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, 2000
--- 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 2,022,637 shares
-------------------------------------- -------------------------------
(class) Outstanding at October 31, 2000
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 September 30, 2000 (unaudited) and at December 31, 1999...............................................2
Condensed Consolidated Statements of Earnings -
Three and Nine Months ended September 30, 2000 and 1999 (unaudited)....................................3-4
Condensed Consolidated Statement of Changes in Stockholders' Equity -
Nine Months ended September 30, 2000 (unaudited).........................................................5
Condensed Consolidated Statements of Cash Flows -
Nine Months ended September 30, 2000 and 1999 (unaudited)..............................................6-7
Notes to Condensed Consolidated Financial Statements (unaudited)........................................8-10
Review by Independent Certified Public Accountants........................................................11
Report on Review by Independent Certified Public Accountants..............................................12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..............................................................................13-17
Item 3. Quantitative and Qualitative Disclosures about Market Risk..........................................18
Part II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................................................18
Item 6. Exhibits and Reports on Form 8-K...................................................................19
SIGNATURES.....................................................................................................20
</TABLE>
1
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
At
September 30, December 31,
Assets 2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
Cash and due from banks .................................... $ 4,245 6,822
Interest-bearing deposits with banks ....................... 13,107 87
--------- ---------
Total cash and cash equivalents ..................... 17,352 6,909
Securities available for sale .............................. 52,969 46,157
Loans receivable, net of allowance for loan losses of $1,771
in 2000 and $1,331 in 1999 .............................. 171,364 150,852
Loans held for sale ........................................ 728 2,696
Accrued interest receivable ................................ 1,961 1,375
Premises and equipment, net ................................ 2,328 2,225
Federal Home Loan Bank stock, at cost ...................... 2,355 1,753
Federal Reserve Bank stock, at cost ........................ 479 479
Foreclosed real estate ..................................... -- 257
Deferred income tax asset .................................. 348 348
Other assets ............................................... 635 605
--------- ---------
Total ............................................... $ 250,519 213,656
========= =========
Liabilities and Stockholders' Equity
Liabilities:
Noninterest-bearing demand deposits ..................... 24,109 21,370
Savings and NOW deposits ................................ 18,594 13,640
Money-market deposits ................................... 37,151 38,146
Time deposits ........................................... 83,629 73,020
--------- ---------
Total deposits ...................................... 163,483 146,176
Official checks ......................................... 1,541 1,075
Other borrowings ........................................ 12,094 5,394
Advances from Federal Home Loan Bank .................... 45,000 35,060
Accrued interest payable ................................ 959 688
Advance payments by borrowers for taxes and insurance ... 1,174 451
Other liabilities ....................................... 476 229
--------- ---------
Total liabilities ................................... 224,727 189,073
--------- ---------
Stockholders' equity:
Preferred stock ......................................... -- --
Common stock ............................................ 23 23
Additional paid-in capital .............................. 23,840 23,753
Retained earnings ....................................... 5,913 4,959
Accumulated other comprehensive income (loss) ........... (949) (1,102)
Treasury stock .......................................... (3,000) (3,000)
Stock incentive plan .................................... (35) (50)
------------------------------------------------------------ --------- ---------
Total stockholders' equity .......................... 25,792 24,583
--------- ---------
Total ............................................... $ 250,519 213,656
========= =========
</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,
--------------------- ----------------------
2000 1999 2000 1999
------- ------- ------- -------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest income:
Loans receivable ...................................................... $ 3,915 3,186 10,914 9,130
Securities ............................................................ 855 624 2,531 1,843
Other interest-earning assets ......................................... 43 58 170 80
------- ------- ------- -------
Total interest income ........................................... 4,813 3,868 13,615 11,053
------- ------- ------- -------
Interest expense:
Deposits .............................................................. 1,643 1,357 4,627 3,944
Borrowings ............................................................ 788 444 2,095 1,102
------- ------- ------- -------
Total interest expense .......................................... 2,431 1,801 6,722 5,046
------- ------- ------- -------
Net interest income ....................................................... 2,382 2,067 6,893 6,007
Provision for loan losses ....................................... 175 165 505 475
------- ------- ------- -------
Net interest income after provision for loan losses ....................... 2,207 1,902 6,388 5,532
------- ------- ------- -------
Noninterest income:
Service charges on deposit accounts ................................... 198 171 586 489
Loan servicing fees ................................................... 12 15 36 43
Net gains from sale of loans .......................................... -- -- 6 32
Net realized gains (losses) on sale of securities ..................... -- -- (124) 38
Other ................................................................. 67 75 260 270
------- ------- ------- -------
Total noninterest income ........................................ 277 261 764 872
------- ------- ------- -------
Noninterest expenses:
Salaries and employee benefits ........................................ 915 849 2,828 2,452
Occupancy expense ..................................................... 302 303 874 843
Advertising and promotion ............................................. 42 76 179 252
Professional fees ..................................................... 60 88 166 212
Data processing ....................................................... 100 95 302 256
Other ................................................................. 364 336 1,034 968
------- ------- ------- -------
Total noninterest expenses ...................................... 1,783 1,747 5,383 4,983
------- ------- ------- -------
Earnings before income taxes and extraordinary
item ......................................................... 701 416 1,769 1,421
Income taxes .............................................................. 232 154 590 526
------- ------- ------- -------
Earnings before extraordinary item .............................. 469 262 1,179 895
Extraordinary item - gain on extinguishment of debt, net of
taxes of $47 .......................................................... -- -- 78 --
------- ------- ------- -------
Net earnings .................................................... $ 469 262 1,257 895
======= ======= ======= =======
</TABLE>
(continued)
3
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings, Continued
(Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net earnings per share - basic:
Earnings before extraordinary item ......................... .23 .12 .58 .40
Extraordinary gain from extinguishment of debt ............. -- -- .04 --
---------- ---------- ---------- ----------
Net earnings per share - basic ....................... $ .23 .12 .62 .40
========== ========== ========== ==========
Net earnings per share - diluted:
Earnings before extraordinary item ......................... .23 .12 .58 .40
Extraordinary gain from extinguishment of debt ............. -- -- .04 --
---------- ---------- ---------- ----------
Net earnings per share - diluted ..................... $ .23 .12 .62 .40
========== ========== ========== ==========
Weighted-average shares outstanding for basic .................. 2,022,637 2,139,107 2,018,585 2,235,876
========== ========== ========== ==========
Weighted-average shares outstanding for diluted ................ 2,022,929 2,151,429 2,018,585 2,246,541
========== ========== ========== ==========
Dividends per share ............................................ $ .05 .05 .15 .10
========== ========== ========== ==========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Changes in Stockholders' Equity
Nine Months Ended September 30, 2000
(In thousands)
<TABLE>
<CAPTION>
Accumulated
Other
Compre- Total
Additional Stock hensive Stock-
Common Paid-In Incentive Treasury Retained Income holders'
Stock Capital Plan Stock Earnings (Loss) Equity
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 ........................... $ 23 23,753 (50) (3,000) 4,959 (1,102) 24,583
-------
Comprehensive income:
Net earnings (unaudited) .......................... -- -- -- -- 1,257 -- 1,257
Net change in unrealized
loss on securities available for sale,
net of tax of $93 (unaudited) ................. -- -- -- -- -- 153 153
-------
Comprehensive income (unaudited) ....................... 1,410
-------
Shares committed to participants
in stock incentive plans (unaudited) .............. -- -- 10 -- -- -- 10
Committed shares cancelled in stock
incentive plan (unaudited) ........................ -- (5) 5 -- -- -- --
Cash dividends paid (unaudited) ........................ -- -- -- -- (303) -- (303)
Issuance of common stock to directors
as compensation (unaudited) ....................... -- 109 -- -- -- -- 109
Cancellation of common stock to
directors as compensation
(unaudited) ....................................... -- (17) -- -- -- -- (17)
------- ------- ------- ------- ------- ------- -------
Balance at September 30, 2000
(unaudited) ....................................... $ 23 23,840 (35) (3,000) 5,913 (949) 25,792
======= ======= ======= ======= ======= ======= =======
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------
2000 1999
-------- --------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net earnings ............................................................................ $ 1,257 895
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Provision for loan losses ............................................................ 505 475
Depreciation ......................................................................... 325 329
Net amortization of fees, premiums, discounts and other .............................. 2 (26)
Shares committed to participants in incentive stock plans ............................ 10 7
Common stock issued as compensation for services ..................................... 92 109
Loss (gain) on sale of securities .................................................... 124 (38)
Gain on sale of loans ................................................................ (6) (32)
Gain on sale of foreclosed real estate ............................................... -- (6)
Net originations of loans held for sale .............................................. (7,091) (1,751)
Proceeds from sale of loans held for sale ............................................ 9,065 449
Increase in other assets ............................................................. (30) (294)
Increase in accrued interest receivable .............................................. (586) (213)
Increase (decrease) in official checks ............................................... 466 (9)
Increase in accrued interest payable ................................................. 271 13
Increase in other liabilities ........................................................ 247 473
-------- --------
Net cash provided by operating activities ........................................ 4,651 381
-------- --------
Cash flows from investing activities:
Purchases of securities available for sale .............................................. (14,576) (25,124)
Proceeds from sale of securities available for sale ..................................... 4,963 17,083
Principal repayments on securities available for sale ................................... 828 2,068
Maturities and calls of securities available for sale ................................... 2,025 7,705
Net increase in loans ................................................................... (21,042) (18,006)
Proceeds from sale of foreclosed real estate ............................................ 257 248
Net increase in other securities ........................................................ (602) (265)
Purchase of premises and equipment, net ................................................. (428) (860)
-------- --------
Net cash used in investing activities ............................................ (28,575) (17,151)
-------- --------
Cash flows from financing activities:
Net increase in deposits ................................................................ 17,307 5,828
Net increase in advances from Federal Home Loan Bank .................................... 9,940 15,000
Net increase in other borrowings ........................................................ 6,700 934
Increase in advance payments by borrowers for taxes and insurance ....................... 723 980
Proceeds from exercise of stock options ................................................. -- 258
Dividends paid on common stock .......................................................... (303) (223)
Purchase of treasury stock .............................................................. -- (1,999)
-------- --------
Net cash provided by financing activities ........................................ 34,367 20,778
-------- --------
Net increase in cash and cash equivalents ................................................ 10,443 4,008
Cash and cash equivalents at beginning of period ......................................... 6,909 3,471
-------- --------
Cash and cash equivalents at end of period ............................................... $ 17,352 7,479
======== ========
</TABLE>
(continued)
6
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows, Continued
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
2000 1999
-------------------------
(Unaudited)
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ................................................................................... $ 6,451 5,033
========= ======
Income taxes ............................................................................... $ 653 288
========= ======
Noncash transactions:
Reclassification of loans receivable to foreclosed real estate ............................. $ -- 181
========= ======
Loans originated for sale of foreclosed real estate ........................................ $ -- 101
========= ======
Accumulated other comprehensive income (loss), net change in unrealized
loss on securities available for sale, net of tax ...................................... $ 153 (513)
========= ======
Transfer of loans to loans held for sale ................................................... $ 6,736 --
========= ======
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
7
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)
1. General. In the opinion of the management of Pointe Financial
Corporation, the accompanying condensed consolidated financial
statements contain all adjustments (consisting principally of normal
recurring accruals) necessary to present fairly the financial position
at September 30, 2000, the results of operations for the three- and
nine-month periods ended September 30, 2000 and 1999 and cash flows for
the nine-month periods ended September 30, 2000 and 1999. The results of
operations for the three and nine months ended September 30, 2000 are
not necessarily indicative of the results to be expected for the year
ending December 31, 2000.
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.
On March 12, 2000, the Company received approval of the election to
become a Financial Holding Company from the Board of Governors of the
Federal Reserve System. During the three months ended September 30,
2000, the Company formed Pointe Capital, an investment banking joint
venture with First Integrated Capital Corporation, a subsidiary of
McGinn, Smith & Company, Inc., a related party. The Company plans to
offer Investment Banking services to small and medium-size businesses in
South 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,
------------------------ ----------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Balance at beginning of period.................... $ 1,597 1,281 1,331 1,078
Provision charged to earnings..................... 175 165 505 475
(Charge-offs), net of recoveries.................. (1) (149) (65) (256)
------- ------ ------ -----
Balance at end of period.......................... $ 1,771 1,297 1,771 1,297
======= ===== ===== =====
The following summarizes the amount of impaired loans (in thousands):
At
-----------------------------
September 30, December 31,
-----------------------------
2000 1999
------------ -----------
Loans identified as impaired:
Gross loans with related allowance for losses recorded.................. $ 150 440
Less allowance on these loans........................................... (75) (220)
----- ---
Net investment in impaired loans............................................ $ 75 220
===== ===
</TABLE>
(continued)
8
<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,
----------------------- ----------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average investment in impaired loans................... $ 75 220 120 220
====== === === ===
Interest income recognized on impaired
loans.............................................. $ - - - -
====== ===== ===== ======
Interest income received on impaired
loans.............................................. $ - - - -
====== ===== ===== ======
</TABLE>
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 the nine months ended September 30, 2000
outstanding stock options are not 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,
-------------------------------------------------------------------------------------
2000 1999
------------------------------------------ ----------------------------------------
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 $ 469 2,022,637 $ .23 $ 262 2,139,107 $ .12
===== =====
Effect of dilutive
securities-
Incremental shares
from assumed exercise
of options utilizing the
treasury stock method 292 12,322
----------- ------
Diluted Earnings Per Share:
Net earnings available
to common stockholders
and assumed conversions $ 469 2,022,929 $ .23 $ 262 2,151,429 $ .12
===== ========= ===== ===== ========= =====
</TABLE>
(continued)
9
<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,
-------------------------------------------------------------------------------------
2000 1999
--------------------------------------- ----------------------------------------
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 $ 1,257 2,018,585 $ .62 895 2,235,876 $ .40
=====
Effect of dilutive
securities-
Incremental shares
from assumed exercise
of options utilizing
the treasury stock
method - 10,665
---------- ---------
Diluted Earnings Per Share:
Net earnings available
to common stockholders
and assumed conversions $ 1,257 2,018,585 $ .62 $ 895 2,246,541 $ .40
======= ========= ===== ===== ========= =====
</TABLE>
4. Regulatory Capital. The Bank is required to maintain certain minimum
regulatory capital requirements. The following is a summary at
September 30, 2000 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........................................... 15.86% 8.00%
Tier I capital to risk-weighted assets.......................................... 14.75% 4.00%
Tier I capital to total assets - leverage ratio................................. 9.41% 4.00%
</TABLE>
5. Extraordinary Item. During the second quarter 2000, the Bank
successfully completed the sale of a $5.0 million Federal Home Loan Bank
advance. The Company recorded a pre-tax gain of $125,000 on the sale of
the advance. This has been reported as an extraordinary item - gain on
extinguishment of debt, net of tax of $47,000. In a related transaction,
the Bank sold $2.1 million of investments available for sale recognizing
a loss of $124,000. The net effect of these transactions had a minimal
effect on the reported earnings.
10
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Review by Independent Certified Public Accountants
Hacker, Johnson & Smith PA, the Company's independent certified public
accountants, have made a limited review of the financial data as of September
30, 2000, and for the three and nine-month periods ended September 30, 2000 and
1999 presented in this document, in accordance with standards established by the
American Institute of Certified Public Accountants.
Their report furnished pursuant to Article 10 of Regulation S-X is included
herein.
11
<PAGE>
Report on Review by Independent Certified Public Accountants
The Board of Directors
Pointe Financial Corporation
Boca Raton, Florida:
We have reviewed the accompanying condensed consolidated balance sheet of
Pointe Financial Corporation and subsidiaries (the "Company") as of September
30, 2000, the related condensed consolidated statements of earnings for the
three- and nine- month periods ended September 30, 2000 and 1999, the related
condensed consolidated statements of cash flows for the nine-month periods ended
September 30, 2000 and 1999 and the related condensed consolidated statement of
changes in stockholders' equity for the nine-month period ended September 30,
2000. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1999, and the
related consolidated statements of earnings, changes in stockholders' equity and
cash flows for the year then ended (not presented herein); and in our report
dated January 21, 2000 we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 1999, is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
HACKER, JOHNSON & SMITH PA
Tampa, Florida
October 13, 2000
12
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Comparison of September 30, 2000 and December 31, 1999
Liquidity and Capital Resources
The Company's primary source of cash during the nine months ended September 30,
2000 was from net deposit inflows of $17.3 million, a net increase in advances
from Federal Home Loan Bank of $9.9 million, an increase in other borrowings of
$6.7 million, proceeds from the sale, maturity and call of securities available
for sale of $7.0 million and cash flows from operating activities of $4.7
million. Cash was used primarily for net loan originations of $21.0 million and
the purchase of securities totaling $14.6 million. At September 30, 2000, the
Company had outstanding commitments to originate loans of $10.0 million and
time deposits of $59.6 million that mature in one year or less. It is expected
that these requirements will be funded from the sources described above. At
September 30, 2000, 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,
2000 1999 1999
------------- ------------ -------------
<S> <C> <C> <C>
Average equity as a percentage
of average assets......................................... 10.79% 12.95% 13.33%
Equity to total assets at end of period...................... 10.30% 11.51% 12.12%
Return on average assets (1)................................. .73% .60% .60%
Return on average equity (1)................................. 6.75% 4.67% 4.49%
Noninterest expense to average assets (1).................... 3.12% 3.32% 3.33%
Nonperforming loans and foreclosed real estate
to total assets at end of period.......................... .57% .83% .62%
(1) Annualized for the nine months ended September 30, 2000 and 1999.
</TABLE>
13
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Results of Operations:
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,
---------------------------------------------------------------
2000 1999
------------------------------ ---------------------------
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 ....................................... $ 168,748 3,915 9.28% $ 148,524 3,186 8.58%
Securities..................................... 55,795 855 6.13 44,683 624 5.59
Other interest-earning assets (1).............. 2,561 43 6.72 4,400 58 5.27
--------- ------- --------- -------
Total interest-earning assets.............. 227,104 4,813 8.48 197,607 3,868 7.83
----- -----
Noninterest-earning assets (2)................. 10,371 9,293
-------- ---------
Total assets............................... $ 237,475 $ 206,900
========= =========
Interest-bearing liabilities:
Savings and NOW deposits....................... 13,044 49 1.50 12,016 45 1.50
Money-market deposits.......................... 36,228 392 4.33 40,556 387 3.82
Time deposits.................................. 82,637 1,202 5.82 71,078 925 5.21
Other borrowings (3)........................... 50,065 788 6.30 34,708 444 5.12
------- ------ -------- -----
Total interest-bearing liabilities......... 181,974 2,431 5.34 158,358 1,801 4.55
------- ----- -----
Demand deposits................................ 26,356 19,475
Noninterest-bearing liabilities................ 3,738 3,591
Stockholders' equity........................... 25,407 25,476
-------- -------
Total liabilities and stockholders' equity. $ 237,475 $ 206,900
========= =========
Net interest income............................... $ 2,382 $ 2,067
======= =======
Interest-rate spread (4).......................... 3.14% 3.28%
==== ====
Net interest margin (5)........................... 4.20% 4.18%
==== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities........... 1.25 1.25
==== ====
</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.
14
<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,
---------------------------------------------------------------
2000 1999
------------------------------ ---------------------------
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 ....................................... $ 160,856 10,914 9.05% $ 141,801 9,130 8.58%
Securities..................................... 55,297 2,531 6.10 45,725 1,843 5.37
Other interest-earning assets (1).............. 3,605 170 6.29 2,102 80 5.07
-------- ------- -------- --------
Total interest-earning assets.............. 219,758 13,615 8.26 189,628 11,053 7.77
------- ------ ------
Noninterest-earning assets (2)................. 10,535 9,649
-------- --------
Total assets............................... $ 230,293 $ 199,277
========= =========
Interest-bearing liabilities:
Savings and NOW deposits....................... 13,057 145 1.48 12,591 141 1.49
Money-market deposits.......................... 37,762 1,196 4.22 39,928 1,121 3.74
Time deposits.................................. 78,853 3,286 5.56 68,462 2,682 5.22
Other borrowings (3)........................... 47,645 2,095 5.86 29,256 1,102 5.02
-------- ------ -------- ------
Total interest-bearing liabilities......... 177,317 6,722 5.05 150,237 5,046 4.48
------ ------
Demand deposits................................ 24,640 19,229
Noninterest-bearing liabilities................ 3,495 3,242
Stockholders' equity........................... 24,841 26,569
-------- --------
Total liabilities and stockholders' equity. $ 230,293 $ 199,277
========= =========
Net interest income............................... $ 6,893 $ 6,007
======== ========
Interest-rate spread (4).......................... 3.21% 3.29%
==== ====
Net interest margin (5)........................... 4.18% 4.22%
==== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities........... 1.24 1.26
==== ====
</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.
15
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Comparison of the Three Months Ended September 30, 2000 and 1999
General. Net earnings for the three months ended September 30, 2000 were
$469,000 or $.23 basic and diluted earnings per share compared to net
earnings of $262,000 or $.12 basic and diluted earnings per share for the
three months ended September 30, 1999. 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 expense and the provision
for income taxes.
Interest Income and Expense. Interest income increased by $945,000, or 24.4%
from $3.9 million for the three months ended September 30, 1999 to $4.8
million for the three months ended September 30, 2000. Interest income on
loans increased $729,000, or 22.9% primarily due to an increase in the
average loan portfolio balance from $148.5 million for the three months
ended September 30, 1999 to $168.7 million for the comparable period in
2000, and an increase in the average yield earned from 8.58% in 1999 to
9.28% in 2000. Interest income on securities increased $231,000 or 37.0%
primarily due to an increase in the average securities portfolio balance
of $11.1 million and an increase in the yield earned from 5.59% in 1999 to
6.13% in 2000.
Interest expense on deposits increased $286,000 or 21.1%, to $1.6 million
for the three months ended September 30, 2000 from $1.4 million for the
three months ended September 30, 1999. Interest expense on deposits
increased due to an increase in the average rate paid on deposits from
4.39% in 1999 to 4.98% in 2000, and an increase in the average balance of
deposits from $123.7 million during 1999 to $131.9 million during 2000.
Interest expense on other borrowings increased $344,000 to $788,000 for
the three months ended September 30, 2000 from $444,000 for the three
months ended September 30, 1999. Interest expense on borrowings increased
due to an increase in the average balance from $34.7 million to $50.1
million for three months ended September 30, 2000 compared to the same
period in 1999 and an increase in the average rate paid on borrowings from
5.12% to 6.30% 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 $175,000
for the three months ended September 30, 2000 compared to $165,000 for the
comparable period in 1999. Management believes the balance in the
allowance for loan losses of $1.8 million at September 30, 2000 is
adequate.
Noninterest Income. Noninterest income increased $16,000 primarily due to an
increase of $27,000 in service charges on deposit accounts for the three
months ended September 30, 2000 compared to the same period in 1999.
Noninterest Expenses. Noninterest expenses increased $36,000 over the three
month period from the previous year, primarily due to increases in
salaries and employee benefits of $66,000 and an increase in other
expenses of $28,000, relating to the overall growth of the Company,
partially offset by a decrease in advertising and promotion of $34,000 and
a decrease in professional fees of $28,000.
Provision for Income Taxes. The income tax provision for the three months
ended September 30, 2000 was $232,000 (an effective rate of 33.1%)
compared to $154,000 (an effective rate of 37.0%) for the comparable 1999
period.
16
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Comparison of the Nine Months Ended September 30, 2000 and 1999
General. Net earnings for the nine months ended September 30, 2000 were
$1,257,000 or $.62 basic and diluted earnings per share compared to net
earnings of $895,000 or $.40 basic and diluted earnings per share for the
nine months ended September 30, 1999. 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 $2.6 million or
23.6% from $11.0 million for the nine months ended September 30, 1999 to
$13.6 million for the nine months ended September 30, 2000. Interest
income on loans increased $1.8 million, or 19.5% primarily due to an
increase in the average loan portfolio balance of $19.1 million from
$141.8 million for the nine months ended September 30, 1999 to $160.9
million for the comparable period in 2000 and by an increase in the
average yield earned from 8.58% in 1999 to 9.05% in 2000. Interest income
on securities increased $688,000 or 37.3% primarily due to an increase in
the average securities portfolio balance of $9.6 million and an increase
in the yield earned from 5.37% in 1999 to 6.10% in 2000.
Interest expense on deposits increased $683,000, or 17.3% from $3.9
million for the nine months ended September 30, 1999 to $4.6 million for
the nine months ended September 30, 2000. Interest expense on deposits
increased due to an increase in the weighted-average rate paid from 4.35%
in 1999 to 4.76% in 2000 and an increase in the average balance, from
$121.0 million in 1999 to $129.7 million in 2000.
Interest expense on other borrowings increased $993,000 to $2.1 million
for the nine months ended September 30, 2000 from $1.1 million for the
nine months ended September 30, 1999. Interest expense on borrowings
increased due to a increase in the average balance from $29.3 million
during 1999 to $47.6 million during 2000 and an increase in the
weighted-average rate paid from 5.02% for the nine months ended September
30, 1999 to 5.86% for the same period in 2000.
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 $475,000 for the nine months ended September 30, 1999 to $505,000 for
the nine months ended September 30, 2000. Management believes the balance
in the allowance for loan losses of $1.8 million at September 30, 2000 is
adequate.
Noninterest Income. Noninterest income decreased $108,000 primarily due to
losses incurred on the sale of securities available for sale of $124,000
in 2000 compared to gains of $38,000 in 1999, partially offset by an
increase of $97,000 in service charges on deposit accounts during the nine
months ended September 30, 2000 compared to the comparable period in 1999.
Noninterest Expense. Noninterest expense increased $400,000 for the nine
months ended September 30, 2000 compared to the same period in 1999
primarily due to increases of $376,000 in salaries and employee benefits,
occupancy expense of $31,000 and $66,000 in other expenses, all relating
to the overall growth of the Company, partially offset by a decrease of
$73,000 in advertising and promotion and a decrease of $46,000 in
professional fees.
Provision for Income Taxes. The income tax provision for the nine months
ended September 30, 2000 was $590,000 (an effective rate of 33.4%)
compared to $526,000 (an effective rate of 37.0%) for the comparable 1999
period.
17
<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, 1999.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceeding to which Pointe Financial
Corporation or any of its subsidiaries is a party or to which any of their
property is subject.
18
<PAGE>
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report.*
<TABLE>
<S> <C>
2.1 Plan of Merger and Merger Agreement dated February 14, 1997 by
and between Pointe Federal Savings Bank and Pointe Bank
(Exhibit 2.1 to the Registrant's Form SB-2 Registration
Statement, File No. 333-49835, as initially filed with the
Securities and Exchange Commission on April 9, 1998 [the
"Registration Statement"]).
3.1 Articles of Incorporation of the Registrant (Exhibit 3.1 to the Registration Statement).
3.2 By-Laws of the Registrant (Exhibit 3.2 to the Registration Statement).
4.1 Specimen Common Stock Certificate (Exhibit 4.1 to the Registration Statement).
10.1** 1994 Non-Statutory Stock Option Plan (Exhibit 10.1 to the Registration Statement).
10.2** Deferred Compensation Plan (Exhibit 10.2 to the Registration Statement).
10.3 Office Lease Agreement dated October 8, 1986 by and between Centrum Pembroke, Inc. and Flamingo
Bank (Exhibit 10.3 to the Registration Statement).
10.4 Lease dated as of July 15, 1992 between Konrad Ulmer and Pointe Savings Bank (Exhibit 10.4 to
the Registration Statement).
10.5 Lease Agreement dated January 23, 1995 by and between Hollywood
Associates VI and Pointe Bank (Exhibit 10.5 to the Registration
Statement).
10.6 Credit Agreement dated August 18, 1997 between Independent Bankers' Bank of Florida and Pointe
Bank (Exhibit 10.6 to the Registration Statement).
10.7 Credit Agreement dated October 14, 1997 between SunTrust Bank/Miami, N.A. and Pointe Bank
(Exhibit 10.7 to the Registration Statement).
10.8 Agreement for Advances and Security Agreement with Blanket
Floating Lien dated November 24, 1997 between Pointe Bank and
the Federal Home Loan Bank of Atlanta (Exhibit 10.8 to the
Registration Statement).
10.9 Equipment Sales and Software License Agreements between Information Technology, Inc. and Pointe
Financial Corporation (Exhibit 10.9 to the Registration Statement).
10.10 Master Equipment Lease Agreement dated May 7, 1997 between
Leasetec Corporation and Pointe Financial Corporation (Exhibit
10.10 to the Registration Statement).
10.11** Letter Agreement dated March 9, 1995 between Pointe Financial Corporation and R. Carl Palmer,
Jr. (Exhibit 10.11 to the Registration Statement).
10.12** 1998 Incentive Compensation and Stock Award Plan.
10.13*** Employment agreement between the company and R. Carl Palmer, Jr.
10.14*** Employment agreement between the company and Beverly P. Chambers
10.15*** Employment agreement between the company and Bradley R. Meredith
27 Financial Data Schedule (for SEC use only)
---------------
* Exhibits followed by a parenthetical reference are incorporated
herein by reference from the documents described therein.
** Exhibits 10.1, 10.2, 10.11 and 10.12 are compensatory plans or arrangements.
*** Contracts with Management.
(b) On July 13, 2000 the Company filed a Form 8-K in connection with an
amendment to the 1998 Directors Deferred Compensation Plan increasing the
number of authorized shares to 122,500.
</TABLE>
19
<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: November 1, 2000 By: /s/ R. Carl Palmer, Jr
----------------- --------------------------
R. Carl Palmer, Jr.,
President and Chief Executive
Officer
Date: November 1, 2000 By: /s/ Bradley R. Meredith
------------------------- ---------------------------
Bradley R. Meredith,
Senior Vice President and
Chief Financial Officer
20
