================================================================================
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, 1999
- --- 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 2,145,793 shares
- -------------------------------------- ----------------------------
(class) Outstanding at July 26, 1999
Transitional small business disclosure format (check one):
YES NO X
--- ---
================================================================================
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information
Item 1. Financial Statements Page
----
<S> <C>
Condensed Consolidated Balance Sheets -
At June 30, 1999 (unaudited) and At December 31, 1998........................................2
Condensed Consolidated Statements of Earnings -
Three and Six Months ended June 30, 1999 and 1998 (unaudited)................................3
Condensed Consolidated Statement of Stockholders' Equity -
Six Months ended June 30, 1999 (unaudited)...................................................4
Condensed Consolidated Statements of Cash Flows -
Six Months ended June 30, 1999 and 1998 (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
Item 3. Quantitative and Qualitative Disclosures About Market Risk..............................17
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders.....................................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
(In thousands)
<TABLE>
<CAPTION>
At
----------------------------
June 30, December 31,
-------- ------------
Assets 1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Cash and due from banks................................................................. $ 3,864 2,866
Interest-bearing deposits with banks.................................................... 61 605
-------- ---------
Total cash and cash equivalents.................................................. 3,925 3,471
Securities available for sale........................................................... 41,954 51,275
Loans receivable, net of allowance for loan losses of $1,281
in 1999 and $1,078 in 1998........................................................... 149,009 128,005
Loans held for sale..................................................................... 1,679 617
Accrued interest receivable............................................................. 1,346 1,270
Premises and equipment, net............................................................. 1,820 1,760
Restricted securities, at cost:
Federal Home Loan Bank stock......................................................... 1,672 1,235
Federal Reserve Bank stock........................................................... 479 479
Foreclosed real estate.................................................................. 312 353
Deferred income tax asset............................................................... 452 221
Other assets............................................................................ 1,063 589
-------- ---------
Total............................................................................ $ 203,711 189,275
======= =======
Liabilities and Stockholders' Equity
Liabilities:
Demand deposits...................................................................... 19,207 18,316
Savings and NOW deposits............................................................. 12,047 12,940
Money-market deposits................................................................ 40,900 38,721
Time deposits........................................................................ 67,458 71,235
-------- -------
Total deposits................................................................... 139,612 141,212
Advances from Federal Home Loan Bank................................................. 30,095 15,000
Other borrowings..................................................................... 4,156 3,446
Official checks...................................................................... 1,948 1,248
Accrued interest payable............................................................. 591 695
Advance payments by borrowers for taxes and insurance................................ 1,047 411
Other liabilities.................................................................... 475 228
--------- ---------
Total liabilities................................................................ 177,924 162,240
------- -------
Stockholders' equity:
Preferred stock...................................................................... -- --
Common stock......................................................................... 23 23
Additional paid-in capital........................................................... 23,759 23,324
Retained earnings.................................................................... 4,582 4,065
Stock incentive plan................................................................. (65) -
Treasury stock....................................................................... (1,752) -
Accumulated other comprehensive income............................................... (760) (377)
-------- --------
Total stockholders' equity....................................................... 25,787 27,035
------- -------
Total............................................................................ $ 203,711 189,275
======= =======
</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,
------------------ -----------------
1999 1998 1999 1998
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest income:
Loans receivable.......................................... $ 3,044 2,651 5,944 5,149
Securities available for sale............................. 598 475 1,219 876
Securities held to maturity............................... -- 110 -- 226
Other interest-earning assets............................. 13 25 22 32
------------ ----------- ---------- -----------
Total interest income............................... 3,655 3,261 7,185 6,283
---------- ----------- ---------- ----------
Interest expense:
Deposits ................................................. 1,284 1,448 2,587 2,888
Borrowings................................................ 369 169 658 270
------------ ----------- ----------- -----------
Total interest expense.............................. 1,653 1,617 3,245 3,158
----------- ---------- ---------- ----------
Net interest income........................................... 2,002 1,644 3,940 3,125
Provision for loan losses........................... 155 100 310 165
----------- ----------- ----------- -----------
Net interest income after provision for loan losses........... 1,847 1,544 3,630 2,960
----------- ---------- ---------- ----------
Noninterest income:
Service charges on deposit accounts....................... 171 196 318 391
Loan servicing fees....................................... 13 13 28 29
Net gains from sale of loans.............................. 32 31 32 100
Net realized gains on sale of securities.................. 9 -- 38 2
Other ................................................. 104 117 195 199
------------ ----------- ----------- -----------
Total noninterest income............................ 329 357 611 721
------------ ----------- ----------- -----------
Noninterest expenses:
Salaries and employee benefits............................ 795 708 1,603 1,409
Occupancy expense......................................... 273 233 540 493
Advertising and promotion................................. 99 101 176 160
Professional fees......................................... 78 25 124 49
Federal deposit insurance premiums........................ 16 14 31 28
Data processing........................................... 81 55 161 125
Other ................................................. 309 273 601 453
------------ ------------ ----------- -----------
Total noninterest expenses.......................... 1,651 1,409 3,236 2,717
----------- ----------- ---------- ----------
Earnings before income taxes........................ 525 492 1,005 964
Income taxes ................................................. 194 180 372 351
----------- ----------- ----------- -----------
Net earnings........................................ $ 331 312 633 613
=========== =========== =========== ===========
Earnings per share:
Basic ................................................. $ .15 .21 .28 .43
=========== ============ ============ ===========
Diluted ................................................. $ .15 .20 .28 .42
=========== ============ ============ ===========
Weighted-average shares outstanding for basic................. 2,285,527 1,506,164 2,285,063 1,378,057
=========== ============ ============ ===========
Weighted-average shares outstanding for diluted............... 2,295,433 1,523,778 2,294,920 1,395,799
=========== ============ ============ ===========
Dividends per share........................................... $ .05 - .05 -
=========== =========== ============ ===========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
3
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Stockholders' Equity
Six Months Ended June 30, 1999
(Dollars in thousands)
<TABLE>
<CAPTION>
Accumulated
Other
Additional Stock Compre- Total
Preferred Common Paid-In Incentive Treasury Retained hensive Stockholders'
Stock Stock Capital Plan Stock Earnings Income Equity
----- ----- ------- ---- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 .............. $ -- 23 23,324 -- -- 4,065 (377) 27,035
------ ------- ------
Comprehensive income:
Net earnings (unaudited) ............. -- -- -- -- -- 633 -- 633
Net change in unrealized
loss on securities
available for sale,
net of tax of $232
(unaudited) ...................... -- -- -- -- -- -- (383) (383)
------ ------ -------
Comprehensive income
(unaudited) .......................... -- -- -- -- -- 633 (383) 250
------ ------ -------
Proceeds from issuance of
common stock, exercise
of stock options (25,458
shares) (unaudited) .................. -- -- 258 -- -- -- -- 258
------
Dividends paid on common
stock (unaudited) .................... -- -- -- -- -- (116) -- (116)
Issuance of common stock
to directors as compensation,
(11,228 shares) (unaudited) .......... -- -- 109 -- -- -- -- 109
Shares issued in stock incentive plan
(6,935 shares) (unaudited) ........... -- -- 68 (68) -- -- -- --
Shares committed to participants
in incentive plans (unaudited) ....... -- -- -- 3 -- -- -- 3
Purchase of treasury stock (164,800
shares) (unaudited) .................. -- -- -- -- (1,752) -- -- (1,752)
----- ------- ------- ------- ------ ------ ------ -------
Balance at June 30, 1999
(unaudited) ........................... $ -- 23 23,759 (65) (1,752) 4,582 (760) 25,787
===== ======= ======= ======= ====== ====== ====== =======
</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>
Six Months Ended
June 30,
-----------------------
1999 1998
---- ----
Cash flows from operating activities: (Unaudited)
<S> <C> <C>
Net earnings .................................................................... $ 633 613
Adjustments to reconcile net earnings to net cash provided by operating activities:
Provision for loan losses....................................................... 310 165
Depreciation and amortization................................................... 212 164
Provision for deferred income taxes............................................. -- 30
Net amortization of fees, premiums, discounts and other......................... 61 63
Shares committed to incentive plan participants................................. 3 --
Common stock issued as compensation for services................................ 109 --
Gain on sale of securities...................................................... (38) (2)
Gain on sale of loans........................................................... (32) (100)
Gain on sale of foreclosed real estate.......................................... (9) (24)
Net originations of loans held for sale......................................... (1,479) --
Proceeds from sale of loans held for sale....................................... 449 4,543
(Increase) decrease in other assets............................................. (474) 47
Increase in accrued interest receivable......................................... (76) (294)
Increase in official checks..................................................... 700 1,711
(Decrease) increase in accrued interest payable................................. (104) 47
Increase in other liabilities................................................... 247 48
-------- --------
Net cash provided by operating activities................................... 512 7,011
-------- ------
Cash flows from investing activities:
Purchase of securities available for sale........................................... (12,788) (29,073)
Purchase of securities held to maturity............................................. -- (2,100)
Proceeds from sale of securities available for sale................................. 12,079 9,549
Principal repayments on securities available for sale............................... 1,636 46
Principal repayments on securities held to maturity................................. -- 259
Maturities and calls of securities available for sale............................... 7,705 1,000
Net increase in loans............................................................... (21,443) (11,204)
Net proceeds from sale of foreclosed real estate.................................... 231 270
Net increase in restricted securities............................................... (437) 36
Purchase of premises and equipment, net............................................. (272) (122)
------- -------
Net cash used in investing activities....................................... (13,289) (31,339)
------ ------
Cash flows from financing activities:
Net increase in demand, savings, NOW and money-market deposits...................... 2,177 11,141
Net (decrease) increase in time deposits............................................ (3,777) 2,145
Net increase in advances from Federal Home Loan Bank................................ 15,095 3,600
Net increase in other borrowings.................................................... 710 2,100
Increase in advance payments by borrowers for taxes and insurance................... 636 697
Net proceeds from issuance of preferred stock....................................... -- 10
Proceeds from exercise of stock options............................................. 258 12,174
Dividends paid on common stock...................................................... (116) --
Purchase of treasury stock.......................................................... (1,752) --
------ ---------
Net cash provided by financing activities................................... 13,231 31,867
------ ---------
(continued)
5
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows, Continued
(In thousands)
Six Months Ended
June 30,
-----------------------
1999 1998
---- ----
(Unaudited)
Net increase in cash and cash equivalents............................................... $ 454 7,539
Cash and cash equivalents at beginning of period........................................ 3,471 2,575
------- -------
Cash and cash equivalents at end of period.............................................. $ 3,925 10,114
======= ======
Supplemental disclosure of cash flow information: Cash paid during the period
for:
Interest............................................................................ $ 3,349 3,111
======= ======
Income taxes........................................................................ $ 256 420
======= ======
Noncash transactions:
Reclassification of loans receivable to foreclosed real estate...................... $ 181 251
======= =======
Accumulated other comprehensive income, net change in unrealized
loss on securities available for sale, net of tax............................... $ (383) (52)
======= =======
Stock dividends paid on preferred stock............................................. $ -- 27
======= =======
</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 June 30, 1999, the results of operations for the three- and six-month
periods ended June 30, 1999 and 1998 and cash flows for the six-month
periods ended June 30, 1999 and 1998. The results of operations for the
three and six months ended June 30, 1999 are not necessarily indicative
of the results to be expected for the year ending December 31, 1999.
Pointe Financial Corporation (the "Holding Company") was incorporated
under the laws of the State of Florida in September 1993. The Holding
Company's principal business is conducted through Pointe Bank (the
"Bank"), a state-chartered commercial bank. The Holding Company and the
Bank are collectively referred to as the "Company." The Bank provides a
wide range of community banking services to small and middle-market
business and individuals through its five banking offices located in
Broward, Miami-Dade and Palm Beach counties, Florida.
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,
---------------------- --------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Balance at beginning of period........................ $ 1,228 913 1,078 848
Provision charged to earnings......................... 155 100 310 165
(Charge-offs), net of recoveries...................... (102) (30) (107) (30)
------ --- ----- ---
Balance at end of period.............................. $ 1,281 983 1,281 983
===== === ===== ===
</TABLE>
The following summarizes the amounts of impaired loans, a majority of
which are collateral dependent (in thousands):
<TABLE>
<CAPTION>
At June 30, At December 31,
----------- ---------------
1999 1998
---- ----
<S> <C> <C>
Loans identified as impaired:
Gross loans with related allowance for losses recorded.................. $ 440 2,473
Less: Allowances on these loans......................................... (220) (407)
--- -----
Net investment in impaired loans........................................ $ 220 2,066
=== =====
(continued)
</TABLE>
7
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
2. Loan Impairment and Loan Losses, Continued. 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,
-------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average net investment in impaired loans.......... $ 220 1,262 220 1,264
===== ===== ===== =====
Interest income recognized on impaired
loans......................................... $ -- 55 -- 73
===== ===== ===== =====
Interest income received on impaired
loans......................................... $ -- 55 -- 73
===== ===== ===== =====
</TABLE>
See Note 5 for a discussion relating to the decrease in impaired loans
at June 30, 1999.
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 income per share, because
there was no active trading market until June 12, 1998, for the Company's
common stock, the average book value per share was used through that date
for the three and six months ended June 30, 1998. For the three and six
months ended June 30, 1999, average quoted market prices were used. For the
three and six months ended June 30, 1999 and 1998 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,
------------------------------------------------------------------------------------
1999 1998
--------------------------------------- --------------------------------------
Earnings Shares Per Share Earnings Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------ ----------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Basic Earnings Per Share:
Net earnings available
to common stockholders.... $ 331 2,285,527 $ .15 $ 312 1,506,164 $ .21
=== ===
Effect of dilutive securities-
Incremental shares from
assumed exercise of
options utilizing the
treasury stock method..... 9,906 17,614
--------- ---------
Diluted Earnings Per Share:
Net earnings available
to common stockholders
and assumed conversions... $ 331 2,295,433 $ .15 $ 312 1,523,778 $ .20
=== ========= === === ========= ===
</TABLE>
8
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
3. Earnings Per Share, Continued
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------------------------------------------------------------
1999 1998
---------------------------------------- ---------------------------------------
Earnings Shares Per Share Earnings Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------ ----------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Basic Earnings Per Share:
Net earnings................ $ 633 $ 613
Less preferred
stock dividends........... - (27)
---
Net earnings available
to common stockholders.... 633 2,285,063 $ .28 586 1,378,057 $ .43
=== ===
Effect of dilutive securities-
Incremental shares from
assumed exercise of
options utilizing the
treasury stock method..... 9,857 17,742
---------- -----------
Diluted Earnings Per Share:
Net earnings available to
common stockholders
and assumed conversions... $ 633 2,294,920 $ .28 $ 586 1,395,799 $ .42
=== ========= ==== === ========= ===
</TABLE>
4. Regulatory Capital. The Bank is required to maintain certain minimum
regulatory capital requirements. The following is a summary at June 30,
1999 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........................................... 17.20% 8.00%
Tier I capital to risk-weighted assets.......................................... 16.23% 4.00%
Tier I capital to total assets - leverage ratio................................. 10.98% 4.00%
</TABLE>
9
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
5. Other Events. In March of 1999 the Company entered into an agreement
whereby the mortgage and note supporting a significant nonaccrual
residential real estate loan were assigned without recourse. Net
proceeds from the transaction reduced the Company's nonperforming assets
by $1.2 million thus reducing the ratio of nonperforming loans and
foreclosed real estate to total assets from 1.60% at December 31, 1998
to .84% at June 30, 1999.
6. New Branches. During March 1999, the Company signed a contract to
purchase land for a branch site in Coral Springs, Florida. Construction
is expected to begin during the third quarter of 1999 and the branch is
expected to be open late in the fourth quarter of 1999. Also, during
April 1999, the Company entered into a five-year lease for a branch
facility located in Ocean Ridge, Florida which commenced operation on
July 1, 1999.
7. Stock Repurchase Program. In May 1999, the Company's Board of Directors
approved a Stock Repurchase Program ("SRP"). The SRP has been allocated
$2.0 million and the Company has repurchased 164,800 shares in treasury
stock. The Company's net cost was approximately $1.8 million during the
three months ended June 30, 1999. On June 25, 1999, the Company filed
the appropriate notification with NASDAQ reducing the number of
outstanding shares of common stock by more than five percent.
8. Dividend Policy. In May 1999, the Company's Board of Directors approved
a dividend policy. On May 4, 1999, the Company declared a $.05 per share
dividend to common stockholders as of May 15, 1999 which was paid on
June 1, 1999 based on earnings of the Company during the three months
ended March 31, 1999.
9. Incentive Stock Plan. During April 1999, the Company awarded 6,935
shares of restricted common stock to employees under the 1998 Incentive
Compensation and Stock Award Plan. Four years following the date of
grant, these restricted stock awards become entirely vested. The Company
is amortizing these restricted stock awards into salaries and employee
benefits using the straight-line method of amortization over the
four-year period. From the date awarded, the employees are entitled to
dividends paid on common stock and may vote these shares.
10
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Comparison of June 30, 1999 and December 31, 1998
Liquidity and Capital Resources
The Company's primary source of cash during the six months ended June 30, 1999
was from an increase in advances from the Federal Home Loan Bank of $15.1
million and proceeds from the sale of securities of $12.1 million. Cash was used
primarily for net loan originations of $21.4 million and the purchase of
securities totaling $13.2 million. At June 30, 1999, the Company had outstanding
commitments to originate loans of $16.5 million. Scheduled maturities of
certificates of deposit due to mature in one year or less totaled $33.2 million.
Management believes the Company has adequate resources to fund all of its
commitments using available resources and that, if desired, certificate of
deposit rates can be adjusted to attract deposits in a changing rate
environment. At June 30, 1999, 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,
1999 1998 1998
----------- ------------ -----------
<S> <C> <C> <C>
Average equity as a percentage
of average assets.................................. 13.88% 12.19% 9.44%
Equity to total assets at end of period............... 12.66% 14.28% 14.61%
Return on average assets (1).......................... .65% .61% .76%
Return on average equity (1).......................... 4.67% 5.02% 8.09%
Noninterest expense to average assets (1)............. 3.31% 3.27% 3.39%
Nonperforming loans and foreclosed real
estate to total assets at end of period............ .84% 1.60% 1.32%
</TABLE>
----------------------------------------------------------------
(1) Annualized for the six months ended June 30, 1999 and 1998.
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 June 30,
------------------------------------------------------------------
1999 1998
------------------------------- ------------------------------
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 ................................... $ 143,529 3,044 8.48% $ 113,531 2,651 9.34%
Securities................................. 44,674 598 5.35 40,803 585 5.74
Other interest-earning assets (1).......... 1,101 13 4.72 1,762 25 5.68
------- ------ -------- ------
Total interest-earning assets.......... 189,304 3,655 7.72 156,096 3,261 8.36
----- -----
Noninterest-earning assets (2)............. 9,444 11,295
-------- --------
Total assets........................... $ 198,748 $ 167,391
======= =======
Interest-bearing liabilities:
Savings and NOW deposits................... 13,123 49 1.49 10,818 38 1.41
Money-market deposits...................... 39,674 371 3.74 39,495 456 4.62
Time deposits.............................. 66,410 864 5.20 66,947 954 5.70
Other borrowings (3)....................... 29,917 369 4.93 12,499 169 5.41
-------- ------ ------- ------
Total interest-bearing liabilities..... 149,124 1,653 4.43 129,759 1,617 4.99
----- -----
Demand deposits............................ 19,183 15,639
Noninterest-bearing liabilities............ 3,287 5,657
Stockholders' equity....................... 27,154 16,336
-------- -------
Total liabilities and
stockholders' equity............... $ 198,748 $ 167,391
======= =======
Net interest income........................... $ 2,002 $ 1,644
===== =====
Interest-rate spread (4)...................... 3.29% 3.37%
==== ====
Net interest margin (5)....................... 4.23% 4.21%
==== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities....... 1.27 1.20
==== ====
</TABLE>
- -------------------------------
(1) Includes interest-bearing deposits and federal funds sold.
(2) Includes nonaccrual loans.
(3) Includes advances from Federal Home Loan Bank, investment repurchase
agreements and federal funds purchased.
(4) Interest-rate spread represents the difference between the
weighted-average yield on interest-earning assets and the
weighted-average cost of interest-bearing liabilities.
(5) 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>
Six Months Ended June 30,
-----------------------------------------------------------------------
1999 1998
------------------------------------ -----------------------------
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 ................................... $ 138,495 5,944 8.58% $ 112,185 5,149 9.18%
Securities................................. 46,254 1,219 5.27 37,822 1,102 5.83
Other interest-earning assets (1).......... 934 22 4.71 1,151 32 5.56
--------- ------- -------- -------
Total interest-earning assets.......... 185,683 7,185 7.74 151,158 6,283 8.31
----- -----
Noninterest-earning assets (2)............. 9,720 9,346
-------- --------
Total assets........................... $ 195,403 $ 160,504
======= =======
Interest-bearing liabilities:
Savings and NOW deposits................... 12,883 96 1.49 10,833 85 1.57
Money-market deposits...................... 39,608 734 3.71 38,684 892 4.61
Time deposits.............................. 67,133 1,757 5.23 66,914 1,911 5.71
Other borrowings (3)....................... 26,486 658 4.97 9,986 270 5.41
-------- ------ -------- ------
Total interest-bearing liabilities..... 146,110 3,245 4.44 126,417 3,158 5.00
----- -----
Demand deposits............................ 19,122 14,881
Noninterest-bearing liabilities............ 3,047 4,050
Stockholders' equity....................... 27,124 15,156
------- -------
Total liabilities and
stockholders' equity............... $ 195,403 $ 160,504
======= =======
Net interest income........................... $ 3,940 $ 3,125
===== =====
Interest-rate spread (4)...................... 3.30% 3.31%
==== ====
Net interest margin (5)....................... 4.24% 4.14%
==== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities....... 1.27 1.20
==== ====
</TABLE>
- --------------------------------
(1) Includes interest-bearing deposits and federal funds sold.
(2) Includes nonaccrual loans.
(3) Includes advances from Federal Home Loan Bank, investment repurchase
agreements and federal funds purchased.
(4) Interest-rate spread represents the difference between the
weighted-average yield on interest-earning assets and the
weighted-average cost of interest-bearing liabilities.
(5) 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 June 30, 1999 and 1998
Results of Operations
General. Net earnings for the three months ended June 30, 1999 were $331,000
or $.15 basic and diluted earnings per share compared to net earnings of
$312,000 or $.21 basic earnings per share ($.20 diluted earnings per
share) for the three months ended June 30, 1998. The increase in the
Company's net earnings was primarily due to an increase in net interest
income, partially offset by increases in noninterest expenses and the
provision for loan losses.
Interest Income and Expense. Interest income increased by $394,000 or 12.1%
from $3.3 million for the three months ended June 30, 1998 to $3.7 million
for the three months ended June 30, 1999. Interest income on loans
increased $393,000 or 14.8% primarily due to an increase of 26.4% in the
average loan portfolio balance from $113.5 million for the three months
ended June 30, 1998 to $143.5 million for the comparable period in 1999,
partially offset by a decrease in the yield earned from 9.34% during 1998
to 8.48% during the 1999 period.
Interest expense on deposit accounts decreased $164,000 or 11.3% to $1.3
million for the three months ended June 30, 1999 from $1.5 million for the
three months ended June 30, 1998. Interest expense on deposits decreased
due to a decrease in the weighted-average rate paid from 4.94% for the
three months ended June 30, 1998 to 4.31% for the comparable period in
1999. The average balance for the three months ended June 30, 1999 was
$119.2 million compared to $117.3 million during the same period in 1998.
Interest expense on other borrowings increased $200,000 to $369,000 for
the three months ended June 30, 1999 from $169,000 for the three months
ended June 30, 1998. Interest expense on other borrowings increased due to
an increase of $17.4 million in the average balance, partially offset by a
decrease in the weighted-average rate paid for the three months ended June
30, 1999 compared to the same period in 1998.
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 $155,000
for the three months ended June 30, 1999 compared to $100,000 for the
comparable period in 1998. The increase was deemed appropriate by
management due to the growth of the loan portfolio during the three months
ended June 30, 1999. Management believes the balance in the allowance for
loan losses of $1.3 million at June 30, 1999 is adequate.
Noninterest Income. Noninterest income decreased $28,000 primarily due to
decreases of $25,000 in service charges on deposit accounts and $13,000 in
other noninterest income partially offset by $9,000 in net gains on the
sale of securities available for sale for the three months ended June 30,
1999 when compared to the same period in 1998.
Noninterest Expenses. Noninterest expenses increased $242,000 for the three
months ended June 30, 1999 compared to the same period in 1998 primarily
due to increases in salaries and employee benefits of $87,000, occupancy
expense of $40,000 and professional fees of $53,000 relating to the
overall growth of the Company.
Provision for Income Taxes. The income tax provision for the three months
ended June 30, 1999 was $194,000 (an effective rate of 37.0%) compared to
$180,000 (an effective rate of 36.6%) for the comparable 1998 period.
14
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Comparison of the Six Months Ended June 30, 1999 and 1998
Results of Operations
General. Net earnings for the six months ended June 30, 1999 were $633,000 or
$.28 basic and diluted earnings per share compared to net earnings of
$613,000 or $.43 basic earnings per share ($.42 diluted earnings per
share) for the six months ended June 30, 1998. The increase in the
Company's net earnings was primarily due to an increase in net interest
income, partially offset by increases in noninterest expenses and the
provision for loan losses.
Interest Income and Expense. Interest income increased by $902,000 or 14.4%
from $6.3 million for the six months ended June 30, 1998 to $7.2 million
for the six months ended June 30, 1999. Interest income on loans increased
$795,000 or 15.4% primarily due to an increase in the average loan
portfolio balance of $26.3 million or 23.5% from $112.2 million for the
six months ended June 30, 1998 to $138.5 million for the comparable period
in 1999, partially offset by a decrease in the yield earned from 9.18%
during 1998 to 8.58% during the 1999 period.
Interest expense on deposit accounts decreased $301,000 or 10.4% from $2.9
million for the six months ended June 30, 1998 to $2.6 million for the six
months ended June 30, 1999. Interest expense on deposits decreased due to
a decrease in the weighted-average rate paid from 4.96% during 1998 to
4.33% during the 1999 period. The average balance for the six months ended
June 30, 1999 was $119.6 million compared to $116.4 million during the
comparable period in 1998.
Interest expense on other borrowings increased $388,000 to $658,000 for
the six months ended June 30, 1999 from $270,000 for the six months ended
June 30, 1998. Interest expense on other borrowings increased due to a
increase in the average balance of $16.5 million partially offset by a
decrease in the weighted-average rate paid for the six months ended June
30, 1999 compared to the same period in 1998.
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 $165,000 for the six months ended June 30, 1998 to $310,000 for the
six months ended June 30, 1999. The increase was deemed appropriate by
management due to the growth in the loan portfolio during the six months
ended June 30, 1999. Management believes the balance in the allowance for
loan losses of $1.3 million at June 30, 1999 is adequate.
Noninterest Income. Noninterest income decreased $110,000 primarily due to
decreases of $73,000 in service charges on deposit accounts and $68,000 in
net gains from sale of loans and loan servicing rights, partially offset
by an increase of $36,000 in net realized gains on sale of securities
available for sale during the six months ended June 30, 1999 when compared
to the comparable period in 1998.
Noninterest Expense. Noninterest expense increased $519,000 for the six
months ended June 30, 1999 compared to the same period in 1998 primarily
due to increases in salaries and employee benefits of $194,000, occupancy
expense of $47,000, professional fees of $75,000 and other noninterest
expenses of $148,000 relating to the overall growth of the Company.
Provision for Income Taxes. The income tax provision for the six months ended
June 30, 1999 was $372,000 (an effective rate of 37.0%) compared to
$351,000 (an effective rate of 36.4%) for the comparable 1998 period.
15
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Year 2000 Issues
Management of the Holding Company is acutely aware of the Year 2000 issue 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 issue. The Committee meets
quarterly or as needed to assess the extent to which the Bank and its outside
vendors may be adversely affected by the Year 2000 problem system failures. 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 June 30, 1999, 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.
Based on current estimates, the Bank does not expect to incur a material amount
of expenses through December 31, 1999 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.
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.
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
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk of loss from adverse changes in market prices and rates.
The Company's market risk arises primarily from interest-rate risk inherent in
its lending and deposit taking activities. The Company has little or no risk
related to trading accounts, commodities or foreign exchange.
Management actively monitors and manages its interest-rate risk exposure. The
primary objective in managing interest-rate risk is to limit, within established
guidelines, the adverse impact of changes in interest rates on the Company's net
interest income and capital, while adjusting the Company's asset-liability
structure to obtain the maximum yield-cost spread on that structure. Management
relies primarily on its asset-liability structure to control interest rate risk.
However, a sudden and substantial increase in interest rates could adversely
impact the Company's earnings, to the extent that the interest rates borne by
assets and liabilities do not change at the same speed, to the same extent, or
on the same basis. There have been no significant changes in the Company's
market risk exposure since December 31, 1998.
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 16, 1999, to consider the election of two
directors each for a term of three years. At the Annual Meeting, incumbent
directors Steven A. Elias and D. Richard Mead, Jr., were reelected. The terms of
Directors Roberto Kassin, Timothy McGinn, R. Carl Palmer, Jr., Morris Massry and
Parker D. Thompson continued after the Annual Meeting.
At the Annual Meeting, 1,393,124 shares were present in person or by proxy. The
following is a summary and tabulation of the matter that was 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>
Steven A. Elias 1,360,101 33,023 -
========= ====== ========
D. Richard Mead, Jr. 1,360,101 33,023 -
========= ====== ========
</TABLE>
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) During the three months ending June 30, 1999, the Company filed a Form
8-K. The event disclosed was the Board of Directors' adoption of a
dividend policy and the announcement of a $.05 dividend for the quarter
ended March 31, 1999. The approval for the Stock Repurchase Program was
also disclosed in the filing.
17
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
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: July 28, 1999 By: /s/ R. Carl Palmer, Jr.
----------------------- ----------------------------------
R. Carl Palmer, Jr., President
and Chief Executive Officer
Date: July 28, 1999 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, 1999 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,864
<INT-BEARING-DEPOSITS> 61<F1>
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 41,954
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 150,290
<ALLOWANCE> 1,281
<TOTAL-ASSETS> 203,711
<DEPOSITS> 139,612
<SHORT-TERM> 14,251
<LIABILITIES-OTHER> 4,061
<LONG-TERM> 20,000
23
0
<COMMON> 0
<OTHER-SE> 25,764
<TOTAL-LIABILITIES-AND-EQUITY> 203,711
<INTEREST-LOAN> 5,944
<INTEREST-INVEST> 1,219
<INTEREST-OTHER> 22
<INTEREST-TOTAL> 7,185
<INTEREST-DEPOSIT> 2,587
<INTEREST-EXPENSE> 3,245
<INTEREST-INCOME-NET> 3,940
<LOAN-LOSSES> 310
<SECURITIES-GAINS> 38
<EXPENSE-OTHER> 3,236<F2>
<INCOME-PRETAX> 1,005
<INCOME-PRE-EXTRAORDINARY> 1,005
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 633
<EPS-BASIC> .28
<EPS-DILUTED> .28
<YIELD-ACTUAL> 4.24
<LOANS-NON> 1,408
<LOANS-PAST> 740
<LOANS-TROUBLED> 20
<LOANS-PROBLEM> 1,580
<ALLOWANCE-OPEN> 1,078
<CHARGE-OFFS> 107
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,281
<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 $1,603, occupancy
expense of $540, and other expenses which totaled $1,093.
(3) Items are only disclosed on an annual basis in the Company's Form 10-KSB,
and are, therefore, not included in this Financial Data Schedule.
</FN>
</TABLE>
