SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 2000. Commission file number:333-87781
Bay National Corporation
(Exact name of Registrant as specified in its charter)
Maryland 52-2176710
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2328 West Joppa Road, Baltimore, MD 21093
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (410) 494-2580
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-------- --------
The number of shares outstanding of the registrant's common stock on
August 7, 2000:
$.01 Par Value - 1,242,020
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------- -----------------
<S> <C> <C>
Cash and cash equivalents $ 3,550,432 $ 763,957
Federal funds sold 5,046,649 0
Investment securities available for sale (AFS) - at fair value 3,221,740 0
Loans 117,423 0
Less: Allowance for credit losses 0 0
------------ ------------
Loans, net 117,423 0
Premises and equipment, net 806,805 22,768
Accrued interest receivable and other assets 32,057 49,659
------------ ------------
Total Assets $ 12,775,107 $ 836,384
============ ============
LIABILITIES
Non-interest bearing deposits $ 296,204 $ 0
Interest bearing deposits 497,205 0
------------ ------------
Total deposits 793,409 0
Short-term borrowings 483,267 0
Accrued expenses and other liabilities 226,269 260,633
------------ ------------
Total Liabilities 1,502,945 260,633
------------ ------------
STOCKHOLDERS' EQUITY
Common stock - $.01 par value, authorized:
9,000,000 shares authorized, 1,242,020 and 112,500
issued and outstanding: 12,420 1,125
Surplus 12,407,780 1,123,875
Accumulated Deficit (1,148,988) (549,249)
Accumulated other comprehensive income 950 0
------------ ------------
Total Stockholders' Equity 11,272,162 575,751
------------ ------------
Total Liabilities and Stockholders' Equity $ 12,775,107 $ 836,384
============ ============
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
Three Months Ending Six Months Ending
June 30, 2000 June 30, 2000
------------- -------------
INTEREST INCOME:
<S> <C> <C>
Interest and fees on loans $ 470 $ 470
Interest on federal funds sold 190,307 190,307
Interest and dividends on investment securities: 29,419 37,999
--------- ---------
Total interest income 220,196 228,776
--------- ---------
INTEREST EXPENSE:
Interest on deposits 1,733 1,733
Interest on short-term borrowings 2,084 2,084
--------- ---------
Total interest expense 3,817 3,817
--------- ---------
Net interest income 216,379 224,959
Provision for credit losses 0 0
--------- ---------
Net interest income after provision for credit losses 216,379 224,959
--------- ---------
OTHER OPERATING INCOME:
Service charges on deposit accounts 20 20
Other income 304 304
--------- ---------
Total other operating income 324 324
--------- ---------
OTHER OPERATING EXPENSES:
Salaries and employee benefits 308,752 440,848
Net occupancy expenses of bank premises 57,437 92,570
Furniture and equipment expenses 32,083 32,083
Legal and professional fees 36,967 46,967
Outside Services 66,238 66,238
Other expenses 88,039 146,315
--------- ---------
Total other operating expenses 589,516 825,021
--------- ---------
Loss before income taxes (372,814) (599,739)
Income tax benefit 0 0
--------- ---------
NET LOSS $(372,814) $(599,739)
========= =========
Per Share Data:
Cash Dividend Paid $ -- $ --
Net Loss (Basic) $ (0.51) $ (1.42)
Net Loss (Diluted) $ (0.51) $ (1.42)
Average Shares Outstanding (Basic) 733,165 422,833
Average Shares Outstanding (Diluted) 733,165 422,823
</TABLE>
fully diluted includes stock options
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE>
<TABLE>
<CAPTION>
BAY NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the six months ended June 30, 2000
Accumulated
Other Total
Common Accumulated Comprehensive Stockholders'
Stock Surplus Deficit Income Equity
------------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 2000 $ 1,125 $1,123,875 $ (549,249) $ - $ 575,751
Net loss (1st and 2nd quarters 2000) - - (599,739) - (599,739)
Other comprehensive income, net of tax:
unrealized gain on securities 950 950
------------
Total other comprehensive income (loss) (598,789)
Issuance of common stock 11,295 11,283,905 - - 11,295,200
---------------------------------------------------------------------------
Balance at June 30, 2000 12,420 12,407,780 (1,148,988) 950 11,272,162
===========================================================================
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
BAY NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended June 30, 2000
2000
-------------------------------------------------------------------------------------------
Cash Flows From Operating Activities
<S> <C>
Net loss $(599,739)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation 21,200
Provision for credit losses 0
Net decrease in accrued interest receivable and other assets 17,602
Net (decrease) in accrued expenses and other liabilities (34,364)
--------------
Net cash used by operating activities (595,301)
--------------
Cash Flows From Investing Activities
Purchases of investment securities - AFS (3,220,790)
Net (increase) in loans (117,423)
Capital expenditures (805,238)
Net cash used by investing activities (4,143,451)
--------------
Cash Flows From Financing Activities
Net increase in deposits 793,409
Net increase in short-term borrowings 483,267
Issuance of of common stock 11,295,200
Net cash provided by financing activities 12,571,877
--------------
Net increase in cash and cash equivalents 7,833,124
Cash and cash equivalents at beginning of year 763,957
--------------
Cash and cash equivalents at end of period $ 8,597,081
==============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
BAY NATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED June 30, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
The foregoing financial statements are unaudited; however, in
the opinion of management, all adjustments (comprising only normal recurring
accruals) necessary for a fair presentation of the results of the interim period
have been included. These statements should be read in conjunction with the
financial statements and accompanying notes included in Bay National
Corporation's 1999 Annual Report on Form 10-KSB. The results shown in this
interim report are not necessarily indicative of results to be expected for the
full year 2000.
The accounting and reporting policies of Bay National
Corporation (the "Company") conform to generally accepted accounting principles.
Nature of Business
Bay National Corporation was incorporated on June 3, 1999 under
the laws of the State of Maryland to operate as a bank holding company of a
national bank with the name Bay National Bank (the "Bank"). On May 12, 2000, the
Company purchased all the shares of common stock issued by the Bank. The
Company's operations to date have been limited to taking the necessary actions
to organize and capitalize the Company and the Bank. The Bank commenced
operations on May 12, 2000 after successfully meeting the conditions of the
Office of the Comptroller of the Currency (the "OCC") to receive its charter
authorizing it to commence operations as a national bank, and obtained the
approval of the Federal Deposit Insurance Corporation to insure its deposit
accounts, and has met certain other regulatory requirements.
Costs Associated with Start-Up Activities
The Company expenses costs incurred during the start-up phase of
organization in accordance with the American Institute of Certified Public
Accountants' Statement of Position 98-5 Reporting on the Costs of Start-Up
Activities.
5
<PAGE>
2. CAPITAL RAISING EFFORTS
As of April 30, 2000, the termination date of the offering, the
Company had received subscriptions for 1,129,520 shares, or an aggregate of
$11,295,200 in subscription funds.
3. INCOME TAXES
The Company uses the liability method of accounting for income
taxes as required by SFAS No. 109, "Accounting for Income Taxes". Under the
liability method, deferred-tax assets and liabilities are determined based on
differences between the financial statement carrying amounts and the tax bases
of existing assets and liabilities (i.e., temporary differences) and are
measured at the enacted rates that will be in effect when these differences
reverse. Deferred income taxes will be recognized when it is deemed more likely
than not that the benefits of such deferred income taxes will be realized,
accordingly, no deferred income taxes or income tax benefits have been recorded
by the Company.
6
<PAGE>
Item 2. Management's Plan of Operation.
General.
Bay National Corporation (the "Company") is a bank holding company,
which on April 30, 2000, completed its efforts to raise capital and closed with
$11,295,200.
On May 12, 2000 the Company became a bank holding company by purchasing
all of the common stock of Bay National Bank. Bay National Bank opened its first
office on May 12, 2000, and a second office on May 26, 2000.
Bay National Bank was formed to serve the business communities of North
Baltimore and Salisbury, Maryland.
Results of Operations.
The Company reported net losses of $(372,814) and $(599,739) for the
quarter and six months ended June 30, 2000. The losses are attributable
primarily to start-up costs associated with filing fees, legal fees, salaries,
rents and other related expenses necessary to complete the offering and prepare
the Bank to do business during the first three months. The loss for the quarter
is related to operating costs of the Bank as it opened for business and
developed its customer base. These losses will be reduced as the Bank increases
its deposit base and generates loan volume.
While the bank is pleased with its deposit growth, ending one and
one-half months with deposits at $793,409, lending activity has not been as
strong as anticipated. The Bank's lending activity has generated loans totaling
$117,423. This is not up to expectations, however, the market is very
competitive and the Bank is committed to maintaining a high quality portfolio
which returns a reasonable market rate, which adequately compensates the bank
for the risks undertaken.
It is expected that the Bank will have losses during its start up
period and not break even for approximately twenty-four months.
IN ADDITION TO THE HISTORICAL INFORMATION CONTAINED IN PART I OF THIS
QUARTERLY REPORT ON FORM 10-QSB, THE DISCUSSION IN PART I OF THIS QUARTERLY
REPORT ON FORM 10-QSB CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS SUCH AS
STATEMENTS OF BAY NATIONAL CORPORATION'S PLANS, OBJECTIVES, EXPECTATIONS AND
INTENTIONS THAT INVOLVE RISKS AND UNCERTAINTIES. THESE RISKS AND UNCERTAINTIES
INCLUDE, AMONG OTHERS, THOSE DISCUSSED IN BAY NATIONAL CORPORATION'S
REGISTRATION STATEMENT UNDER THE CAPTION "RISK FACTORS," SUCH AS THE LACK OF AN
OPERATING HISTORY AND EXPECTATION OF LOSSES; DEPENDENCE ON KEY PERSONNEL; RISKS
RELATED TO BAY NATIONAL BANK'S CHOICE OF LOAN PORTFOLIO; RISKS RELATED TO BAY
NATIONAL BANK'S LENDING LIMIT; RISKS OF A COMPETITIVE MARKET; IMPACT OF
GOVERNMENT REGULATION ON OPERATING RESULTS; AND EFFECT OF DEVELOPMENTS IN
TECHNOLOGY. BAY NATIONAL CORPORATION'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE DISCUSSED HEREIN.
7
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Securities Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
The following exhibit is being filed herewith:
EXHIBIT 27 Financial Data Schedule
(b) Reports on Form 8-K.
None.
8
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Bay National Corporation
Date: August 9, 2000 By: /s/ Hugh W. Mohler
---------------------------------
Hugh W. Mohler, President
(Principal Executive Officer)
Date: August 9, 2000 By: /s/ John S. DiPietro
---------------------------------
John S. DiPietro, Treasurer
(Principal Accounting and Financial Officer)
9
