<PAGE> 1
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 Quarterly Period Ended Commission File Number:
March 31, 1999 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 Trail, Suite 100, Sarasota, Florida 34236
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(Address of principal executive offices)
(941) 955-2626
--------------------------------------
(Issuer's telephone number)
Not applicable
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(Former name, former address and former fiscal year, if changed since last
report)
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 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
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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 559,140
----------------------------------- -----------------------------
Class Outstanding at May 8, 1998
Transitional Small Business Disclosure Format (Check One):
Yes No X
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SARASOTA BANCORPORATION, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS MARCH 31, 1999 DECEMBER 31, 1998
- ------------------------------------------- -------------- -----------------
<S> <C> <C>
Cash and Due From Banks $ 2,840,649 3,661,115
Federal Funds Sold 9,260,000 1,605,000
Securities held to maturity -- --
Securities available for sale 18,153,296 17,873,122
Loans (Net) 57,911,013 54,150,418
Accrued interest receivable 508,862 478,024
Foreclosed real estate 68,073 71,673
Furniture and equipment, net 372,454 387,602
Deferred income taxes 205,000 205,000
Other assets 31,985 33,521
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TOTAL ASSETS: $ 89,351,332 78,465,475
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Demand deposits $ 10,283,665 9,139,666
NOW and money market deposits 23,557,585 12,729,289
Savings deposits 922,774 1,162,127
Other time deposits 41,551,726 43,462,020
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Total deposits 76,315,750 66,493,102
------------ ------------
Repurchase agreements 4,041,760 2,897,485
Borrowed funds-FHLB 2,000,000 2,000,000
Other deposits 112,555 33,650
Accrued interest payable 169,710 136,301
Other liabilities 305,789 654,087
------------ ------------
TOTAL LIABILITIES: 82,945,564 72,214,625
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 5,591
Additional Paid-In Capital 5,588,928 5,588,928
Treasury stock, at cost (27,848) (27,848)
Accumulated Deficit 874,788 653,857
Net unrealized appreciation on available-for-sale securities (net) (35,691) 30,322
------------ ------------
TOTAL STOCKHOLDERS' EQUITY: 6,405,768 6,250,850
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY: $ 89,351,332 78,465,475
============ ============
</TABLE>
REFER TO NOTES TO THE FINANCIAL STATEMENTS.
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SARASOTA BANCORPORATION, INC.
SARASOTA, FLORIDA
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
3/31/99 3/31/98
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<S> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans $1,396,030 1,052,524
Interest on Federal Funds Sold 78,152 50,759
Interest on Investment Securities 267,585 190,930
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TOTAL INTEREST INCOME: 1,741,767 1,294,213
INTEREST EXPENSE:
Interest on Deposits 765,422 614,184
Interest on Borrowings 14,319 --
Interest on Repurchase agreements 35,624 13,115
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TOTAL INTEREST EXPENSE: 815,365 627,299
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NET INTEREST INCOME: 926,402 666,914
Provision For Possible Loan Losses 46,100 13,700
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NET INTEREST INCOME (LOSS) AFTER
PROVISION FOR POSSIBLE LOAN LOSSES: 880,302 653,214
OTHER OPERATING INCOME:
Service Charges on Deposit Accounts 41,317 25,936
Other Fees and Other Income 33,314 29,704
---------- ----------
NET OTHER OPERATING INCOME: 74,631 55,640
OPERATING EXPENSES:
Salaries and employee benefits 241,890 204,537
Occupancy 102,593 82,864
Data processing 21,661 36,981
Professional Fees 45,643 34,418
Other 197,215 108,316
---------- ----------
TOTAL OTHER OPERATING EXPENSES: 609,002 467,116
---------- ----------
INCOME BEFORE TAXES 345,931 241,738
PROVISION FOR TAXES 125,000 91,500
---------- ----------
NET INCOME (LOSS) $ 220,931 150,238
========== ==========
INCOME (LOSS) PER SHARE 0.47 0.32
========== ==========
</TABLE>
REFER TO NOTES TO FINANCIAL STATEMENTS
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SARASOTA BANCORPORATION, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
3/31/99 3/31/98
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITY:
NET INCOME (LOSS) $ 220,931 150,238
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH FLOWS FROM OPERATIONS:
Depreciation 20,250 12,245
Amortization of Organizational Costs -- --
Provision for Loan Losses 46,100 13,700
(Increase) Decrease in Accrued Interest Receivable (30,838) 41,382
(Increase) Decrease in Foreclosed real estate 3,600 --
(Increase) Decrease in Deferred income taxes -- (35,296)
(Increase) Decrease in other assets 1,536 192,850
(Decrease) Increase in Repurchase agreements 1,144,275 779,769
(Decrease) Increase in Accrued Interest Payable 33,409 5,781
(Decrease) Increase in other liabilities (348,298) 67,725
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES: 1,090,965 1,228,394
------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of investment securities, Net (346,187) 1,470,001
Purchase of furniture & equipment (5,102) --
Increase in Loans, Net (3,806,695) (5,259,504)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES: (4,157,984) (3,789,503)
------------ ------------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from directors stock warrants -- 653,610
Net Increase in Deposits 9,901,553 5,540,309
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES: 9,901,553 6,193,919
------------ ------------
NET INCREASE (DECREASE) IN CASH: 6,834,534 3,632,810
CASH AS BEGINNING OF PERIOD: 5,266,115 5,895,155
------------ ------------
CASH AT END OF PERIOD: 12,100,649 9,527,965
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
CASH PAID DURING THE PERIOD FOR INTEREST: $ 815,365 627,299
============ ============
</TABLE>
REFER TO NOTES TO THE FINANCIAL STATEMENTS
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SARASOTA BANCORPORATION, INC.
AND SUBSIDIARY
Notes to Financial Statements (Unaudited)
March 31, 1999
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-QSB. 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 three month
period ended March 31, 1999 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1999. For further information,
refer to the financial statements and footnotes thereto included in the
Company's Form 10-KSB for the year ended December 31, 1998.
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 March 31, 1999 no Investment Securities
were carried as "Held to Maturity."
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Available for Sale Securities. As of March 31, 1999 the market value of
"Available for Sale Securities" was $18,153,296.
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 Bank opened for business. These capitalized costs, or
organizational costs, are amortized over a sixty-month period using the straight
line method. As of March 31, 1999, there were no unamortized organizational
costs.
Profit (Loss) Per Share. Profit per share was $.47 for the quarter
ended March 31, 1999 and may not be indicative of projected earnings (losses)
for the year ending December 31, 1999.
Income Taxes. The Company will be subject to taxation whenever taxable
income is generated. As of March 31, 1999, the provision for income taxes was
$120,500.
Statement of Cash Flows. The presentation of the statement of cash
flows is 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 three months ended March 31, 1999 were
$1,353. Another director provides advertising, printing and other miscellaneous
services to the Company. The gross billings, which include costs passed through
to other companies providing services to the Company, was $7,887 for the three
months ended March 31, 1999.
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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 as reflected in the Company's unaudited financial statements for
the first quarter ended March 31, 1999.
RESULTS OF OPERATIONS
The Company's net income for the first quarter of 1999 was $220,931, a
47.0% increase compared to $150,238 for the same period in 1998. Earnings per
share increased to $0.47 in the first quarter of 1999 compared to $0.32 per
share for the same period in 1998. The increase in net income is primarily
attributable to a 32.6% increase in interest and fees on loans for the
three-month period ended March 31, 1999. Interest on investment securities and
on Federal Funds Sold also showed increases of 40.1% and 54.0%, respectively,
for the three-month period ended March 31, 1999.
Net interest income after the provision for loan losses for the first
quarter of 1999 increased $227,088 or 34.8% to $880,302 from a balance of
$653,214 for the first quarter of 1998. 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 4.15% during the
first quarter of 1999 compared to 4.42% for the first quarter of 1998. The net
interest margin for the three months ended March 31, 1999 was 4.42% on average
earning assets of $84,997,000. For the same period in 1998, the net interest
margin was 4.26% on average earning assets of $60,873,900. The increase in net
interest margin is reflective of growth in higher priced consumer loan accounts
and lower priced deposits.
Non-interest expense for the first quarter of 1999 increased $141,886,
or 30.4%, as compared to the first quarter of 1998. This increase is primarily
the result of increased employee salaries and benefits and loan servicing fees.
Non-interest income decreased $18,991, or 34.1%, during the first
quarter ended March 31, 1999 as compared to the same period in 1998. The
decrease in non-interest income is attributable an increase in daily overdraft
fees for demand deposit accounts.
FINANCIAL CONDITION
For the three month period ended March 31, 1999, the Company
experienced continued asset, loan and deposit growth. Total assets increased
12.2% to $89,351,332 for the three month period ended March 31, 1999 from
$78,465,475 at December 31, 1998. This increase is primarily attributable to an
increase in loans of approximately $3.8 million and an increase in Federal Funds
Sold of approximately $7.6 million during this period.
The allowance for loan loss provision for the first quarter of 1999 was
$46,100 compared to $13,700 in the first quarter of 1998. The reserve balance
for loan losses as of March 31, 1999 was $600,000 as compared to $507,300 at
December 31, 1998. At March 31, 1999, the allowance for
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<PAGE> 8
loan losses represented 1.03% 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 first quarter of 1999, there was one charged-off loan in
the amount of $6,000 and recoveries totaled $2,350, or a net of .01% of total
loans outstanding. The ratio of non-performing loans (including loans 90 days or
more past due) to total outstanding loans was $256,055 or .44% of total
outstanding loans as of March 31, 1999 compared to .02% of total outstanding
loans as of the same period in 1998. At year ended December 31, 1998,
non-performing loans were $270,900 or .50% of total loans outstanding. The
non-performing loans are primarily consumer loans and all of the non-performing
loans are fully secured. There were no other loans past due in excess of 90 days
as of March 31, 1999.
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 4.0% for core capital
(tier 1 capital), 8.0% for total risk-based capital, and at least 3.0% 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 3.0% level. The Company's tier 1 risk-based capital
ratio at March 31, 1999 was 10.47%, its total risk-based capital ratio was
11.45%, and its leverage ratio was 7.58%, well above the required minimums.
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 73.80% at March 31, 1999, cash and due from banks of $2,840,649
and federal funds sold of $9,260,000, 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.
YEAR 2000
A critical issue affecting companies that rely extensively on
electronic data processing systems, such as the Company , is the Year 2000
issue. The Year 2000 issue has arisen due to the
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widespread use of computer programs that rely on two-digit date codes to perform
computations or decision-making functions. Many of these programs may fail as a
result of their inability to properly interpret date codes beginning January 1,
2000. For example, such programs may misinterpret "00" as the year 1900 rather
than 2000. In addition, some equipment, being controlled by microprocessor chips
may not deal appropriately with the year "00." This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions or engage in similar
normal business activities.
The Bank uses a third-party vendor for processing its primary banking
applications. During 1998, the company developed a plan to address the Year 2000
issue, conduct a comprehensive review of the Company's systems and ensure that
the company takes any necessary measures. The company believes that its systems
and those of the Bank are currently Year 2000 compliant and does not believe
that material expenditures will be necessary to implement any further
modifications. The Bank will complete its testing phase with its data processing
vendor during the second quarter of 1999. All coding changes with the data
processing vendor have been completed and are currently in use. The Bank does
not believe that material expenditures will be necessary to implement any
further modifications with its data processing vendor. As of March 31, 1999, the
Company had spent approximately $25,000 to help ensure that its systems would be
Year 2000 compliant. The Company's data processing vendor has assured the
Company that its systems will be Year 2000 compliant well in advance of the Year
2000. The Company's contingency plans relative to Year 2000 issues have not been
finalized. Management will develop and modify a "worst case scenario"
contingency plan which will, among other things, anticipate that the Company's
deposit customers will have increased demands for cash in the latter part of
1999. The plan also provides for copies of documents to be produced in case of
equipment failure, utilization of security personnel in case of security
equipment failure, manual posting of transactions, hiring of temporary
additional personnel and telephone verification of information normally received
by electronic means. However, there can be no assurance that unforeseen
difficulties or costs will not arise. In addition, there can be no assurance
that the systems of other companies on which the Company's systems rely, such as
the Bank's data processing vendor, will be modified on a timely basis, or that
the failure by another company to properly modify its systems will not
negatively impact the Company's systems or operations.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibit is filed with this report:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
27.1 Financial Data Schedule (for SEC use only)
</TABLE>
(b) Reports on Form 8-K. No reports on Form 8-K were filed during
the quarter ended March 31, 1999.
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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 thereunto duly authorized.
SARASOTA BANCORPORATION, INC
Dated: May 6, 1999 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)
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
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<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 MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 2,840,649
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 9,260,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 18,153,296
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 58,511,016
<ALLOWANCE> (600,003)
<TOTAL-ASSETS> 89,351,332
<DEPOSITS> 76,315,750
<SHORT-TERM> 2,000,000
<LIABILITIES-OTHER> 4,629,814
<LONG-TERM> 0
0
0
<COMMON> 5,591
<OTHER-SE> 6,400,177
<TOTAL-LIABILITIES-AND-EQUITY> 89,351,332
<INTEREST-LOAN> 1,396,030
<INTEREST-INVEST> 267,585
<INTEREST-OTHER> 78,152
<INTEREST-TOTAL> 1,741,767
<INTEREST-DEPOSIT> 765,422
<INTEREST-EXPENSE> 815,365
<INTEREST-INCOME-NET> 926,402
<LOAN-LOSSES> 46,100
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 609,002
<INCOME-PRETAX> 345,931
<INCOME-PRE-EXTRAORDINARY> 345,931
<EXTRAORDINARY> 125,000
<CHANGES> 0
<NET-INCOME> 220,931
<EPS-PRIMARY> .47
<EPS-DILUTED> .47
<YIELD-ACTUAL> 8.57
<LOANS-NON> 256,055
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 229,965
<ALLOWANCE-OPEN> 557,546
<CHARGE-OFFS> (5,997)
<RECOVERIES> 2,354
<ALLOWANCE-CLOSE> 600,003
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
