<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OF 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended Commission File Number:
June 30, 1998 33-41045
SARASOTA BANCORPORATION, INC.
- -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Florida 65-0235255
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(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two North Tamiami Train, Suite 100, Sarasota, Florida 34236
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(Address of principal executive offices)
(941) 955-2626
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(Issuer's telephone number)
Not Applicable
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
last 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
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock, $.01 Par Value 587,200
- ----------------------------- ------------------------------
Class Outstanding at August 10, 1998
Transitional Small Business Disclosure Format (Check One):
Yes No x
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<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SARASOTA BANCORPORATION, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS JUNE 30, 1998 DECEMBER 31, 1997
- ------ -------------- -----------------
<S> <C> <C>
Cash and Due From Banks $ 1,958,664 1,626,155
Federal Funds Sold 3,758,000 4,269,000
Securities held to maturity - -
Securities available for sale 14,972,450 13,181,407
Loans (Net) 47,104,097 39,590,147
Accrued interest receivable 445,855 380,541
Foreclosed real estate 71,673 71,673
Furniture and equipment,net 412,207 428,133
Deferred income taxes 186,200 150,904
Other assets 37,019 222,570
-------------- -----------------
TOTAL ASSETS: $ 68,946,165 59,920,530
============== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------
LIABILITIES:
Demand deposits $ 8,863,691 6,678,554
NOW and money market deposits 13,143,652 12,878,302
Savings deposits 1,099,867 798,833
Other time deposits 37,238,978 34,021,075
-------------- -----------------
Total deposits 60,346,188 54,376,764
-------------- -----------------
Repurchase agreements 2,260,408 614,445
Accrued interest payable 107,895 110,288
Other liabilities 352,476 151,447
-------------- -----------------
TOTAL LIABILITIES: 63,066,967 55,252,944
STOCKHOLDERS' EQUITY:
Preferred stock, $.10 Par Value. Authorized 1,000,000 shares;
None Issued or Outstanding - -
Common Stock, $.01 Par Value. Authorized 10,000,000 shares;
Outstanding 536,861 shares 5,591 4,715
Additional Paid-In Capital 5,588,928 4,710,285
Treasury stock, at cost (21,098) (21,098)
Retained earnings (deficit) 251,422 (86,415)
Net unrealized appreciation on available-for-sale securities (net) 54,355 60,099
-------------- -----------------
TOTAL STOCKHOLDERS' EQUITY: 5,879,198 4,667,586
-------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY: $ 68,946,165 59,920,530
============== =================
</TABLE>
-1-
<PAGE> 3
SARASOTA BANCORPORATION, INC.
SARASOTA, FLORIDA
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
6/30/1998 6/30/1997 6/30/1998 6/30/1997
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans $ 1,180,285 818,849 2,232,809 1,561,493
Interest on Federal Funds Sold 63,891 60,554 114,650 95,944
Interest on Investment Securities 224,116 211,486 415,046 392,349
----------- --------- --------- ---------
TOTAL INTEREST INCOME: 1,468,292 1,090,889 2,762,505 2,049,786
INTEREST EXPENSE:
Interest on Deposits 679,020 513,546 1,293,204 957,071
Interest on Borrowings - - - 139
Interest on Repurchase agreements 19,588 16,919 32,703 33,467
----------- --------- --------- ---------
TOTAL INTEREST EXPENSE: 698,608 530,465 1,325,907 990,677
----------- --------- --------- ---------
NET INTEREST INCOME: 769,684 560,424 1,436,598 1,059,109
Provision For Possible Loan Losses 19,000 72,300 32,700 120,800
----------- --------- --------- ---------
NET INTEREST INCOME (LOSS) AFTER
PROVISION FOR POSSIBLE LOAN LOSSES: 750,684 488,124 1,403,898 938,309
OTHER OPERATING INCOME:
Service Charges on Deposit Accounts 26,874 27,951 52,810 60,501
Other Fees and Other Income 30,533 21,506 60,237 46,237
----------- --------- --------- ---------
NET OTHER OPERATING INCOME: 57,407 49,457 113,047 106,738
OPERATING EXPENSES:
Salaries and employee benefits 213,166 162,995 417,703 332,685
Occupancy 67,027 74,376 149,891 149,831
Data processing 33,908 27,354 70,889 40,234
Professional Fees 44,272 26,238 78,690 60,702
Other 148,618 75,995 256,934 150,166
----------- --------- --------- ---------
TOTAL OTHER OPERATING EXPENSES: 506,991 366,958 974,107 733,618
----------- --------- --------- ---------
INCOME BEFORE TAXES 301,100 170,623 542,838 311,429
PROVISION FOR TAXES 113,500 3,000 205,000 6,000
----------- --------- --------- ---------
NET INCOME (LOSS) $ 187,600 167,623 337,838 305,429
=========== ========= ========= =========
INCOME (LOSS) PER SHARE 0.40 0.36 0.72 0.65
=========== ========= ========= =========
</TABLE>
-2-
<PAGE> 4
SARASOTA BANCORPORATION, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
6/30/1998 6/30/1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITY:
NET INCOME (LOSS) $ 337,838 305,429
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH FLOWS FROM OPERATIONS:
Depreciation 24,490 28,399
Amortization of Organizational Costs - 19,413
Provision for Loan Losses 32,700 120,800
(Increase) Decrease in Accrued Interest Receivable (65,314) (35,659)
(Increase) Decrease in Foreclosed real estate - -
(Increase) Decrease in Deferred income taxes (35,296) (15,912)
(Increase) Decrease in other assets 185,551 1,080
(Decrease) Increase in Repurchase agreements 1,645,963 (303,853)
(Decrease) Increase in Accrued Interest Payable (2,393) 17,554
(Decrease) Increase in other liabilities 201,029 13,120
------------- -------------
NET CASH USED IN OPERATING ACTIVITIES: 2,324,568 150,371
------------- -------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of investment securities, Net (1,796,787) (1,624,687)
Purchase of furniture & equipment (8,564) (1,876)
Increase in Loans, Net (7,546,650) (5,547,342)
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES: (9,352,001) (7,173,905)
------------- -------------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from directors stock warrants 879,518 -
Purchase of Treasury stock - (15,730)
Net Increase in Deposits 5,969,424 5,097,097
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NET CASH PROVIDED BY FINANCING ACTIVITIES: 6,848,942 5,081,367
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NET INCREASE (DECREASE) IN CASH: (178,491) (1,942,167)
CASH AS BEGINNING OF PERIOD: 5,895,155 6,185,658
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CASH AT END OF PERIOD: 5,716,664 4,243,491
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
CASH PAID DURING THE PERIOD FOR INTEREST: $ 1,325,907 990,677
============= =============
</TABLE>
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<PAGE> 5
SARASOTA BANCORPORATION, INC
AND SUBSIDIARY
Notes to Financial Statements (Unaudited)
June 30, 1998
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles for Interim Financial Statements
and with the instructions to form 10-Q-SB. Accordingly, they do not include all
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the six month period
ended June 30, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. For further information, refer
to the financial statements and footnotes thereto included in Form 10- KSB for
the year ended December 31, 1997.
NOTE 2 - SUMMARY OF ORGANIZATION
Sarasota BanCorporation, Inc. Sarasota, Florida (the "Company"), was
incorporated under the laws of the State of Florida on December 28, 1990, for
the purpose of becoming a bank holding company with respect to a proposed de
novo bank, Sarasota Bank (the "Bank") Sarasota, Florida. Prior to formation of
the Company, the Company's organizers formed a partnership to commence
organizing a Bank holding company. The partnership was subsequently merged into
the Company as of December 30, 1990. As a result, each organizers' capital
account in the partnership was exchanged for common stock of the company and all
assets of the partnership were contributed as capital to the Company in
consideration of the issuance of its common stock to the organizers. On
September 15, 1992, the organizers received approval from the Office of the
Comptroller of the State of Florida for the organization of a new state banking
association; an approval was also received on May 29, 1992 from the Federal
Reserve Board to form a one-bank holding company. On September 15, 1992, the
company acquired 100% of the Bank's capital stock by injecting $4.25 million
into the Bank's capital accounts.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of the Company conform to
generally accepted accounting principles and to general practices in the banking
industry. The following summarizes the more significant of these policies:
Investment Securities. As of June 30, 1998 no Investment Securities are
carried as "Held to Maturity".
Available for Sale Securities. As of June 30, 1998, the market value of
"Available for Sale Securities" is $14,972,450.
<PAGE> 6
Organizational Costs. In accordance with FASB Statement No. 7, the
Company and the subsidiary Bank capitalized all direct costs that were incurred
in the expectation that they would generate future revenues and otherwise
benefit periods after the subsidiary Bank opened for business. These capitalized
costs, or organizational costs, are amortized over a sixty-month period using
the straight line method. As of June 30, 1998 there are no unamortized
organizational costs.
Profit (Loss) Per Share. Profit per share was $.40 for the quarter
ended June 30, 1998 and may not be indicative of projected earnings (losses) for
the year ending December 31, 1998.
Income Taxes. The company will be subject to taxation whenever taxable
income is generated. As of June 30, 1998 the provision for taxes is $205,000.
Statement of Cash Flows. The presentation of the statement of cash
flows in condensed as permitted by the Securities and Exchange commission. The
classification of cash flows is consistent with the requirements of FASB
Statement No. 95.
NOTE 4 - RELATED PARTIES
One of the Company's directors serves as legal counsel for the Company.
Gross fees for these services during the six months ended June 30, 1998 was
$10,856. This amount includes sums paid by the Bank to this firm as well as sums
paid by bank customers and cost advances. Another director provides advertising,
printing and other miscellaneous services to the Company. The gross billing,
which includes costs passed through to other companies providing services to the
Company, was $35,234 for the six months ended June 30, 1998. Another director
provides accounting services for the Company. For the six months ended June 30,
1998 these services amounted to $600.
<PAGE> 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion addresses the factors that have
affected Sarasota BanCorporation, Inc.'s (the "Company") financial condition and
results of operations reflected in the Company's unaudited financial statements
for the second quarter ended June 30, 1998.
RESULTS OF OPERATIONS
The Company's net income for the second quarter of 1998 was
$187,600, a 11.9% increase compared to $167,623 for the same period in 1997.
Earnings per share increased to .40 in the second quarter of 1998 compared to
.36 per share for the same period in 1997. Net income for the six months ended
June 30, 1998 was $337,838 compared to $305,429 for the same period in 1997, an
increase of 32,409 or 10.6%. The increase in net income is primarily
attributable to a 44.1% and a 43.0% increase in interest and fees on loans for
the three and six month periods ended June 30, 1998, respectively.
Net interest income after provision for loan losses for the
second quarter of 1998 increased $262,560 or 53.8% to $750,684 from a balance of
$488,124 for the second quarter of 1997. Net interest income after provision for
loan losses for the six months ended June 30, 1998 increased $465,589 or 49.6%
to $1,403,898 from a balance of $938,309 for the same period in 1997. The
increase in net interest income resulted primarily from an increase in loan
volume and a corresponding increase in interest and fees on loans. The cost of
deposits averaged 4.43% for the second quarter of 1998 compared to 4.24% for the
second quarter of 1997. The net interest margin for the six month period ended
June 30, 1998 was 4.28% on average earning assets of $64,232,000. For the same
period in 1997, the net interest margin was 4.16% on average earning assets of
$51,414,072. The increase in net interest margin is reflective of growth in
higher priced consumer loan accounts.
Non-interest expense for the second quarter of 1998 increased
$140,033 or 56.2% as compared to the second quarter of 1997. Non-interest
expense increased $240,489 or 32.8% for the six month period ended June 30, 1998
as compared to the same period of 1997. This increase is primarily the result of
increased employee salaries and benefits, data processing fees and loan
servicing fees.
Non-interest income increased $7,950 or 16.1% during the
second quarter ended June 30, 1998 as compared to the same period in 1997.
Non-interest income also increased $6,309 or 5.9% for the six month period ended
June 30, 1998 as compared to the same period in 1997. The increase in
non-interest income is attributable to a overdraft service fees on depository
accounts.
FINANCIAL CONDITION
For the six month period ended June 30, 1998, the company
experienced continued asset, loan and deposit growth. Total assets increased
15.1% to $68,946,165 for the six month period ended June 30, 1998 from
59,920,530 at December 31, 1997. This increase is primarily attributable to an
increase in loans of approximately $7.5 million during the period.
<PAGE> 8
MANAGEMENT
PAGE 2
The allowance for loan loss provision for the second quarter
of 1998 was $19,000 compared to $72,300 in the second quarter of 1997. The
reserve balance for loan losses as of June 30, 1998 was $529,100 as compared to
$482,400 at December 31, 1997. At June 30, 1998, the allowance for loan losses
represented 1.10% of total loans outstanding. Management considers the allowance
to be adequate based upon evaluations of specific loans and the weighting of
various loan categories as suggested by the Bank's internal loan rating system.
The provision for loan losses is based upon management's continuing analysis and
evaluation of various factors, including current economic conditions, the size
of the loan portfolio, past loan loss experience, underlying collateral value,
the Bank's internal rating system and other factors deemed relevant by
management.
Through the second quarter of 1998, there were no charged-off
loans and recoveries totaled $14,000 or a net of <00.03> percent of total loans
outstanding. The ratio of non-performing loans (including loans 90 days or more
past due) to total outstanding loans was $120,000 or .25% as of June 30 1998
compared to 0.16% as of the same period in 1997. At year ended December 31,
1997, non-performing loans were $11,800 or .02% of loans outstanding. The
increase in non-performing loans as compared to year ended December 31, 1997 is
primarily attributable to several consumer loans past due from 30 to 90 days.
There was one loan in the amount of $1,000 past due in excess of 90 days as of
June 30, 1998.
CAPITAL ADEQUACY
Federal banking regulators have established certain capital
adequacy standards required to be maintained by banks and bank holding
companies. These regulations establish minimums of risk-based capital of 4% for
core capital (tier 1), 8% for total risk-based capital, and at least 3% for the
leverage ratio. Three percent is the minimum leverage ratio for the most highly
rated banks. All other banks are required to meet a minimum of at least 100 or
200 basis points above the 3% level. The Company's tier 1 risk-based capital
ratio at June 30, 1998 was 11.72%, its total risk-based capital ratio was
12.80%, and its leverage ratio was 8.39%.
LIQUIDITY
The Company views liquidity as the ability to provide for the
credit needs of the market and to provide funds for deposit withdrawals. With a
loan to deposit ratio of 75.16% at June 30, 1998, cash and due from banks of
$1,958,664 and federal funds sold of $3,758,000, the Company does not anticipate
any events which would require liquidity beyond that which is available through
deposit growth or its investment portfolio. The Company actively manages the
levels, types, and maturities of earning assets in relation to the sources
available to fund current and future needs to ensure adequate funding will be
available at all times. There are no known trends or any known commitments or
uncertainties that will result in the Company's liquidity increasing or
decreasing in any material way.
<PAGE> 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The 1998 Annual Meeting of Shareholders of the Company was held on
April 21,1998. At the meeting, the following persons were elected as directors
to serve for a term of three years and until their successors are elected and
qualified: Timothy J. Clarke, Christine L. Jennings, Sam D Norton and Michael R.
Pender.
The results of voting with respect to the election of directors were a
follows:
<TABLE>
<CAPTION>
Votes Votes
FOR WITHHELD
<S> <C> <C>
Timothy J. Clarke 380,747 500
Christine L. Jennings 380,747 500
Sam D. Norton 380,747 500
Michael R. Pender, Jr. 380,747 500
</TABLE>
The following persons did not stand for reelection to the Board at the
1998 Annual Meeting of Shareholders as their term of office continued after the
Annual Meeting: Susan M. Baker, Kenneth H. Barr, James W. Demler, M.D., Edward
S. Levi, A. Dean Pratt and Gilbert J. Wellman.
No other matters were presented or voted for at the Annual Meeting.
Item 5. Other Information.
Proposals of shareholders intended to be presented at the Company's
1999 Annual Meeting of Shareholders must be received at the Company's principal
executive offices by November 29, 1998 in order to be eligible for inclusion in
the Company's proxy statement and form of proxy for that meeting. With respect
to proposals not received by February 20, 1999, the individuals designated by
management as proxies will vote their proxy in accordance with their judgement
of what is in the best interest of the Company.
Item 6. Exhibits and Reports on Form 8-K.
(A) The following exhibit is filed with this report:
Exhibit No. Description
----------- -----------
27 Financial Data Schedule (for SEC use only)
<PAGE> 10
PART II. OTHER INFORMATION
Item 6. Continued Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K. No report on Form 8-K was filed
during the quarter ended June 30, 1998.
<PAGE> 11
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 thereunto duly authorized.
SARASOTA BANCORPORATION, INC
Dated: August 13, 1998 By:/s/ Christine L. Jennings
-----------------------------------------
Christine L. Jennings
President (Principal Executive Officer)
By:/s/ Susan K. Flynn
------------------------------------------
Susan K. Flynn
Vice President and Chief Financial Officer
(Principal financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SARASOTA
BANCORPORATION, INC. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD
ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 1,958,664
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,758,000
<TRADING-ASSETS> 1,152,954
<INVESTMENTS-HELD-FOR-SALE> 14,972,450
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 47,633,183
<ALLOWANCE> (529,086)
<TOTAL-ASSETS> 68,946,165
<DEPOSITS> 60,346,188
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,720,779
<LONG-TERM> 0
0
0
<COMMON> 5,591
<OTHER-SE> 5,588,928
<TOTAL-LIABILITIES-AND-EQUITY> 68,946,165
<INTEREST-LOAN> 2,232,809
<INTEREST-INVEST> 415,046
<INTEREST-OTHER> 114,650
<INTEREST-TOTAL> 2,762,505
<INTEREST-DEPOSIT> 1,293,204
<INTEREST-EXPENSE> 1,325,907
<INTEREST-INCOME-NET> 1,403,898
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 974,107
<INCOME-PRETAX> 542,838
<INCOME-PRE-EXTRAORDINARY> 542,838
<EXTRAORDINARY> (205,000)
<CHANGES> 0
<NET-INCOME> 337,838
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 150,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 482,398
<CHARGE-OFFS> 0
<RECOVERIES> 13,989
<ALLOWANCE-CLOSE> 529,086
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
