-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J0L73GLyNFAq9yEKgmxdhj9KVN36au2J8kATc4Oi3QKtqAfslTPBEvL8Yt36hgJ2 oNitkRDVUU0vWWqhO8yISw== 0001116502-01-501317.txt : 20020410 0001116502-01-501317.hdr.sgml : 20020410 ACCESSION NUMBER: 0001116502-01-501317 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POINTE FINANCIAL CORP CENTRAL INDEX KEY: 0000917331 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 650451402 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-24433 FILM NUMBER: 1778721 BUSINESS ADDRESS: STREET 1: 21845 POWERLINE RD CITY: BOCA RATON STATE: FL ZIP: 33433 BUSINESS PHONE: 4073686300 MAIL ADDRESS: STREET 1: 21845 POWERLINE RD CITY: BOCA RATON STATE: FL ZIP: 33433 10QSB 1 pointefinancial10qsb.txt QUARTERLY REPORT ================================================================================ 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, 2001 [ ] 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 2,042,889 shares - -------------------------------------- ------------------------------- (class) Outstanding at November 7, 2001 Transitional small business disclosure format (check one): YES NO X ----- ---- ================================================================================ POINTE FINANCIAL CORPORATION AND SUBSIDIARIES INDEX Part I. FINANCIAL INFORMATION Item 1. Financial Statements Page ---- Condensed Consolidated Balance Sheets - at September 30, 2001 (unaudited) and at December 31, 2000....... 2 Condensed Consolidated Statements of Earnings - Three and Nine Months ended September 30, 2001 and 2000 (unaudited)...................................................... 3-4 Condensed Consolidated Statement of Changes in Stockholders' Equity - Nine Months ended September 30, 2001 (unaudited)........ 5 Condensed Consolidated Statements of Cash Flows - Nine Months ended September 30, 2001 and 2000 (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.............................18-19 SIGNATURES............................................................... 20 POINTE FINANCIAL CORPORATION AND SUBSIDIARIES PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets (In thousands)
At ---------------------------- September 30, December 31, 2001 2000 --------- --------- (Unaudited) Assets Cash and due from banks ................................ $ 7,729 6,482 Interest-bearing deposits with banks ................... 20,956 1,134 --------- --------- Total cash and cash equivalents ................. 28,685 7,616 Securities available for sale .......................... 49,518 53,670 Loans, net of allowance for loan losses of $2,313 in 2001 and $1,792 in 2000 .......................... 243,078 173,129 Loans held for sale .................................... 540 719 Accrued interest receivable ............................ 2,271 2,035 Premises and equipment, net ............................ 3,536 2,842 Federal Home Loan Bank stock, at cost .................. 2,550 2,482 Federal Reserve Bank stock, at cost .................... 479 479 Foreclosed real estate ................................. 47 18 Deferred income tax asset .............................. 591 591 Intangible asset, branch acquisition ................... 3,522 -- Other assets ........................................... 1,753 927 --------- --------- Total ........................................... $ 336,570 244,508 ========= ========= Liabilities and Stockholders' Equity Liabilities: Noninterest-bearing demand deposits ................. 47,114 29,827 Savings and NOW deposits ............................ 17,258 12,048 Money-market deposits ............................... 55,134 33,920 Time deposits ....................................... 113,154 85,341 --------- --------- Total deposits .................................. 232,660 161,136 Official checks ..................................... 1,707 1,660 Other borrowings .................................... 25,323 8,067 Advances from Federal Home Loan Bank ................ 45,000 45,000 Accrued interest payable ............................ 1,011 989 Advance payments by borrowers for taxes and insurance 1,273 365 Other liabilities ................................... 873 561 --------- --------- Total liabilities ............................... 307,847 217,778 --------- --------- Stockholders' equity: Preferred stock ..................................... -- -- Common stock ........................................ 23 23 Additional paid-in capital .......................... 24,056 23,835 Retained earnings ................................... 7,232 6,274 Accumulated other comprehensive income (loss) ....... 506 (373) Treasury stock ...................................... (3,000) (3,000) Stock incentive plan ................................ (94) (29) --------- --------- Total stockholders' equity ...................... 28,723 26,730 --------- --------- Total ........................................... $ 336,570 244,508 ========= =========
See Accompanying Notes to Condensed Consolidated Financial Statements. 2 POINTE FINANCIAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Earnings (Dollars in thousands, except share amounts)
Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 2001 2000 2001 2000 ------- ------- ------- ------- (Unaudited) (Unaudited) Interest income: Loans ................................................. $ 4,890 3,915 13,360 10,914 Securities ............................................ 805 855 2,633 2,531 Other interest-earning assets ......................... 67 43 252 170 ------- ------- ------- ------- Total interest income ........................... 5,762 4,813 16,245 13,615 ------- ------- ------- ------- Interest expense: Deposits .............................................. 1,890 1,643 5,643 4,627 Borrowings ............................................ 856 788 2,478 2,095 ------- ------- ------- ------- Total interest expense .......................... 2,746 2,431 8,121 6,722 ------- ------- ------- ------- Net interest income ....................................... 3,016 2,382 8,124 6,893 Provision for loan losses ....................... 225 175 585 505 ------- ------- ------- ------- Net interest income after provision for loan losses ....... 2,791 2,207 7,539 6,388 ------- ------- ------- ------- Noninterest income: Service charges on deposit accounts ................... 358 198 926 586 Loan servicing fees ................................... 7 12 27 36 Net gains from sale of loans .......................... -- -- -- 6 Net realized gains (losses) on sale of securities ..... 138 -- 251 (124) Other ................................................. 138 67 492 260 ------- ------- ------- ------- Total noninterest income ........................ 641 277 1,696 764 ------- ------- ------- ------- Noninterest expenses: Salaries and employee benefits ........................ 1,378 915 3,772 2,828 Occupancy expense ..................................... 570 302 1,310 874 Advertising and promotion ............................. 98 42 279 179 Professional fees ..................................... 37 60 170 166 Data processing ....................................... 146 100 405 302 Amortization of intangible asset ...................... 61 -- 108 -- Other ................................................. 459 364 1,281 1,034 ------- ------- ------- ------- Total noninterest expenses ...................... 2,749 1,783 7,325 5,383 ------- ------- ------- ------- Earnings before income taxes and extraordinary item ......................................... 683 701 1,910 1,769 Income taxes .............................................. 236 232 647 590 ------- ------- ------- ------- Earnings before extraordinary item .............. 447 469 1,263 1,179 Extraordinary item - gain on extinguishment of debt, net of taxes of $47 .......................................... -- -- -- 78 ------- ------- ------- ------- Net earnings .................................... $ 447 469 1,263 1,257 ======= ======= ======= ======= (continued)
3 POINTE FINANCIAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Earnings, Continued (Dollars in thousands, except share amounts)
Three Months Ended Nine Months Ended September 30, September 30, ------------------------------ ---------------------------- 2001 2000 2001 2000 ---------- ---------- ---------- --------- (Unaudited) (Unaudited) Earnings per share, basic: Earnings before extraordinary item ................. .22 .23 .62 .58 Extraordinary gain from extinguishment of debt -- -- -- .04 ---------- ---------- ---------- --------- Net earnings per share, basic ................ $ .22 .23 .62 .62 ========== ========== ========== ========= Earnings per share, diluted: Earnings before extraordinary item ................. .21 .23 .61 .58 Extraordinary gain from extinguishment of debt -- -- -- .04 ---------- ---------- ---------- --------- Net earnings per share, diluted .............. $ .21 .23 .61 .62 ========== ========== ========== ========= Weighted-average shares outstanding for basic .......... 2,039,987 2,022,637 2,034,581 2,018,585 ========== ========== ========== ========= Weighted-average shares outstanding for diluted ........ 2,076,512 2,022,929 2,060,248 2,018,585 ========== ========== ========== ========= Dividends per share .................................... $ .05 .05 .15 .15 ========== ========== ========== =========
See Accompanying Notes to Condensed Consolidated Financial Statements 4 POINTE FINANCIAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statement of Changes in Stockholders' Equity Nine Months Ended September 30, 2001 (In thousands)
Accumulated Other Compre- Additional Stock hensive Total Common Paid-In Incentive Treasury Retained Income Stockholders' Stock Capital Plan Stock Earnings (Loss) Equity ------- --------------- --------- -------- -------- ---------- ------------ Balance at December 31, 2000 ............. $ 23 23,835 (29) (3,000) 6,274 (373) 26,730 ------- Comprehensive income: Net earnings (unaudited) ............ -- -- -- -- 1,263 -- 1,263 Net change in unrealized loss on securities available for sale, net of taxes (unaudited) ........ -- -- -- -- -- 879 879 ------- Comprehensive income (unaudited) ......... 2,142 ------- Shares issued in stock incentive plan (unaudited) ......................... -- 91 (91) -- -- -- -- Shares committed to participants in stock incentive plan (unaudited) . -- -- 22 -- -- -- 22 Committed shares cancelled in stock incentive plan (unaudited) .......... -- (4) 4 -- -- -- -- Cash dividends paid (unaudited) .......... -- -- -- -- (305) -- (305) Exercise of employee stock options (unaudited) ......................... -- 38 -- -- -- -- 38 Issuance of common stock to directors as compensation (unaudited) ......... -- 96 -- -- -- -- 96 ------- ------- ------ ------- ------ ------ ------- Balance at September 30, 2001 (unaudited) ......................... $ 23 24,056 (94) (3,000) 7,232 506 28,723 ======= ======= ====== ======= ====== ====== =======
See Accompanying Notes to Condensed Consolidated Financial Statements 5 POINTE FINANCIAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (In thousands)
Nine Months Ended September 30, ----------------------- 2001 2000 -------- -------- (Unaudited) Cash flows from operating activities: Net earnings .................................................... $ 1,263 1,257 Adjustments to reconcile net earnings to net cash provided by operating activities: Provision for loan losses .................................... 585 505 Depreciation ................................................. 392 325 Net amortization of fees, premiums, discounts and other ...... 152 2 Shares committed to participants in incentive stock plan ..... 22 10 Common stock issued as compensation for services ............. 96 92 (Gain) loss on sale of securities ............................ (251) 124 Gain on sale of loans ........................................ -- (6) Net originations of loans held for sale ...................... -- (7,091) Proceeds from sale of loans held for sale .................... -- 9,065 Increase in other assets ..................................... (1,342) (30) Increase in accrued interest receivable ...................... (236) (586) Increase in official checks .................................. 47 466 Increase in accrued interest payable ......................... 22 271 Increase in other liabilities ................................ 376 247 -------- -------- Net cash provided by operating activities ................ 1,126 4,651 -------- -------- Cash flows from investing activities: Purchases of securities available for sale ...................... (71,886) (14,576) Proceeds from sale of securities available for sale ............. 34,249 4,963 Principal repayments on securities available for sale ........... 2,029 828 Maturities and calls of securities available for sale ........... 41,330 2,025 Net increase in loans ........................................... (37,771) (21,042) Proceeds from sale of foreclosed real estate .................... -- 257 Net increase in other securities ................................ (68) (602) Purchase of premises and equipment, net ......................... (682) (428) Increase in intangible asset, branch acquisition ................ (3,630) -- -------- -------- Net cash used in investing activities .................... (36,429) (28,575) -------- -------- Cash flows from financing activities: Net increase in deposits ........................................ 38,475 17,307 Net increase in advances from Federal Home Loan Bank ............ -- 9,940 Net increase in other borrowings ................................ 17,256 6,700 Increase in advance payments by borrowers for taxes and insurance 908 723 Cash dividends paid on common stock ............................. (305) (303) Exercise of employee stock options .............................. 38 -- -------- -------- Net cash provided by financing activities ................ 56,372 34,367 -------- -------- Net increase in cash and cash equivalents ........................ 21,069 10,443 Cash and cash equivalents at beginning of period ................. 7,616 6,909 -------- -------- Cash and cash equivalents at end of period ....................... $ 28,685 17,352 ======== ======== (continued)
6 POINTE FINANCIAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows, Continued (In thousands)
Nine Months Ended September 30, 2001 2000 -------- -------- (Unaudited) Supplemental disclosure of cash flow information: Cash paid during the period for: Interest ............................................................................ $ 8,099 6,451 ======== ======== Income taxes ........................................................................ $ 1,601 653 ======== ======== Noncash transactions: Reclassification of loans to foreclosed real estate ................................. $ 29 -- ======== ======== Accumulated other comprehensive income (loss), net change in unrealized loss on securities available for sale, net of tax ............................... $ 879 153 ======== ======== Transfer of loans to loans held for sale............................................ $ -- 6,736 ======== ======== Activity in stock incentive plan .................................................... $ (65) 15 ======== ======== Acquisition of branches: Fair value of premises and equipment acquired ................................... $ 404 -- ======== ======== Fair value of loans acquired .................................................... $ 32,912 -- ======== ======== Fair value of deposits assumed .................................................. $ 33,316 -- ======== ========
See Accompanying Notes to Condensed Consolidated Financial Statements. 7 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, 2001, the results of operations for the three- and nine-month periods ended September 30, 2001 and 2000 and cash flows for the nine-month periods ended September 30, 2001 and 2000. The results of operations for the three and nine months ended September 30, 2001 are not necessarily indicative of the results to be expected for the year ending December 31, 2001. Pointe Financial Corporation (the "Holding Company") is a Financial Holding Company. 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 variety of community banking services to small and middle-market business and individuals through its ten banking offices located in Broward, Miami-Dade and Palm Beach counties, Florida. On April 20, 2001, the Company purchased four branch offices in Miami-Dade County from another financial institution. The branches had a combined deposit base of approximately $55.0 million. The Company also acquired in this transaction consumer loans of approximately $7.5 million and $25.1 million of participation interests in existing commercial real estate loans in the seller's portfolio. The fair value of the liabilities assumed exceeded the fair value of the assets acquired by $3.6 million. The unidentifiable intangible asset resulting from this transaction is being amortized on a straight line basis over a useful life of fifteen years. 2. Loan Impairment and Loan Losses. The activity in the allowance for loan losses is as follows (in thousands):
Three Months Ended Nine Months Ended September 30, September 30, --------------------- --------------------- 2001 2000 2001 2000 ------- ------ ------ ------ Balance at beginning of period.................... $ 2,155 1,597 1,792 1,331 Provision charged to earnings..................... 225 175 585 505 Allowance on loans received in acquisition of branches....................... -- -- 465 -- (Charge-offs), net of recoveries.................. (67) (1) (529) (65) ------- ------ ------ ------ Balance at end of period.......................... $ 2,313 1,771 2,313 1,771 ======= ====== ====== ======
The following summarizes the amount of impaired loans (in thousands):
At -------------------------- September 30, December 31, ------------- ----------- 2001 2000 ------ ------ Loans identified as impaired: Gross loans with related allowance for losses recorded.................. $ -- 150 Less allowance on these loans........................................... -- (75) ------ ------ Net investment in impaired loans............................................ $ -- 75 ======= ====== (continued)
8 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):
Three Months Ended Nine Months Ended September 30, September 30, ----------------------- ---------------------- 2001 2000 2001 2000 ---- ---- ---- ----- Average investment in impaired loans................... $ -- 75 49 120 ====== ==== ==== ===== Interest income recognized on impaired loans.............................................. $ -- -- -- -- ====== ==== ==== ===== Interest income received on impaired loans.............................................. $ -- -- -- -- ====== ==== ==== =====
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. The following table presents the calculations of earnings per share ($ in thousands, except per share amounts).
Three Months Ended September 30, -------------------------------------------------------------------------------- 2001 2000 -------------------------------------- --------------------------------------- Weighted- Weighted- Average Average Earnings Shares Per Share Earnings Shares Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ---------- ------------- --------- ----------- ------------- -------- Basic Earnings Per Share: Net earnings available to common stockholders ............. $ 447 2,039,987 $ .22 $469 2,022,637 $ .23 ======= ======= Effect of dilutive securities- Incremental shares from assumed exercise of options utilizing the treasury stock method .............. 36,525 292 -------- --------- Diluted Earnings Per Share: Net earnings available to common stockholders and assumed conversions ............ $ 447 2,076,512 $ .21 $469 2,022,929 $ .23 ======= ========= ======= ==== ========= ======= (continued)
9 POINTE FINANCIAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (unaudited), Continued 3. Earnings Per Share, Continued.
Nine Months Ended September 30, -------------------------------------------------------------------------------- 2001 2000 -------------------------------------- --------------------------------------- Weighted- Weighted- Average Average Earnings Shares Per Share Earnings Shares Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ---------- ------------- --------- ----------- ------------- -------- Basic Earnings Per Share: Net earnings available to common stockholders......... $ 1,263 2,034,581 $ .62 $ 1,257 2,018,585 $ .62 ===== ===== Effect of dilutive securities- Incremental shares from assumed exercise of options utilizing the treasury stock method......................... 25,667 -- --------- --------- Diluted Earnings Per Share: Net earnings available to common stockholders and assumed conversions........ $ 1,263 2,060,248 $ .61 $ 1,257 2,018,585 $ .62 ======= ========= ===== ======= ========= =====
4. Regulatory Capital. The Bank is required to maintain certain minimum regulatory capital requirements. The following is a summary at September 30, 2001 of the regulatory capital requirements and the Bank's actual capital on a percentage basis:
Regulatory Actual Requirement ------ ----------- Total capital to risk-weighted assets.................................................. 10.91% 8.00% Tier I capital to risk-weighted assets................................................. 9.88% 4.00% Tier I capital to total assets - leverage ratio........................................ 7.00% 4.00%
5. Extraordinary Item. During the second quarter of 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 was 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 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, 2001, and for the three and nine-month periods ended September 30, 2001 and 2000 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 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, 2001, the related condensed consolidated statements of earnings for the three- and nine- month periods ended September 30, 2001 and 2000, the related condensed consolidated statements of cash flows for the nine-month periods ended September 30, 2001 and 2000 and the related condensed consolidated statement of changes in stockholders' equity for the nine-month period ended September 30, 2001. These financial statements are the responsibility of the Company's management. We conducted our reviews 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 auditing standards generally accepted in the United States of America, 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 reviews, 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 accounting principles generally accepted in the United States of America. We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet as of December 31, 2000, 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 19, 2001 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, 2000, 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 19, 2001 12 POINTE FINANCIAL CORPORATION AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Comparison of September 30, 2001 and December 31, 2000 Liquidity and Capital Resources The Company's primary source of cash during the nine months ended September 30, 2001 was from net deposit inflows of $38.5 million, an increase in other borrowings of $17.3 million, proceeds from the sale, maturity and call of securities available for sale of $75.6 million and cash flows from operating activities of $1.1 million. Cash was used primarily for net loans originated and acquired totaling $37.8 million and the purchase of securities totaling $71.9 million. At September 30, 2001, the Company had outstanding commitments to originate loans of $6.8 million and time deposits of $99.9 million which mature in one year or less. It is expected that these requirements will be funded from the sources described above. At September 30, 2001, the Bank exceeded its regulatory liquidity requirements. The following table shows selected ratios for the periods ended or at the dates indicated:
Nine Months Nine Months Ended Year Ended Ended September 30, December 31, September 30, 2001 2000 2000 -------------- ------------ ------------- Average equity as a percentage of average assets..................................... 9.35% 10.73% 10.79% Equity to total assets at end of period.................. 8.53% 10.93% 10.30% Return on average assets (1)............................. .58% .73% .73% Return on average equity (1)............................. 6.16% 6.84% 6.75% Noninterest expense to average assets (1)................ 3.34% 3.07% 3.12% Nonperforming loans and foreclosed real estate to total assets at end of period............... .38% .63% .57%
- ---------------- (1) Annualized for the nine months ended September 30, 2001 and 2000. 13 POINTE FINANCIAL CORPORATION AND SUBSIDIARIES Results of Operations The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest and dividend income of the Company from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average cost; (iii) net interest/dividend income; (iv) interest-rate spread; (v) net interest margin; and (vi) ratio of average interest-earning assets to average interest-bearing liabilities.
Three Months Ended September 30, ---------------------------------------------------------------- 2001 2000 --------------------------------- ---------------------------- Interest Average Interest Average Average and Yield/ Average and Yield/ Balance Dividends Rate Balance Dividends Rate --------- --------- ------- ------- --------- ------ ($ in Thousands) Interest-earning assets: Loans.......................................... $ 234,906 4,890 8.33% $ 168,748 3,915 9.28% Securities..................................... 58,661 805 5.49 55,795 855 6.13 Other interest-earning assets (1).............. 7,947 67 3.37 2,561 43 6.72 --------- ------- --------- ------- Total interest-earning assets.............. 301,514 5,762 7.64 227,104 4,813 8.48 ------- ------- Noninterest-earning assets (2)................. 20,077 10,371 --------- --------- Total assets............................... $ 321,591 $ 237,475 ========= ========= Interest-bearing liabilities: Savings and NOW deposits....................... 15,908 38 .96 13,044 49 1.50 Money-market deposits.......................... 53,738 419 3.12 36,228 392 4.33 Time deposits.................................. 113,523 1,433 5.05 82,637 1,202 5.82 Other borrowings (3)........................... 67,678 856 5.06 50,065 788 6.30 --------- ------- --------- ------- Total interest-bearing liabilities......... 250,847 2,746 4.38 181,974 2,431 5.34 ------- ------- Demand deposits................................ 38,138 26,356 Noninterest-bearing liabilities................ 4,853 3,738 Stockholders' equity........................... 27,753 25,407 --------- --------- Total liabilities and stockholders' equity. $ 321,591 $ 237,475 ========= ========= Net interest income............................... $ 3,016 $ 2,382 ======= ======= Interest-rate spread (4).......................... 3.26% 3.14% ==== ==== Net interest margin (5)........................... 4.00% 4.20% ==== ==== Ratio of average interest-earning assets to average interest-bearing liabilities........... 1.19 1.25 ========= =========
- ---------------- (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 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.
Nine Months Ended September 30, 2001 2000 ----------------------------- -------------------------- Interest Average Interest Average Average and Yield/ Average and Yield/ Balance Dividends Rate Balance Dividends Rate ------- --------- ------- ------- --------- ------- ($ in Thousands) Interest-earning assets: Loans.......................................... $ 206,902 13,360 8.61% $ 160,856 10,914 9.05% Securities..................................... 61,183 2,633 5.74 55,297 2,531 6.10 Other interest-earning assets (1).............. 7,594 252 4.42 3,605 170 6.29 --------- -------- --------- -------- Total interest-earning assets.............. 275,679 16,245 7.86 219,758 13,615 8.26 -------- -------- Noninterest-earning assets (2)................. 17,058 10,535 --------- --------- Total assets............................... $ 292,737 $ 230,293 ========= ========= Interest-bearing liabilities: Savings and NOW deposits....................... 14,832 131 1.18 13,057 145 1.48 Money-market deposits.......................... 46,416 1,218 3.50 37,762 1,196 4.22 Time deposits.................................. 104,505 4,294 5.48 78,853 3,286 5.56 Other borrowings (3)........................... 61,005 2,478 5.42 47,645 2,095 5.86 --------- -------- --------- -------- Total interest-bearing liabilities......... 226,758 8,121 4.78 177,317 6,722 5.05 -------- -------- Demand deposits................................ 34,504 24,640 Noninterest-bearing liabilities................ 4,118 3,495 Stockholders' equity........................... 27,357 24,841 --------- --------- Total liabilities and stockholders' equity. $ 292,737 $ 230,293 ========= ========= Net interest income............................... $ 8,124 $ 6,893 ======== ======== Interest-rate spread (4).......................... 3.08% 3.21% ==== ==== Net interest margin (5)........................... 3.93% 4.18% ==== ==== Ratio of average interest-earning assets to average interest-bearing liabilities........... 1.22 1.24 ==== =========
- ---------------- (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 POINTE FINANCIAL CORPORATION AND SUBSIDIARIES Comparison of the Three Months Ended September 30, 2001 and 2000 General. Net earnings for the three months ended September 30, 2001 were $447,000 or $.22 basic and $.21 diluted earnings per share compared to net earnings of $469,000 or $.23 basic and diluted earnings per share for the three months ended September 30, 2000. The decrease in the Company's net earnings was primarily due to an increase in noninterest expense, partially offset by an increase in net interest income and noninterest income. Interest Income and Expense. Interest income increased by $949,000 or 19.7% from $4.8 million for the three months ended September 30, 2000 to $5.8 million for the three months ended September 30, 2001. Interest income on loans increased $975,000 or 24.9% primarily due to an increase of 39.2% in the average loan portfolio balance from $168.7 million for the three months ended September 30, 2000 to $234.9 million for the comparable period in 2001, partially offset by a decrease in the yield earned from 9.28% during 2000 to 8.33% during the 2001 period. Interest income on securities decreased $50,000 or 5.8% primarily due to a decrease in the yield earned from 6.13% in 2000 to 5.49% in 2001, partially offset by an increase in the average securities portfolio balance of $2.9 million. Interest expense on deposit accounts increased $247,000 or 15.0% to $1.9 million for the three months ended September 30, 2001 from $1.6 million for the three months ended September 30, 2000. Interest expense on deposits increased due to an increase in the average balance from $131.9 million in 2000 to $183.2 million in 2001, partially offset by a decrease in the weighted-average rate paid from 4.98% for the three months ended September 30, 2000 to 4.13% for the comparable period in 2001. Interest expense on other borrowings increased $68,000 to $856,000 for the three months ended September 30, 2001 from $788,000 for the three months ended September 30, 2000. Interest expense on other borrowings increased due to an increase of $17.6 million in the average balance, partially offset by a decrease in the weighted-average rate paid for the three months ended September 30, 2001 compared to 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 was $225,000 for the three months ended September 30, 2001 compared to $175,000 for the comparable period in 2000. Management believes the balance in the allowance for loan losses of $2.3 million at September 30, 2001 is adequate. Noninterest Income. Noninterest income increased $364,000 primarily due to an increase of $138,000 in realized gains on the sales of securities available for sale and an increase of $160,000 in service charges on deposit accounts for the three months ended September 30, 2001 when compared to the same period in 2000. Noninterest Expenses. Noninterest expenses increased $966,000 for the three months ended September 30, 2001 compared to the same period in 2000 primarily due to increases in salaries and employee benefits of $463,000, occupancy expense of $268,000, advertising and promotion of $56,000, data processing expense of $46,000 and amortization of an intangible asset of $61,000 which relates to the Company's overall expansion plans. Provision for Income Taxes. The income tax provision for the three months ended September 30, 2001 was $236,000 (an effective rate of 34.6%) compared to $232,000 (an effective rate of 33.1%) for the comparable 2000 period. 16 POINTE FINANCIAL CORPORATION AND SUBSIDIARIES Comparison of the Nine Months Ended September 30, 2001 and 2000 General. Net earnings for the nine months ended September 30, 2001 were $1.3 million or $.62 basic and $.61 diluted earnings per share compared to net earnings of $1.2 million or $.62 basic and diluted earnings per share for the nine months ended September 30, 2000. The increase in the Company's net earnings was primarily due to an increase in net interest income and noninterest income, partially offset by an increase in noninterest expenses. Interest Income and Expense. Interest income increased by $2.6 million or 19.3% from $13.6 million for the nine months ended September 30, 2000 to $16.2 million for the nine months ended September 30, 2001. Interest income on loans increased $2.4 million or 22.4% primarily due to an increase of 28.6% in the average loan portfolio balance from $160.9 million for the nine months ended September 30, 2000 to $206.9 million for the comparable period in 2001, partially offset by a decrease in the yield earned from 9.05% during 2000 to 8.61% during the 2001 period. Interest income on securities increased $102,000 or 4.0% primarily due to an increase in the average securities portfolio balance of $5.9 million, partially offset by a decrease in the yield earned from 6.10% in 2000 to 5.74% in 2001. Interest expense on deposit accounts increased $1.0 million or 22.0% to $5.6 million for the nine months ended September 30, 2001 from $4.6 million for the nine months ended September 30, 2000. Interest expense on deposits increased due to an increase in the average balance from $129.7 million in 2000 to $165.8 million in 2001 partially offset by a decrease in the weighted-average rate paid from 4.76% for the nine months ended September 30, 2000 to 4.54% for the comparable period in 2001. Interest expense on other borrowings increased $383,000 to $2.5 million for the nine months ended September 30, 2001 from $2.1 million for the nine months ended September 30, 2000. Interest expense on other borrowings increased primarily due to an increase of $13.4 million in the average balance for the nine months ended September 30, 2001 compared to 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 was $585,000 for the nine months ended September 30, 2001 compared to $505,000 for the comparable period in 2000. Management believes the balance in the allowance for loan losses of $2.3 million at September 30, 2001 is adequate. Noninterest Income. Noninterest income increased $932,000 primarily due to an increase of $375,000 in realized gains on the sales of securities available for sale and an increase of $340,000 in service charges on deposit accounts for the nine months ended September 30, 2001 when compared to the same period in 2000. Noninterest Expenses. Noninterest expenses increased $1.9 million for the nine months ended September 30, 2001 compared to the same period in 2000 primarily due to increases in salaries and employee benefits of $944,000, occupancy expense of $436,000, advertising and promotion of $100,000, data processing expense of $103,000 and amortization of an intangible asset of $108,000 which relates to the Company's overall expansion plans. Provision for Income Taxes. The income tax provision for the nine months ended September 30, 2001 was $647,000 (an effective rate of 33.9%) compared to $590,000 (an effective rate of 33.4%) for the comparable 2000 period. 17 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, 2000. 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. Item 6. Exhibits and Reports on Form 8-K (a) The following exhibits are filed as part of this report.* 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"]). 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). 18 POINTE FINANCIAL CORPORATION AND SUBSIDIARIES Item 6. Exhibits and Reports on Form 8-K, Continued 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 (Exhibit 10.12 to the Registration Statement). 10.13*** Employment agreement between the Company and R. Carl Palmer, Jr. (Exhibit 10.13 to the 1999 Form 10-K filed February 23, 2000). 10.14*** Employment agreement between the Company and Beverly P. Chambers (Exhibit 10.14 to the 1999 Form 10-K filed February 23, 2000). 10.15*** Employment agreement between the Company and Bradley R. Meredith (Exhibit 10.15 to the 1999 Form 10-K filed February 23, 2000). 10.16 Branch Purchase and Deposit Assumption Agreement by and between Pointe Bank and Republic Bank dated January 4, 2001, amendment included. 11.1 Statement regarding calculation of earnings per common share included in Note 3 to the Condensed Consolidated Financial Statements. - ---------------- * 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) Reports on Form 8-K The Company did not file any Form 8-K's during the three months ended September 30, 2001. 19 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 8, 2001 By: /s/ R. Carl Palmer, Jr. ------------------------- ----------------------------- R. Carl Palmer, Jr., Chairman, President and Chief Executive Officer Date: November 8, 2001 By: /s/ Bradley R. Meredit ------------------------- ----------------------------- Bradley R. Meredith, Senior Vice President and Chief Financial Officer 20 -----END PRIVACY-ENHANCED MESSAGE-----