================================================================================
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 June 30, 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 7,053,826 SHARES
------------------------------------ ----------------------------
(CLASS) OUTSTANDING AT JUNE 30, 2000
================================================================================
<PAGE>
GULF WEST BANKS, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS PAGE
----
Condensed Consolidated Balance Sheets -
June 30, 2000 (unaudited) and December 31, 1999.........................2
Condensed Consolidated Statements of Earnings -
Three and Six months ended June 30, 2000 and 1999 (unaudited)...........3
Condensed Consolidated Statement of Stockholders' Equity -
Six Months Ended June 30, 2000 (unaudited)..............................4
Condensed Consolidated Statements of Cash Flows -
Six Months ended June 30, 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.............................................10-15
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..........16
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS...................................................17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K....................................18
SIGNATURES..................................................................19
EXHIBIT INDEX...............................................................20
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>
JUNE 30, DECEMBER 31,
ASSETS 2000 1999
--------- -----------
(UNAUDITED)
<S> <C> <C>
Cash and due from banks ............................................... $ 11,406 11,924
Federal funds sold and securities purchased under agreements to resell 13,358 12,323
--------- ---------
Total cash and cash equivalents .............................. 24,764 24,247
Securities available for sale ......................................... 78,642 77,857
Loans receivable, net of allowance for loan losses of $2,993 and $2,849 295,758 283,225
Cash surrender value of bank owned life insurance ..................... 13,123 12,857
Premises and equipment, net ........................................... 12,036 11,903
Federal Home Loan Bank stock, at cost ................................. 1,228 --
Accrued interest receivable ........................................... 2,075 2,069
Deferred tax asset .................................................... 1,878 1,639
Goodwill, net ......................................................... 1,499 1,547
Foreclosed real estate, net ........................................... 236 353
Other assets .......................................................... 982 905
--------- ---------
Total ........................................................ $ 432,221 416,602
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Noninterest-bearing demand deposits ................................ 65,955 55,410
Savings, NOW deposits and money-market deposits .................... 135,111 122,939
Time deposits ...................................................... 166,437 178,218
--------- ---------
Total deposits ............................................... 367,503 356,567
Other borrowings ................................................... 30,377 27,417
Other liabilities .................................................. 2,157 2,284
--------- ---------
Total liabilities ............................................ 400,037 386,268
--------- ---------
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, 7,053,826 and 7,006,595 issued and outstanding ...... 7,054 7,007
Additional paid-in capital ......................................... 24,442 24,206
Retained earnings .................................................. 2,370 583
Accumulated other comprehensive income (loss) ...................... (1,682) (1,462)
--------- ---------
Total stockholders' equity ................................... 32,184 30,334
--------- ---------
Total ........................................................ $ 432,221 416,602
========= =========
</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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- -----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $ 6,316 5,485 12,365 10,400
Interest on securities 1,169 1,053 2,404 1,965
Other interest-earning assets 191 87 384 263
---------- ---------- ---------- ----------
Total interest income 7,676 6,625 15,153 12,628
---------- ---------- ---------- ----------
Interest expense:
Deposits 3,232 2,798 6,395 5,438
Other borrowings 317 200 662 375
---------- ---------- ---------- ----------
Total interest expense 3,549 2,998 7,057 5,813
---------- ---------- ---------- ----------
Net interest income 4,127 3,627 8,096 6,815
Provision for loan losses 57 98 280 354
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 4,070 3,529 7,816 6,461
---------- ---------- ---------- ----------
Noninterest income:
Service charges on deposit accounts 365 350 736 661
Leasing fees and commissions 143 228 298 392
Income earned on bank owned life insurance 130 152 266 302
Other 229 180 440 299
---------- ---------- ---------- ----------
Total noninterest income 867 910 1,740 1,654
---------- ---------- ---------- ----------
Noninterest expense:
Salaries and employee benefits 2,027 1,710 4,031 3,264
Occupancy 673 613 1,320 1,156
Data processing 83 207 239 406
Advertising 82 89 173 171
Stationery and supplies 106 113 188 198
Other 428 447 907 898
---------- ---------- ---------- ----------
Total noninterest expense 3,399 3,179 6,858 6,093
---------- ---------- ---------- ----------
Earnings before income taxes 1,538 1,260 2,698 2,022
Income taxes 528 392 911 601
---------- ---------- ---------- ----------
Net earnings $ 1,010 868 1,787 1,421
========== ========== ========== ==========
Basic earnings per share $ .14 .12 .25 .20
========== ========== ========== ==========
Weighted-average number of
shares outstanding for basic 7,052,159 6,996,074 7,036,565 6,992,567
========== ========== ========== ==========
Diluted earnings per share $ .14 .12 .25 .20
========== ========== ========== ==========
Weighted-average number of
shares outstanding for diluted 7,223,509 7,168,910 7,203,679 7,170,910
========== ========== ========== ==========
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
SIX MONTHS ENDED JUNE 30, 2000
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMMON STOCK COMPRE-
------------------------ ADDITIONAL HENSIVE TOTAL
NUMBER OF PAID-IN RETAINED (LOSS) STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS INCOME 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) -- -- -- 1,787 -- 1,787
Net change in unrealized
loss on securities
available for sale,
net of tax of $133
(unaudited) -- -- -- -- (220) (220)
----------
Comprehensive income (unaudited) -- -- -- -- -- 1,567
----------
Shares issued under stock
option plan (unaudited) 25,886 26 102 -- -- 128
Shares sold to employees
(unaudited) 21,345 21 134 -- -- 155
---------- ---------- ---------- ---------- ---------- ----------
Balance at June 30, 2000
(unaudited) 7,053,826 $ 7,054 24,442 2,370 (1,682) 32,184
========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
GULF WEST BANKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------
2000 1999
-------- --------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,787 1,421
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation 563 517
Provision for loan losses 280 354
Net amortization of fees, premiums and discounts 152 144
Deferred income tax (credit) provision (106) 149
Income from mortgage banking activity (31) (4)
Proceeds from sales of loans held for sale 2,725 304
Originations of loans held for sale (2,694) (300)
Increase in accrued interest receivable (6) (333)
Increase in goodwill and other assets (295) (219)
Net proceeds from sale of foreclosed real estate 43 --
Decrease in other liabilities (127) (24)
-------- --------
Net cash provided by operating activities 2,291 2,009
-------- --------
Cash flows from investing activities:
Purchase of securities available for sale (13,752) (23,401)
Proceeds from maturity of securities available for sale 8,333 14,782
Principal repayments on securities available for sale 4,180 7,330
Purchase of Federal Home Loan Bank stock (1,228) --
Purchase of premises and equipment, net (696) (1,067)
Net increase in loans (12,790) (68,918)
-------- --------
Net cash used in investing activities (15,953) (71,274)
-------- --------
Cash flows from financing activities:
Net increase in deposits 10,936 56,946
Net increase of other borrowings 2,960 17,479
Issuance of common stock 283 122
-------- --------
Net cash provided by financing activities 14,179 74,547
-------- --------
Net increase in cash and cash equivalents 517 5,282
Cash and cash equivalents at beginning of period 24,247 27,699
-------- --------
Cash and cash equivalents at end of period $ 24,764 32,981
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 7,007 5,696
======== ========
Income taxes $ 980 628
======== ========
Noncash transactions:
Reclassification of foreclosed real estate to loans $ 74 --
======== ========
Loans transferred to available for sale securities $ -- 18,032
======== ========
Accumulated other comprehensive income (loss), net change in
unrealized gain on securities available for sale, net
of tax $ (220) (1,149)
======== ========
</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, the accompanying condensed
consolidated financial statements of Gulf West Banks, Inc. and
Subsidiaries (the "Company") contain all adjustments (consisting
principally of normal recurring accruals) necessary to present fairly
the financial position at June 30, 2000, and the results of operations
for the three-month and six-month periods ended June 30, 2000 and 1999
and the cash flows for the six-month periods ended June 30, 2000 and
1999. The results of operations for the three and six months ended June
30, 2000 are not necessarily indicative of the results to be expected
for the full year.
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>
SIX MONTHS ENDED
JUNE 30,
----------------
2000 1999
------ ------
(IN THOUSANDS)
<S> <C> <C>
Gross loans with no related allowance, at end of period $2,546 --
====== ======
Average net investment in impaired loans $2,546 --
====== ======
Interest income recognized on impaired loans $ 104 --
====== ======
Interest income received on impaired loans $ 164 --
====== ======
</TABLE>
The activity in the allowance for loan losses is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- ---------------------
2000 1999 2000 1999
------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at beginning of period $ 2,934 $ 2,522 $ 2,849 $ 2,436
Provision for loan losses 57 98 280 354
Charge-offs, net of recoveries 2 (7) (136) (177)
------- ------- ------- -------
Balance at end of period $ 2,993 2,613 2,993 2,613
======= ======= ======= =======
</TABLE>
(continued)
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. All per share amounts reflect the 5% stock dividend
declared October 21, 1999 (dollars in thousands, except per share
amounts).
<TABLE>
<CAPTION>
2000 1999
--------------------------------------- ---------------------------------------
WEIGHTED- PER WEIGHTED- PER
AVERAGE SHARE AVERAGE SHARE
EARNINGS SHARES AMOUNT EARNINGS SHARES AMOUNT
---------- ---------- ------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
THREE MONTHS ENDED JUNE 30:
Basic EPS:
Net earnings available to
common stockholders $ 1,010 7,052,159 $ .14 $ 868 6,996,074 $ .12
========== ======= ========== =======
Effect of dilutive securities-
Incremental shares from assumed
exercise of options 171,350 172,836
---------- ----------
Diluted EPS:
Net earnings available to
common stockholders
and assumed conversions $ 1,010 7,223,509 $ .14 $ 868 7,168,910 $ .12
========== ========== ======= ========== ========== =======
SIX MONTHS ENDED JUNE 30:
Basic EPS:
Net earnings available to
common stockholders $ 1,787 7,036,565 $ .25 $ 1,421 6,992,567 $ .20
========== ======= ========== =======
Effect of dilutive securities-
Incremental shares from assumed
exercise of options 167,114 178,343
---------- ----------
Diluted EPS:
Net earnings available to
common stockholders
and assumed conversions $ 1,787 7,203,679 $ .25 $ 1,421 7,170,910 $ .20
========== ========== ======= ========== ========== =======
</TABLE>
Shares not included in the computations of diluted earnings per share because
the option exercise price was not less than the average market price of
common share are as follows:
<TABLE>
<CAPTION>
NUMBER OF PRICE YEAR YEAR
SHARES RANGE ISSUED EXPIRES
------ ----- ------ -------
<S> <C> <C> <C> <C>
For the three months ended
June 30, 2000 12,310 $ 8.86-11.25 1998-1999 2008-2009
June 30, 1999 197,610 7.99-11.25 1998-1999 2008-2009
For the six months ended
June 30, 2000 199,210 7.97-11.25 1998-1999 2008-2009
June 30, 1999 2,310 11.25 1998 2008
</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 June 30,
2000, and for the three-month and six-month periods ended June 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.
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 condensed consolidated balance sheet of Gulf West
Banks, Inc. and Subsidiaries (the "Company") as of June 30, 2000, and the
related condensed consolidated statements of earnings for the three-month and
six-month periods ended June 30, 2000 and 1999, the condensed consolidated
statements of cash flows for the six-month periods ended June 30, 2000 and 1999
and the condensed consolidated statement of stockholders' equity for the
six-month period ended June 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, 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
July 14, 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 financial 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 variety of
personal and commercial banking services to customers located 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 six months ended June 30, 2000, the Company's primary sources of
funds consisted of deposit inflows, loan principal repayments, other borrowings
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 available for sale securities.
At June 30, 2000, the Company had commitments to originate loans totaling $13.1
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 June 30, 2000, Mercantile had
liquidity of approximately $73 million, or approximately 20% of total deposits.
Management believes Mercantile was in compliance with all minimum capital
requirements which it was subject to at June 30, 2000.
The following ratios and rates are presented for the dates and periods
indicated:
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED
JUNE 30, DECEMBER 31, JUNE 30,
2000 1999 1999
------- ------- -------
<S> <C> <C> <C>
Average equity as a percentage
of average assets 7.40% 7.59% 7.81%
Equity to total assets at end of period 7.45% 7.28% 7.21%
Return on average assets (1) 0.85% 0.79% 0.76%
Return on average equity (1) 11.49% 10.35% 9.67%
Noninterest expenses to average assets (1) 3.26% 3.27% 3.24%
Nonperforming loans and foreclosed real estate as
a percentage of total assets at end of period 0.16% 0.80% 0.35%
</TABLE>
----------
(1) Annualized for the six months ended June 30, 2000 and 1999.
(continued)
11
<PAGE>
GULF WEST BANKS, INC. 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 income; (iv) interest-rate spread; (v) net
interest margin.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-------------------------------------------------------------------------
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>
Interest-earning assets:
Loans (1) $296,202 6,316 8.53% $267,689 5,485 8.20%
Securities 71,305 1,169 6.56 71,265 1,053 5.91
Other interest-earning assets (2) 12,138 191 6.29 7,296 87 4.77
-------- -------- -------- --------
Total interest-earning assets 379,645 7,676 8.09 346,250 6,625 7.65
-------- --------
Noninterest-earning assets 40,952 47,295
-------- --------
Total assets $420,597 $393,545
======== ========
Interest-bearing liabilities:
Savings, NOW accounts and
money-market deposits 134,943 961 2.85 122,224 691 2.26
Time deposits 168,971 2,271 5.38 166,775 2,107 5.05
Borrowings 21,182 317 5.99 18,042 200 4.43
-------- -------- -------- --------
Total interest-bearing liabilities 325,096 3,549 4.37 307,041 2,998 3.91
-------- --------
Noninterest-bearing liabilities 63,878 56,957
Stockholders' equity 31,623 29,547
-------- --------
Total liabilities and stockholders' equity $420,597 $393,545
======== ========
Net interest income $ 4,127 $ 3,627
======== ========
Interest-rate spread (3) 3.72% 3.74%
======= =======
Net interest margin (4) 4.35% 4.19%
======= =======
Ratio of average interest-earning assets to
average interest-bearing liabilities 1.17 1.13
======== ========
</TABLE>
----------
(1) Includes loans on nonaccrual status.
(2) Includes federal funds sold, securities purchased under agreements to
resell and FHLB stock.
(3) Interest-rate spread represents the difference between the average
yield on interest-earning assets and the average cost 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
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; (v) net
interest margin.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------------------------------------------------------
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>
Interest-earning assets:
Loans (1) $ 292,389 12,365 8.46% $ 253,729 10,400 8.20%
Securities 74,129 2,404 6.49 67,504 1,965 5.82
Other interest-earning assets (2) 12,956 384 5.93 11,233 263 4.68
--------- ------- --------- -------
Total interest-earning assets 379,474 15,153 7.99 332,466 12,628 7.60
------- -------
Noninterest-earning assets 40,645 43,668
--------- ---------
Total assets $ 420,119 $ 376,134
========= =========
Interest-bearing liabilities:
Savings, NOW accounts and
money-market deposits 133,155 1,834 2.75 118,504 1,343 2.27
Time deposits 171,562 4,561 5.32 160,729 4,095 5.10
Borrowings 23,148 662 5.72 17,338 375 4.33
--------- ------- --------- -------
Total interest-bearing liabilities 327,865 7,057 4.30 296,571 5,813 3.92
------- -------
Noninterest-bearing liabilities 61,145 50,179
Stockholders' equity 31,109 29,384
--------- ---------
Total liabilities and stockholders' equity $ 420,119 $ 376,134
========= =========
Net interest income $ 8,096 $ 6,815
======= ========
Interest-rate spread (3) 3.69% 3.68%
====== ======
Net interest margin (4) 4.27% 4.10%
====== ======
Ratio of average interest-earning assets to
average interest-bearing liabilities 1.16 1.12
========= =========
</TABLE>
----------
(1) Includes loans on nonaccrual status.
(2) Includes federal funds sold, securities purchased under agreements to
resell and FHLB stock.
(3) Interest-rate spread represents the difference between the average
yield on interest-earning assets and the average cost of
interest-bearing liabilities.
(4) Net interest margin is net interest income divided by average
interest-earning assets.
13
<PAGE>
GULF WEST BANKS, INC. AND SUBSIDIARIES
COMPARISON OF THREE-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999
GENERAL. Net earnings for the three-months ended June 30, 2000 were
$1,010,000 or $.14 per basic and diluted share compared to $868,000 or
$.12 per basic and diluted share for 1999. The increase in 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 $1.1 million to
$7.7 million for the three-month period ended June 30, 2000 from $6.6
million for the three months ended June 30, 1999. Interest on loans
increased $.8 million to $6.3 million due to an increase in the average
loan portfolio balance in 2000 and an increase in the weighted-average
yield earned in 2000. Interest on securities increased $.1 million to
$1.2 million for the three months ended June 30, 2000 due to an increase
in the weighted-average yield earned in 2000. Interest on other
interest-earning assets increased from $87,000 for the three months ended
June 30, 1999 to $191,000 for the three months ended June 30, 2000 due to
an increase in the average balance of other interest-earning assets in
2000 and an increase in the weighted-average yield earned in 2000.
Interest expense on deposits increased $.4 million to $3.2 million for
the three months ended June 30, 2000 from $2.8 million in 1999. The
increase is due to an increase in the average deposits in 2000 and an
increase in the weighted-average rate paid on deposits in 2000.
PROVISION FOR LOAN LOSSES. The provision for loan losses is charged against
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 for loan
losses was $57,000 for the three-month period ended June 30, 2000
compared to $98,000 for the same period in 1999. The allowance for loan
losses is $3.0 million at June 30, 2000. While management believes that
its allowance for loan losses is adequate as of June 30, 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 decreased to $867,000 in 2000 from
$910,000 for the three months ended June 30, 1999. Service charges on
deposits increased in 2000 due to the growth in deposit accounts. Income
from bank owned life insurance policies decreased in 2000 primarily
because of a decrease in the rate earned on life insurance. Income from
leasing activity of MBL decreased in 2000 due to lower volume.
NONINTEREST EXPENSE. Total noninterest expense increased to $3.4 million for
the three months ended June 30, 2000 from $3.2 million for the comparable
period ended June 30, 1999. Increases resulted primarily from increases
in employee compensation, occupancy expense and was partially offset by a
decrease in data processing due to moving this function in-house.
INCOME TAXES. The income tax provision for the three months ended June 30,
2000 was $528,000 or 34.3% of earnings before income taxes compared to
$392,000 or 31.1% for the three months ended June 30, 1999.
14
<PAGE>
GULF WEST BANKS, INC. AND SUBSIDIARIES
COMPARISON OF SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999
GENERAL. Net earnings for the six-months ended June 30, 2000 were $1.8
million or $.25 per basic and diluted share compared to $1.4 million or
$.20 per basic and diluted share for 1999. The increase in 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 to
$15.2 million for the six-month period ended June 30, 2000 from $12.6
million for the six months ended June 30, 1999. Interest on loans
increased $2.0 million to $12.4 million due to an increase in the average
loan portfolio balance in 2000 and an increase in the weighted-average
yield earned in 2000. Interest on securities increased $.4 million to
$2.4 million for the six months ended June 30, 2000 due to an increase in
the average securities portfolio in 2000 and an increase in the
weighted-average yield earned in 2000. Interest on other interest-earning
assets increased from $263,000 for the six months ended June 30, 1999 to
$384,000 for the six months ended June 30, 2000 due to an increase in the
average balance of other interest-earning assets in 2000 and an increase
in the weighted-average yield earned in 2000.
Interest expense on deposits increased $1.0 million to $6.4 million for
the six months ended June 30, 2000 from $5.4 million in 1999. The
increase is due to an increase in the average deposits in 2000 and an
increase in the weighted-average rate paid on deposits in 2000.
PROVISION FOR LOAN LOSSES. The provision for loan losses is charged against
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 for loan
losses was $280,000 for the six-month period ended June 30, 2000 compared
to $354,000 for the same period in 1999. The allowance for loan losses is
$3.0 million at June 30, 2000. While management believes that its
allowance for loan losses is adequate as of June 30, 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 remained at $1.7 million in 2000.
Service charges on deposits increased in 2000 due to the growth in
deposit accounts. Income from bank owned life insurance policies
decreased in 2000 primarily because of lower rates earned on investments
in life insurance. Income from leasing activities of MBL decreased in
2000 due to lower volume.
NONINTEREST EXPENSE. Total noninterest expense increased to $6.9 million for
the six months ended June 30, 2000 from $6.1 million for the comparable
period ended June 30, 1999. Increases resulted primarily from increases
in employee compensation, occupancy expense was partially offset by a
decrease in data processing due to moving this function in-house.
INCOME TAXES. The income tax provision for the six months ended June 30, 2000
was $911,000 or 33.8% of earnings before income taxes compared to
$601,000 or 29.7% for the period ended June 30, 1999.
15
<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 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.
16
<PAGE>
GULF WEST BANKS, INC. AND SUBSIDIARIES
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders (the "Annual Meeting") of Gulf West Banks,
Inc., was held on April 20,2000, to consider the election of three directors
with terms expiring at the 2003 Annual Meeting. The shareholders also voted upon
the adoption of amendments to the Company's 1995 Nonstatutory Stock Option Plan.
At the Annual Meeting, 6,002,570 shares were present in person or by proxy.
Listed below are the directors that were elected at the Annual Meeting with a
summary of the votes cast for each nominee:
FOR AGAINST ABSTAIN
--------- ------- -------
Gordon W. Campbell 5,991,368 11,202 --
John Cooper Petagna 5,994,036 8,534 --
Pandurang V. Kamat, MD was also a candidate for reelection at this meeting, but
he died on March 22, 2000. On March 16, 2000 Henry W. Hanff, MD resigned from
the Board to pursue other business interests. On April 20, 2000 the Board of
Directors of Gulf West elected Robert A. Blakley and Austin L. Fillmon to the
Board to replace Messrs. Kamat and Hanff for terms expiring with the 2001 Annual
Shareholders Meeting.
In addition to the foregoing, the following individuals are directors of Gulf
West whose terms continued after the Annual Meeting:
John Wm. Galbraith (Director Emeritus) Louis P. Ortiz, CPA
Thomas M. Harris P. N. Risser III
Algis Koncius Ross E. Roeder
The shareholder vote on the other matter considered at the meeting was as
follows:
FOR AGAINST ABSTAIN
--------- ------- -------
Amendments to 1995 Nonstatutory
Stock Option Plan 5,810,010 164,212 28,348
17
<PAGE>
GULF WEST BANKS, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION, CONTINUED
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
-------------- -----------------------
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 Amended and Restated Contract of Employment with Gordon W.
Campbell
10.4 1995 Nonstatutory Stock Option Plan as Amended April 20, 2000
10.5(3) Agreement to transfer fiduciary accounts to SunTrust Bank,
Nature Coast
10.6(5) Executive Officer Bonus Program
10.7 Mercantile Bank Executive Severance Pay Plan
11(2) Statement regarding computation of per share earnings
27 Financial Data Schedule (for SEC use only)
(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
June 30, 2000.
18
<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: JULY 26, 2000 By: /s/ GORDON W. CAMPBELL
---------------- -----------------------------------------
Gordon W. Campbell, Chairman of the Board
and President (Chief Executive Officer)
Date: JULY 26, 2000 By: /s/ BARRY K. MILLER
---------------- -----------------------------------------
Barry K. Miller, Secretary
(Chief Financial Officer)
19
<PAGE>
GULF WEST BANKS, INC. AND SUBSIDIARIES
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
-------------- -----------------------
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 Amended and Restated Contract of Employment with Gordon W.
Campbell
10.4 1995 Nonstatutory Stock Option Plan as Amended April 20, 2000
10.5(3) Agreement to transfer fiduciary accounts to SunTrust Bank,
Nature Coast
10.6(5) Executive Officer Bonus Program
10.7 Mercantile Bank Executive Severance Pay Plan
11(2) Statement regarding computation of per share earnings
27 Financial Data Schedule (for SEC use only)
(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.
20
