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 September 30, 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. 2-26080
CAPITAL BANCORP
- ----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 59-2160717
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(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
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(Registrant's telephone number, including area code)
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(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 November 8, 1995, there were 7,379,831 shares of the
registrant's common stock outstanding.
=================================================================
Page 1 of 22 Pages
Exhibit Index Page 19
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<TABLE>
ITEM 1. PART I. FINANCIAL INFORMATION
CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(In Thousands of Dollars)
September 30, December 31,
1995 1994
------------- ------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 112,985 $ 91,712
Federal funds sold and securities
purchased under agreement to resell 56,000 15,000
---------- ----------
Cash and cash equivalents 168,985 106,712
---------- ----------
Securities held to maturity
(Market value 9/30/95 -
$77,489, 12/31/94 - $ 89,122) 76,599 91,031
Securities available for sale
(at market value) 137,007 130,018
---------- ----------
Total securities 213,606 221,049
---------- ----------
Loans 670,340 638,144
Less allowance for loan losses (12,590) (9,210)
Less unearned income (2,815) (2,771)
---------- ----------
Loans, net 654,935 626,163
---------- ----------
Accounts receivable -
factoring subsidiary, net 373,480 262,423
Premises and equipment, net 33,788 32,358
Due from customers on acceptances 32,577 30,575
Other real estate 8,229 14,710
Accrued interest and other assets 33,406 29,679
---------- ----------
Total assets $1,519,006 $1,323,669
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing deposits $ 286,930 $ 296,599
Savings and money market deposits 290,044 315,323
Time deposits 388,502 264,871
---------- ----------
Total deposits 965,476 876,793
---------- ----------
Funds purchased and securities sold
under agreements to repurchase 74,012 87,236
Bank acceptances outstanding 32,577 30,575
Due to clients - factoring subsidiary 136,913 94,513
Long-term debt 176,650 126,980
Other liabilities 25,738 16,209
---------- ----------
Total liabilities 1,411,366 1,232,306
---------- ----------
Stockholders' equity:
Common stock, $1 par value
Authorized - 20,000,000 shares
Issued - 7,335,676 shares - 9/30/95,
4,821,475 shares - 12/31/94 7,336 4,821
Capital surplus 7,263 8,216
Retained earnings 94,324 83,445
Treasury stock -
80,000 shares - 12/31/94 -- (1,440)
Unrealized loss on securities
available for sale (1,283) (3,679)
---------- ----------
Total stockholders' equity 107,640 91,363
---------- ----------
Total liabilities and
stockholders' equity $1,519,006 $1,323,669
========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
Page 2
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<PAGE>
<TABLE>
CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars Except Per Share Data)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans $17,625 $13,410 $48,881 $37,780
Advances-factoring clients 7,325 4,622 19,729 11,638
Taxable securities 3,132 3,394 9,497 8,424
Tax-exempt securities 57 57 178 228
Dividends -- -- -- 2
Federal funds sold and
securities purchased under
agreements to resell 1,113 977 1,945 2,647
-------- ------- ------- -------
Total interest income 29,252 22,460 80,230 60,719
-------- ------- ------- -------
INTEREST EXPENSE:
Savings and money
market deposits 1,723 1,693 5,133 5,105
Time deposits 5,394 2,831 13,223 7,836
Short-term borrowings 1,062 1,097 3,537 2,587
Long-term debt 2,962 1,616 7,896 1,753
-------- ------- ------- -------
Total interest expense 11,141 7,237 29,789 17,281
-------- ------- ------- -------
Net interest income 18,111 15,223 50,441 43,438
Provision for loan losses 1,700 150 2,450 2,475
Provision for doubtful accounts-
factoring subsidiary 700 700 1,650 2,085
-------- ------- ------- -------
Net interest income
after provisions 15,711 14,373 46,341 38,878
-------- ------- ------- -------
OTHER INCOME:
Factoring revenues 6,390 5,452 17,114 14,708
Service charges on deposits 3,043 3,072 9,603 8,446
Fees on letters of credit 1,065 1,029 3,075 3,084
Securities gains -- 151 12 1,213
Other operating income 1,854 1,234 4,565 3,925
-------- ------- ------- -------
Total other income 12,352 10,938 34,369 31,376
-------- ------- ------- -------
OTHER EXPENSES:
Salaries and
employee benefits 9,645 9,042 28,446 26,288
Occupancy expense, net 1,968 1,869 5,658 5,674
Other operating
expenses, net 8,318 7,444 26,221 21,162
-------- ------- ------- -------
Total other expenses 19,931 18,355 60,325 53,124
-------- ------- ------- -------
Income before income taxes 8,132 6,956 20,385 17,130
Provision for income taxes 3,108 2,762 7,700 6,430
-------- ------- ------- -------
Net income $ 5,024 $ 4,194 $12,685 $10,700
======== ======= ======= =======
Earnings per common & common
equivalent share:
Primary $ .66 $ .58 $ 1.67 $ 1.49
======== ======= ======= =======
Fully diluted $ .65 $ .58 $ 1.61 $ 1.49
======== ======= ======= =======
Cash dividends declared per
share of common stock $ .0833 $ .0833 $ .2499 $ .2499
======== ======= ======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
Page 3
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<PAGE>
<TABLE>
CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 12,685 $ 10,700
Adjustments to reconcile net income to net
cash provided by operating
activities:
Provision for loan losses 2,450 2,475
Provision for doubtful
accounts-factoring subsidiary 1,650 2,085
Depreciation and amortization 3,033 2,582
Net losses on other real estate 1,731 355
Securities gains (12) (1,213)
Gain on disposal of premises and equipment (32) (20)
Increase in accrued interest
and other assets (5,143) (8,404)
Increase in other liabilities 9,510 5,946
-------- --------
Net cash provided by
operating activities 25,872 14,506
-------- --------
Cash flows from investing activities:
Proceeds from sales of securities -- 6,164
Proceeds from maturities of securities 44,485 47,234
Purchase of securities (33,074) (112,974)
Net increase in loans (31,730) (43,658)
Proceeds from sale of premises & equipment 81 23
Purchase of premises and equipment (4,656) (9,011)
Proceeds from sale of other real estate 6,039 4,648
Improvements to other real estate (781) (442)
Increase in accounts receivable-factoring
subsidiary (net of due to clients) (70,307) (44,251)
-------- --------
Net cash used in investing activities (89,943) (152,267)
-------- --------
Cash flows from financing activities:
Net increase (decrease) in deposits 88,683 (38,452)
Net increase (decrease) in Federal
funds purchased and securities sold
under agreements to repurchase (13,224) 53,348
Proceeds from issuance of senior
certificates - factoring subsidiary 50,000 97,808
Repayment of debt-factoring subsidiary -- (15,000)
Repayment of long-term debt (330) (625)
Cash dividends (1,787) (1,731)
Proceeds from exercise of stock options 892 623
Redemption of fractional shares after
3-for-2 stock split (2) --
Proceeds from sale of treasury stock 2,112 --
-------- --------
Net cash provided by
financing activities 126,344 95,971
-------- --------
Net increase (decrease) in cash
and cash equivalents 62,273 (41,790)
Cash and cash equivalents
at beginning of period 106,712 156,789
-------- --------
Cash and cash equivalents
at end of period $168,985 $114,999
======== ========
</TABLE>
(Continued)
Page 4
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<PAGE>
<TABLE>
CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
(In Thousands of Dollars)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1995 1994
---- ----
<S> <C> <C>
Supplemental Disclosures
Cash paid during the period for:
Interest $ 29,040 $ 17,102
======== =========
Income taxes $ 8,692 $ 10,705
======== =========
Non-cash activities:
Decrease (increase) in the unrealized
loss on securities available for sale,
net of applicable taxes (benefits) in
1995 - $1,416 and in 1994 - ($2,677) $ 2,396 $ (4,531)
======== =========
Loans transferred to other
asset categories $ 1,104 $ --
======== =========
Loans recorded in connection with
sales of other assets $ 596 $ --
======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5
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<PAGE>
CAPITAL BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
NOTE 1: Basis of Presentation
- ------------------------------
The Consolidated Statements of Condition for Capital Bancorp and
Subsidiaries (the "Company") as of September 30, 1995 and December
31, 1994, the Consolidated Statements of Income for the nine- and
three-month periods ended September 30, 1995 and 1994 and the
Consolidated Statements of Cash Flows for the nine-month periods
ended September 30, 1995 and 1994 included in Form 10-Q have been
prepared by the Company in conformity with the instructions to Form
10-Q and Article 10 of Regulation S-X and therefore do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. 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.
Common stock per share and average share information for prior
periods have been retroactively restated for the 3-for-2 stock
split in the form of a 50% stock dividend which was effective June
22, 1995.
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):
September 30, 1995 December 31, 1994
------------------ -----------------
Performing trade credits $120,597 $111,150
Other performing loans 3,416 3,832
Nonaccrual loans 2,650 334
-------- --------
$126,663 $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 $16.3 million at September 30, 1995 compared to $14.6
million at year end 1994. In addition to the outstanding foreign
loans, at September 30, 1995 and December 31, 1994 there were $29.3
million and $28.1 million, respectively, due primarily from foreign
customers on acceptances, offset by $5.5 million and $2.2 million
of cash collateral maintained at Capital Bank.
Page 6
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<PAGE>
The following is a list of cross border outstandings at September
30, 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):
September 30, December 31,
1995 1994
----------- -----------
Brazil $22,228 Brazil $18,594
Argentina 19,707 Argentina 15,982
Mexico 13,999
------- -------
$41,935 $48,575
======= =======
At September 30, 1995, Capital Bank had cross border outstandings
to Colombia, El Salvador, Ecuador, Peru and Guatemala, aggregating
$14.8 million, $14.7 million, $14.6 million, $14.5 million and
$12.9 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 September 30, 1995 and December 31, 1994 Capital Bank held other
interest earning assets of $6.8 million and $6.6 million,
respectively, issued by debtors located in foreign countries.
Impaired Loans
- --------------
The Company adopted SFAS 114, as amended by SFAS 118, effective
January 1, 1995. This did not have a material impact on the
Company's results of operations nor on its financial position,
including the level of the reserve for possible credit losses.
Instead, it resulted only in a reallocation of the existing reserve
of possible credit losses.
At September 30, 1995, the recorded investment in loans that was
considered impaired under SFAS 114 was $9,054,000. These loans
required a SFAS 114 reserve for possible credit losses of
$3,978,000. The average recorded investment in impaired loans
during the nine months ended September 30, 1995 was $5,639,000.
For the nine months ended September 30, 1995, the Company
recognized interest revenue on these loans of $384,000.
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-accrual 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 September 30, 1995 there were $751,000 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 consumer, commercial and real
estate loans of $454,000, $263,000 and $34,000, respectively, at
September 30, 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.
Page 7
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<PAGE>
Following is a summary of non-accrual loans and advances (in
thousands):
September 30, December 31,
1995 1994
-------- ------------
Commercial $ 2,287 $ 3,416
Foreign 2,650 334
Real Estate 1,141 1,801
Consumer 1,344 1,547
------- -------
$ 7,422 $ 7,098
======= =======
The increase in non-accrual loans and advances is due to the
transfer of several foreign loans with Argentine banks from accrual
status to non-accrual status, offset by charge-offs and
collections. 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 changes that may be unforeseen
by management. Changes to these factors could result in future
adjustments to the allowance for loan losses.
NOTE 3: Long-Term Debt
- -----------------------
On July 28, 1995, Capital Factors, Inc., through its wholly-owned
subsidiary C.F. Funding Corp., issued an additional $50,000,000 of
Variable Rate Asset Backed Certificates ("senior certificates")
with a maturity date of January 2001. The senior certificates bear
an interest rate of LIBOR plus 1.25%. The interest rate on
September 30, 1995 was 7.125%. Interest is payable monthly. The
senior certificates which, including previously issued
certificates, aggregate $175,000,000 are secured by interest
earning advances which totaled $218,366,000 at September 30, 1995.
Capital Factors, Inc. services and administers these advances and
related receivables under an agreement entered into by Bankers
Trust Company as Trustee, CF Funding Corp. and Capital Factors,
Inc.
NOTE 4: Litigation
- -------------------
Various legal actions and proceedings are pending or are threatened
against the Company, 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 Company, 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.
Page 8
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<PAGE>
ITEM 2.
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 $1.5 billion at September 30, 1995. Capital
Bank (the "Bank"), a Florida-chartered commercial bank, is wholly-
owned by Capital Bancorp. Capital Factors Holding, Inc. ("Capital
Factors"), which conducts commercial factoring activities, is
wholly-owned by the Bank.
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 - SEPTEMBER 30, 1995 VS. DECEMBER 31, 1994
- --------------------------------------------------------------
Total assets increased $195.3 million during the first nine months
of 1995, composed of increases of $134.9 million in interest
earning assets and $60.4 million in non-interest earning assets.
The increase in assets was composed of increases of $111.0 million
in net accounts receivable - factoring subsidiary, $62.3 million in
cash and cash equivalents, $28.8 million in net loans, $3.7 million
in accrued interest and other assets, $2.0 million in due from
customers on acceptances and $1.4 million in premises and equipment
offset by decreases of $7.4 million in total securities and $6.5
million in other real estate.
The increase in accounts receivable - factoring subsidiary was due
to an overall increase in factoring volume. During 1995, Capital
Factors opened an office in Charlotte, North Carolina, and
introduced a new service, asset-based lending. Capital Factors
operates factoring offices in New York, New York, Los Angeles,
California, Fort Lauderdale, Florida and Charlotte, North Carolina.
Capital Factors purchases receivables from its clients and records
a liability payable to the clients at the time of such purchase.
From time to time, the liability is reduced by advance payments 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 $239.2 million at September 30, 1995 compared
to $169.7 million at December 31, 1994. Non-accrual advances
amounted to $928,000 and $739,000 at September 30, 1995 and
December 31, 1994, respectively.
The increase in cash and cash equivalents was composed of increases
of $41.0 million in federal funds sold and securities purchased
under agreements to resell and $21.3 million in cash and due from
banks. The increase in federal funds sold and securities purchased
under agreements to resell resulted primarily from net inflows of
deposits during the second and third quarter. The increase in cash
and due from banks resulted primarily from funds raised by Capital
Factors in the sale of $50.0 million of senior certificates to
outside investors in July, 1995.
The increase in net loans primarily consisted of an increase in
loans of $32.2 million offset by an increase of $3.4 million in the
allowance for loan losses. The increase in loans was comprised
primarily of increases of $16.4 million in international -
commercial loans, $11.0 million in mortgage loans and $8.3 million
in installment loans offset by decreases of $2.6 million in
acceptances purchased and $1.3 million in domestic - commercial
loans. The growth in international - commercial loans resulted
from increased marketing efforts of foreign trade finance services.
The increase in mortgage loans reflects the results of expanded
marketing efforts. Installment loans increased primarily due to
expansion of indirect automobile financing.
The allowance for loan losses totaled $12.6 million and $9.2
million at September 30, 1995 and December 31, 1994, respectively,
representing, 1.9% and 1.4% of outstanding loans at these dates,
respectively. The increase in the allowance for loan losses is
primarily due to the recovery in 1995 of $1.6 million of certain
non-trade foreign loans which were charged off during 1994 along
with lower levels of charge-offs in 1995 relative to additional
provisions recorded. Non-accrual loans and loans 90 days or more
past due amounted to $7.2 million and $8.3 million, at September
30, 1995 and December 31, 1994, respectively. The adjusted ratio
of annualized net loans charged off to average loans outstanding
was .14% and
Page 9
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<PAGE>
1.41% for the nine months ended September 30, 1995 and 1994,
respectively. The ratios of annualized net loans charged off to
average loans outstanding mentioned above exclude the $1.6 million
recovery of certain non-trade foreign loans during the first nine
months of 1995 and $4.8 million in net charge-offs of non-trade
foreign loans in the first nine months 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.
The decrease in total securities consisted of maturities and
paydowns during the first nine months totaling $44.5 million offset
by purchases of $33.1 million and a reduction in the unrealized
loss on securities available for sale of $3.8 million. Proceeds
from these maturities and paydowns were used to purchase
securities, as well as fund alternative interest earning assets.
Other real estate amounted to $8.2 million and $14.7 million at
September 30, 1995 and December 31, 1994, respectively. The
decrease in other real estate was due primarily to sales of several
properties totaling $7.4 million.
Total liabilities increased $179.1 million composed of increases of
$88.7 million in total deposits, $49.7 million in long term debt,
$42.4 million in due to factoring clients, $9.5 million in other
liabilities and $2.0 million in bank acceptances outstanding offset
by a decrease of $13.2 million in other funds purchased.
The increase in total deposits included an increase of $123.6
million in time deposits offset by decreases of $25.3 million in
savings and money market deposits and $9.7 million in non-interest
bearing deposits. The increase in time deposits reflects the
combined effect of internal marketing efforts to increase overall
deposits and increased customer demand for time deposits due to
higher rates offered. Management believes the decrease in savings
and money market deposits reflects an industry-wide trend whereby
customers have chosen alternative investment and savings products
over low yielding deposit products.
Deposit liabilities represented 68%, 71% and 82% of total
liabilities at September 30, 1995, December 31, 1994 and December
31, 1993, respectively. For the same dates, interest bearing non-
deposit balances represented 18%, 17% and 6% of total liabilities.
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 $16,277,000 during the first nine
months of 1995 as a result of net income of $12,685,000, proceeds
from the sale of treasury stock of $2,112,000, proceeds from the
exercise of stock options of $892,000 and a decrease in the
unrealized loss on securities available for sale of $2,396,000, all
offset by dividends declared of $1,806,000 and cash redemption of
fractional shares of $2,000 due to the 3-for-2 stock split
effective June 22, 1995.
The Company and the Bank are required by regulations of the Federal
Reserve Board and the Federal Deposit Insurance Corporation,
respectively, to meet minimum ratios of capital to risk-weighted
assets of 4% and 8% for Tier One capital and total risk-based
capital, respectively. The Company and the Bank are also required
to maintain a minimum leverage ratio, defined to be equal to Tier
One capital to average quarterly assets, of 3%. However, the
Federal Reserve Board has publicly stated its expectation that most
banks should maintain a leverage ratio of 1% to 2% above the
minimum requirement. As illustrated in the following table, the
Parent Company and the Bank complied with all regulatory capital
requirements at September 30, 1995.
Company Capital Bank
9/30/95 12/31/94 9/30/95 12/31/94
------- -------- ------- --------
Leverage 7.85% 7.58% 7.61% 7.58%
Tier One
Risk-Based 10.96% 10.32% 10.61% 10.30%
Total
Risk-Based 12.21% 11.53% 11.86% 11.51%
Page 10
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<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 nine months
of 1995 and 1994, respectively, the Company's annualized internal
capital generation rate was 15.92% and 14.15%, respectively. The
Company currently pays dividends of 8.33 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 of 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 nine months of
1995, the average rate paid on interest bearing deposit liabilities
was 3.90%, while the average rate paid for other interest bearing
liabilities was 6.68%. 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 September 30, 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 $616.7 $ 114.8 $102.9 $684.6 $1,519.0
Liabilities and
Equity 347.8 347.6 246.6 577.0 1,519.0
------ ------- ------- ------ --------
Gap 268.9 (232.8) (143.7) 107.6 --
------ ------- ------- ------ --------
Cumulative
Gap $268.9 $ 36.1 $(107.6) $ -- $ --
====== ======= ======= ====== ========
As reflected in the table above, the Company had an estimated
$268.9 million of net assets subject to repricing in the 30 day or
less time horizon. Consequently, a reduction in short-term
interest rates could have a negative impact on net interest income
derived from assets and liabilities repricing during this time
horizon, however such impact is not believed to be significant.
Furthermore, over the 180 day time horizon, the cumulative gap
position decreases to $36.1 million, thus mitigating the potential
negative effect of a reduction in short-term interest rates.
Management believes the overall asset/liability position to be
satisfactory at September 30, 1995.
Page 11
- ------------------------------------------------------------------
<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 September 30, 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 $650,000. At September 30, 1995, the Parent Company
had available cash balances of approximately $5.1 million.
Management believes the Parent Company's cash position at September
30, 1995 to be satisfactory.
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 September 30, 1995, the Company had outstanding commitments to
extend credit, commercial letters of credit and standby letters of
credit amounting to $137.0 million, $99.2 million and $15.1
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 - Nine Months Ended September 30, 1995 and
1994
- ------------------------------------------------------------------
The Company recorded net income of $12,685,000, or $1.67 per share,
for the nine months ended September 30, 1995, compared to
$10,700,000, or $1.49 per share (adjusted for the stock 3-for-2
split in the form of a 50% stock dividend in June 1995), for the
first nine months of 1994. The annualized return on average assets
was 1.21% for the nine months ended September 30, 1995 compared to
1.14% for the same period in 1994. The annualized return on
average stockholders' equity was 17.05% for first nine months of
1995 compared to 16.55% 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 factoring revenues and
service charges on deposits offset by higher other operating
expenses, higher provision for income taxes 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 16 and 17.
Net interest income is the difference between interest and fees
earned on loans and investments and interest paid on deposits and
other sources of funds. Net interest income totaled $50.4 million
and $43.4 million for the nine months ended September 30, 1995 and
1994, respectively. Loan fees included in net interest income
amounted to $1.2 million and $1.4 million for the nine months ended
September 30, 1995 and 1994, respectively. Net interest income on
a fully tax-equivalent basis, including loan fees, totaled $51.4
million for the first nine months of 1995 compared to $44.7 million
for the first nine months of 1994.
Page 12
- ------------------------------------------------------------------
<PAGE>
Net interest income can be viewed as the product of average earning
assets and the net interest margin. Net interest income for the
first nine months ended September 30, 1995 increased $7.0 million
over the comparable period in 1994, as a result of an increase of
$19.5 million in interest income offset by an increase of $12.5
million in interest expense. Interest income and interest expense
increased primarily due to increases in average balances and
interest rates. The annualized net interest margin increased to
6.11% for the nine months ended September 30, 1995 (excluding non-
recurring interest collections) from 5.91% for the nine months
ended September 30, 1994. The increase in net interest income was
due to an increase in average interest earning assets to $1.103
billion for the nine months ended September 30, 1995 from $1.011
billion for the nine months ended September 30, 1994, increased
interest rates and the collection of past due interest which had
not been previously recorded ($975,000). The adjusted annualized
yield on average interest earning assets increased from 8.19% for
the nine months ended September 30, 1994 to 9.72% for the same
period in 1995 primarily due to higher yields on loans, accounts
receivable-advances and federal funds sold and securities purchased
under agreements to resell.
Average interest bearing liabilities increased to $857.9 million
for the first nine months of 1995 from $765.5 million for the same
period in 1994, while the annualized rate paid on these liabilities
increased to 4.64% from 3.02%. The increase in average interest
bearing liabilities occurred primarily in short and long-term
borrowings which averaged $228.8 million in 1995, compared to
$124.5 million in 1994. Capital Factors' average borrowings were
$136.7 million in 1995 compared to $34.4 million in 1994 and
account for most of the increase. Such increase reflects $125.0
million of senior certificates outstanding for nine months in 1995
compared to $100.0 million outstanding for three months in 1994.
Average interest bearing deposits declined by $11.9 million as a
result of a decrease of $62.8 million in the average savings and
money market deposits offset by an increase of $50.9 million in the
average time deposits. Substantially all of the Company's non-
deposit borrowings are floating rate or otherwise reprice in 30
days or less and were thus significantly 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 78.78% for the nine months
ended September 30, 1995 from 80.41% for the same period in 1994.
The utilization rate decreased primarily due to higher average non-
interest earning assets, primarily cash and due from banks and
other assets.
Provisions for Credit Losses
- ----------------------------
For the first nine months of 1995, the provision for loan losses
and the provision for doubtful accounts decreased $25,000 and
$435,000, respectively, compared to the same period in 1994. The
decrease in the provision for doubtful accounts reflects, in part,
the general improvement in asset quality at Capital Factors.
Problem or potential problem loans and advances amounted to $16.1
million at September 30, 1995 and $13.1 million at September 30,
1994. 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 $3.0 million, or 9% for the nine months
ended September 30, 1995 compared to the same period in 1994. The
increase in other income primarily consisted of increases of $2.4
million in factoring revenues and $1.2 million in service charges
on deposits offset by a decrease of $1.2 million in securities
gains.
The Company, through Capital Factors, operates factoring offices in
Fort Lauderdale, Florida, Los Angeles, California, New York, New
York, and Charlotte, North Carolina. Total accounts receivable
factored amounted to $1.5 billion and $1.1 billion during the first
nine months of 1995 and 1994, respectively, representing an
increase of 30.9%. Factoring revenues, primarily representing
commissions earned on factored accounts receivable, increased 16.4%
from $14,708,000 in 1994 to $17,114,000 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.
Service charges on deposits increased 13.7% from $8,446,000 in 1994
to $9,603,000 in 1995. This increase is primarily due to the
adjustment of the pricing of some services during the second
quarter of 1994.
Page 13
- ------------------------------------------------------------------
<PAGE>
In 1994, securities gains included the gain on the sale of certain
floating rate Argentine bonds, received in connection with a prior
Brady Plan restructuring.
Other expenses increased $7.2 million, or 14%, consisting primarily
of increases of $5.1 million in other operating expenses and $2.2
million in salary and employee benefits. The increase in other
operating expenses primarily reflects the $2.7 million provision to
fully reserve for potential losses resulting from overdrafts
related to one customer and increases of $1.2 million in ORE
related expenses (primarily due to an increase in provisions for
potential losses). The increase in salary and employee benefits is
due to merit increases, increased benefit costs and work force
growth. Approximately 84% of the increase in personnel costs is
attributable to expansion of Capital Factors' activities.
RESULTS OF OPERATIONS - Three Months Ended September 30, 1995 and
1994
- -----------------------------------------------------------------
The Company recorded net income of $5,024,000 or $.66 per share,
for the three months ended September 30, 1995, compared to
$4,194,000 or $.58 per share (includes effect of stock split), for
the same period in 1994. The annualized return on average assets
was 1.34% for the three months ended September 30, 1995, compared
to 1.25% for the three months ended September 30, 1994. The
annualized return on average stockholders' equity was 19.01% for
the three months ended September 30, 1995 compared to 18.78% for
the same period in 1994. The increase in income was primarily a
result of improved net interest income, higher factoring revenue
and other operating income offset by increases in the provision for
loan losses, other operating expenses and salary and employee
benefits.
Net Interest Income
- -------------------
Net interest income for the three months ended September 30, 1995
increased $2.9 million over the comparable period in 1994, as a
result of an increase of $6.8 million in interest income (primarily
in interest and fees on loans and interest on advances to factoring
clients) offset by an increase of $3.9 million in interest expense
(primarily in time deposits and long term borrowings). The
increase in interest income is primarily due to higher average
balances along with higher average yields on interest earning
assets. Interest income for the three months ended September 30,
1995 also includes $975,000 in non-recurring interest related to
the collection of a loan previously on non-accrual status.
Interest expense was higher primarily due to higher average
interest bearing liabilities and higher average rates paid. The
net interest margin for the three months ended September 30, 1995
increased to 5.97% (excluding non-recurring collections) from 5.91%
for the three months ended September 30, 1994.
Provisions for Credit Losses
- ----------------------------
For the three months ended September 30, 1995, the provision for
loan losses increased $1,550,000 while the provision for doubtful
accounts remained unchanged compared to the same period in 1994.
During the third quarter of 1994, the Company had $1.9 million in
recoveries of loans which resulted in lower loan loss provisions
compared to 1995. The provisions reflect management's judgment as
to the amount deemed adequate to absorb potential loan and
receivable 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 $1.4 million, or 13% for the three months
ended September 30, 1995 compared to the same period in 1994. The
increase in other income primarily consisted of increases of
$938,000 in factoring revenues and $620,000 in other operating
income. Factoring revenue increased due to expansion of factoring
activities. The increase in other operating income primarily
relates to contract termination payments of $732,000 received upon
data processing conversion.
Other expenses increased $1.6 million, or 9% for the three months
ended September 30, 1995 compared to the same period in 1994. The
increase consisted primarily of increases of $874,000 in other
operating expenses and $603,000 in salary and employee benefits.
Other operating expenses increased primarily in other real estate
expenses due to increased provisions for potential losses. Salary
and employee benefits were higher due to merit increases, workforce
growth and increased benefit costs.
Page 14
- ------------------------------------------------------------------
<PAGE>
LITIGATION
- ----------
Various legal actions and proceedings are pending or are threatened
against the Company, 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 Company, 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 15
- ------------------------------------------------------------------
<PAGE>
<PAGE>
<TABLE>
CAPITAL BANCORP AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION
(All Dollar Amounts in Thousands)
<CAPTION>
For the Nine Months Ended September 30,
-------------------------------------------------------------------------------
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 $ 510,949 $ 38,680 10.12% $ 462,752 $ 31,589 9.13%
Foreign borrowers 124,055 7,626 8.22% 88,230 4,144 6.28%
Tax-exempt 20,198 2,463 16.31% 26,766 3,149 15.73%
---------- ---------- ----------- ---------
Total loans 655,202 48,769 9.95% 577,748 38,882 9.00%
Accounts receivable
advances-factoring
subsidiary, net of due to
clients 199,539 19,729 13.22% 144,454 11,638 10.77%
Securities:
Taxable 205,586 9,497 6.18% 196,110 8,426 5.74%
Tax-exempt 3,451 274 10.62% 4,401 350 10.65%
Federal funds sold and
securities purchased under
agreement to resell 39,391 1,945 6.60% 88,090 2,647 4.02%
---------- ---------- ---------- ---------
Total interest earning
assets 1,103,169 80,214 9.72% 1,010,803 61,943 8.19%
---------- ---------- ---------- ---------
Less allowance for loan losses
and doubtful accounts (12,912) (15,925)
Cash and due from banks 103,730 74,576
Due from customers on acceptances 27,915 29,712
Other real estate 11,856 13,941
Other assets 166,471 143,902
---------- ----------
Total assets $1,400,229 $1,257,009
========== ==========
</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. Yield and interest on loans
to U.S. borrowers exclude $975,000 in interest income relating
to the payoff of a loan which was previously on non-accrual status.
Page 16
- ------------------------------------------------------------------
<PAGE>
<TABLE>
CAPITAL BANCORP AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION
(All Dollar Amounts in Thousands)
<CAPTION>
For the Nine Months Ended September 30,
------------------------------------------------------------------------
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 $ 296,193 $ 5,133 2.32% $ 358,999 $ 5,105 1.90%
Time 332,937 13,223 5.31% 282,079 7,836 3.71%
---------- --------- ---------- ---------
Total interest bearing deposits 629,130 18,356 3.90% 641,078 12,941 2.70%
---------- --------- ---------- ---------
Federal funds purchased and short-term
borrowings:
Domestic banks -- -- -- 87 2 3.01%
Short-term borrowings 90,189 3,526 5.23% 87,814 2,585 3.94%
---------- --------- ---------- --------
90,189 3,526 5.23% 87,901 2,587 3.93%
---------- --------- ---------- --------
Long-term borrowings 138,570 7,907 7.63% 36,568 1,753 6.41%
---------- --------- ---------- --------
Total interest bearing liabilities 857,889 29,789 4.64% 765,547 17,281 3.02%
---------- --------- ---------- --------
Non-interest bearing deposits 289,431 271,840
Bank acceptances outstanding 27,915 29,712
Other liabilities 125,510 103,448
Stockholders' equity 99,484 86,462
---------- ----------
Total liabilities and stockholders'
equity $1,400,229 $1,257,009
========== ==========
Net interest earnings/yield $50,425 6.11% $44,662 5.91%
======= ===== ======= =====
Net interest spread 5.08% 5.17%
===== =====
Utilization rate 78.78% 80.41%
===== =====
</TABLE>
*See previous page for explanation.
Page 17
- ------------------------------------------------------------------
<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, and Part II, Item 1, "Legal Proceedings" of the
Company's Forms 10-Q for the quarters ended March 31, 1995 and June
30, 1995, 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, and Part II, Item 1, "Legal Proceedings" of the
Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1995, which descriptions are incorporated herein by reference
and made a part hereof.
AGUSTIN CORDERO, OLD CUTLER BAY DEVELOPMENT CORPORATION ET AL. VS.
CAPITAL BANK ET AL., 11TH JUDICIAL CIRCUIT, DADE COUNTY, FLORIDA,
CIV. ACTION 95-010662 (CA 23-DONNER)
This action is described in Part II, Item 3, "Legal Proceedings" of
the Company's Form 10-Q for the quarter ended June 30, 1995 (the
"June 10-Q"), which description is incorporated herein by reference
and made a part hereof. Since the date of the June 10-Q, the Bank
filed a motion to dismiss which was granted on November 9, 1995,
without prejudice, allowing the plaintiffs 30 days to amend the
complaint.
Other Litigation
- ----------------
In addition to the matters set forth above, various legal actions
and proceedings are pending or are threatened against the Company,
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 Company, 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 5. Other Information
- ---------------------------
As of August 31, 1995, Daniel Holtz, Chairman of the Board, Chief
Executive Officer and President of the Company, Fana Holtz, the
Vice Chairman of the Board, and Javier Holtz, a director of Capital
Bank owned and/or had the power to vote approximately 7%, 42%, 3%,
respectively, (52% in the aggregate) of the Company's Common Stock
(including shares of Common Stock subject to options exercisable by
such individuals within 60 days). As a result of discussions with
the Florida Department of Banking and Finance, Fana Holtz, Daniel
Holtz and Javier Holtz have advised the Company that they, both
individually and as a group, have voluntarily filed an application
to acquire and/or maintain a controlling interest in the Company.
They have also advised the Company that they do not believe that
such an application is legally required, but that they have filed
to resolve outstanding issues concerning their relationships with
the Company and Capital Bank. Fana Holtz, Daniel Holtz and Javier
Holtz are also having discussions with the Board of Governors of
the Federal Reserve System regarding these issues. The plaintiffs
in the first two legal proceedings described above and one other
shareholder have recently filed a Notice of Intention to Appear and
a Petition for a Formal Administrative Hearing with the Florida
Department of Banking and Finance in connection with the
disposition of the application. It cannot presently be determined
what effect, if any, this action and these discussions will have on
the Company.
Page 18
- ------------------------------------------------------------------
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibit 11 - Calculation of Earnings Per Share - Page 21
Exhibit 27 - Financial Data Schedule
(b) No Current Reports on Form 8-K were filed by the Company
during the quarter ended September 30, 1995.
Page 19
- ------------------------------------------------------------------
<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: November 14, 1995 By: /s/ Lucious T. Harris
-------------------------
LUCIOUS T. HARRIS
Senior Vice President and
Treasurer
(Principal Financial and
Accounting Officer)
Page 20
- ------------------------------------------------------------------
<PAGE>
EXHIBIT 11
<TABLE>
CAPITAL BANCORP AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
<CAPTION>
Nine Months Ended
September 30,
-------
Primary 1995 1994
- ------- ---- ----
<S> <C> <C>
Weighted average number of
common shares outstanding 7,167,449 6,937,655
Common equivalent shares
outstanding - options 426,692 236,914
----------- -----------
Total common and common
equivalent shares outstanding 7,594,141 7,174,569
=========== ===========
Net income $12,685,000 $10,700,000
=========== ===========
Primary earnings per share $ 1.67 $ 1.49
=========== ===========
Fully diluted
- -------------
Weighted average number of
common shares outstanding 7,167,449 6,937,655
Common equivalent shares
outstanding - options 715,202 236,914
----------- -----------
Total common and common
equivalent shares outstanding 7,882,651 7,174,569
=========== ===========
Net income $12,685,000 $10,700,000
=========== ===========
Fully diluted earnings per share $ 1.61 $ 1.49
=========== ===========
Threee Months Ended
September 30,
-------
Primary 1995 1994
- ------- ---- ----
Weighted average number of
common shares outstanding 7,186,217 6,986,036
Common equivalent shares
outstanding - options 449,941 216,892
----------- -----------
Total common and common
equivalent shares outstanding 7,636,158 7,202,928
=========== ===========
Net income $ 5,024,000 $ 4,194,000
=========== ===========
Primary earnings per share $ .66 $ .58
=========== ===========
Fully diluted
- -------------
Weighted average number of
common shares outstanding 7,186,217 6,986,036
Common equivalent shares
outstanding - options 496,749 216,892
----------- -----------
Total common and common
equivalent shares outstanding 7,682,966 7,202,928
=========== ===========
Net income $ 5,024,000 $ 4,194,000
=========== ===========
Fully diluted earnings per share $ .65 $ .58
=========== ===========
</TABLE>
Page 21
- ------------------------------------------------------------------
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