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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE) FORM 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
------ OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
-------------------------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
------ THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM _________TO_________
Commission File No. 333-30182
SUN BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
United States 58-2466380
(State or other jurisdiction of (I.R.S. Employer
incorporation) Identification No.)
4367 RIVERWOOD DRIVE
MURRELLS INLET, SC 29576-1359
(Address of principal executive
offices, including zip code)
(843) 357-7007
(Registrant's telephone number, including area code)
----------------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES [ ] NO [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the date of this filing.
715,000 SHARES OF COMMON STOCK, NO STATED PAR VALUE
PAGE 1 OF 13
EXHIBIT INDEX ON PAGE 2
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SUN BANCSHARES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
INDEX
PART I. FINANCIAL RESULTS Page No.
Item 1. Financial Statements (Unaudited)
Balance Sheets - September 30, 2000 and December 31, 1999.................................................3
Statements of Income - For the period August 3, 1999 (inception)
to September 30, 2000, Nine months ended September 30, 2000, and three months ended
September 30, 2000......................................................................................4
Statements of Shareholders' Equity - For the nine months ended September 30, 2000.........................5
Statements of Cash Flows - For the nine months ended September 30, 2000...................................6
Notes to Financial Statements.............................................................................7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.....................8-10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..........................................................................................11
Item 2. Changes in Securities and Use of Proceeds..................................................................11
Item 3. Defaults Upon Senior Securities............................................................................12
Item 4. Submission of Matters to a Vote of Security Holders........................................................12
Item 5. Other Matters..............................................................................................12
Item 6. Exhibits and Reports on Form 8-K...........................................................................12
(a) Exhibits..............................................................................................12
(b) Reports on Form 8-K...................................................................................12
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SUN BANCSHARES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
See notes to financial statements.
BALANCE SHEETS
September 30, December 31,
2000 1999
------------- ------------
(Unaudited)
ASSETS
Cash and due from banks $ 36,121 $ 10,750
Premises and equipment 317,397 30,740
Deferred stock offering costs 93,390 34,557
Lease deposits 38,083 9,167
Prepaid membership 20,250 --
----------- ---------
Total assets $ 505,241 $ 85,214
=========== =========
LIABILITIES
Borrowings $ 1,060,000 $ 250,000
Accounts payable 20,859 --
----------- ---------
Total liabilities 1,080,859 250,000
----------- ---------
SHAREHOLDERS' EQUITY
Common stock, par value not stated; 10,000,000 shares 10 10
authorized; 1 share issued and outstanding
Preferred stock, par value not stated; 2,000,000 shares -- --
authorized; no shares issued and outstanding
Deficit accumulated in the development stage (575,628) (164,796)
----------- ---------
Total shareholders' equity (deficit) (575,618) (164,786)
----------- ---------
Total liabilities and shareholders' equity $ 505,241 $ 85,214
=========== =========
See notes to financial statements.
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STATEMENTS OF INCOME
(UNAUDITED)
For the Period
August 3, 1999 Nine Months Three Months
(inception) to Ended Ended
September 30, September 30, September 30,
2000 2000 2000
------------- ------------- ---------------
INCOME
Interest income $ 259 $ 22 $ --
-------- --------- ---------
EXPENSE
Interest 41,842 40,696 27,864
Salaries and benefits 229,070 178,647 71,888
Land rent 22,917 22,917 13,750
Consultant and professional fees 158,847 78,377 29,733
Application fee 15,350 -- --
Other operating expenses 107,861 90,217 33,569
--------- --------- ---------
Total expenses 575,887 410,854 176,804
--------- --------- ---------
NET INCOME (LOSS) $(575,628) $(410,832) $(176,804)
========= ========= =========
See notes to financial statements
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SUN BANCSHARES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
Deficit
Accumulated
in the
Capital
Common Stock Development
----------------------------------------
Shares Amount Surplus Stage Total
--------- ------------ ---------- ------------ ---------
BALANCE, DECEMBER 31, 1999 1 $ 10 $ -- $(164,796) $(164,786)
Net income (loss) for the nine month
period ended September 30, 2000 -- -- -- (410,832) (410,832)
--------- --------- --------- --------- ---------
BALANCE, SEPTEMBER 30, 2000 1 $ 10 $ -- $(575,628) $(575,618)
========= ========= ========= ========= =========
See notes to financial statements.
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SUN BANCSHARES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30, 2000
------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(410,832)
Adjustments to reconcile net income to net cash (used) provided by
operating activities:
Increase in accounts payable 20,859
---------
Net cash used by operating activities (389,973)
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in Deposit on leases (28,916)
Prepaid membership (20,250)
Purchases of premises and equipment (286,657)
---------
Net cash used by investing activities (335,823)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 810,000
Increase stock offerings costs (58,833)
---------
Net cash provided by financing activities 751,167
---------
NET INCREASE IN CASH 25,371
CASH, BEGINNING OF PERIOD 10,750
---------
CASH, END OF PERIOD $ 36,121
=========
See notes to financial statements
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SUN BANCSHARES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
NOTE 1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in accordance
with the requirements for interim financial statements. The financial statements
as of September 30, 2000 and for the interim period ended September 30, 2000 are
unaudited and, in the opinion of management, include all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation. The
accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB. The financial information as of December
31, 1999 has been derived from the audited financial statements as of that date.
NOTE 2. ORGANIZATION
Sun Bancshares, Inc., (the Company) was incorporated on August 3, 1999 to serve
as a bank holding company and to hold 100% of the capital stock of SunBank (the
Bank), a national bank in Murrells Inlet, South Carolina.
From August 3, 1999 through November 14, 2000, the Company was a development
stage enterprise as defined by Statement of Financial Accounting Standards No.
7, "Accounting and Reporting by Development Stage Enterprises," as it devoted
substantially all its efforts during this period to establishing a new business.
Planned principal operations had not commenced and therefore no revenue has been
recognized from such planned operations.
NOTE 3. BORROWING - LINE OF CREDIT
The Company obtained a line of credit from The Bankers Bank, Atlanta, Georgia,
for $1,500,000 to fund operations from August 3, 1999 through the close of the
offering and to fund pre-construction costs associated with the construction of
the main office and branch office building. At September 30, 2000, $1,060,000
was outstanding on the line of credit. The line of credit has been guaranteed by
the organizers and bears interest at the prime rate as published in the Money
Rates Section of The Wall Street Journal minus 1/2%. This line was paid off on
November 1, 2000.
NOTE 4. INCOME TAXES
As of September 30, 2000, the Company had a net operating loss carryforward of
$575, 628. There was no provision (benefit) for income taxes for the nine months
ended September 30, 2000 or for the period August 3, 1999 (inception) to
September 30, 2000, since a 100% valuation reserve is being maintained for the
net operating loss carryforward.
NOTE 5. SHAREHOLDERS' EQUITY
We completed our initial stock offering on November 1, 2000. The offering
resulted in the issuance of 715,000 shares of the Company's common stock.
Proceeds from the offerings were $7,150,000, less expenses associated with the
offering totaling $370,784, resulting in net proceeds of $6,779,216.
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SUN BANCSHARES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN
OF OPERATIONS
Sun Bancshares was organized on August 3, 1999 to serve as a holding company for
SunBank, N.A., a national bank located in Murrells Inlet, South Carolina. Since
it was organized, Sun Bancshares; main activities through November 1, 2000 were:
- Seeking, interviewing, and selecting its officers;
- Applying for a national bank charter;
- Applying for FDIC deposit insurance; o Applying to become a
bank holding company;
- Preparing detailed business plans;
- Identifying sites for our banking facilities; and
- Raising equity capital through an offering.
FINANCIAL RESULTS
From August 3, 1999 to September 30, 2000, the net loss amounted to $575,628
attributable to the following expenses:
Salaries and benefits...................... $229,070
Legal and professional fees................ 158,847
Other operating expenses................... 187,711
--------
Total.............................. $575,628
========
At September 30, 2000, we had total assets of $505,241, consisting principally
of premises and equipment of $317,397 and deferred stock offering costs of
$93,390.
Our liabilities at September 30, 2000 were $1,080,859, consisting of borrowing
totaling $1,060,000 and accounts payable of $20,859. We had a shareholders'
deficit of $575, 618 at September 30, 2000.
LINE OF CREDIT
A line of credit was obtained from The Bankers Bank, Atlanta, Georgia, for
$1,500,000 to fund operations from August 3, 1999 through the close of the
offering and to fund pre-construction costs associated with the construction of
the main office and branch office building. At September 30, 2000, $1,060,000
was outstanding on the line of credit. The line of credit has been guaranteed by
the organizers and bears interest at the prime rate as published in the Money
Rates Section of The Wall Street Journal minus 1/2%. This line was paid off on
November 1, 2000.
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SUN BANCSHARES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN
OF OPERATIONS
OFFICES AND FACILITIES
On May 1, 2000, the Company entered into a lease agreement for the main office
site and into a lease agreement for the branch office site. The significant
terms of these leases are described in the table below:
LEASE DATE INITIAL RENT INITIAL TERM RENEWAL OPTIONS
---------- ------------ ------------ ---------------
Main Office Site . . . . . . . May 1, 2000 $7,500 per month 25 Years Up to 15 Years
Branch Site . . . . . . . . . May 1, 2000 $55,000 per year 30 Years Up to 20 Years
Rent is paid in advance on a monthly basis for the main office site and on a
yearly basis for our branch office site. The rental rates for both of these
leases are subject to adjustment based on inflation. Additionally, each of the
leases calls for the Company to pay taxes, insurance, and repairs on the leased
properties.
The Bank began operations on November 15, 2000 in a temporary main office
facility. This facility will be used until the permanent main office is
completed. The permanent main office is planned to be completed in the fourth
quarter of 2001 and the branch office in the second quarter of 2001. The
purchase price of the modular facility was approximately $90,000, and is located
approximately one-tenth of a mile from the site of the permanent main office.
The site for the temporary main office is being leased on a month-to-month basis
at a monthly rental rate of $2,000.
A temporary leased office space has been established in Georgetown. Banking
services will not be provided from this temporary office, but will be used to
establish a market presence in Georgetown.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Since Sun Bancshares was in the development stage as of September 30, 2000,
there are no results to present at this time. Now that SunBank is in operations,
net interest income, Sun Bancshares' primary source of earnings, will fluctuate
with significant interest rate movements. To lessen the impact of these margin
swings, we intend to structure the balance sheet so that repricing opportunities
exist for both assets and liabilities in roughly equal amounts at approximately
the same time intervals. Imbalance in these repricing opportunities at any point
in time creates interest rate sensitivity.
Interest rate sensitivity refers to the responsiveness of interest-bearing
assets and liabilities to change in market interest rates. The rate sensitive
position, or gap, is the difference in the volume of rate sensitive assets and
liabilities at a given time interval. The general objective of gap management is
to actively manage rate-sensitive assets and liabilities in order to reduce the
impact of interest rate fluctuations on net interest income. We will generally
attempt to maintain a balance between rate-sensitive assets and liabilities as
the exposure period is lengthened to minimize SunBank's overall interest rate
risks.
We will evaluate regularly, the balance sheet's asset mix in terms of several
variables; yield, credit quality, appropriate funding sources and liquidity. To
manage effectively the balance sheet's liability mix, we plan to focus on
expanding our deposit base and converting assets to cash as necessary.
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SUN BANCSHARES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN
OF OPERATIONS
LIQUIDITY AND INTEREST RATE SENSITIVITY - continued
As SunBank grows, we will continuously structure its rate-sensitivity position
in an effort to hedge against rapidly rising or falling interest rates.
SunBank's Asset and Liability Management Committee will meet on a quarterly
basis to develop a strategy for the upcoming period.
Liquidity represents the ability to provide steady sources of funds for loan
commitments and investment activities, as well as to maintain sufficient funds
to cover deposit withdrawals and payment of debt and operating obligations. We
can obtain these funds by converting assets to cash or by attracting new
deposits. SunBank's ability to maintain and increase deposits will serve as its
primary source of liquidity.
We know of no trends, demands, commitments, events, or uncertainties that should
result in, or are reasonably likely to result in, Sun Bancshares' liquidity
increasing or decreasing in any material way in the foreseeable future.
CAPITAL ADEQUACY
Capital adequacy for banks and bank holding companies is regulated by the Office
of the Comptroller of Currency, the Federal Reserve, and the FDIC. The primary
measures of capital adequacy for banks and bank holding companies are: (1)
risk-based capital guidelines and (2) the leverage ratio. Changes in the
guidelines or our levels or capital can affect our ability to expand and pay
dividends.
The Company used $6,620,000 of the $7,150,000 raised in its initial public
offering of common stock to capitalize SunBank. This amount is sufficient under
the capital adequacy guidelines applicable to SunBank and the Company believes
this amount will be sufficient to fund the activities of SunBank in its initial
stage of operations.
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SUN BANCSHARES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is
a party or of which any of its property is subject.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) Not applicable
(b) Not applicable
(c) Not applicable
(d) (1) Effective date of the Registration Statement on Form
SB-2 - October 23, 2000. Commission file number 333-30182.
(2) The offering commenced March 31, 2000 (the date of the
Company's first preliminary prospectus).
(3) Not applicable.
(4)(i) The offering terminated on November 26, 2000 (the end of the
underwriter's over-allotment option period). Of the 822,250 shares
registered, 107,250 shares, which were registered solely to cover the
over-allotment option granted to the underwriter, were not sold.
(4)(ii) The managing underwriter was Wachovia Securities, Inc.
(4)(iii) The title of the class of securities registered was Common
Stock, no par value.
(4)(iv) Amount and aggregate price of shares registered shares: 822,250
shares at $10 per share for $8,222,500.
Amount and aggregate price of shares sold: 715,000 shares at $10 per
share for $7,150,000.
(4)(v) Payments to others in connection with the issuance and
distribution of the registered securities include:
- Underwriting discount - $ 169,869
- Underwriter's expenses - $ 75,105
- Other offering expenses - $133,922 (legal, accounting, filing and
printing fees)
(4)(vi) The net offering proceeds to the issuer after deducting the
total expenses described in paragraph (4)(v) were $6,779,216.
(4)(vii)
(A) Not applicable
(B) Payments to others
Gross proceeds from offering.................................... $7,150,000
Underwriter's discount and other expenses....................... 236,862
Expense of organizing Sun Bancshares, Inc....................... 50,000
Expense of offering............................................. 133,922
Investment in capital stock of SunBank.......................... 6,620,000
----------
Working Capital................................................. $ 109,216
==========
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SUN BANCSHARES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 25, 2000, the sole shareholder approved the Company's 2000
Stock Incentive Plan as amended and restated. A copy of the Amended and Restated
Sun Bancshares, Inc. 2000 Stock Incentive Plan was filed as exhibit 10.5 to
Amendment No. 2 to the Company's Registration Statement on Form SB-2.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(b) Reports on Form 8-K
None
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SUN BANCSHARES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
By: /s/ THOMAS BOUCHETTE
------------------------------------
Thomas Bouchette
President & Chief Executive Officer
Date: December 20, 2000 By: /s/ RANDY L. CARMON
------------------------------------
Randy L. Carmon
Chief Financial Officer
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