<PAGE> 1
Exhibit 99.2
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Financial Statements
December 31, 1999 and 1998
(With Independent Auditors' Report Thereon)
<PAGE> 2
[KPMG Letterhead]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Centerstate Banks of Florida, Inc.
and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Centerstate
Banks of Florida, Inc. and subsidiaries as of December 31, 1999 and 1998, the
related consolidated statements of operations, stockholders' equity and
comprehensive income and cash flows for of the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Centerstate Banks of
Florida, Inc. and subsidiaries as of December 31, 1999 and 1998, and the results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
/s/ KPMG LLP
Orlando, Florida
February 4, 2000
<PAGE> 3
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
For the years ended December 31, 1999 and 1998
(in thousands of dollars, except per share data)
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------
1999 1998
-----------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $19,976 $11,582
Federal funds sold 4,069 13,944
Investment securities available for sale 59,827 81,584
Investment securities held to maturity (market value 3,532 2,555
of $3,457 and $2,546 at December 31, 1999 and 1998
respectively)
Loans, less allowance for loan losses of $2,302
and $2,335 at December 31, 1999 and 1998
respectively 175,161 151,790
Accrued interest receivable 1,812 1,954
Bank premises and equipment, net 13,075 11,711
Other real estate owned 190 238
Deferred income taxes, net 838 512
Prepaids and other assets 402 214
-----------------------------------
Total Assets $278,882 $276,084
===================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Interest bearing $205,396 $209,569
Noninterest bearing 42,581 40,062
-----------------------------------
Total deposits 247,977 249,631
Securities sold under agreement to repurchase 4,078 4,886
Accrued interest payable 332 379
Federal reserve bank advances 3,000
Accounts payable and accrued expenses 183 395
-----------------------------------
Total liabilities 255,570 255,291
-----------------------------------
Stockholders' equity:
Preferred Stock, $.01 par value; 5,000,000 shares authorized
no shares issued or outstanding 0 0
Common stock, $.01 par value: 20,000,000 shares
authorized; 2,794,847 and 2,549,445 shares issued
and outstanding at December 31, 1999 and 1998 28 25
Additional paid-in capital 15,296 13,760
Retained earnings 8,253 6,697
Accumulated other comprehensive (loss) income (265) 311
-----------------------------------
Total stockholders' equity 23,312 20,793
Commitments and contingent liabilities 0 0
-----------------------------------
Total liabilities and stockholders' equity $278,882 $276,084
===================================
</TABLE>
See accompanying notes to the consolidated financial statements
F-1
<PAGE> 4
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
For the years ended December 31, 1999 and 1998
(in thousands of dollars, except per share data)
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------
1999 1998
-----------------------------------
<S> <C> <C>
Interest Income
Loans $14,276 $13,481
Investment securities 4,271 3,832
Federal funds sold 555 1,225
-----------------------------------
19,102 18,538
-----------------------------------
Interest expense:
Deposits 8,089 8,588
Securities sold under agreement to repurchase 229 196
-----------------------------------
8,318 8,784
-----------------------------------
Net interest income 10,784 9,754
Provision for loan losses 258 227
-----------------------------------
Net interest income after loan loss provision 10,526 9,527
-----------------------------------
Other income:
Service charges on deposit accounts 1,531 1,203
Other service charges and fees 373 243
Gain on sale of other real estate owned 3 100
-----------------------------------
1,907 1,546
-----------------------------------
Other expenses:
Salaries, wages and employee benefits 4,117 3,393
Occupancy expense 1,213 911
Depreciation of premises and equipment 778 645
Stationary and printing supplies 328 260
Advertising and public relations 212 180
Data processing expense 752 626
Legal and professional fees 275 265
Other expenses 1,692 1,304
-----------------------------------
Total other expenses 9,367 7,584
Income before provision for income taxes 3,066 3,489
Provision for income taxes 1,120 1,202
-----------------------------------
Net income $1,946 $2,287
===================================
Earnings per share:
Basic $0.73 $0.90
Diluted $0.70 $0.85
Common shares used in the calculation of earnings per share:
Basic 2,681,079 2,527,256
Diluted 2,775,184 2,689,603
</TABLE>
See accompanying notes to the consolidated financial statements.
F-2
<PAGE> 5
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Statement of Changes in Stockholders' Equity and Comprehensive Income
Years ended December 31, 1999 and 1998
(in thousands of dollars)
<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common paid-in Retained comprehensive stockholders' Comprehensive
stock surplus earnings income (loss) equity income
------------------------------------------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1997 $24 $12,939 $4,704 $79 $17,746
Dividends Paid (294) (294)
Stock Options exercised 1 692 693
Tax effect of tax deduction in excess
of book deduction on options
exercised during the year 129 129
Comprehensive Income:
Net Income 2,287 2,287 $2,287
Other comprehensive income, net of tax
Change in unrealized market value
adjustment on securities
availble-for-sale, net of tax 232 232 232
---------------
Comprehensive Income $2,519
===============
-------------------------------------------------------------------
Balances, December 31, 1998 25 13,760 6,697 311 20,793
Dividends paid (390) (390)
Stock options exercised 3 1,308 1,311
Tax effect of tax deduction in excess
of book deduction on options
exercised during the year 228 228
Comprehensive Income:
Net Income 1,946 1,946 $1,946
Other comprehensive income, net of tax
Change in unrealized market value
adjustment on securities
availble-for-sale, net of tax (576) (576) (576)
---------------
Comprehensive Income $1,370
===============
-------------------------------------------------------------------
Balances, December 31, 1999 $28 $15,296 $8,253 ($265) $23,312
===================================================================
1999 1998
------------------------- --------------------------------
Reconcilation of Comprehensive Income:
Net Income $1,946 $2,287
Other comprehensive income, net of tax:
Gross unrealized (loss) gain on securities ($580) $232
Less: reclassified adjustments for
gains included in net income 4 0
------------ ---------------
Net unrealized (loss)
gain on securities (576) 232
------------- ---------------
Comprehensive income $1,370 $2,519
------------- ---------------
</TABLE>
See accompanying notes to the consolidated financial statements.
F-3
<PAGE> 6
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands of dollars)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------
1999 1998
-------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $1,946 $2,287
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 258 227
Depreciation of premises and equipment 778 645
Net amortization/accretion of investment securities 279 195
Net deferred loan origination fees 53 21
Loss (gain) on sale of other real estate owned 7 (90)
Gain on sale of securities (4) 0
Deferred income taxes 22 (168)
Tax deduction in excess of book deduction on options exercised 228 129
Cash provided by (used in) changes in:
Net change in accrued interest receivable 141 (254)
Net change in prepaids and other assets (189) (81)
Net change in accrued interest payable (47) 14
Net change in accounts payable and accrued expenses (212) (117)
-------------------------------------
Net cash provided by operating activities 3,260 2,808
-------------------------------------
Cash flows from investing activities:
Purchases of investment securities available for sale (24,273) (68,088)
Purchases of investment securities held to maturity (1,500) (1,058)
Proceeds from callable investment securities available for sale 5,500 8,300
Proceeds from maturities of investment securities available for sale 28,839 24,875
Proceeds from sales of investment securities available for sale 10,517 0
Proceeds from maturities of investment securities held to maturity 500 5,513
Increase in loans, net of repayments (23,846) (14,593)
Purchases of premises and equipment (2,142) (3,266)
Proceeds from sale of other real estate owned 205 667
-------------------------------------
Net cash used in investing activities (6,200) (47,650)
-------------------------------------
Cash flows from financing activities:
Net increase in demand and savings deposits (1,654) 40,998
Net increase (decrease) in securities sold under agreement to repurchase (808) 1,965
Proceeds from federal reserve advances 3,000 0
Stock options exercised 1,311 693
Dividends paid (390) (294)
-------------------------------------
Net cash provided by financing activities 1,459 43,362
-------------------------------------
Net (decrease) increase in cash and cash equivalents (1,481) (1,480)
Cash and cash equivalents, beginning of year 25,526 27,006
-------------------------------------
Cash and cash equivalents, end of year $24,045 $25,526
=====================================
</TABLE>
See accompanying notes to the consolidated financial statements.
F-4
<PAGE> 7
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - continued
(in thousands of dollars)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------
1999 1998
-------------------------------------
<S> <C> <C>
Supplemental schedule of noncash transaction:
Market value adjustment-investment securities available for sale
Market value adjustments-investment securities available for sale (425) 498
Deferred income tax asset (liability) 160 (188)
-------------------------------------
Unrealized (loss) gain on investments available for sale ($265) $310
=====================================
Transfer of loan to other real estate owned $165 $246
=====================================
Cash paid during the year for:
Interest $8,365 $8,770
=====================================
Income taxes $1,205 $1,223
=====================================
</TABLE>
See accompanying notes to the consolidated financial statements.
F-5
<PAGE> 8
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations: Centerstate Banks of Florida, Inc. (the "Company")
is a multi bank holding company that was formed as of the close of
business June 30, 2000 as part of a merger of three independent
commercial banks in central Florida (First National Bank of Osceola
County, Community National Bank of Pasco County and First National Bank
of Polk County). The business combination was accounted for using the
pooling-of-interest accounting method, and, therefore, all historical
financial presentations have been restated to reflect the merger.
First National Bank of Osceola County is a national bank chartered in
September 1989. It operates from three full service locations and one
remote location within Osceola County and two full service locations in
Orange County, which is contiguous with Osceola County.
Community National Bank of Pasco County is a national bank chartered in
November 1989. It operates from seven full service locations within Pasco
and contiguous counties.
First National Bank of Polk County is a national bank chartered in
February 1992. It operates from three full service locations within Polk
County.
The Company, through its subsidiary banks, provides traditional deposit
and lending products and services to its commercial and retail customers.
The following is a description of the basis of presentation and the
significant accounting and reporting policies which the Company follows
in preparing and presenting its financial statements.
(a) CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers
cash and due from banks, federal funds sold and noninterest
bearing deposits in other banks with a purchased maturity of three
months or less to be cash equivalents.
(b) INVESTMENT SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES
HELD TO MATURITY
The Company accounts for investments at fair value, except for
those securities which the Company has the positive intent and
ability to hold to maturity. Investments to be held for indefinite
periods of time and not intended to be held to maturity are
classified as available for sale and are carried at fair value.
Unrealized holding gains and losses are included as a separate
component of shareholders' equity net of the effect of income
taxes.
Securities that management has the intent and the Company has the
ability at the time of purchase or origination to hold until
maturity are classified as investment securities held to maturity.
Securities in this category are carried at amortized cost adjusted
for accretion of discounts and amortization of premiums using the
level yield method over the estimated life of the securities. If a
security has a decline in fair value below its amortized cost that
is other than temporary, then the security will be written down to
its new cost basis by recording a loss in the statements of
operations.
F-6
<PAGE> 9
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
(c) LOANS
Loans receivable that management has the intent and the Company
has the ability to hold until maturity or payoff are reported at
their outstanding unpaid principal balance less the allowance for
loan losses and deferred fees on originated loans.
Loan origination fees, net of related costs, are capitalized and
recognized in income over the contractual life of the loans,
adjusted for estimated prepayments based on the Company's
historical prepayment experience.
Commitment fees and costs relating to the commitments are
recognized over the commitment period on a straight-line basis. If
the commitment is exercised during the commitment period, the
remaining unamortized commitment fee at the time of exercise is
recognized over the life of the loan as an adjustment of yield.
Loans are placed on nonaccrual status when the loan becomes 90
days past due as to interest or principal, unless the loan is both
well secured and in the process of collection, or when the full
timely collection of interest or principal becomes uncertain. When
a loan is placed on nonaccrual status, the accrued and unpaid
interest receivable is written off, amortization of the net
deferred loan origination fees cease and the loan is accounted for
on the cash or cost recovery method thereafter until qualifying
for return to accrual status.
The Company, considering current information and events regarding
the borrower's ability to repay their obligations, considers a
loan to be impaired when it is probable that the Company will be
unable to collect all amounts due according to the contractual
terms of the loan agreement. When a loan is considered to be
impaired, the amount of the impairment is measured based on the
present value of expected future cash flows discounted at the
loan's effective interest rate, the secondary market value of the
loan, or the fair value of the collateral for collateral dependent
loans. Impaired loans are written down to the extent that
principal is judged to be uncollectible and, in the case of
impaired collateral dependent loans where repayment is expected to
be provided solely by the underlying collateral and there is no
other available and reliable sources of repayment, are written
down to the lower of cost or collateral value. Impairment losses
are included in the allowance for loan losses.
(d) ALLOWANCE FOR LOAN LOSSES
The Company follows a consistent procedural discipline and
accounts for loan loss contingencies in accordance with Statement
of Financial Accounting Standards No. 5, "Accounting for
Contingencies" (Statement 5). The following is a description of
how each portion of the allowance for loan losses is determined.
The Company segregates the loan portfolio for loan loss purposes
into the following broad segments: commercial real estate;
residential real estate; commercial business; and consumer loan.
The Company provides for a general allowance for losses inherent
in the portfolio by the above categories, which consists of two
components. General loss percentages are calculated based upon
historical analyses. A supplemental portion of the allowance is
calculated for inherent losses which probably exist as of the
evaluation date even though they might not have been identified by
the more objective processes used for
F-7
<PAGE> 10
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
the portion of the allowance described above. This is due to the
risk of error and/or inherent imprecision in the process. This
portion of the allowance is particularly subjective and requires
judgments based on qualitative factors which do not lend
themselves to exact mathematical calculations such as; trends in
delinquencies and nonaccruals; migration trends in the portfolio;
trends in volume, terms, and portfolio mix; new credit products
and/or changes in the geographic distribution of those products;
changes in lending policies and procedures; loan review reports on
the efficacy of the risk identification process; changes in the
outlook for local, regional and national economic conditions;
concentrations of credit; and peer group comparisons.
Specific allowances are provided in the event that the specific
collateral analysis on each classified loan indicates that the
probable loss upon liquidation of collateral would be in excess of
the general percentage allocation. The provision for loan loss is
debited or credited in order to state the allowance for loan
losses to the required level as determined above.
The Company records impairment in the value of its loans as an
addition to the allowance for loan losses. Any changes in the
value of impaired loans due to the passage of time or revisions in
estimates are reported as adjustments to provision expense in the
same manner in which impairment initially was recognized.
Regulatory examiners may require the Company to recognize
additions to the allowance based upon their judgment about the
information available to them at the time of their examination.
(e) PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated
depreciation which is computed over the estimated useful lives of
the assets which range from 5 to 40 years on a straight-line
basis.
(f) OTHER REAL ESTATE OWNED
Real estate acquired in the settlement of loans is recorded at the
lower of cost (principal balance of the former loan plus costs of
obtaining title and possession) or estimated fair value, less
estimated selling costs. Costs relating to development and
improvement of the property are capitalized, whereas those
relating to holding the property are charged to operations.
(g) COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board established
Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income." This Statement establishes
standards for reporting and display of comprehensive income and
its components in a full set of financial statements. This
Statement requires that an enterprise classify items or other
comprehensive income by nature in a financial statement, and
display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital
in the equity section of a balance sheet.
The Company adopted this Statement effective January 1, 1998. The
Company's other comprehensive income is the unrealized gain/(loss)
on investment securities available for sale.
F-8
<PAGE> 11
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
(h) INCOME TAXES
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that
included the enactment date. Deferred tax assets are recognized
subject to management's judgment that realization is more likely
than not.
(i) USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amount of revenues and expenses during the reporting
period. These estimates include the allowance for loan loss and
the valuation of the deferred tax asset. Actual results could
differ from these estimates.
(j) EFFECT OF NEW PRONOUNCEMENTS
In June 1997, the FASB issued Financial Accounting Standards No.
131, "Disclosure about Segments of an Enterprise and Related
Information". This Statement requires that a public business
enterprise report financial and descriptive information about its
reportable operating segments. Operating segments are components
of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating
decision make in deciding how to allocate resources and in
assessing performance. This Statement is effective for fiscal
years beginning after December 15, 1997. The Company adopted the
Statement effective January 1, 1998, however, the Company has only
one reportable segment.
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and
Hedge Activities". This Statement, which is effective for all
fiscal quarters and all fiscal years beginning after June 15,
1999, requires all derivatives be measured at fair value and be
recognized as assets and liabilities in the statement of financial
position. This Statement sets forth the accounting for changes in
fair value of a derivative depending on the intended use and
designation of the derivative. Implementation of the Statement is
not expected to have a significant impact on the financial
position or results of operations of the Company.
In October 1998, the FASB issued Financial Accounting Standards
No. 134, "Accounting for Mortgage-Backed Securities Retained after
the Securitization of Mortgage Loans Held for Sale by a Mortgage
Banking Enterprise." This Statement requires that after the
securitization of a mortgage loan held for sale, an entity engaged
in mortgage banking activities classify the resulting
mortgage-backed security as a trading security. The Statement is
effective for the first fiscal quarter beginning after December
15, 1998. The Company does not expect the adoption of this
Statement to have any impact on its financial statements.
In June 1999, the Financial Accounting Standards Board issued FASB
137, "Accounting for Derivative Instruments and Hedging Activities
- Deferral of The Effective Date of FASB 133", which is a one year
F-9
<PAGE> 12
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
deferral of the application of FASB 133. In June 2000, the
Financial Accounting Standards Board issued FASB 138, "Accounting
for Certain Derivative Instruments and Certain Hedging Activities
- An Amendment of FASB Statement No. 133", which amends the
accounting and reporting standards of Statement 133 for certain
derivative instruments and certain hedging activities. FASB 133
shall be effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. Implementation of FASB 133
did not have a significant impact on the financial position or
results of operations of the Company.
(k) RECLASSIFICATION
Certain amounts in the 1998 financial statements have been
reclassified to conform with 1999.
F-10
<PAGE> 13
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
(2) INVESTMENT SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES HELD
TO MATURITY
The amortized cost and estimated market values of investment securities
available for sale for the years ended December 31, 1999 and 1998 are as
follows:
INVESTMENT SECURITIES AVAILABLE FOR SALE:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 34,410 $ 3 $ 197 $ 34,216
Obligations of U.S.
government agencies 24,150 0 220 23,930
Mortgage backed securities 1,250 0 10 1,240
Federal reserve bank stock 441 0 0 441
--------------- ------------- -------------- --------------
$ 60,251 $ 3 $ 427 $ 59,827
=============== ============= ============== ==============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 43,232 $ 365 $ 0 $ 43,597
Obligations of U.S.
government agencies 35,085 149 15 35,219
Mortgage backed securities 2,360 0 1 2,359
Federal reserve bank stock 409 0 0 409
--------------- ------------- -------------- --------------
$ 81,086 $ 514 $ 16 $ 81,584
=============== ============= ============== ==============
</TABLE>
The amortized cost and estimated market values of investment securities
held to maturity for the years ended December 31, 1999 and 1998:
INVESTMENT SECURITIES HELD TO MATURITY:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Obligations of U.S.
government agencies $ 3,532 $ 0 $ 75 $ 3,457
--------------- ------------- -------------- --------------
$ 3,532 $ 0 $ 75 $ 3,457
=============== ============= ============== ==============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 500 $ 4 $ 0 $ 504
Obligations of U.S.
government agencies 2,055 0 13 2,042
--------------- ------------- -------------- --------------
$ 2,555 $ 4 $ 13 $ 2,546
=============== ============= ============== ==============
</TABLE>
F-11
<PAGE> 14
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
The amortized cost and estimated market value of investment securities
available for sale and held to maturity for the years ended December 31,
1999 and 1998 by contractual maturity, are shown below. Actual maturities
will differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED MARKET
COST VALUE
---------------------------------
<S> <C> <C>
December 31, 1999
Investment securities available for sale
Due in one year or less $ 40,444 $ 40,242
Due after one year through five years 18,366 18,144
Due after five years through fifteen years 1,000 1,000
Federal reserve bank stock 441 441
--------------- ---------------
$ 60,251 $ 59,827
=============== ===============
December 31, 1998
Investment securities available for sale
Due in one year or less $ 26,783 $ 26,931
Due after one year through five years 53,894 54,244
Federal reserve bank stock 409 409
--------------- ---------------
$ 81,086 $ 81,584
=============== ===============
December 31, 1999
Investment securities held to maturity
Due after one year through five years $ 3,532 $ 3,457
--------------- ---------------
$ 3,532 $ 3,457
=============== ===============
December 31, 1998
Investment securities held to maturity
Due in one year or less $ 500 $ 504
Due after one year through five years 2,055 2,042
--------------- ---------------
$ 2,555 $ 2,546
=============== ===============
</TABLE>
At December 31, 1999 and 1998, the Company had $2,759 and $2,524,
respectively, in investment securities pledged to the Treasurer of the
State of Florida as collateral on public fund deposits and for other
purposes required or permitted by law.
Proceeds from sales of investment securities available for sale were
$10,517 and $-0- in 1999 and 1998 respectively. Gross realized gains on
sales of investment securities available for sale during 1999 and 1998
were $6 and $-0-, respectively. Gross realized losses on sales of
investment securities available for sale during 1999 and 1998 were $2 and
$-0-, respectively.
F-12
<PAGE> 15
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
(3) LOANS
Major categories of loans included in the loan portfolio as of December
31, 1999 and 1998 are:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1999 1998
--------------- ------------------
<S> <C> <C>
Real Estate
Residential $ 60,538 $ 56,270
Commercial 59,758 50,087
Construction 11,913 9,300
--------------- ------------------
Total Real Estate 132,209 115,657
Commercial 28,680 23,952
Installment 16,748 14,580
Overdrafts 128 185
--------------- ------------------
177,765 154,374
Less:
Deferred loan origination fees 302 249
Allowance for loan losses 2,302 2,335
--------------- ------------------
Total net loans $ 175,161 $ 151,790
=============== ==================
</TABLE>
The following is a summary of information regarding nonaccrual and
impaired loans at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1999 1998
------------ -------------
<S> <C> <C>
Nonaccrual loans $ 474 $ 633
============ =============
Recorded investment in impaired loans $ 1,466 $ 1,579
============ =============
Allowance for loan losses related to impaired loans $ 231 $ 262
============ =============
</TABLE>
<TABLE>
<CAPTION>
INTEREST
INCOME NOT INTEREST AVERAGE
RECOGNIZED INCOME RECORDED
ON RECOGNIZED INVESTMENT
NONACCRUAL ON IMPAIRED IN IMPAIRED
LOANS LOANS LOANS
---------------- --------------- ---------------
<S> <C> <C> <C>
For years ended December 31,
1999 $ 35 $ 52 $ 1,522
1998 $ 11 $ 40 $ 1,494
</TABLE>
F-13
<PAGE> 16
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
Certain principal stockholders, directors and officers and their related
interests were indebted to the Company as summarized below December 31,
1999 and 1998:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1999 1998
------------- ------------
<S> <C> <C>
Balance, beginning of year $ 6,990 $ 6,189
Additional new loans 4,027 4,081
Repayments on outstanding loans 3,864 3,280
------------- ------------
Balance, end of year $ 7,153 $ 6,990
============= ============
</TABLE>
All such loans were made in the ordinary course of business. As December
31, 1999 and 1998, principal stockholders, directors and officers of the
Company and their related interests had $2,607 and $1,902, respectively,
available in lines of credit.
Changes in the allowance for loan losses for the years ended December 31,
1999 and 1998 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1999 1998
-------------- ---------------
<S> <C> <C>
Balance, beginning of year $ 2,335 $ 2,189
Provision charged to operations 258 227
Loans charged-off (374) (121)
Recoveries of previous charge-offs 83 40
-------------- ---------------
Balance, end of year $ 2,302 $ 2,335
============== ===============
</TABLE>
(4) PREMISES AND EQUIPMENT
A summary of premises and equipment as of December 31, 1999 and 1998 is
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Land $ 4,186 $ 3,599
Buildings 7,598 6,758
Furniture, fixtures and equipment 4,652 3,893
Construction in progress 277 331
-------------- --------------
16,713 14,581
Less: Accumulated depreciation 3,638 2,870
-------------- --------------
$ 13,075 $ 11,711
============== ==============
</TABLE>
F-14
<PAGE> 17
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
(5) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating fair values of financial instruments as disclosed herein:
CASH AND CASH EQUIVALENTS - The carrying amount of cash and cash
equivalents represents fair value.
INVESTMENTS - The Company's investment securities available for sale
and held to maturity represent investments in U.S. Government
obligations, U.S. Government Agency securities, and state and political
subdivisions. The Company's equity investments at year end represents
stock investments in the Federal Reserve Bank. The stock is not
publicly traded and the carrying amount was used to estimate the fair
value. The fair value of the U.S. Government obligations and U.S.
Government Agency obligations and state and local political subdivision
portfolios was estimated based on quoted market prices.
LOANS - For variable rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying
values. Fair values for commercial real estate, commercial and consumer
loans other than variable rate loans are estimated using discounted
cash flow analysis, using interest rates currently being offered for
loans with similar terms to borrowers of similar credit quality. Fair
values of impaired loans are estimated using discounted cash flow
analysis or underlying collateral values, where applicable.
DEPOSITS - The fair values disclosed for demand deposits are, by
definition, equal to the amount payable on demand at December 31, 1999
(that is their carrying amounts). The carrying amounts of variable
rate, fixed term money market accounts and certificates of deposit
(CDs) approximate their fair value at the reporting date. Fair values
for fixed rate CDs are estimated using a discounted cash flow
calculation that applies interest rates currently being offered on
certificates to a schedule of aggregated expected monthly maturities on
time deposits.
REPURCHASE AGREEMENTS - The carrying amount of the repurchase
agreements approximate their fair value.
COMMITMENTS - Fair values for off-balance-sheet lending commitments are
based on fees currently charged to enter into similar agreements,
taking into account the remaining terms of the agreements and the
counterparties' credit standing.
F-15
<PAGE> 18
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
The following tables present the carrying amounts and estimated fair
values of the Company's financial instruments.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------
CARRYING
AMOUNT FAIR VALUE
-------------- ---------------
<S> <C> <C>
Financial assets:
Cash and due from banks and federal funds sold $ 24,045 $ 24,045
Investment securities available for sale 59,827 59,827
Investment securities held to maturity 3,532 3,457
Loans (carrying amount less allowance
for loan losses of $2,302) 175,161 175,811
Financial liabilities:
Deposits:
Without stated maturities $ 125,913 $ 125,913
With stated maturities 122,064 121,864
Securities sold under agreement to repurchase 4,078 4,078
Federal reserve advances 3,000 3,000
Commitments:
Letter of credit $ $ 763
Lines of credit 20,933
Loan commitments 28,207
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------------
<S> <C> <C>
Financial assets:
Cash and due from banks and federal funds sold $ 25,526 $ 25,526
Investment securities available for sale 81,584 81,584
Investment securities held to maturity 2,555 2,546
Loans (carrying amount less allowance
for loan losses of $2,335) 151,790 154,350
Financial liabilities:
Deposits:
Without stated maturities $ 114,180 $ 114,180
With stated maturities 135,451 137,073
Securities sold under agreement to repurchase 4,886 4,886
Commitments:
Letter of credit $ $ 792
Lines of credit 14,764
Loan commitments 17,126
</TABLE>
F-16
<PAGE> 19
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
(6) DEPOSITS
A detail of deposits for the years ended December 31, 1999 and 1998
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------
WEIGHT WEIGHT
AVERAGE AVERAGE
INTEREST INTEREST
1999 RATE 1998 RATE
------------------------- ---------------------------
<S> <C> <C> <C> <C>
Non-interest bearing deposits $ 42,581 0.0% $ 40,062 0.0%
Interest bearing deposits:
Interest bearing demand deposits 59,899 2.2% 55,385 2.1%
Savings deposits 23,433 2.0% 18,733 1.8%
Time deposits less than $100,000 101,547 4.9% 111,911 5.1%
Time deposits of $100,000 or greater 20,517 5.1% 23,540 5.3%
------------------------- ---------------------------
$ 247,977 3.2% $ 249,631 3.4%
========================= ===========================
</TABLE>
The following table presents, by various interest rate categories, the
amount of certificate accounts as of December 31, 1999, maturing during
the periods reflected below:
<TABLE>
<CAPTION>
INTEREST RATE 2000 2001 2002 2003 2004 TOTAL
------------------- ------------ ------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1.00% - 3.99% $ 4,692 $ 4 $ $ $ $ 4,696
4.00% - 4.99% 41,595 8,405 1,270 800 276 52,346
5.00% - 5.99% 39,728 10,092 2,390 1,479 543 54,232
6.00% - 6.99% 7,157 2,047 873 114 206 10,397
7.00% - 7.45% 320 73 393
- - -
------------ ------------ ------------ ------------ ----------- -----------
$ 93,492 $ 20,548 $ 4,606 $ 2,393 $ 1,025 $ 122,064
============ ============ ============ ============ =========== ===========
</TABLE>
Included in interest-bearing deposits are certificates of deposit which
have remaining maturities at December 31, 1999 and 1998 as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1999 1998
-------------- ---------------
<S> <C> <C>
One year $ 93,492 $ 96,584
Two years 20,549 23,069
Three years 4,606 7,246
Four years 2,392 4,403
Five years 1,025 4,149
-------------- ---------------
$ 122,064 $ 135,451
============== ===============
</TABLE>
F-17
<PAGE> 20
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
A summary of interest expense on deposits for the years ended December 31, 1999
and 1998 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1999 1998
------------- ---------------
<S> <C> <C>
Interest-bearing demand deposits $ 1,228 $ 1,031
Savings deposits 447 365
Time deposits less than $100,000 5,426 6,087
Time deposits of $100,000 or greater 988 1,105
------------- ---------------
$ 8,089 $ 8,588
============= ===============
</TABLE>
The Company had deposits from directors, officers and employees and their
related interests of approximately $6,828 and $3,718 as of December 31,
1999 and 1998, respectively.
(7) OTHER BORROWINGS
The Company enters into sales of securities under agreements to
repurchase. These fixed-coupon agreements are treated as financings, and
the obligations to repurchase securities sold are reflected as a
liability in the balance sheet. The dollar amount of securities
underlying the agreements remain in the asset accounts.
At December 31, 1999 and 1998, the Company had $4,078 and $4,866 in
repurchase agreements with weighted average interest rates of 4.40% and
4.38%, respectively. Repurchase agreements are secured by U.S. Treasury
securities and Government Agency securities with market values of $12,231
and $7,312 at December 31, 1999 and 1998, respectively.
The repurchase agreements were to repurchase the identical securities as
those, which were sold. Repurchase agreements averaged $5,301 and $4,267
for the years ended December 31, 1999 and 1998, respectively. The maximum
amount outstanding at any month-end for the corresponding periods was
$8,130 and $7,417, respectively. Total interest expense paid on
repurchase agreements for the years ending December 31, 1999 and 1998 was
$223 and $196, respectively.
In 1998, the Company had an unsecured line of credit with another
financial institution of $1,000, with an interest rate of 5.59%. As of
December 31, 1999 and 1998, the outstanding balance was zero.
In 1999, the Company had a secured line of credit with the Federal
Reserve Bank of $17,750 with an interest rate of 7%. The line of credit
was secured by U.S. Treasury securities and Government Agencies with
market values of $17,888 at December 31, 1999. As of December 31, 1999,
the outstanding balance was $3,000. Total interest expense paid for
Federal Reserve Bank advances for the year ending December 31, 1999 was
$6.
F-18
<PAGE> 21
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
(8) INCOME TAXES
The provision for income taxes for the years ended December 31, 1999 and
1998 consists of the following:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------------- -------------- --------------
<S> <C> <C> <C>
December 31, 1999
Federal $ 991 $ 18 $ 1,009
State 108 3 111
------------- -------------- --------------
$ 1,099 $ 21 $ 1,120
============= ============== ==============
December 31, 1998
Federal $ 1,205 $ (137) $ 1,068
State 165 (31) 134
------------- -------------- --------------
$ 1,370 $ (168) $ 1,202
============= ============== ==============
</TABLE>
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities for the
years ended December 31, 1999 and 1998 are presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1999 1998
------------- ----------
<S> <C> <C>
Deferred tax assets:
Unrealized loss on investment securities
available for sale $ 160 $ 0
Allowance for loan losses 763 778
Deferred loan fees 52 45
Non accrual interest 41 37
------------- ----------
Total deferred tax asset 1,016 860
------------- ----------
Deferred tax liabilities:
Premises and equipment, due to differences in
depreciation methods and useful lives (177) (157)
Unrealized gain on investment securities
available for sale 0 (188)
Accetion of discount on investments (1) (3)
------------- ----------
Total deferred tax liability (178) (348)
------------- ----------
Net deferred tax asset $ 838 $ 512
============= ==========
</TABLE>
The Bank has recorded a deferred tax asset of $838 and $512 as December
31, 1999 and 1998, respectively. No valuation allowance as defined by
SFAS 109 is required for the years ended December 31, 1999 and 1998.
Management believes that a valuation allowance is not necessary because
it is more likely than not the deferred tax asset is realizable.
F-19
<PAGE> 22
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
A reconciliation between the actual tax expense and the "expected" tax
expense (computed by applying the U.S. federal corporate rate of 34% to
earnings before income taxes) is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1999 1998
------------- -------------
<S> <C> <C>
"Expected" tax expense $ 1,042 $ 1,186
Tax exempt interest (3) (3)
State income taxes, net of federal income tax
Benefits 73 87
Valuation allowance 0 (66)
Other, net 8 (2)
------------- -------------
$ 1,120 $ 1,202
============= =============
</TABLE>
(9) RENT
The following is a schedule of future minimum annual rentals under the
noncancellable operating leases of the Company's facilities as of
December 31, 1999:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
----------------------------------
<S> <C>
2000 $ 176
2001 176
2002 176
2003 176
2004 148
Thereafter 679
------------
$ 1,531
============
</TABLE>
Rent expense for the years ended December 31, 1999 and 1998 was $172 and
$143, respectively, and is included in occupancy expense in the
accompanying consolidated statements of income. Operating lease income
from subleases of the Bank's premises for 1999 and 1998 amounted to $8
and $6, respectively.
(10) REGULATORY CAPITAL
The Company is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could
have a direct material effect on the Company's financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Company must meet specific capital guidelines that
involve quantitative measures of the Company's assets, liabilities and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Company's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings and other factors.
F-20
<PAGE> 23
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
Quantitative measures established by regulation to ensure capital
adequacy require the Company to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier I capital (as defined in the
regulations) to risk-weighted assets. Management believes, as of December
31, 1999, that the Company meets all capital adequacy requirements to
which it is subject.
As of December 31, 1999, the most recent notification from the Office of
Comptroller of the Currency categorized the Company as well capitalized
under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, the Company must maintain total
risk-based, Tier I risk-based, Tier I leverage ratios as set forth in the
table. There are no conditions or events since that notification that
management believes have changed the institution's category.
A summary of actual, required, and capital levels necessary to be
considered well-capitalized for Centerstate Banks of Florida, Inc.
consolidated and its banking subsidiaries, First National Bank of Osceola
County, Community National Bank of Pasco County and First National Bank
of Polk County as of December 31, 1999 and 1998 are presented in the
table below.
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISION
----------------------- ----------------------- ----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
----------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1999
Total capital (to risk weighted assets) $ 25,489 14.8% $ 13,802 > 8% $ 17,253 > 10%
Tier 1 capital (to risk weighted assets) 23,397 13.6% 6,901 > 4% 10,352 > 6%
Tier 1 capital (to average assets) 23,397 8.4% 11,148 > 4% 13,935 > 5%
December 31, 1998
Total capital (to risk weighted assets) $ 22,300 14.7% $ 12,104 > 8% $ 15,130 > 10%
Tier 1 capital (to risk weighted assets) 20,377 13.5% 6,052 > 4% 9,078 > 6%
Tier 1 capital (to average assets) 20,377 7.6% 10,725 > 4% 13,406 > 5%
</TABLE>
(11) DIVIDENDS
The Company declared cash dividends of $390 and $294 during the years
ended December 31, 1999 and 1998, respectively. Banking regulations limit
the amount of dividends that may be paid by the Company without prior
approval of the Bank's regulatory agency.
(12) STOCK OPTION PLANS
The Company currently has incentive stock plans for the directors and
employees.
In September 1989, the Company authorized 195,000 common shares for
future options for all directors of the Company's wholly owned
subsidiary, First National Bank of Osceola County, under an incentive
stock option and non-statutory stock option plan. The number of options
granted to each director shall not exceed 15,000. Options were granted at
$5.00 per share (fair market value of the stock). Each option provides
that the underlying option expires no later than September 18, 1999 and
vesting occurs at 20% on September 18th of each year. As of
F-21
<PAGE> 24
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
December 31, 1999 and 1998, there were -0- and 46,582 options vested and
outstanding, respectively. During 1999 and 1998, 800 and -0-
respectively, were forfeited due to terminations. No additional options
were granted and 45,782 were exercised during the year ended December 31,
1999.
Also in 1989, the Company granted options for a total of 90,000 shares
under a stock options plan to key employees of the Company's wholly owned
subsidiary, First National Bank of Osceola County. Options were granted
at a minimum price of $5.00 per share (fair market value of the stock).
Each option provides an exercise period as decided by the Board with
expiration at ten years from the date of grant. As of December 31, 1999
and 1998, there were 7,500 and 78,862 options vested and 11,000 and
85,362 outstanding, respectively. During 1999 and 1998, 812 and 3,788
were forfeited due to terminations, respectively. No additional options
were granted and 58,782 were exercised during the year ended December 31,
1999.
In October 1989, the Company authorized 126,250 common shares for future
options for all directors of the Company's wholly owned subsidiary,
Community National Bank of Pasco County, under an incentive stock option
and non-statutory stock option plan. The number of options granted to
each director shall not exceed 15,000. Options were granted at $5.00 per
share (fair market value of the stock). Each option provides that the
underlying option expires no later than December 31, 1999 and vesting
occurs at 25% for each year of service from the effective date of the
grant. As of December 31, 1999 and 1998, there were -0- and 12,120
options vested and outstanding, respectively. During 1999 and 1998,
12,120 and -0- respectively, were forfeited due to terminations. No
additional options were granted and 2,020 were exercised during the year
ended December 31, 1999.
Also in 1989, the Company granted options for a total of 90,900 shares
under a stock options plan to key employees of the Company's wholly owned
subsidiary, Community National Bank of Pasco County. Options were granted
at a minimum price of $5.00 per share (fair market value of the stock).
Each option provides a vesting period of 25% at the date of grant and 25%
for each year of service thereafter. The options expire in ten years from
the date of the grant. As of December 31, 1999 and 1998, there were
10,605 and 59,590 options vested and outstanding, respectively. During
1999 and 1998, 253 and -0- were forfeited due to terminations,
respectively. No additional options were granted and 49,743 were
exercised during the year ended December 31, 1999.
In March 1991, the Company authorized 157,950 common shares for future
options for all directors of the Company's wholly owned subsidiary, First
National Bank of Polk County, under an incentive stock option and
non-statutory stock option plan. The number of options granted to each
director shall not exceed 12,150. Options were granted at $5.00 per share
(fair market value of the stock). Each option provides that the
underlying option expires no later than December 31, 2002 and vesting
occurs at the time of grant. As of December 31, 1999 and 1998, there were
-0- and 55,688 options vested and outstanding, respectively. No
additional options were granted and 55,688 were exercised during the year
ended December 31, 1999.
Also in 1991, the Company granted options for a total of 65,205 shares
under a stock options plan to key employees of the Company's wholly owned
subsidiary, First National Bank of Polk County. Options were granted at a
minimum price of $5.00 per share (fair market value of the stock). Each
option provides a vesting period of 25% at the date of grant and 25% for
each year of service thereafter. The options expire in ten years from the
date of the grant. As of December 31, 1999 and 1998, there were 42,849
and 60,872 options outstanding with 41,148 and 56,660 options vested,
respectively. During 1999 and 1998, 202 and 1,985 were forfeited due to
terminations, respectively. No additional options were granted and 17,820
were exercised during the year ended December 31, 1999.
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its plans. Accordingly, no compensation cost has been
recognized for its stock option plans. Had compensation cost for the
Company's
F-22
<PAGE> 25
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
stock-based compensation plan been determined consistent with FASB
Statement No. 123, the Company's net income would have been reduced to
the pro forma amounts indicated below (amounts are in thousands of
dollars except for per share data):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1999 1998
------------- ------------
<S> <C> <C>
Net Income:
As reported $ 1,946 $ 2,287
Pro forma 1,929 2,272
Diluted earnings per share:
As reported 0.70 0.85
Pro forma 0.70 0.85
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the minimum value method with the following weighted-average
assumptions used for grants in 1998: dividend yield of 5.0%, .8% and 1%;
expected volatility of 0%; risk-free interest rates of 4.73% and expected
lives of 7, 8 and 10 years for the plan options.
A summary of the status of the Company's stock option plans for years
ended December 31, 1999 and 1998, and changes during the years ended on
those dates is presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1999 1998
-------------- ----------------
<S> <C> <C>
Outstanding at beginning of year 323,243 446,941
Granted 0 10,240
Exercised (245,402) (128,165)
Forfeited (13,387) (5,773)
-------------- ----------------
Outstanding at end of year 64,454 323,243
-------------- ----------------
Options exercisable at end of year 59,253 311,771
============== ================
Weighted-average fair value of option
granted during the year per share $ - $ 3.74
============== ================
</TABLE>
The following table summarizes information about fixed stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-------------------------------------------------------------------------------------------------------------
WEIGHTED
NUMBER WEIGHTED WEIGHTED NUMBER AVERAGE EXERCISE
OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT PRICE AT
RANGE OF DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, DECEMBER 31,
EXERCISE PRICES 1999 LIFE PRICE 1999 1999
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$4.95 - $12.50 64,454 4 years $7.10 59,253 $6.75
</TABLE>
F-23
<PAGE> 26
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
(13) EMPLOYEE BENEFIT PLAN
The Company maintains a 401(k) compensation and incentive plan for the
benefit of its employees. Employees are eligible to participate in the
plan after completing one year of continuous employment. The Company
contributed an amount equal to a certain percentage of the employees'
contributions based on the discretion of the Board of Directors. The
Company's total contributions are not to exceed six percent of the
employees' annual compensation. For the years ended December 31, 1999 and
1998, the Company's contributions to the plan were $185 and $134,
respectively.
(14) CREDIT COMMITMENTS
The Company has outstanding at any time a significant number of
commitments to extend credit. These arrangements are subject to strict
credit control assessments and each customer's credit worthiness is
evaluated on a case-by-case basis. A summary of commitments to extend
credit and standby letters of credit written for the years ended December
31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1999 1998
------------- --------------
<S> <C> <C>
Standby letters of credit $ 763 $ 792
Available lines of credit 20,933 14,764
Unfunded firm loan commitments - variable rate 28,207 17,126
</TABLE>
Because many commitments expire without being funded in whole or part,
the contract amounts are not estimates of future cash flows.
The majority of loan commitments have terms up to one year and have
variable interest rates.
Credit risk represents the accounting loss that would be recognized at
the reporting date if counterparties failed completely to perform as
contracted. The credit risk amounts are equal to the contractual amounts,
assuming that the amounts are fully advanced and that the collateral or
other security is of no value.
The Company's policy is to require customers to provide collateral prior
to the disbursement of approved loans. The amount of collateral obtained,
if it is deemed necessary by the Company upon extension of credit, is
based on management's credit evaluation of the counterparty. Collateral
held varies but may include accounts receivable, inventory, real estate
and income providing commercial properties.
Standby letters of credit are contractual commitments issued by the
Company to guarantee the performance of a customer to a third party. The
credit risk involved in issuing letters of credit is essentially the same
as that involved in extending loan facilities to customers.
(15) CONCENTRATIONS OF CREDIT RISK
Most of the Company's business activity is with customers located within
Osceola, Pasco, and Polk Counties and portions of adjacent counties. The
majority of commercial and mortgage loans are granted to customers
residing in these areas. Generally, commercial loans are secured by real
estate, and mortgage loans are secured by either first or second
mortgages on residential or commercial property. As of December 31, 1999,
substantially all of the
F-24
<PAGE> 27
CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES
Notes to the consolidated financial statements
(Amounts are in thousands of dollars, except per share data)
December 31, 1999 and 1998
Company's loan portfolio was secured. Although the Company has a
diversified loan portfolio, a substantial portion of its debtors' ability
to honor their contracts is dependent upon the economy of Osceola, Pasco
and Polk Counties and portions of adjacent counties. The Company does not
have significant exposure to any individual customer or counterparty.
(16) BASIC AND DILUTED EARNINGS PER SHARE
Basic and diluted earnings per share are calculated as follows:
<TABLE>
<CAPTION>
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
-------------- ----------------- ------------
<S> <C> <C> <C>
For the year ended 1999:
Basic earnings per share:
Net Income $ 1,946 2,681,079 $ 0.73
============
Effect of dilutive securities:
Stock options 94,105
-------------- -----------------
Diluted earnings per share:
Income and assumed conversions $ 1,946 2,775,184 $ 0.70
============== ================= ============
For the year ended 1998:
Basic earnings per share:
Net Income $ 2,287 2,527,256 $ 0.90
============
Effect of dilutive securities:
Stock options 162,348
-------------- -----------------
Diluted earnings per share:
Income and assumed conversions $ 2,287 2,689,604 $ 0.85
============== ================= ============
</TABLE>
(17) MERGER
The Company's three wholly owned subsidiaries merged as of the close of
business on June 30, 2000. In the merger, the shareholders of First
National Bank of Osceola County received 2.0 shares of Company common
stock for each bank common share owned. The shareholders of Community
National Bank of Pasco County received 2.02 shares of Company common
stock for each bank common share owned, and the shareholders of First
National Bank of Polk County received 1.62 shares of Company common
stock for each bank common share owned. The three banks operate as
separate subsidiaries of the Company.
F-25
