UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to __________________
Commission file no. 2-77167
CAPITAL BANCORP
- ----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 59-2160717
- -----------------------------------------------------------------
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1221 Brickell Avenue, Miami, Florida 33131
- ------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(305) 536-1500
- -----------------------------------------------------------------
(Registrant's telephone number, including area code)
- -----------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
X Yes ______ No
As of May 5, 1995, there were 4,774,148 shares of the registrant's
common stock outstanding.
==================================================================
Page 1 of 20 Pages
Exhibit Index Page 17
<PAGE>
<TABLE>
ITEM 1. PART I. FINANCIAL INFORMATION
CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(In Thousands of Dollars)
<CAPTION>
March 31, December 31,
1995 1994
-------- ------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 91,350 $ 91,712
Federal funds sold and securities
purchased under agreement to resell 18,000 15,000
---------- ----------
Cash and cash equivalents 109,350 106,712
---------- ----------
Securities held to maturity (Market value 3/31/95 -
$82,774, 12/31/94 - $ 89,122) 83,140 91,031
Securities available for sale
(at market value) 127,014 130,018
---------- ----------
Total securities 210,154 221,049
---------- ----------
Loans 658,561 638,144
Less allowance for loan losses (10,356) (9,210)
Less unearned income (2,649) (2,771)
---------- ----------
Loans, net 645,556 626,163
---------- ----------
Accounts receivable -
factoring subsidiary, net 301,413 262,423
Premises and equipment, net 33,825 32,358
Due from customers on acceptances 24,233 30,575
Other real estate 13,216 14,710
Accrued interest and other assets 27,513 29,679
---------- ----------
Total assets $1,365,260 $1,323,669
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing deposits $ 288,009 $ 296,599
Savings and money market deposits 299,033 315,323
Time deposits 309,252 264,871
---------- ----------
Total deposits 896,294 876,793
---------- ----------
Funds purchased and securities sold
under agreements to repurchase 103,107 87,236
Bank acceptances outstanding 24,233 30,575
Due to clients -
factoring subsidiary 98,895 94,513
Long-term debt 126,980 126,980
Other liabilities 19,660 16,209
---------- ----------
Total liabilities 1,269,169 1,232,306
---------- ----------
Stockholders' equity:
Common stock, $1 par value
Authorized - 20,000,000 shares
Issued - 4,852,006 shares - 3/31/95,
4,821,475 shares - 12/31/94 4,852 4,821
Capital surplus 8,617 8,216
Retained earnings 86,537 83,445
Treasury stock, 80,000 shares (1,440) (1,440)
Unrealized loss on securities
available for sale (2,475) (3,679)
---------- ----------
Total stockholders' equity 96,091 91,363
---------- ----------
Total liabilities and
stockholders' equity $1,365,260 $1,323,669
========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
Page 2
- ------------------------------------------------------------------
<PAGE>
<TABLE>
CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars Except Per Share Data)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1995 1994
---- ----
<S> <C> <C>
INTEREST INCOME:
Loans $15,373 $11,732
Advances-factoring clients 5,911 3,345
Taxable securities 3,196 2,390
Tax-exempt securities 63 86
Federal funds sold and securities purchased
under agreements to resell 246 728
------- -------
Total interest income 24,789 18,281
------- -------
INTEREST EXPENSE:
Savings and money market deposits 1,733 1,728
Time deposits 3,345 2,383
Short-term borrowings 1,285 546
Long-term debt 2,430 56
------- -------
Total interest expense 8,793 4,713
------- -------
Net interest income 15,996 13,568
Provision for loan losses 375 1,275
Provision for doubtful accounts-
factoring subsidiary 450 735
------- -------
Net interest income after provisions 15,171 11,558
------- -------
OTHER INCOME:
Factoring revenues 5,195 4,565
Service charges on deposits 3,361 2,509
Fees on letters of credit 911 977
Securities gains -- 1,057
Other operating income 1,362 1,143
------- -------
Total other income 10,829 10,251
------- -------
OTHER EXPENSES:
Salaries and employee benefits 9,290 8,459
Occupancy expense, net 1,819 1,864
Other operating expenses, net 8,985 6,555
------- -------
Total other expenses 20,094 16,878
------- -------
Income before income taxes 5,906 4,931
Provision for income taxes 2,217 1,718
------- -------
Net income $ 3,689 $ 3,213
======= =======
Earnings per common and common
equivalent share $ .74 $ .67
======= =======
Cash dividends declared per share of
common stock $ .125 $ .125
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
Page 3
- ------------------------------------------------------------------
<PAGE>
<TABLE>
CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,689 $ 3,213
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 375 1,275
Provision for doubtful accounts-
factoring subsidiary 450 735
Depreciation and amortization 944 1,109
Net losses on other real estate 254 51
Securities gains -- (1,057)
Gain on disposal of premises and equipment (32) (21)
(Increase) decrease in accrued interest
and other assets 1,455 (2,759)
Increase (decrease) in other liabilities 4,043 (493)
-------- --------
Net cash provided by
operating activities 11,178 2,053
-------- --------
Cash flows from investing activities:
Proceeds from sales of securities -- 1,057
Proceeds from maturities of securities 12,923 24,328
Purchase of securities -- (26,957)
Net increase in loans (20,099) (11,844)
Purchase of premises and equipment (2,567) (2,233)
Proceeds from sale of other real estate 1,835 2,657
Improvements to other real estate (264) (205)
Proceeds from sale of premises
and equipment 75 21
Increase in accounts receivable-factoring
subsidiary (net of due to clients) (35,058) (9,557)
-------- --------
Net cash used in
investing activities (43,155) (22,733)
-------- --------
Cash flows from financing activities:
Net increase in deposits 19,501 2,074
Net increase in Federal funds purchased and
securities sold under
agreements to repurchase 15,871 26,914
Repayment of long-term debt -- (312)
Cash dividends (1,189) (576)
Proceeds from exercise of stock options 432 12
-------- --------
Net cash provided by
financing activities 34,615 28,112
-------- --------
Net increase in cash and cash equivalents 2,638 7,432
Cash and cash equivalents at
beginning of period 106,712 156,789
-------- --------
Cash and cash equivalents at
end of period $109,350 $164,221
======== ========
</TABLE>
(Continued)
Page 4
- ------------------------------------------------------------------
<PAGE>
<TABLE>
CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
(In Thousands of Dollars)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1995 1994
---- ----
<S> <C> <C>
Supplemental Disclosures
Cash paid during the period for:
Interest $ 8,500 $ 4,682
======== =========
Income taxes $ 2,036 $ 4,370
======== =========
Non-cash activities:
(Increase) decrease in the unrealized
loss on securities available for sale,
net of applicable taxes (benefits)
in 1995 - $711 and in
1994 - ($1,673) $ 1,204 $ (2,832)
======== =========
Loans transferred to other
asset categories $ 331 $ --
======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5
- ------------------------------------------------------------------
<PAGE>
CAPITAL BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1995
NOTE 1: Basis of Presentation
- ------------------------------
The Consolidated Statements of Condition for Capital Bancorp and
Subsidiaries (the "Company") as of March 31, 1995 and December 31,
1994, the Consolidated Statements of Income and the Consolidated
Statements of Cash Flows for the three-month periods ended March
31, 1995 and 1994 included in Form 10-Q have been prepared by the
Company pursuant to the rules and regulations of the Securities and
Exchange Commission. The statements are unaudited except for the
Consolidated Statement of Condition as of December 31, 1994.
The accounting policies followed for interim financial reporting
are consistent with the accounting policies set forth in Note 1 of
the Company's latest Annual Report to Stockholders, which is
incorporated by reference by the Company's Annual Report on Form
10-K filed with the Securities and Exchange Commission. Effective
January 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for
Impairment of a Loan," as amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and
Disclosures." Adoption of this Statement did not have a
significant impact on the Company's consolidated financial position
or results of operations.
The consolidated financial statements include the accounts of
Capital Bancorp (the "Parent Company"), Capital Bank (the "Bank")
and its subsidiaries and Capital Factors Holding, Inc., and its
subsidiaries ("Capital Factors") and Capital Factors Financing
Trust, a special purpose trust. All significant inter-company
transactions and balances have been eliminated in consolidation.
In the opinion of management, the interim consolidated financial
statements reflect all adjustments (which include only normal
recurring adjustments) necessary for a fair presentation of the
information contained therein. The interim results of operations
are not necessarily indicative of the results which may be expected
for the full year.
NOTE 2: Risk Elements - Loans and Advances
- ------------------------------------------
Foreign Outstandings
- --------------------
Foreign outstandings included in the loan portfolio consisted of
the following (in thousands of dollars):
March 31, 1995 December 31, 1994
-------------- -----------------
Performing trade credits $122,829 $111,150
Other performing loans 2,368 3,832
Nonaccrual loans 161 334
-------- --------
$125,358 $115,316
======== ========
Performing trade credits consist primarily of refinanced letters of
credit, acceptances purchased and pre-export financings principally
to banks that are located in foreign countries. Cash collateral
maintained at Capital Bank as offsets to outstanding foreign loans
totaled $17.1 million at March 31, 1995 compared to $14.6 million
at year end 1994. In addition to the outstanding foreign loans, at
March 31, 1995 and December 31, 1994 there were $23.0 million and
$28.1 million, respectively, due primarily from foreign customers
on acceptances, offset by $2.1 million and $2.2 million of cash
collateral maintained at Capital Bank.
The following is a list of cross border outstandings at March 31,
1995 and December 31, 1994 for those countries for which the total
amount of outstandings (loans, acceptances, acceptances purchased,
pre-export financings and other interest bearing assets), net of
(a) any written guarantees of principal or interest by domestic or
other non-local third parties (other than the foreign government)
and (b) the value of any tangible liquid collateral that may be
netted against the outstandings, exceeds 1% of consolidated total
assets at the respective dates (in thousands of dollars):
March 31, December 31,
1995 1994
-------- -----------
Argentina $28,342 Brazil $18,594
Brazil 18,618 Argentina 15,982
Mexico 13,999
------- -------
$46,960 $48,575
======= =======
Page 6
- ------------------------------------------------------------------
<PAGE>
At March 31, 1995, Capital Bank had cross border outstandings to
Mexico and Ecuador, aggregating $12.2 million and $12.1 million,
respectively, which exceeded .75%, but were less than 1% of
consolidated total assets. At December 31, 1994, Capital Bank had
cross border outstandings to Peru, Ecuador and Bolivia, aggregating
$13.2 million, $12.8 million and $10.9 million, respectively, which
exceeded .75%, but were less than 1% of consolidated total assets.
At March 31, 1995 and December 31, 1994 Capital Bank held other
interest earning assets of $6.4 million and $6.6 million,
respectively, issued by debtors located in foreign countries.
Non-accrual and Past Due Loans and Advances
- ------------------------------------------
Management evaluates past due and non-accrual loans and advances
regularly in connection with estimating the provisions and the
allowances for loan losses and doubtful accounts, taking into
consideration the value of collateral and the prospects for
repayment of principal and collectibility of interest. Loans and
advances are classified on a non-naccrual basis when management
deems that collectibility of interest is doubtful, which is
generally after 90 days of past due status, unless the loan or
advance is well secured and in the process of collection. Charge-
offs to the allowances are made when a loss is deemed probable.
At March 31, 1995 there were $979,000 of loans that were over 90
days past due and still accruing interest, as compared to $1.9
million at December 31, 1994. Included in loans 90 days past due
and still accruing interest were real estate, consumer and
commercial loans of $825,000, $121,000, and $33,000, respectively,
at March 31, 1995 as compared to foreign, commercial and consumer
loans of $1.5 million, $279,000 and $131,000, respectively, at
December 31, 1994. Loans which are over 90 days past due and still
accruing interest are in the process of collection and deemed to be
well secured.
Following is a summary of non-accrual loans and advances (in
thousands):
March 31, December 31,
1995 1994
-------- ------------
Commercial $ 2,789 $ 3,416
Foreign 161 334
Real Estate 1,989 1,801
Consumer 1,327 1,547
------- -------
$ 6,266 $ 7,098
======= =======
The decrease in non-accrual loans and advances is due to charge-
offs and collections partially offset by the transfer of new loans
from accrual status to non-accrual status. Management has
instituted collection procedures in connection with non-accrual
loans and advances and has established allowances for loan losses
and doubtful accounts deemed adequate to absorb potential losses,
based on information currently available. Many of the factors
considered in management's determination as to the adequacy of the
allowances involve a significant degree of estimation and are
subject to rapid change that may be unforeseen by management.
Changes to these factors could result in future adjustments to the
allowance for loan losses.
Page 7
- ------------------------------------------------------------------
<PAGE>
ITEM 2.
PART I
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAPITAL BANCORP AND SUBSIDIARIES
Introduction
- ------------
Capital Bancorp (the "Parent Company") is a bank holding company.
Capital Bancorp and Subsidiaries (the "Company") had total
consolidated assets of $1.4 billion at March 31, 1995. Capital
Bank (the "Bank"), a Florida-chartered commercial bank, is wholly-
owned by Capital Bancorp.
The following discussion and analysis presents the significant
changes in the financial condition and results of operations for
the periods indicated. The discussion should be read in
conjunction with the consolidated financial statements and notes
included in Part I, Item 1 of this report.
Financial Condition - March 31, 1995 vs. December 31, 1994
- ----------------------------------------------------------
Total assets increased $41.6 million during the first three months
of 1995, composed of an increase of $48.2 million in interest
earning assets offset by a decrease of $6.6 million in non-interest
earning assets. The increase in assets was composed of increases
of $39.0 million in net accounts receivable - factoring subsidiary,
$19.4 million in net loans, $2.6 million in cash and cash
equivalents and $1.5 million in premises and equipment offset by
decreases of $10.9 million in total securities, $6.3 million in due
from customers on acceptances, $2.2 million in accrued interest and
other assets and $1.5 million in other real estate.
The increase in accounts receivable - factoring subsidiary was due
to an overall increase in factoring volume and upward seasonal
trends. Capital Factors Holding, Inc. and subsidiaries ("Capital
Factors"), a wholly-owned subsidiary of Capital Bank, operates
factoring offices in New York, Los Angeles and Ft. Lauderdale.
Capital Factors purchases receivables from its clients and records
a liability payable to the clients. From time to time, the
liability is reduced by advance payment by Capital Factors to the
clients, prior to the contractual payment date for the receivables
purchased. Such advance payments are interest earning balances of
Capital Factors. Interest earning advances amounted to $204.5
million at March 31, 1995, compared to $169.7 million at December
31, 1994. Non-accrual advances amounted to $293,000 and $739,000
at March 31, 1995 and December 31, 1994, respectively.
The increase in net loans primarily consisted of an increase in
loans of $20.4 million offset by an increase of $1.1 million in the
allowance for loan losses. The increase in loans was comprised of
increases of $13.3 million in international - commercial loans,
$4.8 million in mortgage loans, $3.7 million in overdrafts and $1.6
million in domestic - commercial loans offset by decreases of $2.2
in acceptances purchased and $899,000 in installment loans. The
growth in international - commercial loans resulted from increased
marketing efforts of foreign trade finance services.
The allowance for loan losses totaled $10.4 million and $9.2
million at March 31, 1995 and December 31, 1994, respectively,
representing, 1.6% and 1.4% of outstanding loans at these dates,
respectively. The increase in the allowance for loan losses is
primarily due to the $1.1 million recovery of certain non-trade
foreign loans which were charged off during 1994. Non-accrual
loans and loans 90 days or more past due amounted to $7.0 million
and $8.3 million, at March 31, 1995 and December 31, 1994,
respectively. The adjusted ratio of annualized net loans charged
off to average loans outstanding was .20% and 1.77% for the three
months ended March 31, 1995 and 1994, respectively. The ratios of
annualized net loans charged off to average loans outstanding
mentioned above exclude the $1.1 million recovery of certain non-
trade foreign loans during the first quarter of 1995 and $6.3
million in charge-offs of non-trade foreign loans in the first
quarter of 1994. Based on information currently available,
management believes the allowance for loan losses to be adequate to
absorb losses, if any, which might occur on these loans or are
otherwise inherent in the loan portfolio. In determining the level
of the allowance, management considers a variety of factors
including the financial condition of borrowers, the availability
and nature of collateral, current economic conditions and past loan
loss experience, among other things. Such factors are subject to
estimations and assumptions regarding future events. At this time,
management is unable to predict the amount of future adjustments to
the allowance for loan losses if its estimates and assumptions are
determined to be incorrect.
Page 8
- ------------------------------------------------------------------
<PAGE>
The increase in cash and cash equivalents was composed of an
increase of $3.0 million in federal funds sold and securities
purchased under agreements to resell offset by a decrease of
$362,000 in cash and due from banks.
The increase in premises and equipment was primarily due to
additional purchases of computer equipment related to a pending
applications systems conversion.
The decline in total securities consisted of maturities and
paydowns during the first quarter totaling $12.9 million offset by
a reduction in the unrealized loss on securities available for
sale.
The decline in due from customers on acceptances reflects the
increase in competition in the foreign trade financing market and
the general improvement in the Latin American economy which has
reduced the need for such financing.
Other real estate amounted to $13.2 million and $14.7 million at
March 31, 1995 and December 31, 1994, respectively. The decline in
other real estate was due primarily to the sale of one property in
March totaling $1.6 million.
Total liabilities increased $36.9 million, composed of increases of
$19.5 million in total deposits, $15.9 million in funds purchased,
$4.4 million in due to factoring clients and $3.5 million in other
liabilities offset by a decrease of $6.3 million in bank
acceptances outstanding.
The increase in total deposits included an increase of $44.4
million in time deposits offset by decreases of $16.3 million in
savings and money market deposits and $8.6 million in non-interest
bearing deposits. The increase in time deposits is primarily due
to the acquisition of $20.0 million in brokered funds and $10.3
million in public funds. Management believes the decrease in
savings and money market deposits reflects a continuation of an
industry-wide trend whereby customers have chosen alternative
investment and savings products over low yielding deposit products.
At March 31, 1995 and December 31, 1994 deposit liabilities
represented 71% of total liabilities, which is lower than
historical levels. Management believes that non-deposit funding
sources will continue to represent a greater percentage of total
liabilities when compared to historical levels for the foreseeable
future.
Capital Resources
- -----------------
Stockholders' equity increased $4,728,000 during the first three
months of 1995 as a result of net income of $3,689,000 and proceeds
from the exercise of stock options of $432,000 along with a
decrease in the unrealized loss on securities available for sale of
$1,203,000 offset by dividends declared of $597,000.
The capital ratios of the Company and Capital Bank were as follows:
Company Capital Bank
3/31/95 12/31/94 3/31/95 12/31/94
------- -------- ------- --------
Leverage 7.64% 7.56% 7.57% 7.56%
Tier One Risk-Based 9.32% 9.68% 9.22% 9.66%
Total Risk-Based 10.51% 10.82% 10.41% 10.80%
Page 9
- ------------------------------------------------------------------
<PAGE>
In the opinion of management, these ratios are sufficient to
protect depositors and facilitate future growth. Management of the
Company continuously reviews capital adequacy. The various
alternatives for generating equity from external resources are
constantly under review to ascertain the most effective approach
for the Company. The Company has traditionally provided most of
its capital through retained earnings. For the first three months
of 1995 and 1994, respectively, the Company's annualized internal
capital generation rate was 13.73% and 12.63%, respectively. The
Company currently pays dividends of 12.5 cents per share per
quarter. This dividend policy is dependent upon the Bank's ability
to continue the payment of dividends to the Parent Company.
Unforeseen changes in the financial condition of the Company or
Capital Bank, or actions by regulatory authorities, could result in
changes in the dividend policy.
Liquidity and Asset/Liability Management
- ----------------------------------------
Liquidity represents the Company's ability to meet customers'
borrowing needs, take advantage of investment opportunities, fund
deposit withdrawals and maintain reserve requirements. On the
asset side, the primary sources of liquidity are cash and due from
banks, interest bearing deposits with banks, Federal funds sold and
other short-term investments, investment securities and scheduled
repayments on outstanding loans and receivables. On the liability
side, the principal source of liquidity is growth in deposits,
purchased funds and other borrowings.
The liquidity position is evaluated daily by management to maintain
the level of liquidity conducive to efficient operations.
Attention is directed primarily to assets and liabilities that
mature or can be repriced within a period of 30 to 365 days. The
Company matches the maturities of a significant portion of its
assets and liabilities to minimize variability in net interest
income within a 12 to 18 month period. This practice serves to
minimize both liquidity and interest rate risks. Prudent risks are
taken, however, by leaving certain assets and liabilities unmatched
in an effort to benefit from the interest rate sensitivity created.
Deposits represent the primary funding source, however, other
sources, including purchased funds and borrowings by the Company's
factoring subsidiary, increased significantly during the second
half of 1994.
Maintenance of satisfactory funding levels allows the Company to
position itself so that the risks of interest rate fluctuations are
decreased. This, together with a high percentage of variable rate
assets, provides a more consistent margin between interest earning
assets and interest bearing liabilities. For the first quarter of
1995, the average rate paid on interest bearing deposit liabilities
was 3.47%, while the average rate paid for other interest bearing
liabilities was 6.76%. During the remainder of 1995, management
expects yields on earning assets as well as rates paid on
liabilities to rise as a result of overall market rate increases.
Furthermore, to the extent that non-deposit liabilities grow faster
than deposits, the Company's overall cost of funds will likely
rise. At this time, management does not believe these factors will
have a significant adverse impact on net interest income.
Following is a summarized analysis of maturity and repricing
characteristics of assets and liabilities at March 31, 1995. For
purposes of this analysis, regular passbook savings, NOW and money
market accounts and demand deposits are included as repricing based
on an assessment of the underlying liabilities' sensitivity to
changes in interest rates.
Maturity or Repricing (In Millions of Dollars)
----------------------------------------------
30 days 31-180 181-365 Over
or less days days one year Total
------- ------- ------- -------- --------
Assets $530.2 $ 145.7 $ 93.2 $596.2 $1.365.3
Liabilities and
Equity 321.2 320.2 209.4 514.5 1,365.3
------ ------- ------- ------ --------
Gap 209.0 (174.5) (116.2) 81.7 $ --
------ ------- ------- ------ --------
Cumulative Gap $209.0 $ 34.5 $ (81.7) $ -- $ --
====== ======= ======= ====== ========
Page 10
- ------------------------------------------------------------------
<PAGE>
Liquidity is also necessary at the Parent Company level. The
ability of the Parent Company to meet debt service requirements,
pay dividends to stockholders and satisfy other liquidity needs is
primarily dependent on the Bank's ability to continue the payment
of dividends. The ability of the Bank to pay dividends is
restricted by Florida statutes. At periodic intervals, State and
Federal regulatory agencies routinely examine the Parent Company
and the Bank as part of their legally prescribed oversight of the
banking industry and may further restrict the payment of dividends
or other activities by regulatory action. At March 31, 1995, the
Bank was not subject to any restrictions other than statutory.
For the remainder of 1995, the Parent Company's estimated debt
service and stockholder dividend requirements will total
approximately $2.3 million. At March 31, 1995, the Parent Company
had available cash balances of approximately $3.8 million.
Management believes that adequate undistributed earnings of the
Bank will be available, and capital levels will be maintained, to
allow for payment of dividends adequate to meet the Parent
Company's cash requirements for the remainder of 1995.
In the normal course of business, the Company utilizes various
financial instruments with off-balance sheet risk to meet the
financing needs of its customers. These off-balance sheet
activities include commitments to extend credit, commercial letters
of credit and standby letters of credit. The credit and market
risks associated with these financial instruments are generally
managed in conjunction with the Company's balance sheet activities
and are subject to normal credit policies, financial controls and
risk limiting and monitoring procedures. Additionally, the Company
may obtain various types of collateral to further reduce risks,
including, but not limited to, cash, time deposits, securities or
other tangible or intangible property of a nature acceptable to the
Company. The maximum risk may exceed the amounts recognized in the
consolidated statements of condition because these amounts vary
depending on the nature of the underlying instrument and the
related accounting policy.
Credit losses may be incurred when one of the parties fails to
perform in accordance with the terms of the contract. The
Company's exposure to credit loss is represented by the contractual
amount of the commitments to extend credit, commercial letters of
credit and standby letters of credit, reduced by the value of any
associated collateral obtained. This is the maximum potential loss
of principal in the event the commitment is drawn upon and the
counter-party defaults. In addition, the measurement of the risks
associated with these financial instruments is meaningful only when
all related and offsetting transactions are considered.
At March 31, 1995, the Company had outstanding commitments to
extend credit, commercial letters of credit and standby letters of
credit amounting to $129.9 million, $100.9 million and $14.6
million, respectively. In the normal course of business, some of
these commitments may expire without being drawn upon. The Company
expects to meet funding requirements resulting from these
commitments by using its traditional sources of liquidity.
RESULTS OF OPERATIONS - Three Months Ended March 31, 1995 and 1994
- ------------------------------------------------------------------
The Company recorded net income of $3,689,000, or $.74 per share,
for the three months ended March 31, 1995, compared to $3,213,000,
or $.67 per share, for the first three months of 1994. The
annualized return on average assets was 1.12% for the three months
ended March 31, 1995 compared to 1.09% for the same period in 1994.
The annualized return on average stockholders' equity was 15.87%
for the first three months of 1995 compared to 15.33% for the same
period in 1994. The increase in income was primarily a result of
improved net interest margin after provisions for credit losses,
higher service charges on deposits and factoring revenue offset by
higher other operating expenses and lower gains on securities
transactions.
Net Interest Income
- -------------------
The following net interest earnings analysis should be read in
conjunction with selected statistical information presented on
pages 14 and 15.
Net interest income is the difference between interest, fees earned
on loans and investments and interest paid on deposits and other
sources of funds. Net interest income totaled $16.0 million and
$13.6 million for the three months ended March 31, 1995 and 1994,
respectively. Loan fees included in net interest income amounted
to $396,000 and $430,000 for the three months ended March 31, 1995
and 1994, respectively. Net interest income on a fully tax-
equivalent basis, including loan fees, totaled $16.3 million for
the first quarter of 1995 compared to $14.0 million for the first
quarter of 1994.
Page 11
- ------------------------------------------------------------------
<PAGE>
Net interest income can be viewed as the product of average earning
assets and the net interest margin. Net interest income for the
quarter ended March 31, 1995 increased $2.4 million over the
comparable period in 1994, as a result of an increase of $6.5
million in interest income offset by an increase of $4.1 million in
interest expense. The increase in net interest income was due to
an increase in average interest earning assets to $1.056 billion
for the first quarter of 1995 from 968.0 million for the first
quarter of 1994. The annualized net interest margin increased to
6.27% for the three months ended March 31, 1995 from 5.86% for the
three months ended March 31, 1994. The annualized yield on average
interest earning assets increased from 7.83% for the three months
ended March 31, 1994 to 9.64% for the same period in 1995 primarily
due to higher yields on accounts receivable advances and total
loans. Average interest bearing liabilities increased to $815.4
million for the first quarter of 1995 from $714.0 million for the
same period in 1994, while the annualized average rate paid on
these liabilities increased to 4.37% from 2.67%. The increase in
average interest bearing liability balances occurred primarily in
short and long-term borrowings, while average interest bearing
deposits declined by $53.7 million, most significantly in the money
market accounts. The cost of the Company's non-deposit liabilities
significantly were influenced by increased market interest rates.
The higher rates paid on all liabilities combined with the
increased portion of non-deposit liabilities resulted in the
overall increase in the average rates paid on liabilities.
The utilization rate, the ratio of average interest earning assets
to average total assets, decreased to 78.86% for the three months
ended March 31, 1995 from 80.97% for the same period in 1994. The
utilization rate decreased primarily due to higher average non-
interest earning assets, primarily other assets and cash and due
from banks.
Provisions for Credit Losses
- -----------------------------
For the first three months of 1995, the provision for loan losses
and the provision for doubtful accounts decreased $900,000 and
$285,000, respectively, when compared to the same period in 1994.
The decrease in the provisions for credit losses reflects, in part,
the general improvement in asset quality. Problem or potential
problem loans and advances amounted to $8.2 million at March 31,
1995 and $17.0 million at March 31, 1994, respectively. The
provisions reflect management's judgment as to the amount deemed
adequate to absorb potential loan and receivables losses in the
respective portfolios after evaluating the portfolios, current
economic conditions, changes in the nature and volume of the
portfolios, past loss experience and other pertinent factors.
Non-Interest Income and Expense
- -------------------------------
Other income increased $578,000 for the quarter ended March 31,
1995 compared to the same period in 1994. The increase in other
income primarily consisted of increases of $852,000 in service
charges on deposits, $630,000 in factoring revenues and $219,000 in
other operating income offset by a decrease of $1,057,000 in
investment securities gains.
Service charges on deposits increased 34.0% from $2,509,000 in 1994
to $3,361,000 in 1995. This increase was primarily due to the
adjustment to the pricing of some services during the second
quarter of 1994.
The Company, through Capital Factors, operates factoring offices in
Fort Lauderdale, Los Angeles and New York City. Total accounts
receivable factored amounted to $441.2 million and $328.9 million
during the first three months of 1995 and 1994, respectively,
representing an increase of 34.1%. Factoring revenues, primarily
representing commissions earned on factored accounts receivable,
increased 13.8% from $4,565,000 in 1994 to $5,195,000 in 1995,
reflecting volume growth offset by lower commission rates earned on
accounts receivable factored. This growth is primarily
attributable to overall expansion of factoring activities.
In 1994, investment securities gains included the gain on the sale
of certain floating rate Argentinian bonds. There were no sales of
securities during the first quarter of 1995.
Other expenses increased $3,216,000, consisting primarily of
increases of $2,430,000 in other operating expenses and $831,000 in
salary and employee benefits. The increase in other operating
expenses primarily reflects a $1.4 million provision for potential
losses resulting from several overdrafts related to one customer.
The Company has remaining exposure of $1.4 million relating to this
customer and additional provisions for loss may be necessary in
future periods. The increase in salary and employee benefits is
due to merit increases, increased benefit costs and work force
growth. Approximately 60% of the increase in personnel costs is
attributable to Capital Factors activities.
Page 12
- ------------------------------------------------------------------
<PAGE>
Litigation
- ----------
Various legal actions and proceedings are pending or are threatened
against Capital Bank and Capital Factors, some of which seek relief
or damages in amounts that are substantial. These actions or
proceedings arose in the ordinary course of business. Due to the
complex nature of some of these matters, it may be a number of
years before they are ultimately resolved. After consultation with
legal counsel, management believes the aggregate liability, if any,
to the Bank and/or Capital Factors resulting from such pending or
threatened actions and proceedings will not have a material adverse
effect on the Company's consolidated financial condition.
New Accounting Pronouncements
- -----------------------------
Statement of Financial Accounting Standards ("SFAS") No. 114,
"Accounting by Creditors for Impairment of a Loan," as amended by
SFAS No. 118, "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures," is effective for fiscal years
beginning after December 15, 1994. This Statement requires that
certain impaired loans be measured based on the present value of
expected future cash flows discounted at the loan's effective
interest rate or at the observable market price or the fair value
of collateral if the loan is collateral dependent. Adoption of
this Statement did not have a significant impact on the Company's
consolidated financial position or results of operations.
Impact of Inflation and Changing Prices
- ---------------------------------------
The impact of inflation on the Company is reflected primarily in
the increased costs of operations. These increased costs are
generally passed on to customers in the form of increased service
fees. Since the primary assets and liabilities of the Company are
monetary in nature, the impact of inflation on interest rates has
had, and is expected to continue to have, an effect on net income.
In structuring fees, negotiating loan margins and developing
customer relationships, management concentrates its efforts on
maximizing earnings capacity while attempting to contain increases
in operating expenses. In addition, management continually reviews
the feasibility of new and additional fee-generating services to
offset the effects of inflation and changing prices with an
objective of increasing earnings.
Page 13
- ------------------------------------------------------------------
<PAGE>
<TABLE>
CAPITAL BANCORP AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION
(All Dollar Amounts in Thousands)
<CAPTION>
For the Three Months Ended March 31,
--------------------------------------------------------------------------
1995 1994
--------------------------------- -------------------------------------
Average Average
Average Yield Average Yield
Balance Interest* Or Rate* Balance Interest* Or Rate*
---------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
- ------
Interest earning assets:
Loans, net of unearned income:
U.S. borrowers $ 502,913 $ 12,318 9.93% $ 457,353 $ 9,951 8.82%
Foreign borrowers 122,043 2,507 8.33% 82,013 1,103 5.45%
Tax-exempt 20,450 844 16.75% 27,019 1,052 15.79%
---------- ---------- ---------- ---------
Total loans 645,406 15,669 9.85% 566,385 12,106 8.67%
Accounts receivable
advances-factoring
subsidiary, net of due to
clients 184,033 5,911 13.03% 132,675 3,345 10.22%
Securities:
Taxable 210,889 3,196 6.15% 171,629 2,390 5.65%
Tax-exempt 3,640 97 10.79% 4,629 123 10.78%
Federal funds sold and
securities purchased under
agreement to resell 12,478 246 8.00% 92,694 728 3.19%
---------- --------- ---------- ---------
Total interest earning
assets 1,056,446 25,119 9.64% 968,012 18,692 7.83%
---------- --------- ---------- ---------
Less allowance for loan losses
and doubtful accounts (11,280) (20,219)
Cash and due from banks 96,082 75,194
Due from customers on acceptances 28,687 31,471
Other real estate 13,664 15,439
Other assets 156,059 125,589
---------- ----------
Total assets $1,339,658 $1,195,486
========== ==========
</TABLE>
* Yield and interest on tax-exempt loans and securities have been
adjusted to reflect tax-equivalent basis. Loan fees are included in
interest. Nonaccrual loans are included in interest-earning loans
for purposes of calculating average yields.
Page 14
- -----------------------------------------------------------------------
<PAGE>
<TABLE>
CAPITAL BANCORP AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION
(All Dollar Amounts in Thousands)
<CAPTION>
For the Three Months Ended March 31,
-------------------------------------------------------------------------
1995 1994
------------------------------------ --------------------------------
Average Average
Average Yield Average Yield
Balance Interest* Or Rate* Balance Interest* Or Rate*
--------- -------- ------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing liabilities:
Deposits:
Savings and money market $ 310,624 $ 1,733 2.26% $ 368,904 $ 1,728 1.90%
Time 282,002 3,345 4.81% 277,429 2,383 3.48%
---------- --------- ---------- ---------
Total interest bearing deposits 592,626 5,078 3.47% 646,333 4,111 2.58%
---------- --------- ---------- ---------
Federal funds purchased and short-term
borrowings:
Domestic banks -- -- -- 100 1 2.43%
Short-term borrowings 95,780 1,274 5.39% 65,216 545 3.39%
---------- --------- ---------- ---------
95,780 1,274 5.39% 65,316 546 3.39%
---------- --------- ---------- ---------
Long-term borrowings 126,980 2,441 7.80% 2,371 56 9.58%
---------- --------- ---------- ---------
Total interest bearing liabilities 815,386 8,793 4.37% 714,020 4,713 2.67%
---------- --------- ---------- ---------
Non-interest bearing deposits 289,069 266,392
Bank acceptances outstanding 28,687 31,471
Other liabilities 112,245 98,576
Stockholders' equity 94,271 85,027
---------- ----------
Total liabilities and stockholders'
equity $1,339,658 $1,195,486
========== ==========
Net interest earnings/yield $16,326 6.27% $ 13,979 5.86%
======= ===== ========= =====
Net interest spread 5.27% 5.16%
===== =====
Utilization rate 78.86% 80.97%
===== =====
</TABLE>
Page 15
- ---------------------------------------------------------------------------
PAGE
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
NATHAN J. ESFORMES, STANLEY I. WORTON, M.D., AND LEONARD WIEN, AS
INDIVIDUAL SHAREHOLDERS AND ON BEHALF OF ALL OTHER SHAREHOLDERS OF
CAPITAL BANCORP V. ABEL HOLTZ, FANA HOLTZ, DANIEL M. HOLTZ, JAVIER
J. HOLTZ, CAPITAL BANK AND CAPITAL BANCORP, CIRCUIT COURT FOR THE
11TH JUDICIAL DISTRICT IN AND FOR DADE COUNTY, FLORIDA CASE NO. 95-
02515.
This action is described in Part I, Item 3, "Legal Proceedings" of
the Company's Annual Report on Form 10-K for the year ended
December 31, 1994, which description is incorporated herein by
reference and made a part hereof.
STANLEY I. WORTON, M.D. V. ABEL HOLTZ, FANA HOLTZ, DANIEL HOLTZ,
ALEX HALBERSTEIN AND CAPITAL BANCORP, CIRCUIT COURT OF THE 11TH
JUDICIAL DISTRICT IN AND FOR DADE COUNTY, FLORIDA CASE NO. 95-
02520-CA-09.
This action is described in Part I, Item 3, "Legal Proceedings" of
the Company's Annual Report on Form 10-K for the year ended
December 31, 1994, which description is incorporated herein by
reference and made a part hereof. Since the filing of the Form 10-
K, an amended complaint has been filed pursuant to which Nathan J.
Esformes has been added as a plaintiff and directors of the
Company, Messrs. Russell W. Galbut, Timothy E. Kish, Craig L.
Platt, Jeffrey H. Porter and Leon J. Simkins, have been added as
defendants. The amended complaint additionally alleges that
certain of the defendants unlawfully solicited proxies for a
shareholders' meeting and that the actions taken at this meeting,
including the reduction in the size of the Board and the failure to
reelect directors Alex Halberstein and Mr. Esformes, were invalid.
The amended complaint also alleges that the "independent committee"
appointed by the Board to investigate the allegations in the
shareholders' derivative action brought in Case No. 95-02515, noted
above, is not independent because the members were invalidly
elected and because the members knew or should have known about the
alleged illegal proxy solicitation and alleged fraudulent actions
by the Holtz family. The amended complaint seeks an order setting
aside the alleged shareholders' meeting, reinstating Esformes as a
member of the Board of Directors of the Company, enjoining the
current Board from taking any action on behalf of the Company until
the Board members who were not reelected are reinstated and
directing the Company to hold a duly noticed shareholders' meeting
on or before May 28, 1995 to elect a board of directors and
consider other matters properly before it.
Other Litigation
- ----------------
Various legal actions and proceedings are pending or are threatened
against Capital Bank and Capital Factors, some of which seek relief
or damages in amounts that are substantial. These actions or
proceedings arose in the ordinary course of business.
Due to the complex nature of some of these matters, it may be a
number of years before they are ultimately resolved. After
consultation with legal counsel, management believes the aggregate
liability, if any, to the Bank and/or Capital Factors resulting
from such pending or threatened actions and proceedings will not
have a material adverse effect on the Company's consolidated
financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
On February 27, 1995, the annual meeting of the shareholders of the
Company was held by obtaining and delivering to the Company a
Corporate Action by Written Consent of Shareholders fixing the size
of the Board of Directors at seven and reelecting Daniel M. Holtz,
Fana Holtz, Leon J. Simkins, Timothy E. Kish, Jeffrey Porter, Craig
L. Platt and Russell Galbut as directors. Nathan Esformes and Alex
Halberstein, who previously served as directors, were not
reelected.
Page 16
- ---------------------------------------------------------
<PAGE>
These actions received 3,338,251 affirmative votes or approximately
68.8% of the issued and outstanding capital stock of the Company.
Included in these totals are shares owned by Stanley Worton and
family members (the "Worton Shares") and shares owned by Alex
Halberstein and family members (the "Halberstein Shares"), which
together comprise approximately 14% of the issued and outstanding
shares, that were voted by Fana Holtz, as successor proxy to Abel
Holtz, pursuant to certain Shareholder Agreements and Irrevocable
Proxies. Mr. Worton has notified Abel Holtz and Fana Holtz that,
in his view, the proxies for the Worton Shares are invalid. Mr.
Worton has also filed a lawsuit against Abel Holtz, Fana Holtz,
Daniel Holtz, Alex Halberstein and the Company seeking to have the
proxy for both the Worton Shares and the Halberstein Shares
declared invalid. See Part II, Item 1, "Legal Proceedings."
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibit - 11 Calculation of Earnings Per Share - Page 19
Exhibit - 27 Financial Data Schedule - Page 20
(b) No Current Reports on Form 8-K were filed by the Company
during the quarter ended March 31, 1995.
Page 17
- ------------------------------------------------------------------
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: May 12, 1995 By: /s/ Lucious T. Harris
-------------------------
LUCIOUS T. HARRIS
Treasurer
(Principal Financial and
Accounting Officer)
Page 18
- ------------------------------------------------------------------
<PAGE>
EXHIBIT 11
<TABLE>
CAPITAL BANCORP AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
<CAPTION>
Three Months Ended
March 31,
Primary 1995 1994
- ------- ---- ----
<S> <C> <C>
Weighted average number of
common shares outstanding 4,768,515 4,607,641
Common equivalent shares
outstanding - options 184,828 166,436
----------- ----------
Total common and common
equivalent shares outstanding 4,953,343 4,774,077
=========== ==========
Net income $ 3,689,000 $3,213,000
=========== ==========
Primary earnings per share $ .74 $ .67
=========== ==========
Fully diluted
- -------------
Weighted average number of
common shares outstanding 4,768,515 4,607,641
Common equivalent shares
outstanding - options 184,828 166,436
----------- ----------
Total common and common
equivalent shares outstanding 4,953,343 4,774,077
=========== ==========
Net income $ 3,689,000 $3,213,000
=========== ==========
Fully diluted earnings per share $ .74 $ .67
=========== ==========
Page 19
- -------------------------------------------------------------------
<PAGE>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> MAR-31-1995
<CASH> 91,350
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 18,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 127,014
<INVESTMENTS-CARRYING> 83,140
<INVESTMENTS-MARKET> 82,774
<LOANS> 655,912
<ALLOWANCE> 10,356
<TOTAL-ASSETS> 1,365,260
<DEPOSITS> 896,294
<SHORT-TERM> 103,107
<LIABILITIES-OTHER> 19,660
<LONG-TERM> 126,980
<COMMON> 4,852
0
0
<OTHER-SE> 91,239
<TOTAL-LIABILITIES-AND-EQUITY> 1,365,260
<INTEREST-LOAN> 15,373
<INTEREST-INVEST> 3,259
<INTEREST-OTHER> 6,157
<INTEREST-TOTAL> 24,789
<INTEREST-DEPOSIT> 5,078
<INTEREST-EXPENSE> 8,793
<INTEREST-INCOME-NET> 15,996
<LOAN-LOSSES> 825
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 20,094
<INCOME-PRETAX> 5,906
<INCOME-PRE-EXTRAORDINARY> 5,906
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,689
<EPS-PRIMARY> .74
<EPS-DILUTED> .74
<YIELD-ACTUAL> 6.27
<LOANS-NON> 5,973
<LOANS-PAST> 979
<LOANS-TROUBLED> 8,532
<LOANS-PROBLEM> 2,102
<ALLOWANCE-OPEN> 9,210
<CHARGE-OFFS> 656
<RECOVERIES> 1,427
<ALLOWANCE-CLOSE> 10,356
<ALLOWANCE-DOMESTIC> 8,100
<ALLOWANCE-FOREIGN> 350
<ALLOWANCE-UNALLOCATED> 1,906
Page 20
</TABLE>
