U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
CENTERSTATE BANKS OF FLORIDA, INC.
(Exact Name of Registrant as Specified in Its Charter)
Florida 59-3606741
(State of Incorporation or (I.R.S. Employer
Organization) Identification No.)
7722 SR 544 East, Winter Haven, FL 33881
(Address of Principal Executive Offices) (Zip Code)
If this form relates to the If this form relates to the
registration of a class of securities registration of a class of securities
pursuant to Section 12(b) of the pursuant to Section 12(g) of the
Exchange Act and is effective Exchange Act and is effective
pursuant to General Instruction pursuant to General Instruction
A.(c), please check the following A.(d), please check the following
box. [ ] box. [X]
|
Securities Act registration statement file number to which this form relates:
Securities to be registered under Section 12(b) of the Act: None
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
ITEM 1. DESCRIPTION OF SECURITIES.
The authorized capital stock of Centerstate consists of 20,000,000 shares of Centerstate common stock, par value $.01 per share ("Centerstate Common Stock"). As of the date of this Form 8-A, there were 2,815,872 shares of Centerstate Common Stock outstanding and held by approximately 943 shareholders of record. The Centerstate Articles of Incorporation (the "Centerstate Articles") also authorize Centerstate to issue up to 5,000,000 shares of preferred stock, par value $.01 per share, none of which were issued or outstanding as of the date of this Form 8-A.
The following discussion is a brief summary of certain rights relating to Centerstate Common Stock, as determined by the Centerstate Articles and the Centerstate Bylaws. The following discussion is not intended to be a complete description of such capital stock and is qualified in its entirety by reference to governing laws and the Centerstate Articles and the Centerstate Bylaws.
COMMON STOCK
Holders of shares of Centerstate Common Stock are entitled to receive such dividends as may from time to time be declared by the Board of Directors of Centerstate out of funds legally available therefor. Holders of Centerstate Common Stock are entitled to one vote per share on all matters on which the holders are entitled to vote and do not have any cumulative rights. Holders of Centerstate Common Stock have no preemptive, conversion, redemption or sinking fund rights. In the event of a liquidation, dissolution or winding-up of Centerstate, holders of Centerstate Common Stock are entitled to share equally and ratably in the assets of Centerstate, if any, remaining after the payment of all debts and liabilities of Centerstate and the liquidation preferences of any outstanding shares of Centerstate preferred stock. The rights, preferences and privileges of holders of Centerstate Common Stock will be subject to any classes or series of Centerstate preferred stock that Centerstate may issue in the future.
PREFERRED STOCK
The Centerstate Articles provide that the Board of Directors of Centerstate is authorized, without further action by the holders of Centerstate Common Stock, unless such action is required in a particular case by applicable laws or regulations, to provide for the issuance of shares of preferred stock in one or more classes or series and to fix the designations, powers, preferences and relative, participating, optional and other rights, qualifications, limitations and restrictions thereof, including the dividend rate, conversion rights, voting rights, redemption price and liquidation preference, and to fix the number of shares to be included in any such classes or series. Any preferred stock so issued may rank senior to Centerstate Common Stock with respect to the payment of dividends or amounts upon liquidation, dissolution or winding-up, or both. In addition, any such shares of preferred stock may have class or series voting rights.
CERTAIN ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF CENTERSTATE ARTICLES
Authorized Capital Stock. The Centerstate Board of Directors may authorize the issuance of additional shares of Centerstate Common Stock or preferred stock without further action by the Centerstate shareholders, unless such action is required in a particular case by applicable laws or regulations. The authority to issue additional shares of Centerstate Common Stock or preferred stock provides Centerstate with the flexibility necessary to meet its future needs without the delay resulting from seeking shareholder approval. The unissued shares of Centerstate Common Stock and preferred stock may be issued from time to time for any corporate purposes, including, without limitation, stock splits, stock dividends, employee
benefit and compensation plans, acquisitions, and public or private sales for cash as a means of raising capital. Such shares could be used to dilute the stock ownership of persons seeking to obtain control of Centerstate. In addition, the sale of a substantial number of shares of Centerstate Common Stock or the sale of preferred stock to persons who have an understanding with Centerstate concerning the voting of such shares, or the distribution or dividend of shares of Centerstate Common Stock or preferred stock (or the right to receive such shares) to Centerstate shareholders, may have the effect of discouraging or increasing the cost of unsolicited attempts to acquire control of Centerstate. Further, because the Centerstate Board has the power to determine the voting, conversion or other rights of Centerstate preferred stock, the issuance of a series of preferred stock to persons friendly to management could effectively discourage or preclude consummation of a change in control transaction or have the effect of maintaining the position of Centerstate incumbent management. Centerstate does not currently have any plans or commitments for Centerstate to use its authority to effect any such issuance, but reserves the right to take any action that the Board of Directors deems to be in the best interests of Centerstate and its shareholders.
FLORIDA ANTITAKEOVER LAW
Florida has enacted legislation that may deter or frustrate a takeover
of a Florida corporation. The Florida Control Share Act generally provides that
shares acquired in a "control share acquisition" will not possess any voting
rights unless such voting rights are approved by a majority of the corporation's
disinterested shareholders. A "control-share acquisition" is an acquisition,
directly or indirectly, by any person having ownership of, or the power to
direct the exercise of voting power with respect to, issued and outstanding
"control shares" of a publicly held Florida corporation. "Control Shares" are
shares which, except for the Florida Control Share Act, would have voting power
that, when added to all other shares owned by a person or in respect to which
such person may exercise or direct the exercise of voting power, would entitle
such person, immediately after acquisition of such shares, directly or
indirectly, alone or as a part of a group, to exercise or direct the exercise of
voting power in the election of directors within any of the following ranges:
(a) at least 20% but less than 331/3% of all voting power; (b) at least 331/3%
but less than a majority of all voting power; or (c) a majority or more of all
voting power. The Florida Affiliated Transactions Act generally requires
approval by a majority of disinterested directors or two-thirds of shareholders
in specified transactions between a corporation and holders of more than 10% of
the outstanding voting shares of the corporation (or their affiliates). Florida
law also permits the board of directors evaluating a tender offer or other
business combination to consider all relevant factors including, without
limitation, social, legal, economic or other effects on employees, customers,
suppliers, and other constituencies, possible impact on the local community, and
impact on the Florida and national economies.
INDEMNIFICATION PROVISIONS
Florida law authorizes a company to indemnify its directors and officers in certain instances against certain liabilities which they may incur by virtue of their relationship with the company. Further, a Florida company is authorized to provide further indemnification or advancement of expenses to any of its directors, officers, employees, or agents, except for acts or omissions which constitute:
o a violation of the criminal law unless the individual had reasonable cause to believe it was lawful,
o a transaction in which the individual derived an improper personal benefit,
o in the case of a director, a circumstance under which certain liability provisions of the Florida Business Corporation Act are applicable related to payment of dividends or other distributions or repurchases of shares in violation of such Act, or
o willful misconduct or a conscious disregard for the best interest of the company in a proceeding by the company, or a company shareholder.
A Florida company also is authorized to purchase and maintain liability insurance for its directors, officers, employees and agents.
Centerstate's bylaws provide that Centerstate shall indemnify each of its directors and officers to the fullest extent permitted by law, and that the indemnity will include advances for expenses and costs incurred by such director or officer related to any action in regard to which indemnity is permitted. There is no assurance that Centerstate will maintain liability insurance for its directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, or persons controlling Centerstate pursuant to the foregoing provisions, Centerstate has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is therefore unenforceable.
ITEM 2. EXHIBITS.
Exhibit 3.1 - Articles of Incorporation of Centerstate Banks of
Florida, Inc.*
Exhibit 3.2 - Bylaws of Centerstate Banks of Florida, Inc.*
Exhibit 4.1 - Specimen stock certificate of Centerstate Banks of
Florida, Inc.*
Exhibit 23.1 - Consent of KPMG LLP
Exhibit 27 - Financial Data Schedule (SEC use only)
Exhibit 99.1 - Centerstate Banks of Florida, Inc. and subsidiaries
Management's Discussion and Analysis of Financial
Condition and Results of Operations as of and for
the years ended December 31, 1999 and December 31,
1998
Exhibit 99.2 - Centerstate Banks of Florida, Inc. and subsidiaries
financial statements, with auditors' report thereon,
as of and for the years ended December 31, 1999 and
1998
-----------------------------
|
* Incorporated by reference to the Form S-4 Registration Statement of Centerstate Banks of Florida, Inc. (File No. 333-95087).
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.
Centerstate Banks of Florida, Inc.
Date: November 27, 2000 By: /s/ James H. White
-----------------------------------
James H. White
Chairman, President and
Chief Executive Officer
|
By: /s/ James J. Antal
-----------------------------------
James J. Antal
Senior Vice President and
Chief Financial Officer
|
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
Exhibit 23.1 - Consent of KPMG LLP
Exhibit 27 - Financial Data Schedule (SEC use only)
Exhibit 99.1 - Centerstate Banks of Florida, Inc. and subsidiaries
Management's Discussion and Analysis of Financial
Condition and Results of Operations as of and for the
years ended December 31, 1999 and December 31, 1998
Exhibit 99.2 - Centerstate Banks of Florida, Inc. and subsidiaries
financial statements, with auditors' report thereon, as
of and for the years ended December 31, 1999 and 1998
|
Exhibit 23.1
Consent of Independent Auditors
We consent to the use of our report dated February 4, 2000, on the consolidated financial statements of Centerstate Banks of Florida, Inc. and Subsidiaries as of and for the years ended December 31, 1999 and 1998, included in this Form 8-A registration statement.
KPMG LLP
Orlando, Florida
November 21, 2000
| ARTICLE 9 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 8-A FOR THE PERIOD ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 12 MOS |
| FISCAL YEAR END | DEC 31 2000 |
| PERIOD START | JAN 01 1999 |
| PERIOD END | DEC 31 1999 |
| CASH | 19,976 |
| INT BEARING DEPOSITS | 0 |
| FED FUNDS SOLD | 4,069 |
| TRADING ASSETS | 0 |
| INVESTMENTS HELD FOR SALE | 59,827 |
| INVESTMENTS CARRYING | 0 |
| INVESTMENTS MARKET | 0 |
| LOANS | 177,463 |
| ALLOWANCE | 2,302 |
| TOTAL ASSETS | 278,882 |
| DEPOSITS | 247,977 |
| SHORT TERM | 7,078 |
| LIABILITIES OTHER | 515 |
| LONG TERM | 0 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 28 |
| OTHER SE | 23,284 |
| TOTAL LIABILITIES AND EQUITY | 278,882 |
| INTEREST LOAN | 14,276 |
| INTEREST INVEST | 4,271 |
| INTEREST OTHER | 555 |
| INTEREST TOTAL | 19,102 |
| INTEREST DEPOSIT | 8,089 |
| INTEREST EXPENSE | 8,318 |
| INTEREST INCOME NET | 10,784 |
| LOAN LOSSES | 258 |
| SECURITIES GAINS | 0 |
| EXPENSE OTHER | 9,367 |
| INCOME PRETAX | 3,066 |
| INCOME PRE EXTRAORDINARY | 3,066 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 1,946 |
| EPS BASIC | .73 |
| EPS DILUTED | .70 |
| YIELD ACTUAL | 4.29 |
| LOANS NON | 474 |
| LOANS PAST | 58 |
| LOANS TROUBLED | 0 |
| LOANS PROBLEM | 0 |
| ALLOWANCE OPEN | 2,335 |
| CHARGE OFFS | 373 |
| RECOVERIES | 82 |
| ALLOWANCE CLOSE | 2,302 |
| ALLOWANCE DOMESTIC | 2,302 |
| ALLOWANCE FOREIGN | 0 |
| ALLOWANCE UNALLOCATED | 0 |
Exhibit 99.1
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS COVERS IMPORTANT FACTORS AFFECTING THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES FOR THE PERIODS SHOWN. CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES' CONSOLIDATED FINANCIAL STATEMENTS SHOULD BE READ IN CONJUNCTION WITH THIS ANALYSIS.
OVERVIEW
Centerstate Banks of Florida, Inc. (the "Company") is a multi bank holding company that was formed as of the close of business June 30, 2000 as part of a merger of three independent commercial banks in central Florida (First National Bank of Osceola County, Community National Bank of Pasco County and First National Bank of Polk County). The business combination was accounted for using the pooling-of-interest accounting method. All historical financial presentations have been restated to reflect the merger. The outstanding shares of the three banks were converted into Company common stock at agreed upon exchange ratios described in the merger agreements. All of the shareholders of the three banks are now the shareholders of the Company, which owns all of the outstanding shares of the three banks. The three banks will maintain their separate identities as wholly owned subsidiaries of the Company.
First National Bank of Osceola County is a national bank chartered in September 1989. It operates from three full service locations and one remote location within Osceola County and two full service locations in Orange County, which is contiguous with Osceola County.
Community National Bank of Pasco County is a national bank chartered in November 1989. It operates from seven full service locations within Pasco and contiguous counties.
First National Bank of Polk County is a national bank chartered in February 1992. It operates from three full service locations within Polk County.
The Company, through its subsidiary banks, provides traditional deposit and lending products and services to its commercial and retail customers.
COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1999 AND
DECEMBER 31, 1998.
NET INCOME
The Company's net income for the year ended December 31, 1999 was $1,946,000 compared to net income of $2,287,000 for the year ended December 31, 1998. The per share net income for the years ended December 31, 1999 and 1998 was $0.73 ($0.70 diluted) and $0.90 ($0.85 diluted). Net income overall was negatively impacted from 1998 to 1999 due to increased operating expenses resulting primarily from the opening of two new branches in the fourth quarter of 1998 and one in the first quarter of 1999. The per share income was also negatively impacted due to the issuance of additional shares from the exercise of stock options in 1998 and 1999.
The Company's return on average assets ("ROA") and return on average equity ("ROE") for the year ended December 31, 1999 was 0.70% and 8.83%, as compared to the ROA and ROE of 0.90% and 11.79% for the year ended December 31, 1998. The efficiency ratios for the year ended December 31,
1999 and 1998 were 74% and 67%, respectively.
Net income decreased approximately $341,000 or 15% to $1,946,000 for the year ended December 31, 1999, compared to $2,287,000 for the same period during 1998. Both net interest income and non-interest income increased by a combined amount of approximately $1,391,000, which was offset by an increase of approximately $1,783,000 in non interest expenses, primarily due to the opening of two new branches in the fourth quarter of 1998 and another new branch in the first quarter of 1999, as well as investing in future growth by adding additional employees and equipment in other areas of the Company. The provision for loan losses increased by $31,000 and income tax expense decreased by approximately $82,000.
The improvement in net interest income was primarily due to an increase in average interest earning assets resulting from a growth in lending activities. The increase in non-interest income was a result of an increase in deposit related and other miscellaneous fees, both due to the overall growth of the loan and deposit portfolios.
NET INTEREST INCOME/MARGIN
Net interest income consists of interest and fee income generated by earning assets, less interest expense.
Net interest income increased $1,030,000 or 11% to $10,784,000 during the year ended December 31, 1999 compared to $9,754,000 for the year ended December 31, 1998. The $1,030,000 increase was a combination of a $564,000 increase in interest income and a $466,000 decrease in interest expense.
Average interest earning assets increased $18,911,000 to $251,475,000 during the year ended December 31, 1999, compared to $232,564,000 for the year ended December 31, 1998. Comparing these same two periods, yield on average interest earning assets decreased from 7.97% to 7.60%. The increase in volume had a positive effect on the change in interest income ($1,798,000 volume variance), which was partially offset by the negative impact resulting from the 0.37% decrease in average yields ($1,234,000 rate variance). The result was a $564,000 increase in interest income.
Average interest bearing liabilities increased $15,427,000 to $213,505,000 during the year ended December 31, 1999, compared to $198,078,000 for the year ended December 31, 1998. Comparing these same two periods, the cost of average interest bearing liabilities decreased from 4.43% to 3.90%. The increase in volume resulted in an increase in interest expense ($294,000 volume variance), which was offset by the 0.53% decrease in average yields ($760,000 rate variance). The result was a $466,000 decrease in interest expense. Refer to the tables Average Balances - Yields & Rates, and Analysis Of Changes In Interest Income And Expenses below.
AVERAGE BALANCES - YIELDS & RATES
(Dollars are in Thousands)
Years Ended December 31,
-------------------------------------------------------------------------------
1999 1998
---------------------------------- --------------------------------------
Average Interest Average Average Interest Average
Balance Inc/Exp Rate Balance Inc/Exp Rate
------------ --------- --------- ------------ --------- ----------
ASSETS:
Federal Funds Sold $ 11,186 $ 556 4.97% $ 23,770 $ 1,225 5.15%
Securities Available for Sale 75,284 4,069 5.40% 63,452 3,707 5.84%
Securities Held to Maturity 4,746 203 4.28% 2,274 125 5.50%
Loans (2) (1) 160,259 14,274 8.91% 143,068 13,481 9.42%
------------ --------- --------- ------------ --------- ----------
TOTAL EARNING ASSETS $ 251,475 $ 19,102 7.60% $ 232,564 $ 18,538 7.97%
All Other 26,590 22,463
Assets
============ ============
TOTAL ASSETS $ 278,065 $ 255,027
============ ============
LIABILITIES & SHAREHOLDERS' EQUITY:
Deposits:
NOW & Money Markets $ 58,369 $ 1,228 2.10% $ 47,360 $ 1,032 2.18%
Savings 21,591 448 2.07% 16,020 364 2.27%
Time 128,216 6,415 5.00% 130,430 7,191 5.51%
Deposits
Short Term Borrowings 5,329 227 4.26% 4,268 197 4.62%
------------ --------- --------- ------------ --------- ----------
TOTAL INTEREST BEARING
LIABILITIES $ 213,505 $ 8,318 3.90% $ 198,078 $ 8,784 4.43%
Demand Deposits 41,824 35,630
Other 689 1,922
Liabilities
Shareholders' Equity 22,047 19,397
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 278,065 $ 255,027
============ ============
NET INTEREST SPREAD (3) 3.70% 3.54%
========= ==========
NET INTEREST INCOME $ 10,784 $ 9,754
========= =========
NET INTEREST MARGIN (4) 4.29% 4.19%
========= ==========
|
(1) Loan balances are net of deferred fees/cost of origination and reserve for loan loss allowances.
(2) Interest income on average loans includes loan fee recognition of $572,000 and $515,000 for the years ended December 31, 1999 and 1998.
(3) Represents the average rate earned on interest earning assets minus the average rate paid on interest bearing liabilities.
(4) Represents net interest income divided by total earning assets.
ANALYSIS OF CHANGES IN INTEREST INCOME AND EXPENSES
(Dollars are in Thousands)
Net Change Dec 31, 1998 - 1999
--------------------------------------
Net
Volume (1) Rate (2) Change
--------------------------------------
INTEREST INCOME
Federal Funds sold ($649) ($20) ($669)
Securities Available for Sale 691 (329) 362
Securities Held to Maturity 136 (58) 78
Loans 1,620 (827) 793
--------------------------------------
TOTAL INTEREST INCOME $1,798 ($1,234) $564
--------------------------------------
INTEREST EXPENSE
Deposits
NOW & Money Market Accounts $240 ($44) $196
Savings 127 (43) 84
Time Deposits (122) (654) (776)
Short-Term Borrowings 49 (19) 30
--------------------------------------
TOTAL INTEREST EXPENSE $294 ($760) ($466)
--------------------------------------
NET INTEREST INCOME $1,504 ($474) $1,030
======================================
|
(1) The volume variance reflects the change in the average balance outstanding multiplied by the actual average rate during the prior period.
(2) The rate variance reflects the change in the actual average rate multiplied by the average balance outstanding during the current period.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
Management's policy is to maintain the allowance for loan losses at a level sufficient to absorb inherent losses in the loan portfolio. The allowance is increased by the provision for loan losses, which is a charge to current period earnings and decreased by charge-offs net of recoveries on prior period loan charge-offs. In determining the adequacy of the reserve for loan losses, management considers those levels maintained by conditions of individual borrowers, the historical loan loss experience, the general economic environment and the overall portfolio composition. As these factors change, the level of loan loss provision changes.
The provision for loan loss expense increased $31,000 or 14% to $258,000 during the year ended December 31, 1999, as compared to $227,000 for the year ended December 31, 1998, due to an increase in general lending activity. At December 31, 1999, the allowance for loan losses totaled $2,302,000, or 1.30%, of total loans outstanding, compared to $2,335,000 or 1.52% of total loans outstanding at December 31, 1998.
Management believes that the Company's allowance for loan losses was adequate at December 31, 1999. The following sets forth certain information on the Company's allowance for loan losses for the periods presented.
ACTIVITY IN ALLOWANCE FOR LOAN LOSSES
(In Thousands of Dollars)
December 31,
----------------------
1999 1998
----------------------
Balance at Beginning of Year $2,335 $2,190
Loans Charged-Off:
Commercial, Financial & Agricultural (236) (31)
Real Estate, Mortgage (79) (37)
Consumer (58) (54)
----------------------
Total Loans Charged-Off ($373) ($122)
----------------------
Recoveries on Loans Previously Charged-Off
Commercial, Financial & Agricultural $56 $5
Real Estate, Mortgage 9 26
Consumer 17 9
----------------------
Total Loan Recoveries $82 $40
----------------------
Net Loans Charged-Off ($291) ($82)
----------------------
Provision for Loan Losses Charged
to Expense $258 $227
----------------------
Ending Balance $2,302 $2,335
======================
Total Loans Outstanding (net of deferred fees/costs) $177,462 $154,125
Average Loans Outstanding $161,905 $146,740
Allowance for Loan Losses to Loans Outstanding 1.30% 1.52%
Net Charge-offs to Average Loans
Outstanding 0.18% 0.06%
|
NON-INTEREST INCOME
Non-interest income for 1999 increased by $361,000, or 23% to $1,907,000 as compared to $1,546,000 for 1998. The net increase was comprised of a $328,000 increase in service fees on various deposit accounts, a $55,000 increase in ATM related fees, a $6,000 net gain on the sale of securities, a net decrease resulting from a net loss of $103,000 on sale of repossessed real estate, increase in rental income of $10,000 and an increase of approximately $65,000 in all other miscellaneous fees.
NON-INTEREST EXPENSE
Non-interest expense increased $1,783,000 (23%) to $9,367,000 during the year ended December 31, 1999, compared to $7,584,000 for the year ended December 31, 1998. The increase was a result of a $724,000 increase in compensation and related employee benefits, a $435,000 increase in occupancy and related equipment expenses, a $126,000 increase in data processing expenses, and all remaining increases in non-interest expense (approximately $499,000) summarized in the table below - Non-Interest Expenses. The primary reasons for the increase in non interest expense was the two new branches that opened during the last quarter of 1998 and the new branch that opened during the first quarter of 1999, as well as an
increase in employees and equipment required to sustain the overall growth of the Company.
NON INTEREST EXPENSE
(Dollars are in Thousands)
Years Ended Dec 31
--------------------------------------
1999 1998 Increase
--------------------------------------
Salary, wages and employee benefits $4,117 $3,393 $724
Occupancy expense 1,213 911 302
Depreciation of premises and equipment 778 645 133
Stationary and printing supplies 328 260 68
Advertising and public relations 212 180 32
Data processing expense 752 626 126
Legal & professional fees 275 265 10
Other operating expenses 1,692 1,304 388
--------------------------------------
Total other operating expenses $9,367 $7,584 $1,783
======================================
|
INCOME TAXES PROVISION
The income tax provision for the year ended December 31, 1999, was $1,120,000, an effective tax rate of 36.5%, as compared to $1,202,000 for the year ended December 31, 1998, an effective tax rate of 34.5%.
NET INCOME
Net income for the years ended December 31, 1999 and 1998 was $1,946,000 ($0.73 per share basic and $0.70 per share diluted) and $2,287,000 ($0.90 per share basic and $0.85 per share diluted).
COMPARISON OF BALANCE SHEETS AT DECEMBER 31, 1999 AND DECEMBER 31, 1998
OVERVIEW
As of December 31, 1999, the Company had total assets of $278.9 million, compared to $276.1 million as of December 31, 1998. As of December 31, 1999 total net loans were $175.2 million and total deposits were $248.0 million, compared to $151.8 million and $249.6 million as of December 31, 1998.
LOANS
Lending-related income is the most important component of the Company's net interest income and is a major contributor to profitability. The loan portfolio is the largest component of earning assets, and it therefore generates the largest portion of revenues. The absolute volume of loans and the volume of loans as a percentage of earning assets is an important determinant of net interest margin as loans are expected to produce higher yields than securities and other earning assets. Average net loans during the year ended December 31, 1999, were $160,259,000, or 64% of earning assets, as compared to $143,068,000, or 62% of earning assets, for December 31, 1998. Total loans at December 31, 1999 and 1998 were $177,463,000 and $154,125,000 respectively. This represents a loan to total asset ratio of 64% and 56% and a loan to deposit ratio of 72% and 62%, at December 31, 1999 and 1998 respectively.
As of December 31, 1999, the Company had total loans of $177,463,000, net of unearned discount, as compared to $154,125,000 at December 31, 1998, an increase of $23,338,000, or 15%. The growth in loans during this period was mainly due to the general growth in the market and the calling efforts of the loan officers. Commercial, financial and agricultural loans totaled $28,680,000, or 16% of the loan portfolio. Real estate construction loans totaled $11,913,000, or 7% of the loan portfolio. Real estate mortgage loans totaled $119,994,000, or 68% of the loan portfolio. Installment and consumer loans totaled $16,876,000, or 9% of the loan portfolio.
Loan concentrations are considered to exist where there are amounts loaned to multiple borrowers engaged in similar activities, which collectively could be similarly impacted by economic or other conditions and when the total of such amounts would exceed 25% of total capital. Due to the lack of diversified industry and the relative proximity of markets served, the Company has concentrations in geographic as well as in types of loans funded. The tables below provide a summary of the loan portfolio composition and maturities for the periods provided below.
LOAN PORTFOLIO COMPOSITION
(In thousands of dollars)
TYPES OF LOANS December 31,
--------------------------------------------------- -------------------------
1999 1998
------------- -----------
Commercial, financial & agricultural $28,680 $23,951
Real Estate - construction 11,913 9,300
Real Estate - mortgage 119,994 106,108
Installment & consumer loans 16,876 14,766
------------- -----------
Total Loans, net of unearned fees $177,463 $154,125
Less: Allowance for loan losses (2,302) (2,335)
------------- -----------
Net Loans $175,161 $151,790
============= ===========
LOAN MATURITY SCHEDULE
(In thousands of dollars)
|
December 31, 1999
-----------------------------------------------
0 - 12 1 - 5 Over 5
Months Years Years Total
---------- ----------- ------------ -----------
All loans other than construction $75,803 $55,920 $33,827 $165,550
Real Estate - construction 11,913 0 0 11,913
---------- ----------- ------------ -----------
Total $87,716 $55,920 $33,827 $177,463
========== =========== ============ ===========
Fixed interest rate $14,506 $51,094 $21,310 $86,910
Variable interest rate 73,210 4,826 12,517 90,553
---------- ----------- ------------ -----------
Total $87,716 $55,920 $33,827 $177,463
========== =========== ============ ===========
December 31, 1998
-----------------------------------------------
0 - 12 1 - 5 Over 5
Months Years Years Total
---------- ----------- ------------ -----------
All loans other than construction $94,536 $42,844 $7,445 $144,825
Real Estate - construction 9,300 0 0 9,300
---------- ----------- ------------ -----------
Total $103,836 $42,844 $7,445 $154,125
========== =========== ============ ===========
Fixed interest rate $12,467 $38,113 $7,098 $57,678
Variable interest rate 91,369 4,731 347 96,447
---------- ----------- ------------ -----------
Total $103,836 $42,844 $7,445 $154,125
========== =========== ============ ===========
|
CREDIT QUALITY
The Company maintains an allowance for loan losses to absorb inherent losses in the loan portfolio. The loans are charged against the allowance when management believes collection of the principal is unlikely. The reserve consists of amounts established for specific loans and is also based on historical loan loss experience. The specific reserve element is the result of a regular analysis of all loans and commitments based on credit rating classifications. The historical loan loss element represents a projection of future credit problems and is determined using loan loss experience of each loan type. Management also weighs general economic conditions based on knowledge of specific factors that may affect the collectibility of loans. The Company is committed to the early recognition of problems and to maintaining a sufficient allowance. At December 31, 1999, the allowance for loan losses was $2,302,000 or 1.3% of total loans outstanding, net of unearned fees, compared to $2,335,000 or 1.5%, at December 31, 1998.
Non-performing assets consist of non-accrual loans, loans past due 90 days or more and still accruing interest, and other real estate owned. Loans are placed on a non-accrual status when they are past due 90 days and management believes the borrower's financial condition, after giving consideration to economic conditions and collection efforts, is such that collection of interest is doubtful. When a loan is placed on non-accrual status, interest accruals cease and uncollected interest is reversed and charged against current income. Subsequent collections reduce the principal balance of the loan until the loan is returned to accrual status.
Total non-performing assets as of December 31, 1999, decreased $320,000 or 31% to $723,000, compared to $1,043,000 as of December 31, 1998. Non-performing loans, as a percentage of total assets at December 31, 1999 and December 31,1998, was .26% and .38%, respectively. Management believes that the allowance for loan losses on December 31, 1999, was adequate.
Management is continually analyzing its loan portfolio in an effort to recognize and resolve its problem assets as quickly and efficiently as possible. As of December 31, 1999, management believes that it has identified and adequately reserved for such problem assets. However, management recognizes that many factors can adversely impact various segments of its market. As such management continuously focuses its attention on promptly identifying and providing for potential problem loans, as they arise. The tables below summarize the Company's non performing assets and allocation of allowance for loan losses for the periods provided.
NON-PERFORMING ASSETS
(In thousands of dollars)
December 31,
------------------------
1999 1998
------------ -----------
Non-Accrual Loans $474 $632
Past Due Loans 90 Days or More
and Still Accruing Interest 58 173
Other Real Estate Owned 191 238
------------ -----------
Total Non-Performing Assets $723 $1,043
============ ===========
Percent of Total Assets 0.26% 0.38%
============ ===========
Allowance for Loan Losses $2,302 $2,335
============ ===========
Allowance for Loan Losses to
Nonperforming Loans 318% 224%
============ ===========
|
Dec 31, 1999 Dec 31, 1998
------------ ------------
Restructured loans $ 0 $ 0
--------- ---------
Recorded investment in impaired loans $ 1,467 $ 1,579
--------- ---------
|
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
(In thousands of dollars)
December 31, 1999 December 31, 1998
--------------------------------- ---------------------------------
Percent of Percent of
Loans in Each Loans in Each
Category to Category to
Amount Total Loans Amount Total Loans
------------- ------------------- ------------- -------------------
Commercial, Financial & Agricultural $614 16% $721 16%
Real Estate Construction 84 7% 128 6%
Real Estate - Mortgage 804 68% 945 69%
Consumer 258 9% 249 10%
Unallocated 542 0% 292 0%
------------- ------------------- ------------- -------------------
Total $2,302 100% $2,335 100%
============= =================== ============= ===================
|
DEPOSITS AND FUNDS PURCHASED
Total deposits decreased $1,654,000 (0.7%) to $247,977,000 as of December 31, 1999, compared to $249,631,000 on December 31, 1998. The Company made an effort during 1999 to change the deposit mix through pricing strategies. The result was that total time deposits, which tend to be higher cost deposits, decreased by $13,387,000 and non time deposits, which tend to be lower cost deposits, increased by $11,733,000. The Company does not rely on purchased or brokered deposits as a source of funds. Instead, the generation of deposits within its market area serves as the Company's fundamental tool in providing a source of funds to be invested primarily in loans. The table below summarizes selected deposit
information for the periods indicated.
SELECTED STATISTICAL INFORMATION FOR DEPOSITS
(In thousands of dollars)
December 31, 1999 December 31, 1998
-------------------------------- -------------------------------
Average Average
Balance Rate Balance Rate
----------------- -------------- ----------------- -------------
Noninterest-bearing
demand deposits $41,824 0.00% $35,630 0.00%
Interest-bearing demand
Deposits 66,557 2.36% 54,300 1.90%
Savings deposits 21,591 2.08% 16,020 2.27%
Time deposits 120,027 5.05% 123,490 5.82%
----------------- -------------- ----------------- -------------
Total Average Deposits $249,999 3.23% $229,440 3.74%
================= ============== ================= =============
|
MATURITY OF TIME DEPOSITS OF $100,000 OR MORE
(In thousands of dollars)
December 31,
1999 1998
-------------- ------------
Three Months or Less $8,906 $8,805
Three Through Six Months 5,539 5,856
Six Through Twelve Months 6,376 6,127
Over Twelve Months 3,801 2,752
-------------- ------------
Total $24,622 $23,540
============== ============
|
REPURCHASE AGREEMENTS AND FEDERAL RESERVE BANK ADVANCES
The Company's subsidiary Banks enter into agreements to borrow short term funds via Federal Reserve Bank advances and also enter into agreements to repurchase ("repurchase agreements") under which the Company pledges investment securities owned and under its control as collateral against the one-day agreements. The daily average balance of these short-term borrowing agreements for the years ended December 31, 1999, and 1998, was approximately $5,301,000 and $4,267,000, respectively. Interest expense for the same periods was approximately $229,000 and $196,000, respectively, resulting in an average rate paid of 4.32% and 4.59% for the years ended December 31, 1999, and 1998, respectively.
SCHEDULE OF SHORT-TERM BORROWINGS (1)
(In thousands of dollars)
Maximum Average Weighted
Outstanding Interest Rate Average
at any Average during the Ending Interest Rate
Month End Balance Year Balance at Year End
--------------- ------------ -------------- ------------- ----------------
YEAR ENDED DECEMBER 31,
1999 $8,130 $5,301 4.32% $7,078 4.37%
1998 7,417 4,267 4.59% 4,886 4.38%
|
SECURITIES
The Company accounts for investments at fair value except for those securities which the Company has the positive intent and ability to hold to maturity. Investments to be held for indefinite periods of time and not intended to be held to maturity are classified as available for sale and are carried at fair value. Unrealized holding gains and losses are included as a separate component of stockholders' equity net of the effect of income taxes. Realized gains and losses on investment securities available for sale are computed using the specific identification method.
Securities that management has the intent and the Company has the ability at the time of purchase or origination to hold until maturity are classified as investment securities held to maturity. Securities in this category are carried at amortized cost adjusted for accretion of discounts and amortization of premiums using the level yield method over the estimated life of the securities. If a security has a decline in fair value below its amortized cost that is other than temporary, then the security will be written down to its new cost basis by recording a loss in the statement of operations.
The Company does not engage in trading activities as defined in Statement of Financial Accounting Standard Number 115.
The Company's available for sale portfolio totaled $59,827,000 at December 31, 1999 and $81,584,000 at December 31, 1998, or 21% and 30%, respectively, of total assets. The held to maturity portfolio totaled $3,532,000 at December 31, 1999, and $2,555,000 at December 31, 1998, or 1% and 1%, respectively, of total assets. See the tables below for a summary of security type, maturity and average yield distributions.
The Company uses its securities portfolio primarily as a source of liquidity and a base from which to pledge assets for repurchase agreements and public deposits. When the Company's liquidity position exceeds expected loan demand, other investments are considered by management as a secondary earnings alternative. Typically, management remains short-term (under 5 years) in its decision to invest in certain securities. As these investments mature, they will be used to meet cash needs or will be reinvested to maintain a desired liquidity position. The Company has designated substantially all of its securities as available for sale to provide flexibility, in case an immediate need for liquidity arises. The composition of the portfolio offers management full flexibility in managing its liquidity position and interest rate sensitivity, without adversely impacting its regulatory capital levels. The available for sale portfolio is carried at fair market value and had a net unrealized loss of approximately $424,000 on December 31, 1999, and a net unrealized gain of approximately $498,000 on December 31, 1998.
The Company invests primarily in direct obligations of the United States, obligations guaranteed as to the principal and interest by the United States and obligations of agencies of the United States. In addition, the Company enters into federal funds transactions with its principal correspondent banks, and acts as a net seller of such funds. The Federal Reserve Bank also requires equity investments to be maintained by the Company. The tables below summarize the maturity distribution of securities, weighted average yield by range of maturities, and distribution of securities for the periods provided.
MATURITY DISTRIBUTION OF INVESTMENT SECURITIES
(In thousands of dollars)
December 31, 1999 December 31, 1998
------------------------- --------------------------
Amortized Estimated Amortized Estimated
Cost Market Value Cost Market Value
---------- -------------- ----------- --------------
AVAILABLE-FOR-SALE
U.S. Treasury and U.S. Government
Agencies and Corporations and
Obligations of State and Political
Subdivisions:
One Year or Less $40,444 $40,242 $26,551 $26,706
Over One Through Five Years 18,366 18,144 51,126 51,469
Over Five Through Ten Years 1,000 1,000 0 0
Over Ten Years 0 0 3,000 3,000
Federal Reserve Bank Stock 441 441 409 409
---------- -------------- ----------- --------------
Total $60,251 $59,827 $81,086 $81,584
========== ============== =========== ==============
HELD-TO-MATURITY
U.S. Government Agencies and Treasuries
One Year or Less $0 $0 $500 $504
Over One Through Five Years 3,532 3,457 2,055 2,042
---------- -------------- ----------- --------------
Total $3,532 $3,457 $2,555 $2,546
========== ============== =========== ==============
|
WEIGHTED AVERAGE YIELD BY RANGE OF MATURITIES
(Average yields on securities available for sale are calculated based on amortized cost)
Dec 31, 1999 Dec 31, 1998
------------ ------------
One Year or Less 5.21% 5.87%
Over One Through Five Years 5.59% 5.37%
Over Five Through Ten Years 6.60% 0.00%
Over Ten Years 0.00% 5.72%
|
DISTRIBUTION OF INVESTMENT SECURITIES
(In thousands of dollars)
December 31, 1999 December 31, 1998
------------------------- --------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
-------------- ---------- -------------- -----------
AVAILABLE-FOR-SALE
US Treasury Securities $34,410 $34,216 $43,232 $43,597
US Government Agencies 23,150 22,930 31,085 31,219
State, County, & Municipal 1,000 1,000 4,000 4,000
Mortgage-Backed Securities 1,250 1,240 2,360 2,359
Federal Reserve Bank Stock 441 441 409 409
-------------- ---------- -------------- -----------
Total $60,251 $59,827 $81,086 $81,584
============== ========== ============== ===========
HELD-TO-MATURITY
US Treasury Securities $0 $0 $2,055 $2,042
US Government Agencies 3,532 3,457 500 504
-------------- ---------- -------------- -----------
Total $3,532 $3,457 $2,555 $2,546
============== ========== ============== ===========
|
LIQUIDITY AND INTEREST RATE SENSITIVITY
Market and public confidence in the financial strength of the Company and financial institutions in general will largely determine the Company's access to appropriate levels of liquidity. This confidence is significantly dependent on the Company's ability to maintain sound asset quality and appropriate levels of
capital reserves.
Liquidity is defined as the ability to meet anticipated customer demands for funds under credit commitments and deposit withdrawals at a reasonable cost and on a timely basis. Management measures the liquidity position by giving consideration to both on- and off-balance sheet sources of and demands for funds on a daily and weekly basis.
Sources of liquidity include cash and cash equivalents, net of federal requirements to maintain reserves against deposit liabilities; investment securities eligible for pledging to secure borrowings from dealers and customers pursuant to securities sold under repurchase agreements; loan repayments; loan sales; deposits and certain interest rate-sensitive deposits; and borrowings under overnight federal fund lines available from correspondent banks. In addition to interest rate-sensitive deposits, the primary demand for liquidity is anticipated fundings under credit commitments to customers.
Interest rate sensitivity refers to the responsiveness of interest-earning assets and interest-bearing liabilities to changes 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, including both floating rate instruments and instruments which are approaching maturity. The measurement of the Company's interest rate sensitivity, or gap, is one of the principal techniques used in asset and liability management. Management generally attempts to maintain a balance between rate-sensitive assets and liabilities as the exposure period is lengthened to minimize overall interest rate risks.
The asset mix of the balance sheet is evaluated continually in terms of several variables: yield, credit quality, appropriate funding sources and liquidity. Management of the liability mix of the balance sheet focuses on expanding the various funding sources.
The Company's gap and liquidity positions are reviewed periodically by management to determine whether or not changes in policies and procedures are necessary to achieve financial goals. At December 31, 1999, approximately 51% of total gross loans were adjustable rate and 66% of total securities either reprice or mature in less than one year. Liabilities consisted of approximately $33,141,000 (14%) in NOW accounts, $50,192,000 (20%) in Money Market Accounts and Savings, $122,063,000 (49%) in time deposits and $42,581,000 (17%) in non-interest bearing demand accounts. At December 31, 1998, approximately 62% of total gross loans were adjustable rate and 29% of total securities either reprice or mature in less than one year. Liabilities consisted of approximately $31,234,000 (13%) in NOW, $42,884,000 (17%) in Money Market Accounts and Savings, $135,451,000 (54%) in time deposits, and $40,062,000 (16%) in non-interest bearing demand accounts. A rate sensitivity analysis is presented below as of December 31, 1999 and December 31, 1998.
The Company has prepared a table which presents the market risk associated with financial instruments held by the company. In the "Rate Sensitivity Analysis" table, rate sensitive assets and liabilities are shown by maturity or repricing periods, separating fixed and variable interest rates. The estimated fair value of each instrument category is also shown in the table. While these estimates of fair value are based on management's judgment of the most appropriate factors, there is no assurance that, if the Company had to disposed of such instruments at December 31, 1998, and December 31, 1999, the estimated fair values would necessarily have been achieved at that date, since market values may differ depending on various circumstances. The estimated fair values at December 31, 1998, and December 31, 1999, should not necessarily be considered to apply at subsequent dates.
RATE SENSITIVITY ANALYSIS
December 31, 1999
(In thousands of dollars)
Est. Fair
(Dollars in thousands) 0-1 Yr 1-2 Yrs 2-3 Yrs 3-4 Yrs 4-5 Yrs 5 Ys + TOTAL Value
---------------------- ------ ------- ------- ------- ------- ------ ----- -----
INTEREST EARNING ASSETS:
Loans
Fixed Rate Loans (3) $ 19,312 $7,186 $12,101 $16,684 $12,694 $18,933 $ 86,910 $87,117
Average Interest Rate 8.77% 9.27% 9.00% 8.70% 8.48% 8.29% 8.68%
Variable Rate Loans (3) 84,225 390 1,165 2,289 2,149 335 90,553 90,553
Average Interest Rate 8.46% 8.13% 8.12% 8.25% 8.35% 7.30% 8.44%
Investment Securities (1)
Fixed Rate Investments 40,494 13,348 3,848 2,326 2,326 0 62,342 61,998
Average Interest Rate 5.21% 5.58% 5.61% 5.41% 5.41% 5.33%
Variable Rate Investments 1,000 0 0 0 0 0 1,000 1,000
Average Interest Rate 6.69% 6.69%
Federal Funds Sold 4,069 0 0 0 0 0 4,069 4,069
Average Interest Rate 5.04% 5.04%
Other Earning Assets (2) 441 0 0 0 0 0 441 441
Average Interest Rate 6.00% 6.00%
----------- ---------- ---------- --------- ---------- ---------- ----------- ------------
Total Interest-Earning Assets $149,541 $20,924 $17,114 $21,299 $17,169 $19,268 $245,315 $245,178
Average Interest Rate 7.51% 6.90% 8.18% 8.29% 8.05% 8.27% 7.67%
=========== ========== ========== ========= ========== ========== ===========
INTEREST BEARING LIABILITIES
NOW $33,141 $ - $ - $ - $ - $ - $33,141 $ 33,141
Average Interest Rate 1.03% 1.03%
Money Market 26,759 0 0 0 0 0 26,759 26,759
Average Interest Rate 3.74% 3.74%
Savings 23,433 0 0 0 0 23,433 23,433
Average Interest Rate 2.01% 2.01%
CDs $100,000 & Over 20,820 2,731 502 469 100 0 24,622 24,692
Average Interest Rate 5.03% 5.56% 6.21% 5.61% 6.00% 5.13%
CDs Under $100,000 72,945 17,548 4,103 1,929 916 0 97,441 97,350
Average Interest Rate 4.82% 5.15% 5.68% 5.49% 5.11% 4.93%
Securities Sold Under
Repurchase Agreement 7,078 0 0 0 0 0 7,078 7,078
Average Interest Rate 4.20% 4.20%
----------- ---------- ---------- --------- ---------- ---------- ----------- ------------
Total Interest-Bearing Liabilities $184,176 $20,279 $4,605 $2,398 $1,016 $ - $212,474 $212,453
Average Interest Rate 3.62% 5.20% 5.74% 5.51% 5.20% 3.85%
=========== ========== ========== ========= ========== ========== ===========
|
RATE SENSITIVITY ANALYSIS
December 31, 1998
(Dollars are in Thousands)
Est. Fair
0-1 Yr 1-2 Yrs 2-3 Yrs 3-4 Yrs 4-5 Yrs 5 Ys + TOTAL Value
------ ------- ------- ------- ------- ------ ----- -----
INTEREST EARNING ASSETS
Loans
Fixed Rate Loans (3) $12,979 $8,934 $9,110 $12,382 $8,884 $5,389 $57,678 $58,337
Average Interest Rate 8.77% 9.65% 9.32% 8.94% 8.73% 9.24% 9.07%
Variable Rate Loans (3) 90,814 1,194 951 3,116 25 347 96,447 96,447
Average Interest Rate 8.23% 8.48% 9.13% 8.55% 8.80% 7.40% 8.24%
Investment Securities (1)
Fixed Rate Securities 23,274 45,044 8,055 2,859 1,000 2,000 82,232 82,732
Average Interest Rate 5.95% 5.54% 5.78% 5.76% 5.62% 5.70% 5.69%
Variable Rate Securities 1,000 0 0 0 0 0 1,000 1,000
Average Interest Rate 5.77% 5.77%
Federal Funds Sold 13,944 0 0 0 0 0 13,944 13,944
Average Interest Rate 5.31% 5.31%
Other Earning Assets (2) 409 0 0 0 0 0 409 409
Average Interest Rate 6.00% 6.00%
---------- --------- --------- --------- --------- --------- ---------- -----------
Total Interest-Earning Assets $142,420 $55,172 $18,116 $18,357 $9,909 $7,736 $251,710 $252,869
7.59% 6.27% 7.74% 8.38% 8.42% 8.24% 7.42%
========== ========= ========= ========= ========= ========= ==========
INTEREST BEARING LIABILITIES
NOW Accounts $31,234 $0 $0 $0 $0 $0 $31,234 $31,234
Average Interest Rate 1.20% 1.20%
Money Market Accounts 24,151 0 0 0 0 0 24,151 24,151
Average Interest Rate 3.05% 3.05%
Savings Accounts 18,733 0 0 0 0 0 18,733 18,733
Average Interest Rate 1.74% 1.74%
CDs $100,000 & Over 21,056 1,352 403 502 227 0 23,540 23,869
Average Interest Rate 5.39% 5.73% 6.01% 6.11% 5.79% 5.44%
CDs Under $100,000 75,623 21,740 6,808 3,843 3,890 7 111,911 113,638
Average Interest Rate 5.21% 5.66% 5.64% 5.77% 5.79% 4.00% 5.36%
Securities Sold Under
Repurchase Agreement 4,886 0 0 0 0 0 4,886 4,886
Average Interest Rate 4.27% 4.27%
---------- --------- --------- --------- --------- --------- ---------- -----------
Total Interest-Bearing Liabilities $175,683 $23,092 $7,211 $4,345 $4,117 $7 $214,455 $216,511
3.82% 5.67% 5.66% 5.81% 5.79% 4.00% 4.16%
========== ========= ========= ========= ========= ========= ==========
|
PRIMARY SOURCES AND USES OF FUNDS
The primary source of funds during the period included maturity/sale of investments net of purchases ($20,780,000), decrease in federal funds sold and other cash items ($1,481,000), exercise of stock options net of tax benefit, ($1,539,000) increase in borrowings from repurchase agreements and Federal Reserve Bank advances ($2,192,000) and net income ($1,946,000). The primary uses of funds during the period included a decrease in deposits ($1,654,000), an increase in net loans outstanding ($23,371,000), increase in premises and equipment ($1,364,000), dividends paid ($390,000), and other miscellaneous net uses ($1,159,000).
CAPITAL RESOURCES
Shareholders' equity at December 31, 1999, was $23,312,000 compared to $20,793,000 at December 31, 1998.
The Comptroller has established risk-based capital requirements for national banks. These guidelines are intended to provide an additional measure of a bank's capital adequacy by assigning weighted levels of risk to asset categories. Banks are also required to systematically maintain capital against such "off- balance sheet" activities as loans sold with recourse, loan commitments, guarantees and standby letters of credit. These guidelines are intended to strengthen the quality of capital by increasing the emphasis on common equity and restricting the amount of loan loss reserves and other forms of equity such as preferred stock that may be included in capital. Each of the Company's subsidiary bank's goal is to maintain its current status as a "well-capitalized institution" as that term is defined by its regulators.
Under the terms of the guidelines, banks must meet minimum capital adequacy based upon both total assets and risk adjusted assets. All banks are required to maintain a minimum ratio of total capital to risk-weighted assets of 8% and a minimum ratio of Tier 1 capital to risk-weighted assets of 4%. Adherence to these guidelines has not had an adverse impact on the Company. Selected consolidated capital ratios at December 31, 1999, and 1998 were as follows:
CAPITAL RATIOS
(Dollars are in Thousands)
Actual Well Capitalized Excess
------------------------ -------------------------
Amount Ratio Amount Ratio Amount
------------------------ ------------------------- ------------
AS OF DECEMBER 31, 1999:
Total Capital: (to Risk Weighted Assets): $25,489 14.8% $17,253 10.0% $9,488
Tier 1 Capital: (to Risk Weighted Assets): $23,397 13.6% $10,352 6.0% $14,297
Tier 1 Capital: (to Average Assets): $23,397 8.4% $13,935 5.0% $10,419
AS OF DECEMBER 31, 1998:
Total Capital: (to Risk Weighted Assets): $22,300 14.7% $15,129 10.0% $7,171
Tier 1 Capital: (to Risk Weighted Assets): $20,377 13.5% $9,077 6.0% $11,300
Tier 1 Capital: (to Average Assets): $20,377 7.6% $13,406 5.0% $6,971
|
EFFECTS OF INFLATION AND CHANGING PRICES
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates generally have a more significant impact on the performance of a financial institution than the effects of general levels of inflation. Although interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services, increases in inflation generally have resulted in increased interest rates. In addition, inflation affects financial institutions' increased cost of goods and services purchased, the cost of salaries and benefits, occupancy expense, and similar items. Inflation and related increases in interest rates generally decrease the market value of investments and loans held and may adversely affect liquidity, earnings, and shareholders' equity. Commercial and other loan originations and refinancings tend to slow as interest rates increase, and can reduce the Company's earnings from such activities.
ACCOUNTING PRONOUNCEMENTS
On January 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 provides new accounting and reporting standards for reporting and displaying comprehensive income and its components in a full set of general-purpose financial statements. The adoption of this standard did not have a material impact on reported results of operations of the Company.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The statement establishes accounting and reporting standards for derivative instruments (including certain derivative instruments imbedded in other contracts). The statement is effective for fiscal years beginning after June 15, 1999. The financial impact of the adoption of this statement has not been determined. However, the effect of the adoption of the statement is not expected to be material. In June of 1999, the FASB issued SFAS No. 137, which delays implementation of SFAS No. 133 for one year.
QUARTERLY FINANCIAL INFORMATION
The following table sets forth, for the periods indicated, certain consolidated quarterly financial information. This information is derived from the Company's unaudited financial statements which include, in the opinion of management, all normal recurring adjustments which management considers necessary for a fair presentation of the results for such periods. This information should be read in conjunction with the Company's Financial Statements included elsewhere in this document. The results for any quarter are not necessarily indicative of results for future periods.
SELECTED QUARTERLY DATA
(In thousands of dollars)
1999 1998
(Dollars in Thousands except -------------------------------- -------------------------------
for per share data) 4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q
--------------------------------- -------------------------------- -------------------------------
Net Interest Income $2,836 $2,691 $2,681 $2,576 $2,479 $2,450 $2,421 $2,404
Provision for Loan Losses 87 36 48 87 (58) 57 106 122
-------------------------------- -------------------------------
Net Interest Income after
provision for loan losses $2,749 $2,655 $2,633 $2,489 $2,537 $2,393 $2,315 $2,282
Non-Interest Income 515 481 471 442 514 372 337 322
Securities gains (losses) (2) 0 0 0 0 0 0 0
Non-Interest Expenses 2,433 2,375 2,333 2,225 2,043 1,895 1,850 1,796
-------------------------------- -------------------------------
Income before income
tax expense $829 $761 $771 $706 $1,008 $870 $802 $808
Income tax expense 296 272 289 264 319 317 255 310
-------------------------------- -------------------------------
Net Income $533 $489 $482 $442 $689 $553 $547 $498
================================ ===============================
Basic earnings per common share $0.19 $0.18 $0.18 $0.17 $0.27 $0.22 $0.22 $0.20
Diluted earnings per common share $0.19 $0.18 $0.17 $0.16 $0.26 $0.21 $0.20 $0.19
|
Exhibit 99.2
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Financial Statements
December 31, 1999 and 1998
(With Independent Auditors' Report Thereon)
[KPMG Letterhead]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Centerstate Banks of Florida, Inc.
and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Centerstate Banks of Florida, Inc. and subsidiaries as of December 31, 1999 and 1998, the related consolidated statements of operations, stockholders' equity and comprehensive income and cash flows for of the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Centerstate Banks of Florida, Inc. and subsidiaries as of December 31, 1999 and 1998, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles.
/s/ KPMG LLP
Orlando, Florida
February 4, 2000
|
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
For the years ended December 31, 1999 and 1998
(in thousands of dollars, except per share data)
Years ended December 31,
-----------------------------------
1999 1998
-----------------------------------
ASSETS
Cash and due from banks $19,976 $11,582
Federal funds sold 4,069 13,944
Investment securities available for sale 59,827 81,584
Investment securities held to maturity (market value 3,532 2,555
of $3,457 and $2,546 at December 31, 1999 and 1998
respectively)
Loans, less allowance for loan losses of $2,302
and $2,335 at December 31, 1999 and 1998
respectively 175,161 151,790
Accrued interest receivable 1,812 1,954
Bank premises and equipment, net 13,075 11,711
Other real estate owned 190 238
Deferred income taxes, net 838 512
Prepaids and other assets 402 214
-----------------------------------
Total Assets $278,882 $276,084
===================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Interest bearing $205,396 $209,569
Noninterest bearing 42,581 40,062
-----------------------------------
Total deposits 247,977 249,631
Securities sold under agreement to repurchase 4,078 4,886
Accrued interest payable 332 379
Federal reserve bank advances 3,000
Accounts payable and accrued expenses 183 395
-----------------------------------
Total liabilities 255,570 255,291
-----------------------------------
Stockholders' equity:
Preferred Stock, $.01 par value; 5,000,000 shares authorized
no shares issued or outstanding 0 0
Common stock, $.01 par value: 20,000,000 shares
authorized; 2,794,847 and 2,549,445 shares issued
and outstanding at December 31, 1999 and 1998 28 25
Additional paid-in capital 15,296 13,760
Retained earnings 8,253 6,697
Accumulated other comprehensive (loss) income (265) 311
-----------------------------------
Total stockholders' equity 23,312 20,793
Commitments and contingent liabilities 0 0
-----------------------------------
Total liabilities and stockholders' equity $278,882 $276,084
===================================
|
See accompanying notes to the consolidated financial statements
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
For the years ended December 31, 1999 and 1998
(in thousands of dollars, except per share data)
Years ended December 31,
-----------------------------------
1999 1998
-----------------------------------
Interest Income
Loans $14,276 $13,481
Investment securities 4,271 3,832
Federal funds sold 555 1,225
-----------------------------------
19,102 18,538
-----------------------------------
Interest expense:
Deposits 8,089 8,588
Securities sold under agreement to repurchase 229 196
-----------------------------------
8,318 8,784
-----------------------------------
Net interest income 10,784 9,754
Provision for loan losses 258 227
-----------------------------------
Net interest income after loan loss provision 10,526 9,527
-----------------------------------
Other income:
Service charges on deposit accounts 1,531 1,203
Other service charges and fees 373 243
Gain on sale of other real estate owned 3 100
-----------------------------------
1,907 1,546
-----------------------------------
Other expenses:
Salaries, wages and employee benefits 4,117 3,393
Occupancy expense 1,213 911
Depreciation of premises and equipment 778 645
Stationary and printing supplies 328 260
Advertising and public relations 212 180
Data processing expense 752 626
Legal and professional fees 275 265
Other expenses 1,692 1,304
-----------------------------------
Total other expenses 9,367 7,584
Income before provision for income taxes 3,066 3,489
Provision for income taxes 1,120 1,202
-----------------------------------
Net income $1,946 $2,287
===================================
Earnings per share:
Basic $0.73 $0.90
Diluted $0.70 $0.85
Common shares used in the calculation of earnings per share:
Basic 2,681,079 2,527,256
Diluted 2,775,184 2,689,603
|
See accompanying notes to the consolidated financial statements.
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Statement of Changes in Stockholders' Equity and Comprehensive Income Years ended December 31, 1999 and 1998
(in thousands of dollars)
Accumulated
Additional other Total
Common paid-in Retained comprehensive stockholders' Comprehensive
stock surplus earnings income (loss) equity income
------------------------------------------------------------------- ---------------
Balances, December 31, 1997 $24 $12,939 $4,704 $79 $17,746
Dividends Paid (294) (294)
Stock Options exercised 1 692 693
Tax effect of tax deduction in excess
of book deduction on options
exercised during the year 129 129
Comprehensive Income:
Net Income 2,287 2,287 $2,287
Other comprehensive income, net of tax
Change in unrealized market value
adjustment on securities
availble-for-sale, net of tax 232 232 232
---------------
Comprehensive Income $2,519
===============
-------------------------------------------------------------------
Balances, December 31, 1998 25 13,760 6,697 311 20,793
Dividends paid (390) (390)
Stock options exercised 3 1,308 1,311
Tax effect of tax deduction in excess
of book deduction on options
exercised during the year 228 228
Comprehensive Income:
Net Income 1,946 1,946 $1,946
Other comprehensive income, net of tax
Change in unrealized market value
adjustment on securities
availble-for-sale, net of tax (576) (576) (576)
---------------
Comprehensive Income $1,370
===============
-------------------------------------------------------------------
Balances, December 31, 1999 $28 $15,296 $8,253 ($265) $23,312
===================================================================
1999 1998
------------------------- --------------------------------
Reconcilation of Comprehensive Income:
Net Income $1,946 $2,287
Other comprehensive income, net of tax:
Gross unrealized (loss) gain on securities ($580) $232
Less: reclassified adjustments for
gains included in net income 4 0
------------ ---------------
Net unrealized (loss)
gain on securities (576) 232
------------- ---------------
Comprehensive income $1,370 $2,519
------------- ---------------
|
See accompanying notes to the consolidated financial statements.
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands of dollars)
Years Ended December 31,
-------------------------------------
1999 1998
-------------------------------------
Cash flows from operating activities:
Net income $1,946 $2,287
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 258 227
Depreciation of premises and equipment 778 645
Net amortization/accretion of investment securities 279 195
Net deferred loan origination fees 53 21
Loss (gain) on sale of other real estate owned 7 (90)
Gain on sale of securities (4) 0
Deferred income taxes 22 (168)
Tax deduction in excess of book deduction on options exercised 228 129
Cash provided by (used in) changes in:
Net change in accrued interest receivable 141 (254)
Net change in prepaids and other assets (189) (81)
Net change in accrued interest payable (47) 14
Net change in accounts payable and accrued expenses (212) (117)
-------------------------------------
Net cash provided by operating activities 3,260 2,808
-------------------------------------
Cash flows from investing activities:
Purchases of investment securities available for sale (24,273) (68,088)
Purchases of investment securities held to maturity (1,500) (1,058)
Proceeds from callable investment securities available for sale 5,500 8,300
Proceeds from maturities of investment securities available for sale 28,839 24,875
Proceeds from sales of investment securities available for sale 10,517 0
Proceeds from maturities of investment securities held to maturity 500 5,513
Increase in loans, net of repayments (23,846) (14,593)
Purchases of premises and equipment (2,142) (3,266)
Proceeds from sale of other real estate owned 205 667
-------------------------------------
Net cash used in investing activities (6,200) (47,650)
-------------------------------------
Cash flows from financing activities:
Net increase in demand and savings deposits (1,654) 40,998
Net increase (decrease) in securities sold under agreement to repurchase (808) 1,965
Proceeds from federal reserve advances 3,000 0
Stock options exercised 1,311 693
Dividends paid (390) (294)
-------------------------------------
Net cash provided by financing activities 1,459 43,362
-------------------------------------
Net (decrease) increase in cash and cash equivalents (1,481) (1,480)
Cash and cash equivalents, beginning of year 25,526 27,006
-------------------------------------
Cash and cash equivalents, end of year $24,045 $25,526
=====================================
|
See accompanying notes to the consolidated financial statements.
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - continued
(in thousands of dollars)
Years Ended December 31,
-------------------------------------
1999 1998
-------------------------------------
Supplemental schedule of noncash transaction:
Market value adjustment-investment securities available for sale
Market value adjustments-investment securities available for sale (425) 498
Deferred income tax asset (liability) 160 (188)
-------------------------------------
Unrealized (loss) gain on investments available for sale ($265) $310
=====================================
Transfer of loan to other real estate owned $165 $246
=====================================
Cash paid during the year for:
Interest $8,365 $8,770
=====================================
Income taxes $1,205 $1,223
=====================================
|
See accompanying notes to the consolidated financial statements.
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations: Centerstate Banks of Florida, Inc. (the "Company") is a multi bank holding company that was formed as of the close of business June 30, 2000 as part of a merger of three independent commercial banks in central Florida (First National Bank of Osceola County, Community National Bank of Pasco County and First National Bank of Polk County). The business combination was accounted for using the pooling-of-interest accounting method, and, therefore, all historical financial presentations have been restated to reflect the merger.
First National Bank of Osceola County is a national bank chartered in September 1989. It operates from three full service locations and one remote location within Osceola County and two full service locations in Orange County, which is contiguous with Osceola County.
Community National Bank of Pasco County is a national bank chartered in November 1989. It operates from seven full service locations within Pasco and contiguous counties.
First National Bank of Polk County is a national bank chartered in February 1992. It operates from three full service locations within Polk County.
The Company, through its subsidiary banks, provides traditional deposit and lending products and services to its commercial and retail customers.
The following is a description of the basis of presentation and the significant accounting and reporting policies which the Company follows in preparing and presenting its financial statements.
(a) CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers cash and due from banks, federal funds sold and noninterest bearing deposits in other banks with a purchased maturity of three months or less to be cash equivalents.
(b) INVESTMENT SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES HELD TO MATURITY
The Company accounts for investments at fair value, except for those securities which the Company has the positive intent and ability to hold to maturity. Investments to be held for indefinite periods of time and not intended to be held to maturity are classified as available for sale and are carried at fair value. Unrealized holding gains and losses are included as a separate component of shareholders' equity net of the effect of income taxes.
Securities that management has the intent and the Company has the ability at the time of purchase or origination to hold until maturity are classified as investment securities held to maturity. Securities in this category are carried at amortized cost adjusted for accretion of discounts and amortization of premiums using the level yield method over the estimated life of the securities. If a security has a decline in fair value below its amortized cost that is other than temporary, then the security will be written down to its new cost basis by recording a loss in the statements of operations.
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
(c) LOANS
Loans receivable that management has the intent and the Company has the ability to hold until maturity or payoff are reported at their outstanding unpaid principal balance less the allowance for loan losses and deferred fees on originated loans.
Loan origination fees, net of related costs, are capitalized and recognized in income over the contractual life of the loans, adjusted for estimated prepayments based on the Company's historical prepayment experience.
Commitment fees and costs relating to the commitments are recognized over the commitment period on a straight-line basis. If the commitment is exercised during the commitment period, the remaining unamortized commitment fee at the time of exercise is recognized over the life of the loan as an adjustment of yield.
Loans are placed on nonaccrual status when the loan becomes 90 days past due as to interest or principal, unless the loan is both well secured and in the process of collection, or when the full timely collection of interest or principal becomes uncertain. When a loan is placed on nonaccrual status, the accrued and unpaid interest receivable is written off, amortization of the net deferred loan origination fees cease and the loan is accounted for on the cash or cost recovery method thereafter until qualifying for return to accrual status.
The Company, considering current information and events regarding the borrower's ability to repay their obligations, considers a loan to be impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. When a loan is considered to be impaired, the amount of the impairment is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, the secondary market value of the loan, or the fair value of the collateral for collateral dependent loans. Impaired loans are written down to the extent that principal is judged to be uncollectible and, in the case of impaired collateral dependent loans where repayment is expected to be provided solely by the underlying collateral and there is no other available and reliable sources of repayment, are written down to the lower of cost or collateral value. Impairment losses are included in the allowance for loan losses.
(d) ALLOWANCE FOR LOAN LOSSES
The Company follows a consistent procedural discipline and accounts for loan loss contingencies in accordance with Statement of Financial Accounting Standards No. 5, "Accounting for Contingencies" (Statement 5). The following is a description of how each portion of the allowance for loan losses is determined.
The Company segregates the loan portfolio for loan loss purposes into the following broad segments: commercial real estate; residential real estate; commercial business; and consumer loan. The Company provides for a general allowance for losses inherent in the portfolio by the above categories, which consists of two components. General loss percentages are calculated based upon historical analyses. A supplemental portion of the allowance is calculated for inherent losses which probably exist as of the evaluation date even though they might not have been identified by the more objective processes used for
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
the portion of the allowance described above. This is due to the risk of error and/or inherent imprecision in the process. This portion of the allowance is particularly subjective and requires judgments based on qualitative factors which do not lend themselves to exact mathematical calculations such as; trends in
delinquencies and nonaccruals; migration trends in the portfolio; trends in volume, terms, and portfolio mix; new credit products and/or changes in the geographic distribution of those products; changes in lending policies and procedures; loan review reports on the efficacy of the risk identification process; changes in the outlook for local, regional and national economic conditions; concentrations of credit; and peer group comparisons.
Specific allowances are provided in the event that the specific collateral analysis on each classified loan indicates that the probable loss upon liquidation of collateral would be in excess of the general percentage allocation. The provision for loan loss is debited or credited in order to state the allowance for loan losses to the required level as determined above.
The Company records impairment in the value of its loans as an addition to the allowance for loan losses. Any changes in the value of impaired loans due to the passage of time or revisions in estimates are reported as adjustments to provision expense in the same manner in which impairment initially was recognized.
Regulatory examiners may require the Company to recognize additions to the allowance based upon their judgment about the information available to them at the time of their examination.
(e) PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation which is computed over the estimated useful lives of the assets which range from 5 to 40 years on a straight-line basis.
(f) OTHER REAL ESTATE OWNED
Real estate acquired in the settlement of loans is recorded at the lower of cost (principal balance of the former loan plus costs of obtaining title and possession) or estimated fair value, less estimated selling costs. Costs relating to development and improvement of the property are capitalized, whereas those relating to holding the property are charged to operations.
(g) COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board established Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income." This Statement establishes standards for reporting and display of comprehensive income and its components in a full set of financial statements. This Statement requires that an enterprise classify items or other comprehensive income by nature in a financial statement, and display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a balance sheet.
The Company adopted this Statement effective January 1, 1998. The Company's other comprehensive income is the unrealized gain/(loss) on investment securities available for sale.
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
(h) INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Deferred tax assets are recognized subject to management's judgment that realization is more likely than not.
(i) USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. These estimates include the allowance for loan loss and the valuation of the deferred tax asset. Actual results could differ from these estimates.
(j) EFFECT OF NEW PRONOUNCEMENTS
In June 1997, the FASB issued Financial Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and Related Information". This Statement requires that a public business enterprise report financial and descriptive information about its reportable operating segments. Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision make in deciding how to allocate resources and in assessing performance. This Statement is effective for fiscal years beginning after December 15, 1997. The Company adopted the Statement effective January 1, 1998, however, the Company has only one reportable segment.
In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedge Activities". This Statement, which is effective for all fiscal quarters and all fiscal years beginning after June 15, 1999, requires all derivatives be measured at fair value and be recognized as assets and liabilities in the statement of financial position. This Statement sets forth the accounting for changes in fair value of a derivative depending on the intended use and designation of the derivative. Implementation of the Statement is not expected to have a significant impact on the financial position or results of operations of the Company.
In October 1998, the FASB issued Financial Accounting Standards No. 134, "Accounting for Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise." This Statement requires that after the securitization of a mortgage loan held for sale, an entity engaged in mortgage banking activities classify the resulting mortgage-backed security as a trading security. The Statement is effective for the first fiscal quarter beginning after December 15, 1998. The Company does not expect the adoption of this Statement to have any impact on its financial statements.
In June 1999, the Financial Accounting Standards Board issued FASB
137, "Accounting for Derivative Instruments and Hedging Activities
- Deferral of The Effective Date of FASB 133", which is a one year
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
deferral of the application of FASB 133. In June 2000, the
Financial Accounting Standards Board issued FASB 138, "Accounting
for Certain Derivative Instruments and Certain Hedging Activities
- An Amendment of FASB Statement No. 133", which amends the
accounting and reporting standards of Statement 133 for certain
derivative instruments and certain hedging activities. FASB 133
shall be effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. Implementation of FASB 133
did not have a significant impact on the financial position or
results of operations of the Company.
(k) RECLASSIFICATION
Certain amounts in the 1998 financial statements have been reclassified to conform with 1999.
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
(2) INVESTMENT SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES HELD TO MATURITY
The amortized cost and estimated market values of investment securities available for sale for the years ended December 31, 1999 and 1998 are as follows:
INVESTMENT SECURITIES AVAILABLE FOR SALE:
DECEMBER 31, 1999
-----------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
-----------------------------------------------------------------
U.S. Treasury securities $ 34,410 $ 3 $ 197 $ 34,216
Obligations of U.S.
government agencies 24,150 0 220 23,930
Mortgage backed securities 1,250 0 10 1,240
Federal reserve bank stock 441 0 0 441
--------------- ------------- -------------- --------------
$ 60,251 $ 3 $ 427 $ 59,827
=============== ============= ============== ==============
|
DECEMBER 31, 1998
-----------------------------------------------------------------
U.S. Treasury securities $ 43,232 $ 365 $ 0 $ 43,597
Obligations of U.S.
government agencies 35,085 149 15 35,219
Mortgage backed securities 2,360 0 1 2,359
Federal reserve bank stock 409 0 0 409
--------------- ------------- -------------- --------------
$ 81,086 $ 514 $ 16 $ 81,584
=============== ============= ============== ==============
|
The amortized cost and estimated market values of investment securities held to maturity for the years ended December 31, 1999 and 1998:
INVESTMENT SECURITIES HELD TO MATURITY:
DECEMBER 31, 1999
-----------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
-----------------------------------------------------------------
Obligations of U.S.
government agencies $ 3,532 $ 0 $ 75 $ 3,457
--------------- ------------- -------------- --------------
$ 3,532 $ 0 $ 75 $ 3,457
=============== ============= ============== ==============
|
DECEMBER 31, 1998
-----------------------------------------------------------------
U.S. Treasury securities $ 500 $ 4 $ 0 $ 504
Obligations of U.S.
government agencies 2,055 0 13 2,042
--------------- ------------- -------------- --------------
$ 2,555 $ 4 $ 13 $ 2,546
=============== ============= ============== ==============
|
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
The amortized cost and estimated market value of investment securities
available for sale and held to maturity for the years ended December 31,
1999 and 1998 by contractual maturity, are shown below. Actual maturities
will differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
ESTIMATED
AMORTIZED MARKET
COST VALUE
---------------------------------
December 31, 1999
Investment securities available for sale
Due in one year or less $ 40,444 $ 40,242
Due after one year through five years 18,366 18,144
Due after five years through fifteen years 1,000 1,000
Federal reserve bank stock 441 441
--------------- ---------------
$ 60,251 $ 59,827
=============== ===============
December 31, 1998
Investment securities available for sale
Due in one year or less $ 26,783 $ 26,931
Due after one year through five years 53,894 54,244
Federal reserve bank stock 409 409
--------------- ---------------
$ 81,086 $ 81,584
=============== ===============
December 31, 1999
Investment securities held to maturity
Due after one year through five years $ 3,532 $ 3,457
--------------- ---------------
$ 3,532 $ 3,457
=============== ===============
December 31, 1998
Investment securities held to maturity
Due in one year or less $ 500 $ 504
Due after one year through five years 2,055 2,042
--------------- ---------------
$ 2,555 $ 2,546
=============== ===============
|
At December 31, 1999 and 1998, the Company had $2,759 and $2,524, respectively, in investment securities pledged to the Treasurer of the State of Florida as collateral on public fund deposits and for other purposes required or permitted by law.
Proceeds from sales of investment securities available for sale were $10,517 and $-0- in 1999 and 1998 respectively. Gross realized gains on sales of investment securities available for sale during 1999 and 1998 were $6 and $-0-, respectively. Gross realized losses on sales of investment securities available for sale during 1999 and 1998 were $2 and $-0-, respectively.
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
(3) LOANS
Major categories of loans included in the loan portfolio as of December
31, 1999 and 1998 are:
DECEMBER 31,
------------------------------------
1999 1998
--------------- ------------------
Real Estate
Residential $ 60,538 $ 56,270
Commercial 59,758 50,087
Construction 11,913 9,300
--------------- ------------------
Total Real Estate 132,209 115,657
Commercial 28,680 23,952
Installment 16,748 14,580
Overdrafts 128 185
--------------- ------------------
177,765 154,374
Less:
Deferred loan origination fees 302 249
Allowance for loan losses 2,302 2,335
--------------- ------------------
Total net loans $ 175,161 $ 151,790
=============== ==================
|
The following is a summary of information regarding nonaccrual and impaired loans at December 31, 1999 and 1998:
DECEMBER 31,
----------------------------
1999 1998
------------ -------------
Nonaccrual loans $ 474 $ 633
============ =============
Recorded investment in impaired loans $ 1,466 $ 1,579
============ =============
Allowance for loan losses related to impaired loans $ 231 $ 262
============ =============
|
INTEREST
INCOME NOT INTEREST AVERAGE
RECOGNIZED INCOME RECORDED
ON RECOGNIZED INVESTMENT
NONACCRUAL ON IMPAIRED IN IMPAIRED
LOANS LOANS LOANS
---------------- --------------- ---------------
For years ended December 31,
1999 $ 35 $ 52 $ 1,522
1998 $ 11 $ 40 $ 1,494
|
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
Certain principal stockholders, directors and officers and their related
interests were indebted to the Company as summarized below December 31,
1999 and 1998:
DECEMBER 31,
-----------------------------
1999 1998
------------- ------------
Balance, beginning of year $ 6,990 $ 6,189
Additional new loans 4,027 4,081
Repayments on outstanding loans 3,864 3,280
------------- ------------
Balance, end of year $ 7,153 $ 6,990
============= ============
|
All such loans were made in the ordinary course of business. As December 31, 1999 and 1998, principal stockholders, directors and officers of the Company and their related interests had $2,607 and $1,902, respectively, available in lines of credit.
Changes in the allowance for loan losses for the years ended December 31, 1999 and 1998 are as follows:
DECEMBER 31,
--------------------------------
1999 1998
-------------- ---------------
Balance, beginning of year $ 2,335 $ 2,189
Provision charged to operations 258 227
Loans charged-off (374) (121)
Recoveries of previous charge-offs 83 40
-------------- ---------------
Balance, end of year $ 2,302 $ 2,335
============== ===============
|
(4) PREMISES AND EQUIPMENT
A summary of premises and equipment as of December 31, 1999 and 1998 is
as follows:
DECEMBER 31,
--------------------------------
1999 1998
-------------- --------------
Land $ 4,186 $ 3,599
Buildings 7,598 6,758
Furniture, fixtures and equipment 4,652 3,893
Construction in progress 277 331
-------------- --------------
16,713 14,581
Less: Accumulated depreciation 3,638 2,870
-------------- --------------
$ 13,075 $ 11,711
============== ==============
|
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
(5) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating fair values of financial instruments as disclosed herein:
CASH AND CASH EQUIVALENTS - The carrying amount of cash and cash equivalents represents fair value.
INVESTMENTS - The Company's investment securities available for sale and held to maturity represent investments in U.S. Government obligations, U.S. Government Agency securities, and state and political subdivisions. The Company's equity investments at year end represents stock investments in the Federal Reserve Bank. The stock is not publicly traded and the carrying amount was used to estimate the fair value. The fair value of the U.S. Government obligations and U.S. Government Agency obligations and state and local political subdivision portfolios was estimated based on quoted market prices.
LOANS - For variable rate loans that reprice frequently and have no significant change in credit risk, fair values are based on carrying values. Fair values for commercial real estate, commercial and consumer loans other than variable rate loans are estimated using discounted cash flow analysis, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values of impaired loans are estimated using discounted cash flow analysis or underlying collateral values, where applicable.
DEPOSITS - The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at December 31, 1999 (that is their carrying amounts). The carrying amounts of variable rate, fixed term money market accounts and certificates of deposit (CDs) approximate their fair value at the reporting date. Fair values for fixed rate CDs are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.
REPURCHASE AGREEMENTS - The carrying amount of the repurchase agreements approximate their fair value.
COMMITMENTS - Fair values for off-balance-sheet lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing.
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
The following tables present the carrying amounts and estimated fair values of the Company's financial instruments.
DECEMBER 31, 1999
----------------------------------
CARRYING
AMOUNT FAIR VALUE
-------------- ---------------
Financial assets:
Cash and due from banks and federal funds sold $ 24,045 $ 24,045
Investment securities available for sale 59,827 59,827
Investment securities held to maturity 3,532 3,457
Loans (carrying amount less allowance
for loan losses of $2,302) 175,161 175,811
Financial liabilities:
Deposits:
Without stated maturities $ 125,913 $ 125,913
With stated maturities 122,064 121,864
Securities sold under agreement to repurchase 4,078 4,078
Federal reserve advances 3,000 3,000
Commitments:
Letter of credit $ $ 763
Lines of credit 20,933
Loan commitments 28,207
|
DECEMBER 31, 1998
----------------------------------
Financial assets:
Cash and due from banks and federal funds sold $ 25,526 $ 25,526
Investment securities available for sale 81,584 81,584
Investment securities held to maturity 2,555 2,546
Loans (carrying amount less allowance
for loan losses of $2,335) 151,790 154,350
Financial liabilities:
Deposits:
Without stated maturities $ 114,180 $ 114,180
With stated maturities 135,451 137,073
Securities sold under agreement to repurchase 4,886 4,886
Commitments:
Letter of credit $ $ 792
Lines of credit 14,764
Loan commitments 17,126
|
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
(6) DEPOSITS
A detail of deposits for the years ended December 31, 1999 and 1998
follows:
DECEMBER 31,
---------------------------------------------------------
WEIGHT WEIGHT
AVERAGE AVERAGE
INTEREST INTEREST
1999 RATE 1998 RATE
------------------------- ---------------------------
Non-interest bearing deposits $ 42,581 0.0% $ 40,062 0.0%
Interest bearing deposits:
Interest bearing demand deposits 59,899 2.2% 55,385 2.1%
Savings deposits 23,433 2.0% 18,733 1.8%
Time deposits less than $100,000 101,547 4.9% 111,911 5.1%
Time deposits of $100,000 or greater 20,517 5.1% 23,540 5.3%
------------------------- ---------------------------
$ 247,977 3.2% $ 249,631 3.4%
========================= ===========================
|
The following table presents, by various interest rate categories, the amount of certificate accounts as of December 31, 1999, maturing during the periods reflected below:
INTEREST RATE 2000 2001 2002 2003 2004 TOTAL
------------------- ------------ ------------ ------------ ------------ ----------- -----------
1.00% - 3.99% $ 4,692 $ 4 $ $ $ $ 4,696
4.00% - 4.99% 41,595 8,405 1,270 800 276 52,346
5.00% - 5.99% 39,728 10,092 2,390 1,479 543 54,232
6.00% - 6.99% 7,157 2,047 873 114 206 10,397
7.00% - 7.45% 320 73 393
- - -
------------ ------------ ------------ ------------ ----------- -----------
$ 93,492 $ 20,548 $ 4,606 $ 2,393 $ 1,025 $ 122,064
============ ============ ============ ============ =========== ===========
|
Included in interest-bearing deposits are certificates of deposit which have remaining maturities at December 31, 1999 and 1998 as follows:
DECEMBER 31,
---------------------------------
1999 1998
-------------- ---------------
One year $ 93,492 $ 96,584
Two years 20,549 23,069
Three years 4,606 7,246
Four years 2,392 4,403
Five years 1,025 4,149
-------------- ---------------
$ 122,064 $ 135,451
============== ===============
|
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
A summary of interest expense on deposits for the years ended December 31, 1999
and 1998 is as follows:
DECEMBER 31,
---------------------------------
1999 1998
------------- ---------------
Interest-bearing demand deposits $ 1,228 $ 1,031
Savings deposits 447 365
Time deposits less than $100,000 5,426 6,087
Time deposits of $100,000 or greater 988 1,105
------------- ---------------
$ 8,089 $ 8,588
============= ===============
|
The Company had deposits from directors, officers and employees and their related interests of approximately $6,828 and $3,718 as of December 31, 1999 and 1998, respectively.
(7) OTHER BORROWINGS
The Company enters into sales of securities under agreements to repurchase. These fixed-coupon agreements are treated as financings, and the obligations to repurchase securities sold are reflected as a liability in the balance sheet. The dollar amount of securities underlying the agreements remain in the asset accounts.
At December 31, 1999 and 1998, the Company had $4,078 and $4,866 in repurchase agreements with weighted average interest rates of 4.40% and 4.38%, respectively. Repurchase agreements are secured by U.S. Treasury securities and Government Agency securities with market values of $12,231 and $7,312 at December 31, 1999 and 1998, respectively.
The repurchase agreements were to repurchase the identical securities as those, which were sold. Repurchase agreements averaged $5,301 and $4,267 for the years ended December 31, 1999 and 1998, respectively. The maximum amount outstanding at any month-end for the corresponding periods was $8,130 and $7,417, respectively. Total interest expense paid on repurchase agreements for the years ending December 31, 1999 and 1998 was $223 and $196, respectively.
In 1998, the Company had an unsecured line of credit with another financial institution of $1,000, with an interest rate of 5.59%. As of December 31, 1999 and 1998, the outstanding balance was zero.
In 1999, the Company had a secured line of credit with the Federal Reserve Bank of $17,750 with an interest rate of 7%. The line of credit was secured by U.S. Treasury securities and Government Agencies with market values of $17,888 at December 31, 1999. As of December 31, 1999, the outstanding balance was $3,000. Total interest expense paid for Federal Reserve Bank advances for the year ending December 31, 1999 was $6.
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
(8) INCOME TAXES
The provision for income taxes for the years ended December 31, 1999 and
1998 consists of the following:
CURRENT DEFERRED TOTAL
------------- -------------- --------------
December 31, 1999
Federal $ 991 $ 18 $ 1,009
State 108 3 111
------------- -------------- --------------
$ 1,099 $ 21 $ 1,120
============= ============== ==============
December 31, 1998
Federal $ 1,205 $ (137) $ 1,068
State 165 (31) 134
------------- -------------- --------------
$ 1,370 $ (168) $ 1,202
============= ============== ==============
|
The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities for the years ended December 31, 1999 and 1998 are presented below:
DECEMBER 31,
-----------------------------
1999 1998
------------- ----------
Deferred tax assets:
Unrealized loss on investment securities
available for sale $ 160 $ 0
Allowance for loan losses 763 778
Deferred loan fees 52 45
Non accrual interest 41 37
------------- ----------
Total deferred tax asset 1,016 860
------------- ----------
Deferred tax liabilities:
Premises and equipment, due to differences in
depreciation methods and useful lives (177) (157)
Unrealized gain on investment securities
available for sale 0 (188)
Accetion of discount on investments (1) (3)
------------- ----------
Total deferred tax liability (178) (348)
------------- ----------
Net deferred tax asset $ 838 $ 512
============= ==========
|
The Bank has recorded a deferred tax asset of $838 and $512 as December 31, 1999 and 1998, respectively. No valuation allowance as defined by SFAS 109 is required for the years ended December 31, 1999 and 1998. Management believes that a valuation allowance is not necessary because it is more likely than not the deferred tax asset is realizable.
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
A reconciliation between the actual tax expense and the "expected" tax expense (computed by applying the U.S. federal corporate rate of 34% to earnings before income taxes) is as follows:
DECEMBER 31,
------------------------------
1999 1998
------------- -------------
"Expected" tax expense $ 1,042 $ 1,186
Tax exempt interest (3) (3)
State income taxes, net of federal income tax
Benefits 73 87
Valuation allowance 0 (66)
Other, net 8 (2)
------------- -------------
$ 1,120 $ 1,202
============= =============
|
(9) RENT
The following is a schedule of future minimum annual rentals under the noncancellable operating leases of the Company's facilities as of December 31, 1999:
YEAR ENDING DECEMBER 31,
----------------------------------
2000 $ 176
2001 176
2002 176
2003 176
2004 148
Thereafter 679
------------
$ 1,531
============
|
Rent expense for the years ended December 31, 1999 and 1998 was $172 and $143, respectively, and is included in occupancy expense in the accompanying consolidated statements of income. Operating lease income from subleases of the Bank's premises for 1999 and 1998 amounted to $8 and $6, respectively.
(10) REGULATORY CAPITAL
The Company is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company's assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets. Management believes, as of December 31, 1999, that the Company meets all capital adequacy requirements to which it is subject.
As of December 31, 1999, the most recent notification from the Office of Comptroller of the Currency categorized the Company as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Company must maintain total risk-based, Tier I risk-based, Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the institution's category.
A summary of actual, required, and capital levels necessary to be considered well-capitalized for Centerstate Banks of Florida, Inc. consolidated and its banking subsidiaries, First National Bank of Osceola County, Community National Bank of Pasco County and First National Bank of Polk County as of December 31, 1999 and 1998 are presented in the table below.
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISION
----------------------- ----------------------- ----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
----------------------- ----------------------- ----------------------
December 31, 1999
Total capital (to risk weighted assets) $ 25,489 14.8% $ 13,802 > 8% $ 17,253 > 10%
Tier 1 capital (to risk weighted assets) 23,397 13.6% 6,901 > 4% 10,352 > 6%
Tier 1 capital (to average assets) 23,397 8.4% 11,148 > 4% 13,935 > 5%
December 31, 1998
Total capital (to risk weighted assets) $ 22,300 14.7% $ 12,104 > 8% $ 15,130 > 10%
Tier 1 capital (to risk weighted assets) 20,377 13.5% 6,052 > 4% 9,078 > 6%
Tier 1 capital (to average assets) 20,377 7.6% 10,725 > 4% 13,406 > 5%
|
(11) DIVIDENDS
The Company declared cash dividends of $390 and $294 during the years ended December 31, 1999 and 1998, respectively. Banking regulations limit the amount of dividends that may be paid by the Company without prior approval of the Bank's regulatory agency.
(12) STOCK OPTION PLANS
The Company currently has incentive stock plans for the directors and employees.
In September 1989, the Company authorized 195,000 common shares for future options for all directors of the Company's wholly owned subsidiary, First National Bank of Osceola County, under an incentive stock option and non-statutory stock option plan. The number of options granted to each director shall not exceed 15,000. Options were granted at $5.00 per share (fair market value of the stock). Each option provides that the underlying option expires no later than September 18, 1999 and vesting occurs at 20% on September 18th of each year. As of
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
December 31, 1999 and 1998, there were -0- and 46,582 options vested and outstanding, respectively. During 1999 and 1998, 800 and -0- respectively, were forfeited due to terminations. No additional options were granted and 45,782 were exercised during the year ended December 31, 1999.
Also in 1989, the Company granted options for a total of 90,000 shares under a stock options plan to key employees of the Company's wholly owned subsidiary, First National Bank of Osceola County. Options were granted at a minimum price of $5.00 per share (fair market value of the stock). Each option provides an exercise period as decided by the Board with expiration at ten years from the date of grant. As of December 31, 1999 and 1998, there were 7,500 and 78,862 options vested and 11,000 and 85,362 outstanding, respectively. During 1999 and 1998, 812 and 3,788 were forfeited due to terminations, respectively. No additional options were granted and 58,782 were exercised during the year ended December 31, 1999.
In October 1989, the Company authorized 126,250 common shares for future options for all directors of the Company's wholly owned subsidiary, Community National Bank of Pasco County, under an incentive stock option and non-statutory stock option plan. The number of options granted to each director shall not exceed 15,000. Options were granted at $5.00 per share (fair market value of the stock). Each option provides that the underlying option expires no later than December 31, 1999 and vesting occurs at 25% for each year of service from the effective date of the grant. As of December 31, 1999 and 1998, there were -0- and 12,120 options vested and outstanding, respectively. During 1999 and 1998, 12,120 and -0- respectively, were forfeited due to terminations. No additional options were granted and 2,020 were exercised during the year ended December 31, 1999.
Also in 1989, the Company granted options for a total of 90,900 shares under a stock options plan to key employees of the Company's wholly owned subsidiary, Community National Bank of Pasco County. Options were granted at a minimum price of $5.00 per share (fair market value of the stock). Each option provides a vesting period of 25% at the date of grant and 25% for each year of service thereafter. The options expire in ten years from the date of the grant. As of December 31, 1999 and 1998, there were 10,605 and 59,590 options vested and outstanding, respectively. During 1999 and 1998, 253 and -0- were forfeited due to terminations, respectively. No additional options were granted and 49,743 were exercised during the year ended December 31, 1999.
In March 1991, the Company authorized 157,950 common shares for future options for all directors of the Company's wholly owned subsidiary, First National Bank of Polk County, under an incentive stock option and non-statutory stock option plan. The number of options granted to each director shall not exceed 12,150. Options were granted at $5.00 per share (fair market value of the stock). Each option provides that the underlying option expires no later than December 31, 2002 and vesting occurs at the time of grant. As of December 31, 1999 and 1998, there were -0- and 55,688 options vested and outstanding, respectively. No additional options were granted and 55,688 were exercised during the year ended December 31, 1999.
Also in 1991, the Company granted options for a total of 65,205 shares under a stock options plan to key employees of the Company's wholly owned subsidiary, First National Bank of Polk County. Options were granted at a minimum price of $5.00 per share (fair market value of the stock). Each option provides a vesting period of 25% at the date of grant and 25% for each year of service thereafter. The options expire in ten years from the date of the grant. As of December 31, 1999 and 1998, there were 42,849 and 60,872 options outstanding with 41,148 and 56,660 options vested, respectively. During 1999 and 1998, 202 and 1,985 were forfeited due to terminations, respectively. No additional options were granted and 17,820 were exercised during the year ended December 31, 1999.
The Company applies APB Opinion No. 25 and related interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for its stock option plans. Had compensation cost for the Company's
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
stock-based compensation plan been determined consistent with FASB Statement No. 123, the Company's net income would have been reduced to the pro forma amounts indicated below (amounts are in thousands of dollars except for per share data):
DECEMBER 31,
--------------------------------
1999 1998
------------- ------------
Net Income:
As reported $ 1,946 $ 2,287
Pro forma 1,929 2,272
Diluted earnings per share:
As reported 0.70 0.85
Pro forma 0.70 0.85
|
The fair value of each option grant is estimated on the date of grant using the minimum value method with the following weighted-average assumptions used for grants in 1998: dividend yield of 5.0%, .8% and 1%; expected volatility of 0%; risk-free interest rates of 4.73% and expected lives of 7, 8 and 10 years for the plan options.
A summary of the status of the Company's stock option plans for years ended December 31, 1999 and 1998, and changes during the years ended on those dates is presented below:
DECEMBER 31,
----------------------------------
1999 1998
-------------- ----------------
Outstanding at beginning of year 323,243 446,941
Granted 0 10,240
Exercised (245,402) (128,165)
Forfeited (13,387) (5,773)
-------------- ----------------
Outstanding at end of year 64,454 323,243
-------------- ----------------
Options exercisable at end of year 59,253 311,771
============== ================
Weighted-average fair value of option
granted during the year per share $ - $ 3.74
============== ================
|
The following table summarizes information about fixed stock options outstanding at December 31, 1999:
DECEMBER 31, 1999
-------------------------------------------------------------------------------------------------------------
WEIGHTED
NUMBER WEIGHTED WEIGHTED NUMBER AVERAGE EXERCISE
OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT PRICE AT
RANGE OF DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, DECEMBER 31,
EXERCISE PRICES 1999 LIFE PRICE 1999 1999
-------------------------------------------------------------------------------------------------------------
$4.95 - $12.50 64,454 4 years $7.10 59,253 $6.75
|
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
(13) EMPLOYEE BENEFIT PLAN
The Company maintains a 401(k) compensation and incentive plan for the benefit of its employees. Employees are eligible to participate in the plan after completing one year of continuous employment. The Company contributed an amount equal to a certain percentage of the employees' contributions based on the discretion of the Board of Directors. The Company's total contributions are not to exceed six percent of the employees' annual compensation. For the years ended December 31, 1999 and 1998, the Company's contributions to the plan were $185 and $134, respectively.
(14) CREDIT COMMITMENTS
The Company has outstanding at any time a significant number of commitments to extend credit. These arrangements are subject to strict credit control assessments and each customer's credit worthiness is evaluated on a case-by-case basis. A summary of commitments to extend credit and standby letters of credit written for the years ended December 31, 1999 and 1998 are as follows:
DECEMBER 31,
--------------------------------
1999 1998
------------- --------------
Standby letters of credit $ 763 $ 792
Available lines of credit 20,933 14,764
Unfunded firm loan commitments - variable rate 28,207 17,126
|
Because many commitments expire without being funded in whole or part, the contract amounts are not estimates of future cash flows.
The majority of loan commitments have terms up to one year and have variable interest rates.
Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties failed completely to perform as contracted. The credit risk amounts are equal to the contractual amounts, assuming that the amounts are fully advanced and that the collateral or other security is of no value.
The Company's policy is to require customers to provide collateral prior to the disbursement of approved loans. The amount of collateral obtained, if it is deemed necessary by the Company upon extension of credit, is based on management's credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, real estate and income providing commercial properties.
Standby letters of credit are contractual commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.
(15) CONCENTRATIONS OF CREDIT RISK
Most of the Company's business activity is with customers located within Osceola, Pasco, and Polk Counties and portions of adjacent counties. The majority of commercial and mortgage loans are granted to customers residing in these areas. Generally, commercial loans are secured by real estate, and mortgage loans are secured by either first or second mortgages on residential or commercial property. As of December 31, 1999, substantially all of the
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
Company's loan portfolio was secured. Although the Company has a diversified loan portfolio, a substantial portion of its debtors' ability to honor their contracts is dependent upon the economy of Osceola, Pasco and Polk Counties and portions of adjacent counties. The Company does not have significant exposure to any individual customer or counterparty.
(16) BASIC AND DILUTED EARNINGS PER SHARE
Basic and diluted earnings per share are calculated as follows:
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
-------------- ----------------- ------------
For the year ended 1999:
Basic earnings per share:
Net Income $ 1,946 2,681,079 $ 0.73
============
Effect of dilutive securities:
Stock options 94,105
-------------- -----------------
Diluted earnings per share:
Income and assumed conversions $ 1,946 2,775,184 $ 0.70
============== ================= ============
For the year ended 1998:
Basic earnings per share:
Net Income $ 2,287 2,527,256 $ 0.90
============
Effect of dilutive securities:
Stock options 162,348
-------------- -----------------
Diluted earnings per share:
Income and assumed conversions $ 2,287 2,689,604 $ 0.85
============== ================= ============
|
(17) MERGER
The Company's three wholly owned subsidiaries merged as of the close of business on June 30, 2000. In the merger, the shareholders of First National Bank of Osceola County received 2.0 shares of Company common stock for each bank common share owned. The shareholders of Community National Bank of Pasco County received 2.02 shares of Company common stock for each bank common share owned, and the shareholders of First National Bank of Polk County received 1.62 shares of Company common stock for each bank common share owned. The three banks operate as separate subsidiaries of the Company.