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, 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 2,122,193 shares
- -------------------------------------- -------------------------------
(class) Outstanding at October 25, 1999
Transitional small business disclosure format (check one):
YES NO X
--- ---
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
Part I. Financial Information
<TABLE>
<CAPTION>
<S> <C>
Item 1. Financial Statements Page
----
Condensed Consolidated Balance Sheets -
At September 30, 1999 (unaudited) and at December 31, 1998...............................................2
Condensed Consolidated Statements of Earnings -
Three and Nine Months ended September 30, 1999 and 1998 (unaudited)......................................3
Condensed Consolidated Statement of Stockholders' Equity -
Nine Months ended September 30, 1999 (unaudited).........................................................4
Condensed Consolidated Statements of Cash Flows -
Nine Months ended September 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 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
------------------------------
September 30, December 31,
------------- ------------
Assets 1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Cash and due from banks $ 4,128 2,866
Interest-bearing deposits with banks 3,351 605
-------- ---------
Total cash and cash equivalents 7,479 3,471
Securities available for sale 48,602 51,275
Loans receivable, net of allowance for loan losses of $1,297 in 1999
and $1,078 in 1998 145,638 128,005
Loans held for sale 1,952 617
Accrued interest receivable 1,483 1,270
Premises and equipment, net 2,291 1,760
Restricted securities, at cost:
Federal Home Loan Bank stock 1,500 1,235
Federal Reserve Bank stock 479 479
Foreclosed real estate 190 353
Deferred income tax asset 531 221
Other assets 883 589
--------- ---------
Total $ 211,028 189,275
========= =========
Liabilities and Stockholders' Equity
Liabilities:
Demand deposits 20,066 18,316
Savings and NOW deposits 12,069 12,940
Money-market deposits 41,200 38,721
Time deposits 73,705 71,235
--------- ---------
Total deposits 147,040 141,212
Advances from Federal Home Loan Bank 30,000 15,000
Other borrowings 4,380 3,446
Official checks 1,239 1,248
Accrued interest payable 708 695
Advance payments by borrowers for taxes and insurance 1,391 411
Other liabilities 701 228
--------- ---------
Total liabilities 185,459 162,240
--------- ---------
Stockholders' equity:
Preferred stock - -
Common stock 23 23
Additional paid-in capital 23,759 23,324
Retained earnings 4,737 4,065
Stock incentive plan (61) -
Treasury stock (1,999) -
Accumulated other comprehensive income (890) (377)
--------- ---------
Total stockholders' equity 25,569 27,035
--------- ---------
Total $ 211,028 189,275
========= =========
</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 Nine Months Ended
September 30, September 30,
--------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
(Unaudited) (Unaudited)
Interest income:
<S> <C> <C> <C> <C>
Loans receivable $ 3,186 2,614 9,130 7,763
Securities available for sale 624 728 1,843 1,604
Securities held to maturity - 45 - 271
Other interest-earning assets 58 25 80 57
------------ ------------- ----------- -------------
Total interest income 3,868 3,412 11,053 9,695
------------ ------------- ----------- -------------
Interest expense:
Deposits 1,357 1,478 3,944 4,366
Borrowings 444 211 1,102 481
------------ ------------- ----------- -------------
Total interest expense 1,801 1,689 5,046 4,847
------------ ------------- ----------- -------------
Net interest income 2,067 1,723 6,007 4,848
Provision for loan losses 165 630 475 795
------------ ------------- ----------- -------------
Net interest income after provision for loan losses 1,902 1,093 5,532 4,053
------------ ------------- ----------- -------------
Noninterest income:
Service charges on deposit accounts 171 151 489 542
Loan servicing fees 15 16 43 45
Net gains from sale of loans - 58 32 158
Net realized gains on sale of securities - 162 38 164
Other 75 96 270 295
------------ ------------- ----------- -------------
Total noninterest income 261 483 872 1,204
------------ ------------- ----------- -------------
Noninterest expenses:
Salaries and employee benefits 849 713 2,452 2,122
Occupancy expense 303 252 843 745
Advertising and promotion 76 64 252 224
Professional fees 88 24 212 73
Federal deposit insurance premiums 15 15 46 43
Data processing 95 81 256 206
Other 321 255 922 708
------------ ------------- ----------- -------------
Total noninterest expenses 1,747 1,404 4,983 4,121
------------ ------------- ----------- -------------
Earnings before income taxes 416 172 1,421 1,136
Income taxes 154 65 526 416
------------ ------------- ----------- -------------
Net earnings $ 262 107 895 720
============ ============= =========== =============
Earnings per share:
Basic $ .12 .05 .40 .41
============ ============= =========== =============
Diluted $ .12 .05 .40 .40
============ ============= =========== =============
Weighted-average shares outstanding for basic 2,139,107 2,257,631 2,235,876 1,678,214
============ ============= =========== =============
Weighted-average shares outstanding for diluted 2,151,429 2,298,178 2,246,541 1,712,307
============ ============= =========== =============
Dividends per share $ .05 - .10 -
============ ============= =========== =============
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
3
<PAGE>
<TABLE>
<CAPTION>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Stockholders' Equity
Nine Months Ended September 30, 1999
(Dollars in thousands)
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) - - - - - 895 - 895
Net change in unrealized
loss on securities
available for sale,
net of tax of $310
(unaudited) - - - - - - (513) (513)
------
Comprehensive income
(unaudited) 382
------
Proceeds from issuance of
common stock, exercise
of stock options (25,458
shares) (unaudited) - - 258 - - - - 258
Dividends paid on common
stock (unaudited) - - - - - (223) - (223)
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) - - - 7 - - - 7
Purchase of treasury stock (188,400
shares) (unaudited) - - - - (1,999) - - (1,999)
---- --- --------- ---- ----- ------- ---- ------
Balance at September 30, 1999
(unaudited) $ - 23 23,759 (61) (1,999) 4,737 (890) 25,569
==== === ========= ==== ===== ======= ==== ======
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
4
<PAGE>
<TABLE>
<CAPTION>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
Nine Months Ended
September 30,
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 895 720
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Provision for loan losses 475 795
Depreciation 329 245
Net amortization of fees, premiums, discounts and other (26) 185
Shares committed to incentive plan participants 7 -
Common stock issued as compensation for services 109 170
Gain on sale of securities (38) (164)
Gain on sale of loans (32) (158)
Gain on sale of foreclosed real estate (6) (40)
Net originations of loans held for sale (1,751) (549)
Proceeds from sale of loans held for sale 449 5,150
Increase in other assets (294) (10)
Increase in accrued interest receivable (213) (345)
Decrease in official checks (9) (698)
Increase in accrued interest payable 13 70
Increase in other liabilities 473 248
-------- -------
Net cash provided by operating activities 381 5,619
-------- -------
Cash flows from investing activities:
Purchases of securities available for sale (25,124) (45,007)
Purchases of securities held to maturity - (2,100)
Proceeds from sale of securities 17,083 24,847
Principal repayments on securities available for sale 2,068 324
Principal repayments on securities held to maturity - 259
Maturities and calls of securities available for sale 7,705 1,450
Net increase in loans (18,006) (18,547)
Proceeds from sale of foreclosed real estate 248 390
Net increase in restricted securities (265) (144)
Purchase of premises and equipment, net (860) (163)
-------- -------
Net cash used in investing activities (17,151) (38,691)
-------- -------
Cash flows from financing activities:
Net increase in demand, savings, NOW and money-market deposits 3,358 7,997
Net increase in time deposits 2,470 1,311
Net increase in advances from Federal Home Loan Bank 15,000 10,600
Net increase in other borrowings 934 1,565
Increase in advance payments by borrowers for taxes and insurance 980 941
Net proceeds from issuance of preferred stock - 10
Net proceeds from issuance of common stock - 12,196
Proceeds from exercise of stock options 258 -
Dividends paid on common stock (223) -
Purchase of treasury stock (1,999) -
-------- -------
Net cash provided by financing activities 20,778 34,620
-------- -------
(continued)
5
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows, Continued
(In thousands)
Nine Months Ended
September 30,
1999 1998
---- ----
(Unaudited)
Net increase in cash and cash equivalents 4,008 1,548
Cash and cash equivalents at beginning of period 3,471 2,575
------- -------
Cash and cash equivalents at end of period $ 7,479 4,123
======= =======
Supplemental disclosure of cash flow information: Cash paid during the period
for:
Interest $ 5,033 4,777
======= =======
Income taxes $ 288 130
======= =======
Noncash transactions:
Reclassification of loans receivable to foreclosed real estate $ 181 610
======= =======
Loans originated for sale of foreclosed real estate $ 101 -
======= =======
Accumulated other comprehensive income, net change in unrealized
loss on securities available for sale, net of tax $ (513) (143)
======= =======
Stock dividends paid on preferred stock $ - 27
======= =======
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, 1999, the results
of operations for the three- and nine-month periods ended September 30,
1999 and 1998 and cash flows for the nine-month periods ended September 30,
1999 and 1998. The results of operations for the three and nine months
ended September 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 Nine Months Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Balance at beginning of period $ 1,281 983 1,078 848
Provision charged to earnings 165 630 475 795
(Charge-offs), net of recoveries (149) (452) (256) (482)
------- ----- ----- -----
Balance at end of period $ 1,297 1,161 1,297 1,161
======= ===== ===== =====
</TABLE>
The following summarizes the amounts of impaired loans, a majority of which
are collateral dependent (in thousands):
<TABLE>
<CAPTION>
At September 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 Nine Months Ended
September 30, September 30,
----------------------- ----------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average investment in impaired loans $ 220 1,260 220 1,261
===== ====== ===== ======
Interest income recognized on impaired
loans $ - 19 - 92
===== ====== ===== ======
Interest income received on impaired
loans $ - 19 - 92
===== ====== ===== ======
</TABLE>
See note 5 for a discussion relating to the decrease in impaired loans at
September 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 earnings 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. Average quoted market prices were used after June 12, 1998. For
the three and nine months ended September 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 September 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 $ 262 2,139,107 $ .12 $ 107 2,257,631 $ .05
=== ===
Effect of dilutive
securities-
Incremental shares
from assumed
exercise of
options utilizing the
treasury stock method 12,322 40,547
------ ------
Diluted Earnings Per Share:
Net earnings available
to common
stockholders
and assumed
conversions $ 262 2,151,429 $ .12 $ 107 2,298,178 $ .05
=== ========= === === ========= ===
</TABLE>
8
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
3. Earnings Per Share, Continued
<TABLE>
<CAPTION>
Nine Months Ended September 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 $ 895 $ 720
Less preferred
stock dividends - (27)
----- ---
Net earnings available
to common
stockholders 895 2,235,876 $ .40 693 1,678,214 $ .41
=== ===
Effect of dilutive
securities-
Incremental shares
from assumed
exercise of
options utilizing
the treasury stock
method 10,665 34,093
----------- ----------
Diluted Earnings Per Share:
Net earnings available
to common
stockholders
and assumed
conversions $ 895 2,246,541 $ .40 $ 693 1,712,307 $ .40
=== ========= === === ========= ===
</TABLE>
4. Regulatory Capital. The Bank is required to maintain certain minimum
regulatory capital requirements. The following is a summary at September 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 17.23% 8.00%
Tier I capital to risk-weighted assets 16.26% 4.00%
Tier I capital to total assets - leverage ratio 10.26% 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 .62% at September
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 fourth quarter of 1999 and the branch is expected to be
open late in the first quarter of 2000.
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 188,400 shares in treasury
stock. The Company's net cost was approximately $2.0 million through
September 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. On July 23, 1999, the Company declared an additional $.05
per share dividend to common stockholders as of August 17, 1999, which was
paid on September 1, 1999 based on earnings of the Company during the three
months ended June 30, 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 September 30, 1999 and December 31, 1998
Liquidity and Capital Resources
The Company's primary source of cash during the nine months ended September 30,
1999 was from a net increase in advances from Federal Home Loan Bank of $15.0
million and proceeds from the sale of securities of $17.1 million. Cash was used
primarily for net loan originations of $18.3 million and the purchase of
securities totaling $25.4 million. At September 30, 1999, the Company had
outstanding commitments to originate loans of $14.5 million. Scheduled
maturities of certificates of deposit due to mature in one year or less totaled
$41.7 million. Management believes the Company has adequate resources to fund
all of its commitments using available resources and that, if desired,
certificates of deposit rates can be adjusted to attract deposits in a changing
rate environment. At September 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>
Nine Months Nine Months
Ended Year Ended Ended
September 30, December 31, September 30,
1999 1998 1998
------------ ------------ --------------
<S> <C> <C> <C>
Average equity as a percentage
of average assets 13.33% 12.19% 11.34%
Equity to total assets at end of period 12.12% 14.28% 14.66%
Return on average assets (1) .60% .61% .57%
Return on average equity (1) 4.49% 5.02% 5.05%
Noninterest expense to average assets (1) 3.33% 3.27% 3.25%
Nonperforming loans and foreclosed real estate to
total assets at end of period .62% 1.60% 1.89%
</TABLE>
- ------------------
(1) Annualized for the nine months ended September 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 assets to
average interest-bearing liabilities.
<TABLE>
<CAPTION>
Three Months Ended September 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 $ 148,524 3,186 8.58% $ 118,368 2,614 8.83%
Securities 44,683 624 5.59 53,851 773 5.74
Other interest-earning assets (1) 4,400 58 5.27 1,754 25 5.70
--------- ------- --------- -------
Total interest-earning assets 197,607 3,868 7.83 173,973 3,412 7.85
------- -------
Noninterest-earning assets (2) 9,293 8,021
--------- ---------
Total assets $ 206,900 $ 181,994
========= =========
Interest-bearing liabilities:
Savings and NOW deposits 12,016 45 1.50 11,079 41 1.48
Money-market deposits 40,556 387 3.82 41,303 468 4.53
Time deposits 71,078 925 5.21 66,728 969 5.81
Borrowings (3) 34,708 444 5.12 16,082 211 5.25
-------- ------- ------- -------
Total interest-bearing liabilities 158,358 1,801 4.55 135,192 1,689 5.00
------- -------
Demand deposits 19,475 16,633
Noninterest-bearing liabilities 3,591 3,465
Stockholders' equity 25,476 26,704
--------- ---------
Total liabilities and stockholders' equity $ 206,900 $ 181,994
========= =========
Net interest income $ 2,067 $ 1,723
======= =====
Interest-rate spread (4) 3.28% 2.85%
==== ====
Net interest margin (5) 4.18% 3.96%
==== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities 1.25 1.29
==== ====
</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 assets to
average interest-bearing liabilities.
<TABLE>
<CAPTION>
Nine Months Ended September 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 $ 141,801 9,130 8.58% $ 114,246 7,763 9.06%
Securities 45,725 1,843 5.37 43,165 1,875 5.79
Other interest-earning assets (1) 2,102 80 5.07 1,352 57 5.62
--------- -------- --------- ------
Total interest-earning assets 189,628 11,053 7.77 158,763 9,695 8.14
-------- ------
Noninterest-earning assets (2) 9,649 8,904
--------- ---------
Total assets $ 199,277 $ 167,667
========= =========
Interest-bearing liabilities:
Savings and NOW deposits 12,591 141 1.49 10,915 126 1.54
Money-market deposits 39,928 1,121 3.74 39,557 1,360 4.58
Time deposits 68,462 2,682 5.22 66,852 2,880 5.74
Borrowings (3) 29,256 1,102 5.02 12,018 481 5.34
-------- -------- --------- ------
Total interest-bearing liabilities 150,237 5,046 4.48 129,342 4,847 5.00
-------- -----
Demand deposits 19,229 15,465
Noninterest-bearing liabilities 3,242 3,855
Stockholders' equity 26,569 19,005
--------- ---------
Total liabilities and stockholders' equity $ 199,277 $ 167,667
========= =========
Net interest income $ 6,007 $ 4,848
======== =====
Interest-rate spread (4) 3.29% 3.14%
==== ====
Net interest margin (5) 4.22% 4.07%
==== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities 1.26 1.23
==== ====
</TABLE>
- ----------------------
(1) Includes interest-bearing deposits, federal funds sold and securities
purchased under agreements to resell.
(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 September 30, 1999 and 1998
Results of Operations:
General. Net earnings for the three months ended September 30, 1999 were
$262,000 or $.12 basic and diluted earnings per share compared to net
earnings of $107,000 or $.05 basic and diluted earnings per share for the
three months ended September 30, 1998. This increase in the Company's net
earnings was primarily due to an increase in net interest income and a
decrease in the provision for loan losses, partially offset by an increase
in noninterest expense and a decrease in noninterest income.
Interest Income and Expense. Interest income increased by $456,000, or 13.4%
from $3.4 million for the three months ended September 30, 1998 to $3.9
million for the three months ended September 30, 1999. Interest income on
loans increased $572,000, or 21.9% primarily due to an increase in the
average loan portfolio balance from $118.4 million for the three months
ended September 30, 1998 to $148.5 million for the comparable period in
1999, partially offset by a decrease in the average yield from 8.83% in 1998
to 8.58% in 1999.
Interest expense on deposits decreased $121,000 or 8.2%, to $1.4 million for
the three months ended September 30, 1999 from $1.5 million for the three
months ended September 30, 1998. Interest expense on deposits decreased due
to a decrease in the average rate paid on deposits from 4.96% in 1998 to
4.39% in 1999, partially offset by a increase in the average balance of
deposits from $119.1 million during 1998 to $123.7 million during 1999.
Interest expense on borrowings increased $233,000 to $444,000 for the three
months ended September 30, 1999 from $211,000 for the three months ended
September 30, 1998. Interest expense on borrowings increased due to a
increase in the average balance from $16.1 million to $34.7 million for
three months ended September 30, 1998 compared to the same period in 1999,
partially offset by a decrease in the average rate paid of borrowings from
5.25% to 5.12% 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 $165,000
for the three months ended September 30, 1999 compared to $630,000 for the
comparable period in 1998. This decrease was due to a decrease in net
charge-offs from $452,000 in 1998 compared to $149,000 over the same period
in 1999. 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 $1.3 million at September 30, 1999 is adequate.
Noninterest Income. Noninterest income decreased $222,000 primarily due to
decreases of $162,000 in net realized gains on sale of securities and
$58,000 in net gains from sale of loans for the three months ended September
30, 1999 when compared to the same period in 1998.
Noninterest Expenses. Noninterest expenses increased $343,000 over the three
month period from the previous year, primarily due to increases in salaries
and employee benefits of $136,000, occupancy expense of $51,000 and
professional fees of $64,000 relating to the overall growth of the Company.
Provision for Income Taxes. The income tax provision for the three months
ended September 30, 1999 was $154,000 (an effective rate of 37.0%) compared
to $65,000 (an effective rate of 37.8%) for the comparable 1998 period.
14
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Comparison of the Nine Months Ended September 30, 1999 and 1998
Results of Operations:
General. Net earnings for the nine months ended September 30, 1999 were
$895,000 or $.40 basic and diluted earnings per share compared to net
earnings of $720,000 or $.41 basic earnings per share ($.40 diluted earnings
per share) for the nine months ended September 30, 1998. This increase in
the Company's net earnings was primarily due to an increase in net interest
income, partially offset by an increase in noninterest expenses.
Interest Income and Expense. Interest income increased by $1.4 million or
14.0% from $9.7 million for the nine months ended September 30, 1998 to
$11.1 million for the nine months ended September 30, 1999. Interest income
on loans increased $1.4 million, or 17.6% primarily due to an increase in
the average loan portfolio balance of $27.6 million from $114.2 million for
the nine months ended September 30, 1998 to $141.8 million for the
comparable period in 1999, partially offset by a decrease in the average
yield from 9.06% in 1998 to 8.58% in 1999.
Interest expense on deposits decreased $422,000, or 9.7% from $4.4 million
for the nine months ended September 30, 1998 to $3.9 million for the nine
months ended September 30, 1999. Interest expense on deposits decreased due
to a decrease in the weighted average rate paid from 4.96% in 1998 to 4.34%
in 1999, partially offset by an increase in the average balance, from $117.3
million in 1998 to $121.0 million in 1999.
Interest expense on borrowings increased $621,000 to $1.1 million for the
nine months ended September 30, 1999 from $481,000 for the nine months ended
September 30, 1998. Interest expense on borrowings increased due to a
increase in the average balance from $12.0 million during 1998 to $29.3
million during 1999, partially offset by a decrease in the weighted-average
rate paid from 5.34% for the nine months ended September 30, 1998 to 5.02%
for the same period in 1999.
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 decreased from
$795,000 for the nine months ended September 30, 1998 to $475,000 for the
nine months ended September 30, 1999. The decrease was due to net
charge-offs of $256,000 in 1999 compared to $482,000 over the same period in
1998. The increase in net charge-offs in 1998 related to one loan of which
$440,000 was charged-off. Management believes the balance in the allowance
for loan losses of $1.3 million at September 30, 1999 is adequate.
Noninterest Income. Noninterest income decreased $332,000 primarily due to
decreases of $126,000 on net realized gains on sales of securities and
$126,000 in net gains from sale of loans during the nine months ended
September 30, 1999 when compared to the comparable period in 1998.
Noninterest Expense. Noninterest expense increased $862,000 for the nine
months ended September 30, 1999 compared to the same period in 1998
primarily due to increases of $330,000 in salaries and employee benefits,
occupancy expense of $98,000, professional fees of $139,000 and other
noninterest expense of $214,000 relating to the overall growth of the
Company.
Provision for Income Taxes. The income tax provision for the nine months
ended September 30, 1999 was $526,000 (an effective rate of 37.0%) compared
to $416,000 (an effective rate of 36.6%) 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
September 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 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) On October 20, 1999, the Company filed a Form 8-K. The filing increased
the authorized amount of capital to be used for the stock repurchase
program to $3,000,000 and announced the declaration of a $.05 dividend
for the quarter ending September 30, 1999.
17
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
POINTE FINANCIAL CORPORATION
(Registrant)
Date: October 25, 1999 By: /s/ R. Carl Palmer, Jr.
------------------------- ---------------------------------------
R. Carl Palmer, Jr., President and
Chief Executive Officer
Date: October 25, 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 September 30, 1999 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,128
<INT-BEARING-DEPOSITS> 3,351 <F1>
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 48,602
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 148,887
<ALLOWANCE> 1,297
<TOTAL-ASSETS> 211,028
<DEPOSITS> 147,040
<SHORT-TERM> 4,380
<LIABILITIES-OTHER> 4,039
<LONG-TERM> 30,000
<COMMON> 23
0
0
<OTHER-SE> 25,546
<TOTAL-LIABILITIES-AND-EQUITY> 211,028
<INTEREST-LOAN> 9,130
<INTEREST-INVEST> 1,843
<INTEREST-OTHER> 80
<INTEREST-TOTAL> 11,053
<INTEREST-DEPOSIT> 3,944
<INTEREST-EXPENSE> 5,046
<INTEREST-INCOME-NET> 6,007
<LOAN-LOSSES> 475
<SECURITIES-GAINS> 38
<EXPENSE-OTHER> 4,983 <F2>
<INCOME-PRETAX> 1,421
<INCOME-PRE-EXTRAORDINARY> 895
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 895
<EPS-BASIC> .40
<EPS-DILUTED> .40
<YIELD-ACTUAL> 4.22
<LOANS-NON> 1,108
<LOANS-PAST> 428
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,529
<ALLOWANCE-OPEN> 1,078
<CHARGE-OFFS> 260
<RECOVERIES> 4
<ALLOWANCE-CLOSE> 1,297
<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 $2,452,
occupancy and equipment of $843, and other expenses which totaled $1,688.
(3) Items are only disclosed on an annual basis in the Company's Form 10-K,
and are, therefore, not included in this Financial Data Schedule.
</FN>
</TABLE>
