ITEM 1. DESCRIPTION OF BUSINESS
Business
Pointe Financial Corporation, a Florida corporation, is a bank holding company headquartered in Boca Raton. Pointe Financial Corporation's ("Pointe" or the "Company") fundamental business consists of operating its commercial bank subsidiary, Pointe Bank ("the Bank"), a Florida state chartered commercial bank. At December 31, 2000, the Company has total assets of $244.508 million and stockholders equity of $26.730 million.
As a bank holding company registered under the Bank Holding Company Act (BHCA), the Company was subject to the regulation and supervision of the Board of Governors of the Federal Reserve System ("FRB"). The Company is required to file with the FRB annual reports and other information regarding its business operations and those of its subsidiaries.
There are a number of obligations and restrictions imposed on bank holding companies and their depository institution subsidiaries by law and regulatory policy that are designed to minimize potential loss to the depositors of such depository institutions and the FDIC insurance funds in the event the depository institution becomes in danger of default. Under a policy of the FRB with respect to bank holding company operations, a bank holding company is required to serve as a source of financial strength to its subsidiary depository institutions and to commit resources to support such institutions in circumstances where it might not do so absent such policy. The FRB also has the authority under the BHCA to require a bank holding company to terminate any activity or to relinquish control of a non-bank subsidiary upon the FRB's determination that such activity or control constitutes a serious risk to the financial soundness and stability of any bank subsidiary of the bank holding company.
The BHCA has been substantially amended by the Gramm-Leach-Bliley Financial Modernization Act of 1999 (the "Modernization Act"). The portion of the Modernization Act affecting the powers of the Company became effective March 13, 2000. Prior to the Modernization Act, the BHCA prohibited a bank holding company, with certain limited exceptions, from:
(i) Acquiring or retaining direct or indirect ownership or control of more than 5% of the outstanding voting stock of any company which is not a bank or bank holding company;
(ii) Engaging directly or indirectly in activities other than those of banking, managing or controlling banks, or performing services for its subsidiaries, unless such non-banking business is determined by the FRB to be so closely related to banking or managing or controlling banks as to be properly incident thereto.
The Modernization Act, among other things:
Allows bank holding companies meeting management, capital and Community Reinvestment Act standards to elect the status of financial holding company and thereafter engage in a substantially broader range of non-banking activities, including insurance underwriting and making merchant banking investments in commercial and financial companies;
Allows insurers and other financial services companies to acquire banks or bank holding companies;
Removes various restrictions that currently apply to bank holding company ownership of securities firms and mutual fund advisory companies; and
Establishes the overall regulatory structure applicable to bank holding companies that also engage in insurance and securities operations.
The Company filed a declaration with the Federal Reserve Bank to become a financial holding company under the Modernization Act. The Board of Governors of the Federal Reserve System advised Pointe Financial that its election to become a financial holding company was effective on March 13, 2000.
The Company was incorporated under the laws of the State of Florida on September 29, 1993 for the dual purpose of serving as a holding company for Pointe Federal Savings Bank, a federally chartered thrift (the "Thrift"), and to facilitate the acquisition of the Bank, then known as Flamingo Bank, in mid-1994. Both the Bank and the Thrift were established in the mid-1980's. The Thrift, headquartered in Boca Raton, had been a mortgage banking thrift highly focused on residential mortgage lending. The Bank had focused on small business commercial lending, with emphasis on originating Small Business Administration ("SBA") guaranteed loans. After the acquisition of the Bank in mid-1994, the Company had been both a bank holding company (subject to regulation by the FRB and a thrift holding company (subject to regulation by the Office of Thrift Supervision (the "OTS")). This was a very complex regulatory environment for the Company. The Company streamlined its operations through the merger in April 1997 of the Thrift into the Bank. As a result of the merger of the Thrift into the Bank, the Company is no longer subject to regulation by the OTS, thus the merger allowed the Company to alleviate some of its regulatory burdens without negatively impacting its ability
to service its customers. On June 12, 1998 the Company completed an initial public offering issuing 869,565 shares of its common stock. The proceeds totaled $12.076 million of which $6.000 million was invested in the Bank; the remainder was retained by the Company for general corporate purposes.
The Company's principal business, conducted through the Bank, is making commercial, consumer and real estate loans. Attracting deposits from the general public, along with utilizing Federal Home Loan Bank advances and other borrowings, are the primary sources of funds used to make these loans, and to a lesser extent, purchase security investments. The Bank conducts business through its five full service facilities located in Palm Beach, Broward and Miami-Dade counties. The Company derives revenues principally from interest income earned on loans and securities, fee income associated with loans serviced and originated, service charges on depository accounts, and the sale of assets designated as available for sale.
Investment Banking Joint Venture
In July, 2000, the Company formed Pointe Capital, LLC an Investment Banking Joint Venture with First Integrated Capital. Pointe Capital offers Investment Banking services to customers who are overlooked by larger investment banking firms. Pointe Capital had negligible effect on the Company's performance during 2000.
Pending Acquisition
On January 4, 2001, the Company has entered into a definitive agreement with Republic Bank, headquartered in St. Petersburg, Florida, to acquire their banking offices located in Miami-Dade County. The branch offices have a combined deposit base of approximately $57.2 million. In addition, Pointe Bank will acquire approximately $6.5 million of Consumer Loans related to the Miami-Dade offices and acquire approximately $25.0 million of Commercial Real Estate Loans originated by Republic. The acquisition is expected to close in the first half of 2001 pending regulatory approvals and satisfaction of other customary closing conditions.
Market Area and Competition
The financial services industry in which the Company operates is highly competitive. The Bank competes with national and state banks, savings and loan associations and credit unions for loans and deposits. In addition, the Bank competes with other providers of financial services, from both inside and outside Florida, including finance companies, institutional buyers of commercial paper, money market funds, brokerage firms, investment companies, insurance companies, insurance agencies and governmental agencies. These competitors are actively engaged in marketing various types of loans, commercial paper, short-term obligations, investments, insurance and other products and services. The Company anticipates that the intensity of competition among financial institutions will be increased with the provisions in the Modernization Act. The Modernization Act permits banks, securities firms, and insurance companies to affiliate which could then serve its customers' varied financial needs through a single corporate structure. The Company has become a financial holding company in order to take advantage of the opportunities afforded under the Modernization Act.
The consolidation of the financial services industry has continued to create opportunities and challenges for the Company. Mergers among institutions have disrupted many customer relationships and created opportunities for the Bank to acquire new customers. The Bank's objective is to compete for deposits and loans by offering the customers a higher level of personal service, together with a wide range of products offered at competitive rates. Management continues to evaluate market needs and products to meet those needs, which would also allow Pointe to control the growth of its assets and liabilities.
Market Risk
Market risk is the uncertainty 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. To that end, management actively monitors and manages its interest-rate risk exposure. The measurement of market risk associated with financial instruments is meaningful only when all related and offsetting on- and off-balance-sheet transactions are aggregated, and the resulting net positions are identified. Disclosures about the fair value of financial instruments, which reflect changes in market prices and rates, can be found in Note 9 of Notes to Consolidated Financial Statements.
The Company's primary objective in managing interest-rate risk is to minimize the adverse impact of changes in interest rates on the bank's net interest income and capital, while adjusting the company's asset-liability structure to obtain the maximum yield-cost spread on that structure. The Company relies primarily on its asset-liability structure to control interest-rate risk. However, a sudden and substantial increase or decrease in interest rates may 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. The Company does not engage in trading activities.
Employees
As of December 31, 2000, the Company employed 79 employees of which 74 were full-time and 5 part-time, including 3 executive officers. The company's employees are not represented by a collective bargaining group, and the Company considers its relations with its employees to be good. The Company provides employees with benefits customary in the banking industry, which include major medical insurance, group term life insurance, dental insurance, long term disability insurance, a 401(k) plan, and vacation and sick leave.
Year 2000 Compliance
The Company's operating and financial systems have been found to be compliant with the year 2000 issue. The "Y2K problem" has not adversely affected the Company's operations nor does management expect that it will. The most significant vendor to the Bank, which provides the software support for the in-house system, Information Technology, Inc., has proven compliant.
Forward-Looking Statements
When used in this Form 10-K or future filings by the Company with the Securities and Exchange Commission, in the Company's press releases or other public or shareholder communications, or in oral statements made with the approval of an authorized executive officer, the word or phrases "will likely result", "expect", "will continue", "anticipate", "estimate", "project", "believe" and similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and to advise readers that various factors, including general economic factors and conditions, changes in levels of market interest rates, credit risks of lending activities, competitive and regulatory factors, and expansion strategies could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from those anticipated or projected. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
ITEM 2.
ITEM 2. PROPERTIES
The Bank conducts its business through its main office and four branch offices. The following table sets forth certain information regarding the Bank's office properties:
(1) Leased branch office (2) During 1999, the Company purchased vacant land for a branch site in Coral Springs, Florida. Construction will be completed and the branch open by end of first quarter of 2001.
The branch offices to be acquired from Republic Bank are not reflected in the above table.
The Bank owns and operates personal computers, teller terminals and associated equipment. At December 31, 2000, such equipment had a net book value of $439,019, included above.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Company and the Bank 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 the Company and the Bank which, if determined adversely, would have a material adverse effect on the business, results of operations, or financial position of the Company or the Bank.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the stockholders during the fourth quarter of the fiscal year ended December 31, 2000, through the solicitation of proxies or otherwise.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Price and Dividends
(a) The common stock of the Company, par value $.01 per share, has been traded on the Nasdaq National Market System under the symbol "PNTE" since June 12, 1998. Prior to June 12, 1998 there was no established public trading market for the Company's common stock. The following table sets forth the high and low bids for the common stock for the periods indicated as reported by Nasdaq.
Currently the Company has five market makers in its common stock: Keefe, Bruyette & Woods, Inc. McConnell Budd & Downes Advest, Inc. Instinet Corporation Spear, Leeds & Kellogg
As of December 31, 2000 there were 2,022,227 common shares issued and outstanding held by approximately 124 shareholders of record and 338 beneficial shareholders, not including persons or entities where stock is held in nominee or "street" name through various brokerage firms or banks.
The following table sets forth cash dividends paid during the years ended 2000 and 1999.
2000 1999 ---------------------------- --------------------------- Quarter Ended Dividend Quarter Ended Dividend ---------------------------- --------------------------- March 31 $ .05 March 31 $ -- June 30 $ .05 June 30 $ .05 September 30 $ .05 September 30 $ .05 December 31 $ .05 December 31 $ .05
Future payments of dividends are subject to determination and declaration by the Board of Directors. See Note 18 to the Audited Consolidated Financial Statements for discussion of restrictions on dividend payments.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA (Dollars in thousands, except per share figures)
SELECTED FINANCIAL DATA, continued (Dollars in thousands, except per share figures)
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(1) The Bank was subject to a one-time special assessment that was paid by all financial institutions insured by the SAIF in 1996. The Bank's pre-tax assessment was $926,000 ($581,000 after taxes).
(2) All per share information is presented to reflect a three-for-two stock split effective February 1998. The per share information also reflects the consummation of an initial public offering issuing 869,565 shares of common stock on June 12, 1998.
(3) Difference between weighted-average yield on all interest-earning assets and weighted-average rate on all interest-bearing liabilities.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Pointe Financial Corporation (the "Company") owns 100% of the outstanding stock of Pointe Bank (the "Bank"). The Bank is a State (Florida) chartered commercial bank. The Bank, through five banking offices, provides a wide range of banking services to individuals and businesses located primarily in South Florida. The Company owns an inactive subsidiary, Pointe Financial Service and also is a 50% owner of Pointe Capital, LLC, an investment banking joint venture.
On June 12, 1998, the Company consummated an initial public offering (the "Offering") of 869,565 shares of common stock, par value $.01 per share. The shares were sold at an offering price of $15.375 per share. Keefe, Bruyette & Woods, Inc. and McGinn, Smith & Co. acted as the representatives of the underwriters of the Offering. The net proceeds of the Offering totaled $12.076 million of which $6.000 million was invested in its bank subsidiary, Pointe Bank. The remaining proceeds retained by the Company will continue to fund branch expansion and support growth in the loan and security portfolio.
At December 31, 2000, the Company had total consolidated assets of $244.508 million, an increase of $30.852 million or 14.4% over total assets of $213.656 million at December 31, 1999. The majority of asset growth is reflected in the loans receivable ending December 31, 2000 at $173.848 million, an increase of $20.300 million or 13.2% over December 31, 1999, $153.548 million. The Company's portfolio of securities increased $7.513 million or 16.3% to $53.670 million as of December 31, 2000 from $46.157 million as of December 31, 1999. The Bank's deposits increased to $161.136 million as of December 31, 2000 from $146.176 million as of December 31, 1999, a 10.2% increase. The Company had consolidated net earnings of $1.719 million or earnings per basic and diluted share of $.85 for the year ended December 31, 2000 compared to a consolidated net earnings of $1.223 million or $.56 basic and diluted earnings per share for 1999.
Regulation and Legislation
As a state-chartered commercial bank, the Bank is subject to extensive regulation by the Florida Department of Banking and Finance ("Florida DBF"), the Federal Reserve Board and the Federal Deposit Insurance Corporation ("FDIC"). The Bank files reports with the Florida DBF and the FDIC concerning its activities and financial condition, in addition to obtaining regulatory approvals prior to entering into certain transactions such as mergers with or acquisitions of other financial institutions. Periodic examinations and inspections are performed by the Florida DBF and the Federal Reserve Board to monitor the Bank's compliance with the various regulatory requirements.
Credit Risk
The Bank's primary business is making commercial, business, consumer and real estate loans. That activity entails potential loan losses, the magnitude of which depend on a variety of economic factors affecting borrowers which are beyond the control of the Bank. While management has instituted underwriting guidelines and credit review procedures to protect the Bank from avoidable credit losses, some losses will inevitably occur.
The following table sets forth certain information regarding nonaccrual loans and foreclosed real estate, including the ratio of such loans and foreclosed real estate to total assets as of the dates indicated, and certain other related information.
The following table sets forth information with respect to activity in the Bank's allowance for loan losses during the periods indicated:
In the Company's $1.526 million of non-performing loans $251,000 are partially guaranteed by the United States Small Business Administration. The guaranteed portion of such loans totals $195,000. The provision for loan losses for the year ended December 31, 2000, was $685,000 as compared to $610,000 for the year ended December 31, 1999. The Company continues to make significant provisions for loan losses. The Company has historically had strong asset quality as evidenced by the low percentage of net charge-offs to average loans outstanding over the last five years of .25%. Management believes that the allowance for loan losses of $1.792 million is adequate at December 31, 2000.
The following table presents information regarding the Bank's total allowance for loan losses as well as the allocation of such amounts to the various categories of loans:
Management evaluates currently available information in order to establish the allocation of the allowance for loan losses. Future adjustments to the allowance may be necessary if conditions change in the portfolio. Among these changes are risk characteristics of the loan portfolio, the quality of specific loans, the level of nonaccruing loans, current economic conditions, trends in delinquencies or charge-offs and the value of underlying collateral, all of which are subject to change. Management believes that the allowance for loan losses of $1.792 million is adequate at December 31, 2000.
Results of Operations
The operating results of the Company depend primarily on its net interest income, which is the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities, consisting primarily of deposits. Net interest income is determined by the difference between yields earned on interest-earning assets and rates paid on interest-bearing liabilities ("interest-rate spread") and the relative amounts of interest-earning assets and interest-bearing liabilities. The Company's interest-rate spread is affected by regulatory, economic and competitive factors that influence interest rates, loan demand and deposit flows. In addition, the Company's net earnings are also affected by the level of nonperforming loans and foreclosed real estate, as well as the level of its noninterest income, and its noninterest expenses, such as salaries and employee benefits, occupancy and equipment costs and losses on foreclosed real estate and income taxes.
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) interest margin; and (vi) ratio of average interest-earning assets to average interest-bearing liabilities.
(1) Does not include the tax equivalent yield on tax exempt municipal bonds purchased in 2000.
(2) Includes interest-bearing deposits, federal funds sold and securities purchased under agreements to resell.
(3) Includes nonaccrual loans.
(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.
Rae/Volume Analysis
The following table sets forth certain information regarding changes in interest income and interest expense of the Company for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in rate (change in rate multiplied by prior volume), (2) changes in volume (change in volume multiplied by prior rate) and (3) changes in rate-volume (change in rate multiplied by change in volume).
Liquidity and Capital Resources
A Florida chartered commercial bank is required to maintain a liquidity reserve of at least 15% of its total transaction accounts and 8% of its total nontransaction accounts. 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 determined by the rules of the Florida DBF, such as federal funds sold and United States securities or securities guaranteed by the United States or agencies thereof. As of December 31, 2000 and December 31, 1999, the Bank had liquidity of approximately $38.218 million and $33.551 million, or approximately 24.59% and 24.72%, respectively.
During the year ended December 31, 2000, the Company's primary sources of funds consisted of principal payments on loans and securities, from sales and maturities of securities, net increases in deposits, increase in Federal Home Loan Bank advances and net cash flows from operating activities. The Company used its capital resources principally to purchase securities and fund existing and continuing loan commitments. At December 31, 2000, the Company had commitments to originate loans totaling $16.476 million. Scheduled maturities of certificates of deposit during the 12 months following December 31, 2000 totaled $65.770 million. Management believes the Company has adequate resources to fund all of its commitments, that substantially all of its existing commitments will be funded within the next twelve months and, if so desired, that it can adjust the rates on certificates of deposit to attract deposits in a changing interest-rate environment.
The following table sets forth, by maturity distribution, certain information pertaining to the securities portfolio (dollars in thousands):
Regulatory Capital Requirements
Federal and state banking regulations place certain restrictions on dividends paid and loans or advances made by the Bank to the Holding Company.
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's and the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgements by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.
Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and percentages (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2000 and 1999, that the Company and the Bank met all capital adequacy requirements to which they are subject.
Under FDIC regulations, the Bank is required to meet certain minimum regulatory capital requirements. This is not a valuation allowance and has not been created by charges against earnings. It represents a restriction on stockholders' equity.
As of December 31, 2000, the most recent notification from the regulatory authorities categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage percentages as set forth in the following tables. There are no conditions or events since that notification that management believes have changed the Bank's category. The Company and the Bank's actual capital amounts and percents as of December 31, 2000 and 1999 are also presented in the table (dollars in thousands).
Asset - Liability Structure
As part of its asset and liability management, the Company has emphasized establishing and implementing internal asset-liability decision processes, as well as communications and control procedures to aid in managing the Company's earnings. Management believes that these processes and procedures provide the Company with better capital planning, asset mix and volume controls, loan-pricing guidelines, and deposit interest-rate guidelines which should result in tighter controls and less exposure to interest-rate risk.
The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are "interest-rate sensitive" and by monitoring an institution's interest-rate sensitivity "gap." An asset or liability is said to be interest-rate sensitive within a specific time period if it will mature or reprice within that time period. The interest-rate sensitivity gap is defined as the difference between interest-earning assets and interest-bearing liabilities maturing or repricing within a given time period. The gap ratio is computed as dividing rate-sensitive assets by rate-sensitive liabilities. A gap ratio of 1.0% represents perfect matching. A gap is considered positive when the amount of interest-rate sensitive assets exceeds interest-rate sensitive liabilities. A gap is considered negative when the amount of interest-rate sensitive liabilities exceeds interest-rate sensitive assets. During a period of rising interest rates, a negative gap would adversely affect net interest income, while a positive gap would result in an increase in net interest income. During a period of falling interest rates, a negative gap would result in an increase in net interest income, while a positive gap would adversely affect net interest income.
In order to minimize the potential for adverse effects of material and prolonged increases in interest rates on the results of operations, the Company's management continues to monitor asset and liability management policies to better match the maturities and repricing terms of its interest-earning assets and interest-bearing liabilities. Such policies have consisted primarily of: (i) emphasizing the origination of adjustable-rate loans; (ii) maintaining a stable core deposit base; and (iii) maintaining a significant portion of liquid assets (cash and short-term investments).
The following table sets forth certain information relating to the Company's interest-earning assets and interest-bearing liabilities at December 31, 2000 that are estimated to mature or are scheduled to reprice within the period shown.
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(1) In preparing the table above, adjustable-rate loans are included in the period in which the interest rates are next scheduled to adjust rather than in the period in which the loans mature. Fixed-rate loans are scheduled, including repayment, according to their contractual maturities.
(2) Includes nonaccrual loans and loans held for sale.
(3) Securities are scheduled according to their respective repricing and maturity dates, includes Federal Home Loan Bank (FHLB) stock and Federal Reserve Bank stock.
(4) Savings, NOW and money-market accounts are regarded as readily accessible withdrawable accounts. All other time accounts are scheduled according to their respective maturity dates.
(5) Borrowings include FHLB convertible advances which have a call option. For the purposes of the table above, the advances are categorized at their contractual maturity dates.
The following table reflects the contractual principal repayments of the Company's loan portfolio at December 31, 2000:
Of the $122.2 million in loans due after one year, 66.8% of such loans have fixed rates of interest and 33.2% have adjustable rates.
The following table displays loan originations by type of loan and principal reductions during the periods indicated.
The originations noted in the table above exclude originations of loans held for sale of $7.082 million, $2.496 million, $1.994 million, $9.005 million, and $51.533 million for periods ended December 31, 2000, 1999, 1998, 1997 and 1996, respectively.
The following table summarizes the loan portfolio of the Company by type of loan as of December 31, 2000, 1999, 1998, 1997 and 1996.
The Bank originates, purchases and participates in loans for its own portfolio and for sale in the secondary market. The Bank provides commercial business loans, commercial and residential real estate loans, and consumer loans. Loans secured by real estate generally include commercial and residential real estate, loans to refinance or purchase existing properties and home equity loans. The gradual change in the composition of the loan portfolio is evident by the growth in the commercial and the commercial real estate categories.
Commercial business loans totaled $41.305 million or 23.59% of the Bank's loan portfolio, as of December 31, 2000. Commercial business loan underwriting practices assess the borrower's creditworthiness and ability to repay, including an evaluation of the value of any collateral securing the proposed loan. While commercial business loans generally are made for shorter terms and at higher yields than one-to-four family residential loans, such loans generally involve a higher level of risk than one-to-four family residential loans. To a lesser extent, the bank originates and services Small Business Administration (SBA) loans, which are underwritten in accordance with the guidelines of the SBA. These loans are made to small businesses and usually require that significant collateral be assigned to the Bank from the borrower. Typically, the SBA guarantees 70% to 90% of the loan balance with the remaining portion unguaranteed. The Bank is permitted to sell the SBA-guaranteed portion of the loan in secondary markets, with the Bank retaining the portion that is not guaranteed. The Bank is compensated by the premium derived from the sale into the secondary market and a 1% servicing fee on the sold guaranteed portion. SBA loans are similar to commercial business loans in yield and credit risk.
The Bank's commercial real estate loans at December 31, 2000 totaled $29.699 million or 16.96% of the Bank's portfolio. The portfolio primarily consisted of owner-occupied commercial properties and generally have terms ranging from fifteen to twenty years and interest rate adjustment periods ranging from monthly to five years. Amortization periods for commercial mortgage loans generally do not exceed 25 years. Commercial real estate loans originated by the Bank are primarily secured by income-producing properties such as office buildings, warehouse buildings, retail space and to a lessor extent multi-family property. Generally, in underwriting commercial real estate loans, the Bank requires the personal guaranty of borrowers, a maximum loan to value ratio of 75%, and a cash flow to debt service ratio of 1.25 to 1.
The Bank's real estate mortgage loans, which totaled $88.659 million or 50.62% of the Bank's total loan portfolio as of December 31, 2000, consist of residential mortgage loans secured by existing properties. The Bank's residential mortgage loans have terms which do not exceed 30 years and are secured by one-to-four family residences. Loans made for an amount in excess of 80% of the appraised value of the financed residences are generally originated with private mortgage insurance, which essentially insures that portion of the loan which is in excess of 80% of the appraised value of the financed residences. As of December 31, 2000, the residential loan portfolio of the Bank consisted of approximately 25% in ARMs and 75% in fixed rate loans. Residential mortgage loans generally are underwritten by the Bank in accordance with guidelines of the Federal National Mortgage Association (the "FNMA") and the Federal Home Loan Mortgage Corporation (the "FHLMC").
Consumer loans are extended for a variety of purposes including the purchase of automobiles, home improvement, lines of credit and unsecured personal loans. As of December 31, 2000, consumer loans were approximately $15.468 million or 8.83% of total loans.
Consumer loan underwriting standards include an examination of the applicant's payment history on other debts and an evaluation of the applicant's ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of the applicant is of primary importance, the underwriting process also includes a comparison of the value of the security, if any, in relation to the proposed loan amount. While consumer loans generally involve a higher element of credit risk than one-to-four family residential loans, consumer loans are typically made at higher interest rates and for shorter terms, or at adjustable rates, and are helpful in maintaining a profitable spread between the Bank's loan yield and its cost of funds.
The following table shows the distribution of, and certain other information relating to, deposit accounts by type:
Jumbo certificates ($100,000 and over) included above mature as follows:
The scheduled maturities of time deposits are as follows:
The following table sets forth the net deposit flows of the Company during the period indicated:
The following table indicates the daily average balances and weighted average interest rates paid on interest bearing deposits for each of the three years ended December 31, 2000, 1999 and 1998:
Comparison of Year Ended December 31, 2000 and 1999 General
Net earnings for the year ended December 31, 2000 were $1.719 million or $.85 per basic and diluted share compared to net earnings of $1.223 million or $.56 per basic and diluted share for the year ended December 31, 1999. The increase in income was primarily due to an increase in net interest income partially offset by increases in noninterest expenses and decreases in noninterest income.
Interest Income and Expense
Interest income increased from $15.044 million for the year ended December 31, 1999 to $18.545 million for the year ended December 31, 2000. Interest income on loans increased $2.503 million due to an increase in the average loan portfolio balance from $143.882 million for the year ended December 31, 1999 to $163.247 million for the year ended December 31, 2000, and an increase in the weighted-average yield earned on the portfolio from 8.59% to 9.11%. Interest on securities increased to $3.439 million for the year ended December 31, 2000 from $2.581 million for the year ended December 31, 1999. The average security portfolio increased to $56.241 million in 2000 from $46.943 million in 1999. The weighted average yield increased from 5.50% in 1999 to 6.11% in 2000. Interest on other interest-earning assets increased $140,000 due to an increase in average other interest-earning assets from $1.981 million in 1999 to $3.798 million in 2000.
Interest expense increased to $9.305 million for the year ended December 31, 2000 from $6.904 million for the year ended December 31, 1999. Interest expense on deposit accounts increased $1.003 million from $5.331 million in 1999 to $6.334 million during 2000, primarily attributed to an increase in the weighted average yield from 4.36% in 1999 to 4.85% in 2000. The average interest-bearing deposit balances increased from $122.376 million during the year ended December 31, 1999 to $130.603 million for 2000, a $8.227 million increase. Interest expense on other borrowings increased $1.398 million from $1.573 million in 1999 to $2.971 million in 2000, primarily due to an increase in average borrowings from $31.086 million during the year ended December 31, 1999 to $49.713 million in 2000. The average cost of all interest-bearing liabilities increased to 5.16% for the year ended December 31, 2000 from 4.50% for the year ended December 31, 1999.
Provision for Loan Losses
The provision for loan losses is charged to earnings to bring the total allowance to a level deemed appropriate by management and is based upon historical experience, the volume and type of lending conducted by the Bank, industry standards, the amounts of nonperforming loans, general economic conditions, particularly as they relate to the Bank's market areas, and other factors related to the collectability of the Bank's loan portfolio. The provision increased to $685,000 for the year ended December 31, 2000 from $610,000 for the year ended December 31, 1999. The increase in the provision is a result of management's decision to increase reserves as the composition of the loans continues to shift from residential mortgage dominance to a more traditional commercial bank portfolio. Net loan charge-offs for the period ending December 31, 2000 of $224,000 as compared to the $357,000 for the period ending December 31, 1999. Management believes that the allowance for loan losses of $1.792 million is adequate at December 31, 2000.
Noninterest Income
Total noninterest income for the period ended December 31, 2000 was $1.092 million as compared to the $1.131 million for the period ended December 31, 1999. The decrease of noninterest income of $39,000, is primarily attributed to net losses realized on the sale of investments available for sale as the Company repositioned its earning assets.
Noninterest Expenses
Total noninterest expenses increased $465,000 to $7.185 million for the year ended December 31, 2000 from $6.720 million for the year ended December 31, 1999. The increases are primarily attributed to the Company's increased staffing levels as we continue to focus on providing the required service to our customers.
Provision for Income Taxes
The provision for income taxes increased from $718,000 (an effective rate at 37.0%) during the year ended December 31, 1999 to $821,000 (an effective rate at 33.3%) during the year ended December 31, 2000. The decrease in the income tax is directly related to the purchases of Bank Qualified Municipal Investments during the year ending December 31, 2000.
Extraordinary Item
During the period ending December 31, 2000, the Bank successfully completed the sale of a $5.000 million Federal Home Loan Bank advance. The Company recorded a pre-tax gain of $125,000 on the sale of the liability. The transaction is considered an extraordinary item - a gain on extinguishment of debt, net of a $47,000 tax.
Comparison of Year Ended December 31, 1999 and 1998 General
Net earnings for the year ended December 31, 1999 were $1.223 million or $.56 per basic and diluted share compared to net earnings of $1.053 million or $.56 per basic share ($.55 per diluted share) for the year ended December 31, 1998. The increase in income was primarily due to an increase in net interest income partially offset by increases in noninterest expenses and decreases in noninterest income.
Interest Income and Expense
Interest income increased from $13.113 million for the year ended December 31, 1998 to $15.044 million for the year ended December 31, 1999. Interest income on loans increased $1.902 million due to an increase in the average loan portfolio balance from $116.499 million for the year ended December 31, 1998 to $143.882 million for the year ended December 31, 1999, partially offset by a decrease in the weighted-average yield earned on the portfolio from 8.98% to 8.59%. Interest on securities remained constant for the two years ended December 31 at $2.581 million as the average security portfolio increased to $46.943 million in 1999 from $45.634 million in 1998; however, the weighted average yield decreased from 5.66% in 1998 to 5.50% in 1999. Interest on other interest-earning assets increased $29,000 due to an increase in average other interest-earning assets from $1.313 million in 1998 to $1.981 million in 1999.
Interest expense increased to $6.904 million for the year ended December 31, 1999 from $6.498 million for the year ended December 31, 1998. Interest expense on deposit accounts decreased $428,000 from $5.759 million in 1998 to $5.331 million during 1999, primarily attributed to a decrease in the weighted average yield from 4.88% in 1998 to 4.36% in 1999. The average interest-bearing deposit balances increased from $118.104 million during the year ended December 31, 1998 to $122.376 million for 1999, a $4.272 million increase. Interest expense on other borrowings increased $834,000 from $739,000 in 1998 to $1.573 million in 1999, primarily due to an increase in average borrowings from $14.055 million during the year ended December 31, 1998 to $31.086 million in 1999. The average cost of all interest-bearing liabilities decreased from 4.92% for the year ended December 31, 1998 to 4.50% for the year ended December 31, 1999.
Provision for Loan Losses
The provision for loan losses is charged to earnings to bring the total allowance to a level deemed appropriate by management and is based upon historical experience, the volume and type of lending conducted by the Bank, industry standards, the amounts of nonperforming loans, general economic conditions, particularly as they relate to the Bank's market areas, and other factors related to the collectability of the Bank's loan portfolio. The provision decreased to $610,000 for the year ended December 31, 1999 from the provision of $950,000 for the year ended December 31, 1998. The decrease is a result of the Company's improved credit quality and net loan charge-offs for the period ending December 31, 1999 of $357,000 as compared to the $720,000 for the period ending December 31, 1998. Management believes that the allowance for loan losses of $1.331 million is adequate at December 31, 1999.
Noninterest Income
Total noninterest income for the period ended December 31, 1999 was $1.131 million as compared to the $1.650 million for the period ended December 31, 1998. The Company continues to focus on core earnings and is less dependent on non-recurring sources of revenues as illustrated by net gains on asset sales for the period ending December 31, 1998 of $456,000 as compared to $70,000 for the period ended December 31, 1999.
Noninterest Expenses
Total noninterest expenses increased $1.089 million to $6.720 million for the year ended December 31, 1999 from $5.631 million for the year ended December 31, 1998. The increases are primarily attributed to the Company's planned branch expansions, opening an additional two offices during 1999.
Provision for Income Taxes
The provision for income taxes increased from $631,000 (an effective rate at 37.5%) during the year ended December 31, 1998 to $718,000 (an effective rate at 37.0%) during the year ended December 31, 1999.
Impact of Inflation and Changing Prices
The financial statements and related data presented herein have been prepared in accordance with GAAP, which requires the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation. Unlike most industrial companies, substantially all of the assets and liabilities of the Company are monetary in nature. As a result, interest rates have a more significant impact on the Company's performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services, since such prices are affected by inflation to a larger extent than interest rates.
Future Accounting Requirements
Financial Accounting Standards 133 - Accounting for Derivative Investments and Hedging Activities requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivatives and whether they qualify for hedge accounting. The key criterion for hedge accounting is that the hedging relationship must be highly effective in achieving offsetting changes in fair value or cash flows. The Company will be required to adopt this Statement effective January 1, 2001. Management does not anticipate that this Statement will have a material impact on the Company.
The following table presents summarized quarterly data (in thousands, except per share amounts):
Item 7A.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk See Part I, Item 1. DESCRIPTION OF BUSINESS, Market Risk.
Item 8.
Item 8. Financial Statements and Supplementary Data. Pointe Financial Corporation
INDEX
Audited Consolidated Financial Statement Page(s)
Report of Independent Certified Public Accounts (Hacker, Johnson & Smith PA) .....................................
Consolidated Balance Sheets as of December 31, 2000 and 1999 .....
Consolidated Statements of Earnings for the years ended December 31, 2000, 1999 and 1998 ................................. ,
Consolidated Statements of Stockholder's Equity for the years ended December 31, 2000, 1999 and 1998 ..................... ,
Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998 ................................. ,
Notes to Consolidated Financial Statements ....................... ,
Independent Auditors' Report on Supplementary Information ......................................................
Consolidated Balance Sheets as of December 31, 2000 ..............
Consolidated Statements of Operations for the year ended December 31, 2000 .................................................
Schedules are omitted because the conditions requiring their filing are not applicable or because the required information is provided in the Consolidated Financial Statements, including the Notes thereto.
Independent Auditors' Report
Board of Directors Pointe Financial Corporation Boca Raton, Florida
We have audited the consolidated balance sheets of Pointe Financial Corporation and Subsidiaries (the "Company") at December 31, 2000 and 1999, and the related consolidated statements of earnings, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company at December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2000 in conformity with generally accepted accounting principles.
HACKER, JOHNSON & SMITH PA Fort Lauderdale, Florida January 19, 2001
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets ($ in thousands, except share amounts)
See Accompanying Notes to Consolidated Financial Statements.
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings ($ in thousands except per share amounts)
(continued)
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings, Continued ($ in thousands except per share amounts)
See Accompanying Notes to Consolidated Financial Statements
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity ($ In thousands)
(continued)
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity ($ In thousands)
See Accompanying Notes to Consolidated Financial Statements
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows ($ in thousands)
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued ($ in thousands)
See Accompanying Notes to Consolidated Financial Statements
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2000, 1999 and 1998
(1) Description of Business and Summary of Significant Accounting Policies General. Pointe Financial Corporation (the "Holding Company") is a Financial Holding Company. The Holding Company owns 100% of Pointe Bank (the "Bank"), a state-chartered commercial bank and Pointe Financial Services, Inc., (collectively the "Company"). The Bank provides a variety of community banking services to small and middle-market businesses and individuals through its five banking offices located in Broward, Miami-Dade and Palm Beach counties, Florida. Pointe Financial Services, Inc. is an inactive subsidiary.
In 2000, the Company formed Pointe Capital, an investment banking joint venture with First Integrated Capital Corporation, a subsidiary of McGinn, Smith & Company, Inc., a related party. Pointe Capital offers investment banking services to small and medium-size businesses in South Florida. The Company accounts for its investment in Pointe Capital using the equity method of accounting. Activity was minimal during the year ended December 31, 2000 and the Company's investment of approximately $500,000 in Pointe Capital is included in other assets in the consolidated balance sheet.
On January 4, 2001, the Company entered into an agreement to purchase four branch offices in Miami-Dade County from another financial institution. The branches have a combined deposit base of approximately $57.2 million. The Company will also acquire in this transaction consumer loans of approximately $6.5 million and $25.0 million of participation interests in existing commercial real estate loans in the seller's portfolio.
Basis of Presentation. The accompanying consolidated financial statements include the Holding Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
The accounting and reporting policies of the Company conform to generally accepted accounting principles and to general practices within the banking industry. The following summarizes the more significant of these policies and practices.
Use of Estimates. In preparing consolidated financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and deferred tax assets.
Cash and Cash Equivalents. For purposes of the consolidated statements of cash flows, cash and cash equivalents include cash and balances due from banks and interest-bearing deposits with banks.
Securities. The Company may classify its securities as either trading, held to maturity or available for sale. Trading securities are held principally for resale and recorded at their fair values. Unrealized gains and losses on trading securities are included immediately in earnings. Held-to-maturity securities are those which the Company has the positive intent and ability to hold to maturity and are reported at amortized cost. Available-for-sale securities consist of securities not classified as trading securities nor as held-to-maturity securities. Unrealized holding gains and losses, net of tax, on available-for-sale securities are excluded from earnings and reported in other comprehensive income. Gains and losses on the sale of available-for-sale securities are recorded on the trade date and are determined using the specific-identification method. Premiums and discounts on securities available for sale are recognized in interest income using the interest method over the period to maturity.
(continued)
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Description of Business and Summary of Significant Accounting Policies, Continued Loans Held for Sale. Loans held for sale are carried at the lower of cost or estimated market value in the aggregate. Net unrealized losses are recognized through a valuation allowance by charges to earnings. At December 31, 2000 and 1999 the book value of loans held for sale approximated market value in the aggregate.
Loan origination fees and direct loan origination costs are deferred until the related loan is sold, at which time the net fees are included in the gain on sale of loans in the consolidated statements of earnings.
Loans Receivable. Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans.
Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield of the related loan.
The accrual of interest on loans is discontinued at the time the loan is ninety days delinquent unless the credit is well-secured and in process of collection. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.
All interest accrued but not collected for loans that are placed on nonaccrual or charged-off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Allowance for Loan Losses. The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.
The allowance for loan losses is evaluated on a regular basis by management and is based upon management's periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower's ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and commercial real estate loans by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price, or the fair value of the collateral if the loan is collateral dependent.
(continued)
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Description of Business and Summary of Significant Accounting Policies, Continued Allowance for Loan Losses, Continued. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment disclosures.
Foreclosed Real Estate. Real estate properties acquired through, or in lieu of, loan foreclosure are to be sold and are initially recorded at fair value at the date of foreclosure establishing a new cost basis. After foreclosure, valuations are periodically performed by management and the real estate is carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in the consolidated statements of earnings.
Premises and Equipment. Premises, furniture, fixtures, equipment and leasehold improvements are carried at cost, less accumulated depreciation and amortization computed using the straight-line method.
Transfer of Financial Assets. Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.
IncomeTaxes. Deferred tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws.
Stock Compensation Plans. Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, encourages all entities to adopt a fair value based method of accounting for employee stock compensation plans, whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. However, it also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, whereby compensation cost is the excess, if any, of the quoted market price of the stock at the grant date (or other measurement date) over the amount an employee must pay to acquire the stock. Stock options issued under the Company's stock option plan have no intrinsic value at the grant date, and under Opinion No. 25 no compensation cost is recognized for them. The Company has elected to continue with the accounting methodology in Opinion No. 25 and, as a result, has provided proforma disclosures of net earnings and earnings per share and other disclosures, as if the fair value based method of accounting had been applied. (See Note 15).
Earnings Per Share. Basic earnings per share is computed on the basis of the weighted-average number of common shares outstanding. Diluted earnings per share is computed based on the weighted-average number of shares outstanding plus the effect of outstanding stock options, computed using the treasury stock method.
Off-Balance-Sheet Financial Instruments. In the ordinary course of business the Company has entered into off-balance-sheet financial instruments consisting of commitments to extend credit, unused lines of credit and stand-by letters of credit. Such financial instruments are recorded in the consolidated financial statements when they are funded.
(continued)
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Description of Business and Summary of Significant Accounting Policies, Continued Fair Values of Financial Instruments. The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. SFAS 107 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. The following methods and assumptions were used by the Company in estimating fair values of financial instruments:
Cash and Cash Equivalents. The carrying amounts of cash and cash equivalents approximate their fair value.
Securities. Fair values for securities available for sale are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. The carrying value of Federal Home Loan Bank stock and Federal Reserve Bank stock approximates fair value.
Loans Held for Sale. Fair values of loans held for sale are based on commitments on hand from investors or prevailing market prices.
Loans. For variable-rate loans that reprice frequently and have no significant change in credit risk, fair values are based on carrying values. Fair values for fixed-rate mortgage (e.g. one-to-four family residential), commercial real estate and commercial loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values for nonperforming loans are estimated using discounted cash flow analysis or underlying collateral values, where applicable.
Accrued Interest Receivable. Book value approximates fair value.
Deposit Liabilities. The fair values disclosed for demand, NOW, money-market and savings deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities of time deposits.
Borrowed Funds. The carrying amounts of other borrowings approximate their fair values. Fair values of advances from Federal Home Loan Bank are estimated using discounted cash flow analysis based on the Company's current incremental borrowing rates for similar types of borrowings.
Off-Balance-Sheet Instruments. Fair values for off-balance-sheet lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing.
Advertising. The Company expenses all advertising as incurred.
(continued)
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Description of Business and Summary of Significant Accounting Policies, Continued Future Accounting Requirements. Financial Accounting Standards 133 - Accounting for Derivative Investments and Hedging Activities requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivatives and whether they qualify for hedge accounting. The key criterion for hedge accounting is that the hedging relationship must be highly effective in achieving offsetting changes in fair value or cash flows. The Company will be required to adopt this Statement January 1, 2001. Management does not anticipate that this Statement will have a material impact on the Company.
(2) Securities Available for Sale Securities have been classified according to management's intent. The carrying amount of securities and their approximate fair values are summarized as follows (in thousands):
TheCompany currently invests in one mutual fund consisting of a Short U.S. Government Securities Portfolio. The Short U.S. Government Securities Portfolio pursues its investment objective by investing in high-quality assets, primarily in securities issued or guaranteed by the U.S. Government, its agencies or instrumentalties with remaining maturities of 5 years or less that qualify as "liquid assets."
During the quarter ended September 30, 1998, the Company sold $1.2 million of securities from the held to maturity category. As required by Statement of Financial Accounting Standards No. 115 - Accounting for Certain Investments in Debt and Equity Securities, all the remaining securities classified as held to maturity totaling $8.5 million were transferred to the available for sale category.
At December 31, 2000 and 1999, approximately $505,000 and $492,000 respectively, of securities were pledged for the Company's treasury tax and loan account, approximately $11,262,000 and $6,251,000 were pledged as collateral for investment repurchase agreements and approximately $11,290,000 and $12,736,000 were pledged for public deposits.
(continued)
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Securities Available for Sale, Continued The following summarizes sales of securities (in thousands):
The scheduled maturities of securities available for sale at December 31, 2000 are as follows (in thousands):
(3) Loans Receivable The components of loans are summarized as follows (in thousands):
(continued)
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(3) Loans Receivable, Continued An analysis of the change in the allowance for loan losses follows (in thousands):
The following summarizes the amount of impaired loans (in thousands):
The average net investment in impaired loans and interest income recognized and received on impaired loans is as follows (in thousands):
No additional funds are committed to be advanced in connection with impaired loans.
(continued)
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Premises and Equipment Premises and equipment is summarized as follows (in thousands):
The Company leases four of its banking offices. Rental expense was approximately $534,000, $487,000 and $434,000 for the years ended December 31, 2000, 1999 and 1998, respectively. Approximate future minimum annual rental payments under noncancellable leases are as follows (in thousands):
(5) Deposits The aggregate amount of jumbo certificates of deposit with a minimum denomination of $100,000, was approximately $31.6 million and $28.2 million at December 31, 2000 and 1999, respectively.
At December 31, 2000, the scheduled maturities of certificates of deposit are as follows (in thousands):
(6) Other Borrowings The Company enters into investment repurchase agreements that require the Company to pledge securities as collateral for the balance in the accounts. At December 31, 2000 and 1999 the balance totaled $8,067,000 and $5,394,000, respectively and the Company pledged securities as collateral for these agreements with a carrying value of approximately $11,262,000 and $6,251,000, respectively.
(continued)
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Advances from Federal Home Loan Bank Maturities and interest rates on advances from the Federal Home Loan Bank ("FHLB") were as follows (dollars in thousands):
The FHLB has the option to call the above advances at an earlier date than the maturity date. At December 31, 2000 and 1999, pursuant to the collateral agreement with the FHLB, advances are collateralized by the Company's FHLB stock and a blanket lien on the Company's qualifying first mortgage, one-to-four family residential loans.
In 2000, the Company 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 gain is reported as an extraordinary item - gain on extinguishment of debt, net of tax of $47,000.
(8) Commitments and Contingencies In the ordinary course of business, the Company has various outstanding commitments and contingent liabilities that are not reflected in the accompanying consolidated financial statements.
(9) Financial Instruments The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments are commitments to extend credit and standby letters of credit and may involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the consolidated balance sheet. The contract amounts of these instruments reflect the extent of involvement the Company has in these financial instruments.
The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for on-balance-sheet instruments.
(continued)
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(9) Financial Instruments, Continued Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Company upon extension of credit is based on management's credit evaluation of the counterparty.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.
The estimated fair values of the Company's financial instruments were as follows (in thousands):
A summary of the notional amounts of the Company's financial instruments, which approximate fair value, with off balance sheet risk at December 31, 2000 follows (in thousands):
Unfunded loan commitments at fixed rates.................. $ 3,732 ========
Unfunded loan commitments at variable rates............... $ 12,744 ========
Available lines of credit................................. $ 18,374 ========
Standby letters of credit................................. $ 1,067 ========
(10) Credit Risk The Company grants a majority of its loans to borrowers primarily in Palm Beach, Broward and Miami-Dade Counties, Florida. Although the Company has a diversified loan portfolio, a significant portion of its borrowers' ability to honor their contracts is dependent upon the economy of these counties in Florida. The contractual amounts of credit-related financial instruments such as commitments to extend credit and standby letters of credit represent the amounts of potential accounting loss should the contract be fully drawn upon, the customer default and the value of any existing collateral become worthless.
(continued)
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(11) Income Taxes
Allocation of Federal and state income taxes between current and deferred portions is as follows (in thousands):
Year Ended December 31, 2000: Current Deferred Total ----------------------------- ------- -------- -----
Federal ......................... $ 903 (207) 696 State ........................... 161 (36) 125 ------ ------ ------
Total ....................... $1,064 (243) 821 ====== ====== ======
Year Ended December 31, 1999: ----------------------------- ------
Federal ......................... 756 (108) 648 State ........................... 89 (19) 70 ------ ------ ------
Total ....................... $ 845 (127) 718 ====== ====== ======
Year Ended December 31, 1998: ------
Federal ......................... 566 3 569 State ........................... 62 -- 62 ------ ------ ------
Total ....................... $ 628 3 631 ====== ====== ======
The reasons for the differences between the statutory Federal income tax rate and the effective tax rate are summarized as follows:
(continued)
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(11) Income Taxes, Continued The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities relate to the following (in thousands):
At December 31, --------------- 2000 1999 ---- ---- Deferred tax assets: Allowance for loan losses.................... $ 564 411 Depreciation................................. 156 131 Interest income from impaired loans.......... 25 16 Other........................................ 11 22 ----- ----
Total gross deferred tax assets........... 756 580 ----- ----
Deferred tax liabilities: Deferred loan fees........................... 140 210 Accrued dividends............................ 18 12 Other........................................ 7 10 ----- ----
Total gross deferred tax liabilities...... 165 232 --- ----
Net deferred tax asset.................... $ 591 348 ===== ====
(12) Related Parties The Company has entered into transactions with officers, directors and principal stockholders in the ordinary course of business. Loans to such related parties amounted to approximately $3,343,000 and $3,483,000 at December 31, 2000 and 1999, respectively. During the year ended December 31, 2000, total principal additions were approximately $1,942,000 and total principal payments were approximately $2,082,000. Deposits from such related parties at December 31, 2000 and 1999 were approximately $3,708,000 and $5,176,000, respectively.
(13) Profit Sharing Plan The Company sponsors a 401(k) profit sharing plan (the "Plan"). The Plan is available to all employees electing to participate after meeting certain length-of-service requirements. The Company's contributions to the Plan are discretionary and are determined annually. Expense relating to the Company's contributions to the Plan included in the accompanying consolidated financial statements was $53,000, $26,000 and $19,000 for 2000, 1999 and 1998, respectively.
(14) Deferred Compensation Plans In 1998 a directors deferred compensation plan was adopted by the Board of Directors. The plan permits the directors to receive common stock of the Company in lieu of cash as payment of their annual retainer fee for being directors and provides the directors the opportunity to defer portions of these retainers. The total number of shares available under this plan is 122,500. For the years ended December 31, 2000, 1999 and 1998, a total of 12,164, 11,228 and 6,924 shares, respectively were paid in lieu of cash of $109,476, $109,500 and $106,456, respectively to the directors. For the year ended December 31, 2000, 1,945 of these shares were cancelled.
In addition in 1998 certain directors received a total of 1,595 shares of common stock in payment for director fees totaling $23,821 that were accrued at December 31, 1997.
Prior to 1998, the Company had deferred compensation plans for certain directors that allowed for a portion of the participants earned compensation to be deferred and paid upon retirement, disability, death or termination of service at which time accrued benefits were payable in a lump-sum payment or in monthly installments for a period of 10 years. During 1998, the deferred compensation plans were terminated and all remaining obligations were paid in cash or through the issuance of 2,526 shares of common stock in lieu of cash of $38,837.
(continued)
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(15) Stock Award Plans Certain key employees and directors of the Company have options to purchase shares of the Company's common stock under a nonqualified stock option plan adopted in 1994. Under the plan, the total number of shares which may be issued is 300,000. At December 31, 2000, 36,831 shares remain available for grant. In addition, in 1998 a new Incentive Compensation and Stock Award Plan was adopted under which both qualified and nonqualified options can be granted and stock can be awarded to employees as compensation. A total of 200,000 options or shares can be granted to directors and employees of the Company under this plan. As of December 31, 2000, 56,678 options or shares remain available for grant. A summary of stock option transactions follows ($ in thousands, except per share amounts):
(continued)
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(15) Stock Award Plans, Continued
The weighted-average remaining contractual life of the outstanding stock options at December 31, 2000, 1999 and 1998 was sixty-two months, thirty-five months and forty months, respectively.
These options are exercisable as follows:
FASB Statement 123 requires proforma information regarding net earnings and earnings per share. This proforma information has been determined as if the Company had accounted for its stock options under the fair value method of that Statement and is as follows ($ in thousands, except per share amounts):
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
(continued)
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(15) Stock Award Plans, Continued Also in April 1999, the Company awarded 6,935 shares of restricted common stock to employees under the 1998 Incentive Compensation and Stock Award Plan. Four years following the date of grant these restricted stock awards become entirely vested. The Company is amortizing these restricted stock awards into salaries and employee benefits over the four-year period. From the date awarded, the employees are entitled to dividends paid on common stock and may vote these shares. During the years ended December 31, 2000 and 1999, 1,250 and 575 shares, respectively were forfeited due to employee termination and zero and 240 shares, respectively became entirely vested.
(16) Preferred Stock At December 31, 1997, the Company had 54,116 outstanding shares of convertible, redeemable, cumulative preferred stock Series A, $.01 par value ("preferred stock"). During the first quarter of 1998 an additional 500 shares were sold by the Company and 1,410 shares were issued in the form of a stock dividend. In the second quarter of 1998 all outstanding preferred shares were converted by the shareholders into 126,026 shares of common stock.
(17) Regulatory Matters
Federal and state banking regulations place certain restrictions on dividends paid and loans or advances made by the Bank to the Holding Company.
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the Federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's and the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgements by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to financial holding companies.
Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and percentages (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2000 and 1999, that the Company and the Bank met all capital adequacy requirements to which they are subject.
(continued)
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(17) Regulatory Matters, Continued As of December 31, 2000, the most recent notification from the regulatory authorities categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage percentages as set forth in the following tables. There are no conditions or events since that notification that management believes have changed the Bank's category. The Company and the Bank's actual capital amounts and percentages as of December 31, 2000 and 1999 are also presented in the table (dollars in thousands).
(continued)
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(18) Stockholders' Equity In 1999, the Company's Board of Directors approved a stock repurchase program. The program was initially allocated $3.0 million and in the year 2000, the Board authorized up to an additional $3.0 million to be used to repurchase Company stock. As of December 31, 1999, the Company has repurchased 297,000 shares in treasury stock at a net cost of approximately $3.0 million.
The Company's ability to pay cash dividends on its common stock is limited to the amount of dividends it could receive from the Bank plus its own cash and cash equivalents, which amounted to $1,704 at December 31, 2000. The amount of dividends the Bank is permitted to pay to the Company is restricted to 100% of its calendar year-to-date net earnings plus retained earnings for the preceding two years. Twenty percent of the net earnings in the preceding two-year period may not be paid in dividends, but must be retained to increase capital surplus until such surplus equals the amount of the Bank's common stock then outstanding. In addition, no Bank may pay a dividend at any time that net earnings in the current year when combined with retained earnings from the preceding two years produce a loss. Under Florida law, a Florida chartered commercial bank may not pay cash dividends that would cause the Bank's capital to fall below the minimum amount required by Federal or Florida law.
(19) Earnings Per Share Basic earnings per share represents earnings available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to earnings that would result from the assumed issuance. Potential common shares that may be issued by the Company relate solely to outstanding stock options, and are determined using the treasury stock method. Earnings per common share have been computed based on the following (dollars in thousands):
(continued)
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(20) Comprehensive Income The Company follows SFAS 130, Reporting Comprehensive Income. Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net earnings. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheet, such items along with net earnings, are components of comprehensive income. The adoption of SFAS 130 had no effect on the Company's net earnings or stockholders' equity. The components of other comprehensive income and related tax effects are as follows (in thousands):
(continued)
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(21) Holding Company Financial Information
The Holding Company's unconsolidated financial information is as follows (in thousands):
Condensed Balance Sheets
Condensed Statements of Earnings
(continued)
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(21) Holding Company Financial Information, Continued
Condensed Statements of Cash Flows
Independent Auditors' Report on Supplementary Information
Board of Directors Pointe Financial Corporation Boca Raton, Florida
We have audited the accompanying consolidated financial statements of Pointe Financial Corporation and Subsidiaries at and for the year ended December 31, 2000, and have issued our report thereon dated January 19, 2001. Our audit was conducted for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The consolidating information in the accompanying schedules is presented for purposes of additional analysis of the consolidated financial statements rather than to present the financial position and results of operations of the individual companies. The consolidating information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the consolidated financial statements taken as a whole.
HACKER, JOHNSON & SMITH PA Fort Lauderdale, Florida January 19, 2001
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidating Balance Sheet December 31, 2000 (In thousands)
POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidating Statement of Operations Year Ended December 31, 2000 (In thousands)
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Company.
The information contained under the caption "Election of Directors" to appear in the Company's definitive proxy statement relating to the Company's 2000 Annual Meeting of Stockholders, which definitive proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the end of the Company's fiscal year covered by this report on Form 10-K (hereinafter referred to as the "Annual Meeting Proxy Statement"), is incorporated herein by reference. Information concerning the executive officers of the Company is included in Part I of this Report on Form 10-K.
The following table sets forth information concerning the executive officers of the Company and the Bank.
R. Carl Palmer, Jr. Mr. Palmer joined the Company and Bank in 1995 as Chief Executive Officer, President and director. He was elected to serve as Chairman of the Company in November 2000. He began his banking career at Chemical Bank in New York in 1964. In 1979, he moved to South Florida as an Executive Vice President for Southeast Banking Corporation. During his tenure at that bank with $17 billion in assets, he had responsibilities for business development, business banking and community banking. From 1988 to 1991, he was President, Chief Operating Officer and director of BancFlorida in Naples, Florida. He became a Senior Associate with Martin W. Taplin & Associates, Inc., a real estate investment firm, in 1991. Mr. Palmer received a B.A. from Dartmouth College in 1962, an M.B.A. from Amos Tuck School in 1963 and a J.D. from New York Law School in 1969. Mr. Palmer resides in Palm Beach County.
Beverly P. Chambers. Ms. Chambers joined the Company in 1995 with twenty-five years of banking experience and manages marketing and human resources. Prior to joining the Company, she spent three years as a Senior Vice President and Manager of Private Banking for NationsBank of Florida. Prior to that position, Ms. Chambers was a Senior Vice President of Southeast Banking Corporation managing commercial banking, marketing and private banking departments. Ms. Chambers received an M.S. from Florida State University in 1973. Ms. Chambers resides in Broward County.
Bradley R. Meredith. Mr. Meredith joined the Company in 1997, after eight years as Executive Vice President and Chief Financial Officer for First Family Financial Corporation in Central Florida. The majority of his eighteen years of banking experience has been with community banks. Mr. Meredith graduated from DePaul University with a B.S. in Finance in 1982. Mr. Meredith received a diploma from the Graduate School of Banking at the University of Wisconsin in 1989. Mr. Meredith resides in Palm Beach County.
Item 11.
Item 11. Executive Compensation.
The information contained under the caption "Executive Compensation" to appear in the Annual Meeting Proxy Statement is incorporated herein by reference.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information contained under the caption "Security Ownership of Certain Beneficial Owners and Management" to appear in the Annual Meeting Proxy Statement is incorporated herein by reference.
Item 13.
Item 13. Certain Relationships and Related Transactions.
The information contained under the captions "Compensation Committee Interlocks and Insider Participation" and "Certain Relationships and Related Transactions" to appear in the Annual Meeting Proxy Statement is incorporated herein by reference.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) The Following Documents Are Filed as Part of this Report:
(1) Financial Statements.
The following consolidated financial statements of the Company and the report of the independent certified public accountants thereon filed with this report:
Report of Independent Certified Public Accountants (Hacker, Johnson & Smith, P.A.)
Consolidated Statements of Financial Condition as of December 31, 2000 and 1999.
Consolidated Statements of Earnings for the years ended December 31, 2000, 1999 and 1998.
Consolidated Statements of Stockholder"s Equity for the years ended December 31, 2000, 1999 and 1998.
Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998.
Notes to Consolidated Financial Statements.
(2) Financial Statement Schedules.
Schedules are omitted because the conditions requiring their filing are not applicable or because the required information is provided in the Consolidated Financial Statements, including the Notes thereto.
(3) Exhibits.*
2.1 Plan of Merger and Merger Agreement dated February 14, 1997 by and between Pointe Federal Savings Bank and Pointe Bank (Exhibit 2.1 to the Registrant's Form SB-2 Registration Statement, File No. 333-49835, as initially filed with the Securities and Exchange Commission on April 9, 1998 [the "Registration Statement"]).
3.1 Articles of Incorporation of the Registrant (Exhibit 3.1 to the Registration Statement).
3.2 By-Laws of the Registrant (Exhibit 3.2 to the Registration Statement).
4.1 Specimen Common Stock Certificate (Exhibit 4.1 to the Registration Statement).*
10.1** 1994 Non-Statutory Stock Option Plan (Exhibit 10.1 to the Registration Statement).
10.2** Deferred Compensation Plan (Exhibit 10.2 to the Registration Statement).
10.3 Office Lease Agreement dated October 8, 1986 by and between Centrum Pembroke, Inc. and Flamingo Bank (Exhibit 10.3 to the Registration Statement).
10.4 Lease dated as of July 15, 1992 between Konrad Ulmer and Pointe Savings Bank (Exhibit 10.4 to the Registration Statement).
10.5 Lease Agreement dated January 23, 1995 by and between Hollywood Associates VI and Pointe Bank (Exhibit 10.5 to the Registration Statement).
10.6 Credit Agreement dated August 18, 1997 between Independent Bankers' Bank of Florida and Pointe Bank (Exhibit 10.6 to the Registration Statement).
10.7 Credit Agreement dated October 14, 1997 between SunTrust Bank/Miami, N.A. and Pointe Bank (Exhibit 10.7 to the Registration Statement).
10.8 Agreement for Advances and Security Agreement with Blanket Floating Lien dated November 24, 1997 between Pointe Bank and the Federal Home Loan Bank of Atlanta (Exhibit 10.8 to the Registration Statement).
10.9 Equipment Sales and Software License Agreements between Information Technology, Inc. and Pointe Financial Corporation (Exhibit 10.9 to the Registration Statement).
10.10 Master Equipment Lease Agreement dated May 7, 1997 between Leasetec Corporation and Pointe Financial Corporation (Exhibit 10.10 to the Registration Statement).
10.11*** Letter Agreement dated March 9, 1995 between Pointe Financial Corporation and R. Carl Palmer, Jr. (Exhibit 10.11 to the Registration Statement).
10.12** 1998 Incentive Compensation and Stock Award Plan. (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).
11.1 Statement regarding calculation of earnings per common share (included in the Audited Consolidated Financial Statements in the 2000 Form 10-K).
12.1 Statement regarding calculation of ratio of earnings to fixed charges (included in the Management's Discussion and Analysis of the Financial Condition and Results of Operation in the 2000 Form 10-K).
21.1 Subsidiaries of the Registrant (included in the Audited Consolidated Financial Statements in the 2000 Form 10-K).
23.1 Consent of Hacker, Johnson & Smith, P.A.
---------------------
* 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 of Form 8-K.
During the fourth quarter, no form 8-K's were filed by the Company.
Supplemental Information. As of the date of filing of this report on Form 10-K no annual report or proxy material has been sent to security holders. Such material will be furnished to security holders and the Securities and Exchange Commission subsequent to the filing of this report on Form 10-K.
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ R. Carl Palmer, Jr. ------------------------ R. Carl Palmer, Jr. Chairman of the Board, Chief Executive Officer and President
Dated: March 16, 2001
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.