<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF THE
SECURITIES EXCHANGE ACT OF 1934
FORT BROOKE BANCORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-3382314
- --------------------------------------- -----------------------------------
(State of incorporation or organization) (I.R.S. Employer Identification No.)
510 Vonderburg Drive, Brandon, Florida 33509-1970
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
-------------------------------------
Securities to be registered pursuant to Section 12(b) of the Act: None
-------------------------------------
If this Form relates to the registration of a class of debt securities
and is effective upon filing pursuant to General Instruction A.(c)(1), please
check the following box. [ ]
If this Form relates to the registration of a class of debt securities
and is to become effective simultaneously with the effectiveness of a concurrent
registration statement under the Securities Act of 1933 pursuant to General
Instruction A.(c)(2), please check the following box.
[ ]
-------------------------------------
Securities to be registered pursuant to Section 12(g) of the Act:
Common stock, $.001 par value
-----------------------------------
(Title of class)
<PAGE> 2
ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
The Registrant was incorporated under Florida law on March 14, 1996
solely for the purpose of seeking and obtaining approval of the Board of
Governors of the Federal Reserve System (the "Board") to operate as a bank
holding company under The Bank Holding Company Act of 1956, as amended, by
acquiring, through the mechanism of a reverse triangular merger, all of the
issued and outstanding shares of Fort Brooke Bank, a Florida chartered
commercial bank (the "Bank") maintaining a class of securities registered,
effective as of June 29, 1995, under Section 12(g) and (i) of the Securities
Exchange Act of 1934, as amended. The Registrant's holding company status was
approved by the Board on June 6, 1996, and the referenced merger was made
effective as of July 11, 1996. As a result thereof, one share of the
Registrant's single class of capital stock was then issued to each
non-dissenting Bank shareholder in exchange for the assignment thereby to the
Registrant of each share of Bank stock then owned by such shareholder. The
990,553 shares so issued by the Registrant were not made the subject of a
registration statement in reliance upon the availability with respect thereto of
the transactional exemption from registration afforded by Section 3(a)(12) of
the Securities Act of 1933, as amended.
The Registrant's authorized capital stock consists of 10,000,000 shares
of common stock, each with a par value of $.001, and containing the following
characteristics:
DIVIDENDS
Under Florida law, the Registrant will be prohibited from
paying any dividend or making any other capital distribution if, after
giving it effect, (i) the Registrant would not be able to pay its debts
as they become due in the usual course of business, or (ii) the
Registrant's total assets would be less than the sum of its total
liabilities plus the amount that would be needed, if the Registrant
were to be dissolved at the time of the distribution, to satisfy the
rights of shareholders that were superior to the rights of those
receiving the distribution. Moreover, federal authorities have issued
policy statements that indicate bank holding companies should generally
only pay dividends out of current operating earnings.
REDEMPTION
The Registrant has no right, under its existing corporate
governance documents or by contract, to redeem any of its outstanding
shares of common stock. Under current regulations promulgated by the
Board of Governors of the Federal Reserve System (the "Board"), a bank
holding company may purchase or redeem its capital stock only after
providing prior written notice to the Board, provided, among other
matters, that such company maintains adequate capital following the
purchase.
VOTING RIGHTS
Each holder of the Registrant's common stock will be entitled
to cast one vote for each share held on all matters requiring a
shareholder vote, but may not cumulate his,
<PAGE> 3
her or its votes for the election of directors or for any other
purpose. Under Florida law, action on any matter other than the
election of directors will be approved if the votes cast in favor of
the matter exceed the votes cast in opposition thereto, unless a
greater number of affirmative votes is required by the Registrant's
articles of incorporation or the Florida Business Corporation Act. The
Registrant's articles of incorporation contain no such provision.
Directors of a Florida corporation are elected by a plurality of the
votes cast by the shares entitled to vote in the election at a meeting
at which a quorum is present.
LIQUIDATION RIGHTS
In any liquidation, dissolution or winding up of the
Registrant, holders of common stock will be entitled to share ratably
in all assets available for distribution after payment of debts,
liabilities and preferences.
ABSENCE OF PREEMPTIVE RIGHTS
Holders of the Registrant's common shares will not have
preemptive rights to subscribe for additional shares on a pro rata
basis when and if such additional shares are offered for sale by the
Registrant. The absence of preemptive rights increases the Registrant's
flexibility to raise capital as needed, to support growth, and to offer
employee benefit and incentive plans, but likely will reduce Registrant
shareholders' proportionate ownership interest if additional stock is
issued.
FULLY PAID AND NON-ASSESSABLE
No shares of the Registrant's common stock may be issued
before they are fully paid. Consequently, once issued, the holders of
such shares may not be subjected to further assessment by the
Registrant for the purpose of restoring impaired capital or otherwise.
No new consideration will be required to be paid by Bank shareholders
participating in the Merger.
ITEM 2. EXHIBITS.
EX-2 Definitive Proxy Statement, dated April 23, 1996, as filed
with the Federal Deposit Insurance Corporation, and
transmitted to the shareholders of the Bank in connection with
the conduct of their annual meeting held on May 9, 1996
EX-3(i) The Registrant's Articles of Incorporation, filed for record
as of April 8, 1996
EX-3(ii) The Registrant's current Bylaws
EX-99 Specimen copy of a certificate evidencing the Registrant's
shares of common stock, $.001 par value
<PAGE> 4
SIGNATURE PAGE
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, thereto duly authorized.
Fort Brooke Bancorporation
Date: November 8, 1996 By: /s/ Richard H. Eatman
-------------------------
Richard H. Eatman, President
<PAGE> 1
EXHIBIT 2
<PAGE> 2
PROXY STATEMENT
FOR
FORT BROOKE BANK
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 9, 1996
This Proxy Statement (the "Proxy Statement") is being furnished to the
holders of the single class of voting common stock, par value $8.00 per share
(the "Common Stock"), of Fort Brooke Bank, a Florida commercial banking
corporation ("Fort Brooke" or the "Bank"), in connection with the solicitation
of proxies by the Bank's board of directors for use at the annual meeting of
Fort Brooke shareholders to be held at 4:00 p.m., local time, on Thursday, May
9, 1996 at the Bank's principal offices, 510 Vonderburg Drive, Brandon, Florida
33511 (the "Meeting"), and at any adjournments or postponements thereof.
At the Meeting, the Bank's shareholders of record as of March 15, 1996
will consider and vote upon a proposal to approve an Agreement and Plan of
Reorganization, dated March 22, 1996 (the "Merger Agreement"), by and among Fort
Brooke, Fort Brooke Bancorporation, a separate newly formed Florida corporation
(the "Company") and Brooke Interim Corporation ("Interim"), an inactive Florida
corporation also newly formed and wholly owned by the Company. The shareholders
will also elect new Bank directors and consider and vote upon whether to ratify
the board's selection of independent auditors (See "SOLICITATION AND REVOCATION
OF PROXIES," "PROPOSAL NO. 1 - THE PROPOSED MERGER"; "PROPOSAL NO. 2 - ELECTION
OF DIRECTORS," and "PROPOSAL NO. 3 RATIFICATION OF PRIOR SELECTION OF
INDEPENDENT AUDITORS" below). Under the Merger Agreement, and subject to certain
regulatory approvals, Interim will be merged with and into Fort Brooke and its
outstanding shares of capital stock will be cancelled and eliminated; the Fort
Brooke shareholders not electing to exercise their statutory rights of dissent
will receive shares of the Company's voting common stock in the identical number
as they presently hold Fort Brooke shares; all shares of Fort Brooke common
stock will be assigned to and registered in the name of the Company which,
thereafter, will be the Bank's sole shareholder; and the Company will become a
bank holding company under The Bank Holding Company Act of 1956, as amended.
Such transaction, to be completed in accordance with the terms of the Merger
Agreement, is hereinafter sometimes referred to as the "Merger." For a
description of the Merger Agreement, which is included in its entirety as
Appendix A to this Proxy Statement, see "PROPOSAL NO. 1 - THE PROPOSED MERGER -
General", and "PROPOSAL NO. 1 - THE PROPOSED MERGER - Conditions to Consummation
of the Merger." Neither the Common Stock nor shares of the Company's common
stock are listed on any exchange or quoted on any automated quotation system,
and there is no recognized market for such shares.
This Proxy Statement and the accompanying Proxy are first being mailed
to shareholders of Fort Brooke on or about April 23, 1996.
<PAGE> 3
AVAILABLE INFORMATION
This Proxy Statement incorporates documents by reference which are not
presented herein. Such documents, other than certain exhibits to such documents,
are available without charge upon request made to Fort Brooke Bank, 510
Vonderburg Drive, Brandon, Florida 333511 (telephone (813) 685-2000), Attention:
Nancy Soleto, Shareholder Relations Department. In order to ensure timely
delivery of the documents, any request should be made of Fort Brooke by April
20, 1996.
The Company is not presently subject to filing requirements under the
Securities Act of 1933 (the "Securities Act") or the Securities Exchange Act of
1934 (the "Exchange Act"), and, accordingly, no information or documents
relating thereto are incorporated herein by reference. The Bank is, however,
subject to the informational requirements of the Exchange Act and in accordance
with Section 12(i) thereof files reports and other information with the Federal
Deposit Insurance Corporation (the "FDIC"). Such reports and other information
filed by the Bank with the FDIC may be inspected and copied at the public
reference facilities maintained by the FDIC at 550 17th Street, N.W.,
Washington, D.C. 20006. Copies of such materials may be obtained at prescribed
rates from the Registration and Disclosure Section of the FDIC at its
Washington, D.C. address.
Following consummation of the Merger, the Company will effect a
registration of its issued and outstanding shares with the Securities and
Exchange Commission (the "Commission") and will thereafter become subject to the
informational requirements of the Exchange Act, and, in accordance therewith,
will be required to file reports, proxy statements and other information with
the Securities and Exchange Commission. Copies of such documents will be
available for inspection or can be obtained, at prescribed rates, from the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
In addition, such documents may be inspected at the public reference facilities
referred to above and at the regional offices of the Commission at 7 World Trade
Center, 13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. It will also furnish
annual reports to its shareholders which will contain audited financial
statements certified by its independent public accountants. The Company may
distribute unaudited quarterly reports and other interim reports to its
shareholders as it deems appropriate.
All information herein relating to any party and its business was
provided by that entity specifically for inclusion herein and has been included
in reliance on its representations as to the truthfulness, accuracy and adequacy
thereof. No person is authorized to give any information or to make any
representation other than as contained herein and, if given or made, such
information or representations must not be relied upon as having been
authorized. This Proxy Statement does not constitute a solicitation by anyone in
any jurisdiction in which such solicitation is not authorized or in which the
person making such solicitation is not qualified to do so or to any person to
whom it is unlawful to make such offer or solicitation. Neither the delivery of
this Proxy Statement nor any distribution of securities effected as a result of
actions herein described shall under any circumstances create an implication
that there has been no
2
<PAGE> 4
change in the affairs of Fort Brooke since the date hereof or that the
information herein is correct as of any time subsequent to the date hereof.
SOLICITATION AND REVOCATION OF PROXIES
As this solicitation is being made exclusively by the board of
directors of Fort Brooke, all of its members having approved and being in
support of the actions proposed herein to be taken at the Meeting, any costs
incurred in connection therewith will be borne by Fort Brooke.
Securities brokerage firms and other nominees holding record title to
shares of common stock of the particular issuer will be requested to forward all
proxy solicitation material to their beneficial owners, and any expenses
incurred in that effort will also be paid by the issuer. All proxies are being
solicited by mail in the form of this Proxy Statement, but further solicitation
following the original mailing may be made by board members, officers, employees
or representatives of the particular issuer by telephone, telegraph or personal
contact with certain shareholders.
Execution of the enclosed form of proxy will not affect a shareholder's
rights to attend the Meeting and vote in person. A shareholder giving such a
proxy may revoke it at any time before exercise by (i) notifying the Bank's
Secretary of its revocation, (ii) submitting a substitute proxy dated subsequent
to the initial one, or (iii) attending the Meeting and voting in person.
All properly executed proxy cards returned to the Bank in response to
this solicitation and not timely revoked will be voted at the subject Meeting in
accordance with the directions given therein. If no specific instructions are
included with regard to any one or more of the matters to be voted upon, the
shares represented by a signed proxy card will be voted as follows:
As to PROPOSAL NO. 1: FOR approval of the Merger Agreement and the
Merger;
As to PROPOSAL NO. 2: FOR the election as Directors of Fort Brooke of
the 14 individual nominees identified below in the Section entitled "PROPOSAL
NO. 2 - ELECTION OF DIRECTORS;"
As to PROPOSAL NO. 3: FOR ratification of the appointment of Hacker,
Johnson, Cohen & Grieb, CPA's, as Fort Brooke's independent certified public
accountants and auditors for calendar year 1996, as is proposed below in the
Section entitled "PROPOSAL NO. 3 - RATIFICATION OF PRIOR SELECTION OF
INDEPENDENT AUDITORS;" and
As to any other matter which is properly submitted to a vote of the
Fort Brooke shareholders at the Meeting, in accordance with the discretion, as
reasonably exercised, of the person or persons named as proxy in the
accompanying proxy card.
A proxy card is enclosed for your use. YOU ARE SOLICITED ON BEHALF OF
THE FORT BROOKE BOARD OF DIRECTORS TO COMPLETE, SIGN, DATE AND RETURN
3
<PAGE> 5
THE PROXY CARD IN THE ACCOMPANYING ENVELOPE. See "INFORMATION REGARDING THE
MEETING", "PROPOSAL NO. 1 - THE PROPOSED MERGER", "PROPOSAL NO. 2 - ELECTION OF
DIRECTORS," AND "PROPOSAL NO. 3 - RATIFICATION OF PRIOR SELECTION OF INDEPENDENT
AUDITORS."
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
AVAILABLE INFORMATION .............................................. 2
SOLICITATION AND REVOCATION OF PROXIES ............................. 3
SUMMARY INFORMATION ................................................ 9
The Proposed Merger ....................................... 9
Parties to the Merger Transactions ........................ 9
Fort Brooke ...................................... 9
The Company ...................................... 10
Interim .......................................... 10
Reasons for the Merger; Board Recommendations ............. 11
Effect of the Merger ...................................... 11
Federal Income Tax Consequences ........................... 12
Accounting Treatment ...................................... 12
Shareholder Meeting ....................................... 12
Vote Required; Record Date ................................ 12
Effective Date of the Merger .............................. 12
Conditions; Regulatory Approvals .......................... 13
Termination of the Merger Agreement ....................... 13
Management after the Merger ............................... 13
Dissenters' Rights ........................................ 14
SUMMARY CONDENSED CONSOLIDATED FINANCIAL INFORMATION ............... 14
CERTAIN RISK FACTORS ............................................... 16
INFORMATION REGARDING THE MEETING .................................. 20
General ................................................... 20
Meeting ................................................... 20
Record Date; Quorum ....................................... 21
Vote Required ............................................. 21
Proxies ................................................... 21
</TABLE>
4
<PAGE> 6
<TABLE>
<S> <C>
PROPOSAL NO. 1 - THE PROPOSED MERGER ............................... 22
General ................................................... 22
Reasons for and Background of the Merger .................. 23
Board Recommendation ...................................... 23
Closing and Effective Dates ............................... 24
Effect of the Merger ...................................... 24
Conditions to Consummation of the Merger .................. 25
Mutual Conditions ................................ 25
Individual Conditions ............................ 26
Regulatory Approvals ...................................... 27
Board of Governors ............................... 27
FDIC ............................................. 27
Florida .......................................... 27
Conduct of Business Pending the Merger .................... 28
Termination and Amendment of Merger Agreement ............. 28
Management After the Merger ............................... 28
Effect on Fort Brooke Employee Benefit Plans .............. 28
Certain Federal Income Tax Considerations ................. 29
Accounting Treatment ...................................... 30
Expenses .................................................. 30
Dissenters' Rights ........................................ 30
PROPOSAL NO. 2 - ELECTION OF DIRECTORS ............................. 32
Nominees for Election ..................................... 32
PROPOSAL NO. 3 - RATIFICATION OF PRIOR SELECTION OF
INDEPENDENT AUDITORS ............................................. 35
OTHER MATTERS ...................................................... 36
FORT BROOKE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS .................... 36
General ................................................... 36
Acquisition ............................................... 36
Regulation and Legislation ................................ 37
Credit Risk ............................................... 37
Results of Operations ..................................... 37
Rate/Volume Analysis ............................. 39
Liquidity and Capital Resources .................. 40
Regulatory Capital Requirements .................. 40
Asset and Liability Management ................... 41
</TABLE>
5
<PAGE> 7
<TABLE>
<S> <C>
Comparison of Years Ended December 1995 and 1994 .......... 44
General .......................................... 44
Interest Income and Expense ...................... 44
Provision for Credit Losses ...................... 44
Noninterest Expense .............................. 44
Income Taxe Provision ............................ 44
Comparison of Years Ended 1994 and 1993 ................... 45
General .......................................... 45
Interest Income and Expense ...................... 45
Provision for Credit Losses ...................... 45
Noninterest Expenses ............................. 45
Income Taxe Provision ............................ 45
Impact of Inflation and Changing Prices ................... 45
Trustee Accounting Requirements ........................... 46
Selected Quarterly Financial Data ......................... 47
BUSINESS OF THE COMPANY AND THE BANK ............................... 48
General ................................................... 48
Market Area ............................................... 49
Competition ............................................... 50
Lending Activities ........................................ 51
General .......................................... 51
Loan Maturities .................................. 51
Types of Loans ................................... 51
Loan Commitments ................................. 54
Secondary Mortgage Market ........................ 54
Income from Lending Activities ................... 54
Nonperforming Loans .............................. 54
Classified Assets ......................................... 56
Other Real Estate Owned ................................... 57
Investment Securities ..................................... 57
Source of Funds ........................................... 58
General .......................................... 58
Deposits ......................................... 59
Short-Term Borrowings ............................ 61
Employees ................................................. 61
SUPERVISION AND REGULATION ......................................... 62
General ................................................... 62
Transactions with Affiliates .............................. 63
Holding Company Structure and Support of the Bank ......... 63
Capital Requirements ...................................... 64
</TABLE>
6
<PAGE> 8
<TABLE>
<S> <C>
Impact of Monetary Policies ............................... 66
Insurance of Deposits ..................................... 67
Recent Legislation and Other Matters ...................... 68
Change of Control ......................................... 71
Payment of Dividends ...................................... 71
Brokered Deposits ......................................... 72
Depositor Preference ...................................... 72
Liquidity ................................................. 72
Assessments ............................................... 73
Loans to One Borrower ..................................... 73
Community Reinvestment .................................... 73
FORT BROOKE MANAGEMENT ............................................. 74
General ................................................... 74
Remuneration of Officers and Directors .................... 75
Stock Options ............................................. 75
401(k) Defined Contribution Plan .......................... 76
Material Transactions ..................................... 77
MANAGEMENT OF THE COMPANY .......................................... 78
FORT BROOKE PRINCIPAL SHAREHOLDERS ................................. 78
DESCRIPTION OF FORT BROOKE CAPITAL STOCK ........................... 79
Voting Rights ............................................. 79
Dividends ................................................. 80
Liquidation Rights ........................................ 80
Vote Required to Amend .................................... 80
Absence of Preemptive Rights .............................. 81
Issuance of Debt Securities ............................... 81
Fully Paid and Non-Assessable ............................. 81
Other Matters ............................................. 81
DESCRIPTION OF COMPANY CAPITAL STOCK ............................... 81
Voting Rights ............................................. 82
Dividends ................................................. 82
Liquidation Rights ........................................ 82
Vote Required to Amend .................................... 82
Absence of Preemptive Rights .............................. 82
Issuance of Debt Securities ............................... 83
Fully Paid and Non-Assessable ............................. 83
Par Value ................................................. 83
</TABLE>
7
<PAGE> 9
<TABLE>
<S> <C>
Redemption ................................................ 83
Other Matters ............................................. 83
MARKETABILITY OF SECURITIES ........................................ 84
NO LITIGATION ...................................................... 84
LEGAL OPINIONS ..................................................... 84
FINANCIAL STATEMENTS ............................................... 84
INDEX TO FINANCIAL STATEMENTS ...................................... F-1
Independent Auditors' Report .............................. F-2
Consolidated Balance Sheets,
December 31, 1995 and 1994 .............................. F-3
Consolidated Statements of Earnings for Each of the Years
in the Three-Year Period Ended December 31, 1995 ........ F-4
Consolidated Statements of Stockholders' Equity for Each of
the Years in the Three-Year Period Ended December 31, 1995 F-5
Consolidated Statements of Cash Flows for Each of the Years
in the Three-Year Period Ended December 31, 1995 ........ F-6
Notes to Consolidated Financial Statements for
Each of the Years in the Three-Year Period Ended
December 31, 1995 ....................................... F-7 to F-21
</TABLE>
APPENDICES
APPENDIX A Agreement and Plan of Reorganization, dated March 22,
1996, by and among Fort Brooke, the Company and
Interim
APPENDIX B Section 658.44, Florida Statutes, describing
dissenting shareholder rights
APPENDIX C Existing Articles of Incorporation of Fort Brooke
Bancorporation
8
<PAGE> 10
SUMMARY INFORMATION
The following summary is not intended to be a complete description of
all material facts regarding Fort Brooke, the Company or Interim or the matters
to be considered at the Meeting, and is qualified in all respects by the more
detailed information appearing elsewhere or incorporated by reference in this
Proxy Statement, the Appendices hereto and the documents referred to herein.
THE PROPOSED MERGER
This Proxy Statement relates primarily to the proposed merger of
Interim, the inactive, wholly owned subsidiary of the Company, with and into
Fort Brooke pursuant to the Merger Agreement, to the resulting exchange by the
Bank's non-dissenting shareholders of their Bank shares for an identical number
of Company shares, and to the acquisition and future ownership by the Company of
all of the Bank's issued and outstanding shares of Common Stock. The Fort Brooke
shareholders are being asked to approve the Merger Agreement and the Merger, and
also to elect directors for the ensuing year and to ratify the board's prior
selection of the Bank's independent auditors. They will also consider such other
matters as may properly be brought before such Meeting. See "PROPOSAL NO. 1 -
THE PROPOSED MERGER - General" and "PROPOSAL NO. 1 - THE PROPOSED MERGER -
Conditions to Consummation of the Merger." Shareholders not wishing to receive
Company shares will be afforded their statutory right to dissent from the Merger
if they effect notification of such intention in accordance with the
requirements set forth herein (see "PROPOSAL NO. 1 - THE PROPOSED MERGER
Dissenters' Rights").
PARTIES TO THE MERGER TRANSACTIONS
FORT BROOKE. Fort Brooke, an independent, Florida chartered commercial
banking corporation headquartered in Brandon, Florida, was originally formed on
March 20, 1981 as a Florida chartered savings and loan association. On December
31, 1991, that entity received from the Office of the Comptroller of the State
of Florida a Certificate of Authority to commence operations, as of that date,
as a commercial bank, as well as notice that its authorization to operate as a
savings and loan association was being contemporaneously cancelled. It has since
operated as a commercial bank. The Bank's principal executive office is located
at 510 Vonderburg Drive, Brandon, Florida 33511, and its branch offices are
seven in number, including the Plant City Office, 2318 Jim Redman Pkwy., Plant
City, FL 33566; the Seffner Office, 1707 South Parsons Avenue, Seffner, FL
33584; the Park Central Office, 410 Ware Boulevard, Tampa, FL 33619; the Apollo
Beach Office, 205 Apollo Beach Blvd., Apollo Beach, FL 33572; the West Shore
Office, 4427 West Kennedy Blvd, Tampa, FL 33609; the Anderson Road Office, 12002
Anderson Road, Tampa, FL 33625; and the Downtown Tampa Office, 200 E. Madison
Street, Tampa, FL 33602. Its principal telephone number is (813) 685- 2000. The
board of directors of Fort Brooke currently consists of the same 14 individuals
being proposed for election in this Proxy Statement (see "PROPOSAL NO. 2 -
ELECTION OF DIRECTORS").
9
<PAGE> 11
Fort Brooke offers to its customer base, including individuals, small
and medium sized businesses and a variety of governmental agencies with
residences, offices or other relationships located in Hillsborough County, a
wide variety of the normal personal, consumer and commercial services expected
of a locally owned, independently operated bank. Its deposits are insured by the
Federal Deposit Insurance Corporation (the "FDIC"), and, as such, the Bank is
subject to regulation by that federal agency and to periodic examinations of its
operations and documentary compliance by FDIC personnel. As a state chartered
bank which is not a member of the Federal Reserve System, it is also regulated
by the Division of Banking of the Florida Department of Banking and Finance (the
"Department"). At December 31, 1995, the Bank's assets totaled approximately
$187,100,000, its deposits $168,300,000 and its total shareholders' equity
$15,800,000, and its Tier I capital, stated as a percentage of average total
assets, was 8.55%. Fort Brooke presently has 672 shareholders who own an
aggregate of 1,005,920 shares of its single class of common stock, and an
additional 60,460 shares of that same class, presently authorized but unissued,
are reserved for future issuance to Fort Brooke employees upon their exercise of
options that have been or may hereafter be granted under the terms of an
outstanding Non-Qualified Stock Option Plan. (See "FORT BROOKE BANK MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,"
"BUSINESS OF THE COMPANY AND FORT BROOKE" and "FORT BROOKE MANAGEMENT - Stock
Options").
THE COMPANY. Fort Brooke Bancorporation is a newly formed Florida
corporation, having been incorporated as of March 14, 1996. All of its
outstanding shares are presently owned by the chairman of the Bank's board of
directors, and its own board of directors is composed of those individuals
presently serving on the Bank's board. The Company conducts no business activity
and has been formed solely for the purpose of applying to the Board of Governors
of the Federal Reserve System (the "Board of Governors") for permission to be
registered as a bank holding company under The Bank Holding Company of 1956, as
amended, and, contemporaneously therewith, to acquire, through the mechanism of
the Merger, all of the issued and outstanding shares of the Bank's Common Stock
so as thereafter to constitute the Bank's sole shareholder. The Company's
application was submitted to the Board of Governors on April _, 1996. Upon the
effective date of the Merger the chairman's shares will be redeemed for the same
price paid therefore and thereafter all of the Company's outstanding shares will
be owned by those Bank shareholders who do not exercise their statutory rights
of dissent. See "BUSINESS OF THE COMPANY AND THE BANK."
INTERIM. Brooke Acquisition Corporation is also newly formed, similarly
as a Florida corporation, and all of its outstanding shares of capital stock are
owned by the Company. Interim will engage in no business activities during the
period of its corporate existence and its sole reason for incorporation is to
enable the Merger transaction between the Company and the Bank to be effected,
if approved by the Bank's shareholders, in the form of a "reverse triangular
merger." See below, "PROPOSAL NO 1 - THE PROPOSED MERGER - Effect of the
Merger."
10
<PAGE> 12
REASONS FOR THE MERGER; BOARD RECOMMENDATIONS
In light of the continuing consolidations that have been occurring in
the financial industry over the past few years, the influx into the marketing
areas of Fort Brooke by regional bank holding company operations, the likelihood
that such activities will continue and even increase as national bank holding
companies, now or soon to be able under federal law to establish banking offices
throughout the country, target the larger Florida population bases for full
service operations, and the increased competition that such activities bring to
bear on independent banks, the management and directors of Fort Brooke have come
to believe that, from the standpoint of long-term corporate viability and
competitiveness, it would be in the best interests of the shareholders of Fort
Brooke for the Bank to be owned by a registered holding company which itself
would be owned by the Bank's present shareholders. Such a structure will better
enable the Bank to obtain infusions of capital, as needed, for example, for
geographic or service expansions, without risking a dilution of its existing
shareholder base or a negative impact upon its financial statements, and will
place the Bank's senior management, separately operating as the Company's
management, in a better position to consider or, with board approval, to
undertake related business activities which are permitted by the Board of
Governors. After reviewing and analyzing the Bank's management and marketing
capabilities, the board of directors determined that the Merger, in the form as
set forth in the Merger Agreement, would be fair to, and in the best interests
of, the Bank's shareholders. The board of directors therefore recommends that
the shareholders vote FOR approval of the Merger Agreement and the Merger,
believing that the Merger will provide the potential for future added
shareholder value, enhance shareholder liquidity and enable shareholders to
participate in the opportunities for growth that the board expects the Merger to
make more practicable. See "PROPOSAL NO. 1 - THE PROPOSED MERGER - Reasons for
the Merger."
EFFECT OF THE MERGER
Pursuant to the Merger Agreement, on the Effective Date of the Merger
Interim will terminate as a Florida corporation, its outstanding shares will be
cancelled and Fort Brooke will become the surviving or resulting entity.
Contemporaneously, the Company's outstanding shares will be cancelled and new
shares of that same class of voting common stock will be issued to each of Fort
Brooke's shareholders not exercising a statutory right of dissent in exchange
for their relinquishment of and assignment to the Company of the Bank's shares
of Common Stock that they presently own. The exchange ratio will be one share of
the Company's common voting stock for one share of the Bank's Common Stock. See
"PROPOSAL NO. 1 - THE PROPOSED MERGER- Effect of the Merger." The financial
condition of the Bank immediately prior to and after the effectiveness of the
Merger will be identical, subject to the amount of money that will have to be
committed to the satisfaction of dissenting shareholder rights. Under the terms
of the Merger Agreement, its consummation is dependent upon no more than ten
percent of all Fort Brooke shareholders electing to exercise their statutory
dissenters' rights (see "PROPOSAL NO. 1 - THE PROPOSED MERGER - Dissenters'
Rights").
11
<PAGE> 13
FEDERAL INCOME TAX CONSEQUENCES
It is intended that the Merger will qualify as a federal income
tax-free reorganization within the meaning of Section 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended, so that no gain or loss will be
recognized for federal income tax purposes by the shareholders of Fort Brooke or
Interim or persons holding options to acquire Fort Brooke shares. See "PROPOSAL
NO. 1 - THE PROPOSED MERGER- Certain Federal Income Tax Considerations".
ACCOUNTING TREATMENT
It is expected that the Merger will be accounted for in a manner
similar to a pooling-of-interests, under which the assets and liabilities of the
Bank will be reflected in the consolidated financial statements of the Company
at their historical costs, and the stated value of the Company's outstanding
shares of voting common stock, its capital surplus and retained earnings will be
recorded in an aggregate amount equal to the book value of the Bank. See
"PROPOSAL NO. 1 - THE PROPOSED MERGER- Accounting Treatment."
SHAREHOLDER MEETING
The Meeting will be held at 4:00 p.m., local time, on Thursday, May 9,
1996, at the main offices of Fort Brooke, to consider and vote upon a proposal
to approve the Merger Agreement and the Merger, elect directors, ratify a prior
selection of independent auditors and consider such other matters as may
properly come before the Meeting. As the Company is the sole shareholder of
Interim, no separate Interim shareholder meeting will be conducted to consider
and vote upon approval of the Merger Agreement or Merger; rather, it is
anticipated that written action approving that transaction will be executed by
the Company, in its shareholder capacity, contemporaneously with the approval by
the Fort Brooke shareholders of the same transaction. See "INFORMATION REGARDING
THE MEETING".
VOTE REQUIRED; RECORD DATE
Only shareholders of record of Fort Brooke at the close of business on
Friday, March 15, 1996, will be entitled to vote at the Meeting (the "Record
Date"). The affirmative vote of at least a majority of the shares of such entity
issued and outstanding on its Record Date is a condition precedent to the
consummation of the Merger. It is expected that as of the Record Date, there
will be outstanding and entitled to be voted 1,005,920 shares of Common Stock,
held by 672 shareholders. See "INFORMATION REGARDING THE MEETING - Vote
Required," and "INFORMATION REGARDING THE MEETING - Record Date."
EFFECTIVE DATE OF THE MERGER
The Merger will become effective when appropriate documents (the
"Closing Documents") needed to consummate the Merger are executed in accordance
with all legal
12
<PAGE> 14
requirements and are delivered or filed as required by law, or on such later
date as the Closing Documents may specify (the "Effective Date of the Merger" or
"Effective Date"). The Closing Documents will be delivered or filed on a date to
be selected by Fort Brooke and the Company that occurs after the receipt of all
required regulatory and shareholder approvals. The closing date of the Merger
(the "Closing Date") will take place on the Effective Date. See "PROPOSAL NO. 1
- - THE PROPOSED MERGER - Closing and Effective Dates."
CONDITIONS; REGULATORY APPROVALS
Effectiveness of the Merger and issuance of shares of the Company's
common stock to the Fort Brooke shareholders are subject to various conditions,
including approval of the Merger Agreement and the Merger by the requisite
majority interest of the Fort Brooke shareholders, receipt of all necessary
regulatory approvals and satisfaction of other customary closing conditions.
Before the Merger may be consummated, approval must be obtained as to various
aspects thereof from each of the Board of Governors, the FDIC and the Florida
Department of Banking and Finance (the "Department"). There can be no assurance
that such regulatory approvals will be obtained, or, if obtained, by any
particular date. There can also be no assurance that any such approval will not
contain a condition or requirement which causes such approval to fail to satisfy
all conditions set forth in the Merger Agreement. See "PROPOSAL NO. 1 - THE
PROPOSED MERGER- Conditions to Consummation of the Mergers" and "PROPOSAL NO. 1
- - THE PROPOSED MERGER - Regulatory Approvals".
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated and the Merger abandoned prior
to the Closing Date, either before or after its approval by shareholders of the
respective parties, as follows: (i) by the mutual consent of Fort Brooke, the
Company and Interim, (ii) by Fort Brooke individually under certain specified
circumstances, or (iii) as a result of a failure by an applicable regulatory
agency to approve the Merger. See "PROPOSAL NO. 1 - THE PROPOSED MERGER -
Termination and Amendment of Merger Agreement."
MANAGEMENT AFTER THE MERGER
Immediately following consummation of the Merger, the Fort Brooke board
of directors will be composed of the individuals elected at the Fort Brooke
Meeting (who are expected to be the 14 individuals named herein (see "FORT
BROOKE PROPOSAL NO. 2 - Election of Directors"). The management of Fort Brooke,
as the bank designated to survive the Merger, is expected to remain unchanged
from its present composition. The Company's initial board of directors will
include the 14 individuals identified in its Articles of Incorporation (a copy
of which is included in these materials as APPENDIX D), each of which presently
serves on the Bank's board, and its initial management will include the Bank's
existing president (who will also serve as the Company's treasurer) and
secretary. See "PROPOSAL NO. 1 - THE PROPOSED MERGER - Management after the
Merger," "FORT BROOKE MANAGEMENT" and "COMPANY MANAGEMENT."
13
<PAGE> 15
DISSENTERS' RIGHTS
Assuming passage of the Merger proposal, any holder of Fort Brooke
Common Stock who properly dissents from the same shall be entitled, in lieu of
receiving the Company's common stock following the Effective Date of the Merger,
to receive the fair market value, in cash, of those shares of Fort Brooke Common
Stock which are voted against the Merger, if, prior to the vote on the Merger at
the Meeting, he or she furnishes written notice to Fort Brooke that the
shareholder dissents from the plan of Merger and the Merger Agreement as to all
or any lesser number of the shares held by the shareholder, or at the Meeting
votes such shares against the Merger. Failure to effect such notice or to cast
such vote properly may result in a loss of the right to dissent from the action
otherwise approved by the requisite majority interest. Under the Merger
Agreement, if holders of more than 10% of the outstanding shares of Fort Brooke
properly elect to dissent from the Merger, then Fort Brooke may terminate the
Merger Agreement, prior to its consummation, without liability. See "PROPOSAL
NO. 1 - THE PROPOSED MERGER -Dissenters' Rights."
SUMMARY CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following tables present selected unaudited historical financial
data for Fort Brooke and its single subsidiary. In the opinion of Fort Brooke
management, the data presented includes all adjustments (consisting of only
normal recurring accruals) necessary for its fair presentation. These tables are
based upon, and should be read in conjunction with, the historical financial
statements and notes thereto included elsewhere in this Proxy Statement.
[The balance of this page is intentionally left blank]
14
<PAGE> 16
SELECTED FINANCIAL DATA
(Dollars in thousands, except per share figures)
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
AT YEAR END:
Cash and cash equivalents ..................................... $ 11,997 8,436 17,650 12,344 11,866
Investment securities ......................................... 43,719 45,041 44,095 37,621 35,086
Loans, net .................................................... 122,511 112,298 102,052 107,143 118,251
All other assets .............................................. 8,889 9,535 8,997 7,901 8,703
---------- --------- ------- ------- --------
Total assets ................................................. $ 187,116 175,310 172,794 165,009 173,906
========== ========= ======= ======= ========
Deposit accounts .............................................. 168,297 157,877 158,212 148,724 156,836
All other liabilities ......................................... 3,019 3,676 1,111 3,745 5,976
Stockholders' equity .......................................... 15,800 13,757 13,471 12,540 11,094
---------- --------- ------- ------- --------
Total liabilities and stockholders' equity ................... $ 187,116 175,310 172,794 165,009 173,906
========== ========= ======= ======= ========
FOR THE YEAR:
Total interest income ......................................... 13,929 11,613 11,296 12,654 15,338
Total interest expense ........................................ 5,588 4,504 4,630 6,071 9,620
---------- --------- ------- ------- --------
Net interest income ........................................... 8,341 7,109 6,666 6,583 5,718
Provision for credit losses ................................... 705 184 344 1,726 1,216
---------- --------- ------- ------- --------
Net interest income after provision for credit losses ......... 7,636 6,925 6,322 4,857 4,502
Other income .................................................. 1,266 1,319 1,435 1,708 1,559
Other expenses ................................................ 6,129 7,213 6,312 6,487 5,908
---------- --------- ------- ------- --------
Earnings before income tax provision and
cumulative effect of change in accounting
principle .................................................... 2,773 1,031 1,445 78 153
Income tax provision .......................................... 1,109 412 522 34 175
---------- --------- ------- ------- --------
Net earnings (loss) before cumulative effect of
change in accounting principle ............................... 1,664 619 923 44 (22)
---------- --------- ------- ------- --------
Cumulative benefit for effect of change
in accounting principle ...................................... -- -- -- -- 173
---------- --------- ------- ------- --------
Net earnings .................................................. $ 1,664 619 923 44 151
========== ========= ======= ======= ========
Earnings (loss) per share before cumulative
effect of accounting change .................................. $ 1.65 .63 .95 .05 (.03)
========== ========= ======= ======= ========
Net earnings per share (1) .................................... $ 1.65 .63 .95 .05 .20
========== ========= ======= ======= ========
Weighted average number of shares outstanding (1) ............. 1,005,920 984,711 966,864 867,243 762,560
========== ========= ======= ======= ========
RATIOS AND OTHER DATA:
Return on average assets ...................................... .93% .36% .56% .03% .09%
Return on average equity ...................................... 11.18% 4.59% 7.16% .37% 1.39%
Average equity to average assets .............................. 8.27% 7.79% 7.81% 7.09% 6.09%
Interest-rate spread during the period ........................ 4.16% 3.99% 3.92% 3.73% 2.85%
Net yield on average interest-earning assets .................. 5.03% 4.55% 4.41% 4.30% 3.45%
Noninterest expenses to average assets ........................ 3.41% 4.17% 3.82% 3.90% 3.53%
Ratio of average interest-earning assets to average
interest-bearing liabilities ................................. 1.26 1.19 1.16 1.14 1.10
Nonperforming loans, in-substance foreclosed loans
and real estate owned as a percentage of
total assets at end of year .................................. 1.10% 1.47% 1.39% 2.00% 3.71%
Allowance for credit losses as a percentage
of total loans at end of year ................................ 1.37% 1.37% 1.37% 1.05% 1.11%
Total number of banking offices ............................... 7 7 8 7 7
Total shares outstanding at end of year (1) ................... 1,005,920 1,005,920 966,864 966,864 819,290
Book value per share at end of year (1) ....................... $ 15.71 $ 13.68 $ 13.93 $ 12.97 $ 13.54
</TABLE>
- --------------------------------------------
(1) Presented to reflect 10% stock dividend declared in 1995.
15
<PAGE> 17
CERTAIN RISK FACTORS
Bank Shareholders should carefully consider the risks, including, without
limitation, the following, which may attach to an investment in shares of the
Company's common voting stock as compared to their current investments in shares
of the Bank's Common Stock. Given that such Shareholders, as Company
shareholders following the Merger, will continue to have an indirect ownership
interest in the Bank, they will continue to have the same risks as presently
associated with their holdings of Common Stock.
DISPARITY BETWEEN INSURANCE PREMIUM RATES; SAVINGS ASSOCIATION INSURANCE FUND
SPECIAL ASSESSMENT
As the Bank was originally a state chartered savings and loan
association, it has been required to remain a member of the Savings Association
Insurance Fund (the "SAIF") and pay premiums with respect to its insured
deposits at rates promulgated thereby, even though its savings association
charter was eliminated as of December 31, 1991, and it has operated as a
commercial bank thereafter. In mid-1994, it acquired by merger The Merchant Bank
of Florida ("Merchant"), and thereby became a member of the Bank Insurance Fund
(the "BIF") with respect to Merchant's assumed deposits. Based on that deposit
assumption, the Bank pays insurance premiums to the FDIC at both the SAIF and
BIF assessment rates. As of December 31, 1995, the most recent measuring date
for assessment purposes, approximately 65.8% of the Bank's deposits were treated
as SAIF-insured deposits, with the remaining 34.2% of deposits being assessed at
the BIF rate. This relative ratio of SAIF- and BIF-assessed deposits will remain
constant in the absence of any further deposit assumption transactions by the
Bank.
In August 1995, the FDIC adopted final regulations, retroactive to June
1, 1995, reducing assessment rates for BIF members for the remainder of 1995.
Under the revised assessment schedule, BIF-insured institutions paid assessments
for the second half of 1995 ranging from 0.04% of deposits to 0.31% of deposits
(4 to 31 basis points), with an average assessment rate of 0.044% of deposits.
In November 1995, the FDIC lowered assessment rates for BIF-insured institutions
by 0.04% to an assessment ranging from zero percent to 0.27% of deposits. At the
same time, the FDIC elected to retain the existing assessment range of 0.23% of
deposits to 0.31% of deposits (23 to 31 basis points) for SAIF members for the
foreseeable future given the undercapitalized nature of that insurance fund. The
Bank anticipates savings of approximately $101,600 in insurance premium costs
during the year ended December 31, 1996 with respect to its deposits that are
assessed at BIF rates as compared to 1995. However, by virtue of the fact that
roughly 65.8% of its deposits are currently assessed at the much higher SAIF
premium rates, the Bank is now paying much more in insurance premium costs than
a comparably-sized bank that does not hold any formerly SAIF-insured deposits.
There can be no assurance that the current disparity in premium rates will not
have a potentially adverse impact on the Bank's operations, earnings, and/or its
competitive position in the markets where it operates.
On July 28, 1995, the FDIC, the Treasury Department and the Office of
Thrift Supervision introduced a proposed plan (the "Proposed Plan") to
recapitalize the SAIF. The Proposed Plan,
16
<PAGE> 18
which is pending before Congress as a part of the proposed budget reconciliation
legislation, would require all SAIF-member institutions to pay a special
assessment of approximately 85 basis points (0.85% of deposits) based on the
amount of SAIF-insured deposits held by them on March 31, 1995. If enacted, the
special assessment would be payable some time in 1996, and would result in a
significant recapitalization of the SAIF so as to enable the fund to reach its
designated reserve ratio (i.e., the ratio of reserves to insured deposits) of
1.25 percent. It is anticipated that following the SAIF recapitalization,
premium rates for the SAIF would be reduced to the same levels to be paid by BIF
members. The Proposed Plan also provides that the BIF and the SAIF funds would
be merged no later than January 1, 1998, provided that the bank and thrift
charters would be merged by that date, and that interest on the $8.6 billion in
so-called FICO bonds issued in the late 1980s to provide funds to resolve
troubled thrift institutions would be henceforth borne by members of both
insurance funds.
Based on the amount of SAIF-assessed deposits held by the Bank on March
31, 1995, under the current version of the Proposed Plan the Bank would be
required to pay a special assessment to the SAIF of approximately $840,000
($503,000 on an after-tax basis). In accordance with accounting standards, the
Bank had not recorded an accrual for this contingency at December 31, 1995. If
this amount had been assessed and paid as of December 31, 1995, the Bank's Tier
1 capital, Tier 1 risk-based capital, and Total risk-based capital ratios on
that date would have been 8.28%, 12.00%, and 13.25%, respectively. The special
assessment paid by the Bank would be at least partially offset by a reduction in
insurance premiums paid by the Bank to the SAIF if, as expected, the FDIC were
to reduce SAIF premiums to BIF levels following payment of the special
assessment and recapitalization of the SAIF. Although it is anticipated that the
Bank's capital levels will continue to exceed all regulatory minimum
requirements following the payment of any special assessment, there can be no
assurance that the Bank's capital levels thereafter will be sufficient to
support management's growth strategy, or that additional capital will not be
required in the future to meet capital requirements and to permit the Bank's
continued growth and geographic expansion.
DEPENDENCY UPON THE BANK; DIVIDEND POLICY
The Company will depend upon the Bank's earnings and capital position
for funds sufficient (i) to pay the principal of, and interest on, its
indebtedness, if any, arising as a result of Bank Shareholders electing their
statutory rights of dissent, (ii) to pay Company expenses, and (iii) to pay
dividends upon the Company's common stock. The Bank does not expect to pay
dividends on its capital stock following the effectiveness of the Merger other
than for the purpose of enabling the Company to service any debt obligations
that it properly incurs or to pay dividends on the Company shares that holders
of the Common Stock will receive in the Merger. Moreover, the Company is
uncertain as to its ability or willingness to pay dividends on its common stock
for the foreseeable future following the Merger. In addition, the ability of the
Bank to pay dividends to the Company, as well as the amount that the Company may
pay as dividends to its shareholders, are limited by statute, regulation and
Federal Reserve policy, as well as other factors. Among these are the
maintenance of adequate capital in the Bank and by the Company, the prior
payment of interest on and principal of the Bank's deposits and other
17
<PAGE> 19
indebtedness, the realization of sufficient Bank earnings, and the prior payment
of interest on and principal of the Company's indebtedness (if any) and other
expenses. See "CERTAIN RISK FACTORS - The Company's Support of the Bank" and
"SUPERVISION AND REGULATION - Payment of Dividends".
THE COMPANY'S SUPPORT OF THE BANK
Under Federal Reserve policy, the Company, as a bank holding company,
will be expected to act as a source of financial strength for, and to commit
resources to support, the Bank. This support may be required at times when,
absent such a Federal Reserve policy, the Company may not be inclined to provide
it, and when such support would be contrary to the best interests of the
Company's shareholders. The Company is currently without equity capital and has
no present expectation of raising the same. See "SUPERVISION AND REGULATION."
COMPETITION
The financial services industry generally, and the commercial banking
industry in particular, are characterized by significant competition in
attracting and retaining deposits and in lending funds. The Bank competes for
deposits, as well as lending opportunities, with other commercial banks, savings
institutions, mortgage bankers and other financial intermediaries, as well as
securities firms and others offering money market funds and corporate and
government securities that may provide higher yields than those offered by
depository institutions. New and larger financial institutions may also enter
the Bank's market area and compete with the Bank for deposits and lending
opportunities in the future. Many of those institutions have substantially
greater financial resources and better name recognition and visibility than the
Bank. See "BUSINESS OF THE COMPANY AND THE BANK - Market Area".
LACK OF INVESTMENT LIQUIDITY
As its shares are not listed on any securities exchange or quoted on
any automated quotation system, there is no established trading market for
shares of Fort Brooke Common Stock, and neither the Bank's nor the Company's
management has any present intention of taking immediate action that would lead
to such a listing or quotation arrangement. Purchases and sales of such shares
have generally been, and are expected to continue to be, effected by interested
parties only as a result of indicating such interest to Fort Brooke. As an
accommodation to its shareholders and to persons wishing to acquire its
outstanding shares, the Company has traditionally been willing to inform such
inquiring persons of any prior expressions of interest in a purchase or sale by
others. Such an arrangement offers no assurance with regard to the liquidity of
the shares of the Company common stock that will be received by the Shareholders
if the Merger is consummated. While such shares, to the extent owned by persons
other than the Company's officers and directors or any controlling shareholder,
will not, following the Company's filing of a short-form registration statement
with the Securities and Exchange Commission, be subject to any specific
restrictions on transfer, it is not anticipated that an active trading market
will develop as a result of the Merger. Accordingly, each person anticipating
18
<PAGE> 20
the receipt of Company common stock as a result of the Merger should assume that
he, she or it may be required to bear the economic risk of his, her or its
original investment in the Bank for an indefinite period of time. See
"MARKETABILITY OF SECURITIES."
REGULATORY MATTERS
The banking industry is heavily regulated, both at federal and state
levels, and has been subjected to major business and regulatory changes in the
past decade. The significant number of failures of federally insured
institutions that occurred in the late 1980's and in the first three years of
the present decade, coupled with a like increase in institutions otherwise
requiring regulatory assistance, have generated laws requiring substantially
higher deposit insurance premiums and a resulting increase in operating costs,
as well as the establishment of new capital measurements and requirements,
additional lending and investment limits, and an increased level in regulatory
review of insured institutions. The volatility of interest rates prior to the
most recent several year period and the sensitivity of deposit costs to interest
rate developments have also contributed to substantial fluctuation in the profit
margins of banking institutions. Although the management of Fort Brooke believes
that interest rates have stabilized, they have continued to tailor the structure
of their respective asset portfolios to emphasize adjustable rate and short term
loans and short term investments to enable them to respond promptly to future
changes in prevailing interest rates. Such a business plan is expected to be
followed after the Merger. There can, however, be no assurance that it will
prove to be successful. See "FORT BROOKE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Results of Operations - Interest
Rate Sensitivity Analysis," and "SUPERVISION AND REGULATION."
FDIC INSURANCE.
Although chartered under Florida law, Fort Brooke is also regulated and
its deposits insured by the FDIC. Because of its status, prior to December 31,
1991, as a savings and loan association, Fort Brooke pays deposit insurance
premiums to the FDIC administered Savings and Loan Association Insurance Fund
which was established to administer the insurance requirements applicable to
such associations, and to the Bank Insurance Fund, the commercial bank
counterpart of SAIF. Those premiums are presently charged at a rate
substantially higher than that imposed prior to the effectiveness of current
law, which also authorizes future increases, and, as deemed necessary by the
FDIC, the imposition of special assessments. See "SUPERVISION AND REGULATION -
Insurance of Deposits."
COMMERCIAL, CONSTRUCTION AND CONSUMER LENDING.
It is expected that the Bank's strategy with regard to the growth of
its assets and the limitation of its liabilities will closely follow its current
activities, which include, in addition to the maintenance of traditional
activities related to the origination of a wide variety of commercial loans, the
development of a very limited number of well positioned and collateralized real
estate acquisition and development loans, as well as consumer loans. Although
these types of loans
19
<PAGE> 21
provide for higher interest rates, they also potentially involve more risk than
do commercial loans. Because commercial and construction loans are made to
developers and businesses and may be secured by unimproved real estate or
general business assets, they are considered to be more sensitive to general
economic conditions in the community. A significant number of consumer loans are
secured by items of personal property such as automobiles. Although the loan
loss experience of Fort Brooke has not been significant in the past, such
experience may not be representative of future loss performance in view of the
intended expansion of the bank's commercial, construction and consumer lending
activities. See "BUSINESS OF THE COMPANY AND FORT BROOKE - Lending Activities."
INFORMATION REGARDING THE MEETING
GENERAL
This Proxy Statement is being furnished to the holders of Fort Brooke
Common Stock in connection with the solicitation of proxies by the board of
directors of Fort Brooke for use at the annual meeting of its shareholders and
at any adjournments thereof. Each copy of this Proxy Statement being mailed or
otherwise delivered to holders of Common Stock is accompanied by a proxy card
and the Notice of Annual Meeting of Shareholders. It is anticipated that this
Proxy Statement and the accompanying Notice and proxy card will be mailed to
Fort Brooke shareholders on or about April 23, 1996.
MEETING
The Meeting is scheduled to be held on Thursday, May 9, 1996, at 4:00
p.m. local time, at the main offices of Fort Brooke located at 510 Vonderburg
Drive, Brandon, Florida. Only holders of record of Fort Brooke Common Stock at
the close of business on the Record Date are entitled to receive notice of and
to vote at the Meeting. At the Meeting, shareholders will consider and vote upon
the following proposals: (i) to approve the Merger Agreement and the Merger to
which it relates; (ii) to elect as directors of the Bank the nominees identified
in this Proxy Statement, or such other nominees, of which the Bank's existing
directors have no knowledge as of the date of this Proxy Statement, as may
properly be brought to the consideration of the Bank's shareholders at the
Meeting; (iii) to ratify the board of directors' prior selection of the Bank's
independent auditors for calendar year 1996; and (iv) such other matters as may
properly be brought before the Meeting. No member of the board of directors of
Fort Brooke knows of any business that will be presented for consideration at
the Meeting other than the matters described herein. On each matter to be
considered at the Meeting, each shareholder will have one vote for each share of
Common Stock held of record on the Record Date.
20
<PAGE> 22
RECORD DATE; QUORUM
Only holders of record of Common Stock as of the close of business on
Friday, March 15, 1996 (the "Record Date") will be entitled to vote at the
Meeting. As of the Record Date, there are expected to be 1,005,920 shares of
Common Stock outstanding and entitled to vote, held by 672 shareholders of
record, with each share being entitled to one vote. The presence, in person or
by proxy, of holders of a bare majority of the outstanding shares of Common
Stock (or approximately 502,961), is necessary to constitute a quorum at the
Meeting. Proxy cards marked "Abstain" for any proposal presented at the Meeting
will be counted for purposes of determining the presence of a quorum but shall
not be voted for or against such proposal.
VOTE REQUIRED
Once a quorum is established, approval of the Merger requires the
affirmative vote of a majority of the holders of the outstanding shares of
Common Stock. The failure to return a properly executed proxy card or,
alternatively, to vote in person at the Meeting will have the same legal effect
as a vote against the Merger Agreement and the Merger. Approval of any other
matter to be considered, other than the election of directors, will require the
vote of only a bare majority of the shareholders in attendance at the Meeting,
whether in person or by properly submitted proxy, and the election of individual
directors will be determined by a plurality of votes actually cast. The
directors and executive officers of Fort Brooke and their affiliates are
expected to be the beneficial owners, as of the Record Date, of 307,237 shares
(or approximately 30.5% of the outstanding shares) of Common Stock. All have
indicated an intention to vote in favor of the Merger Agreement and the Merger.
PROXIES
Any holder of Fort Brooke Common Stock who shall have delivered a proxy
may revoke it any time before it is voted by (i) giving notice of revocation in
writing, or (ii) submitting a signed proxy card bearing a later date to the
issuer of the shares, provided that such notice or proxy card is actually
received by the issuer before the vote of shareholders, or (iii) stating in the
Meeting prior to the taking of the shareholder vote that the proxy is revoked.
Any notice of revocation should be sent to Fort Brooke at its principal office
address: Attention: Corporate Secretary. A proxy will not be revoked by
subsequent death or incapacity of the shareholder executing the proxy unless,
before the vote, notice of such death or incapacity is filed with the Secretary.
Shares of Common Stock represented by properly executed proxies received at or
prior to the Meeting and not subsequently revoked will be voted as directed in
such proxies. If the proxy is properly executed but instructions are not given
with regard to a particular voting matter, shares represented by proxies
received will be voted FOR approval of each matter herein identified. If any
other matters are properly presented at the Meeting for consideration, the
person(s) named in the Proxy Card enclosed herewith will have discretionary
authority to vote on such matters; provided that the same will only be exercised
to the extent permissible under applicable federal and state securities and
corporation laws. If necessary, and unless contrary instructions are given, the
proxy holder also may vote in favor of a proposal to adjourn the
21
<PAGE> 23
meeting to permit further solicitation of proxies in order to obtain sufficient
votes to approve any matter herein referenced. As of the date of this Proxy
Statement, no member of the board of directors of Fort Brooke is aware of any
business to be presented for consideration at its Meeting other than the matters
described in this Proxy Statement.
The cost of soliciting proxies from holders of Common Stock will be
borne by Fort Brooke. Such solicitation will be made by mail but also may be
made by telephone or in person by the directors, officers and employees of the
issuing corporation (who will receive no additional compensation for doing so).
In addition, Fort Brooke may make arrangements with brokerage firms and other
custodians, nominees and fiduciaries to send proxy materials to their
principals. See "PROPOSAL NO. 1 - THE PROPOSED MERGER - Expenses".
HOLDERS OF FORT BROOKE COMMON STOCK ARE REQUESTED TO SIGN, DATE AND
RETURN PROMPTLY THE ACCOMPANYING PROXY CARD TO FORT BROOKE IN THE ENCLOSED
POSTAGE-PAID, ADDRESSED ENVELOPE. FAILURE TO RETURN YOUR PROPERLY EXECUTED PROXY
CARD OR TO VOTE AT THE APPLICABLE MEETING WILL HAVE THE SAME EFFECT AS A VOTE
AGAINST THE MERGER.
PROPOSAL NO. 1- THE PROPOSED MERGER
The following information, insofar as it relates to matters contained
in the Merger Agreement among Fort Brooke, the Company and Interim is qualified
in its entirety by reference to the Merger Agreement, which is incorporated
herein by reference and attached hereto as Appendix A. Each shareholder is urged
to read it carefully.
GENERAL
Subject to the conditions set forth therein, the Merger Agreement
provides for the merger of Interim with and into Fort Brooke, with Fort Brooke
emerging therefrom as the surviving or resulting entity. Upon completion of the
Merger each Fort Brooke shareholder choosing not to exercise a statutory right
of dissent (see "PROPOSAL NO. 1 - THE PROPOSED MERGER Dissenters Right") will be
entitled to receive, in exchange for the automatic cancellation and transfer to
the Company of each share of Fort Brooke Common Stock of which he or she will
then be deemed the owner of record, that number of whole shares of the Company's
common voting stock, $.001 par value, as shall equal the number of Company
shares then owned by such shareholder.
In addition to its outstanding shares of Common Stock, Fort Brooke has
heretofore granted non-qualified options to acquire an aggregate of 60,460
shares of its Common Stock to certain Fort Brooke employees (the "Employee
Options"). Upon the Effective Date of the Merger, each holder of an Employee
Option will be entitled to receive, in exchange for such Option's cancellation,
an option to acquire that same number of shares of the Company's Common Stock,
then authorized but previously unissued. The exercise price payable by the
holder of such a
22
<PAGE> 24
resulting option in order to acquire a single share of the Company's common
voting stock will be identical to the exercise price payable to acquire a single
share of Fort Brooke Common Stock reserved for issuance under an Employee
Option.
REASONS FOR AND BACKGROUND OF THE MERGER
As part of its strategic planning activities, Fort Brooke's management
has, since early 1991, periodically evaluated opportunities for business
combinations and acquisitions as a means by which to increase its asset and
earnings growth rate and actual size so as to enhance its ability to more
effectively compete with the regional bank holding company operations that have
come to dominate banking activities within Fort Brooke's service market. Such
efforts have been viewed by Fort Brooke's board of directors as compatible with
its fiduciary duty to seek preservation and growth of shareholder investment
value. In that regard, in the late fall of 1995, as a result of determining
that, at the end of calendar year 1995, the Bank's financial condition would be
sound and somewhat better than had been expected at the commencement of that
year, the Bank's management proposed that a bank holding company structure would
be of benefit to the Bank's shareholders and customer base, principally by
providing the Bank with expanded structural and financial flexibility derived
from a holding company's ability to acquire or establish nonbanking businesses
to engage in activities closely related to banking business, such as insurance
and investment advisory services; to raise capital through a potentially wider
variety of instruments than available to the Bank; to better respond to
opportunities to expand the Bank's geographic area of operations through the
acquisition of other existing banks that could be operated as separate
subsidiaries; and to provide a greater potential for shareholder liquidity
arising out of the Company's ability to repurchase limited quantities of its
outstanding shares or to expand the number of shares of Company stock through
stock splits or dividends, which could be effected without prior regulatory
approval; which factors would tend to enhance the Bank's competitive posture in
its service area.
In mid-January 1996, such plan was presented to the Bank's board of
directors and authority for its implementation was granted, subject to the
filing of all required regulatory applications and the receipt of subsequent
approvals, and to the approval of a majority in interest of the Bank's
shareholders at their annual meeting. Separate and supplemental Board action was
taken in March 1996. The Company and Interim have been formed, the Merger
Agreement negotiated and executed and applications for authority to effect the
Merger and to create the bank holding company structure herein described filed,
respectively, with the Department, the Board of Governors and the FDIC.
BOARD RECOMMENDATION
FOR THE REASONS DISCUSSED ABOVE, THE BOARD OF DIRECTORS OF FORT BROOKE
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT EACH FORT BROOKE
SHAREHOLDER VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT AND THE MERGER AND ALL
OTHER MATTERS RELATING TO THE MERGER PRESENTED AT THE FORT BROOKE ANNUAL
MEETING.
23
<PAGE> 25
CLOSING AND EFFECTIVE DATES
The "Closing Date" of the Merger and the date on which the Merger is to
be legally effective (the "Effective Date") are intended by the parties to occur
on the same date, but may be separated by mutual consent. The rationale for such
an arrangement derives from their mutual desire that all representations and
warranties made to the other in the Merger Agreement be deemed restated at the
precise time as of which the Merger is determined to be legally effective. In
that regard, Florida law contemplates issuance by the Florida Department of
Banking and Finance, subsequent to its receipt of evidence substantiating all
other regulatory and shareholder approvals to the Merger, of a Certificate of
Merger that fixes the Effective Date on or after the date of such issuance.
Because a merger of corporate entities, irrespective of whether some or all are
commercial banks, is deemed legally effective, however, only at the time the
Certificate of Merger is actually filed by the Department with the Florida
Department of State, an event which is under the control of the Department
rather than the parties and usually occurs one or more days after the
Certificate is executed by the State Comptroller (in his capacity as the head of
the Department of Banking and Finance), the parties will request the Department
to designate an Effective Date in the Certificate on which it is certain to be
able to effect the required filing, and will then schedule their Closing to
coincide with that date, thereby assuring the desired restatement of warranties
on the Effective Date.
EFFECT OF THE MERGER
On the Effective Date of the Merger, the corporate charter of Interim
will be terminated and surrendered, and its corporate existence will be deemed
merged with and into that of Fort Brooke. Thereafter, all rights, franchises,
property and other interests of Interim, as well as all of its obligations and
liabilities, will be deemed transferred to and vested in Fort Brooke without the
necessity of there being created, executed and exchanged any instruments of
transfer.
On that same Date, each of the certificates representing one or more of
the then outstanding shares of Fort Brooke Common Stock and Interim common stock
will be deemed cancelled and each holder thereof will cease to have any rights
in respect of such shares. In lieu thereof, the holder of each share of Fort
Brooke Common Stock will have rights (a) in the case of all non-dissenting
shareholders, solely in respect of the Company Common Stock into which shares of
Fort Brooke Common Stock will have been deemed automatically converted and
exchanged under the provisions of the Merger Agreement, or (b) in the case of
any other Fort Brooke holder, as a dissenting shareholder exercising his, her or
its statutory right to receive fair value for the cancelled shares of Fort
Brooke Common Stock so owned. Each non-dissenting Fort Brooke shareholder shall,
following consummation of the Merger, have the right to receive from the Company
an identical number of shares of the Company's common voting stock, as provided
in the Merger Agreement. Until replaced by one or more Company certificates
evidencing the shares of its common stock to which a non-dissenting Fort Brooke
shareholder will be entitled, each outstanding certificate which, prior to the
Effective Date of the Merger, will have represented one or more shares of Fort
Brooke Common Stock owned by such a shareholder will be deemed for all corporate
purposes to evidence ownership of the same number of full shares
24
<PAGE> 26
of the Company's common stock into which the shares of Fort Brooke Common Stock
will have been deemed so converted. All shares of Fort Brooke Common Stock held,
at the Effective Date of the Merger, by non-dissenting Fort Brooke shareholders
will be deemed automatically transferred and assigned to the Company, rendering
the Bank a wholly owned subsidiary of the Company, and all shares of the
Company's common stock issued and outstanding immediately prior to the
effectiveness of the Merger will, upon such effectiveness, be redeemed by the
Company, thereafter rendering the Bank's Shareholders the sole shareholders of
the Company.
Further, each holder of an Employee Option will be entitled to receive,
in exchange for such Option's deemed cancellation, an option to acquire the same
number of shares of the Company's Common Stock, then authorized but previously
unissued. The exercise price payable by the holder of such a resulting option in
order to acquire a single share of Fort Brooke's Common Stock shall be the same
as the exercise price payable to acquire a single share of Fort Brooke Common
Stock reserved for issuance under an Employee Option.
CONDITIONS TO CONSUMMATION OF THE MERGERS
MUTUAL CONDITIONS The respective obligations of Fort Brooke, the
Company and Interim to effect the Merger are subject to the satisfaction or
waiver of certain conditions, including the following which are mutual in
nature:
1. Receipt by the parties of all applicable regulatory
approvals, including, as necessary, the following:
a. By the Board of Governors, to the Company's application
for authority to acquire 100% of the Bank's outstanding stock and to
contemporaneously be constituted as a bank holding company under The
Bank Holding Company Act of 1956, as amended, or any other applicable
statute or regulation;
b. By each of the FDIC and the Department, as applicable,
to the Merger; and
c. By any federal or state regulatory agency, as may be
required with respect to the proposed issuance by the Company of shares
of its common voting stock to the Fort Brooke shareholders in
connection with the Merger.
2. Receipt by the Fort Brooke board of directors of an opinion
furnished by its legal counsel to the effect that the Merger is more likely than
not to qualify as a "reorganization," as that quoted term is defined in Section
368(a) of the Internal Revenue Code of 1986, as amended.
3. The requisite majority interest of shareholders of Fort Brooke
having approved the consummation of the transactions described in this Proxy
Statement.
25
<PAGE> 27
4. Holders of no more than ten percent of the issued and
outstanding shares of Fort Brooke having properly exercised their right
to claim dissenting shareholder status so as to be entitled to receive
cash in exchange for a cancellation and voiding of their Fort Brooke
shares.
INDIVIDUAL CONDITIONS The obligation of each of Fort Brooke,
the Company and Interim to complete the transactions described herein shall be
subject to the performance by each of the other two of all its agreements and
covenants to be performed under the Merger Agreement on or before the occurrence
of the Closing Date, to the truth and accuracy of the representations and
warranties of the other contained in the Merger Agreement at the Closing of the
Merger, and to the further conditions that:
1. Each shall have received from the other certificates,
dated, respectively, as of the Closing Date, and stating that (i) the
representations and warranties of the certifying party are then correct
and complete, (ii) such party is then in full compliance with every
term and condition of the Merger Agreement applicable to it; and (iii)
there have occurred no material adverse changes in the affairs,
business, financial condition or prospects of the certifying party
between the date of any financial statements referenced in the Merger
Agreement and the date upon which the certificate is to be furnished.
2. Each of the representations and warranties of the other
party contained in the Merger Agreement shall be correct and complete
as of the Closing Date, with the same effect as though made on and as
of such date.
3. Each of the agreements of the other party to be performed
or complied with on or before the Closing Date pursuant to the terms of
the Merger Agreement shall have been duly performed or complied with.
4. All consents to the consummation of the transactions
contemplated by the Merger Agreement which are required in order to
prevent a breach of, or a default under, the terms of any material
agreement to which the other is a party or is bound shall have been
obtained.
5. No action or proceeding shall have been instituted or, to
the knowledge of the other party, shall have been threatened to
prohibit, restrain or modify the transactions contemplated by the
Merger Agreement; no governmental agency shall have taken any other
action or made any request of one of the parties as a result of which
the other reasonably deems it inadvisable to proceed with the Merger;
and resolution of all other legal proceedings involving any party shall
have been effected in a manner satisfactory to the board of directors
of the other(s) and applicable counsel, or, alternatively, provisions
acceptable to such board of directors and counsel shall have been made
with respect to any potential liability that might arise therefrom.
26
<PAGE> 28
6. Each party shall have delivered to the others correct and
complete copies of the resolutions or written actions of its board of
directors and shareholders pursuant to which the execution and
consummation of the Merger Agreement were duly and validly authorized.
REGULATORY APPROVALS
The Merger may not become effective without prior approval by
applicable regulatory authorities. No assurance can be furnished that all such
approvals will be forthcoming or, if obtained, as to the date thereof.
Applications have been submitted seeking each of the regulatory approvals
referred to below.
BOARD OF GOVERNORS The Company must file an application with the Board
of Governors pursuant to Section 3(a)(1) of the Bank Holding Company Act of
1956, as amended, seeking prior approval of its proposed acquisition of a 100%
ownership interest in the Bank and of its resulting status as a bank holding
company. The application requires information relating to the proposed
transaction and certain financial and managerial matters. Generally, completion
of the acquisition may be effected at a time of the applicant's choice which is
more than 30 days after the initial filing date, subject to the right of Board
or its delegated authority to comment upon the application or to require further
information or undertakings in respect thereof.
FDIC Under Section 18(c) of the Federal Deposit Insurance Act,
sometimes known as the Bank Merger Act, written approval of the FDIC must be
obtained before any insured bank may merge with an uninsured entity if the
surviving or resulting bank is not to be a member of the Federal Reserve System.
Although the Merger of Interim with and into Fort Brooke technically constitutes
such a transaction, the FDIC recognizes that where the transaction is to be
undertaken solely for purposes of effecting a corporate reorganization only an
abbreviated review process should be required. Such process is initiated by the
filing of a "phantom merger" application with the Regional Office of the FDIC
for the region in which each subject depository institution is located, which is
thereafter considered by such agency with a view to ensuring that the corporate
structure and operations of the bank will not materially change. Inquiries are
required to be made by the reviewing agency of the Department of Justice and the
other bank regulatory agencies, principally to ensure the application of uniform
standards of review, and, once approval has been issued, the applicable merger
may be promptly completed. The process typically requires a period of 45 days.
FLORIDA Since Fort Brooke is chartered by the State of Florida, it must
file a separate application with the Florida Department of Banking and Finance
seeking approval to merge. As background investigations of each of the directors
and executive officers of the Bank and the Company have previously been
conducted, the review process will focus principally upon the proposed
management of the Company and the capital strength of the resulting bank holding
company arrangement and its potential competitive effects. Although the
applicable Florida statutes contemplate a 90 day period of review, a transaction
involving a "phantom" merger
27
<PAGE> 29
partner tends to involve a shorter period, more likely of the same duration as
that contemplated with respect to the FDIC.
CONDUCT OF BUSINESS PENDING THE MERGER
Except as otherwise provided in the Merger Agreement, Fort Brooke has
agreed, pending consummation of the Merger, to conduct its operations in the
ordinary course of business, consistent with past practice, the Company has
agreed to take all reasonable actions to timely and favorably conclude its
application for registration as a bank holding company; and Interim has agreed
to undertake no banking or other forms of business activity.
TERMINATION AND AMENDMENT OF MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior the Effective
Date by mutual consent of a majority of the members of the boards of directors
of either Fort Brooke or the Company. In addition, either of those parties may
terminate the Merger Agreement in the event of (i) a breach by another party of
any of its representations or warranties which has not been cured, otherwise
resolved to the satisfaction of, or waived by the terminating party on or prior
to the Effective Date, (ii) a breach of any material covenant or other agreement
contained in the Merger Agreement; or (iii) a failure by any applicable
regulatory agency to approve the Merger transaction, or any aspect thereof, as
described herein. Upon any termination of the Merger Agreement in accordance
with its terms, the Merger Agreement shall become void and there shall be no
liability on the part of any party to another, except for certain expense and
confidentiality obligations. The Merger Agreement, including all the provisions
set forth above, may be amended or modified in writing by the parties thereto at
any time before the Effective Date.
MANAGEMENT AFTER THE MERGER
The directors and officers of Fort Brooke serving in those capacities
immediately prior to the Effective Date will continue as those same directors
and officers upon consummation of the Merger. The Company's board of directors
is composed of the same individuals who presently serve on the Bank's board and
who are nominees for reelection to those positions. Messrs. Eatman and Adams,
respectively the Bank's President and Secretary, will hold those same positions
in the Company and Mr. Eatman will also serve as its Treasurer. As it is not
contemplated that the Company will initially conduct any business activities
other than as the holder of all shares of the Bank's Common Stock, the Company's
board has not deemed it necessary or advisable to elect additional officers.
EFFECT ON FORT BROOKE EMPLOYEE BENEFIT PLANS
The employees and officers of Fort Brooke will, at and after the
Effective Date, continue to be covered under the plans and policies that are
currently being provided by Fort Brooke to those same persons.
28
<PAGE> 30
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The discussion below provides general information about certain
expected federal income tax consequences of the Merger. Each Fort Brooke
shareholder should consult his or her own tax advisor as to the specific tax
consequences of the Merger for such shareholder, including the applicable and
possible effect of foreign, state, and local tax laws.
The consummation of the Merger is conditioned upon the receipt by Fort
Brooke from its legal counsel of an opinion to the effect that for federal
income tax purposes the Merger is more likely than not to qualify as a
"reorganization" as that quoted term is defined in Section 368(a) of the Code.
In rendering such opinion, legal counsel will be entitled to rely on
representations by Fort Brooke as to factual matters.
Assuming that the Merger qualifies as a "reorganization" within the
meaning of Section 368(a) of the Code, a Fort Brooke shareholder will recognize
neither gain nor loss on the exchange of all of his or her Fort Brooke shares
solely for shares of the Company's voting common stock. The tax basis of the
Company's common stock received in the Merger by a Fort Brooke shareholder will
be equal to the shareholder's tax basis for the Fort Brooke Common Stock
exchanged therefor. If a shareholder holds his or her Fort Brooke Common Stock
as a capital asset, such shareholder will include the period during which such
Stock surrendered was held in his or her holding period for the shares of the
Company's common stock received in exchange therefor.
THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION
ONLY. IT DOES NOT ADDRESS THE STATE, LOCAL, OR FOREIGN TAX ASPECTS OF THE
MERGER. SUCH DISCUSSION IS AND THE OPINION OF COUNSEL DESCRIBED ABOVE WILL BE
BASED ON CURRENTLY EXISTING PROVISIONS OF THE INTERNAL REVENUE CODE, EXISTING
TREASURY REGULATIONS THEREUNDER, AND CURRENT ADMINISTRATIVE RULINGS AND COURT
DECISIONS. THE OPINION OF COUNSEL DESCRIBED ABOVE WILL NOT BE BINDING UPON THE
INTERNAL REVENUE SERVICE, AND NO RULINGS OF THE INTERNAL REVENUE SERVICE WILL BE
SOUGHT OR OBTAINED. THERE IS NO ASSURANCE THAT THE INTERNAL REVENUE SERVICE WILL
AGREE WITH THE FOREGOING DISCUSSION OR THE OPINION DESCRIBED ABOVE. ALL OF THE
FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING
VALIDITY OF THIS DISCUSSION AND THE OPINION. BECAUSE OF THE COMPLEXITIES OF THE
TAX LAWS, EACH FORT BROOKE SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR
WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO HIM OR HER,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL, AND FOREIGN TAX LAWS.
29
<PAGE> 31
ACCOUNTING TREATMENT
For financial purposes, the Merger of Interim with and into Fort Brooke
is expected to be accounted for as a pooling-of-interests. In a pooling
transaction, the shareholders neither withdraw or exchange assets, but exchange
shares in accordance with a ratio that preserves their ownership interests. The
assets and liabilities of the Bank will be reflected in the consolidated
financial statements of the Company at their historical costs and the Company's
common stock, additional paid-in capital and retained earnings will be recorded
in an aggregate amount equal to the book value of the Bank.
EXPENSES
Fort Brooke is responsible for the payment of all fees charged by any
regulatory authority in connection with the receipt or review of each
application for approval of any aspect of the transactions contemplated by the
Merger Agreement, as well as all expenses of all financial or other consultants,
accountants and counsel engaged in connection with the transactions herein
described.
DISSENTERS' RIGHTS
The following summary does not purport to be a complete statement of
the procedure to be followed by Fort Brooke shareholders desiring to exercise
dissenters' rights and is qualified in its entirety by reference to Section
658.44 of the Florida Banking Code (Chapter 658, Florida Statutes), the full
text of which is attached hereto as Appendix B (the "Dissenter Provisions").
Since the preservation and exercise of dissenters' rights require strict
adherence to the provisions of such law, any Fort Brooke shareholder who desires
to exercise such rights should review such laws carefully, timely consult his or
her own legal advisors and strictly follow the Dissenter Provisions.
Each outstanding share of Fort Brooke Common Stock, the holder of which
shall have perfected his or her demand for payment of the fair market value of
such share in accordance with the Dissenter Provisions, and who has not
effectively withdrawn or lost his or her right to such payment, shall not be
exchanged for or converted into a share of the Company's common stock, but shall
represent only rights granted with respect to such dissenting Fort Brooke Common
Stock pursuant to the Dissenter Provisions. If the holders of more than ten
percent of the Bank's Common Stock shall exercise their dissenters' rights,
however, Fort Brooke may elect not to consummate the Merger, in which event such
holders would continue as Fort Brooke shareholders and would have no right to
receive the cash payment herein described.
Under the Dissenter Provisions, any holder of Fort Brooke Common Stock
shall be entitled to receive the fair market value of his or her shares thereof,
in cash, if he or she shall have taken either of the following actions: (i) at
any time before the vote is taken at the Meeting with respect to approval of the
Merger Agreement and the Merger, the holder furnishes written notice to Fort
Brooke that he or she dissents from the Merger Agreement and the Merger and,
30
<PAGE> 32
at the time of the vote, either refrains from voting with respect to such issue
or votes in opposition to the Merger; or (ii) at the Meeting, having failed to
provide such prior written notice of dissent, the holder votes his or her shares
against approval of the Merger Agreement and the Merger. A shareholder may
effect the foregoing dissent with respect to all or less than all of his or her
shares of Common Stock.
Promptly after the Effective Date of the Merger, Fort Brooke and the
Company shall fix an amount which it considers to be not more than the fair
market value of each share of Common Stock, and shall make a written offer to
each dissenting shareholder to pay such amount, in cash, within 30 days after
such Effective Date. Such offer shall be accompanied by a balance sheet of Fort
Brooke prepared as of the latest available date and not more than 12 months
prior to the making of such offer, a profit and loss statement of Fort Brooke
for the 12 month period then ended, and an acceptance form, with appropriate
instructions, which the shareholder may execute and return.
If any electing holder of Fort Brooke Common Stock accepts the offer,
payment for his or her dissenting shares shall be made within 30 days after the
Effective Date of the Merger. Conversely, as to each dissenting shareholder who
fails to accept the offer in time for payment to be made within such period, the
Bank and/or the Company, as applicable, will promptly furnish a notice setting
forth the names of all such dissenting shareholders; advising that Florida law
requires that three appraisers be appointed to effect a valuation of their Fort
Brooke shares, one of which will be selected by the Bank, one by such dissenting
shareholders and the third by the other two; identifying the appraiser selected
by the Bank under that process; and requesting that, within the 50 day period,
measured from the Effective Date of the Merger, such dissenting shareholders
select their appraiser. The appraiser selected by at least two-thirds of such
dissenting shareholders will represent their interests, and following selection
of the third appraiser, such representatives will determine the value of the
Bank's shares. Agreement by any two of the three appraisers will be controlling
and binding on all parties. If, within the 90 day period following the Effective
Date of the Merger, one or more of the appraisers is not selected or the
selected appraisers fail to reach the requisite agreement with regard to value,
then the Department shall have jurisdiction to cause an appraisal to be
undertaken which will be binding on the parties. The Bank or the Company, as
applicable, will expect to pay the appraised value to each such dissenting
shareholder within ten days after final determination of the appraisal
proceeding, however conducted. The costs and expenses of any such proceeding
will be paid by the Bank.
31
<PAGE> 33
ANY FORT BROOKE SHAREHOLDER INTENDING TO DISSENT FROM THE
MERGER AND TO DEMAND PAYMENT FOR HIS SHARES IF THE MERGER IS
EFFECTUATED IS REQUESTED TO DELIVER A WRITTEN
NOTICE OF SUCH INTENTION, PRIOR TO THE VOTE ON SUCH
MATTER, TO:
Fort Brooke Bank
510 Vonderburg Drive
Brandon, Florida 33511
Attention: Nancy Soleto, Shareholder Relations
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL NO. 1
PROPOSAL NO. 2 - ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
Fort Brooke's Articles of Incorporation provide that its board of
directors shall consist of not less than five members. Its bylaws impose an
upward limit of 15 members and grant the directors the authority to fix the
actual number within those limits by providing them with the right to nominate
the individuals who are to be voted upon by Fort Brooke's shareholders. Both
governing instruments require the election of each director on an annual basis,
and grant the Bank's shareholders the right to authorize its board of directors
to increase the number of directors by no more than two during the period
between annual shareholder meetings. Directors elected at an annual shareholder
meeting are to serve until the occurrence of the next such annual meeting and
the election of their respective successors. Fort Brooke's bylaws do not limit
the number of consecutive one year terms to which a director may be elected.
Unless otherwise instructed, the shares represented by the board of
director proxies being solicited hereby will be voted for the election as
directors of the 14 nominees named below, each of whom is currently serving as a
Fort Brooke director. Board of director proxies cannot be voted for a greater
number than the 14 nominees named below. The Fort Brooke board has no reason to
believe that any nominee will be unavailable to serve, but in that event the
proxies will be voted for each substitute as the board may recommend at the
Meeting:
<TABLE>
<CAPTION>
Position Years of
Name and with the Service as
Residential Address Age Bank Director
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John D. Adams, 64 Director 15
7209 Adamo Drive
Tampa, FL 33619
</TABLE>
32
<PAGE> 34
<TABLE>
<S> <C> <C> <C>
Melvin R. Belisle 59 Director 4
505 Lakeside Drive
Seffner, FL 33584
Tommy W. Brown 55 Director 15
3010 N. 38th Street
Tampa, FL 33605
Richard H. Eatman 53 Director, President and 7
607 Royal Crest Drive Chief Executive Director
Brandon, FL 33511
H. Rex Etheredge 49 Director 3
918 Centerbrook Drive
Brandon, FL 33511
Joseph Garcia 65 Director 10
2014 Woodberry Road
Brandon, FL 33511
Riley L. Hogan 61 Director 10
1704 Cottage Way Court
Brandon, FL 33511
Alex D. MacKinnon 56 Director 4
705 Centerbrook Drive
Brandon, FL 33511
Thomas H. Miller 59 Chairman of the 15
616 West Brandon Blvd. Board of Directors
Brandon, FL 33511
Charles W. Poe 67 Director 13
4601 San Miguel
Tampa, FL 33629
William F. Poe 64 Director 13
70 Ladoga
Tampa, FL 33606
Reese T. Poppell 57 Director 3
2807 Wedgewood Drive
Plant City, FL 33567
</TABLE>
33
<PAGE> 35
<TABLE>
<S> <C> <C> <C>
Sam Rampello 55 Director 15
1107 Riverhills Drive
Temple Terrace, FL 33617
David C. Worthington 63 Director 11
908 South Parsons
Brandon, FL 33511
</TABLE>
JOHN D. ADAMS, SR. is president of Adams Air and Hydraulics, Inc., a
hydraulic and pneumatic sales, service and engineering company.
MELVIN R. BELISLE is President of Fife Industrial Pipe Co., Brandon, FL
TOMMY W. BROWN is Chief Executive Officer of Brown Automatic
Sprinklers, Inc., Tampa.
RICHARD H. EATMAN has been a Director, as well as the President and
Chief Executive Officer of Fort Brooke Bank since 1989.
H. REX ETHEREDGE is Chief Executive Officer of Columbia Brandon
Regional Medical Center.
JOSEPH GARCIA is managing partner of the Tampa, Florida law firm of
Garcia & Fields, P.A. and a general partner of Big Bend Farms, Ltd. He is also
Chairman of the Tampa Port Authority.
RILEY L. HOGAN JR. is the general manager of The Tampa Independent
Dairy Farmers Association. He also serves as a Director of the Tampa Port
Authority.
ALEX D. MACKINNON is President of Yale Industrial Trucks, Inc. He also
serves on the Board of Trustees of Brandon Hospital. He is a member of the Board
of Trustees of the Tampa Sports Authority.
THOMAS H. MILLER is an owner-agent with State Farm Insurance Companies.
He has also served as secretary/treasurer of Wise Land Development, Inc.
(formerly known as Spivey and Miller Restaurant Systems, Inc.) since 1974. He is
active with the Brandon Chamber of Commerce.
CHARLES W. POE is President of Poe Industries, Inc., a consulting firm,
and is a director of Poe & Brown, Inc., a publicly held general insurance agency
in Florida. Previously, Mr. Poe was owner and chief executive officer and
president of City Ready Mix Company in Plant City, Florida for many years.
34
<PAGE> 36
WILLIAM F. POE is President/Owner of Poe Investments, Inc. Mr. Poe is
Director of Poe & Brown, Inc., a publicly owned general insurance agency
headquartered in Tampa. He served as mayor of the City of Tampa from 1974
through 1979.
REESE T. POPPELL is President and CEO of Poppell Insurance Inc., and
President of Redelco, Inc.
SAMUEL J. RAMPELLO is Supervisor of School Finance and Special Programs
in the Hillsborough County School System, and is a past member of the
Hillsborough County School Board.
DAVID C. WORTHINGTON, M.D., is a physician and former Chief of the
Department of Surgery of Brandon Hospital. He is also former Chairman of the
Board of Trustees of Brandon Hospital and formerly served as Medical Director of
The Village at Brandon, a Nursing Home.
Each Fort Brooke director is elected for a term of one year normally to
expire at the annual meeting of the Fort Brooke shareholders or at such other
time as his or her successor is elected and shall have qualified. Fort Brooke's
board of directors held 12 regular meetings during 1995. Each current director
attended at least 75% of those meetings. The board of directors has appointed
various committees, including an Audit Committee, Compensation Committee, Asset
and Liability Management Committee and Loan Review and Approval Committee, to
review and consider various aspects of Fort Brooke's operations and to summarize
the same and adopt recommendations with regard to their treatment for
presentation to the full board of directors. Each officer of Fort Brooke is
elected by and serves at the pleasure of the board of directors.
PROPOSAL NO. 3 - RATIFICATION OF PRIOR
SELECTION OF INDEPENDENT AUDITORS
Fort Brooke's board of directors has selected the Tampa based
independent certified public accounting firm of Hacker, Johnson, Cohen & Grieb
to perform audit and related functions with respect to Fort Brooke's accounts
for its fiscal year ending December 31, 1996. That firm has been selected to
perform these services for the Bank continuously since 1994. The board
recommends ratification of its selection. Accordingly, unless a contrary
instruction appears, the shares represented by proxy cards executed and returned
to Fort Brooke as a result of this Proxy Statement will be voted for the
ratification of the appointment of Hacker, Johnson, Cohen & Grieb as Fort
Brooke's independent auditors and accountants. Should its selection be ratified,
the board reserves the right to replace such firm without further shareholder
approval if it deems such a change to be in the best interests of Fort Brooke.
One or more representatives of that accounting firm may be in attendance at the
Meeting to respond to any appropriate questions which may be raised by
shareholders.
35
<PAGE> 37
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL
NO. 3.
OTHER MATTERS
As of the date this Proxy Statement is being furnished, the board of
directors of Fort Brooke has no information that any other matter will be
brought before the Meeting. If, however, other matters are presented, it is the
intention of the person or persons named in the accompanying form of proxy card
prepared for use in connection with the conduct of the Meeting to vote the proxy
in accordance with his or their reasonable discretion, authority to do so being
granted in the proxy card.
FORT BROOKE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion is provided to afford the reader an
understanding of the major elements of Fort Brook's financial condition, results
of operation, capital resources and liquidity. It should be read in conjunction
with the financial statements and notes thereto and other information appearing
elsewhere in this Proxy Statement.
GENERAL
The Bank's main business is to attract deposits and to invest those
funds in loans, including both secured and unsecured commercial loans,
construction and permanent residential mortgage loans, and, to a lesser extent,
loans secured by commercial and multi-family residential real estate properties
and consumer loans. At December 31, 1995, the Bank had total assets of $187.1
million (an increase of 6.77% over the $175.3 million recorded at December 31,
1994) and total stockholders' equity of $15.8 million (up 14.5% over the $13.8
million at December 31, 1994). For the year ended December 31, 1995, it had
consolidated net earnings of $1,664,000, an increase of 169% from the previous
year's total of $619,000.
During the year ended December 31, 1995 net loans receivable increased
$10.1 million or 9.0%. The Bank's portfolio of investment securities decreased
to $43.7 million as of December 31, 1995 from $45.0 million as of December 31,
1994. The Bank's deposits increased to $168.3 million as of December 31, 1995
from $157.9 million as of December 31, 1994. The 6.6% increase in deposits
reflected the Bank's strategy of continuing to accept and retain deposit
accounts for which funds can be prudently invested.
ACQUISITION
On July 14, 1994, the Bank effected a statutory merger with The
Merchant Bancorporation of Florida, Inc., a one bank holding company ("MBF"),
and its wholly owned
36
<PAGE> 38
subsidiary, The Merchant Bank of Florida, a Florida chartered commercial bank
("Merchant".) Under the merger agreement, each of MBF and Merchant were merged
with and into the Bank and 397,904 shares of the Bank's common stock were issued
in exchange for all of the outstanding common stock of MBF. The Merger was
accounted for as a pooling of interests, and accordingly, the accompanying
consolidated financial statements have been restated for all periods prior to
the acquisition to include the results of operations, financial positions and
cash flows of MBF.
REGULATION AND LEGISLATION
As a state-chartered commercial bank, Fort Brooke is subject to
extensive regulation by the Department and the FDIC. Fort Brooke files reports
with the Department and the FDIC concerning its activities and financial
condition, in addition to obtaining regulatory approvals prior to entering into
certain transactions such as mergers with or acquisitions of other financial
institutions. Periodic examinations are performed by the Department and the FDIC
to monitor Fort Brooke's compliance with the various regulatory requirements.
The Bank is also subject to regulation by the Board of Governors with respect to
reserves required to be maintained against deposits and certain other matters.
As a Florida corporation, it is subject to that state's banking laws and to
certain regulation by the Florida Department of State.
CREDIT RISK
Fort Brooke's business activity entails potential loan losses, the
magnitude of which depend on a variety of economic factors affecting borrowers
which are beyond the control of the Bank. While Fort Brooke has instituted
underwriting guidelines and credit review procedures to protect the Bank from
avoidable credit losses, some losses will inevitably occur. See "BUSINESS OF THE
COMPANY AND FORT BROOKE - Lending Activities", for a detailed discussion and
analysis of the Bank's operations with respect to the types of loans
historically offered, loan maturities, commitment activities, the effect upon
the Bank of the secondary mortgage market, loan income, nonperforming and
classified assets.
RESULTS OF OPERATIONS
The operating results of the Bank depend primarily on its net interest
income, which is equal to the difference between interest income on
interest-earning assets and interest expense on interest-bearing liabilities,
consisting primarily of deposits. Net interest income is determined by reference
to (i) the difference between yields earned on interest-earning assets and rates
paid on interest-bearing liabilities ("interest rate spread"), and (ii) the
relative amounts of interest-earning assets and interest-bearing liabilities.
The Bank's interest rate spread is affected by regulatory, economic and
competitive factors that influence interest rates, loan demand and deposit
flows. In addition, the Bank's net earnings are also affected by the level of
nonperforming loans and real estate owned, as well as the level of its
non-interest bearing income and non-interest paying expenses, such as salaries
and employee benefits, occupancy and equipment costs and provisions for losses
on real estate owned and income taxes.
37
<PAGE> 39
The following table sets forth for the periods indicated information
regarding (i) the total dollar amount of interest and dividend income of the
Bank from interest-earning assets and the resultant average yields; (ii) the
total dollar amount of interest expense on interest-bearing liabilities and the
resultant average cost; (iii) net interest/dividend income; (iv) interest rate
spread; and (v) interest margin. Average balances are based upon daily balances.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------
1995 1994 1993
-------------------------- ---------------------------- ----------------------------
Interest Average Interest Average Interest Average
Average and Yield/ Average and Yield/ Average and Yield/
Balance Dividends Rate Balance Dividends Rate Balance Dividends Rate
-------- --------- ----- ------- --------- ------ ------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans (1) ..................... $ 114,502 10,883 9.50% $ 100,905 8,824 8.74% $ 102,772 8,790 8.55%
Investment securities ......... 42,985 2,567 5.97 47,305 2,397 5.07 39,941 2,209 5.53
Other interest-earning
assets (2) ................ 8,315 479 5.76 8,039 392 4.88 8,415 297 3.53
--------- ------ --------- ------ --------- -----
Total ................ 165,802 13,929 8.40 156,249 11,613 7.43 151,128 11,296 7.47
------ ------ ------
Noninterest-earning assets ........ 14,178 16,896 13,979
---------
Total ................ $ 179,980 $ 173,145 $ 165,107
========= ========= =========
Interest-bearing liabilities:
Savings and NOW accounts ...... 31,331 662 2.11 32,086 653 2.03 28,579 594 2.08
Money market deposits ......... 23,296 690 2.96 27,518 654 2.38 22,576 530 2.35
Certificates of deposit ....... 74,911 4,135 5.52 70,157 3,141 4.48 78,395 3,482 4.44
Borrowings .................... 2,223 101 4.54 1,322 56 4.24 781 24 3.07
--------- ------ --------- ------ --------- -----
Total interest-bearing
liabilities ........ 131,761 5,588 4.24 131,083 4,504 3.44 130,331 4,630 3.55
--------- ------ --------- ------ --------- -----
Noninterest-bearing liabilities ... 33,337 28,570 21,881
Stockholders' equity .............. 14,882 13,492 12,895
--------- --------- ---------
Total liabilities and
stockholders' equity $ 179,980 $ 173,145 $ 165,107
========= ========= =========
Net interest/dividend income ...... $ 8,341 $ 7,109 $ 6,666
======== ========= =======
Interest-rate spread (3) .......... 4.16% 3.99% 3.92%
==== ==== ====
Net yield on average interest-
earning assets (4) ............ 5.03% 4.55% 4.41%
==== ==== ====
Ratio of average interest-earning
assets to average interest-
bearing liabilities ........... 1.26 1.19 1.16
==== ==== ====
</TABLE>
(1) Includes non-accrual loans
(2) Includes interest-bearing deposits
(3) Interest-rate spread represents the difference between the average
yield on interest-earning assets and the average cost of
interest-bearing liabilities.
(4) Net interest margin is net interest income divided by average
interest-earning assets.
38
<PAGE> 40
RATE/VOLUME ANALYSIS
The following table sets forth certain information regarding changes in
interest income and interest expense of the Bank for the periods indicated. For
each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (1) changes in rate (change
in rate multiplied by prior volume), (2) changes in volume (change in volume
multiplied by prior rate) and (3) changes in rate-volume (change in rate
multiplied by change in volume).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 VS. 1994
-----------------------------------------------
INCREASE (DECREASE) DUE TO
-----------------------------------------------
RATE/
RATE VOLUME VOLUME TOTAL
---- ------ ------ -----
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans ........................................................$ 767 1,188 104 2,059
Investment securities............................................. 426 (219) (37) 170
Other interest-earning assets..................................... 71 13 3 87
----- ----- --- -----
Total................................................... 1,264 982 70 2,316
----- ----- --- -----
Interest-bearing liabilities:
Deposits:
Savings and NOW accounts...................................... 26 (15) (2) 9
Money market accounts......................................... 160 (100) (24) 36
Certificate accounts.......................................... 729 213 52 994
Borrowings........................................................ 4 38 3 45
----- ----- --- -----
Total................................................... 919 136 29 1,084
----- ----- --- -----
Net change in net interest income before
provision for credit losses.......................................$ 345 846 41 1,232
===== ===== === =====
1994 VS. 1993
-----------------------------------------------
INCREASE (DECREASE) DUE TO
-----------------------------------------------
RATE/
RATE VOLUME VOLUME TOTAL
---- ------ ------ -----
Interest-earning assets:
Loans ........................................................ $ 196 (159) (3) 34
Investment securities............................................. (184) 407 (35) 188
Other interest-earning assets..................................... 114 (13) (6) 95
--- --- -- ---
Total................................................... 126 235 (44) 317
--- --- -- ---
Interest-bearing liabilities:
Deposits:
Savings and NOW accounts...................................... (14) 74 (1) 59
Money market accounts......................................... 7 116 1 124
Certificate accounts.......................................... 30 (367) (4) (341)
Borrowings........................................................ 9 17 6 32
--- --- -- ---
Total................................................... 32 (160) 2 (126)
--- --- -- ---
Net change in net interest income before
provision for credit losses....................................... $ 94 395 (46) 443
=== === == ===
</TABLE>
39
<PAGE> 41
The rates and yields are as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
YIELD OR RATE AT
DECEMBER 31, 1995
-----------------
<S> <C>
YIELDS AND RATES:
Loans........................................................................................... 9.23%
Securities...................................................................................... 6.30
All interest-bearing assets..................................................................... 8.44
Savings and NOW accounts........................................................................ 2.08
Money market accounts........................................................................... 2.78
Certificates of deposit......................................................................... 5.64
All interest-bearing liabilities................................................................ 4.30
Interest-rate spread............................................................................ 4.14
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
A Florida chartered commercial bank is required to maintain a liquidity
reserve of at least 15% of its total transaction accounts and 8% of its total
nontransaction accounts less those deposits of certain public funds. The
liquidity reserve may consist of cash on hand, cash on demand with other
correspondent banks and other investments and short-term marketable securities
as determined by the rules of the Department, such as federal funds sold and
United States securities or securities guaranteed by the United States. As of
December 31, 1995, Fort Brooke's liquidity totaled approximately $54.0 million,
or approximately 32.1% of its total deposits.
During the year ended December 31, 1995, the Bank's primary sources of
funds consisted of principal payments on loans and investment securities,
proceeds from sales and maturities of investment securities and net increases in
deposits. Fort Brooke used its capital resources principally to purchase
investment securities and fund existing and continuing loan commitments. At
December 31, 1995, the Bank had commitments to originate loans totalling $5.3
million. Scheduled maturities of certificates of deposit during the 12 months
following December 31, 1995 totalled $49.9 million as of December 31, 1995.
Management believes that Fort Brooke has adequate resources to fund all such
commitments, that substantially all will be funded in 1996 and that, if so
desired, it can adjust the rates on certificates of deposit to retain deposits
in a changing interest rate environment.
REGULATORY CAPITAL REQUIREMENTS
For the purpose of evaluating what should constitute the minimum
capital adequacy of a financial institution Federal banking regulators have
adopted regulations which make reference to the institution's "Tier 1 leverage"
capital and also to its "total" capital. In most instances, "Tier 1 leverage"
capital will consist solely of funds permanently committed to the institution
(i.e. stockholders' equity), less net intangible assets. Conversely, "total"
capital (comprised of
40
<PAGE> 42
the sum of Tier 1 and supplementary, or Tier 2, capital) includes not only
stockholders' equity, but an allowance for loan losses (subject to limitations).
Under FDIC regulations, the Bank is required to meet certain minimum capital
thresholds. The requirement is not a valuation allowance and has not been
created by charges against earnings; rather it represents a restriction on
stockholders' equity. The following chart compares the minimum capital ratios
required by the FDIC to the ratios maintained by the Bank:
<TABLE>
<CAPTION>
REGULATORY RATIOS OF
REQUIREMENT THE BANK
----------- --------
<S> <C> <C>
AT DECEMBER 31, 1995:
Total capital to risk-weighted assets 8.00% 13.64%
Tier I capital to risk-weighted assets 4.00 12.39
Tier I capital to total average assets - leverage ratio 4.00 8.55
</TABLE>
ASSET AND LIABILITY MANAGEMENT
As part of its asset and liability management, Fort Brooke has
emphasized establishing and implementing internal asset-liability decision
processes, as well as communications and control procedures to aid in managing
the Bank's earnings. Management believes that these processes and procedures
provide Fort Brooke with better capital planning, asset mx and volume controls,
loan-pricing guidelines, and deposit interest-rate guidelines which should
result in tighter controls and less exposure to interest-rate risk.
The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap." An asset or
liability is said to be interest rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest rate sensitivity
gap is defined as the difference between interest-earning assets and
interest-bearing liabilities maturing or repricing within a given time period.
The gap ratio is computed as rate sensitive assets to rate sensitive
liabilities. A gap ratio of 1.0% represents perfect matching. A gap is
considered positive when the amount of interest-rate sensitive assets exceeds
interest-rate sensitive liabilities. A gap is considered negative when the
amount of interest-rate sensitive liabilities exceeds interest-rate sensitive
assets. During a period of rising interest rates, a negative gap would adversely
affect net interest income, while a positive gap would result in an increase in
net interest income. During a period of falling interest rates, a negative gap
would result in an increase in net interest income, while a positive gap would
adversely affect net interest income.
In order to minimize the potential for adverse effects of material and
prolonged increases in interest rates on Fort Brooke's results of operations,
management continues to monitor asset and liability management policies to
better match the maturities and repricing terms of the Bank's interest-earning
assets and interest-bearing liabilities. Such policies have consisted primarily
of: (i) emphasizing the origination of adjustable-rate loans; (ii) maintaining a
stable
41
<PAGE> 43
core deposit base; and (iii) maintaining a significant portion of liquid assets
(cash and short-term investments).
Fort Brooke has also maintained a relatively large portfolio of liquid
assets (cash and assets maturing or repricing in one year or less) in order to
reduce its vulnerability to shifts in market rates of interest. At December 31,
1995, 28.9% of Fort Brooke's total assets consisted of cash and short-term U.S.
Government securities, and its overall liquidity ratio was approximately 32.1%
of total deposits.
Fort Brooke seeks to maintain a large stable core deposit base by
providing quality service to its customers without significantly increasing its
cost of funds or operating expenses. The success of Fort Brooke's core deposit
strategy is demonstrated by the stability of its money market deposit accounts,
savings accounts and NOW accounts, which, in the aggregate, totaled $52.9
million, representing 31.4% of total deposits at December 31, 1995. These
accounts bore a weighted average nominal rate of 2.37% at December 31, 1995.
Management anticipates that these accounts will continue to increase and in the
future comprise a significant portion of its deposit base.
As of December 31, 1995, Fort Brooke's one-year negative interest-rate
sensitivity gap was $19.4 million. Although management believes that the
implementation of the referenced strategies has reduced the potential adverse
effects of changes in interest rates on Fort Brooke's results of operations, any
substantial and prolonged increase in market interest rates could have an
adverse impact on Fort Brooke's results of operations. Management monitors the
Bank's interest-rate sensitivity gap on a quarterly basis, using First Tennessee
Bank to provide both a practical and a theoretical gap report. The practical gap
report is based on the Federal Reserve Board's March 26, 1993 draft for
incorporating Interest Rate Risk into Risk-Based Capital Standards. Management
believes that its present gap position is appropriate for the current interest
rate environment.
The Bank's management goals are ahead of expectations in all areas,
including liquidity, volatile dependency and rate sensitivity. Although
management believes little can be done until the maturity of Fort Brooke's
deposits occur to effect changes in rate sensitivity, the asset mix continues to
move toward less rate sensitivity for all time periods, and that while a
negative gap will continue in the one year time period, it should decline in
line with management goals.
[The balance of this page is intentionally left blank]
42
<PAGE> 44
The following table sets forth certain information relating to the
Bank's interest-earning assets and interest-bearing liabilities at December 31,
1995 that are estimated to mature or are scheduled to reprice within the period
shown:
<TABLE>
<CAPTION>
More than
One Year to More than
One Year Five Years Five Years Total
-------- ---------- ---------- -----
(dollars in thousands)
<S> <C> <C> <C> <C>
Mortgage and commercial loans (1) (2):
Adjustable rate (all property types)....................... $ 56,666 4,097 69 60,832
Fixed rate................................................. 7,416 25,687 18,120 51,223
--------- ------- ------- --------
Total mortgage loans............................... 64,082 29,784 18,189 112,055
Consumer and other loans..................................... 5,300 4,120 2,689 12,109
Interest-bearing deposits ................................... 1,092 - - 1,092
Investments (3)(4)........................................... 14,894 19,723 9,912 44,529
--------- ------- ------- --------
Total rate-sensitive assets........................ 85,368 53,627 30,790 169,785
--------- ------- ------- --------
Deposit accounts (5):
Certificates of deposit.................................... 49,904 29,555 772 80,231
Savings and NOW accounts................................... 31,334 - - 31,334
Money market accounts...................................... 21,551 - - 21,551
Other borrowings........................................... 1,965 - - 1,965
--------- ------- ------- --------
Total rate-sensitive liabilities................... 104,754 29,555 772 135,081
------- ------- --------
GAP (repricing differences).................................. $(19,386) 24,072 30,018 34,704
========= ======= ======= ========
Cumulative GAP ............................................ $(19,386) 4,686 34,704
========= ======= =======
Cumulative GAP/total assets.................................. -10.36% 2.50% 18.54%
========= ======= =======
</TABLE>
- ----------
(1) In preparing the table above, adjustable-rate loans are included in the
period in which the interest rates are next scheduled to adjust rather
than in the period in which the loans mature. Fixed rate loans are
scheduled, including repayment, according to their maturities.
(2) Excludes nonaccrual loans.
(3) Investments are scheduled through repricing and maturity dates.
(4) Includes Federal Homes Loan Bank stock.
(5) Checking accounts, NOW accounts, and savings accounts are regarded as
ready accessible withdrawable accounts. All other time accounts are
scheduled through the maturity dates.
43
<PAGE> 45
COMPARISON OF YEARS ENDED DECEMBER 1995 AND 1994
GENERAL. Net earnings for the year ended December 31, 1995 were $1.7
million or $1.65 per share compared to $619,000 or $.63 per share for 1994. The
increase in earnings was due primarily to an increase in net interest income as
well as a decrease in noninterest expense.
INTEREST INCOME AND EXPENSE. Interest income increased $2.3 million or
19.9% to $13.9 million during the year ended December 31, 1995. Interest on
loans increased $2.1 million to $10.9 million due to an increase in the weighted
average yield from 8.74% during the year ended December 31, 1994 to 9.50% during
the year ended December 31, 1995. The increase was also due to an increase in
the average loan portfolio from $100.9 million during 1994 to $114.5 million
during 1995. Interest on investment securities increased $170,000 to $2.6
million due to an increase in the average yield from 5.07% during 1994 to 5.97%
during 1995. This increase was partially offset by a decrease in the average
amount invested in securities during 1995 compared with 1994.
Interest expense on deposit accounts increased from $4.4 million for
the year ended December 31, 1994 to $5.5 million for the year ended December 31,
1995. This increase was primarily the result of an increase in rates paid on
deposits.
PROVISION FOR CREDIT LOSSES. The provision for credit losses is charged
to earnings to bring the total allowance to a level deemed appropriate by
management and is based upon historical experience, the volume and type of
lending conducted by the Bank, industry standards, the amount of nonperforming
loans, general economic conditions, particularly as they relate to the Bank's
market areas, and other factors related to the collectibility of the Bank's loan
portfolio. The provision for loan losses increased from $184,000 for the year
ended December 31, 1994 to $705,000 during 1995. The allowance for loan losses
increased from $1.6 million at December 31, 1994 to $1.7 million at December 31,
1995. Nonperforming assets to total assets decreased to 1.10% at December 31,
1995 from 1.47% at December 31, 1994. While management believes that its
allowance for loan losses is adequate as of December 31, 1995, future
adjustments to the Bank's allowance for loan losses may be necessary if economic
conditions differ substantially from the assumptions used in making the
determination.
NONINTEREST EXPENSE. Total noninterest expense decreased $1.1 million
for the year ended December 31, 1995 from the year ended December 31, 1994.
Compensation decreased $389,000 primarily as a result of a severance package
with an officer of Merchant during 1994 with no corresponding amount in 1995.
Occupancy expense decreased $336,000 primarily due to a decrease in rent expense
resulting from the purchase of the Bank's headquarters as well as a general
decrease in operating expenses. Other expenses decreased $334,000 due in part to
the acquisition costs of Merchant incurred during 1994 with no corresponding
amounts in 1995.
INCOME TAX PROVISION. The income tax provision increased from $412,000
for the year ended December 31, 1994 to $1.1 million for 1995, due to increased
earnings before income taxes.
44
<PAGE> 46
COMPARISON OF YEARS ENDED DECEMBER 1994 AND 1993
GENERAL. Net earnings for the year ended December 31, 1994 were
$619,000 or $.63 per share compared to $923,000 or $.95 per share for 1993. The
decrease in earnings was primarily due to increased noninterest expenses
resulting from acquisition costs and a severance payment to a former officer of
Merchant.
INTEREST INCOME AND EXPENSE. Interest income increased $317,000 or 2.8%
to $11.6 million during the year ended December 31, 1994. Interest on loans
increased $34,000 to $8.8 million due to an increase in the weighted average
yield from 8.55% during the year ended December 31, 1993 to 8.74% during the
year ended December 31, 1994. The increase in yield was partially offset by a
decrease in the average loan portfolio balance. Interest on investment
securities increased $188,000 to $2.4 million due to an increase in the average
amounts invested in securities during 1994 compared to 1993. This increase was
partially offset by a decrease in the average yield earned during 1994.
Interest expense on deposit accounts decreased from $4.6 million for
the year ended December 31, 1993 to $4.4 million for the year ended December 31,
1994. This decrease was primarily the result of a decrease in rates paid on
deposits.
PROVISION FOR CREDIT LOSSES. The provision for credit losses is charged
to earnings to bring the total allowance to a level deemed appropriate by
management and is based upon historical experience, the volume and type of
lending conducted by the Bank, industry standards, the amount of nonperforming
loans, general economic conditions, particularly as they relate to the Bank's
market areas, and other factors related to the collectibility of the Bank's loan
portfolio. The provision for loan losses decreased from $344,000 for the year
ended December 31, 1993 to $184,000 during 1994. The allowance for loan losses
increased from $1.4 million at December 31, 1993 to $1.6 million at December 31,
1994.
NONINTEREST EXPENSE. Total noninterest expense increased $901,000 for
the year ended December 31, 1994 from the year ended December 31, 1993.
Compensation increased $398,000 primarily as a result of a severance package
with an officer of Merchant and regular merit salary increases. Occupancy
expense increased $310,000 primarily due to an increase in depreciation expense
for building, furniture, fixtures and equipment and an increase in real estate
taxes. Other expenses increased $252,000 primarily due to the acquisition costs
of Merchant.
INCOME TAX PROVISION. The income tax provision decreased from $522,000
for the year ended December 31, 1993 to $412,000 for 1994, primarily because of
a decrease in earnings before income taxes.
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related data presented herein have been
prepared in accordance with GAAP, which requires the measurement of financial
position and operating
45
<PAGE> 47
results in terms of historical dollars, without considering changes in the
relative purchasing power of money over time due to inflation. Unlike most
industrial companies, substantially all of the assets and liabilities of Fort
Brooke are monetary in nature. As a result, interest rates have a more
significant impact on the Bank's performance than the effects of general levels
of inflation. Interest rates do not necessarily move in the same direction or in
the same magnitude as the prices of goods and services, since such prices are
affected by inflation to a larger extent than interest rates.
FUTURE ACCOUNTING REQUIREMENTS
FASB has issued Statement of Financial Accounting Standards No. 122
("SFAS 122") which requires mortgage banking enterprises that acquire mortgage
servicing rights through either the purchase or origination of mortgage loans
and sells or securitizes those loans with servicing rights retained to allocate
the total cost of the mortgage loans to the mortgage servicing rights and the
loans based on their relative fair values. Mortgage banking enterprises include
commercial banks and thrift institutions that conduct operations substantially
similar to the primary operations of a mortgage banking enterprise. This
Statement is effective for 1996. Management does not anticipate this Statement
will have a material impact on the Bank.
The FASB has also issued Statement of Financial Accounting Standards
No. 123 ("SFAS 123") which encourages employers to account for stock-based
compensation awards based on their fair value on the date the awards are
granted. The resulting compensation award would be shown as an expense on the
statement of earnings. Entities can choose not to apply the new accounting
method and continue to apply current accounting requirements, which generally
result in no compensation cost for most fixed stock-option plans. Those that do
so, however, will be required to disclose in the notes to the financial
statements what net earnings and earnings per share would have been had they
followed the Statement's accounting method. This Statement is effective for
1996. Management does not anticipate this Statement will have a material impact
on the Bank.
[Remainder of page intentionally left blank]
46
<PAGE> 48
SELECTED QUARTERLY FINANCIAL DATA
The following tables present summarized quarterly data (dollars in
thousands, except per share amounts):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Interest income................................... $3,301 3,502 3,528 3,598 13,929
Interest expense.................................. 1,236 1,383 1,486 1,483 5,588
----- ----- ----- ----- -----
Net interest income 2,065 2,119 2,042 2,115 8,341
Provision for credit losses....................... 19 155 304 227 705
Net interest income after -- --- --- --- ---
provision for credit losses..................... 2,046 1,964 1,738 1,888 7,636
Other income...................................... 318 315 343 290 1,266
Other expense..................................... 1,641 1,545 1,570 1,373 6,129
----- ----- ----- ----- -----
Earnings before income tax provision.............. 723 734 511 805 2,773
Income tax provision.............................. 289 294 204 322 1,109
--- --- --- --- -----
Net earnings...................................... $434 440 307 483 1,664
==== === === === =====
Earnings per share................................ $.43 .44 .31 .48 1.65
=== === === === ====
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
YEAR ENDED DECEMBVER 31, 1994
Interest income................................... $2,675 2,876 2,938 3,124 11,613
Interest expense.................................. 1,104 1,115 1,133 1,152 4,504
----- ----- ----- ----- -----
Net interest income............................... 1,571 1,761 1,805 1,972 7,109
Provision for credit losses....................... 3 - 15 166 184
------ ------- -- --- ---
Net interest income after provision for
credit losses................................... 1,568 1,761 1,790 1,806 6,925
Other income...................................... 328 318 336 337 1,319
Other expense..................................... 1,760 1,931 1,707 1,815 7,213
----- ----- ----- ----- -----
Earnings before income tax provision.............. 136 148 419 328 1,031
Income tax provision.............................. 54 59 166 133 412
----- ----- ------ ------ ------
Net earnings...................................... $ 82 89 253 195 619
======= ====== ======= ======= =======
Earnings per share................................ $ .08 .09 .25 .20 .63
====== ===== ===== ==== =====
</TABLE>
47
<PAGE> 49
BUSINESS OF THE COMPANY AND THE BANK
GENERAL
The Company was incorporated on March 14, 1996, and on April 10,
submitted its application to the Board of Governors for authority to acquire a
100 % equity ownership interest in the Bank. Aside from organizational
activities and those associated with the referenced filing and the negotiation
and approval of the Merger transaction, the Company has engaged in no business
activities, and has no present expectation of doing so in the event that the
Merger is approved and consummated, other than by way of its ownership of the
Bank's shares and resulting oversight of its operations.
Fort Brooke Bank (in this Proxy Statement sometimes referred to as the
"Bank" or "Fort Brooke") was chartered by the State of Florida as a capital
stock savings and loan association in December 1980 and commenced operations in
March 1981. During its period of activity in that capacity, the Bank operated as
a traditional savings institution, attracting checking and savings deposits from
the general public and using such deposits, together with funds from other
sources, to originate loans secured by mortgages on residential and commercial
real estate located primarily in Florida. To a lesser extent, the Bank also
originated construction loans, lines of credit and installment loans. Its income
was primarily derived from interest and fees received in connection with real
estate and other loans and interest earned on mortgage-backed securities.
Interest on savings deposits and general and administrative expenses were the
Bank's major expense items. On December 31, 1991, the Bank was converted to a
Florida chartered commercial bank having no membership in the Federal Reserve
System.
Fort Brooke currently engages in the general business of personal and
commercial banking in the Brandon, Plant City, Seffner, Apollo Beach, downtown
Tampa, Carrollwood and Westshore areas of Hillsborough County, Florida, relying
for its primary sources of deposits upon personal and business checking, savings
and specialized deposit accounts. The Bank's primary sources of loans include
residential mortgage loans, secured and unsecured commercial and consumer loans,
including construction and permanent mortgage loans, revolving credit lines,
automobile and home improvement loans and education loans. The Bank's directors
expect the Bank to contribute to the development of those areas of Hillsborough
County within which it operates by assisting in the growth of the businesses
therein located.
On July 14, 1994, the Bank effected a statutory merger with The
Merchant Bancorporation of Florida, Inc., a one bank holding company
incorporated in 1983 ("MBF"), and its wholly owned subsidiary, The Merchant Bank
of Florida, a Florida commercial bank ("Merchant"). Under the terms of the
merger agreement, each of MBF and Merchant was merged into the Bank and MBF's
279 shareholders, under operation of a comparative book value formula (Fort
Brooke's book value being approximately $8.1 million and MBF's consolidated book
value about $5.4 million), received an aggregate of 397,904 shares of the Bank's
common stock in exchange for the relinquishment and cancellation of their MBF
shares. The merger increased the Bank's shareholders to a total of 744 and the
number of shares of its single class
-48-
<PAGE> 50
of common stock then issued and outstanding to 914,644, of which 52.5% were held
by former Bank shareholders and 47.5% by former holders of MBF shares. It also
resulted in an expansion of the Bank's board of directors, from ten to 15, and
in the election of five former MBC directors to fill the newly established
seats. Further, as the merger was, for financial accounting purposes, treated as
a "pooling of interests" rather than as a "purchase," the assets and liabilities
of MBF and Merchant were combined at their historical values with the assets and
liabilities of Fort Brooke, and their operating results, for all periods
presented in Fort Brooke financial statements, have been treated as the
operating results of Fort Brooke.
MARKET AREA
All of the Bank's eight existing offices are located in Hillsborough
County, Florida which is a part of the Tampa Bay Metropolitan Statistical Area.
A Standard Metropolitan Statistical Area (an "SMSA"), as defined by the U.S.
Census Bureau, is a geographic area with a significant population nucleus, along
with any adjacent communities that have a high degree of economic and social
integration with that nucleus. As of January 1, 1994, the latest estimate
available, the Tampa Bay SMSA had a population of more than 2.2 million, ranking
it 23rd in the nation, and was designated as one of the fastest growing regions
in the country.
Hillsborough County accounted for close to half of that figure.
While changing conditions involving the infrastructure requirements of
various geographic locations around the country have limited economic growth and
population expansion, the Bank's market area has continued to grow because of
the area's ability to attract new residents to its favorable year round climate
and its relatively stable economic environment. Although the major economic base
in the market area is service, retail, real estate development and manufacturing
businesses, there also has been a growth in tourism. The Bank believes that its
office locations are situated so as to take advantage of the existing and
expected economic and demographic growth in the market area.
In the future, the Company may consider strategic expansion through
branching or acquisitions of banks or banking assets in those geographic areas
that management believes would complement the existing business of the Bank and
would most effectively achieve market penetration within its core market area
and possibly allow it to expand outside of Hillsborough County. The Bank has not
entered into any such transactions, nor is it or the Company actively
considering any acquisitions at this time. The Company will consider and
evaluate potential strategic market expansion, acquisitions, mergers or other
opportunities which are brought to its attention to determine whether the same
are in the best interests of the Bank or, if the Merger is consummated, the
Company and its shareholders, and should be pursued. There is no assurance that
any market expansion or acquisition opportunity will be identified or that, if
identified, it will receive regulatory approval or be consummated.
-49-
<PAGE> 51
COMPETITION
All phases of Fort Brooke's business are highly competitive and it has
been subject to severe competitive pressures in its operations as a commercial
bank. The Bank competes with local commercial banks as well as numerous
regionally based commercial banks, credit unions and savings and loan
associations, many of which have assets, capital and lending limits larger than
the Bank. It is one of 23 commercial banks that have some 171 offices located
within Hillsborough County. Fort Brooke, along with other commercial banks, also
competes with respect to its lending activities, as well as in attracting demand
deposits, with savings banks, savings and loan associations, insurance
companies, regulated small loan companies, credit unions and with the issuers of
commercial paper and other securities, such as shares in money market funds.
Among the advantages larger institutions have over Fort Brooke are
their ability to finance wide ranging advertising campaigns and to allocate
their investment assets to products of highest yields and demand. By virtue of
their greater total capital, such institutions have substantially higher lending
limits than the Bank (legal lending limits to an individual customer being
limited to a percentage of a bank's total capital accounts). These competitors
may intensify their advertising and marketing activities to counter the Bank's
efforts to attract new business as a result of its increased size. In addition,
as a result of legislation enacted earlier in the decade, there is increased
competition between banks, savings and loan associations and credit unions for
the deposit and loan business of individuals. These activities may hinder the
Bank's ability to capture a significant market share.
To compete with the financial institutions in its market area, Fort
Brooke intends to use the flexibility which its independent status will permit.
Its activities in this regard include an ability to solicit business,
professional and personal accounts through the personal efforts of the Bank's
directors and officers. Management believes a locally-based bank is often
perceived by the local business community as possessing a clearer understanding
of local commerce and its needs. Consequently, the Bank expects that it will be
able to make prudent lending decisions quickly and more equitably than its
competitors without compromising asset quality or the Bank's profitability. It
will also continue to focus on the smaller commercial customer because this
segment offers the greatest concentration of potential business and historically
has tended to demonstrate a higher degree of loyalty in its banking
relationships. The Bank has been able in the past to respond quickly to changes
in the interest rates paid on time and savings deposits and charged on loans,
and to charges imposed on depositary accounts, so as to remain competitive in
the market place, and expects to be able to do so in the future. If there are
customers whose loan demands exceed the Bank's lending limits, the Bank has the
ability to arrange for such loans on a participation basis with other financial
institutions. No assurance can be given, however, that the Bank's efforts to
compete with other financial institutions in its market area will be successful.
-50-
<PAGE> 52
LENDING ACTIVITIES
GENERAL Fort Brooke offers a variety of loans in order to serve the
credit needs of customers in its community. Since the Bank has been operating as
a commercial institution, more emphasis has been placed on business and other
commercial loan transactions, as well as one-to-four unit family residential
mortgage loans that are sold to the secondary market. At December 31, 1995, the
Bank's gross loan portfolio totalled $124,164,000, representing 66.3% of total
assets. At that date, the portfolio included $34,539,000 of one-to-four unit
family mortgage loans, $52,269,000 of commercial real estate loans and
$37,356,000 of other commercial and consumer loans, representing, respectively,
27.8%, 42.1% and 30.1% of total loans at that date. Of the total loan portfolio,
$52,543,000, or 42.3% were fixed rate loans, and $71,621,000 or 57.6% were
variable rate.
LOAN MATURITIES The table below sets forth the contractual maturity of
Fort Brooke's total loan portfolio at December 31, 1995. Demand loans, secured
exclusively by passbook savings or CD's and having no stated schedule of
repayments and no stated maturity, are reported as due within one year. The
table does not reflect anticipated prepayments.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
YEARS ENDING RESIDENTIAL REAL COMMERCIAL REAL CONSUMER AND
DECEMBER 31, ESTATE LOANS ESTATE LOANS OTHER LOANS TOTAL
- ------------ ------------ ------------ ----------- -----
<S> <C> <C> <C> <C>
1996 $3,127 $12,484 $24,753 $40,364
1997 1,394 13,220 4,500 19,114
1998 1,464 12,765 3,147 17,376
1999-2000 1,907 8,384 2,465 12,756
2001-2011 9,957 2,711 2,491 15,159
2012-2031 9,867 2,691 - 12,558
2031 and thereafter 6,823 14 - 6,837
------- ------- ------- --------
Total $34,539 $52,269 $37,356 $124,164
======= ======= ======= ========
</TABLE>
TYPES OF LOANS Fort Brooke's loan originations derive from a number of
sources, including real estate agent referrals, existing customers of the Bank's
branch network, builders, walk-in customers, direct solicitations and through
mass market advertising and the distribution and display of advertising
materials at each branch office. Interest rates and loan origination fees
charged on loans originated by the Bank are generally competitive with other
financial institutions and other mortgage originators in the Bank's general
market area.
The loan underwriting procedures followed by Fort Brooke conform to
regulatory specifications and are designed to assess both the borrower's ability
to make principal and interest payments and the value of any property serving as
collateral for the loan. Generally, as part of this process, the Bank loan
officer meets with each applicant to obtain the appropriate employment and
financial information as well as any other required loan information. The Bank
then obtains reports with respect to the borrower's credit record, and orders
and reviews an
-51-
<PAGE> 53
appraisal of any collateral for the loan (prepared by the Bank approved
independent appraisers). The loan information supplied by the borrower is
independently verified. Loan officers or other loan production personnel in a
position to directly benefit monetarily through loan solicitation fees from
individual loan transactions do not have approval authority. The Bank requires
that all loans be reviewed and approved at various management levels, including
the Bank's Loan Committee, which is currently comprised of seven directors and
meets at least twice a month on a regular basis.
In connection with fixed rate and adjustable rate mortgage loans, Fort
Brooke may lend up to 95% of the value of the property securing the loan but
requires that all loans made in excess of 80% of the value of the property be
insured by private mortgage insurance. In determining the value of the property,
the Bank uses the appraised value or the purchase price for the property,
whichever is less. Appraised values are determined by on-site inspections
conducted by qualified independent appraisers and must meet regulatory
guidelines. In the case of mortgage loans, the Bank may procure mortgagee's
title insurance to protect against defects in its lien on any property which may
secure the loan. The Bank requires title, fire and extended casualty insurance
to be obtained by the borrower and, where appropriate, flood insurance. The Bank
maintains its own errors and omissions insurance policy to protect against loss
in the event of failure of a mortgagor to pay premiums on fire and other hazard
insurance policies.
The original contractual loan payment periods for residential loans
originated by the Bank presently range up to 30 years. Industry experience
(which Fort Brooke believes is reflected in its own experience) has indicated
that because of prepayments in connection with refinancing and sales of
property, the average life of residential loans in Florida has been between six
and eight years. The Bank charges no penalty for prepayment of mortgage loans.
Mortgage loans originated by the Bank customarily include a "due-on-sale" clause
giving the Bank the right to declare a loan immediately due and payable in the
event, among other matters, that the borrower sells or otherwise disposes of the
real property subject to the mortgage. In general, the Bank enforces due-on-sale
clauses.
Federal regulations permit institutions to originate and purchase
mortgage loans secured by one-to-four family residences on which the payment
amount, the loan terms, the principal balance or any combination thereof may
change periodically as a result of changes in interest rates. Pursuant to such
regulations, changes in the interest rate must be based on the movement of an
index that is beyond the control of Fort Brooke and is agreed to by the
institution and the borrower. Such regulations historically have not limited
interest rate adjustments, which may occur as frequently as monthly. However,
under provisions of the Competitive Equality Banking Act of 1987 ("CEBA"),
adjustable rate mortgage loans ("ARMs") must specify a limitation on the maximum
interest which may be imposed during the term of the loan. As of December 31,
1995, the Bank offered three types of ARMs, one which provides for adjustment of
the interest rate every year, one annually after the third year and one annually
after the fifth year. Under the ARMs available at the Bank, borrowers may, upon
the payment of specified fees, convert ARMs to fixed-rate loans during a
specified time frame.
-52-
<PAGE> 54
Fort Brooke is attempting to increase the yield on its loan portfolio
and to cause it to adjust more rapidly to market interest conditions. To this
end, the Bank has increased its volume of ARMs, as well as commercial lending
and consumer loans consisting of more rate sensitive loan and short maturity
levels.
Fort Brooke offers residential construction mortgage loans to
developers and individuals. Most of such loans are made on a short-term basis,
usually not exceeding one year. The rates are generally in excess of the Bank's
single-family lending rate. These loans may involve additional risks
attributable to the fact that funds are advanced upon the security of the
project under construction, which is of uncertain value prior to completion and
because it is relatively difficult to evaluate accurately the total funds
required to complete a project. Upon completion of construction, the
construction loan automatically converts to a permanent mortgage loan having a
maximum term and amortization of 29 years. The application process includes the
same items as are required for other residential mortgage loans, and also
requires a submission to the Bank of plans, specifications and estimated costs
of the property to be constructed. These items, along with market data, are used
as a basis to determine the appraised value of the subject property. Appraisal
reports are completed by qualified independent appraisers. Maximum loan amounts
are based on the lesser of the current appraised value or the purchase price for
the property. Generally, the loan-to-value ratio for construction loans does not
exceed 80%.
Fort Brooke's commercial real estate loans include permanent mortgage
loans on commercial and industrial projects and, to a lesser extent, land
acquisition and development loans, which generally involve providing financing
for the acquisition and development of property for single-family residential
projects. The commercial real estate loans consist of loans secured by apartment
buildings, shopping centers, warehouses and office buildings. It is the Bank's
policy to limit the amount of its commercial real estate loans to 80% of the
lesser of the appraised value or the purchase price of the property. In making
its lending decision, the Bank considers, among other matters, the overall
quality of the loan, the credit of the borrower, the location of the real
estate, the projected income stream of the property and the quality of
management administering the property. The Bank also generally requires that
loans for the acquisition and development of unimproved commercial property be
guaranteed by one or more individuals who have made a significant equity
investment in the property. Commercial and industrial real estate loans are
generally considered to involve a higher risk of default than do residential
loans because repayment typically is dependent on the successful operation of
the related project and thus may be subject, to a greater extent, to adverse
conditions in the real estate market or the economy generally.
Fort Brooke originates consumer and commercial (non-real estate) loans
related to home improvements, unsecured and secured lines of credit, working
capital needs (usually secured by accounts receivable and inventory), personal
loans for automobiles, mobile homes, education, and others secured by savings
accounts. Home improvement loans are secured by a junior lien on residential
real property and are typically based on a 90% loan-to-value ratio. Personal
loans may be secured by various forms of collateral, both real and personal, or
may be made on an
-53-
<PAGE> 55
unsecured basis. Although consumer loans typically involve a higher degree of
risk, they generally carry higher yields and have shorter terms to maturity.
LOAN COMMITMENTS Fort Brooke issues commitments to make both commercial
and residential mortgage loans, conditioned upon the occurrence of certain
events and pursuant to certain specific terms. Loan commitments are generally
issued in connection with the origination of loans for the financing of
residential properties by prospective purchasers and in connection with
construction loans secured by commercial and multi-unit residential
income-producing properties. The Bank currently charges a fee for issuing
commercial loan commitments. Loan commitments by the Bank are generally limited
in duration from 30 to 90 days with the interest rate at the date of application
being the rate charged on the loan. As of December 31, 1995, the Bank had
approximately $5,272,000 in outstanding mortgage loan commitments, compared to
$2,478,000 as of December 31, 1994, excluding the undisbursed portion of the
loans in process.
SECONDARY MORTGAGE MARKET Loans originated by Fort Brooke are generally
retained in its portfolio. To increase the yield on the Bank's loan portfolio,
it has, however, during the past five years sold (individually or as securitized
groups), and presently intends to continue to sell, both fixed and variable rate
mortgage loans, including those held in its portfolio and newly originated, as
market conditions permit, with the intention of making available to borrowers
the net proceeds of such sales at higher interest rates than were being produced
by the mortgage loans disposed of. Notwithstanding such intended sales, the Bank
expects to continue servicing loans sold in the secondary market.
INCOME FROM LENDING ACTIVITIES Fort Brooke generates interest and fee
income through its lending activities. Income is generated from fees charged in
connection with the issuance of loan commitments, from document preparation fees
and from points charged in connection with the origination of loans. The Bank
also receives loan fees and charges relating to existing loans, including fees
for late payments, interest rate adjustments, permitting changes in borrowers,
converting ARMs to fixed rate mortgages, closing services performed by the Bank
personnel and for other miscellaneous services. These fees are paid by the
borrowers. In addition, the Bank receives servicing fees relating to loans sold
with servicing retained. The income realized from origination and other fees
varies from period to period, both with respect to the volume and type of loans
made and also in response to competitive factors. Loan income, consisting of
interest and fees on loans and loan originations equalled for the years ended
December 31, 1995 and 1994 approximately 71.6% and 70.4%, respectively, of the
Bank's total income.
NONPERFORMING LOANS Management conducts regular review and follow up of
all loan delinquencies. When a borrower fails to make a payment on a loan, Fort
Brooke will take steps to have the borrower cure the delinquency and restore the
loan to current status. The Bank commences collection procedures once the loan
payment is 15 days past due, either by sending a past due notice or contacting
the borrower by telephone. Additional notices or telephone calls are made if the
loan is 30 days past due. A summary analysis of all delinquencies is reviewed
monthly by the board of directors. Most loan delinquencies are cured and no
legal action is
-54-
<PAGE> 56
required. If a delinquency is not cured through the Bank's normal collection
procedures, the Bank will institute measures after 90 days to enforce its
remedies resulting from the default, including, in the case of mortgage loans,
commencing a foreclosure action.
The following table sets forth certain information regarding
non-accrual loans and real estate owned, the ratio of such loans and real estate
owned to total assets as of the dates indicated, and certain other related
information:
<TABLE>
<CAPTION>
AT DECEMBER 31,
(DOLLARS IN THOUSANDS)
-----------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Non-accrual loans:
Real estate loans:
Residential $ 184 $ 184 $ 247 $ 297 $ 338
Commercial 542 528 18 703 1,914
Consumer and other loans 186 108 61 50 404
----- ----- ---- ---- -----
Total nonperforming loans 912 820 326 1,050 2,656
Other real estate owned:
Real estate acquired by foreclosure or
deed in lieu of foreclosure 1,147 1,847 2,076 2,246 3,802
----- ----- ----- ----- -----
Total nonperforming loans,
and other real estate owned 2,059 2,667 2,402 3,296 6,458
Allowance for loan losses (1,702) (1,562) (1,426) (1,145) (1,346)
-------- ------- ------- ------- -------
Total nonperforming loans
and other real estate owned, net $357 $1,105 $ 976 $2,151 $5,112
==== ====== ===== ====== ======
Total nonperforming loans to
total assets .49% .43% .09% .12% 1.53%
==== ==== ==== ==== =====
Total nonperforming loans
and other real estate owned to
total assets 1.10% 1.47% 1.39% 2.00% 3.71%
===== ===== ===== ===== =====
Total nonperforming loans
and other real estate owned, net
to total assets .19% .63% .56% 1.30% 2.94%
---- ==== ==== ===== =====
</TABLE>
-55-
<PAGE> 57
In originating loans, Fort Brooke recognizes that credit losses will be
experienced and that the risk of loss will vary with, among other matters, the
type of loan being made, the credit worthiness of the borrower over the term of
the loan and, in the case of a secured loan, the value of the security for the
loan. At the end of each month, Fort Brooke reviews all loans delinquent by 30
days or more to determine an adequate specific valuation allowance. Such reviews
include, but are not limited to the ability of the borrower to repay the loan,
the loan to value ratio, the value of any collateral and the estimated loss to
Fort Brooke, if any. A general valuation allowance is provided to properly
reflect the collectibility of the loan portfolio as a whole. This general
allowance is based on such factors as estimates of Fort Brooke's historical loan
loss experience, an evaluation of economic conditions, regular reviews of
delinquencies and an evaluation of Fort Brooke's loan portfolio quality and
composition.
The following table sets forth information with respect to activity in
the Bank's allowance for loan losses during the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Average loans outstanding, net $114,502 $100,905 $102,772 $110,599 $126,640
======== ======== ======== ======== ========
Allowance at beginning of period $1,562 $1,426 $1,145 $1,346 $903
Charge-offs:
Residential real estate loans 39 - 2 45 158
Commercial real estate loans 17 32 - 121 476
Commercial loans 410 23 60 1,823 95
Consumer loans 189 96 121 46 70
----- ------ ------ ----- ------
Total loans charge-off 655 151 183 2,035 799
----- ------ ------ ----- ------
Recoveries 90 103 120 108 26
-- --- --- --- --
Net charge-offs (recoveries) 565 48 63 1,927 773
----- ---- ---- ----- -----
Provision for loan losses 705 184 344 1,726 1,216
charged to operating expenses
Allowance at end of year $1,702 $1,562 $1,426 $1,145 $1,346
====== ====== ====== ====== ======
Ratio of net charge-offs to
average loans outstanding .0049 .0005 .0006 .0174 .0061
===== ===== ===== ===== =====
Ratio allowance to period-end
loans .0137 .0137 .0137 .0105 .0111
===== ===== ===== ===== =====
Period end total loans $124,164 $114,135 $103,760 $108,896 $120,871
======== ======== ======== ======== ========
</TABLE>
CLASSIFIED ASSETS As of December 31, 1995, Fort Brooke classified
certain of its outstanding loans in accordance with standards set forth in FDIC
regulations. The three classification standards currently used to identify
classified loans are "substandard", "doubtful" and "loss." As of December 31,
1995, outstanding loans of $2,200,000 were classified as substandard. No loans
were then classified as either doubtful or a loss. As part of the Bank's
-56-
<PAGE> 58
classification policy, additions are made to the allowance for loan losses.
Currently, such additions are fixed at 20% of loans classified as substandard,
50% classified as doubtful and 100% classified as a loss.
OTHER REAL ESTATE OWNED
As of December 31, 1995, other real estate assets generated as a result
of foreclosure or other form of attachment totalled $1,147,000, or .61% of total
assets. Of this amount, the largest single asset, a vacant commercial property,
reflected a carrying value of $565,000 or 49.3% of the total. Management of the
Bank is cognizant of its need to reduce this balance as rapidly as practicable
and expects to make further dispositions in the current year.
INVESTMENT SECURITIES
Statement of Financial Accounting Standards No. 115 ("SFAS 115"),
Accounting for Certain Investments in Debt and Equity Securities, sets standards
for classification of and accounting for investments in equity securities that
have readily determinable fair values, and all investments in debt securities
which are to be classified as held-to-maturity securities, available-for-sale
securities, or trading securities.
Debt securities that an enterprise has the positive intent and ability
to hold to maturity are classified as held-to-maturity securities and reported
at amortized cost. Debt and equity securities that are bought and held
principally for the purpose of selling them in the near term are classified as
trading securities and reported at fair value, with unrealized gains and losses
included in earnings. Debt and equity securities not classified as either
held-to-maturity securities or trading securities are classified as
available-for-sale securities and reported at fair value, with unrealized gains
and losses excluded from earnings and reported in a separate component of
stockholders' equity.
Fort Brooke classifies its investments at the purchase date in
accordance with the above-described guidelines. Premiums or discounts on
securities at the date of purchase are being amortized or accredited,
respectively, over the estimated life of the security using a method which
approximates the level yield method. Gains and losses realized on the
disposition of securities are based on the specific identification method and
are reflected in other income.
[Remainder of page intentionally left blank]
-57-
<PAGE> 59
The following table sets forth the carrying value of the Bank's
investment portfolio as of the dates indicated:
<TABLE>
<CAPTION>
------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Investment securities available-for-sale:
U.S. Government and agency obligations 11,856 $ 3,268 $ 7,803
Municipal bonds 252 2,006 3,639
Mortgage-backed securities 11,969 10,889 19,034
---------- ---------- ----------
Total available-for-sale 24,077 16,163 30,476
---------- ---------- ----------
Investment securities held-to-maturity:
U.S. Government and agency obligations 9,942 18,010 12,130
Municipal bonds 2,228 2,229 1,489
Mortgage-backed securities 7,472 8,639 --
---------- ---------- ----------
Total held-to-maturity 19,642 28,878 13,619
---------- ---------- ----------
Total $ 43,719 $ 45,041 $ 44,095
========== ========== ==========
</TABLE>
The following table sets forth, by maturity distribution, certain
information pertaining to the Bank's investment securities portfolio ($ in
thousands):
<TABLE>
<CAPTION>
One Year After One Year After Five Years Due After
or Less to Five Years to Ten Years Ten Years Total
------- ------------- ------------ --------- -----
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield Value Yield Value Yield
----- ----- ----- ----- ----- ----- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1995
U.S. Government and
agency obligations $1,999 4.47% $18,292 6.52% $ 1,507 6.49% $ -- --% $21,798 6.33%
Municipal securities -- -- 252 4.35 2,228 5.29 -- -- 2,480 5.19
Mortgage-backed securities 136 8.22 1,178 6.86 -- 18,127 6.52 19,441 6.55
----- ------ ------ ---- --- --- ------ ---- ------ ----
Total $2,135 4.71% $19,722 6.51% $3,735 5.77% $18,127 6.52% $43,719 6.36%
===== ==== ====== ==== ====== ==== ====== ==== ====== ====
</TABLE>
SOURCES OF FUNDS
GENERAL Historically, deposits have been the primary source of Fort
Brooke's funds for use in lending and for other general business purposes. Loan
interest and principal repayments, mortgage-backed securities principal
repayments, proceeds from sales of mortgage-backed and investment securities and
loans, proceeds from capital stock offerings and short-term borrowings have been
additional sources of funds. Scheduled loan payments are a relatively stable
source of funds, while deposit inflows and outflows are significantly influenced
by prevailing interest rates and money market conditions. Borrowings may be used
on a short-term basis to compensate for reductions in other sources of funds
such as deposit inflows at less than projected levels and on a longer term basis
to support expanded lending activities.
-58-
<PAGE> 60
DEPOSITS Fort Brooke offers a number of alternatives for depositors which
are designed to attract both short-term and long-term deposits from the general
public, including regular statement savings accounts, classic checking accounts,
negotiable order of withdrawal checking accounts ("NOW accounts"), money market
accounts, certificates of deposit of various terms, and negotiated rate jumbo
certificates. Included among these savings programs are Individual Retirement
Accounts.
The Bank solicits deposits through advertisements in newspapers of
general circulation and direct mail advertising primarily in Hillsborough
County, Florida. The Bank's deposits are obtained primarily from the communities
surrounding its offices. As of December 31, 1995, deposits from out-of-state
sources represented an insignificant portion of the total deposit accounts. The
Bank does not seek brokered deposits.
The Bank's deposit accounts are insured for each depositor by the FDIC up
to a maximum of $100,000. In the event of the Bank's liquidation, depositors
would be entitled to full payment of their insured accounts prior to payment to
stockholders. The FDIC, however, has the authority to take various actions with
different results for depositors in conducting receiverships of insured
institutions in default, including without limitation, merging the insured
institution in default with another insured institution, taking over the assets
of and operating such insured institution, and organizing a new institution to
take over such insured institution's assets.
The following table shows the distribution of, and certain other information
relating to, Fort Brooke Bank deposit accounts by type:
<TABLE>
<CAPTION>
AT DECEMBER 31,
(DOLLARS IN THOUSANDS)
-------------------------------------------------------------------------
1995 1994 1993
------ ------ -----
% of % OF % OF
Amount Deposit AMOUNT DEPOSIT AMOUNT DEPOSIT
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Demand deposits $ 35,181 20.9% $ 28,892 18.3% $ 22,532 14.3%
Savings and NOW deposits 31,334 18.6 32,170 20.3 31,562 19.9
Money market deposits 21,551 12.8 28,508 18.1 26,611 16.8
------- ----- ------- ---- ------- -----
Subtotal 88,066 52.3 89,570 56.7 80,705 51.0
------- ----- ------- ----- ------- -----
Certificate of deposits:
2.00% - 3.99% -- -- 15,405 9.8 30,613 19.4
4.00% - 5.99% 54,201 32.2 50,135 31.7 27,204 17.2
6.00% - 7.99% 26,030 15.5 2,767 1.8 16,356 10.3
8.00% - 9.99% -- -- -- -- 3,331 2.1
10/00% -11.99% -- -- -- -- 3 --
------ ------ ------ ---- ------ -----
Total certificates of
deposit (1) 80,231 47.7 68,307 43.3 77,507 49.0
------ ---- ------- ----- ------- -----
Total deposits $ 168,297 100.0% $ 157,877 100.0% $ 158,212 100.0%
======= ===== ======= ===== ======= =====
</TABLE>
- ----------
(1) Includes individual retirement accounts ("IRAs") totalling $12,496,000
and $11,394,000 at December 31, 1995, 1994 and 1993, respectively, all
of which are in the form of certificates of deposits.
-59-
<PAGE> 61
The following table shows the average amount of and the average rate
paid on each of the following deposit account categories during the periods
indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
1995 1994 1993
------- ------ -----
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE YIELD BALANCE YIELD BALANCE YIELD
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Noninterest bearing $30,867 0% $26,166 0% $20,078 0%
checking accounts
NOW and savings accounts 31,331 2.11 32,086 2.03 28,579 2.08
Money market accounts 23,296 2.96 27,158 2.38 22,576 2.35
Certificates of deposit 74,911 5.52 70,157 4.48 78,395 4.44
------ ---- -------- ------ ------ ----
Total deposits $160,405 3.42% $155,567 2.86% $149,628 3.08%
======== ==== ======== ==== ======== ====
</TABLE>
The following table presents for various interest rate categories the
amounts of outstanding certificates of deposit at December 31, 1995 which mature
during the periods indicated:
<TABLE>
<CAPTION>
Year Ending December 31,
(dollars in thousands)
------------------------------------------------------------------------------------------
2000
DECEMBER 31, 1995: 1996 1997 1998 1999 AND THEREAFTER TOTAL
---- ---- ---- ---- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
4.00% - 4.99% $7,727 - - - - 7,727
5.00% - 5.99% 41,636 2,974 1,093 772 46,475
6.00% - 6.99% 542 12,336 9,726 - 3,425 26,029
----- ------ ----- ------ ----- ------
Total certificates of deposit $49,905 $12,336 $12,700 $1,093 $4,197 $80,231
======= ======= ======= ====== ====== =======
</TABLE>
Jumbo certificates ($100,000 and over) outstanding as of December 31, 1995
mature as follows:
Due within three months or less $ 4,762
Due over three months to six months 4,108
Due over six months to one year 1,861
Due over one year 5,105
--------
$15,836
========
-60-
<PAGE> 62
The following table sets forth the net deposit flows of the Bank during the
periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS)
--------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Net increase (decrease) before interest credited $ 10,255 $ (286) $ 9,527
Net interest credited 165 (49) (39)
---------- ---------- ----------
Net deposit increase (decrease) $ 10,420 $ (335) $ 9,488
========== ========== ==========
</TABLE>
SHORT-TERM BORROWINGS During periods when the supply of funds from
deposits cannot meet the demand for loans, Fort Brooke seeks to provide a
portion of the funds necessary through loans (advances) from its correspondent
banks. The Federal Home Loan Bank (the "FHLB"), Atlanta, Georgia, and other
large correspondent banks, provide credit for banks such as Fort Brooke. As a
correspondent of the FHLB System, the Bank owns capital stock in the FHLB of
Atlanta and is authorized to apply for advances from the FHLB of Atlanta on the
security of such stock and certain of its home mortgages and other assets
(principally securities which are obligations of, or guaranteed by, the United
States Government).
Fort Brooke has an FHLB line of credit available in the amount of
$5,000,000, secured by a lien on specifically identified wholly owned
residential (one-to-four units) first mortgage loans in its portfolio. From time
to time, the Bank has drawn on this line when its primary sources of funds have
not been sufficient to meet lending and other cash requirements. Interest on the
line is payable monthly. As of December 31, 1995 and 1994, respectively, there
was no balance outstanding on this line of credit.
Fort Brooke also maintains an agreement with Barnett Bank under which
it may obtain overnight advances, up to a maximum of $10,000,000, in exchange
for the pledge of certain of its securities having a value in excess of the
amount borrowed. Under the terms of such agreement, interest fluctuates and is
paid daily based on the lender's overnight Fed Fund rate (5.875% at December 31,
1995). As of December 31, 1994, the balance outstanding on this
reverse-repurchase agreement was $1,225,000, while no balance was owing at the
end of 1995. An additional unsecured overnight Federal Funds line of credit,
with a maximum limit of $1,500,000, is maintained with the Independent Bankers'
Bank of Florida. As of December 31, 1995 and 1994, respectively, no borrowings
had been effected thereunder by Fort Brooke. These lines of credit and the
separate repurchase agreement provide the Bank with additional liquidity to meet
withdrawals and expand its lending and short-term investment activities.
EMPLOYEES
In addition to a Chief Executive Officer; Senior Vice President,
Administration; Senior Vice President, Lending; Vice President, Human Resources;
and a Chief Financial Officer, Fort Brooke presently employs a staff of
approximately 101 persons on a full or part-time basis. See "FORT BROOKE
MANAGEMENT."
-61-
<PAGE> 63
SUPERVISION AND REGULATION
GENERAL
If the Company qualifies as a bank holding company, it will be subject
to the continuing regulation and supervision of the Board of Governors under the
Bank Holding Company Act of 1956, as amended (the "BHCA"). Under the BHCA, bank
holding companies may not in general directly or indirectly acquire ownership or
control of more than five percent of the voting shares or substantially all of
the assets of any company, including a bank, without the prior approval of the
Board of Governors. The BHCA also restricts the types of activities in which a
bank holding company and its subsidiaries may engage. Generally, activities are
limited to banking and activities found by the Board of Governors to be so
closely related to banking as to be a proper incident thereto. In addition, the
BHCA now allows the Board of Governors to approve an application by a bank
holding company to acquire shares of a bank or bank holding company located
outside the acquiror's principal state of operations.
As a state chartered, independent, commercial bank, Fort Brooke is
subject to primary supervision, periodic examination and regulation by the
Florida Department of Banking and Finance. The deposits of the Bank are insured
by the FDIC to the maximum extent provided by law, and, as such, the Bank's
activities are also subject to FDIC regulation. The regulations promulgated by
these two agencies govern most aspects of the Bank's business, including the
maintenance of minimum reserves against deposits, limitations on loans to a
single borrower and to its directors, officers and employees, investments,
mergers and acquisitions, borrowings, dividends, location and operation of
branch offices, adequacy of capitalization and loss reserves, security and other
control procedures, the granting of credit under equal and fair conditions, the
disclosures of the cost and terms of such credit, and the maintenance of books
and records. There are also a number of state and federal laws governing
businesses and employers generally which are applicable to the Bank, including
the federal Equal Opportunity Employment Act and the Occupational Safety and
Health Act. In addition, a variety of federal statutes and regulations apply
only to financial institutions or other lenders, including the Truth-in-Lending
Act, the Equal Credit Opportunity Act, the Home Mortgage Disclosure Act, the
Electronic Fund Transfer Act, discrimination prohibitions and other consumer
protections. Other statutes such as the Fair Debt Collection Practices Act, the
Fair Credit Reporting Act and the Right to Financial Privacy Act further
restrict each bank's practices and procedures.
Fort Brooke's records and operations are examined periodically by both
the Department and the FDIC to each of whom it submits regular periodic reports
regarding its financial condition and other matters. Both the FDIC and the
Department have a broad range of powers to enforce regulations under their
respective jurisdictions, and to take discretionary actions determined to be for
the protection of the safety and soundness of the Bank, including the
institution of cease and desist orders and the removal of directors and
officers.
On certain loans, the Bank is subject to the usury laws of the State of
Florida, which limit the rates of interest that may be legally charged to
borrowers. Currently the maximum
-62-
<PAGE> 64
interest rates which may be charged under Florida law are 18% per year for loans
of up to $500,000 and 25% per year for loans in excess of $500,000. Federal and
Florida banking laws also impose substantial restrictions on the sale of a
controlling interest in the Bank's outstanding voting stock. A controlling
interest is generally defined as 25% or more of a bank's outstanding voting
stock, but can be as low as 10% of a bank's outstanding voting stock under
certain circumstances.
TRANSACTIONS WITH AFFILIATES
There are various legal restrictions on the extent to which the Company
and any future nonbank subsidiaries can borrow or otherwise obtain credit from
the Bank. There also are legal restrictions on the Bank's purchase of or
investments in the securities of and purchases of assets from the Company and
any of its future nonbank subsidiaries, a bank's loans or extensions of credit
to third parties collateralized by the securities or obligations of the Company
and any of its future nonbank subsidiaries, the issuance of guaranties,
acceptances and letters of credit on behalf of the Company and any of its future
nonbank subsidiaries, and certain bank transactions with the Company and any of
its future nonbank subsidiaries, or with respect to which the Company and
nonbank subsidiaries, act as agent, participate or have a financial interest.
Subject to certain limited exceptions, the Bank may not extend credit to the
Company or to any other affiliate in an amount which exceeds 10% of the Bank's
capital stock and surplus and may not extend credit in the aggregate to such
affiliates in an amount which exceeds 20% of its capital stock and surplus.
Further, there are legal requirements as to the type, amount and quality of
collateral which must secure such extensions of credit transactions between the
Bank and the Company or such other affiliates, and such transactions must be on
terms and under circumstances, including credit standards, that are
substantially the same or at least as favorable to the Bank as those prevailing
at the time for comparable transactions with non-affiliated companies. Also, the
Company and its subsidiaries are prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit, lease or sale of
property or furnishing of services.
HOLDING COMPANY STRUCTURE AND SUPPORT OF THE BANK
If the Merger is consummated, the Company will be the parent holding
company of the Bank. By reason thereof, its right to participate in the assets
of any subsidiary upon the latter's liquidation or reorganization will be
subject to the prior claims of the subsidiary's creditors (including depositors
in the case of bank subsidiaries) except to the extent that the Bank may itself
be a creditor with recognized claims against the subsidiary.
Under the policies of the Board of Governors, the Company is expected
to act as a source of financial strength to, and commit resources to support,
the Bank. This support may be required at times when, absent such Board of
Governors policy, the Company may not be inclined to provide it. In addition,
any capital loans by a bank holding company to any of its subsidiary banks are
subordinate in right of payment to deposits and to certain other indebtedness of
such subsidiary bank. In the event of a bank holding company's bankruptcy, any
commitment
-63-
<PAGE> 65
by the bank holding company to a federal bank regulatory agency to maintain the
capital of a subsidiary bank will be assumed by the bankruptcy trustee and
entitled to a priority of payment.
Under the Federal Deposit Insurance Act (the "FDIA"), a depository
institution insured by the FDIC can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC after August 9, 1989 in
connection with (i) the default of a commonly-controlled FDIC-insured depository
institution or (ii) any assistance provided by the FDIC to any
commonly-controlled FDIC-insured depository institution "in danger of default."
"Default" is defined generally as the appointment of a conservator or receiver
and "in danger of default" is defined generally as the existence of certain
conditions indicating that a default is likely to occur in the absence or
regulatory assistance. The FDIC's claim for damages is superior to claims of
depositors, secured creditors and holders of subordinated debt (other than
affiliates) of the commonly-controlled insured depository institution. The Bank
is subject to these cross-guarantee provisions; however, the Company has no
present plans to have any bank subsidiaries other than the Bank.
CAPITAL REQUIREMENTS
Fort Brooke has been subject to FDIC capital requirements since its
inception, and has continuously been in compliance therewith. Effective April
10, 1991, the FDIC revised the minimum capital standards applicable to
FDIC-regulated banks. Under the new regulation, the most highly-rated
institutions are required to meet a "Tier 1" leverage capital ratio of at least
3% of total assets. Tier 1 capital consists of the net capital received from the
sale of the institution's common stock minus all intangible assets other than
limited amounts of purchased mortgage servicing rights. Loan loss reserves have
been deleted from the prior definition of capital. All other banks (including
the Bank) must have a Tier 1 leverage ratio of at least 100- 200 basis points
above the 3% minimum, or somewhere between 4% and 5%. Based on the definitions
contained in the FDIC's revised capital regulation, the Bank is presently
required to maintain Tier 1 capital of 4%.
Like the FDIC's former capital regulation, the new capital regulation
requires higher capital levels for banks which exhibit more than a moderate
degree of risk or exhibit other characteristics which necessitate that higher
than minimum levels of capital be maintained. The new regulation also provides
that any insured bank with a Tier 1 capital to total assets ratio of less than
2% will be deemed to be operating in an unsafe and unsound condition pursuant to
Section 8(a) of the Federal Deposit Insurance Act unless the insured bank enters
into a written agreement, to which the FDIC is a party, to correct its capital
deficiency. Insured banks operating with Tier 1 capital levels below 2% (and
which have not entered into a written agreement) are subject to an insurance
removal action. Insured banks operating with lower than the prescribed minimum
capital levels generally will not receive approval of applications submitted to
the FDIC. Also, inadequately capitalized state nonmember banks will be subject
to such administration action as the FDIC deems necessary.
-64-
<PAGE> 66
FDIC capital requirements are designated as the minimum acceptable
standards for banks whose overall financial condition is fundamentally sound,
which are well-managed and have no material or significant financial weaknesses.
The FDIC capital regulations state that, where the FDIC determines that the
financial history or condition, including off-balance sheet risk, managerial
resources and/or the future earnings prospects of a bank are not adequate and/or
a bank has a significant volume of assets classified substandard, doubtful or
loss or otherwise criticized, the FDIC may determine that the minimum adequate
amount of capital for that bank is greater than the minimum standards
established in the regulation.
In March 1989, the FDIC adopted a "Statement of Policy on Risk-Based
Capital" to supplement its existing capital regulations. The Board of Governors
of the Federal Reserve System and the Office of the Comptroller of the Currency
("OCC") also have adopted very similar risk-based capital rules. The Statement
of Policy consists of a definition of capital for risk-based capital purposes, a
system for calculating risk-weighted assets by assigning assets and off-balance
sheet items to broad risk categories, and a schedule specifying a phase-in
period for achieving a minimum supervisory ratio of capital-to-risk-weighted
assets. According to the Statement of Policy, a bank's risk-based capital is
calculated by dividing its qualifying total capital base by its risk-weighted
assets. A bank's qualifying total capital base consists of "core capital" (or
"Tier 1" capital) and "supplemental capital" (or "Tier 2" capital). The
Statement of Policy specifies the components of each category and that banks
generally will be expected to meet a minimum total capital to risk-weighted
asset ratio of 8.00%, at least one-half of which is required to be in the form
of Tier 1 capital.
[The balance of this page is intentionally left blank]
-65-
<PAGE> 67
The following table presents Fort Brooke's historical capital position
relative to its capital requirements at December 31, 1995. For discussion of the
assumptions underlying the pro forma capital calculations presented below, see
"PRO FORMA CONDENSED COMBINED STATEMENTS OF EARNINGS (UNAUDITED)" and "NOTES TO
PRO FORMA CONDENSED COMBINED BALANCE SHEET AND STATEMENTS OF EARNINGS." The
definitions of the terms used in the table are those established by FDIC
regulations.
<TABLE>
<CAPTION>
Historical
December 31, 1995
-----------------
Amount Percentage
------ ----------
(Dollars in Thousands)
<S> <C> <C>
Tier 1 leverage capital (a) $ 15,848 8.55%
Tier 1 leverage capital requirement (a) 11,119 4.00
-------- --------
Excess (a) $ 4,729 4.55%
======== ========
Tier 1 capital (b) $ 15,848 12.39%
Total tier 1 capital to isk-weighted assets requirement (b) 5,116 4.00
-------- --------
Excess (b) $ 10,732 8.39%
======== ========
Total capital (b) $ 17,447 13.64%
Total tier 1 capital to
risk-weighted assets requirement (b) 10,233 8.00
-------- --------
Excess (b) $ 7,214 5.64%
======== ========
Total average assets $185,315 100.00%
======== ========
Total risk-weighted assets $127,909 100.00%
======== ========
</TABLE>
- -------------------
(a) Ratios are as a percentage of assets, using the preceding
thirteen week average of total assets.
(b) Ratios are as a percentage of risk-weighted assets.
IMPACT OF MONETARY POLICIES
Banking has traditionally been a business which depends on interest
rate differentials. In general, the differences between the interest paid by a
bank on its deposits and its other borrowings, and the interest received by the
bank on loans extended to its customers and securities held in its investment
portfolio, will comprise the major portion of the bank's earnings, but due to
recent deregulation of the industry, the banking business is becoming
increasingly dependent on the generation of fees and service charges as well.
Both sources of earnings will also remain subject to the influence of economic
conditions generally, both domestic and, to a lesser extent, foreign, and also
to the monetary and fiscal policies of the United States and its agencies,
particularly the Board of Governors of the Federal Reserve System, the Federal
Deposit Insurance Corporation and the Depository Institutions Deregulation
Committee. An important function of the Federal Reserve System is to regulate
the money supply, credit conditions and interest rates. Among the instruments
used to implement these
-66-
<PAGE> 68
objectives are open market operations in U. S. Government securities, changes in
reserve requirements against bank deposits and limitations on interest rates
that member banks may pay on deposits. These instruments are used in varying
combinations to influence overall growth and distribution of credit, bank loans,
investments and deposits, and their use may also affect interest rates charged
on loans or paid on deposits. Fort Brooke is not a member of the Federal Reserve
System, but it is subject to reserve requirements imposed by that agency on
non-member banks. Monetary policies and regulations of the Federal Reserve Board
have had a significant effect on the operating results of commercial banks in
the past and are expected to continue to do so in the future. The effects of
such policies upon the future business, earnings and growth of each bank cannot
be predicted.
Also important in terms of its effect on banks has been the
deregulation of interest rates paid by banks on deposits and the types of
deposit accounts that may be offered by banks. Most regulatory limits on
permissible deposit interest rates and minimum deposit amounts expired on or
before March 31, 1986. The effect of the deregulation of deposit interest rates
generally has been to increase banks' costs of funds and to make their costs of
funds more sensitive to fluctuations in money market rates. A result of the
pressure on banks' interest margins due to deregulation had been a trend toward
expansion of services offered by banks and an increase in the emphasis placed on
fee or non-interest income.
INSURANCE OF DEPOSITS
The depository accounts of each bank are insured by the FDIC up to a
maximum of $100,000 per insured depositor. The FDIC issues regulations, conducts
periodic examinations, requires the filing of reports and generally supervises
the operations of its insured banks. The approval of the FDIC is required prior
to a merger or consolidation or the establishment or relocation of an office
facility. This supervision and regulation is intended primarily for the
protection of depositors.
Any insured bank which is not operated in accordance with or does not
conform to FDIC regulations, policies and directives may be sanctioned for
non-compliance. Proceedings may be instituted against any insured bank or any
director, officer or employee of such bank engaging in unsafe and unsound
practices, including the violation of applicable laws and regulations. The FDIC
has the authority to terminate insurance of accounts pursuant to procedures
established for that purpose.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA"), enacted on August 9, 1989, abolished the Federal Savings and Loan
Insurance Corporation and established two separate insurance funds, one for
commercial banks and the other for savings institutions, named, respectively,
the Bank Insurance Fund and the Savings Associations Insurance Fund. Both funds
are under the management of the FDIC which sets insurance premium rates for all
insured institutions. The legislation produced a substantial increase in deposit
insurance premiums paid by federally insured banks, which, for calendar year
1992, was fixed for all institutions at an annual assessment rate of $.23 per
$100.
-67-
<PAGE> 69
Under regulations effective with respect to 1993 and beyond, the
assessment rate applicable to each bank holding membership in the Bank Insurance
Fund fall within a range of $.23 to $.31 per $100 of deposits, the precise
amount to be determined semi-annually by reference to the particular assessment
risk classification that will be assigned by the FDIC to the member, giving
effect to (a) capital factors that will classify the member as either well,
adequately or under-capitalized, and to (b) supervisory risk factors that will
rate each member within a particular capital classification as (i) being
financially sound, (ii) having weaknesses which, if uncorrected, could lead to
the institution's deterioration, or (iii) posing a substantial probability of
loss to the fund unless effective corrective action is taken. Such arrangement
will be subject to further review and a possible lowering of the rates once the
fund is recapitalized to the point of achieving a reserve ratio of 1.25% of
deposits, a goal that the FDIC expects to reach by the summer of 2002. See
"CERTAIN RISK FACTORS - Disparity between Insurance Premium Rates; Savings
Association Insurance Fund Special Assessment," for a discussion of the added
premiums and special assessment to which the Bank is currently subjected under
the law.
Insurance premiums from each industry are allocated only to the
insurance fund established therefor.
RECENT LEGISLATION AND OTHER MATTERS
From time to time, legislation is proposed or enacted which has the
effect of increasing the cost of doing business and changing the competitive
balance between banks and other financial and non-financial institutions.
Under the Florida Regional Reciprocal Banking Act of 1984, a
controlling interest in a bank has generally not been able to be acquired by any
bank holding company which has its principal place of business outside of the
District of Columbia or the 12 states included in Florida's southeast reciprocal
banking region. The Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 (the "Interstate Act"), which was enacted on September 29, 1994, now
permits, however, subject to certain conditions and exceptions, (1) bank holding
company acquisitions, commencing one year after enactment, of banks of a minimum
age of up to five years as established by state law in any state, (ii) mergers
of national and state banks after May 31, 1997 across state lines unless the
state has opted out of the interstate bank merger provisions, (iii) branching de
novo by national and state banks into other states if the state has elected to
be controlled by this provision of the Interstate Act, and (iv) certain
interstate bank agency activities one year after enactment. Regulations have not
yet been issued under the Interstate Act.
The FDIC Improvement Act of 1991 ("FDICIA") was enacted in December
1991. The centerpiece of that legislation is a provision authorizing an increase
in the FDIC's ability to borrow from the United States Treasury, up from a
previous limit of 5 billion dollars to a new ceiling of 30 billion dollars so as
to provide a means, prior to full recapitalization of the FDIC's insurance
funds, to replenish their liquidity. The 1991 Act also contains provisions,
however,
-68-
<PAGE> 70
which will directly affect the operation of state non-member banks whose
deposits are insured by the FDIC. Periodic full scope, on-site examinations, the
expense of which may be charged to the examined bank, are to be required
annually, subject to the right of the agency to defer such examination for one
year, if, in the intervening year, a full scope, on-site examination shall have
been conducted by the state regulatory agency having jurisdiction over the
bank's operation. Tightened uniform financial accounting principles are imposed
on insured depository institutions, and five new capital categories, ranging
from "well capitalized" down through "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized," are established, and a series of regulatory tools are
provided the FDIC to monitor and limit the activities of institutions as their
capitalization decreases from a "well capitalized" to a "critically
undercapitalized" condition. Under such regulations, a depository institution
will qualify as well capitalized if it maintains a Leverage Ratio of at least
5%, a risk adjusted Tier 1 Capital Ratio of at least 6% and a Total Capital
Ratio of at least 10% and is not otherwise in a "troubled condition" as
specified by its appropriate federal regulatory agency. It will be deemed
adequately capitalized if it meets all of its minimum capital requirements. In
addition, a depository institution will be considered undercapitalized if it
fails to meet any minimum required measure, significantly undercapitalized if it
is significantly below such measure and critically undercapitalized if it fails
to maintain a level of tangible equity equal to not less than 2% of total
assets. A depository institution may be deemed to be in a capitalization
category that is lower than is indicated by its actual capital position if it
receives an unsatisfactory examination rating.
FDICIA also generally prohibits a depository institution from making
any capital distribution (including payment of dividends) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized. Undercapitalized depository institutions are
subject to restrictions on borrowing from the FRB, effective December 19, 1993.
In addition, undercapitalized depository institutions are subject to growth
limitations and are required to submit capital restoration plans. The federal
banking agencies may not accept a capital plan without determining, among other
things, that the plan is based on realistic assumptions and is likely to succeed
in restoring the depository institution's capital. If a depository institution
fails to submit an acceptable plan, it is treated as significantly
undercapitalized. Significantly undercapitalized depository institutions may be
subject to a number of requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized, requirements to reduce
total assets and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized depository institutions are subject to appointment
of a receiver or conservator.
The law also requires the FDIC to establish new non-capital standards
with respect to such diverse banking activities as internal control, information
and audit systems; loan documentation; credit underwriting; interest rate
exposure; asset growth; compensation, fees and benefits authorized for financial
institution insiders; other operational and managerial standards; and asset
quality, earnings and stock valuation. In the event that an institution fails to
meet these regulatory standards for safety and soundness, it must develop and
submit to the agency, within 30 days after a determination has been made of such
failure, a plan specifying the steps
-69-
<PAGE> 71
that the institution will take to correct the deficiency. A separate portion of
FDICIA prohibits insured state banks from engaging as principals in activities
not permitted to national banks unless certain capital adequacy standards, and
other criteria are met. Expressly included in the list of generally prohibited
activities are insurance underwriting and equity investments.
FIRREA is generally regarded as constituting the most significant
regulatory reorganization of the thrift industry since the enactment, in 1933,
of the statutes that established the initial basic regulatory pattern for the
thrift industry and the establishment of the Federal Home Loan Bank system. Its
impact on commercial banks, however, aside from imposing a new deposit insurance
fund and the premium arrangement referenced above, is more general in nature,
relating principally to an expansion of and increase in civil and criminal
penalties available for use by the appropriate regulatory agency against certain
"institution-affiliated parties" (primarily including management, employees and
agents of a regulated financial institution, independent contractors such as
attorneys and accountants and others who participate in the conduct of the
financial institution's affairs) who knowingly or recklessly either violate a
law or regulation, breach a fiduciary duty or engage in unsafe or unsound
practices. Such practices can include the failure of an institution to timely
file required reports or the submission of inaccurate reports. Criminal fines
and other sanctions have been substantially increased, and, in addition,
regulators are provided with far greater flexibility to impose enforcement
action on an institution that fails to comply with its regulatory requirements,
particularly with respect to capital requirements. Such action ranges from the
imposition of a capital plan to the termination of deposit insurance, and
agencies are authorized to issue cease and desist orders that may require
affirmative action to correct any harm resulting from a violation or practice,
including restitution, reimbursement, indemnification or guaranty against loss.
A financial institution may also be ordered to restrict its growth, dispose of
certain assets or take other action as determined by the ordering agency to be
appropriate.
Other legislation has been proposed or is pending before the United
States Congress which could affect the financial institutions industry. Such
legislation includes wide-ranging proposals to further alter the structure,
regulation and competitive relationships of the nation's financial institutions,
to reorganize the federal regulatory structure of the financial institutions
industry, to authorize interstate banking via expanded regional reciprocity
agreements, to subject banks to increased disclosure and reporting requirements,
to impose geographical restrictions on cross-industry acquisitions, and to
expand the range of financial services which banks and bank holding companies
can provide. Other proposals which have been introduced or are being discussed
would equalize the relative powers of savings and loan holding companies and
bank holding companies, and authorize such holding companies to engage in
insurance underwriting and brokerage, real estate development and brokerage, and
certain securities activities, including underwriting and dealing in U.S.
Government and municipal securities, sponsoring and managing investment
companies and underwriting the securities thereof. It cannot be predicted
whether or in what form any of these proposals will be adopted, or to what
extent they will affect the various entities comprising the financial
institutions industry.
-70-
<PAGE> 72
CHANGE OF CONTROL
State and federal law restricts the amount of voting stock of a bank
that a person may acquire without the prior approval of banking regulators. The
overall effect of such laws is to make it more difficult to acquire a bank by
tender offer or similar means than it might be to acquire control of another
type of corporation. Consequently, shareholders of the Bank are less likely to
benefit from the rapid increases in stock prices that often result from tender
offers or similar efforts to acquire control of other companies.
Pursuant to Florida law, no person or group of persons may, directly or
indirectly or acting by or through one or more persons, purchase or acquire a
controlling interest in any bank which would result in the change in control of
that bank unless the Department first shall have approved such proposed
acquisition. A person or group will be deemed to have acquired "control" of a
bank if he, she or it, directly or indirectly, or, acting through one or more
other persons, (i) owns, controls or has power to vote 25% or more of any class
of voting securities of the bank, (ii) controls in any manner the election of a
majority of the directors of the bank, or (iii) exercises a controlling
influence over the management or policies of the bank (as otherwise determined
by the Department.) The law creates a rebuttable presumption of control if a
person or group acquires 10% or more of a bank's voting stock and if one or more
other "control factors" set forth in the statute are present.
Federal law imposes additional restrictions on acquisitions of stock in
FDIC-insured banks. Under the federal Change in Bank Control Act and the
regulations thereunder, a person or group must give advance notice to the FDIC
before acquiring control of any federally-insured bank. Upon receipt of such
notice, the FDIC either may approve or disapprove the acquisition.
PAYMENT OF DIVIDENDS
If the Merger is consummated, the Company's principal source of cash
flow, including that needed to service or amortize any debt and to pay dividends
to its shareholders, will be dividends from the Bank. Federal banking agencies
have indicated that paying dividends that deplete a depository institution's
holding company's capital base to an inadequate level would be an unsafe and
unsound banking practice. Moreover, both the Board of Governors and the the FDIC
have issued policy statements which provide that bank holding companies and
insured depository institutions generally should only pay dividends out of
current operation earnings. A Florida chartered commercial bank may not pay cash
dividends that would cause its capital to fall below the minimum amount required
by federal or Florida law. Otherwise, a commercial bank may pay a dividend out
of the total current net profits plus retained net profits of the preceding two
years to the extent it deems expedient, except as described below. First, 20% of
the net profits in the preceding two year period may not be paid in dividends
but must be retained to increase capital surplus until such surplus equals the
amount of common and preferred stock issued and outstanding. In addition, no
bank may pay a dividend at any time when the net earnings in the current year
when combined with retained net earnings from the
-71-
<PAGE> 73
preceding two years produces a loss. The ability of Fort Brooke, following the
Effective Date of the Merger, to pay dividends will depend in part on the FDIC
capital requirements in effect from time to time and the Bank's ability to
comply with such requirements. See "DESCRIPTION OF CAPITAL STOCK OF THE BANK-
Dividends."
Various other legislation, including proposals to revise the banking
regulatory system and to limit the investments that a depository institution may
make with insured funds, is from time to time introduced in Congress.
BROKERED DEPOSITS
The FDIC has adopted regulations under FDICIA governing the receipt of
brokered deposits. Under these regulations, a depository institution cannot
accept, rollover or renew brokered deposits unless (i) it is well capitalized or
(ii) it is adequately capitalized and receives a waiver from the FDIC. A
depository institution that cannot receive brokered deposits also cannot offer
"pass-through" insurance on certain employee benefit accounts. Whether or not it
has obtained such a waiver, an adequately capitalized depository institution may
not pay an interest rate on any deposits in excess of 75 basis points over
certain prevailing market rates specified by regulation. There are no such
restrictions on a depository institution that is well capitalized.
DEPOSITOR PREFERENCE
The recently adopted Omnibus Budget Reconciliation Act of 1993 provides
for a national depositor preference on amounts realized from the liquidation or
other resolution of any depository institution insured by the FDIC. The act
requires claims to be paid in the following priority: the receiver's
administrative expenses; deposits; other general or senior liabilities of the
institution; obligations subordinated to depositors or general creditors; and
obligations to shareholders. Under an FDIC interim rule, which became effective
August 13, 1993, "administrative expenses of the receiver" are defined as those
incurred by the receiver in liquidating or resolving the affairs of a failed
insured depository institution.
LIQUIDITY
A Florida chartered commercial bank is required to maintain a liquidity
reserve of at least 15% of its total transaction and 8% of its total
nontransaction accounts, less those deposits of public funds for which adequate
security has been pledged. The liquidity reserve may consist of cash on hand,
cash on demand deposit with correspondent banks and other investments and
short-term marketable securities as determined by rule by the Department, such
as federal funds sold and United States securities or securities guaranteed by
the United States. At December 31, 1995, Fort Brooke had liquidity of
approximately $54,000,000 million, or 32.1% of total deposits.
-72-
<PAGE> 74
ASSESSMENTS
As a state-chartered bank, Fort Brooke is required by Department and
FDIC regulations to pay assessments to those regulatory agencies. The general
assessments paid by Fort Brooke for the year ended 1995 totalled $291,687. Based
on the amount of SAIF-assessed deposits held by the Bank on March 31, 1995, the
Bank will likely be required to pay in 1996 a special assessment to the SAIF of
approximately $840,000. See "CERTAIN RISK FACTORS Disparity between Insured
Premium Rates; Savings Association Insurance Fund Special Assessment."
LOANS TO ONE BORROWER
Florida Law allows a state bank to extend credit to any one borrower or
related group of borrowers in an amount up to 25% of its capital accounts (i.e.
unimpaired capital, surplus and undivided profits) as long as the unsecured
portion does not exceed 15% of such accounts. At December 31, 1995, the limit on
unsecured loans to one borrower at Fort Brooke was $2,315,000 and on secured
loans $3,858,000.
COMMUNITY REINVESTMENT
Under the Community Reinvestment Act ("CRA"), as implemented by OTS and
FDIC regulations, a financial institution has a continuing and affirmative
obligation, consistent with safe and sound banking operations, to help meet the
credit needs of its entire community, including low- and moderate-income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community, consistent with the CRA. The CRA
requires the federal regulatory agency charged with examining the financial
institution in a compliance examination to assess the institution's record of
meeting the credit needs of its community and to take such record into account
in its evaluation of certain applications by such institution. FIRREA amended
the CRA to require, effective July 1, 1990, public disclosure of an
institution's CRA rating and to require that the FDIC provide a written
evaluation of an institution's CRA performance using a four-tiered descriptive
rating system in lieu of the then existing five tiered numerical rating system.
The most recent CRA rating for Fort Brooke was "Outstanding."
[Remainder of page intentionally left blank]
-73-
<PAGE> 75
FORT BROOKE MANAGEMENT
GENERAL
In addition to the 14 incumbent Fort Brooke directors identified above
in the Section entitled "PROPOSAL NO. 2 - ELECTION OF DIRECTORS," Fort Brooke is
managed by the following executive officers:
<TABLE>
<CAPTION>
Years of
Service with
Name Age Position Bank
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
President and
Richard H. Eatman 53 Chief Executive Officer 7
Marvin F. Crabtree, Jr. 53 Senior Vice President and 6
Senior Lending Officer
Edmund R. Komlodi 57 Senior Vice President and 6
Chief Financial Officer
Judy C. Sherwood 47 Senior Vice President, Operations 10
David E. Brown 42 Senior Vice President, Commercial Loans 7
Robert S. Covington, Jr. 48 Senior Vice President, Commercial Loans 1
Daniel L. Dail 53 Senior Vice President, Credit Administration/
Commercial Loans 12
Ronald D. Daniel 57 Senior Vice President, Area Executive 3
Gary L. Boothe 49 Vice President, Commercial Loans 1
Jeff S. Campbell 35 Vice President, Commercial Loans 4
Richard H. Johnson 50 Vice President, Human Resources Director 7
Loren B. McKenzie 55 Vice President Consumer Loan Department 6
Deborah R. Resnick 40 Vice President, Residential Mortgage
Department 2
</TABLE>
-74-
<PAGE> 76
<TABLE>
<S> <C> <C> <C>
Peggy E. Tew 56 Vice President Commercial Mortgage
Loans 13
Charles C. Whitaker III 49 Vice President, Area Executive 5
Randy L. Friskney 38 Senior Audit Manager 7
</TABLE>
REMUNERATION OF DIRECTORS AND OFFICERS
Since early 1992, each director has been paid compensation, at the rate
of $350 per meeting, in exchange for his attendance at board of director
meetings, as well as $100 per month for attendance at director committee
meetings (irrespective of the number involved). During 1995, Fort Brooke's board
of directors held 12 regular meetings and one special meeting, and each of the
directors attended at least 75% of the total.
The following table sets forth certain information regarding the
compensation paid to Mr. Eatman, the Bank's president and chief executive
officer and its only officer who received more than $100,000 during all of
calendar year 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME AND ANNUAL OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
------------------ ---- ------ ----- ------------
<S> <C> <C> <C> <C>
RICHARD H. EATMAN 1995 $130,000 $20,000 N/A
1994 $128,000 $20,000 N/A
1993 $120,480 $15,000 N/A
</TABLE>
STOCK OPTIONS
On March 26, 1992, Fort Brooke's shareholders approved the adoption of
a Non-Qualified Stock Option Plan (the "Plan"), providing for the grant to
selected employees of Fort Brooke (including its officers) of options to
purchase up to an aggregate of 76,319 shares of the bank's common stock, $8.00
par value, which maximum number may subsequently be increased by action of the
board of directors to the lesser of 110,000 shares or an amount equal to 20% of
the shares of such class of common stock as shall be issued and outstanding
during the pendency of the Plan.
Under the Plan, options may be granted during the ten year period that
commenced March 1, 1992 to such Fort Brooke employees as shall be designated by
the board of directors, in such amounts and upon such terms as shall be fixed by
the board committee administering the Plan (the "Committee"). As of December 31,
1995, options to acquire an aggregate of 60,460 shares had been granted to 18
employees. All are deemed granted at an exercise price equal to
-75-
<PAGE> 77
the greater of the fair market value of the Bank's common stock on the date of
the grant or the par value of such stock. Each option will generally expire 10
years from its date of grant, provided that if the optionholder is terminated by
Fort Brooke for cause (as defined in the Plan), the option will be voided
immediately and if he or she resigns, is terminated for a reason other than
cause or dies, the option will remain subject to exercise for only the
succeeding six month period. The board of directors may amend or terminate the
Plan, in whole or in part, in its sole discretion, except that it may not modify
the option exercise price contained in the Plan, increase above 100,000 the
number of shares that may be delivered upon exercise of options (subject to the
right of the board of directors to make such adjustments to reflect changes in
the capital structure of the bank), or authorize changes in the Plan
inconsistent with Florida law. The Plan was adopted as a means by which to
provide Fort Brooke employees of special merit with a benefit that will have the
potential for appreciation of value, in direct relationship to their efforts on
behalf of the Bank. The net proceeds of sales of common stock sold pursuant to
the Plan will be added to the general funds of Fort Brooke and will be used for
working capital. If the Merger is consummated, the Plan will be adopted by the
Company and amended to provide for the issuance, upon any future exercise of
then outstanding options, of Company shares of common stock in a number
identical to the number of Bank shares of Common Stock to which each such option
relates.
On March 17, 1992, Mr. Eatman was granted an option under the Plan to
acquire 11,000 shares at an exercise price of $9.77 per share, on August 16,
1994, he was granted an additional option under the Plan to acquire 13,750
shares at an exercise price of $12.01 per share and in October 1995, he was
granted an additional option under the Plan to acquire 3,500 shares at an
exercise price of $15.07 per share.
On December 8, 1992, Mr. Eatman was made the recipient of a
non-qualified deferred compensation agreement under which he was provided a
retirement, disability or death benefit. The retirement benefit is in the amount
of $500,000, payable in 120 monthly payments each of $4,166.67. The first
payment is due on the first day of the first full calendar month following Mr.
Eatman's retirement date. This compensation is funded by a paid up insurance
policy which was purchased by the Bank in December 1992.
401(K) DEFINED CONTRIBUTION PLAN
Fort Brooke maintains a qualified Section 401(k) profit sharing plan
for its participating employees which the board of directors established
effective as of January 1, 1993 (the "Plan"). Under the Plan, a participating
employee is given an opportunity to make an elective contribution under a salary
reduction arrangement in which up to 15% of a participant's compensation may be
set aside for the benefit of such participant as an employer contribution. In
addition, Fort Brooke makes a separate matching contribution equal to 50% of the
amount that each participant elects to set aside, up to a maximum of 6% of a
participant's compensation. All employees that have completed one year of
service and have reached the age of 18 are eligible to participate in the Plan.
Mr. Eatman participates in the 401(k) plan at 6.0% of his
-76-
<PAGE> 78
salary. The Plan will be continued in its present form following the Effective
Date of the Merger.
MATERIAL TRANSACTIONS
Except as set forth below, there are neither pending nor proposed any
direct or indirect material transactions between Fort Brooke and any of its
directors, officers or controlling shareholders outside the ordinary course of
the bank's business.
Mr. Eatman, Fort Brooke's President and Chief Executive Officer, is
employed pursuant to the terms of a written employment agreement, under which he
is to be paid an annual salary of $100,000 plus any normal salary increase, as
well as fringe benefits normal to his position. He is also entitled to six
months of severance pay in the event his termination is effected without cause,
$250,000 in the event his termination is effected as a result of a major change
of control in Fort Brooke's ownership. Although not reduced to writing, it is
Fort Brooke's informal policy that all other executive officers will be entitled
to receive full salary plus benefits for a period of one month if terminated for
reasons other than cause, and that, in the event of death, such benefits will
accrue to the individual's estate. The directors further intend that Fort Brooke
will provide for its employees' life, health, accident and disability insurance
plans competitive with those offered by other banking corporations in the bank's
market area.
It is anticipated that Fort Brooke's directors, officers or controlling
shareholders will have direct or indirect banking transactions with the bank in
the ordinary course of business. Any loans or commitments to make loans to such
persons are required by state law to be made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons of similar creditworthiness, and must
be approved in advance by the bank's board of directors.
The Florida Business Corporation Act provides that directors and
officers of a corporation, including Fort Brooke, may be indemnified in certain
instances against certain liabilities which they may incur by virtue of their
relationship with the corporation. Fort Brooke's bylaws provide for such
indemnification, and for the advancement of expenses pursuant to the Florida
Act, to each person who is or was a director or officer of the bank and each
person who is or was serving at the request of the bank as a director or officer
of another corporation if the person may be indemnified under the Florida Act.
Fort Brooke also presently maintains directors' and officers' liability
insurance to offset such requirement.
-77-
<PAGE> 79
MANAGEMENT OF THE COMPANY
The board of directors of the Company is identical to that of Fort
Brooke, and its officers are limited to Mr. Eatman, as President and Treasurer,
and Mr. Adams, as secretary. As the Company does not presently contemplate
engaging in business activities other than those associated with the Merger and,
if it is consummated, with the ownership of the Bank, no regularly scheduled
meetings of the board have been fixed and no compensation is currently being
paid to any director or officer.
FORT BROOKE PRINCIPAL SHAREHOLDERS
The following table enumerates, as of December 31, 1995, the name,
position with Fort Brooke, if any, and ownership, both by numerical holding and
percentage interest, of each person known to own more than five percent of Fort
Brooke's outstanding common stock, each of the directors of Fort Brooke,
individually, and all of the directors and executive officers of Fort Brooke as
a group:
<TABLE>
<CAPTION>
Name and Position # of Shares Percentage
of Beneficial Owner Beneficially Owned(1) Ownership (2)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
John D. Adams, Secretary and Director 43,580 4.09 %
Melvin R. Belisle, Director 27,471 2.58
Tommy W. Brown, Director 10,367 .97
Richard H. Eatman, President,
Chief Executive Officer and Director(3) 42,788 4.02
H. Rex Etheredge, Director 1,391 .13
Joseph Garcia, Director 10,999 1.03
Riley L. Hogan, Jr., Director 17,492 1.64
A. D. "Sandy" MacKinnon, Director 8,050 .75
Thomas H. Miller, Chairman
of the Board 74,828 7.02
Charles W. Poe, Director 32,153 3.02
William F. Poe, Director 18,210 1.71
</TABLE>
-78-
<PAGE> 80
<TABLE>
<S> <C> <C>
Reese T. Poppell, Director 3,300 .31
Sam Rampello, Director 4,188 .39
David C. Worthington, Director 12,874 1.21
All directors and executive
officers as a group (29
persons, including those
above named) 339,611 31.89%
</TABLE>
- ------------------------
(1) In accordance with applicable regulations, a person will be deemed to be
the beneficial owner of a security if he or she has or shares voting or
investment power with respect to such security or has the right to
acquire such ownership within the succeeding 60 day period.
(2) In calculating the percentage ownership for a given individual or group,
the number of shares of Common Stock deemed outstanding will include
unissued shares subject to options which are exercisable within the
succeeding 60 day period.
(3) Includes 28,250 shares which are subject to purchase by Mr. Eatman upon
exercise of option grants, and an additional 435 shares held by Mr.
Eatman's wife, as to which he disclaims beneficial ownership.
DESCRIPTION OF FORT BROOKE CAPITAL STOCK
Fort Brooke's authorized capital stock consists of 2,000,000 shares of
common stock, par value $8.00, of which 1,005,920 are currently issued and
outstanding; and 110,000 are reserved for issuance upon the exercise of stock
options granted or to be granted under the terms of the Bank's Non-Qualified
Stock Option Plan.
VOTING RIGHTS
Each shareholder of Fort Brooke is entitled to cast one vote for each
share held on all issues requiring a shareholder vote, but may not cumulate his,
her or its votes for the election of directors or for any other purpose.
-79-
<PAGE> 81
DIVIDENDS
In each of calendar years 1993 and 1996, Fort Brooke declared and paid
a dividend equal to $.25 per share, and in 1995 declared and paid a 10% stock
dividend. If the Merger is consummated, Fort Brooke will expect to follow a
policy of retaining earnings, if any, for the balance of the year in order to
increase the Bank's net worth and reserves, and will likely pay cash dividends
within such period only to the extent needed by the Company to service any debt
generated as a result of Bank shareholders properly dissenting from the Merger.
The future dividend policy of Fort Brooke will be determined at the discretion
of its board of directors, subject to regulatory review (see the discussion
relating to the FDIC Improvement Act of 1991 appearing under "SUPERVISION AND
REGULATION - Recent Legislation and Other Matters") and to the desires of the
Company, it its capacity as the Bank's sole shareholder, and will depend upon a
number of factors, including future earnings, financial conditions, liquidity
and general business conditions. No assurance can be given that the Bank's
earnings will permit the future payment of dividends.
To the extent that the Bank declares and pays a dividend, each share
will participate equally therein. State law requires that dividends may be paid
only from a bank's current and retained net profits, after taking into account
allowances for depreciation, worthless assets and bad debts. Approval of the
Department is required if the bank's directors seek to declare a dividend from
retained net profits which accrued prior to the two-year period preceding the
year in which the declaration is to be made. The payment of dividends out of a
bank's net profits is further limited by state law which requires that, prior to
declaration of a dividend, the bank must pay into its surplus fund 20% of its
current and retained net profits until such fund shall at least equal the amount
of its issued and outstanding capital stock.
The Department may prohibit the payment of any dividend which would
constitute an unsafe and unsound banking practice.
LIQUIDATION RIGHTS
In any liquidation, dissolution or winding up of Fort Brooke, holders
of common stock will be entitled to share ratably in all assets available for
distribution after payment of debts, liabilities and preferences.
VOTE REQUIRED TO AMEND
Fort Brooke's Articles of Incorporation will be subject to amendment at
any regular or special meeting of the shareholders by the affirmative vote of
the holders of a majority of the bank's outstanding common shares, unless the
vote of the holders of a greater number of shares is required by law.
-80-
<PAGE> 82
ABSENCE OF PREEMPTIVE RIGHTS
Holders of common shares will not have preemptive rights to subscribe
for additional shares on a pro rata basis when and if such additional shares are
offered for sale by Fort Brooke.
ISSUANCE OF DEBT SECURITIES
From time to time, Fort Brooke may issue debt securities, such as
subordinated notes and debentures, without the approval of shareholders. The
holders of such securities would have a claim to Fort Brooke's net assets
superior to that of any shareholder, and upon its liquidation would be paid the
value of their securities prior to a shareholder receiving any distribution. The
directors presently have no plans for Fort Brooke to issue debt securities in
the foreseeable future.
FULLY PAID AND NON-ASSESSABLE
No shares of common stock may be issued before they are fully paid.
Consequently, once issued, the holders of such shares may not be subjected to
further assessment by Fort Brooke for the purpose of restoring impaired capital
otherwise.
OTHER MATTERS
Fort Brooke presently serves as its own transfer agent and registrar
for outstanding shares of the Fort Brooke Common Stock, but reserves the right
to engage another financial institution to perform this service.
DESCRIPTION OF COMPANY CAPITAL STOCK
The Company's authorized capital stock consists of 10,000,000 shares of
common stock, par value $.001, of which ten shares are currently issued and
outstanding. The shares presently outstanding will be redeemed upon the
effectiveness of the Merger, and new shares will then be issued to those Bank
shareholders who do not dissent from the Merger, in a number identical to the
number of Bank shares which they then hold. There are reserved for issuance upon
the consummation of the Merger such additional number of common shares, as well
as that further number which will be available for issuance upon exercise of
stock options granted or to be granted under the terms of the Bank's existing
Non-Qualified Stock Option Plan. A copy of the Company's existing Articles of
Incorporation is attached to this Proxy Statement as Appendix D, and the
following description is qualified in its entirety by reference thereto.
-81-
<PAGE> 83
VOTING RIGHTS
Each holder of the Company's common stock will be entitled to cast one
vote for each share held on all issues requiring a shareholder vote, but may not
cumulate his, her or its votes for the election of directors or for any other
purpose.
DIVIDENDS
Under Florida law, the Company will be prohibited from paying any
dividend or making any other capital distribution if, after giving it effect,
(i) the Company would not be able to pay its debts as they become due in the
usual course of business, or (ii) the Company's total assets would be less than
the sum of its total liabilities plus the amount that would be needed, if the
Company were to be dissolved at the time of the distribution, to satisfy the
rights of shareholders that were superior to the rights of those receiving the
distribution. Moreover, federal authorities have issued policy statements that
indicate bank holding companies should generally only pay dividends out of
current operating earnings.
LIQUIDATION RIGHTS
In any liquidation, dissolution or winding up of the Company, holders
of common stock will be entitled to share ratably in all assets available for
distribution after payment of debts, liabilities and preferences.
VOTE REQUIRED TO AMEND
The Company's Articles of Incorporation will be subject to amendment at
any regular or special meeting of the shareholders by the affirmative vote of
the holders of a majority of the Company's outstanding common shares, unless the
vote of the holders of a greater number of shares is required by law.
ABSENCE OF PREEMPTIVE RIGHTS
Holders of the Company's common shares will not have preemptive rights
to subscribe for additional shares on a pro rata basis when and if such
additional shares are offered for sale by the Company. The absence of preemptive
rights increases the Company's flexibility to raise capital as needed, to
support growth, and to offer employee benefit and incentive plans, but likely
will reduce Company shareholders' proportionate ownership interest if additional
stock is issued.
-82-
<PAGE> 84
ISSUANCE OF DEBT SECURITIES
From time to time, the Company may issue debt securities, such as
subordinated notes and debentures, without the approval of shareholders. The
holders of such securities would have a claim to the Company's net assets
superior to that of any shareholder, and upon its liquidation would be paid the
value of their securities prior to a shareholder receiving any distribution. The
Company's directors presently have no plans for the Company to issue debt
securities in the foreseeable future other than, as necessary or appropriate, to
obtain funds with which to pay Bank shareholders who dissent from the Merger the
fair market value of the Bank shares with respect to which a dissent shall have
been undertaken.
FULLY PAID AND NON-ASSESSABLE
No shares of the Company's common stock may be issued before they are
fully paid. Consequently, once issued, the holders of such shares may not be
subjected to further assessment by the Company for the purpose of restoring
impaired capital or otherwise. No new consideration will be required to be paid
by Bank shareholders participating in the Merger.
PAR VALUE
As the par value of the Company's common stock is $.001, and the par
value of the Bank's Common Stock is $8.00, the Company's stated capital account,
which will appear on its consolidated financial statements after consummation of
the Merger, will be decreased to reflect the lower par value, and its additional
paid-in capital account will be increased to reflect the difference. The
combination of the Company's stated capital and additional paid-in capital
accounts will, however, be identical, upon consummation of the Merger, to the
aggregate of those two accounts as maintained by the Bank immediately prior
thereto.
REDEMPTION
While the Bank may not reduce its capital stock without first obtaining
approval from the Department, the Company may, under current Board of Governors
regulations, purchase or redeem its capital stock subject to prior written
notice to the Board, provided, among other matters, that the Company has
adequate capital following the purchase.
OTHER MATTERS
The Company intends to serve as its own transfer agent and registrar
for outstanding shares of its common stock, but reserves the right to engage
another financial institution to perform this service.
-83-
<PAGE> 85
MARKETABILITY OF SECURITIES
Although the shares of Fort Brooke Common Stock have been freely
transferable from the time of their issuance, no public trading market for their
future transfer was developed. Further, no licensed securities broker has in the
past made, or has indicated an expectation in the future to make, a market in
Fort Brooke's outstanding securities. Prior trading transactions have therefore
been infrequent and negotiated privately between the purchaser and seller (with
the Bank, in certain of those instances, supplying one with the identity of the
other as a possible purchaser or seller). Even though such shares may be bought
or sold in over-the-counter markets through securities dealers without a market
maker being in place, it is anticipated that, if the Merger is not consummated,
only insignificant open market trading activities in such shares will take place
in the foreseeable future and that private transactions will continue to
represent the principal form of trading activity. Presently, Fort Brooke's
securities are not eligible for listing on any securities exchange or under the
NASDAQ System.
If the Merger is approved and consummated, the Company will thereafter
promptly effect a registration with the Securities and Exchange Commission,
under the provisions of Section 12(g) of the Exchange Act, of the common shares
issued to Bank shareholders, upon the effectiveness of which the Company shares
owned by shareholders other than directors, officers or those owning 5% or more
of such shares (collectively the "Control Shareholders") will be freely
tradeable. Those shares held by Control Shareholders will be available for
resale only under an effective registration statement applicable thereto or
pursuant to the terms of a transactional exemption from registration.
NO LITIGATION
Neither Fort Brooke, the Company nor Interim, nor any officer or
director of any such entity, is a defendant in any pending legal or
administrative proceeding having a material effect upon any matter herein
discussed and no such proceeding is known to be threatened or contemplated.
LEGAL OPINIONS
The validity of the shares of the Company's common stock to be issued
to Fort Brooke shareholders as a result of the effectiveness of the Merger will
be passed upon by Bush Ross Gardner Warren & Rudy, P.A., Tampa, Florida.
FINANCIAL STATEMENTS
The consolidated financial statements of Fort Brooke at December 31,
1995 and 1994, and for each of the years in the three-year period ended December
31, 1995, included within
-84-
<PAGE> 86
these materials, have been audited by Hacker, Johnson, Cohen & Grieb,
independent auditors, as described in its reports with respect thereto. A
representative of that firm is expected to attend the Fort Brooke Meeting and to
be available to respond to appropriate questions from shareholders.
[The balance of this page is intentionally left blank]
-85-
<PAGE> 87
FORT BROOKE BANK AND SUBSIDIARY
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Independent Auditors' Report ........................................................................F - 2
Consolidated Balance Sheets, December 31, 1995 and 1994 .............................................F - 3
Consolidated Statements of Earnings for Each of the Years
in the Three-Year Period Ended December 31, 1995 ..................................................F - 4
Consolidated Statements of Stockholders' Equity for Each
of the Years in the Three-Year Period Ended December 31, 1995 .....................................F - 5
Consolidated Statements of Cash Flows for Each of the Years
in the Three-Year Period Ended December 31, 1995 ..................................................F - 6
Notes to Consolidated Financial Statements for
Each of the Years in the Three-Year Period
Ended December 31, 1995..................................................................F - 7 to F - 21
</TABLE>
All schedules are omitted because of the absence of the conditions
under which they are required or because the required information is
included in the financial statements and related notes.
F-1
<PAGE> 88
[HACKER, JOHNSON, COHEN & GRIEB LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Fort Brooke Bank
Brandon, Florida:
We have audited the consolidated balance sheets of Fort Brooke Bank and
Subsidiary (the "Bank") as of December 31, 1995 and 1994 and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1995. These
financial statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these 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 the Bank as
of December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1995, in
conformity with generally accepted accounting principles.
/s/ HACKER, JOHNSON, COHEN & GRIEB
HACKER, JOHNSON, COHEN & GRIEB
Tampa, Florida
February 9, 1996
F-2
<PAGE> 89
FORT BROOKE BANK
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------
ASSETS 1995 1994
--------- ---------
<S> <C> <C>
Cash and due from banks ........................................................... $ 11,997 8,436
--------- ---------
Investment securities:
Available-for-sale, at market value ......................................... 24,077 16,163
Held-to-maturity, at cost (market value of $19,726 and $27,813) ............. 19,642 28,878
--------- ---------
Total investment securities ................................................. 43,719 45,041
--------- ---------
Loans, net of allowance for credit losses of $1,702 and $1,562 .................... 122,511 112,370
Other real estate owned ........................................................... 1,147 1,847
Premises and equipment, net ....................................................... 4,723 4,431
Federal Home Loan Bank stock ...................................................... 809 809
Accrued interest receivable ....................................................... 1,266 1,104
Deferred tax asset ................................................................ 211 529
Other assets ...................................................................... 733 743
--------- ---------
Total ............................................................. $ 187,116 175,310
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand deposits ............................................................. 35,181 28,892
Savings and NOW deposits .................................................... 31,334 32,170
Money market deposits ....................................................... 21,551 28,508
Other time deposits ......................................................... 80,231 68,307
--------- ---------
Total deposits .................................................... 168,297 157,877
Advances by borrowers for taxes and insurance ..................................... 128 202
Short term borrowings ............................................................. 1,965 2,718
Accrued interest payable .......................................................... 490 325
Current income taxes .............................................................. 158 126
Other liabilities ................................................................. 278 305
--------- ---------
Total liabilities ................................................. 171,316 161,553
--------- ---------
Commitments and contingency (Notes 7 and 15)
Stockholders' equity:
Common stock, $8 par value; 2,000,000 shares authorized,
1,005,920 and 914,644 issued and outstanding ........................... 8,047 7,317
Additional paid-in capital .................................................. 4,571 3,944
Retained earnings ........................................................... 3,298 2,994
Unrealized loss on investment securities .................................... (116) (498)
--------- ---------
Total stockholders' equity ........................................ 15,800 13,757
--------- ---------
Total ............................................................. $ 187,116 175,310
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE> 90
FORT BROOKE BANK
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Interest income:
Interest on loans........................................................ $ 10,883 8,824 8,790
Interest on investment securities........................................ 2,567 2,397 2,209
Other interest........................................................... 479 392 297
---------- -------- --------
Total interest income............................................... 13,929 11,613 11,296
---------- ------- -------
Interest expense:
Interest on deposits..................................................... 5,487 4,448 4,606
Interest on other borrowings............................................. 101 56 24
---------- -------- --------
Total interest expense.............................................. 5,588 4,504 4,630
---------- ------- -------
Net interest income................................................. 8,341 7,109 6,666
Provision for credit losses.................................................... 705 184 344
---------- ------- -------
Net interest income after provision for credit losses............... 7,636 6,925 6,322
---------- ------- -------
Noninterest income:
Other fees and service charges........................................... 1,206 1,173 1,171
Gain (loss) on sale of investment securities............................. (24) (16) 40
Other income............................................................. 84 162 224
---------- -------- --------
Total noninterest income............................................ 1,266 1,319 1,435
---------- ------- -------
Noninterest expense:
Employee compensation and benefits....................................... 2,960 3,349 2,951
Occupancy................................................................ 1,123 1,459 1,149
Data processing.......................................................... 330 306 238
Federal insurance premium................................................ 329 400 429
Advertising.............................................................. 100 94 160
Real estate expense...................................................... 137 141 186
Professional fees........................................................ 165 145 132
Other.................................................................... 985 1,319 1,067
---------- ------- -------
Total noninterest expense........................................... 6,129 7,213 6,312
---------- ------- -------
Earnings before income tax provision........................................... 2,773 1,031 1,445
Income tax provision................................................ 1,109 412 522
---------- -------- --------
Net earnings................................................................... $ 1,664 619 923
========== ======== ========
Earnings per share............................................................. $ 1.65 .63 .95
========== ========= ========
Weighted average number of shares outstanding................................... 1,005,920 984,711 966,864
========== ========= ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE> 91
FORT BROOKE BANK
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
ADDITIONAL ON TOTAL
NUMBER OF COMMON PAID-IN RETAINED INVESTMENT STOCKHOLDERS'
SHARES STOCK CAPITAL EARNINGS SECURITIES EQUITY
--------- --------- -------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1992 ............ 878,967 $ 7,032 3,936 1,572 -- 12,540
Net earnings ............ -- -- -- 923 -- 923
Dividend ................ -- -- -- (120) -- (120)
Unrealized gain on
investment securities -- -- -- -- 128 128
--------- --------- --------- --------- --------- ---------
Balance at December
31, 1993 ............ 878,967 7,032 3,936 2,375 128 13,471
Net earnings ............ -- -- -- 619 -- 619
Issuance of common stock 35,677 285 8 -- -- 293
Unrealized loss on
investment securities -- -- -- -- (626) (626)
--------- --------- --------- --------- --------- ---------
Balance at December
31, 1994 ............ 914,644 7,317 3,944 2,994 (498) 13,757
Net earnings ............ -- -- -- 1,664 -- 1,664
Stock dividend .......... 91,276 730 627 (1,357) -- --
Payment fractional shares -- -- -- (3) -- (3)
Unrealized gain on
investment securities -- -- -- -- 382 382
--------- --------- --------- --------- --------- ---------
Balance at December
31, 1995 ............ 1,005,920 $ 8,047 4,571 3,298 (116) 15,800
========= ========= ========= ========= ========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE> 92
FORT BROOKE BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings ................................................. $ 1,664 619 923
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation ............................................ 482 594 440
Provision for credit losses ............................. 705 184 344
Loss (gain) from sale of investment securities .......... 24 16 (40)
Gain on sale of loans ................................... -- -- (168)
Net amortization of fees, premiums and discounts ........ (115) (148) 101
FHLB stock dividend ..................................... -- -- (43)
Write-down on other real estate owned ................... 55 81 77
Loss (gain) on sale of other real estate owned .......... 38 (34) (9)
Decrease (increase) in other assets ..................... 10 (55) 156
(Increase) decrease in accrued interest receivable ...... (162) (191) 20
Increase (decrease) in accrued interest payable ......... 165 (49) (39)
Deferred income tax provision (credit) .................. 64 (263) (75)
Increase (decrease) in current income taxes ............. 32 41 (152)
(Decrease) increase in other liabilities ................ (27) 14 (263)
-------- -------- --------
Net cash flow provided by operating activities ..... 2,935 809 1,272
-------- -------- --------
Cash flows from investing activities:
Purchase of investment securities ............................ (25,672) (23,133) (24,055)
Proceeds from sales and maturities of investment securities .. 25,056 15,026 12,808
Proceeds from sale of Federal Reserve Bank stock ............. -- 110 --
Principal repayments on investment securities ................ 2,541 6,076 4,830
Net decrease (increase) in loans ............................. (10,458) (10,741) 4,821
Proceeds from sales of other real estate owned ............... 343 858 863
Net additions of premises and equipment ...................... (774) (801) (2,781)
-------- -------- --------
Net cash used in investing activities .............. (8,964) (12,605) (3,514)
-------- -------- --------
Cash flows from financing activities:
Net increase (decrease) in deposits .......................... 10,420 (335) 9,488
Net (decrease) increase in advance payments by
borrowers for taxes and insurance ....................... (74) 119 (33)
(Decrease) increase in reverse repurchase agreements ......... (753) 2,505 (1,787)
Sale of common stock ......................................... -- 293 --
Cash dividend paid ........................................... (3) -- (120)
-------- -------- --------
Net cash provided by financing activities .......... 9,590 2,582 7,548
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 3,561 (9,214) 5,306
Cash and cash equivalents at beginning of year ..................... 8,436 17,650 12,344
-------- -------- --------
Cash and cash equivalents at end of year ........................... $ 11,997 8,436 17,650
======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-6
<PAGE> 93
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, BACKGROUND AND BUSINESS
COMBINATION
BACKGROUND. Fort Brooke Bank (the "Bank" or "Fort Brooke") is a state
chartered commercial bank headquartered in Brandon, Florida. The
Bank was founded on March 20, 1981 as a state savings and loan
association. On December 31, 1991, Fort Brooke converted from a
savings and loan association to a commercial bank. On July 13, 1994,
Fort Brooke merged with the Merchant Bancorporation of Florida
("Merchant"). Merchant was a one-bank holding company founded in
1984. Fort Brooke, through seven banking offices, provides a full
range of banking services to individuals and businesses located
primarily in Hillsborough County, Florida. The Bank also owns all of
the common shares of BDW Holdings Inc. (Subsidiary). The
subsidiary's only business activity is the ownership of a parcel of
other real estate.
BUSINESS COMBINATION. On July 13, 1994, Merchant was merged with and
into the Bank and 397,904 shares of the Bank's common stock were
issued in exchange for all of the outstanding common stock of
Merchant. The merger was accounted for as a pooling of interests,
and accordingly, the accompanying consolidated financial statements
have been restated for all periods prior to the acquisition to
include the results of earnings, financial positions, and cash flows
of Merchant. Expenses of $192,000 relating to the acquisition of
Merchant were charged to expense during 1994.
Net interest income and net earnings for the individual entities were as
follows:
<TABLE>
<CAPTION>
JANUARY
1, 1994
THROUGH YEAR ENDED
JUNE 30, DECEMBER 31,
-------- ------------
1994 1993
---- ----
(IN THOUSANDS)
<S> <C> <C>
Net interest income after provision for
credit losses and other income:
Fort Brooke Bank .................................................................. $2,551 5,024
Merchant .......................................................................... 1,378 2,733
------ -----
Combined ..................................................................... $3,929 7,757
====== =====
Net earnings:
Fort Brooke Bank .................................................................. 115 542
Merchant .......................................................................... 89 381
------ -----
Combined ..................................................................... $ 204 923
====== =====
</TABLE>
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. The following is a
description of the significant accounting policies and practices
followed by the Bank, which conform with generally accepted
accounting principles and prevailing practices within the banking
industry.
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 amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(continued)
F-7
<PAGE> 94
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, BACKGROUND AND BUSINESS
COMBINATION, CONTINUED
CASH AND CASH EQUIVALENTS. For purposes of the statements of cash flows,
cash and cash equivalents are defined as cash and due from banks.
INVESTMENT SECURITIES. The Bank may categorize its investment securities
in one of three categories as follows:
TRADING SECURITIES. Securities held principally for resale in the
near term are classified as trading securities and recorded at their
fair values. Unrealized gains and losses on trading securities are
included in other income.
SECURITIES AVAILABLE-FOR-SALE. Securities available-for-sale consist
of securities not classified as trading securities nor as securities
to be held-to-maturity. Unrealized holding gains and losses, net of
tax, on securities available-for-sale are reported as a net amount
in a separate component of stockholders' equity.
SECURITIES TO BE HELD-TO-MATURITY. Securities for which the Bank has
the positive intent and ability to hold to maturity are reported at
cost, adjusted for amortization of premiums and accretion of
discounts which are recognized in interest income using the interest
method over the period to maturity.
Declines in the fair value of individual held-to-maturity and
available-for-sale securities below their cost that are other than
temporary may result in write-downs of the individual securities to
their fair value. These write-downs would be included in earnings as
realized losses. Gains and losses on the sale of securities
available-for-sale are determined using the specific identification
method.
UNCOLLECTED INTEREST. The Bank places loans on nonaccrual status when
the loan is more than 90 days past due or if management believes the
collection of interest is doubtful. If the ultimate collectibility
of principal and interest due according to the contractual terms of
the loan agreement is in doubt, the loan is considered impaired, and
interest is credited to income when collected.
LOAN IMPAIRMENT AND LOSSES. On January 1, 1995, the Bank adopted
Statements of Financial Accounting Standards No. 114 and 118 ("SFAS
114 and 118"). These Statements address the accounting by creditors
for impairment of certain loans. The Statements generally require
the Bank to identify loans for which the Bank probably will not
receive full repayment of principal and interest, as impaired loans.
The Statements require that impaired loans be valued at the present
value of expected future cash flows, discounted at the loan's
effective interest rate, or at the observable market price of the
loan, or the fair value of the underlying collateral if the loan is
collateral dependent. The Bank has implemented the Statements by
modifying its monthly review of the adequacy of the allowance for
credit losses to also identify and value impaired loans in
accordance with guidance in the Statements. The adoption of the
Statements did not have any material effect on the results of
operations for the year ended December 31, 1995.
Management considers a variety of factors in determining whether a
loan is impaired, including (i) any notice from the borrower that
the borrower will be unable to repay all principal and interest
amounts contractually due under the loan agreement, (ii) any
delinquency in the principal and interest payments other than
minimum delays or shortfalls in payments, and (iii) other
information known by management which would indicate that full
repayment of the principal and interest is not probable. In
evaluating loans for impairment, management generally considers
delinquencies of 60 days or less to be minimum delays, and
accordingly does not consider such delinquent loans to be impaired
in the absence of other indications of impairment.
(continued)
F-8
<PAGE> 95
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, BACKGROUND AND BUSINESS
COMBINATION, CONTINUED
LOAN IMPAIRMENT AND LOSSES, CONTINUED. Management evaluates smaller
balance, homogeneous loans for impairment and adequacy of allowance
for credit losses collectively, and evaluates other loans for
impairment individually, on a loan-by-loan basis. The Bank evaluates
the consumer loan portfolio and the residential mortgage loan
portfolio which are smaller balance homogeneous loans for impairment
on an aggregate basis, and utilizes its own historical charge-off
experience, as well as the charge-off experience of its peer group
and industry statistics to evaluate the adequacy of the allowance
for credit losses. For all commercial and commercial real estate
loans, the Bank evaluates for impairment on a loan-by-loan basis.
The Bank evaluates all nonaccrual loans as well as any accruing
loans exhibiting collateral or other credit deficiencies for
impairment. With respect to impaired, collateral-dependent loans,
any portion of the recorded investment in the loan that exceeds the
fair value of the collateral is charged off.
For impairment recognized in accordance with these Statements, the
entire change in the present value of expected cash flows, or the
entire change in estimated fair value of collateral for collateral
dependent loans is reported as a provision for credit losses in the
same manner in which impairment initially was recognized or as a
reduction in the amount of the provision that otherwise would be
reported.
LOAN ORIGINATION FEES AND COSTS. Loan origination and commitment fees
and certain direct loan origination costs are deferred and the net
amount amortized to interest income as a yield adjustment over the
contractual life of the related loan.
OTHER REAL ESTATE OWNED. Other real estate owned consists of properties
acquired through foreclosure or by deed in lieu of foreclosure. At
the time of acquisition, such properties are recorded at the lesser
of the Bank's net investment in the related loan or the fair value
of the property as determined by independent appraisal less
anticipated selling costs. Any loss arising from foreclosure is
charged against the allowance for loan losses. Gains and losses on
the sale of other real estate owned, write-downs resulting from
periodic reevaluation of the property and expenses associated with
holding the properties are generally charged to other operating
expense. Legal expenses and other direct costs associated with
foreclosure actions are included in the accompanying statements of
earnings in other noninterest expense.
PREMISES AND EQUIPMENT. Premises and equipment are stated at cost less
accumulated amortization and depreciation. Improvements to leased
property are amortized over the shorter of the estimated useful
lives of the improvements or the life of the lease. It is the policy
of the Bank to provide depreciation based on the estimated useful
life of individual assets, calculated using the straight-line
method. Estimated useful lives generally range from three to
twenty-five years for bank building and improvements, five years for
leasehold improvements and five to ten years for furniture, fixtures
and equipment.
INCOME TAXES. Provisions for income taxes are based on taxes payable or
refundable for the current year and deferred taxes on temporary
differences between the amount of taxable income and pretax
financial income and between the tax bases of assets and liabilities
and their reported amounts in the financial statements. Deferred tax
assets and liabilities are included in the financial statements at
currently enacted income tax rates applicable to the period in which
the deferred tax assets and liabilities are expected to be realized
or settled as prescribed in FASB Statement No. 109, Accounting for
Income Taxes. As changes in tax laws or rates are enacted, deferred
tax assets and liabilities are adjusted through the provision for
income taxes.
(continued)
F-9
<PAGE> 96
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, BACKGROUND AND BUSINESS
COMBINATION, CONTINUED
FAIR VALUES OF FINANCIAL INSTRUMENTS. The following methods and
assumptions were used by the Bank in estimating fair values of
financial instruments:
CASH AND CASH EQUIVALENTS. The carrying amounts of cash and due from
banks approximate their fair value.
INVESTMENT SECURITIES. Fair values for investment securities are
based on quoted market prices, where available. If quoted market
prices are not available, fair values are based on quoted market
prices of comparable instruments.
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 certain fixed-rate mortgage (e.g.
one-to-four family residential), commercial real estate and
commercial loans are estimated using discounted cash flow analyses,
using interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality.
DEPOSIT LIABILITIES. The fair values disclosed for demand, NOW,
money market and savings deposits are, by definition, equal to the
amount payable on demand at the reporting date (that is, their
carrying amounts). Fair values for fixed-rate certificates of
deposit 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.
SHORT-TERM BORROWINGS. Rates currently available to the Bank for
debt with similar terms and remaining maturities are used to
estimate fair value of existing debt.
OFF-BALANCE-SHEET INSTRUMENTS. 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.
ADVERTISING. The Bank expenses all media advertising as incurred.
PER SHARE AMOUNTS. Per share amounts are computed by dividing net
earnings by the weighted average number of common shares outstanding
during the period. Earnings per share would not be materially
diluted by exercise of outstanding stock options. All per share
amounts have been presented to show the effect of the ten percent
stock dividend declared in 1995.
FUTURE ACCOUNTING REQUIREMENTS. FASB has issued Statement of Financial
Accounting Standards No. 122 ("SFAS 122") which requires mortgage
banking enterprises that acquire mortgage servicing rights through
either the purchase or origination of mortgage loans and sells or
securitizes those loans with servicing rights retained to allocate
the total cost of the mortgage loans to the mortgage servicing
rights and the loans based on their relative fair values. Mortgage
banking enterprises include commercial banks and thrift institutions
that conduct operations substantially similar to the primary
operations of a mortgage banking enterprise. This Statement is
effective for 1996. Management does not anticipate this Statement
will have a material impact on the Bank.
(continued)
F-10
<PAGE> 97
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, BACKGROUND AND BUSINESS
COMBINATION, CONTINUED
FUTURE ACCOUNTING REQUIREMENTS, CONTINUED. The FASB has also issued
Statement of Financial Accounting Standards No. 123 ("SFAS 123")
which encourages employers to account for stock-based compensation
awards based on their fair value on the date the awards are granted.
The resulting compensation award would be shown as an expense on the
statement of earnings. Entities can choose not to apply the new
accounting method and continue to apply current accounting
requirements, which generally result in no compensation cost for
most fixed stock-option plans. Those that do so, however, will be
required to disclose in the notes to the financial statements what
net earnings and earnings per share would have been had they
followed the Statement's accounting method. This Statement is
effective for 1996. Management does not anticipate this Statement
will have a material impact on the Bank.
RECLASSIFICATION. Certain amounts in the 1993 and 1994 financial
statements have been reclassified to conform with the 1995
presentation.
(2) INVESTMENT SECURITIES
The amortized cost of investment securities as shown in the accompanying
balance sheets of the Bank and their approximate fair values are as
follows (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- -----
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1995:
Available-for-sale:
U.S. Government and agency obligations $11,832 39 15 11,856
Municipal bonds ...................... 250 2 -- 252
Mortgage-backed securities ........... 12,151 23 205 11,969
------- ---- ----- -------
Total ............................. $24,233 64 220 24,077
======= ==== ===== =======
Held-to-maturity:
U.S. Government and agency obligations 9,942 10 34 9,918
Municipal bonds ...................... 2,228 77 -- 2,305
Mortgage-backed securities ........... 7,472 52 21 7,503
------- ---- ----- -------
Total ............................. $19,642 139 55 19,726
======= ==== ===== =======
AT DECEMBER 31, 1994:
Available-for-sale:
U.S. Government and agency obligations .. 3,478 -- 210 3,268
Municipal bonds ......................... 2,045 -- 39 2,006
Mortgage-backed securities .............. 11,410 -- 521 10,889
------- ---- ----- -------
Total ................................ $16,933 -- 770 16,163
======= ==== ===== =======
Held-to-maturity:
U.S. Government and agency obligations 18,010 -- 611 17,399
Municipal bonds ......................... 2,229 -- 107 2,122
Mortgage-backed securities .............. 8,639 6 353 8,292
------- ---- ----- -------
Total ................................ $28,878 6 1,071 27,813
======= ==== ===== =======
</TABLE>
(continued)
F-11
<PAGE> 98
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(2) INVESTMENT SECURITIES, CONTINUED
On December 31, 1993, the Bank adopted Statement of Financial Accounting
Standards No. 115 and classified investment securities as
available-for-sale and held-to-maturity. On April 30, 1994 the Bank
reclassified certain investment securities from available-for-sale to
held-to-maturity. In accordance with Statement of Financial Accounting
Standards No. 115 the unrealized holding loss at the date of transfer
was included as a separate component of stockholders' equity and is
being amortized over the remaining term of the associated securities as
an adjustment of yield. Unrealized loss on investment securities is
summarized below (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------
1995 1994
----- -----
<S> <C> <C>
Unrealized loss on investment securities available-
for-sale, net of tax effect of $62 and $308 in 1995 and 1994.......... $ (94) (462)
Net unamortized unrealized loss on investment securities
transferred from available-for-sale to held-to-maturity,
net of tax effect of $15 and $24 in 1995 and 1994 .................... (22) (36)
----- -----
$(116) (498)
===== =====
</TABLE>
Scheduled maturities of debt securities at December 31, 1995 are as follows (in
thousands):
<TABLE>
<CAPTION>
SECURITIES SECURITIES
AVAILABLE-FOR-SALE HELD-TO-MATURITY
----------------------- --------------------
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
---- ----- ---- -----
<S> <C> <C> <C> <C>
Due in one year or less.......................... $ - - 1,999 1,992
Due from one to five years....................... 10,583 10,601 7,943 7,926
Due from five to ten years....................... 1,499 1,507 2,228 2,305
Mortgage-backed securities....................... 12,151 11,969 7,472 7,503
------ ------ ------ ------
$ 24,233 24,077 19,642 19,726
====== ====== ====== ======
</TABLE>
Expected maturities may differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without
prepayment penalties.
The following summarizes sales of investment securities:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Proceeds from sale of investment securities ...... $ 11,936 11,526 12,808
======== ======== ========
Gross gains from sale of investment securities.... 9 22 40
Gross losses from sale of investment securities... 33 38 --
-------- -------- --------
Net (loss) gain .................................. $ (24) (16) 40
======== ======== ========
</TABLE>
At December 31, 1995, investment securities with an amortized cost of
approximately $4,909,000 and a market value of $4,889,000, were pledged
to secure public deposits and for other purposes required or permitted
by law.
(continued)
F-12
<PAGE> 99
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(3) LOANS
THE LOAN PORTFOLIO. Major categories of loans included in the loan portfolio
are as follows (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------
1995 1994
--------- ---------
<S> <C> <C>
Real estate loans:
Residential ....................................... $ 34,539 29,039
Commercial ........................................ 52,269 48,256
--------- ---------
Total real estate loans ..................... 86,808 77,295
Commercial loans ...................................... 25,247 23,774
Consumer loans ........................................ 12,109 13,066
--------- ---------
Total loans ................................. 124,164 114,135
Add (deduct):
Allowance for credit losses .................... (1,702) (1,562)
Deferred loan fees, net ........................ 26 (183)
Other, net ..................................... 23 (20)
--------- ---------
Loans, net .................................. $ 122,511 112,370
========= =========
</TABLE>
At December 31, 1995, 1994 and 1993 the Bank was servicing loans for others
amounting to approximately $11,336,000, $13,135,000 and $17,538,000,
respectively. Servicing loans for others generally consists of
collecting mortgage payments, maintaining escrow accounts, disbursing
payments to investors and processing of foreclosures. Loan servicing
income includes servicing fees from investors and certain charges
collected from borrowers, such as late payment fees.
At December 31, 1995 and 1994, loans in the approximate amount of $879,000
and $1,236,000, respectively, were pledged as collateral for the Bank's
line of credit with the Federal Home Loan Bank of Atlanta.
CREDIT RISK. The Bank grants loans to borrowers throughout the State of
Florida with a majority of the loans in the west coast area. Although
the Bank has a diversified loan portfolio, a significant portion of its
borrowers' ability to honor their contracts is dependent upon the
economy of the west coast area of Florida.
An analysis of the changes in the allowance for credit losses is as follows
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year............. $ 1,562 1,426 1,145
Provision charged to operations.......... 705 184 344
Charge-offs.............................. (655) (151) (183)
Recoveries............................... 90 103 120
----- ----- -----
Balance at end of year................ $ 1,702 1,562 1,426
===== ===== =====
</TABLE>
(continued)
F-13
<PAGE> 100
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(3) LOANS, CONTINUED
LOAN IMPAIRMENT AND LOSSES. The following summarizes the reclassification of
December 31, 1994 amounts which were reclassified as a result of the
Bank adopting SFAS 114 and 118 in 1995:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1994
----
(IN THOUSANDS)
<S> <C>
Insubstance foreclosures reclassified to loans receivable.................. $ 72
====
</TABLE>
The following summarizes the amounts of impaired loans (in thousands):
<TABLE>
<CAPTION>
ESTIMATED FAIR
VALUE OF COLLATERAL
AT DECEMBER 31,
-------------------
1995 1994
---- ----
<S> <C> <C>
Loans identified as impaired:
Gross loans with no related allowance for losses ...................... $ -- --
Gross loans with related allowance for losses recorded ................ 263 --
Less: Allowances on these loans ...................................... (53) --
----- -----
Net investment in impaired loans .......................................... $ 210 --
===== =====
</TABLE>
The average net investment in impaired loans and interest income recognized
and received on impaired loans is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1995 1994
---- ----
<S> <C> <C>
Average investment in impaired loans.............................................. $ 238 139
==== ===
Interest income recognized on impaired loans...................................... $ - -
==== ===
Interest income received on impaired loans........................................ $ - -
==== ===
</TABLE>
LOANS TO RELATED PARTIES. The aggregate amount of loans owed to the Bank by
its executive and senior officers, directors, and their related entities
at December 31, 1995 and 1994, were approximately $3,371,000 and
$5,060,000, respectively. The activity for the year follows (in
thousands):
<TABLE>
<S> <C>
Balance at beginning of year...................................................... $ 5,060
Additions......................................................................... 249
Repayments........................................................................ (1,938)
-------
Balance at end of year............................................................ $ 3,371
=======
</TABLE>
(continued)
F-14
<PAGE> 101
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(4) PREMISES AND EQUIPMENT
Premises and equipment are summarized below (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------
1995 1994
---- ----
<S> <C> <C>
Land $ 1,181 1,087
Building and leasehold improvements.................................................. 3,271 3,194
Furniture, fixtures and equipment.................................................... 3,405 3,112
----- -----
Total, at cost................................................................. 7,857 7,393
Less accumulated depreciation........................................................ 3,134 2,962
----- -----
Premises and equipment, net.................................................... $ 4,723 4,431
===== =====
</TABLE>
(5) DEPOSITS
A schedule of maturities for certificate of deposit accounts follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
DECEMBER 31, 1995
------------ ----
<S> <C>
1996............................................................................. $ 49,905
1997............................................................................. 12,336
1998............................................................................. 12,700
1999............................................................................. 1,093
2000 and thereafter.............................................................. 4,197
--------
$ 80,231
========
</TABLE>
At December 31, 1995 certificates of deposits in denominations of $100,000
and over were as follows (in thousands):
<TABLE>
<CAPTION>
MATURITY AMOUNT
-------- ------
<S> <C>
Three months or less............................................................... $ 4,762
Three to six months................................................................ 4,108
Six months to one year............................................................. 1,861
Over one year...................................................................... 5,105
--------
$ 15,836
========
</TABLE>
(continued)
F-15
<PAGE> 102
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(6) SHORT-TERM BORROWINGS
At December 31, 1995, the Bank has agreements to sell investment securities
to its customers under revolving sales/repurchase agreements aggregating
$4,900,000, and the Bank has a $10,000,000 revolving reverse repurchase
agreement with another bank. The following table provides information on
these agreements (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Maximum borrowing at any month-end
within the period............................................... $ 5,449 4,250 3,753
Average borrowing during the year................................... 2,091 1,322 781
Average interest cost during the year............................... 4.85% 4.24% 3.09%
Average interest cost at end of the year............................ 3.90% 4.84% 2.50%
</TABLE>
Securities sold under agreements to repurchase are summarized below (in
thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------
1995 1994
---- ----
<S> <C> <C>
Agreements to repurchase the same security with another bank..................... $ - 1,225
Customer repurchase agreements................................................... 1,965 1,493
------ ------
Total.................................................................... $ 1,965 2,718
====== ======
Securities pledged as collateral for the agreements,
at amortized cost which approximate market................................... $ 15,323 12,519
====== ======
</TABLE>
The Bank has an available line of credit with the Federal Home Loan Bank of
Atlanta in the amount of $5,000,000, which expires in March 1996. As of
December 31, 1995 and 1994, no amounts had been drawn on this line.
The Bank has negotiated an unsecured overnight Federal Funds line of credit
of up to $1,500,000 with the Independent Bankers' Bank of Florida and
$1,000,000 with another bank. As of December 31, 1995 and 1994 no funds
had been drawn against these lines.
(7) COMMITMENTS
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK. In the normal course of
business the Bank is party to financial instruments not reflected in the
accompanying financial statements. These financial instruments are shown
below (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------
1995 1994
---- ----
<S> <C> <C>
Unfunded loan commitments at variable rates............................. $ 5,272 2,478
====== ======
Available lines of credit............................................... $ 18,981 16,267
====== ======
Standby letters of credit............................................... $ 1,248 350
====== ======
</TABLE>
(continued)
F-16
<PAGE> 103
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(7) COMMITMENTS, CONTINUED
The Bank's exposure to credit loss in the event of nonperformance by the
other party to these financial instruments is represented by the
contractual amount of those instruments. The credit and collateral
policies applied in extending these commitments are essentially the same
as those required by the Bank for the financial instruments which are
included in the accompanying balance sheets. The Bank evaluates each
borrower's credit worthiness on a case-by-case basis. The amount of
collateral obtained by the Bank, if any, is based upon management's
credit evaluation of the borrower. Such collateral may include real
estate, receivables, inventory, vehicles and equipment or other types of
assets. Since the Bank's loan commitments often expire without being
drawn upon, the total amount of these commitments does not necessarily
represent a required future use of the Bank's cash or equivalents.
LEASES. The Bank leases certain facilities under operating leases with
noncancellable terms. Rental expense amounted to $286,000, $420,000 and
$523,000 for the years ended December 31, 1995, 1994 and 1993,
respectively. Rental income amounted to $89,000 and $60,000 for the
years ended December 31, 1995 and 1994. The operating lease agreements
contain escalator clauses based upon the consumer price index and
increases in proportionate operating costs of the facilities and provide
for annual adjustments to the previous year's rental. A summary of the
future minimum operating lease commitments are as follows (in
thousands):
<TABLE>
<CAPTION>
OPERATING OPERATING
LEASE LEASE
YEAR ENDING DECEMBER 31, EXPENSE INCOME
------------------------ --------- ---------
<S> <C> <C>
1996.............................. $ 200 131
1997.............................. 137 131
1998.............................. 47 125
1999.............................. 35 122
2000.............................. 35 101
After 2000........................ 6 -
---- ----
$ 460 610
=== ===
</TABLE>
(8) INCOME TAXES
The provision for income taxes is different than the amount computed by
applying the federal statutory rate of 34% as indicated in the following
analysis (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1995 1994 1993
------------------ ------------------ ------------------
% OF PRETAX % OF PRETAX % OF PRETAX
AMOUNT EARNINGS AMOUNT EARNINGS AMOUNT EARNINGS
------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Tax provision at statutory
rate .......................... $ 943 34.0% $ 350 34.0% $ 491 34.0%
Increase (decrease) resulting from:
State taxes, net of federal
income tax benefit ............ 80 2.9 27 2.6 20 1.4
Nondeductible merger expenses ..... -- -- 50 4.9 -- --
Other, net ........................ 86 3.1 (15) (1.5) 11 .7
------ ------ ------ ------ ------ ------
Income tax provision .......... $1,109 40.0% $ 412 40.0% $ 522 36.1%
====== ====== ====== ====== ====== ======
</TABLE>
(continued)
F-17
<PAGE> 104
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(8) INCOME TAXES, CONTINUED
The provision (credit) for income taxes consisted of the following (in
thousands):
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995:
Federal................................................... $ 933 55 988
State..................................................... 112 9 121
----- --- -----
Total.................................................. $ 1,045 64 1,109
===== === =====
YEAR ENDED DECEMBER 31, 1994:
Federal................................................... 596 (225) 371
State..................................................... 79 (38) 41
----- --- -----
Total.................................................. $ 675 (263) 412
==== === =====
YEAR ENDED DECEMBER 31, 1993:
Federal................................................... 555 (64) 491
State..................................................... 42 (11) 31
----- --- -----
Total.................................................. $ 597 (75) 522
==== === =====
</TABLE>
The tax effects of each type of significant item that gave rise to deferred
taxes are (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------
1995 1994
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses....................................................... $ 364 347
Real estate writedowns.......................................................... 83 88
Unrealized loss on investment securities........................................ 78 332
Other 12 17
--- ---
Total gross deferred tax assets........................................... 537 784
--- ---
Deferred tax liabilities:
Federal Home Loan Bank stock basis.............................................. (109) (109)
Deferred loan fees.............................................................. (98) (63)
Accumulated depreciation on property and equipment.............................. (77) (28)
Section 481 change in accounting method adjustment.............................. (16) (33)
Core deposit amortization....................................................... (20) (22)
Other (6) -
--- ---
Total gross deferred tax liabilities...................................... (326) (255)
--- ---
Net deferred tax asset.................................................... $ 211 529
=== ===
</TABLE>
(continued)
F-18
<PAGE> 105
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(9) STOCK OPTIONS
The Bank has a nonqualified stock option plan (the "Plan") for its officers
and employees. Under the Plan, the option price shall not be less than
the estimated fair market value of the shares on the date of grant. An
individual option granted under the Plan may not exceed 33,000 shares,
is exercisable as of the date of grant, and may have a term of up to ten
years. The maximum number of shares which may be subject to options
issued and outstanding pursuant to the Plan is initially 76,319 shares,
which may be increased by the Board of Directors to the lesser of
110,000 shares or an amount equal to 20% of the shares which shall be
issued and outstanding at any time during the term of the Plan. A
summary of transactions follows:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
PER SHARE NUMBER OF OPTION
PRICE SHARES PRICE
---------- ------------ -----------
(IN
THOUSANDS)
<S> <C> <C> <C>
Outstanding at December 31, 1993 and 1992 $ 8.91 43,545 388
Options granted ......................... 13.22 30,855 408
Options exercised ....................... 8.37 (22,110) (185)
Options from terminated employees ....... 9.09 (110) (1)
------- -------
Outstanding at December 31, 1994 ........ 11.69 52,180 610
Options granted ......................... 15.07 9,050 136
Options from terminated employees ....... 12.98 (770) (10)
------- ------- -------
Outstanding at December 31, 1995 ........ $ 12.17 60,460 $ 736
======= ======= =======
</TABLE>
(10) STOCK DIVIDEND
The Board of Directors declared a 10% stock dividend payable on August 1,
1995 to stockholders of record on June 30, 1995. Accordingly, the Bank
capitalized approximately $1,357,000 of retained earnings which
represents 91,276 shares at date of record. All per share amounts have
been presented to reflect this stock dividend.
(11) PROFIT SHARING PLAN
The Bank maintains a qualified Section 401(k) profit sharing plan and trust
(the "Plan"). Under the Plan, a participating employee may make an
elective contribution under a salary reduction arrangement of up to 15%
of his or her compensation. In addition, the Bank may make a separate
discretionary matching contribution. The Bank's contribution in 1995,
1994 and 1993 was $22,300, $17,300 and $13,600, respectively.
(continued)
F-19
<PAGE> 106
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(12) REGULATORY MATTERS
Banking laws and regulations limit the amount of dividends that may be paid
by the Bank. The FDIC requires insured banks to maintain certain
specified levels of capital.
LEVERAGE-CAPITAL RATIO. The FDIC requires banks to maintain a minimum
leverage-capital ratio of Tier I capital (as defined) to total assets.
The leverage-capital ratio generally ranges from 3% to 5% based on the
bank's rating under the regulatory rating system. The Bank's required
leverage-capital ratio at December 31, 1995 was 4%.
RISK-WEIGHTED ASSETS CAPITAL RATIOS. The FDIC has also adopted a risk-based
capital statement of policy which imposes an additional capital standard
on insured banks. Under this regulation, a bank must classify its assets
and certain off-balance sheet activities into categories, and maintain
specified levels of capital for each category. The amount of capital
that is required is dependent upon the amount of risk attributed to each
category by the FDIC. A bank must have a total risk-based capital ratio
of no less than 8% and a Tier I capital to risk-weighted assets ratio of
no less than 4%. Under the statement of policy, certain assets are
required to be deducted from risk-based capital. Such assets include
certain nonqualifying intangible assets, unconsolidated banking and
finance subsidiaries, investments in securities subsidiaries, and
reciprocal holdings of capital instruments with other banks. In
addition, the FDIC may consider deducting other assets on a case-by-case
basis or investments in other subsidiaries on a case-by-case basis or
based on the general characteristics or functional nature of the
subsidiaries.
CAPITAL RATIOS. At December 31, 1995, a comparison of the required capital
ratios to actual capital ratios was as follows:
<TABLE>
<CAPTION>
RATIOS OF REGULATORY
THE BANK REQUIREMENT
--------- -----------
<S> <C> <C>
AT DECEMBER 31, 1995:
Total capital to risk-weighted assets............................. 13.64% 8.00%
Tier I capital to risk-weighted assets ........................ 12.39% 4.00%
Tier I capital to total average assets - leverage ratio........... 8.55% 4.00%
</TABLE>
(13) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Supplemental disclosure of cash flow information is as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Cash paid during the period for:
Interest ...................................................$5,423 4,497 4,669
====== ====== ======
Income taxes ...............................................$1,027 448 447
====== ====== ======
Noncash transactions:
Reclassification of other real estate owned to loans .......$ 374 -- --
====== ====== ======
Unrealized gain (loss) on securities
available-for-sale ....................................$ 614 (958) 128
====== ====== ======
Stock dividends ............................................$1,357 -- --
====== ====== ======
</TABLE>
(continued)
F-20
<PAGE> 107
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(14) FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair values of the Bank's financial instruments were as
follows (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31, 1995
--------------------------
CARRYING FAIR
AMOUNT VALUE
------ -----
<S> <C> <C>
Financial assets:
Cash and due from banks.................................................... $ 11,997 11,997
Investment securities...................................................... 43,719 43,803
Loans ..................................................................... 122,511 122,560
Accrued interest receivable................................................ 1,266 1,266
FHLB stock................................................................. 809 809
Financial liabilities:
Deposit liabilities........................................................ 168,297 169,112
Short term borrowings...................................................... 1,965 1,965
Off-balance-sheet instruments:
Commitments to extend credit............................................... 5,272 5,272
Available lines of credit.................................................. 18,981 18,981
Standby letters of credit.................................................. 1,248 1,248
</TABLE>
(15) CONTINGENT LIABILITY
The FDIC has proposed a one-time assessment on all SAIF-insured deposits, in
the range of 85 cents to 90 cents per $100 of domestic deposits, held as
of March 31, 1995. This one-time assessment is intended to recapitalize
the SAIF to the required level of 1.25% of insured deposits, and could
be payable in early 1996. If the assessment is made at the proposed
rate, the effect on the Bank would be a pretax charge of approximately
$839,000 (0.85% on deposits of $98.7 million at March 31, 1995), or
$503,000 after tax (40% assumed tax rate).
F-21
<PAGE> 108
AGREEMENT AND PLAN OF REORGANIZATION
REORGANIZATION AGREEMENT, dated as of March 22, 1996, by and among Fort
Brooke Bancorporation, a Florida corporation with a business office located at
510 Vonderburg Drive, Brandon, Florida 33511 ("Bancorporation"); Fort Brooke
Bank, a Florida commercial banking corporation with principal offices currently
being maintained at that same address ("Fort Brooke"); and Brooke Interim
Corporation, also a Florida corporation which maintains an administrative office
at the same address as Bancorporation and Fort Brooke ("Interim").
BACKGROUND INFORMATION
Fort Brooke is an active Florida commercial banking corporation whose
deposits are insured by the Federal Deposit Insurance Corporation (the "FDIC").
Fort Brooke is not a member of the Federal Reserve System. Consequently, its
operations and other activities are subject to review and audit by the FDIC and
separately by the Division of Banking of the Florida Department of Banking and
Finance (the "Division"). As a result of authorization recently granted by the
Board of Directors of Fort Brooke, Fort Brooke's management has caused the
formation of each of Bancorporation and Interim as a separate Florida
corporation which maintains no current business activities, the establishment
within each of those entities of a board of directors and officers, and the
issuance of a nominal number of shares of capital stock, in the case of
Bancorporation to Thomas H. Miller, Fort Brooke's chairman, and in the case of
Interim to Bancorporation, thereby causing Interim to become a wholly owned
subsidiary of Bancorporation. Nominal consideration has been paid for the shares
issued by each of those entities.
Bancorporation is in the process of applying to the Board of Governors
of the Federal Reserve System and the Federal Reserve Bank of Atlanta, as its
delegee (individually and collectively, the "Fed") for approval to consummate an
acquisitive transaction that will cause it to become a bank holding company
under The Bank Holding Company Act of 1956. Following (a) Bancorporation's
receipt of such approval, (b) Fort Brooke's and Interim's receipt of separate
approval from the Division for Fort Brooke and Interim to consummate a statutory
merger under which Fort Brooke will continue as the resulting bank, and (c) Fort
Brooke's receipt of approval from the holders of a majority in interest of its
outstanding shares of capital stock, the parties to this Agreement intend to
consummate a statutory merger transaction as a result of which Interim will be
extinguished, the nominal shares of Bancorporation will be redeemed, all of the
outstanding shares of Fort Brooke capital stock held prior to such merger by
shareholders not dissenting therefrom will be transferred to and thereafter held
of record by Bancorporation, rendering Fort Brooke a wholly owned subsidiary of
Bancorporation, and each of such non-dissenting Fort Brooke shareholders will
receive and thereafter hold of record the same number of Bancorporation shares
of common voting stock as such shareholder shall have held shares of Fort Brooke
capital stock prior to such merger.
Through actions of the authorized representatives of each of
Bancorporation, Fort Brooke
<PAGE> 109
and Interim, which actions have been approved by the board of directors of each
such entity, the parties have determined it to be in their separate and mutual
best interests, and in those of their respective shareholders, to develop,
execute, deliver and subsequently consummate a plan of corporate reorganization,
in the definitive form embodied within this Agreement, which they believe to
qualify as a federal income tax-free reorganization within the meaning of
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended, which
plan will effect the acquisitive transaction described above. Accordingly, in
consideration of the mutual covenants, representations, warranties and
conditions set forth below, the parties hereto agree as follows:
OPERATIVE PROVISIONS
1. Adoption of Plan. The board of directors of each of
Bancorporation, Fort Brooke and Interim having approved the same, the Plan and
Agreement of Reorganization embodied in this Agreement and its Exhibits and
Schedules (the "Plan") is hereby adopted.
2. Terms of Merger.
2.1 Execution of Merger Agreement. Prior to the Effective Date
of the Merger (as defined in Section 3. hereof), Fort Brooke and
Interim shall, subject to the remaining terms of this Agreement,
execute an Agreement and Plan of Merger in substantially the form
attached hereto as Exhibit 2.1 (the "Merger Agreement") and effect the
transactions as provided therein, subject to all terms and conditions
of this Agreement (the "Merger").
2.2 Exchange and Conversion of Outstanding Shares of Fort
Brooke for and into Shares of Bancorporation Common Stock. Upon the
Effective Date of the Merger, as contemporaneous transactions, and
subject to the termination right described in the succeeding paragraph
of this Section, the separate corporate existence of Interim shall be
extinguished and its outstanding shares owned of record by
Bancorporation shall be deemed redeemed and cancelled without the
necessity of Interim effecting any affirmative action to cause such
result; the outstanding shares of Bancorporation (other than those that
will be issued upon the Effective Date of the Merger) will be redeemed
in exchange for the payment to that entity's single shareholder of the
same consideration as he shall have paid at the time of his acquisition
of such shares; each share of Fort Brooke common stock, par value $8.00
per share, owned of record by a shareholder of Fort Brooke who shall
not, prior to such Effective Date, have properly exercised a statutory
right to dissent from the Merger (individually a "Shareholder" and
collectively the "Shareholders"), shall, by virtue of the Merger, be
deemed automatically transferred and exchanged for and converted into
one share of the authorized but unissued common voting stock of
Bancorporation, $.001 par value; and the shares of the Bank's capital
stock formerly owned by such Shareholders shall be deemed owned solely
by Bancorporation such that the Bank will then constitute a wholly
owned subsidiary of
-2-
<PAGE> 110
Bancorporation.
Notwithstanding the intention of each of the parties to
consummate the Merger in the manner herein described, Fort Brooke may,
at any time prior to such consummation, terminate this Agreement
without liability if the holders of more than ten percent of Fort
Brooke's outstanding capital stock properly dissent from the Merger.
2.3 Dissenting Shareholders. Each shareholder of Fort Brooke
properly dissenting from the Merger in accordance with applicable
Florida statutory law will be entitled to receive, in lieu of
replacement shares to be issued by Bancorporation, the fair value of
such person's shareholdings in Fort Brooke. If the Merger is
consummated, both Bancorporatin and Fort Brooke will be liable for each
such payment, and the method by which any such shares will be valued
and the timing of payment to each dissenting shareholder will be
determined by applicable Florida law.
2.4 Shares and Stock Options Outstanding. On the date of this
Agreement (a) Interim has issued and outstanding ten shares of its
single class of common stock, par value $1.00, all of which are owned
by Bancorporation; (b) Bancorporation has issued and outstanding ten
shares of its single class of common stock, par value $.001, which are
owned by a single shareholder of record; and (c) Fort Brooke has issued
and outstanding 1,005,920 shares of its single class of common stock,
par value $8.00, which are owned by 667 shareholders of record, and has
granted presently unexercised options to certain Fort Brooke employees
to acquire up to an additional 60,410 shares of Fort Brooke common
stock (the "Employee Options").
2.5 Continued Effectiveness of Employee Options. Each holder
of an Employee Option shall have identical rights with respect thereto
both before and after the consummation of the Merger.
2.6 No Fractional Shares. Notwithstanding anything contained
in this Agreement to the contrary, in no event shall Bancorporation be
required to issue a fractional share to any Shareholder or to make any
payment in cash or other form of consideration with respect to any
fractional share right so determined. In lieu thereof, however,
Bancorporation shall issue to each qualifying person one additional
whole share of its authorized but previously unissued common stock, par
value $.001 per share, for each fractional share of more than one-half
to which the Shareholder or Employee Option holder would otherwise be
entitled but for this provision (but no additional share shall be
issued to any person otherwise entitled to the receipt of a fractional
share totaling one-half or less.)
2.7 Surrender and Exchange of Outstanding Shares Issued by
Fort Brooke. On the Effective Date of the Merger, each of the
certificates representing one or more of the then outstanding shares of
capital stock previously issued by Fort Brooke shall be deemed
cancelled and voided and each holder thereof shall cease to have any
rights in
-3-
<PAGE> 111
respect of such shares and, in lieu thereof, shall have rights (a) in
the case of each Shareholder, solely in respect of the Bancorporation
common stock into which shares of Fort Brooke shall have been deemed
automatically converted under the provisions of Section 2.2 above, or
(b) in the case of any other holder, as a dissenting shareholder
exercising his, her or its statutory right to receive fair value for
the cancelled shares of Fort Brooke so owned. Each Shareholder shall,
following consummation of the Merger, have the right to receive from
Bancorporation the shares of Bancorporation common stock as provided in
Sections 2.2 and 2.6, respectively. Until replaced by one or more
Bancorporation certificates evidencing the shares of that entity to
which a Shareholder shall be entitled hereunder, each outstanding
certificate which, prior to the Effective Date of the Merger, shall
have represented one or more shares of capital stock of Fort Brooke
owned by a Shareholder shall be deemed for all corporate purposes to
evidence ownership of the number of full shares of Bancorporation
common stock into which the shares of Fort Brooke shall have been
deemed so converted.
3. Closing of Transactions and Effectiveness of Merger. The closing of
the transactions described in this Agreement shall take place at the offices of
Bush Ross Gardner Warren & Rudy, P.A., counsel to the parties, 220 South
Franklin Street, Tampa, Florida 33602, commencing no later than 9:00a.m., Tampa,
Florida time, on the Effective Date of the Merger, or at such other time, on
such other date and at such other place to which the parties may hereafter
mutually agree (the "Closing Date"). The term, "Effective Date of the Merger,"
as used in this Agreement, shall be deemed the date upon which an executed
certificate of merger, to be issued by the Division or its parent organization,
the Florida Department of Banking and Finance, under the provisions of Section
658.45(1), Florida Statutes, is filed with the Florida Department of State.
Because that statute contemplates such Date as being whatever one is reasonably
requested by the entity surviving the Merger, the parties herein agree, subject
to any alternative subsequent agreement reached by the presidents of Fort Brooke
and Interim, to use their reasonable efforts to cause such Effective Date to
occur on the last business day of the week or month within which there shall
have occurred the last of all required regulatory and shareholder approvals to
the consummation of the Merger.
4. Representations and Warranties of Fort Brooke. Fort Brooke
represents and warrants to each of Bancorporation and Interim that:
4.1 Organization and Good Standing. Fort Brooke is a
corporation duly organized, validly existing and in good standing under
the laws of Florida; and has all corporate power necessary to engage in
its business activities. Fort Brooke maintains no ownership interest in
any other entity.
4.2 Capitalization. The authorized capitalization of Fort
Brooke consists of 2,000,000 common shares, $8.00 par value per share
(the "Common Shares"), of which 1.005,920 Common Shares have been
validly issued and are currently outstanding, fully paid and
nonassessable. As of the date of this Agreement, except as disclosed in
Schedule 4.2, Fort Brooke has no other commitment or obligation to
issue, sell or deliver
-4-
<PAGE> 112
under any offer, stock option agreement, bonus agreement or purchase
plan, stock incentive compensation plan, warrant, conversion right,
contingent share agreement or otherwise any of its Common Shares or
other securities, and there are no preemptive rights with respect to
such Shares or other securities.
4.3 Authority. The execution of this Agreement by Fort Brooke
and its delivery of an executed counterpart hereof to each of
Bancorporation and Interim have been duly authorized by the board of
directors of Fort Brooke, and no further corporate action will be
necessary on the part of Fort Brooke to make this Agreement valid and
binding upon Fort Brooke in accordance with its terms.
4.4 Financial Statements. There has heretofore been delivered
to each of Bancorporation and Interim the balance sheets of Fort Brooke
as of December 31, l995 and 1994, and related statements of its income
and expense, shareholder equity and cash flow, for the calendar years
ended as of those same dates, and accompanying notes and schedules,
together with the reports of the independent public accounting firm of
Hacker, Johnson, Cohen & Grieb, Tampa, Florida (the "Historic FB
Financial Statements"). The Historic FB Financial Statements (a) are in
accordance with the books and records of Fort Brooke, (b) set forth
fairly the financial condition and results of operations of Fort Brooke
as at and for the periods therein specified, (c) are prepared in
accordance with generally accepted accounting principles applicable to
banking institutions, applied on a basis consistent with the financial
statements of prior years, (d) contain and reflect all necessary
adjustments for a fair presentation of the results of operations and
financial condition for the periods covered thereby, and (e) with
respect to any of Fort Brooke's obligations and commitments, contain
and reflect reserves for all material liabilities and for all
reasonably anticipated material losses and costs in excess of receipts
expected to be derived therefrom, including adequate reserves for loan
losses.
4.5 Title to Properties. Fort Brooke has good and marketable
title to all its properties and assets (except property and assets
disposed of in the usual and ordinary course of business since the date
of the Historic FB Financial Statements) and such properties or assets
are subject to no pledge, lien, or other encumbrance except as
disclosed in the Historic FB Financial Statements or in Schedule 4.5
hereto.
4.6 No Obligations. As of the date of each of the Historic FB
Financial Statements, Fort Brooke had no obligations, liabilities or
commitments, direct or indirect, absolute or contingent, determined or
undetermined, except as reflected in the balance sheet comprising a
part of each such Statement.
4.7 No Undisclosed Liabilities. Fort Brooke has no material
obligations, liabilities or commitments, direct or indirect, absolute,
contingent or otherwise, determined or undetermined, except as
reflected in the Historic FB Financial Statements or in Schedule 4.7
hereto.
-5-
<PAGE> 113
4.8 No Material Adverse Changes. Since the date of each of the
Historic FB Financial Statements, there has been no change in the
nature of the business of Fort Brooke, nor in its financial condition
or properties, other than changes in the usual and ordinary course of
business, none of which has been materially adverse, and Fort Brooke
has not incurred any obligation or liability or made any commitment
other than in the usual and ordinary course of business or as disclosed
in Schedule 4.8 hereto.
4.9 Agreements. Except as set forth in Schedule 4.9 or in
another Schedule to this Agreement, Fort Brooke is not a party to any
material contract, agreement, commitment, lease, indenture, fringe
benefit or other plan affecting its operations or activities. For
purposes of this Section 4.9, "material" shall mean any contract,
agreement, commitment, lease, indenture, fringe benefit or other plan
entered into which is not in the ordinary course of business or, if
entered into in the ordinary course of business, which involves a
payment, commitment or entitlement in excess of $5,000. Complete and
correct copies of all of the contracts, agreements, commitments,
leases, indentures, fringe benefits or other plans, documents and
instruments identified in Schedule 4.9, other than purchase orders set
forth in a schedule which has been provided to each of Bancorporation
and Interim, have been supplied to Bancorporation and Interim.
4.10 Litigation. As of the date hereof, Fort Brooke has not
been served with any summons, complaint or notice to arbitrate with
respect to any action presently unresolved, and none of the officers or
directors of Fort Brooke has any knowledge of any suit or action
(equitable, legal or administrative), arbitration or other proceeding
pending or threatened against Fort Brooke, or, to the best knowledge of
Fort Brooke's management, against its directors, officers or
shareholders, which materially relates to Fort Brooke's business,
properties or assets. Fort Brooke is not a party to any litigation,
proceeding, arbitration or controversy before, or subject to the order
or adverse recommendation of, any court or administrative agency, nor
does Fort Brooke have any knowledge of any suit or action (equitable,
legal or administrative), arbitration or other proceeding pending or
threatened by or against it, which, if determined adversely to Fort
Brooke, would have a material adverse affect on the financial
condition, net worth, business or prospects of Fort Brooke.
4.11 No Defaults. Fort Brooke is not in default under any
agreement to which it is a party nor in the payment or performance of
any of its obligations, and has received no notice alleging any such
default.
4.12 Intellectual Property Rights. To the best of its
knowledge and belief, Fort Brooke has not infringed, and is not now
infringing upon, any trademark, trade name, service mark or copyright
belonging to any other entity or individual.
4.13 Taxes. All federal, state and local income taxes, ad
valorem, excise, sales, use, payroll and other taxes and assessments
(hereinafter collectively "Taxes")
-6-
<PAGE> 114
heretofore due and payable by Fort Brooke, directly or as a transferee,
have been properly computed, duly reported, fully paid and discharged,
and, except as set forth on Schedule 4.13, there are no unpaid Taxes
which are or could become a lien on the property or assets of, or
require payment by, Fort Brooke, except for current and deferred Taxes
not yet due and payable. Fort Brooke has not incurred any liability for
penalties, assessments or interest under federal, state, local or
foreign tax laws except as set forth on Schedule 4.13. No unexpired
waiver executed by or on behalf of Fort Brooke or with respect to any
of the foregoing is in effect.
4.14 Compliance With Securities Laws. None of Fort Brooke's
outstanding securities have been offered, issued or sold in violation
of any applicable federal, state or other securities law, rule or
regulation.
4.15 No Material Misstatements or Omissions. No
representations or warranties by Fort Brooke in this Agreement nor any
document, written statement, certificate or schedule furnished or to be
furnished by Fort Brooke pursuant hereto, or in connection with the
transactions contemplated hereby, contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material
fact necessary to make the statements or facts contained herein not
misleading.
5. Representations and Warranties of Bancorporation and Interim. Each
of Bancorporation and Interim represents and warrants to Fort Brooke, as
applicable, that:
5.1 Organization and Good Standing. Each of Bancorporation and
Interim is a corporation duly organized, validly existing and in good
standing under the laws of Florida; and has all corporate power
necessary to engage in its business activities.
5.2 Capitalization: The authorized capitalization of
Bancorporation and Interim, respectively, is set forth in Schedule 5.2
hereto. On the date hereof, the shares of common stock of each of
Bancorporation and Interim that are issued and outstanding are as
specified in Schedule 5.2.1. All of Bancorporation's and Interim's
outstanding shares have been duly authorized and validly issued and are
fully paid and nonassessable. On the date hereof, there are no
outstanding rights, options, warrants, conversion privileges or
agreements of any kind for the purchase or acquisition from, or the
sale or issuance by, Bancorporation or Interim of any shares of its
common stock, no authorization therefor has been given, and no such
shares have been reserved by board of director action for issuance. The
Articles of Incorporation of neither Bancorporation or Interim entitle
any holder of its common stock to a preemptive right with respect to
any subsequent issuance of the entity's securities. None of
Bancorporation's or Interim's outstanding securities were offered,
issued or sold in violation of any applicable federal, state or other
securities law, rule or regulation.
5.3 Authority. The execution of this Agreement by each of
Bancorporation and
-7-
<PAGE> 115
Interim and its delivery to Fort Brooke have been duly authorized by
the board of directors of such entity and when the principal terms of
the transaction and the nature and amount of the consideration have
been approved by the requisite vote or written consent of shareholders
entitled to exercise the voting power of the entity, no further
corporate action will be necessary on the part of the entity to make
this Agreement valid and binding upon the entity in accordance with its
terms. Neither the execution or delivery of this Agreement by
Bancorporation or Interim nor the performance by such entity of its
terms will result in a violation or breach of any term or provision of
the entity's Articles of Incorporation or bylaws, nor constitute a
default, nor give any party a right to accelerate the due date of any
indebtedness, under any indenture, mortgage, deed of trust or other
contract or agreement to which the entity is a party or to which its
properties are subject.
5.4 No Undisclosed Liabilities. Neither Bancorporation nor
Interim has any obligations, liabilities or commitments, direct or
indirect, absolute, contingent or otherwise, determined or
undetermined, except as reflected in Schedule 5.4 hereto.
5.5 Compliance With Securities Laws. The issuance to the
Shareholders of the Bancorporation common shares in accordance with the
terms of this Agreement will be made pursuant to exemptions from
registration under both federal and state securities laws, including
without limitation the Securities Act of 1933, as amended (the
"Securities Act") and the Florida Securities and Investor Protection
Act (the "Florida Act"). After the passage of 120 days following the
issuance of the Bancorporation common shares to be delivered hereunder,
such shares shall not be subject to any restriction upon further
transfer, but no warranty is furnished with regard to the marketability
of such shares.
5.6 No Material Misstatements or Omissions. No representation
or warranty by Bancorporation or Interim in this Agreement nor any
document, instrument, agreement, statement, certificate or schedule
furnished or to be furnished by either such entity pursuant hereto, or
in connection with the transactions contemplated hereby, contains or
will contain any untrue statement of a material fact, or omits or will
omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
5.7 Common Shares to be Delivered. The shares of
Bancorporation common stock to be delivered to the Shareholders
pursuant to this Agreement will, when so delivered, be duly authorized,
validly issued and outstanding, fully paid and nonassessable and
entitled to full voting rights on all matters presented to the
shareholders of Bancorporation for their vote.
6. Covenants of Fort Brooke. Fort Brooke hereby covenants and agrees as
follows:
6.1 Authorization of Shareholders. Prior to the Closing Date,
Fort Brooke shall use its reasonable best efforts to obtain the
requisite approval of its shareholders to
-8-
<PAGE> 116
the Plan and this Agreement calling for a merger of Interim with and
into Fort Brooke as provided herein, and to the timely and adequate
completion of all other necessary corporate action to be taken in
connection therewith. In taking such action, Fort Brooke will timely
furnish to each of its shareholders a proxy statement which will
adequately describe the Merger transaction.
6.2 Conduct of Business. Between the date hereof and the
Effective Date of the Merger, Fort Brooke's business shall be conducted
diligently and only in the ordinary course; its business organization,
administration, customers, employees and other relationships shall, to
the extent commercially reasonable, be maintained intact; and it shall
undertake no action which would adversely affect its ability to (a)
obtain any shareholder or regulatory approval of or consent to the
transactions herein contemplated, or (b) perform its other covenants
and agreements under this Agreement.
6.3 Best Efforts. Fort Brooke will use its best efforts to
satisfy or cause to be satisfied all of the conditions precedent to the
consummation of its obligations under this Agreement, to the extent
that action or inaction can control or influence the satisfaction of
such conditions, expressly including the timely preparation and
submission to each appropriate regulatory authority of all applications
necessary to cause the Merger to be approved and consummated.
6.4 Reporting of Adverse Changes. Fort Brooke will give
written notice promptly to each of Bancorporation and Interim upon
becoming aware of the occurrence or impending occurrence of any event
or circumstance relating to it which (a) is reasonably likely to have,
individually or in the aggregate, a material adverse effect upon it, or
(b) would cause or constitute a material breach of any of its
representations, warranties or covenants contained herein, and to use
its reasonable efforts to prevent or promptly to remedy the same.
6.5 Applications. Fort Brooke shall promptly prepare and file
applications with all regulatory authorities having jurisdiction over
the transactions contemplated by this Agreement by which to seek the
requisite consents necessary to consummate the same.
6.6 Indemnification. Fort Brooke shall indemnify, defend and
hold harmless the present and former directors, officers, employees and
agents of Bancorporation and Interim (each an "Indemnified Party")
against all losses, expenses, claims, damages, costs, judgments, fees,
amounts paid in settlement or liabilities (collectively the
"Indemnified Liabilities") arising out of actions or omissions
allegedly occurring on or prior to the Effective Date of the Merger
(including, without limitation, the transactions contemplated by this
Agreement) to the extent and in the manner contemplated under
ss.607.0850, Florida Statutes, or any successor thereto (the
"Statute"). Without limiting the foregoing, in any case in which
approval by Fort Brooke is required by the Statute to effectuate any
indemnification, Fort Brooke shall direct, at the election of the
Indemnified Party, that the determination of any such approval shall be
made by
-9-
<PAGE> 117
independent counsel selected by a three-fourths majority vote of Fort
Brooke's full board of directors (in which vote directors who are
parties to such actions or omissions may participate).
Any Indemnified Party wishing, after the Effective Date of the
Merger, to claim a right to indemnification under this provision,
shall, upon learning of the threat of an Indemnified Liability or of
the commencement of any proceeding or action in which such Liability is
asserted or may be incurred, promptly notify Fort Brooke thereof. If a
proceeding or action shall have commenced, Fort Brooke shall have the
right to assume the defense thereof and shall not be liable to such
Indemnified Party for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof, except that if Fort Brooke elects not to
assume such defense, or counsel for the Indemnified Party advises that
there are substantive issues which raise conflicts or interest between
Fort Brooke and the Indemnified Party, the Indemnified Party may retain
counsel satisfactory to him or her, and Fort Brooke shall be
responsible for the payment or reimbursement of all reasonable fees and
expenses of such counsel for the Indemnified Party to the extent and in
the manner contemplated by the Statute; provided that Fort Brooke shall
be so responsible only with respect to one firm of legal counsel for
all similarly situated Indemnified Parties in any one jurisdiction.
7. Access and Information. Each of the parties to this Agreement shall
afford to each other and its counsel, accountants and other representatives
reasonable access, during normal business hours throughout the period from the
date hereof to the Effective Date of the Merger, to all of its properties,
books, contracts, commitments and records, and shall furnish each other during
such period with all such information concerning its affairs as any other party
may reasonably request, including copies and/or extracts of pertinent records,
documents and contracts. Each party shall cause its accountants to furnish to
any other requesting party during such period any and all of its statements,
working papers and other records and data as the requesting party may reasonably
seek. Each party's commitments under this Section 7. are made with the
understanding that each other party and its representatives shall keep
confidential any information (unless readily ascertainable from public or
published information or trade sources) obtained from the party concerning the
properties, operations and business of the party. In the event of the
termination of this Agreement prior to consummation, each party and its
representatives shall continue to keep such information confidential and shall
return immediately information provided by each other party.
8. Conditions to Effectiveness of Merger. The effectiveness of the
Merger shall be subject to the occurrence of the following conditions precedent:
8.1 Regulatory Approvals. Receipt by the parties of all
applicable regulatory approvals, including, as necessary, but not
limited to, the following:
8.1.1 By the Fed, to the effort of Bancorporation to qualify
as a bank
-10-
<PAGE> 118
holding company under The Bank Holding Company Act of 1956,
as amended;
8.1.2 By the Division, to the Merger;
8.1.3 By any federal or state regulatory agency, as may be
required with respect to the proposed issuance by
Bancorporation of shares of its common voting stock to the
Shareholders in connection with the Merger.
8.2 Approval of Directors and Shareholders. The board of
directors of each of Bancorporation, Interim and Fort Brooke shall have
approved the consummation of the transactions called for hereunder, and
the requisite majority interest of shareholders of Fort Brooke shall
have effected a similar approval.
8.4 Limitation on Number of Dissenting Shareholders. Holders
of no more than ten percent of the issued and outstanding shares of
Fort Brooke shall have properly exercised their right to claim
dissenting shareholder status so as to be entitled to receive cash in
exchange for a cancellation and voiding of their shares in either
entity.
8.5 Limitation on Amount to Be Paid to Dissenting
Shareholders. The aggregate amount of cash to be paid to shareholders
of Fort Brooke who perfect dissenting shareholder rights shall not
exceed 49% of the value of the formerly outstanding stock of that
corporation.
9. Conditions to Closing by Bancorporation. The obligations of
Bancorporation to complete the transactions provided for herein shall be subject
to the performance by Fort Brooke of all its agreements and covenants to be
performed hereunder on or before the Closing Date, to the truth and accuracy of
the representations and warranties of Fort Brooke contained herein, to the
fulfillment of each of the conditions specified in Section 8. above, and to the
further conditions that:
9.1 Certificates. Bancorporation shall have received from Fort
Brooke certificates, dated, respectively, as of the Closing Date,
executed by Fort Brooke's President and attested to by its Secretary,
stating that (i) the representations and warranties of Fort Brooke made
herein are correct and complete as of such date, (ii) Fort Brooke is
then in full compliance with every term and condition of this Agreement
applicable to it; and (iii) there have occurred no material adverse
changes in the affairs, business, financial condition or prospects of
Fort Brooke between the date of any of the Historic FB Financial
Statements and the date upon which the certificate is to be furnished.
9.2 Representations and Warranties; No Survival. Each of the
representations and warranties of Fort Brooke contained in this
Agreement shall be correct and complete as of the Closing Date, with
the same effect as though made on and as of such date. No such
representation or warranty shall continue to survive after the
Effective Date of the
-11-
<PAGE> 119
Merger.
9.3 Performance. Each of the agreements of Fort Brooke to be
performed or complied with on or before the Closing Date, pursuant to
the terms hereof shall have been duly performed or complied with.
9.4 Consents. All consents to the consummation of the
transactions contemplated herein which are required in order to prevent
a breach of, or a default under, the terms of any material agreement to
which Fort Brooke is a party or is bound shall have been obtained.
9.5 No Litigation. No action or proceeding shall have been
instituted or, to the knowledge of Fort Brooke, shall have been
threatened to prohibit, restrain or modify the transactions
contemplated herein. No governmental agency shall have taken any other
action or made any request of Fort Brooke as a result of which
Bancorporation reasonably deems it inadvisable to proceed with the
Merger. Resolution of all other legal proceedings involving Fort Brooke
shall have been effected in a manner satisfactory to the board of
directors of Bancorporation and its counsel, or, alternatively,
provisions acceptable to such board of directors and its counsel shall
have been made with respect to any potential liability that might arise
therefrom.
9.6 Certified Resolutions or Written Actions. Fort Brooke
shall have delivered to Bancorporation correct and complete copies of
the resolutions or written actions of its board of directors and
shareholders pursuant to which the execution and consummation of this
Agreement were duly and validly authorized, certified by Fort Brooke's
Secretary to be in full force and effect as of the Closing Date.
10. Conditions to Fort Brooke Closing. Fort Brooke's obligation to
complete the transactions provided for herein shall be subject to the
performance by each of Bancorporation and Interim of all agreements and
covenants to be performed thereby hereunder on or before the Closing Date, to
the material truth and accuracy of the representations and warranties of each
contained herein, to the fulfillment of each of the conditions specified in
Section 8. above, and to the further conditions that:
10.1 Certificates. Fort Brooke shall have received from
Bancorporation a certificate, dated as of the Closing Date, executed by
Bancorporation's President and attested to by its Secretary, stating
that (i) the representations and warranties of Bancorporation made
herein are correct and complete as of the Closing Date; (ii)
Bancorporation is then in full compliance with every term and condition
of the Agreement applicable to it; and (iii) there have occurred no
material adverse changes in the affairs, business, financial condition
or prospects of Bancorporation between the date of this Agreement and
the Closing Date.
10.2 Representations and Warranties; No Survival. Each of the
representations
-12-
<PAGE> 120
and warranties of Bancorporation contained in this Agreement shall be
correct and complete as of the Closing Date with the same effect as
though made on and as of such date. No such representation or warranty
shall continue to survive after the Effective Date of the Merger.
10.3 Performance. Each of the agreements of Bancorporation to
be performed or complied with on or before the Closing Date pursuant to
the terms hereof shall have been duly performed or complied with.
10.4 No Litigation. No action or proceeding shall have been
instituted or, to the knowledge of Bancorporation, shall have been
threatened to prohibit, restrain or modify the transactions
contemplated herein. No governmental agency shall have taken any other
action or made any request of Bancorporation as a result of which Fort
Brooke deems it inadvisable to proceed with the Merger. Resolution of
all other legal proceedings involving Bancorporation shall have been
effected in a manner satisfactory to the board of directors of Fort
Brooke and its counsel, or, alternatively, provisions acceptable to
such board of directors and its counsel shall have been made with
respect to any potential liability that might arise therefrom.
11. Ownership and Possession of Properties and Assets.
11.1 Time of Transfer. Ownership and possession of the assets
of Interim shall be transferred to Fort Brooke on the Effective Date of
the Merger by operation of Florida law. All risk of loss with respect
to the properties and assets of Interim shall be borne by Interim and
its shareholder until the Effective Date of the Merger.
12. Miscellaneous Provisions.
12.1 Notices. All notices and other communications hereunder
shall be in writing and shall be given to the person either personally
or by sending a copy thereof by first class or express mail, postage
prepaid, or by telegram (with messenger service specified), telex or
TWX (with answer back received) or courier services, charges prepaid,
or by telecopier, to such party's address (or to such party's telex,
TWX, telecopier or telephone number). If the notice is sent by mail,
telegraph or courier services, it shall be deemed to have been given to
the person entitled thereto when deposited in the United States mail or
with a telegraph office or courier service for delivery to that person
or, in the case of telex or TWX, when dispatched, and addressed as
indicated hereinabove. Notice of any change in any such address shall
also be given in the manner set forth above, but shall be deemed given
only when received. Whenever the furnishing of notice is required, the
same may be waived by the party entitled to receive such notice.
12.2 Binding Agreements; Assignability. Each of the provisions
and agreements herein contained shall be binding upon and inure to the
benefit of the respective parties
-13-
<PAGE> 121
hereto, as well as their successors. The rights under this Agreement
shall not be assignable nor the duties delegable by any party except as
expressly contemplated in this Agreement, without the written consent
of the other party; and nothing contained in this Agreement, express or
implied, is intended to confer upon any person or entity, other than
the parties hereto and their successors in interest and permitted
assignees, any rights or remedies under or by reason of this Agreement
unless so stated to the contrary.
12.3 Entire Agreement. This Agreement, and any other document
referenced herein, constitutes the entire understanding of the parties
hereto with respect to the subject matter hereof and supersedes all
prior agreements, arrangements or understandings relating thereto, and
no amendment, modification or alteration of the terms hereof shall be
binding unless the same be in writing, dated subsequent to the date
hereof and duly approved and executed by each of the parties hereto.
12.4 Severability. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is illegal or
invalid for any reason whatever, such illegality or invalidity shall
not affect the validity of the remainder of this Agreement.
12.5 Headings. The headings of this Agreement are inserted for
convenience and identification only, and are in no way intended to
describe, interpret, define or limit the scope, extent or intent
hereof.
12.6 Application of Florida Law. This Agreement, and the
application or interpretation thereof, shall be governed exclusively by
its terms and by the laws of the State of Florida. Venue for all
purposes shall be deemed to lie within Hillsborough County, Florida.
12.7 Counterparts. This Agreement and any of its Exhibits may
be executed in any number of counterparts, by means of multiple
signature pages each containing less than all required signatures, and
by means of facsimile signatures, each of which shall be deemed an
original, but all of which together shall constitute one and the same
document.
12.8 Legal Fees and Costs. If a legal action is initiated by
any party to this Agreement against another, arising out of or relating
to the alleged performance or nonperformance of any right or obligation
established hereunder, or any dispute concerning the same, any and all
fees, costs and expenses reasonably incurred by each successful party
or its legal counsel in investigating, preparing for, prosecuting,
defending against, or providing evidence, producing documents or taking
any other action in respect of, such action shall be the joint and
several obligation of and shall be paid or reimbursed by the
unsuccessful party(ies).
-14-
<PAGE> 122
12.9 Right to Waive Covenants and Conditions. Each of the
parties hereto may waive, in writing, any of the covenants or
conditions which have been included herein for its benefit or
protection and are to be performed or fulfilled on or prior to the
Closing Date.
12.10 No Benefit to Others. The representations, warranties,
covenants and agreements contained in this Agreement are for the sole
benefit of the parties hereto and their successors and assigns, and
they shall not be construed as conferring and are not intended to
confer any rights on any other persons.
12.11 Publicity. Prior to the Closing Date, all notices to
third parties and all other publicity relating to the transactions
contemplated by this Agreement shall be jointly planned, coordinated
and agreed to by Fort Brooke, Bancorporation and Interim, as
applicable. Except as may be required by law, prior to the Closing Date
none of the parties hereto shall act unilaterally in this regard,
provided, however, that the remaining party's approval shall not be
unreasonably withheld.
12.12 Expenses. Fort Brooke shall be responsible for the
payment of all fees charged by any regulatory authority in connection
with the receipt or review of each application for approval of any
aspect of the Merger transaction contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
FORT BROOKE BANK
ATTEST:
/s/ John D. Adams By:/s/ Richard H. Eatman
- -------------------------------- -----------------------------------
John D. Adams, Secretary Richard H. Eatman, President
Fort Brooke BanCorporation
ATTEST:
/s/ John D. Adams By:/s/ Richard H. Eatman
- -------------------------------- -----------------------------------
John D. Adams, Secretary Richard H. Eatman, President
Brooke Interim Corporation
ATTEST:
/s/ John D. Adams By:/s/ Richard H. Eatman
- -------------------------------- -----------------------------------
John D. Adams, Secretary Richard H. Eatman, President
-15-
<PAGE> 123
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of May
10, 1996, by and among Fort Brooke Bancorporation, a Florida corporation
currently maintaining its sole business office at 510 Vonderburg Drive, Brandon,
Florida 33511 ("Bancorporation"); Brooke Interim Corporation, an inactive
Florida corporation wholly owned by Bancorporation with an administrative office
located at the same address ("Interim"); and Fort Brooke Bank, a Florida
commercial banking corporation currently maintaining its principal business
office at the same location as that of Bancorporation and Interim ("Fort
Brooke").
BACKGROUND INFORMATION
The board of directors of each of Bancorporation, Interim and Fort
Brooke, by affirmative vote of at least a majority of the members of each such
board furnished at a meeting properly noticed and convened to consider and act
upon such issue, has determined that it is advisable and to the advantage of
each such corporation and its shareholder(s) that Interim effect a statutory
merger with and into Fort Brooke, at the conclusion of which Fort Brooke shall
remain as the surviving or resulting entity, the corporate existence of Interim
shall terminate and expire, the ten shares of Bancorporation capital stock
presently issued and outstanding shall be cancelled and returned to the status
of authorized but unissued, and all issued and outstanding shares of Fort
Brooke's capital stock held, as of the effective date of the merger, by
shareholders not electing to dissent therefrom, shall be deemed cancelled and
transferred to Bancorporation in exchange for the issuance to each such
shareholder of an identical number of Bancorporation's common voting shares. In
furtherance thereof, each board has approved and adopted the terms of an
Agreement and Plan of Reorganization, dated March 22, 1996 (the "Agreement"),
and the shareholder(s) of each entity have, by appropriate action, similarly
approved the Agreement and its underlying transactions.
ACCORDINGLY, in consideration of the representations, covenants,
agreements and other provisions set forth in such Agreement, Bancorporation,
Interim and Fort Brooke hereby agree to effect a statutory merger in the
following manner:
OPERATIVE PROVISIONS
1. Merger. In accordance with applicable provisions of the Florida
Banking Code, Chapter 658, Florida Statutes, on a date to be requested by Fort
Brooke and Interim coinciding with or following the closing of the transactions
contemplated by the Agreement and by this Agreement and Plan of Merger (the
"Plan of Merger"), which date shall be reflected in a certificate of merger to
be issued by the Florida Department of Banking and Finance (the "Effective Date
of the Merger"), Interim shall be merged with and into Fort Brooke (the
"Merger") and Fort Brooke shall constitute the surviving and resulting
corporation of such Merger (Fort Brooke being hereinafter sometimes referred to
as the "Resulting Bank"), and all rights, franchises, properties and other
interests of Interim, as the constituent financial institution not surviving the
Merger, and all obligations and liabilities thereof, shall be deemed transferred
<PAGE> 124
to, be vested in and become the obligations of, the Resulting Bank by virtue of
the Merger, without the execution, delivery or recording of any deed, bill of
sale or other instrument of transfer or conveyance being required.
2. Constituent Banks. The constituent banks to the Merger are Fort
Brooke Bank and Brooke Interim Corporation. The specific location of the main
and of each branch office of Fort Brooke Bank is set forth on Schedule I hereto.
Brooke Interim Corporation, being a statutory successor institution, is inactive
and has no business office of any sort. Neither constituent bank has been
granted trust powers and therefore maintains no trust service office.
3. Resulting Bank Offices. The name and specific location of the
proposed main office and each existing and proposed branch office of the
Resulting Bank are set forth in Schedule II hereto.
4. Resulting Bank Directors. The name and residential address of each
individual who is to serve as a director of the Resulting Bank, from the
Effective Date of the Merger until the first succeeding meeting of shareholders
of that entity at which directors are elected, are set forth in Schedule III
hereto.
5. Resulting Bank Officers. The name and residential address of each
individual who is to serve as an executive officer of the Resulting Bank are set
forth in Schedule IV hereto.
6. Resulting Bank Capitalization. The Resulting Bank's authorized
capitalization shall consist of 2,000,000 shares of common voting stock, each
with a par value of $8.00, and with no limitations, rights, preferences or other
special terms attaching thereto. Of the total shares so authorized,
approximately 1,005,920 are expected to be deemed issued and outstanding
immediately following the Effective Date of the Merger, subject to reductions in
that number resulting from the effects of properly elected dissenting
shareholder rights, and the Resulting Bank's capital, surplus and undivided
profits accounts are expected to be $8,047,360, $4,570,689 and $3,047,050,
respectively.
7. No Trust Powers. The Resulting Bank will have no trust powers.
8. Articles of Incorporation. The complete Articles of Incorporation
under which the Resulting Bank will operate are set forth in Schedule V hereto.
9. Bylaws. The Bylaws of Fort Brooke in being on the Effective Date
of the Merger shall continue in full force and effect as the Bylaws of the
Resulting Bank until altered, amended or repealed as provided therein.
10. Terms of the Exchange. Upon the Effective Date of the Merger, all
of the issued and outstanding shares of capital stock of Interim shall be deemed
cancelled and voided, without the necessity of any certificate evidencing such
shares being surrendered to the Resulting Bank, and the separate corporate
existence of Interim shall cease; the ten shares of capital stock of
-2-
<PAGE> 125
Bancorporation then issued and outstanding shall be redeemed, cancelled and
returned to the status of authorized but unissued shares, and the sole
shareholder thereof shall be paid the same consideration as he advanced to that
corporation at the time of issuance of such shares ($10.00); all issued and
outstanding shares of Fort Brooke capital stock held of record by shareholders
who did not elect to dissent from the Merger shall be deemed cancelled and
transferred to Bancorporation and converted into and exchanged for an identical
number of whole shares of Bancorporation's common voting stock, $.001 par value;
and Bancorporation shall issue such number of shares of its common voting stock
to those former Fort Brooke shareholders as provided in Section 2.2 of the
Agreement.
11. Required Approvals. This Plan of Merger is subject to the approval
of (a) the holders of a majority in interest of the outstanding shares of
capital stock of Fort Brooke, (b) the single holder of the outstanding shares of
Interim, (c) the Florida Department of Banking and Finance, (d) the Federal
Reserve Bank of Atlanta, under authority delegated to it by the Board of
Governors of the Federal Reserve System, and (e) the Federal Deposit Insurance
Corporation.
12. Dissenting Shareholder Rights. As no shares of the Resulting Bank's
capital stock are being offered under the Agreement or this Plan of Merger to
Fort Brooke shareholders dissenting from the Merger, neither the Agreement nor
this Plan of Merger contains provisions governing the manner of alternative
disposition of Resulting Bank shares offered to but not taken by such
shareholders. Each Fort Brooke shareholder, in advance of the time at which he,
she or it was asked to vote in favor of, or to consent to, the Merger, was
furnished with notice fairly summarizing the material features of the Agreement
and this Plan of Merger and containing a clear statement of the statutory right
of each shareholder to dissent from the transactions contemplated therein and
herein and, by reason of such dissent, to receive, in lieu of the shares of the
Resulting Bank that are to be issued to all other Fort Brooke shareholders, cash
in an amount equal to the fair value of his, her or its Fort Brooke shares.
13. Further Assurances. From time to time, as and when requested by the
Resulting Bank or by its successors or assigns, the individuals presently
comprising directors of Interim, will, when Interim's corporate existence has
been terminated by consummation of the Merger, and any other legal successor in
interest to Interim, shall execute and deliver or cause to be executed and
delivered all such instruments and other documents and shall take or cause to be
taken such further or other action as the Resulting Bank may reasonably deem
necessary or desirable in order to vest in and confirm to the Resulting Bank
title to and possession of all rights, privileges, immunities, properties,
assets and business of Interim. The officers and directors of the Resulting Bank
are hereby fully authorized, in the name and on behalf of Interim, or otherwise,
to take all such actions and to execute and deliver all such documents and other
instruments necessary to effectuate the purposes of this Plan of Merger.
14. Abandonment of Merger. At any time before the Effective Date of the
Merger, this Plan of Merger may be terminated and the Merger may be abandoned by
action of the board of directors of either Fort Brooke, Bancorporation or
Interim in accordance with the terms of
-3-
<PAGE> 126
the Agreement, notwithstanding approval of this Plan of Merger by a requisite
majority in interest of the shareholders of each such entity.
15. Counterparts. This Plan of Merger may be executed in counterparts,
each of which shall be deemed to be an original.
IN WITNESS WHEREOF, Bancorporation, Interim and Fort Brooke have caused
this Agreement and Plan of Merger to be executed by their respective officers
thereunto duly authorized as of the date first written above.
Fort Brooke Bancorporation Fort Brooke Bank
By: By:
----------------------------- ------------------------------
Richard H. Eatman, President Richard H. Eatman, President
Brooke Interim Corporation
By:
----------------------------
Richard H. Eatman, President
-4-
<PAGE> 127
658.44 APPROVAL BY STOCKHOLDERS; RIGHTS OF DISSENTERS; PREEMPTIVE RIGHTS.
(1) The department shall not issue a certificate of merger to a
resulting state bank or trust company unless the plan of merger and merger
agreement, as adopted by a majority of the entire board of directors of each
constituent bank or trust company, and as approved by each appropriate federal
regulatory agency and by the department, has been approved:
(a) By the stockholders of each constituent national bank as
provided by, and in accordance with the procedures required by, the laws of the
United States applicable thereto, and
(b) After notice as hereinafter provided, by the affirmative
vote or written consent of the holders of at least a majority of the shares
entitled to vote thereon of each constituent state bank or state trust company,
unless any class of shares of any constituent state bank or state trust company
is entitled to vote thereon as a class, in which event as to such constituent
state bank or state trust company the plan of merger and merger agreement shall
be approved by the stockholders upon receiving the affirmative vote or written
consent of the holders of a majority of the shares of each class of shares
entitled to vote thereon as a class and of the total shares entitled to vote
thereon. Such vote of stockholders of a constituent state bank or state trust
company shall be at an annual or special meeting of stockholders or by written
consent of the stockholders without a meeting as provided in s. 607.0704.
Approval by the stockholders of a constituent bank or trust company of a plan of
merger and merger agreement shall constitute the adoption by the stockholders of
the articles of incorporation of the resulting state bank or state trust company
as set forth in the plan of merger and merger agreement.
(2) Written notice of the meeting of, or proposed written consent
action by, the stockholders of each constituent state bank or state trust
company shall be given to each stockholder of record, whether or not entitled to
vote, and whether the meeting is an annual or a special meeting or whether the
vote is to be by written consent pursuant to s. 607.0704, and the notice shall
state that the purpose or one of the purposes of the meeting, or of the proposed
action by the stockholders without a meeting, is to consider the proposed plan
of merger and merger agreement. Except to the extent provided otherwise with
respect to stockholders of a resulting bank or trust company pursuant to
subsection (7), the notice shall also state that dissenting stockholders will be
entitled to payment in cash of the value of only those shares held by the
stockholders:
(a) Which at a meeting of the stockholders are voted against
the approval of the plan of merger and merger agreement;
(b) As to which, if the proposed action is to be by written
consent of stockholders pursuant to s. 607.0704, such written consent is not
given by the holder thereof; or
APPENDIX B
<PAGE> 128
(c) With respect to which the holder thereof has given written
notice to the constituent state bank or trust company, at or prior to the
meeting of the stockholders or on or prior to the date specified for action by
the stockholders without a meeting pursuant to s. 607.0704 in the notice of such
proposed action, that the stockholder dissents from the plan of merger and
merger agreement.
Hereinafter in this section, the term "dissenting shares" means and includes
only those shares, which may be all or less than all the shares of any class
owned by a stockholder, described in paragraphs (a), (b), and (c).
(3) On or promptly after the effective date of the merger, the
resulting state bank or trust company, or a bank holding company which, as set
out in the plan of merger or merger agreement, is offering shares rights,
obligations, or other securities or property in exchange for shares of the
constituent banks or trust companies, may fix an amount which it considers to be
not more than the fair market value of the shares of a constituent bank or trust
company and which it will pay to the holders of dissenting shares of that
constituent bank or trust company and, if it fixes such amount, shall offer to
pay such amount to the holders of all dissenting shares of that constituent bank
or trust company. The amount payable pursuant to any such offer which is
accepted by the holders of dissenting shares, and the amount payable to the
holders of dissenting shares pursuant to an appraisal, shall constitute a debt
of the resulting state bank or state trust company.
(4) The owners of dissenting shares who have accepted an offer made
pursuant to subsection (3) shall be entitled to receive the amount so offered
for such shares in cash upon surrendering the stock certificates representing
such shares at any time within 30 days after the effective date of the merger,
and the owners of dissenting shares, the value of which is to be determined by
appraisal, shall be entitled to receive the value of such shares in cash upon
surrender of the stock certificates representing such shares at any time within
30 days after the value of such shares has been determined by appraisal made on
or after the effective date of the merger.
(5) The value of dissenting shares of each constituent state bank or
state trust company, the owners of which have not accepted an offer for such
shares made pursuant to subsection (3), shall be determined as of the effective
date of the merger by three appraisers, one to be selected by the owners of at
least two-thirds of such dissenting shares, one to be selected by the board of
directors of the resulting state bank, and the third to be selected by the two
so chosen. The value agreed upon by any two of the appraisers shall control and
be final and binding on all parties. If, within 90 days from the effective date
of the merger, for any reason one or more of the appraisers is not selected as
herein provided, or the appraisers fail to determine the value of such
dissenting shares, the department shall cause an appraisal of such dissenting
shares to be made which will be final and binding on all parties. The expenses
of appraisal shall be paid by the resulting state bank or trust company.
2
<PAGE> 129
(6) Upon the effective date of the merger, all the shares of stock of
every class of each constituent bank or trust company, whether or not
surrendered by the holders thereof, shall be void and deemed to be cancelled,
and no voting or other rights of any kind shall pertain thereto or to the
holders thereof except only such rights as may be expressly provided in the plan
of merger and merger agreement or expressly provided by law.
(7) The provisions of subsection (6) and, unless agreed by all the
constituent banks and trust companies and expressly provided in the plan of
merger and merger agreement, subsections (3), (4), and (5) are not applicable to
a resulting bank or trust company or to the shares or holders of shares of a
resulting bank or trust company the cash, shares, rights, obligations, or other
securities or property of which, in whole or in part, is provided in the plan of
merger or merger agreement to be exchanged for the shares of the other
constituent banks or trust companies.
(8) The stock, rights, obligations, and other securities of a resulting
bank or trust company may be issued as provided by the terms of the plan of
merger and merger agreement, free from any preemptive rights of the holders of
any of the shares of stock or of any of the rights, obligations, or other
securities of such resulting bank or trust company or of any of the constituent
banks or trust companies.
(9) After approval of the plan of merger and merger agreement by the
stockholders as provided in subsection (1), there shall be filed with the
department, within 30 days after the time limit in s. 658.43(5), a fully
executed counterpart of the plan of merger and merger agreement as so approved
if it differs in any respect from any fully executed counterpart thereof
theretofore filed with the department, and copies of the resolutions approving
the same by the stockholders of each constituent bank or trust company,
certified by the president, or chief executive officer if other than the
president, and the cashier or corporate secretary of each constituent bank or
trust company, respectively, with the corporate seal impressed thereon.
3
<PAGE> 130
ARTICLES OF INCORPORATION
OF
FORT BROOKE BANCORPORATION
ARTICLE I
Corporate Name and Principal Office
The name of the Corporation shall be Fort Brooke Bancorporation and the
street address of its principal office, as of the date of these Articles of
Incorporation, is 510 Vonderburg Drive, Brandon, Florida 33511.
ARTICLE II
General Nature of Business
The Corporation is formed for the purpose of qualifying and thereafter
operating as a bank holding company, and of engaging in such related and
permissible business activities in connection therewith as the Corporation's
board of directors may specify by resolution.
ARTICLE III
Capital Stock
The aggregate number of shares of capital stock authorized to be issued
by the Corporation shall be 10,000,000 shares of common stock, each with a par
value of $.001 (the "Common Stock"). Each share of issued and outstanding Common
Stock shall entitle the holder thereof to fully participate in all shareholder
meetings, to cast one vote on each matter with respect to which shareholders
have the right to vote, and to share ratably in all dividends and other
distributions declared and paid with respect to the Common Stock, as well as in
the net assets of the corporation upon liquidation or dissolution.
ARTICLE IV
Initial Registered Office and Agent
The street address of the initial registered office of the Corporation
shall be 220 South Franklin Street, Tampa, Florida 33602, and the initial
registered agent of the Corporation at such address is Jeremy P. Ross.
ARTICLE V
Term of Existence
The term for which the Corporation shall exist shall be perpetual
unless terminated pursuant to applicable Florida law.
<PAGE> 131
ARTICLE VI
Directors
Section 6.1 Composition. The Board of Directors shall be composed of a
membership consisting of no fewer than five nor more than 25 individuals, each
of whom shall serve for a term of one year and until the election and
qualification of his or her successor, subject to his or her earlier resignation
or removal from office.
Section 6.2 Identity. The initial Board of Directors of the corporation
shall consist of 14 members, whose identities and residential addresses are:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
John D. Adams, 7209 Adamo Drive
Tampa, FL 33619
Melvin R. Belisle 505 Lakeside Drive
Seffner, FL 33584
Tommy W. Brown 3010 N. 38th Street
Tampa, FL 33605
Richard H. Eatman 607 Royal Crest Drive
Brandon, FL 33511
H. Rex Etheredge 918 Centerbrook Drive
Brandon, FL 33511
Joseph Garcia 2014 Woodberry Road
Brandon, FL 33511
Riley L. Hogan 1704 Cottage Way Court
Brandon, FL 33511
Alex D. MacKinnon 705 Centerbrook Drive
Brandon, FL 33511
Thomas H. Miller 616 West Brandon Blvd.
Brandon, FL 33511
Charles W. Poe 4601 San Miguel
Tampa, FL 33629
William F. Poe 70 Ladoga
Tampa, FL 33606
</TABLE>
<PAGE> 132
<TABLE>
<S> <C>
Reese T. Poppell 2807 Wedgewood Drive
Plant City, FL 33567
Sam Rampello 1107 Riverhills Drive
Temple Terrace, FL 33617
David C. Worthington 908 South Parsons
Brandon, FL 33511
</TABLE>
ARTICLE VII
Waiver of Statutory Provisions
The Corporation elects not to be governed by Section 607.0901, Florida
Statutes, relating to certain affiliated transactions, and separately elects
that Section 607.0902, Florida Statutes, shall not apply to control-share
acquisitions of the corporation's shares.
<PAGE> 1
EXHIBIT 3(i)
<PAGE> 2
ARTICLES OF INCORPORATION
OF
FORT BROOKE BANCORPORATION
ARTICLE I
Corporate Name and Principal Office
The name of the Corporation shall be Fort Brooke Bancorporation and the
street address of its principal office, as of the date of these Articles of
Incorporation, is 510 Vonderburg Drive, Brandon, Florida 33511.
ARTICLE II
General Nature of Business
The Corporation is formed for the purpose of qualifying and thereafter
operating as a bank holding company, and of engaging in such related and
permissible business activities in connection therewith as the Corporation's
board of directors may specify by resolution.
ARTICLE III
Capital Stock
The aggregate number of shares of capital stock authorized to be issued
by the Corporation shall be 10,000,000 shares of common stock, each with a par
value of $.001 (the "Common Stock"). Each share of issued and outstanding Common
Stock shall entitle the holder thereof to fully participate in all shareholder
meetings, to cast one vote on each matter with respect to which shareholders
have the right to vote, and to share ratably in all dividends and other
distributions declared and paid with respect to the Common Stock, as well as in
the net assets of the corporation upon liquidation or dissolution.
ARTICLE IV
Initial Registered Office and Agent
The street address of the initial registered office of the Corporation
shall be 220 South Franklin Street, Tampa, Florida 33602, and the initial
registered agent of the Corporation at such address is Jeremy P. Ross.
ARTICLE V
Term of Existence
The term for which the Corporation shall exist shall be perpetual
unless terminated pursuant to applicable Florida law.
<PAGE> 3
ARTICLE VI
Directors
Section 6.1 Composition. The Board of Directors shall be composed of a
membership consisting of no fewer than five nor more than 25 individuals, each
of whom shall serve for a term of one year and until the election and
qualification of his or her successor, subject to his or her earlier resignation
or removal from office.
Section 6.2 Identity. The initial Board of Directors of the corporation
shall consist of 14 members, whose identities and residential addresses are:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
John D. Adams, 7209 Adamo Drive
Tampa, FL 33619
Melvin R. Belisle 505 Lakeside Drive
Seffner, FL 33584
Tommy W. Brown 3010 N. 38th Street
Tampa, FL 33605
Richard H. Eatman 607 Royal Crest Drive
Brandon, FL 33511
H. Rex Etheredge 918 Centerbrook Drive
Brandon, FL 33511
Joseph Garcia 2014 Woodberry Road
Brandon, FL 33511
Riley L. Hogan 1704 Cottage Way Court
Brandon, FL 33511
Alex D. MacKinnon 705 Centerbrook Drive
Brandon, FL 33511
Thomas H. Miller 616 West Brandon Blvd.
Brandon, FL 33511
Charles W. Poe 4601 San Miguel
Tampa, FL 33629
William F. Poe 70 Ladoga
Tampa, FL 33606
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Reese T. Poppell 2807 Wedgewood Drive
Plant City, FL 33567
Sam Rampello 1107 Riverhills Drive
Temple Terrace, FL 33617
David C. Worthington 908 South Parsons
Brandon, FL 33511
</TABLE>
ARTICLE VII
Waiver of Statutory Provisions
The Corporation elects not to be governed by Section 607.0901, Florida
Statutes, relating to certain affiliated transactions, and separately elects
that Section 607.0902, Florida Statutes, shall not apply to control-share
acquisitions of the corporation's shares.
<PAGE> 1
EXHIBIT 3(ii)
<PAGE> 2
BYLAWS
of
FORT BROOKE BANCORPORATION
a Florida Corporation
ARTICLE I - OFFICES
Section 1. Business Offices. FORT BROOKE BANCORPORATION (herein the
"Corporation"), may have such offices, either within or without the State of
Florida, as the Board of Directors may designate from time to time.
Section 2. Registered Office. The Corporation shall maintain a
registered office in the State of Florida, which may be changed from time to
time by the Board of Directors.
ARTICLE II - STOCKHOLDERS
Section 1. Annual Meeting. The Annual Meeting of stockholders of the
Corporation shall be held subsequent to the end of each fiscal year of the
Corporation, on such date and at such hour as the Board of Directors shall
annually determine.
Section 2. Special Meeting. Special meetings of the stockholders may be
called by the Board of Directors, the Chairman of the Board of Directors, or the
Chief Executive Officer of the Corporation. No business shall be transacted at
any special meeting unless such business is stated in the notice of the meeting
as one of the purposes of that special meeting.
Section 3. Place and Time of Meeting. The Board of Directors shall
designate the place and time of any annual meeting or special meeting of the
stockholders. The place so designated may be either within or without the State
of Florida, as the Board may choose.
Section 4. Notice of Meeting. Notice of the meeting, stating the place,
day and hour of the meeting and, in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be delivered not less than
ten calendar days nor more than 60 calendar days before the date of the meeting,
by written, telegraphic or any other means of communication, by or at the
direction of the Chief Executive Officer, the President, the Secretary or the
other person(s) calling the meeting, to each stockholder of record entitled to
vote at such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail, addressed to the stockholder at his
address as it appears on the stock transfer books of the Corporation, with
postage thereon prepaid.
Section 5. Notice of Adjourned Meeting. When a meeting is adjourned to
another time or place, it shall not be necessary to give any notice of the
adjourned meeting if the time and
-2-
<PAGE> 3
place to which the meeting is adjourned are announced at the meeting at which
the adjournment is taken. If the adjournment is for more than 30 days, or if,
after the adjournment, a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall then be given to each stockholder of
record entitled to vote at the meeting. At an adjourned meeting, any business
may be transacted that might have been transacted on the original date of the
meeting.
Section 6. Waiver of Notice of Meeting of Stockholders. Whenever any
notice is required to be given to any stockholder of the Corporation under the
provisions of any statute, or under the provisions of these Bylaws, a waiver
thereof signed by the person(s) entitled to such notice, whether before or after
the time stated therein, shall be equivalent to the giving of such notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends the meeting for the expressed purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any annual or special meeting of the
stockholders need be specified in any written waiver of notice.
Section 7. Fixing of Record Date. For the purpose of determining
stockholders entitled to notice of, or to vote at, any meeting of stockholders
or any adjournment thereof, or stockholders entitled to receive payment of any
dividend, or in order to make a determination of stockholders for any other
proper purpose, the Board of Directors shall fix in advance a date as the record
date for any such determination of stockholders, such date in any case to be not
more than 60 days prior to the date on which the particular action requiring
such determination of stockholders is to be taken and, in the case of a meeting
of stockholders, not less than ten days prior to the date on which the
particular action requiring such determination of stockholders is to be taken.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this Section, such determination shall
apply to any adjournment thereof, unless the Board of Directors fixes a new
record date for the adjourned meeting.
All notice and record periods established herein shall be adjusted
where required to conform to any prescribed periods now or hereafter provided by
the Florida Business Corporation Act.
Section 8. Stockholder Quorum and Action. A majority of the shares
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of stockholders. The stockholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum. If a quorum is
present, the affirmative vote of the majority of the shares represented at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless otherwise provided by law.
-3-
<PAGE> 4
Section 9. List of Stockholders. The Secretary of the Corporation shall
prepare and make available at least ten days before every meeting of the
stockholders, a complete list of the stockholders entitled to vote at the
meeting.
Section 10. Voting. Each outstanding share entitled to vote shall be
entitled to one vote upon each matter submitted to a vote at a meeting of
stockholders.
Section 11. Proxies. Every stockholder entitled to vote at a meeting of
stockholders, or to express consent or dissent to corporate action in writing
without a meeting, may authorize any other person(s) to act for him by proxy.
However, no such proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period. A duly executed proxy shall
be irrevocable if it states that it is irrevocable and if, and only as long as,
it is coupled with an interest sufficient in law to support an irrevocable
power. A proxy may be made irrevocable regardless of whether the interest with
which it is coupled is an interest in the stock itself or an interest in the
Corporation generally.
Section 12. Organization. Meetings of the stockholders shall be
presided over by the Chairman of the Board, if any, the Vice Chairman of the
Board, if any, the Chief Executive Officer, if any, the President, any Vice
President or, in their absence, by a chairman to be chosen by a majority of the
stockholders entitled to vote at the meeting who are present in person or by
proxy. The Secretary, an Assistant Secretary, or in their absence, any person
appointed by the chairman of the meeting, shall act as secretary of the meeting.
Section 13. Action by Stockholders Without a Meeting. Any action
required or permitted to be taken at a meeting of the stockholders may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Within ten days after obtaining such authorization by written consent,
notice shall be given to those stockholders who have not consented in writing.
The notice shall fully summarize the material features of the authorized action
and, if the action be a merger, consolidation or sale or exchange of assets for
which dissenters' rights are provided by law, the notice shall contain a clear
statement of the rights of stockholders dissenting therefrom.
ARTICLE III - DIRECTORS
Section 1. Powers. Except as otherwise provided by law or by the
Corporation's Certificate of Incorporation, all corporate powers shall be
exercised by or under the authority of, and the property, business and affairs
of the Corporation shall be managed under the direction of, the Board of
Directors.
Section 2. Number Tenure and Qualification. The number of directors of
the Corporation shall be not less than five nor more than 25, with the exact
number of directors to be determined from time to time by the Stockholders,
subject, however, to the right of the Board
-4-
<PAGE> 5
of Directors, at any time between the conduct of annual stockholder meetings, to
increase such number, up to but not in excess of the maximum identified above,
by no more than two. Each director shall serve for a term ending on the date of
the annual meeting of stockholders next following the annual meeting at which
such director shall have been elected. Notwithstanding the foregoing, each
director shall hold office until such director's successor shall have been duly
elected and qualified or until such director's earlier resignation or removal.
Directors need not be residents of the State of Florida or stockholders of the
Corporation.
Section 3. Election of Directors. At the Annual Meeting of
Stockholders, directors shall be elected by the affirmative vote of the holders
of a majority of the shares represented at the meeting and entitled to vote for
the election of directors. If the election of directors is not held on the day
designated by the Board of Directors for any Annual Meeting of Stockholders, or
at any adjournment thereof, the Board of Directors may cause the election to be
held at a special meeting of stockholders specifically called for that purpose.
Section 4. Regular Meetings. A regular meeting of the Board of
Directors shall be held without notice other than this Bylaw provision
immediately after, and at the same place as, the annual election of directors.
The Board of Directors may, from time to time, by resolution appoint the time
and place, either within or without the State of Florida, for holding other
regular meetings of the Board if it be deemed advisable. Such regular meetings
shall thereupon be held at the time and place so appointed, without any
necessity for the giving of notice with regard thereto.
Section 5. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by the Chairman, the Chief Executive Officer, the
President or any two directors. The person(s) authorized to call special
meetings of the Board of Directors may fix any place, either within or without
the State of Florida, and any time, as the place and time for holding any
special meeting of the Board of Directors called by him or them.
Section 6. Notice of Special Meeting. Notice to a director of a call
for any special meeting of the Board may be given in writing by mailing the same
to the residence or place of business of the director, as shown on the books of
the Corporation, so that the director receives such notice not less than 24
hours before the scheduled time for commencement of the meeting. Alternatively,
notice to a director of any special meeting may be given by (a) sending the same
to him at his residence or place of business by telegram or cablegram, (b)
transmitting the same to him at such place by facsimile transmission, (c)
delivering the same to him personally (whether by courier or other service), (d)
leaving the same for him at his residence or place of business, or (e) giving
the same to him by telephone, any of these not later than 24 hours before such
meeting. If mailed, such notice shall be deemed to be delivered when received.
If notice is given by telegram or cablegram, it shall be deemed to be delivered
when the telegram or cablegram is delivered to the telegraph company. If faxed,
such notice shall be deemed to be delivered when the sender is in receipt of a
written confirmation that the transmission has been completed. Except as
otherwise provided in the Bylaws, or as may be indicated in the notice thereof,
any and all business may be transacted at any special meeting.
-5-
<PAGE> 6
When a special meeting of the Board of Directors is adjourned to
another time and place, no notice of the adjourned meeting need be given if the
time and place to which the meeting is adjourned are announced at the meeting at
which the adjournment is taken.
Section 7. Waiver of Notice. A director may waive the requirement of
notice of a special meeting of the Board of Directors by signing a waiver of
notice whether before or after the meeting. The attendance of a director at a
meeting shall constitute a waiver of notice of such meeting and a waiver of any
and all objections to the place or time of such meeting or the manner in which
it has been called or convened, except when the director states, at the
beginning of the meeting, any objection to the transaction of business because
the meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting.
Section 8. Quorum and Action. A majority of the total number of
directors then in office shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, but if less than such
majority is present at the meeting, a majority of the directors present may
adjourn the meeting from time to time until a quorum shall have been obtained.
Directors shall be deemed present at a meeting of the Board of Directors if a
conference telephone, or similar communications equipment by means of which all
persons participating in the meeting can hear each other, is used. The
affirmative vote of the majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board of Directors except and to the
extent otherwise required by law.
Section 9. Presumption of Assent. A director of the Corporation who is
present at a meeting of its Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless he
votes against such action or abstains from voting in respect thereto because of
an asserted conflict of interest.
Section 10. Action Without a Meeting. Any action required or permitted
to be taken by the Board of Directors at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors and filed in the minutes of the proceedings of
the Board of Directors.
Section 11. Interested Directors. No contract or other transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers or have a financial interest, shall be void or voidable solely for this
reason, or solely because such director or officer is present at or participates
in the meeting of the Board of Directors or a committee thereof, which
authorizes, approves or ratifies such contract or transaction or solely because
his or their votes are counted for such purpose, if:
-6-
<PAGE> 7
(a) The material facts as to such relationship or interest and as
to the contract or transaction are disclosed or known to the
Board of Directors or committee, and the Board or committee in
good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less
than a quorum; or
(b) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or known to the
stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of
the stockholders; or
(c) The contract or transaction is fair to the Corporation as of
the time it is authorized, approved, or ratified by the Board
of Directors, a committee or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction.
Section 12. Compensation of Directors. The Board of Directors may (but
is not required to) pay each director a stated compensation or fixed sum for
attendance at meetings of the Board of Directors or any committee thereof, may
issue to directors shares of the Corporation's capital stock in exchange for
Board service (whether past or future), or grant stock options therefor, and may
reimburse each director for his expenses of attendance at each such meeting. The
Board may also pay to each director rendering services to the Corporation not
ordinarily rendered by directors, as such, special compensation appropriate to
the value of such services, as determined by the Board from time to time. None
of these payments shall preclude any director from serving the Corporation in
any other capacity and receiving compensation therefor. The Board of Directors
may determine the compensation of a director who is also an officer, for service
as an officer, as well as for service as a director.
Section 13. Resignation. Any director of the Corporation may resign at
any time upon written notice to the Corporation. The death of a director shall
be deemed a resignation. Any resignation shall take effect at the time specified
therefor, and unless otherwise specified with respect thereto, the acceptance of
such resignation shall not be necessary to make it effective.
Section 14. Removal. A director may be removed from office, with or
without cause, by the affirmative vote of the holders of not less than a
majority of the total voting power of all outstanding securities of the
Corporation then entitled to vote generally in the election of directors, voting
together as a single class at an annual meeting of stockholders or at any
special meeting thereof expressly called to consider such a removal.
Section 15. Vacancies. Vacancies on the Board of Directors resulting
from resignation, removal or otherwise and newly created directorships
resulting from any increase in the number
-7-
<PAGE> 8
of directors may be filled by the affirmative vote of a majority of all
remaining directors or by the affirmative vote of the holders of a majority of
the issued and outstanding shares of the Corporation's voting stock. Each
director so elected shall hold office for a term that shall coincide with the
term to which the resigned or removed director shall have been elected. If there
are no directors in office, then an election of directors may be held in
accordance with Florida law.
Section 16. Committees. The Board of Directors, by resolution adopted
by a majority of its full membership, may designate one or more board
committees, the membership of which shall consist of one or more Directors. The
Board shall have power at any time to fill vacancies in, change the membership
of, designate one or more Directors as alternate members of, or discharge any
such committee. In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting who are not disqualified
from voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board to act at the meeting in place of any such
absent or disqualified member.
Section 17. Powers and Duties of Committees. Any committee shall have
and may exercise all of the powers and authority of the Board in the management
of the business and affairs of the Corporation to the extent provided for in the
resolution of the Board and as limited by these Bylaws, and may authorize the
seal of the Corporation to be affixed to all papers which may require it; but no
such committee shall have power or authority to amend the Articles of
Incorporation, adopt an agreement of merger or consolidation, recommend to the
stockholders the sale, lease, or exchange of all or substantially all of the
Corporation's property and assets, recommend to the stockholders a dissolution
of the Corporation or a revocation of dissolution, or amend these Bylaws; and,
unless the resolution or these Bylaws expressly so provide, no such committee
shall have the power or authority to declare a dividend or to authorize the
issuance of stock.
Section 18. Chairman of the Board of Directors. The Chairman of the
Board of Directors shall be elected by the directors in its organizational
action and thereafter at the regular meeting of the Board of Directors following
the annual election of directors. The Chairman shall hold office until the
regular meeting of the Board of Directors following the annual election of
directors in the next subsequent year and until his successor shall have been
duly elected and shall have qualified, or until his earlier resignation, removal
from office, or both. The Chairman shall preside, when available, at all
meetings of the stockholders and the Board of Directors. He shall have the
specific powers conferred by these Bylaws, and he shall also have and may
exercise such further powers and duties as from time to time may be conferred
upon or assigned to him by the Board of Directors.
ARTICLE IV - OFFICERS
Section 1. Executive Officers. The executive officers of the
Corporation shall include a Chief Executive Officer, a President, a Secretary, a
Treasurer and such other officers and
-8-
<PAGE> 9
assistant officers as may be deemed by the Board of Directors necessary or
appropriate to the operation of the Corporation. Each executive officer shall be
elected by the Board of Directors. Any two or more offices herein designated may
be held by the same individual, and if the offices of Chief Executive Officer
and President are so combined, the President will constitute the chief executive
officer of the Corporation with or without such formal designation being
applied.
Section 2. Election and Term of Office. The executive officers of the
Corporation shall be elected at the regular meeting of the Board of Directors
held immediately following the annual election of directors. Each such officer
shall hold office until the regular meeting of the Board of Directors
immediately following the annual election of directors in the succeeding year
and until his or her successor shall have been duly elected and shall have
qualified, or until his or her earlier resignation, removal from office or
death.
Section 3. Removal from Office. Any executive officer may be removed
from office by action of the Board of Directors taken with or without cause.
Section 4. Vacancies. A vacancy in any executive office may be filled
by action of the Board of Directors, and its appointee shall hold office for the
unexpired term or until his or her successor is elected and qualified.
Section 5. Chief Executive Officer. The Chief Executive Officer, in the
absence of the Chairman of the Board, shall preside at meetings of the
stockholders and of the Board of Directors. The Chief Executive Officer shall
have general charge of the business of the Corporation and the power to
formulate all plans and policies in connection therewith, subject to the control
of the Board of Directors. He shall keep the Board of Directors fully informed
and shall consult with the Board of Directors concerning the business of the
Corporation. The Chief Executive Officer shall have the authority to bestow upon
(and to remove from) one or more individual employees of the Corporation the
title of vice-president and designate the particular operational function to
which his or her service is directed, notwithstanding that such designee shall
not have been elected by the Board of Directors. Such title shall be
administrative in nature and shall not be treated as providing the designee with
any executive authority granted to the executive officers identified in Section
1. above. The Chief Executive Officer shall also have such additional powers and
perform such additional duties as may, from time to time, be specified by the
Board of Directors.
Section 6. President. The President shall have general responsibility
for the day to day management and direction of the business, properties and
affairs of the Corporation. He shall have general executive powers, including
all powers required by law to be exercised by a president of a profit seeking
corporation, as well as the specific powers conferred by these Bylaws and by the
Board of Directors. When the offices of the Chief Executive Officer and the
President are occupied by different individuals, the President shall report to
and be under the direct supervision and control of the Chief Executive Officer,
and in his absence shall perform the duties of the Chairman, with all power of
and restrictions upon that office.
-9-
<PAGE> 10
Section 7. Vice President. In the absence of the President, or in the
event of his death, inability, or refusal to act, the Vice President, if one has
been appointed or elected by the Board of Directors (or in the event there be
more than one Vice President, the Vice Presidents in the order designated at the
time of their appointment or election, or in the absence of any designation,
then in the order of their appointment or election), shall perform the duties of
the President and, when so acting, shall have all of the powers of, and be
subject to all of the restrictions upon, the President.
Each Vice President shall have general executive powers, as well as the
specific powers conferred by these Bylaws, and by the Board of Directors, and by
the President.
Section 8. Secretary. The Secretary shall (a) keep the minutes of the
proceedings of the Board of Directors and the stockholders in one or more books
provided for that purpose, (b) see that all notices are duly given in accordance
with the provisions of these Bylaws or as required by law, (c) be custodian of
the corporate records and of the seal of the Corporation and see that the seal
of the Corporation is affixed to all documents the execution of which on behalf
of the Corporation under its seal is duly authorized, (d) be the registrar of
the Corporation and keep a register of the addresses of all stockholders which
shall be furnished to the Secretary by the stockholders or by the Corporation's
transfer agent, (e) have general charge of the stock transfer books and records
of the Corporation, and in general, perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board of Directors.
Section 9. Treasurer. The Treasurer shall (a) have charge and custody
of, and be responsible for, all funds and securities of the Corporation, (b)
receive and give receipts for monies due and payable to the Corporation from any
source whatsoever, and deposit all such monies in the name of the Corporation in
such banks, trust companies, or other depositories as the Board of Directors may
direct or authorize, and (c) in general, perform all of the duties as from time
to time may be assigned to him by the Chief Executive Officer or the Board of
Directors. If required by the Board of Directors, the Treasurer shall give a
bond for the faithful discharge of his duties in such sum, and with such surety
or sureties, as the Board of Directors shall determine.
Section 10. Salaries. No officer shall be prevented from receiving
a salary by reason of the fact that he is also a director of the Corporation.
-10-
<PAGE> 11
ARTICLE V - CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of
the Corporation shall be in such form as shall be determined by the Board of
Directors. Every holder of stock in the Corporation shall be entitled to have a
certificate signed by the President and by the Secretary, and sealed with the
corporate seal or a facsimile thereof, certifying the number of shares owned by
him in the Corporation. Each certificate shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the Corporation. No certificate
shall be issued for any share until such share is fully paid. In case any
officer, transfer agent, or registrar who has signed, or whose facsimile
signature has been placed upon, a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall be
sealed with the seal of the Corporation, or a facsimile thereof.
Section 2. Transfer of Shares. The Corporation or its duly authorized
agent shall register a certificate for shares presented to it for transfer if
(a) the certificate is endorsed by the appropriate person(s), (b) reasonable
assurance is given that those endorsements are genuine and effective, (c) the
Corporation or its duly authorized agent has no duty to inquire into adverse
claims, or has discharged any such duty, (d) any applicable law relating to the
collection of taxes has been complied with, and (e) the transfer is in fact
rightful, or is to a purchaser for value in good faith, and without notice of
any adverse claim. The new certificate(s) shall be issued only upon surrender of
the old certificate, which shall be canceled upon the issuance of the new
certificate(s). The person in whose name shares stand on the books of the
Corporation shall be deemed by the Corporation to be the owner thereof for all
purposes, and the Corporation shall not be bound to recognize an equitable or
other claim to, or interest in, such share on the part of any other person
whether or not it shall have express or other notice thereof, except as
expressly provided by the laws of the State of Florida.
Section 3. Lost, Stolen, or Destroyed Stock Certificates: Issuance of
New Certificates. The Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it, alleged to have been lost,
stolen, or destroyed, and the Corporation may require the owner of the lost,
stolen, or destroyed certificate, or his legal representative, to give the
Corporation a bond sufficient to indemnity the Corporation against any claim
that may be made against it on account of the alleged loss, theft, or
destruction of any such certificate, or the issuance of such new certificate.
ARTICLE VI - BOOKS AND RECORDS
Section 1. Books and Records. The Corporation shall keep correct and
complete books and records of account, and shall keep minutes of the proceedings
of its Board of Directors and stockholders. The Corporation shall also keep, at
its principal place of business or with its duly
-11-
<PAGE> 12
authorized agent, a record of its stockholders, giving names and addresses of
all stockholders and the number of shares held by each.
ARTICLE VII - BYLAW AMENDMENTS
Section 1. By Shareholders. New Bylaws may be adopted or these Bylaws
may be repealed or amended at the annual or any other meeting of stockholders
called for that purpose, by a vote of stockholders entitled to exercise a
majority of the voting power of the Corporation.
Section 2. By Board of Directors. Subject to the right of the
stockholders to adopt, amend or repeal Bylaws, as provided in this section, the
Board of Directors may adopt, amend or repeal any of these Bylaws other than the
Bylaw or amendment thereof changing the authorized number of directors.
Section 3. Record of Amendments. Whenever an amendment to or
repeal of any existing Bylaw is adopted, or an additional Bylaw
provision is approved, a replacement page containing such new material
and noting the date and manner of its adoption shall be inserted in the
original Bylaws, in the appropriate place.
ARTICLE VIII - MISCELLANEOUS PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors upon consultation with the Corporation's
accountants.
Section 2. Dividends. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in the
manner, and upon the terms and conditions, provided by law and the Articles of
Incorporation.
Section 3. Corporate Seal. The Board of Directors shall provide a
corporate seal which shall be circular in form and shall have inscribed thereon
the name of the Corporation and the state of incorporation.
Section 4. Execution of Instruments. All bills, notes, checks, other
instruments for the payment of money, agreements, indentures, mortgages, deeds,
conveyances, transfers, certificates, declarations, receipts, discharges,
releases, satisfactions, settlements, petitions, schedules, accounts,
affidavits, bonds, undertakings, proxies and other instruments or documents may
be signed, executed, acknowledged, verified, delivered or accepted on behalf of
the Corporation by the Chief Executive Officer, the President, any Vice
President, the Secretary, or the Treasurer. Any such instruments may also be
signed, executed, acknowledged, verified, delivered or accepted on behalf of the
Corporation in such other manner, and by such other officers, employees or
agents of the Corporation as the Board of Directors may from time to time
direct.
-12-
<PAGE> 13
Section 5. Parliamentary Procedure:
When not in conflict with these By-Laws, Roberts Rules of Parliamentary
Procedure shall establish the rules at all stockholder and director meetings.
Section 6. Consent to Meeting:
The transactions approved at any meeting of the Board of Directors,
however called and noticed, shall be as valid as though acted upon at a meeting
duly held after regular call and notice, if a quorum is present and if, either
before or after the meeting, each of the directors not present signs a written
waiver of notice, or a consent to the holding of such meeting, or an approval of
the minutes thereof. All such waivers, consents or approvals shall be filed with
the corporate records or made a part of the minutes of the meeting.
-13-
<PAGE> 1
EXHIBIT 99
<PAGE> 2
NUMBER # of
_ SHARES
--
FORT BROOKE BANCORPORATION
a Florida corporation
10,000,000 Shares Common Stock, Par Value $.001 Per Share
THIS CERTIFIES THAT ________________ is the registered owner of ___
shares of fully paid and non-assessable COMMON capital stock issued by FORT
BROOKE BANCORPORATION (the "Corporation"), which shares shall be transferable on
the books of the Corporation only by the holder hereof or by the Holder's duly
authorized agent, and only upon surrender of this certificate in a properly
endorsed condition.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by its duly authorized officers and its corporate seal to be hereunto
affixed this ____ day of _____ 199_.
- ------------------------------------ ---------------------------------------
John D. Adams, Secretary Richard H. Eatman, President
Corporate Seal
- --------------------------------------------------------------------------------
<PAGE> 3
EXPLANATION OF ABBREVIATIONS
The following abbreviations, when used in the inscription of ownership
on the face of this certificate, shall be construed as if they were written out
in full according to applicable laws or regulations. Abbreviations, in addition
to those appearing below, may be used.
JT TEN As joint tenants with TEN ENT As tenants by the entireties
right of survivorship and
not as tenants in common UNIF GIFT
TEN COM As tenants in common MIN ACT Uniform Gifts to Minors Act
CUST Custodian for
FOR VALUE RECEIVED, I ___________________________________, hereby sell,
[name of seller]
assign and transfer unto _________________________________, _________________,
[name of purchaser] [number of shares]
represented by the Certificate to which this assignment is appended, and do
hereby irrevocably constitute and appoint __________________________________
[name of attorney-in-fact]
and agent to transfer such shares on the books of the Corporation, with full
power of substitution in the premises.
Dated _______________________________________, 19_______
Please insert Social Security
or other identifying number of
assignee:_______________________
In the presence of
_______________________________________ _____________________________________
(signature)
_____________________________________
(printed or typed name)
