10-K 1 e-6525.txt ANNUAL REPORT FOR THE YEAR ENDED 12/31/2000 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2000 or [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 000-26191 SUN COMMUNITY BANCORP LIMITED (Exact name of registrant as specified in its Charter) ARIZONA 86-0878747 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 2777 East Camelback Road Suite 375 Phoenix, Arizona 85016 (Address of principal executive offices) Registrant's telephone number, including area code: (602) 955-6100 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, no par value (Title of class) 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 [X] NO [ ] Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] State the aggregate market value of the voting stock held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked price of stock, as of a specified date within 60 days prior to the date of filing: $18,286,559 as of February 21, 2001. Indicate the number of shares outstanding of each of the registrant's classes of common stock as of the latest practicable date: 5,809,317 as of February 21, 2001. DOCUMENTS INCORPORATED BY REFERENCE See Cross-Reference Sheet SUN COMMUNITY BANCORP LIMITED Form 10-K Fiscal Year Ended: December 31, 2000 CROSS REFERENCE SHEET

KEY: "Annual Report" means the 2000 Annual Report of the Registrant provided to Stockholders and the Commission pursuant to Rule 14a-3(b). Sun's 2000 Annual Report consists of two documents: a Financial Information Section and a Marketing Section. "Proxy Statement" means the Proxy Statement of the Registrant on Schedule 14A to be filed pursuant to Rule 14a-101 on or about April 12, 2001, the approximate date of mailing to stockholders. Note: The page number references herein are based on the paper version of the Annual Report and Proxy Statement. Accordingly, those page number references may differ from the electronically filed versions of those documents. -2- SUN COMMUNITY BANCORP LIMITED 2000 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS Page ---- PART I ITEM 1. Business........................................................ 4 ITEM 2. Properties...................................................... 12 ITEM 3. Legal Proceedings............................................... 12 ITEM 4. Submission of Matters to a Vote of Security Holders............. 12 PART II ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters............................................ 13 ITEM 6. Selected Financial Data......................................... 13 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................... 13 ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk...... 13 ITEM 8. Financial Statements and Supplementary Data..................... 14 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....................................... 14 PART III ITEM 10. Directors and Executive Officers of the Registrant.............. 15 ITEM 11. Executive Compensation........................................... 15 ITEM 12. Security Ownership of Certain Beneficial Owners and Management... 15 ITEM 13. Certain Relationships and Related Transactions................... 15 PART IV ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.. 16 -3- PART I ITEM 1. BUSINESS. a. General development of business: Incorporated by reference from Pages 5-8 under the captions "The Business of Sun and its Banks", and "Sun's Structure", and Pages 24-25, Financial Information Section of Annual Report, under the caption "Note A--Nature of Operations, Basis of Presentation and Principles of Consolidation". b. Financial information about industry segments: Incorporated by reference from Pages 24-25, Financial Information Section of Annual Report, under the caption "Note A--Nature of Operations, Basis of Presentation and Principles of Consolidation". c. Narrative description of business: Incorporated by reference from Pages 5-8 under the captions "The Business of Sun and its Banks", and "Sun's Structure", Pages 24-25, Financial Information Section of Annual Report, under the caption "Note A--Nature of Operations, Basis of Presentation and Principles of Consolidation", and Pages 15-17, Financial Information Section of Annual Report, under the caption "Trends Affecting Operations" and Pages 12-14, Financial Information Section of Annual Report, under the caption "Liquidity, Capital Resources and Capital Adequacy". At December 31, 2000, Sun and its subsidiaries employed 226 full time equivalent employees. The following tables (Tables A to F, inclusive), present certain statistical information regarding Sun's business. -4- DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY (TABLE A) SUN COMMUNITY BANCORP LIMITED Net interest income, the primary component of earnings, represents the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities. Net interest income depends upon the volume of interest-earning assets and interest-bearing liabilities and the rates earned or paid on them. This table shows the daily average balances for the major asset and liability categories and the actual related interest income and expense (in $1,000s) and average yield/cost for 2000, 1999, and 1998.

(1) Average yield/cost is determined by dividing the actual interest income/expense by the daily average balance of the asset or liability category. (2) Tax equivalent yield. (3) Average balance of loans includes non-accrual loans. (4) Interest rate spread represents the average yield on interest-earning assets less the average cost of interest-bearing liabilities. (5) Net yield on interest-earning assets is based on net interest income as a percentage of average total interest-earning assets. -5- CHANGES IN NET INTEREST INCOME (TABLE B) SUN COMMUNITY BANCORP LIMITED The table below summarizes the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected Sun's net interest income during the periods indicated (in $1,000s). The change in interest attributable to volume is calculated by multiplying the annual change in volume by the prior year's rate. The change in interest attributable to rate is calculated by multiplying the annual change in rate by the current year's average balance. Any variance attributable jointly to volume and rate changes has been allocated to each category based on the percentage of each to the total change in both categories.

-6- LOAN PORTFOLIO AND SUMMARY OF OTHER REAL ESTATE OWNED (TABLE C) SUN COMMUNITY BANCORP LIMITED Portfolio loans outstanding as of December 31 are shown below (in $1,000s):

The table below summarizes (in $1,000s) the remaining maturity of portfolio loans outstanding at December 31, 2000 according to scheduled repayments of principal: Aggregate maturities of portfolio loan Fixed Variable balances which are due: Rate Rate Total -------- -------- -------- In one year or less $ 35,040 $104,307 $139,347 After one year but within five years 52,457 74,434 126,891 After five years 22,606 133,500 156,106 -------- -------- -------- Total $110,103 $312,241 $422,344 ======== ======== ======== The following summarizes, in general, Sun's various loan classifications: Commercial: Comprised of a broad mix of business use and multi-family housing properties, including office, retail, warehouse and light industrial uses. Also includes a range of business credit products, current asset lines of credit and equipment term loans. These products bear higher inherent economic risk than other types of lending activities. A typical loan size approximates $500,000. Real Estate Mortgage: Includes single family residential loans held for permanent portfolio, and home equity lines of credit. Risks are nominal, borne out by loss experience, housing economic data and loan-to-value percentages. Installment: Includes a broad range of consumer credit products, secured by automobiles, boats, etc., with typical consumer credit risks. All loans are subject to underwriting procedures commensurate with the loan size, nature of collateral, industry trends, risks and experience factors. Appropriate collateral is required for most loans, as is documented evidence of debt repayment sources. -7- TABLE C, CONTINUED SUN COMMUNITY BANCORP LTD. The aggregate amount of nonperforming portfolio loans is shown below. Nonperforming loans comprise (a) loans accounted for on a nonaccrual basis, and (b) loans contractually past due 90 days or more as to principal and interest payments (but not included in nonaccrual loans in (a) above) and consist primarily of commercial real estate loans. Nonperforming portfolio loans include all loans for which, based on the Sun's loan rating system, management has concerns. Loans are placed in nonaccrual status when, in management's opinion, there is a reasonable probability of not collecting 100% of future principal and interest payments. In addition, certain loans, although current based on Sun's rating criteria, are placed in nonaccrual status. Generally, loans are placed in nonaccrual status when they become 90 days delinquent; however, management may elect to continue the accrual of interest in certain circumstances. When interest accruals are discontinued, interest previously accrued (but unpaid) is reversed. If non-performing loans (including loans in nonaccrual status) had performed in accordance with their contractual terms during the year, additional interest income of $50,000 would have been recorded in 2000. Interest income recognized on loans in nonaccrual status in 2000 operations approximated $1,000. At December 31, 2000, there were no material amounts of loans which were restructured or otherwise renegotiated as a concession to troubled borrowers. December 31 --------------------------------------- 2000 1999 1998 1997 1996 ------- ---- ---- ---- ---- Nonperforming loans: (in $1,000s) Nonaccrual loans: Commercial $ 1,793 $ 34 Real estate 14 Installment ------- ---- ---- ---- ---- Total nonaccrual loans 1,807 34 0 0 0 Past due loans: Commercial Real estate Installment ------- ---- ---- ---- ---- Total past due loans 0 0 0 0 0 ------- ---- ---- ---- ---- Total nonperforming loans $ 1,807 $ 34 $ 0 $ 0 $ 0 ======= ==== ==== ==== ==== Nonperforming loans as a percentage of total portfolio loans 0.43% * -- -- -- ======= ==== ==== ==== ==== Nonperforming loans as a percentage of total assets 0.34% * -- -- -- ======= ==== ==== ==== ==== Allowance for loan losses as a percentage of nonperforming loans 301.05% N.M. N/A N/A N/A ======= ==== ==== ==== ==== * Less than .01%. N.M. - Not Meaningful. N/A - Not applicable. -8- SUMMARY OF LOAN LOSS EXPERIENCE (TABLE D) SUN COMMUNITY BANCORP LIMITED The table below summarizes changes in the allowance for loan losses and related portfolio data and ratios each period:

The allowance for loan losses has been established as a general allowance for losses on the loan portfolio estimated at the balance sheet date. For internal purposes, management allocates the allowance to all loan classifications. The amounts allocated in the following table, which include all loans which, based on Sun's loan rating system, management has concerns, should not be interpreted as an indication of future charge-offs and the amounts allocated are not intended to reflect the amount that may be available for future losses since the allowance is a general allowance.

-9- AVERAGE DEPOSITS (TABLE E) SUN COMMUNITY BANCORP LIMITED The table below summarizes the average balances of deposits (in $1,000s) and the average rates of interest for the years ended December 31, 2000, 1999, and 1998:

The table below shows the amount of time certificates of deposit issued in amounts of $100,000 or more, by time remaining until maturity, which were outstanding at December 31, 2000 (in $1,000s): Three months or less $ 31,619 Three months to twelve months 70,337 Over 12 months 24,249 -------- Total $126,205 ======== -10- FINANCIAL RATIOS (TABLE F) SUN COMMUNITY BANCORP LIMITED Year Ended December 31 -------------------------- 2000 1999 1998 ----- ----- ----- Net income (loss) as a percentage of: Average stockholders' equity 1.58% (4.23%) 0.34% Average total assets 0.19% (0.77%) 0.06% Capital ratios: Average stockholders' equity as a percentage of average total assets 12.27% 18.10% 18.35% Average total equity (stockholders' equity and minority interests in consolidated subsidiaries) as a percentage of average total assets 18.11% 25.50% 24.06% Dividend payout ratio (cash dividends per share as a percentage of net income per share): Basic -- -- -- Diluted -- -- -- -11- ITEM 2. PROPERTIES. Each of Sun's banks operates from a single location, except Sunrise Bank of Arizona (which had a loan production office in San Diego, California at year-end 2000). The address of each subsidiary's main office is stated in the Marketing Section of Annual Report, which are incorporated herein by reference, from the following captioned pages therein: Arrowhead Community Bank Red Rock Community Bank Bank of Tucson Southern Arizona Community Bank Black Mountain Community Bank Sunrise Bank of Albuquerque Camelback Community Bank Sunrise Bank of Arizona Desert Community Bank Valley First Community Bank East Valley Community Bank Yuma Community Bank Mesa Bank Most of the bank facilities are generally small (i.e., less than 10,000 square feet), first floor offices with convenient access to parking. Some of the banks have drive-up customer service. The banks are typically located in or near high traffic centers of commerce in their respective communities. Customer service is enhanced through utilization of ATMs to process some customer-initiated transactions and some of the banks also make available a courier service to pick up transactions at customers' locations. The principal offices of Sun are located within the same building as Camelback Community Bank in Phoenix, Arizona. Those headquarters include administrative, operations, accounting and executive staff. Sun's data center is located in Tempe, Arizona. Certain of the office locations are leased. Incorporated by reference from Page 30, Financial Information Section of Annual Report, under the caption "Note F--Premises and Equipment". One of the banks' facilities is leased from a related party. Incorporated by reference from the 2nd paragraph on Page 10, Proxy Statement, under the caption "Certain Relationships and Related Transactions." Management believes Sun's and its banks' offices to be in good and adequate condition and adequately covered by insurance. ITEM 3. LEGAL PROCEEDINGS. As of December 31, 2000, there were no material pending legal proceedings to which Sun or its subsidiaries is a party or to which any of its property was subject, except for proceedings which arise in the ordinary course of business. In the opinion of management, pending legal proceedings will not have a material effect on the consolidated financial position or results of operations of Sun. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. During the fourth quarter of 2000, no matters were submitted to a vote by security holders. -12- PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. A. Market Information: Incorporated by reference from Page 3, Financial Information Section of Annual Report, under the caption "Information Regarding Sun's Common Stock", Pages 30-32, under the caption "Note J--Common Stock and Stock Options" and Page 1, under the caption "Shareholder Information". B. Holders: Incorporated by reference from first sentence of third paragraph on Page 3, Financial Information Section of Annual Report, under the caption "Information Regarding Sun's Common Stock". C. Dividends: Incorporated by reference from second sentence of second paragraph on Page 3, Financial Information Section of Annual Report, under the caption "Information Regarding Sun's Common Stock", Pages 35-36, Financial Information Section of Annual Report, under the caption "Note O--Dividend Limitations of Subsidiaries and Other Capital Requirements". ITEM 6. SELECTED FINANCIAL DATA. Incorporated by reference from Page 2, Financial Information Section of Annual Report, under the caption "Selected Consolidated Financial Data" under the column heading "As of and for the Year Ended December 31, 2000, 1999, 1998 and 1997". ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Incorporated by reference from Pages 5-18, Financial Information Section of Annual Report, under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Page 5, Financial Information Section of Annual Report, under the caption "Forward Looking Statements". ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Incorporated by reference from Pages 15-17, Financial Information Section of Annual Report, under the caption "Trends Affecting Operations" and Page 4, Financial Information Section of Annual Report, under the caption "Forward Looking Statements". -13- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. See Item 14 (under subcaption "A. Exhibits") of this Form 10-K for specific description of financial statements incorporated by reference from Financial Information Section of Annual Report. Incorporated by reference from Page 2, Financial Information Section of Annual Report, under the caption "Quarterly Results of Operations". ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. -14- PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Incorporated by reference from Pages 2-3, Proxy Statement, under the caption "Election of Directors". Executive officers of Sun are as follows: Name and Year First Became Principal Positions Age An Officer ------------------- --- ---------- Joseph D. Reid 58 1997 Chairman, President and Chief Executive Officer Michael L. Kasten 55 1997 Vice Chairman John S. Lewis 47 1999 Vice Chairman Richard N. Flynn 57 1997 Secretary James F. Crawford 50 2000 Executive Vice President David J. Dutton 50 1999 Executive Vice President and Chief Information Officer Cristin Reid English 32 1997 Executive Vice President Michael F. Hannley 52 1997 Executive Vice President Lee W. Hendrickson 45 1997 Executive Vice President and Chief Financial Officer Gerry J. Smith 43 1998 Executive Vice President Stephen D. Todd 50 2000 Executive Vice President Brian K. English 35 2000 General Counsel Patricia L. Stone 51 1998 Senior Vice President Leonard C. Zazula 46 1997 Senior Vice President Katherine P. Bowden 36 1997 Vice President and Regional Controller Paige E. Mulhollan 43 1999 Vice President and Corporate Controller ITEM 11. EXECUTIVE COMPENSATION. Incorporated by reference from Pages 5-9, Proxy Statement under the captions "Compensation Committee Report on Executive Compensation" and "Executive Compensation" and; Page 4, Proxy Statement, the second paragraph under the caption "Meetings of the Board of Directors." ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Incorporated by reference from Page 1, Proxy Statement, under the caption "Voting Securities and Principal Holders Thereof", Pages 2-3, Proxy Statement, under the caption "Election of Directors" and Page 3, Proxy Statement, under the caption "Meetings of the Board of Directors". ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Incorporated by reference from Page 10, Proxy Statement, under the caption "Certain Relationships and Related Transactions". -15- PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. A. Exhibits: The following consolidated financial statements of Sun Community Bancorp Limited and subsidiaries and report of independent auditors included on Pages 19-38 of the Financial Information Section of Annual Report of the registrant to its stockholders for the year ended December 31, 2000, are incorporated by reference in Item 8: Report of Independent Auditors. Consolidated balance sheets--December 31, 2000 and 1999. Consolidated statements of operations--Years ended December 31, 2000, 1999 and 1998. Consolidated statements of changes in stockholders' equity--Years ended December 31, 2000, 1999 and 1998. Consolidated statements of cash flows--Years ended December 31, 2000, 1999 and 1998. Notes to consolidated financial statements. All financial statements and schedules have been incorporated by reference from the Annual Report or are included in Management's Discussion and Analysis of Financial Condition and Results of Operations. No schedules are included here because they are either not required, not applicable or the required information is contained elsewhere. B. Reports on Form 8-K: During the fourth quarter of 2000, no reports on Form 8-K were filed by the registrant. -16- SIGNATURES 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. SUN COMMUNITY BANCORP LIMITED Registrant By: /s/ Joseph D. Reid By: /s/ Lee W. Hendrickson ----------------------------- ----------------------------- Joseph D. Reid Lee W. Hendrickson Chairman, President and Executive Vice President and Chief Executive Officer Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant as Directors of the Corporation on March 29, 2001. /s/ Joseph D. Reid /s/ John S. Lewis ------------------------------------- ------------------------------------- Joseph D. Reid, Chairman, President John S. Lewis, Vice Chairman and Chief Executive Officer and Director Director /s/ Michael J. Devine ------------------------------------- ------------------------------------- Richard N. Flynn, Secretary and Michael J. Devine, Director Director /s/ Michael F. Hannley /s/ Richard F. Imwalee ------------------------------------- ------------------------------------- Michael F. Hannley, Executive Richard F. Imwalee, Director Vice President and Director /s/ Humberto S. Lopez /s/ Michael L. Kasten ------------------------------------- ------------------------------------- Humberto S. Lopez, Director Michael L. Kasten, Vice Chairman and Director /s/ Ronald K. Sable /s/ Kathryn L. Munro ------------------------------------- ------------------------------------- Ronald K. Sable, Director Kathryn L. Munro, Director -17- EXHIBIT INDEX

KEY: (1) Incorporated by reference from Registration Statement on Form S-1, Amendment No.2, filed June 15, 1999 (Commission file No. 333-76719). -18-

SUN COMMUNITY BANCORP LTD 10-K