- --------------------------------------------------------------------------------
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 September 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 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, par value $.01 per share 2,266,972 shares
- -------------------------------------- -------------------------------
(class) Outstanding at October 21, 1998
Transitional small business disclosure format (check one):
YES NO X
---- ----
- --------------------------------------------------------------------------------
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
<S> <C>
Part I. Financial Information
Item 1. Financial Statements Page
----
Condensed Consolidated Balance Sheets -
At September 30, 1998 (unaudited) and at December 31, 1997...............................................2
Condensed Consolidated Statements of Earnings -
Three and Nine Months ended September 30, 1998 and 1997 (unaudited)......................................3
Condensed Consolidated Statement of Stockholders' Equity -
Nine Months ended September 30, 1998 (unaudited).........................................................4
Condensed Consolidated Statements of Cash Flows -
Nine Months ended September 30, 1998 and 1997 (unaudited)..............................................5-6
Notes to Condensed Consolidated Financial Statements (unaudited)........................................7-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .............................................................................11-16
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K....................................................................17
SIGNATURES.....................................................................................................17
</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
-------------------------------
September 30, December 31,
-------------- -----------
Assets 1998 1997
---- ----
(Unaudited)
<S> <C> <C>
Cash and due from banks $ 2,756 2,272
Interest bearing deposits with banks 1,367 303
--------- ---------
Total cash and cash equivalents 4,123 2,575
Securities available for sale 50,620 22,745
Securities held to maturity - 7,764
Loans receivable, net of allowance for loan losses of $1,161
in 1998 (unaudited) and $848 in 1997 122,661 105,653
Loans held for sale - 4,443
Accrued interest receivable 1,372 1,027
Premises and equipment, net 1,143 1,225
Restricted securities:
Federal Home Loan Bank stock 1,235 1,271
Federal Reserve Bank stock 479 299
Foreclosed real estate 365 105
Deferred income tax asset 310 224
Other assets 519 509
--------- ---------
Total $ 182,827 147,840
========= =========
Liabilities and Stockholders' Equity
Liabilities:
Demand deposits 15,870 12,136
Savings and NOW deposits 11,750 9,834
Money-market deposits 40,673 38,326
Time deposits 66,010 64,699
--------- ---------
Total deposits 134,303 124,995
Official checks 622 1,320
Other borrowings 3,356 1,791
Advances from Federal Home Loan Bank 15,000 4,400
Accrued interest payable 743 673
Advance payments by borrowers for taxes and insurance 1,274 333
Other liabilities 731 483
--------- ---------
Total liabilities 156,029 133,995
--------- ---------
Stockholders' equity:
Convertible preferred stock - 1
Common stock 23 8
Additional paid-in capital 23,324 10,935
Retained earnings 3,732 3,039
Accumulated other comprehensive income (281) (138)
--------- ---------
Total stockholders' equity 26,798 13,845
--------- ---------
Total $ 182,827 147,840
========= =========
</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 Nine Months Ended
September 30, September 30,
---------------------------- -----------------------
1998 1997 1998 1997
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $ 2,614 2,374 7,763 6,888
Securities available for sale 728 425 1,604 1,517
Securities held to maturity 45 115 271 385
Other interest-earning assets 25 12 57 65
------------- ------------ ------------- ------------
Total interest income 3,412 2,926 9,695 8,855
------------- ------------ ------------- ------------
Interest expense:
Deposits 1,478 1,355 4,366 3,899
Borrowings 211 219 481 858
------------- ------------ ------------- ------------
Total interest expense 1,689 1,574 4,847 4,757
------------- ------------ ------------- ------------
Net interest income 1,723 1,352 4,848 4,098
Provision for loan losses 630 17 795 28
------------- ------------ ------------- ------------
Net interest income after provision for loan losses 1,093 1,335 4,053 4,070
------------- ------------ ------------- ------------
Noninterest income:
Service charges on deposit accounts 151 139 542 366
Loan servicing fees 16 12 45 58
Net gains from sale of loans and loan servicing rights 58 139 158 351
Net realized gains on sale of securities 162 7 164 29
Other 96 55 295 202
------------- ------------ ------------- ------------
Total noninterest income 483 352 1,204 1,006
------------- ------------ ------------- ------------
Noninterest expenses:
Salaries and employee benefits 713 656 2,122 2,001
Occupancy expense 252 264 745 802
Advertising and promotion 64 62 224 177
Professional fees 24 27 73 53
Federal deposit insurance premiums 15 13 43 46
Data processing 81 95 206 294
Other 255 208 708 672
------------- ------------ ------------- ------------
Total noninterest expenses 1,404 1,325 4,121 4,045
------------- ------------ ------------- ------------
Earnings before income taxes 172 362 1,136 1,031
Income taxes 65 133 416 385
------------- ------------ ------------- ------------
Net earnings $ 107 229 720 646
============= ============ ============= ============
Earnings per common share:
Basic $ .05 .17 .41 .48
============= ============ ============= ============
Diluted $ .05 .15 .40 .44
============= ============ ============= ============
Weighted-average common shares outstanding for basic 2,257,631 1,225,368 1,678,214 1,222,209
============= ============ ============= ============
Weighted-average common shares outstanding for diluted 2,298,178 1,349,113 1,712,307 1,343,600
============= ============ ============= ============
Dividends per share $ - - - -
============= ============ ============= ============
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
3
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Stockholders' Equity
Nine Months Ended September 30, 1998
(Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
Accumulated
Other
Convertible Additional Compre- Total
Preferred Common Paid-In Retained hensive Stockholders'
Stock Stock Capital Earnings Income Equity
----- ----- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $ 1 8 10,935 3,039 (138) 13,845
------
Comprehensive income:
Net earnings (unaudited) - - - 720 - 720
Net change in unrealized
loss on securities
available for sale,
net of tax of $86
(unaudited) - - - - (143) (143)
-------
Comprehensive income (unaudited) - - - - - 577
-------
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
(869,565 shares) (unaudited) - 8 12,068 - - 12,076
Proceeds from issuance of common
stock, exercise of stock options
(11,982 shares) (unaudited) - 1 119 - - 120
Issuance of common stock to directors
as compensation (11,045 shares)
(unaudited) - 1 169 - - 170
----- -- ------- -------- ------ -------
Balance at September 30, 1998
(unaudited) $ - 23 23,324 3,732 (281) 26,798
===== == ======= ======== ====== =======
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
4
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 720 646
Adjustments to reconcile net earnings to net cash provided by
(used in) operating activities:
Provision for loan losses 795 28
Depreciation and amortization 245 301
Provision for deferred income taxes - 400
Net amortization of fees, premiums, discounts and other 185 17
Common stock issued as compensation for services 170 -
Gain on sale of securities (164) (29)
Gain on sale of loans and loan servicing rights (158) (351)
Gain on sale of foreclosed real estate (40) (33)
Originations of loans held for sale (549) (8,920)
Proceeds from sale of loans held for sale 5,150 3,013
(Increase) decrease in other assets (10) 2,179
(Increase) decrease in accrued interest receivable (345) 149
(Decrease) increase in official checks (698) 522
Increase (decrease) in accrued interest payable 70 (229)
Increase (decrease) in other liabilities 248 (21)
------- --------
Net cash provided by (used in) operating activities 5,619 (2,328)
------- --------
Cash flows from investing activities:
Purchases of securities available for sale (45,007) (5,230)
Purchases of securities held to maturity (2,100) -
Proceeds from sale of securities 24,847 13,577
Principal repayments on securities available for sale 324 916
Principal repayments on securities held to maturity 259 351
Maturities of securities available for sale 1,450 1,000
Net increase in loans (18,547) (11,114)
Proceeds from sale of foreclosed real estate 390 284
Net (increase) decrease in restricted securities (144) 285
Purchase of premises and equipment, net (163) (270)
------- --------
Net cash used in investing activities (38,691) (201)
------- --------
Cash flows from financing activities:
Net increase in demand, savings, NOW and money-market deposits 7,997 2,207
Net increase in time deposits 1,311 6,848
Net increase in Federal Home Loan Bank advances 10,600 6,376
Net increase (decrease) in other borrowings 1,565 (18,083)
Increase in advance payments by borrowers for taxes and insurance 941 1,321
Net proceeds from issuance of preferred stock 10 239
Net proceeds from issuance of common stock 12,196 42
Cash dividends paid on preferred stock - (59)
------- --------
Net cash provided by (used in) financing activities 34,620 (1,109)
------- --------
(continued)
</TABLE>
5
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows, Continued
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
Net increase (decrease) in cash and cash equivalents 1,548 (3,638)
Cash and cash equivalents at beginning of period 2,575 6,663
------- -------
Cash and cash equivalents at end of period $ 4,123 3,025
======= =======
Supplemental disclosure of cash flow information: Cash paid during the period
for:
Interest $ 4,777 4,986
======= =======
Income taxes $ 130 10
======= =======
Noncash transactions:
Reclassification of loans receivable to foreclosed real estate $ 610 57
======= =======
Reclassification of foreclosed real estate to loans receivable $ - 68
======= =======
Accumulated other comprehensive income, change in unrealized
loss on securities available for sale $ (143) 48
======= =======
Stock dividends paid on preferred stock $ 27 51
======= =======
Transfer of securities from held to maturity category to available
for sale category $ 8,456 -
======= =======
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
6
<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 September 30, 1998, the results of operations for the three- and
nine-month periods ended September 30, 1998 and 1997 and cash flows for
the nine-month periods ended September 30, 1998 and 1997. The results of
operations for the three and nine months ended September 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 Nine Months Ended
September 30, September 30,
--------------------- -------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Balance at beginning of period $ 983 834 848 777
Provision charged to earnings 630 17 795 28
(Charge-offs), net of recoveries (452) (2) (482) 44
-------- ---- ----- ----
Balance at end of period $ 1,161 849 1,161 849
======== ==== ===== ====
</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 Nine Months Ended
September 30, September 30,
-------------------- ------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average investment in impaired loans $ 1,260 104 1,261 105
======= ===== ===== ===
Interest income recognized on impaired
loans $ 19 - 92 -
======= ===== ===== ===
Interest income received on impaired
loans $ 19 - 92 -
======= ===== ===== ===
(continued)
</TABLE>
7
<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 September
30, 1998, average quoted market prices were used. For the three and
nine months ended September 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 September 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 $ 107 229
Less preferred
stock dividends - (22)
---- ---
Net earnings available
to common
stockholders 107 2,257,631 $ .05 207 1,225,368 $ .17
=== ===
Effect of dilutive
securities-
Incremental shares
from assumed
exercise of
options 40,547 7,985
Incremental shares
from assumed
conversion of
preferred stock - 115,760
--------- ---------
Diluted Earnings Per Share:
Net earnings available
to common
stockholders
and assumed
conversions $ 107 2,298,178 $ .05 $ 207 1,349,113 $ .15
=== ========= === === ========= ===
</TABLE>
8
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (unaudited), Continued
3. Earnings Per Share, Continued
<TABLE>
<CAPTION>
Nine Months Ended September 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 $ 720 646
Less preferred
stock dividends (27) (59)
--- ---
Net earnings available
to common
stockholders 693 1,678,214 $ .41 587 1,222,209 $ .48
=== ===
Effect of dilutive
securities-
Incremental shares
from assumed
exercise of
options 34,093 5,631
Incremental shares
from assumed
conversion of
preferred stock - 115,760
--------- ---------
Diluted Earnings Per Share:
Net earnings available
to common
stockholders
and assumed
conversions $ 693 1,712,307 $ .40 $ 587 1,343,600 $ .44
=== ========= === === ========= ===
</TABLE>
4. Regulatory Capital. The Bank is required to maintain certain minimum
regulatory capital requirements. The following is a summary at September
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 19.31% 8.00%
Tier I capital to risk-weighted assets 18.27% 4.00%
Tier I capital to total assets - leverage ratio 11.17% 4.00%
</TABLE>
9
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (unaudited), Continued
5. Other Events. The Bank entered into a loan agreement with First
American Railways, Inc. (the "Borrower") in March 1997, which provided
for a $1 million line of credit for the purpose of funding start-up
expenses of the Florida Fun Train. In late September 1998, having
failed to raise additional capital, the Borrower suspended operations
and in early October filed for liquidation under Chapter 7 of the
Bankruptcy Code. At September 30, 1998 the balance outstanding on this
loan was approximately $880,000. The Bank's management has written down
the balance of this loan by 50% through the Bank's loan loss reserve
and classified the remaining $440,000 balance as doubtful. The Bank
made an additional provision for loan losses of $540,000, largely to
accommodate this charge. The Company's provision for loan losses during
the quarter ended September 30, 1998 was $630,000. The additional loan
loss provision of $540,000 will impact the third quarter basic earnings
by $.15 per share and has resulted in the Company reporting basic
earnings of $.05 per share for the period.
During the quarter ended September 30, 1998, the Bank sold $1.2 million
of securities from the held to maturity category. As required by
Statement of Financial Accounting Standards No. 115- Accounting for
Certain Investments in Debt and Equity Securities, all the remaining
securities classified as held to maturity totaling $8.4 million were
transferred to the available for sale category. Furthermore, the Bank's
management intends to classify all securities purchased from July 1,
1998 to July 1, 2000 as either available for sale or trading.
6. Branch Acquisition. During October 1998, the Company signed a contract
to purchase a branch facility in Boca Raton, Florida. The branch is
expected to be open in the first quarter of 1999.
7. 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 September 30, 1998 or results of operations for
the three and nine months then ended.
8. 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.
10
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Comparison of September 30, 1998 and December 31, 1997
Liquidity and Capital Resources
The Company's primary source of cash during the nine months ended September
30, 1998 was from proceeds from the issuance of common stock totaling $12.2
million, net deposit inflows of $9.3 million, net increase in Federal Home
Loan Bank advances of $10.6 million and proceeds from the sale of securities
of $24.8 million. Cash was used primarily for net loan originations of $18.5
million and the purchase of securities totaling $47.1 million. At September
30, 1998, the Company had outstanding commitments to originate loans of
$14.5 million. It is expected that these requirements will be funded from
the sources described above. At September 30, 1998, the Bank exceeded its
regulatory liquidity requirements.
The following table shows selected ratios for the periods ended or at the
dates indicated:
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Year Ended Ended
September 30, December 31, September 30,
1998 1997 1997
------------- ------------- --------------
<S> <C> <C> <C>
Average equity as a percentage
of average assets 11.34% 8.58% 8.55%
Equity to total assets at end of period 14.66% 9.36% 8.83%
Return on average assets (1) .57% .60% .57%
Return on average equity (1) 5.05% 7.04% 6.70%
Noninterest expense to average assets (1) 3.25% 3.62% 3.59%
Nonperforming loans and foreclosed real estate to
total assets at end of period 1.89% 1.76% .91%
</TABLE>
- --------------------------
(1) Annualized for the nine months ended September 30, 1998 and 1997.
11
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
The following table sets forth, for the periods indicated, information regarding
(i) the total dollar amount of interest and dividend income of the Company from
interest-earning assets and the resultant average yields; (ii) the total dollar
amount of interest expense on interest-bearing liabilities and the resultant
average cost; (iii) net interest/dividend income; (iv) interest-rate spread; (v)
net interest margin; and (vi) ratio of average interest-earning asset to average
interest-bearing liabilities.
<TABLE>
<CAPTION>
Three Months Ended September 30,
---------------------------------------------------------------------
1998 1997
--------------------------------- --------------------------------
Interest Average Interest Average
Average and Yield/ Average and Yield/
Balance Dividends Rate Balance Dividends Rate
------- --------- ---- ------- --------- ----
($ in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans $ 118,368 2,614 8.83% $ 104,813 2,374 9.06%
Securities 53,851 773 5.74 34,521 540 6.26
Other interest-earning assets (1) 1,754 25 5.70 827 12 5.80
--------- ------- ---------- -------
Total interest-earning assets 173,973 3,412 7.85 140,161 2,926 8.35
------- -------
Noninterest-earning assets (2) 8,021 8,289
--------- ----------
Total assets $ 181,994 $ 148,450
========= ==========
Interest-bearing liabilities:
Savings and NOW deposits 11,079 41 1.48 9,303 46 1.98
Money-market deposits 41,303 468 4.53 36,344 424 4.67
Time deposits 66,728 969 5.81 61,419 885 5.76
Borrowings 16,082 211 5.25 15,250 219 5.74
--------- ------- ---------- -------
Total interest-bearing liabilities 135,192 1,689 5.00 122,316 1,574 5.15
------- -------
Demand deposits 16,633 9,982
Noninterest-bearing liabilities 3,465 3,053
Stockholders' equity 26,704 13,099
--------- ----------
Total liabilities and
stockholders' equity $ 181,994 $ 148,450
========= ==========
Net interest income $ 1,723 $ 1,352
======= =======
Interest-rate spread (3) 2.85% 3.20%
==== ====
Net interest margin (4) 3.96% 3.86%
==== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities 1.29 1.15
==== ====
</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.
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>
Nine Months Ended September 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 $ 114,246 7,763 9.06% $ 99,825 6,888 9.20%
Securities 43,165 1,875 5.79 40,297 1,902 6.29
Other interest-earning assets (1) 1,352 57 5.62 1,865 65 4.65
--------- ------ -------- ------
Total interest-earning assets 158,763 9,695 8.14 141,987 8,855 8.32
------ ------
Noninterest-earning assets (2) 8,904 8,303
--------- ---------
Total assets $ 167,667 $ 150,290
========= =========
Interest-bearing liabilities:
Savings and NOW deposits 10,915 126 1.54 10,137 149 1.96
Money-market deposits 39,557 1,360 4.58 36,368 1,260 4.62
Time deposits 66,852 2,880 5.74 58,877 2,490 5.64
Borrowings 12,018 481 5.34 20,128 858 5.68
------- ------ -------- ------
Total interest-bearing liabilities 129,342 4,847 5.00 125,510 4,757 5.05
------ ------
Demand deposits 15,465 9,596
Noninterest-bearing liabilities 3,855 2,333
Stockholders' equity 19,005 12,851
--------- ---------
Total liabilities and
stockholders' equity $ 167,667 $ 150,290
========= =========
Net interest income $ 4,848 $ 4,098
===== =====
Interest-rate spread (3) 3.14% 3.27%
==== ====
Net interest margin (4) 4.07% 3.85%
==== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities 1.23 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
Comparison of the Three Months Ended September 30, 1998 and 1997
Results of Operations:
General. Net earnings for the three months ended September 30, 1998 were
$107,000 or $.05 basic and diluted earnings per share compared to net
earnings of $229,000 or $.17 basic earnings per share ($.15 diluted
earnings per share) for the three months ended September 30, 1997. The
reduction in earnings per share during 1998 is primarily attributable to
the issuance of 869,565 shares of common stock in June. This decrease in
the Company's net earnings was primarily due to an increase in the
provision for loan losses and noninterest expenses, partially offset by an
increase in noninterest income and net interest income.
Interest Income and Expense. Interest income increased by $486,000 from $2.9
million for the three months ended September 30, 1997 to $3.4 million for
the three months ended September 30, 1998. Interest income on loans
increased $240,000 primarily due to an increase in the average loan
portfolio balance from $104.8 million for the three months ended September
30, 1997 to $118.4 million for the comparable period in 1998, partially
offset by a decrease in the average yield from 9.06% in 1997 to 8.83% in
1998. Interest on securities increased $233,000 primarily due to an
increase in the average securities portfolio balance from $34.5 million in
1997 to $53.9 million in 1998 partially offset by a decrease in the
weighted average yield of 52 basis points.
Interest expense on deposits increased to $1.5 million for the three
months ended September 30, 1998 from $1.4 million for the three months
ended September 30, 1997. Interest expense on deposits increased due to an
increase in the average balance from $107.1 million in 1997 to $119.1
million in 1998 partially offset by a slight decrease in the average rate
paid on deposits.
Interest expense on borrowings decreased $8,000 to $211,000 for the three
months ended September 30, 1998 from $219,000 for the three months ended
September 30, 1997. Interest expense on borrowings decreased due to a
decrease in the weighted-average rate paid for the three months ended
September 30, 1998 compared to the same period in 1997, partially offset
by an increase in the average balance of borrowings over the same period.
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 $630,000
for the three months ended September 30, 1998 compared to $17,000 for the
comparable period in 1997. This increase was due to an increase in net
charge-offs from $2,000 in 1997 compared to $452,000 over the same period
in 1998. The increase in net charge-offs in 1998 relate to one loan of
which $440,000 was charged-off. Management believes the balance in the
allowance for loan losses of $1.2 million at September 30, 1998 is
adequate.
Noninterest Income. Noninterest income increased $131,000 primarily due to an
increase of $155,000 in net realized gains on sale of securities partially
offset by a decrease of $81,000 in net gains from sale of loans and loan
servicing rights for the three months ended September 30, 1998 when
compared to the same period in 1997.
Noninterest Expenses. Noninterest expenses increased $79,000 over the three
month period from the previous year, primarily due to an increase in
salary and employee benefits.
Provision for Income Taxes. The income tax provision for the three months
ended September 30, 1998 was $65,000 (an effective rate of 37.8%) compared
to $133,000 (an effective rate of 36.7%) for the comparable 1997 period.
14
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Comparison of the Nine Months Ended September 30, 1998 and 1997
Results of Operations:
General. Net earnings for the nine months ended September 30, 1998 were
$720,000 or $.41 basic earnings per share ($.40 diluted earnings per
share) compared to net earnings of $646,000 or $.48 basic earnings per
share ($.44 diluted earnings per share) for the nine months ended
September 30, 1997. The reduction in earnings per share during 1998 is
primarily attributable to the issuance of 869,565 shares of common stock
in June. This increase in the Company's net earnings was primarily due to
an increase in net interest income and noninterest income, partially
offset by an increase in the provision for loan losses and noninterest
expenses.
Interest Income and Expense. Interest income increased by $840,000 from $8.9
million for the nine months ended September 30, 1997 to $9.7 million for
the nine months ended September 30, 1998. Interest income on loans
increased $875,000 primarily due to an increase in the average loan
portfolio balance of $14.4 million from $99.8 million for the nine months
ended September 30, 1997 to $114.2 million for the comparable period in
1998. Interest on securities decreased $27,000 primarily due to a decrease
in the weighted average rate earned, partially offset by an increase in
the average securities portfolio balance during the nine months ended
September 30, 1998 when compared to the comparable period in 1997.
Interest expense on deposits increased $467,000 from $3.9 million for the
nine months ended September 30, 1997 to $4.4 million for the nine months
ended September 30, 1998. Interest expense on deposits increased due to an
increase in the average balance, from $105.4 million in 1997 to $117.3
million in 1998 and an increase in the weighted average rate paid from
4.93% in 1997 to 4.96% in 1998.
Interest expense on borrowings decreased $377,000 to $481,000 for the nine
months ended September 30, 1998 from $858,000 for the nine months ended
September 30, 1997. Interest expense on borrowings decreased due to a
decrease in the average balance and weighted-average rate paid for the
nine months ended September 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 $28,000 for the nine months ended September 30, 1997 to $795,000 for
the nine months ended September 30, 1998. The increase was due to net
charge-offs of $482,000 in 1998 compared to net recoveries of $44,000 over
the same period in 1997. The increase in net charge-offs in 1998 relate to
one loan of which $440,000 was charged-off. Management believes the
balance in the allowance for loan losses of $1.2 million at September 30,
1998 is adequate.
Noninterest Income. Noninterest income increased $198,000 primarily due to
increases of $176,000 in service charges on deposit accounts and $135,000
on net realized gains on sales of securities partially offset by a
decrease of $193,000 in net gains from sale of loans and loan servicing
rights during the nine months ended September 30, 1998 when compared to
the comparable period in 1997.
Noninterest Expense. Noninterest expense increased $76,000 for the nine
months ended September 30, 1998 compared to the same period in 1997
primarily due to an increase of $121,000 in salaries and employee
benefits. This increase was partially offset by decreases in data
processing of $88,000 and occupancy expense of $57,000 which were
attributed to efficiencies realized from operational changes.
Provision for Income Taxes. The income tax provision for the nine months
ended September 30, 1998 was $416,000 (an effective rate of 36.6%)
compared to $385,000 (an effective rate of 37.3%) for the comparable 1997
period.
15
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Year 2000 Issues
Management of the Company is acutely aware of the Year 2000 problem and has an
ongoing program designed to ensure that its operational and financial systems,
and those of its commercial bank subsidiary, will not be adversely affected by
Year 2000 software failures, due to processing errors arising from calculations
using the Year 2000 date. The Bank's Data Processing Steering Committee has been
assigned the Year 2000 compliance topic. The committee meets monthly to assess
the extent to which the Bank and its outside vendors may be adversely affected
by the Year 2000 problem. The Committee has prepared and is responsible for
monitoring the Vendor Status Report which identifies the vendors and equipment
that have been determined to be Year 2000 sensitive. As of September 30, 1998,
the Bank had received written assurances from all of the materially significant
companies listed on the Vendor Status Report indicating that their systems are
Year 2000 compliant.
The most significant vendor to the Bank, which provides the software support for
the in-house system, Information Technology, Inc., has completed their testing
process. The Bank has and will continue to participate in the testing and
verification of Year 2000 related changes made by that vendor.
Based on current estimates, the Bank does not expect to incur a material amount
of expenses over the next two years on its program to redevelop, replace or
repair its computer applications to make them "Year 2000 compliant." It is
recognized that any Year 2000 compliance failures could result in additional
expense to the Bank.
While management is diligently working to assure Year 2000 compliance,
compliance by the Bank is largely dependent upon compliance by vendors,
primarily in the area of on-line data processing. Management is requiring its
computer system and software vendors to represent that the products are, or will
be, Year 2000 compliant, and has planned a program for testing for compliance.
Although management believes that the Bank's system will be Year 2000 compliant,
a written contingency plan has been developed to address problems that might be
caused from Year 2000 system failures.
16
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
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.
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: October 22, 1998 By: /s/ R. Carl Palmer, Jr.
--------------------- --------------------------------
R. Carl Palmer, Jr., President
and Chief Executive Officer
Date: October 22, 1998 By: /s/ Bradley R. Meredith
--------------------- --------------------------------
Bradley R. Meredith, Senior Vice
President and Chief Financial
Officer
17
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from
Form 10-Q for the period ended September 30, 1998 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,756
<INT-BEARING-DEPOSITS> 1,367<F1>
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 50,620
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 123,822
<ALLOWANCE> 1,161
<TOTAL-ASSETS> 182,827
<DEPOSITS> 134,303
<SHORT-TERM> 18,356
<LIABILITIES-OTHER> 3,370
<LONG-TERM> 0
0
0
<COMMON> 23
<OTHER-SE> 26,775
<TOTAL-LIABILITIES-AND-EQUITY> 182,827
<INTEREST-LOAN> 7,763
<INTEREST-INVEST> 1,875
<INTEREST-OTHER> 57
<INTEREST-TOTAL> 9,695
<INTEREST-DEPOSIT> 4,366
<INTEREST-EXPENSE> 4,847
<INTEREST-INCOME-NET> 4,848
<LOAN-LOSSES> 795
<SECURITIES-GAINS> 164
<EXPENSE-OTHER> 4,121<F2>
<INCOME-PRETAX> 1,136
<INCOME-PRE-EXTRAORDINARY> 1,136
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 720
<EPS-PRIMARY> .41
<EPS-DILUTED> .40
<YIELD-ACTUAL> 4.07
<LOANS-NON> 3,093
<LOANS-PAST> 693
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,226
<ALLOWANCE-OPEN> 848
<CHARGE-OFFS> 483
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 1,161
<ALLOWANCE-DOMESTIC> 0<F3>
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0<F3>
<FN>
<F1> Includes short-term investments and interest-bearing deposits with banks.
<F2> Other expense includes: salaries and employee benefits of $2,122,
occupancy and equipment of $745, and other expenses which totaled $1,254.
<F3> 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>
