- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange
- ---- Act of 1934
For the quarterly period ended June 30, 1998
____ Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from _____ to _____
Commission file number 0-24433
POINTE FINANCIAL CORPORATION
----------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Florida 65-0451402
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
21845 Powerline Road
Boca Raton, Florida 33433
(Address of Principal Executive Offices)
(561) 368-6300
(Issuer's Telephone Number, Including Area Code)
(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 Exchange Act 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 ____ NO X
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date;
Common stock, par value $.01 per share 2,252,722 shares
- -------------------------------------- -------------------------------
(class) Outstanding at August 7, 1998
Transitional small business disclosure format (check one):
YES ____ NO X
- --------------------------------------------------------------------------------
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information
<S> <C>
Item 1. Financial Statements Page
----
Condensed Consolidated Balance Sheets -
At June 30, 1998 (unaudited) and December 31, 1997.......................................................2
Condensed Consolidated Statements of Earnings -
Three and Six Months ended June 30, 1998 and 1997 (unaudited)............................................3
Condensed Consolidated Statements of Comprehensive Income -
Three and Six Months ended June 30, 1998 and 1997 (unaudited)............................................4
Condensed Consolidated Statement of Stockholders' Equity -
Six Months ended June 30, 1998 (unaudited)...............................................................5
Condensed Consolidated Statements of Cash Flows -
Six Months ended June 30, 1998 and 1997 (unaudited)....................................................6-7
Notes to Condensed Consolidated Financial Statements (unaudited)........................................8-11
Item 2. Management's Discussion and Analysis or Plan of Operation .......................................12-16
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders.................................................17
Item 5. Other Information..................................................................................17
Item 6. Exhibits and Reports on Form 8-K....................................................................17
SIGNATURES.....................................................................................................18
</TABLE>
1
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
At
-----------------------------
June 30, December 31,
Assets 1998 1997
---------- -----------
(Unaudited)
<S> <C> <C>
Cash and due from banks $ 2,636 2,272
Interest bearing deposits with banks 7,478 303
--------- --------
Total cash and cash equivalents 10,114 2,575
Securities available for sale 41,150 22,745
Securities held to maturity 9,610 7,764
Loans receivable, net of allowance for loan losses of $983
in 1998 (unaudited) and $848 in 1997 116,396 105,653
Loans held for sale - 4,443
Accrued interest receivable 1,321 1,027
Premises and equipment, net 1,183 1,225
Restricted securities:
Federal Home Loan Bank stock 1,235 1,271
Federal Reserve Bank stock 299 299
Foreclosed real estate 110 105
Deferred income tax asset 214 224
Other assets 462 509
---------- ---------
Total $ 182,094 147,840
========== =========
Liabilities and Stockholders' Equity
Liabilities:
Demand deposits 17,448 12,136
Savings and NOW deposits 13,490 9,834
Money-market deposits 40,499 38,326
Time deposits 66,844 64,699
---------- ---------
Total deposits 138,281 124,995
Official checks 3,031 1,320
Other borrowings 3,891 1,791
Advances from Federal Home Loan Bank 8,000 4,400
Accrued interest payable 720 673
Advance payments by borrowers for taxes and insurance 1,030 333
Other liabilities 531 483
---------- ---------
Total liabilities 155,484 133,995
---------- ---------
Stockholders' equity:
Convertible preferred stock - 1
Common stock 22 8
Additional paid-in capital 23,133 10,935
Retained earnings 3,625 3,039
Accumulated other compensation income, unrealized loss on securities
available for sale, net of taxes of $103 in 1998 (unaudited) and $83 in 1997 (170) (138)
---------- ---------
Total stockholders' equity 26,610 13,845
---------- ---------
Total $ 182,094 147,840
========== =========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------------------------------------
1998 1997 1998 1997
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $ 2,651 2,267 5,149 4,514
Securities available for sale 475 549 876 1,092
Securities held to maturity 110 129 226 270
Other interest-earning assets 25 19 32 53
------------- ----------- ----------- ------------
Total interest income 3,261 2,964 6,283 5,929
------------- ----------- ----------- ------------
Interest expense:
Deposits 1,448 1,267 2,888 2,544
Borrowings 169 337 270 639
------------- ----------- ----------- ------------
Total interest expense 1,617 1,604 3,158 3,183
------------- ----------- ----------- ------------
Net interest income 1,644 1,360 3,125 2,746
Provision for loan losses 100 - 165 11
------------- ----------- ----------- ------------
Net interest income after provision for loan losses 1,544 1,360 2,960 2,735
------------- ----------- ----------- ------------
Noninterest income:
Service charges on deposit accounts 196 115 391 227
Loan servicing fees 13 25 29 46
Net gains from sale of loans and loan servicing rights 31 92 100 187
Net realized gains on sale of securities available for sale - 18 2 22
Other 117 80 199 172
------------- ----------- ----------- ------------
Total noninterest income 357 330 721 654
------------- ----------- ----------- ------------
Noninterest expenses:
Salaries and employee benefits 708 646 1,409 1,345
Occupancy expense 233 254 493 538
Advertising and promotion 101 64 160 115
Professional fees 25 26 49 26
Federal deposit insurance premiums 14 22 28 33
Data processing 55 91 125 199
Other 273 289 453 464
------------- ----------- ----------- ------------
Total noninterest expenses 1,409 1,392 2,717 2,720
------------- ----------- ----------- ------------
Earnings before income taxes 492 298 964 669
Income taxes 180 113 351 252
------------- ----------- ----------- ------------
Net earnings $ 312 185 613 417
============= =========== =========== ============
Earnings per share:
Basic $ .21 .12 .43 .31
============= =========== =========== ============
Diluted $ .20 .11 .42 .28
============= =========== =========== ============
Weighted-average shares outstanding for basic 1,506,164 1,222,209 1,378,057 1,220,630
============= =========== =========== ============
Weighted-average shares outstanding for diluted 1,523,778 1,336,223 1,395,799 1,334,547
============= =========== =========== ============
Dividends per share $ - - - -
============= =========== =========== ============
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
3
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- -------------------
1998 1997 1998 1997
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net earnings $ 312 185 613 417
Other comprehensive income-
Change in unrealized losses arising during period,
net of tax (benefit) of $16 and $61 for the
three months ended June 30, 1998 and 1997
(unaudited), and $(20) and $1 for the six
months ended June 30, 1998 and 1997
(unaudited) 41 132 (32) 4
----- --- --- -----
Comprehensive income $ 353 317 581 421
===== === === =====
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
4
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Stockholders' Equity
Six Months Ended June 30, 1998
(Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive
Income,
Unrealized
Loss on
Convertible Additional Securities Total
Preferred Common Paid-In Retained Available Stockholders'
Stock Stock Capital Earnings for Sale Equity
----------- ------ ---------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $ 1 8 10,935 3,039 (138) 13,845
Three-for-two stock split (416,626
shares) (unaudited) - 4 (4) - - -
Stock dividends on preferred stock
(1,410 shares) (unaudited) - - 27 (27) - -
Proceeds from issuance of preferred
stock, net of offering costs
(500 shares) (unaudited) - - 10 - - 10
Conversion of preferred stock (56,026
shares) to common stock
(126,026 shares) (unaudited) (1) 1 - - - -
Proceeds from issuance of common
stock, net of offering costs
(878,342 shares) (unaudited) - 9 12,165 - - 12,174
Other comprehensive income
(unaudited) - - - - (32) (32)
Net earnings (unaudited) - - - 613 - 613
----- ----- --------- ------ ----- --------
Balance at June 30, 1998
(unaudited) $ - 22 23,133 3,625 (170) 26,610
===== ===== ========= ====== ===== ========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
5
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 613 417
Adjustments to reconcile net earnings to net cash provided by
(used in) operating activities:
Provision for loan losses 165 11
Depreciation and amortization 164 207
Provision for deferred income taxes 30 390
Net amortization of fees, premiums, discounts and other 63 4
Gain on sale of securities available for sale (2) (22)
Gain on sale of loans and loan servicing rights (100) (187)
Gain on sale of foreclosed real estate (24) (33)
Originations of loans held for sale - (7,267)
Proceeds from sale of loans held for sale 4,543 1,741
Decrease in other assets 47 744
Increase in accrued interest receivable (294) (80)
Increase in official checks 1,711 594
Increase (decrease) in accrued interest payable 47 (182)
Increase (decrease) in other liabilities 48 (182)
--------- ---------
Net cash provided by (used in) operating activities 7,011 ( 3,845)
--------- ---------
Cash flows from investing activities:
Purchase of securities available for sale (29,073) (4,162)
Purchase of securities held to maturity (2,100) -
Proceeds from sale of available-for-sale securities 9,549 3,347
Principal repayments on securities available for sale 46 724
Principal repayments on securities held to maturity 259 258
Maturities of securities available for sale 1,000 1,000
Net increase in loans (11,204) (326)
Proceeds from sale of foreclosed real estate 270 284
Net decrease in restricted securities 36 -
Purchase of premises and equipment, net (122) (173)
--------- ---------
Net cash (used in) provided by investing activities (31,339) 952
--------- ---------
Cash flows from financing activities:
Net increase (decrease) in demand, savings, NOW and money-market deposits 11,141 (455)
Net increase (decrease) in time deposits 2,145 (63)
Net increase in Federal Home Loan Bank advances 3,600 18,316
Net increase (decrease) in other borrowings 2,100 (19,768)
Increase in advance payments by borrowers for taxes and insurance 697 908
Net proceeds from issuance of preferred stock 10 188
Net proceeds from issuance of common stock 12,174 42
Cash dividends paid on preferred stock - (37)
--------- ---------
Net cash provided by (used in) financing activities 31,867 (869)
--------- ---------
(continued)
</TABLE>
6
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows, Continued
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
Net increase (decrease) in cash and cash equivalents 7,539 (3,762)
Cash and cash equivalents at beginning of period 2,575 6,663
-------- ---------
Cash and cash equivalents at end of period $ 10,114 2,901
======== =========
Supplemental disclosure of cash flow information: Cash paid during the period
for:
Interest $ 3,111 3,365
======== =========
Income taxes $ 420 10
======== =========
Noncash transactions:
Reclassification of loans receivable to foreclosed real estate $ 251 57
======== =========
Reclassification of foreclosed real estate to loans receivable $ - 68
======== =========
Accumulated other comprehensive income, change in unrealized
loss on securities available for sale $ (52) 5
======== =========
Stock dividends paid on preferred stock $ 27 -
======== =========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
7
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)
1. General. In the opinion of the management of Pointe Financial
Corporation, the accompanying condensed consolidated financial
statements contain all adjustments (consisting principally of normal
recurring accruals) necessary to present fairly the financial position
at June 30, 1998, the results of operations for the three- and six-month
periods ended June 30, 1998 and 1997 and cash flows for the six-month
periods ended June 30, 1998 and 1997. The results of operations for the
three and six months ended June 30, 1998 are not necessarily indicative
of the results to be expected for the entire year.
Pointe Financial Corporation (the "Holding Company") was formed in
September 1993 and received approval from the appropriate authorities to
become both a savings and loan holding company and a bank holding
company. Prior to April 14, 1997, the Holding Company owned 100% of
Pointe Federal Savings Bank ("Pointe Federal"), a federally-chartered
thrift, Pointe Bank (the "Bank"), a state-chartered commercial bank and
Pointe Financial Services, Inc., (collectively the "Company"). On April
14, 1997, Pointe Federal was merged into the Bank. The Bank provides a
wide range of community banking services to small and middle-market
businesses and individuals through its three banking offices located in
Broward, Miami-Dade and Palm Beach counties, Florida. Pointe Financial
Services, Inc. is an inactive subsidiary.
The accompanying condensed consolidated financial statements include the
Holding Company and its subsidiaries. The Holding Company's primary
business activity is the ownership of the Bank. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
2. Loan Impairment and Loan Losses. The activity in the allowance for loan
losses is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Balance at beginning of period $ 913 830 848 777
Provision charged to earnings 100 - 165 11
(Charge-offs), net of recoveries (30) 4 (30) 46
----- ----- ---- ----
Balance at end of period $ 983 834 983 834
===== ===== ==== ====
</TABLE>
The average net investment in impaired loans and interest income recognized
and received on impaired loans is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ----------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average investment in impaired loans $ 1,262 107 1,264 108
======= ===== ======= =====
Interest income recognized on impaired
loans $ 55 - 73 -
======= ===== ======= =====
Interest income received on impaired
loans $ 55 - 73 -
======= ===== ======= =====
(continued)
</TABLE>
8
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
3. Earnings Per Share. Earnings per share of common stock has been
computed on the basis of the weighted-average number of shares of
common stock outstanding. For purposes of calculating diluted earnings
per share, because there was no active trading market until June 18,
1998, for the Company's common stock, the average book value per share
was used through that date. For the period June 18, 1998 to June
30, 1998, average quoted market prices were used. For the three and six
months ended June 30, 1998 and 1997 outstanding stock options are
considered dilutive securities for purposes of calculating diluted
earnings per share. The following table presents the calculations of
earnings per share ($ in thousands, except per share amounts).
<TABLE>
<CAPTION>
Three Months Ended June 30,
------------------------------------------------------------------------------------
1998 1997
------------------------------------------- ---------------------------------------
Earnings Shares Per Share Earnings Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
---------- ------------ --------- --------- ----------- ---------
<S> <C> <C>
Basic Earnings Per Share:
Net earnings $ 312 185
Less preferred
stock dividends - (37)
------- -----
Net earnings available
to common
stockholders 312 1,506,164 $ .21 148 1,222,209 $ .12
===== =====
Effect of dilutive
securities-
Incremental shares
from assumed
exercise of
options 17,614 4,551
Incremental shares
from assumed
conversion of
preferred stock - 109,463
--------- ---------
Diluted Earnings Per Share:
Net earnings available
to common
stockholders
and assumed
conversions $ 312 1,523,778 $ .20 $ 148 1,336,223 $ .11
========== ========= ===== ===== ========= =====
</TABLE>
9
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (unaudited), Continued
3. Earnings Per Share, Continued
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------------------------------------------------------------
1998 1997
------------------------------------------- ---------------------------------------
Earnings Shares Per Share Earnings Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
---------- ------------ --------- --------- ----------- ---------
<S> <C> <C>
Basic Earnings Per Share:
Net earnings $ 613 417
Less preferred
stock dividends (27) (37)
----- -----
Net earnings available
to common
stockholders 586 1,378,057 $ .43 380 1,220,630 $ .31
===== =====
Effect of dilutive
securities-
Incremental shares
from assumed
exercise of
options 17,742 4,454
Incremental shares
from assumed
conversion of
preferred stock - 109,463
--------- ---------
Diluted Earnings Per Share:
Net earnings available
to common
stockholders
and assumed
conversions $ 586 1,395,799 $ .42 $ 380 1,334,547 $ .28
===== ========= ===== ===== ========= =====
</TABLE>
4. Regulatory Capital. The Bank is required to maintain certain minimum
regulatory capital requirements. The following is a summary at June 30,
1998 of the regulatory capital requirements and the Bank's actual
capital on a percentage basis:
<TABLE>
<CAPTION>
Regulatory
Actual Requirement
------ -----------
<S> <C> <C>
Total capital to risk-weighted assets 20.96% 8.00%
Tier I capital to risk-weighted assets 19.99% 4.00%
Tier I capital to total assets - leverage ratio 11.17% 4.00%
</TABLE>
10
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (unaudited), Continued
5. Impact of New Accounting Standard. On January 1, 1998, the Company
adopted Statement of Financial Accounting Standards 130 - Reporting
Comprehensive Income ("SFAS No. 130") which establishes standards for
reporting comprehensive income. The Standard defines comprehensive
income as the change in equity of an enterprise except those resulting
from stockholder transactions. All components of comprehensive income
are required to be reported in a new financial statement that is
displayed with equal prominence as existing financial statements. The
adoption of SFAS No. 130 had no significant effect on the Company's
financial position at June 30, 1998 or results of operation for the
three and six months then ended.
6. Future Accounting Requirements. Statement of Financial Accounting
Standards No. 133 - Accounting for Derivative Instruments and Hedging
Activities establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities. It requires
that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair
value. The Company will be required to adopt this Statement January 1,
2000. Management does not anticipate that this Statement will have a
material impact on the Company.
11
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis or Plan of Operation
Comparison of June 30, 1998 and December 31, 1997
Liquidity and Capital Resources
The Company's primary source of cash during the six months ended June 30,
1998 was from proceeds from the issuance of common stock totaling $12.2
million, net deposit inflows of $13.3 million and proceeds from the sale of
securities available-for-sale of $9.5 million. Cash was used primarily for
net loan originations of $11.2 million and the purchase of securities
totaling $31.2 million. At June 30, 1998, the Company had outstanding
commitments to originate loans of $10.8 million. It is expected that these
requirements will be funded from the sources described above. At June 30,
1998, the Bank exceeded its regulatory liquidity requirements.
The following table shows selected ratios for the periods ended or at the
dates indicated:
<TABLE>
<CAPTION>
Six Months Six Months
Ended Year Ended Ended
June 30, December 31, June 30,
1998 1997 1997
------------- -------------- --------------
<S> <C> <C> <C> <C>
Average equity as a percentage
of average assets 9.44% 8.58% 8.42%
Equity to total assets at end of period 14.61% 9.36% 8.64%
Return on average assets (1) .76% .60% .55%
Return on average equity (1) 8.09% 7.04% 6.55%
Noninterest expense to average assets (1) 3.39% 3.62% 3.60%
Nonperforming loans and foreclosed real estate to
total assets at end of period 1.32% 1.76% .89%
</TABLE>
-----------------------------
(1) Annualized for the six months ended June 30, 1998 and 1997.
12
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
The following table sets forth, for the periods indicated, information regarding
(i) the total dollar amount of interest and dividend income of the Company from
interest-earning assets and the resultant average yields; (ii) the total dollar
amount of interest expense on interest-bearing liabilities and the resultant
average cost; (iii) net interest/dividend income; (iv) interest-rate spread; (v)
net interest margin; and (vi) ratio of average interest-earning asset to average
interest-bearing liabilities.
<TABLE>
<CAPTION>
Three Months Ended June 30,
------------------------------------------------------------------
1998 1997
--------------------------------- ------------------------------
Interest Average Interest Average
Average and Yield/ Average and Yield/
Balance Dividends Rate Balance Dividends Rate
------- --------- ------- ------- --------- -------
($ in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans $ 113,531 2,651 9.34% $ 99,319 2,267 9.13%
Securities 40,803 585 5.74 42,829 678 6.33
Other interest-earning assets (1) 1,762 25 5.68 1,512 19 5.03
-------- ------ -------- ------
Total interest-earning assets 156,096 3,261 8.36 143,660 2,964 8.25
------ ------
Noninterest-earning assets (2) 11,295 7,752
--------- ---------
Total assets $ 167,391 $ 151,412
========= =========
Interest-bearing liabilities:
Savings and NOW deposits 10,818 38 1.41 10,659 53 1.99
Money-market deposits 39,495 456 4.62 36,478 422 4.63
Time deposits 66,947 954 5.70 56,849 792 5.57
Other borrowings 12,499 169 5.41 23,363 337 5.77
------- ------ ------- ------
Total interest-bearing liabilities 129,759 1,617 4.99 127,349 1,604 5.04
------ ------
Demand deposits 15,639 9,610
Noninterest-bearing liabilities 5,657 1,639
Stockholders' equity 16,336 12,814
--------- ---------
Total liabilities and
stockholders' equity $ 167,391 $ 151,412
========= =========
Net interest income $ 1,644 $ 1,360
======= =======
Interest-rate spread (3) 3.37% 3.21%
==== ====
Net interest margin (4) 4.21% 3.79%
==== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities 1.20 1.13
==== ====
</TABLE>
- -------------------------
(1) Includes interest-bearing deposits, federal funds sold and securities
purchased under agreements to resell.
(2) Includes nonaccrual loans.
(3) Interest-rate spread represents the difference between the weighted-
average yield on interest-earning assets and the weighted-average
cost of interest-bearing liabilities.
(4) Net interest margin is net interest income divided by average
interest-earning assets.
13
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
The following table sets forth, for the periods indicated, information regarding
(i) the total dollar amount of interest and dividend income of the Company from
interest-earning assets and the resultant average yields; (ii) the total dollar
amount of interest expense on interest-bearing liabilities and the resultant
average cost; (iii) net interest/dividend income; (iv) interest-rate spread; (v)
net interest margin; and (vi) ratio of average interest-earning asset to average
interest-bearing liabilities.
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------------------------------------------------
1998 1997
--------------------------------- ---------------------------------
Interest Average Interest Average
Average and Yield/ Average and Yield/
Balance Dividends Rate Balance Dividends Rate
------- --------- ------- ------- --------- -------
($ in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans $ 112,185 5,149 9.18% $ 97,331 4,514 9.28%
Securities 37,822 1,102 5.83 43,185 1,362 6.31
Other interest-earning assets (1) 1,151 32 5.56 2,384 53 4.45
--------- ------- --------- ------
Total interest-earning assets 151,158 6,283 8.31 142,900 5,929 8.30
------- ------
Noninterest-earning assets (2) 9,346 8,310
--------- ---------
Total assets $ 160,504 $ 151,210
========= =========
Interest-bearing liabilities:
Savings and NOW deposits 10,833 85 1.57 10,554 103 1.95
Money-market deposits 38,684 892 4.61 36,380 836 4.60
Time deposits 66,914 1,911 5.71 57,606 1,605 5.57
Other borrowings 9,986 270 5.41 22,567 639 5.66
--------- ------ --------- ------
Total interest-bearing liabilities 126,417 3,158 5.00 127,107 3,183 5.01
------ ------
Demand deposits 14,881 9,403
Noninterest-bearing liabilities 4,050 1,973
Stockholders' equity 15,156 12,727
--------- ---------
Total liabilities and
stockholders' equity $ 160,504 $ 151,210
========= =========
Net interest income $ 3,125 $ 2,746
======= =======
Interest-rate spread (3) 3.31% 3.29%
==== ====
Net interest margin (4) 4.14% 3.84%
==== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities 1.20 1.12
==== ====
</TABLE>
(1) Includes interest-bearing deposits, federal funds sold and securities
purchased under agreements to resell.
(2) Includes nonaccrual loans.
(3) Interest-rate spread represents the difference between the weighted-
average yield on interest-earning assets and the weighted-average
cost of interest-bearing liabilities.
(4) Net interest margin is net interest income divided by average
interest-earning assets.
14
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Comparison of the Three Months Ended June 30, 1998 and 1997
Results of Operations:
General. Net earnings for the three months ended June 30, 1998 were $312,000
or $.21 basic earnings per share ($.20 diluted earnings per share)
compared to net earnings of $185,000 or $.12 basic earnings per share
($.11 diluted earnings per share) for the three months ended June 30,
1997. This increase in the Company's net earnings was primarily due to an
increase in net interest income, partially offset by an increase in the
provision for loan losses.
Interest Income and Expense. Interest income increased by $297,000 from $3.0
million for the three months ended June 30, 1997 to $3.3 million for the
three months ended June 30, 1998. Interest income on loans increased
$384,000 primarily due to an increase in the average loan portfolio
balance from $99.3 million for the three months ended June 30, 1997 to
$113.5 million for the comparable period in 1998. Interest on securities
decreased $93,000 primarily due to a decrease in the average securities
portfolio balance.
Interest expense on deposit accounts increased to $1.4 million for the
three months ended June 30, 1998 from $1.3 million for the three months
ended June 30, 1997. Interest expense on deposits increased due to an
increase in the average balance and in the weighted-average rate from the
three months ended June 30, 1997 to the comparable period in 1998.
Interest expense on other borrowings decreased $168,000 to $169,000 for
the three months ended June 30, 1998 from $337,000 for the three months
ended June 30, 1997. Interest expense on other borrowings decreased due to
a decrease in the average balance and in the weighted-average rate paid
for the three months ended June 30, 1998 compared to the same period in
1997.
Provision for Loan Losses. The provision for loan losses is charged to
earnings to bring the total allowance to a level deemed appropriate by
management and is based upon historical experience, the volume and type of
lending conducted by the Company, industry standards, the amount of
nonperforming loans, general economic conditions, particularly as they
relate to the Company's market areas, and other factors related to the
collectibility of the Company's loan portfolio. The provision was $100,000
for the three months ended June 30, 1998 compared to none for the
comparable period in 1997. Management believes the balance in the
allowance for loan losses of $983,000 at June 30, 1998 is adequate.
Noninterest Income. Noninterest income increased $27,000 primarily due to an
increase of $81,000 in service charges on deposit accounts partially
offset by a decrease of $61,000 in net gains from sale of loans for the
three months ended June 30, 1998 when compared to the same period in 1997.
Noninterest Expenses. Noninterest expenses increased $17,000 for the three
months ended June 30, 1998 compared to the same period in 1997 primarily
due to an increase in employee compensation and benefits of $62,000
partially offset by decreases in data processing and occupancy expense.
Provision for Income Taxes. The income tax provision for the three months
ended June 30, 1998 was $180,000 (an effective rate of 36.6%) compared to
$113,000 (an effective rate of 37.9%) for the comparable 1997 period.
15
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Comparison of the Six Months Ended June 30, 1998 and 1997
Results of Operations:
General. Net earnings for the six months ended June 30, 1998 were $613,000 or
$.43 basic earnings per share ($ .42 diluted earnings per share) compared
to net earnings of $417,000 or $.31 basic earnings per share ($.28 diluted
earnings per share) for the six months ended June 30, 1997. This increase
in the Company's net earnings was primarily due to an increase in net
interest income, partially offset by an increase in the provision for loan
losses.
Interest Income and Expense. Interest income increased by $354,000 from $5.9
million for the six months ended June 30, 1997 to $6.3 million for the six
months ended June 30, 1998. Interest income on loans increased $635,000
primarily due to an increase in the average loan portfolio balance of
$14.9 from the six months ended June 30, 1997 to the comparable period in
1998. Interest on securities decreased $260,000 primarily due to a
decrease in the average securities portfolio balance of $5.4 million
during the six months ended June 30, 1998 when compared to the comparable
period in 1997.
Interest expense on deposit accounts increased $344,000 from $2.5 million
for the six months ended June 30, 1997 to $2.9 million for the six months
ended June 30, 1998. Interest expense on deposits increased due to an
increase in the average balance and in the weighted-average rate from 1997
to 1998. The average balance for the six months ended June 30, 1998 was
$116.4 million compared to $104.5 million during the comparable period in
1997 and the weighted average rate was 4.96% in 1998 compared to 4.87% in
1997.
Interest expense on other borrowings decreased $369,000 to $270,000 for
the six months ended June 30, 1998 from $639,000 for the six months ended
June 30, 1997. Interest expense on other borrowings decreased due to a
decrease in the average balance and weighted-average rate paid for the six
months ended June 30, 1998 compared to the same period in 1997.
Provision for Loan Losses. The provision for loan losses is charged to
earnings to bring the total allowance to a level deemed appropriate by
management and is based upon historical experience, the volume and type of
lending conducted by the Company, industry standards, the amount of
nonperforming loans, general economic conditions, particularly as they
relate to the Company's market areas, and other factors related to the
collectibility of the Company's loan portfolio. The provision increased
from $11,000 for the six months ended June 30, 1997 to $165,000 for the
six months ended June 30, 1998. The increase was deemed appropriate by
management due to the growth in the loan portfolio during the six months
ended June 30, 1998. Management believes the balance in the allowance for
loan losses of $983,000 at June 30, 1998 is adequate.
Noninterest Income. Noninterest income increased $67,000 primarily due to an
increase of $164,000 in service charges on deposit accounts partially
offset by a decrease of $87,000 in net gains from sale of loans during the
six months ended June 30, 1998 when compared to the comparable period in
1997.
Noninterest Expense. Noninterest expense decreased $3,000 for the six months
ended June 30, 1998 compared to the same period in 1997 primarily due to
decreases in data processing of $74,000 and occupancy expense of $45,000
which were attributed to efficiencies realized from operational changes.
These decreases were partially offset by an increase of $64,000 in
salaries and employee benefits.
Provision for Income Taxes. The income tax provision for the six months ended
June 30, 1998 was $351,000 (an effective rate of 36.4%) compared to
$252,000 (an effective rate of 37.7%) for the comparable 1997 period.
16
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders (the "Annual Meeting") of Pointe Financial
Corporation was held on April 27, 1998, to consider the election of two
directors each for a term of three years, amending the Company's Articles of
Incorporation to increase the number of authorized shares of common stock
from $2.5 million to $5.0 million and approve the 1998 Incentive Compensation
and Stock Award Plan.
At the Annual Meeting, 975,194 shares were present in person or by proxy. The
following is a summary and tabulation of the matters that were voted upon at
the Annual Meeting:
Proposal I.
The election of two directors, each for a term of three years:
<TABLE>
<CAPTION>
For Withheld Against
------- -------- -------
<S> <C> <C> <C>
Morris Massry 973,481 600 1,113
======= ====== =====
Parker Thomson 972,907 1,174 1,113
======= ====== =====
</TABLE>
Proposal II:
To increase the number of authorized shares of common stock from 2,500,000 to
5,000,000:
<TABLE>
<CAPTION>
For Withheld Against
------- -------- -------
<S> <C> <C> <C>
973,181 300 1,713
======= === =====
</TABLE>
Proposal III:
To approve the 1998 Incentive Compensation and Stock Award Plan:
<TABLE>
<CAPTION>
For Withheld Against
------- -------- -------
<S> <C> <C> <C>
972,581 900 1,713
======= === =====
</TABLE>
Item 5. Other Events
On June 11, 1998 Pointe Financial Corporation (the "Company") consummated an
initial public offering (the "Offering") of 869,565 shares of common stock, par
value $.01 per share. The shares were sold at an offering price of $15.375 per
share. Keefe, Bruyette & Woods, Inc. and McGinn, Smith & Co. acted as the
representatives of the underwriters of the Offering. As of June 30, 1998, the
Company had total assets of $182.094 million, reflecting the consummation of the
Offering and the receipt by the Company of approximately $12.080 million net
proceeds of the Offering.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-B)
27. Financial Data Schedule (for SEC use only)
(b) No reports on Form 8-K were filed during the period covered by this report.
17
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
SIGNATURES
In accordance with 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.
POINTE FINANCIAL CORPORATION
(Registrant)
Date: August 7, 1998 By: /s/ R. Carl Palmer, Jr.
--------------------- ------------------------------------
R. Carl Palmer, Jr., President and
Chief Executive Officer
Date: August 7, 1998 By: /s/ Bradley R. Meredith
--------------------- ------------------------------------
Bradley R. Meredith, Senior Vice
President and Chief Financial Officer
18
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from
Form 10-QSB for the period ended June 30, 1998 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 2,636
<INT-BEARING-DEPOSITS> 7,478<F1>
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 41,150
<INVESTMENTS-CARRYING> 9,610
<INVESTMENTS-MARKET> 9,509
<LOANS> 117,379
<ALLOWANCE> 983
<TOTAL-ASSETS> 182,094
<DEPOSITS> 138,281
<SHORT-TERM> 11,891
<LIABILITIES-OTHER> 3,562
<LONG-TERM> 0
<COMMON> 22
0
0
<OTHER-SE> 26,588
<TOTAL-LIABILITIES-AND-EQUITY> 182,094
<INTEREST-LOAN> 5,149
<INTEREST-INVEST> 1,102
<INTEREST-OTHER> 32
<INTEREST-TOTAL> 6,283
<INTEREST-DEPOSIT> 2,888
<INTEREST-EXPENSE> 3,158
<INTEREST-INCOME-NET> 3,125
<LOAN-LOSSES> 165
<SECURITIES-GAINS> 2
<EXPENSE-OTHER> 2,717<F2>
<INCOME-PRETAX> 964
<INCOME-PRE-EXTRAORDINARY> 964
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 613
<EPS-PRIMARY> .43
<EPS-DILUTED> .42
<YIELD-ACTUAL> 4.14
<LOANS-NON> 2,285
<LOANS-PAST> 831
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 513
<ALLOWANCE-OPEN> 848
<CHARGE-OFFS> 30
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 983
<ALLOWANCE-DOMESTIC> 0<F3>
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0<F3>
<FN>
(1) Includes short-term investments and interest-bearing deposits with banks.
(2) Other expense includes: salaries and employee benefits of $1,409,
occupancy and equipment of $493, and other expenses which totaled $815.
(3) Items are only disclosed on an annual basis in the Company's Form 10-K,
and are, therefore, not included in this Financial Data Schedule.
</FN>
</TABLE>
