================================================================================
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934.
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
or
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from___________to
Commission file number 000-23713
---------
GULF WEST BANKS, INC.
---------------------
(Exact Name of Registrant as Specified in its Charter)
Florida 59-3276590
- -------------------------------- --------------
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
425 22nd Avenue, North
St. Petersburg, Florida 33704
-----------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(727) 894-5696
--------------------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such quarterly reports), and (2) has been subject to such
filing requirements for the past 90 days:
YES [X] NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common stock, par value $1 per share 7,050,491 shares
- ------------------------------------ ---------------------------
(CLASS) OUTSTANDING AT MARCH 31, 2000
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
<TABLE>
<CAPTION>
GULF WEST BANKS, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS PAGE
----
<S> <C>
Condensed Consolidated Balance Sheets -
March 31, 2000 (unaudited) and December 31, 1999...........................................................2
Condensed Consolidated Statements of Earnings -
Three months ended March 31, 2000 and 1999 (unaudited).....................................................3
Condensed Consolidated Statement of Stockholders' Equity -
Three Months Ended March 31, 2000 (unaudited)..............................................................4
Condensed Consolidated Statements of Cash Flows -
Three Months ended March 31, 2000 and 1999 (unaudited).....................................................5
Notes to Condensed Consolidated Financial Statements (unaudited)...........................................6-7
Review By Independent Certified Public Accountants...........................................................8
Report on Review by Independent Certified Public Accountants.................................................9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................................................................10-13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.............................................14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS......................................................................................14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.......................................................................15
SIGNATURES.....................................................................................................16
EXHIBIT INDEX..................................................................................................17
</TABLE>
1
<PAGE>
GULF WEST BANKS, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AT
MARCH 31, DECEMBER 31,
ASSETS 2000 1999
---- ----
(UNAUDITED)
<S> <C> <C>
Cash and due from banks............................................................. $ 9,694 11,924
Federal funds sold and securities purchased under agreements to resell.............. 18,018 12,323
-------- --------
Total cash and cash equivalents............................................ 27,712 24,247
Securities available for sale....................................................... 76,655 77,857
Loans receivable, net of allowance for loan losses of $2,934 and $2,849............. 290,733 283,225
Cash surrender value of bank owned life insurance................................... 12,993 12,857
Premises and equipment, net......................................................... 11,906 11,903
Federal Home Loan Bank stock, at cost............................................... 1,228 -
Accrued interest receivable......................................................... 2,099 2,069
Deferred tax asset.................................................................. 1,863 1,639
Goodwill, net....................................................................... 1,523 1,547
Foreclosed real estate, net......................................................... 317 353
Other assets........................................................................ 1,290 905
-------- ---------
Total...................................................................... $ 428,319 416,602
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Noninterest-bearing demand deposits.............................................. 63,691 55,410
Savings, NOW deposits and money-market deposits.................................. 134,910 122,939
Time deposits.................................................................... 171,533 178,218
------- -------
Total deposits............................................................. 370,134 356,567
Other borrowings................................................................. 24,742 27,417
Other liabilities................................................................ 2,261 2,284
-------- ---------
Total liabilities.......................................................... 397,137 386,268
------- -------
Stockholders' equity:
Class A preferred stock, $5 par value, authorized
1,000,000 shares, none issued or outstanding.................................. - -
Common stock, $1 par value; 25,000,000 shares
authorized, 7,050,491 and 7,006,595 issued and outstanding.................... 7,051 7,007
Additional paid-in capital....................................................... 24,430 24,206
Retained earnings................................................................ 1,360 583
Accumulated other comprehensive income (loss).................................... (1,659) (1,462)
-------- ---------
Total stockholders' equity................................................. 31,182 30,334
------- --------
Total...................................................................... $ 428,319 416,602
======= =======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
GULF WEST BANKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
2000 1999
---- ----
(UNAUDITED)
<S> <C> <C>
Interest income:
Loans receivable.................................................................. $ 6,050 4,916
Interest on securities............................................................ 1,235 912
Other interest-earning assets..................................................... 193 175
------------ ------------
Total interest income......................................................... 7,478 6,003
----------- -----------
Interest expense:
Deposits.......................................................................... 3,163 2,640
Other borrowings.................................................................. 345 175
------------ ------------
Total interest expense........................................................ 3,508 2,815
----------- -----------
Net interest income........................................................... 3,970 3,188
Provision for loan losses............................................................. 223 256
------------ ------------
Net interest income after provision for loan losses........................... 3,747 2,932
----------- -----------
Noninterest income:
Service charges on deposit accounts............................................... 371 311
Leasing fees and commissions...................................................... 154 165
Income earned on bank owned life insurance........................................ 136 150
Other............................................................................. 211 150
------------ ------------
Total noninterest income...................................................... 872 776
------------ ------------
Noninterest expense:
Salaries and employee benefits.................................................... 2,004 1,554
Occupancy expense................................................................. 648 576
Data processing .................................................................. 156 198
Advertising .................................................................. 91 83
Stationery and supplies........................................................... 82 84
Other............................................................................. 478 451
------------ ------------
Total noninterest expense..................................................... 3,459 2,946
----------- -----------
Earnings before income taxes.......................................................... 1,160 762
Income taxes.................................................................. 383 209
------------ ------------
Net earnings.......................................................................... $ 777 553
============ ============
Basic earnings per share.............................................................. $ 0.11 0.08
============ ============
Weighted-average number of shares outstanding for basic............................... 7,024,454 6,989,390
========= =========
Diluted earnings per share............................................................ $ 0.11 0.08
============ ============
Weighted-average number of shares outstanding for diluted............................. 7,191,321 7,174,302
============ ============
Dividends per share .................................................................. $ - -
============ ============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
GULF WEST BANKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMPRE-
COMMON STOCK ADDITIONAL HENSIVE TOTAL
-------------- PAID-IN RETAINED INCOME STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS (LOSS) EQUITY
------ ------ ------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999............ 7,006,595 $ 7,007 24,206 583 (1,462) 30,334
------
Comprehensive income:
Net earnings (unaudited)............. - - - 777 - 777
Net change in unrealized
loss on securities
available for sale,
net of tax of $118
(unaudited)...................... - - - - (197) (197)
------
Comprehensive income (unaudited)..... 580
Shares issued under stock
option plan (unaudited).............. 22,551 23 90 - - 113
Shares sold to employees
(unaudited).......................... 21,345 21 134 - - 155
---------- ------ ------ ------- -------- -------
Balance at March 31, 2000
(unaudited).......................... 7,050,491 $ 7,051 24,430 1,360 (1,659) 31,182
========= ===== ====== ===== ===== ======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
GULF WEST BANKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
2000 1999
---- ----
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net earnings....................................................................... $ 777 553
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation .................................................................. 277 244
Provision for loan losses...................................................... 223 256
Deferred income tax credit..................................................... (106) (141)
Income from mortgage banking activity.......................................... (18) (4)
Proceeds from sales of loans held for sale..................................... 1,534 304
Originations of loans held for sale............................................ (1,516) (300)
Net amortization of fees, premiums and discounts............................... 103 63
Increase in accrued interest receivable........................................ (30) (279)
Increase in other assets....................................................... (497) (481)
(Decrease) increase in other liabilities....................................... (23) 608
-------- -------
Net cash provided by operating activities................................. 724 823
------- -------
Cash flows from investing activities:
Purchase of securities available for sale.......................................... (3,115) (5,019)
Net proceeds from maturity, call, sales of securities available for sale........... 2,083 5,355
Principal repayments on securities available for sale.............................. 1,849 4,070
Net increase in loans.............................................................. (7,728) (62,670)
Purchase of Federal Home Loan Bank stock........................................... (1,228) -
Net purchase of premises and equipment............................................. (280) (522)
------ -------
Net cash used in investing activities..................................... (8,419) (58,786)
------ ------
Cash flows from financing activities:
Net increase in deposits........................................................... 13,567 54,904
Net (decrease) increase of other borrowings........................................ (2,675) 1,898
Issuance of common stock........................................................... 268 83
-------- --------
Net cash provided by financing activities................................. 11,160 56,885
------ ------
Net increase (decrease) in cash and cash equivalents...................... 3,465 (1,078)
Cash and cash equivalents at beginning of period........................................ 24,247 27,699
------ ------
Cash and cash equivalents at end of period.............................................. $ 27,712 26,621
====== ======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest .................................................................. $ 3,498 2,767
====== =======
Income taxes .................................................................. $ 175 83
======= ========
Noncash transactions:
Accumulated other comprehensive income (loss), net change in
unrealized (loss) gain on securities available for sale, net of tax... $ (197) (111)
======= =======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
GULF WEST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. GENERAL. In the opinion of the management of Gulf West Banks, Inc. (the
"Company "or "Gulf West"), the accompanying condensed consolidated
financial statements contain all adjustments (consisting principally of
normal recurring accruals) necessary to present fairly the financial
position at March 31, 2000 and the results of operations and cash flows
for the three-month periods ended March 31, 2000 and 1999. The results
of operations and other data for the three-month period ended March 31,
2000 are not necessarily indicative of results that may be expected for
the year ending December 31, 2000.
2. LOAN IMPAIRMENT AND LOSSES. The average net investment in collateral
dependent impaired loans and interest income recognized and received
on these loans is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
2000 1999
---- ----
(IN THOUSANDS)
<S> <C> <C>
Gross loans with no related allowance, at end of period...................... $ 2,546 2,546
===== =====
Average net investment in impaired loans..................................... $ 2,546 -
===== =====
Interest income recognized on impaired loans................................. $ 51 -
===== =====
Interest income received on impaired loans................................... $ 85 -
===== =====
The activity in the allowance for loan losses is as follows:
THREE MONTHS ENDED
MARCH 31,
--------------------
2000 1999
---- ----
(IN THOUSANDS)
Balance at beginning of period............................................ $ 2,849 2,436
Provision for loan losses................................................. 223 256
Net charge-offs........................................................... (138) (170)
----- -----
Balance at end of period.................................................. $ 2,934 2,522
===== =====
(continued)
</TABLE>
6
<PAGE>
GULF WEST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
3. EARNINGS PER SHARE ("EPS"). The following is a reconciliation of the
numerators and denominators of the basic and diluted earnings per share
computations. Options to purchase 227,660 and 2,310 shares of common
stock between $7.79 and $11.25 a share issued in 1999 and 1998 were not
included in the 2000 and 1999, respectively, computation of diluted EPS
because the options exercise price was not less than the average market
price of the common shares. These options expire between June 17, 2008
and December 16, 2009. (Dollars are in thousands, except per share
amounts.)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------------------------
2000 1999
------------------------------- -----------------
WEIGHTED- PER WEIGHTED- PER
AVERAGE SHARE AVERAGE SHARE
EARNINGS SHARES AMOUNT EARNINGS SHARES AMOUNT
-------- ------ ------ -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net earnings available to
common stockholders........................ $ 777 7,024,454 $ .11 $ 553 6,989,390 $ .08
=== ===
Effect of dilutive securities-
Incremental shares from assumed
exercise of options........................ - 166,867 - 184,912
------ --------- ---- ---------
Diluted EPS:
Net earnings available to
common stockholders
and assumed conversions.................... $ 777 7,191,321 $ .11 $ 553 7,174,302 $ .08
=== ========= === === ========= ===
4. YEAR 2000 ISSUES. The Company's operating and financial systems have been found to be compliant; the "Y2K
Problem" has not adversely affected the Company's operations nor does management expect that it will.
</TABLE>
7
<PAGE>
GULF WEST BANKS, INC. AND SUBSIDIARIES
REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Hacker, Johnson, Cohen & Grieb PA, the Company's independent certified public
accountants, have made a limited review of the financial data as of March 31,
2000, and for the three-month periods ended March 31, 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.
8
<PAGE>
REPORT ON REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Gulf West Banks, Inc.
St. Petersburg, Florida:
We have reviewed the accompanying condensed consolidated balance sheet of
Gulf West Banks, Inc. and Subsidiaries (the "Company") as of March 31, 2000, and
the related condensed consolidated statements of earnings and cash flows for the
three-month periods ended March 31, 2000 and 1999, and the condensed
consolidated statement of stockholders' equity for the three-month period ended
March 31, 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, 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, COHEN & GRIEB PA
Tampa, Florida
April 12, 2000
9
<PAGE>
GULF WEST BANKS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Gulf West Banks, Inc. ("Gulf West" or the "Company") is a one-bank holding
company registered under the Bank Holding Company Act of 1956, as amended, and
was incorporated under the laws of the State of Florida effective October 24,
1994. Gulf West's principal assets are all of the issued and outstanding shares
of capital stock of Mercantile Bank, a Florida state banking corporation which
is headquartered in St. Petersburg, Florida ("Mercantile"), and all of the
issued and outstanding shares of Mercantile Bank Leasing, Inc. ("MBL"), a
Florida corporation located in Tampa, Florida, which is engaged in equipment
leasing.
Through its subsidiaries, Mercantile and MBL, the Company provides a wide range
of personal and commercial banking services to customers located primarily in
the Florida counties of Pinellas, Hillsborough, and Pasco. The Company targets
niche markets that are underserved by the larger regional banks. These markets
include small to mid-size businesses and professional offices as well as
individuals who expect a higher level of personalized attention.
The Company has local directorship and management actively involved in its
market areas and committed to the economic growth and development of those
markets. Local management allows the Company to provide faster, more responsive
and flexible decision making which management believes is important to its
targeted customer base.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 2000, the Company's primary sources of
funds consisted of deposit inflows and proceeds from the maturity and principal
repayment of securities available for sale. The Company used its capital
resources principally to fund existing and continuing loan commitments and to
purchase securities. At March 31, 2000, the Company had commitments to originate
loans totaling $6.7 million. Management believes the Company has adequate
resources to fund all its commitments and that substantially all of its existing
commitments will be funded in 2000. Management also believes that, if so
desired, it can adjust the rates on time deposits to retain deposits in a
changing interest rate environment.
10
<PAGE>
GULF WEST BANKS, INC. AND SUBSIDIARIES
As a Florida-chartered commercial bank, Mercantile is required to maintain a
liquidity reserve of at least 15% of its total transaction accounts and 8% of
its total nontransaction accounts less those deposits of certain public funds.
The liquidity reserve may consist of cash on hand, cash on demand with other
correspondent banks and other investments and short-term marketable securities
as defined, such as federal funds sold and United States securities or
securities guaranteed by the United States. As of March 31, 2000, the Bank had
liquidity of approximately $70.6 million, or approximately 20% of total deposits
(net of secure deposits).
Management believes Mercantile was in compliance with all minimum capital
requirements which it was subject to at March 31, 2000.
The following ratios and rates are presented for the dates and periods
indicated:
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED YEAR ENDED ENDED
MARCH 31, DECEMBER 31, MARCH 31,
2000 1999 1999
----------- ----------- ------------
<S> <C> <C> <C>
Average equity as a percentage
of average assets.......................................... 7.30% 7.59% 8.07%
Equity to total assets at end of period....................... 7.28% 7.28% 7.56%
Return on average assets (1).................................. 0.74% 0.79% 0.61%
Return on average equity (1).................................. 10.16% 10.35% 7.56%
Noninterest expenses to average assets (1).................... 3.30% 3.27% 3.25%
Nonperforming loans and foreclosed real estate as
a percentage of total assets at end of period.............. 0.11% 0.80% 0.19%
</TABLE>
(1) Annualized for the three months ended March 31, 2000 and 1999.
(continued)
11
<PAGE>
GULF WEST BANKS, INC. 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 income; (iv) interest-rate spread; and (v) net
interest margin.
THREE MONTHS ENDED MARCH 31,
----------------------------
<TABLE>
<CAPTION>
2000 1999
------------------------------- ----------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE AND YIELD/ AVERAGE AND YIELD/
BALANCE DIVIDENDS RATE BALANCE DIVIDENDS RATE
------- --------- ------- -------- --------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans (1)..................................... $ 288,633 6,050 8.38% $ 239,451 4,916 8.21%
Securities.................................... 76,951 1,235 6.42 63,701 912 5.73
Other interest-earning assets (2)............. 13,519 193 5.71 15,214 175 4.60
-------- ------ -------- ------
Total interest-earning assets............. 379,103 7,478 7.89 318,366 6,003 7.54
----- -----
Noninterest-earning assets....................... 40,538 43,769
-------- -------
Total assets.............................. $ 419,641 $ 362,135
======= =======
Interest-bearing liabilities:
Savings, NOW, money-market deposit
accounts.................................. 131,394 873 2.66 114,741 652 2.27
Time deposit.................................. 174,153 2,290 5.26 154,619 1,988 5.14
Borrowings ........................... 25,115 345 5.49 16,250 175 4.31
-------- ------ -------- -------
Total interest-bearing liabilities........ 330,662 3,508 4.24 285,610 2,815 3.94
----- -----
Noninterest-bearing liabilities.................. 58,365 47,279
Stockholders' equity............................. 30,614 29,246
------- --------
Total liabilities and stockholders' equity $ 419,641 $ 362,135
======= =======
Net interest income.............................. $ 3,970 $ 3,188
===== =====
Interest-rate spread (3)......................... 3.65% 3.60%
==== ====
Net interest margin (4).......................... 4.19% 4.01%
==== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities.......... 1.15 1.11
==== ====
</TABLE>
(1) Includes loans on nonaccrual status.
(2) Includes Federal Home Loan Bank stock and federal funds sold.
(3) Interest-rate spread represents the difference between the average
yield on interest-earning assets and the average rate of
interest-bearing liabilities.
(4) Net interest margin is net interest income divided by average
interest-earning assets.
12
<PAGE>
GULF WEST BANKS, INC. AND SUBSIDIARIES
COMPARISON OF THREE-MONTH PERIODS ENDED MARCH 31, 2000 AND 1999
GENERAL. Net earnings for the three months ended March 31, 2000 were $777,000
or $0.11 per basic and diluted share compared to $553,000 or $0.08 per
basic and diluted share for 1999. The increase in earnings was primarily
due to an increase in interest income associated with the purchase of
several large loan participations in 1999.
INTEREST INCOME AND EXPENSE. Interest income increased by $1.5 million to
$7.5 million for the three-month period ended March 31, 2000 from $6.0
million for the three months ended March 31, 1999. Interest on loans
increased $1.1 million to $6.1 million due to an increase in the average
loan portfolio balance and an increase in the weighted-average yield
earned in 2000. Interest on securities increased $.3 million to $1.2
million for the three months ended March 31, 2000 due to an increase in
the average securities portfolio in 2000 and an increase in the average
yield earned in 2000.
Interest expense on deposits increased $.6 million to $3.2 million for
the three months ended March 31, 2000 from $2.6 million in 1999. The
increase is due to an increase in the average interest-bearing deposits
in 2000 and an increase in the weighted-average rate paid on these
deposits.
PROVISION FOR LOAN LOSSES. The provision for loan losses is charged to income
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 for loan losses was
$223,000 for the three-month period ended March 31, 2000 compared to
$256,000 for the same period in 1999. The allowance for loan losses is
$2.9 million at March 31, 2000. While management believes that its
allowance for loan losses is adequate as of March 31, 2000, future
adjustments to the Company's allowance for loan losses may be necessary
if economic conditions differ substantially from the assumptions used in
making the initial determination.
NONINTEREST INCOME. Noninterest income increased to $872,000 in 2000 from
$776,000 for the three months ended March 31, 1999. Service charges on
deposits increased in 2000 due to the growth in deposit accounts. The
increase was partially offset by a decrease in leasing fees and
commissions and a decrease in income earned on bank owned life insurance.
NONINTEREST EXPENSE. Total noninterest expense increased to $3.5 million for
the three months ended March 31, 2000 from $2.9 million for the
comparable period ended March 31, 1999, primarily from increases in
employee compensation and occupancy expense.
INCOME TAXES. The income tax provision for the three months ended March 31,
2000 was $383,000 or 33.0% of income before income taxes compared to
$209,000 or 27.4% for the three months ended March 31, 1999.
13
<PAGE>
GULF WEST BANKS, INC. 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 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
Gulf West and Mercantile are parties to various legal proceedings in the
ordinary course of business. Management does not believe that there is any
pending or threatened proceeding against Gulf West or Mercantile which, if
determined adversely, would have a material adverse effect on the business,
results of operations, or financial position of Gulf West or Mercantile.
14
<PAGE>
GULF WEST BANKS, INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
- -------------- -----------------------
<S> <C> <C>
2(1) Amended and Restated Agreement and Plan of Merger by and among Citizens
National Bank and Trust Company, Inc., Gulf West Banks, Inc. and
Mercantile Bank
3.1(1) Articles of Incorporation of Gulf West Banks, Inc.
3.2(1) Bylaws of Gulf West Banks, Inc.
3.3(4) Articles of Amendment to Articles of Incorporation of Gulf West Banks,
Inc.
10.1(1) Form of Registration Rights Agreement with Gordon W. Campbell and John
Wm. Galbraith
10.2(1) Salary Continuation Agreements with Gordon W. Campbell, Barry K. Miller,
and Robert A. Blakley
10.3(1) Employment Contract with Gordon W. Campbell
10.4(1) Stock Option Plan
10.5(3) Agreement to transfer fiduciary accounts to SunTrust Bank, Nature Coast
10.6(5) Executive Officer Bonus Program
11(2) Statement regarding computation of per share earnings
27 Financial Data Schedule (for SEC use only)
</TABLE>
(1) incorporated by reference to the exhibits included in Amendment No. 2
to Gulf West"s S-4 Registration Statement, as filed with the Securities and
Exchange Commission on December 4, 1997 (Registration No. 333-37307).
(2) contained in Note 3 to the consolidated financial statements set forth
in this Form 10-Q.
(3) incorporated by reference to the exhibits included in Gulf West"s Form
10-Q for the quarter ended March 31, 1998, as filed with the Securities and
Exchange Commission on May 8, 1998.
(4) incorporated by reference to the exhibits included in Gulf West"s Form
10-Q for the quarter ended June 30, 1999, as filed with the Securities and
Exchange Commission on July 27, 1999.
(5) incorporated by reference to the exhibits included in Gulf West's Form
10-K for the year ended December 31, 1999 as filed with the Securities and
Exchange Commission on March 20, 2000.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company during the quarter ended
March 31, 2000.
15
<PAGE>
GULF WEST BANKS, INC. AND SUBSIDIARIES
SIGNATURES
Under 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.
GULF WEST BANKS, INC.
(Registrant)
Date: May , 2000 By: /s/Gordon W. Campbell
---------------------- ----------------------
Gordon W. Campbell, Chairman of the
Board and President
(Chief Executive Officer)
Date: May , 2000 By: /s/Barry K. Miller
--------------------- -----------------------------------
Barry K. Miller, Executive Vice
President/Secretary
(Chief Financial Officer)
16
<PAGE>
GULF WEST BANKS, INC. AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
- -------------- -----------------------
<S> <C> <C>
2(1) Amended and Restated Agreement and Plan of Merger by and among Citizens
National Bank and Trust Company, Inc., Gulf West Banks, Inc. and
Mercantile Bank
3.1(1) Articles of Incorporation of Gulf West Banks, Inc.
3.2(1) Bylaws of Gulf West Banks, Inc.
3.3(4) Articles of Amendment to Articles of Incorporation of Gulf West Banks,
Inc.
10.1(1) Form of Registration Rights Agreement with Gordon W. Campbell and John
Wm. Galbraith
10.2(1) Salary Continuation Agreements with Gordon W. Campbell, Barry K. Miller,
and Robert A. Blakley
10.3(1) Employment Contract with Gordon W. Campbell
10.4(1) Stock Option Plan
10.5(3) Agreement to transfer fiduciary accounts to SunTrust Bank, Nature Coast
10.6(5) Executive Officer Bonus Program
11(2) Statement regarding computation of per share earnings
27 Financial Data Schedule (for SEC use only)
</TABLE>
(1) incorporated by reference to the exhibits included in Amendment No. 2
to Gulf West"s S-4 Registration Statement, as filed with the Securities and
Exchange Commission on December 4, 1997 (Registration No. 333-37307).
(2) contained in Note 3 to the consolidated financial statements set forth
in this Form 10-Q.
(3) incorporated by reference to the exhibits included in Gulf West"s Form
10-Q for the quarter ended March 31, 1998, as filed with the Securities and
Exchange Commission on May 8, 1998.
(4) incorporated by reference to the exhibits included in Gulf West"s Form
10-Q for the quarter ended June 30, 1999, as filed with the Securities and
Exchange Commission on July 27, 1999.
(5) incorporated by reference to the exhibits included in Gulf West's Form
10-K for the year ended December 31, 1999 as filed with the Securities and
Exchange Commission on March 20, 2000.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from Form 10-Q
for the period ended March 31, 2000 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 9,694
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 18,018
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 76,655
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 293,667
<ALLOWANCE> 2,934
<TOTAL-ASSETS> 428,319
<DEPOSITS> 370,134
<SHORT-TERM> 24,742
<LIABILITIES-OTHER> 2,261
<LONG-TERM> 0
0
0
<COMMON> 7,051
<OTHER-SE> 24,131
<TOTAL-LIABILITIES-AND-EQUITY> 428,319
<INTEREST-LOAN> 6,050
<INTEREST-INVEST> 1,235
<INTEREST-OTHER> 193
<INTEREST-TOTAL> 7,478
<INTEREST-DEPOSIT> 3,163
<INTEREST-EXPENSE> 3,508
<INTEREST-INCOME-NET> 3,747
<LOAN-LOSSES> 223
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,459
<INCOME-PRETAX> 1,160
<INCOME-PRE-EXTRAORDINARY> 1,160
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 777
<EPS-BASIC> .11
<EPS-DILUTED> .11
<YIELD-ACTUAL> 3.65
<LOANS-NON> 173
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,849
<CHARGE-OFFS> 140
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 2,934
<ALLOWANCE-DOMESTIC> 2,934
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
