UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number 0-24683
FLORIDA BANKS, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 58-2364573
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
SUITE 212 SOUTHPOINT SQUARE II
4110 SOUTHPOINT BOULEVARD
JACKSONVILLE, FL
32216-0925
(Address of principal executive offices)
(904) 296-2329
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No X
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the latest practicable date.
Class Outstanding at September 4, 1998
Common Stock, $.01 par value per share 5,852,756
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<PAGE>
FLORIDA BANKS, INC.
INDEX
PAGE NO.
PART 1. Financial Information
Item 1. Financial Statements:
Condensed Balance Sheets
June 30, 1998 and December 31, 1997 3
Condensed Statements of Operations
for the Three and Six Month Periods Ended
June 30, 1998 and 1997 4
Condensed Statement of Changes in
Shareholders' Equity for the Six Month Period
Ended June 30, 1998 5
Condensed Statements of Cash Flows
for the Six Month Periods Ended June 30, 1998
and 1997 6
Notes to Condensed Financial Statements
for the Three and Six Month Periods
Ended June 30, 1998 and 1997 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosure about
Market Risk 13
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 17
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<PAGE>
<TABLE>
Item 1. Financial Statements
Florida Banks, Inc.
Condensed Balance sheets (Unaudited)
- ---------------------------------------------------------------------------------------------------
June 30 December 31
1998 1997
<CAPTION>
<S> <C> <C>
CASH AND DUE FROM BANKS $ 1,915,823 $ 2,788,211
FEDERAL FUNDS SOLD 8,665,000 10,245,000
----------- -----------
Total cash and cash equivalents 10,580,823 13,033,211
INVESTMENT SECURITIES:
Available for sale, at fair value (cost $10,473,061 and
$10,445,885 at June 30, 1998 and December 31, 1997, respectively) 10,455,232 10,452,185
Other investments 291,850 313,050
LOANS:
Commercial real estate 14,566,519 15,281,442
Commercial 15,087,266 13,157,905
Residential mortgage 3,542,152 3,268,704
Consumer 1,086,588 1,222,045
Credit card and other loans 1,089,098 869,031
----------- -----------
Total loans 35,371,623 33,799,127
Allowance for loan losses (527,153) (481,462)
Net deferred loan fees (94,411) (78,765)
----------- -----------
Net loans 34,750,059 33,238,900
PREMISES AND EQUIPMENT, NET 584,867 511,503
ACCRUED INTEREST RECEIVABLE 345,557 332,031
DEFERRED INCOME TAXES, NET 2,403,716 2,420,271
OTHER ASSETS 103,883 94,628
----------- -----------
TOTAL ASSETS $59,515,987 $60,395,779
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS
Noninterest-bearing demand 6,227,664 6,441,785
Interest-bearing demand 2,816,591 3,073,535
Regular savings 6,117,007 5,874,911
Money market accounts 1,413,391 1,348,431
Time $100,000 and over 11,053,397 10,214,403
Other time 16,749,672 18,507,107
----------- -----------
Total deposits 44,377,702 45,460,172
REPURCHASE AGREEMENTS 5,863,549 5,911,513
OTHER BORROWED FUNDS 2,404,196 2,405,604
ACCRUED INTEREST PAYABLE 183,508 198,817
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 101,642 106,038
----------- -----------
Total liabilities 52,930,597 54,082,144
SHAREHOLDERS' EQUITY:
Common Stock 13,750 12,152
Additional paid-in capital 5,776,398 5,537,996
Retained earnings (deficit of $8,434,037 eliminated
upon quasi-reorganization on December 31, 1995) 806,296 759,707
Unrealized gain (loss) on available for sale
investment securities, net of tax (11,054) 3,780
----------- -----------
Total shareholders' equity 6,585,390 6,313,635
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $59,515,987 $60,395,779
=========== ===========
</TABLE>
See notes to condensed financial statements.
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<PAGE>
FLORIDA BANKS, INC.
CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Month Period Ended Six Month Period Ended
June 30, June 30,
------------------------ ------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 868,882 $ 856,586 $ 1,676,700 $ 1,653,118
Investment securities 157,580 138,534 320,296 278,666
Federal funds sold 81,150 98,271 177,439 199,028
---------- ---------- ----------- -----------
Total interest income 1,107,612 1,093,391 2,174,435 2,130,812
---------- ---------- ----------- -----------
INTEREST EXPENSE:
Deposits 506,112 527,175 1,015,598 1,036,151
Repurchase agreements 59,030 47,726 119,732 88,206
Borrowed funds 22,853 8,785 47,568 15,419
---------- ---------- ----------- -----------
Total interest expense 587,995 583,686 1,182,898 1,139,776
---------- ---------- ----------- -----------
NET INTEREST INCOME 519,617 509,705 991,537 991,036
PROVISION FOR LOAN LOSSES 15,000 15,000 30,000 30,000
---------- ---------- ----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 504,617 494,705 961,537 961,036
---------- ---------- ----------- -----------
NONINTEREST INCOME:
Service fees 91,276 65,470 186,239 151,596
Gain on sale of loans 44,550 19,709 108,925
Gain on sale of other real estate owned 8,197 7,391
Other noninterest income 24,314 11,499 53,677 22,093
---------- ---------- ----------- -----------
115,590 121,519 267,822 290,005
---------- ---------- ----------- -----------
NONINTEREST EXPENSES:
Salaries and benefits 335,017 274,103 634,887 512,885
Occupancy and equipment 87,735 60,480 163,445 120,645
Data processing 23,774 23,332 49,239 46,099
Other 182,066 103,984 306,649 237,219
---------- ---------- ----------- -----------
628,592 461,899 1,154,220 916,848
---------- ---------- ----------- -----------
INCOME (LOSS) BEFORE PROVISION
(BENEFIT) FOR INCOME TAXES (8,385) 154,325 75,139 334,193
PROVISION (BENEFIT) FOR
INCOME TAX EXPENSES (3,180) 58,890 28,550 127,527
---------- ---------- ----------- -----------
NET INCOME (LOSS) $ (5,205) $ 95,435 $ 46,589 $ 206,666
========== ========== =========== ===========
EARNINGS (LOSS) PER SHARE:
Basic $ 0.00 $ 0.07 $ 0.03 $ 0.16
========== ========== =========== ==========
Diluted $ 0.00 $ 0.07 $ 0.03 $ 0.16
========== ========== =========== ==========
</TABLE>
See notes to condensed financial statements.
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<PAGE>
FLORIDA BANKS, INC.
CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unrealized
(Loss) Gain on
Available
for sale
Common Stock Additional Investment
--------------------- Paid-In Retained Securities,
Shares Par Value Capital Earnings Net of Tax Total
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 1,215,194 $12,152 $5,537,996 $759,707 $ 3,780 $6,313,635
Net income 46,589 46,589
Exercise of stock options 159,806 1,598 238,402 240,000
Unrealized loss on available
for sale investment securities,
net (14,834) (14,834)
--------- ------- ---------- -------- -------- ----------
BALANCE, JUNE 30, 1998
(UNAUDITED) 1,375,000 $13,750 $5,776,398 $806,296 $(11,054) $6,585,390
========= ======= ========== ======== ======== ==========
See notes to condensed financial statements.
</TABLE>
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<PAGE>
<TABLE>
FLORIDA BANKS, INC.
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
- ------------------------------------------------------------------------------------------------
Six Month Period Ended
June 30
----------------------------------
1998 1997
----------------------------------
<CAPTION>
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 46,589 $206,666
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 68,502 51,032
Deferred income taxes 63,553 127,527
Gain on sale of securities (8,197) (7,391)
Amortization of premiums on investments, net (20,365) (8,074)
Provision for loan losses 30,000 30,000
Increase in accrued interest receivable (13,527) (26,566)
(Decrease) increase in accrued interest payable (15,309) 12,642
Increase in other assets (44,258) (9,583)
Decrease in other liabilities (4,396) (16,739)
----------- -----------
Net cash provided by operating activities 102,592 359,514
----------- -----------
INVESTING ACTIVITIES:
Proceeds from sales, paydowns and maturities
of investment securities:
Available for sale 5,499,797 10,077,091
Other 28,600 -
Purchases of investment securities:
Available for sale (5,501,110) (10,556,657)
Other investments (7,400) (17,000)
Net increase in loans (1,541,159) (2,837,880)
Purchases of premises and equipment (141,866) (45,734)
Net cash used in investing activities (1,663,138) (3,380,180)
FINANCING ACTIVITIES:
Net (decrease) increase in demand deposits,
money market accounts and savings accounts (164,029) 845,693
Net (decrease) increase in time deposits (918,441) 246,844
Decrease in repurchase agreements (47,964) (69,138)
Decrease in other borrowed funds (1,408) (906,450)
Exercise of stock options 240,000 -
----------- -----------
Net cash (used in) provided by financing activities (891,842) 116,949
----------- -----------
NET DECREASE IN CASH
AND CASH EQUIVALENTS (2,452,388) (2,903,717)
CASH AND CASH EQUIVALENTS:
Beginning of period 13,033,211 14,898,784
End of period $10,580,823 $11,995,067
=========== ===========
</TABLE>
See notes to condensed financial statements.
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<PAGE>
FLORIDA BANKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED
JUNE 30, 1998 AND 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
Florida Banks, Inc. (the "Company") was incorporated on October 15, 1997
for the purpose of becoming a bank holding company and acquiring First
National Bank of Tampa (the "Bank"). On August 4, 1998, the Company
completed its initial public offering and its merger (the "Merger") with
the Bank pursuant to which the Bank was merged with and into Florida Bank
No. 1, N.A., a wholly-owned subsidiary of the Company, and renamed Florida
Bank, N.A. Shareholders of the Bank received 1,375,000 shares of common
stock of the Company valued at $13,750,000. The Merger was considered a
reverse acquisition for accounting purposes, with the Bank identified as
the accounting acquiror. The Merger will be accounted for as a purchase,
but no goodwill will be recorded in the Merger and the financial
statements of the Bank will become the historical financial statements of
the Company. Accordingly, the financial statements for the three month and
six month periods ended June 30, 1998 and 1997, presented herein are the
financial statements of the Bank and do not reflect the Merger with the
Company which was effective on August 4, 1998.
The number of shares of common stock, the par value of common stock and
per share amounts have been restated to reflect the shares exchanged in
the Merger.
The condensed financial statements have been prepared in accordance with
the rules and regulations of the Securities and Exchange Commission
related to interim financial statements. These unaudited condensed
financial statements do not include all disclosures provided in the annual
financial statements. The condensed financial statements should be read in
conjunction with the financial statements and notes thereto contained in
the Company's Registration Statement on Form S-1 as filed with the
Securities and Exchange Commission. All adjustments of a normal recurring
nature which, in the opinion of management, are necessary to fairly
present the results of the interim periods have been made. Results of
operations for the six month period ended June 30, 1998 are not
necessarily indicative of the results to be expected for the full year.
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<PAGE>
FLORIDA BANKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED
JUNE 30, 1998 AND 1997 (UNAUDITED) (Continued)
- --------------------------------------------------------------------------------
2. MERGER
The Company's operations through June 30, 1998 relate primarily to
expenditures for incorporating and organizing the Company and are not
reflected in the financial statements presented herein. The following is a
summary of the balance sheet and statement of operations of the Company as
of June 30, 1998 and for the six month period then ended:
BALANCE SHEET
ASSETS
Cash $ 63,435
Deferred public offering costs 340,318
----------
TOTAL ASSETS $ 403,753
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued expenses and public offering costs $ 251,030
----------
Total liabilities 251,030
----------
SHAREHOLDERS' EQUITY
Preferred stock 606,000
Common stock 3,778
Additional paid-in capital 3,774,222
Warrants to acquire common stock 164,832
Accumulated deficit (4,396,109)
----------
Total shareholders' equity 152,723
----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 403,753
==========
STATEMENT OF OPERATIONS
EXPENSES
Salaries and benefits $ 3,210,568
Financing costs 972,024
Occupancy and equipment 16,301
Other 170,774
----------
Net loss before cumulative effect of
change in accounting (4,369,667)
Cumulative effect of change in accounting
for organizational costs (26,442)
-----------
Net loss $(4,396,109)
===========
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<PAGE>
FLORIDA BANKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED
JUNE 30, 1998 AND 1997 (UNAUDITED) (Continued)
- --------------------------------------------------------------------------------
3. STOCK OPTIONS
During 1994, the Bank's Board of Directors approved a Stock Option Plan
(the "Plan") for certain key officers, employees and directors whereby
199,758 shares of the Bank's common stock were made available through
qualified incentive stock options and non-qualified stock options. The
Plan specifies that the exercise price per share of common stock under
each option shall not be less than the fair market value of common stock
on the date of the grant, except for qualified stock options granted to
individuals who own either directly or indirectly more than 10% of the
Bank's outstanding stock. For qualified stock options granted to those
individuals owning more than 10% of the Bank's outstanding stock, the
exercise price shall not be less than 110% of the fair market value of the
common stock on the date of grant. Options issued under the Plan expire
ten years after the date of grant, except for qualified stock options
granted to individuals owning more than 10% of the Bank's outstanding
stock. For qualified stock options granted to more individuals owning more
than 10% of the Bank's outstanding stock, the expiration date shall be
five years from the date of grant or earlier if specified in the option
agreement. During 1994, the Bank granted stock options to purchase 159,806
shares of the Bank's common stock at an exercise price of $1.50182 per
share. No options were granted during 1995, 1996 or 1997. All 159,806 of
the options were exercised on May 28, 1998.
4. EARNINGS PER SHARE
The following is a reconciliation of the denominator used in the
computation of basic and diluted earnings per common share.
<TABLE>
<CAPTION>
Three Month Period Ended Six Month Period Ended
June 30, June 30,
------------------------ ----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding - Basic 1,272,013 1,215,194 1,243,604 1,215,194
Incremental shares from assumed
conversion of stock options 87,519 85,903 111,663 85,903
--------- --------- --------- ---------
Total - Diluted 1,359,532 1,301,097 1,355,267 1,301,097
========= ========= ========= =========
</TABLE>
The incremental shares from the assumed conversion of stock options were
determined using the treasury stock method under which the assumed
proceeds were equal to (1) the amount that the Bank would receive upon the
exercise of the options plus (2) the amount of tax benefit that would be
credited to additional paid-in capital assuming exercise of the options.
The assumed proceeds are used to purchase outstanding common shares at the
Company's offering price of $10.00 per share for 1998 and an assumed fair
value equal to the Bank's average book value per common share for 1997 as
the Bank's stock was not actively traded and limited trades during 1997
indicated that book value was a reasonable estimate of fair value.
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<PAGE>
FLORIDA BANKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED
JUNE 30, 1998 AND 1997 (UNAUDITED) (Continued)
- --------------------------------------------------------------------------------
5. NEW ACCOUNTING PRONOUCEMENTS
During the quarter ended March 31, 1998, the Bank adopted Statement of
financial Accounting Standards No. 130, "Reporting Comprehensive Income"
(SFAS 130). This Statement establishes standards for reporting and display
of comprehensive income and its components (revenues, expenses, gains, and
losses) in a full set of general-purpose financial statements. SFAS 130
requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in
a financial statement that is displayed with the same prominence as other
financial statements. SFAS 130 does not require a specific format for the
financial statement but requires that an enterprise display an amount
representing total comprehensive income for the period in the financial
statement. Additionally, SFAS 130 requires that an enterprise (a) classify
items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital in
the equity section of a statement of financial position. This Statement is
effective for fiscal years beginning after December 15, 1997. Total
comprehensive income (loss) for the three months and six months ended June
30, 1998 was $(1,423) and $31,755, respectively. Other comprehensive
income was comprised solely of the change in unrealized gains (loss) on
available for sale investment securities, net.
6. SUBSEQUENT EVENTS
On August 4, 1998, the Company completed its initial public offering of
4,000,000 shares at an offering price of $10.00 per share and completed
its Merger with the Bank. See Note 1.
On September 1, 1998, the Underwriters exercised a portion of their
over-allotment option and purchased an additional 100,000 shares of the
Company's Common Stock, $.01 par value per share, at a price of $10.00 per
share, less underwriting discounts and commissions.
- 10 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the financial
statements and related notes appearing elsewhere in this Form 10-Q.
LIQUIDITY
The Bank has traditionally maintained levels of liquidity above levels required
by regulatory authorities. The Bank's operational needs, demand for loan
disbursements, and savings withdrawals can be met by loan principal, interest
payments received, new deposits, and excess liquid assets. Significant loan
demand, deposit withdrawal, increased delinquencies, and increased real estate
acquired in settlement of loans could alter this condition. Management does not
foresee any liquidity problems for 1998.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1998 Compared to three Months Ended June 30, 1997
The Bank's net income for the second quarter of 1998 decreased $101,000, or
106%, to a net loss of $5,000 for the three month period ended June 30, 1998,
from net income of $95,000 for the corresponding period in 1997. Basic and
diluted earnings per share were $.00 for the second quarter of 1998 compared to
$.07 for the second quarter in 1997. The increase in net interest income of
$10,000 and decrease in the provision for income taxes of $62,000 was offset by
an increase in noninterest expense of $167,000 and a decrease in noninterest
income of $6,000.
The increase in net interest income of $10,000, or 1.9%, for the second quarter
in 1998 compared to the second quarter in 1997, consists of an increase in
interest income of $14,000, or 1.3%, and an increase in interest expense of
$4,000, or 0.7%.
The provision for loan losses charged to operation in both the second quarters
of 1998 and 1997 totaled $15,000.
Noninterest income decreased $6,000, or 4.8%, for the second quarter in 1998
compared to the second quarter in 1997. Increases in service fees and other
noninterest income were offset by a decrease in the gain on sale of loans for
the second quarter or 1998. The decrease in the gain on sale of loans is due to
the timing of the sale of such loans.
Noninterest expense increased $167,000, or 36%, to $629,000 for the second
quarter of 1998 from $462,000 for the second quarter in 1997. The increase in
noninterest expense resulted primarily from increases in salaries and benefits,
occupancy and equipment, and other expenses. The increase in salaries and
benefits of $61,000, or 22%, to $335,000 for the second quarter of 1998 from
$274,000 for the second quarter in 1997, results from normal salary increases
and the addition of lending and other staff for the Jacksonville branch. The
increase in occupancy and equipment expense of $27,000, or 45%, resulted from
the additional leased space for the Bank's SBA department, start up costs for
the Jacksonville branch and from additional depreciation and maintenance
expenses resulting from the purchase of additional computer equipment. The
increase in other expenses of $78,000, or 75%, to $182,000 results from the
additional expenses in relation to the opening of the Jacksonville branch and
legal, accounting and other professional fees associated with the merger with
first National Bank of Tampa (the "Merger").
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<PAGE>
The effective tax rate for both the second quarter of 1998 and 1997 was 38%,
representing the estimated effective annual tax rates for both periods.
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
The Bank's net income for the six months ended June 30, 1998 decreased $160,000,
or 77%, to $47,000 from $207,000 for the corresponding period in 1997. Basic and
diluted earnings per share were $.03 for the first six months of 1998 compared
to $.16 for the first six months of 1997. The increase in net interest income of
$1,000 and decrease in the provision for income taxes of $99,000 was partially
offset by decrease in noninterest income of $22,000 and an increase in
noninterest expense of $237,000.
The increase in net interest income of $1,000 for the first six months of 1998
compared to the same period in 1997 consists of an increase in interest income
of $44,000, or 2.0%, and an increase in interest expense of $43,000, or 3.8%.
The provision for loan losses charged to operation in both the first six month
periods of 1998 and 1997 totaled $30,000.
Noninterest income decreased $22,000, or 7.6%, for the first six months in 1998
compared to the same period in 1997. Increases in service fees of $35,000, or
23%, and other noninterest income of $32,000, or 143%, were offset by a decrease
in the gain on sale of loans of $89,000 for the first six months of 1998
compared to the corresponding period of 1997. The decrease in the gain on sale
of loans is due to the timing of the sale of such loans which can fluctuate
rather significantly on a quarterly basis.
Noninterest expense increased $237,000 , or 26%, to $1.2 million for the first
six months of 1998 from $917,000 for the first six months of 1997. The increase
in noninterest expenses resulted primarily from increases in salaries and
benefits, occupancy and equipment costs, and other expenses. The increase in
salaries and benefits of $122,000, or 24%, to $635,000 for the first six months
of 1998 from $513,000 for the first six months in 1997 resulted from normal
salary increases and the addition of lending and other staff for the
Jacksonville branch. The increase in occupancy and equipment expense of $43,000,
or 35%, resulted from the additional leased space for the Bank's SBA department,
start up costs for the Jacksonville branch and from additional depreciation and
maintenance expenses resulting from the purchase of additional computer
equipment. The increase in other expenses of $70,000, or 29%, from $237,000 to
$307,000 resulted from the additional expenses incurred in connection with the
opening of the Jacksonville branch and legal, accounting and other professional
fees associated with the Merger.
The effective tax rate for both the first six months of 1998 and 1997 was 38%,
representing the estimated effective annual tax rates for both periods.
FINANCIAL CONDITION
Total assets at June 30, 1998 were $59.5 million, a decrease of $880,000, or
1.5%, from $60.4 million at December 31, 1997. Total loans increased $1.6
million, or 4.7%, to $35.4 million at June 30, 1998 from $33.8 million at
December 31, 1997. The increase in total loans was funded by a reduction in
Federal funds sold of $1.6 million, or 15.4%, from $10.2 million at December 31,
1997 to $8.7 million at June 30, 1998.
Deposits decreased $1.1 million, or 2.4%,from $45.5 million at December 31, 1997
to $44.4 million at June 30, 1998. The decrease in total deposits results
primarily from a decrease in other time deposits of $1.8 million which is offset
- 12 -
<PAGE>
by an increase in time deposits of $100,000 and over of $839,000. Time deposits
often fluctuate in response to interest rate changes and can vary rather
significantly on a quarterly basis. Shareholder's equity increased by $272,000,
or 4.3% from $6.3 million at December 31, 1997 to $6.6 million at June 30, 1998.
This increase results primarily from the exercise of stock options on May 28,
1998 whereby 240,000 shares of stock were purchased at an exercise price or
$1.00 per share.
Nonaccrual loans increased $415,000 at June 30, 1998, compared to $0 at December
31, 1997. These nonaccrual loans represent five commercial loans, four of which
are SBA loans of which $303,000 are guaranteed by the SBA, subject to certain
conditions. The Bank reflected these loans as nonaccrual as they are over 90
days past-due and in liquidation at June 30, 1998. These loans were classified
as impaired loans at December 31, 1997 which an allowance for loan losses for
the Bank's estimated exposure on these loans.
CAUTIONARY STATEMENT RELATING TO FORWARD LOOKING STATEMENTS
The foregoing Management's Discussion and Analysis contains various "forward
looking statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which represent the Company's expectations or beliefs concerning future
events, including, but not limited to, statements regarding growth in sales of
the Company's products, profit margins and the sufficiency of the Company's cash
flow for its future liquidity and capital resource needs. These forward looking
statements are further qualified by important factors that could cause actual
results to differ materially from those in the forward looking statements.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Not applicable.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities and Use of Proceeds
USE OF PROCEEDS FROM SALES OF REGISTERED SECURITIES
On August 4, 1998, the Company completed an initial public offering of its
Common Stock, $.01 par value per share (the "Offering"). The managing
underwriters in the Offering were The Robinson- Humphrey Company, LLC and
Interstate/Johnson Lane Corporation (the "Underwriters"). The shares of Common
Stock sold in the Offering were registered under the Securities Act of 1933, as
amended, on a Registration Statement on Form S-1 (the "Registration Statement,"
registration number 333-50867). The Registration Statement was declared
effective by the Securities and Exchange Commission on July 28, 1998.
On July 30, 1998, the Company commenced the Offering. The offering terminated on
August 4, 1998 after the Company had sold all 4,000,000 shares of Common Stock
registered under the Registration Statement. In addition, on September 1, 1998,
the Underwriters exercised a portion of their over-allotment option to purchase
an additional 100,000 shares of Common Stock at a price of $10.00 per share,
less underwriting discounts and commissions. The Company registered a total of
- 13 -
<PAGE>
4,600,000 shares, of which 600,000 shares were registered to cover the
Underwriters' over-allotment, at an assumed offering price of $12.00 per share
for an aggregate price of the amount registered of $55,200,000. From the
effective date of the Registration Statement to September 1, 1998, 4,100,000 of
the shares were sold at a price to the public of $10.00 per share for an
aggregate offering price of $41,000,000, less underwriting discounts and
commissions.
From the effective date of the Registration Statement to September 1, 1998, the
Company paid an aggregate of $2,870,000 in underwriting discounts and
commissions. In addition, the following table sets forth an estimate of all
expenses incurred in connection with the Offering, other than underwriting
discounts and commissions. All of the amounts shown are estimated except for the
registration fees of the Securities and Exchange Commission, the National
Association of Securities Dealers, Inc. and the Nasdaq National Market. None of
the amounts shown were paid directly or indirectly to any director, officer,
general partner of the Company or their associates, persons owning ten percent
or more of any class of equity securities of the Company, or an affiliate of the
Company.
SEC registration fee $ 20,991
NASD filing fee 6,020
Nasdaq national market filing fee 62,725
Printing and engraving expenses 140,400
Legal fees and expenses 237,000
Accounting fees and expenses 130,000
Miscellaneous 139,864
---------
Total $ 737,000
=========
After deducting underwriting discounts and commissions and the Offering expenses
described above, net proceeds to the Company from the Offering were
approximately $37,100,000. Of this amount, the Company infused $12 million into
the Bank's capital. The remaining amount of approximately $25,100,000 has been
allocated for the redemption of preferred stock in the amount of $606,000 and
for general working capital. The remaining proceeds were invested as follows
(amounts are estimated):
Temporary investments
Repurchase agreements $18,800,000
Available for sale securities 6,300,000
-----------
Total $25,100,000
===========
None of the net proceeds of the Offering were paid directly or indirectly to any
director, officer, general partner of the Company or their associates, persons
owning ten percent of more of any class of equity securities of the Company, or
an affiliate of the Company, except that $137,500 was paid to an affiliate of
the Company in connection with the Merger.
Item 3. Defaults Upon Senior Securities
Not applicable.
- 14 -
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
In lieu of a special meeting of the shareholders of the Company, on June 6,
1998, the shareholders of the Company by written consent approved the following
matters:
(i) an amendment to the Company's Articles of Incorporation
increasing the Company's authorized capital stock from 10,000,000
shares to 31,000,000 shares and increasing the Company's
authorized Common Stock from 9,000,000 shares to 30,000,000
shares;
(ii) an amendment to the Company's Articles of Incorporation providing
that a director elected to fill a vacancy shall be elected for
the unexpired term of his predecessor in office;
(iii) an amendment to the Company's Articles of Incorporation providing
that the Company elects not to be governed by the anti-takeover
provisions as provided in Section 607.0901 of the Florida
Business Corporation Act;
(iv) the filing of the Second Amended and Restated Articles of
Incorporation with the Secretary of State of the State of
Florida; and
(v) the adoption of the Florida Banks, Inc. 1998 Stock Option Plan
providing for the grant of incentive stock options as well as
non-qualified stock options to directors, officers and employees
of the Company and certain consultants and advisors of the
Company.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
No report on Form 8-K was filed during the quarter ended June 30, 1998.
- 15 -
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Florida Banks, Inc.
Date: September 4, 1998 By: /s/ Charles E. Hughes, Jr.
--------------------------
Charles E. Hughes, Jr.
President and Chief
Executive Officer
Date: September 4, 1998 By: /s/ T. Edwin Stinson, Jr.
--------------------------
T. Edwin Stinson, Jr.
Chief Financial Officer
- 16 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of Florida Banks, Inc. for the six month
period from January 1, 1998 through June 30, 1998 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,915,823
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 8,665,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 10,455,232
<INVESTMENTS-CARRYING> 291,850
<INVESTMENTS-MARKET> 0
<LOANS> 35,371,623
<ALLOWANCE> 527,153
<TOTAL-ASSETS> 59,515,987
<DEPOSITS> 44,377,702
<SHORT-TERM> 8,552,895
<LIABILITIES-OTHER> 0
<LONG-TERM> 0
0
0
<COMMON> 2,065,000
<OTHER-SE> 4,520,000
<TOTAL-LIABILITIES-AND-EQUITY> 59,515,987
<INTEREST-LOAN> 1,676,700
<INTEREST-INVEST> 320,296
<INTEREST-OTHER> 177,439
<INTEREST-TOTAL> 2,174,435
<INTEREST-DEPOSIT> 1,015,598
<INTEREST-EXPENSE> 1,182,898
<INTEREST-INCOME-NET> 991,537
<LOAN-LOSSES> 30,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,154,220
<INCOME-PRETAX> 75,139
<INCOME-PRE-EXTRAORDINARY> 75,139
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,589
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 415,000
<LOANS-PAST> 216,503
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 5,250
<ALLOWANCE-OPEN> 481,463
<CHARGE-OFFS> 0
<RECOVERIES> 15,690
<ALLOWANCE-CLOSE> 527,153
<ALLOWANCE-DOMESTIC> 527,153
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
