U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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, 1998.
[_] Transition report under Section 13 or 15(d) of the Exchange Act of 1934.
For the transition period from to .
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Commission file number 000-22925
AMERICASBANK CORP.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Maryland 52-1948980
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3621 East Lombard Street, Baltimore, Maryland 21224
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(Address of Principal Executive Offices)
(410) 342-8303
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(Issuer's Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of October 31, 1998, there
were 300,000 shares of Issuer's $.01 par value common stock outstanding.
Transitional Small Business Disclosure Format (check one):
Yes X No
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICASBANK CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
September 30, December 31,
1998 1997
------------- ------------
Assets (unaudited)
- ------
Cash and cash equivalents:
On-hand and due from banks $ 338,000 $ 155,000
Interest-bearing accounts - 31,000
Federal funds sold 3,581,000 3,151,000
Investment securities, available for sale 520,000 569,000
Loans receivable, net 6,161,000 6,251,000
Investment in Federal Home Loan Bank stock, at cost 54,000 54,000
Accrued interest receivable 54,000 51,000
Property and equipment, net 738,000 746,000
Organizational costs, net 112,000 133,000
Other assets, net 412,000 279,000
----------- -----------
Total assets $11,970,000 $11,420,000
=========== ===========
Liabilities and Stockholders' Equity
- ------------------------------------
Deposits:
Noninterest-bearing $ 545,000 $ 952,000
Interest-bearing 8,515,000 7,444,000
Mortgage escrow deposits 63,000 119,000
Accrued interest on deposits - 32,000
Accounts payable and accrued expenses 190,000 62,000
----------- -----------
Total liabilities $ 9,313,000 $ 8,609,000
----------- -----------
Stockholders' Equity:
Preferred stock, par value $0.01 per share,
5,000,000 shares authorized, 0 shares issued
and outstanding
Common stock, par value $0.01 per share,
5,000,000 shares authorized, 300,000 shares
issued and outstanding 3,000 3,000
Additional paid-in capital 2,847,000 2,847,000
Accumulated deficit (193,000) (39,000)
----------- -----------
Total stockholders' equity 2,657,000 2,811,000
----------- -----------
Total liabilities and stockholders' equity $11,970,000 $11,420,000
=========== ===========
The accompanying notes are an integral part of this consolidated balance sheet.
2
AMERICASBANK CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATION
(UNAUDITED)
Nine Months Ended Sept. 30, Three Months ended Sept. 30,
1998 1997 1998 1997
---- ---- ---- ----
Interest Income:
Interest income on loans $ 455,000 $ - $144,000 $ -
Interest income on
investment securities 137,000 17,000 53,000 6,000
--------- ------- -------- -------
Total interest income 592,000 17,000 197,000 6,000
Interest expense on deposits 276,000 - 96,000 -
--------- ------- -------- -------
Net interest income 316,000 17,000 101,000 6,000
Provision for loan losses 22,000 - 4,000 -
--------- ------- -------- -------
Net interest income after
provision for loan losses 294,000 17,000 97,000 6,000
--------- ------- -------- -------
Fees and service charges 14,000 - 7,000 -
--------- ------- -------- -------
Other operating expenses:
Salaries and benefits 96,000 - 34,000 -
Depreciation and amortization 118,000 - 35,000 -
Occupancy expense 22,000 - 12,000 -
Data processing 42,000 - 14,000 -
Professional fees 100,000 19,000 43,000 14,000
Office supplies 14,000 - 4,000 -
Other operating expenses 70,000 - 24,000 -
--------- ------- -------- -------
Total other operating
expenses 462,000 19,000 166,000 14,000
--------- ------- -------- -------
(Loss) income before
provision for income taxes (154,000) (2,000) (62,000) (8,000)
Provision for Income Taxes - - - -
--------- ------- -------- -------
Net (loss) income $(154,000) $(2,000) $(62,000) $(8,000)
========= ======= ======== =======
Loss Per Common Share -
Basic and Diluted $ (.51) $ - $ (.21) $ -
========== ======= ======== =======
Weighted Average Shares
Outstanding 300,000 - 300,000 -
========== ======= ======== =======
The accompanying notes are an integral part of these consolidated statements.
3
AMERICASBANK CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended Sept. 30,
1998 1997
---- ----
Cash Flows from Operating Activities:
Net loss $ (154,000) $ (2,000)
Adjustments to reconcile net loss
to net cash provided by operating activities-
Provision for loan losses 22,000 -
Depreciation and amortization 118,000 -
Increase in accrued interest receivable (3,000) (1,000)
Increase in other assets (195,000) -
Decrease in accrued interest on deposits (32,000) -
Increase in accounts payable and accrued expenses 128,000 16,000
----------- --------
Net cash provided by (used in) operating
activities (116,000) 13,000
----------- --------
Cash Flows from Investing Activities:
Sales of investment securities 49,000 -
Loan principal disbursements (1,436,000) -
Principal repayments on loans receivable 1,504,000 -
Purchase of property and equipment (27,000) -
Cash paid for organizational costs - (92,000)
----------- --------
Net cash used in investing activities 90,000 (92,000)
----------- --------
Cash Flows from Financing Activities:
Decrease in savings deposits 664,000 -
Increase in mortgage escrow deposits (56,000) -
Advances from related parties, net - 135,000
----------- --------
Net cash (used in) provided from financing
activities 608,000 135,000
----------- --------
Increase In Cash and Cash Equivalents 582,000 56,000
Cash and Cash Equivalents, beginning of period 3,337,000 298,000
----------- --------
Cash and Cash Equivalents, end of period $ 3,919,000 $354,000
=========== ========
Cash paid for:
Interest $ 308,000 -
=========== ========
The accompanying notes are an integral part of these consolidated statements.
4
AMERICASBANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Organization and Business
AmericasBank Corp. (the Company) was incorporated under the laws of the State of
Maryland on June 4, 1996 primarily to hold all the outstanding shares of capital
stock of a federal stock savings bank.
Effective November 30, 1997, the Company completed an initial public offering
(the Offering) in which it sold 300,000 shares of common stock for $10 per
share, less offering costs. On December 1, 1997, the Company acquired certain
assets and assumed certain deposit liabilities primarily related to the
Baltimore Branch of Rushmore Trust and Savings, FSB. Concurrent with the
acquisition, the branch commenced banking operations under the name AmericasBank
(the Bank) as a wholly-owned subsidiary of the Company. The Bank is a member of
the Federal Home Loan Bank System, and its deposits are insured by the Federal
Deposit Insurance Corporation.
As the Bank is a start-up operation, there can be no assurance that the Bank can
attract sufficient depositors or issue sufficient quality loans to operate at a
profit. The Bank is subject to other risks and uncertainties, including interest
rate risk. The interest rate risk related to interest rates is significant to
the Bank as its deposits have relatively short maturities, while the loans have
much longer maturities at fixed rates. Without a significant change in the
Bank's investment, deposit or loan portfolio, an increase in interest rates
could have a significant negative effect on the Bank's net interest income and
results of operations.
(2) Summary of Significant Accounting Policies:
Basis of Presentation
- ---------------------
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. However, the Company believes that the disclosures are adequate to
make the information presented not misleading. These condensed financial
statements should be read in conjunction with the financial statements and notes
thereto for the year ended December 31, 1997, included in the Company's Annual
Report on Form 10-KSB.
5
The unaudited condensed financial statements included herein reflect all
adjustments (which include only normal, recurring adjustments) which are, in the
opinion of management, necessary to state fairly the results for the nine months
and three months ended September 30, 1998 and 1997. The results of the interim
periods are not necessarily indicative of the results expected for the full
fiscal year.
New Accounting Standards
- ------------------------
During 1997, the FASB issues SFAS No. 130, "Reporting Comprehensive Income"
("SFAS No. 130"), which is effective for fiscal years beginning after December
31, 1997. This statement establishes standards for reporting and display of
comprehensive income and its components. Comprehensive income is defined as the
change in equity of a business enterprise during a period from transactions and
other events and circumstances from nonowner sources. The Company adopted this
standard effective January 1, 1998. The Company does not have any adjustment for
comprehensive income for the periods presented. Comprehensive income is the same
as income reported in the accompanying statement of operations.
During 1997, the FASB issued SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information ("SFAS No. 131"), which is effective for
fiscal years beginning after December 15, 1997. This statement establishes
revised standards under which an entity must report business segment information
in its financial statements and what segment information must be disclosed. The
Company adopted this standard effective January 1, 1998 and concluded that it
only has one segment.
(3) Stock Options and Warrants
On June 1, 1998, the Company adopted a stock option plan for the granting of
stock options to employees and nonemployee directors. The options are vested
immediately and may be exercised six months after the grant date. In the event
of termination without cause, the stock options expire in three months from the
date of termination. Options granted to directors expire on the first
anniversary of the effective date of termination as a director. All options
expire on the 10th anniversary of the grant date.
As of September 30, 1998, 29,200 stock options have been issued at an option
price of $10.00 per share, and 1,400 stock options have been issued at an
option price of $12.00 per share, which prices approximate management's estimate
of the fair value of the Company's common stock on the date of grant. No options
have been exercised as of June 30, 1998.
6
On September 2, 1998, the Company issued to the holders of record of its Common
Stock on September 1, 1998, a dividend of one common stock purchase warrant for
each share of Common Stock then held by the stockholders (the "Dividend
Warrants"). Each Dividend Warrant entitles the holder thereof to purchase one
share of Common Stock at an exercise price of $10.00 per share, subject to
adjustment for certain events, beginning any time after April 1, 2000, until the
Dividend Warrant's expiration on September 1, 2008.
(4) Secondary Offering of Common Stock
On August 13, 1998, the Company filed a Registration Statement on Form SB-1 with
the Securities and Exchange Commission, which became effective on October 9,
1998, in connection with the offering by the Company of a minimum of 125,000
units and a maximum of 312,500 units, each unit consisting of one share of
common stock and one common stock purchase warrant, at a price of $12.00 per
unit.
The offering is ongoing as of the date of this filing. By its terms, the
offering will expire on December 31, 1998, unless extended or earlier
terminated.
7
Item 2. Plan of Operation
General
- -------
AmericasBank Corp. (the "Company") was incorporated under the laws of the
State of Maryland on June 4, 1996, primarily to own all of the outstanding
shares of capital stock of a federal stock savings bank to be named AmericasBank
(the "Bank"). On April 15, 1997, the Office of Thrift Supervision (the "OTS")
granted the Company the necessary approvals to acquire the capital stock of the
Bank and to become a savings and loan holding company of the Bank. The Company
acquired all of the Bank's capital stock and the Bank opened on December 1,
1997. The Bank currently has one branch in Baltimore, Maryland.
Effective as of December 1, 1997, the Bank also purchased certain assets
and assumed certain deposit liabilities primarily related to the Baltimore,
Maryland branch office of Rushmore Trust and Savings, FSB ("Rushmore"), located
at 3621 East Lombard Street, Baltimore, Maryland 21224 (the "Baltimore Branch").
The Company currently is classified as a non-diversified unitary savings
and loan holding company and, as such, the Company may engage in certain
non-banking activities that the OTS has deemed to be closely related to banking.
If the Conversion is consummated (see "Business Conducted and to be Conducted by
the Bank," below, the Company will become a bank holding company under the Bank
Holding Company Act of 1956, as amended, and generally will be limited to
banking and banking related activities. Currently, the Company has no present
intention of engaging in any activity other than owning all of the outstanding
shares of capital stock of the Bank and the outstanding shares of capital stock
of AmericasBank Holdings Corporation, a subsidiary formed to hold certain real
property. However, if circumstances should lead the Company's management to
determine that it would be beneficial for the Company to engage in other
activities, management of the Company would have the flexibility to do so,
subject to the applicable regulatory requirements.
As the Bank commenced operations as of December 1, 1997, the fiscal
quarter ended September 30, 1998 was only the third full fiscal quarter for
which the Bank was in operation. Prior to December 1, 1997, the Company and the
Bank were engaged in the activities necessary to organize the Bank and the
Company.
As of March 24, 1998, the Company's Common Stock became eligible to be
quoted on the OTC Bulletin Board and reported in the "pink sheets" under the
symbol AMBB.
8
Business Conducted and to be Conducted by the Bank
- --------------------------------------------------
The Bank is a community-oriented financial institution. Its business has
been to attract retail deposits and to seek to invest those deposits, together
with funds generated from operations and borrowings, in one-to four-family
mortgage loans. Over 80% of the loans acquired from Rushmore were one-to-four
family mortgage loans. To a lesser extent, the Bank has sought to invest in home
equity and second trust loans, multi-family loans, commercial real estate loans,
commercial business loans, construction and lot loans (primarily for one- to
four-family home construction for the borrower) and consumer loans. The Bank's
deposit base is comprised of various deposit products including checking
accounts, insured investment accounts, statement savings accounts, passbook
deposit accounts, money market accounts, certificates of deposit and individual
retirement accounts.
The Bank offers direct deposit of payroll and social security checks and
automatic drafts for various accounts to its customers. To provide additional
convenience to its customers, the Bank participates in the HONOR Automatic
Teller Machine Network at locations throughout the United States, through which
customers can gain access to their accounts at any time. Although the Bank's
East Lombard Street branch does not have an automatic teller machine, an
AmericasBank automatic teller machine currently is operational at the proposed
branch of the Bank in Towson, Maryland (see "Strategy," below). Although it does
not currently do so, the Bank intends to offer its customers cash management
services, safe deposit boxes and travelers checks.
Management has determined that as a result of recent consolidations of
financial institutions, the Bank's current and potential market areas are not
being adequately served by existing financial institutions and that there is an
increasing local demand for commercial real estate, commercial business,
construction and consumer loans offered by a truly community-oriented financial
institution. As a result, the Bank will seek to convert from a federal stock
savings bank to a Maryland commercial bank (the "Conversion"), and management
will refocus the Bank's lending strategy. Pursuant to this strategy, while
continuing to pursue its existing business of seeking to originate mortgage
loans for the purpose of financing and refinancing one-to-four family
residential properties, the Bank intends to expand gradually its commercial real
estate, commercial business, construction and consumer lending.
The Conversion requires the prior approval of the Commissioner of
Financial Regulation of the State of Maryland (the "Commissioner") for the Bank
to become a Maryland commercial bank, and the Board of Governors of the Federal
Reserve for the Company to become a bank holding company. Management believes
that to obtain the regulatory
9
approval, the Company must, among other things, raise additional capital. There
can be no assurance that the Company will be able to raise the necessary
additional capital or that the necessary regulatory approvals will be obtained.
See "Capital Resources," below.
In order to implement the Bank's refocused lending strategy and to enhance
the Bank's management in connection with the Conversion, management believes
that the Bank's President must have substantial experience in commercial
banking. On September 24, 1998, the Bank hired Richard J. Hunt, Jr. to serve as
President of the Bank. Mr. Hunt has over nine years of commercial banking
experience, having served in numerous capacities with several Maryland and
Washington, D.C. based banks. Mr. Hunt's appointment as President of the Bank is
subject to regulatory approval and there can be no assurance that such
regulatory approval will be obtained. In addition, there can be no assurance
that Mr. Hunt will be able to successfully implement the refocused lending
strategy.
Strategy
- --------
The Bank intends to pursue a strategy of long term growth by competing for
loans and deposits in its market area, establishing a new branch office at 500
York Road, Towson, Maryland 21286, and by opening additional branches, either
through internal growth or through acquisitions of existing financial
institutions or branches thereof. Management anticipates that the Bank will draw
most of its customer deposits and conduct most of its lending transactions from
within the area surrounding its branch offices, as well as from within the
Baltimore metropolitan area.
Management believes that to obtain regulatory approval to open the Towson
branch, the Company must, among other things, raise additional capital. There
can be no assurance that the Company will be able to raise the necessary
additional capital or that the necessary regulatory approvals will be obtained.
See "Capital Resources," below.
The Bank's ability to expand internally by establishing new branch
offices will be dependent on the ability to identify advantageous locations for
such branches and to fund the development of new branches. The ability to grow
through selective acquisitions of other financial institutions or branches of
such institutions will be dependent on successfully identifying, acquiring and
integrating such institutions or branches. Furthermore, the success of the
branch expansion strategy will be dependent upon the Bank's access to capital,
its ability to attract and train or retain qualified employees and its ability
to obtain regulatory approvals. The branch
10
expansion strategy anticipates losses from branch operations until such time as
branch deposits and the volume of other banking business reach the levels
necessary to support profitable branch operations.
There can be no assurance that the Bank will be able to generate internal
growth or identify attractive acquisition candidates, acquire such candidates on
favorable terms, or successfully integrate any acquired institutions or branches
into its operations. In addition, the Bank's inability to implement the branch
expansion strategy could negatively impact the Bank's long term ability to
successfully compete in the marketplace. At this time, other than the plan to
open a Towson branch, the Company and the Bank have no specific plans regarding
new branch offices or acquisitions of existing financial institutions or
branches thereof.
The Company's executive offices and the Bank's current banking office are
located at 3621 East Lombard Street, Baltimore, Maryland 21224. Upon opening a
branch office at 500 York Road, Towson, Maryland 21286, which property is owned
by the Company's wholly owned subsidiary, AmericasBank Holdings Corporation, the
Company's and the Bank's executive offices will move to the York Road property.
Capital Resources
- -----------------
On November 30, 1997, the Company completed an initial public offering
(the "Initial Offering") of a maximum of 300,000 shares of its common stock,
$0.01 par value per share (the "Common Stock"), primarily for the purpose of
raising the funds necessary to capitalize the Bank. The Company received gross
Initial Offering proceeds of $3,000,000, and incurred Initial Offering expenses
of $150,000, resulting in net Initial Offering proceeds of $2,850,000. Effective
as of December 1, 1997, the Company purchased $2,150,000 of the capital stock of
the Bank, and the Bank became a wholly owned subsidiary of the Company.
On September 2, 1998, the Company issued to the holders of record of its
Common Stock on September 1, 1998, a dividend of one common stock purchase
warrant for each share of Common Stock then held by the stockholders (the
"Dividend Warrants"). Each Dividend Warrant entitles the holder thereof to
purchase one share of Common Stock at an exercise price of $10.00 per share,
subject to adjustment for certain events, beginning any time after April 1,
2000, until the Dividend Warrant's expiration at 5:00 p.m. EST, on September 1,
2008.
On October 9, 1998, the Company commenced a public offering (the "Second
Offering") of a minimum of 125,000 units (the "Minimum Number of Units") and a
maximum of 312,500 units (the "Maximum Number of Units"), at a price of $12.00
per unit, pursuant to the Company's
11
Registration Statement on Form SB-1 (No. 333-61335). Each unit consists of one
share of the Company's Common Stock and one Common Stock purchase warrant (the
"Purchase Warrants"). Each Purchase Warrant entitles the holder thereof to
purchase one share of Common Stock at an exercise price of $13.00 per share,
subject to adjustment for certain events, beginning any time after April 8,
2000, until the Purchase Warrant's expiration at 5:00 p.m. EST, on October 8,
2001.
The offering is ongoing as of the date of this filing. By its terms, the
offering will expire on December 31, 1998, unless extended or earlier
terminated. There can be no assurance that any units will be sold in the Second
Offering.
Of the estimated $1,225,000 of net proceeds, assuming the sale of the
Minimum Number of Units in the Second Offering, it is anticipated that
approximately $1,100,000 will be used to make additional capital contributions
to the Bank. It is anticipated that the Bank will use approximately $205,000 of
the additional capital for expenses associated with the Towson branch. The
Bank's remaining additional capital may be used to further the branch expansion
strategy, for loan originations, investments and general banking purposes.
Of the estimated $3,340,000 of net proceeds, assuming the sale of the
Maximum Number of Units in the Second Offering, it is anticipated that
approximately $3,300,000 will be used to make additional capital contributions
to the Bank. Approximately $205,000 of such additional capital will be expended
by the Bank for expenses associated with the Towson branch. The Bank's remaining
additional capital may be used to further the branch expansion strategy, for
loan originations, investments and general banking purposes.
Any net proceeds not used to make additional capital contributions to the
Bank may be used by the Company to further the branch expansion strategy and for
general corporate purposes.
Management believes that if the Minimum Number of Units is sold in the
Second Offering, the approximately $1,100,000 of additional capital to be
provided to the Bank by the Company will enable the Bank to receive regulatory
approval to open the Towson branch, although there can be no assurance that this
will be the case. Management also believes that if the Maximum Number of Units
is sold in the Second Offering, the approximately $3,300,000 of additional
capital to be provided to the Bank by the Company will enable the Bank to
receive regulatory approval to consummate the Conversion, although there can be
no assurance that this will be the case.
12
Summary of Financial Condition and Results of Operations
- --------------------------------------------------------
The Bank commenced operations as of December 1, 1997, and its activities
have primarily consisted of accepting deposits, making loans and servicing the
deposits and loans acquired from Rushmore.
At September 30, 1998, the Company had total assets of approximately
$11,970,000, total loans of approximately $6,161,000 and total deposits of
approximately $9,060,000. From December 31, 1997 to September 30, 1998, the
Company's loans decreased from approximately $6,251,000 to $6,161,000, and its
deposits increased from approximately $8,396,000 to $9,060,000. The Company
experienced a loss of approximately $154,000 for the nine months ended September
30, 1998.
Net interest income for the third quarter of 1998 was approximately
$101,000, a decrease of approximately $11,000 from the second quarter of 1998.
Net interest income for the nine months ended September 30, 1998 was $316,000.
Net interest income, which is the difference between the interest expense
incurred in connection with the Company and the Bank's interest-bearing
liabilities, such as interest on deposit accounts, and the interest income
received from interest-earning assets, such as loans and investment securities,
is the most significant component of the Company's earnings. Volatility in
interest rates could cause the Bank to pay increased interest rates to obtain
deposits and, if the Bank is not able to increase the interest rate on its loans
and the rate of return on its investment portfolio, net interest income will
suffer.
In April 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
98-5 (the "SOP") regarding financial reporting on the costs of start-up
activities. Under the SOP, organizational costs are considered start-up costs
and, commencing with fiscal years beginning after December 15, 1998, entities
are required to expense such costs as they are incurred. As a result of the SOP,
the Company will be required to write off its unamortized organizational costs
during the first quarter of 1999, as a cumulative change in an accounting
principal. It is anticipated that an aggregate of approximately $112,000 will be
written off by the Company and the Bank during the first quarter of 1999, which
will negatively affect the Company's consolidated results of operations for that
period.
13
As a federal stock savings bank, the Bank is required to meet a qualified
thrift lender ("QTL") test. A savings institution that fails the QTL test must
either convert to a bank charter or operate under certain restrictions on its
activities. To meet the QTL test, a savings institution is required to maintain
at least 65% of its "portfolio assets" (generally, total assets less: (i)
specified liquid assets up to 20% of total assets; (ii) intangibles, including
goodwill; and (iii) the value of property used to conduct business) in certain
"qualified thrift investments" (primarily residential mortgages and related
investments, including certain mortgage-backed and related securities) on a
monthly average basis in at least 9 months out of each 12 month period.
From December 1997 to June 1998, the Bank maintained at least 65% of its
portfolio assets in qualified thrift investments. In July, August and September
1998, the Bank did not maintain at least 65% of its portfolio assets in
qualified thrift investments. As of September 30, 1998, the Bank was evaluating
the effect of its failure to have at least 65% of its portfolio assets in
qualified thrift investments in these months.
Because the Bank commenced operations on December 1, 1997, it had not had
twelve (12) full calendar months of operations history at September 30, 1998.
The Bank is unable to predict whether it will maintain adequate levels of
qualified thrift investments in future months, or whether its failure to
maintain adequate levels of qualified thrift investments in July, August and
September 1998 will result in its failure to meet the QTL test for the twelve
month period ended November 30, 1998 or any future twelve month period.
The Bank currently maintains a liquidity ratio and a level of
capitalization in excess of the minimum standards required by the Bank's primary
regulator, the OTS.
Year 2000 Compliance
- --------------------
The much publicized Year 2000 Issue is the result of computer programs
being written using two digits rather than four to define an applicable year.
Computer programs with date-sensitive software may recognize a date using "00"
as the year 1900 rather than the year 2000. With respect to software used for
bank operations, mistakes of this nature could cause disruptions of operations,
including, among other things, the temporary inability to process transactions
or engage in similar normal business activities. In addition, the Year 2000
Issue increases transaction risk with third parties, including customers.
14
The Bank contracts with an outside firm to provide data processing
services. The Bank's contract with this firm is scheduled to expire on December
1, 2000. The data processing firm has advised the Bank that it intends for its
software to be Year 2000 compliant by December 31, 1998; therefore, the Bank
expects that the data processing firm's software would not be impacted by any
date-sensitive calculations related to the Year 2000 Issue. The Bank does not
anticipate incurring any extra costs from the data processing firm in connection
with the Year 2000 Issue. The data processing firm provides the Bank with
periodic updates on its progress with regard to the Year 2000 Issue. The Bank
does not believe that its operations will be materially impacted by the Year
2000 Issue, assuming that the data processing firm fulfills its representation
to the Bank that its software will be Year 2000 compliant by December 31, 1998.
However, there can be no assurance that the data processing system will be Year
2000 compliant, and such failure may have a material adverse effect on the
Company and the Bank's earnings, cash flows and overall financial condition. If
the data processing system failed, the Bank would process its transactions
manually, until a new system could be placed online. The Company has not
estimated the cost of such method of data processing.
In addition to risks relating to internal Year 2000 compliance, the Bank
may be vulnerable to the failure of customers or other third parties with which
the Bank conducts business to remedy their own Year 2000 issues. For example, a
customer's failure to remedy its Year 2000 issues could impact the customer's
ability to pay its obligations to the Bank, which failure could have a material
adverse effect on the Company and the Bank's earnings, cash flows and overall
financial condition.
In accordance with OTS requirements, the Bank has appointed a Year 2000
Committee and has adopted a written plan detailing the procedures to be followed
by management to identify and solve potential problems and to monitor the
progress made by the Bank and the data processing firm to avoid Year 2000
problems. To date, the Year 2000 Committee has completed the evaluation phase
but has not completed the assessment and implementation phases of the plan. It
is expected that the remaining phases will be completed in 1999.
IN ADDITION TO THE HISTORICAL INFORMATION CONTAINED IN PART I OF THIS
QUARTERLY REPORT ON FORM 10-QSB, THE DISCUSSION IN PART I OF THIS QUARTERLY
REPORT ON FORM 10-QSB CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS SUCH AS
STATEMENTS OF THE COMPANY'S PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS THAT
INVOLVE RISKS AND UNCERTAINTIES.
15
THESE RISKS AND UNCERTAINTIES INCLUDE, AMONG OTHERS, THE COMPANY'S LIMITED
OPERATING HISTORY AND HISTORY OF LOSSES; ABILITY TO OPEN A TOWSON BRANCH; DELAY
OR DENIAL OF CONVERSION; RISKS RELATED TO COMMERCIAL, CONSTRUCTION AND CONSUMER
LENDING; RISKS RELATED TO NEW MANAGEMENT; IMPACT OF INTEREST RATE VOLATILITY ON
DEPOSITS; INTEREST RATE, LENDING AND OTHER RISKS ASSOCIATED WITH THE LOANS
ACQUIRED FROM RUSHMORE; RISK OF LOAN LOSSES; RISK OF BRANCH EXPANSION STRATEGY;
RELIANCE ON OFFICERS OF BANK AND KEY PERSONNEL; IMPACT OF GOVERNMENT REGULATION
ON OPERATING RESULTS; RISKS OF COMPETITIVE MARKET; IMPACT OF MONETARY POLICY AND
OTHER ECONOMIC FACTORS ON OPERATING RESULTS; DIVIDEND RESTRICTIONS; UNCERTAINTY
AS TO EFFECTS OF PROPOSED FEDERAL LEGISLATION; DEVELOPMENTS IN TECHNOLOGY; YEAR
2000 ISSUES; AND CONTROL BY MANAGEMENT. THE COMPANY'S ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE DISCUSSED HEREIN.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities and Use of Proceeds.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Securities Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
The following exhibits are being filed herewith:
EXHIBIT 3A Form of Warrant*
EXHIBIT 3B Form of Dividend Warrant*
EXHIBIT 6A Agreement of Lease between AmericasBank
Holdings Corporation and Network
Processing, LLC*
EXHIBIT 6B Employment Agreement between the Bank and
Richard J. Hunt, Jr.*
EXHIBIT 27 Financial Data Schedule
* Exhibits 3A, 3B, 6A AND 6B were previously filed by the Company as Exhibits
(with the same respective Exhibit numbers, except Exhibit 6A and Exhibit 6B,
which were previously filed as Exhibit 6C and Exhibit 6D, respectively) to the
Company's Registration Statement on Form SB-1, as amended, filed on August 13,
1998 (SEC File No. 333-61335), and such documents are incorporated herein by
reference.
(b) Reports on Form 8K
None.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, as amended, the registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
AMERICASBANK CORP.
Date: November 16, 1998 By: /s/ J. Clarence Jameson, III
_____________________________
J. Clarence Jameson, III,
President and Chairman of the
Board of Directors
(Principal Executive Officer)
Date: November 16, 1998 By: /s/ Larry D. Ohler
_____________________________
Larry D. Ohler, Treasurer
(Principal Financial and
Accounting Officer)
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