:
Timothy R. Hilyer, age 47, will be Vice President/Credit Administrator of
the Bank. Mr. Hilyer has over ten years of experience with the financial
services industry, including credit administration positions with
community and large regional banks. Prior to joining the Bank, he was
Vice President and Senior Credit Officer with Gulf Coast National Bank
(Naples, Florida). Mr. Hilyer's prior employment has included: Senior
Credit Officer, Community First Bank (Jacksonville), Credit
Administration Officer, Bank South (Waycross, Georgia), and Senior Credit
Analyst, First Union National Bank (Columbus, Georgia). A native of
Georgia, he holds a bachelors of business administration from the
University of Georgia.
-19-
<PAGE>
David C. Keasler, age 41, will be Senior Vice President and Senior
Loan Officer of the Bank. Mr. Keasler has 17 years financial services
experience, with specific expertise in the areas of credit production,
underwriting and administration. Most recently, he was President of
Ponte Vedra Capital, Inc., a Jacksonville-based mortgage brokerage
business. His prior financial institutions affiliations include: Vice
President-Corporate Banking, Southeast Bank (Miami, Florida), Vice
President, American National Bank of Florida. A native of Florida, Mr.
Keasler holds a B.S.B.A. in Finance and Banking from the University of
Arkansas. Mr. Keasler has been a resident of Jacksonville for 42
years.
Lynn H. Sandberg, age 42, will be Senior Vice President and Chief
Operations Officer of the Bank. Ms. Sandberg has nearly 25 years of
financial institution experience, focused primarily in the areas of
financial management, operations, and information technology. Ms.
Sandberg was most recently Vice President/Cashier with Enterprise
National Bank, a community bank based in Jacksonville, Florida. At
Enterprise National Bank, Ms. Sandberg was responsible for item
processing, bookkeeping, and information systems. Her previous
financial services positions included: Senior Product Manager, Nation
or (a financial services software firm), Vice President-Operations,
FloridaBank (Jacksonville), Operations Officer, Barnett Operations
Company (Jacksonville), and Assistant Vice President, Florida National
Bank (Jacksonville). A Florida native, Ms. Sandberg is a graduate of
Santa Fe Community College (Gainesville) and is presently attending
Jacksonville University.
9.3 Subsequent Events
Subsequent to December 31, 1998, Mr. Victor M. George resigned his
position as President, CEO, and director of the Company and the Bank.
Mr. Timothy R. Hilyer, Mr. David C. Keasler and Ms. Lynn H. Sandberg
are also no longer employed by the Company or the Bank.
Mr. Price Schwenck has become Chief Executive Officer and Chairman of
the Bank. Mr. Pomar had become President of the Company and President
and CEO of the Bank. Also, on March 2, 1999, Cheryl L. Whalen became
Senior Vice President and Chief Financial Officer of the Bank. Mr.
Schwenck and Mr. Pomar has also become directors of the Company and
the Bank. Finally, Mr. Scott M. Hall was employed as Senior Vice
President of Commercial Lending at the Bank. The following is a brief
description of the business experience of the new officers and
directors.
Price W. Schwenck, age 56, is the Chief Executive Officer of the
Company and the Chairman of the Board for the Bank. Mr. Schwenck
served as Regional President for First Union National Bank in Fort
Lauderdale, Florida from 1988 to 1994 and First Union National Bank of
Jacksonville, Florida from 1994 until he retired in 1999. His
community activities include the Jacksonville Chamber of Commerce,
Enterprise North Florida and North Florida Venture Capital Network.
Mr. Schwenck received his bachelors degree and MBA from the University
of South Florida in 1966 and 1970, respectively, and his MS from the
University of Miami in 1996.
Gilbert J. Pomar, III, age 39, is the President and Chief Executive
Officer of the Bank. Mr. Pomar joined the Bank on March 10, 1999.
Prior to joining the Bank, he was employed with First Union National
Bank of Jacksonville. Mr. Pomar joined First Union in 1991. During his
tenure with First Union, he was promoted to Senior Vice
President/Commercial Lending Manager in 1994 and head of Commercial
Banking in 1996. Mr. Pomar's banking experience includes four years
with Southeast Bank in West Palm Beach, Florida, as a Real Estate
Workout Officer and four years as a Commercial Real Estate Loan
Officer at First Chicago in Miami, Florida. Mr. Pomar is active in
various community efforts, including the United Way, Boy Scouts of
America and is a Board Member of the Timuquana Country Club. He is a
graduate of the University of Florida, where he received his Bachelor
of Arts in Finance.
Cheryl L. Whalen, age 38, is the Executive Vice President and Chief
Financial Officer for the Company and the Bank. From March 1990 until
March 1999, Ms. Whalen was with the O'Neil Companies and Merchants and
Southern Bank in Gainesville, Florida; initially as Senior Vice
President and Cashier, and later as Executive Vice President and Chief
Financial Officer. Ms. Whalen has a Certified Internal Auditor
designation and is a graduate of Florida State University, where she
received her Bachelor of Science Degree in Accounting.
Scott M. Hall, age 35, is Senior Vice President of Commercial Banking.
Mr. Hall has 13 years of experience in the financial services
industry. Prior to joining the Bank, he was employed with First Union
National Bank of Jacksonville for 8 years as Vice President/Commercial
Banking Relationship Manager. His community activities include the
Jacksonville Chamber of Commerce, Habitat for Humanity and he is a
member of the Clay County General Government Committee. Mr. Hall is a
graduate of the University of North Florida, where he received his
Bachelors of Business Administration Degree in Finance.
-20-
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
10.1 General
The following table shows the cash compensation paid by the Bank for
services rendered in all capacities during the year ended December 31,
1998, to the Bank's Chief Executive Officers and other principals with
annual compensation exceeding $100,000.
Annual Compensation
-------------------
Name and Other Annual
Principal Position Year Salary Bonus Compensation
- ------------------ ---- ------ ----- ------------
Victor M. George 1998 $70,000 $ 0 $ 0
President and CEO 1997 24,000 0 0
1996 0 0 0
10.2 Stock Option Plans
The Board of Directors intends to present, for shareholder approval, at
the Company's first annual meeting of shareholders, a Directors' Stock
Option Plan and a Key Employee Stock Option Plan (collectively the
"Plans"), which will be designed to provide incentive compensation to
Directors and key employees of the Company. The detail of the Plans have
not yet been determined, but such details would be disclosed to
shareholders in the Company's Proxy Statement issued in connection with
solicitation of shareholder approval of such Plans. It is anticipated
that 15% of the shares of the outstanding shares resulting from this
Offering will be set aside for stock options under the Plans, 7.0% to the
Employees of the Company, and 8.0% to the directors of the Company, based
pro-rata on the number of shares of the Company that each director
purchased. Such options will not be granted at less than fair market
value of the Company's Common Stock on the date of grant. Under Mr.
George's employment agreement, he was entitled to a stock option for
50,000 shares, subject to adoption and approval by the Company's
shareholders of the Key Employee Stock Option Plan. No stock options were
granted as of December 31.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
No stock was outstanding during the period covered by this report.
(a) Security Ownership of Management
No stock was outstanding during the period covered by this report.
(b) Changes in Control
No stock was outstanding during the period covered by this report.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
12.1 Organizational Advances
In order to fund the initial organizational expenses of the Bank,
estimated to be approximately $700,000, one of the Directors, R. C.
Mills, loaned the Company $150,000, as evidenced by a Promissory Note
dated October 10, 1997. The loan is at 8.5% interest payable and will be
repaid from the proceeds of the Offering. The terms of this loan are as
favorable to the Company as those loans generally available from
unaffiliated third parties. In particular, the 8.5% interest rate is less
than the interest rate being charged by commercial lenders in the
Jacksonville area for similar loans. The loan has been ratified by a
majority of the company's independent directors who had no interest in
the transaction and who had access to independent legal counsel at the
time of the transaction.
-21-
<PAGE>
Pre-opening expenses exceeding the $150,000 loaned to the Company by the
Director will be funded through two lines of credit that have been
extended to the Company by the Independent Banker's Bank of Florida and
Columbus Bank & Trust Company on terms and conditions as follows:
Independent Banker's Bank of Florida
Loan Amount. . . . up to $450,000.
Terms. . . . . . . On demand, interest monthly, due on or before April 10, 1999.
Rate . . . . . . . Wall Street Journal prime minus 1%, floating.
Fee. . . . . . . . None.
Guarantors . . . . Organizing Directors limited to $62,500 per director.
Columbus Bank & Trust Company
Loan Amount. . . . up to $135,000 (No funds have been drawn down).
Terms. . . . . . . On demand, interest monthly, due on or before April 16, 1999.
Rate . . . . . . . Wall Street Journal prime at 7 3/4%.
Fee. . . . . . . . None.
Guarantors . . . . John C. Kowkabany.
The Organizers and Directors have also agreed to act as guarantors on
loans of up to $1.8 million pursuant to a commitment in that amount from
Columbus Bank Trust Company for loans to purchase and renovate the main
office facility and to purchase furniture, fixtures and equipment. This
loan commitment permits the Company to make a series of unsecured loans
with an interest rate of the prime rate less % and permits the execution
of separate six-month notes, renewable up to one year. Pursuant to this
loan commitment, the Company has borrowed $625,000 on January 11, 1998,
for the acquisition of the Banks main office; $450,000 on December 1,
1998, to renovate the main office, and $250,000 on October 18, 1998, for
the purpose of purchasing equipment, furniture and fixtures. These loans
mature March 24, 1999, March 24, 1999, and February 16, 1999,
respectively, and were repaid from the proceeds of the sale of the
Company's stock.
12.2 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.
12.3 Financial Advisors
On June 10, 1998, the Company engaged McAllen Capital Partners, Inc.
("McAllen Capital") as a financial advisor to assist the Company with its
marketing efforts and future strategic planning. McAllen Capital is a
diversified consulting firm providing financial, economic and management
consulting services to the financial services industry. McAllen Capital
is providing financial advice to the Company in connection with the
Offering and has been retained to provide post-capitalization strategic
planning services. McAllen Capital was chosen because of its specific
expertise in the financial services industry and experience in corporate
recapitalization, including transactions involving shareholder rights
offerings and community offerings. Following the Offering, McAllen
Capital will assist management and the Board of Directors in the
post-capitalization phase by analyzing and monitoring the Company's
program in implementing its new corporate strategies. John W. Rose, a
Director for both the Company and the Bank, is the President of McAllen
Capital, which will receive 1.5% fee of the gross proceeds of the public
offering (excluding the amount raised from directors and employees) for
its advisory service in connection with this Offering. McAllen Capital
will not, solicit the sale or purchase or purchase or sell Common Stock
in connection with the Offering and otherwise act as an underwriter with
respect to the Offering. This transaction was ratified by outside-non
employee Directors of the Company. Mr. Rose did not vote or participate
in the discussions relating to the engagement of McAllen Capital.
-22-
<PAGE>
PART IV
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, and are hereby
incorporated by reference from Jacksonville Bancorp's Registration
Statement on Form SB-2, as effective with the Securities and Exchange
Commission on September 30, 1998, Registration No. 333-64815. 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.
27.0 Financial Data Schedule (SEC Use Only)
(b) Reports on Form 8-K. The Bank did not file a Form 8-k during the last
quarter of 1998.
-23-
<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.
JACKSONVILLE BANCORP, INC.
Dated: August 25, 1999 _______________ By:/s/____________________________
Price W. Schwenck
Chairman of the Board and
Chief Executive Officer
Dated: August 25, 1999 _______________ By:/s/____________________________
Cheryl L. Whalen
Executive Vice President and
Chief Financial Officer
(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:
Signature Title Date
/s/__________________________ Director August 25, 1999
C. Michael Carter
/s/__________________________ Director August 25, 1999
Melvin Gottlieb
/s/__________________________ Director August 25, 1999
James M. Healey
/s/__________________________ Director August 25, 1999
John C. Kowkabany
/s/__________________________ Director August 25, 1999
Rudolph A. Kraft
/s/__________________________ Director August 25, 1999
R. C. Mills
/s/__________________________ Director August 25, 1999
Gilbert J. Pomar
/s/__________________________ Director August 25, 1999
John W. Rose
-24-
<PAGE>
/s/__________________________ Director August 25, 1999
John R. Schultz
/s/__________________________ Chairman of the Board, August 25, 1999
Price W. Schwenck Chief Executive Officer
/s/__________________________ Director August __, 1999
Charles F. Spencer
/s/__________________________ Director August __, 1999
Bennett A. Tavar
/s/__________________________ Director August __, 1999
Gary L. Winfield, M.D.
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.
-25-
<PAGE>
EXHIBIT 27.0
Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from Form 10-KSB
for the period ended December 31, 1998 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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 9
<INT-BEARING-DEPOSITS> 21
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 1,631
<DEPOSITS> 0
<SHORT-TERM> 1,615
<LIABILITIES-OTHER> 341
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> (325)
<TOTAL-LIABILITIES-AND-EQUITY> 1,631
<INTEREST-LOAN> 0
<INTEREST-INVEST> 0
<INTEREST-OTHER> 2
<INTEREST-TOTAL> 2
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 30
<INTEREST-INCOME-NET> (28)
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 458<F1>
<INCOME-PRETAX> (460)
<INCOME-PRE-EXTRAORDINARY> (287)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (287)
<EPS-BASIC> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Other expense includes: salaries and employee benefits of $292, occupancy of
$37, professional fees of $38 and other expenses which totaled $91.
</FN>
</TABLE>
