UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 000-26403
FPB FINANCIAL CORP.
(Exact name of small business issuer as specified in its charter)
LOUISIANA 72 - 1438784
--------- ------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 WEST MORRIS AVENUE, HAMMOND, LOUISIANA 70403
(Address of principal executive offices)
Issuer's telephone number, including area code: (504) 345-1880
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the issuer was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No [X]
Shares of common stock, par value $.01 per share, outstanding as
of May 31, 1999: 100
Transitional Small business Disclosure Format (check one):
Yes No [X].
* The issuer just became subject to the filing requirements of Section 13 or
15(d) when its Form SB-2 was declared effective on May 13, 1999.
<PAGE>
FPB Financial Corp.
Form 10-QSB
Quarter Ended March 31, 1999
PART I - FINANCIAL INFORMATION
Interim Financial Information required by Rule 10-01 of Regulation S-X and Item
303 of Regulation S-B is included in this Form 10-QSB as referenced below:
Page
----
Item 1 - Financial Statements
Statement of Financial Condition at March 31, 1999 .................. 3
Statement of Income (Unaudited) From February 18,
1999 (Date of Incorporation) to March 31, 1999 ...................... 4
Statement of Cash Flows (Unaudited) From February 18,
1999 (Date of Incorporation) To March 31, 1999 ...................... 5
Notes to Financial Statements ....................................... 6
Item 2 - Management's Discussion and Analysis or Plan of Operation ........ 7
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings ................................................ 8
Item 2 - Changes in Securities and Use of Proceeds ........................ 8
Item 3 - Defaults Upon Senior Securities .................................. 8
Item 4 - Submission of Matters to a Vote of Security Holders .............. 8
Item 5 - Other Information ................................................ 8
Item 6 - Exhibits and Reports on Form 8-K ................................. 9
Signatures ................................................................ 10
2
<PAGE>
FPB Financial Corp.
STATEMENT OF FINANCIAL CONDITION
--------------------------------
March 31, 1999
(Unaudited)
ASSETS
Assets:
Cash ........................................................... $1,000
Other assets ................................................... --
------
Total Assets ................................................... $1,000
======
LIABILITIES AND STOCKHOLDER EQUITY
Liabilities
Total Liabilities .............................................. $ --
Stockholder's Equity:
Preferred Stock, Par Value $.01, 2,000,000
Shares Authorized; 0 Shares Issued and Outstanding ....... --
Common Stock, Par Value $.01, 5,000,000
Shares Authorized; 100 Shares Issued and Outstanding ..... 1
Additional Paid-In Capital ..................................... 999
Retained Earnings .............................................. --
------
Total Stockholder's Equity ............................... 1,000
------
Total Liabilities and Stockholder's Equity ..................... $1,000
======
See accompanying notes to financial statements.
3
<PAGE>
FPB Financial Corp.
STATEMENT OF INCOME
(Unaudited)
For the Period from
February 18, 1999
(Date of Incorporation)
to March 31, 1999
-----------------
Total Income .............................................. $ --
Total Expense ............................................. --
-----
Net Income ............................................. $ --
=====
Earnings Per Share ........................................ $ --
=====
See accompanying notes to financial statements.
4
<PAGE>
FPB Financial Corp.
STATEMENT OF CASH FLOWS
For the Period from February 18, 1999 (Date
of Incorporation) To March 31, 1999
(Unaudited)
Cash Flows from Operating Activities:
Net Income ..................................................... $ --
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Changes in Assets and Liabilities:
(Increase) Decrease in Receivable ................ --
------
Net Cash Provided by Operating Activities .................. --
Cash Flows from Investing Activities:
Net Cash Provided by Investing Activities .................. --
Cash Flows from Financing Activities:
Issuance of Common Stock ................................... 1,000
------
Net Cash Provided by Financing Activities .................. 1,000
------
Increase in Cash and Cash Equivalents ............................ 1,000
Cash and Cash Equivalents at Beginning of Period ................. --
------
Cash and Cash Equivalents at End of Period ....................... $1,000
======
See accompanying notes to financial statements.
5
<PAGE>
FPB Financial Corp.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation -
On February 18, 1999, Florida Parishes Bank (formerly known as Florida
Parishes Homestead Association) (the "Bank") incorporated FPB Financial Corp.
(the "Company") to facilitate the conversion of the Bank from mutual to stock
form (the "Conversion"). In connection with the Conversion, the Company offered
its common stock to the depositors and borrowers of the Bank as of specified
dates, to an employee stock ownership plan and to members of the general public.
The Conversion is expected to be consummated on or about June 30, 1999, at which
time the Company will become the holding company for the Bank and issue shares
of its common stock to the general public.
The Company filed a Form SB-2 with the Securities and Exchange Commission
("SEC") on March 11, 1999, which as amended was declared effective by the SEC on
May 13, 1999. The Association filed a Form AC with the Office of Thrift
Supervision ("OTS") on or about March 10, 1999. The Form AC and related offering
and proxy materials, as amended, were conditionally approved by the OTS by
letters dated May 13, 1999 and May 14, 1999. The Company also filed an
Application H-(e) 1-S with the OTS on or about March 18, 1999, which was
conditionally approved by the OTS by letter dated May 13, 1999. The members of
the Association approved the Plan at a special meeting held on June 22, 1999,
and the subscription and community offerings closed on June 18, 1999.
In connection with the incorporation of the Company, the Company issued
100 shares of common stock to the Association on March 9, 1999. The shares will
be cancelled upon consummation of the Conversion, and the Conversion will be
accounted for under the pooling of interests method of accounting.
The Company received orders for 331,355 shares of common stock in the
subscription and community offerings at a price of $10.00 per share, for
aggregate gross proceeds of $3,313,550. The consummation of the Conversion is
subject to regulatory approval of the final appraisal update and satisfaction of
other customary conditions.
The accompanying unaudited financial statements were prepared in
accordance with instructions for Form 10-QSB and, therefore, do not include
information or footnotes necessary for a complete presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. However, all adjustments (consisting only of
normal recurring accruals) which, in the opinion of management, are necessary
for a fair presentation of the financial statements have been included.
6
<PAGE>
Note 2 - Earnings Per Share -
Earnings per share is not considered meaningful as the Conversion has not
yet been completed, the Company has not engaged in any operations other than to
facilitate the Conversion, and the 100 shares issued and outstanding at March
31, 1999 will be cancelled upon consummation of the Conversion.
Item 2 - Management's Discussion and Analysis or Plan of Operation.
FPB Financial Corp. is a Louisiana corporation organized in February 1999
by the Bank for the purpose of becoming a unitary holding company of the Bank.
The Company will acquire all of the capital stock of the Bank in exchange for
50% of the net Conversion proceeds and will issue shares of its common stock to
persons who submitted orders in the subscription and community offerings.
Immediately following the Conversion, the only significant assets of the Company
will be the capital stock of the Bank, the Company's loan to the ESOP, and the
remainder of the net Conversion proceeds retained by the Company. Initially, the
business and management of the Company will primarily consist of the business
and management of the Bank. Initially, the Company will neither own nor lease
any property, but will instead use the premises, equipment and furniture of the
Bank. At the present time, the Company does not intend to employ any persons
other than officers of the Bank, and the Company will utilize the support staff
of the Bank from time to time. Additional employees will be hired as appropriate
to the extent the Company expands or changes its business in the future.
Management believes that the holding company structure will provide the
Company with additional flexibility to diversify, should it decide to do so, its
business activities through existing or newly formed subsidiaries, or through
acquisitions of or mergers with other financial institutions and financial
services related companies. Although there are no current arrangements,
understandings or agreements, written or oral, regarding any such opportunities
or transactions, the Company will be in a position, subject to regulatory
limitations and the Company's financial position, to take advantage of any such
opportunities that may arise. The initial activities of the Company are
anticipated to be funded by the proceeds retained by the Company and earnings
thereon or, alternatively, through dividends from the Bank.
To date, the Company has not engaged in any business activities other than
those related to the Conversion.
7
<PAGE>
FPB Financial Corp.
Form 10-QSB
Quarter Ended March 31, 1999
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings:
There are no matters required to be reported under this item.
Item 2 - Changes in Securities and Use of Proceeds:
(a) and (b) Not applicable.
(c) On March 9, 1999, the Company sold 100 shares of its common stock
to the Bank at a price of $10.00 per share, for a total purchase
price of $1,000. The shares were sold in reliance upon the
exemption set forth in Section 4(2) of the Securities Act of
1933, and no underwriter was used. These 100 shares will be
cancelled upon completion of the Conversion.
(d) The Company's Form SB-2 (File No. 333-74259) was declared
effective by the SEC on May 13, 1999. The offering commenced on
May 20, 1999, and the offering closed (subject to final
regulatory approval) on June 18, 1999. Not all of the registered
shares were sold in the offering. Trident Securities, Inc. was
the underwriter. A total of 449,650 shares of common stock were
registered solely for the account of the Company, at an aggregate
offering price of $4,496,500. Orders for a total of 331,355
shares at an aggregate offering price of $3,313,550 have been
received, and the Conversion has not yet been completed.
Item 3 - Defaults Upon Senior Securities:
There are no matters required to be reported under this item.
Item 4 - Submission of Matters to a Vote of Security Holders:
There are no matters required to be reported under this item.
Item 5 - Other Information:
There are no matters required to be reported under this item.
8
<PAGE>
Item 6 - Exhibits and Reports on Form 8-K:
(a) The following exhibits are filed herewith:
EXHIBIT NO. DESCRIPTION
27.1 Financial Data Schedule
99.1 Information for the Bank in the format of
a Form 10-QSB for the quarter ended March
31, 1999.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the
quarter ended March 31, 1999.
9
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FPB FINANCIAL CORP.
Date: June 23, 1999 By: /s/ Fritz W. Anderson, II
-----------------------------------------
Fritz W. Anderson, II
President and Chief Executive Officer
10
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,000
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 1,000
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 0
<LONG-TERM> 0
0
0
<COMMON> 1
<OTHER-SE> 999
<TOTAL-LIABILITIES-AND-EQUITY> 1,000
<INTEREST-LOAN> 0
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 0
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 0
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 0
<INCOME-PRETAX> 0
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
FLORIDA PARISHES BANK
STATEMENT OF FINANCIAL CONDITION
AS OF MARCH 31, 1999 AND DECEMBER 31, 1998
MARCH 31, 1999 December 31,1998
-------------- ----------------
(Unaudited)
ASSETS
Cash and cash equivalents:
Cash and non-interest earning
deposits ............................. $ 244,829 $ 446,684
Interest-earning deposits in other
depository institutions .............. 2,948,759 1,904,021
------------ ------------
TOTAL CASH AND CASH EQUIVALENTS .... 3,193,588 2,350,705
Investment securities (Available for Sale) ..... 992,994 992,994
Mortgage-backed securities (Held to Maturity) .. 2,694,433 2,924,100
Federal Home Loan Bank stock ................... 352,500 316,300
Loans receivable ............................... 37,289,157 35,032,552
Less:
Loans in process ...................... (594,318) (737,569)
Allowance for loan losses ............. (170,000) (170,000)
Net deferred loan costs ............... 44,371 26,689
------------ ------------
Loans receivable, net ........ 36,569,210 34,151,672
Accrued interest receivable .................... 75,277 64,139
Premises and equipment, net .................... 200,332 204,005
Prepaid expenses and other assets .............. 124,817 54,446
------------ ------------
TOTAL ASSETS ....................... $ 44,203,151 $ 41,058,361
============ ============
LIABILITIES AND EQUITY
Deposits:
Non-interest bearing demand ........... $ 1,033,438 $ 709,739
Interest bearing ...................... 35,531,785 33,354,904
------------ ------------
Total Deposits ..................... 36,565,223 34,064,643
Interest payable on deposits ................... 73,098 74,860
Advances from Federal Home Loan Bank ........... 3,800,000 3,200,000
Accrued expense and other liabilities .......... 71,142 94,106
Federal income tax payable ..................... 38,371 48,771
Deferred income taxes .......................... 8,209 5,827
------------ ------------
TOTAL LIABILITIES .................. 40,556,043 37,488,207
EQUITY:
Retained earnings ..................... 3,651,732 3,574,778
Accumulated other comprehensive
income (loss) ........................ (4,624) (4,624)
------------ ------------
TOTAL EQUITY ....................... 3,647,108 3,570,154
------------ ------------
TOTAL LIABILITIES AND EQUITY ....... $ 44,203,151 $ 41,058,361
============ ============
1
<PAGE>
FLORIDA PARISHES BANK
STATEMENT OF INCOME
Three Months Ended March 31, 1999 and March 31, 1998
(Unaudited)
March 31, 1999 March 31, 1998
(Unaudited) (Unaudited)
----------- -----------
Interest Income:
Mortgage loans & fees ..................... $644,904 $468,594
Loans on deposits ......................... 8,328 7,447
Consumer loans ............................ 15,706 15,504
FHLB stock and other investment
securities ............................... 17,322 18,710
Mortgage-backed securities ................ 44,503 69,092
Demand deposits ........................... 31,211 50,085
-------- --------
TOTAL INTEREST INCOME ............ 761,974 629,432
Interest Expense:
Deposits .................................. 408,350 362,556
Federal Home Loan Bank advances ........... 49,930 9,880
-------- --------
TOTAL INTEREST EXPENSE ........... 458,280 372,436
NET INTEREST INCOME ........ 303,694 256,996
Provision for loan losses .......................... -- 5,764
-------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES .. 303,694 251,232
Noninterest Income:
Gain on foreclosed real estate sold ....... 478 --
Insurance commissions ..................... 660 687
Service charges on deposits ............... 1,551 222
Other ..................................... 4,250 2,001
-------- --------
TOTAL NONINTEREST INCOME ......... 6,939 2,910
Noninterest Expense:
Compensation and employee benefits ........ 112,887 81,071
Occupancy and equipment ................... 12,270 6,104
Data processing ........................... 14,473 12,790
Advertising ............................... 9,111 2,558
Federal insurance expense ................. 4,869 4,449
Other ..................................... 40,469 24,842
-------- --------
TOTAL NONINTEREST EXPENSE ........ 194,079 131,814
INCOME BEFORE INCOME TAXES . 116,554 122,328
Income tax expense ................................. 39,600 43,000
-------- --------
NET INCOME ....................... 76,954 79,328
Other comprehensive income (loss):
Unrealized gain(loss) on investment
securities available for sale, net of
($0) deferred tax expense (benefit)........ -- --
-------- --------
COMPREHENSIVE INCOME ............. $ 76,954 $ 79,328
======== ========
2
<PAGE>
FLORIDA PARISHES BANK
STATEMENTS IN CHANGES IN EQUITY
Three months Ended March 31, 1999 and 1998
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME RETAINED TOTAL
(LOSS) EARNINGS EQUITY
----- -------- ------
Balance at December 31, 1997 ..... $ -- $3,338,631 $3,338,631
Net Income ....................... -- 79,328 79,328
---------- ---------- ----------
Balance at March 31, 1998
(Unaudited) ..................... $ -- $3,417,959 $3,417,959
========== ========== ==========
Balance at December 31, 1998 ..... $ (4,624) $3,574,778 $3,570,154
Net Income ....................... -- $ 76,954 $ 76,954
---------- ---------- ----------
Balance at March 31, 1999
(Unaudited) ..................... $ (4,624) $3,651,732 $3,647,108
========== ========== ==========
3
<PAGE>
FLORIDA PARISHES BANK
STATEMENT OF CASH FLOWS
Three months Ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
Three months ended
-----------------------------
March 31 March 31
1999 1998
(Unaudited) (Unaudited)
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income ........................................... $ 76,954 $ 79,328
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation ..................................... 7,387 2,407
Provision for loan losses ........................ -- 5,764
Stock dividends on Federal Home Loan Bank Stock .. (4,300) (4,400)
Premium amortization on mortgage-backed
and other securities - net ....................... 1,676 1,738
Changes in Operating Assets and Liabilities:
Accrued interest .............................. (11,138) (3,528)
Prepaid expenses and other assets ............. (3,460) (8,414)
Interest payable on deposits .................. (1,762) 6,862
Accrued expenses and other liabilities ........ (20,582) (8,080)
Federal income tax payable .................... (10,400) (38,041)
Deferred loan origination and commitment costs (17,682) (1,487)
----------- -----------
Total adjustments ................................ (60,261) (47,179)
Net Cash provided by operating activities ........ 16,693 32,149
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) in loans receivable ............... (2,399,856) (2,489,330)
Improvements to premises ......................... (6,146)
Purchase of equipment and/or software ............ (3,714)
Principal payments from mortgage-backed securities 227,991 297,214
Purchase of Federal Home Loan Bank Stock ......... (31,900)
----------- -----------
Net cash (used in) investing activities .......... (2,207,479) (2,198,262)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits .............. 2,500,580 (223,226)
Advances from Federal Home Loan Bank ............. 600,000 950,000
Deferred charges - stock ......................... (66,911) --
----------- -----------
Net cash provided by financing activities ........ 3,033,669 726,774
Net increase (decrease) in cash and cash equivalents.. 842,883 (1,439,339)
Cash and cash equivalents - beginning of period ...... 2,350,705 4,235,963
----------- -----------
Cash and cash equivalents - end of period ............ $ 3,193,588 $ 2,796,624
=========== ===========
</TABLE>
4
<PAGE>
FLORIDA PARISHES BANK
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Three Months Ended March 31, 1999 and March 31, 1998
A: SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies followed by Florida Parishes Bank are
in accordance with generally accepted accounting principles and conform to
general practices within the savings and loan industry.
The accompanying unaudited financial statements were prepared in accordance
with instructions for Form 10-QSB and, therefore, do not include information or
footnotes necessary for a complete presentation of financial position, results
of operations and cash flows in conformity with generally accepted accounting
principles. Management believes that all normal recurring adjustments that are
necessary for a fair presentation of interim period financial information have
been reflected in these financial statements.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The profitability of Florida Parishes Bank ("Florida Parishes" or the
"Bank") depends primarily on its net interest income, which is the difference
between interest and dividend income on interest-earning assets, principally
loans, mortgage-backed securities and interest-earning deposits in other
institutions, and interest expense on interest-bearing deposits and Federal Home
Loan Bank ("FHLB") advances. Net interest income is dependent upon the level of
interest rates and the extent to which such rates are changing. Florida
Parishes's profitability also is dependent, to a lesser extent, on the level of
its noninterest income, provision for loan losses, noninterest expense and
income taxes. During the periods reported herein, net interest income after
provision for loan losses exceeded total noninterest expense. Total noninterest
expense consists of general, administrative and other expenses, such as
compensation and benefits, occupancy and equipment expenses, deposit insurance
premiums, and miscellaneous other expenses.
The Bank's operations and profitability are subject to changes in interest
rates, applicable statutes and regulations and general economic conditions, as
well as other factors beyond the Bank's control.
Changes in Financial Condition
Total assets increased by $3.1 million or 7.7% from December 31, 1998 to
March 31, 1999. The increase was primarily due to a $2.4 million or 7.1%
increase in net loans receivable, primarily reflecting increases in residential
and consumer loans. In addition, interest-earing deposits in other institutions
increased by $1.0 million or 54.9% in the first quarter of 1999, as the Bank
increased its liquidity. Because the Bank is not purchasing new mortgage-backed
securities at this time, mortgage-backed securities continued to decline in the
first quarter of 1999.
Deposits increased by $2.5 million or 7.3% in the first quarter of 1999,
and borrowings increased by $600,000 or 18.8% in the same period. The additional
borrowings were needed to help fund the increase in total assets. Total equity
increased by $77,000 from December 31, 1998 to March 31, 1999 due to net income
for the first quarter of 1999.
Results of Operations
Total interest income increased by $132,000 or 21.0% in the first quarter
of 1999 from the comparable 1998 quarter, due to a $177,000 increase in interest
on loans. The increased income on loans was due to significant increases in
one-to four-family residential loans and consumer loans. Interest on
mortgage-backed securities, investment securities and interest-earning deposits
declined, primarily due to lower yields and, in the case of mortgage-backed
securities, a lower average balance.
Total interest expense increased by $86,000 or 23.0% in the first quarter
of 1999 from the comparable 1998 quarter. Interest on deposits increased by
$46,000 or 12.6% and interest on borrowings increased by $40,000 or over 400% in
the first quarter of 1999. These increases were due to substantial increases in
average deposits and borrowings, partially offset by declines in the average
rates paid.
Net interest income increased by $47,000 or 18.0% in the first quarter
of 1999 from the comparable 1998 quarter, primarily due to an increase in net
average interest-earning assets. The increase in net interest-earning assets was
partially offset by a decrease in the average interest rate spread from 2.62%
for the quarter ended March 31, 1998 to 2.43% for the quarter ended March 31,
1999.
The Bank had $0 and $6,000 of provisions for loan losses for the quarters
ended March 31, 1999 and 1998, respectively. The absence of a provision in the
1999 quarter was primarily due to a decrease in total non-accruing
6
<PAGE>
loans from $202,000 at December 31, 1998 to $103,000 at March 31, 1999. The
$170,000 allowance for loan losses amounted to .46% of total loans and 165% of
total non-accruing loans at March 31, 1999.
Total noninterest income increased by $4,100 in the first quarter of 1999
from the comparable 1998 quarter, primarily due to increases of $2,300 in
miscellaneous income and $1,300 in service charges. The increase in
miscellaneous income was primarily due to fees for returned checks, stop payment
charges and ATM fees. The higher service charges on deposits was primarily due
to an increase in transaction accounts.
Total noninterest expense increased by $62,000 or 47.2% in the first
quarter of 1999 from the comparable 1998 quarter, as each category of
noninterest expense increased. The largest increases were in compensation
($32,000 or 39.2%), miscellaneous expenses ($15,000 or 57.4%) and advertising
($6,600 or 256.2%). The increase in compensation was primarily due to an
increase in employees from eight at March 31, 1998 to 12 at March 31, 1999,
which reflected the hiring of a compliance officer and a loan officer. The
largest increase in miscellaneous expenses were legal and accounting fees,
telephone and postage costs, and stationery, printing and office supplies. The
significant increase in advertising expense was due to advertising of the Bank's
name change, ATM and checkcard services, and other new products.
Pre-tax income decreased by $5,800 or 4.7% in the March 31, 1999 quarter
from the comparable 1998 quarter, as the higher noninterest expense offset
increases in net interest income and noninterest income. The decrease in tax
expense primarily reflected the decrease in pre-tax income.
Net income decreased by $2,600 or 3.3% in the March 31, 1999 quarter from
the comparable 1998 quarter.
Liquidity and Capital Resources
Florida Parishes's is required under applicable federal regulations to
maintain specified levels of "liquid" investments in qualifying types of U.S.
Government, federal agency and other investments having maturities of five years
or less. Current Office of Thrift Supervision ("OTS") regulations require that a
savings institution maintain liquid assets of not less than 4% of its average
daily balance of net withdrawable deposit accounts and borrowings payable in one
year or less. At March 31, 1999, Florida Parishes's liquidity was in excess of
the minimum OTS requirement.
Cash was generated by Florida Parishes's operating activities during the
first quarter of 1999 and 1998 primarily as a result of net income in each
period. The adjustments to reconcile net income to net cash provided by
operations during the periods presented consisted primarily of increases or
decreases in various receivable and payable accounts. The primary investing
activities of Florida Parishes are the origination of loans. Investing
activities used net cash in the first quarter of 1999 and 1998 primarily due to
increases in the net loan portfolio. The primary financing activity consists of
deposits and FHLB advances. Financing activities provided net cash in the first
quarter of both 1999 and 1998 due to an increase in deposits and FHLB advances.
Total cash and cash equivalents increased by $843,000 in the first quarter of
1999 and decreased by $1.4 million in the first quarter of 1998. Total cash and
cash equivalents amounted to $3.2 million at March 31, 1999.
Florida Parishes believes that it has adequate resources to fund all of its
commitments and that it can adjust the rate on certificates of deposit to retain
deposits in a changing interest rate environment. If Florida Parishes requires
funds beyond its internal funding capabilities, advances from FHLB of Dallas are
available as an additional source of funds.
Florida Parishes is required to maintain regulatory capital sufficient to
meet tangible, core and risk-based capital ratios of at least 1.5%, 3.0% and
8.0%, respectively. At March 31, 1999, Florida Parishes exceeded each of its
capital requirements, with tangible, core and risk-based capital ratios of
8.26%, 8.26% and 18.62%, respectively.
7
<PAGE>
Impact of Inflation and Changing Prices
The financial statements and related financial data presented herein have
been prepared in accordance with generally accepted accounting principles, which
generally require the measurement of financial position and operating results in
terms of historical dollars, without considering changes in relative purchasing
power over time due to inflation. Unlike most industrial companies, virtually
all of Florida Parishes's assets and liabilities are monetary in nature. As a
result, interest rates generally have a more significant impact on the Florida
Parishes's performance than does the effect 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.
The Year 2000
General. The Year 2000 issue confronting us, as well as our suppliers,
customers, customer's suppliers and competitors, centers on the inability of
many computer systems to recognize the Year 2000. Many existing computer
programs and systems originally were programmed with six digit dates that
provided only two digits to identify the calendar year in the date field. With
the impending new millennium, these programs and computers will recognize "00"
as the year 1900 rather than the year 2000 unless they are corrected or
replaced.
Like most financial service providers, we may be significantly affected by
the Year 2000 issue due to our dependence on technology and date-sensitive data.
Computer software, hardware and other equipment, both within and outside the
Bank's direct control and third parties with whom the Bank electronically or
operationally interfaces are likely to be affected. If computer systems are not
modified in order to be able to identify the Year 2000, many computer
applications could fail or create erroneous results. In this event, calculations
which rely on date field information, such as interest, payment or due dates and
other operating functions, could generate results which are significantly
misstated.
In accordance with federal regulatory pronouncements, the Bank's Year 2000
plan addressed issues involving awareness, assessment, renovation, validation,
implementation and contingency planning . These phases are discussed below.
Awareness and Assessment. The Bank has a Year 2000 team, consisting of the
President, an Assistant Vice President and the Compliance Officer, which is
responsible for addressing Year 2000 issues. The Year 2000 team periodically
reports to the Board of Directors its actions and findings.
Management has conducted as assessment of all software, hardware,
environmental systems and other computer-controlled systems. In addition,
management has identified and developed an inventory of all technological
components and vendors. Three service providers were identified as "mission
critical", where the failure to become Year 2000 compliant in a timely manner
could cause major operational risks or disruptions.
Renovation Phase Has Been Completed. The Bank has upgraded its in-house
hardware and software that was mission critical or had applications with date
sensitive areas. The Bank's data processing and items processing are handled by
two independent third party data centers, and both centers have indicated that
they completed their renovation process. In addition, the software used with the
FHLB of Dallas was replaced.
The Bank's Validation or Testing Phase Has Been Completed. During 1998, the
Bank tested its loan origination, loan servicing, savings deposits, savings
withdrawal and general ledger activities for Year 2000 compliance. All teller
terminals and general ledger posting terminals were tested, and different tests
were conducted with the Bank's service providers and software vendors. The
Bank's service providers and software vendors were examined by the Federal
Financial Institutions Examination Council, which consists of federal banking
agencies, for Year 2000 compliance. However, neither the council nor its member
agencies certify the Year 2000 readiness of any service provider or vendor. The
Bank explored during 1998 the steps involved in switching its data processing
and items processing to different service providers in the event its current
providers were unable to become Year 2000 compliant in a timely manner. Based on
the results of the testing, the Bank does not believe that a switch to
8
<PAGE>
new service providers will be necessary.
Implementation Phase Has Been Completed. Additional testing was conducted
in the first quarter of 1999, and the implementation phase has now been
completed. All in-house hardware and software that is critical and date
sensitive is Year 2000 compliant. In-house software that is not compliant will
be used only for word processing and not for date sensitive applications.
Contingency Planning. The Bank has adopted contingency plans in the event
that one or more of its internal or external computer systems fails to operate
on or after January 1, 2000. In a worst case scenario, the Bank would need to
post accounts and general ledger entries manually, which was last done in the
1970's. Management has discusses a manual posting system with its independent
auditors. This system still needs to be set up and tested. Testing of the Bank's
business resumption plan is scheduled to be completed by June 30, 1999.
The Bank has obtained a $500,000 Year 2000 line of credit from the FHLB of
Dallas that can be used for liquidity purposes if other sources of funds are not
available when needed. This line of credit was obtained in anticipation of
higher than normal savings withdrawals in late 1999. The Bank can also obtain
short-term FHLB advances if necessary.
Risks. If one or more internal or external computer systems fail to operate
properly on or after January 1, 2000, the Bank may be unable to process
transactions, prepare statements or engage in similar normal business
activities. If all transactions were required to be handled manually due to
computer or other failures, we would need to hire additional personnel which
could significantly increase our expenses.
In the event any of our local utility companies were unable to provide
electricity or other needed services, our operations would be disrupted. We are
unable to provide any assurances as to the Year 2000 readiness of the utility
companies. In addition, while we believe the testing described below was done in
accordance with applicable regulatory guidelines, we are unable to provide any
assurances that the testing took into account all problems that may develop on
or after January 1, 2000.
We believe we have taken appropriate steps with respect to matters that are
within our control in order to become ready for the Year 2000 in a timely
manner. Based on the steps taken to date, including testing and other
documentation, management believes that its three mission critical service
providers are Year 2000 compliant and that issues related to the Year 2000 will
not have a material adverse effect on FPB Financial's liquidity, capital
resources or consolidated results of operations. However, we are unable to
provide any assurance that we have foreseen all problems that may develop on or
after January 1, 2000 or that we have taken all actions that may be considered
necessary in hindsight. In addition, the readiness of all third parties,
including customers and suppliers, is inherently uncertain and cannot be
guaranteed by us. While our outside service providers have shared with us their
testing results, the findings of examination of them by regulatory authorities
and their responses to such examinations, none of the service providers have
provided us with enforceable assurances. One of the mission critical service
providers has indicated in writing that they are not making any express or
implied representation or warranty as to their Year 2000 readiness.
Costs. The Bank currently estimates the total cost of becoming Year 2000
compliant to be less than $15,000 of which approximately $6,000 has been
incurred as of March 31, 1999.
Status of Borrowers and Other Customers. The Bank's customer base consists
primarily of individuals who use the Bank's services for personal, household or
consumer uses. Management believed these customers are not likely to
individually pose material Year 2000 risks directly. It is not possible at this
time to gauge the indirect risks which could be faced if the employers of these
customers encounter unresolved Year 2000 issues. Most of the Bank's loans are
residential or consumer in nature. The Bank had 11 commercial real estate loans
at December 31, 1998 with an average balance of $59,000 at that date. Management
determined that the risk of these borrowers adversely impacting the Bank was not
material. As a result, the Bank has not contacted its customers or borrowers to
determine the status of their readiness for the Year 2000.
9
<PAGE>
For new commercial real estate loans, the Bank is requiring the borrower to
represent that it expects to become Year 2000 compliant in a timely manner and
that it will promptly notify the Bank if the borrower or any of its material
vendors or suppliers will not achieve compliance timely, in each case excluding
any noncompliance that would not have a material adverse effect on the
borrower's financial condition. The Bank believed these representations will
assist management in monitoring the status of new commercial borrowers.
10
