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FORM 8-K
Securities and Exchange Commission
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): February 4, 1998
Surety Capital Corporation
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(exact name of registrant as specified in its charter)
Delaware 33-1983 75-2065607
- --------------- ------------ --------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
1845 Precinct Line Road, Suite 100, Hurst, Texas 76054
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(address of principal executive offices)
Registrant's telephone number, including area code: 817-498-2749
Not applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events
On February 4, 1998 Surety Capital Corporation (the "Company")
announced the results for its year ended December 31, 1997. The net
loss for the twelve months ended December 31, 1997 was ($3,476,304),
or ($0.58) per diluted share, compared to net income of $1,697,987,
or $0.31 per diluted share, for the comparable period in 1996. The
net loss for the fourth quarter of 1997 was ($5,007,393), or ($0.84)
per diluted share, compared to net income of $564,770, or $0.10 per
diluted share, for the fourth quarter of 1996. A copy of the press
release is attached hereto as Exhibit 1.
The net loss in the fourth quarter of 1997 was the result of a
decision by the Company's management to charge off certain medical
claims receivables and to make provision for other receivables
outstanding over 120 days, due to concerns regarding the collect-
ibility of such receivables. Management's fourth quarter and year-
end evaluations of the Company's medical claims factoring portfolio
indicated that as of December 31, 1997 approximately $6,266,711 in
medical claims receivables were outstanding over 120 days. As a
result, management determined that charge offs of approximately
$2,033,587 were warranted in the fourth quarter, as well as a
provision for an additional $3,686,409 in such receivables. Manage-
ment also determined to write off goodwill of $1,151,111 relating to
the medical claims factoring division during the fourth quarter.
New management of the medical claims factoring division is
concentrating its efforts on collecting the current portfolio of
outstanding receivables, rather than acquiring receivables from new
customers. While the Company's management will vigorously pursue
collection of the outstanding receivables of $6,266,711, the Company
cannot predict at this time the likely amount of any such recoveries.
The Company's core business of community banking and insurance
premium financing loans remains sound and profitable, and the Company
expects that business to continue to expand in the future. The
Company's previously announced intention to acquire TexStar National
Bank will proceed, subject to the Company obtaining satisfactory
financing to consummate the transaction. However, in light of the
fourth quarter charge offs and provision for other receivables
outstanding over 120 days, the Company withdrew its pending Registra-
tion Statement on Form S-1, and will pursue other options for
financing the acquisition of TexStar.
Item 7. Exhibits
1 Press Release.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
SURETY CAPITAL CORPORATION
DATE: February 9, 1998 /s/ B. J. Curley
----------------
B. J. Curley, Chief Accounting
Officer
**News Release** EXHIBIT 1
SURETY CAPITAL CORPORATION
4th Quarter Operating Results
Unaudited Financial Highlights
For Release: Immediately Contact: C. Jack Bean
Date: February 4, 1998 Chairman of the Board
AMEX Symbol: SRY 1 (800) SRY-5995
<TABLE>
<CAPTION>
Twelve Months Ended Quarter Ended
December 31, December 31,
1997 1996 1997 1996
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Total interest income $15,282,686 $14,390,362 $ 3,275,273 $3,914,604
Total interest expense 5,749,798 5,361,689 1,459,744 1,400,051
----------- ----------- ----------- ----------
Net interest income 9,532,888 9,028,673 1,815,529 2,514,553
Provision for credit losses 6,234,996 135,000 5,939,996 45,000
----------- ----------- ----------- ----------
Income after provision for
credit losses 3,297,892 8,893,673 (4,124,467) 2,469,553
Total non-interest income 2,538,918 1,877,454 774,213 522,678
Total non-interest expense 11,113,184 8,135,012 4,332,126 2,083,304
----------- ----------- ----------- ----------
Income (loss) before income
taxes (5,276,374) 2,636,115 (7,682,380) 908,927
Income tax expense (benefit) (1,800,070) 938,128 (2,674,987) 344,157
----------- ----------- ----------- ----------
Net Income (loss) $(3,476,304) $ 1,697,987 $(5,007,393) $ 564,770
=========== =========== =========== ==========
Weighted-average common stock
outstanding 5,751,847 5,389,366 5,753,793 5,747,243
Basic income (loss) per
common share $(0.60) $0.32 $(0.87) $0.10
Weighted-average common stock
outstanding and common stock
equivalents 5,990,815 5,437,661 5,991,740 5,759,503
Diluted income (loss) per share $(0.58) $0.31 $(0.84) $0.10
</TABLE>
December 31,
1997 1996
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Total Assets $170,846,049 $176,439,310
Loans, net 96,761,742 95,750,642
Medical claims factoring receivables, net 3,073,155 6,116,271
Deposits 154,541,492 155,690,341
Shareholders' equity 15,877,339 19,230,552
Book value per share $2.74 $3.34
Allowance for credit losses to total loans 0.8% 1.10%
Allowance for credit losses to medical
claims factoring receivables 58.4% 3.4%
Nonperforming loans to total loans 0.2% 0.2%
Nonperforming assets to total assets 3.2% 0.6%
Capital ratios
Leverage ratio 6.1% 7.0%
Tier I risk-based capital 9.2% 11.1%
Total risk-based capital 10.5% 12.3%
Loans to deposit 62.0% 62.2%
Page 1 of 2
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**News Release**
SURETY CAPITAL CORPORATION
4th Quarter Operating Results
Unaudited Financial Highlights
Hurst, Texas, February 4, 1998 - Surety Capital Corporation ("Surety
Capital"), a bank holding company located in Hurst, Texas, announced today
results for its year ended 1997. For the twelve months ended December 31,
1997, total interest income increased 6.2% to $15,282,686 from $14,390,362 in
the comparable period in 1996. Net loss for the twelve months ended December
31, 1997, was ($3,476,304), or ($0.58) per diluted share, compared to net
income of $1,697,987, or $0.31 per diluted share for the comparable period
in 1996. For the quarter ended December 31, 1997, total interest income was
$3,275,273 vs. $3,914,604 in the comparable period in 1996. The net loss
for the fourth quarter was ($5,007,393), or ($0.84) per diluted share,
compared to net income of $564,770, or $0.10 per diluted share in the fourth
quarter of 1996.
Surety Capital experienced growth within its insurance premium finance
division during 1997, with the average balance of insurance premium finance
loans outstanding during 1997 increasing by 51.1% to $45,255,998 from
$29,949,099 in 1996. The interest income generated by the insurance premium
finance loans grew by 34.3% to $4,785,717 in 1997 from $3,563,467 in 1996.
The reported net loss in the fourth quarter was a result of a decision by
Surety Capital's management to charge-off certain medical claims receivables
and to make provision for other receivables outstanding over 120 days, due to
management's concerns regarding the collectibility of such receivables.
Management's fourth quarter and year-end evaluation of Surety Capital's
medical claims factoring portfolio, indicated that at December 31, 1997,
approximately $6,267,000 in medical claims receivables were outstanding over
120 days. Consequently, management determined that charge-offs of
approximately $2,034,000 of the $6,267,000 were warranted in the fourth
quarter as well as a provision for an additional $3,686,409 of such
receivables. Due to the above, management decided to write-off all goodwill
of $1,151,111 relating to medical claims factoring division during the fourth
quarter.
New management within the medical claims factoring division will vigorously
pursue collecting the portfolio of the outstanding receivables over 120 days
old, as opposed to acquiring receivables from new customers. At this time,
however, the Company cannot predict the likely amount of any such recoveries.
Surety Capital's core business of community banking and insurance premium
financing loans remains sound and profitable, and the Company expects that
business to continue to expand in the future. In light of the fourth quarter
operating results, Surety Capital intends to ask permission from the
Securities and Exchange Commission to withdraw its pending Registration
Statement on Form S-1, the proceeds of which would have been used for its
acquisition of TexStar National Bank. Surety Capital's acquisition of
TexStar National Bank will proceed subject to the Company obtaining
satisfactory financing to consummate the transaction.
This press release contains forward-looking statements. All forward-looking
statements involve risks and uncertainties, including, without limitation,
the risks detailed in Surety Capital's filings and reports with the
Securities and Exchange Commission. Such statements are only predictions
and actual events or results may differ materially.
www.sry.com
Email [email protected]
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