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U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-QSB þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934FOR THE TRANSITION REPORT FROM _____ TO _____
 Commission file number 0-23619 Tarpon Coast Bancorp, Inc. 
  Florida
    
    65-0772718(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 1490 Tamiami TrailPort Charlotte, FL 33948(Address of principal executive offices)
 941-629-8111(Issuers telephone number)
 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, as required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No
o State the number of shares outstanding of each of the issuers classes of common equity as of the
latest practicable date. Class
    
    

Outstanding
as of May 6, 2005Common Stock, $.01 par value
    
    
    1,182,151Transitional Small Business Disclosure Format:
    
    Yes o No þ




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TARPON COAST BANCORP, INC. INDEX  
 PART
I -  FINANCIAL INFORMATIONItem 1. Consolidated Financial StatementsBalance Sheets as of March 31, 2005 and December 31, 2004
    
    
    1Statements of Operations for the Three Months
Ended March 31, 2005 and 2004
    
    
    2Statements of Cash Flows for the Three Months
Ended March 31, 2005 and 2004
    
    
    3Notes to Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis
    
    
    6Item 3. Controls and Procedures
    
    
    9PART II - OTHER INFORMATIONItem 1.Legal Proceedings
    
    
    10Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    10Item 3.Defaults Upon Senior Securities
    
    
    10Item 4. Submission of Matters to a Vote of Security Holders
    
    
    10Item 5.Other Information
    
    
    10Item 6. Exhibits
    
    
    10SIGNATURES
    
    
    11EXHIBITS
    
    
    12EX-31.1: SECTION 302 CERTIFICATION OF CEOEX-31.2: SECTION 302 CERTIFICATION OF PRESIDENTEX-31.3: SECTION 302 CERTIFICATION OF CFOEX-32.1: SECTION 906 CERTIFICATION OF CEOEX-32.2: SECTION 906 CERTIFICATION OF PRESIDENTEX-32.3: SECTION 906 CERTIFICATION OF CFO




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PART I - FINANCIAL INFORMATION  
 
 March 31, 2005
    
    
    December 31, 2004(Unaudited)ASSETSCash and due from banks
    
    $
    6,741
    
    
    $
    4,959Federal funds sold
    
    
    7,833
    
    
    
    1,677Total cash and cash equivalents
    
    
    14,574
    
    
    
    6,636Securities available for sale
    
    
    24,679
    
    
    
    29,135Loans
    
    
    112,103
    
    
    
    104,157Less allowance for loan losses
    
    
    (1,178
    )
    
    
    (1,148
    )Net loans
    
    
    110,925
    
    
    
    103,009Premises and equipment, net
    
    
    5,372
    
    
    
    5,433Accrued interest & other assets
    
    
    1,648
    
    
    
    1,420Total assets
    
    $
    157,198
    
    
    $
    145,633LIABILITIES AND SHAREHOLDERS EQUITYDeposits:Non-interest bearing
    
    $
    41,701
    
    
    $
    34,488Interest bearing
    
    
    99,750
    
    
    
    97,517Total deposits
    
    
    141,451
    
    
    
    132,005Customer Repurchase Agreements
    
    
    4,979
    
    
    
    2,686Accrued interest & other liabilities
    
    
    325
    
    
    
    461Total liabilities
    
    
    146,755
    
    
    
    135,152Shareholders equity:Common stock, par value $.01 per share,
10,000,000 shares authorized; 1,182,151 shares
issued and outstanding
    
    
    12
    
    
    
    12Additional paid-in capital
    
    
    10,941
    
    
    
    10,941Accumulated deficit
    
    
    (129
    )
    
    
    (319
    )Unrealized gain (loss) on securities available for sale
    
    
    (381
    )
    
    
    (153
    )Total shareholders equity
    
    
    10,443
    
    
    
    10,481Total liabilities and shareholders equity
    
    $
    157,198
    
    
    $
    145,633
 See accompanying notes to financial statements. 1




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TARPON COAST BANCORP, INC. AND SUBSIDIARIES 
 
 Three months ended March 31,2005
    
    
    2004Interest income:Interest and fees on loans
    
    $
    1,630
    
    
    $
    1,291Interest on securities
    
    
    277
    
    
    
    240Interest on federal funds sold
    
    
    14
    
    
    
    3Total interest income
    
    
    1,921
    
    
    
    1,534Interest expense:Interest on deposits
    
    
    288
    
    
    
    277Interest on repurchase agreements
    
    
    20
    
    
    
    6Total interest expense
    
    
    308
    
    
    
    283Net interest income
    
    
    1,613
    
    
    
    1,251Provision for loan losses
    
    
    30
    
    
    
    Net interest income after
provision for loan losses
    
    
    1,583
    
    
    
    1,251Non-interest income
    
    
    372
    
    
    
    371Non-interest expense:Salaries and benefits
    
    
    892
    
    
    
    800Occupancy and equipment expense
    
    
    199
    
    
    
    214Other expense
    
    
    559
    
    
    
    339Total non-interest expense
    
    
    1,650
    
    
    
    1,353Income before income taxes
    
    
    305
    
    
    
    269Income (taxes) benefit
    
    
    (115
    )
    
    
    (106
    )Net income
    
    
    190
    
    
    
    163Other comprehensive income (loss)
    
    
    (228
    )
    
    
    200Comprehensive income (loss)
    
    $
    (38
    )
    
    $
    363Earnings per share:Basic
    
    $
    0.16
    
    
    $
    0.14Diluted
    
    $
    0.15
    
    
    $
    0.13Weighted average shares outstanding:Basic
    
    
    1,182,151
    
    
    
    1,182,151Diluted
    
    
    1,270,197
    
    
    
    1,218,296
 See accompanying notes to financial statements. 2




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TARPON COAST BANCORP, INC. AND SUBSIDIARIES 
 
 Three months ended March 31,2005
    
    
    2004Cash flows from operating activities:Net income
    
    $
    190
    
    
    $
    163Adjustments to reconcile net income to net
cash provided by (used in) operating activities:Depreciation
    
    
    77
    
    
    
    86Provision for loan losses
    
    
    30
    
    
    
    Deferred tax provision (benefit)
    
    
    (10
    )
    
    
    106(Increase) Decrease in accrued interest
and other assets
    
    
    42
    
    
    
    (292
    )Increase (Decrease) in accrued interest
and other liabilities
    
    
    (136
    )
    
    
    186Total adjustments
    
    
    3
    
    
    
    86Net cash provided by operating activities
    
    
    193
    
    
    
    249Cash flows from investing activities:Net increase in loans
    
    
    (7,946
    )
    
    
    (5,355
    )Purchases of securities available for sale
    
    
    
    
    
    
    Maturities of securities available for sale
    
    
    4,110
    
    
    
    1,063Purchase of restricted securities
    
    
    (142
    )
    
    
    (142
    )Purchases of premises and equipment
    
    
    (16
    )
    
    
    (63
    )Net cash used in investing activities
    
    
    (3,994
    )
    
    
    (4,497
    )Cash flows from financing activities:Increase in deposits
    
    
    9,446
    
    
    
    1,479Increase in customer repurchase agreements
    
    
    2,293
    
    
    
    1,209Net cash provided by financing activities
    
    
    11,739
    
    
    
    2,688Increase (Decrease) in cash and cash equivalents
    
    
    7,938
    
    
    
    (1,560
    )Cash and cash equivalents, beginning of period
    
    
    6,636
    
    
    
    12,464Cash and cash equivalents, end of period
    
    $
    14,574
    
    
    
    10,904Supplemental disclosure of cash flow information:Cash paid during the period for interest
    
    $
    305
    
    
    $
    292Cash paid during the period for income taxes
    
    $
    212
    
    
    $
    
 See accompanying notes to financial statements. 3




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TARPON COAST BANCORP, INC. AND SUBSIDIARIES 
 
 NOTE A - ORGANIZATION AND BASIS OF PRESENTATION: Organization: Tarpon Coast Bancorp, Inc. (the Company) was incorporated under the laws of the state of
Florida on August 7, 1997. Effective June 1, 1998, the Companys wholly owned subsidiary, Tarpon
Coast National Bank (the Bank) received federal regulatory approval to commence its banking
operations. Contemporaneously, the Company became a registered bank holding company under the Bank
Holding Company Act of 1956, as amended. Also effective June 1, 1998, the Bank received approval
from the Federal Deposit Insurance Corporation (the FDIC) for deposit insurance. In 2000, the
Company formed Tarpon Coast Financial Services, Inc. as a wholly owned subsidiary of the Bank for
the purpose of selling insurance and investment products. Basis of Presentation: The accompanying unaudited consolidated financial statements include the accounts of the
Company and its subsidiaries. All inter-company accounts and transactions have been eliminated in
consolidation. The accompanying unaudited consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information and with
instructions to Form 10-QSB. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring accruals) considered
necessary have been made for the fair presentation of the Companys consolidated financial position
and results of operations. Operating results for the three-month period ended March 31, 2005 are
not necessarily indicative of the results that may be expected for the year ended December 31,
2005. Earnings per Share: Basic earnings per common share are net income divided by the weighted average number of
common shares outstanding during the period. Diluted earnings per common share include the dilutive
effect of additional potential common shares issuable under stock options and warrants. 4




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NOTE B  STOCK-BASED COMPENSATION: Employee compensation expense under stock options is reported using the intrinsic value
method. No stock-based compensation cost is reflected in net income, as all options granted had an
exercise price equal to or greater than the market price of the underlying common stock at date of
grant. The following table illustrates the effect on net income and earnings per share if expense
was measured using the fair value recognition provisions of FASB Statement No. 123, Accounting for
Stock-Based Compensation. Three MonthsEnded March 31,2005
    
    
    2004(Dollars in thousands,except per share data)Net income as reported
    
    $
    190
    
    
    $
    163Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards
net of related tax effects
    
    $
    11
    
    
    $
    11Pro forma net income
    
    $
    179
    
    
    $
    152Basic income per share as reported
    
    $
    0.16
    
    
    $
    0.14Basic pro forma income per share
    
    $
    0.15
    
    
    $
    0.13Diluted income per share as reported
    
    $
    0.15
    
    
    $
    0.13Diluted pro forma income per share
    
    $
    0.14
    
    
    $
    0.12
 NOTE C  PENDING MERGER TRANSACTION On February 24, 2005, the Company entered into an Agreement and Plan of Merger (Agreement) with
First Busey Corporation (FBC) and FBC Acquisition III Corp.(a wholly owned subsidiary of FBC),
for FBC to acquire all of the issued and outstanding stock of the Company for $27 per share. Under
the terms of the Agreement, shares of Company common stock will be converted into shares of FBC
common stock and cash, subject to the stock and cash parameters and proration provisions of the
Agreement. The closing of the acquisition is subject to a number of conditions, including receipt
of prior approval from the bank regulatory agencies and approval of the Agreement by the
shareholders of the Company. 5




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations General The following is a discussion of the Companys financial condition and results of operations for
the period ended March 31, 2005. Except for historical information contained herein, this quarterly
report contains comments or information that constitutes forward-looking statements, within the
meaning of the Private Securities Litigation Reform Act of 1995, which involves significant risks
and uncertainties. Actual results may differ materially from the results discussed in the
forward-looking statements. On February 24, 2005, the Company entered into an Agreement and Plan of Merger (Agreement) with
First Busey Corporation (FBC) and FBC Acquisition III Corp.(a wholly owned subsidiary of FBC),
for FBC to acquire all of the issued and outstanding stock of the Company for $27 per share. Under
the terms of the Agreement, shares of Company common stock will be converted into shares of FBC
common stock and cash, subject to the stock and cash parameters and proration provisions of the
Agreement. The closing of the acquisition is subject to a number of conditions, including receipt
of prior approval from the bank regulatory agencies and approval of the Agreement by the
shareholders of the Company. Impacts of 2004 Hurricane Season Hurricane Charley, a category 4 storm, made a direct hit on the Companys primary market area and
Hurricanes Frances and Jeanne further impacted the communities it serves. The conduct of business
in the wake the storms, has been significantly impacted. In many instances, plans for the
development and expansion of commerce have been replaced with plans for recovery and redevelopment.
Permitting activity has since focused largely on repairing and rebuilding. As a consequence, new
housing and commercial building starts have since slowed. Management believes these conditions to
be near-term issues as demand for these products has begun to rebound to historical levels. Credit Quality  In the aftermath of Hurricane Charley, management of the Company evaluated all
significant lending relationships and, in order to grant some relief, offered to defer principal
payments (while continuing to collect interest) for up to six months in those cases where the
underlying businesses or homes sustained heavy damage. At March 31, 2005, the Company has not
experienced any payment defaults and had no loans delinquent as to the payment of principal or
interest in excess of 30 days that have not since been brought current. While it is premature to
conclude the ultimate impact of the hurricanes on the credit quality of the loan portfolio,
management believes that its allowance for loan losses was adequate at March 31, 2005. Liquidity  The Company experienced an increase in deposit account balances largely as a
consequence of the influx of insurance and FEMA damage remittances. Management recognizes that
these funds are temporary and placed these balances in short-term investments with maturity dates
ranging from 3 to 24 months to ensure it can meet the demand for these funds as repairs and
reconstruction commence. 6




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Management believes that the Company has liquidity to meet this demand together with the likelihood
of increasing loan demand. See Liquidity and Capital Resources below. Financial Condition At March 31, 2005, the Company had $141.5 million in deposits and $5.0 million in customer
repurchase agreements as compared to $132.0 million and $2.7 million, respectively, at December 31,
2004. Stockholders equity was $10.4 million at March 31, 2005 and $10.5 million at December 31,
2004, the change comprising net income for the period of $190,000 net of unrealized losses in the
Companys investment portfolio of $228,000. To March 31, 2005, the Company used these funds to generate $112.1 million in outstanding loans
($104.2 million at December 31, 2004). At March 31, 2005 the Company also had approximately $39.6
million in unfunded loan commitments. Non-performing assets totaled $142,000 at March 31, 2005 and
are comprised of one junior lien on a residential property. Non-performing assets at December 31,
2004 totaled $145,000. The Company continues to experience significant demand for lending and deposit relationships due
largely to the continuing growth in the areas population and the consequential demand for
property, goods and services. Accordingly, the Company has realized substantial increases in loans
and deposits outstanding and anticipates that, except for the near-term conditions discussed above
under the caption Impact of Hurricane Season, such demand will continue.
At March 31, 2005 the Company held approximately $24.7 million ($29.1 million at December 31, 2004)
in investment securities and carried premises and equipment of approximately $5.4 million at both
March 31, 2005 and December 31, 2004. The Companys remaining liquidity at March 31, 2005, less
current cash reserve requirements, was invested in overnight federal funds of $7.8 million ($1.7
million at December 31, 2004). Results of Operations For the three-month period ended March 31, 2005, the Company reported net income of $190,000,
compared to net income of $163,000 for the comparable period in 2004, or an increase of 16.6%. Net
income for 2005 was negatively impacted by the expensing of merger related expenses of $153,000 or
approximately $95,000 after income taxes. Interest income for the comparable three-month periods ended March 31 was $1,921,000 in 2005 and
$1,534,000 in 2004 or a yield on average earning assets of 5.61% and 5.76%, respectively. Net
interest income was $1,613,000 in 2005 and $1,251,000 in 2004 (net interest margins of 4.71% and
4.69%, respectively) after deducting interest expense of $308,000 in 2005 and $283,000 in 2004 or
an average rate paid on interest-bearing funds of 1.24% and 1.22%, respectively. Rate variances
between the comparable three-month periods of 2005 and 2004 increased net interest income
approximately $6,000 while corresponding volume variances contributed another $356,000. Yields on interest-earning assets decreased between the comparable three-month periods ended March
31, 2005 and 2004 by 15 basis points 7




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while the average rates paid on interest bearing funds increased by two basis points. However, net interest margins between the comparable periods
experienced a disproportionate increase of two basis points. This is reflective of the change in
the mix of the Companys deposit base. For the three-months ended March 31, 2005, average
non-interest bearing deposits comprised 28% of all funds while for the comparable period of 2004,
non-interest bearing funds comprised only 17%. While the Federal Reserve adopted a policy to tighten rates beginning in 2004 and into 2005,
management does not anticipate this policy decision will have a significant negative impact on the
Companys net interest margins unless markets rates were to increase precipitously. Provisions for loan losses of $30,000 and $0 for the three-month periods ended March 31, 2005 and
2004, respectively, were based on the Banks loss experience together with its assessment of the
potential impacts of current economic conditions on the credit quality of the portfolio, including
an analysis of potential problem credits for impairment, supplemented with peer industry loss data
of comparably sized and positioned commercial banks. Significant to this assessment in 2004 was net
recovery of previously charged-off loan balances of approximately $42,000 for the quarter that
served to replenish the allowance for loan losses. Non-interest income is comprised principally of service charges on deposit accounts, fees on
residential lending secondary market activities and fees and commissions from the sale of insurance
and investment products. Non-interest income aggregated $372,000 and $371,000 for the three-month
periods ended March 31, 2005 and 2004, respectively. Amounts for the three-month periods ended
March 31, 2005 and 2004 include commission and fee income from the sales of insurance and
investment products aggregating $141,000 and $153,000, respectively. Residential lending secondary
market activities generated fee income of $129,000 for the three month period ending March 31, 2005
compared with $113,000 for the corresponding period in 2004. An active purchase and construction
market has aided fee income from residential secondary market activities in recent years, the
demand for which may decline in the event of rising rates together with the saturation of the
Companys potential market. This condition would not be expected to have a material adverse impact,
as most expenses associated with this activity are incremental and direct in nature. The balance of
non-interest income is generally consistent with the volume of deposit activity. Non-interest expenses for the comparable three-month periods ended March 31, 2005 and 2004 were
$1,650,000 and $1,353,000 comprised principally of salaries and benefits ($892,000 in 2005 and
$800,000 in 2004) and occupancy costs ($199,000 in 2005 and $214,000 in 2004). Other expense
increased by $220,000 between the comparable three month periods of which $153,000 of the increase
is comprised of non-recurring merger expenses. At March 31, 2005 the Company had 62 employees
compared to 58 employees a year earlier, and had four full-service banking offices at March 31,
2005 compared to three such offices a year ago. 8




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Liquidity and Capital Resources The Company utilizes its investment portfolio principally as a source of liquidity. Deposit growth,
to the extent not necessary to maintain liquidity, is generally utilized to fund loan demand. At
March 31, 2005, the Company had unencumbered overnight liquidity aggregating approximately $15.7
million to meet its current liquidity needs. In addition, if needed, the Company has $12.5 million
in credit facilities available through correspondent banks and maintains outlets for the sale
and/or participation of loans from its portfolio. Management of the Company strives to maintain capital at levels sufficient to be considered well
capitalized under regulatory guidelines. At March 31, 2005, capital levels were sufficient for
this purpose. When planning its growth and expansion strategies, the Companys practice is to
ensure its well capitalized position is maintained at all times, taking into account current
capital levels together with the reinvestment of earnings. 
 Item 3. Controls and Procedures The Companys Chief Executive Officer and Chief Financial Officer have evaluated the Companys
disclosure controls and procedures as of the end of the period covered by this report. Based upon
that evaluation, they have concluded that the Companys disclosure controls and procedures are
effective in timely alerting them to material information relating to the Company, including its
consolidated subsidiaries, required to be included in the Companys periodic filings under the
Securities and Exchange Act of 1934. The Company made no changes in its internal controls over financial reporting during its most
recent quarter that has materially affected the Companys internal control over financial
reporting. 9




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PART II - OTHER INFORMATION 
 Item 1. Legal Proceedings There are no material legal proceedings to which the Company or its subsidiaries are a party
or to which any of their properties are subject. 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Not Applicable. 
 Item 3. Defaults upon Senior Securities Not Applicable. 
 Item 4. Submission of Matters to a Vote of Security Holders None. 
 Item 5. Other Information Not Applicable. 
 Item 6. Exhibits  31.1
    Certification pursuant to Section 302 of the Sarbanes-Oxley act of 200231.2
    Certification pursuant to Section 302 of the Sarbanes-Oxley act of 200231.3
    Certification pursuant to Section 302 of the Sarbanes-Oxley act of 200232.1
    Certification pursuant to 18 U.S.C. Section 1350, as added by section 906 of
the Sarbanes-Oxley Act of 200232.2
    Certification pursuant to 18 U.S.C. Section 1350, as added by section 906 of
the Sarbanes-Oxley Act of 200232.3
    Certification pursuant to 18 U.S.C. Section 1350, as added by section 906 of
the Sarbanes-Oxley Act of 2002 10




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SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to
be signed on its behalf by the undersigned, thereto duly authorized. Date: May 6, 2005
    
    /s/ George E. Cline, IIIGeorge E. Cline, IIIChief Financial OfficerDate: May 6, 2005
    
    /s/ Todd H. KatzTodd H. KatzPresidentDate: May 6, 2005
    
    /s/ Lewis S. AlbertLewis S. AlbertChief Executive Officer
 11