AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 1, 1997
REGISTRATION STATEMENT NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
REPUBLIC BANKING CORPORATION OF FLORIDA
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
FLORIDA 6711 59-1318959
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
<TABLE>
<S> <C>
OSCAR BUSTILLO, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
2800 PONCE DE LEON BOULEVARD 2800 PONCE DE LEON BOULEVARD
CORAL GABLES, FLORIDA 33134 CORAL GABLES, FLORIDA 33134
(305) 441-7300 (305) 441-7300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
---------------
COPIES OF COMMUNICATIONS TO:
<TABLE>
<S> <C>
ROBERT L. GROSSMAN, ESQ. JOHN REISS, ESQ.
GREENBERG TRAURIG HOFFMAN WHITE & CASE
LIPOFF ROSEN & QUENTEL, P.A. 1155 AVENUE OF THE AMERICAS
1221 BRICKELL AVENUE NEW YORK, NEW YORK 10036
MIAMI, FLORIDA 33131 (212) 819-8200
(305) 579-0500 (FACSIMILE) (212) 354-8113
(FACSIMILE) (305) 579-0717
</TABLE>
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE AGGREGATE OFFERING AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par value ... 2,300,000 shares $16.00 $36,800,000 $10,856
</TABLE>
================================================================================
(1) Includes 300,000 shares of Common Stock which may be purchased by the
Underwriters pursuant to an over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, as amended.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 1, 1997
PRELIMINARY PROSPECTUS
2,000,000 SHARES
REPUBLIC BANKING CORPORATION OF FLORIDA
COMMON STOCK
------------
Of the 2,000,000 shares of Common Stock (the "Common Stock") offered
hereby (the "Offering"), 933,270 shares are being sold by Republic Banking
Corporation of Florida (the "Company") and 1,066,730 shares are being sold by
certain shareholders of the Company (the "Selling Shareholders"). The Company
will not receive any proceeds from the sale of shares by the Selling
Shareholders. Prior to the Offering, there has been no established public
market for the Common Stock and there can be no assurance that any active
trading market will develop. The initial public offering price will be
determined by negotiations between the Company and the representatives of the
Underwriters (the "Representatives"). It is estimated that the initial public
offering price will be in the range of $14.00 to $16.00 per share. See
"Underwriting." Application has been made to have the shares of Common Stock
approved for quotation on The Nasdaq Stock Market's National Market ("Nasdaq")
under the symbol "RBCF."
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT
ACCOUNTS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
BANK INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER
GOVERNMENTAL AGENCY.
SEE "RISK FACTORS" ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
================================================================================
<TABLE>
<CAPTION>
PRICE PROCEEDS PROCEEDS TO
TO UNDERWRITING TO SELLING
PUBLIC DISCOUNTS (1) COMPANY(2) SHAREHOLDERS
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
Per Share ...... $ $ $ $
- --------------------------------------------------------------------------------
Total(3) ......... $ $ $ $
</TABLE>
================================================================================
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting."
(2) Before deducting Offering expenses payable by the Company, estimated at
$800,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
300,000 additional shares of Common Stock, on the same terms and
conditions as set forth above, solely to cover over-allotments, if any. If
such option is exercised in full, the total Price to Public, Underwriting
Discount and Proceeds to Company will be approximately $ ,
$ and $ , respectively. See "Underwriting."
The shares of Common Stock to be distributed to the public are offered by
the Underwriters, subject to prior sale, when, as and if received and accepted
by the Underwriters, subject to approval of certain legal matters by counsel
for the Underwriters and certain other conditions. The Underwriters reserve the
right to withdraw, cancel or modify such offer and to reject orders in whole or
in part. It is expected that delivery of the certificates for the shares of
Common Stock will be made against payment thereon in New York, New York on or
about , 1998.
KEEFE, BRUYETTE & WOODS, INC. CIBC OPPENHEIMER
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE>
----------------
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON NASDAQ IN ACCORDANCE
WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
OFFERED HEREBY. SUCH TRANSACTIONS MAY INCLUDE STABILIZING THE MARKET PRICE OF
THE COMMON STOCK, THE PURCHASE OF COMMON STOCK TO COVER SYNDICATE SHORT
POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION AND FINANCIAL
STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS
PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL SHARE AND PER SHARE INFORMATION HAS
BEEN ADJUSTED TO GIVE EFFECT TO A 2.5 FOR 1 STOCK SPLIT TO BE EFFECTED PRIOR TO
THE OFFERING (THE "STOCK SPLIT"). A REORGANIZATION OF THE CAPITAL STRUCTURE OF
THE COMPANY, WAS COMPLETED IN NOVEMBER 1997 (THE "REORGANIZATION") AND
CONSISTED OF THE ISSUANCE OF 1,220,225 SHARES OF COMMON STOCK (POST-STOCK
SPLIT) FOR SHARES IN THE COMPANY'S THEN 93.1%-OWNED SUBSIDIARY, REPUBLIC
NATIONAL BANK OF MIAMI (THE "BANK"). THE EFFECT OF THE REORGANIZATION IS
REFLECTED ONLY IN PRO-FORMA INFORMATION CONTAINED IN THIS PROSPECTUS AND AS
OTHERWISE INDICATED HEREIN. REFERENCES IN THIS PROSPECTUS TO THE "COMPANY"
INCLUDE REPUBLIC BANKING CORPORATION OF FLORIDA ("BANCORP"), AND ITS NOW
99.1%-OWNED SUBSIDIARY, THE BANK. UNLESS OTHERWISE INDICATED, ALL INFORMATION
IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT
EXERCISED.
THE COMPANY
GENERAL
Bancorp was incorporated as a business corporation under the laws of the
State of Florida in 1970 to serve as a holding company for the Bank. The Bank
was chartered in 1965 as a national bank with one banking office in Miami,
Florida. Since its formation, Bancorp has derived substantially all of its
revenues and income from the operations of the Bank. At September 30, 1997, the
Company had total assets of $1,517.5 million, total loans of $953.1 million,
total deposits of $1,298.5 million and total shareholders' equity of $129.2
million. As of March 31, 1997, the Company was the third largest independent
bank holding company in terms of deposits with headquarters in the State of
Florida.
The Company has reported consistent growth in earnings since 1993. The
Company's earnings have increased from $11.7 million in 1993 to $18.0 million
in 1996. During this period, the mean of the Company's return on average assets
was 1.26% and the mean of the Company's return on average equity was 15.24%.
For the nine months ended September 30, 1997, the Company earned $14.1
million, compared to $12.9 million for the nine months ended September 30,
1996. The 1997 results represent an annualized return on average assets of
1.23% and an annualized return on average equity of 15.42%.
MARKET POSITION
The Bank, since its formation, has acted as a community bank, serving the
needs of businesses and individuals located in Miami-Dade County, Florida. The
Company believes that Miami-Dade County, Florida is an attractive market for
operating a community bank. Miami-Dade County has a population of more than 2
million, representing more than 14% of the population of the State of Florida
and accounting for approximately 19.1% of domestic deposits in the State of
Florida. Miami-Dade County ranks first in population and first in deposits in
the State of Florida.
Historically, the Bank has catered primarily to the growing Cuban
population, which has become a major economic force in Miami-Dade County,
Florida, and to other Hispanic populations in Miami-Dade County, Florida. These
populations remain the core of the Bank's client base. In 1996, Hispanics
represented a majority of the population of Miami-Dade County, Florida.
Management believes that approximately 90% of the Company's customers are
Hispanic.
Although 94% of the Bank's branch deposits and 25 of its branches are
located in Miami-Dade County, Florida, the Company has recently established two
branches in adjoining Broward County, Florida. The Company intends to continue
its expansion in Broward County, Florida, and in future
3
<PAGE>
years, in adjoining Palm Beach County, Florida. Broward and Palm Beach
Counties, Florida, are two of the fastest-growing counties in the United
States. They rank as the counties with (i) the second and third largest
population bases in Florida, respectively, (ii) the second and third largest
banking markets in Florida, respectively, measured by total deposits, and (iii)
the eighth highest and the highest per capita income in Florida, respectively.
BUSINESS STRATEGY
The consolidation of financial institutions in south Florida has reduced
the number of locally-headquartered commercial banks. The Company believes that
this has created a niche for the Bank as a community bank which focuses on
establishing long-term relationships with its customers and in providing
responsive and personalized service to its customers. The Company's community
banking style emphasizes local decision-making ability by its management and
accessibility of its senior management to customers. The Company also attempts
to make decisions for customers quickly and to modify its products, if
appropriate, to match the needs of its customers. The Company believes that
these attributes allow the Company to compete effectively against larger,
regional financial institutions operating in south Florida. In addition, the
Company believes that the Bank's larger capital base, larger branch network and
broader product mix enable it to compete effectively against smaller community
banks operating in south Florida.
The Company's location in south Florida, which is also the location of
many businesses and individuals who engage in substantial trade with Latin
America and the Caribbean, and the Company's relationships with the Hispanic
community in Miami-Dade County, Florida, have enabled the Company to be active
in trade financing activities and in private banking operations with customers
in Latin America and the Caribbean. The Company derives a significant portion
of its deposits, loans and fee income from these customers.
CONTROLLING SHAREHOLDERS AND MANAGEMENT
The Company's largest shareholder is Rebank Netherlands Antilles N.V.
("Rebank"), which is owned by Roberto Isaias, Estefano Isaias and William
Isaias, three brothers who also own a major Ecuadorian bank. Roberto, Estefano
and William Isaias directly or indirectly own, in the aggregate, 13,190,005
shares or 65.6% of the issued and outstanding Common Stock after the
Reorganization and prior to this Offering and will own 62.7% of the issued and
outstanding Common Stock after this Offering, as none of the Isaias brothers
are selling shares of Common Stock in this Offering. The Isaias family acquired
control of the Company in 1970.
Roberto Isaias is the Chairman of the Board of Bancorp and has served in
that capacity since 1982. He has been a director of Bancorp since 1970. Oscar
Bustillo, Jr., the Chief Executive Officer and President of Bancorp and
Chairman of the Board, Chief Executive Officer and President of the Bank,
joined the Bank in 1985. In 1989, Mr. Bustillo became President of the Bank and
in 1994 he became President of Bancorp. The Company's President and six
Executive Vice Presidents have an aggregate of nearly 200 years of banking
experience. Its three Executive Vice Presidents involved in lending have an
aggregate of 65 years of lending experience. Its Executive Vice
President--Retail Banking has 28 years of experience in the industry. The
Company believes that this combination of consistent ownership and highly
experienced local management gives the Company a competitive advantage in
operating a community banking institution.
LENDING ACTIVITIES
The Bank's lending activities consist of community bank lending activities
and international lending activities.
The Bank, in its community bank lending activities, initially served as a
commercial lender to small and medium-sized businesses and as a commercial real
estate lender. Construction loans and consumer
4
<PAGE>
loans have also been part of the Bank's loan portfolio since it commenced
business. The Bank has continued to add a variety of other loan products.
Today, the bank has a diversified loan portfolio. At September 30, 1997, the
Company's community bank lending activities consisted primarily of commercial
loans ($289.3 million), commercial real estate and construction loans ($303.4
million), single-family residential mortgage loans ($150.1 million) and
consumer loans, including equity lines, ($82.6 million).
The Company's international lending activities are leveraged off
historical relationships the Company has formed with correspondent financial
institutions in Latin America and the Caribbean. At September 30, 1997, the
Company's total international lending activities, including foreign bank
acceptances, consisted of $106.7 million of loans.
The Company's international lending activities primarily include (i) trade
financing for correspondent financial institutions in Latin America and the
Caribbean, including pre-export financing, advances on letters of credit and
bankers' acceptances, (ii) trade financing for local commercial customers who
are primarily importing from or exporting to Latin America or the Caribbean,
(iii) the term financing of the export of United States goods and services
guaranteed by the EximBank and (iv) other correspondent banking services. Trade
finance for correspondent financial institutions comprises the largest segment
of the Company's international lending activities and represents 7.62% of the
Company's total lending activities. The yield on such loans is lower than the
average yield for the Company's loan portfolio, but such loans are floating
rate, have short term maturities, and historically have had low credit losses.
Accordingly, the Company considers this to be an attractive line of business.
Management also believes that the Company has a significant opportunity to
expand its EximBank guaranteed financing business.
DEPOSITS AND BRANCH OFFICES
Lending and investment activities are funded from a strong deposit base,
which consisted of over 100,000 deposit accounts at September 30, 1997.
Approximately 43.40% of the amount of the Company's deposits at September 30,
1997 consisted of checking and savings accounts.
The Company primarily attracts deposits through a network of 27 branches,
25 of which are located in Miami-Dade County, Florida and two of which are
located in Broward County, Florida. The Company built its strong core deposit
base through de novo expansion, as well as through acquisitions. From 1988 to
1991, the Company acquired branch locations and deposits from four failed
financial institutions being liquidated by the Federal Deposit Insurance
Corporation (the "FDIC") and the Resolution Trust Corporation (the "RTC"). In
1995, the Company expanded its retail offices in Miami-Dade County as well as
entered into Broward County, Florida with the acquisition of Plaza Bank of
Miami.
In addition to its branch deposit base, the Company obtains significant
deposits as a result of its relationships throughout Latin America and the
Caribbean and from foreigners who travel to south Florida. Such deposits
provide the Company with an additional funding source at reasonable costs,
require lower overhead expenses than domestic deposit gathering activities and
provide the Company with additional fee income through service charges. At
September 30, 1997, $331 million of the Company's deposits were from foreigners
or correspondents, $169 million of which were attributable to the private
banking department. The Company intends to continue to maintain this deposit
base by providing quality services to its private banking customers and by
maintaining relationships in Latin America and the Caribbean.
GROWTH STRATEGY
The Company also believes that consolidation of the south Florida banking
industry should provide it with the opportunity to service additional customers
who prefer to conduct business with a local,
5
<PAGE>
community-oriented financial institution, such as the Company, and that the
Company can take advantage of the opportunities presented by the growing
populations in Miami-Dade, Broward and Palm Beach Counties, Florida.
The Company's overall business strategy is to (i) continue to serve the
local community by increasing lending activity in commercial, commercial real
estate, construction and single-family residential loans, (ii) increase
international trade services, (iii) take advantage of regional bank
consolidation by pursuing customers wishing to do business with a local
community bank and (iv) expand its operations in south Florida.
Such expansion could be through the formation of de novo branches or
through strategic acquisitions of financial institutions or banking assets in
those locations that management believes would complement and help grow the
Company's existing business. Such acquisitions may be structured as
stock-for-stock exchanges with other institutions. The Company believes that
having publicly traded stock will facilitate such acquisitions and therefore
enhance the ability of the Company to expand through acquisitions. See "Risk
Factors."
HEADQUARTERS
The Company's headquarters are located at 2800 Ponce de Leon Boulevard,
Coral Gables, Florida 33134, and its telephone number is (305) 441-7300.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company ...... 933,270 shares
Common Stock offered by the Selling
Shareholders ........................... 1,066,730 shares
Common Stock to be outstanding after
the Offering ........................... 21,026,399 shares(1)(2)
Use of Proceeds ........................... The estimated net proceeds of the Offering to the
Company (approximately $12.2 million at an assumed
initial offering price of $15.00) will be invested in the
capital of the Bank to support future growth in its
business and for working capital and other general
corporate purposes. See "Use of Proceeds."
Risk Factors .............................. See "Risk Factors" and "Dilution" for a discussion of
certain factors that should be considered by each
prospective investor.
Proposed Nasdaq Symbol .................. "RBCF"
</TABLE>
- ----------------
(1) Does not include 1,000,000 shares of Common Stock reserved for issuance
upon the exercise of options under the Company's 1998 Stock Option Plan
(the "Plan") pursuant to which options to purchase shares of Common
Stock will be issued and outstanding upon consummation of this Offering at
an exercise price equal to the initial public offering price. See
"Management--1998 Stock Option Plan."
(2) Upon consummation of this Offering, 68.7% of the issued and outstanding
shares of Common Stock of the Company will be held by the Company's
executive officers, directors and beneficial owners of more than 5% of the
issued and outstanding shares of Common Stock.
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following Summary Consolidated Financial Data of the Company is
derived from the Selected Consolidated Financial Data appearing elsewhere in
this Prospectus, and should be read in conjunction with the consolidated
financial statements of the Company and the notes thereto (the "Consolidated
Financial Statements"), the information contained in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and other
financial information included elsewhere in this Prospectus. The selected
historical consolidated financial data as of and for the four years ended
December 31, 1996 are derived from the Company's Consolidated Financial
Statements which have been audited by Price Waterhouse LLP, independent
certified public accountants. The selected historical consolidated financial
data as of and for the year ended December 31, 1992 are derived from the
Company's Consolidated Financial Statements which have been audited by other
independent certified public accountants. The selected historical consolidated
financial data as of and for the nine months ended September 30, 1997 and
September 30, 1996 have not been audited but, in the opinion of management,
contain all adjustments (consisting of normal recurring adjustments) necessary
for a fair statement of the results for the interim periods. The results of
operations for the nine months ended September 30, 1997 are not necessarily
indicative of the results of operations that may be expected for the year ended
December 31, 1997, or for any future periods.
<TABLE>
<CAPTION>
AS OF AND FOR THE
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1997 1996
------------ ------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
INCOME STATEMENT DATA:
Interest income .................................... $ 85,886 $ 77,323
Interest expense ................................. 38,039 31,762
-------- --------
Net interest income .............................. 47,847 45,561
Provision for loan losses ........................ 3,604 1,778
-------- --------
Net interest income after provision for loan losses 44,243 43,783
Noninterest income ................................. 17,963 17,856
Noninterest expenses .............................. 39,799 40,345
-------- --------
Net income before taxes ........................... 22,407 21,294
Provision for income tax expense .................. 7,243 7,468
Cumulative effect of change in accounting principle -- --
Minority interest ................................. 1,058 961
-------- --------
Net income ....................................... $ 14,106 $ 12,865
======== ========
PRO FORMA INCOME STATEMENT DATA(1):
Net income before taxes ........................... $ 22,238
Provision for income tax expense .................. 7,243
Minority interest ................................. 144
--------
Net income ....................................... $ 14,851
========
PER SHARE DATA(2):
Net income ....................................... $ 0.75 $ 0.68
Book value ....................................... 6.84 6.31
Tangible book value .............................. 6.39 5.81
Cash dividends .................................... 0.52 0.50
Dividends payout ratio ........................... 69.33% 73.53%
Weighted average common and common equivalent shares
outstanding (in thousands) ........................ 18,873 18,873
PRO FORMA PER SHARE DATA(1):
Net income ....................................... $ 0.74
Book value ....................................... 7.07
Cash dividends .................................... 0.52
Dividends payout ratio ........................... 70.27%
Weighted average common and common equivalent shares
outstanding (in thousands) ........................ 20,093
<CAPTION>
AS OF AND FOR THE
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1996 1995 1994 1993 1992
------------- ------------ ------------ ------------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income .................................... $ 104,134 $ 95,056 $ 76,964 $ 75,531 $ 83,737
Interest expense ................................. 43,249 38,411 24,322 21,795 31,984
--------- -------- -------- --------- --------
Net interest income .............................. 60,885 56,645 52,642 53,736 51,753
Provision for loan losses ........................ 2,381 890 2,500 2,450 3,205
--------- -------- -------- --------- --------
Net interest income after provision for loan losses 58,504 55,755 50,142 51,286 48,548
Noninterest income ................................. 24,231 22,458 20,289 17,046 17,886
Noninterest expenses .............................. 53,017 50,021 46,456 50,379 47,822
--------- -------- -------- --------- --------
Net income before taxes ........................... 29,718 28,192 23,975 17,953 18,612
Provision for income tax expense .................. 10,324 9,103 7,687 6,181 4,983
Cumulative effect of change in accounting principle -- -- -- 838 --
Minority interest ................................. 1,350 1,330 1,136 881 949
--------- -------- -------- --------- --------
Net income ....................................... $ 18,044 $ 17,759 $ 15,152 $ 11,729 $ 12,680
========= ======== ======== ========= ========
PRO FORMA INCOME STATEMENT DATA(1):
Net income before taxes ........................... $ 29,492
Provision for income tax expense .................. 10,324
Minority interest ................................. 184
---------
Net income ....................................... $ 18,984
=========
PER SHARE DATA(2):
Net income ....................................... $ 0.96 $ 0.94 $ 0.80 $ 0.62 $ 0.67
Book value ....................................... 6.61 6.15 5.32 5.06 4.84
Tangible book value .............................. 6.12 5.62 5.25 4.97 4.73
Cash dividends .................................... 0.50 0.25 0.42 0.40 0.35
Dividends payout ratio ........................... 52.08% 26.60% 52.50% 64.52% 52.24%
Weighted average common and common equivalent shares
outstanding (in thousands) ........................ 18,873 18,873 18,873 18,873 18,873
PRO FORMA PER SHARE DATA(1):
Net income ....................................... $ 0.94
Book value .......................................
Cash dividends .................................... 0.50
Dividends payout ratio ........................... 53.19%
Weighted average common and common equivalent shares
outstanding (in thousands) ........................ 20,093
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
AS OF AND FOR THE
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------------
1997 1996
--------------- ---------------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets .......................................... $ 1,517,529 $ 1,451,676
Securities ............................................. 384,988 346,676
Loans ................................................... 953,052 909,202
Allowance for loan losses .............................. 12,209 11,770
Total deposits .......................................... 1,298,535 1,253,964
Total shareholders' equity .............................. 129,150 119,123
PRO FORMA BALANCE SHEET DATA(1):
Total assets .......................................... $ 1,522,044
Total shareholders' equity .............................. 141,989
AVERAGE BALANCE SHEET DATA:
Total assets .......................................... $ 1,533,553 $ 1,387,477
Securities ............................................. 330,095 324,240
Loans ................................................... 983,091 851,834
Allowance for loan losses .............................. 12,272 11,823
Total deposits .......................................... 1,326,907 1,208,298
Total shareholders' equity .............................. 122,346 114,714
PERFORMANCE RATIOS(3):
Return on average assets .............................. 1.23% 1.24%
Return on average equity .............................. 15.42 14.98
Net interest margin .................................... 4.57 4.81
Efficiency ratio(4) .................................... 60.48 63.62
ASSET QUALITY RATIOS(5):
Nonperforming assets to total loans and other real
estate ................................................ 1.82% 0.60%
Net loan charge-offs to average loans(3) ............... 0.40 0.22
Allowance for loan losses to total loans ............... 1.28 1.29
Allowance for loan losses to nonperforming loans(6) 79.70 504.93
CAPITAL RATIOS(5):
Leverage ratio .......................................... 8.52% 8.27%
Average shareholders' equity to average total assets . 7.98 8.27
Tier 1 risk-based capital ratio ........................ 14.14 14.06
Total risk-based capital ratio ........................ 15.39 15.31
<CAPTION>
AS OF AND FOR THE
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
1996 1995 1994 1993
---------------- --------------- --------------- ---------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets .......................................... $ 1,511,951 $ 1,324,968 $ 1,172,209 $ 1,106,641
Securities ............................................. 331,204 320,084 359,545 284,611
Loans ................................................... 973,640 821,090 667,091 641,413
Allowance for loan losses .............................. 11,578 11,411 11,680 11,563
Total deposits .......................................... 1,320,126 1,156,324 1,029,116 967,615
Total shareholders' equity .............................. 124,693 116,140 100,447 95,509
PRO FORMA BALANCE SHEET DATA(1):
Total assets ..........................................
Total shareholders' equity ..............................
AVERAGE BALANCE SHEET DATA:
Total assets .......................................... $ 1,405,517 $ 1,261,146 $ 1,136,191 $ 1,148,513
Securities ............................................. 327,425 348,438 328,504 342,779
Loans ................................................... 872,094 735,318 635,555 627,929
Allowance for loan losses .............................. 11,793 11,893 11,968 10,922
Total deposits .......................................... 1,221,350 1,105,382 1,000,787 1,011,508
Total shareholders' equity .............................. 116,493 106,141 95,250 91,393
PERFORMANCE RATIOS(3):
Return on average assets .............................. 1.28% 1.41% 1.33% 1.02%
Return on average equity .............................. 15.49 16.73 15.91 12.83
Net interest margin .................................... 4.75 4.91 5.06 5.14
Efficiency ratio(4) .................................... 62.29 63.09 63.70 71.17
ASSET QUALITY RATIOS(5):
Nonperforming assets to total loans and other real
estate ................................................ 0.55% 0.96% 1.21% 2.19%
Net loan charge-offs to average loans(3) ............... 0.25 0.25 0.37 0.14
Allowance for loan losses to total loans ............... 1.19 1.39 1.75 1.80
Allowance for loan losses to nonperforming loans(6) 395.96 244.09 230.74 112.46
CAPITAL RATIOS(5):
Leverage ratio .......................................... 8.52% 8.78% 9.32% 8.82%
Average shareholders' equity to average total assets . 8.29 8.42 8.38 7.96
Tier 1 risk-based capital ratio ........................ 14.44 13.75 15.63 16.13
Total risk-based capital ratio ........................ 15.69 15.00 16.88 17.38
<CAPTION>
1992
---------------
<S> <C>
BALANCE SHEET DATA:
Total assets .......................................... $ 1,193,649
Securities ............................................. 343,900
Loans ................................................... 678,920
Allowance for loan losses .............................. 10,022
Total deposits .......................................... 1,062,368
Total shareholders' equity .............................. 91,329
PRO FORMA BALANCE SHEET DATA(1):
Total assets ..........................................
Total shareholders' equity ..............................
AVERAGE BALANCE SHEET DATA:
Total assets .......................................... $ 1,195,731
Securities ............................................. 372,866
Loans ................................................... 613,459
Allowance for loan losses .............................. 9,116
Total deposits .......................................... 1,068,858
Total shareholders' equity .............................. 84,479
PERFORMANCE RATIOS(3):
Return on average assets .............................. 1.06%
Return on average equity .............................. 15.01
Net interest margin .................................... 4.78
Efficiency ratio(4) .................................... 68.67
ASSET QUALITY RATIOS(5):
Nonperforming assets to total loans and other real
estate ................................................ 4.62%
Net loan charge-offs to average loans(3) ............... 0.27
Allowance for loan losses to total loans ............... 1.48
Allowance for loan losses to nonperforming loans(6) 64.20
CAPITAL RATIOS(5):
Leverage ratio .......................................... 8.03%
Average shareholders' equity to average total assets . 7.07
Tier 1 risk-based capital ratio ........................ 14.46
Total risk-based capital ratio ........................ 15.71
</TABLE>
- ----------------
(1) Pro forma balance sheet information gives effect to the Reorganization as
if it occurred on September 30, 1997. Pro forma income statement
information gives effect to the goodwill amortization and change in
minority interest as a result of the Reorganization as if the
Reorganization occurred on January 1, 1996.
(2) Per share data is based upon the weighted average number of common and
common equivalent shares outstanding during the period, adjusted for a 20%
stock dividend in 1996 and for the 2.5 for 1 stock split.
(3) All interim periods have been annualized.
(4) Calculated by dividing total noninterest expenses by net interest income
plus noninterest income, excluding securities gains and losses.
(5) At period end, except for "Net loan charge-offs to average loans" and
"Average shareholders' equity to average total assets."
(6) Nonperforming loans consist of nonaccrual loans, restructured loans and
accruing loans 90 days or more past due.
8
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK, INCLUDING THE RISKS DESCRIBED BELOW. IN ADDITION TO THE OTHER INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE HEREIN, THE FOLLOWING FACTORS SHOULD BE
CONSIDERED CAREFULLY IN EVALUATING THE COMPANY BEFORE PURCHASING THE COMMON
STOCK OFFERED HEREBY. INFORMATION CONTAINED IN THIS PROSPECTUS CONTAINS
"FORWARD-LOOKING STATEMENTS" WHICH CAN BE IDENTIFIED BY THE USE OF
FORWARD-LOOKING TERMINOLOGY SUCH AS "BELIEVES," "EXPECTS," "MAY," "WILL,"
"SHOULD," "COULD," "INTEND," "ESTIMATED," "PROJECTED," "CONTEMPLATED" OR
"ANTICIPATES" OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE
TERMINOLOGY. NO ASSURANCE CAN BE GIVEN THAT THE FUTURE RESULTS COVERED BY THE
FORWARD-LOOKING STATEMENTS WILL BE ACHIEVED. THESE STATEMENTS, BY THEIR NATURE,
INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES, CERTAIN OF WHICH ARE BEYOND THE
COMPANY'S CONTROL. THE FOLLOWING FACTORS AND OTHER FACTORS DESCRIBED ELSEWHERE
IN THIS PROSPECTUS COULD CAUSE ACTUAL EXPERIENCE TO VARY MATERIALLY FROM THE
FUTURE RESULTS COVERED IN SUCH FORWARD-LOOKING STATEMENTS. OTHER FACTORS, SUCH
AS THE GENERAL STATE OF THE ECONOMY, COULD ALSO CAUSE ACTUAL EXPERIENCE TO VARY
MATERIALLY FROM THE MATTERS COVERED IN SUCH FORWARD-LOOKING STATEMENTS.
EXPOSURE TO LOCAL AND REGIONAL ECONOMIC CONDITIONS
The Company's success is dependent to a significant extent upon general
economic conditions in Florida, particularly south Florida, and Latin America
and the Caribbean. General economic conditions include such factors as the
south Florida real estate market, inflation, recession, unemployment and other
factors beyond the Company's control. During the mid-1980s, adverse economic
conditions in Latin America adversely affected the south Florida economy. In
the 1990s, the economy has improved in part due to economic growth in Latin
America. Although the south Florida economy has strengthened, it remains
susceptible to adverse effects resulting from adverse conditions in the south
Florida real estate markets, a decline in tourism, or adverse economic
conditions or recession in the national economy or in Latin America or the
Caribbean. Economic recession over a prolonged period or other economic
dislocation in south Florida, Latin America or the Caribbean could cause
increases in nonperforming assets, thereby causing operating losses, impairing
liquidity and eroding capital. There can be no assurance that future adverse
changes in the Florida, Latin American or Caribbean economies would not have a
material adverse effect on the Company's financial condition, results of
operations or cash flows.
INTEREST RATE RISK
The Company's earnings depend to a great extent on "rate differentials,"
which are the differences between interest income that the Company earns on
interest-bearing assets, such as loans and investments, and the interest
expense paid on interest-bearing liabilities, such as deposits and other
borrowings. Financial institutions, including the Bank, are affected by changes
in general interest rate levels. Fluctuations in interest rates are not
predictable or controllable. Interest rates are highly sensitive to many
factors which are beyond the Company's control, including general economic
conditions and the policies of various government and regulatory authorities.
For example, actions taken by the Board of Governors of the Federal Reserve
System (the "FRB") can lead to changes in interest rates, which affect the
Company's interest income, interest expense and investment portfolio. The
nature, timing and effect of any future changes in federal monetary and fiscal
policies on the Company and its results of operations are not predictable. From
time to time, maturities of assets and liabilities are not balanced, and a
rapid increase or decrease in interest rates could have a material adverse
effect on the net interest margin and results of operations of the Company.
There can be no assurance that the Company will not experience a material
adverse effect on its net interest income in a changing rate environment. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--For the Nine Months Ended September 30, 1997 and 1996--Interest
Rate Sensitivity and Liquidity" and "--For the Years Ended December 31, 1996,
1995 and 1994"--Interest Rate Sensitivity and Liquidity."
CREDIT RISKS AND COLLATERAL
The financial difficulty or failure of customers of the Company may
adversely affect the Company's ability to recover funds due to it. In addition,
most of the Company's lending and financing activities
9
<PAGE>
involve collateral or guarantees. The Company, in its lending, runs the risk
that such collateral or guarantees will be inadequate, largely due to changing
market conditions, deteriorating financial condition of guarantors or
deterioration in the value of the collateral. In its trade financing activity,
the Company also runs the risk of fraud in the underlying trade transaction,
which may leave either the Company or its customer holding documents of title
to non-existent or defective goods. In addition, at September 30, 1997,
approximately 82.00% of the Company's lending to correspondent banks involved
pre-export financing, which is unsecured and more susceptible to risks
associated with the creditworthiness of the borrower and economic and political
conditions in Latin America. Accordingly, the Company maintains an allowance
for loan losses. The allowance for loan losses is determined after evaluating
historic loan loss experience adjusted for current conditions and
circumstances, ratio analyses of credit quality classifications and their trend
in light of current portfolio trends and economic conditions, as well as other
pertinent considerations, all of which involve significant estimation and
judgment and are subject to rapid changes which may not be foreseeable. As a
result, ultimate losses could vary significantly from current estimates and may
be either greater or less than the Company's allowance for loan losses. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--For the Nine Months Ended September 30, 1997 and 1996--Allowance
For Loan Losses" and "--For the Years Ended December 31, 1996, 1995 and
1994--Allowance for Loan Losses."
ABILITY OF THE COMPANY TO CONTINUE ITS GROWTH
The Company has historically achieved growth in its lending activities by
attracting new customers, expanding its services to existing customers and
increasing its deposit base. In 1995 and 1996, the Company's total loans
increased approximately 23.08% and 18.57% in the aggregate, respectively, to
approximately $821.1 million and $973.6 million, and deposits increased by
approximately 12.36% and 14.17%, respectively, to approximately $1,156.3
million and $1,320.1 million. There can be no assurance that the Company will
be able to continue to grow at these rates in the future. In fact, for the nine
month period ended September 30, 1997, total loans decreased by 2.11% to $953.1
million, and deposits decreased by 1.64% to $1,298.5 million. Management
believes that these declines were primarily attributable to the disruption
caused by the announcement of a proposed sale of the Company to Barnett Banks,
Inc. ("Barnett") and the subsequent termination of the negotiations related
thereto. Historical growth rates are not necessarily indicative of future
results, and it becomes more difficult to maintain historical rates of growth
as a company increases in size. The Company's ability to further implement its
strategy for continued growth of its lending activities is largely dependent
upon the Company's ability to attract and retain quality customers for the
Company's services in a competitive market, on the business growth of those
customers, and on the Company's ability to increase deposit growth, all of
which may be affected by a number of factors not within the Company's control.
As many of the Company's loans and most of its deposits are short-term in
nature and thereby turn over rapidly, any decline or reversal of the growth
rate could occur more quickly than it would otherwise. Moreover, as part of its
growth strategy, the Company expects to increase its exposure to certain
customers and to attract larger customers. A significant loss on these larger
exposures could have a material adverse effect on the Company's business,
prospects, financial condition and results of operations.
CONCENTRATION OF DEPOSITS
A significant portion of the Company's deposits are comprised of
certificates of deposit and other time deposits in amounts in excess of
$100,000. At September 30, 1997, approximately 21.73% of the Company's total
deposits were comprised of time deposits in amounts in excess of $100,000. Most
of such deposits closely match the maturity of the Company's assets. In the
event that more deposits were withdrawn at or prior to their respective
maturities than anticipated, the Company could be required to satisfy such
deposit amounts through the (i) sale of short-term investments, (ii) borrowings
utilizing its investment portfolio as collateral, (iii) sale or securitization
of Fannie Mae qualified residential mortgage loans, (iv) discount of bankers'
acceptances or (v) liquidation of certain investments. Although management
believes that it has historically been successful in matching the maturity
dates of these deposits against its loan portfolio, there can be no assurance
that the Company will continue to be successful or that it would not ultimately
be required to liquidate assets or take other steps in order to satisfy such
deposit amounts.
10
<PAGE>
COMPETITION
The banking business is highly competitive, and the profitability of the
Company depends principally upon the Company's ability to compete in the market
areas in which its banking operations are located. The Company competes for
loans, deposits and other matters with other commercial banks, savings banks,
savings and loan associations, credit unions, finance companies, mutual funds,
insurance companies, brokerage and investment banking firms and asset-based
non-bank lenders which may offer more favorable financing than the Company. The
Company competes with similarly-sized local financial institutions, regional
and multi-regional financial institutions and smaller community banks, although
its size, including the number of branches, and a higher legal lending limit,
give it certain competitive advantages with respect to the smaller community
banks. In Broward and Palm Beach counties, the Company may compete primarily
with regional and multi-regional financial institutions. Many of the foregoing
institutions also are the primary competitors of the Company for employees and
several of them hired a number of Company employees after the announcement of a
proposed sale to Barnett. In addition, the Company competes with major money
center banks and foreign banks operating in Miami-Dade County with respect to
its private banking and international lending businesses. Many of the Company's
competitors, including the regional and multi-regional financial institutions,
have greater financial and other resources than the Company. Although the
Company has been able to compete effectively with other financial institutions
in the past, no assurances may be given that the Company will continue to be
able to compete effectively in the future. In addition, various legislative
acts in recent years have led to increased competition among financial
institutions. As a result of these acts, most barriers to entry in the south
Florida market by out-of-state financial institutions have been eliminated.
There can be no assurance that the United States Congress or the Florida
legislature will not enact legislation that may further increase competitive
pressures on the Company. Competition from both financial and nonfinancial
institutions is expected to continue. See "The Company--Competition."
RISKS ASSOCIATED WITH CROSS-BORDER LENDING ACTIVITIES
At September 30, 1997, approximately 13.28% in principal amount of the
Company's total loans were outstanding to borrowers in over 20 countries
outside the United States, almost exclusively in Latin America and the
Caribbean, including Brazil (3.35%), Peru (1.57%) and Ecuador (1.26%). All such
loans are denominated in United States dollars. Most of these borrowers are
correspondent banks, which are subject to different types of regulation than
United States banks. Providing loans and financing in Latin America and the
Caribbean subjects the Company to certain economic and political risks in
addition to the usual credit risks involved with lending and financing,
including those described in "--Credit Risks and Collateral."
ECONOMIC RISKS
During the 1980s, many of the countries in Latin America and the Caribbean
experienced severe economic difficulties, including periods of slow or negative
growth, large government budget deficits, high inflation, currency
devaluations, government influence over the private sector, nationalization and
expropriation of assets, vulnerability to weakness in world prices for
commodity exports (particularly in smaller countries), large foreign
indebtedness on the part of their governments, and exchange controls and
unavailability of foreign exchange, including United States dollars. As a
result, many governments and public and private institutions in this region
were unable to make interest and principal payments on their external debt.
Much of this external debt has now been restructured to provide for extensions
of repayment schedules, grace periods during which payments of principal are
suspended and, in certain cases, reduced rates of interest. In recent years
there have been significant improvements in the economies of many countries in
this region. However, there have been periodic, serious economic downturns for
countries in this region, and there can be no assurance that widespread
economic difficulties will not be experienced by countries in this region at
some time in the future. Any such downturn could adversely affect business in
Latin America and the Caribbean and could have a material adverse effect on the
Company's business, prospects, financial condition and results of operations.
11
<PAGE>
POLITICAL RISKS
Democracy has largely prevailed in Latin America and the Caribbean since
the early 1990s, and was endorsed as a key, shared principle at the
Presidential Summit of the Americas celebrated in Miami, Florida in December
1994 among 37 Presidents representing various Hemispheric nations.
Nevertheless, many Latin American and Caribbean countries have a history of
political instability involving periodic, non-democratic forms of government. A
number of these countries have also experienced or are experiencing popular
unrest, internal insurgencies, terrorist activities, hostilities with
neighboring countries, drug trafficking and authoritarian military governments.
A return to such non-democratic forms of government or expansion of such
destabilizing activities in one or more of the key countries in Latin America
or the Caribbean could affect investors' confidence not only in these
countries, but in Latin America and the Caribbean as a whole, reducing trade
with such countries. This could have a material adverse effect on the south
Florida economy generally and on the Company's lending and financing activities
in Latin America and the Caribbean and, consequently, on the Company's
business, prospects, financial condition and results of operations.
REGULATION
Bank holding companies and banks operate in a highly regulated environment
and are subject to extensive supervision and examination by several federal and
state regulatory agencies. Bancorp is subject to the Bank Holding Company Act
of 1956, as amended (the "BHCA"), and to regulation and supervision by the FRB.
The Bank, as a national bank, the deposits of which are insured by the FDIC, is
subject to the primary regulation and supervision of the Office of the
Comptroller of the Currency (the "OCC"). These regulations are intended
primarily for the protection of depositors and customers, rather than for the
benefit of investors. Federal laws and regulations govern numerous matters,
including changes in the ownership or control of banks and bank holding
companies, maintenance of adequate capital and the financial condition of a
financial institution, permissible types, amounts and terms of extensions of
credit and investments, permissible non-banking activities, the level of
reserves against deposits and restrictions on dividend payments. In addition,
the FRB has adopted a policy that requires a bank holding company such as
Bancorp to serve as a source of financial strength to its banking subsidiaries.
The FRB has required bank holding companies to contribute cash to their
troubled bank subsidiaries based upon this "source of strength" policy, which
could have the effect of decreasing funds available for distributions to
shareholders. In addition, a bank holding company in certain circumstances
could be required to guarantee the capital plan of an undercapitalized banking
subsidiary. The OCC and the FDIC possess cease and desist powers to prevent or
remedy unsafe or unsound practices or violations of law by national banks, and
the FRB possesses similar powers with respect to bank holding companies. These
and other restrictions limit the manner in which Bancorp and the Bank may
conduct business and obtain financing.
The Company is subject to changes in federal and state laws, as well as
changes in regulations and governmental policies, income tax laws and
accounting principles. The effects of any potential changes cannot be predicted
but could materially adversely affect the business and operations of the
Company in the future. Furthermore, the commercial banking business is affected
by general economic conditions, and the monetary policies of the FRB. See "The
Company--OCC Agreement" and "Regulation."
FOREIGN OWNERSHIP OF UNITED STATES BANKS
Since the enactment of the federal Foreign Bank Supervision and
Enforcement Act of 1991, it has become increasingly difficult for foreign
companies, and foreign individuals acting through a holding company, to acquire
control of United States banks. In mid-1996, the Bank submitted to the FRB the
names of Roberto, William and Estefano Isaias, the controlling shareholders of
the Company, for the FRB to initiate background checks. Such checks are part of
the process of obtaining FRB approval of an acquisition and are believed to
require considerable time to complete. Until such time as the Bank is notified
that such background checks are completed and that the FRB would not have an
objection to an acquisition by the Company of another United States bank based
on such background checks, the Company does not intend to undertake
acquisitions which require FRB approval. No assurance can be given that such
background checks will be completed at any time or, if completed, that the FRB
would
12
<PAGE>
approve the Company's acquisition of another United States bank. As a result,
the Company's ability to acquire other institutions is more limited than that
of domestically owned institutions, but the Company believes that it can
acquire other institutions in transactions which are structured in such a way
so as not to require the approval of the FRB. For example, currently, a direct
bank to bank merger effected by the Bank would not necessarily be subject to
FRB approval. However, such direct mergers could have adverse tax consequences
to the Company unless they can be structured as tax-free transactions under the
Internal Revenue Code of 1986, as amended. The Company believes that having
publicly traded stock will facilitate such "tax free" acquisitions and
therefore enhance the ability of the Company to expand through acquisitions.
Currently, foreign individuals are required by the FRB to enter into a
series of negotiated commitments prior to acquiring control of a United States
bank. Although the Isaias family entered into certain commitments in 1987 when
they organized Rebank, should the Company decide to effect a merger or
acquisition which requires approval of the FRB, the completion of that
acquisition could be also hampered or delayed should the FRB at that time feel
it appropriate to require the Company's foreign majority shareholders to enter
into additional commitments.
RESTRICTIONS ON ABILITY TO PAY DIVIDENDS
While Bancorp has paid cash dividends on the Common Stock since 1990,
there is no assurance that Bancorp will pay dividends on the Common Stock in
the future. The declaration and payment of dividends on the Common Stock will
depend upon the earnings and financial condition of the Company, liquidity and
capital requirements, the general economic and regulatory climate, the
Company's ability to service any equity or debt obligations senior to the
Common Stock and other factors deemed relevant by Bancorp's Board of Directors.
The FRB's policy is that bank holding companies should pay cash dividends on
common stock only out of income available over the past year and only if
prospective earnings retention is consistent with the organization's expected
future needs and financial condition. The policy provides that bank holding
companies should not maintain a level of cash dividends that undermines the
bank holding company's ability to serve as a source of strength to its banking
subsidiaries.
Bancorp's principal source of funds to pay dividends on the shares of
Common Stock will be cash dividends that Bancorp receives from the Bank. The
payment of dividends by the Bank to Bancorp is subject to certain restrictions
imposed by federal banking laws, regulations and authorities. The federal
banking statutes prohibit federally insured banks from making any capital
distributions (including a dividend payment) if, after making the distribution,
the institution would be "undercapitalized" as defined by statute. In addition,
the relevant federal regulatory agencies also have authority to prohibit an
insured bank from engaging in an unsafe or unsound practice, as determined by
the agency, in conducting an activity. The payment of dividends could be deemed
to constitute such an unsafe or unsound practice, depending on the financial
condition of the Bank. Regulatory authorities could impose administratively
stricter limitations on the ability of the Bank to pay dividends to Bancorp if
such limits were deemed appropriate to preserve certain capital adequacy
requirements. As of September 30, 1997, an aggregate of approximately $27.7
million was available for payment of dividends by the Bank to Bancorp under
applicable restrictions, without regulatory approval, taking into consideration
dividends that would have to be paid to minority shareholders of the Bank after
giving effect to the Reorganization. See "Dividend Policy," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Capital Resources" and "Regulation."
CONTROLLING OWNERSHIP INTEREST AND POSSIBLE EFFECTS
After the consummation of the Offering, Roberto, Estefano and William
Isaias will beneficially own, directly or indirectly, including through their
ownership interest in Rebank, 62.7% of the outstanding shares of Common Stock,
and approximately 61.8% of such shares of Common Stock if the Underwriters'
over-allotment option is fully exercised. Accordingly, these shareholders will
be able to control, to a significant extent, the outcome of all matters
required to be submitted to the Company's shareholders for approval, including
decisions relating to the election of directors of the Company, future
issuances of Common Stock or other securities by the Company, any dividend
payable on the
13
<PAGE>
Common Stock, the determination of day-to-day corporate and management policies
of the Company and other significant corporate transactions. See "Management,"
"Principal and Selling Shareholders" and "Description of Capital Stock."
RECENT PERSONNEL LOSSES
The Company has recently experienced personnel losses that were
significantly heavier than historical experience. The Company believes that
this was due to the public disclosure that it was involved in merger
negotiations that have since terminated, the resulting uncertainties for
employees, and competitors attempts to take advantage of these uncertainties.
The Company has replaced most of the personnel that has left, including several
officers, through a combination of internal promotion of personnel and the
hiring of individuals from external organizations, there can be no assurance
that such departures will not have a material adverse effect on the Company or
that the Company will not experience significant personnel losses in the
future. See "The Company--Barnett Negotiations."
DEPENDENCE ON MANAGEMENT AND KEY PERSONNEL
The Company's success depends to a significant degree upon the continued
contribution of members of its senior management, particularly Oscar Bustillo,
Jr., the Company's Chief Executive Officer, as well as other key officers and
personnel, many of whom would be difficult to replace. The future success of
the Company also depends on its ability to identify, attract and retain
additional qualified personnel, particularly managerial personnel with the
appropriate experience in the banking business. No employees or executive
officers currently have employment agreements with the Company. The loss of Mr.
Bustillo or other key officers and personnel could have a material adverse
effect on the Company's business, prospects, financial condition and results of
operations. The Company does not maintain key person life insurance with
respect to any of its officers. See "Management."
YEAR 2000
Almost all of the Company's operations are supported by accounting and
recordkeeping computerized systems and are dependent on the capability of
software applications and operating systems to function properly in the year
2000. The Company has entered into a licensing contract with its main existing
software vendor to convert all of its loan, deposit and principal accounting
applications to a year 2000 compliant system in 1998, replacing an existing
licensing arrangement which will expire in 1999. This new software will require
additional hardware capacity. Costs associated with this endeavor are related
to the new software and hardware acquisition and are not principally the result
of the year 2000 programming. The Company is evaluating the impact of the year
2000 on other smaller applications and PC computer hardware. The Company
believes that all essential computer applications will be year 2000 compliant.
ABSENCE OF PUBLIC MARKET; POSSIBLE FLUCTUATIONS OF STOCK PRICE
Prior to this Offering, there has been no public market for Bancorp's
Common Stock. An application has been filed to have the Common Stock approved
for quotation on Nasdaq under the symbol "RBCF." The Representatives have
advised the Company that they intend to make a market in the Common Stock as
long as the volume of trading activity in the Common Stock and certain other
market making conditions justify doing so. Nonetheless, there can be no
assurance that an active trading market for the Common Stock will develop or
that, if developed, it will be sustained after this Offering, or that it will
be possible to resell the shares of Common Stock at or above the initial public
offering price. Making a market involves maintaining bid and asked quotations
for the Common Stock and being available as principal to effect transactions in
reasonable quantities at those quoted prices, subject to various securities
laws and other regulatory requirements. A public trading market having the
desired characteristics of depth, liquidity and orderliness depends upon the
presence in the marketplace of willing buyers and sellers of the Common Stock
at any given time, which presence is dependent upon the individual decisions of
investors over which neither the Company nor any market maker has any control.
The market price of the Common Stock could be subject to significant
fluctuations in response to the Company's operating results and other factors.
In addition, the stock market in recent years has
14
<PAGE>
experienced extreme price and volume fluctuations that often have been
unrelated or disproportionate to the operating performance of individual
companies. Such fluctuations, and general economic and market conditions, may
adversely affect the market price of the Common Stock. See "Underwriting."
DETERMINATION OF INITIAL PUBLIC OFFERING PRICE
The initial public offering price of the shares of Common Stock will be
determined by negotiations between the Company and the Representatives and will
not necessarily bear any relationship to the Company's book value, past
operating results, financial condition or other established criteria of value
and may not be indicative of the market price of the Common Stock after the
Offering. Among the factors considered in such negotiations are prevailing
market and general economic conditions, the market capitalization, trading
histories and stages of development of other traded companies that the Company
and the Representatives of the Underwriters believed to be comparable to the
Company, the results of operations of the Company in recent periods, the
current financial position of the Company, estimates of business potential of
the Company and the present state of the Company's development and the
availability for sale in the market of a significant number of shares of Common
Stock. Additionally, consideration will be given to the general status of the
securities market, the market conditions for new issues of securities and the
demand for securities of comparable companies at the time the Offering is made.
See "Underwriting" for information relating to the method of determining the
initial public offering price.
BROAD DISCRETION IN USE OF PROCEEDS
The Company intends to contribute substantially all of the net proceeds of
the Offering to the capital of the Bank to support future growth in the Bank's
business and for working capital and other general corporate purposes.
Accordingly, the Company will have broad discretion as to the application of
such proceeds. An investor will not have the opportunity to evaluate the
economic, financial and other relevant information which will be utilized by
the Company in determining the application of such proceeds. See "Use of
Proceeds."
SHARES ELIGIBLE FOR FUTURE SALE
After the Reorganization and upon consummation of this Offering, Bancorp
will have 21,026,399 shares of Common Stock outstanding (21,326,399 if the
over-allotment option granted to the Underwriters is exercised in full). Of
these shares, 6,834,208 shares (7,134,208 shares if the over-allotment option
granted to the Underwriters is exercised in full) will be freely transferable
without restriction or registration under the Securities Act, unless purchased
by persons deemed to be "affiliates" (as that term is defined under the
Securities Act) of the Company. All of the remaining 14,192,191 shares of
Common Stock held by the controlling shareholders, directors and executive
officers of the Company and by shareholders who participated in the
Reorganization will be "restricted securities" as that term is defined in Rule
144 promulgated under the Securities Act. The Company, Bancorp's and the Bank's
executive officers, directors, the Selling Shareholders and certain of
Bancorp's other existing shareholders are agreeing that they will not sell or
otherwise transfer any shares of Common Stock for 180 days after the Offering
without the prior written consent of the Representatives, except for bona fide
gifts or similar transfers or devises for estate planning, charitable and other
related purposes or pursuant to bona fide pledges, in any such case, only to
persons who agree to be bound by the foregoing restrictions. A majority of the
shares of Common Stock issued and outstanding prior to the Offering have been
pledged to financial institutions. In addition, the Company may issue its
Common Stock to minority shareholders of the Bank in exchange for their shares
in the Bank. See "Underwriting." Additionally, upon consummation of this
Offering, 1,000,000 shares of Common Stock will have been reserved for issuance
under the Plan and options to purchase shares of Common Stock will
have been issued under the Plan at the initial public offering price per share.
The Company intends to register under the Securities Act all eligible shares
reserved for issuance under the Plan. Shares covered by such registration will
be eligible for resale in the public market, subject to Rule 144 limitations
applicable to affiliates. See "Management--1998 Stock Option Plan." Future
sales of substantial amounts of Common Stock in the public market, or the
availability of such shares for future sale, could impair the Company's ability
to raise capital through an offering of securities and may adversely affect the
then-prevailing market prices. See "Shares Eligible for Future Sale."
15
<PAGE>
CERTAIN POTENTIAL ANTI-TAKEOVER PROVISIONS
The Company's Amended and Restated Articles of Incorporation (the
"Articles") and Amended and Restated Bylaws (the "Bylaws") will contain certain
provisions which may delay, frustrate, discourage or prevent the removal of
incumbent directors or an attempted acquisition or change of control of the
Company, including a merger, tender offer or proxy contest, even if such events
were perceived by shareholders as beneficial to their interests. These
provisions include: (i) a Board of Directors classified into three classes of
directors with the directors of each class having staggered, three-year terms,
(ii) provisions authorizing the Board to increase its size by up to two members
between annual meetings and authorizing either the Board or the shareholders to
fill vacancies on the Board, (iii) a provision that any special meeting of
shareholders of the Company may be called only by a majority of the Board of
Directors, the Chairman of the Board, the Chief Executive Officer, or the
holders of at least 30% of the shares entitled to vote on the matter and that
any action required or permitted to be taken by the Company's shareholders may
not be effected by consent in writing and (iv) a provision establishing certain
advance notice procedures for nomination of candidates for election as
directors and for shareholder proposals to be considered at an annual or
special meeting of shareholders. The Company's Articles will provide for
noncumulative voting for directors and authorize the Board of Directors of the
Company to issue shares of preferred stock of the Company without shareholder
approval and upon such terms, as the Board of Directors may determine. The
issuance of preferred stock, could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from acquiring,
a controlling interest in the Company and could adversely affect the voting
power of other rights of shareholders of the Company's Common Stock. Although
the Company at present has no intention to issue any shares of its preferred
stock, there can be no assurance that the Company will not do so in the future.
In addition, certain provisions of Florida and federal law may also have the
effect of delaying, discouraging or preventing attempted acquisition or change
in control of the Company in which shareholders of the Company might otherwise
receive a substantial premium for their shares over then-current market prices.
See "Regulation" and "Description of Capital Stock--Preferred Stock."
REGULATION OF CONTROL
Individuals or entities, alone or acting in concert with others, wishing
to acquire 10% or more of any class of voting securities of the Company (5% if
the prospective acquiror is already a bank holding company), must obtain the
prior approval of the FRB for any such acquisition. Accordingly, prospective
investors need to be aware of and comply with these requirements in connection
with any purchase of shares of the Common Stock offered hereby.
16
<PAGE>
THE COMPANY
GENERAL
Bancorp was incorporated as a business corporation under the laws of the
State of Florida in 1970 to serve as a holding company for the Bank. The Bank
was chartered in 1965 as a national bank with one banking office in Miami,
Florida. Since its formation, Bancorp has derived substantially all of its
revenues and income from the operations of the Bank. At September 30, 1997, the
Company had total assets of $1,517.5 million, total loans of $953.1 million,
total deposits of $1,298.5 million and total shareholders' equity of $129.2
million. As of March 31, 1997, the Company was the third largest independent
bank holding company in terms of deposits with headquarters in the State of
Florida.
The Company has reported consistent growth in earnings since 1993. The
Company's earnings have increased from $11.7 million in 1993 to $18.0 million
in 1996. During this period the mean of the Company's return on average assets
was 1.26% and the mean of the Company's return on average equity was 15.24%.
For the nine months ended September 30, 1997, the Company earned $14.1 million
compared to $12.9 million for the nine months ended September 30, 1996. The
1997 results represent an annualized return on average assets of 1.23% and an
annualized return on average equity of 15.42%.
MARKET POSITION
The Bank, since its formation, has acted as a community bank, serving the
needs of businesses and individuals located in Miami-Dade County, Florida. The
Company believes that Miami-Dade County, Florida is an attractive market for
operating a community bank. Miami-Dade County has a population of more than 2
million, representing more than 14% of the population of the State of Florida
and accounting for approximately 19.1% of domestic deposits in the State of
Florida. Miami-Dade County ranks first in population and first in deposits in
the State of Florida.
Historically, the Bank has catered primarily to the growing Cuban
population, which has become a major economic force in Miami-Dade County,
Florida, and to other Hispanic populations in Miami-Dade County, Florida. These
populations remain the core of the Bank's client base. In 1996, Hispanics
represented a majority of the population of Miami-Dade County, Florida.
Management believes that approximately 90% of the Company's customers are
Hispanic.
Although 94% of the Bank's branch deposits and 25 of its branches are
located in Miami-Dade County, Florida, the Company has recently established two
branches in adjoining Broward County, Florida. The Company intends to continue
its expansion in Broward County, Florida, and in future years, in adjoining
Palm Beach County, Florida. Broward and Palm Beach Counties, Florida, are two
of the fastest-growing counties in the United States. They rank as the counties
with (i) the second and third largest population bases in Florida,
respectively, (ii) the second and third largest banking markets in Florida,
respectively, measured by total deposits, and (iii) the eighth highest and the
highest per capita income in Florida, respectively.
BUSINESS STRATEGY
The consolidation of financial institutions in south Florida has reduced
the number of locally-headquartered commercial banks. The Company believes that
this has created a niche for the Bank as a community bank which focuses on
establishing long-term relationships with its customers and in providing
responsive and personalized service to its customers. The Company's community
banking style emphasizes local decision-making ability by its management and
accessibility of its senior management to customers. The Company also attempts
to make decisions for customers quickly and to modify its products, if
appropriate, to match the needs of its customers. The Company believes that
these attributes allow the Company to compete effectively against larger,
regional financial institutions operating in south Florida. In addition, the
Company believes that the Bank's larger capital base, larger branch network and
broader product mix enable it to compete effectively against smaller community
banks operating in south Florida.
The Company's location in south Florida, which is also the location of
many businesses and individuals who engage in substantial trade with Latin
America and the Caribbean, and the Company's
17
<PAGE>
relationships with the Hispanic community in Miami-Dade County, Florida, have
enabled the Company to be active in trade financing activities and in private
banking operations with customers in Latin America and the Caribbean. The
Company derives a significant portion of its deposits, loans and fee income
from these customers.
CONTROLLING SHAREHOLDERS AND MANAGEMENT
The Company's largest shareholder is Rebank, which is owned by Roberto
Isaias, Estefano Isaias and William Isaias, three brothers who also own a major
Ecuadorian bank. Roberto, Estefano and William Isaias directly or indirectly
own, in the aggregate, 13,190,005 shares or 65.6% of the issued and outstanding
Common Stock after the Reorganization and prior to this Offering and will own
62.7% of the issued and outstanding Common Stock after this Offering, as none
of the Isaias brothers are selling shares of Common Stock in this Offering. The
Isaias family acquired control of the Company in 1970.
Roberto Isaias is the Chairman of the Board of Bancorp and has served in
that capacity since 1982. He has been a director of Bancorp since 1970. Oscar
Bustillo, Jr., the Chief Executive Officer and President of Bancorp and
Chairman of the Board, Chief Executive Officer and President of the Bank,
joined the Bank in 1985. In 1989, Mr. Bustillo became President of the Bank,
and in 1994 he became President of Bancorp. The Company's President and six
Executive Vice Presidents have an aggregate of nearly 200 years of banking
experience. Its three Executive Vice Presidents involved in lending have an
aggregate of 65 years of lending experience. Its Executive Vice
President--Retail Banking has 28 years of experience in the industry. The
Company believes that this combination of consistent ownership and highly
experienced local management gives the Company a competitive advantage in
operating a community banking institution.
LENDING ACTIVITIES
The Bank's lending activities consist of community bank lending activities
and international lending activities.
The Bank, in its community bank lending activities, initially served as a
commercial lender to small and medium-sized businesses and as a commercial real
estate lender. Construction loans and consumer loans have also been part of the
Bank's loan portfolio since it commenced business. The Bank has continued to
add a variety of other loan products. Today, the Bank has a diversified loan
portfolio. At September 30, 1997, the Company's community bank lending
activities consisted primarily of commercial loans ($289.3 million), commercial
real estate and construction loans ($303.4 million), single-family residential
mortgage loans ($150.1 million) and consumer loans, including equity lines,
($82.6 million).
The Company's international lending activities are leveraged off
historical relationships the Company has formed with correspondent financial
institutions in Latin America and the Caribbean. At September 30, 1997, the
Company's total international lending activities, including foreign bank
acceptances, consisted of $106.7 million of loans.
The Company's international lending activities primarily include (i) trade
financing for correspondent financial institutions in Latin America and the
Caribbean, including pre-export financing, advances on letters of credit and
bankers' acceptances, (ii) trade financing for local commercial customers who
are primarily importing from or exporting to Latin America or the Caribbean,
(iii) the term financing of the export of United States goods and services
guaranteed by the EximBank and (iv) other correspondent banking services. Trade
finance for correspondent financial institutions comprises the largest segment
of the Company's international lending activities and represents 7.62% of the
Company's total lending activities. The yield on such loans is lower than the
average yield for the Company's loan portfolio, but such loans are floating
rate, have short term maturities, and historically have had low credit losses.
Accordingly, the Company considers this to be an attractive line of business.
Management also believes that the Company has a significant opportunity to
expand its EximBank guaranteed financing business.
18
<PAGE>
DEPOSITS AND BRANCH OFFICES
Lending and investment activities are funded from a strong deposit base,
which consisted of over 100,000 deposit accounts at September 30, 1997.
Approximately 43.40% of the amount of the Company's deposits at September 30,
1997, consisted of checking and savings accounts.
The Company primarily attracts deposits through a network of 27 branches,
25 of which are located in Miami-Dade County, Florida and two of which are
located in Broward County, Florida. The Company built its strong core deposit
base through de novo expansion, as well as through acquisitions. From 1988 to
1991, the Company acquired branch locations and deposits from four failed
financial institutions being liquidated by the FDIC and the RTC. In 1995, the
Company expanded its retail offices in Miami-Dade County as well as entered
into Broward County, Florida with the acquisition of Plaza Bank of Miami.
In addition to its branch deposit base, the Company obtains significant
deposits as a result of its relationships throughout Latin America and the
Caribbean and from foreigners who travel to south Florida. Such deposits
provide the Company with an additional funding source at reasonable costs,
require lower overhead expenses than domestic deposit gathering activities and
provide the Company with additional fee income through service charges. At
September 30, 1997, $331 million of the Company's deposits were from foreigners
or correspondents, $169 million of which were attributable to the private
banking department. The Company intends to continue to maintain this deposit
base by providing quality services to its private banking customers and by
maintaining relationships in Latin America and the Caribbean.
GROWTH STRATEGY
The Company also believes that consolidation of the south Florida banking
industry should provide it with the opportunity to service additional customers
who prefer to conduct business with a local, community-oriented financial
institution, such as the Company, and that the Company can take advantage of
the opportunities presented by the growing populations in Miami-Dade, Broward
and Palm Beach Counties, Florida.
The Company's overall business strategy is to (i) continue to serve the
local community by increasing lending activity in commercial, commercial real
estate, construction and single-family residential loans, (ii) increase
international trade services, (iii) take advantage of regional bank
consolidation by pursuing customers wishing to do business with a local
community bank, and (iv) expand its operations in south Florida.
Such expansion could be through the formation of de novo branches or
through strategic acquisitions of financial institutions or banking assets in
those locations that management believes would complement and help grow the
Company's existing business. Such acquisitions may be structured as
stock-for-stock exchanges with other institutions. The Company believes that
having publicly traded stock will facilitate such acquisitions and therefore
enhance the ability of the Company to expand through acquisitions. See "Risk
Factors."
HEADQUARTERS
The Company's headquarters are located at 2800 Ponce de Leon Boulevard,
Coral Gables, Florida 33134, and its telephone number is (305) 441-7300.
PRIOR GRAND JURY INVESTIGATIONS AND SETTLEMENT
In 1988, the Bank discovered certain transactions that appeared to be
contrary to banking laws and regulations and reported them to the appropriate
governmental agencies. Corrective action was taken based upon the advice of
counsel. A federal grand jury then commenced an investigation involving money
laundering and other criminal activities. The investigation also focused on
self-dealing by three former officers of the Bank. These three former officers
were ultimately indicted and convicted of
19
<PAGE>
self-dealing, although the convictions were overturned on procedural grounds.
In connection with the grand jury investigation, in January 1994 the Bank
ultimately entered into a settlement agreement with the Department of Justice
in which the Bank paid a civil money penalty of $1.95 million for failure to
file timely currency transaction reports in 1987 and 1988.
In addition, as part of the settlement, the Bank agreed to purchase at
appraised value from the United States government, at such time as the
government acquires title, properties at which one bank branch is located and a
former bank branch was located. The Bank paid the United States government
$800,000 in connection with the settlement and relinquished any rights under an
existing mortgage in the principal amount of $800,000 relating to a previously
charged-off loan. The settlement agreement resolved the criminal and civil
liability of the Bank for any act, omission or transaction that was committed
at the Bank by an officer or employee of the Bank which was learned of in the
course of the investigations by the United States Attorney's Office, the
Internal Revenue Service and the FBI.
OCC AGREEMENT
In 1992, the OCC entered into an agreement with the Bank requiring, among
other things, that the Bank assess senior management, improve its credit
administration by, for example, reviewing its compliance procedures,
establishing a position for a person to review real estate appraisals and
reviewing its allowance for loan loss methodology, as well as improving its
Community Reinvestment Act methodology. The agreement was terminated by the OCC
in 1993. The Bank believes that its current relationship with the OCC is
excellent.
BARNETT NEGOTIATIONS
In May 1997, the Company entered into a letter of intent to be acquired by
Barnett for a purchase price in excess of $400 million. Within two weeks of
publicly disclosing the proposed sale, the parties determined that a
transaction would not be consummated. During the ninety day period following
the disclosure of the proposed sale, 102 employees, including the
then-Executive Vice President of Corporate Banking and four Senior Vice
Presidents, three of whom were involved in retail banking, left the Company.
This was more than twice the normal amount of turnover for such a period. The
Company has replaced virtually all personnel that left during this period.
Turnover has returned to historical levels. See "Risk Factors--Recent Personnel
Losses."
TRADEMARKS AND INTELLECTUAL PROPERTY
The Company owns eight registered domestic U.S. trademarks or service
marks, and has three pending applications for registration. All of the pending
applications are currently subject to a concurrent use proceeding before the
United States Patent and Trademark Office (concurrent use proceeding No. 791).
These pending applications relate to the use of the proposed trademarks "RNB
Republic Bank", "Republic National Bank" and "Republic National Bank of Miami."
Pursuant to the proceeding, the Company is seeking the right to the exclusive
use of the marks subject to pending applications in certain Florida counties.
The pending applications are contested by several parties. Management believes
that the Company's inability to obtain federal registration of the foregoing
trademarks would not have a material adverse effect on the Company.
LEGAL PROCEEDINGS
The Company is involved only in routine litigation incidental to the
business of banking, none of which is expected to have a material adverse
effect on the Company.
EMPLOYEES
At September 30, 1997, the Company had 691 full-time equivalent employees.
The Company's employees are not represented by a collective bargaining group,
and the Company considers its relations with its employees to be good.
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<PAGE>
PROPERTIES
The Company is currently managed from its newly constructed headquarters
located in Coral Gables, Florida, where a branch office is also located.
Twenty-four of the Company's other branch offices are located in Miami-Dade
County, Florida. Two branch offices are located in Broward County, Florida.
The table below summarizes the Company's owned and leased facilities:
<TABLE>
<CAPTION>
AVERAGE DEPOSITS
FOR
LEASED SEPTEMBER
LOCATION TYPE OF FACILITY OR OWNED EXPIRATION DATE 1997
- ---------------------------------------- ------------------ ---------- ----------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
MIAMI-DADE COUNTY:
Coral Gables ........................... Corporate Owned -- $ 322,389
headquarters
and branch
Bird Road .............................. Branch Owned -- 52,859
Calle Ocho ........................... Branch (1) July 2000(3) 70,543
Country Walk ........................ Branch Leased March 2000 3,779
Downtown .............................. Branch Leased October 2000 87,709
East Hialeah ........................ Branch Owned -- 34,009
Fisher Island ........................ Branch Leased June 2001 14,218
Gratigny .............................. Branch Leased February 2003 35,010
Hialeah .............................. Branch Owned -- 49,271
LeJeune .............................. Branch (1) January 2001(3) 167,766
Little Havana ........................ Branch (1) November 2055 38,790
Miami Lakes ........................... Branch Leased June 2001 13,448
Milam Dairy ........................... Branch Leased July 1998 18,236
North Dade ........................... Branch Leased March 2000 29,529
Orange Bowl ........................... Branch Owned -- 44,106
Overtown .............................. Branch Leased October 2000 1,030
Palmetto .............................. Branch Leased June 2004 6,438
South Miami ........................... Branch Owned -- 20,925
Tamiami .............................. Branch Owned -- 26,893
Suniland(2) ........................... Branch Leased March 1999 --
West Dade ........................... Branch Owned -- 38,378
West Gables ........................... Branch Owned -- 591
West Kendall ........................ Branch Owned -- 33,463
Westchester ........................... Branch Leased December 2015 63,699
Westland .............................. Branch Leased October 2013 55,292
-----------
Total Miami-Dade
County deposits .................. 1,228,371
-----------
BROWARD COUNTY:
Palm Aire ........................... Branch Leased December 1998 32,355
Tamarac .............................. Branch Leased September 2006 46,361
-----------
Total Broward County deposits ...... 78,716
-----------
Total deposits ..................... $1,307,087
===========
</TABLE>
- ----------------
(1) Represents branches at which the buildings are located on land, a portion
of which is leased by the Company pursuant to a long-term lease.
(2) Represents branch opened after September 30, 1997.
(3) On locations with multiple land leases, the earliest expiration date is
shown.
21
<PAGE>
COMPETITION
The banking business is highly competitive, and the profitability of the
Company depends principally upon the Company's ability to compete in the market
areas in which its banking operations are located. The Company competes for
loans, deposits and other matters with other commercial banks, savings banks,
savings and loan associations, credit unions, finance companies, mutual funds,
insurance companies, brokerage and investment banking firms and asset-based
non-bank lenders which may offer more favorable financing than the Company. The
Company competes with similarly-sized local financial institutions, regional
and multi-regional financial institutions and smaller community banks, although
its size, including the number of branches, and a higher legal lending limit,
give it certain competitive advantages with respect to the smaller community
banks. In Broward and Palm Beach counties, the Company may compete primarily
with regional and multi-regional financial institutions. Many of the foregoing
institutions also are the primary competitors of the Company for employees, and
several of them hired a number of Company employees after the announcement of a
proposed sale to Barnett. In addition, the Company competes with major money
center banks and foreign banks operating in Miami-Dade County with respect to
its private banking and international lending businesses. Many of the Company's
competitors, including the regional and multi-regional financial institutions,
have greater financial and other resources than the Company. The Company
believes that it has been able to compete effectively with other financial
institutions by emphasizing customer service, through local decision-making, by
establishing long-term customer relationships and building customer loyalty and
by designing its loan products to address the specific needs of its customers,
when appropriate. Although the Company has been able to compete effectively in
the past, no assurances may be given that the Company will continue to be able
to compete effectively in the future. In addition, various legislative acts in
recent years have led to increased competition among financial institutions. As
a result of these acts, most barriers to entry in the south Florida market by
out of state financial institutions have been eliminated. There can be no
assurance that the United States Congress or the Florida legislature will not
enact legislation that may further increase competitive pressures on the
Company. Competition from both financial and nonfinancial institutions is
expected to continue. See "Risk Factors--Competition."
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of shares of
Common Stock offered hereby, based upon an assumed initial public offering
price of $15.00 per share and after deducting the underwriting discount and
estimated offering expenses, are estimated to be approximately $12.2 million
($16.4 million if the Underwriters' over-allotment option is exercised in
full). The Company will receive no proceeds from the sale of Common Stock by
the Selling Shareholders.
The Company intends to invest substantially all of the net proceeds of the
Offering in the Bank to support future growth in the Bank's business and for
working capital and other general corporate purposes.
22
<PAGE>
DIVIDEND POLICY
Holders of Common Stock are entitled to receive dividends when, as and if
declared by the Company's Board of Directors out of funds legally available
therefor. While the Company has declared dividends on its Common Stock since
1990 and in 1997 paid an annual dividend aggregating $0.52 per share, there is
no assurance that the Company will continue to pay dividends in the future.
For the foreseeable future, the principal source of cash revenues of
Bancorp will be dividends paid by the Bank with respect to the Bank's capital
stock. There are certain restrictions on the payment of such dividends imposed
by federal and state banking laws, regulations and authorities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Regulation--The Bank."
In the future, the declaration and payment of dividends on the Common
Stock will depend upon the earnings and financial condition of the Company,
liquidity and capital requirements, the general economic and regulatory
climate, the Company's ability to service any equity or debt obligations senior
to the Common Stock and other factors deemed relevant by the Company's Board of
Directors, although the Company presently intends to pay quarterly dividends of
$0.07 per share after the Offering. See "Regulation" and "Description of
Capital Stock." As of September 30, 1997, an aggregate of approximately $27.7
million was available for payment of dividends by the Bank to Bancorp under
applicable restrictions, without regulatory approval, taking into consideration
dividends that would have to be paid to minority shareholders of the Bank after
giving effect to the Reorganization. Regulatory authorities could impose
administratively stricter limitations on the ability of the Bank to pay
dividends to Bancorp if such limits were deemed appropriate to preserve certain
capital adequacy requirements. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Regulation."
23
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of September 30, 1997 giving pro forma effect to the Reorganization
and to the proposed change in par value of the Common Stock to $0.01 per share,
and as adjusted, giving effect also to the sale by the Company of 933,270
shares of Common Stock offered hereby (at an assumed initial public offering
price of $15.00 per share) and the related estimated net proceeds therefrom
(approximately $12.2 million). See "Use of Proceeds."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------------------------
ACTUAL PRO FORMA(1) AS ADJUSTED
------------- -------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Shareholders' Equity:
Preferred Stock, $0.01 par value; 5,000,000 shares authorized; 0
shares issued and outstanding .............................. $ -- $ -- $ --
Common Stock, $0.01 par value; 50,000,000 shares authorized;
18,872,904 shares issued and outstanding; 20,093,129 pro
forma shares issued and outstanding(1), 21,026,399 shares
issued and outstanding, as adjusted(2) ..................... 9,437 201 210
Capital surplus ................................................ 77,221 99,269 111,479
Retained earnings ............................................. 42,077 42,077 42,077
Net unrealized gain on available-for-sale securities ......... 415 442 442
--------- --------- ---------
Total shareholders' equity ................................. $ 129,150 $ 141,989 $ 154,208
========= ========= =========
Ratios(3):
Tier 1 Capital Ratio .......................................... 14.14% 14.14% 15.35%
Total Capital Ratio .......................................... 15.39 15.39 16.60
Leverage Ratio ................................................ 8.52 8.52 9.25
</TABLE>
- ----------------
(1) The pro forma information gives effect to the Reorganization as if the
Reorganization had occurred on September 30, 1997. Common Stock is
reflected at $0.01 par value per common share.
(2) Does not include an aggregate of 1,000,000 shares of Common Stock reserved
for issuance under the Plan, pursuant to which options to purchase
shares of Common Stock will be issued and outstanding upon
consummation of this Offering. See "Management--1998 Stock Option Plan."
(3) The net proceeds from this Offering will initially be deposited in cash and
cash equivalents and will subsequently be applied as described in "Use of
Proceeds." The "as adjusted" ratios have been calculated assuming the net
proceeds are invested in assets with a weighted average risk weighting of
60%, which is consistent with the Company's historical risk-weighted asset
composition.
24
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following Selected Consolidated Financial Data of the Company should
be read in conjunction with the Consolidated Financial Statements of the
Company, the information contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and other financial information
included elsewhere in this Prospectus. The selected historical consolidated
financial data as of and for the four years ended December 31, 1996 are derived
from the Company's Consolidated Financial Statements which have been audited by
Price Waterhouse LLP, independent certified public accountants. The selected
historical consolidated financial data as of and for the year ended December
31, 1992 are derived from the Company's Consolidated Financial Statements which
have been audited by other independent certified public accountants. The
selected historical consolidated financial data as of and for the nine months
ended September 30, 1997 and September 30, 1996 have not been audited but, in
the opinion of management, contain all adjustments (consisting of normal
recurring adjustments) necessary for a fair statement of the results for the
interim periods. The results of operations for the nine months ended September
30, 1997 are not necessarily indicative of the results of operations that may
be expected for the year ended December 31, 1997, or for any future periods.
<TABLE>
<CAPTION>
AS OF AND FOR THE
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1997 1996
------------ ------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
INCOME STATEMENT DATA:
Interest income .................................... $ 85,886 $ 77,323
Interest expense ................................. 38,039 31,762
-------- --------
Net interest income .............................. 47,847 45,561
Provision for loan losses ........................ 3,604 1,778
-------- --------
Net interest income after provision for loan losses 44,243 43,783
Noninterest income ................................. 17,963 17,856
Noninterest expenses .............................. 39,799 40,345
-------- --------
Net income before taxes ........................... 22,407 21,294
Provision for income tax expense .................. 7,243 7,468
Cumulative effect of change in accounting principle -- --
Minority interest ................................. 1,058 961
-------- --------
Net income ....................................... $ 14,106 $ 12,865
======== ========
PRO FORMA INCOME STATEMENT DATA(1):
Net income before taxes ........................... $ 22,238
Provision for income tax expense .................. 7,243
Minority interest ................................. 144
--------
Net income ....................................... $ 14,851
========
PER SHARE DATA(2):
Net income ....................................... $ 0.75 $ 0.68
Book value ....................................... 6.84 6.31
Tangible book value .............................. 6.39 5.81
Cash dividends .................................... 0.52 0.50
Dividends payout ratio ........................... 69.33% 73.53%
Weighted average common and common equivalent shares
outstanding (in thousands) ........................ 18,873 18,873
PRO FORMA PER SHARE DATA(1):
Net income ....................................... $ 0.74
Book value ....................................... 7.07
Cash dividends .................................... 0.52
Dividends payout ratio ........................... 70.27%
Weighted average common and common equivalent shares
outstanding (in thousands) ........................ 20,093
<CAPTION>
AS OF AND FOR THE
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1996 1995 1994 1993 1992
------------- ------------ ------------ ------------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income .................................... $ 104,134 $ 95,056 $ 76,964 $ 75,531 $ 83,737
Interest expense ................................. 43,249 38,411 24,322 21,795 31,984
--------- -------- -------- --------- --------
Net interest income .............................. 60,885 56,645 52,642 53,736 51,753
Provision for loan losses ........................ 2,381 890 2,500 2,450 3,205
--------- -------- -------- --------- --------
Net interest income after provision for loan losses 58,504 55,755 50,142 51,286 48,548
Noninterest income ................................. 24,231 22,458 20,289 17,046 17,886
Noninterest expenses .............................. 53,017 50,021 46,456 50,379 47,822
--------- -------- -------- --------- --------
Net income before taxes ........................... 29,718 28,192 23,975 17,953 18,612
Provision for income tax expense .................. 10,324 9,103 7,687 6,181 4,983
Cumulative effect of change in accounting principle -- -- -- 838 --
Minority interest ................................. 1,350 1,330 1,136 881 949
--------- -------- -------- --------- --------
Net income ....................................... $ 18,044 $ 17,759 $ 15,152 $ 11,729 $ 12,680
========= ======== ======== ========= ========
PRO FORMA INCOME STATEMENT DATA(1):
Net income before taxes ........................... $ 29,492
Provision for income tax expense .................. 10,324
Minority interest ................................. 184
---------
Net income ....................................... $ 18,984
=========
PER SHARE DATA(2):
Net income ....................................... $ 0.96 $ 0.94 $ 0.80 $ 0.62 $ 0.67
Book value ....................................... 6.61 6.15 5.32 5.06 4.84
Tangible book value .............................. 6.12 5.62 5.25 4.97 4.73
Cash dividends .................................... 0.50 0.25 0.42 0.40 0.35
Dividends payout ratio ........................... 52.08% 26.60% 52.50% 64.52% 52.24%
Weighted average common and common equivalent shares
outstanding (in thousands) ........................ 18,873 18,873 18,873 18,873 18,873
PRO FORMA PER SHARE DATA(1):
Net income ....................................... $ 0.94
Book value .......................................
Cash dividends .................................... 0.50
Dividends payout ratio ........................... 53.19%
Weighted average common and common equivalent shares
outstanding (in thousands) ........................ 20,093
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
AS OF AND FOR THE
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------------
1997 1996
--------------- ---------------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets .......................................... $ 1,517,529 $ 1,451,676
Securities ............................................. 384,988 346,676
Loans ................................................... 953,052 909,202
Allowance for loan losses .............................. 12,209 11,770
Total deposits .......................................... 1,298,535 1,253,964
Total shareholders' equity .............................. 129,150 119,123
PRO FORMA BALANCE SHEET DATA(1):
Total assets .......................................... $ 1,522,044
Total shareholders' equity .............................. 141,989
AVERAGE BALANCE SHEET DATA:
Total assets .......................................... $ 1,533,553 $ 1,387,477
Securities ............................................. 330,095 324,240
Loans ................................................... 983,091 851,834
Allowance for loan losses .............................. 12,272 11,823
Total deposits .......................................... 1,326,907 1,208,298
Total shareholders' equity .............................. 122,346 114,714
PERFORMANCE RATIOS(3):
Return on average assets .............................. 1.23% 1.24%
Return on average equity .............................. 15.42 14.98
Net interest margin .................................... 4.57 4.81
Efficiency ratio(4) .................................... 60.48 63.62
ASSET QUALITY RATIOS(5):
Nonperforming assets to total loans and other real
estate ................................................ 1.82% 0.60%
Net loan charge-offs to average loans(3) ............... 0.40 0.22
Allowance for loan losses to total loans ............... 1.28 1.29
Allowance for loan losses to nonperforming loans(6) 79.70 504.93
CAPITAL RATIOS(5):
Leverage ratio .......................................... 8.52% 8.27%
Average shareholders' equity to average total assets . 7.98 8.27
Tier 1 risk-based capital ratio ........................ 14.14 14.06
Total risk-based capital ratio ........................ 15.39 15.31
<CAPTION>
AS OF AND FOR THE
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
1996 1995 1994 1993
---------------- --------------- --------------- ---------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets .......................................... $ 1,511,951 $ 1,324,968 $ 1,172,209 $ 1,106,641
Securities ............................................. 331,204 320,084 359,545 284,611
Loans ................................................... 973,640 821,090 667,091 641,413
Allowance for loan losses .............................. 11,578 11,411 11,680 11,563
Total deposits .......................................... 1,320,126 1,156,324 1,029,116 967,615
Total shareholders' equity .............................. 124,693 116,140 100,447 95,509
PRO FORMA BALANCE SHEET DATA(1):
Total assets ..........................................
Total shareholders' equity ..............................
AVERAGE BALANCE SHEET DATA:
Total assets .......................................... $ 1,405,517 $ 1,261,146 $ 1,136,191 $ 1,148,513
Securities ............................................. 327,425 348,438 328,504 342,779
Loans ................................................... 872,094 735,318 635,555 627,929
Allowance for loan losses .............................. 11,793 11,893 11,968 10,922
Total deposits .......................................... 1,221,350 1,105,382 1,000,787 1,011,508
Total shareholders' equity .............................. 116,493 106,141 95,250 91,393
PERFORMANCE RATIOS(3):
Return on average assets .............................. 1.28% 1.41% 1.33% 1.02%
Return on average equity .............................. 15.49 16.73 15.91 12.83
Net interest margin .................................... 4.75 4.91 5.06 5.14
Efficiency ratio(4) .................................... 62.29 63.09 63.70 71.17
ASSET QUALITY RATIOS(5):
Nonperforming assets to total loans and other real
estate ................................................ 0.55% 0.96% 1.21% 2.19%
Net loan charge-offs to average loans(3) ............... 0.25 0.25 0.37 0.14
Allowance for loan losses to total loans ............... 1.19 1.39 1.75 1.80
Allowance for loan losses to nonperforming loans(6) 395.96 244.09 230.74 112.46
CAPITAL RATIOS(5):
Leverage ratio .......................................... 8.52% 8.78% 9.32% 8.82%
Average shareholders' equity to average total assets . 8.29 8.42 8.38 7.96
Tier 1 risk-based capital ratio ........................ 14.44 13.75 15.63 16.13
Total risk-based capital ratio ........................ 15.69 15.00 16.88 17.38
<CAPTION>
1992
---------------
<S> <C>
BALANCE SHEET DATA:
Total assets .......................................... $ 1,193,649
Securities ............................................. 343,900
Loans ................................................... 678,920
Allowance for loan losses .............................. 10,022
Total deposits .......................................... 1,062,368
Total shareholders' equity .............................. 91,329
PRO FORMA BALANCE SHEET DATA(1):
Total assets ..........................................
Total shareholders' equity ..............................
AVERAGE BALANCE SHEET DATA:
Total assets .......................................... $ 1,195,731
Securities ............................................. 372,866
Loans ................................................... 613,459
Allowance for loan losses .............................. 9,116
Total deposits .......................................... 1,068,858
Total shareholders' equity .............................. 84,479
PERFORMANCE RATIOS(3):
Return on average assets .............................. 1.06%
Return on average equity .............................. 15.01
Net interest margin .................................... 4.78
Efficiency ratio(4) .................................... 68.67
ASSET QUALITY RATIOS(5):
Nonperforming assets to total loans and other real
estate ................................................ 4.62%
Net loan charge-offs to average loans(3) ............... 0.27
Allowance for loan losses to total loans ............... 1.48
Allowance for loan losses to nonperforming loans(6) 64.20
CAPITAL RATIOS(5):
Leverage ratio .......................................... 8.03%
Average shareholders' equity to average total assets . 7.07
Tier 1 risk-based capital ratio ........................ 14.46
Total risk-based capital ratio ........................ 15.71
</TABLE>
- ----------------
(1) Pro forma balance sheet information gives effect to the Reorganization as
if it occurred on September 30, 1997. Pro forma income statement
information gives effect to the goodwill amortization and change in
minority interest as a result of the Reorganization as if the
Reorganization occurred on January 1, 1996.
(2) Per share data is based upon the weighted average number of common and
common equivalent shares outstanding during the period, adjusted for a 20%
stock dividend in 1996 and for the 2.5 for 1 stock split.
(3) All interim periods have been annualized.
(4) Calculated by dividing total noninterest expenses by net interest income
plus noninterest income, excluding securities gains and losses.
(5) At period end, except for "Net loan charge-offs to average loans" and
"Average shareholders' equity to average total assets."
(6) Nonperforming loans consist of nonaccrual loans, restructured loans and
accruing loans 90 days or more past due.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Company analyzes the major elements of the Company's balance
sheets and statements of operations. This section should be read in conjunction
with the Company's Consolidated Financial Statements and accompanying notes and
other detailed information appearing elsewhere in this Prospectus.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
OVERVIEW
The strong balance sheet growth from 1995 and 1996 continued through the
first quarter of 1997. During the second quarter, the Board of Directors
entered into negotiations with Barnett for the sale of the Company. While these
negotiations terminated within ten days of the public announcement thereof,
they resulted in high personnel turnover, significantly greater than historical
experience. During the second and third quarters, the Company's retail and
lending staff experienced particularly high turnover. See "The Company--Barnett
Negotiations." The Company took a defensive posture with its customers during
this period resulting in pressure on loan and deposit pricing, as well as
increased costs in personnel and advertising. The Company overcame this episode
with a limited impact on its balance sheet, but experienced some shrinkage and
felt the impact of the resulting competitive pressures on its second and third
quarter earnings. The provision for loan losses during the nine month period
ended September 30, 1997 was also above historical levels, as the Company
experienced a higher than historical level of losses in its commercial loan
portfolio and continued losses in its consumer portfolio.
Net income for the nine month period ended September 30, 1997 was $14.1
million or 9.30% more than net income of $12.9 million for the nine months
ended September 30, 1996. Net income per share was $0.75 for the nine months
ended September 30, 1997 and $0.68 for the nine months ended September 30,
1996. The increase in net income reflected higher net interest income, which
was driven by growth in interest-earning assets. Earnings were impacted by a
higher provision for loan losses in 1997 which was double the amount provided
for during the same period in 1996. Return on average assets and return on
average equity were 1.23% and 15.42%, respectively, for the nine months ended
September 30, 1997, compared to 1.24% and 14.98%, respectively, for the nine
months ended September 30, 1996. Earnings for the nine month period ended
September 30, 1996 were affected by a special FDIC assessment of $1.4 million.
Total assets at September 30, 1997 increased to $1,517.5 million from
$1,451.7 million at September 30, 1996, an increase of $65.8 million or 4.53%.
Deposits rose to $1,298.5 million at September 30, 1997 from $1,254.0 million
at September 30, 1996, an increase of $44.5 million or 3.55%. Total
shareholders' equity was $129.2 million at September 30, 1997, representing a
$10.1 million or 8.48% increase over total shareholders' equity of $119.1
million at September 30, 1996.
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income represents the amount by which interest income on
interest-earning assets, including securities and loans, exceeds interest
expense incurred on interest-bearing liabilities, including deposits and other
borrowed funds. Net interest income is the principal source of the Company's
earnings. Interest rate fluctuations, as well as changes in the amount and type
of interest-earning assets and interest-bearing liabilities, combine to affect
net interest income.
Net interest income for the nine months ended September 30, 1997 was $47.8
million compared to $45.6 million for the nine months ended September 30, 1996,
an increase of $2.2 million or 4.82%. Interest income increased primarily as a
result of increased loan volume, partially offset by a decrease in average
yields on loans. Average interest-earning assets increased to $1,399.4 million
for the nine months ended September 30, 1997 from $1,264.9 million for the nine
months ended September 30, 1996, an increase of $134.5 million or 10.63%.
Average loans increased to $983.1 million for the nine months ended September
30, 1997 from $851.8 million for the nine months ended September 30, 1996, an
27
<PAGE>
increase of $131.3 million or 15.41%. The increase in interest income was
partially offset by a $6.3 million or 19.76% increase in interest expense
primarily due to the growth in time deposits and the average rates paid
thereon. Average interest-bearing liabilities increased to $1,119.3 million for
the nine months ended September 30, 1997 from $984.0 million for the nine
months ended September 30, 1996, an increase of $135.3 million or 13.75%.
Average time deposits increased to $742.8 million for the nine months ended
September 30, 1997 from $616.0 million for the nine months ended September 30,
1996, an increase of $126.8 million or 20.58%.
The Company posted net interest margins of 4.57% and 4.81% and net
interest spreads of 3.66% and 3.86% for the periods ended September 30, 1997
and September 30, 1996, respectively. The decrease in the net interest margin
from the first nine months of 1996 to the first nine months of 1997 reflects a
three basis point increase in the yield on average interest-earning assets and
a 23 basis point increase in the cost of interest-bearing liabilities. The
yield on average interest-earning assets increased to 8.20% for the nine months
ended September 30, 1997 from 8.17% for the nine months ended September 30,
1996, primarily due to a 22 basis point increase in the average yield on
securities. This was partially offset by a 16 basis point decrease in the
average yield on loans due to competitive pressures and growth in lower
yielding international loans. The cost of interest-bearing liabilities
increased to 4.54% for the nine months ended September 30, 1997 from 4.31% for
the nine months ended September 30, 1996. This increase was due mainly to
increased funding from higher cost time deposits and higher costs of funds.
28
<PAGE>
The following table presents for the periods indicated the total dollar
amount of average balances, interest income from average interest-earning
assets, as well as the interest expense on average interest-bearing
liabilities, expressed both in dollars and annualized rates. No tax equivalent
adjustments were made and all average balances are average daily balances.
Nonaccruing loans have been included in the tables as loans carrying a zero
yield.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------------------------------------
1997 1996
------------------------------------------- -------------------------------------------
AVERAGE AVERAGE
OUTSTANDING INTEREST AVERAGE OUTSTANDING INTEREST AVERAGE
BALANCE EARNED/PAID YIELD/RATE BALANCE EARNED/PAID YIELD/RATE
------------- ---------------- ------------ ------------- ----------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Total loans(1) ..................... $ 983,091 $ 66,934(1) 9.10% $ 851,834 $ 59,035(1) 9.26%
Taxable securities .................. 295,435 13,974 6.32 294,174 13,294 6.04
Tax-exempt securities ............... 34,660 1,480 5.71 30,066 1,363 6.06
Federal funds sold and other
temporary investments ............ 86,217 3,498 5.42 88,800 3,631 5.46
----------- ----------- ----- ----------- ------------ -----
Total interest-earning assets ...... 1,399,403 85,886 8.20 1,264,874 77,323 8.17
----------- ----- ------------ -----
Less allowance for loan losses ...... 12,272 11,823
----------- -----------
Total interest-earning assets, net of
allowance ........................... 1,387,131 1,253,051
Nonearning assets ..................... 146,422 134,426
----------- -----------
Total assets ........................ $1,533,553 $1,387,477
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits . $ 64,388 729 1.51 $ 66,444 820 1.65
Savings and money market
accounts ........................... 250,766 5,260 2.80 262,989 5,635 2.86
State, county and municipal
certificates of deposit ............ 28,535 1,170 5.48 16,920 677 5.39
Certificates of deposit ............ 714,305 28,628 5.36 599,030 23,225 5.18
Federal funds purchased and
securities sold under repurchase
agreements ........................ 54,471 1,965 4.82 34,040 1,208 4.74
Other borrowings ..................... 6,824 287 5.62 4,609 197 5.71
----------- ----------- ----- ----------- ------------ -----
Total interest-bearing liabilities . 1,119,289 38,039 4.54 984,032 31,762 4.31
----------- ----- ------------ -----
Noninterest-bearing liabilities:
Noninterest-bearing demand
deposits ........................ 268,913 262,913
Other liabilities .................. 13,909 17,294
----------- -----------
Total liabilities .................. 1,402,111 1,264,239
Minority interest .................. 9,096 8,524
Shareholders' equity ............... 122,346 114,714
----------- -----------
Total liabilities and
shareholders' equity ............ $1,533,553 $1,387,477
=========== ===========
Net interest income .................. $ 47,847 $ 45,561
=========== ============
Net interest spread .................. 3.66% 3.86%
===== =====
Net interest margin .................. 4.57% 4.81%
===== =====
</TABLE>
- ----------------
(1) Includes $2.2 million and $1.7 million in loan fees for the 1997 and 1996
periods, respectively.
29
<PAGE>
The following schedule presents the dollar amount of changes in interest
income and interest expense for the major components of interest-earning assets
and interest-bearing liabilities and distinguishes between the increase
(decrease) related to higher outstanding balances and the volatility of
interest rates. For purposes of this table, changes attributable to both rate
and volume have been allocated to rate.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1997 VS. 1996
------------------------------------
INCREASE (DECREASE)
DUE TO
-----------------------
VOLUME RATE TOTAL
-------- ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest-earning assets
Total loans ............................................. $9,096 $ (1,197) $7,899
Securities ................................................ 265 532 797
Federal funds sold and other temporary investments ...... (106) (27) (133)
------ --------- ------
Total increase (decrease) in interest income ............ 9,255 (692) 8,563
------ --------- ------
Interest-bearing liabilities
Interest-bearing demand deposits ........................ (25) (66) (91)
Savings and money market accounts ........................ (262) (113) (375)
State, county and municipal certificates of deposit ...... 465 28 493
Certificates of deposit and other time deposits ......... 4,466 937 5,403
Federal funds purchased and securities sold under
repurchase agreements ................................. 725 32 757
Other borrowings .......................................... 95 (5) 90
------ --------- ------
Total increase (decrease) in interest expense ............ 5,464 813 6,277
------ --------- ------
Increase (decrease) in net interest income ............... $3,791 $ (1,505) $2,286
====== ========= ======
</TABLE>
PROVISION FOR LOAN LOSSES
In determining the adequacy of the allowance for loan losses, the Company
considers portfolio quality, composition, loss experience, growth, economic
conditions and other risk factors related to the loan portfolio. The provision
for loan losses increased to $3.6 million for the nine months ended September
30, 1997 from $1.8 million for the same time period in 1996, an increase of
$1.8 million or 100%. The increased provision resulted from a continued high
level of consumer loan losses and above historical average commercial loan
losses in 1997. See "--Financial Condition--Allowance for Loan Losses."
NONINTEREST INCOME
Noninterest income is an important source of revenue for financial
institutions in a deregulated environment. Noninterest income for the nine
months ended September 30, 1997 was $18.0 million, an increase of $107,000 or
0.60% from $17.9 million for the same period in 1996. The following table
presents for the periods indicated the major categories of noninterest income:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1997 1996
--------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Service charges on deposit accounts ...... $ 9,037 $ 9,754
Merchant credit card discounts ............ 6,109 5,246
Letter of credit fees ..................... 793 792
Gains on sale of securities ............... -- 1
Other noninterest income .................. 2,024 2,063
-------- --------
Total noninterest income ............... $17,963 $17,856
======== ========
</TABLE>
30
<PAGE>
Service charges on deposit accounts is the largest component of
noninterest income and a significant source of revenue to the Company. Service
charges on deposit accounts declined by $717,000 or 7.35% to $9.0 million for
the nine months ended September 30, 1997 from $9.8 million for the nine months
ended September 30, 1996, principally as a result of a reduced number of
overdrafts and reduced monthly service fees on certain checking accounts. The
Company generates substantial noninterest income from merchant credit card
discounts, consisting of fees paid by commercial clients for the processing of
credit card transactions. Merchant credit card discounts increased $863,000 or
16.45% to $6.1 million for the nine months ended September 30, 1997 from $5.2
million for the nine months ended September 30, 1996, principally due to the
successful marketing of such services. Letter of credit fees remained constant
during the nine months ended September 30, 1997 as compared to the nine months
ended September 30, 1996.
NONINTEREST EXPENSE
Noninterest expenses decreased $546,000 or 1.37% to $39.8 million for the
nine month period ended September 30, 1997 from $40.3 million for the nine
month period ended September 30, 1996. The efficiency ratio, calculated by
dividing total noninterest expenses by net interest income plus noninterest
income excluding securities gains or losses, was 60.48% for the nine months
ended September 30, 1997 and 63.62% for the nine months ended September 30,
1996. This improvement was partially due to personnel savings in 1997 and the
aforementioned large 1996 expenditures.
The following table represents for the periods indicated the major
categories of noninterest expense:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1997 1996
--------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Employee compensation and benefits .................. $20,144 $20,472
------- -------
Non-staff expenses:
Occupancy .......................................... 4,379 3,661
Furniture and equipment ........................... 2,034 2,088
Provision for loss on disposition of property ...... -- 810
Merchant credit card interchange fees ............ 4,227 3,693
Professional fees ................................. 379 1,097
FDIC assessment .................................... 194 1,720
Advertising ....................................... 1,025 696
Amortization of intangibles ........................ 683 716
Printing and supplies .............................. 689 731
Other real estate owned ........................... 236 149
Fraud losses (recoveries) net ..................... 401 (60)
Capitalized construction interest credit ......... (390) (520)
Other ............................................. 5,798 5,092
------- -------
Total non-staff expenses ........................ 19,655 19,873
------- -------
Total noninterest expense ........................ $39,799 $40,345
======= =======
</TABLE>
Employee compensation and benefit expense for the nine months ended
September 30, 1997 was $20.1 million, a decrease of $328,000 or 1.60% from
$20.5 million in the same period of 1996. This decrease was primarily a result
of the implementation of a reengineering study of the Company (the
"Reengineering Study"), partially offset by normal salary increases, the impact
of branch expansion and mid-year staff compensation adjustments due to the high
level of turnover. Total full-time equivalent employees at September 30, 1997
increased to 691 from 683 at September 30, 1996.
Non-staff expenses decreased to $19.7 million for the nine month period
ended September 30, 1997 from $19.9 million for the same period in 1996, a
decrease of $218,000 or 1.10%. This decrease in non-staff expenses primarily
reflected reduced charges related to a special FDIC assessment, provision for
loss on disposition of property and the Reengineering Study, partially offset
by increased occupancy
31
<PAGE>
expenses relating to the Company's new headquarters and the opening of three
new branches, increased merchant credit card interchange fees, increased
advertising expenditures, increased fraud losses and increases in certain other
expenses.
Occupancy expenses increased $718,000 in the nine months ended September
30, 1997, principally as a result of the opening of the Company's new corporate
headquarters in April 1997. During the nine months ended September 30, 1996,
the Company recorded a provision of $810,000 related to disposition of
property. The Company did not record a similar provision during the nine months
ended September 30, 1997.
In 1995, the Company commissioned an independent consultant to conduct the
Reengineering Study. The focus of the Reengineering Study was to enable the
Company to better manage costs related to personnel. The costs associated with
the Reengineering Study are reflected in professional fees paid by the Company
in 1995 and 1996. Professional fees decreased by $718,000 in the nine months
ended September 30, 1997 as compared to the nine months ended September 30,
1996, primarily as a result of the completion of the Reengineering Study in
August 1996.
In September 1996, the Company paid a one-time FDIC assessment of $1.4
million with respect to the Company's deposits acquired from failed thrifts and
insured by the Savings Association Insurance Fund ("SAIF") of the FDIC.
Principally because no similar assessment was made in the nine months ended
September 30, 1997, FDIC assessment decreased by $1.5 million as compared to
the nine months ended September 30, 1996.
Merchant credit card interchange fees increased by $534,000 in the nine
months ended September 30, 1997 as compared to the nine months ended September
30, 1996 as a result of the growth of the Company's merchant credit card
operations.
INCOME TAXES
Income tax expense includes the regular federal income tax at the
statutory rate and the Florida bank franchise tax. The amount of federal income
tax expense is influenced by the amount of taxable income, the amount of
tax-exempt income, the amount of non-deductible interest expenses and the
amount of other non-deductible expense. Taxable income with respect to the
Florida bank franchise tax is federal pre-tax income, plus income obligations
of tax exempt entities located outside the state of Florida less related
nondeductible interest expenses. A credit is allowed against the tax equal to
the lesser of 65.00% of the bank franchise tax or the amount of Florida
intangible tax expense paid during the year. An additional exclusion from
taxable income is provided for net income from an international banking
facility. During the nine months ended September 30, 1997, income tax expense
was $7.2 million or 4.00% lower than the $7.5 million for the nine months ended
September 30, 1996. The effective tax rate for the nine months ended September
30, 1997 was 32.32%.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities" and in
December 1996, the FASB issued a related Statement of Financial Accounting
Standards No. 127, "Deferral of the Effective Date of Certain Provisions of
FASB No. 125" (collectively "Statement No. 125"). Statement No. 125 provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishment of liabilities based on a financial components
approach that focuses on control. Portions of Statement No. 125 were effective
for transactions entered into after December 31, 1996 with the remaining
portions effective for transactions entered into after December 31, 1997. The
impact of adopting Statement No. 125 has not been nor is it currently expected
to be material to the Company's financial position or results of operations.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, "Earnings per Share" ("Statement No. 128"). Statement No.
128 specifies the computation, presentation and disclosure requirements for
earnings per share for public companies. It replaces primary earnings per share
and fully diluted earnings per share with basic earnings per share and diluted
earnings per share and is effective for the reporting periods ending after
December 15, 1997. For the Company, the
32
<PAGE>
computation for basic earnings per share is similar to the primary earnings per
share currently presented by the Company. The calculation of diluted earnings
per share will first apply to the Company for the financial statements upon the
effective date of the Plan and the grant of options thereunder. The impact of
adopting Statement No. 128 will depend upon the number of options outstanding
under the Plan at any one time.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 129, "Disclosure of Information about Capital Structure"
("Statement No. 129"). Statement No. 129 continues previous requirements to
disclose certain information about an entity's capital structure. The Company
currently complies with the disclosure requirements of Statement No. 129.
33
<PAGE>
FINANCIAL CONDITION
LOAN PORTFOLIO
Loans, net of unearned interest, were $953.1 million at September 30,
1997, an increase of $43.9 million or 4.83% from $909.2 million at September
30, 1996.
The following table summarizes the loan portfolio of the Company by type
of loan as of the dates indicated:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
----------------------------------------------------------------
1997 1996
------------------------------- ------------------------------
AMOUNT % OF GROSS LOANS AMOUNT % OF GROSS LOANS
---------- ------------------ ---------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Domestic:
Commercial ........................ $289,291 30.25% $276,585 30.31%
Commercial real estate ............ 249,468 26.09 216,233 23.69
Construction ..................... 53,923 5.64 32,891 3.60
Residential first mortgages ...... 150,125 15.70 128,142 14.04
Residential equity lines ......... 17,698 1.85 18,434 2.02
Consumer ........................ 64,884 6.79 88,602 9.71
Overdrafts ........................ 3,845 0.40 3,401 0.37
Bankers' acceptances ............ -- -- 29,762 3.26
-------- ------- -------- -------
Total domestic .................. 829,234 86.72 794,050 87.00
-------- ------- -------- -------
Foreign:
Banks ........................... 63,498 6.64 84,117 9.22
Bankers' acceptances ............ 26,862 2.81 5,981 0.66
Government ........................ 2,000 0.21 4,000 0.44
Other ........................... 34,588 3.62 24,512 2.68
-------- ------- -------- -------
Total foreign .................. 126,948 13.28 118,610 13.00
-------- ------- -------- -------
Total gross loans ............... 956,182 100.00% 912,660 100.00%
======= =======
Unearned ........................... (3,130) (3,458)
-------- --------
Total loans .................. $953,052 $909,202
======== ========
</TABLE>
The primary lending focus of the Company is on commercial loans,
commercial real estate loans and construction loans. The Company also focuses
on single-family residential loans, as well as to a lesser extent,
international loans and consumer loans.
The Company engages in commercial lending to small and medium-sized
businesses. The commercial loans primarily include term loans and lines of
credit. Commercial loans include trade financing for local commercial customers
who are primarily importing from or exporting to Latin America or the
Caribbean. A broad range of short to medium-term commercial loans, primarily
collateralized, are made available to businesses for working capital (including
inventory and receivables), business expansion and the purchase of equipment
and machinery. Commercial loans are originated primarily through relationships
that the Company's officers have with local businesses. Generally, the
Company's commercial loans are underwritten in the Company's primary market
area on the basis of the borrower's ability to service such debt from income or
asset conversion. Commercial loans generally are for amounts between $25,000
and $15 million, and are generally secured by business assets, which may
include accounts receivable and inventory, certificates of deposit, securities,
real estate, guarantees or other collateral. At September 30, 1997, the average
loan was approximately $100,000 and the Company had outstanding $289.3 million
of commercial loans. Approximately 6.30% of the commercial loans outstanding at
September 30, 1997 were unsecured.
The Commercial Real Estate Division of the Bank focuses on commercial real
estate loans, which include permanent financing of various types of properties,
and on construction loans. Commercial real
34
<PAGE>
estate loans generally range between $1 million and $16 million. Such loans are
originated primarily through relationships that the Company's officers have
with local property owners and developers. These loans are generally
collateralized by first liens on the underlying real estate, including the
property being constructed, where applicable, and generally relate to rental
apartments, shopping centers, office buildings, warehouses and single-family
residential projects. Generally, these loans relate to real estate in the
Company's primary market area. The Company conducts periodic inspections,
either directly or through an agent, prior to approval of periodic draws on
construction loans. Construction loans generally have terms ranging from 12-18
months. Permanent loans are generally for five-year terms with a balloon
payment due in the final year, although for competitive reasons, the Company
has begun to offer ten-year loans with a rate adjustment after five years and a
balloon payment due in the tenth year. In underwriting commercial real estate
loans, consideration is given to the property's operating history, future
operating projections, location and physical condition of the property. In
underwriting construction loans, consideration is given to the experience of
the builder and the feasibility of the project. The underwriting analysis also
includes credit checks, appraisals and a review of the financial condition of
the borrower. The Company originates most of its commercial real estate
portfolio, although it will occasionally purchase participations in commercial
real estate loans directly from other financial institutions. Generally, the
loan-to-value ratio of these loans does not exceed 75% of appraised value. At
September 30, 1997, the average loan was approximately $700,000 and the Company
had outstanding $303.4 million of commercial real estate and construction
loans.
The Company offers a complete line of single-family residential mortgage
loans. Single-family residential mortgage loans are generally for terms of 15
or 30 years and may be fixed or adjustable, usually depending upon the market.
Loans collateralized by single-family residential real estate generally have
been originated in amounts of no more than 80% of appraised value or have
mortgage insurance. The Company always requires mortgage title insurance and
hazard insurance in the amount of the loan. Although at September 30, 1997,
32.88% of the Company's residential mortgage loans are Fannie Mae-qualified,
loans in excess of $207,000 and loans made to international customers are not.
Single-family residential mortgage loans are usually originated through
advertisements and referrals. The Company generally does not purchase or sell
residential mortgage loans, although on occasion the Company will sell such
loans without recourse to the Company and retain servicing rights. At September
30, 1997, the Company had outstanding $150.1 million in single-family
residential mortgage loans and was servicing $21.5 million of such loans which
it had sold.
The Retail Division of the Bank focuses on consumer loans, including
automobile loans, home improvement loans and personal loans, as well as
residential equity lines. Consumer loans generally range between $1,000 and
$300,000. The terms of these loans typically range from one year to six years
and vary based upon the nature of collateral and size of loan. Equity lines
expire after a maximum of ten years. The Bank's branches represent the primary
sources for these loans. In April 1997, the Company discontinued its indirect
automobile lending operations due to a high level of loan losses. At September
30, 1997, the Company had outstanding $82.6 million of consumer loans and
residential equity lines, $28.4 million of which were indirect automobile
loans.
Foreign loans consist of most international loans and other loans to
foreign-domiciled borrowers with respect to whom the Company has domestic
guarantees or cash collateral. The Bank does not consider the latter a part of
international lending activities. At September 30, 1997, the Company had
outstanding $106.7 million of international loans, ($100.8 million of which
represented foreign loans) and $26.1 million in loans to foreign-domiciled
borrowers, or an aggregate of $126.9 million of foreign loans. Institutional
loans primarily consist of trade financing for correspondent financial
institutions, which aggregated $72.6 million at September 30, 1997. This
included pre-export financing, which represented 82% of trade financing for
correspondent financial institutions at September 30, 1997. International loans
range between $50,000 and $6 million. The terms of these loans generally do not
exceed six months. These loans usually are originated through correspondent
banking relationships which the Company has developed in Latin America and the
Caribbean over the years. The Company also provides financing to local
import-export companies, including financing guaranteed by the Eximbank.
The Company is organized along specialized lending groups. The Real Estate
Division is responsible for commercial and residential real estate loans. The
Corporate Division is responsible for
35
<PAGE>
commercial and international loans. At September 30, 1997, the Company's
lending limit was approximately $22.0 million. Finally, the Retail Banking
Division is responsible for consumer lending and commercial loans below
$100,000.
The Company's Credit Division maintains the Company's credit policy and
establishes underwriting standards. This division monitors compliance with
policy through the Company's Credit Administration department and handles
problem credits through the Company's Special Assets department. Finally, the
Credit Division provides support in the underwriting process through the
preparation of credit analyses and other reports by the Credit Analysis
department.
Each lending division can approve non-residential mortgage loans of up to
$200,000 internally if there are no exceptions to Company underwriting
guidelines and policy, and up to $100,000 if there are exceptions.
Non-residential mortgage loans over this amount and up to $500,000 must be
approved by the Credit Division and loans of $500,000 and more require Loan
Committee approval. Residential mortgage loans under $1 million are approved
within the Real Estate Division. Residential mortgage loans $1 million and
higher must be approved by the Loan Committee. The Loan Committee consists of
the Chief Executive Officer and President of the Bank, the Executive Vice
President and Chief Credit Officer, the Executive Vice President--Real Estate
Lending and the Executive Vice President-- Corporate Banking. In addition, the
Company has a Country Risk Committee that meets regularly throughout the year
to review the Company's international lending activities and practices and the
level of exposure in the countries in which it makes loans. The Country Risk
Committee consists of the Chairman of the Company, the Chief Executive Officer
of Bancorp and the Bank, the Executive Vice President and Chief Credit Officer
of the Bank, the Executive Vice President--Corporate Banking of the Bank and
the Vice President--International of the Bank.
At September 30, 1997, commercial loans outstanding were $289.3 million,
an increase of $12.7 million or 4.59% from the $276.6 million outstanding at
September 30, 1996. Commercial real estate loans outstanding at September 30,
1997 were $249.5 million, an increase of $33.3 million or 15.40% from the
$216.2 million outstanding at September 30, 1996. Construction loans
outstanding at September 30, 1997 were $53.9 million, an increase of $21.0
million or 63.83% from the $32.9 million outstanding at September 30, 1996.
Residential mortgage loans increased $22.0 million or 17.17% from $128.1
million at September 30, 1996 to $150.1 million at September 30, 1997. Consumer
loans, including residential equity lines outstanding, declined $24.4 million
or 22.80% from $107.0 million at September 30, 1996 to $82.6 million at
September 30, 1997. Foreign loans increased $8.3 million or 7.00% from $118.6
million at September 30, 1996 to $126.9 million at September 30, 1997.
36
<PAGE>
The contractual maturity ranges of domestic commercial, commercial real
estate and construction loan portfolio and foreign loan portfolio and the
amount of such loans with predetermined interest rates and floating rates in
each maturity range as of September 30, 1997 are summarized in the following
table:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
----------------------------------------------------
BETWEEN
ONE YEAR ONE AND AFTER
OR LESS FIVE YEARS FIVE YEARS TOTAL
---------- ------------ ------------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Domestic:
Commercial .................................... $136,339 $126,885 $26,067 $289,291
Commercial real estate ........................ 38,429 163,626 47,413 249,468
Construction loans ........................... 33,338 19,329 1,256 53,923
--------- --------- -------- ---------
Total domestic .............................. 208,106 309,840 74,736 592,682
--------- --------- -------- ---------
Foreign:
Banks ....................................... 63,148 350 -- 63,498
Bankers' acceptances ........................ 26,862 -- -- 26,862
Government .................................... 2,000 -- -- 2,000
Other ....................................... 34,588 -- -- 34,588
--------- --------- -------- ---------
Total foreign .............................. 126,598 350 -- 126,948
--------- --------- -------- ---------
Total .................................... $334,704 $310,190 $74,736 $719,630
========= ========= ======== =========
Loans with a predetermined interest rate ...... $177,576 $198,499 $55,780 $431,855
Loans with a floating interest rate ............ 157,128 111,691 18,956 287,775
--------- --------- -------- ---------
Total .................................... $334,704 $310,190 $74,736 $719,630
========= ========= ======== =========
</TABLE>
LOANS BY COUNTRY
The following table sets forth the distribution of the Company's gross
loans by country of the borrower at the dates indicated.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
------------------------------------------------
1997 1996
----------------------- ----------------------
% OF GROSS % OF GROSS
AMOUNT LOANS AMOUNT LOANS
-------- ------------ -------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
United States ............ $829 86.71% $794 86.97%
Brazil .................. 32 3.35 28 3.07
Peru ..................... 15 1.57 13 1.42
Ecuador .................. 12 1.26 13 1.42
Other(1) .................. 68 7.11 65 7.12
----- ------- ----- -------
Total Gross Loans ...... $956 100.00% $913 100.00%
===== ======= ===== =======
</TABLE>
- ----------------
(1) "Other" consists of loans to borrowers in countries in which loans did not
exceed the lesser of $11 million or one percent of total assets on the
dates indicated.
37
<PAGE>
TOTAL CROSS-BORDER OUTSTANDINGS BY COUNTRY
The following table sets forth, at the dates indicated, the aggregate
amount of the Company's cross-border outstandings (including foreign bonds, due
from bank accounts and interest-earning deposits with other banks), as well as
the percentage of such cross-border outstandings to the Company's total assets.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
------------------------------------------------
1997 1996
----------------------- ----------------------
% OF TOTAL % OF TOTAL
AMOUNT ASSETS AMOUNT ASSETS
-------- ------------ -------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Brazil ......... $ 32 2.11% $ 28 1.93%
Peru ......... 15 0.99 13 0.90
Ecuador ...... 12 0.79 13 0.90
Other(1) ...... 70 4.61 67 4.61
----- ----- ----- -----
Total ...... $129 8.50% $121 8.34%
===== ===== ===== =====
</TABLE>
- ----------------
(1) "Other" consists of loans to borrowers in countries in which loans did not
exceed $11 million or one percent of total assets on the dates indicated.
NONPERFORMING ASSETS
The Company has established procedures to assist it in maintaining the
overall quality of its loan portfolio. The Company has established underwriting
guidelines to be followed by its officers. The Company also monitors its
delinquency levels for any negative or adverse trends. There can be no
assurance, however, that the Company's loan portfolio will not become subject
to increasing pressures from deteriorating borrower credit due to general
economic conditions.
The Company has historically reflected improving loan quality, with
non-performing assets declining from 1992 through 1996 as a percentage of loans
and other real estate owned. At September 30, 1997, nonaccrual loans had
increased to $14.1 million from $1.5 million at September 30, 1996. This large
increase is primarily attributable to a single borrowing relationship
consisting of two loans with an aggregate outstanding balance at September 30,
1997 of $9.7 million. This indebtedness consists of a performing asset-based
lending line secured by inventory and accounts receivable and a term workout
loan of $2.6 million secured by various other assets of the borrowing entity.
Both loans are on nonaccrual status with interest recognized on a cash basis
due to the financial condition of the borrower. A specific allowance for
possible loan losses has been made for these loans.
The Company generally places a loan on nonaccrual status and ceases
accruing interest when loan payment performance is deemed unsatisfactory. All
loans past due 90 days are placed on nonaccrual status, unless a loan is both
well-secured and in the process of collection. Cash payments received while a
loan is classified as nonaccrual are recorded as a reduction of principal as
long as significant doubt exists as to collection of the principal. Otherwise,
interest is recognized on a cash basis. The Company is sometimes required to
revise a loan's interest rate or repayment terms in a troubled debt
restructuring. In addition to nonaccrual loans, the Company's internal loan
review department evaluates additional potential problem loans as to risk
exposure in determining the adequacy of the allowance for loan losses.
The Company maintains on an ongoing basis updated appraisals on nonaccrual
loans and potential problem loans secured by real estate. In instances where
updated appraisals reflect reduced collateral values, an evaluation of the
borrower's overall financial condition is made to determine the need, if any,
for possible writedowns or appropriate additions to the allowance for loan
losses. The Company records other real estate at fair value at the time of
acquisition, less estimated costs to sell.
38
<PAGE>
The following table presents information regarding nonperforming assets at
September 30, 1997 and September 30, 1996:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
--------------------------
1997 1996
------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Nonaccrual loans ................................................ $ 14,058 $ 1,459
Restructured loans ............................................. 379 419
Accruing loans 90 days or more past due ........................ 882 453
Other real estate ............................................. 2,043 3,140
-------- -------
Total nonperforming assets .................................... $ 17,362 $ 5,471
======== =======
Nonperforming assets to total loans and other real estate ...... 1.82% 0.60%
======== =======
</TABLE>
There were no foreign loans in these categories on each of the reporting
dates. The Company expects to add a former operations facility currently listed
for sale at $3.4 million to "other real estate" in the fourth quarter.
The Company would have recorded additional interest income of
approximately $237,000 in the first nine months of 1997 on nonperforming loans
if the loans had been current in accordance with original terms. Interest
income recorded on nonperforming loans for the first nine months of 1997 was
approximately $957,000.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is a reserve established through charges to
earnings in the form of a provision for loan losses. Management has established
an allowance for loan losses which it believes is adequate for estimated losses
in the Company's loan portfolio. Based on an evaluation of the loan portfolio
by the Company's internal loan review department, management presents a monthly
review of the allowance for loan losses to the Bank's Board of Directors,
indicating any change in the allowance since the last review and any
recommendations as to adjustments in the allowance. In making its evaluation,
management considers the diversification of the Company's commercial loan
portfolio, the effect of changes in the local real estate market on collateral
values, the results of recent regulatory examinations, the effects on the loan
portfolio of current economic indicators and their probable impact on
borrowers, the amount of charge-offs for the period, the amount of
nonperforming loans and related collateral security, and the evaluation of its
loan portfolio by the loan review function, which prepares an analysis of the
adequacy of the allowance. Charge-offs occur when loans are deemed to be
uncollectible.
The Company follows a loan review program to evaluate the credit risk in
the loan portfolio. Through the loan review process, the Company maintains an
internally classified loan list which, along with the delinquency list of
loans, helps management assess the overall quality of the loan portfolio and
the adequacy of the allowance for loan losses. Loans classified as
"substandard" are those loans with clear and defined weaknesses such as a
highly-leveraged position, unfavorable financial ratios, uncertain repayment
sources or poor financial condition, which may jeopardize recoverability of the
debt.
Loans classified as "doubtful" are those loans which have characteristics
similar to substandard accounts, but with an increased risk that a loss may
occur, or at least a portion of the loan may require a charge-off if liquidated
at present. Loans classified as "loss" are those loans which are in the process
of being charged off.
In order to determine the adequacy of the allowance for loan losses,
management considers the risk classification or delinquency status of loans and
other factors, such as collateral value, portfolio composition, trends in
economic conditions and the financial strength of borrowers. Management
establishes specific allowances for loans which management believes require
reserves greater than those allocated according to their classification or
delinquent status. A general allowance is established based upon the Company's
historical loss experience for loans not criticized. An unallocated portion of
the allowance represents a subjective cushion for uncertainties, such as those
related to changes in
39
<PAGE>
economic conditions. The Company then charges to operations a provision for
loan losses to maintain the allowance for loan losses at an adequate level as
determined by the foregoing methodology.
For the nine months ended September 30, 1997, net loan charge-offs
totalled $3.0 million or 0.30% of average loans outstanding for the period (or
0.40% on an annualized basis), compared to $1.4 million in net loan charge-offs
or 0.17% of average loans outstanding for the nine months ended September 30,
1996 (or 0.22% on an annualized basis). During the nine months ended September
30, 1997, the Company recorded a provision for loan losses of $3.6 million,
compared to $1.8 million for the nine months ended September 30, 1996. In 1997,
the Company charged off $1.3 million with respect to two commercial loans which
accounted for most of the increase in the provision. In addition, the Company
experienced a continuing high level of losses on consumer loans, substantially
arising from losses with respect to indirect automobile loans and small
unsecured loans. At September 30, 1997, the allowance totalled $12.2 million or
1.28% of total loans, resulting in a ratio of the allowance to nonperforming
loans of 79.70%.
The following table presents, for the periods indicated, an analysis of
the allowance for loan losses and other related data:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1997 1996
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Average loans outstanding .................................... $983,091 $851,834
======== =========
Total loans outstanding at end of period ..................... $953,052 $909,202
======== =========
Allowance for loan losses at beginning of period ............ $ 11,578 $ 11,411
Provision for loan losses .................................... 3,604 1,778
Charge-offs:
Commercial and industrial ................................. (2,119) (789)
Real estate ................................................ (146) (1)
Consumer ................................................... (1,765) (1,448)
Foreign ................................................... -- --
Recoveries:
Commercial and industrial ................................. 512 350
Real estate ................................................ 14 17
Consumer ................................................... 531 452
Foreign ................................................... -- --
-------- ---------
Net loan charge-offs .......................................... (2,973) (1,419)
-------- ---------
Allowance for loan losses at end of period .................. $12,209 $ 11,770
======== =========
Ratio of allowance to end of period loans ..................... 1.28% 1.29%
Ratio of net loan charge-offs to average loans ............... 0.30% 0.17%
Ratio of allowance to end of period nonperforming loans ...... 79.70% 504.93%
</TABLE>
40
<PAGE>
The following table describes the allocation of the allowance for loan
losses among various categories of loans and certain other information for the
dates indicated. The allocation is made for analytical purposes and is not
necessarily indicative of the categories in which future losses may occur. The
total allowance is available to absorb losses from any segment of loans.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997 AS OF SEPTEMBER 30, 1996
------------------------- ------------------------
% OF % OF
AMOUNT GROSS LOANS AMOUNT GROSS LOANS
--------- ------------- --------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance of allowance for loan losses applicable to:
Domestic:
Commercial .................................... $ 7,865 30.25% $ 5,140 30.31%
Commercial real estate ........................ 616 26.09 586 23.69
Construction .................................... 75 5.64 59 3.60
Residential first mortgages ..................... 364 15.70 212 14.04
Residential equity lines ........................ 147 1.85 47 2.02
Consumer ....................................... 1,237 6.79 1,024 9.71
Overdrafts .................................... 275 0.40 63 0.37
Bankers' acceptances ........................... -- -- -- 3.26
-------- ------- -------- -------
Total domestic ................................. 10,579 86.72 7,131 87.00
-------- ------- -------- -------
Foreign:
Banks .......................................... 381 6.64 684 9.22
Bankers' acceptances ........................... -- 2.81 -- 0.66
Government .................................... 17 0.21 36 0.44
Other .......................................... 232 3.62 144 2.68
-------- ------- -------- -------
Total foreign ................................. 630 13.28 864 13.00
-------- ------- -------- -------
Unallocated .................................... 1,000 3,775
-------- --------
Total allowance for loan losses ............... $12,209 100.00% $11,770 100.00%
======== ======= ======== =======
</TABLE>
The Company believes that the allowance for loan losses at September 30,
1997 is adequate to cover losses inherent in the portfolio as of such date.
There can be no assurance, however, that the Company will not sustain losses in
future periods, which could be substantial in relation to the size of the
allowance at September 30, 1997.
SECURITIES
The Company uses its securities portfolio primarily as a source of
liquidity and secondarily as a source of income. At September 30, 1997,
investment securities totalled $385.0 million, an increase of $38.3 million
from $346.7 million at September 30, 1996. The increase was primarily
attributable to purchases of securities of United States agencies and
corporations. At September 30, 1997, investment securities represented 25.37%
of total assets compared to 23.88% of total assets at September 30, 1996. The
yield on the investment portfolio for the nine months ended September 30, 1997
was 6.26% compared to a yield of 6.04% for the nine months ended September 30,
1996.
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities. At the date of purchase, the Company is required to classify
debt and equity securities into one of three categories: held-to-maturity,
trading or available-for-sale. At each reporting date, the appropriateness of
the classification is reassessed. Investments in debt securities are classified
as held-to-maturity and measured at amortized cost in the financial statements
only if management has the positive intent and ability to hold these securities
to maturity. Investments not classified as held to maturity are classified as
available-for-sale and measured at fair value in the financial statements with
unrealized gains and losses reported, net of tax, in a separate component of
shareholders' equity until realized. The Company does not have a trading
account.
41
<PAGE>
The following table presents the amortized cost of securities classified
as available-for-sale and their approximate fair values at September 30, 1997:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
--------------------------------------------------------------------
GROSS GROSS FAIR
AMORTIZED COST UNREALIZED GAIN UNREALIZED LOSS VALUE
---------------- ----------------- ----------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
United States Treasury securities ...... $109,020 $535 $ -- $109,555
Securities of the United States
agencies and corporations ............ 45,437 263 (70) 45,630
--------- ----- ----- ---------
Total ................................. $154,457 $798 $ (70) $155,185
========= ===== ===== =========
</TABLE>
The following table presents the amortized cost of securities classified
as held-to-maturity and their approximate fair values at September 30, 1997:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
--------------------------------------------------------------------
GROSS GROSS FAIR
AMORTIZED COST UNREALIZED GAIN UNREALIZED LOSS VALUE
---------------- ----------------- ----------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
United States Treasury securities ...... $ 72,445 $ 502 $ -- $ 72,947
Securities of the United States agencies
and corporations ..................... 122,757 195 (62) 122,890
Securities issued by states and political
subdivisions ........................... 32,782 744 -- 33,526
Other debt securities .................. 600 -- -- 600
Federal Reserve Bank stock ............ 1,219 -- -- 1,219
--------- ------- ----- ---------
Total ................................. $229,803 $1,441 $ (62) $231,182
========= ======= ===== =========
</TABLE>
The following table summarizes the contractual maturity of investment
securities at amortized cost (including federal funds sold and temporary
investments) and their weighted average yields. No tax equivalent adjustments
were made.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
-------------------------------------------
AFTER ONE YEAR
BUT WITHIN
WITHIN ONE YEAR FIVE YEARS
--------------------- ---------------------
AMOUNT YIELD AMOUNT YIELD
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
United States Treasury
securities .................. $110,420 6.33% $ 71,045 6.29%
Securities of other United
States agencies and
corporations .................. 29,870 6.87 125,709 6.57
Securities issued by states
and political subdivisions . 3,858 5.56 2,994 4.44
Other debt securities ......... -- -- 250 8.00
--------- ------ --------- ------
Total debt securities ......... 144,148 6.42 199,998 6.44
Federal Reserve Bank stock -- -- -- --
Federal funds sold ............ 42,103 6.19 -- --
Temporary investments ......... 873 4.13 -- --
--------- ------ --------- ------
Total ........................ $187,124 6.37% $199,998 6.44%
========= ====== ========= ======
<CAPTION>
AFTER FIVE YEARS
BUT WITHIN
TEN YEARS AFTER TEN YEARS
----------------- -----------------
AMOUNT YIELD AMOUNT YIELD TOTAL YIELD
--------- ------- --------- ------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
United States Treasury
securities .................. $ -- --% $ -- --% $181,465 6.31%
Securities of other United
States agencies and
corporations .................. 6,496 6.61 6,119 6.61 168,194 6.63
Securities issued by states
and political subdivisions . 11,482 5.24% 14,448 5.78 32,782 5.44
Other debt securities ......... 350 7.03 -- -- 600 7.43
-------- ----- -------- ----- --------- -----
Total debt securities ......... 18,328 5.76 20,567 6.02 383,041 6.37
Federal Reserve Bank stock -- -- 1,219 6.00 1,219 6.00
Federal funds sold ............ -- -- -- -- 42,103 6.19
Temporary investments ......... -- -- -- -- 873 4.13
-------- ----- -------- ----- --------- -----
Total ........................ $18,328 5.76% $21,786 6.02% $427,236 6.36%
======== ===== ======== ===== ========= =====
</TABLE>
DERIVATIVES
At September 30, 1997, the Company did not have off-balance sheet
derivative contracts outstanding. The Company does engage in a nominal amount
of foreign exchange contracts primarily as an accommodation to commercial
customer needs. The investment portfolio includes a $25 million par value
United States government agency inverse floater maturing in February 1998. The
portfolio also contains some securities with callable options.
42
<PAGE>
DEPOSITS
The Company offers a variety of deposit accounts having a wide range of
interest rates and terms to its deposit customers, both foreign and domestic.
The Company relies primarily on competitive pricing and customer service to
attract and retain these deposits. The Company does not have any brokered
deposits.
The Company's average total deposits for the nine months ended September
30, 1997 were $1,326.9 million or 9.82% above the average total deposits during
the same period in 1996. The Company's total deposits at September 30, 1997
were $1,298.5 million or 3.55% over total deposits at September 30, 1996.
The Company's lending and investment activities are funded primarily by
deposits, approximately 43.40% of which were demand and savings deposits at
September 30, 1997. Average non-interest bearing deposits for the nine month
period ended September 30, 1997 were $268.9 million as compared to $262.9
million for the same period in 1996, an increase of 2.28%. Approximately 20.27%
of average deposits for the nine month period ended September 30, 1997 were
non-interest bearing. Interest-bearing time deposits have represented the
primary source of deposit growth during 1997. Interest-bearing time deposits
increased an average of 20.60% for the first nine months of 1997 compared to
the comparable period in 1996.
The daily average balances and weighted average interest rates paid on
interest-bearing deposits for the nine months ended September 30, 1997 are
presented below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
----------------------------------------
AMOUNT % OF TOTAL RATE
------------ ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest-bearing demand deposits ........................ $ 64,388 4.85% 1.51%
Savings ................................................... 133,534 10.06 2.94
Money market ............................................. 117,232 8.84 2.65
State, county and municipal certificates of deposit ...... 28,535 2.15 5.48
Time deposits less than $100,000 ........................... 425,749 32.09 5.42
Time deposits $100,000 and over ........................... 239,704 18.06 5.38
International banking facility deposits .................. 48,852 3.68 5.21
----------- ------- ------
Total interest-bearing deposits ........................ 1,057,994 79.73 4.52
Noninterest-bearing deposits .............................. 268,913 20.27 --
----------- ------- ------
Total deposits ....................................... $1,326,907 100.00% 3.61%
=========== ======= ======
</TABLE>
The following table sets forth the amount of the Company's time deposits
that are $100,000 or greater by time remaining until maturity (includes
international banking facility deposits and state, county and municipal
certificates of deposit that are $100,000 or greater):
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
-------------------------
(DOLLARS IN THOUSANDS)
<S> <C>
3 months or less .................. $101,147
Between 3 months and 6 months ...... 81,873
Between 6 months and 1 year ......... 84,715
Over 1 year ........................ 14,460
---------
Total ........................... $282,195
=========
</TABLE>
As of September 30, 1997, 34 of such deposits had balances between
$500,000 and $1 million and 12 had balances over $1 million.
43
<PAGE>
As part of its funding process, the Company obtains deposits from
customers domiciled in other countries, primarily in Latin America. The
following table sets forth the amounts of deposits by country from customers
domiciled outside of the United States as of the dates indicated, as well as
the composition of such deposits by deposit type.
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
--------------
1997 1996
------ -----
(DOLLARS IN
MILLIONS)
<S> <C> <C>
COUNTRY:
Venezuela ............................................. $ 89 $ 71
Ecuador ............................................. 46 65
Dominican Republic .................................... 19 12
Costa Rica .......................................... 18 18
Mexico ................................................ 18 19
Spain ................................................ 17 8
Brazil ................................................ 12 10
Argentina ............................................. 13 8
Guatemala ............................................. 14 10
Colombia ............................................. 11 11
Panama ................................................ 11 6
Honduras ............................................. 10 8
El Salvador .......................................... 8 5
British West Indies ................................. 4 2
Other(1) ............................................. 41 32
----- -----
Total foreign deposits .............................. $331 $285
===== =====
COMPOSITION BY DEPOSIT TYPE:
Certificates of deposit and other time deposits ...... $182 $106
Other ................................................ 149 179
----- -----
Total foreign deposits .............................. $331 $285
===== =====
</TABLE>
- ----------------
(1) "Other" consists of deposits from customers domiciled in countries from
which total deposits did not exceed $4 million as of September 30, 1997.
44
<PAGE>
INTEREST RATE SENSITIVITY AND LIQUIDITY
The Company's fund management policy provides management with guidance for
effective funds management, and the Company has established a measurement
system for monitoring its net interest rate sensitivity position. The Company
manages its sensitivity position within established guidelines.
An interest rate sensitive asset or liability is one that, within a
defined time period, either matures or experiences an interest rate change in
line with general market interest rates. The management of interest rate risk
is performed by analyzing the maturity and repricing relationships between
interest-earning assets and interest-bearing liabilities at specific points in
time ("GAP") and by analyzing the effects of interest rate changes on net
interest income over specific periods of time by projecting the performance of
the mix of assets and liabilities in varied interest rate environments.
Interest rate sensitivity reflects the potential effect on net interest income
of a movement in interest rates. A company is considered to be asset sensitive,
or having a positive GAP, when the amount of interest-earning assets maturing
or repricing within a given period exceeds the amount of its interest-bearing
liabilities maturing or repricing within that time period. Conversely, a
company is considered to be liability sensitive, or having a negative GAP, when
the amount of its interest-bearing liabilities maturing or repricing within a
given period exceeds the amount of its interest-earning assets maturing or
repricing within that time period. During a period of rising interest rates, a
negative GAP would tend to affect adversely net interest income, while a
positive GAP would tend to result in an increase in net interest income. During
a period of falling interest rates, a negative GAP would tend to result in an
increase in net interest income, while a positive GAP would tend to affect net
interest income adversely.
The following table sets forth an interest rate sensitivity analysis for
the Company at September 30, 1997:
<TABLE>
<CAPTION>
VOLUMES SUBJECT TO REPRICING WITHIN
----------------------------------------
0-30 31-180 181-365
DAYS DAYS DAYS
------------ ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest-earning assets:
Federal funds sold and other
temporary investments ............... $ 42,453 $ -- $ 523
Securities ........................... 48,209 101,939 85,734
Total loans ........................ 362,687 116,906 69,629
------------ ------------- -------------
Total interest-earning assets ...... 453,349 218,845 155,886
------------ ------------- -------------
Interest-bearing liabilities:
Demand, money market and
savings deposits .................. 299,255 -- --
Certificates of deposit and other
time deposits ..................... 100,300 331,301 245,474
------------ ------------- -------------
Total interest-bearing deposits ... 399,555 331,301 245,474
Federal funds purchased and
securities sold under repurchase
agreements ........................ 50,898 -- --
Other borrowings ..................... 18,985 -- --
------------ ------------- -------------
Total interest-bearing liabilities 469,438 331,301 245,474
------------ ------------- -------------
Period GAP ........................... (16,089) (112,456) (89,588)
Cumulative GAP ..................... (16,089) (128,545) (218,133)
Period GAP to total assets ......... (1.06)% (7.41)% ( 5.90)%
Cumulative GAP to total assets ...... (1.06) (8.47) (14.37)
Cumulative interest-earning assets
to cumulative interest-bearing
liabilities ........................ 96.57 83.95 79.15
<CAPTION>
GREATER
1-3 3-5 5-10 THAN
YEARS YEARS YEARS 10 YEARS TOTAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold and other
temporary investments ............... $ -- $ -- $ -- $ -- $ 42,976
Securities ........................... 128,175 5,700 13,810 1,421 384,988
Total loans ........................ 110,831 147,075 52,063 93,861 953,052
---------- ---------- ---------- ---------- ------------
Total interest-earning assets ...... 239,006 152,775 65,873 95,282 1,381,016
---------- ---------- ---------- ---------- ------------
Interest-bearing liabilities:
Demand, money market and
savings deposits .................. -- -- -- -- 299,255
Certificates of deposit and other
time deposits ..................... 56,720 924 26 -- 734,745
---------- ---------- ---------- ---------- ------------
Total interest-bearing deposits ... 56,720 924 26 -- 1,034,000
Federal funds purchased and
securities sold under repurchase
agreements ........................ -- -- -- -- 50,898
Other borrowings ..................... -- -- -- -- 18,985
---------- ---------- ---------- ---------- ------------
Total interest-bearing liabilities 56,720 924 26 -- 1,103,883
---------- ---------- ---------- ---------- ------------
Period GAP ........................... 182,286 151,851 65,847 95,282 $ 277,133
============
Cumulative GAP ..................... (35,847) 116,004 181,851 277,133
Period GAP to total assets ......... 12.01% 10.01% 4.34% 6.28%
Cumulative GAP to total assets ...... (2.36) 7.64 11.98 18.26
Cumulative interest-earning assets
to cumulative interest-bearing
liabilities ........................ 96.75 110.51 116.47 125.11
</TABLE>
Although the GAP analysis reflects a negative position, the Company
believes that savings deposits reflected as repriceable in the 0-30 days'
window and on which rates are set by management will reprice more slowly than
the GAP analysis indicates.
45
<PAGE>
Shortcomings are inherent in GAP analysis since certain assets and
liabilities may not move proportionately as interest rates change.
Consequently, in addition to GAP analysis, the Company uses a simulation model
and shock analysis to test the interest rate sensitivity of net interest income
and the balance sheet, respectively. Based on the Company's September 30, 1997
simulation analysis, the Company estimates that a 200 basis point rise or
decline in rates over the next twelve month period would have an impact of less
than 3.0% on its net interest income for the same period. The change is
relatively small, despite the Company's liability sensitive GAP position. This
results primarily from the behavior of demand, money market and savings
deposits. The Company maintains an Asset/Liability Committee that reviews the
Company's interest rate risk position, generally on a bi-weekly basis.
Liquidity involves the Company's ability to raise funds to support asset
growth or reduce assets to meet deposit withdrawals and other payment
obligations, to maintain reserve requirements and otherwise to operate the
Company on an ongoing basis. During the past three years, the Company's
liquidity needs have been met primarily by financing activities, which
consisted mainly of growth in time deposits and borrowings supplemented by
earnings through operating activities. The composition of the investment
portfolio also provides the Company with flexibility in its liquidity
management.
CAPITAL RESOURCES
Capital management consists of providing equity to support both current
and future operations. The Company is subject to capital adequacy requirements
imposed by the FRB and the Bank is subject to capital adequacy requirements
imposed by the OCC. Both the FRB and the OCC have adopted risk-based capital
requirements for assessing bank holding company and bank capital adequacy.
These standards define capital and establish minimum capital requirements in
relation to assets and off-balance sheet exposure, adjusted for credit risk.
The risk-based capital standards currently in effect are designed to make
regulatory capital requirements more sensitive to differences in risk profiles
among bank holding companies and banks, to account for off-balance sheet
exposure and to minimize disincentives for holding liquid assets. Assets and
off-balance sheet items are assigned to broad risk categories, each with
appropriate relative risk weights. The resulting capital ratios represent
capital as a percentage of total risk-weighted assets and off-balance sheet
items.
Bank regulatory authorities in the United States have issued risk-based
capital standards by which all bank holding companies and banks are evaluated
in terms of capital adequacy. The risk-based capital standards issued by the
FRB apply to the Company. These guidelines relate a financial institution's
capital to the risk profile of its assets. The risk-based capital standards
require all financial institutions to have "Tier 1 capital" of at least 4.0%
and "total risk-based" capital (Tier 1 and Tier 2) of at least 8.0% of total
risk-adjusted assets. "Tier 1 capital" may consist of a limited amount of
intermediate-term preferred stock, a limited amount of term subordinated debt,
certain hybrid capital instruments and other debt securities, perpetual
preferred stock not qualifying as Tier 1 capital, and a limited amount of the
general valuation allowance for loan losses. The sum of Tier 1 capital and Tier
2 capital is "total risk-based capital."
The FRB has also adopted guidelines which supplement the risk-based
capital guidelines with a minimum ratio of Tier 1 capital to adjusted average
total consolidated assets ("leverage ratio") of 3.0% for institutions with well
diversified risk, including no undue interest rate exposure; excellent asset
quality; high liquidity; good earnings; and that are generally considered to be
strong banking organizations, rated composite 1 under applicable federal
guidelines, and that are not experiencing or anticipating significant growth.
Other banking organizations are required to maintain a leverage ratio of at
least 4.0% to 5.0%. These rules further provide that banking organizations
experiencing internal growth or making acquisitions will be expected to
maintain capital positions substantially above the minimum supervisory levels
and comparable to peer group averages, without significant reliance on
intangible assets.
Pursuant to Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), each federal banking agency revised its risk-based capital
standards to ensure that those standards take adequate account of interest rate
risk, concentration of credit risk and the risks of nontraditional activities,
as well as reflect the actual performance and expected risk of loss on
multifamily mortgages. The Bank is subject to capital adequacy guidelines of
the OCC that are substantially similar to the FRB
46
<PAGE>
guidelines. Also pursuant to FDICIA, the OCC has promulgated regulations
setting the levels at which a national bank such as the Bank would be
considered "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" and "critically undercapitalized." See
"Regulation-- The Company" and "--The Bank."
Shareholders' equity increased from $119.1 million at September 30, 1996
to $129.2 million at September 30, 1997, an increase of $10.1 million or 8.48%.
This increase was primarily the result of net income of $19.3 million, less the
payment of common stock dividends of $9.8 million and an increase in net
unrealized gain on available for sale securities, net of taxes of $556,000.
The following table provides a comparison of the Company's and the Bank's
leverage and risk-weighted capital ratios as of September 30, 1997 to the
minimum and well-capitalized regulatory standards:
<TABLE>
<CAPTION>
ACTUAL RATIO
MINIMUM REQUIRED WELL-CAPITALIZED AT SEPTEMBER 30, 1997
------------------ ------------------ ----------------------
<S> <C> <C> <C>
THE COMPANY
Leverage ratio ........................ 3.00%(1) N/A 8.52%
Tier 1 risk-based capital ratio ...... 4.00 6.00% 14.14
Risk-based capital ratio ............ 8.00 10.00 15.39
THE BANK
Leverage ratio ........................ 3.00%(2) 5.00% 8.50%
Tier 1 risk-based capital ratio ...... 4.00 6.00 14.12
Risk-based capital ratio ............ 8.00 10.00 15.37
</TABLE>
- ----------------
(1) The FRB may require the Company to maintain a leverage ratio of up to 200
basis points above the required minimum.
(2) The OCC may require the Bank to maintain a leverage ratio of up to 200
basis points above the required minimum.
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
OVERVIEW
The Company engaged in several transactions in 1994, 1995 and 1996 which
had a significant impact on the Company's performance in each of those years.
In June 1995, the Company acquired the Plaza Bank of Miami which was merged
into the Bank. This transaction added $105.7 million in deposits and $124.4
million in assets. A resulting intangible asset of $9.3 million was recorded as
a result of this transaction. In 1995, the Bank began construction of its new
headquarters which were occupied in April 1997. In anticipation of this move,
the Company made provisions for estimated loss on disposition of property in
1995 and in 1996 in the amount of $650,000 and $1.3 million, respectively. In
1995, the Company commenced the Reengineering Study which was completed in
August 1996. Professional fees associated with this study amounted to $209,000
and $638,000 in 1995 and 1996, respectively. In September 1996, the Company
paid a one time FDIC assessment of $1.4 million with respect to the Company's
deposits acquired from failed thrifts and insured by the SAIF.
Net income was $18.0 million, $17.8 million and $15.2 million for each of
the years ended December 31, 1996, 1995 and 1994, respectively, and net income
per share was $0.96, $0.94 and $0.80 for each of these same periods,
respectively. Earnings growth from 1995 to 1996 resulted principally from loan
growth and increased fee income, but was impacted by the special FDIC
assessment, Reengineering Study costs and provision for estimated loss on
disposition of property. The increase in earnings from 1994 to 1995 was due
primarily to loan growth, increased fee income and a reduced provision for loan
losses. The Company posted returns on average assets of 1.28%, 1.41% and l.33%
and returns on average equity of 15.49%, 16.73% and 15.91% for the years 1996,
1995 and 1994, respectively.
Total assets at December 31, 1996, 1995 and 1994 were $1,512.0 million,
$1,325.0 million and $1,172.2 million, respectively. Total deposits at December
31, 1996, 1995 and 1994 were $1,320.1 million, $1,156.3 million and $1,029.1
million, respectively. The Company retained the five offices acquired in 1995,
as well as a major portion of the deposits at those locations. Total loans at
December 31, 1996, 1995 and 1994 were $973.6 million, $821.1 million, and
$667.1 million, respectively. Total loans increased $152.5 million or 18.57%
from December 31, 1995 to December 31, 1996 and $154.0 million or 23.09% from
December 31, 1994 to December 31, 1995. Total shareholders' equity was $124.7
million, $116.1
47
<PAGE>
million and $100.4 million at December 31, 1996, 1995 and 1994, respectively.
Changes in common shareholders' equity primarily reflect net income, less cash
dividends.
RESULTS OF OPERATIONS
NET INTEREST INCOME
1996 VERSUS 1995. Net interest income totalled $60.9 million in 1996
compared to $56.6 million in 1995, an increase of $4.3 million or 7.60%.
Interest income increased $9.0 million or 9.46% primarily as a result of
increased loan volume and the acquisition of an aggregate of $115.5 million of
interest-earning assets relating to the acquisition of the Plaza Bank of Miami
by the Company in June 1995, partially offset by a decrease in the average
yield on loans. Average interest-earning assets increased by $127.5 million or
11.05% and average loans increased by $136.8 million or 18.60%, respectively,
in 1996 as compared to 1995. The increase in interest income was partially
offset by a $4.8 million or 12.50% increase in interest expense, primarily due
to the growth in time deposits, net of a decline in the average rate paid on
such deposits. Average interest-bearing liabilities increased by $114.7 million
or 12.97% and average time deposits increased by $106.4 million or 20.36%,
respectively, in 1996 as compared to 1995.
Net interest margins were 4.75% and 4.91% and net interest spreads were
3.80% and 3.90%, in each case, for 1996 and 1995, respectively. The decrease in
the net interest margin from 1995 to 1996 primarily reflects an 11 basis point
decline in the yield on average interest-earning assets. The yield on average
interest-earning assets declined to 8.13% in 1996 from 8.24% in 1995,
principally due to a 37 basis point decline in the average yield on loans. The
cost of interest-bearing liabilities declined from 4.34% in 1995 to 4.33% in
1996, principally due to a 10 basis point decrease in the average rate paid on
time deposits and a 14 basis point decrease in the average rate paid on savings
and money market accounts.
Funds utilized for the construction of the Company's headquarters reduced
the available volume of earning assets and resulting net interest income in
1996 and 1995. A capitalized construction interest cost was imputed and
reflected as a credit in "Other Operating Expenses" in the amount of $773,000
and $255,000 in 1996 and 1995, respectively.
1995 VERSUS 1994. Net interest income totalled $56.6 million for 1995
compared to $52.6 million in 1994, an increase of $4.0 million or 7.60%.
Interest income increased $18.1 million primarily due to strong loan growth, an
increased average yield on loans, and the acquisition of an aggregate of $115.5
million of interest-earning assets relating to the acquisition by the Company
of the Plaza Bank of Miami in June 1995. Average interest-earning assets
increased 10.93% and average loans increased 15.70%, respectively, in 1995 as
compared to 1994. Loan yield increased from 8.50% in 1994 to 9.53% in 1995. The
increase in interest income was partially offset by an increase in interest
expense of $14.1 million, or 57.93%, reflecting an increase in interest-bearing
deposits primarily as a result of an increase in the average rate paid on time
deposits and savings and money market accounts, and also as a result of an
increase in time deposits. Average interest-bearing liabilities increased by
$93.6 million or 11.84% and average time deposits increased by $103.3 million
or 24.63%, respectively, in 1995 as compared to 1994.
Net interest margins were 4.91% and 5.06% and net interest spreads were
3.90% and 4.32%, for 1995 and 1994, respectively. The decrease in the net
interest margin from 1994 to 1995 reflects a 126 basis point increase in the
rate paid on average interest-bearing liabilities, partially offset by an 84
basis point increase in the yield on average interest-earning assets. The yield
on average interest-earning assets increased to 8.24% in 1995 from 7.40% in
1994, principally due to a 103 basis point increase in the average yield on
loans. The cost of interest-bearing liabilities increased from 3.08% in 1994 to
4.34% in 1995, principally due to a 160 basis point increase in the average
rate paid on time deposits and a 65 basis point increase in the average rate
paid on savings and money market accounts.
48
<PAGE>
The following table represents for the periods indicated the total dollar
amount of interest income from average interest-earning assets and the
resultant yields, as well as the interest expense on average interest-bearing
liabilities, expressed both in dollars and rates. No tax equivalent adjustments
were made and all average balances are yearly average balances. Nonaccruing
loans have been included in the tables as loans carrying a zero yield.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------
1996 1995
---------------------------------------- ----------------------------------------
AVERAGE INTEREST AVERAGE AVERAGE INTEREST AVERAGE
OUTSTANDING EARNED/ YIELD/ OUTSTANDING EARNED/ YIELD/
BALANCE PAID RATE BALANCE PAID RATE
------------- ---------------- --------- ------------- ---------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Total loans .................. $ 872,094 $ 79,897(1) 9.16% $ 735,318 $ 70,077(1) 9.53%
Taxable securities ............ 296,318 17,893 6.04 312,897 18,447 5.90
Tax-exempt securities ......... 31,107 1,874 6.02 35,541 2,340 6.58
Federal funds sold and other
temporary investments ......... 82,064 4,470 5.45 70,330 4,192 5.96
---------- ----------- ----- ---------- ----------- -----
Total interest earning
assets ..................... 1,281,583 104,134 8.13 1,154,086 95,056 8.24
----------- ----- ----------- -----
Less allowance for
loan losses .................. (11,793) (11,893)
---------- ----------
Total interest-earning
assets, net of
allowance .................. 1,269,790 1,142,193
Nonearning assets ............... 135,727 118,953
---------- ----------
Total assets .................. $1,405,517 $1,261,146
========== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand
deposits ..................... $ 66,229 1,103 1.67 $ 65,124 1,310 2.01
Savings and money market
accounts ..................... 261,718 7,474 2.86 270,119 8,111 3.00
State, county and municipal
certificates of deposit ...... 18,907 1,013 5.36 2,879 161 5.59
Certificates of deposit ...... 610,132 31,692 5.19 519,761 27,480 5.29
Federal funds purchased and
securities sold ............... 37,483 1,769 4.72 21,465 1,105 5.15
Other borrowings ............... 4,432 198 4.47 4,883 244 5.00
---------- ----------- ----- ---------- ----------- -----
Total interest-bearing
liabilities ............... 998,901 43,249 4.33 884,231 38,411 4.34
----------- ----- ----------- -----
Noninterest-bearing liabilities:
Noninterest-bearing demand
deposits ..................... 264,364 247,499
Other liabilities ............ 17,102 15,393
---------- ----------
Total liabilities ............ 1,280,367 1,147,123
Minority interest ............ 8,657 7,882
Shareholders' equity ......... 116,493 106,141
---------- ----------
Total liabilities and
shareholders' equity ...... $1,405,517 $1,261,146
========== ==========
Net interest income ............ $ 60,885 $ 56,645
=========== ===========
Net interest spread ............ 3.80% 3.90%
===== =====
Net interest margin ............ 4.75% 4.91%
===== =====
<CAPTION>
1994
---------------------------------------
AVERAGE INTEREST AVERAGE
OUTSTANDING EARNED/ YIELD/
BALANCE PAID RATE
------------- ---------------- --------
<S> <C> <C> <C>
ASSETS
Interest-earning assets:
Total loans .................. $ 635,555 $ 54,003(1) 8.50%
Taxable securities ............ 274,321 16,000 5.83
Tax-exempt securities ......... 54,183 3,844 7.09
Federal funds sold and other
temporary investments ......... 76,288 3,117 4.09
---------- ----------- -----
Total interest earning
assets ..................... 1,040,347 76,964 7.40
----------- -----
Less allowance for
loan losses .................. (11,968)
----------
Total interest-earning
assets, net of
allowance .................. 1,028,379
Nonearning assets ............... 107,812
----------
Total assets .................. $1,136,191
==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand
deposits ..................... $ 65,464 1,414 2.16
Savings and money market
accounts ..................... 286,090 6,726 2.35
State, county and municipal
certificates of deposit ...... 1,356 45 3.32
Certificates of deposit ...... 418,006 15,444 3.69
Federal funds purchased and
securities sold ............... 14,865 530 3.57
Other borrowings ............... 4,813 163 3.39
---------- ----------- -----
Total interest-bearing
liabilities ............... 790,594 24,322 3.08
----------- -----
Noninterest-bearing liabilities:
Noninterest-bearing demand
deposits ..................... 229,871
Other liabilities ............ 13,410
----------
Total liabilities ............ 1,033,875
Minority interest ............ 7,066
Shareholders' equity ......... 95,250
----------
Total liabilities and
shareholders' equity ...... $1,136,191
==========
Net interest income ............ $ 52,642
===========
Net interest spread ............ 4.32%
=====
Net interest margin ............ 5.06%
=====
</TABLE>
- ----------------
(1) Includes $2.1 million, $1.5 million and $1.5 million in loan fees for 1996,
1995 and 1994, respectively.
49
<PAGE>
The following schedule presents the dollar amount of changes in interest
income and interest expense for the major components of interest-earning assets
and interest-bearing liabilities and distinguishes between the increase related
to higher outstanding balances and the volatility of interest rates. For
purposes of this table, changes attributable to both rate and volume have been
allocated to rate.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996 VS. 1995
------------------------------------
INCREASE (DECREASE)
DUE TO ------------
VOLUME RATE TOTAL
------------------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest-earning assets:
Total loans ............................................. $ 13,035 $ (3,215) $ 9,820
Securities ................................................ (1,254) 234 (1,020)
Federal funds sold and other temporary
investments ............................................. 699 (421) 278
--------- -------- ---------
Total increase (decrease) in interest income ............ 12,480 (3,402) 9,078
--------- -------- ---------
Interest-bearing liabilities:
Interest-bearing demand deposits ........................ 22 (229) (207)
Savings and money market accounts ........................ (252) (385) (637)
State, county and municipal certificates of deposit ...... 896 (44) 852
Certificates of deposit and other time deposits ......... 4,781 (569) 4,212
Federal funds purchased and securities sold under
repurchase agreements ................................. 825 (161) 664
Other borrowings .......................................... (23) (23) (46)
--------- -------- ---------
Total increase (decrease) in interest expense ......... 6,249 (1,411) 4,838
--------- -------- ---------
Increase (decrease) in net interest income ............... $ 6,231 $ (1,991) $ 4,240
========= ======== =========
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995 VS. 1994
-------------------------------------
INCREASE (DECREASE)
DUE TO
-------------------------
VOLUME RATE TOTAL
------------ ------------ -----------
<S> <C> <C> <C>
Interest-earning assets:
Total loans ............................................. $8,480 $ 7,594 $16,074
Securities ................................................ 1,204 (261) 943
Federal funds sold and other temporary
investments ............................................. (244) 1,319 1,075
------- -------- -------
Total increase (decrease) in interest income ............ 9,440 8,652 18,092
------- -------- -------
Interest-bearing liabilities:
Interest-bearing demand deposits ........................ (7) (97) (104)
Savings and money market accounts ........................ (375) 1,760 1,385
State, county and municipal certificates of deposit ...... 51 65 116
Certificates of deposit and other time deposits ......... 3,755 8,281 12,036
Federal funds purchased and securities sold under
repurchase agreements ................................. 235 340 575
Other borrowings .......................................... 2 79 81
------- -------- -------
Total increase (decrease) in interest expense ......... 3,661 10,428 14,089
------- -------- -------
Increase (decrease) in net interest income ............... $5,779 $ (1,776) $ 4,003
======= ======== =======
</TABLE>
PROVISION FOR LOAN LOSSES
The provision for loan losses increased to $2.4 million for 1996 from
$890,000 for 1995, reflecting the impact of rising consumer loan losses and
changes in the overall portfolio quality assessment. The provision for loan
losses decreased to $890,000 for 1995 from $2.5 million for 1994, reflecting
improved portfolio quality.
NONINTEREST INCOME
Noninterest income for the year ended December 31, 1996 was $24.2 million,
an increase of $1.7 million or 7.56% compared to $22.5 million in 1995,
primarily as a result of an increase in merchant credit card discounts.
Noninterest income in 1995 increased $2.2 million or 10.84% over non-interest
income of $20.3 million in 1994, primarily as a result of an increase in
merchant credit card discounts. The following table presents for the periods
indicated the major categories of noninterest income:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
--------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service charges on deposit accounts ...... $12,960 $12,722 $12,769
Merchant credit card discounts ............ 7,307 5,761 3,776
Letter of credit fees ..................... 1,064 1,214 1,222
Gain (loss) on sale of securities ......... 1 (185) 3
Other non-interest income ............... 2,899 2,946 2,519
-------- ------- --------
Total non-interest income ............... $24,231 $22,458 $20,289
======== ======= ========
</TABLE>
50
<PAGE>
Service charges on deposit accounts are the primary component of
noninterest income and have remained stable from 1994 to 1996. The increases in
noninterest income from 1994 to 1996 resulted primarily from increases in
merchant credit card discounts, the next largest component of noninterest
income. Merchant credit card discounts increased by $1.5 million from $5.8
million in 1995 to $7.3 million in 1996 and by $2.0 million in 1995 from $3.8
million in 1994, principally due to successful marketing. Letter of credit fee
income is another major source of noninterest income and declined by $150,000
or 12.50% in 1996 from $1.2 million in 1995, but was relatively constant from
1994 to 1995.
NONINTEREST EXPENSES
For the years ended December 31, 1996, 1995 and 1994, noninterest expense
totaled $53.0 million, $50.0 million and $46.5 million, respectively. The
Company's efficiency ratios were 62.29%, 63.09% and 63.70% for 1996, 1995 and
1994, respectively. The efficiency ratio improved slightly each year reflecting
the Company's continued efforts to control operating expenses.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
--------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Employee compensation and benefits .................. $26,775 $27,472 $25,463
------- ------- --------
Non-staff expenses:
Occupancy expense ................................. 4,962 4,661 4,399
Furniture and equipment expense .................. 2,793 2,375 2,340
Provision for loss on disposition of property ...... 1,275 650 --
Merchant credit card interchange fees ............ 5,104 3,961 2,554
Professional fees ................................. 1,218 895 827
FDIC assessment .................................... 1,868 1,451 2,104
Advertising ....................................... 880 1,098 725
Amortization of intangibles ........................ 953 674 276
Printing and supplies .............................. 940 952 966
Other real estate owned ........................... 111 478 763
Fraud losses (recoveries) net ..................... (11) (816) 378
Capitalized construction interest credit ......... (773) (255) --
Other ............................................. 6,922 6,425 5,661
------- ------- --------
Total non-staff expenses ........................ 26,242 22,549 20,993
------- ------- --------
Total noninterest expense ........................ $53,017 $50,021 $46,456
======= ======= ========
</TABLE>
Employee compensation and benefit expense for the year ended December 31,
1996 was $26.8 million, a decrease of $697,000 or 2.54% from $27.5 million for
1995. Employee compensation and benefit expenses for the year 1995 increased
$2.0 million or 7.89% from 1994. The increase in 1995 was, to a large degree,
due to increased staff as a result of the acquisition of the Plaza Bank of
Miami. The decrease in 1996 resulted mainly from savings associated from
implementation of the Reengineering Study. Total full-time equivalent employees
at December 31, 1996, 1995 and 1994 were 690, 763 and 719, respectively.
Non-staff expenses were $26.2 million in 1996, an increase of $3.7 million
or 16.44% from $22.5 million in 1995. This increase in non-staff expenses
primarily reflected increased merchant credit card interchange fees, an
increase in the provision for loss on disposition of property, an increase in
furniture and equipment expense and occupancy expense and amortization of
intangibles related to the acquisition of Plaza Bank of Miami, increased
charges related to the special FDIC assessment and the Reengineering Study and
increases in certain other expenses. These increased expenses were partially
offset by an increase in capitalized construction interest credit and decreases
in other real estate owned and advertising expenses.
Merchant credit card interchange fees increased by $1.1 million in 1996 as
compared to 1995 as a result of the growth of the Company's merchant credit
card operations.
51
<PAGE>
Occupancy expense increased $301,000, furniture and equipment expense
increased $418,000 and amortization of intangibles increased by $279,000 in
1996 as compared to 1995, principally as a result of the acquisition of Plaza
Bank of Miami. The provision for loss on disposition of property related to the
opening of the Company's new headquarters increased by $625,000 in 1996 as
compared to 1995. In addition, the capitalized interest credit relating to the
construction of such headquarters increased by $518,000 in 1996 as compared to
1995.
Principally as a result of expenses related to the Reengineering Study,
professional fees increased by $323,000 in 1996 as compared to 1995. Other real
estate owned expense decreased by $367,000 in 1996 as compared to 1995,
principally as a result of the reduction of other real estate owned from $3.2
million as of December 31, 1995 to $2.4 million as of December 31, 1996, and a
decrease in property taxes paid with respect to such property. Non-staff
expenses in 1995 were also reduced by a substantial fraud recovery of $801,000.
Non-staff expenses in 1995 increased by $1.5 million or 7.14% from $21.0
million in 1994. This increase in non-staff expenses primarily reflected
increased merchant credit card interchange fees, the provision for loss on
disposition of property, increased occupancy expense, amortization of
intangibles related to the acquisition of Plaza Bank of Miami and increases in
certain other expenses. These increased expenses were partially offset by a
substantial fraud recovery in 1995, decreases in the FDIC assessment and other
real estate owned expense, and an increase in capitalized construction interest
credit.
Merchant credit card interchange fees increased by $1.4 million in 1995 as
compared to 1994 as a result of the growth of the Company's merchant credit
card operations.
Occupancy expense increased $262,000 and amortization of intangibles
increased by $398,000 in 1995 as compared to 1994, principally as a result of
the acquisition of Plaza Bank of Miami. In 1995, the Company established a
$650,000 provision for loss on disposition of property related to the opening
of the Company's new headquarters. In addition, the Company recorded a
capitalized construction interest credit of $255,000 relating to the
construction of such headquarters.
Other real estate owned expense decreased by $285,000 in 1995 as compared
to 1994, principally as a result of lower net losses realized on the
disposition of other real estate owned.
INCOME TAXES
In 1996, income tax expense was $10.3 million, an increase of $1.2 million
or 13.19% from $9.1 million for 1995. The 1995 amount was $1.4 million or
18.18% higher than $7.7 million for 1994. The effective tax rates in 1996, 1995
and 1994, respectively, were 34.74%, 32.29% and 32.06%.
FINANCIAL CONDITION
LOAN PORTFOLIO
Total loans increased by $152.5 million or 18.57% to $973.6 million at
December 31, 1996, from $821.1 million at December 31, 1995. During 1995, total
loans increased by $154.0 million or 23.08% from $667.1 million at December 31,
1994. The growth in loans reflected strong loan demand and the loans obtained
in connection with the 1995 acquisition.
Total loans represented 64.39%, 61.97% and 56.91% of assets at December
31, 1996, 1995 and 1994, respectively. Total loans represented 73.75%, 71.01%
and 64.82% of deposits at December 31, 1996, 1995 and 1994, respectively.
52
<PAGE>
The following table summarizes the loan portfolio of the Company by type
of loan as of the dates indicated:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------
1996 1995
--------------------- ---------------------
% %
OF GROSS OF GROSS
AMOUNT LOANS AMOUNT LOANS
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Domestic:
Commercial ........................ $286,054 29.25% $287,080 34.81%
Commercial real estate ............ 225,813 23.09 181,887 22.05
Construction ..................... 38,761 3.96 33,957 4.12
Residential first mortgages ...... 133,005 13.60 120,539 14.61
Residential equity lines ......... 19,938 2.04 17,458 2.12
Consumer ........................ 83,331 8.52 85,226 10.33
Overdrafts ........................ 3,722 0.38 3,349 0.41
Bankers' acceptances ............ 20,826 2.14 -- 0.00
-------- ------- -------- -------
Total domestic .................. 811,450 82.98 729,496 88.45
-------- ------- -------- -------
Foreign:
Banks ........................... 116,421 11.91 66,469 8.06
Bankers' acceptances ............ 20,760 2.12 220 0.03
Government ........................ 3,000 0.31 6,000 0.73
Other ........................... 26,213 2.68 22,614 2.73
-------- ------- -------- -------
Total foreign .................. 166,394 17.02 95,303 11.55
-------- ------- -------- -------
Total gross loans ............... 977,844 100.00% 824,799 100.00%
======= =======
Unearned ........................... (4,204) (3,709)
-------- --------
Total loans .................. $973,640 $821,090
======== ========
<CAPTION>
1994 1993 1992
--------------------- --------------------- --------------------
% % %
OF GROSS OF GROSS OF GROSS
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Domestic:
Commercial ........................ $202,921 30.26% $207,962 32.22% $215,589 31.52%
Commercial real estate ............ 165,102 24.62 141,146 21.87 145,133 21.22
Construction ..................... 16,976 2.53 17,049 2.64 21,032 3.08
Residential first mortgages ...... 90,926 13.56 96,192 14.90 115,323 16.86
Residential equity lines ......... 9,829 1.47 4,701 0.73 3,953 0.58
Consumer ........................ 72,668 10.84 62,810 9.73 57,921 8.47
Overdrafts ........................ 3,771 0.56 3,351 0.52 3,564 0.52
Bankers' acceptances ............ 564 0.09 941 0.15 11,098 1.62
-------- ------- -------- ------- -------- -------
Total domestic .................. 562,757 83.93 534,152 82.76 573,613 83.87
-------- ------- -------- ------- -------- -------
Foreign:
Banks ........................... 74,591 11.12 58,739 9.10 61,682 9.02
Bankers' acceptances ............ 5,236 0.78 12,986 2.01 18,935 2.77
Government ........................ 7,000 1.04 9,000 1.39 7,957 1.16
Other ........................... 20,901 3.13 30,520 4.74 21,762 3.18
-------- ------- -------- ------- -------- -------
Total foreign .................. 107,728 16.07 111,245 17.24 110,336 16.13
-------- ------- -------- ------- -------- -------
Total gross loans ............... 670,485 100.00% 645,397 100.00% 683,949 100.00%
======= ======= =======
Unearned ........................... (3,394) (3,984) (5,029)
-------- -------- --------
Total loans .................. $667,091 $641,413 $678,920
======== ======== ========
</TABLE>
The contractual maturity ranges of the foreign, commercial and industrial
and real estate loan portfolio and the amount of such loans with predetermined
interest rates and floating rates in each maturity range as of December 31,
1996 are summarized in the following table:
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
-------------------------------------------------
BETWEEN AFTER
ONE YEAR ONE AND FIVE
OR LESS FIVE YEARS YEARS TOTAL
---------- ------------ --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Domestic:
Commercial .................................... $129,707 $122,577 $33,770 $286,054
Commercial real estate ........................ 32,579 132,191 61,043 225,813
Construction loans ........................... 26,639 11,383 739 38,761
--------- --------- -------- ---------
Total domestic .............................. 188,925 266,151 95,552 550,628
--------- --------- -------- ---------
Foreign:
Banks ....................................... 116,421 -- -- 116,421
Bankers' acceptances ........................ 20,760 -- -- 20,760
Government .................................... 1,000 2,000 -- 3,000
Other ....................................... 26,213 -- -- 26,213
--------- --------- -------- ---------
Total foreign .............................. 164,394 2,000 -- 166,394
--------- --------- -------- ---------
Total ....................................... $353,319 $268,151 $95,552 $717,022
========= ========= ======== =========
Loans with a predetermined interest rate ...... $202,751 $165,959 $52,426 $421,136
Loans with a floating interest rate ............ 150,568 102,192 43,126 295,886
--------- --------- -------- ---------
Total ....................................... $353,319 $268,151 $95,552 $717,022
========= ========= ======== =========
</TABLE>
53
<PAGE>
Effective January 1, 1995 the Company adopted SFAS No. 114, ACCOUNTING FOR
CREDITORS FOR IMPAIRMENT OF A LOAN, as amended by SFAS No. 118, ACCOUNTING BY
CREDITORS FOR IMPAIRMENT OF A LOAN--INCOME RECOGNITION AND DISCLOSURES. Under
SFAS No. 114, as amended, a loan is considered impaired based on current
information and events, if it is probable that the Company will be unable to
collect the scheduled payments of principal or interest when due according to
the contractual terms of the loan agreement. The measurement of impaired loans
is based on the present value of expected future cash flows discounted at the
loan's effective interest rate or the loan's observable market price or based
on the fair value of the collateral if the loan is collateral-dependent. The
implementation of SFAS No. 114 did not have a material adverse affect on the
Company's financial statements.
LOANS BY COUNTRY
The following table sets forth the distribution of the Company's gross
loans by country of the borrower at the dates indicated.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------------------------------------
1996 1995 1994
----------------------- ----------------------- ----------------------
% OF GROSS % OF GROSS % OF GROSS
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
-------- ------------ -------- ------------ -------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
United States ............ $812 83.03% $730 88.48% $563 84.03%
Brazil .................. 30 3.07 19 2.30 30 4.48
Peru ..................... 21 2.15 8 0.97 2 0.30
Ecuador .................. 13 1.33 13 1.58 8 1.19
Colombia ............... 12 1.23 8 0.97 7 1.04
Guatemala ............... 11 1.12 13 1.58 11 1.64
Panama .................. 11 1.12 4 0.48 3 0.45
Other(1) ............... 68 6.95 30 3.64 46 6.87
----- ------- ----- ------- ----- -------
Total Gross Loans ...... $978 100.00% $825 100.00% $670 100.00%
===== ======= ===== ======= ===== =======
</TABLE>
- ----------------
(1) "Other" consists of loans to borrowers in countries in which loans did not
exceed the lesser of $11 million or one percent of total assets on the
dates indicated.
TOTAL CROSS-BORDER OUTSTANDINGS BY COUNTRY
The following table sets forth, at the dates indicated, the aggregate
amount of the Company's cross-border outstandings (including foreign bonds, due
from bank accounts and interest-earning deposits with other banks), as well as
the percentage of such cross-border outstandings to the Company's total assets.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------------------------------------
1996 1995 1994
----------------------- ----------------------- ----------------------
% OF TOTAL % OF TOTAL % OF TOTAL
AMOUNT ASSETS AMOUNT ASSETS AMOUNT ASSETS
-------- ------------ -------- ------------ -------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Brazil ......... $ 30 1.98% $ 19 1.44% $ 30 2.56%
Peru ............ 21 1.39 8 0.60 2 0.17
Ecuador ......... 13 0.86 13 0.98 8 0.68
Colombia ...... 12 0.79 8 0.60 7 0.60
Guatemala ...... 11 0.73 13 0.98 11 0.94
Panama ......... 11 0.73 4 0.30 3 0.26
Other(1) ...... 70 4.63 57 4.31 58 4.94
----- ------ ----- ----- ----- ------
Total ......... $168 11.11% $122 9.21% $119 10.15%
===== ====== ===== ===== ===== ======
</TABLE>
- ----------------
(1) "Other" consists of loans to borrowers in countries in which loans did not
exceed the lesser of $11 million or one percent of total assets on the
dates indicated.
54
<PAGE>
NONPERFORMING ASSETS
The Company's lending approach, as well as a healthy local economy, have
resulted in strong asset quality. Nonperforming assets at December 31, 1996
were $5.3 million compared to $7.9 million at December 31, 1995 and $8.1
million at December 31, 1994. This resulted in ratios of nonperforming assets
to total loans plus other real estate of 0.55%, 0.96% and 1.21% for the years
ended 1996, 1995 and 1994, respectively.
The following table presents information regarding nonperforming assets at
the dates indicated:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans ..................... $ 1,563 $ 4,066 $ 4,564 $ 9,283 $ 14,622
Restructured loans .................. 404 306 368 540 664
Accruing loans 90 days or more
past due ........................... 957 303 130 459 324
Other real estate .................. 2,411 3,247 3,041 3,855 16,529
------- ------- ------- -------- --------
Total nonperforming assets ......... $ 5,335 $ 7,922 $ 8,103 $ 14,137 $ 32,139
======= ======= ======= ======== ========
Nonperforming assets to total loans and
other real estate .................. 0.55% 0.96% 1.21% 2.19% 4.62%
</TABLE>
There were no foreign assets in these categories at each reporting date,
except that at December 31, 1992 the Company had $561,000 of foreign assets in
these categories.
ALLOWANCE FOR LOAN LOSSES
For the year ended 1996, net loan charge-offs totalled $2.2 million or
0.25% of average loans outstanding for the period, compared to $1.9 million or
0.25% in net loan charge-offs during 1995. During 1996, the Company recorded a
provision for loan losses of $2.4 million compared with $890,000 for 1995. At
December 31, 1996, the allowance totalled $11.6 million, or 1.19% of total
loans. The Company made a provision for loan losses of $890,000 during 1995 as
compared to a provision of $2.5 million for 1994. At December 31, 1995, the
allowance aggregated $11.4 million or 1.39% of total loans compared to $11.7
million, or 1.75% of total loans at December 31, 1994.
55
<PAGE>
The following table presents, for the periods indicated, an analysis of
the allowance for loan losses and other related data:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------
1996 1995 1994 1993 1992
-------------- ---------- ---------- -------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Average loans outstanding ........................ $872,094 $735,318 $635,555 $627,929 $613,459
========= ======== ======== ========= ========
Total loans outstanding at end of period ......... $973,640 $821,090 $667,091 $641,413 $678,920
========= ======== ======== ========= ========
Allowance for loan losses at beginning
of period ....................................... $ 11,411 $11,680 $11,563 $ 10,022 $ 8,500
Provision for loan losses ........................ 2,381 890 2,500 2,450 3,205
Allowance from acquired bank ..................... -- 701 -- -- --
Charge-offs:
Commercial and industrial ..................... (1,182) (690) (1,487) (595) (1,784)
Real estate .................................... (1) (131) (864) (625) (366)
Consumer ....................................... (2,058) (1,241) (732) (314) (429)
Foreign banks ................................. -- (521) (210) (5) --
Recoveries:
Commercial and industrial ..................... 400 261 320 372 630
Real estate .................................... 17 21 82 41 64
Consumer ....................................... 610 441 298 212 202
Foreign banks ................................. -- -- 210 5 --
--------- -------- -------- --------- --------
Net loan charge-offs .............................. (2,214) (1,860) (2,383) (909) (1,683)
--------- -------- -------- --------- --------
Allowance for loan losses at end of period ...... $ 11,578 $11,411 $11,680 $ 11,563 $ 10,022
========= ======== ======== ========= ========
Ratio of allowance to end of period loans ...... 1.19% 1.39% 1.75% 1.80% 1.48%
Ratio of net loan charge-offs to
average loans ................................. 0.25 0.25 0.37 0.14 0.27
Ratio of allowance to end of period
nonperforming loans ........................... 395.96 244.09 230.74 112.46 64.20
</TABLE>
56
<PAGE>
The following tables describe the allocation of the allowance for loan
losses among various categories of loans and certain other information for the
dates indicated. The allocation is made for analytical purposes and is not
necessarily indicative of the categories in which future losses may occur. The
total allowance is available to absorb losses from any segment of loans.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------------------------
1996 1995 1994
--------------------- --------------------- ---------------------
% OF % OF % OF
GROSS GROSS GROSS
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
--------- ----------- --------- ----------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance of allowance for
loan losses applicable
to:
Domestic:
Commercial ............... $ 5,464 29.25% $ 3,921 34.81% $ 3,693 30.26%
Commercial real estate . 498 23.09 1,138 22.05 797 24.62
Construction ............... 58 3.96 61 4.12 115 2.53
Residential first
mortgages ............... 185 13.60 254 14.61 196 13.56
Residential equity lines 66 2.04 28 2.12 13 1.47
Consumer .................. 1,164 8.52 825 10.33 781 10.84
Overdrafts ............... 150 0.38 78 0.41 95 0.56
Bankers' acceptances ...... -- 2.14 -- -- -- 0.09
-------- ------- -------- ------- -------- -------
Total domestic ............ 7,585 82.98 6,305 88.45 5,690 83.93
-------- ------- -------- ------- -------- -------
Foreign:
Banks ..................... 943 11.91 597 8.06 1,321 11.12
Bankers' acceptances ...... -- 2.12 -- 0.03 -- 0.78
Government ............... 20 0.31 52 0.73 79 1.04
Other ..................... 51 2.68 -- 2.73 -- 3.13
-------- ------- -------- ------- -------- -------
Total foreign ............ 1,014 17.02 649 11.55 1,400 16.07
-------- ------- -------- ------- -------- -------
Unallocated: ............... 2,979 4,457 4,590
-------- -------- --------
Total allowance for
loan losses ............ $11,578 100.00% $11,411 100.00% $11,680 100.00%
======== ======= ======== ======= ======== =======
<CAPTION>
1993 1992
--------------------- ---------------------
% OF % OF
GROSS GROSS
AMOUNT LOANS AMOUNT LOANS
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Balance of allowance for
loan losses applicable
to:
Domestic:
Commercial ............... $ 5,579 32.22% $ 3,957 31.52%
Commercial real estate . 1,070 21.87 1,824 21.22
Construction ............... 226 2.64 136 3.08
Residential first
mortgages ............... 377 14.90 702 16.86
Residential equity lines 16 0.73 15 0.58
Consumer .................. 417 9.73 674 8.47
Overdrafts ............... 115 0.52 177 0.52
Bankers' acceptances ...... -- 0.15 -- 1.62
-------- ------- -------- -------
Total domestic ............ 7,800 82.76 7,485 83.87
-------- ------- -------- -------
Foreign:
Banks ..................... 698 9.10 598 9.02
Bankers' acceptances ...... -- 2.01 -- 2.77
Government ............... 57 1.39 83 1.16
Other ..................... 198 4.74 72 3.18
-------- ------- -------- -------
Total foreign ............ 953 17.24 753 16.13
-------- ------- -------- -------
Unallocated: ............... 2,810 1,784
-------- --------
Total allowance for
loan losses ............ $11,563 100.00% $10,022 100.00%
======== ======= ======== =======
</TABLE>
SECURITIES
The following table summarizes the amortized cost of investment securities
held by the Company as of the dates shown:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------
1996 1995 1994
---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
United States Treasury securities .............................. $203,096 $190,096 $191,214
Securities of the United States agencies and corporations ...... 89,956 71,275 99,075
Securities issued by states and political subdivisions ......... 35,895 30,909 43,265
Other debt securities .......................................... 600 26,676 29,504
Federal Reserve Bank stock .................................... 1,219 599 599
--------- --------- ---------
Total securities ............................................. $330,766 $319,555 $363,657
========= ========= =========
</TABLE>
57
<PAGE>
The following table summarizes the carrying value and classification of
securities as of the dates shown:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------
1996 1995 1994
---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Available-for-sale ...... $168,894 $161,673 $152,321
Held-to-maturity ......... 162,310 158,411 207,224
--------- --------- ---------
Total securities ...... $331,204 $320,084 $359,545
========= ========= =========
</TABLE>
At December 31, 1996, securities totalled $331.2 million, an increase of
$11.1 million from $320.1 million at December 31, 1995. The increase occurred
primarily in United States securities. During 1995, securities decreased $39.4
million from $359.5 million at December 31, 1994. The yield on the securities
portfolio was 6.04%, 5.97% and 6.04% for 1996, 1995 and 1994, respectively.
Portfolio volume fluctuations reflected the impact of loan demand and liquidity
needs.
The following table presents the amortized cost of securities classified
as available for sale and their approximate fair values as of the dates shown.
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------------------------------ ------------------------------------------------
GROSS GROSS GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE COST GAIN LOSS VALUE
----------- ------------ ------------ ---------- ----------- ------------ ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
United States
Treasury
securities ......... $117,238 $169 $ (23) $117,384 $105,867 $293 $ (103) $106,057
Securities of the
United States
agencies and
corporations ...... 51,218 430 (138) 51,510 55,277 403 (64) 55,616
--------- ----- ------ --------- --------- ----- ------ ---------
Total ............ $168,456 $599 $ (161) $168,894 $161,144 $696 $ (167) $161,673
========= ===== ====== ========= ========= ===== ====== =========
<CAPTION>
DECEMBER 31, 1994
-----------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE
----------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
United States
Treasury
securities ......... $124,182 $65 $ (3,517) $120,730
Securities of the
United States
agencies and
corporations ...... 32,251 -- (660) 31,591
--------- ---- -------- ---------
Total ............ $156,433 $65 $ (4,177) $152,321
========= ==== ======== =========
</TABLE>
The following table presents the amortized cost of securities classified
as held-to-maturity and their approximate fair values as of the dates shown:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------------------------------ ------------------------------------------------
GROSS GROSS GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE COST GAIN LOSS VALUE
----------- ------------ ------------ ---------- ----------- ------------ ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
United States
Treasury
securities ......... $ 85,858 $ 952 $ (13) $ 86,797 $ 84,229 $2,550 $ -- $ 86,779
Securities of the
United States
agencies and
corporations ...... 38,738 16 (196) 38,558 15,998 43 (136) 15,905
Securities issued
by states and
political
subdivisions ...... 35,895 597 (4) 36,488 30,909 895 (10) 31,794
Other debt
securities ......... 600 -- -- 600 26,676 28 -- 26,704
Federal Reserve
Bank stock ......... 1,219 -- -- 1,219 599 -- -- 599
--------- ------- ------- --------- --------- ------- ------ ---------
Total ............ $162,310 $1,565 $ (213) $163,662 $158,411 $3,516 $ (146) $161,781
========= ======= ======= ========= ========= ======= ====== =========
<CAPTION>
DECEMBER 31, 1994
-----------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE
----------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
United States
Treasury
securities ......... $ 67,032 $ -- $ (2,117) $ 64,915
Securities of the
United States
agencies and
corporations ...... 66,824 -- (4,846) 61,978
Securities issued
by states and
political
subdivisions ...... 43,265 904 (871) 43,298
Other debt
securities ......... 29,504 16 (494) 29,026
Federal Reserve
Bank stock ......... 599 -- -- 599
--------- ----- -------- ---------
Total ............ $207,224 $920 $ (8,328) $199,816
========= ===== ======== =========
</TABLE>
58
<PAGE>
The following table summarizes the contractual maturity of investment
securities at amortized cost (including federal funds sold and other temporary
investments) and their weighted average yields. No tax equivalent adjustments
were made.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
-------------------------------------------
AFTER ONE YEAR
BUT WITHIN
WITHIN ONE YEAR FIVE YEARS
--------------------- ---------------------
AMOUNT YIELD AMOUNT YIELD
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
United States Treasury securities ...... $ 77,798 5.99% $125,298 6.17%
Securities of other United States agencies
and corporations ..................... 16,000 5.23 67,080 6.43
Securities issued by states and political
subdivisions ........................... 2,682 6.30 5,356 4.58
Other debt securities .................. -- -- 250 7.75
--------- ------ --------- ------
Total debt securities ............... 96,480 5.87 197,984 6.22
Federal Reserve Bank stock ............ -- --
Federal funds sold ..................... 71,056 6.46 -- --
Temporary investments .................. 5,880 5.33 -- --
--------- ------ --------- ------
Total ................................. $173,416 6.10% $197,984 6.22%
========= ====== ========= ======
<CAPTION>
AFTER FIVE YEARS
BUT WITHIN
TEN YEARS AFTER TEN YEARS
------------------- --------------------
AMOUNT YIELD AMOUNT YIELD TOTAL YIELD
-------- ---------- --------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
United States Treasury securities ...... $ -- -- $ -- -- $203,096 6.10%
Securities of other United States agencies
and corporations ..................... -- -- 6,876 6.32 89,956 6.21
Securities issued by states and political
subdivisions ........................... 8,892 5.50 18,965 6.15 35,895 5.77
Other debt securities .................. 350 6.97 -- -- 600 7.30
------- ------ -------- ------ --------- -----
Total debt securities ............... 9,242 5.55 25,841 6.20 329,547 6.10
Federal Reserve Bank stock ............ -- -- 1,219 6.00 1,219 6.00
Federal funds sold ..................... -- -- -- -- 71,056 6.46
Temporary investments .................. -- -- -- -- 5,880 5.33
------- ------ -------- ------ --------- -----
Total ................................. $9,242 5.55% $27,060 6.19% $407,702 6.15%
======= ====== ======== ====== ========= =====
</TABLE>
DEPOSITS
Average total deposits during 1996 increased to $1,221.4 million from
$1,105.4 million in 1995, an increase of $116.0 million or 10.49%. The increase
resulted primarily from growth in time deposits. Average deposits in 1995
increased from $1,000.8 million in 1994, an increase of $104.6 million or
10.45%. The increase resulted from internal growth and the acquisition of the
Plaza Bank of Miami on June 2, 1995. The Company's ratios of average
noninterest-bearing demand deposits to average total deposits for the years
ended December 31, 1996, 1995, and 1994 were 21.65%, 22.39% and 22.97%,
respectively.
The daily average balances and weighted average interest rates paid on
deposits for each of the years ended December 31, 1996, 1995 and 1994 are
presented below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------
1996 1995
------------------------------------ ------------------------------------
AMOUNT % OF TOTAL RATE AMOUNT % OF TOTAL RATE
------------ ------------ ---------- ------------ ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing demand deposits ...... $ 66,229 5.42% 1.67% $ 65,124 5.89% 2.01%
Savings .............................. 135,568 11.09 2.97 137,008 12.39 3.11
Money market ........................... 126,150 10.33 2.74 133,111 12.04 2.89
State, county and municipal
certificates of deposit ............... 18,907 1.55 5.36 2,879 0.26 5.58
Time deposits less than $100,000 ...... 351,090 28.75 5.22 298,758 27.03 5.26
Time deposits $100,000 and over ......... 217,622 17.82 5.26 186,453 16.87 5.32
International banking
facility deposits ..................... 41,420 3.39 5.12 34,550 3.13 5.87
----------- ------- ------ ----------- ------- ------
Total interest-bearing deposits ...... 956,986 78.35 4.31 857,883 77.61 4.32
Noninterest-bearing deposits ......... 264,364 21.65 -- 247,499 22.39 --
----------- ------- ------ ----------- ------- ------
Total deposits ..................... $1,221,350 100.00% 3.38% $1,105,382 100.00% 3.35%
=========== ======= ====== =========== ======= ======
<CAPTION>
1994
------------------------------------
AMOUNT % OF TOTAL RATE
------------ ------------ ----------
<S> <C> <C> <C>
Interest-bearing demand deposits ...... $ 65,464 6.54% 2.16%
Savings .............................. 148,859 14.87 2.20
Money market ........................... 137,231 13.71 2.51
State, county and municipal
certificates of deposit ............... 1,356 0.14 3.31
Time deposits less than $100,000 ...... 228,904 22.87 3.75
Time deposits $100,000 and over ......... 160,328 16.02 3.70
International banking
facility deposits ..................... 28,774 2.88 3.93
----------- ------- ------
Total interest-bearing deposits ...... 770,916 77.03 3.07
Noninterest-bearing deposits ......... 229,871 22.97 --
----------- ------- ------
Total deposits ..................... $1,000,787 100.00% 2.36%
=========== ======= ======
</TABLE>
59
<PAGE>
The following table sets forth the amount of the Company's time deposits
that are $100,000 or greater by time remaining until maturity (includes
international banking facility deposits and state, county and municipal
certificates of deposit that are $100,000 or greater):
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
3 months or less .................. $217,078
Between 3 months and 6 months ...... 80,485
Between 6 months and 1 year ......... 69,162
Over 1 year ........................ 5,237
---------
Total ........................... $371,962
=========
</TABLE>
As part of its funding process, the Company obtains deposits from
customers domiciled in other countries, primarily in Latin America. The
following table sets forth the amounts of deposits by country from customers
domiciled outside of the United States as of the dates indicated, as well as
the composition of such deposits by deposit type.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------
1996 1995 1994
------ ------ -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
COUNTRY:
Ecuador ............................................. $119 $ 72 $ 62
Venezuela ............................................. 73 89 73
Costa Rica .......................................... 18 19 18
Mexico ................................................ 15 21 17
Brazil ................................................ 11 10 16
Guatemala ............................................. 11 13 16
Dominican Republic .................................... 10 17 16
British West Indies ................................. 10 6 7
Spain ................................................ 10 21 20
Colombia ............................................. 10 12 12
Argentina ............................................. 9 8 6
Panama ................................................ 8 14 17
Honduras ............................................. 8 13 15
El Salvador .......................................... 6 9 12
Other(1) ............................................. 37 40 39
----- ----- -----
Total foreign deposits .............................. $355 $364 $346
===== ===== =====
COMPOSITION BY DEPOSIT TYPE:
Certificates of deposit and other time deposits ...... $176 $182 $175
Other ................................................ 179 182 171
----- ----- -----
Total foreign deposits .............................. $355 $364 $346
===== ===== =====
</TABLE>
- ----------------
(1) "Other" consists of deposits from customers domiciled in countries from
which total deposits did not exceed $6 million.
60
<PAGE>
INTEREST RATE SENSITIVITY AND LIQUIDITY
The following table sets forth an interest rate sensitivity analysis for
the Company at December 31, 1996:
<TABLE>
<CAPTION>
VOLUMES SUBJECT TO REPRICING WITHIN
----------------------------------------
181-365
0-30 DAYS 31-180 DAYS DAYS
------------ ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest-earning assets:
Federal funds sold and other
temporary investments .................. $ 71,406 $ 524 $ 5,006
Securities .............................. 62,083 52,112 44,098
Total loans .............................. 357,778 193,475 60,863
------------ ------------- -------------
Total interest-earning assets ............ 491,267 246,111 109,967
------------ ------------- -------------
Interest-bearing liabilities:
Demand, money market and
savings deposits ........................ 318,441 -- --
Certificates of deposit and other
time deposits ........................... 186,749 391,701 139,199
------------ ------------- -------------
Total interest-bearing deposits ......... 505,190 391,701 139,199
------------ ------------- -------------
Federal funds purchased and
securities sold under repurchase
agreements .............................. 28,918 -- --
Other borrowings ........................ 16,679 -- --
------------ ------------- -------------
Total interest-bearing liabilities ...... 550,787 391,701 139,199
------------ ------------- -------------
Period GAP ................................. (59,520) (145,590) (29,232)
Cumulative GAP ........................... (59,520) (205,110) (234,342)
Period GAP to total assets ............... (3.94)% ( 9.63)% ( 1.93)%
Cumulative GAP to total assets ............ (3.94) (13.57) (15.50)
Cumulative interest-earning assets
to cumulative interest-bearing
liabilities .............................. 89.19 78.24 78.34
<CAPTION>
GREATER
THAN
1-3 YEARS 3-5 YEARS 5-10 YEARS 10 YEARS TOTAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold and other
temporary investments .................. $ -- $ -- $ -- $ -- $ 76,936
Securities .............................. 151,793 3,112 18,006 -- 331,204
Total loans .............................. 123,682 105,232 47,571 85,039 973,640
---------- ---------- ---------- ---------- ------------
Total interest-earning assets ............ 275,475 108,344 65,577 85,039 1,381,780
---------- ---------- ---------- ---------- ------------
Interest-bearing liabilities:
Demand, money market and
savings deposits ........................ -- -- -- -- 318,441
Certificates of deposit and other
time deposits ........................... 15,992 4,273 248 -- 738,162
---------- ---------- ---------- ---------- ------------
Total interest-bearing deposits ......... 15,992 4,273 248 -- 1,056,603
---------- ---------- ---------- ---------- ------------
Federal funds purchased and
securities sold under repurchase
agreements .............................. -- -- -- -- 28,918
Other borrowings ........................ -- -- -- -- 16,679
---------- ---------- ---------- ---------- ------------
Total interest-bearing liabilities ...... 15,992 4,273 248 -- 1,102,200
---------- ---------- ---------- ---------- ------------
Period GAP ................................. 259,483 104,071 65,329 85,039 $ 279,580
============
Cumulative GAP ........................... 25,141 129,212 194,541 279,580
Period GAP to total assets ............... 17.16% 6.88% 4.32% 5.62%
Cumulative GAP to total assets ............ 1.66 8.55 12.87 18.49
Cumulative interest-earning assets
to cumulative interest-bearing
liabilities .............................. 102.29 111.73 117.65 125.37
</TABLE>
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--For the Nine Months Ended September 30, 1997 and
1996--Interest Rate Sensitivity and Liquidity" for a discussion of the
Company's policies regarding asset and liability risk management.
CAPITAL RESOURCES
Shareholders' equity increased to $124.7 million at December 31, 1996 from
$116.1 million at December 31, 1995, an increase of $8.6 million or 7.41%. This
increase was primarily the result of net income of $18.0 million offset by a
decline in the net unrealized gain on available-for-sale securities, net of tax
of $52,000, and dividends paid of $9.4 million. During 1995, shareholders'
equity increased by $15.7 million or 15.64%, from $100.4 million at December
31, 1994. In addition to net income of $17.8 million, the increase reflected a
change of $2.7 million in unrealized gain on available-for-sale securities, net
of tax, and dividends paid of $4.7 million.
61
<PAGE>
The following table provides a comparison of the Company's and the Bank's
leverage and risk-weighted capital ratios as of December 31, 1996 to the
minimum and well-capitalized regulatory standards:
<TABLE>
<CAPTION>
ACTUAL RATIO
MINIMUM REQUIRED WELL-CAPITALIZED AT DECEMBER 31, 1996
------------------ ------------------ ---------------------
<S> <C> <C> <C>
THE COMPANY
Leverage ratio ........................ 3.00%(1) N/A 8.52%
Tier 1 risk-based capital ratio ...... 4.00 6.00% 14.44
Risk-based capital ratio ............ 8.00 10.00 15.69
THE BANK
Leverage ratio ........................ 3.00%(2) 5.00% 8.51%
Tier 1 risk-based capital ratio ...... 4.00 6.00 14.42
Risk-based capital ratio ............ 8.00 10.00 15.67
</TABLE>
- ----------------
(1) The FRB may require the Company to maintain a leverage ratio of up to 200
basis points above the required minimum.
(2) The OCC may require the Bank to maintain a leverage ratio of up to 200
basis points above the required minimum.
62
<PAGE>
REGULATION
The supervision and regulation of bank holding companies and their
subsidiaries is intended primarily for the protection of depositors, the
deposit insurance funds of the FDIC and the banking system as a whole, and not
for the protection of the bank holding company, shareholders or creditors. The
federal banking agencies have broad enforcement power over bank holding
companies and banks including the power to impose substantial fines and other
penalties for violations of laws and regulations.
The following description summarizes some of the laws to which the Company
is subject. References herein to applicable statutes and regulations are brief
summaries thereof, do not purport to be complete, and are qualified in their
entirety by reference to such statutes and regulations.
THE COMPANY
Bancorp is a bank holding company registered under the BHCA, and as such
it is subject to supervision, regulation and examination by the FRB. The BHCA
and other federal laws subject bank holding companies to particular
restrictions on the types of activities in which they may engage in, and to a
range of supervisory requirements and activities, including regulatory
enforcement actions for violations of laws and regulations.
REGULATORY RESTRICTIONS ON DIVIDENDS; SOURCE OF STRENGTH. It is the policy
of the FRB that bank holding companies should pay cash dividends on common
stock only out of income available over the past year and only if prospective
earnings retention is consistent with the organization's expected future needs
and financial condition. The policy provides that bank holding companies should
not maintain a level of cash dividends that undermines the bank holding
company's ability to serve as a source of strength to its bank subsidiaries.
Under FRB policy, a bank holding company is expected to act as a source of
financial strength to each of its bank subsidiaries and commit resources to
their support. Such support may be required at times when, absent this FRB
policy, a holding company may not be inclined to provide it. As discussed
below, a bank holding company in certain circumstances could be required to
guarantee the capital plan of an undercapitalized bank subsidiary.
In the event of a bank holding company's bankruptcy under Chapter 11 of
the U.S. Bankruptcy Code, the trustee will be deemed to have assumed and is
required to cure immediately any deficit under any commitment by the debtor
holding company to any of the federal banking agencies to maintain the capital
of an insured depository institution, and any claim for breach of that
obligation will generally have priority over most other unsecured claims.
ACTIVITIES "CLOSELY RELATED" TO BANKING. The BHCA prohibits a bank holding
company, with certain limited exceptions, from acquiring direct or indirect
ownership or control of any voting shares of any company which is not a bank or
from engaging in any activities other than those of banking, managing or
controlling banks and certain other subsidiaries, or furnishing services to or
performing services for its subsidiaries. One principal exception to these
prohibitions allows the acquisition of interests in companies whose activities
are found by the FRB, by order or regulation, to be so closely related to
banking or managing or controlling banks, as to be a proper incident thereto.
Some of the activities that have been determined by regulation to be closely
related to banking are making or servicing loans, performing certain data
processing services, acting as an investment or financial advisor to certain
investment trusts and investment companies, and providing securities brokerage
services. Other activities approved by the FRB include the provision of
consumer financial counseling, tax planning and tax preparation, futures and
options advisory services, check guaranty services, collection agency and
credit bureau services, and personal property appraisals.
In approving acquisitions by bank holding companies of companies engaged
in banking-related activities, the FRB considers a number of factors and weighs
the expected benefits to the public (such as
63
<PAGE>
greater convenience and increased competition or gains in efficiency) against
the risks of possible adverse effects (such as undue concentration of
resources, decreased or unfair competition, conflicts of interest, or unsafe
and unsound banking practices). The FRB is also empowered to differentiate
between activities commenced de novo and activities commenced through
acquisition of a going concern.
SECURITIES ACTIVITIES. The FRB has approved applications by bank holding
companies to engage, through nonbank subsidiaries, in certain
securities-related activities (underwriting of municipal revenue bonds
commercial paper, consumer receivable-related securities and one-to-four family
mortgage-backed securities), provided that the affiliates would not be
"principally engaged" in such activities for purposes of Section 20 of the
Glass-Steagall Act. In limited situations, holding companies may be able to use
such subsidiaries to underwrite and deal in corporate debt and equity
securities.
SAFE AND SOUND BANKING PRACTICES. Bank holding companies are not permitted
to engage in unsafe and unsound banking practices. The FRB's Regulation Y, for
example, generally requires a holding company to give the FRB prior notice of
any redemption or repurchase of its own equity securities, if the consideration
to be paid, together with the consideration paid for any repurchases or
redemptions in the preceding year, is equal to 10% or more of the company's
consolidated net worth. The FRB may oppose the transaction if it believes that
the transaction would constitute an unsafe or unsound practice or would violate
any law or regulation. Depending upon the particular facts and circumstances,
the FRB could take the position that paying a dividend would constitute an
unsafe or unsound banking practice.
The FRB has broad authority to prohibit activities of bank holding
companies and their nonbanking subsidiaries which represent unsafe and unsound
banking practices or which constitute violations of laws or regulations, and
can assess civil money penalties for certain activities conducted on a knowing
and reckless basis, if those activities caused a substantial loss to a
depository institution. The penalties can be as high as $1,000,000 for each day
the activity continues.
ANTI-TYING RESTRICTIONS. Banks are prohibited from tying the provision of
certain services, such as extensions of credit, to other services offered by an
affiliated bank holding company or its affiliates.
CAPITAL ADEQUACY REQUIREMENTS. The FRB has adopted a system using
risk-based capital guidelines to evaluate the capital adequacy of bank holding
companies. Under the guidelines, specific categories of assets are assigned
different risk weights, based generally on the perceived credit risk of the
asset. These risk weights are multiplied by corresponding asset balances to
determine a "risk-weighted" asset base. The guidelines require a minimum total
risk-based capital ratio of 8.0% (of which at least 4.0% is required to consist
of Tier 1 capital elements). Total capital is the sum of Tier 1 and Tier 2
capital. As of September 30, 1997, the Company's ratio of Tier 1 capital to
total risk-weighted assets was 14.14%, and its ratio of total capital to total
risk-weighted assets was 15.39%. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Capital Resources."
In addition to the risk-based capital guidelines, the FRB uses a leverage
ratio as an additional tool to evaluate the capital adequacy of bank holding
companies. The leverage ratio is a company's Tier 1 capital divided by its
adjusted average total consolidated assets. Certain highly-rated bank holding
companies may maintain a minimum leverage ratio of 3.0%, but other bank holding
companies may be required to maintain a leverage ratio of up to 200 basis
points above the regulatory minimum. As of September 30, 1997, the Company's
leverage ratio was 8.52%. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Capital Resources."
The federal banking agencies' risk-based and leverage ratios are minimum
supervisory ratios generally applicable to banking organizations that meet
certain specified criteria, assuming that they have the highest regulatory
rating. Banking organizations not meeting these criteria are expected to
operate with capital positions above the minimum ratios. The federal bank
regulatory agencies may set capital requirements for a particular banking
organization that are higher than the minimum ratios when circumstances
warrant. FRB guidelines also provide that banking organizations experiencing
internal growth or making acquisitions will be expected to maintain strong
capital positions above the minimum supervisory levels, without significant
reliance on intangible assets.
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IMPOSITION OF LIABILITY FOR UNDERCAPITALIZED BANK SUBSIDIARIES. Bank
regulators are required to take "prompt corrective action" to resolve problems
associated with insured depository institutions whose capital declines below
certain levels. In the event an institution becomes "undercapitalized," it must
submit a capital restoration plan. The capital restoration plan will not be
accepted by the regulators unless each company having control of the
undercapitalized institution guarantees the subsidiary's compliance with the
capital restoration plan up to a certain specified amount. Any such guarantee
from a depository institution's holding company is entitled to a priority of
payment in bankruptcy.
The aggregate liability of the holding company of an undercapitalized
subsidiary bank is limited to the lesser of 5% of the institution's assets at
the time it became undercapitalized or the amount necessary to cause the
institution to be "adequately capitalized." The bank regulators have greater
power in situations where an institution becomes "significantly" or
"critically" undercapitalized or fails to submit a capital restoration plan.
For example, a bank holding company controlling such an institution can be
required to obtain prior FRB approval of proposed dividends, or might be
required to consent to a consolidation or to divest the troubled institution or
other affiliates.
ACQUISITIONS BY BANK HOLDING COMPANIES. The BHCA requires every bank
holding company to obtain the prior approval of the FRB before it may acquire
all or substantially all of the assets of any bank, or ownership or control of
any voting shares of any bank, if after such acquisition it would own or
control, directly or indirectly, more than 5% of the voting shares of such
bank. In approving bank acquisitions by bank holding companies, the FRB is
required to consider the financial and managerial resources and future
prospects of the bank holding company and the banks concerned, the convenience
and needs of the communities to be served and various competitive factors.
Rebank, the Company's majority shareholder, is a foreign bank holding
company registered under the BHCA and is subject to regulation by the FRB.
According to the FRB, Rebank is subject to the requirements of the Foreign Bank
Supervision Enforcement Act ("FBSEA"), which include, in connection with the
acquisition of control of a bank, a review of current commitments, background
checks of principals and a review of the bank holding company's affiliates and
of affiliates of the principals of the foreign bank holding company. See "Risk
Factors--Foreign Ownership of United States Banks."
CONTROL ACQUISITIONS. The BHCA prohibits a person or group of persons from
acquiring "control" of a bank holding company unless the FRB has been notified
and has not objected to the transaction. Under a rebuttable presumption
established by the FRB, the acquisition of 10% of more of a class of voting
stock of a bank holding company with a class of securities registered under
Section 12 of the Exchange Act, such as the Company, would, under the
circumstances set forth in the presumption, constitute acquisition of control
of the Company. In addition, any company is required to obtain the approval of
the FRB under the BHCA before acquiring 25% (5% in the case of an acquiror that
is already a bank holding company) or more of the outstanding Common Stock of
the Company, or otherwise obtaining control or a "controlling influence" over
the Company.
CROSS-GUARANTEE PROVISIONS. The Financial Institutions Reform, Recovery
and Enforcement Act of 1989 ("FIRREA") contains a "cross-guarantee" provision
which generally makes commonly controlled insured depository institutions
liable to the FDIC for any losses incurred in connection with the failure of a
commonly controlled depository institution.
INSTABILITY OF REGULATORY STRUCTURE
Various legislation, including proposals to overhaul the federal bank
regulatory system, expand the powers of banking institutions and bank holding
companies and limit the investments that a depository institution may make with
insured funds, is from time to time introduced in Congress. Such legislation
may change the federal banking statutes and the operating environment of the
Company and its bank subsidiaries in substantial and unpredictable ways. The
Company cannot determine the ultimate effect that potential legislation, if
enacted, or implementing regulations with respect thereto, would have upon the
financial condition or results of operations of the Company or its
subsidiaries.
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EXPANDING ENFORCEMENT AUTHORITY
FIRREA and FDICIA both significantly increased the ability of the federal
banking agencies to monitor the activities of banks and their holding
companies. In addition, the FRB, the OCC, and the FDIC possess extensive
authority to police unsafe or unsound practices and violations of applicable
laws and regulations by national banks and their holding companies. For
example, if an institution is considered to be engaged in an unsafe or unsound
practice, the FDIC may terminate its deposit insurance, after the institution
is served a written notice and given an opportunity for a hearing on the
matter. The agencies can also assess civil money penalties, issue cease and
desist or removal orders, seek injunctions and publicly disclose such actions.
FDICIA, FIRREA and other laws have expanded the agencies' authority in recent
years, and the agencies have not yet fully tested the limits of their powers.
EFFECT ON ECONOMIC ENVIRONMENT
The policies of regulatory authorities, including the monetary policy of
the FRB, have a significant effect on the operating results of bank holding
companies and their subsidiaries. Among the means available to the FRB to
affect the money supply are open market operations in U.S. Government
securities, changes in the discount rate on member bank borrowings and changes
in reserve requirements against member bank deposits. These means are used in
varying combinations to influence overall growth and distribution of bank
loans, investments and deposits, and their use may affect interest rates
charged on loans or paid for deposits.
FRB monetary policies have materially affected the operating results of
commercial banks in the past and are expected to continue to do so in the
future. The nature of future monetary policies and the effect of such policies
on the business and earnings of the Company and its subsidiaries cannot be
predicted.
INTERSTATE BANKING
As of September 29, 1995, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "RNA") permitted adequately capitalized and managed
bank holding companies to acquire control of banks in any state. Additionally,
beginning on June 1, 1997, the RNA provides for banks to branch across state
lines, although individual states may authorize interstate branches earlier or
elect to opt-out entirely. Florida has allowed bank holding companies from the
Southeastern United States. to acquire banks in Florida since 1984, and in 1994
this was expanded to include bank holding companies from other parts of the
United States as well. In 1996, Florida enacted legislation, effective as of
June 1, 1997 which allowed out-of-state banks to enter Florida by merger with
an existing Florida-based bank, and thereafter to branch throughout the state,
while also allowing Florida-based banks to establish branches in other states
by merger with out-of-state banks. This may further increase competition for
the Bank by allowing large banks from other parts of the United States to
operate directly in Florida.
REGULATION OF THE BANK
GENERAL. The Bank, as a national bank, is subject to regulation primarily
by the OCC. Also, as a national bank, the Bank is a member of the Federal
Reserve System and its deposits are insured by the FDIC. Its operations are
therefore also subject to certain FRB and FDIC regulations. Various other
federal and state consumer laws and regulations also affect the operations of
the Bank.
As a national bank, the Bank may be able to engage in certain activities
approved by the OCC which the FRB would not necessarily approve for the Company
or its non-national bank subsidiaries. The OCC has in recent years allowed
national banks to undertake an ever-increasing range of securities and
insurance activities. Along these lines, pursuant to certain revisions to the
OCC's regulations pertaining to national bank activities effective on December
31, 1996, national banks, among other things, are now be permitted on a
case-by-case basis to operate subsidiaries that may engage in activities some
of which are not permissible for the bank itself. Although the revised
regulations do not
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authorize any new activities per se, it is expected that national banks, if
eligible and if they obtain the approval of the OCC, will use them to expand
further into the businesses of insurance and securities underwriting.
The revised OCC regulations contain "fire walls" intended to protect a
national bank from the risks taken by its subsidiary, including a 10%
limitation on the amount of bank capital that may be invested in the new
subsidiary, as well as requirements that extensions of credit to the operating
subsidiary be fully-collateralized and that transactions between the bank and
the subsidiary be conducted at arm's-length. Also, other safeguards are that
the parent national bank's exposure to any losses the subsidiary may incur be
limited to the bank's equity investment in the subsidiary, and that the parent
national bank be well-capitalized both before and after the investment is made.
Since OCC approval is required on a case-by-case basis for an eligible
bank to be permitted to engage in activities not permissible for the bank to
conduct directly, it is unclear at this time what the effect of these revised
regulations on the operations of national banks will be. Further, Congress is
considering new banking legislation which may address these revisions.
As a national bank, the Bank may not ordinarily lend more than 15% of its
capital unsecured to any one borrower, and may lend up to an additional 10% of
its capital to that same borrower on a fully secured basis involving readily
marketable collateral having a market value, as determined by reliable and
continuously available price quotations, equal at least to the amount borrowed.
In addition, there are various other circumstances in which the Bank may lend
in excess of such limits, including authority to lend up to 35% of capital and
surplus when the loan is secured by documents of title to readily marketable
staples and certain other exceptions relevant to international trade finance.
Federal law also imposes additional restrictions on the Bank with respect
to loans and extensions of credit to certain related parties and purchases from
and other transactions with the Bank and the Company's principal shareholders,
officers, directors and affiliates. Extensions of credit (i) must be made on
substantially the same terms (including interest rates and collateral) as, and
follow credit underwriting procedures that are not less stringent than, those
prevailing at the time for comparable transactions with members of the general
public, and (ii) must not involve more than the normal risk of repayment or
present other unfavorable features. In addition, extensions of credit to each
such person beyond certain limits set by applicable law must be approved by the
Bank's Board of Directors, with the individual who is applying for the credit
abstaining from participation in the decision. The Bank also is subject to
certain lending limits and restrictions on overdrafts to such persons. A
violation of these restrictions may result in the assessment of substantial
civil monetary penalties against the Bank or any officer, director, employee,
agent or other person participating in the conduct of the affairs of the Bank
or the imposition by the FRB of a cease and desist order.
The Bank is allowed to establish new branches throughout Florida. In
addition, by merger with a bank with branches in other states, the Bank may
also now establish branches in those other states. See "Interstate Banking"
above.
Moreover, under the Change in Bank Control Act of 1978, as amended, no
person or group of persons may directly or indirectly acquire control of the
voting stock of the Bank unless the OCC has been given 60 days' prior written
notice of the proposed acquisition and within that time period the OCC has not
issued a notice disapproving the proposed acquisition.
DIVIDENDS. The Bank is subject to legal limitations on the frequency and
amount of dividends that can be paid to Bancorp. The OCC, in general, also has
the ability to prohibit dividends by the Bank which would otherwise be
permitted under applicable regulations if the OCC determines that such
distribution would constitute an unsafe or unsound practice.
For the Bank, the approval of the OCC is required for the payment of
dividends in any calendar year if the total of all dividends declared by the
Bank in that year exceeds the current year's net income combined with the
retained net income of the two preceding years. "Retained net income" means the
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net income of a specified period less any common or preferred stock dividends
declared for that period. Moreover, no dividends may be paid by a national bank
in excess of its undivided profits account.
In accordance with the above regulatory restrictions, the Bank currently
has the ability to pay dividends. As of September 30, 1997, an aggregate of
approximately $27.7 million was available for payment of dividends by the Bank
to Bancorp under applicable restrictions, without regulatory approval, after
taking into consideration dividends that would have to be paid to minority
shareholders of the Bank after giving effect to the Reorganization.
There are also statutory limits on other transfer of funds to Bancorp and
any other future non-banking subsidiaries of Bancorp by the Bank, whether in
the form of loans or other extensions of credit, investments or asset
purchases. Such transfers by the Bank generally are limited in amount to 10% of
the Bank's capital and surplus, to Bancorp or any future Bancorp subsidiary, or
20% in the aggregate to Bancorp and all such subsidiaries. Furthermore, such
loans and extensions of credit are required to be fully collateralized in
specified amounts depending on the nature of the collateral involved.
FDICIA
FDICIA was enacted on December 19, 1991. It substantially revised the bank
regulatory and funding provisions of the Federal Deposit Insurance Act and made
significant revisions to other federal banking statutes. FDICIA provided for,
among other things, (i) a recapitalization of the Bank Insurance Fund of the
FDIC (the "BIF") by increasing the FDIC's borrowing authority and providing for
adjustments in its assessment rates; (ii) annual on-site examinations of
federally-insured depository institutions by banking regulators; (iii) publicly
available annual financial condition and management reports for financial
institutions, including audits by independent accountants; (iv) the
establishment of uniform accounting standards by federal banking agencies; (v)
the establishment of a "prompt corrective action" system of regulatory
supervision and intervention, based on capitalization levels, with more
scrutiny and restrictions placed on depository institutions with lower levels
of capital; (vi) additional grounds for the appointment of a conservator or
receiver; (vii) a requirement that the FDIC use the least-cost method of
resolving cases of troubled institutions in order to keep the costs to
insurance funds at a minimum; (viii) more comprehensive regulation and
examination of foreign banks; (ix) consumer protection provisions, including a
Truth-in-Savings Act; (x) a requirement that the FDIC establish a risk-based
deposit insurance premium assessment system; (xi) restrictions or prohibitions
on accepting brokered deposits, except for institutions which significantly
exceed minimum capital requirements; and (xii) certain additional limits on
deposit insurance coverage.
A central feature of FDICIA is the requirement that the federal banking
agencies take "prompt corrective action" with respect to insured depository
institutions that do not meet minimum capital requirements. Pursuant to FDICIA,
the federal bank regulatory authorities have adopted regulations setting forth
a five-tiered system for measuring the capital adequacy of the depository
institutions they supervise. Under these regulations, a depository institution
is classified in one of the following capital categories: "well capitalized,"
"adequately capitalized," "undercapitalized," "significantly undercapitalized,"
and "critically undercapitalized."
FDICIA generally prohibits the Bank from making any capital distribution
(including payment of a cash dividend) or paying any management fees to Bancorp
if the Bank would thereafter be undercapitalized. Undercapitalized depository
institutions are subject to growth limitations and are required to submit
capital restoration plans acceptable to the federal banking agencies. If a
depository institution fails to submit an acceptable plan, it is treated as if
it is "significantly undercapitalized."
Significantly undercapitalized depository institutions may be subject to a
number of other requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized, and requirements to
reduce total assets and to stop accepting deposits from correspondent banks.
Critically undercapitalized institutions are subject to the appointment of a
receiver or conservator, generally within 90 days of the date such institution
is determined to be critically undercapitalized.
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FDICIA also provided for increased funding of the BIF. Under the FDIC's
risk-based insurance premium assessment system, each bank whose deposits are
insured by the BIF is assigned one of the nine risk classifications based upon
certain capital and supervisory measures and, depending upon its
classification, is assessed premiums. On November 14, 1995, the FDIC board of
directors voted to lower the BIF premium range to zero from .27% effective
January 1996. Accordingly, the Bank at this time is not subject to paying any
deposit insurance premiums. The rate schedule is subject to future adjustments
by the FDIC. In addition, the FDIC has authority to impose special assessments
from time to time. As a result of the enactment of the Federal Deposit
Insurance Funds Act of 1996 on September 30, 1996, commercial banks are now
required to pay part of the interest on the Financing Corporation's ("FICO")
bonds issued to deal with the savings and loan crisis of the late 1980s. As a
result, commercial bank deposits are now also subject to assessment by FICO
upon the approval by the FDIC Board ("FICO Assessment") of such assessment.
Beginning in 1997 and until the earlier of December 31, 1999 or the date on
which the last saving association ceases to exist, the assessment rate FICO
imposes on a commercial bank must be at a rate equal to one-fifth the
assessment rate applicable to deposits assessable by the SAIF. The Bank's FICO
Assessment for 1997 was $265,000, and the Bank believes it will be at least
$265,000 for 1998.
RESERVE REQUIREMENTS. The Bank is required to maintain reserves against
its transaction accounts. The reserves must be maintained in an interest-free
account at the Federal Reserve Bank of Atlanta. Reserve requirements and the
amount of required reserves is subject to adjustment by the FRB from time to
time. The current rate for reserves is 3% of a depository institution's
transaction accounts (less certain permissible deductions) up to $52 million,
plus 10% of the amount over $52 million.
BROKERED DEPOSIT RESTRICTIONS. Well-capitalized institutions may accept
brokered deposits. Adequately capitalized institutions cannot accept, renew or
roll over brokered deposits except with a waiver from the FDIC, and are subject
to restrictions on the interest rates that can be paid on such deposits.
Undercapitalized institutions may not accept, renew, or roll over brokered
deposits.
COMMUNITY REINVESTMENT ACT. The Community Reinvestment Act of 1977 ("CRA")
and the regulations issued thereunder are intended to encourage banks to help
meet the credit needs of their service area, including low and moderate income
neighborhoods, consistent with the safe and sound operations of the banks.
These regulations also provide for regulatory assessment of a bank's record in
meeting the needs of its service area when considering applications to
establish branch merger applications and applications to acquire the assets and
assume the liabilities of another bank. FIRREA requires federal banking
agencies to make public a rating of a bank's performance under the CRA. In the
case of a bank holding company, the CRA performance record of the banks
involved in the transaction are reviewed in connection with the filing of an
application to acquire ownership or control of shares or assets of a bank or to
merge with any other bank holding company. An unsatisfactory record can
substantially delay or block the transaction. Under the Bank's last two CRA
examinations, conducted in 1993 and 1995, the Bank received "Outstanding"
ratings (the highest rating) from the OCC.
CONSUMER LAWS AND REGULATIONS. In addition to the laws and regulations
discussed herein, the Bank is also subject to certain consumer laws and
regulations that are designed to protect consumers in transactions with banks.
While the list set forth herein is not exhaustive, these laws and regulations
include the Truth in Lending Act, the Truth in Savings Act, the Electronic
Funds Transfer Act, the Expedited Funds Availability Act, the Equal Credit
Opportunity Act, and the Fair Housing Act, among others. These laws and
regulations mandate certain disclosure requirements and regulate the manner in
which financial institutions must deal with customers when taking deposits or
making loans to such customers. The Bank must comply with the applicable
provisions of these consumer protection laws and regulations.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------- ----- -----------------------------------------------------------------
<S> <C> <C>
Roberto Isaias ............ 53 Chairman of the Board of Bancorp and Director of the Bank
Oscar Bustillo, Jr. ...... 53 President, Chief Executive Officer and Director of Bancorp and
Chairman of the Board, Chief Executive Officer and President
of the Bank
Bernardo M. Argudin ...... 46 Vice President, Chief Financial Officer and Director of Bancorp,
Executive Vice President, Chief Financial Officer and Director
of the Bank
Felix M. Garcia ............ 48 Executive Vice President, Chief Credit Officer and Director of
the Bank
Edward F. Holden ......... 44 Executive Vice President--Corporate Banking of the Bank
Fernando J. Martinez ...... 57 Executive Vice President--Real Estate Lending of the Bank
Rafael Quintana ............ 56 Executive Vice President--Retail Banking of the Bank
Orlando A. Quintero ...... 63 Executive Vice President--Operations of the Bank
Jose P. Bared ............ 56 Director of Bancorp and the Bank
John H. Blake ............ 52 Director of Bancorp and the Bank
Estefano Isaias ............ 49 Director of Bancorp
William Isaias ............ 53 Director of Bancorp
Milton H. Lehr ............ 79 Director of Bancorp and the Bank
Fernando Tamayo ............ 47 Director of Bancorp and the Bank
</TABLE>
ROBERTO ISAIAS has been a director of Bancorp since October 1970, and has
served as Chairman of the Board since May 1982. Mr. Isaias has served as a
director of the Bank since October 1984 and as Chairman of the Executive
Committee of the Bank since March 1985. Since 1985, Mr. Isaias has served as
President of Filanbanco, S.A., a major Ecuadorian bank. From 1971 to 1985, Mr.
Isaias was employed in various capacities at Filanbanco, S.A.
OSCAR BUSTILLO, JR. has served as President and Chief Executive Officer of
Bancorp since April 1994. Since March 1989, he has served as an officer and
director of Bancorp. Mr. Bustillo has served as President of the Bank since
February 1989, as Chief Executive Officer of the Bank since June 1993, as
Chairman of the Board of the Bank since April 1995, and as a director since
February 1989. From April 1985 to February 1989, Mr. Bustillo served as Senior
Vice President of the Bank and headed its International Division. From May 1980
to May 1985, Mr. Bustillo served as Vice President of the Bank of New England.
During the period from January 1975 to May 1980, Mr. Bustillo served as
Assistant Vice President in the Latin American Division of Irving Trust
International. Mr. Bustillo has approximately 30 years of banking experience.
BERNARDO M. ARGUDIN has served as Vice President and Chief Financial
Officer of Bancorp since April 1992. Mr. Argudin has served as a director of
Bancorp since November 1997 and as a director of the Bank since April 1997. He
has served as Executive Vice President of the Bank since April 1994, and as
Chief Financial Officer of the Bank since April 1992. From May 1988 to April
1992, Mr. Argudin served as Comptroller of the Bank. He was first employed by
the Bank in February 1986 as a Loan Review Officer, and served in that capacity
until May 1988. From May 1982 to June 1985, Mr. Argudin served as Comptroller
of FGS, Inc., a bank holding company located in Inverness, Florida. Mr. Argudin
worked as an OCC national bank examiner from June 1973 to May 1982. Mr. Argudin
has approximately 24 years of banking experience.
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FELIX M. GARCIA has served as an Executive Vice President of the Bank
since January 1987, and as Chief Credit Officer of the Bank since April 1992.
He has served as a director of the Bank since April 1997. From February 1986 to
the present, Mr. Garcia has headed the Bank's Credit Division. From April 1985
to February 1986 he served as a Loan Review Officer for the Bank. Prior to
joining the Bank, Mr. Garcia served as an OCC field office manager from May
1982 to April 1985, and as an OCC national bank examiner from December 1972 to
May 1982. Mr. Garcia has approximately 25 years of banking experience.
EDWARD F. HOLDEN has served as Executive Vice President--Corporate Banking
of the Bank since June 1997. From March 1992 until June 1997, Mr. Holden served
as Senior Vice President of the Bank and headed Corporate Lending. Prior to
joining the Bank, Mr. Holden served as a Vice President of Southeast Bank, N.A.
from January 1987 to April 1991. Before that, Mr. Holden served as a Vice
President of Irving Business Center from February 1985 to January 1987. From
April 1979 to February 1985, Mr. Holden held a variety of positions with Irving
Trust International Bank, including that of Vice President. Mr. Holden held a
variety of positions with Southeast Bank N.A. from January 1976 to April 1979.
Mr. Holden has approximately 21 years of banking experience.
FERNANDO J. MARTINEZ has served as Executive Vice President--Real Estate
Lending of the Bank since June 1997. During the period from August 1985 through
June 1997, Mr. Martinez served as Senior Vice President of the Bank and headed
Commercial Real Estate Lending. Prior to joining the Bank, Mr. Martinez served
as Senior Vice President of Consolidated Bank, NA from January 1979 to July
1985. Mr. Martinez has approximately 19 years of banking experience.
RAFAEL QUINTANA has served as Executive Vice President--Retail Banking of
the Bank since March 1994, and has headed the Bank's Retail Banking Division
since March 1992. Mr. Quintana joined the Bank as Senior Vice President in
January 1990, and headed the Bank's Marketing Department until March 1992. From
March 1975 to August 1989, Mr. Quintana held various positions with Amerifirst
Savings, including that of Vice President. Mr. Quintana served as President of
Union Federal Savings and Loan Association from May 1974 to May 1975. Mr.
Quintana served as Vice President--Retail Banking of Amerifirst Savings from
March 1969 to March 1973. Mr. Quintana has approximately 28 years of banking
experience.
ORLANDO A. QUINTERO has served as Executive Vice President--Operations of
the Bank since January 1986. During the period from August 1972 through the
present, Mr. Quintero has held various positions in the Bank's Operations
Department. From January 1952 to December 1965, Mr. Quintero worked in various
capacities in banking operations in Cuba. Mr. Quintero has approximately 45
years of banking experience.
JOSE P. BARED has served as a director of Bancorp since November 1997. He
has previously served several one-year terms as a director of Bancorp, as
Bancorp has historically rotated two director positions among directors of the
Bank. He has served as a director of the Bank since 1971. Since August 1992,
Mr. Bared has been Chief Executive Officer and President of Farm Stores, Inc.
From 1977 to 1992, Mr. Bared served as Chief Executive Officer and President of
Bared Company, Inc., an electrical and mechanical engineering contracting firm.
JOHN H. BLAKE has served as a director of Bancorp since November 1997 and
as a director of the Bank since June 1986. He has previously served several
one-year terms as a director of Bancorp, as Bancorp has historically rotated
two director positions among directors of the Bank. Since January 1995, Mr.
Blake has been President of A.I. Risk Specialists, Inc., a company specializing
in the insurance business. From June 1994 to December 1994, Mr. Blake was
General Manager of Northwest Brokers, a reinsurance broker doing business in
Latin America. From November 1992 to June 1994, Mr. Blake worked as a
consultant to banks and insurance companies.
ESTEFANO ISAIAS has served as a director of Bancorp since April 1982. Mr.
Isaias has served as President of Seguros Rocafuerte, an Ecuadorian insurance
company, since September 1985. He has
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been President of Emilio Isaias C.A. de Comercio, an Ecuadorian company since
January 1980, and has been President of Compania Minera Gribipe, an Ecuadorian
mining company, since June 1994. Mr. Isaias has also served as President of
General Fruit S.A., a company engaged in the fruit exporting business, since
March 1995. Mr. Isaias has served as a director of Filanbanco, S.A., a major
Ecuadorian bank, since June 1980.
WILLIAM ISAIAS has served as a director of Bancorp since March 1987. Since
1988, Mr. Isaias has served as Executive Vice-President of Filanbanco, S.A., a
major Ecuadorian bank. He served as General Manager of the Quito branch office
of Filanbanco, S.A. from 1984 to 1988. Since 1984, Mr. Isias has been a member
of the Board of Directors of Indulana, S.A. a textile manufacturing company in
Ecuador.
MILTON H. LEHR has served as a director of Bancorp since November 1997 and
as a director of the Bank since December 1976. He has previously served several
one-year terms as a director of Bancorp, as Bancorp has historically rotated
two director positions among directors of the Bank. Mr. Lehr has been the owner
of the American Travel Club of Miami, a company specializing in the
organization of travel tours, since December 1978. Mr. Lehr has been the
co-publisher of IN SPAIN magazine since July 1979. From November 1959 until
February 1993, Mr. Lehr served as President of International Video Affiliates,
a company specializing in the sale of television films.
FERNANDO TAMAYO, has served as a director of Bancorp since November 1997
and has been a director of the Bank since March 1995. He has previously served
a one-year term as a director of Bancorp, as Bancorp has historically rotated
two director positions among directors of the Bank. Mr. Tamayo has served as
President of Southern Industrial Sales Corp., a company engaged in the export
of sugar mill equipment to Latin America, since May 1986.
Set forth below are descriptions of each of the directors of the Bank not
described above:
ANNE BETANCOURT, age 50, has served as a director of the Bank since April
1993. Since November 1991, Ms. Betancourt has been the director of the Center
for Professional Development of Miami-Dade Community College.
ROBERTO GONZALEZ-BLANCO, age 66, has served as a director of the Bank from
April 1978 to the present and served in various capacities, including Vice
Chairman of the Board, with the Bank from July 1968 until June 1996, when he
retired. Mr. Gonzalez-Blanco has served as President and Chief Executive
Officer of Argebe Strategic Financial Advisors, Inc., a company engaged in
consulting since November 1996. From September 1966 to July 1968, Mr.
Gonzalez-Blanco served as a bank examiner for the Federal Reserve Bank of New
York. From March 1963 to September 1966, Mr. Gonzalez-Blanco worked for the
Central Savings Bank, New York, New York.
OSCAR C. DE TUYA, JR., age 68, has served as a director of the Bank since
June 1978. He has previously served several alternating one-year terms as a
director of Bancorp, as Bancorp has historically rotated two director positions
among directors of the Bank. Since September 1992, Mr. de Tuya has served as
President of Amexport, a company engaged in the export of goods to Latin
America. Mr. de Tuya has also served as a consultant to Latin American
Forwarding Company, an international freight forwarder, since September 1992.
RICHARD A. ELIAS, M.D., age 67, has served as a director of the Bank since
September 1969. He has previously served several one-year terms as a director
of Bancorp, as Bancorp has historically rotated two director positions among
directors of the Bank. Mr. Elias has served as President of NPESC, P.A., a
medical practice, since July 1986. Mr. Elias has been a Clinical Professor of
Medicine at the University of Miami and Chief of the Miami Heart Institute
since July 1965. Mr. Elias served on the Advisory Committee of Southeast Bank,
N.A. from 1976 to 1979.
ROBERT PAUL, ESQ., age 66, has been a director of the Bank since 1967 and
was a director of Bancorp from 1982 until November 1997. Mr. Paul is an
attorney and has been a member of the law firm of
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<PAGE>
Hornsby, Sacher, Zelman, Stanton, Paul & Beiley, P.A. since January 1995. From
May 1964 to June 1994, Mr. Paul was a member of the law firm of Paul, Landy,
Beiley & Harper, P.A. Mr. Paul has been Chairman of TerraLex, Inc., a network
of international law firms, since April 1990. Mr. Paul has represented various
financial institutions during his almost 35 years of practice as an attorney.
Directors of Bancorp will be elected for three year terms, classified into
Classes I, II and III. Messrs. William Isaias, Blake and Tamayo will be Class I
directors with terms of office expiring on the date of the Company's annual
meeting of shareholders in 1998; Messrs. Estefano Isaias, Bared and Lehr will
be Class II directors with terms of office expiring on the date of Bancorp's
annual meeting of shareholders in 1999; and Messrs. Roberto Isaias, Argudin and
Bustillo will be Class III directors with terms of office expiring on the date
of Bancorp's annual meeting of shareholders in 2000. Each officer of Bancorp is
appointed by the Board of Directors of Bancorp and holds office until the
earlier of his or her death, resignation or removal.
Roberto Isaias, Estefano Isaias and William Isaias are brothers.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of Bancorp has established Audit and Compensation
Committees. The Audit Committee will review the general scope of the audit
conducted by the Company's independent auditors and matters relating to the
Company's internal control systems. In performing its function, the Audit
Committee will meet separately with representatives of the Company's
independent auditors and with representatives of senior management. The members
of the Audit Committee have not yet been determined.
The Compensation Committee will be responsible for making recommendations
to the Board of Directors with respect to the compensation of the Company's
executive officers and with respect to the establishment of policies dealing
with various compensation and employee benefit matters. The Compensation
Committee will also administer the Plan and will make recommendations to the
Board of Directors as to option grants to Company employees under the Plan. The
members of the Compensation Committee have not yet been determined. All matters
approved by the Compensation Committee must also be approved by the Board of
Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the formation of the Compensation Committee, matters related to
compensation, and employee benefit matters were considered by Mr. Roberto
Isaias, the Chairman of the Executive Committee of the Bank and by Mr.
Bustillo, Chief Executive Officer and President of the Bank. Mr. Bustillo
participated in determinations as to compensation for executive officers,
including himself. Final determination regarding compensation was made by the
Board of Directors of the Bank.
DIRECTOR COMPENSATION
Members of the Board of Directors of Bancorp have received a fee in the
amount of $100 per meeting attended. Following the consummation of the
Offering, members of Bancorp's Board of Directors, other than executive
officers and directors of the Bank, will receive a monthly retainer of $1,000.
Each director of Bancorp, other than executive officers will receive a fee of
$300 for each committee meeting attended. The Company will continue to
reimburse all directors of Bancorp for all travel-related expenses incurred in
connection with their activities as directors.
To date, the Bank's Board of Directors has been actively involved in the
Bank's business. In recent years, each outside member of the Bank's Board of
Directors has received a monthly retainer of $1,000. In addition to the monthly
retainer, each director of the Bank who is not also an executive officer has
received a fee of $300 for each meeting of a committee of the Board of
Directors attended by such director. The Bank also provides out-of-town
directors and two honorary directors, William and
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<PAGE>
Estefano Isaias, with a travel allowance for travel expenses incurred in
connection with their activities as directors. For the year ended December 31,
1996, the Company paid an aggregate of $137,000 in fees to its directors and
$39,142 in travel allowances. Bancorp also provides each director and honorary
director of Bancorp and the Bank with the option to participate in the
Company's self-insured health plan on the same cost basis as employees.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning
compensation paid or accrued by the Company for the fiscal year ended December
31, 1996 to or on behalf of the Company's President and Chief Executive
Officer, each of the other four most highly compensated executive officers (the
"Named Executive Officers") (determined as of the end of the last fiscal year)
and one person who served as an executive officer of the Company during 1996,
but whose employment with the Company terminated prior to the end of 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------
OTHER ANNUAL
SALARY BONUS COMPENSATION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($)(3)(4) ($) COMPENSATION(6)
- -------------------------------------------- ------ --------- ----------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
Oscar Bustillo, Jr.
President, Chief Executive Officer and
director of Bancorp and Chairman of the
Board, Chief Executive Officer and
President of the Bank .................. 1996 308,334 194,000 (5) 2,096
Mario L. del Valle(1) ..................... 1996 134,000 38,000 (5) 925
Felix M. Garcia
Executive Vice President and Chief
Credit Officer of the Bank ............ 1996 144,167 38,000 (5) 997
Roberto Gonzalez-Blanco(2) ............... 1996 82,493 -- (5) 83,178
Rafael Quintana
Executive Vice President--Retail Banking
of the Bank ........................... 1996 127,833 37,000 (5) 874
Bernardo M. Argudin
Vice President and Chief Financial Officer
of Bancorp and Executive Vice President,
Chief Financial Officer and director of
the Bank .............................. 1996 129,167 30,000 (5) 893
</TABLE>
- ----------------
(1) Mr. del Valle left the employ of the Company as of June 17, 1997. Prior to
that date, Mr. del Valle served as Executive Vice President--Corporate
Banking of the Bank.
(2) Mr. Gonzalez-Blanco retired on June 30, 1996. Prior to that date, Mr.
Gonzalez-Blanco served as Vice Chairman of the Board of the Bank, and
Chief Investment Officer of the Bank. Mr. Gonzalez-Blanco remains a
director of the Bank. His salary represents his salary for the six month
period ended June 30, 1996. All other compensation reflects continuation
of his salary through December 31, 1996 and term insurance premiums.
(3) Bonuses were paid in March 1997 for 1996 performance.
(4) Does not include bonuses of $191,000, 35,000, 35,000, 18,000, 35,000 and
25,000 paid to Messrs. Bustillo, del Valle, Garcia, Gonzalez-Blanco,
Quintana and Argudin, respectively, in March 1996 for 1995 performance.
(5) The aggregate amount of perquisites and other personal benefits provided to
such Named Executive Officer is the lesser of 10% of the total annual
salary and bonus of such Named Executive Officer or $50,000.
(6) Except for salary continuation of $82,500 for Mr. Gonzalez-Blanco,
represents the dollar value of premiums paid by the Company for term life
insurance.
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<PAGE>
BANK BONUS POLICY
Historically, pursuant to the Bank's bonus policy, which has been approved
by the Bank's Board of Directors and administered by the Bank's Chief Executive
Officer, the Bank has distributed an aggregate of 5 to 6% of the Bank's pre-tax
net income, before deduction of the bonus pool, to its executive officers and
other employees as bonuses. Historically, employees and executive officers of
the Company have received approximately 80% and 20% of the bonus pool,
respectively. For the year ended December 31, 1996, approximately $1.6 million
was distributed pursuant to the Company's bonus pool.
Following the consummation of the Offering, bonuses, if any, will be
recommended on an annual basis by the Company's Compensation Committee and
approved by the Board, or paid pursuant to employment agreements.
EMPLOYMENT AGREEMENTS
The Company is presently negotiating employment agreements with certain
executive officers.
1998 STOCK OPTION PLAN
Under the Company's 1998 Stock Option Plan (the "Plan"), effective on
January 1, 1998, 1,000,000 shares of Common Stock are reserved for issuance
upon exercise of stock options granted under the Plan. The Plan is designed as
a means to retain and motivate qualified and competent persons who provide
services to the Company and its subsidiaries. The Compensation Committee of the
Board of Directors (the "Compensation Committee") will administer and interpret
the Plan and the Compensation Committee, subject to final approval by the Board
of Directors, is authorized to grant options thereunder to all eligible
employees, directors (whether or not also employees of the Company or any of
its subsidiaries), consultants and independent contractors of the Company or
its subsidiaries. In the event of a change in the Common Stock due to a stock
dividend or recapitalization, the Plan provides for appropriate adjustment in
the number of shares available for grant under the Plan and the number of
shares and the exercise price per share under any option then outstanding under
the Plan, so that the same percentage of the Company's issued and outstanding
shares shall remain subject to being optioned under the Plan or subject to
purchase at the same aggregate exercise price under any such outstanding
option, as applicable. Unless otherwise provided in any option, the
Compensation Committee, with the Board of Directors' approval, may change the
option price and/or number of shares under any outstanding option when, in
their discretion, such adjustment becomes appropriate so as to preserve but not
increase benefits under the Plan. The aggregate number of shares subject to
options granted to any one optionee under the Plan may not exceed 400,000,
subject to adjustment as described above.
The Plan provides for the granting of both incentive stock options (as
defined in Section 422 of the Internal Revenue Code) and nonqualified stock
options. No incentive stock options may be granted to a person who is not also
an employee of the Company or a subsidiary. Options may generally be granted
under the Plan on such terms and at such prices as determined by the
Compensation Committee, subject to the approval of the Board of Directors,
except that the per share exercise price of any options cannot be less than the
fair market value of a share of the Common Stock on the date of grant. Each
option is exercisable after the period or periods specified in the option
agreement, but no option may become exercisable after the expiration of ten
years from the date of grant or vest over a period of less than three years in
equal annual increments; however, the Compensation Committee, with the Board of
Directors' approval, may accelerate the exercisability or vesting of any option
or shares previously acquired by the exercise of any options, and, in the event
of a Change in Control (as defined in the Plan), each outstanding option will
become immediately fully exercisable. Incentive stock options granted to an
individual who owns (or is deemed to own) at least 10% of the total combined
voting power of all classes of stock of the Company or its subsidiary must have
an exercise price of at least 110% of the fair market value of the Common Stock
subject to such option on the date of grant and a
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<PAGE>
term of no more than five years. Incentive stock options granted under the Plan
are not transferable other than by will or by the laws of descent and
distribution. Nonqualified stock options are also not transferable unless the
consent of the Compensation Committee is obtained and such transfer does not
violate Rule 16b-3 under the Exchange Act. Unless otherwise provided in any
option, the option price may be paid by cash, certified or official bank check,
personal check if accepted by the Compensation Committee or the Board of
Directors, money order, shares of Common Stock, witholding of shares of Common
Stock, any cashless exercise procedure approved by the Compensation Committee
or the Board of Directors, other consideration deemed appropriate by the
Compensation Committee or the Board of Directors or a combination of the above.
The Plan also authorizes the Company to make or guarantee loans to optionees to
enable them to exercise their options. Such loans must (i) provide for recourse
to the optionee, (ii) bear interest at no less than the prime rate of the Bank,
(iii) be secured by the shares of Common Stock purchased and (iv) comply with
all applicable laws and regulations. The Board of Directors or the Compensation
Committee with the approval of the Board has the authority to amend or
terminate the Plan or any options, provided that no such action may
substantially impair the rights or benefits of the holder of any outstanding
option without the consent of such holder, and provided further that certain
amendments to the Plan are subject to shareholder approval. Unless terminated
sooner, the Plan will continue in effect until all options granted thereunder
have expired or been exercised, provided that no options may be granted after
December 31, 2007.
OPTION GRANTS AND EXERCISES
The Company did not grant any options during 1996 or 1997 and no options
were exercised in 1996 or 1997. No options are currently outstanding, but upon
consummation of the Offering, options to purchase shares will be
outstanding under the Plan.
PENSION PLAN
The Bank has a tax-qualified non-contributory defined benefit pension plan
covering substantially all full time employees of the Bank, including the Named
Executive Officers (the "Pension Plan").
The following table sets forth the total estimated annual pension benefits
payable to a covered participant who retired from service with the Company in
1996 at age 65 and had attained the earnings and years of service
classifications specified under the Pension Plan, based upon compensation
covered under the pension plan ("covered compensation") and years of service
with the Bank credited under the pension plan ("Credited Service"):
PENSION PLAN TABLE
<TABLE>
<CAPTION>
FINAL AVERAGE COMPENSATION YEARS OF CREDITED SERVICE
- ---------------------------- -------------------------------------------------------------
15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
$125,000 .................. $39,725 $43,174 $46,624 $50,074 $53,524
$150,000 .................. 47,796 51,978 56,160 60,342 64,524
</TABLE>
Benefits shown above are computed as a single life annuity and are not
subject to any deduction for Social Security or other offset amounts. "Final
Average Compensation" is a participant's average annual compensation over the
five consecutive years in the most recent ten years yielding the highest
average annual compensation. A participant's covered compensation includes all
annual compensation reported in the Summary Compensation Table, but is subject
to certain limitations on compensation under the Internal Revenue Code.
Estimated years of credited service for each of the following officers as
of September 30, 1997 are as follows: Oscar Bustillo, Jr. - 13 years; Mario L.
del Valle - 8 years; Felix M. Garcia - 13 years; Roberto Gonzalez-Blanco - 29
years; Bernardo M. Argudin - 12 years; Fernando J. Martinez - 13 years; Rafael
Quintana - 8 years; and Orlando A. Quintero - 26 years. Covered compensation
for all Named Executive Officers was $150,000 each for the fiscal year ended
December 31, 1996.
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<PAGE>
CERTAIN TRANSACTIONS
From time to time, the Bank makes loans and extends credit to certain of
the Bank's officers, directors, employees and to certain companies affiliated
with such persons. In the opinion of the Company, all of such loans and
extensions of credit were made in the ordinary course of business, on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with unrelated persons
entered into on an arm's length basis. At September 30, 1997, December 31,
1996, 1995 and 1994, an aggregate of $2.6 million, $1.7 million, $2.4 million
and $1.4 million, respectively, of loans and extensions of credit were
outstanding to the then-existing executive officers and directors of the
Company and to certain companies affiliated with such persons.
In connection with the construction of a headquarters and office building
in Coral Gables, Florida, the Bank entered into a contract in April 1995 with a
contractor to provide mechanical work for a total initial contract amount of
$3.5 million. Members of the family of Jose P. Bared, a director of Bancorp and
the Bank, are principals of the contractor. Through September 30, 1997 a total
of $4.17 million had been paid by the Bank to the contractor, including change
orders to the original contract, $2.5 million of which was paid in 1996 and
$1.0 million of which was paid in 1995. This contract was awarded under a
sealed bid.
The Bank has paid fees for courier and pouch support services of $44,000
through September 30, 1997 and $53,000, $24,765 and $32,162 in 1996, 1995 and
1994, respectively, to Filanbanco, S.A., an Ecuadorian bank of which Roberto
Isaias is President and a director, William Isaias is Executive Vice President
and a director and Estefano Isaias is a director.
In 1994, the Bank entered into an agreement to acquire a license to
customized software to support its teller operations from Infordatos, S.A., an
affiliate of Filanbanco, S.A. and Roberto, Estefano and William Isaias.
Pursuant to the agreement, the Bank acquired a license for an indefinite
period, which would end only with a change in control in ownership of the Bank,
for a total license fee of $197,000, and without ongoing license payments. An
initial payment of $100,000 was made in 1994 and a final payment of $97,000 was
made in 1997 after all custom features were completed.
In addition to federal law, the Bank's policy as it relates to certain
affiliates requires that transactions with its officers, directors or
affiliates be on terms no less favorable than those that could be obtained from
unrelated third parties. Any transactions requiring approval of the Bank's
Board of Directors must be approved by a majority of the Bank's disinterested
directors. Currently, any such transaction in excess of $25,000, if not
otherwise required by law to be approved by the Board of Directors, requires
approval of the Bank's Executive Committee, and any such transaction in excess
of $75,000 requires approval of the Bank's Board of Directors.
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<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information concerning the beneficial
ownership of the Common Stock immediately after giving effect to the
Reorganization, and as adjusted to reflect the issuance and sale by Bancorp of
933,270 shares of Common Stock offered by Bancorp in this Offering (assuming no
exercise of the Underwriters' over-allotment option) and the sale of 1,066,730
shares of Common Stock by the Selling Shareholders, by (i) each director of
Bancorp, (ii) each person known to the Company to be the beneficial owner of
more than 5% of the outstanding Common Stock of Bancorp, (iii) each of the
Named Executive Officers, (iv) each of the Selling Shareholders and (v) all
directors of Bancorp and executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES TO BE
OWNED BENEFICIALLY OWNED
PRIOR TO THE OFFERING AFTER OFFERING(2)
------------------------ -----------------------
NAME(1) NUMBER PERCENT SHARES OFFERED NUMBER PERCENT
- --------------------------------------------- ------------ --------- --------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Rebank Netherlands Antilles N.V. (2) ...... 12,606,350 62.7% -- 12,606,350 60.0%
Roberto Isaias (3) ........................ 13,182,900 65.6 -- 13,182,900 62.7
Oscar Bustillo, Jr.(4) ..................... 21,902 * -- 21,902 *
Bernardo M. Argudin(5) ..................... 20,250 * -- 20,250 *
Felix M. Garcia(6) ........................ 11,600 * -- 11,600 *
Edward F. Holden(7) ........................ 300 * -- 300 *
Fernando J. Martinez ........................ 8,092 * -- 8,092 *
Rafael Quintana(8) ........................ 7,000 * -- 7,000 *
Orlando A. Quintero(9) ..................... 4,067 * -- 4,067 *
Jose P. Bared(10) ........................... 85,742 * -- 85,742 *
John H. Blake .............................. 4,412 * -- 4,412 *
Estefano Isaias (11) ..................... 13,180,500 65.6 -- 13,180,500 62.7
William Isaias (12) ........................ 13,187,605 65.6 -- 13,187,605 62.7
Milton H. Lehr .............................. 9,375 * -- 9,375 *
Fernando Tamayo ........................... 4,460 * -- 4,460 *
Investors Overseas Limited, Inc. ......... 1,294,640 6.4 647,320 647,320 3.1
True Flight Investors, Ltd. ............... 1,080,317 5.4 -- 1,080,317 5.1
Miguel and Angela Baduy .................. 419,410 2.1 419,410 -- --
All directors of Bancorp and executive
officers of the Company as a group,
including those listed above
(14 persons) .............................. 13,367,205 66.5 -- 63.6
</TABLE>
- ----------------
* Less than 1%.
(1) The address of each of the beneficial owners identified is 2800 Ponce de
Leon Boulevard., Coral Gables, Florida 33134.
(2) Roberto, Estefano and William Isaias are the sole shareholders of Rebank.
The shares of Common Stock beneficially owned by the Isaiases through
their ownership in Rebank are included in calculating the shares
beneficially owned by Roberto, Estefano and William Isaias.
(3) Includes 12,606,350 shares held by Rebank, 574,150 shares jointly held by
Roberto, Estefano and William Isaias and 2,400 shares held by Roberto
Isaias individually.
(4) Includes 19,502 shares owned jointly with his wife, Virginia, and 2,400
shares held individually.
(5) Includes 14,250 shares held jointly with his wife, Cynthia, and 6,000
shares held by his wife as custodian for their minor children under the
Florida Uniform Gifts to Minors Act.
(6) Includes 500 shares owned jointly with his wife, Diana, and 11,100 shares
held individually.
(7) Shares are held jointly with his wife, Linda.
(8) Shares are held in trust by Mr. Quintana for his adult children.
(9) Shares are held jointly with his wife, Maria.
(10) Includes 81,000 shares held as trustee for his adult children and 4,742
shares held individually.
(11) Includes 12,606,350 shares held by Rebank and 574,150 shares jointly held
by Roberto, Estefano and William Isaias.
(12) Includes 12,606,350 shares held by Rebank, 574,150 shares jointly held by
Roberto, Estefano and William Isaias and 7,105 shares held jointly by
William and his wife, Carmen.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Bancorp's authorized capital stock will consist of 50 million shares of
Common Stock, par value $0.01 per share, and 5 million shares of Preferred
Stock, par value $0.01 per share. After giving effect to the Reorganization and
to the Stock Split, an aggregate of 21,026,399 shares of Common Stock and no
shares of Preferred Stock will be issued and outstanding. The following brief
description of Bancorp's capital stock does not purport to be complete and is
subject in all respects to applicable Florida law and the provisions of the
Company's Articles and Bylaws, which will be in effect prior to the effective
date of this Offering. Copies of the Articles and Bylaws are being filed as
exhibits to the Registration Statement of which this Prospectus is a part.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters
submitted to a vote of shareholders, including the election of directors. The
Common Stock does not have cumulative voting rights, which means that the
holders of a majority of the shares voting for election of directors can elect
all members of the Board of Directors. A majority of the shares voting is also
required for other actions that require the vote of shareholders, except where
otherwise required by law. For example, certain corporate actions such as
mergers require the approval of a majority of the shares outstanding. Dividends
may be paid to holders of Common Stock when, as and if declared by the Board of
Directors out of funds legally available therefor. See "Dividend Policy." Upon
liquidation or dissolution of Bancorp, holders of Common Stock will be entitled
to share ratably in the assets of Bancorp legally available for distribution to
shareholders.
The holders of Common Stock have no preemptive or conversion rights and
are not subject to further calls or assessments by Bancorp.
PREFERRED STOCK
Although Bancorp has no present plans to issue shares of Preferred Stock,
Preferred Stock may be issued from time to time in one or more classes or
series with such designations, powers, preferences, rights, qualifications,
limitations and restrictions as may be fixed by Bancorp's Board of Directors.
The Board of Directors, without obtaining shareholder approval, could issue the
Preferred Stock with voting and/or conversion rights and thereby dilute the
voting power and equity of the holders of Common Stock and adversely effect the
market price of such stock. The issuance of Preferred Stock could also be used
as an antitakeover measure by Bancorp without any further action by the
shareholders.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF FLORIDA LAW, FEDERAL BANKING LAW
AND BANCORP'S ARTICLES AND BYLAWS
Bancorp is subject to several anti-takeover provisions under Florida law
that apply to a public corporation organized under Florida law, unless the
corporation has elected to opt out of such provisions in its Articles of
Incorporation or Bylaws. Bancorp is subject to the "affiliated transactions"
and "control-share acquisition" provisions of the Florida Business Corporation
Act (the "FBCA"). These provisions require, subject to certain exceptions, that
an "affiliated transaction" be approved by the holders of two-thirds of the
voting shares other than those beneficially owned by an "interested
shareholder" or by a majority of disinterested directors and that voting rights
be conferred on "control shares" acquired in specified control share
acquisitions generally only to the extent conferred by resolution approved by
the shareholders, excluding holders of shares defined as "interested shares."
These provisions could prohibit or delay the accomplishment of mergers or other
takeover or change in control attempts with respect to the Company and,
accordingly, may discourage attempts to acquire the Company.
In addition, certain provisions of the Articles and Bylaws, which will be
in effect prior to the effective date of this Offering and are summarized in
the following paragraphs, may be deemed to have
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<PAGE>
an anti-takeover effect and may delay, defer or prevent a tender offer or
takeover attempt that a shareholder might consider in its best interest,
including those attempts that might result in a premium over the market price
for the shares held by shareholders.
CLASSIFIED BOARD OF DIRECTORS. Under the Company's Articles and Bylaws,
the Board of Directors is classified into three classes, with the directors
being elected for staggered, three-year terms. The classification of the
Company's Board of Directors will have the effect of making it more difficult
to change the composition of the Board of Directors, because at least two
annual meetings of the shareholders would be required to change the control of
the Board of Directors rather than one.
SIZE OF AND VACANCIES ON BOARD OF DIRECTORS. The Articles and Bylaws
authorize a majority of the Board of Directors or the shareholders to fill
vacant directorships. In addition, the Articles authorize the Board of
Directors to increase its size by up to two members between annual meetings.
This provision may deter a shareholder from removing incumbent directors and
simultaneously gaining control of the Board of Directors.
SPECIAL MEETINGS. The Articles and Bylaws provide that special meetings of
shareholders may be called only by a majority of the Board of Directors, the
Chairman of the Board, the Chief Executive Officer or upon the written demand
of the holders of not less than 30% of the votes entitled to be cast at a
special meeting.
ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. The Bylaws provide that shareholders seeking to bring business
before an annual meeting of shareholders, or to nominate candidates for
election as directors at an annual or special meeting of shareholders, must
provide timely notice thereof in writing. To be timely, a shareholder's notice
must be delivered to or mailed and received at the principal executive offices
of the Company not less than 90 days nor more than 120 days prior to the first
anniversary of the date of the Company's notice of annual meeting provided with
respect to the previous year's annual meeting; provided, however, that if no
annual meeting was held the previous year or the date of the annual meeting has
been changed to be more than 30 calendar days earlier than or 60 calendar days
after such anniversary, such shareholders' notice to be timely must be so
received not more than 90 days prior to nor later than the later of 60 days
prior (i) to the annual meeting or (ii) the close of business on the 10th day
following the day on which notice of the date of the annual meeting is given to
shareholders or made public. The Bylaws also specify certain requirements for a
shareholder's notice to be in proper written form. These provisions may
preclude some shareholders from bringing matters before the shareholders at an
annual or special meeting or from making nominations for directors at an annual
or special meeting.
AUTHORIZED BUT UNISSUED SHARES. The authorized but unissued shares of
Common Stock and Preferred Stock are available for future issuance without
shareholder approval (subject to certain limitations under the rules of
Nasdaq). If issued, these additional shares may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans. The existence of
authorized but unissued and unreserved Common Stock and Preferred Stock may
enable the Board of Directors to issue shares to persons friendly to current
management which could render more difficult or discourage an attempt to obtain
control of the Company by means of a proxy contest, tender offer, merger or
otherwise, and thereby protect the continuity of the Company's management.
ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF FEDERAL BANKING LAW. Because
Bancorp is a bank holding company, any person or entity which acquires 10% or
more of any class of its voting stock (5% in the case of a person which is
itself a banking holding company) will need prior approval from the FRB under
the federal Change in Bank Control Act. Furthermore, any entity which acquires
25% or more of any class of Bancorp's voting stock will likely itself become a
bank holding company, subject to the restrictions of, and to regulation by, the
FRB under the BHCA. These provisions may restrict the number of shares of
Bancorp that any investor may seek to acquire.
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<PAGE>
LIMITED LIABILITY AND INDEMNIFICATION
Under the FBCA, a director is not personally liable for monetary damages
to the corporation or any other person for any statement, vote, decision or
failure to act unless (i) the director breached or failed to perform his duties
as a director and (ii) a director's breach of, or failure to perform, those
duties constitutes (1) a violation of the criminal law, unless the director had
reasonable cause to believe his conduct was lawful or had no reasonable cause
to believe his conduct was unlawful, (2) a transaction from which the director
derived an improper personal benefit, either directly or indirectly, (3) a
circumstance under which an unlawful distribution is made, (4) in a proceeding
by or in the right of the corporation to procure a judgment in its favor or by
or in the right of a shareholder, conscious disregard for the best interest of
the corporation or willful misconduct, or (5) in a proceeding by or in the
right of someone other than the corporation or a shareholder, recklessness or
an act or omission which was committed in bad faith or with malicious purpose
or in a manner exhibiting wanton and willful disregard of human rights, safety
or property. A corporation may purchase and maintain insurance on behalf of any
director or officer against any liability asserted against him and incurred by
him in his capacity or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the FBCA.
The Articles of Bancorp provide that Bancorp may, to the fullest extent
permitted by applicable law, as amended from time to time, indemnify all
directors of Bancorp, as well as any officers or employees of Bancorp to whom
Bancorp has agreed to grant indemnification. Bancorp has also entered into an
agreement with each of its directors and certain of its officers wherein it has
agreed to indemnify each of them to the fullest extent permitted by law.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar of the Common Stock will be American
Stock Transfer & Trust Company, New York, New York.
81
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
After the Reorganization and upon consummation of this Offering, Bancorp
will have 21,026,399 shares of Common Stock outstanding (21,326,399 shares if
the over-allotment option granted to the Underwriters is exercised in full). Of
those shares, the 2,000,000 shares sold in this Offering (2,300,000 shares if
the over-allotment option is exercised in full) will be freely transferable
without restriction or registration under the Securities Act, unless purchased
by persons deemed to be "affiliates" (as that term is defined under the
Securities Act) of the Company. In the aggregate, including the shares offered
hereby, 6,834,208 shares (7,134,208 shares if the over-allotment option granted
to the Underwriters is exercised in full) will be freely transferable without
restriction or registration under the Securities Act, unless purchased by
persons deemed to be "affiliates" of the Company. All of the remaining
14,192,191 shares of Common Stock to be outstanding immediately following the
Offering, are held by the controlling shareholders, directors and executive
officers of the Company and the shareholders who participated in the
Reorganization, and therefore the transfer thereof is restricted in accordance
with applicable securities laws ("restricted shares"). Such shares may only be
sold in the public market if such shares are registered under the Securities
Act or sold in accordance with Rule 144 promulgated under the Securities Act.
In general, under Rule 144 a person (or persons whose shares are
aggregated), including an affiliate, who has beneficially owned his shares for
one year may sell in the open market within any three-month period a number of
shares that does not exceed the greater of (i) 1% of the then outstanding
shares of the Company's Common Stock (approximately 210,264 shares immediately
after this Offering, 213,264 if the over-allotment option is exercised in full)
or (ii) the average weekly trading volume in the Common Stock in the
over-the-counter market during the four calendar weeks preceding such sale.
Sales under Rule 144 are also subject to certain limitations on the manner of
sale, notice requirements and availability of current public information about
the Company. A person (or persons whose shares are aggregated) who is deemed
not to have been an "affiliate" of the Company at any time during the 90 days
preceding a sale by such person and who has beneficially owned his shares for
at least two years may sell such shares in the public market under Rule 144(k)
without regard to the volume limitations, manner of sale provisions, notice
requirements or availability of current information referred to above.
Restricted shares properly sold in reliance upon Rule 144 are thereafter freely
tradable without restrictions or registration under the Securities Act, unless
thereafter held by an "affiliate" of the Company.
The Company has reserved an aggregate of 1,000,000 shares of Common Stock
for issuance pursuant to the Plan. Options to purchase shares of
Common Stock will be issued under the Plan upon consummation of this Offering
at the initial public offering price per share. The Company intends to register
eligible shares of Common Stock issuable upon the exercise of options under the
Plan on Form S-8 following this Offering. Subject to restrictions imposed
pursuant to the Plan, such eligible shares of Common Stock issued pursuant to
the Plan after the effective date of any Registration Statement on Form S-8
will be available for sale in the public market without restriction to the
extent they are held by persons who are not affiliates of the Company. See
"Management--1998 Stock Option Plan."
Prior to this Offering, there has been no trading market for the Common
Stock. No prediction can be made as to the effect, if any, that future sales of
shares pursuant to Rule 144 or otherwise will have on the market price
prevailing from time to time. Sales of substantial amounts of the Common Stock
in the public market following this Offering could adversely affect the then
prevailing market price. The Company, Bancorp's and the Bank's executive
officers, directors, the Selling Shareholders and certain of Bancorp's other
existing shareholders are agreeing that they will not sell or otherwise
transfer any shares of Common Stock for 180 days after this Offering without
the prior written consent of the Representatives, except for bona fide gifts or
similar transfers or devises for estate planning, charitable and other related
purposes or pursuant to bona fide pledges, in any such case, only to persons
who agree to be bound by the foregoing restrictions. A majority of the shares
of Common Stock issued and outstanding prior to the offering have been pledged
to financial institutions. In addition, the Company may issue its Common Stock
to minority shareholders of the Bank in exchange for their shares in the Bank.
Such shares could be offered on the same terms and conditions, including for
the same
82
<PAGE>
consideration, as the shares of Common Stock issued in connection with the
Reorganization. See "Risk Factors--Shares Eligible for Future Sale" and
"Underwriting."
CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following is a general discussion of certain U.S. federal income and
estate tax consequences of the acquisition, ownership and disposition of Common
Stock by a "Non-U.S. Holder" and is included in this Prospectus because a
substantial number of "Non-U.S. Holders" hold and are expected to continue to
hold Common Stock. For this purpose, a "Non-U.S. Holder" is any person who is,
for U.S. federal income tax purposes, a foreign corporation, a non-resident
alien individual, a foreign partnership or a foreign estate or trust, as those
terms are defined in section 7701(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). The rules classifying trusts as foreign for U.S. federal
income tax purposes have changed recently, and a prospective purchaser of
Common Stock that is a trust is urged to consult its tax adviser regarding its
classification. This discussion does not address tax consequences to U.S.
citizens or residents or domestic corporations, partnerships, estates or
trusts. This discussion does not address all aspects of U.S. federal income and
estate taxation and does not deal with state, local or foreign tax consequences
that may be relevant to a Non-U.S. Holder in light of his particular
circumstances. This discussion is based on provisions of the Code, existing and
proposed regulations promulgated thereunder and administrative and judicial
interpretations thereof as of the date hereof, all of which are subject to
change, possibly retroactively. Each prospective purchaser of Common Stock is
advised to consult his tax adviser with respect to current and possible future
U.S. federal income tax consequences of acquiring, owning and disposing of
Common Stock as well as any tax consequences that may arise under the laws of
any state, local, foreign or other taxing jurisdiction.
DIVIDENDS
A dividend paid to a Non-U.S. Holder of Common Stock generally will be
subject to withholding of U.S. federal income tax at a 30 percent rate or at a
lower rate that may be specified by an applicable income tax treaty. However, a
dividend that is effectively connected with the conduct of a trade or business
by the Non-U.S. Holder within the United States (or, if a tax treaty applies,
is attributable to a U.S. permanent establishment of the Non-U.S. Holder) is
not subject to U.S. withholding tax (provided certain certification and
disclosure requirements are satisfied) but instead is subject to U.S. federal
income tax on a net income basis at regular graduated U.S. federal income tax
rates. Any effectively connected dividend received by a foreign corporation
will be subject, under certain circumstances, to an additional "branch profits
tax" at a 30 percent rate or at a lower rate that may be specified by an
applicable income tax treaty. A Non-U.S. Holder of Common Stock who is eligible
for a reduced rate of U.S. withholding tax pursuant to an income tax treaty may
obtain a refund of any excess tax withheld by filing an appropriate claim for
refund with the U.S. Internal Revenue Service ("IRS").
Under U.S. Treasury regulations in effect for payments made before January
1, 1999, dividends paid to an address outside the United States are presumed to
be paid to a resident of that country (unless the payer has knowledge to the
contrary) for purposes of the withholding tax discussed above and, under the
current interpretation of U.S. Treasury regulations, for purposes of
determining the applicability of a tax treaty rate. Under U.S. Treasury
regulations that apply to payments made after December 31, 1998, a Non-U.S.
Holder of Common Stock who wishes to claim the benefit of an applicable treaty
rate (and avoid backup withholding of tax, as discussed below) would be
required to satisfy certain certification and other requirements.
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to U.S. federal income tax
with respect to gain recognized on a sale or other disposition of Common Stock
unless (i) the gain is effectively connected with a trade or business of the
Non-U.S. Holder in the United States, (ii) in the case of a Non-U.S.
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<PAGE>
Holder who is an individual and holds the Common Stock as a capital asset, the
holder is present in the United States for 183 or more days in the taxable year
of the sale or other disposition and certain other conditions are met, (iii)
the Non-U.S. Holder is subject to U.S. federal income tax pursuant to rules
applicable to certain U.S. expatriates and prior lawful permanent residents of
the United States or (iv) the Company is or, in certain circumstances, has been
a "United States real property holding corporation" for U.S. federal income tax
purposes.
An individual Non-U.S. Holder described in clause (i) above will be
subject to tax on its net effectively connected gains at regular graduated U.S.
federal income tax rates. Gain realized by an individual Non-U.S. Holder
described in clause (ii) above, which may be offset by U.S. source capital
losses (even though the individual is not considered a resident of the United
States), will be subject to a 30 percent tax. Gain realized by a Non-U.S.
Holder described in clause (i) above that is a foreign corporation will be
subject to tax at regular graduated U.S. federal income tax rates and, in
addition, under certain circumstances, will be subject to an additional "branch
profits tax" at a 30 percent rate or at a lower rate that may be specified by
an applicable income tax treaty.
The Company is not currently and does not anticipate becoming a "United
States real property holding corporation" for U.S. federal income tax purposes.
FEDERAL ESTATE TAX
Common Stock owned or treated as owned by an individual Non-U.S. Holder at
the time of death will be included in the Non-U.S. Holder's gross estate for
U.S. federal estate tax purposes unless an applicable estate tax treaty
provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company must report annually to the IRS and to each Non-U.S. Holder
the amount of dividends paid to that Non-U.S. Holder and the tax withheld with
respect to those dividends, regardless of whether withholding was required.
Copies of the information returns reporting the dividends and the tax withheld
also may be made available to the tax authorities in the country in which the
Non-U.S. Holder resides under the provisions of an applicable income tax treaty
or other agreement.
Under U.S. Treasury regulations in effect for payments made before January
1, 1999, backup withholding of tax generally will not apply to dividends paid
to a Non-U.S. Holder at an address outside the United States (unless the payer
has knowledge that the payee is a United States person). Under Treasury
regulations that apply to payments made after December 31, 1998, however, a
Non-U.S. Holder will be subject to backup withholding of tax, at the rate of 31
percent, unless applicable certification and other requirements are met.
Payment of the proceeds of a sale of Common Stock by or through a U.S.
office of a broker is subject to both backup withholding and information
reporting unless the beneficial owner certifies under penalties of perjury that
it is a Non-U.S. Holder or otherwise establishes an exemption. In general,
backup withholding and information reporting will not apply to a payment made
outside the United States of the proceeds of a sale of Common Stock by or
through a foreign office of a broker. However, U.S. information reporting
requirements (but not backup withholding) will apply to a payment of
disposition proceeds outside the United States if (i) the payment is made
through an office outside the United States of a broker that, for U.S. federal
income tax purposes, is a United States person, a controlled foreign
corporation, or a foreign person that derives 50 percent or more of its gross
income for a specified period from the conduct of a trade or business in the
United States, and (ii) the broker fails to maintain documentary evidence in
its records that (a) the beneficial owner is a Non-U.S. Holder and certain
other conditions are met or (b) the beneficial owner otherwise is entitled to
an exemption.
Any amounts withheld under the backup withholding rules may be allowed as
a refund or a credit against the holder's U.S. federal income tax liability
provided the required information is furnished to the IRS.
84
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Purchase Agreement among the
Company, the Selling Shareholders and the Representatives, on behalf of the
Underwriters, the underwriters named below (the "Underwriters") have severally
agreed to purchase from the Company and the Selling Shareholders, the following
respective numbers of shares of Common Stock at the initial public offering
price less the underwriting discounts and commissions set forth on the cover
page of this Prospectus.
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- ---------------------------------------- -----------------
<S> <C>
Keefe, Bruyette & Woods, Inc. ......
CIBC Oppenheimer Corp. ............
2,000,000
===========
</TABLE>
The Purchase Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all such shares of the Common Stock if any of such shares are
purchased. The Underwriters are obligated to take and pay for all of the shares
of Common Stock offered hereby (other than those covered by the over-allotment
option described below) if any are taken.
The Company has been advised by the Representatives of the Underwriters
that the Underwriters propose to offer such shares of Common Stock to the
public at the public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow, and such dealers may
re-allow, a concession not in excess of $ per share to certain other
dealers. After the initial public offering, the offering price and other
selling terms may be changed by the Representatives of the Underwriters.
Pursuant to the Purchase Agreement, the Company has granted to the
Underwriters an option, exercisable not later than 30 days after the date of
this Prospectus, to purchase up to 300,000 additional shares of Common Stock at
the public offering price, less the underwriting discounts and commissions set
forth on the cover page of this Prospectus, solely to cover over-allotments. To
the extent that the Underwriters exercise such option, each Underwriter will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of such additional shares as the number set forth next to such
Underwriter's name in the preceding table bears to the total number of shares
in such table, and the Company will be obligated, pursuant to the option, to
sell such shares to the Underwriters.
The Company, Bancorp's and the Bank's executive officers, directors, the
Selling Shareholders and certain of Bancorp's other existing shareholders are
agreeing that they will not sell or otherwise transfer any shares of Common
Stock for a period of 180 days after the Offering without the prior written
consent of the Representatives, except for bona fide gifts or similar transfers
or devises for estate planning, charitable and other related purposes or
pursuant to bona fide pledges, in any such case, only to persons who agree to
be bound by the foregoing restrictions. A majority of the shares of Common
Stock issued and outstanding prior to the Offering have been pledged to
financial institutions. In addition, the Company may issue its Common Stock to
minority shareholders of the Bank in exchange for their shares in the Bank. See
"Risk Factors--Shares Eligible for Future Sale" and "Shares Eligible for Future
Sale."
The Representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
85
<PAGE>
The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.
Until the distribution of the Common Stock is completed, rules of the
Commission (as defined herein) may limit the liability of the Underwriters and
certain selling group members to bid for and purchase the Common Stock. As an
exception to these rules, the Underwriters are permitted to engage in certain
transactions that stabilize the price of the Common Stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the Offering, i.e., if they sell a greater aggregate number of
shares of Common Stock than is set forth on the cover page of this Prospectus,
the Underwriters may reduce the short position by purchasing shares of Common
Stock in the open market. The Underwriters may also elect to reduce any short
position by exercising all or part of the over-allotment option described
above.
The Underwriters may also impose a penalty bid on certain selling group
members. This means that if the Underwriters purchase Common Stock in the open
market to reduce the selling group members' short position or to stabilize the
price of the Common Stock, they may reclaim the amount of the selling
concession from the selling group members who sold those shares of Common Stock
as part of the Offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company nor the Representatives make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor the Representatives make any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
The Underwriters and dealers may engage in passive market making
transactions in the shares of Common Stock in accordance with Rule 103 of
Regulation M promulgated by the Commission. In general, a passive market maker
may not bid for, or purchase, shares of Common Stock at a price that exceeds
the highest independent bid. In addition, the net daily purchases made by any
passive market maker generally may not exceed 30% of its average daily trading
volume in the Common Stock during a specified two month prior period, or 200
shares, whichever is greater. A passive market maker must identify passive
market making bids as such on the Nasdaq electronic inter-dealer reporting
system. Passive market making may stabilize or maintain the market price of the
Common Stock above independent market levels. Underwriters and dealers are not
required to engage in passive market making and may end passive market making
activities at any time.
Prior to the Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price for the Common Stock has
been determined by negotiations between the Company and the Representatives of
the Underwriters. Among the factors considered in such negotiations were
prevailing market and general economic conditions, the market capitalizations,
trading histories and stages of development of other traded companies that the
Company and the Representatives of the Underwriters believed to be comparable
to the Company, the results of operations of the Company in recent periods, the
current financial position of the Company, estimates of the business potential
of the Company and the present state of the Company's development and the
availability for sale in the market of a significant number of shares of Common
Stock. Additionally, consideration has been given to the general status of the
securities market, the market conditions for new issues of securities and the
demand for securities of comparable companies at the time the Offering was
made.
Application has been made for quotation of the Common Stock on Nasdaq.
86
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock to be issued by the Company
will be passed upon by Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A.,
Miami, Florida. Certain legal matters with respect to the Common Stock offered
hereby have been passed upon for the Underwriters by White & Case.
EXPERTS
The financial statements as of December 31, 1996 and 1995 and for each of
the three years in the period ended December 31, 1996 included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent certified public accountants, given on the authority of said
firm as experts in auditing and accounting.
AVAILABLE INFORMATION
The Company is not subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended. The company has filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement on Form S-1
(the "Registration Statement") under the Securities Act, with respect to the
offer and sale of Common Stock pursuant to this Prospectus. This Prospectus,
filed as a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement or the exhibits and
schedules thereto in accordance with the rules and regulations of the
Commission and reference is hereby made to such omitted information. Statements
made in this Prospectus concerning the contents of any contract, agreement or
other document filed as an exhibit to the Registration Statement are summaries
of the terms of such contracts, agreements or documents and are not necessarily
complete. Reference is made to each such exhibit for a more complete
description of the matters involved and such statements shall be deemed
qualified in their entirety by such reference. The Registration Statement and
the exhibits and schedules thereto filed with the Commission may be inspected,
without charge, and copies may be obtained at prescribed rates, at the public
reference facility maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. For further information pertaining to the
Common Stock offered by this Prospectus and the Company, reference is made to
the Registration Statement. The Registration Statement and other information
filed by the Company with the Commission are also available at the Commission's
World Wide Web site on the Internet at http:www.sec.gov.
The Company intends to furnish its shareholders with annual reports
containing audited financial statements certified by independent auditors and
quarterly reports containing unaudited financial statements for the first three
quarters of each fiscal year.
87
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
THE COMPANY'S FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants ................................. F-2
Consolidated Balance Sheets as of September 30, 1997 (unaudited) and December 31, 1996 F-3
and 1995 ...........................................................................
Consolidated Statements of Operations for the Nine Months Ended September 30, 1997 F-4
and 1996 (unaudited) and for the Years Ended December 31, 1996, 1995, and 1994 ......
Consolidated Statements of Changes in Stockholders' Equity F-5
for the Nine Months Ended September 30, 1997 (unaudited) and for the
Years Ended December 31, 1996, 1995, and 1994 .......................................
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1997 and F-6
1996 (unaudited) and for the Years Ended December 31, 1996, 1995, and 1994 .........
Notes to Consolidated Financial Statements .......................................... F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Republic Banking Corporation of Florida
The stock split described in Note 18 to the consolidated financial
statements has not been consummated at December 1, 1997. When it has been
consummated, we will be in a position to furnish the following report:
"In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of changes in stockholders'
equity and of cash flows present fairly, in all material respects, the
financial position of Republic Banking Corporation of Florida and its
subsidiary at December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles. These consolidated financial statements are the responsibility
of Republic's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion
expressed above."
PRICE WATERHOUSE LLP
Miami, Florida
February 21, 1997
F-2
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------------
1997 1996 1995
-------------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents:
Non-interest earning .................................... $ 56,113 $ 58,124 $ 53,360
Federal funds sold .................................... 42,103 71,056 41,054
----------- ----------- -----------
98,216 129,180 94,414
Interest earning deposits in other banks ............... 873 5,880 26,246
Held-to-maturity securities .............................. 229,803 162,310 158,411
Available-for-sale securities ........................... 155,185 168,894 161,673
Loans receivable, net .................................... 940,843 962,062 809,679
Premises and equipment, net .............................. 58,166 48,349 34,927
Customers' acceptance liability ........................ 3,842 4,289 6,620
Accrued interest receivable .............................. 11,532 12,159 12,339
Other real estate owned ................................. 2,043 2,411 3,247
Deferred taxes .......................................... 4,128 3,818 4,125
Other assets ............................................. 4,433 3,424 3,267
Goodwill and other intangibles ........................... 8,465 9,175 10,020
----------- ----------- -----------
Total assets .......................................... $1,517,529 $1,511,951 $1,324,968
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing .................................... $ 264,535 $ 263,523 $ 256,772
Interest bearing:
NOW and Money Market ................................. 166,986 183,930 194,459
Savings ................................................ 132,269 134,511 132,916
Time ................................................... 734,745 738,162 572,177
----------- ----------- -----------
1,298,535 1,320,126 1,156,324
Securities sold under repurchase agreements ............ 50,898 28,918 24,002
Other short-term borrowings .............................. 18,985 16,679 4,683
Acceptances outstanding ................................. 3,842 4,289 6,620
Accrued interest payable ................................. 2,405 2,427 2,459
Income taxes payable .................................... 731 1,746 2,386
Other liabilities ....................................... 3,378 3,803 3,724
----------- ----------- -----------
Total liabilities .................................... 1,378,774 1,377,988 1,200,198
----------- ----------- -----------
Commitments and contingencies (Notes 12 and 13) ......... -- -- --
----------- ----------- -----------
Minority interest in consolidated subsidiary ............ 9,605 9,270 8,630
----------- ----------- -----------
Stockholders' equity:
Common stock-authorized 20,000,000 shares of $0.50 par
value; 18,872,935 shares issued and outstanding in 1997
and 1996 (15,727,580 shares in 1995) .................. 9,437 9,437 7,864
Capital surplus ....................................... 77,221 77,221 59,444
Retained earnings ....................................... 42,077 37,785 48,530
Net unrealized gain on available-for-sale securities,
net of tax .......................................... 415 250 302
----------- ----------- -----------
Total stockholders' equity ........................... 129,150 124,693 116,140
----------- ----------- -----------
Total liabilities and stockholders' equity ............ $1,517,529 $1,511,951 $1,324,968
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-3
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
----------------------- -------------------------------------
1997 1996 1996 1995 1994
---------- ---------- ---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans ........................ $66,933 $59,030 $79,897 $70,077 $ 54,003
Investment securities:
Taxable interest ................................. 13,975 13,293 17,893 18,447 16,000
Tax exempt interest .............................. 1,480 1,363 1,874 2,340 3,844
Interest on deposits in other banks ............ 175 781 825 1,282 934
Interest on federal funds sold .................. 3,323 2,856 3,645 2,910 2,183
-------- ------- -------- -------- --------
Total interest income ........................... 85,886 77,323 104,134 95,056 76,964
-------- ------- -------- -------- --------
Interest expense:
Deposits .......................................... 35,786 30,399 41,282 37,062 23,630
Securities sold under repurchase agreements ...... 1,828 1,045 1,512 1,105 530
Other borrowings ................................. 425 318 455 244 162
-------- ------- -------- -------- --------
Total interest expense ........................ 38,039 31,762 43,249 38,411 24,322
-------- ------- -------- -------- --------
Net interest income .............................. 47,847 45,561 60,885 56,645 52,642
Provision for loan losses ........................ 3,604 1,778 2,381 890 2,500
-------- ------- -------- -------- --------
Net interest income after provision
for loan losses .............................. 44,243 43,783 58,504 55,755 50,142
-------- ------- -------- -------- --------
Non-interest income:
Service charges on deposit accounts ............... 9,037 9,754 12,960 12,722 12,769
Other charges, commissions and fees ............... 8,926 8,101 11,270 9,921 7,517
Gain (loss) on sale of securities ............... -- 1 1 (185) 3
-------- ------- -------- -------- --------
17,963 17,856 24,231 22,458 20,289
-------- ------- -------- -------- --------
Non-interest expenses:
Salaries and wages .............................. 15,870 16,334 21,664 21,638 19,753
Employee benefits ................................. 4,274 4,138 5,111 5,834 5,710
Occupancy expense ................................. 4,379 3,661 4,962 4,661 4,399
Furniture and equipment expense .................. 2,034 2,088 2,793 2,375 2,340
Other real estate owned expense .................. 236 149 111 478 763
Other ............................................. 13,006 13,975 18,376 15,035 13,491
-------- ------- -------- -------- --------
39,799 40,345 53,017 50,021 46,456
-------- ------- -------- -------- --------
Income before provision for income taxes ......... 22,407 21,294 29,718 28,192 23,975
Provision for income taxes ........................ 7,243 7,468 10,324 9,103 7,687
-------- ------- -------- -------- --------
Income before minority interest .................. 15,164 13,826 19,394 19,089 16,288
Minority interest ................................. (1,058) (961) (1,350) (1,330) (1,136)
-------- ------- -------- -------- --------
Net income ....................................... $14,106 $12,865 $18,044 $17,759 $ 15,152
======== ======= ======== ======== ========
Earnings per common share ........................ $ 0.75 $ 0.68 $ 0.96 $ 0.94 $ 0.80
======== ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-4
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------- UNREALIZED
SHARES GAIN (LOSS) ON TOTAL
ISSUED AND PAR CAPITAL RETAINED AVAILABLE-FOR-SALE STOCKHOLDERS'
OUTSTANDING VALUE SURPLUS EARNINGS SECURITIES, NET EQUITY
------------- -------- --------- ----------- -------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 ......... 15,728 $7,864 $59,444 $ 28,201 $ -- $ 95,509
Effect of adoption of SFAS 115 ...... -- -- -- -- 2,517 2,517
Cash dividend paid on
January 31, 1994 .................. -- -- -- (7,864) -- (7,864)
Net income ........................... -- -- -- 15,152 -- 15,152
Net change in unrealized loss on
available-for-sale securities,
net of tax ........................ -- -- -- -- (4,867) (4,867)
------- ------- -------- --------- -------- --------
Balance at December 31, 1994 ......... 15,728 7,864 59,444 35,489 (2,350) 100,447
Cash dividend ........................ -- -- -- (4,718) -- (4,718)
Net income ........................... -- -- -- 17,759 -- 17,759
Net change in unrealized loss on
available-for-sale securities,
net of tax ........................ -- -- -- -- 2,652 2,652
------- ------- -------- --------- -------- --------
Balance at December 31, 1995 ......... 15,728 7,864 59,444 48,530 302 116,140
Stock dividend ..................... 3,145 1,573 17,777 (19,350) -- --
Cash dividend ..................... -- -- -- (9,439) -- (9,439)
Net income ........................... -- -- -- 18,044 -- 18,044
Net change in unrealized gain on
available-for-sale securities,
net of tax ........................ -- -- -- -- (52) (52)
------- ------- -------- --------- -------- --------
Balance at December 31, 1996 ......... 18,873 9,437 77,221 37,785 250 124,693
Cash dividend ..................... -- -- -- (9,814) -- (9,814)
Net income (unaudited) ............... -- -- -- 14,106 -- 14,106
Net change in unrealized gain on
available-for-sale securities,
net of tax (unaudited) ............ -- -- -- -- 165 165
------- ------- -------- --------- -------- --------
Balance at September 30, 1997
(unaudited) ........................ 18,873 $9,437 $77,221 $ 42,077 $ 415 $129,150
======= ======= ======== ========= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-5
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
-------------------------- --------------------------------------
1997 1996 1996 1995 1994
------------- ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................. $ 14,106 $ 12,865 $ 18,044 $ 17,759 $ 15,152
---------- ---------- ---------- --------- ----------
Adjustments to reconcile net income to
net cash provided by operating activities:
Minority interest in
consolidated subsidiary .................. 1,058 961 1,350 1,330 1,136
Depreciation and amortization ............ 1,886 1,405 1,859 1,855 1,686
Investment (accretion) amortization, net ... (589) 51 (167) 75 1,942
Amortization of goodwill and
other intangibles ........................ 710 599 845 709 311
Provision for loan losses .................. 3,604 1,778 2,381 890 2,500
Deferred tax provision (benefit) ......... (421) 3 342 (970) 737
Other .................................... (247) 271 1,192 853 360
Changes in assets and liabilities, net of
effect of acquisition:
Increase (decrease) in unearned
income ................................. (1,074) (251) 495 315 (590)
Decrease (increase) in accrued interest
receivable ........................... 627 1,247 180 113 (1,830)
(Increase) decrease in other assets ...... (1,009) 107 (923) 1,588 (1,165)
Decrease in income taxes payable ......... (1,015) (1,327) (642) (936) (859)
(Decrease) increase in accrued
interest payable ..................... (22) (348) (32) 173 156
Increase (decrease) in other liabilities (425) 3,259 729 (1,097) (2,791)
---------- ---------- ---------- --------- ----------
Total adjustments ........................ 3,083 7,755 7,609 4,898 1,593
---------- ---------- ---------- --------- ----------
Net cash provided by
operating activities .................. 17,189 20,620 25,653 22,657 16,745
---------- ---------- ---------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in interest earning
deposits in other banks .................. 5,007 25,322 20,366 (14,777) 14,998
Proceeds from sales or redemptions of
held-to-maturity securities ............... 35,692 44,496 56,955 58,131 43,575
Purchase of held-to-maturity securities ... (102,824) (32,862) (59,159) (23,999) (143,509)
Proceeds from sales or redemptions of
available-for- sale securities ............ 46,749 36,789 67,000 93,025 87,687
Purchase of available-for-sale securities ... (32,523) (75,842) (75,842) (52,943) (68,738)
Net loan (originations) pay downs ......... 18,639 (89,687) (155,689) (95,022) (29,884)
Investment in premises and equipment ...... (11,313) (12,178) (16,475) (8,097) (1,919)
Proceeds from sale of other real estate
owned and other ........................... 275 547 1,388 2,853 2,868
Net cash and cash equivalents received
in acquisition ........................... -- -- -- 12,135 --
---------- ---------- ---------- --------- ----------
Net cash used in investing activities ... (40,298) (103,415) (161,456) (28,694) (94,922)
---------- ---------- ---------- --------- ----------
</TABLE>
(CONTINUED)
F-6
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
--------------------------- --------------------------------------------
1997 1996 1996 1995 1994
------------- ----------- ------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in demand deposits,
NOW, Money Market and savings
accounts .................................... $ (18,174) $ 13,757 $ (2,183) $ (46,791) $ (17,384)
Net increase (decrease) in time deposits ...... (3,417) 83,883 165,985 68,269 78,885
Net increase in securities sold under
repurchase agreements ........................ 21,980 12,160 4,916 611 2,307
Net increase (decrease) in
other borrowings ........................... 2,306 12,269 11,996 (2,174) (3,164)
Dividend paid by subsidiary to
minority interest ........................... (736) (706) (706) (352) (589)
Dividends paid ................................. (9,814) (9,439) (9,439) (4,718) (7,864)
--------- -------- -------- --------- ---------
Net cash provided by (used in)
financing activities ..................... (7,855) 111,924 170,569 14,845 52,191
--------- -------- -------- --------- ---------
Net increase (decrease) in cash and cash
equivalents .................................... (30,964) 29,129 34,766 8,808 (25,986)
Cash and cash equivalents at beginning
of the period ................................. 129,180 94,414 94,414 85,606 111,592
--------- -------- -------- --------- ---------
Cash and cash equivalents at end
of the period ................................. $ 98,216 $123,543 $129,180 $ 94,414 $ 85,606
========= ======== ======== ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest .................................... $ 38,061 $ 32,110 $ 41,250 $ 38,042 $ 24,166
========= ======== ======== ========= =========
Income taxes ................................. $ 8,750 $ 8,232 $ 10,080 $ 8,457 $ 7,694
========= ======== ======== ========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING ACTIVITIES:
Transfers from loans to other real
estate owned ................................. $ 50 $ 407 $ 430 $ 3,059 $ 2,413
========= ======== ======== ========= =========
Transfers from held-to-maturity securities to
available-for-sale securities ............... $ -- $ -- $ -- $ 33,024 $ --
========= ======== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-7
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of Republic Banking Corporation of
Florida (the "Company") include the accounts of the Company and its 93.1% owned
subsidiary, Republic National Bank of Miami (the "Bank")(See Note 18). The Bank
is a commercial bank with branches located in Miami-Dade and Broward counties,
Florida. The accounting and reporting policies of the Company conform to
practices within the banking industry and generally accepted accounting
principles.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The unaudited consolidated financial statements as of and for the nine
months ended September 30, 1997 and 1996 have not been audited but, in the
opinion of management, contain all adjustments (consisting of normal recurring
adjustments) necessary for a fair statement of the results for the interim
periods.
A summary of the Company's more significant accounting and reporting
policies applied in the preparation of the accompanying financial statements
follows.
PRINCIPLES OF CONSOLIDATION
All significant intercompany accounts and transactions are eliminated in
the consolidation.
INVESTMENT SECURITIES AND DEPOSITS WITH BANKS
The Company classifies its securities as either held-to-maturity or
available-for-sale with distinct accounting treatment for each classification.
Investments available-for-sale are reported at fair value, with unrealized net
gains and losses, net of the tax effect, reported as a separate component of
stockholders' equity. Securities held-to-maturity are recorded at cost,
adjusted for amortization of premiums and accretion of discounts.
Gains and losses on securities sales or redemptions are accounted for by
the specific identification method and are included in other operating income
when securities are sold.
Interest earning deposits in other banks mature within one year.
LOANS RECEIVABLE
Loans are stated at the amount of unpaid principal, reduced by unearned
income and allowance for loan losses. Unearned income on installment loans is
recognized over the term of the loans. Accrual of interest is discontinued on a
loan when management believes that the borrower's financial condition is such
that collection of interest is unlikely. When a loan is placed on non-accrual
status, any interest accrued in the current period, but not collected, is
reversed against interest income; prior year's
F-8
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
uncollected interest is charged against the allowance for loan losses.
Collection of interest while the loan is on non-accrual status is generally
recognized on a cash basis unless collection of principal is doubtful, in which
case, cash collections are applied to unpaid principal.
Non-refundable loan origination fees and certain costs associated with the
loan origination process are deferred and amortized as an adjustment to the
yield of the loans over the term of those loans.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is an amount that management believes will
be adequate to absorb possible loan losses on existing loans that may become
uncollectible. The adequacy of the allowance is based on ongoing evaluations of
the collectibility of loans and prior loan loss experience. The evaluations
take into consideration such factors as changes in the nature and volume of the
loan portfolio, overall portfolio quality, review of specific problem loans and
collateral and current economic conditions that may affect the borrowers'
ability to pay.
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for loan
losses when management believes that the collectibility of the principal is
unlikely. Recoveries on amounts previously charged off are credited to the
allowance.
Management, considering current information and events regarding the
borrowers' ability to repay their obligations, considers a loan to be impaired
when it is probable that the Bank will be unable to collect all amounts due
according to the contractual terms of the loan. When a loan is considered to be
impaired, the amount of the impairment is measured based on the present value
of expected future cash flows discounted at the loan's effective interest rate.
Impairment losses are included in the allowance for loan losses through a
charge to the provision. Cash receipts on impaired loans on which collection of
principal is doubtful are applied to reduce the principal amount of such loans
until the principal has been recovered, and are thereafter recognized as
interest income.
OTHER REAL ESTATE OWNED
Real estate acquired through foreclosure or through deed in lieu of
foreclosure is reflected in the financial statements at the lower of cost or
estimated net realizable value. Real estate in which the Bank has acquired
physical possession but no legal title is also classified as other real estate
owned. Upon classification as other real estate, the excess of the unpaid
balance of the loans over the fair value of the collateral is charged to the
allowance for loan losses. Net expenses of maintaining properties, subsequent
writedowns due to changes in market conditions and gains or losses on
disposition are included in other operating expenses.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation is provided principally on the straight-line
basis over the estimated useful life of each type
F-9
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
of asset, usually 5 to 40 years. Leasehold improvements are amortized over the
life of the respective leases or the estimated useful life of the asset,
generally between 5 and 40 years, whichever is shorter.
GOODWILL AND OTHER INTANGIBLES
Intangible assets consist of the excess of cost over the fair value of the
net assets of businesses acquired, which excess cost is allocated between
goodwill and core deposit premium. Goodwill is amortized on a straight-line
basis over fifteen years. Core deposit premiums are amortized over varying
useful lives ranging from seven to ten years. At December 31, 1996 and 1995,
intangible assets amount to $14,984,000 and $14,840,000, respectively
($14,984,000 at September 30, 1997 (unaudited)). Accumulated amortization of
intangible assets was $5,809,000 and $4,820,000 as of December 31, 1996 and
1995, respectively, and $6,519,000 at September 30, 1997 (unaudited).
INCOME TAXES
The Company uses the asset and liability method of accounting for income
taxes. The asset and liability approach requires the recognition of deferred
tax assets and liabilities utilizing the currently expected tax rate to be
applied when the temporary differences reverse. Income tax expense is
recognized on the periodic change in the deferred tax asset and liability
amounts at the current statutory rates. Changes in the value of deferred tax
assets and liabilities resulting from a change in the expected tax rate are
recognized in the year when the tax rate change is enacted. The deferred tax
asset is reduced by a valuation allowance when, based on all available
evidence, it is more likely than not that some portion of the deferred asset
will not be realized.
The Company files consolidated tax returns with its subsidiary.
CASH AND CASH EQUIVALENTS
For the purpose of reporting cash flows, cash and cash equivalents include
cash on hand, demand balances due from banks and other cash equivalents having
an initial maturity of three months or less.
EARNINGS PER SHARE
Earnings per common share have been computed based on the weighted average
number of shares outstanding after giving retroactive effect to the 2.5 for 1
stock split (see Note 18) and the 20% common stock dividend in January 1996.
The weighted average number of shares was 18,872,935 for all periods for which
earnings per share are presented.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities" and in
December 1996, the FASB issued a related Statement of Financial Accounting
Standards No. 127, "Deferral of the Effective Date of Certain Provisions of
FASB
F-10
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
No. 125" (collectively, "Statement No. 125"). Statement No. 125 provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishment of liabilities based on a financial components
approach that focuses on control. Portions of Statement No. 125 were effective
for transactions entered into after December 31, 1996 with the remaining
portions effective for transactions entered into after December 31, 1997. The
impact of adopting Statement No. 125 has not been nor is it currently expected
to be material to the Company's financial position or results of operations.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, "Earnings per Share" ("Statement No. 128"). Statement No.
128 specifies the computation, presentation and disclosure requirements for
earnings per share for public companies. It replaces primary earnings per share
and fully diluted earnings per share with basic earnings per share and diluted
earnings per share and is effective for reporting periods ending after December
15, 1997. For the Company, the computation for basic earnings per share is
similar to the primary earnings per share currently presented by the Company.
The calculation of diluted earnings per share will first apply to the Company
for the financial statements upon the effective date of the Company's 1998
Stock Option Plan and the grant of options thereunder (See Note 18). The impact
of adopting Statement No. 128 will depend upon the number of options
outstanding under the Plan at any time.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 129, "Disclosure of Information about Capital Structure"
("Statement No. 129"). Statement No. 129 continues previous requirements to
disclose certain information about an entity's capital structure. The Company
currently complies with the disclosure requirements of Statement No. 129.
RECLASSIFICATIONS
Certain amounts in 1995 and 1994 have been reclassified to conform to the
1996 financial statement presentation.
2. Acquisition
On June 2, 1995, the Company acquired all of the outstanding capital stock
of The Plaza Bank of Miami ("Plaza") for approximately $12,850,000 in cash and
$1,898,000 in loans retained by the seller. The acquisition was accounted for
using the purchase method. Accordingly, the purchase price was allocated to
assets and liabilities acquired based on their estimated fair values. Goodwill
and core deposit premiums of approximately $7,300,000 and $2,000,000,
respectively, representing the excess of cost over the fair value of net assets
acquired, were recorded as a result of this transaction. Results of operations
of Plaza have been included in the statement of operations since the date of
acquisition.
F-11
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
2. ACQUISITION--(CONTINUED)
A summary of the fair values of the net assets acquired is as follows (in
thousands):
<TABLE>
<S> <C>
Cash ...................................................... $ 5,284
Federal funds sold .......................................... 19,700
Investment securities ....................................... 30,375
Loans, net ................................................ 65,408
Bank premises and equipment ................................. 1,384
Accrued interest receivable ................................. 1,064
Other assets ................................................ 1,224
---------
124,439
---------
Deposits ................................................... 105,731
Securities sold under agreements to repurchase ............ 7,975
Accrued interest payable .................................... 196
Taxes payable ............................................. 3,300
Other liabilities .......................................... 1,820
---------
119,022
---------
Fair value of net assets acquired ........................... 5,417
Purchase price ............................................. 14,748
---------
Excess of cost over fair value of net assets acquired ...... $ 9,331
=========
</TABLE>
F-12
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
3. Investment Securities
Carrying amounts and estimated fair values of held-to-maturity securities
are summarized as follows (in thousands):
<TABLE>
<CAPTION>
GROSS UNREALIZED ESTIMATED
AMORTIZED ---------------------- FAIR
COST GAINS LOSSES VALUE
----------- -------- ----------- ----------
<S> <C> <C> <C> <C>
SEPTEMBER 30, 1997 (UNAUDITED)
U.S. Treasury securities ............... $ 72,445 $ 502 $ -- $ 72,947
Securities of other U.S. agencies and
corporations ........................... 122,757 195 (62) 122,890
Securities issued by states and political
subdivisions ........................... 32,782 744 -- 33,526
Other debt securities .................. 600 -- -- 600
--------- ------- ------- ---------
Total debt securities .................. 228,584 1,441 (62) 229,963
Federal Reserve Bank stock ............ 1,219 -- -- 1,219
--------- ------- ------- ---------
Total securities ..................... $229,803 $1,441 $ (62) $231,182
========= ======= ======= =========
DECEMBER 31, 1996
U.S. Treasury securities ............... $ 85,858 $ 952 $ (13) $ 86,797
Securities of other U.S. agencies and
corporations ........................... 38,738 16 (196) 38,558
Securities issued by states and political
subdivisions ........................... 35,895 597 (4) 36,488
Other debt securities .................. 600 -- -- 600
--------- ------- ------- ---------
Total debt securities .................. 161,091 1,565 (213) 162,443
Federal Reserve Bank stock ............ 1,219 -- -- 1,219
--------- ------- ------- ---------
Total securities ..................... $162,310 $1,565 $ (213) $163,662
========= ======= ======= =========
DECEMBER 31, 1995
U.S. Treasury securities ............... $ 84,229 $2,550 $ -- $ 86,779
Securities of other U.S. agencies and
corporations ........................... 15,998 43 (136) 15,905
Securities issued by states and political
subdivisions ........................... 30,909 895 (10) 31,794
Other debt securities .................. 26,676 28 -- 26,704
--------- ------- ------- ---------
Total debt securities .................. 157,812 3,516 (146) 161,182
Federal Reserve Bank stock ............ 599 -- -- 599
--------- ------- ------- ---------
Total securities ..................... $158,411 $3,516 $ (146) $161,781
========= ======= ======= =========
</TABLE>
F-13
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
3. INVESTMENT SECURITIES--(CONTINUED)
Amortized cost and estimated fair values of available-for-sale securities are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
GROSS UNREALIZED ESTIMATED
AMORTIZED ------------------ FAIR
COST GAINS LOSSES VALUE
----------- ------- -------- ----------
<S> <C> <C> <C> <C>
SEPTEMBER 30, 1997 (UNAUDITED)
U.S. Treasury securities .............................. $109,020 $535 $ -- $109,555
Securities of other U.S. agencies and corporations . 45,437 263 (70) 45,630
--------- ----- ------ ---------
Total securities ....................................... $154,457 $798 $ (70) $155,185
========= ===== ====== =========
DECEMBER 31, 1996
U.S. Treasury securities .............................. $117,238 $169 $ (23) $117,384
Securities of other U.S. agencies and corporations . 51,218 430 (138) 51,510
--------- ----- ------ ---------
Total securities ....................................... $168,456 $599 $(161) $168,894
========= ===== ====== =========
DECEMBER 31, 1995
U.S. Treasury securities .............................. $105,867 $293 $(103) $106,057
Securities of other U.S. agencies and corporations . 55,277 403 (64) 55,616
--------- ----- ------ ---------
Total securities ....................................... $161,144 $696 $(167) $161,673
========= ===== ====== =========
</TABLE>
At December 31, 1996, the scheduled maturity of held-to-maturity and
available-for-sale securities was as follows (in thousands):
<TABLE>
<CAPTION>
HELD-TO-MATURITY AVAILABLE-FOR-SALE
------------------------- ------------------------
ESTIMATED ESTIMATED
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Within one year ......... $ 55,438 $ 55,763 $ 41,043 $ 41,025
One to five years ...... 77,447 77,998 120,537 121,003
Five to ten years ...... 9,242 9,408 -- --
Over ten years ......... 20,183 20,493 6,876 6,866
--------- --------- --------- ---------
Total .................. $162,310 $163,662 $168,456 $168,894
========= ========= ========= =========
</TABLE>
F-14
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
3. INVESTMENT SECURITIES--(CONTINUED)
The following sets forth information concerning sales of
available-for-sale securities, for the periods indicated and calls of
held-to-maturity securities (in thousands):
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS
ENDED FOR THE YEAR ENDED DECEMBER
SEPTEMBER 30, 31,
----------------- -----------------------------
1997 1996 1996 1995 1994
-------- ------ ------ --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES
Amortized cost ............ $5,000 $ -- $ -- $51,889 $22,698
Proceeds .................. $5,000 $ -- $ -- $51,701 $22,701
Gross realized gains ...... $ -- $ -- $ -- $ 22 $ 89
Gross realized losses ...... $ -- $ -- $ -- $ 210 $ 86
HELD-TO-MATURITY SECURITIES
Amortized cost ............ $4,515 $240 $240 $ 9,936 $ --
Proceeds .................. $4,515 $241 $241 $ 9,939 $ --
Gross realized gains ...... $ -- $ 1 $ 1 $ 3 $ --
Gross realized losses ...... $ -- $ -- $ -- $ -- $ --
</TABLE>
Held-to-maturity securities with an amortized cost of $33,024,000 and
market value of $33,131,000 were transferred to the available for sale
portfolio on December 19, 1995 in accordance with a one time accounting
provision established by the FASB.
The Company has only limited involvement with derivative financial
instruments. The Company has one U.S. government agency security ("inverse
floater") with an aggregate cost of $25,000,000 and estimated fair value of
$25,187,500, $25,375,000 and $25,187,000, respectively, at September 30, 1997
(unaudited), December 31, 1996 and 1995, respectively. This security, with
stated maturity in 1998, is classified as available-for-sale and recorded at
its estimated fair value. The interest rate earned by the Company on this
security (7.17% at September 30, 1997 (unaudited), 6.37% at December 31, 1996
and 4.85% at December 31, 1995) is calculated as the difference between a
stated rate ("cap"), 12.75% at September 30, 1997 (unaudited), 11.75% at
December 31, 1996, and 10.75% at December 31, 1995, and the average federal
funds rate.
Securities with an aggregate cost of approximately $92,047,000,
$67,344,000 and $72,242,000 at September 30, 1997 (unaudited) and December 31,
1996 and 1995 were pledged as collateral for public depositors or subject to
sales under repurchase agreements.
F-15
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
4. Loans and Allowance for Loan Losses
Major classifications of loans are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, --------------------------
1997 1996 1995
-------------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Commercial ....................................... $ 309,583 $309,238 $ 310,873
Commercial real estate and construction ......... 303,391 264,574 215,844
International .................................... 79,794 122,450 71,290
Residential first mortgages ..................... 150,125 133,005 120,539
Residential equity lines ........................ 17,698 19,938 17,458
Installment ....................................... 64,884 83,331 85,226
Overdrafts ....................................... 3,845 3,722 3,349
Bankers' acceptances .............................. 26,862 41,586 220
--------- --------- ---------
956,182 977,844 824,799
Unearned income ................................. (3,130) (4,204) (3,709)
--------- --------- ---------
953,052 973,640 821,090
Allowance for loan losses and transfer risk ...... (12,209) (11,578) (11,411)
--------- --------- ---------
Loans, net ....................................... $ 940,843 $962,062 $ 809,679
========= ========= =========
</TABLE>
Real estate mortgage loans serviced for others, not included in the above
amounts, were approximately $24,300,000 and $29,000,000 in 1996 and 1995,
respectively ($21,478,000 at September 30, 1997 (unaudited)).
The following table sets forth, at the dates indicated, the aggregate
amount of the Company's cross-border outstandings, including foreign bonds, due
from bank accounts and interest earning deposits with other banks (in
thousands).
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------------
1997 1996 1995
-------------- ---------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Brazil ......... $ 32,000 $ 30,000 $ 19,000
Peru ............ 15,000 21,000 8,000
Ecuador ......... 12,000 13,000 13,000
Guatemala ...... 9,000 11,000 13,000
Panama ......... 8,000 11,000 4,000
Colombia ...... 4,000 12,000 8,000
Other ......... 49,000 70,000 57,000
--------- --------- ---------
$129,000 $168,000 $122,000
========= ========= =========
</TABLE>
F-16
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
4. LOANS AND ALLOWANCE FOR LOAN LOSSES--(CONTINUED)
Changes in the allowance for loan losses are as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED
SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
----------------------- -------------------------------------
1997 1996 1996 1995 1994
---------- ---------- ---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period ...... $11,578 $11,411 $11,411 $11,680 $ 11,563
Allowance from acquired bank ......... -- -- -- 701 --
Provision charged to operations ...... 3,604 1,778 2,381 890 2,500
-------- -------- -------- -------- --------
15,182 13,189 13,792 13,271 14,063
-------- -------- -------- -------- --------
Loans charged-off ..................... (4,030) (2,238) (3,241) (2,583) (3,293)
Less recoveries ..................... 1,057 819 1,027 723 910
-------- -------- -------- -------- --------
Net charge-offs ..................... (2,973) (1,419) (2,214) (1,860) (2,383)
-------- -------- -------- -------- --------
Balance at end of period ............ $12,209 $11,770 $11,578 $11,411 $ 11,680
======== ======== ======== ======== ========
Loans not accruing interest at end
of period ........................... $14,058 $ 1,459 $ 1,563 $ 4,066 $ 4,564
======== ======== ======== ======== ========
</TABLE>
Had the Company recorded interest on non-accrual loans, interest income on
loans would have increased by approximately $226,000, $350,000 and $700,000 in
1996, 1995 and 1994, respectively, and by $237,000 and $256,000 for the nine
month periods ended September 30, 1997 and 1996 (unaudited), respectively.
5. Premises and Equipment
Major classifications of premises and equipment are summarized below (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ---------------------------
1997 1996 1995
-------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Bank buildings ....................................... $ 44,155 $ 13,759 $ 14,875
Leasehold improvements .............................. 5,308 3,920 3,645
Leasehold acquisition costs ........................... 1,284 1,228 1,228
Furniture and equipment .............................. 19,466 16,894 16,154
Construction in progress .............................. 108 22,844 8,209
--------- --------- ---------
70,321 58,645 44,111
Less--accumulated depreciation and amortization ...... (24,030) (22,184) (21,092)
--------- --------- ---------
46,291 36,461 23,019
Land ................................................ 11,875 11,888 11,908
--------- --------- ---------
Net premises and equipment ........................... $ 58,166 $ 48,349 $ 34,927
========= ========= =========
</TABLE>
F-17
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
5. PREMISES AND EQUIPMENT--(CONTINUED)
During 1997, the Bank finalized construction of its new headquarters and
office building in Coral Gables, Florida. The Company capitalized interest
costs of approximately $773,000 in 1996 and $255,000 in 1995 with respect to
this construction project. Capitalized interest for the nine months ended
September 30, 1997 and 1996 (unaudited) amounted to $390,000 and $520,000,
respectively.
The Company leases facilities for several branch offices, certain land and
equipment under operating leases from unrelated parties. Net rent expense was
approximately $2,172,000, $2,064,000 and $1,836,000 for 1996, 1995 and 1994,
respectively, and $1,746,000 and $1,569,000 for the nine months ended September
30, 1997 and 1996 (unaudited), respectively. The minimum rental commitments
over the lives of the leases are as follows at December 31, 1996:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
- ------------------------- ---------------
(IN THOUSANDS)
<S> <C>
1997 ............ $ 1,982
1998 ............ 1,850
1999 ............ 1,712
2000 ............ 1,071
2001 ............ 640
Thereafter ...... 14,602
--------
Total ......... $21,857
========
</TABLE>
Beginning in 1997, the Company leases office space in its office building
to unrelated parties. Future minimum lease payments receivable under these
leases are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
- ------------------------- ------------
(UNAUDITED)
<S> <C>
1997 ............ $ 502
1998 ............ 1,300
1999 ............ 1,306
2000 ............ 1,312
2001 ............ 1,318
Thereafter ...... 6,492
--------
Total ......... $12,038
========
</TABLE>
6. Deposits
At September 30, 1997 and December 31, 1996 and 1995, time deposits
greater than $100,000 totalled $282,195,000 (unaudited), $371,962,000 and
$245,319,000, respectively; the average interest rate on these time deposits
was approximately 5.4% (unaudited), 5.3% and 5.3% for the same periods. The
majority of time deposits mature within one year. Deposits held from related
financial institutions amounted to approximately $12,587,000 (unaudited),
$69,018,000 and $7,214,000 at September 30, 1997, December 31, 1996 and 1995,
respectively.
F-18
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
7. Short-Term Borrowings
Securities sold under repurchase agreements are primarily used to
accommodate commercial deposit customers. Funds generated are principally
placed in money market investments. The following sets forth information
concerning repurchase agreements for the periods indicated (in thousands):
<TABLE>
<CAPTION>
AS OF AND FOR THE NINE
MONTHS ENDED AS OF AND FOR THE
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------------- ------------------------------------------
1997 1996 1996 1995 1994
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Maximum amount of outstanding
agreements at any month-end during
the period ........................ $ 58,088 $ 36,162 $ 42,200 $ 31,256 $ 19,034
Average amount outstanding during the
period .............................. 51,168 29,849 32,574 21,449 14,865
Weighted average interest rate for the
period .............................. 4.78% 4.68% 4.64% 5.15% 3.60%
</TABLE>
Other short term borrowings consist of U.S. Treasury tax and loan notes
("TT&L Notes") and Federal funds purchased. The maximum amount outstanding of
TT&L Notes at any month end was $14,457,000 in 1997 (unaudited), $9,900,000 in
1996 and $10,405,000 in 1995. The average balance outstanding was $6,824,000 in
1997 (unaudited), $4,432,000 in 1996 and $4,883,000 in 1995. The average
interest rate was 5.61% in 1997 (unaudited), 4.47% in 1996 and 5.00% in 1995.
The maximum outstanding Federal funds purchased at any month end was $5,000,000
in 1997 (unaudited) and $12,000,000 in 1996 (none in 1995). The average
interest rate was 4.15% in 1997 (unaudited) and 5.26% in 1996.
8. Income Taxes
The components of the provision for income taxes are as follows (in
thousands):
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED FOR THE YEAR ENDED DECEMBER
SEPTEMBER 30, 31,
------------------- ------------------------------
1997 1996 1996 1995 1994
-------- -------- --------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Currently payable
Federal .............................. $6,772 $7,002 $ 9,326 $8,619 $6,193
State ................................. 713 492 656 935 689
Deferred provision (benefit) ......... (242) (26) 342 (451) 805
------ ------ -------- ------ -------
Total provision for income taxes ...... $7,243 $7,468 $10,324 $9,103 $7,687
====== ====== ======== ====== =======
</TABLE>
F-19
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
8. INCOME TAXES--(CONTINUED)
A reconciliation of income taxes to statutory rates is as follows (in
thousands):
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED
SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
------------------------------------- -----------------------------------------------------------
1997 1996 1996 1995 1994
------------------ ------------------ ------------------- ------------------ --------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
-------- --------- -------- --------- --------- --------- -------- --------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tax at Federal
statutory rate ............ $7,842 35% $7,453 35% $10,413 35% $9,867 35% $ 8,391 35%
Tax exempt income ......... (487) (2) (444) (2) (653) (2) (791) (3) (1,329) (5.5)
State income tax, less effect
on Federal tax ............ 474 2 449 2 651 2 661 2 528 2.2
Other ..................... (586) (3) 10 -- (87) -- (634) (2) 97 .3
------ ---- ------ ---- ------- ---- ------ ---- -------- -----
$7,243 32% $7,468 35% $10,324 35% $9,103 32% $ 7,687 32%
====== ==== ====== ==== ======= ==== ====== ==== ======== =====
</TABLE>
The components of the net deferred income tax asset are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------------
1997 1996 1995
-------------- -------- -------
(UNAUDITED)
<S> <C> <C> <C>
Allowance for loan losses ........................... $4,323 $4,083 $4,015
Loan origination fees .............................. 69 212 555
Self-insurance reserve .............................. 76 112 252
Other real estate losses ........................... 93 93 426
Deferred compensation .............................. 79 96 118
Other ................................................ 917 847 291
------- ------- -------
Gross deferred tax assets ........................... 5,557 5,443 5,657
------- ------- -------
Depreciation ....................................... 949 1,302 1,185
Unrealized gain--available-for-sale securities ...... 280 169 204
Pension ............................................. 122 86 67
FDIC prepayment .................................... -- -- 54
Other ................................................ 78 68 22
------- ------- -------
Gross deferred tax liabilities ..................... 1,429 1,625 1,532
------- ------- -------
Net deferred tax asset .............................. $4,128 $3,818 $4,125
======= ======= =======
</TABLE>
Based on available information, management considers that the net deferred
tax asset at December 31, 1996 will be realized; therefore, no valuation
allowance has been established.
Federal income tax returns for the years 1985 through 1988, and 1990
through 1992, are currently being examined. Management believes that income
taxes for those years and subsequent years have been adequately provided for.
F-20
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
9. Stockholders' Equity
In January 1996, the Company declared a 20% stock dividend to stockholders
of record as of December 31, 1995. As a result, 3,145,355 shares (post stock
split shares--see Note 18) of common stock were issued.
Cash dividends paid amounted to $9,439,000 and $4,718,000 in 1996 and
1995, respectively. A cash dividend was declared on January 16, 1997 to
shareholders of record on December 31, 1996 and amounted to $9,814,000.
See also Note 18.
10. Pension Plan
The Bank has a non-contributory defined benefit pension plan covering
substantially all full time employees. The plan benefits are based on years of
service and the employees highest average compensation over a consecutive five
year period. Retirement plan expense is computed using the actuarial unit
credit method. The Company's funding policy is to contribute no less than the
minimum required by ERISA and no more than the maximum allowed by the Internal
Revenue Service as a deduction for the year.
The following table sets forth the plan status as of year end:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of:
Accumulated benefit obligation including vested benefits of
$10,744 in 1996 and $9,858 in 1995 ........................ $11,306 $ 10,711
======== ========
Projected benefit obligation .............................. $14,537 $ 13,743
Plan assets at fair value ................................. 12,216 11,661
-------- --------
Projected benefit obligation in excess of plan assets ...... 2,321 2,082
Unrecognized prior service cost ........................... 768 623
Unrecognized net transition liability ..................... (171) (205)
Unrecognized net actuarial loss ........................... (3,142) (2,675)
-------- --------
Net prepaid pension cost ................................. $ (224) $ (175)
======== ========
</TABLE>
Computational assumptions in determining the projected benefit obligation
were as follows:
<TABLE>
<CAPTION>
1996 1995
------ -----
<S> <C> <C>
Weighted average discount rate ............... 7.5% 7.0%
Rate of increase in compensation levels ...... 4.0% 4.0%
</TABLE>
F-21
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
10. PENSION PLAN--(CONTINUED)
Components of pension cost included in employee benefits were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
---------------------
1996 1995
-------- ----------
(IN THOUSANDS)
<S> <C> <C>
Service cost-benefits earned during the period ...... $1,262 $ 1,294
Interest cost on projected benefit obligation ......... 944 918
Amortization of unrecognized prior service cost ...... (82) (62)
Actual return on plan assets ........................ (428) (1,127)
Other amortization .................................... 199 189
Deferred net asset (loss) gain ........................ (551) 348
------ --------
Net periodic pension cost ........................... $1,344 $ 1,560
====== ========
</TABLE>
Computational assumptions used in determining net periodic pension cost
were as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Weighted average discount rate .............................. 7.0% 8.0%
Rate of increase in compensation levels ..................... 4.0% 5.0%
Expected long term rate of return on plan assets ............ 8.5% 8.5%
Amortization period on unrecognized prior service cost ...... 11 years 11 years
</TABLE>
11. Regulatory Matters
The Bank is subject to certain restrictions on the amount of dividends
that it may declare without prior regulatory approval. At December 31, 1996,
approximately $25,100,000 ($28,000,000 at September 30, 1997 (unaudited)) of
retained earnings were available for dividend declaration without prior
regulatory approval.
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken, could have a direct
material effect on the Bank's financial statements. The regulations require the
Bank to meet specific capital adequacy guidelines that involve quantitative
measures of the Bank's assets, liabilities, and certain off-balance sheet items
as calculated under regulatory accounting practices. The Bank's capital
classification is also subject to qualitative judgments by the regulators about
components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of Total and Tier I
capital to risk-weighted assets, and of Tier I capital to average assets.
Management believes, as of December 31, 1996, that the Bank meets all capital
adequacy requirements to which it is subject.
As of December 31, 1996, the most recent notification from the Bank's
regulators categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. To be
F-22
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
11. REGULATORY MATTERS--(CONTINUED)
categorized as well capitalized the Bank must maintain minimum total risk
based, Tier I risk based, and Tier I leverage ratios as set forth in the table
below. There are no conditions or events since that notification that
management believes have changed the Bank's category.
The Bank's capital amounts and ratios are presented in the following table
(dollars in thousands).
<TABLE>
<CAPTION>
TO BE WELL
REQUIRED FOR CAPITALIZED UNDER
CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
-------------------- ------------------- ------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
---------- ------- --------- ------- --------- ------
As of September 30, 1997 (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Total capital ratio ............ $141,321 15.4% $73,449 8.0% $91,811 10.0%
========= ====== ======== ==== ======== ======
Tier I capital ratio ............ 129,844 14.1 36,724 4.0 55,086 6.0
========= ====== ======== ==== ======== ======
Tier I leverage ratio ............ 129,844 8.5 45,731 3.0 76,218 5.0
========= ====== ======== ==== ======== ======
As of December 31, 1996
Total capital ratio ............ 135,136 15.7 68,989 8.0 86,236 10.0
========= ====== ======== ==== ======== ======
Tier I capital ratio ............ 124,356 14.4 34,494 4.0 51,742 6.0
========= ====== ======== ==== ======== ======
Tier I leverage ratio ............ 124,356 8.5 43,832 3.0 73,042 5.0
========= ====== ======== ==== ======== ======
As of December 31, 1995
Total capital ratio ............ 124,694 15.0 66,593 8.0 83,242 10.0
========= ====== ======== ==== ======== ======
Tier I capital ratio ............ 114,277 13.8 33,296 4.0 49,945 6.0
========= ====== ======== ==== ======== ======
Tier I leverage ratio ............ 114,277 8.8 39,076 3.0 65,127 5.0
========= ====== ======== ==== ======== ======
</TABLE>
12. Contingencies
The Company maintains a self-funded medical reimbursement plan covering
employees and their eligible dependents. Employees contribute towards a portion
of the cost of dependent coverage. The plan covers reimbursement of eligible
medical and dental expenses up to $1,000,000 over the life of the eligible
participant. The Company maintains an insurance policy that limits loss per
specific participant per year to $100,000. In addition, the Company maintains a
policy that limits the aggregate loss within a plan year to a variable amount
based on the number of participants in the plan. At December 31, 1996, this
aggregate annual stop loss level was approximately $2,700,000. The Company had
accrued approximately $493,000, $593,000 and $835,000 at September 30, 1997
(unaudited) and December 31, 1996 and 1995 for estimated claims which were
incurred as of those dates but not yet paid.
The Bank is a defendant in several legal actions arising from its normal
business activities. Legal counsel and management believe that the ultimate
liability, if any, resulting from these legal actions will not materially
affect the Company's financial position or results of operations.
F-23
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
13. Off-Balance Sheet Risk
In the normal course of business, the Bank engages in off-balance sheet
activities in order to meet the financial needs of its customers. These
activities include commitments to extend credit, commercial letters of credit,
standby letters of credit and guarantees.
These instruments carry credit and market risks and are managed in
accordance with the Company's credit and country risk policies. The maximum
credit risk from failure of a counterparty to perform may be in excess of
amounts, if any, reflected on the balance sheet. Collateral required in
accordance with the approval of specific transactions may consist of cash, real
estate or other consideration, and may mitigate this exposure.
The maximum potential credit loss from commitments to extend credit,
commercial letters of credit and standby letters of credit is represented by
the contractual amount of the commitment. The measurement of the risk
associated with these transactions must be evaluated in conjunction with
failure of the counterparty to perform.
A summary of the Bank's contractual or notional amounts for off-balance
sheet activities as of September 30, 1997 (unaudited) and December 31, 1996 is
summarized below (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
CREDIT ACTIVITIES 1997 1996
- --------------------------------------------- --------------- -------------
(UNAUDITED)
<S> <C> <C>
Unused commercial lines of credit ...... $193,050 $158,029
Other commitments to extend credit ...... 90,462 86,505
Standby letters of credit ............... 14,681 9,840
Commercial letters of credit ............ 27,535 24,333
--------- ---------
$325,728 $278,707
========= =========
</TABLE>
Of the outstanding standby letters of credit, approximately $3,900,000 are
secured by cash collateral at December 31, 1996 and $6,397,000 at September 30,
1997.
14. Concentrations of Credit Risk
While maintaining a diversified portfolio, the Company is dependent on the
economic conditions affecting the Miami-Dade County, Florida market and that of
Central and South America, its primary source of international lending
activity. The investment and loan portfolio credit risk concentration
distribution is as described in Notes 3 and 4, respectively.
Diversification is managed through asset/liability management policies
with limitations for exposures to individual debtor entities and for country
risk exposure.
15. Related Party Transactions
In its normal course of business, the Bank lends to directors, officers,
employees and their related interests. Loans outstanding to executive officers,
directors, principal stockholders or their related
F-24
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
15. RELATED PARTY TRANSACTIONS--(CONTINUED)
interests were approximately $1,766,000 and $2,412,000 at December 31, 1996 and
1995, respectively ($2,558,000 at September 30, 1997 (unaudited)). In
connection with the construction of its new headquarters and office building
(see Note 5), the Company entered into a contract with a mechanical contractor,
the owners of which are related to a member of the Board of Directors, to
provide mechanical work. The total contract amount is approximately $4,166,000.
Approximately $602,000 (unaudited), $2,555,000 and $1,009,000 were paid during
the period ended September 30, 1997 and the years ended December 31, 1996 and
1995, respectively, in connection with this contract.
16. Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial
instruments have been estimated by the Company using available market
information for marketable instruments and appropriate valuation methodologies
for other instruments. However, considerable judgment and subjectivity is
necessarily required in interpreting data to develop the estimates of fair
value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts the Company could realize in a current market
exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------- ------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
---------- ------------ ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents ............... $129,180 $129,180 $ 94,414 $ 94,414
Marketable certificates of deposit ...... 5,880 5,880 26,246 26,266
Marketable securities .................. 331,204 332,556 320,084 323,452
Performing loans ........................ 972,077 970,511 817,024 823,185
Liabilities:
Time deposits ........................... 738,162 739,544 572,177 574,613
Other deposits ........................... 581,964 581,964 584,147 584,147
Securities sold under repurchase
agreements ........................... 28,918 28,918 24,002 24,002
Other short term borrowings ............ 16,679 16,679 4,683 4,683
</TABLE>
The fair value of loans is estimated based on present values using
applicable discount factors based on the current rates of interest charged by
the Company for similar transactions. For this purpose loans have been
aggregated into major categories based on pricing characteristics. No
adjustment was made to the discount factors for changes in the credit quality
of loans. Management believes that the risk factor embedded in the discount
rates along with the portion of the allowance for possible loan losses
applicable to the performing loans results in a fair valuation of the
performing loan portfolio. The fair value of non-accrual loans with a recorded
book value of $1,563,000 in 1996 and $4,066,000 in 1995 was not estimated
because it is not practicable to reasonably assess the credit adjustment that
would be applied in the marketplace for such loans.
F-25
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
16. FAIR VALUE OF FINANCIAL INSTRUMENTS--(CONTINUED)
The fair value of investments is based on quoted market values. See Note
3--Investment Securities.
The fair value of time deposits is estimated based on present values using
discount factors based on the current rate of interest paid for deposits of
similar maturity. All other categories of deposits, which have no stated
maturities, are shown at their face value. Management estimates that these core
deposits would have a market value discount. This is attributable to the
estimated cost savings from the low cost of such deposits over their estimated
life, discounted using an alternative cost of funds rate. Management has not
assessed the core deposit value of its total core deposit base. A core deposit
premium has been paid by the Company in the acquisition of core deposits from
other institutions. The net value of this core deposit premium is $2,081,000 in
1996 and $2,532,000 in 1995.
Borrowings consist of overnight and short-term debt instruments with
original maturities of ninety days or less. These borrowings are shown at face
value which approximate fair value.
Standby letters of credit and other commitments to extend credit are of a
short term nature and reflective of the current fee structure of the Company in
providing these services. The face value of these instruments is considered
reflective of fair value and is disclosed in Note 13--Off-Balance Sheet Risk.
The fair values presented herein are based on pertinent information
available to management as of December 31, 1996 and 1995. Although management
is not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since that date and, therefore, current estimates
of fair value may differ from the amounts presented herein.
F-26
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
17. Republic Banking Corporation of Florida
The following summarizes the major categories of the Company's (parent
company only) financial statements (in thousands):
CONDENSED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------------
1997 1996 1995
-------------- ---------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Assets:
Cash ...................................................... $ 169 $ 161 $ 421
Investment in the Bank ................................. 128,593 124,120 115,545
Excess of cost over net assets of subsidiaries, net ...... 383 410 446
Other assets ............................................. 5 2 8
--------- --------- ---------
Total assets .......................................... $129,150 $124,693 $116,420
========= ========= =========
Liabilities ................................................ $ -- $ -- $ 280
--------- --------- ---------
Stockholders' equity:
Common stock ............................................. 9,437 9,437 7,864
Paid-in capital .......................................... 77,221 77,221 59,444
Retained earnings ....................................... 42,077 37,785 48,530
Net unrealized gains on securities available-for-sale,
net of taxes .......................................... 415 250 302
--------- --------- ---------
Total stockholders' equity .............................. 129,150 124,693 116,140
--------- --------- ---------
Total liabilities and stockholders' equity ............ $129,150 $124,693 $116,420
========= ========= =========
</TABLE>
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED
SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
------------------------ ----------------------------------------
1997 1996 1996 1995 1994
------------ --------- ------------ ------------ ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Dividend from subsidiary ........................... $ 9,833 $ 9,455 $ 9,455 $ 4,728 $ 7,879
Interest income .................................... 6 6 9 7 4
Equity in undistributed earnings of the Bank ...... 4,309 3,436 8,627 13,076 7,328
Operating expenses ................................. (47) (32) (49) (57) (69)
-------- ------- -------- -------- -------
Income before income taxes ........................ 14,101 12,865 18,042 17,754 15,142
Income tax expense (benefit) ..................... (5) -- (2) (5) (10)
-------- ------- -------- -------- -------
Net income ....................................... $14,106 $12,865 $18,044 $17,759 $15,152
======== ======= ======== ======== =======
</TABLE>
F-27
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
17. REPUBLIC BANKING CORPORATION OF FLORIDA--(CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED
SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
----------------------- ---------------------------------------
1997 1996 1996 1995 1994
---------- ---------- ---------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flow from operating activities:
Net income ....................................... $14,106 $12,865 $18,044 $ 17,759 $ 15,152
Less: Equity in undistributed earnings of
the Bank .................................... (4,309) (3,436) (8,627) (13,076) (7,328)
Other .......................................... 25 123 (239) 320 (135)
-------- -------- -------- --------- --------
Net cash provided by operating activities ...... 9,822 9,552 9,178 5,003 7,689
-------- -------- -------- --------- --------
Cash flow used in financing activities:
Cash dividends paid ........................... (9,814) (9,439) (9,439) (4,718) (7,864)
-------- -------- -------- --------- --------
Decrease (increase) in cash and
cash equivalents .............................. 8 113 (261) 285 (175)
Cash and cash equivalents at beginning
of year ....................................... 161 422 422 137 312
-------- -------- -------- --------- --------
Cash and cash equivalents at end of year ......... $ 169 $ 535 $ 161 $ 422 $ 137
======== ======== ======== ========= ========
</TABLE>
18. SUBSEQUENT EVENTS (UNAUDITED)
The company is declaring a 2.5 For 1 stock split to be effective in 1998.
The accompanying financial statements have been restated to reflect the effect
of the stock split on all share amounts and earnings per share for all periods
presented.
In November 1997, the Company exchanged 1,220,225 shares (post
stock-split) of common stock of the Company for the same number of shares of
common stock from a limited number of minority shareholders of the Bank's
common stock. The difference between the estimated fair value of the shares of
the Company given in exchange valued at approximately $12,812,000 and the book
value of the minority interest acquired, amounting to approximately $8,391,000,
will be recorded as goodwill in the Company's financial statements, at the
transaction's effective date, and amortized over 20 years.
The Company has approved (i) an increase in the number of authorized
shares of common stock from 20,000,000 shares to 50,000,000 shares and (ii) an
amendment to its articles of incorporation to effect a change in the par value
of its common stock outstanding from $0.50 per share, post stock split to $0.01
per share.
The Company is adopting the 1998 Stock Option Plan ("the Plan"). This Plan
provides for incentive stock option grants to certain officers and employees of
the Company and non-qualified options to directors. Options may only be granted
at or above the fair market value of the stock at the
F-28
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
18. SUBSEQUENT EVENTS (UNAUDITED)--(CONTINUED)
date of grant. The Board's Compensation Committee will grant options only upon
approval by the Board of Directors. The maximum term of the Plan is ten years
and will become effective January 1, 1998. The maximum number of shares
authorized to be granted under this Plan is 1,000,000 shares (post
stock-split). No options have been granted to date under the Plan.
The unaudited pro forma condensed consolidated statements of operations
and balance sheets of the Company for the periods ended, and at, September 30,
1997 and December 31, 1996, after giving effect to the exchange transaction
(post stock-split) described in the preceding paragraph, as if that transaction
had taken place on September 30, 1997 for pro forma balance sheet and on
January 1, 1996 for pro forma income statements, is presented below:
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
AND THE YEAR ENDED DECEMBER 31, 1996
UNAUDITED
<TABLE>
<CAPTION>
1997 1996
------------- ------------
(IN THOUSANDS,
EXCEPT PER SHARE)
<S> <C> <C>
Income before provision for income taxes ......... $ 22,238 $ 29,492
Provision for income taxes ..................... 7,243 10,324
------------ ------------
Income before minority interest .................. 14,995 19,168
Minority interest .............................. 144 184
------------ ------------
Net income ....................................... $ 14,851 $ 18,984
============ ============
Earnings per common share ........................ $ 0.74 $ 0.94
============ ============
Weighted average common shares outstanding ...... 20,093,129 20,093,129
</TABLE>
F-29
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
18. SUBSEQUENT EVENTS (UNAUDITED)--(CONTINUED)
* * * * *
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
SEPTEMBER 30, 1997
UNAUDITED
<TABLE>
<CAPTION>
1997
---------------
(IN THOUSANDS)
<S> <C>
Assets
Cash and cash equivalents ....................................... $ 98,216
Investments and interest earnings deposits in other banks ...... 385,861
Loans receivable, net .......................................... 940,843
Other assets ................................................... 84,144
Goodwill and other intangibles ................................. 12,980
-----------
$1,522,044
===========
Liabilities and Stockholders' Equity
Deposits ...................................................... $1,298,535
Other liabilities ............................................. 80,239
-----------
1,378,774
Minority interest ................................................ 1,281
Stockholders' equity ............................................. 141,989
-----------
$1,522,044
===========
</TABLE>
F-30
<PAGE>
- ---------------------------- ----------------------------
- ---------------------------- ----------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON
IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED,
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary ..................
Summary Consolidated Financial Data ...
Risk Factors ........................
The Company ...........................
Use of Proceeds .....................
Dividend Policy ........................
Capitalization ........................
Selected Consolidated Financial Data
Management's Discussion and Analysis
of Financial Condition and
Results of Operations ............
Regulation ...........................
Management ...........................
Certain Transactions ..................
Principal and Selling Shareholders ...
Description of Capital Stock .........
Shares Eligible for Future Sale ......
Certain United States Tax Consequences
to Non-U.S. Holders ...............
Underwriting ........................
Legal Matters ........................
Experts ..............................
Available Information ..................
Index to Consolidated Financial
Statements ........................ F-1
</TABLE>
------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
2,000,000 SHARES
REPUBLIC BANKING
CORPORATION OF FLORIDA
COMMON STOCK
------------
PROSPECTUS
------------
KEEFE, BRUYETTE & WOODS, INC.
CIBC OPPENHEIMER
, 1998
- ---------------------------- ----------------------------
- ---------------------------- ----------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses (other than underwriting discounts and commissions) of
the sale of the shares of Common Stock are as follows:
<TABLE>
<S> <C>
SEC registration fee ..................... $ 10,856
NASD filing fee ........................ 4,180
Nasdaq National Market listing fee ...... 30,500
Legal fees and expenses .................. 300,000/dagger/
Blue Sky fees and expenses ............... 10,000
Accounting fees and expenses ............ 250,000/dagger/
Printing and engraving expenses ......... 75,000/dagger/
Transfer agent and registrar fees ...... 5,000/dagger/
Miscellaneous fees and expenses ......... 114,464/dagger/
-----------------
Total ................................. $800,000/dagger/
=================
</TABLE>
- ----------------
/dagger/ Estimated.
The Company intends to pay all expenses of registration, issuance and
distribution, excluding underwriters' discounts and commissions, with respect
to the shares being sold by the Selling Shareholders.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant has authority under the FBCA to indemnify its directors and
officers to the extent provided in such statute. The Registrant's Articles
provide that the Registrant may indemnify its executive officers and directors
to the fullest extent permitted by law either now or hereafter. In general,
Florida law permits a Florida corporation to indemnify its directors, officers,
employees and agents, and persons serving at the corporation's request in such
capacities for another enterprise against liabilities arising from conduct that
such persons reasonably believed to be in, or not opposed to, the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful. The
Company has also entered into an agreement with each of its directors and
certain of its officers, in the form attached to this Registration Statement as
Exhibit 10.1, wherein it has agreed to indemnify each of them to the fullest
extent permitted by law.
The provisions of the FBCA that authorize indemnification do not eliminate
the duty of care of a director and, in appropriate circumstances, equitable
remedies such as injunctive or other forms of nonmonetary relief will remain
available under Florida law. In addition, each director will continue to be
subject to liability for (a) violations of the criminal law, unless the
director had reasonable cause to believe his conduct was lawful or had no
reasonable cause to believe his conduct was unlawful, (b) deriving an improper
personal benefit from a transaction, (c) voting for or assenting to an unlawful
distribution and (d) willful misconduct or a conscious disregard for the best
interests of the Registrant in a proceeding by or in the right of the
Registrant to procure a judgment in its favor or in a proceeding by or in the
right of a shareholder. The statute does not affect a director's
responsibilities under any other law, such as the Federal securities laws or
state or Federal environmental laws.
At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought from the Registrant, nor is the Registrant aware of any threatened
litigation that may result in claims for indemnification from the Registrant by
any officer or director.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In November 1997, the Registrant took action to reorganize its capital
structure (the "Reorganization") by issuing to 13 existing shareholders of the
Bank other than Bancorp an aggregate of 488,091 shares of Common Stock
(pre-Stock Split; 1,220,225 shares post-Stock Split) for 488,091 shares of
common stock in the Bank (or one share of Common Stock for each share of common
stock in the Bank) and no cash consideration. No other shares of capital stock
have been issued by the Company in the last five years other than pursuant to a
stock dividend in January 1996.
The aforementioned issuances and sales were made in reliance upon the
exemption from the registration provisions of the Securities Act afforded by
Section 4(2) thereof and/or Regulation D promulgated thereunder, as
transactions by an issuer not involving a public offering. The purchasers of
the securities described above acquired them for their own account and not with
a view to any distribution thereof to the public. The certificates evidencing
the securities bear legends stating that the securities may not be offered,
sold or transferred other than pursuant to an effective registration statement
under the Securities Act, or an exemption from such registration requirements.
The Company will place stop transfer instructions with its transfer agent with
respect to all such securities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following documents are filed as exhibits to this Registration
Statement:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------- ------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement.**
3.1 Form of Amended and Restated Articles of Incorporation of the Company.*
3.2 Form of Amended and Restated Bylaws of the Company.*
4.1 See Exhibits 3.1 and 3.2 for provisions in the Company's Amended and Restated Articles of
Incorporation and Amended and Restated Bylaws defining the rights of holders of the
Company's Common Stock.*
5.1 Opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. with respect to the
legality of the Common Stock being issued.**
10.1 Form of Indemnification Agreement between the Company and each of its directors and
certain officers.**
10.2 Form of 1998 Stock Option Plan*
10.3 Bank Software License and Development Agreement between Republic National Bank of
Miami, Filanbanco, S.A. and Infordatos, S.A. dated February 12, 1994.*
10.4 Construction Agreement between Republic National Bank of Miami and The Bared
Construction Company of Miami dated August 10, 1995.*
10.5 Agreement between Republic National Bank of Miami and Kirchman Corporation dated
November 7, 1997.*
21.1 List of subsidiaries of the Company.*
23.1 Consent of Price Waterhouse LLP.*
23.2 Consent of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. (included in its
opinion to be filed as Exhibit 5.1).**
24.1 Powers of Attorney of Directors and Executive Officers (included on the Signature Page of
this Registration Statement).*
27.1 Financial Data Schedule as of and for the year ended December 31, 1995.*
27.2 Financial Data Schedule as of and for the year ended December 31, 1996.*
27.3 Financial Data Schedule as of and for the nine months ended September 30, 1997.*
</TABLE>
- ----------------
* Filed herewith.
** To be filed by amendment.
II-2
<PAGE>
(b) The following financial statement schedules have been filed with this
Registration Statement: None.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(c) The undersigned Registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(ii) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Coral
Gables, State of Florida, on this 30th day of November, 1997.
REPUBLIC BANKING CORPORATION OF FLORIDA
By: /s/ OSCAR BUSTILLO, JR.
--------------------------------------
Oscar Bustillo, Jr.
Chief Executive Officer and President
POWER OF ATTORNEY
The undersigned directors and officers of Republic Banking Corporation of
Florida hereby constitute and appoint Oscar Bustillo, Jr. and Bernardo M.
Argudin and each of them, with full power to act without the other and with
full power of substitution and resubstitution, our true and lawful
attorneys-in-fact and agents with full power to execute in our name and behalf
in the capacities indicated below any and all amendments (including 462(b)
amendments, post-effective amendments and amendments thereto) to this
Registration Statement and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully in all
intents and purposes as he might or could do in person, and hereby ratify and
confirm that such attorneys-in-fact, or either of them, or their substitutes
shall lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ----------------------------- ------------------------------------- ------------------
<S> <C> <C>
/s/ ROBERTO ISAIAS Chairman of the Board November 30, 1997
- -----------------------------
ROBERTO ISAIAS
/s/ OSCAR BUSTILLO, JR. Chief Executive Officer, November 30, 1997
- -----------------------------
OSCAR BUSTILLO, JR. President and Director
/s/ BERNARDO M. ARGUDIN Vice President and November 30, 1997
- -----------------------------
BERNARDO M. ARGUDIN Chief Financial Officer and Director
/s/ JOSE P. BARED Director November 30, 1997
- -----------------------------
JOSE P. BARED
/s/ JOHN H. BLAKE Director November 30, 1997
- -----------------------------
JOHN H. BLAKE
/s/ ESTEFANO ISAIAS Director November 30, 1997
- -----------------------------
ESTEFANO ISAIAS
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------- ---------- ------------------
<S> <C> <C>
/s/ WILLIAM ISAIAS Director November 30, 1997
- -------------------------
WILLIAM ISAIAS
/s/ MILTON H. LEHR Director November 30, 1997
- -------------------------
MILTON H. LEHR
/s/ FERNANDO TAMAYO Director November 30, 1997
- -------------------------
FERNANDO TAMAYO
</TABLE>
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
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3.1 Form of Amended and Restated Articles of Incorporation of the Company.
3.2 Form of Amended and Restated Bylaws of the Company.
4.1 See Exhibits 3.1 and 3.2 for provisions in the Company's Amended and
Restated Articles of Incorporation and Amended and Restated Bylaws
defining the rights of holders of the Company's Common Stock.
10.2 Form of 1998 Stock Option Plan
10.3 Bank Software License and Development Agreement between Republic
National Bank of Miami, Filanbanco, S.A. and Infordatos, S.A. dated
February 12, 1994.
10.4 Construction Agreement between Republic National Bank of Miami and The
Bared Construction Company of Miami dated August 10, 1995.
10.5 Agreement between Republic National Bank of Miami and Kirchman
Corporation dated November 7, 1997.
21.1 List of subsidiaries of the Company.
23.1 Consent of Price Waterhouse LLP.
24.1 Powers of Attorney of Directors and Executive Officers (included on the
Signature Page of this Registration Statement).
27.1 Financial Data Schedule as of and for the year ended December 31,
1995.
27.2 Financial Data Schedule as of and for the year ended December 31,
1996.
27.3 Financial Data Schedule as of and for the nine months ended September
30, 1997.
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
REPUBLIC BANKING CORPORATION OF FLORIDA
The original Articles of Incorporation were filed with the Secretary of
State on October 12, 1970.
ARTICLE I
NAME
The name of the corporation is REPUBLIC BANKING CORPORATION OF FLORIDA
(hereinafter called the "Corporation").
ARTICLE II
PURPOSE
The purposes of the Corporation shall be to engage in any activities or
business permitted under the laws of the United States of America and the State
of Florida.
ARTICLE III
PRINCIPAL OFFICE
The address of the principal office and the mailing address of the
Corporation is 2800 Ponce de Leon Boulevard, Coral Gables, Florida 33134.
ARTICLE IV
CAPITAL STOCK
The maximum number of shares of all classes of capital stock which the
Corporation is authorized to issue is Fifty-Five Million (55,000,000) shares,
consisting of (i) Fifty Million (50,000,000) shares of common stock, par value
$0.01 per share (the "Common Stock"), and (ii) Five Million (5,000,000) shares
of preferred stock, par value $0.01 per share (the "Preferred Stock").
Except as may be provided by the resolutions of the Board of Directors
authorizing the issuance of any class or series of Preferred Stock, cumulative
voting by any shareholder is hereby expressly denied.
No shareholder of the Corporation shall have, by reason of holding
shares of any class or series of stock of the Corporation, any preemptive or
preferential rights to purchase or subscribe
<PAGE>
for any other shares of any class or series of the Corporation now or hereafter
authorized, any other equity securities of the Corporation or any notes,
debentures, warrants, bonds or other securities convertible into, or carrying
options or warrants to purchase shares of, any class of stock of the
Corporation, now or hereafter authorized, whether or not the issuance of any
such shares, or such notes, debentures, bonds or other securities, would
adversely affect the dividend or voting rights of such shareholder.
ARTICLE V
COMMON STOCK
Except as otherwise required by law or as may be provided by the
resolutions of the Board authorizing the issuance of any class or series of the
Preferred Stock, as hereinabove provided, all rights to vote and all voting
power shall be vested exclusively in the holders of the Common Stock.
Subject to the rights of the holders of the Preferred Stock, the
holders of the Common Stock shall be entitled to receive when, as and if
declared by the Board, out of funds legally available therefor, dividends and
other distributions payable in cash, property, stock (including shares of any
class or series of the Corporation, whether or not shares of such class or
series are already outstanding) or otherwise.
Upon any liquidation, dissolution or winding-up of the Corporation,
whether voluntary or involuntary, and after the holders of the Preferred Stock
shall have been paid in full the amounts to which they shall be entitled, if
any, or a sum sufficient for such payment in full shall have been set aside, the
remaining net assets of the Corporation shall be distributed pro rata to the
holders of the Common Stock in accordance with their respective rights and
interests, to the exclusion of the holders of the Preferred Stock.
ARTICLE VI
PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more
classes or series, the shares of each class or series to have such designations
and powers, preferences and rights, and qualifications, limitations and
restrictions thereof as are stated and expressed herein and in the resolution or
resolutions providing for the issue of such class or series adopted by the Board
of Directors (the "Board") as hereinafter prescribed.
Authority is hereby expressly granted to and vested in the Board to
authorize the issuance of the Preferred Stock from time to time in one or more
classes or series, to determine and take necessary proceedings fully to effect
the issuance and redemption of any such Preferred Stock and, with respect to
each class or series of the Preferred Stock, to fix and state, by resolution or
resolutions from time to time adopted providing for the issuance thereof, the
following:
(i) whether or not the class or series is to have voting rights, full
or limited, or is to be without voting rights;
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(ii) the number of shares to constitute the class or series and the
designations thereof;
(iii) the preferences and relative, participating, optional or other
special rights, if any, and the qualifications, limitations or restrictions
thereof, if any, with respect to any class or series;
(iv) whether or not the shares of any class or series shall be
redeemable and if redeemable the redemption price or prices, and the time or
times at which and the terms and conditions upon which, such shares shall be
redeemable and the manner of redemption;
(v) whether or not the shares of a class or series shall be subject to
the operation of retirement or sinking funds to be applied to the purchase or
redemption of such shares for retirement, and if such retirement or sinking fund
or funds be established, the annual amount thereof and the terms and provisions
relative to the operation thereof;
(vi) the dividend rate, whether dividends are payable in cash, stock of
the Corporation or other property, the conditions upon which and the times when
such dividends are payable, the preference to or the relation to the payment of
the dividends payable on any other class or classes or series of stock, whether
or not such dividend shall be cumulative or noncumulative, and, if cumulative,
the date or dates from which such dividends shall accumulate;
(vii) the preferences, if any, and the amounts thereof that the holders
of any class or series thereof shall be entitled to receive upon the voluntary
or involuntary dissolution of, or upon any distribution of the assets of, the
Corporation;
(viii) whether or not the shares of any class or series shall be
convertible into, or exchangeable for, the shares of any other class or classes
or of any other series of the same or any other class or classes of the
Corporation and the conversion price or prices or ratio or ratios or the rate or
rates at which such conversion or exchange may be made, with such adjustments,
if any, as shall be stated and expressed or provided for in such resolution or
resolutions; and
(ix) such other special rights and protective provisions with respect
to any class or series as the Board may deem advisable.
The shares of each class or series of the Preferred Stock may vary from
the shares of any other class or series thereof in any or all of the foregoing
respects. The Board may increase the number of shares of Preferred Stock
designated for any existing class or series by a resolution adding to such class
or series authorized and unissued shares of the Preferred Stock not designated
for any other class or series. The Board may decrease the number of shares of
the Preferred Stock designated for any existing class or series by a resolution,
subtracting from such series unissued shares of the Preferred Stock designated
for such class or series, and the shares so subtracted shall become authorized,
unissued and undesignated shares of the Preferred Stock.
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<PAGE>
ARTICLE VII
BOARD OF DIRECTORS
The Corporation's Board shall consist of not less than five (5)
members, with the exact number to be fixed from time to time by resolution of
the Board to the extent provided below. No decrease in the number of directors
shall have the effect of shortening the term of any incumbent director. The
Board shall be divided into three classes, Class I, Class II and Class III. The
number of directors elected to each class shall be as nearly equal in number as
possible. The Board shall designate initially which of the current directors
shall serve in each of the classes. Each director in Class I shall serve an
initial term to expire at the annual meeting next ensuing, each director in
Class II shall serve an initial term to expire one year thereafter and each
director in Class III shall serve an initial term to expire two years
thereafter, in each case until his or her successor is duly elected and
qualified or until his or her earlier resignation, death or removal from office.
Upon the expiration of the initial terms of office for each class of directors,
the directors of each class shall be elected for a term of three years and to
serve until their successors are duly elected and qualified or until their
earlier resignation, death or removal from office. The Board shall apportion any
increase or decrease in the number of directorships among the classes so as to
make the number of directors in each class as nearly equal as possible.
Whenever any vacancy on the Board shall occur due to death,
resignation, retirement, disqualification, removal, increase in the number of
directors or otherwise, a majority of directors in office, although less than a
quorum of the entire Board, may fill the vacancy or vacancies for the balance of
the unexpired term or terms, at which time a successor or successors shall be
duly elected by the shareholders and qualified. The Board, by the vote of a
majority of the full Board, may in any year between annual meetings of
shareholders increase the membership of the Board by not more than two members,
and by like vote, appoint qualified persons to fill the vacancies created
thereby and designate the class in which they shall serve.
ARTICLE VIII
MEETINGS OF SHAREHOLDERS
Except as otherwise required by law, the Corporation shall not be
required to hold a special meeting of shareholders of the Corporation unless, in
addition to any other requirements of law, (i) the holders of not less than
thirty percent (30%) of all the votes entitled to be cast on any issue proposed
to be considered at the proposed special meeting sign, date and deliver to the
Corporation's secretary one or more written demands for the meeting describing
the purpose or purposes for which it is to be held, (ii) the meeting is called
by the Board pursuant to a resolution approved by a majority of the entire Board
or (iii) the meeting is called by the Chairman of the Board or the Chief
Executive Officer. Only business within the purpose or purposes described in the
special meeting notice required by the Florida Business Corporation Act may be
conducted at a special shareholders' meeting.
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<PAGE>
ARTICLE IX
BYLAWS
Unless otherwise provided by law, the Bylaws of the Corporation may be
altered, amended or repealed, in whole or in part, or new Bylaws may be adopted,
by the affirmative vote of a majority of the directors in office or the
affirmative vote of holders of a majority of the shares entitled to vote on the
matter.
ARTICLE X
INDEMNITY
The Corporation may indemnify, to the full extent permitted by law, any
officer, director, employee or agent of the Corporation, or any former officer,
director, employee or agent of the Corporation, or any person who at the request
of the Corporation is or was serving as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise.
Notwithstanding the foregoing, a court of competent jurisdiction may not require
the Corporation to indemnify a director, officer, employee or agent unless the
court determines that (i) such person has acted in good faith or in a manner
he/she believed to be in, or not opposed to, the best interest of the
Corporation, or (ii) with respect to any criminal action, such person had no
reasonable cause to believe his conduct was unlawful.
ARTICLE XI
REGISTERED OFFICE AND AGENT
The street address of the Corporation's registered office shall be 900
Ingraham Building, 25 Southeast 2nd Avenue, Miami, Florida 33131 and the
registered agent for the Corporation at such address shall be Murai, Wald,
Biondo & Moreno, P.A.
ARTICLE XII
AMENDMENT
Except as provided herein, these Amended and Restated Articles of
Incorporation may be altered, amended or repealed by the shareholders of the
Corporation in accordance with the applicable laws of the State of Florida.
5
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Amended and Restated
Articles of Incorporation to be executed by its Chairman of the Board this ____
day of _______________, 199__.
REPUBLIC BANKING
CORPORATION OF FLORIDA
By:
--------------------
Oscar Bustillo, Jr.
President
6
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
REPUBLIC BANKING CORPORATION OF FLORIDA
(A FLORIDA CORPORATION)
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<TABLE>
<CAPTION>
INDEX
PAGE
NUMBER
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<S> <C> <C>
ARTICLE ONE - OFFICES
1. Registered Office....................................................... 1
2. Other Offices........................................................... 1
ARTICLE TWO - MEETINGS OF SHAREHOLDERS
1. Place................................................................... 1
2. Time of Annual Meeting.................................................. 1
3. Call of Special Meetings................................................ 1
4. Conduct of Meetings..................................................... 1
5. Notice and Waiver of Notice............................................. 2
6. Business of Special Meeting............................................. 2
7. Notice Requirements for Shareholder Proposals........................... 2
8. Quorum.................................................................. 2
9. Voting Per Share........................................................ 3
10. Voting of Shares........................................................ 3
11. Proxies................................................................. 3
12. Shareholder List........................................................ 4
13. Action Without Meeting.................................................. 4
14. Fixing Record Date...................................................... 4
15. Inspectors and Judges................................................... 5
16. Voting for Directors.................................................... 5
ARTICLE THREE - DIRECTORS
1. Number, Election and Term............................................... 5
2. Vacancies............................................................... 5
3. Powers.................................................................. 5
4. Place of Meetings....................................................... 5
5. Annual Meeting.......................................................... 5
6. Regular Meetings........................................................ 5
7. Special Meetings and Notice............................................. 5
8. Quorum; Required Vote; Presumption
of Assent............................................................. 7
9. Action Without Meeting.................................................. 7
10. Conference by Telephone or Similar
Communications Equipment Meetings..................................... 7
11. Committees.............................................................. 7
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12. Compensation of Directors............................................... 8
13. Chairman of the Board................................................... 8
ARTICLE FOUR - OFFICERS
1. Positions............................................................... 8
2. Election of Specified Officers by Board................................. 8
3. Election or Appointment of Other
Officers.............................................................. 8
4. Salaries................................................................ 8
5. Term; Resignation....................................................... 9
6. President............................................................... 9
7. Vice Presidents......................................................... 9
8. Secretary............................................................... 9
9. Treasurer............................................................... 9
10. Other Officers, Employees and Agents.................................... 10
ARTICLE FIVE - CERTIFICATES FOR SHARES
1. Issue of Certificates................................................... 10
2. Legends for Preferences and Restrictions
on Transfer........................................................... 10
3. Facsimile Signatures.................................................... 10
4. Lost Certificates....................................................... 11
5. Transfer of Shares...................................................... 11
6. Registered Shareholders................................................. 11
7. Redemption of Control Shares............................................ 11
ARTICLE SIX - GENERAL PROVISIONS
1. Dividends............................................................... 11
2. Reserves................................................................ 11
3. Checks.................................................................. 12
4. Fiscal Year............................................................. 12
5. Seal.................................................................... 12
6. Gender.................................................................. 12
ARTICLE SEVEN - AMENDMENTS OF BYLAWS................................................................ 12
</TABLE>
ii
<PAGE>
REPUBLIC BANKING CORPORATION OF FLORIDA
BYLAWS
ARTICLE ONE
OFFICES
1. REGISTERED OFFICE. The registered office of REPUBLIC BANKING
CORPORATION OF FLORIDA, a Florida corporation (the "Corporation"), shall be
located in the City of Coral Gables, State of Florida, unless otherwise
designated by the Board of Directors.
2. OTHER OFFICES. The Corporation may also have offices at such other
places, either within or without the State of Florida, as the Board of Directors
of the Corporation (the "Board of Directors") may from time to time determine or
as the business of the Corporation may require.
ARTICLE TWO
MEETINGS OF SHAREHOLDERS
1. PLACE. All annual meetings of shareholders shall be held at such
place, within or without the State of Florida, as may be designated by the Board
of Directors and stated in the notice of the meeting or in a duly executed
waiver of notice thereof. Special meetings of shareholders may be held at such
place, within or without the State of Florida, and at such time as shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
2. TIME OF ANNUAL MEETING. Annual meetings of shareholders shall be
held on such date and at such time fixed, from time to time, by the Board of
Directors, provided that there shall be an annual meeting held every year at
which the shareholders shall elect a Board of Directors and transact such other
business as may properly be brought before the meeting.
3. CALL OF SPECIAL MEETINGS. Special meetings of the shareholders shall
be held if called by a majority of the entire Board of Directors, the Chairman
of the Board, the Chief Executive Officer, or if the holders of not less than
thirty percent (30%) of all the votes entitled to be cast on any issue proposed
to be considered at the proposed special meeting sign, date and deliver to the
Secretary one or more written demands for the meeting describing the purpose or
purposes for which it is to be held.
4. CONDUCT OF MEETINGS. The Chairman of the Board (or in his absence,
the President or such other designee of the Chairman of the Board) shall preside
at the annual and special meetings of shareholders and shall be given full
discretion in establishing the rules and procedures to be followed in conducting
the meetings, except as otherwise provided by law or in these Bylaws.
<PAGE>
5. NOTICE AND WAIVER OF NOTICE. Except as otherwise provided by law,
written or printed notice stating the place, day and hour of the meeting and, in
the case of a special meeting, the purpose or purposes for which the meeting is
called, shall be delivered not less than ten (10) nor more than sixty (60) days
before the day of the meeting, either personally or by first-class mail, by or
at the direction of the President, the Secretary, or the officer or person
calling the meeting, to each shareholder of record entitled to vote at such
meeting. If the notice is mailed at least thirty (30) days before the date of
the meeting, it may be done by a class of United States mail other than
first-class. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail addressed to the shareholder at his address
as it appears on the stock transfer books of the Corporation, with postage
thereon prepaid. If a meeting is adjourned to another time and/or place, and if
an announcement of the adjourned time and/or place is made at the meeting, it
shall not be necessary to give notice of the adjourned meeting unless the Board
of Directors, after adjournment, fixes a new record date for the adjourned
meeting. Whenever any notice is required to be given to any shareholder, a
waiver thereof in writing signed by the person or persons entitled to such
notice, whether signed before, during or after the time of the meeting stated
therein, and delivered to the Corporation for inclusion in the minutes or filing
with the corporate records, shall be equivalent to the giving of such notice.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the shareholders need be specified in any written waiver of
notice. Attendance of a person at a meeting shall constitute a waiver of (a)
lack of or defective notice of such meeting, unless the person objects at the
beginning to the holding of the meeting or the transacting of any business at
the meeting, or (b) lack of defective notice of a particular matter at a meeting
that is not within the purpose or purposes described in the meeting notice,
unless the person objects to considering such matter when it is presented.
6. NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. Shareholders seeking to bring business before an annual meeting of
shareholders, or to nominate candidates for election as directors at an annual
or special meeting of shareholders, must provide timely notice thereof in
writing stating the place, day and hour of the meeting. To be timely, a
shareholder's notice must be delivered to or mailed and received at the
principal executive offices of the Company not less than 90 days nor more than
120 days prior to the first anniversary of the date of the Company's notice of
annual meeting provided with respect to the previous year's annual meeting;
provided, however, that if no annual meeting was held the previous year or the
date of the annual meeting has been changed to be more than 30 calendar days
earlier than or 60 calendar days after such anniversary, such shareholder notice
to be timely must be so received not more than 90 days prior to nor later than
the later of (i) 60 days prior to the annual meeting or (ii) the close of
business on the 10th day following the day on which notice of the date of the
annual meeting is given to shareholders or made public.
7. BUSINESS OF SPECIAL MEETING. Business transacted at any special
meeting shall be confined to the purposes stated in the notice thereof.
8. QUORUM. Shares entitled to vote as a separate voting group may take
action on a matter at a meeting only if a quorum of these shares exists with
respect to that matter. Except as otherwise provided in the Articles of
Incorporation or by law, a majority of the shares entitled to vote on the matter
by each voting group, represented in person or by proxy, shall constitute a
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quorum at any meeting of shareholders, but in no event shall a quorum consist of
less than a majority of the shares of each voting group entitled to vote. If
less than a majority of outstanding shares entitled to vote are represented at a
meeting, a majority of the shares so represented may adjourn the meeting from
time to time without further notice. After a quorum has been established at any
shareholders' meeting, the subsequent withdrawal of shareholders, so as to
reduce the number of shares entitled to vote at the meeting below the number
required for a quorum, shall not affect the validity of any action taken at the
meeting or any adjournment thereof. Once a share is represented for any purpose
at a meeting, it is deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting unless a new record date is or
must be set for that adjourned meeting.
9. VOTING PER SHARE. Except as otherwise provided by law, each holder
of shares of Common Stock is entitled to one (1) vote for each outstanding share
of Common Stock held by him on each matter submitted to a vote of shareholders.
10. VOTING OF SHARES. A shareholder may vote at any meeting of
shareholders of the Corporation, either in person or by proxy. Shares standing
in the name of another corporation, domestic or foreign, may be voted by the
officer, agent or proxy designated by the bylaws of such corporate shareholder
or, in the absence of any applicable bylaw, by such person or persons as the
board of directors of the corporate shareholder may designate. In the absence of
any such designation, or, in case of conflicting designation by the corporate
shareholder, the chairman of the board, the president, any vice president, the
secretary and the treasurer of the corporate shareholder, in that order, shall
be presumed to be fully authorized to vote such shares. Shares held by an
administrator, executor, guardian, personal representative or conservator may be
voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name or the name of his
nominee. Shares held by or under the control of a receiver, a trustee in
bankruptcy proceedings, or an assignee for the benefit of creditors may be voted
by such person without the transfer thereof into his name. If shares stand of
record in the names of two or more persons, whether fiduciaries, members of a
partnership, joint tenants, tenants in common, tenants by the entirety or
otherwise, or if two or more persons have the same fiduciary relationship
respecting the same shares, unless the Secretary of the Corporation is given
notice to the contrary and is furnished with a copy of the instrument or order
appointing them or creating the relationship wherein it is so provided, then
acts with respect to voting shall have the following effect: (a) if only one
votes, in person or by proxy, his act binds all; (b) if more than one vote, in
person or by proxy, the act of the majority so voting binds all; (c) if more
than one vote, in person or by proxy, but the vote is evenly split on any
particular matter, each faction is entitled to vote the share or shares in
question proportionally; or (d) if the instrument or order so filed shows that
any such tenancy is held in unequal interest, a majority or a vote evenly split
for purposes hereof shall be a majority or a vote evenly split in interest. The
principles of this paragraph shall apply, insofar as possible, to execution of
proxies, waivers, consents, or objections and for the purpose of ascertaining
the presence of a quorum.
11. PROXIES. Any shareholder of the Corporation, other person entitled
to vote on behalf of a shareholder pursuant to law, or attorney-in-fact for such
persons may vote the
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shareholder's shares in person or by proxy. Any shareholder of the Corporation
may appoint a proxy to vote or otherwise act for him by signing an appointment
form, either personally or by his attorney-in-fact. An executed telegram or
cablegram appearing to have been transmitted by such person, or a photographic,
photostatic or equivalent reproduction of an appointment form, shall be deemed a
sufficient appointment form. An appointment of a proxy is effective when
received by the Secretary of the Corporation or such other officer or agent
which is authorized to tabulate votes, and shall be valid for up to 11 months,
unless a longer period is expressly provided in the appointment form. The death
or incapacity of the shareholder appointing a proxy does not affect the right of
the Corporation to accept the proxy's authority unless notice of the death or
incapacity is received by the secretary or other officer or agent authorized to
tabulate votes before the proxy exercises his authority under the appointment.
An appointment of a proxy is revocable by the shareholder unless the appointment
is coupled with an interest.
12. SHAREHOLDER LIST. After fixing a record date for a meeting of
shareholders, the Corporation shall prepare an alphabetical list of the names of
all its shareholders who are entitled to notice of the meeting, arranged by
voting group with the address of, and the number and class and series, if any,
of shares held by each. The shareholders' list must be available for inspection
by any shareholder for a period of ten (10) days prior to the meeting or such
shorter time as exists between the record date and the meeting and continuing
through the meeting at the Corporation's principal office, at a place identified
in the meeting notice in the city where the meeting will be held, or at the
office of the Corporation's transfer agent or registrar. Any shareholder of the
Corporation or his agent or attorney is entitled on written demand to inspect
the shareholders' list (subject to the requirements of law), during regular
business hours and at his expense, during the period it is available for
inspection. The Corporation shall make the shareholders' list available at the
meeting of shareholders, and any shareholder or his agent or attorney is
entitled to inspect the list at any time during the meeting or any adjournment.
13. ACTION WITHOUT MEETING. Any action required by law to be taken at a
meeting of shareholders, or any action that may be taken at a meeting of
shareholders, may be taken without a meeting or notice if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted with respect to the subject matter thereof,
and such consent shall have the same force and effect as a vote of shareholders
taken at such a meeting.
14. FIXING RECORD DATE. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other proper purposes, the Board
of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than sixty
(60) days, and, in case of a meeting of shareholders, not less than ten (10)
days, prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
date on which the notice of the meeting is mailed or the date on which the
resolutions of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such
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determination of shareholders. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this Section
13, such determination shall apply to any adjournment thereof, except where the
Board of Directors fixes a new record date for the adjourned meeting or as
required by law.
15. INSPECTORS AND JUDGES. The Board of Directors in advance of any
meeting may, but need not, appoint one or more inspectors of election or judges
of the vote, as the case may be, to act at the meeting or any adjournment(s)
thereof. If any inspector or inspectors, or judge or judges, are not appointed,
the person presiding at the meeting may, but need not, appoint one or more
inspectors or judges. In case any person who may be appointed as an inspector or
judge fails to appear or act, the vacancy may be filled by the Board of
Directors in advance of the meeting, or at the meeting by the person presiding
thereat. The inspectors or judges, if any, shall determine the number of shares
of stock outstanding and the voting power of each, the shares of stock
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes, ballots and consents, hear and determine
all challenges and questions arising in connection with the right to vote, count
and tabulate votes, ballots and consents, determine the result, and do such acts
as are proper to conduct the election or vote with fairness to all shareholders.
On request of the person presiding at the meeting, the inspector or inspectors
or judge or judges, if any, shall make a report in writing of any challenge,
question or matter determined by him or them, and execute a certificate of any
fact found by him or them.
16. VOTING FOR DIRECTORS. Unless otherwise provided in the Articles of
Incorporation, directors shall be elected by a plurality of the votes cast by
the shares entitled to vote in the election at a meeting at which a quorum is
present.
ARTICLE THREE
DIRECTORS
1. NUMBER, ELECTION AND TERM. The Board of Directors shall
consist of not less than five (5) directors, with the exact number to be fixed
from time to time by resolution of the Board to the extent provided below;
provided, however, no director's term shall be shortened by reason of a
resolution decreasing the number of directors. The Board shall be divided into
three classes, Class I, Class II and Class III. The number of directors elected
to each class shall be as nearly equal in number as possible. The Board shall
designate initially which of the current directors shall serve in each of the
classes. Each director in Class I shall serve an initial term to expire at the
annual meeting next ensuing, each director in Class II shall serve an initial
term to expire one year thereafter and each director in Class III shall serve
an initial term to expire two years thereafter, in each case and until his or
her successor is duly elected and qualified or until his or her earlier
resignation, death or removal from office. Upon the expiration of the initial
terms of office for each class of directors, the directors of each class shall
be elected, except as provided in Section 2 of this article, at the annual
meeting of shareholders, for a term of three years and to serve until their
successors are duly elected and qualified or until their earlier resignation,
death or removal from office. The Board, by the vote of a majority of the full
Board, may in any year between annual meetings of shareholders increase the
membership of the Board by not more than two members, and by like vote, appoint
qualified persons to fill the vacancies created thereby and designate the class
in which they shall
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serve. Directors must be natural persons who are 18 years of age or older but
need not be residents of the State of Florida, shareholders of the Corporation
or citizens of the United States. Any director may be removed at any time, with
or without cause, at a special meeting of the shareholders called for that
purpose.
2. VACANCIES. A director may resign at any time by giving written
notice to the Corporation, the Board of Directors or the Chairman of the Board.
Such resignation shall take effect when the notice is delivered unless the
notice specifies a later effective date, in which event the Board of Directors
may fill the pending vacancy before the effective date if they provide that the
successor does not take office until the effective date. Any vacancy occurring
in the Board of Directors and any directorship to be filled by reason of an
increase in the size of the Board of Directors shall be filled by the
affirmative vote of a majority of the current directors though less than a
quorum of the Board of Directors; or may be filled by an election at an annual
or special meeting of the shareholders called for that purpose, unless otherwise
provided by law. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office, or until the next election of one
or more directors by shareholders if the vacancy is caused by an increase in the
number of directors.
3. POWERS. Except as provided in the Articles of Incorporation and by
law, all corporate powers shall be exercised by or under the authority of, and
the business and affairs of the Corporation shall be managed under the direction
of, its Board of Directors.
4. PLACE OF MEETINGS. Meetings of the Board of Directors, regular or
special, may be held either within or without the State of Florida.
5. ANNUAL MEETING. The first meeting of each newly elected Board of
Directors shall be held, without call or notice, immediately following each
annual meeting of shareholders.
6. REGULAR MEETINGS. Regular meetings of the Board of Directors may
also be held without notice at such time and at such place as shall from time to
time be determined by the Board of Directors.
7. SPECIAL MEETINGS AND NOTICE. Special meetings of the Board of
Directors may be called by the Chairman of the Board or by the President and
shall be called by the Secretary on the written request of any two directors.
Written notice of special meetings of the Board of Directors shall be given to
each director at least forty-eight (48) hours before the meeting. Except as
required by statute, neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Board of Directors need be specified
in the notice or waiver of notice of such meeting. Notices to directors shall be
in writing and delivered personally or mailed to the directors at their
addresses appearing on the books of the Corporation. Notice by mail shall be
deemed to be given at the time when the same shall be received. Notice to
directors may also be given by telegram, teletype or other form of electronic
communication. Notice of a meeting of the Board of Directors need not be given
to any director who signs a written waiver of notice before, during or after the
meeting. Attendance of a director at a meeting shall constitute a waiver of
notice of such meeting and a waiver of any and all objections to the place of
the meeting, the time of the meeting and the manner in which it has been called
or convened, except when a director states, at the beginning of the meeting or
promptly upon
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arrival at the meeting, any objection to the transaction of business because the
meeting is not lawfully called or convened.
8. QUORUM; REQUIRED VOTE; PRESUMPTION OF ASSENT. A majority of the
number of directors fixed by, or in the manner provided in, these bylaws shall
constitute a quorum for the transaction of business; provided, however, that
whenever, for any reason, a vacancy occurs in the Board of Directors, a quorum
shall consist of a majority of the remaining directors until the vacancy has
been filled. The act of a majority of the directors present at a meeting at
which a quorum is present when the vote is taken shall be the act of the Board
of Directors. A director of the Corporation who is present at a meeting of the
Board of Directors or a committee of the Board of Directors when corporate
action is taken shall be presumed to have assented to the action taken, unless
he objects at the beginning of the meeting, or promptly upon his arrival, to
holding the meeting or transacting specific business at the meeting, or he votes
against or abstains from the action taken.
9. ACTION WITHOUT MEETING. Any action required or permitted to be taken
at a meeting of the Board of Directors or a committee thereof may be taken
without a meeting if a consent in writing, setting forth the action taken, is
signed by all of the members of the Board of Directors or the committee, as the
case may be, and such consent shall have the same force and effect as a
unanimous vote at a meeting. Action taken under this section is effective when
the last director signs the consent, unless the consent specifies a different
effective date. A consent signed under this Section 9 shall have the effect of a
meeting vote and may be described as such in any document.
10. CONFERENCE TELEPHONE OR SIMILAR COMMUNICATIONS EQUIPMENT MEETINGS.
Members of the Board of Directors may participate in a meeting of the Board by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other at the same
time. Participation in such a meeting shall constitute presence in person at the
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground the
meeting is not lawfully called or convened.
11. COMMITTEES. The Board of Directors, by resolution adopted by a
majority of the full Board of Directors, may designate from among its members an
executive committee, an audit committee, a compensation committee, and one or
more other committees. The Audit Committee will review the general scope of the
audit conducted by the Company's independent auditors and matters relating to
the Company's internal control systems. In performing its function, the Audit
Committee will meet separately with representatives of the Company's independent
auditors and with representatives of senior management. The Compensation
Committee will be responsible for making recommendations to the Board of
Directors with respect to the compensation of the Company's executive officers
and with respect to the establishment of policies dealing with various
compensation and employee benefit matters. The Compensation Committee will also
administer all stock option plans and will make recommendations to the Board of
Directors as to option grants to Company employees under any such plans. All
matters approved by the Compensation Committee must also be approved by the
Board of Directors. Each committee must have two or more members who serve at
the pleasure of the Board of Directors. The Board of Directors, by resolution
adopted in accordance with this Article Three, may designate one or more
directors as alternate members of any committee, who may act in the place and
stead of any absent member or members at any meeting of such committee.
Vacancies in the membership of a committee shall be filled by the Board of
Directors at a
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Regular or special meeting of the Board of Directors. The Executive, Audit and
Compensation Committees shall keep regular minutes of their proceedings and
report the same to the Board of Directors when required. The designation of any
such committee and the delegation thereto of authority shall not operate to
relieve the Board of Directors, or any member thereof, of any responsibility
imposed upon it or him by law.
12. COMPENSATION OF DIRECTORS. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
13. CHAIRMAN OF THE BOARD. The Board of Directors may, in its
discretion, choose a chairman of the board who shall preside at meetings of the
shareholders and of the directors and shall be an ex officio member of all
standing committees. The Chairman of the Board shall have such other powers and
shall perform such other duties as shall be designated by the Board of
Directors. The Chairman of the Board shall be a member of the Board of Directors
but no other officers of the Corporation need be a director. The Chairman of the
Board shall serve until his successor is chosen and qualified, but he may be
removed at any time by the affirmative vote of a majority of the Board of
Directors.
ARTICLE FOUR
OFFICERS
1. POSITIONS. The officers of the Corporation shall consist of a
President, a Secretary and a Treasurer, and, if elected by the Board of
Directors by resolution, a Chairman of the Board and/or one or more Vice
Presidents. Any two or more offices may be held by the same person.
2. ELECTION OF SPECIFIED OFFICERS BY BOARD. The Board of Directors at
its first meeting after each annual meeting of shareholders shall elect a
President, a Secretary, a Treasurer and may elect one or more Vice Presidents.
3. ELECTION OR APPOINTMENT OF OTHER OFFICERS. Such other officers and
assistant officers and agents as may be deemed necessary may be elected or
appointed by the Board of Directors, or, unless otherwise specified herein,
appointed by the President of the Corporation. The Board of Directors shall be
advised of appointments by the President at or before the next scheduled Board
of Directors meeting.
4. SALARIES. The salaries of all officers of the Corporation to be
elected by the Board of Directors pursuant to Article Four, Section 2 hereof
shall be fixed from time to time by the Board of Directors or pursuant to its
discretion. The salaries of all other elected or appointed officers of the
Corporation shall be fixed from time to time by the President of the Corporation
or pursuant to his direction.
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5. TERM; RESIGNATION. The officers of the Corporation shall hold office
until their successors are chosen and qualified. Any officer or agent elected or
appointed by the Board of Directors or the President of the Corporation may be
removed, with or without cause, by the Board of Directors. Any officers or
agents appointed by the President of the Corporation pursuant to Section 3 of
this Article Four may also be removed from such officer positions by the
President, with or without cause. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise shall be filled by the
Board of Directors, or, in the case of an officer appointed by the President of
the Corporation, by the President or the Board of Directors. Any officer of the
Corporation may resign from his respective office or position by delivering
notice to the Corporation. Such resignation is effective when delivered unless
the notice specifies a later effective date. If a resignation is made effective
at a later date and the Corporation accepts the future effective date, the Board
of Directors may fill the pending vacancy before the effective date if the Board
provides that the successor does not take office until the effective date.
6. PRESIDENT. The President shall be the Chief Executive Officer of the
Corporation, shall have general and active management of the business of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. In the absence of the Chairman of the Board
or in the event the Board of Directors shall not have designated a Chairman of
the Board, the President shall preside at meetings of the shareholders and the
Board of Directors.
7. VICE PRESIDENTS. The Vice Presidents in the order of their
seniority, unless otherwise determined by the Board of Directors, shall, in the
absence or disability of the President, perform the duties and exercise the
powers of the President. They shall perform such other duties and have such
other powers as the Board of Directors shall prescribe or as the President may
from time to time delegate.
8. SECRETARY. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the shareholders and record all the proceedings of
the meetings of the shareholders and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the shareholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be. He shall keep in safe custody
the seal of the Corporation and, when authorized by the Board of Directors,
affix the same to any instrument requiring it.
9. TREASURER. The Treasurer shall have the custody of corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors. He shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors at its regular meetings or when the
Board of Directors so requires an account of all his transactions as treasurer
and of the financial condition of the Corporation unless otherwise specified by
the Board of Directors, the Treasurer shall be the Corporation's Chief Financial
Officer.
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10. OTHER OFFICERS, EMPLOYEES AND AGENTS. Each and every other officer,
employee and agent of the Corporation shall possess, and may exercise, such
power and authority, and shall perform such duties, as may from time to time be
assigned to him by the Board of Directors, the officer so appointing him and
such officer or officers who may from time to time be designated by the Board of
Directors to exercise such supervisory authority.
ARTICLE FIVE
CERTIFICATES FOR SHARES
1. ISSUE OF CERTIFICATES. The Corporation shall deliver certificates
representing all shares to which shareholders are entitled; and such
certificates shall be signed by the Chairman of the Board, President or a Vice
President, and by the Secretary or an Assistant Secretary of the Corporation,
and may be sealed with the seal of the Corporation or a facsimile thereof.
2. LEGENDS FOR PREFERENCES AND RESTRICTIONS ON TRANSFER. The
designations, relative rights, preferences and limitations applicable to each
class of shares and the variations in rights, preferences and limitations
determined for each series within a class (and the authority of the Board of
Directors to determine variations for future series) shall be summarized on the
front or back of each certificate. Alternatively, each certificate may state
conspicuously on its front or back that the Corporation will furnish the
shareholder a full statement of this information on request and without charge.
Every certificate representing shares that are restricted as to the sale,
disposition, or transfer of such shares shall also indicate that such shares are
restricted as to transfer and there shall be set forth or fairly summarized upon
the certificate, or the certificate shall indicate that the Corporation will
furnish to any shareholder upon request and without charge, a full statement of
such restrictions. If the Corporation issues any shares that are not registered
under the Securities Act of 1933, as amended, and registered or qualified under
the applicable state securities laws, the transfer of any such shares shall be
restricted substantially in accordance with the following legend:
"THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME."
3. FACSIMILE SIGNATURES. The signatures of the Chairman of the Board,
the President or a Vice President and the Secretary or Assistant Secretary upon
a certificate may be facsimiles, if the certificate is manually signed by a
transfer agent, or registered by a registrar, other than the Corporation itself
or an employee of the Corporation. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such
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officer before such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer at the date of the issuance.
4. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost or destroyed. When authorizing such issue of
a new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost or destroyed.
5. TRANSFER OF SHARES. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
6. REGISTERED SHAREHOLDERS. The Corporation shall be entitled to
recognize the exclusive rights of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of the State of
Florida.
7. REDEMPTION OF CONTROL SHARES. As provided by the Florida Business
Corporation Act, if a person acquiring control shares of the Corporation does
not file an acquiring person statement with the Corporation, the Corporation may
redeem the control shares at fair market value at any time during the 60-day
period after the last acquisition of such control shares. If a person acquiring
control shares of the Corporation files an acquiring person statement with the
Corporation, the control shares may be redeemed by the Corporation only if such
shares are not accorded full voting rights by the shareholders as provided by
law.
ARTICLE SIX
GENERAL PROVISIONS
1. DIVIDENDS. The Board of Directors may from time to time declare, and
the Corporation may pay, dividends on its outstanding shares in cash, property,
or its own shares pursuant to law and subject to the provisions of the Articles
of Incorporation.
2. RESERVES. The Board of Directors may by resolution create a reserve
or reserves out of earned surplus for any proper purpose or purposes, and may
abolish any such reserve in the same manner.
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3. CHECKS. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
4. FISCAL YEAR. The fiscal year of the Corporation shall be fixed by
the Board of Directors and may be otherwise changed from time to time by
resolution of the Board of Directors.
5. SEAL. The corporate seal shall have inscribed thereon the name and
state of incorporation of the Corporation. The seal may be used by causing it or
a facsimile thereof to be impressed or affixed or in any other manner
reproduced.
6. GENDER. All words used in these Bylaws in the masculine gender shall
extend to and shall include the feminine and neuter genders.
ARTICLE SEVEN
AMENDMENTS OF BYLAWS
Unless otherwise provided by law, these Bylaws may be altered, amended
or repealed, in whole or in part, or new Bylaws may be adopted, by the
affirmative vote of a majority of the directors in office or the affirmative
vote of holders of a majority of the shares entitled to vote on the matter.
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EXHIBIT 10.2
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REPUBLIC BANKING CORPORATION OF FLORIDA
1998 STOCK OPTION PLAN
---------------------------------------
1. PURPOSE. The purpose of this Plan is to advance the interests of
Republic Banking Corporation Of Florida, a Florida corporation (the "Company"),
and its Subsidiaries by providing an additional incentive to attract and retain
qualified and competent persons who provide services to the Company and its
Subsidiaries, and upon whose efforts and judgment the success of the Company and
its Subsidiaries is largely dependent, through the encouragement of stock
ownership in the Company by such persons.
2. DEFINITIONS. As used herein, the following terms shall have the
meaning indicated:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Committee" shall mean the committee appointed by the Board
pursuant to Section 13(a) hereof.
(c) "Common Stock" shall mean the Company's Common Stock, par
value $.01 per share.
(d) "Director" shall mean a member of the Board.
(e) "Fair Market Value" of a Share on any date of reference shall
mean the "Closing Price" (as defined below) of the Common Stock on the business
day immediately preceding such date, unless the Committee or the Board in its
sole discretion shall determine otherwise in a fair and uniform manner. For the
purpose of determining Fair Market Value, the "Closing Price" of the Common
Stock on any business day shall be (i) if the Common Stock is listed or admitted
for trading on any United States national securities exchange, or if actual
transactions are otherwise reported on a consolidated transaction reporting
system, the last reported sale price of Common Stock on such exchange or
reporting system, as reported in any newspaper of general circulation, (ii) if
the Common Stock is quoted on the National Association of Securities Dealers
Automated Quotations System ("NASDAQ"), or any similar system of automated
dissemination of quotations of securities prices in common use, the last
reported sale price of Common Stock on such system or, if sales prices are not
reported, the mean between the closing high bid and low asked quotations for
such day of Common Stock on such system, as reported in any newspaper of general
circulation or (iii) if neither clause (i) or (ii) is applicable, the mean
between the high bid and low asked quotations for the Common Stock as reported
by the National Quotation Bureau, Incorporated if at least two securities
dealers have inserted both bid and asked quotations for Common Stock on at least
five of the ten preceding days. If neither (i), (ii), or (iii) above is
applicable, then Fair Market Value shall be determined in good faith by the
Committee or the Board in a fair and uniform manner.
<PAGE>
(f) "Incentive Stock Option" shall mean an incentive stock option
as defined in Section 422 of the Internal Revenue Code.
(g) "Internal Revenue Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
(h) "Non-Qualified Stock Option" shall mean an Option which is not
an Incentive Stock Option.
(i) "Officer" shall mean the Company's Chairman of the Board,
President, Chief Executive Officer, principal financial officer, principal
accounting officer, any vice-president of the Company in charge of a principal
business unit, division or function (such as sales, administration or finance),
any other officer who performs a policy-making function, or any other person who
performs similar policy-making functions for the Company. Officers of
Subsidiaries shall be deemed Officers of the Company if they perform such
policy-making functions for the Company. As used in this paragraph, the phrase
"policy-making function" does not include policy-making functions that are not
significant. If pursuant to Item 401(b) of Regulation S-K (17 C.F.R. ss.
229.401(b)) the Company identifies a person as an "executive officer," the
person so identified shall be deemed an "Officer" even though such person may
not otherwise be an "Officer" pursuant to the foregoing provisions of this
paragraph.
(j) "Option" (when capitalized) shall mean any option granted
under this Plan.
(k) "Optionee" shall mean a person to whom a stock option is
granted under this Plan or any person who succeeds to the rights of such person
under this Plan by reason of the death of such person.
(l) "Outside Director" shall mean a member of the Board who
qualifies as an "outside director" under Section 162(m) of the Internal Revenue
Code and the regulations thereunder and as a "Non-Employee Director" under Rule
16b-3 promulgated under the Securities Exchange Act.
(m) "Plan" shall mean this 1998 Stock Option Plan for the Company.
(n) "Securities Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended from time to time.
(o) "Share" shall mean a share of Common Stock.
(p) "Subsidiary" shall mean any corporation (other than the
Company) in any unbroken chain of corporations beginning with the Company if, at
the time of the granting of the Option, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50 percent or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
3. SHARES AVAILABLE FOR OPTION GRANTS. The Committee, with the Board's
approval, may grant to Optionees from time to time Options to purchase an
aggregate of up to one million (1,000,000) Shares from the Company's authorized
and unissued Shares. If any Option
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<PAGE>
granted under the Plan shall terminate, expire, or be cancelled or surrendered
as to any Shares, new Options may thereafter be granted covering such Shares.
4. INCENTIVE AND NON-QUALIFIED OPTIONS.
(a) An Option granted hereunder shall be either an Incentive
Stock Option or a Non-Qualified Stock Option as determined by the Committee,
with the Board's approval, at the time of grant of such Option and shall clearly
state whether it is an Incentive Stock Option or a Non-Qualified Stock Option.
All Incentive Stock Options shall be granted within 10 years from the effective
date of this Plan. Incentive Stock Options may not be granted to any person who
is not an employee of the Company or any Subsidiary.
(b) Options otherwise qualifying as Incentive Stock Options
hereunder will not be treated as Incentive Stock Options to the extent that the
aggregate fair market value (determined at the time the Option is granted) of
the Shares, with respect to which Options meeting the requirements of Section
422(b) of the Internal Revenue Code are exercisable for the first time by any
individual during any calendar year (under all plans of the Company and its
parent and subsidiary corporations as defined in Section 424 of the Internal
Revenue Code), exceeds $100,000.
5. CONDITIONS FOR GRANT OF OPTIONS.
(a) Each Option shall be evidenced by an option agreement that
may contain any term deemed necessary or desirable by the Committee and the
Board, provided such terms are not inconsistent with this Plan or any applicable
law. Optionees shall be (i) those persons selected by the Committee and the
Board from the class of all regular employees of, or persons who provide
consulting or other services as independent contractors to, the Company or its
Subsidiaries, including Directors and Officers who are regular employees, and
(ii) Directors who are not employees of the Company or of any Subsidiaries. Any
person who files with the Committee and the Board, in a form satisfactory to the
Committee and the Board, a written waiver of eligibility to receive any Option
under this Plan shall not be eligible to receive any Option under this Plan for
the duration of such waiver.
(b) In granting Options, the Committee and the Board shall
take into consideration the contribution the person has made to the success of
the Company or its Subsidiaries and such other factors as the Committee and the
Board shall determine. The Committee and the Board shall also have the authority
to consult with and receive recommendations from officers and other personnel of
the Company and its Subsidiaries with regard to these matters. The Committee,
with the Board's approval, may from time to time in granting Options under the
Plan prescribe such other terms and conditions concerning such Options as it
deems appropriate, including, without limitation, (i) prescribing the date or
dates on which the Option becomes exercisable, (ii) providing that the Option
rights accrue or become exercisable in installments over a period of years, or
upon the attainment of stated goals or both, or (iii) relating an Option to the
continued employment of the Optionee for a specified period of time, provided
that such terms and conditions are not more favorable to an Optionee than those
expressly permitted herein.
(c) The Options granted to employees under this Plan shall be
in addition to regular salaries, pension, life insurance or other benefits
related to their employment with the
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Company or its Subsidiaries. Neither the Plan nor any Option granted under the
Plan shall confer upon any person any right to employment or continuance of
employment by the Company or its Subsidiaries.
(d) Notwithstanding any other provision of this Plan, an
Incentive Stock Option shall not be granted to any person owning directly or
indirectly (through attribution under Section 424(d) of the Internal Revenue
Code) at the date of grant, stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company (or of its parent or
subsidiary corporation (as defined in Section 424 of the Internal Revenue Code)
at the date of grant) unless the option price of such Option is at least 110% of
the Fair Market Value of the Shares subject to such Option on the date the
Option is granted, and such Option by its terms is not exercisable after the
expiration of five years from the date such Option is granted.
(e) Notwithstanding any other provision of this Plan, and in
addition to any other requirements of this Plan, the aggregate number of Options
granted to any one Optionee may not exceed 400,000, subject to adjustment as
provided in Section 10 hereof.
6. OPTION PRICE. The option price per Share of any Option shall be any
price determined by the Committee, with the Board's approval, but shall not be
less than the Fair Market Value of the Share underlying such Option on the date
the Option is granted.
7. EXERCISE OF OPTIONS. An Option shall be deemed exercised when (i)
the Company has received written notice of such exercise in accordance with the
terms of the Option, (ii) full payment of the aggregate option price of the
Shares as to which the Option is exercised has been made, and (iii) arrangements
that are satisfactory to the Committee and the Board in their sole discretion
have been made for the Optionee's payment to the Company of the amount that is
necessary for the Company or Subsidiary employing the Optionee to withhold in
accordance with applicable Federal or state tax withholding requirements. Unless
further limited by the Committee and the Board in any Option, and subject to
such guidelines as the Committee and the Board may establish, the option price
of any Shares purchased shall be paid (1) in cash, (2) by certified or official
bank check, (3) by money order, (4) with Shares, (5) by the withholding of
Shares issuable upon exercise of the Option or by any other form of cashless
exercise procedure approved by the Committee with the Board's approval, or (6)
in such other consideration as the Committee and the Board deems appropriate, or
by a combination of the above. The Committee and the Board in their sole
discretion may accept a personal check in full or partial payment of any Shares.
If the exercise price is paid in whole or in part with Shares, or through the
withholding of Shares issuable upon exercise of the Option, the value of the
Shares surrendered or withheld shall be their Fair Market Value on the date the
Option is exercised. The Company in its sole discretion may lend money to an
Optionee, guarantee a loan to an Optionee, or otherwise assist an Optionee to
obtain the cash necessary to exercise all or a portion of an Option granted
hereunder or to pay any tax liability of the Optionee attributable to such
exercise. Such loans shall (i) provide for full recourse to the maker, (ii) be
collateralized by the pledge of the Shares that the Optionee purchases upon
exercise of such Option, (iii) bear interest at no less than the prime rate of
Republic National Bank of Miami, (iv) contain such other terms as the Committee
or the Board in their sole discretion shall reasonably require, and (v) comply
with all applicable laws and regulations. No Optionee shall be deemed to be a
holder of any Shares subject to an Option unless and until a stock certificate
or certificates for such Shares are issued to such person(s) under
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<PAGE>
the terms of this Plan. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such stock
certificate is issued, except as expressly provided in Section 10 hereof.
8. EXERCISABILITY OF OPTIONS. Any Option shall become exercisable in
such amounts, at such intervals and upon such terms as the Committee or the
Board shall provide in such Option, except as otherwise provided in this Section
8.
(a) The expiration date of an Option shall be determined by
the Committee, with the Board's approval, at the time of grant, but in no event
shall an Option be exercisable after the expiration of 10 years from the date on
which the Option is granted.
(b) Except as provided in section 8(c), the Committee, with
the Board's approval, shall determine the vesting periods of the Options, but in
no event shall more than one third of any Option vest in less than one year,
more than two thirds of any Option vest in less than two years, and full vesting
of any Option shall not occur in less than three years,
(c) Unless otherwise provided in any Option, each outstanding
Option shall become immediately fully exercisable in the event of a "Change in
Control" or in the event that the Committee, with the Board's approval,
exercises its discretion to provide a cancellation notice with respect to the
Option pursuant to Section 9(b) hereof. For this purpose, the term "Change in
Control" shall mean:
(i) Approval by the shareholders of the Company of a
reorganization, merger, consolidation or other form of corporate transaction or
series of transactions, in each case, with respect to which persons who were the
shareholders of the Company immediately prior to such reorganization, merger or
consolidation or other transaction do not, immediately thereafter, own more than
50% of the combined voting power entitled to vote generally in the election of
directors of the reorganized, merged or consolidated company's then outstanding
voting securities, or a liquidation or dissolution of the Company or the sale of
all or substantially all of the assets of the Company (unless such
reorganization, merger, consolidation or other corporate transaction,
liquidation, dissolution or sale is subsequently abandoned); or
(ii) the acquisition (other than from the Company) by
any person, entity or "group", within the meaning of Section 13(d)(e) or
14(d)(2) of the Securities Exchange Act, (excluding, for this purpose, the
Company or its Subsidiaries, or any employee benefit plan of the Company or its
Subsidiaries which acquires beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Securities Exchange Act and excluding Rebank
Netherlands Antilles N.V.)) of 51% or more of either the then outstanding shares
of common stock or the combined voting power of the Company's then outstanding
voting securities entitled to vote generally in the election of directors.
(d) The Committee, with the Board's approval, may in its
discretion, accelerate the date on which any Option may be exercised and may
accelerate the vesting of any Shares subject to any Option or previously
acquired by the exercise of any Option.
9. TERMINATION OF OPTION PERIOD. The unexercised portion of any Option
shall automatically and without notice terminate and become null and void at the
time of the earliest to occur of the following:
(i) three months after the date on which the Optionee's
employment is terminated or, in the case of a Non-Qualified Stock Option, and
unless the Committee, with the Board's approval, shall otherwise determine in
writing in their sole discretion, the date on which the Optionee's
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<PAGE>
employment is terminated, in either case for any reason other than by reason of
(A) cause, which, solely for purposes of this Plan, shall mean the termination
of the Optionee's employment by reason of the Optionee's willful misconduct or
gross negligence, (B) a mental or physical disability (within the meaning of
Internal Revenue Code Section 22(e)) as determined by a medical doctor
satisfactory to the Committee, or (C) death;
(ii) immediately upon the termination of the
Optionee's employment for Cause;
(iii) twelve months after the date on which the
Optionee's employment is terminated by reason of a mental or physical disability
(within the meaning of Internal Revenue Code Section 22(e)) as determined by a
medical doctor satisfactory to the Committee or the Board;
(iv) (A) twelve months after the date of termination
of the Optionee's employment by reason of death of the Optionee, or, if later,
(B) three months after the date on which the Optionee shall die if such death
shall occur during the one year period specified in Subsection 9(a)(iii) hereof.
All references herein to the termination of the Optionee's employment shall, in
the case of a Optionee who is not an employee of the Company or a Subsidiary,
refer to the termination of the Optionee's service with the Company.
(b) To the extent not previously exercised, (i) each Option
shall terminate immediately in the event of (1) the liquidation or dissolution
of the Company, or (2) any reorganization, merger, consolidation or other form
of corporate transaction in which the Company does not survive, unless the
successor corporation, or a parent or subsidiary of such successor corporation,
assumes the Option or substitutes an equivalent option or right pursuant to
Section 10(c) hereof, and (ii) the Committee, with the Board's approval, in its
sole discretion may by written notice ("cancellation notice") cancel, effective
upon the consummation of any corporate transaction described in Subsection
8(c)(i) hereof in which the Company does survive, any Option that remains
unexercised on such date. The Committee, or the Board, shall give written notice
of any proposed transaction referred to in this Section 9(b) a reasonable period
of time prior to the closing date for such transaction (which notice may be
given either before or after approval of such transaction), in order that
Optionees may have a reasonable period of time prior to the closing date of such
transaction within which to exercise any Options that then are exercisable
(including any Options that may become exercisable upon the closing date of such
transaction). An Optionee may condition his exercise of any Option upon the
consummation of a transaction referred to in this Section 9(b).
10. ADJUSTMENT OF SHARES.
(a) If at any time while the Plan is in effect or unexercised
Options are outstanding, there shall be any increase or decrease in the number
of issued and outstanding Shares through the declaration of a stock dividend or
through any recapitalization resulting in a stock split-up, combination or
exchange of Shares, then and in such event:
(i) appropriate adjustment shall be made in the
maximum number of Shares available for grant under the Plan, or available for
grant to any person under the Plan, so that
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<PAGE>
the same percentage of the Company's issued and outstanding Shares shall
continue to be subject to being so optioned; and
(ii) appropriate adjustment shall be made in the number of
Shares and the exercise price per Share thereof then subject to any outstanding
Option, so that the same percentage of the Company's issued and outstanding
Shares shall remain subject to purchase at the same aggregate exercise price.
(b) Unless otherwise provided in any Option, the Committee,
with the Board's approval, may change the terms of Options outstanding under
this Plan, with respect to the option price or the number of Shares subject to
the Options, or both, when, in the Committee's, judgement, with the Board's
approval, such adjustments become appropriate so as to preserve but not increase
benefits under the Plan.
(c) In the event of a proposed sale of all or substantially
all of the Company's assets or any reorganization, merger, consolidation or
other form of corporate transaction in which the Company does not survive, where
the securities of the successor corporation, or its parent company, are issued
to the Company's shareholders, then the successor corporation or a parent of the
successor corporation may, with the consent of the Committee, with the Board's
approval, assume each outstanding Option or substitute an equivalent option or
right. If the successor corporation, or its parent, does not cause such an
assumption or substitution to occur, or the Committee or the Board does not
consent to such an assumption or substitution, then each Option shall terminate
pursuant to Section 9(b) hereof upon the consummation of sale, merger,
consolidation or other corporate transaction.
(d) Except as otherwise expressly provided herein, the
issuance by the Company of shares of its capital stock of any class, or
securities convertible into shares of capital stock of any class, either in
connection with a direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made to, the number of or exercise price
for Shares then subject to outstanding Options granted under the Plan.
(e) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate (i)
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business; (ii) any merger or
consolidation of the Company; (iii) any issue by the Company of debt securities,
or preferred or preference stock that would rank above the Shares subject to
outstanding Options; (iv) the dissolution or liquidation of the Company; (v) any
sale, transfer or assignment of all or any part of the assets or business of the
Company; or (vi) any other corporate act or proceeding, whether of a similar
character or otherwise.
11. TRANSFERABILITY OF OPTIONS AND SHARES.
(a) No Incentive Stock Option, and unless the prior written
consent of the Committee or the Board is obtained and the transaction does not
violate the requirements of Rule 16b-3 promulgated under the Securities Exchange
Act no Non-Qualified Stock Option, shall be subject to alienation, assignment,
pledge, charge or other transfer other than by the Optionee by will
- 7 -
<PAGE>
or the laws of descent and distribution, and any attempt to make any such
prohibited transfer shall be void. Each Option shall be exercisable during the
Optionee's lifetime only by the Optionee, or in the case of a Non-Qualified
Stock Option that has been assigned or transferred with the prior written
consent of the Committee, with the Board's approval, only by the permitted
assignee.
(b) Unless the prior written consent of the Committee, with
the Board's approval, is obtained and the transaction does not violate the
requirements of Rule 16b-3 promulgated under the Securities Exchange Act, no
Shares acquired by an Officer or Director pursuant to the exercise of an Option
may be sold, assigned, pledged or otherwise transferred prior to the expiration
of the six-month period following the date on which the Option was granted.
12. ISSUANCE OF SHARES.
(a) Notwithstanding any other provision of this Plan, the
Company shall not be obligated to issue any Shares unless it is advised by
counsel of its selection that it may do so without violation of the applicable
Federal and State laws pertaining to the issuance of securities, and may require
any stock so issued to bear a legend, may give its transfer agent instructions,
and may take such other steps, as in its judgment are reasonably required to
prevent any such violation.
(b) As a condition to any sale or issuance of Shares upon
exercise of any Option, the Committee, with the Board's approval, may require
such agreements or undertakings as the Committee, with the Board's approval, may
deem necessary or advisable to facilitate compliance with any applicable law or
regulation including, but not limited to, the following:
(i) a representation and warranty by the Optionee to
the Company, at the time any Option is exercised, that he is acquiring the
Shares to be issued to him for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares; and
(ii) a representation, warranty and/or agreement to
be bound by any legends endorsed upon the certificate(s) for such Shares that
are, in the opinion of the Committee or the Board, necessary or appropriate to
facilitate compliance with the provisions of any securities laws deemed by the
Committee or the Board to be applicable to the issuance and transfer of such
Shares.
13. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by a committee appointed by
the Board (the "Committee") which shall be composed of two or more Directors all
of whom shall be Outside Directors. The membership of the Committee shall be
constituted so as to comply at all times with the applicable requirements of
Rule 16b-3 promulgated under the Securities Exchange Act and Section 162(m) of
the Internal Revenue Code. The Committee shall serve at the pleasure of the
Board and shall have the powers designated herein and such other powers as the
Board may from time to time confer upon it.
(b) The Board may grant Options pursuant to this Plan to
Directors who are not employees of the Company or any Subsidiary and/or other
persons to whom Options may be granted under Section 5(a) hereof.
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<PAGE>
(c) The Committee, with the Board's approval, from time to
time, may adopt rules and regulations for carrying out the purposes of the Plan.
The determinations by the Committee and the Board, and the interpretation and
construction of any provision of the Plan or any Option by the Committee and the
Board, shall be final and conclusive.
(d) Any and all decisions or determinations of the Committee
shall be made either (i) by a majority vote of the members of the Committee at a
meeting or (ii) without a meeting by the written approval of the majority of the
members of the Committee.
14. WITHHOLDING OR DEDUCTION FOR TAXES. If at any time specified herein
for the making of any issuance or delivery of any Option or Common Stock to any
Optionee or beneficiary, any law or regulation of any governmental authority
having jurisdiction in the premises shall require the Company to withhold, or to
make any deduction for, any taxes or take any other action in connection with
the issuance or delivery then to be made, such issuance or delivery shall be
deferred until such withholding or deduction shall have been provided for by the
Optionee or beneficiary, or other appropriate action shall have been taken.
15. INTERPRETATION.
(a) As it is the intent of the Company that the Plan comply in
all respects with Rule 16b-3 promulgated under the Securities Exchange Act
("Rule 16b-3"), any ambiguities or inconsistencies in construction of the Plan
shall be interpreted to give effect to such intention, and if any provision of
the Plan is found not to be in compliance with Rule 16b-3, such provision shall
be deemed null and void to the extent required to permit the Plan to comply with
Rule 16b-3. The Committee, with the Board's approval, may from time to time
adopt rules and regulations under, and amend, the Plan in furtherance of the
intent of the foregoing.
(b) The Plan shall be administered and interpreted so that all
Incentive Stock Options granted under the Plan will qualify as Incentive Stock
Options under Section 422 of the Internal Revenue Code. If any provision of the
Plan should be held invalid for the granting of Incentive Stock Options or
illegal for any reason, such determination shall not affect the remaining
provisions hereof, but instead the Plan shall be construed and enforced as if
such provision had never been included in the Plan.
(c) This Plan shall be governed by the laws of the State of
Florida.
(d) Headings contained in this Plan are for convenience only
and shall in no manner be construed as part of this Plan.
(e) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.
16. AMENDMENT AND DISCONTINUATION OF THE PLAN. The Committee, with the
Board's approval, or the Board, may from time to time amend, suspend or
terminate the Plan or any Option; provided, however, that, any amendment to the
Plan shall be subject to the approval of the Company's shareholders if such
shareholder approval is required by any federal or state law or regulation
(including, without limitation, Rule 16b-3 or to comply with Section 162(m) of
the Internal Revenue Code) or the rules of any Stock exchange or automated
quotation system on which the Common Stock may then be
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<PAGE>
listed or granted. Except to the extent provided in Sections 9 and 10 hereof, no
amendment, suspension or termination of the Plan or any Option issued hereunder
shall substantially impair the rights or benefits of any Optionee pursuant to
any Option previously granted without the consent of the Optionee.
17. EFFECTIVE DATE AND TERMINATION DATE. The effective date of the Plan
is January 1, 1998, and the Plan shall terminate on December 31, 2007. The Plan
shall be submitted to the shareholders of the Company for their approval and
adoption and Options hereunder may be granted prior to such approval and
adoption but contingent upon such approval and adoption.
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EXHIBIT 10.3
BANK SOFTWARE LICENSE AND DEVELOPMENT AGREEMENT
----------------------------
Among
Filanbanco S.A.
Infordatos S.A.
and
Republic National Bank of Miami
----------------------------
Dated as of February 12, 1994
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
PAGE
----
<S> <C>
Introduction......................................................................................................1
Recitals..........................................................................................................1
ARTICLE I Defined Terms..........................................................................................2
SECTION 1.01. Defined Terms..........................................................................2
ARTICLE II License of Microsoft Select Software Projects..........................................5
SECTION 2.01. License From Filanbanco to Republic of Microsoft Select Software Products; New
Enrollments; Additional Copies.........................................................5
SECTION 2.02. Quarterly Enrollment Reporting; Payments by Republic and Filanbanco....................7
SECTION 2.03. Microsoft Services; Maintenance of Microsoft Licensed Software.........................8
SECTION 2.04. Copying Licensed Software Products Prohibited; Confidentiality of Microsoft
Agreements.............................................................................9
SECTION 2.05. Filanbanco's Warranty as to Microsoft Agreements and Filanbanco's Authority to
License Microsoft Select Software Products.............................................9
SECTION 2.06. Filanbanco's Warranty Against Software Infringement: Indemnity.........................9
SECTION 2.07. Filanbanco's Disclaimer of All Other Warranties with Respect to Microsoft
Licensed Software.....................................................................10
SECTION 2.08. Voluntary Termination of License by Republic; Reconveyance to Filanbanco..............11
SECTION 2.09. Intent of Sections 2.01 and 2.03 of This Agreement....................................11
ARTICLE III Joint Development of SABI (USA) System................................................11
SECTION 3.01. Teller Software System - Phase A......................................................11
(a) Feasibility Study by Parties; Background..........................................11
(b) Detailed Plan of Phase A: Elements of Phase, Phase Start Date, Phase
Managers and Personnel Assigned, Responsible Personnel, Situs of Work and
Completion Dates of Elements of Phase.............................................13
(c) Teller Software System Specifications; Programming Work...........................14
(d) Testing and Approval Process; Acceptance; Implementation..........................14
(e) Payments by Republic..............................................................14
(f) Ownership of Teller Software System; Quitclaim Conveyance by Republic to
Filanbanco........................................................................15
(g) License by Filanbanco to Republic of Teller Software System.......................15
(h) Filanbanco's Warranty Against Software infringement indemnity.....................17
(i) Filanbanco's Disclaimer of All Other Warranties with Respect to the
Teller Software-System and Components thereof.....................................18
(j) Voluntary Termination of License by Republic; Reconveyance to Filanbanco..........18
i
<PAGE>
SECTION 3.02. Other Applications - Subsequent Phases................................................19
SECTION 3.03. Force Majeure.........................................................................20
ARTICLE IV Future Upgrades, Improvements and Enhancements of SABI (USA) ...........................
Systems;Modifications; Cooperation Among Parties......................................20
SECTION 4.01. Future Upgrades, Improvements and Enhancements of SABI (USA) System;
Modifications; Cooperation Among Parties..............................................20
ARTICLE V Change of Control of Republic; Continuation of License; Voluntary ......................
Termination of SABI (USA) Licenses by Republic; Reconveyance to ........................
Filanbanco............................................................................21
SECTION 5.01. Change of Control of Republic; Continuation/ Termination of Licenses..................21
SECTION 5.01 Voluntary Termination of SABI (USA) System License(s) by Republic;
Reconveyance to Filanbanco............................................................22
ARTICLE VI Patent, Trademark and Copyright Registration Obligations..............................23
SECTION 6.01. Affixation of Copyright Notice an System Media........................................23
SECTION 6.02. Patent, Trademark and Copyright Protection in the United States and Florida...........23
SECTION 6.03. Patent, Trademark and Copyright Protection in Ecuador.................................24
ARTICLE VII Consent by Filanbanco.................................................................25
SECTION 7.01. Consent by Filanbanco.................................................................25
ARTICLE VIII Compliance with Rederal Reserve Act...................................................25
SECTION 8.01. Compliance with Federal Reserve Act...................................................25
ARTICLE IX Confidentiality.......................................................................26
SECTION 9.01. Confidentiality.......................................................................26
ARTICLE X Consent to Jurisdiction...............................................................27
SECTION 10.01. Filanbanco Consent to Jurisdiction....................................................27
ARTICLE XI Miscellaneous.........................................................................27
SECTION 11.01. No Waiver.............................................................................28
SECTION 11.02. Amendments/Waivers in Writing.........................................................28
SECTION 11.03. Notices...............................................................................28
SECTION 11.04. English Language/Dollar Values to Control.............................................29
SECTION 11.05. Binding Effect; Assignments not Permitted.............................................30
SECTION 11.06. Governing Law.........................................................................30
SECTION 11.07. Severability of Provisions............................................................30
SECTION 11.08. Headings..............................................................................30
SECTION 11.09. Execution in Counterparts.............................................................30
TESTIMONIUM .....................................................................................................
EXECUTION........................................................................................................
</TABLE>
ii
<PAGE>
BANK SOFTWARE LICENSE AND DEVELOPMENT AGREEMENT
This Agreement dated as of February 12, 1994, by and between FILANBANCO
S.A., a banking corporation organized under the laws of the Republic of Ecuador
(hereinafter called "FILANBANCO"), INFORDATOS S.A., a bank service company
organized under the laws of the Republic of Ecuador and a wholly-owned
subsidiary of Filanbanco (hereinafter called "Infordatos"), and REPUBLIC
NATIONAL BANK OF MIAMI, a national banking association organized under the laws
of the United States of America (hereinafter called "REPUBLIC"),
W I T N E S S E T H:
WHEREAS, by virtue of common ownership, Filanbanco and Infordatos on
the one hand and Republic on the other are affiliated corporations; and
WHEREAS, the parties wish to collaborate in the development of a fully
integrated bank software system for use in Republic's business operations and
for marketing in the United States, having applications to the teller function
and, possibly, other commercial banking functions and to be known as the "SABI
(USA) System"; and
WHEREAS, Filanbanco is a party to agreements with Microsoft Corporation
under which Filanbanco is entitled to obtain licenses to use certain Microsoft
Select Software Products useful in the development and operation of an
integrated bank software system and to sublicense such Products to its
affiliates (including Republic), and to receive the benefit of volume pricing
with respect to Microsoft Select Software Products which it licenses and
sublicenses, and Filanbanco is willing to extend the benefits of such agreements
with Microsoft Corporation to Republic under this Agreement; and
WHEREAS, the parties have heretofore met and agreed as to the
feasibility of the project, to a detailed plan for the development of an
integrated bank teller software system as Phase A of the project, and to target
dates for the completion of the various elements of Phase A, and have assigned
personnel within their respective organizations as having specified
responsibilities in connection with the Phase A development work, and are
entering into this Agreement for the purpose of providing for the grant by
Filanbanco to Republic of licenses to Microsoft Select Software Products
selected by Republic for use in connection with the project and setting forth
the terms and conditions under which the Phase A teller system and, perhaps,
other bank software systems will be developed and implemented by the parties;
and
WHEREAS, it is contemplated that Filanbanco will be the owner of any
software product(s) developed by the parties hereunder and included in the SABI
(USA) System upon completion of the project, and that Republic will receive a
royalty free, nonexclusive, perpetual license to use such software products in
its business at locations in the United States and other countries in which
Republic may at any time and from time to time have an authorized branch;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINED TERMS. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"AGREEMENTS WITH MICROSOFT" means the Microsoft Select Master Agreement
and the Microsoft Select Enrollment Agreement, collectively.
"BUSINESS DAY" means a day on which both Filanbanco and Republic are
open to the general public for the purpose of carrying on substantially all of
their banking functions at their respective main offices.
"CHANGE OF CONTROL" has the meaning assigned to that term in Section
5.01 of this Agreement.
"CONFIDENTIAL INFORMATION" has the meaning assigned to that term in
Section 9.01 hereof.
"DOLLAR" and the sign "$" mean lawful money of the United States of
America.
"DOS" means Disk Operating System.
"EXHIBIT A" means Exhibit A attached to this Agreement and hereby made
a part of this Agreement.
"EXHIBIT B" means Exhibit B attached to this Agreement and hereby made
a part of this Agreement, as said Exhibit may be supplemented from time to time
pursuant to Section 2.01 of this Agreement.
"EXHIBIT B-1" means Exhibit B-1 attached to this Agreement and hereby
made a part of this Agreement.
"EXHIBIT C" means Exhibit C attached to this Agreement and hereby made
a part of this Agreement, as said Exhibit may be supplemented from time to time
pursuant to Section 3.01(b) of this Agreement.
"EXHIBIT C-1" means Exhibit C-1 attached to this Agreement and hereby
made a part of this Agreement.
"EXHIBIT C-2" means Exhibit C-2 attached to this Agreement and hereby
made a part of this Agreement.
"EXHIBIT D" means Exhibit D attached to this Agreement and hereby made
a part of this Agreement, as said Exhibit may be supplemented from time to time
pursuant to Section 3.01(c) of this Agreement.
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<PAGE>
"EXHIBIT D-1" means Exhibit D-1 attached to this Agreement and hereby
made a part of this Agreement.
"EXHIBIT E" means Exhibit E attached to this Agreement and hereby made
a part of this Agreement.
"EXHIBIT F" means Exhibit F attached to this Agreement and hereby made
a part of this Agreement, as said Exhibit may be supplemented from time to time
pursuant to Section 3.01(g) of this Agreement.
"EXHIBIT F-1" means Exhibit F-1 attached to this Agreement and hereby
made a part of this Agreement.
"FILANBANCO" has the meaning assigned to that term in the introduction
to this Agreement.
"IBM" means International Business Machines Corporation, a New York
Corporation, USA.
"INFORDATOS" has the meaning assigned to that term in the introduction
to this Agreement.
"INTELLECTUAL PROPERTY RIGHTS AGREEMENT" means that certain agreement
between the Government of the United States of America and the Government of
Ecuador dated October 15, 1993, entitled "Agreement Concerning the Protection
and Enforcement of Intellectual Property Rights Between the Government of the
United States of America and the Government of Ecuador", as the same may at any
time and from time to time be amended or supplemented and in effect.
"LARGER ACCOUNT RESELLER" means the organization named and acting from
tine to time as the "Large Account Reseller" under the Microsoft Select
Enrollment Agreement, currently Maint Cia Ltda, a Ecuadorian Company.
"MEMBER BANK" has the meaning assigned to that term in Section 8.01 of
this Agreement.
"MICROSOFT" means Microsoft Corporation, a Washington corporation,
having its principal office in the United States on the date of this Agreement
at One Microsoft Way, Redwood, Washington, USA 98052-6399.
"MICROSOFT AGREEMENTS" means the Microsoft Select Master Agreement and
the Microsoft Select Enrollment Agreement, collectively.
"MICROSOFT LICENSED SOFTWARE" or "LICENSED SOFTWARE" means, at the time
any reference thereto is made, the software products then subject to the license
from Filanbanco to Republic under Section 2.01 hereof, whether or not any such
software product is then described
-3-
<PAGE>
on Exhibit B or any supplement to Exhibit B added to this Agreement pursuant to
Section 2.01 of this Agreement.
"MICROSOFT SELECT ENROLLMENT AGREEMENT" means that certain agreement
entitled "Microsoft Select Enrollment Agreement" and assigned Select Agreement
Number 27-00003, between Filanbanco and Microsoft, a true and correct copy of
which as initially in effect is attached to this Agreement as Exhibit A, by
which, among other things, Filanbanco, as "Select Customer", (i) designated
Republic as a "Lead Customer Affiliate" to acquire licenses from Filanbanco to
Microsoft Select Software Products covered by the Microsoft Variable License Pak
and the Microsoft Variable License Pak for Maintenance available under the
Microsoft Select Master Agreement, and (ii) enrolled, under the Microsoft
Variable License Pak for Maintenance see definition of Microsoft Select Master
Agreement, the Microsoft Select Software Products licensed or to be licensed by
Filanbanco in the Applications, Systems and Server product pools, as said
agreement may at any time and from time to time be amended or modified and in
effect.
"MICROSOFT SELECT MASTER AGREEMENT" means that certain agreement
entitled "Microsoft Select Master Agreement" and assigned Select Agreement
Number 27-00003, between Filanbanco and Microsoft, a true and correct copy of
which as initially in effect is attached to this Agreement as Exhibit A, by
which, among other things, Filanbanco, as "Lead Customer", designated Republic
to become a "Select Customer" entitled, under the agreement, to acquire licenses
to use and reproduce one or more Microsoft Select Software Products covered by
the so-called "Microsoft Variable License Pak" and the "Microsoft Variable
License Pak for Maintenance" available under the agreement, as said agreement
may at any time and from time to time be amended or modified and in effect. The
Microsoft Variable License Pak covers application software products, system
software products and server software products. The Microsoft Variable License
Pak for Maintenance allows the Select Customer to receive certain successor
products and certain product and maintenance upgrades from Microsoft with
respect to software products which the Select Customer "enrolls" under an
enrollment agreement entered into with Microsoft, upon payment of a fixed and
non-cancelable fee payable under the enrollment agreement.
"MVLP SOFTWARE PRODUCTS" has the meaning assigned to that term in
Section 2.01 of this Agreement.
"ONLINE SIGNATURE SOFTWARE" means the OnLine Signature Software
licensed to Republic by Filanbanco pursuant to the OnLine Signature Software
License and Development Agreement.
"ONLINE SIGNATURE SOFTWARE LICENSE AND DEVELOPMENT AGREEMENT" means
that certain agreement entitled "OnLine Signature Software License and
Development Agreement" dated as of February 12, 1994 between and among
Filanbanco, Infordatos and Republic, providing, among other things, for a
license to Republic of OnLine Signature Software owned by Filanbanco and for the
further development of said software by the parties for use in Republic's
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business, as said agreement may at any time and from time to time be amended or
modified and in effect.
"ORIGINAL VERSION OF DETAILED PLAN OF PHASE A" has the meaning assigned
to that term in Section 3.01(b) hereof.
"PERSON" means a natural person or a trust, estate, partnership,
corporation unincorporated association, joint venture, joint stocks company,
government (or any agency or subdivision of any government) or other entity of
any kind, domestic or foreign.
"PERIPHERAL EQUIPMENT" means the disk drives, tape drives, servers,
interfaces, modems, monitors, console printers, remote printers and other items
of equipment used on or in connection with the Republic Host Mainframe.
"PHASE A ACCEPTANCE DATE" has the meaning assigned to that term in
Section 3.01(d) hereof.
"PHASE ACCEPTANCE DATE" means the date of acceptance by Republic of a
bank software program developed by the parties under Article III of this
Agreement, including the Phase A Acceptance Date.
"REPUBLIC" has the meaning assigned to that term in the introduction to
this Agreement.
"SABI PROJECT" means the computer software development project
contemplated by Article III of this Agreement.
"SABI (USA) SYSTEM" means the integrated bank software system developed
and to be developed by the parties under Article III of this Agreement and
assigned the trade name "SABI (USA) System" by Filanbanco as owner of the
System.
"TELLER SYSTEM LICENSED SOFTWARE" means, at any time any reference
thereto is made, the Teller Software System applications, modules and
enhancements then subject to the license from Filanbanco under Section 3.01(g)
hereof, whether or not any such software product is then described on Exhibit F
or any supplement to Exhibit F added to this Agreement pursuant to Section
3.01(g) of this Agreement.
"UNITED STATES" or "USA" means the United States of America and its
territories.
ARTICLE II
LICENSE OF MICROSOFT SELECT SOFTWARE PRODUCTS
SECTION 2.01. LICENSE FROM FILANBANCO TO REPUBLIC OF MICROSOFT SELECT
SOFTWARE PRODUCTS; NEW ENROLLMENTS; ADDITIONAL COPIES.
Subject to the provisions of Section 5.01 of this Agreement, Filanbanco
hereby grants to Republic a non-exclusive, perpetual license to use the
Microsoft Select Software Products listed
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on Exhibit B (as said Exhibit may be supplemented from time to time as
hereinafter provided) in its business at locations in the United States and
other countries in which Republic may at any time and from time to time have an
authorized office or branch, including all successor products and product and
maintenance upgrades issued by Microsoft from time to time with respect to such
licensed Software Products, effective as of the "Effective Date" specified in
Exhibit 1B or relevant supplement thereto, and otherwise in accordance with the
further provisions of this Section.
Filanbanco shall provide the Microsoft Licensed Software to Republic in
the form (CD-ROM disks, 3.5" floppy disks or other media) supplied to Filanbanco
under the Microsoft Select Master Agreement by Microsoft or by the Large Account
Reseller, promptly following the "Effective Date" specified in Exhibit B or the
relevant supplement to Exhibit B.
The Microsoft Licensed Software may be used only on an IBM Personal
Computer, utilizing a DOS or Windows operating system, or on compatible computer
hardware utilizing a DOS or Windows operating system.
During the term of the Microsoft Agreements, Republic may order from
Filanbanco (i) new Microsoft Select Software Products covered by the Microsoft
Variable License Pak (such Software Products being herein sometimes referred to
as "MVLP SOFTWARE PRODUCTS") and included in any of the three product pools:
Applications Products, Systems Products and Server Products, and/or (ii)
additional copies of MVIP Software products already subject to the license
granted by Filanbanco under this Section 2.01, by executing and sending to
Filanbanco, in triplicate, in the English language and consecutively numbered
(e.g., B-1, B-2, etc.), a supplement to Exhibit B in the form of Exhibit B-1
hereto, completed in accordance with the form except as to "Effective Date".
Promptly following Filanbanco's receipt of such supplement to Exhibit
B, Filanbanco will obtain a license to any such new MVLP Software Product(s)
from Microsoft or the Large Account Reseller, or will reproduce the MVLP
Software Product(s) already on license to Republic under this Section and as to
which Republic has ordered an additional copy or additional copies, and send
such new products and/or additional copies to Republic in the form of CD-ROM
disks or 3.5" floppy disks, as applicable, together with one copy of the
supplement to Exhibit B signed an behalf of Filanbanco by Filanbanco's Project
Manager for the SABI Project and completed as to "Effective Date" with the date
on which such new product(s), additional copy(ies) and supplement are mailed or
personally delivered to Republic, as the case may be. Upon receipt by Republic
from Filanbanco of a fully completed and signed copy of the relevant supplement
to Exhibit B, this Agreement shall be amended and supplemented as to Exhibit B
as provided in the relevant supplement effective as of the "Effective Date"
specified therein. From and after the "Effective Date" of any such supplement,
each reference in this Agreement to "this Agreement", and the terms "hereof",
"hereby", "hereunder" and words of similar import used herein, shall be deemed
to be references to this Agreement as amended and supplemented by such
supplement.
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Filanbanco shall promptly deliver to Republic hereunder, in the form
(CD-ROM disks, 3.5" floppy disks or other media) supplied to Filanbanco under
the Microsoft Select Master Agreement by Microsoft or by the Large Account
Reseller, reproductions of any successor or upgrade product(s) received from
Microsoft or the Large Account Reseller relating to any Microsoft Licensed
Software, which successor or upgrade product shall, ipso facto, become subject
to the license to Republic under this section 2.01 upon delivery of such
successor or upgrade product(s) to Republic, without the necessity for the
execution and delivery by Filanbanco of any further or other document,
instrument or paper.
In addition, Filanbanco shall provide to Republic, at the time of
delivery to Republic of the first copy of any disk containing any Microsoft
Select Software Product becoming subject to the license under this Section 2.01
and without charge to Republic, at least one (1) copy of the current user
manual(s) published by Microsoft with respect to such Software Product, and
shall provide further copies of any such user manual(s) ordered by Republic at
Filanbanco's cost.
No title to or ownership of any Microsoft Licensed Software is
transferred to Republic under this Agreement, and such title or ownership shall
at all times remain in Microsoft or other rightful owner.
Republic shall not make any Microsoft Licensed Software or related user
manual(s) available in any form to any Person not a party to this Agreement (i)
except in the circumstances described in clauses (c), (d), (e) and (f) of
Section 9.01 hereof, (ii) except to Microsoft, its employees and agents
rendering product support services, and (iii) except to employees and agents of
the parties concerned with Republic's licensed use of such Licensed Software or
the operation of Republic's Host Mainframe and/or any related Peripheral
Equipment, to the extent such employees and agents of the parties have a need to
know of such matters.
Filanbanco may terminate the license granted to Republic under this
Section, and require Republic to return all disks containing Microsoft Licensed
Software and related user manual(s), if Republic shall fail to comply with the
penultimate paragraph of this Section 2.01 or with Section 2.04 of this
Agreement.
SECTION 2.02. QUARTERLY ENROLLMENT REPORTING; PAYMENTS BY REPUBLIC AND
FILANBANCO
Within seven (7) days from the last day of each calendar quarter during
the term of the Microsoft Select Enrollment Agreement, and within seven (7) days
from the date of termination of said Enrollment Agreement, Republic shall
deliver to Filanbanco, by air courier, a report, in both written and electronic
form as prescribed by Microsoft, setting forth the number of new MVLP Software
Products, and/or additional copies of existing Microsoft Licensed Software, that
Republic acquired from or through Filanbanco during such calendar quarter,
together with Republic's check, payable in Dollars, for the sum of the Microsoft
purchase prices payable with respect to such new MVLP Software Products and/or
additional copies so acquired, as such prices are set forth, in Dollars, on the
latest update of the Microsoft Select Ecuador-Peru Price List attached to the
Microsoft Select Enrollment Agreement or subsequently supplied to Republic by
Filanbanco.
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Within fifteen (15) days from the last day of each calendar quarter
during the term of the Microsoft Select Enrollment Agreement, and within fifteen
(15) days from the date of termination of said Enrollment Agreement, Filanbanco
shall deliver to Microsoft or the Large Account Reseller (as applicable) a
report, in both written and electronic form as prescribed by Microsoft, setting
forth the number of new licenses, by MVLP Software Product and version number,
and/or additional copies of previously licensed MVLP Software Products, acquired
by Filanbanco from Microsoft or the Large Account Reseller (as applicable)
during such calendar quarter, as well as information regarding licenses to MVLP
Software Products which have been acquired and transferred outside of Ecuador by
Filanbanco or sublicensed to one or more Lead Company Affiliates of Filanbanco
(including any sublicenses of MVLP Software Products granted by Filanbanco to
Republic under Section 2.01 hereof) pursuant to the Microsoft Select Master
Agreement, and shall remit to Microsoft, or to said Large Account Reseller, as
applicable, the sum of the Microsoft purchase prices payable with respect to
such new licenses and/or additional copies of MVLP Software Products, to the end
that Filanbanco shall not be in breach of the Microsoft Select Enrollment
Agreement and thereby provide Microsoft with grounds for termination of said
Enrollment Agreement and the Microsoft Variable License Pak selected by
Filanbanco under the Microsoft Select Master Agreement.
SECTION 2.03. MICROSOFT SERVICES; MAINTENANCE OF MICROSOFT LICENSED
SOFTWARE
In accordance with Section 8(a) of the Microsoft Select Master
Agreement, Republic, as a "Select Customer" designated by Filanbanco under said
Master Agreement, shall be entitled to receive the same free product support
services (excluding free telephone support), if any, as are generally available
from Microsoft to retail customers in the area in which Republic is located.
Accordingly, promptly following the date of execution and delivery by the
parties of this Agreement, Filanbanco's Phase A Project: Manager, Sr. Alfredo
Ochoa Espinosa, shall arrange, through Microsoft's Select Account Manager in
Ecuador, Sr. Alejandro Voysest, for Republic's full participation in the
Microsoft Select program for account administration purposes, to include the
receipt by Republic under the program of, among other things, advice on
education and training offerings by or through Microsoft and assistance with
problem situations concerning any Microsoft Licensed Software.
In addition, as a "Select Customer" designate under the Microsoft
Select Master Agreement, and by virtue of the Microsoft Select Enrollment
Agreement entered into by Filanbanco with Microsoft, Republic shall be entitled,
and has been enrolled, to receive any and all successor or upgrade products
released by Microsoft with respect to the MVLP Software Products enrolled by
Filanbanco under the Microsoft Variable License Pak for Maintenance Addendum
attached to the Microsoft Select Master Agreement. Pursuant to Section 5 of said
Addendum, any such product upgrades applicable to Microsoft Licensed Software
are to be delivered to Republic, as such designated "Select Customer", via media
sets distributed by Microsoft.
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SECTION 2.04. COPYING LICENSED SOFTWARE PRODUCTS PROHIBITED;
CONFIDENTIALITY OF MICROSOFT AGREEMENT.
In accordance with Section 9 of the Microsoft Select Master Agreement,
Republic shall use all reasonable efforts to make its employees, agents and
other individuals using Microsoft Licensed Software aware of the fact that such
Products are licensed from Microsoft; that such Products may only be used
subject to the terms of the license(s) contained in the Microsoft Variable
License Pak covering such Product(s); and that such Products may not be copied,
transferred or otherwise used in violation of such licenses. With each Microsoft
Select Software Product initially licensed under Section 2.01 of this Agreement,
Filanbanco shall provide Republic with the terms of the license contained in the
Microsoft Variable License Pak governing such licensed Product.
In accordance with Section 12(b) of the Microsoft Select Master
Agreement, Republic hereby acknowledges that the terms and conditions of said
Master Agreement and the Microsoft Select Enrollment Agreement related thereto
are confidential and may not be disclosed to any Person not a party to this
Agreement other than Republic's officers and employees, Republic's affiliates
(including Filanbanco and Infordatos), their agents and employees, the "Large
Account Reseller" designated in the Microsoft Select Enrollment Agreement and
the distributor of said Large Account Reseller.
SECTION 2.05. FILANBANCO'S WARRANTY AS TO MICROSOFT AGREEMENTS AND
FILANBANCO'S AUTHORITY TO LICENSE MICROSOFT SELECT SOFTWARE PRODUCTS
As an inducement to Republic to enter into this Agreement and to accept
licenses from Filanbanco of Microsoft Select Software Products hereunder,
Filanbanco hereby represents and warrants to Republic that the Microsoft Select
Master Agreement and the Microsoft Select Enrollment Agreement are or were each
in full force and effect as of the date of this Agreement, and that Filanbanco
is not in default or breach under either of said Agreements or any Addendum
thereto.
Subject to Section 2.09 hereof, Filanbanco further represents and
warrants to Republic that Filanbanco has good right and lawful authority to
license the Microsoft Select Software Products licensed to Republic hereunder,
and/or to reproduce Microsoft Select Software Products for licensing to Republic
hereunder, in the manner and for the purposes hereby done or contemplated.
SECTION 2.06. FILANBANCO'S WARRANTY AGAINST SOFTWARE INFRINGEMENT:
INDEMNITY
As an inducement to Republic to enter into this Agreement and to accept
licenses from Filanbanco of Microsoft Select Software Products hereunder,
Filanbanco hereby represents and warrants to Republic that, when licensed,
delivered, installed and operating on the computer equipment specified in
Section 2.01 hereof, the use by Republic for the purposes contemplated by this
Agreement of any Microsoft Licensed Software will not infringe or violate any
patent, copyright, trade secret or other proprietary right of any Person not a
party to this Agreement.
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Filanbanco shall defend, at its own expense, any claim or suit brought
against Republic alleging that Republic's use of any Microsoft Licensed Software
(or any component thereof) for the purposes contemplated by this Agreement
infringes or has infringed or violates or has violated any patent, copyright,
trade secret or other proprietary right of any Person not a party to this
Agreement, and shall pay all costs and damages, if any, finally awarded against
Republic in any such suit; PROVIDED that Filanbanco is given prompt written
notice by Republic of the assertion of any such claim and the commencement of
any such suit and is given information, reasonable assistance and the sole
authority to defend or settle such claim or suit; AND, PROVIDED, FURTHER, that
no settlement of any such claim or suit that would affect in any way any right,
power, privilege or remedy of Republic with respect to any matter or thing other
than Republic's use of Microsoft Select Software Products shall be entered into
by Filanbanco without the prior written approval of Republic.
In the defense or settlement of any such claim or suit, Filanbanco may
obtain for Republic the right to continue the use of the Microsoft Licensed
Software which is the subject of such claim or suit, or may replace or modify
such Software (or any component thereof) so that it becomes non-infringing, or,
if such remedies are not reasonably available to Filanbanco, may grant Republic
a refund of the purchase price paid by Republic for its license to use the
Microsoft Licensed Software (or component thereof) found to be infringing or in
violation of any patent, copyright, trade secret or other proprietary right of
any Person not a party to this Agreement, upon the return to Filanbanco of the
Licensed Software (or component thereof) found to be so infringing or violative
of any such patent, copyright, trade secret or other proprietary rights. In the
event that substantially all of the Microsoft Licensed Software is found to be
infringing or violative of the patent, copyright, trade secret or other
proprietary rights of any Person not a party to this Agreement, and Filanbanco
is unable to obtain for Republic the right to continue the use of such Software
or to replace or modify the same so that it becomes non-infringing, then
Filanbanco will refund the purchase price previously paid by Republic for all
Microsoft Licensed Software then subject to this Agreement, upon the return to
Filanbanco by Republic of all such Licensed Software and all related user
manual(s) then in Republic's possession.
The obligations of Filanbanco and Republic under this Section 2.06
shall survive the termination of this Agreement and any license granted
hereunder to any Microsoft Select Software Product.
SECTION 2.07. FILANBANCO'S DISCLAIMER OF ALL OTHER WARRANTIES WITH
RESPECT TO MICROSOFT LICENSED SOFTWARE
EXCEPT FOR THE EXPRESS WARRANTIES OF FILANBANCO CONTAINED IN SECTION
2.05 HEREOF, FILANBANCO HEREBY DISCLAIMS ANY AND ALL WARRANTIES WITH RESPECT TO
MICROSOFT SELECT SOFTWARE PRODUCTS (AND ANY AND ALL COMPONENTS THEREOF) AT ANY
TIME SUBJECT OR BECOMING SUBJECT TO THIS AGREEMENT, INCLUDING WITHOUT
LIMITATION, ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
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SECTION 2.08. VOLUNTARY TERMINATION OF LICENSE BY REPUBLIC;
RECONVEYANCE TO FILANBANCO
Republic shall have the right at any time and from time to time, with
or without cause, to terminate and reconvey to Filanbanco the license granted to
Republic under Section 2.01 of this Agreement with respect to any or all
Microsoft Select Software Products subject or becoming subject to this
Agreement. Any such reconveyance shall be without recourse upon or warranty by
Republic.
In conjunction with any such termination and reconveyance, Republic
shall redeliver to Filanbanco all CD-ROM disks and/or 3.51, floppy disks
containing the Software Products reconveyed and all related user manual(s) in
Republic's possession, whereupon neither Filanbanco nor Republic: shall have any
further obligation or liability to the other with respect to any such Software
Products except with respect to matters arising prior to the effective date of
such termination, reconveyance and redelivery and except with respect to
obligations hereunder (including any indemnities provided for under this
Agreement) stated to survive the termination of this Agreement or any license
hereunder.
SECTION 2.09. INTENT OF SECTIONS 2.01 AND 2.03 OF THIS AGREEMENT
Nothing contained in Section 2.01 or Section 2.03 of this Article II is
intended to grant rights to Republic to obtain and use Microsoft Licensed
Software or MVLP Software Products, or additional copies thereof, or any
successor or upgrade products relating to any Microsoft Licensed Software, or
reproductions thereof, or further copies of any user manuals relating to any of
the foregoing software products, or any free product support services from
Microsoft, or to provide benefits to Republic under the Microsoft Select
program, except as the Microsoft Select Master Agreement or the Microsoft Select
Enrollment Agreement allows for the granting of such rights or benefits to
Republic by Filanbanco, or to impose any obligations on Filanbanco under said
Sections beyond those obligations which Filanbanco can fulfill under the
Microsoft Agreement.
ARTICLE III
JOINT DEVELOPMENT OF SABI (USA) SYSTEM
SECTION 3.01. TELLER SOFTWARE SYSTEM - PHASE A
(A) FEASIBILITY STUDY BY PARTIES; BACKGROUND
During 1992 and 1993, representatives of the parties met in Guayaquil,
Ecuador and Miami, Florida for the purpose of discussing the feasibility of
working together to develop for Republic and for marketing by Filanbanco in the
United States a technologically advanced integrated bank software system,
through the adaptation of a computer bank software system in use by Filanbanco
in Ecuador and marketed in Latin American countries, known in Spanish as
"Sistemas de Aplicaciones Bancarias Integradas" or "SABI".
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From the point of view of Republic, the primary objectives of the
development of a proprietary system were (i) to eliminate reliance by Republic
on outside vendors for bank software products and (ii) to make available to
Republic a flexible bank software package that could be readily adapted to meet
changes in banking regulations in the United States and to provide for
applications to new products and services that were not or might not be
available from outside vendors, thereby containing future software costs and
giving Republic a competitive advantage in its markets. Filanbanco's objective,
on the other hand, was to obtain ownership of a technologically advanced bank
software system jointly developed with Republic for use in the United States
banking market and the benefit of future licensing revenues from licensing the
product in the United States, with Republic to be provided with a non-exclusive,
royalty-free license to use the system in its own business.
From their initial discussions, the parties determined that adaptation
of SABI to fulfill Republic's software needs and United States marketing
expectations was feasible, and a two-phase implementation plan was considered,
consisting of the following two groups of applications:
GROUP ONE
---------
/bullet/ Central Information Files
/bullet/ Platform/Branch Banker
/bullet/ Demand Deposits
/bullet/ Savings Deposits
/bullet/ Certificates of Deposit
/bullet/ Teller Transactions
/bullet/ Automated Teller Machine
/bullet/ General Ledger
GROUP TWO
---------
/bullet/ Commercial Loans
/bullet/ Installment Loans
/bullet/ Mortgage Loans
/bullet/ Credit Line
/bullet/ Investments
/bullet/ Budgets
/bullet/ Cost Accounting
Special applications unique to the United States banking market, as
well as special features requested by Republic, were discussed at meetings
between the parties. It was also initially considered that most of the
development work in connection with the project would be carried out by
Filanbanco and/or Infordatos in Ecuador.
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As discussions progressed through 1993, it was determined in meetings
among the parties held in Guayaquil, Ecuador from November 30, 1993 through
December 2, 1993 that it would be Republic's responsibility to develop product
and operational requirements and the related software design specifications,
utilizing Microsoft software products under a license from Filanbanco
supplemented by software programs obtained by Republic from other software
vendors; that the project would be carried out in three phases, rather than two
phases, with a Teller System (designated as Phase A) to be the first phase; and
that the programming effort, based on Republic developed design specifications,
would be divided between the parties, with Republic bearing the lion's share of
the burden with assistance from Filanbanco and Infordatos.
(B) DETAILED PLAN OF PHASE A: ELEMENTS OF PHASE, PHASE START DATE,
PHASE MANAGERS AND PERSONNEL ASSIGNED, RESPONSIBLE PERSONNEL, SITUS OF WORK AND
COMPLETION DATES OF ELEMENTS OF PHASE.
As a result of the aforesaid meetings among the parties held in
Guayaquil from November 30, 1993 through December 2, 1993, a Detailed Plan of
Phase A, Teller System and OnLine Signature Program (the latter being a
proprietary program licensed by Filanbanco to Republic with which the Teller
System programs will interface) was written in English and Spanish (said
Detailed Plan being herein referred to as the "ORIGINAL VERSION OF THE DETAILED
PLAN OF PHASE A"). A copy of the English version of the Original Version of the
Detailed Plan of Phase A is attached to this Agreement as Exhibit C.
By mutual agreement of the parties, the original version of the
Detailed Plan of Phase A was modified as to target dates as set forth in EXHIBIT
C-1, and to establish, among other things, the start date for Phase A as
February 12, 1994, the date of this Agreement. Reference is made to Exhibit C
for the elements of Phase A, the Phase A start date, the Phase managers and
personnel assigned to work on Phase A at each company, the personnel responsible
for overseeing or supervising completion of the various elements of Phase A at
each company, the situs of the work to be carried out under Phase A and the
projected completion date of the various elements of Phase A, as of the date of
this Agreement.
The Detailed Plan of Phase A set forth on Exhibit C shall govern the
duties and responsibilities of the parties hereunder with respect to the
development of a Teller Software System under this Article III, unless and until
the Detailed Plan of Phase A shall be further modified by the execution and
delivery by the parties, in the English language, of a supplement to Exhibit C
in the form of Exhibit C-2, in which event the duties and responsibilities of
the parties with respect to the Detailed Plan of Phase A shall be governed by
such supplement from and after the "Effective Date" specified therein. From and
after the "Effective Date" of any supplement to Exhibit C executed and delivered
by the parties, this Agreement shall be amended and supplemented as to Exhibit C
as provided in the relevant supplement, which supplement shall become a part of
this Agreement as of such "Effective Date". From and after the "Effective Date"
of any such supplement, each reference in this Agreement to "this Agreement" and
the terms "hereof", "hereby", "hereunder" and words of similar import used
herein, shall be deemed to be references to this Agreement as amended and
supplemented by such supplement.
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(C) TELLER SOFTWARE SYSTEM SPECIFICATIONS; PROGRAMMING WORK
Under the Detailed Plan of Phase A attached hereto as Exhibit C,
Republic has and has had the chief responsibility for developing the detailed
design specifications for the Teller Software System contemplated by the
parties. Such design specifications are to be or were developed by Republic and
circulated to the Infordatos Technical Manager for review and approval by the
target date specified in Exhibit C-1. Said design specifications, as approved by
the parties, are or are to be attached to this Agreement as Exhibit D.
Following approval of the design specifications by the parties, the
parties shall mutually determine their respective responsibilities for carrying
out the programming work with respect to the various applications and modules
comprising the Teller Software System. Such responsibilities shall be or are set
forth on a supplement to Exhibit D and include the delivery date of each such
application or module. Such applications or modules shall include a source code
and object code, be written in the English language and be set forth on CD-ROM
disks or 3.5" floppy disks.
(D) TESTING AND APPROVAL PROCESS; ACCEPTANCE; IMPLEMENTATION
When all applications and modules comprising the Teller Software System
have been written and provided to the parties in the form of CD-ROM disks or
3.5" floppy disks, the various programs shall be tested and approved by the
parties in accordance with the Detailed Plan of Phase A attached hereto as
Exhibit C or further supplement, if any, to Exhibit C.
When the relevant parties have finally tested and approved all programs
comprising the Teller Software System, the parties shall formally accept the
System by executing an Acceptance in the form of Exhibit E, which shall set
forth the date of acceptance of the System (which date is herein and in said
Exhibit E referred to as the "Phase A Acceptance Date"). Following the Phase A
Acceptance Date, Republic shall pay Filanbanco and/or Infordatos for its
assistance in developing the Teller Software System, in accordance with
paragraph (e) of this Section 3.01, and the parties shall implement the System
in their own countries in accordance with the aforementioned Detailed Plan of
Phase A attached hereto as Exhibit C as supplemented.
(E) PAYMENTS BY REPUBLIC
In consideration of the assistance rendered and to be rendered to
Republic by Filanbanco and Infordatos during Phase A of the SABI Project,
Republic shall pay to Infordatos the sum of $197,080.00. Said sum (less the
aggregate amount of any prior payment(s) made by Republic on account of said
sum) shall be payable-by Republic to Infordatos in Dollars, on or within five
(5) days following the Phase A Acceptance Date, by crediting Filanbanco's
deposit account with Republic, No. 6000228, for the account of Infordatos, in
immediately available funds, upon advice to Filanbanco.
Except for the foregoing payment by Republic to Filanbanco, each of the
parties shall bear its own costs and expenses in carrying out its
responsibilities under this Section 3.01 in
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developing the Teller Software System, including (without limitation) salary and
travel expenses and the cost of equipment purchases.
(F) OWNERSHIP OF TELLER SOFTWARE SYSTEM; QUITCLAIM CONVEYANCE BY
REPUBLIC TO FILANBANCO
It is understood and agreed by the parties that, when development is
completed, Filanbanco shall be the owner of the Teller Software System and all
applications and modules thereof developed pursuant to this Section 3.01 and
Section 4.01 hereof, but that Filanbanco will grant Republic a non-exclusive,
royalty-free, perpetual license to use said System, applications and modules in
its business as provided under paragraph (g) of this Section 3.01.
By way of further assurance to Filanbanco of its complete ownership of
the Teller Software System developed pursuant to this Agreement, Republic hereby
sells, assigns, conveys, transfers, sets over, delivers and quitclaims unto
Filanbanco, effective as of the Phase A Acceptance Date, all of Republic's
right, title and interest in and to the Teller Software System and all
applications and modules thereof developed pursuant to this Section 3.01,
together with the source and object codes applicable thereto, which conveyance
is made by Republic without warranty of any kind. Notwithstanding such
conveyance, Republic shall be permitted to retain all copies of all disks
containing the Teller Software System applications and modules in Republic's
possession on the Phase A Acceptance Date and to use such disks in its business
in accordance with the license granted to Republic under paragraph (g) of this
Section.
(G) LICENSE BY FILANBANCO TO REPUBLIC OF TELLER SOFTWARE SYSTEM.
Subject to the provisions of Section 5.01 of this Agreement and to the
payment in full by Republic to Infordatos of the sum specified in paragraph (e)
of this Section 3.01, Filanbanco hereby grants to Republic a non-exclusive,
royalty-free, perpetual license to use the Teller Software System and all
applications and modules listed on Exhibit F (as said Exhibit may be
supplemented from time to time as hereinafter provided), together with the
source and object codes applicable thereto, in its business at locations in the
United States and other countries in which Republic may at any time and from
time to time have an authorized office or branch, including all additional
applications, modules and enhancements developed with respect to the Teller
Software System pursuant to Section 4.01 hereof, and the source and object codes
applicable thereto, effective as of the "Effective Date" specified in Exhibit F
or relevant supplement thereto, and otherwise in accordance with the further
provisions of this Section.
If not in Republic's possession an the Phase A Acceptance Date, or when
further applications, modules or enhancements to the Teller Software System are
developed, Filanbanco shall provide the Teller System Licensed Software to
Republic in the form of CD-ROM disks or 3.5" floppy disks, promptly following
the "Effective Date" specified in Exhibit F or relevant supplement, if any, to
Exhibit F.
The Teller System Licensed Software may be used only on an IBM Personal
Computer, utilizing a DOS or Windows operating system, or an compatible computer
hardware utilizing a DOS or Windows operating system.
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Following completion of the development of any additional applications,
modules or enhancements to the Teller Software System pursuant to Section 4.01
hereof, the parties shall complete, execute and deliver, in triplicate, a
supplement to Exhibit F in the form of Exhibit F-I hereto, which shall be in the
English language, be consecutively numbered (e. g, F-2, F-3, F-4, etc, ) and set
forth the "Effective Date" of such supplement, whereupon the ,applications,
modules and enhancements listed on such supplement shall, ipso facto, become
subject to the license granted to Republic under this paragraph (g), without the
necessity for the execution or delivery by Filanbanco of any further or other
document, instrument or paper, and this Agreement shall be amended and
supplemented as to Exhibit F as provided in the relevant supplement effective as
of the "Effective Date" specified therein. From and after the "Effective Date"
of any such supplement, each reference in this Agreement to "this Agreement",
and the terms "hereof", "hereby". "hereunder" and words of similar import used
herein, shall be deemed to be references to this Agreement as amended and
supplemented by such supplement.
In addition, if not retained by Republic at the time of completion of
the development of any applications, modules or enhancements of the Teller
Software System pursuant to this Section 3.01 or Section 4.01 hereof, Filanbanco
shall provide to Republic, at the time of delivery to Republic of the first copy
of the disks containing such software and without charge to Republic, at least
one (1) copy of the current user manual(s) prepared by Filanbanco or Republic
relative to such software.
No title to or ownership of any Teller Licensed Software is transferred
to Republic under this Agreement, and such title or ownership shall at all times
remain in Filanbanco or subsequent owner.
Republic shall be free to make further copies or reproductions of disks
containing Teller System Licensed Software retained by or delivered to Republic
pursuant to this paragraph (g) as well as any user manual(s) so retained by or
delivered to Republic, for use in its business within the terms of the license
granted to Republic pursuant to this paragraph (g), but shall not make any
Teller Licensed Software or related user manual(s) available in any form to any
Person not a party to this Agreement, except in the circumstances described in
clauses (a) through (f) of Section 9.01 hereof and except to employees and
agents of the parties concerned with Republic's licensed use of Teller System
Licensed Software or the operation of Republic's Host Mainframe and/or related
Peripheral Equipment to the extent such employees and agents of the parties have
a need to know of such matters. Republic agrees to use all reasonable efforts to
make its employees, agents and other individuals using the Teller System
Licensed Software and any related user manuals aware of Republic's obligations
under the preceding sentence and under Article IX (Confidentiality) of this
Agreement, and agrees to obtain from such employees, agents and other
individuals a form of confidentiality agreement provided by Filanbanco that
conforms to the aforementioned obligations of Republic under this Agreement.
Filanbanco may terminate the license granted to Republic under this
paragraph (g), and require Republic to return all disks containing Teller
Licensed Software and related user manual(s), if Republic shall fail to comply
with the penultimate paragraph of this paragraph (g).
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(H) FILANBANCO'S WARRANTY AGAINST SOFTWARE INFRINGEMENT INDEMNITY
In consideration of Republic's conveyance, under paragraph (f) of this
Section 3.01, of Republic's entire right, title and interest in and to the
Teller Software System and all applications and modules thereof developed
pursuant to this Section 3.01, together with the source and object codes
applicable thereto (each such application, module and relevant source and object
code being hereinafter in this Section 3.01 referred to as a "COMPONENT" and all
such applications, modules and source and object codes, at the time in being,
being hereinafter in this Section 3.01 collectively referred to as
"COMPONENTS"), and of the payment in full by Republic to Infordatos of the sum
specified in paragraph (e) of this Section 3.01, Filanbanco hereby represents
and warrants to Republic that, when licensed to Republic pursuant to paragraph
(g) of this Section 3.01 and delivered, installed and operating on the computer
equipment specified in said paragraph (g), the use by Republic of the Teller
Software System and any or all component(s) thereof, within the terms of said
license, will not infringe or violate Any patent, copyright, trade secret or
other proprietary right of any Person not a party to this Agreement.
Subject to the next sentence, Filanbanco shall defend any claim or suit
brought against Republic alleging that Republic's use of the Teller Software
System (or any component thereof) within the terms of the license herein granted
to Republic by Filanbanco infringes or has infringed or violates or has violated
any patent, copyright, trade secret or other proprietary right of any Person not
a party to this Agreement, and shall pay the costs and damages, if any, finally
awarded against Republic in any such suit; PROVIDED that Filanbanco is given
prompt written notice by Republic of the assertion of any such claim or the
commencement of any such suit and is given information, reasonable assistance
and the sole authority to defend or settle such claim or suit; AND, PROVIDED,
FURTHER, that no settlement of any such claim or suit that would affect in any
way any right, power, privilege or remedy of Republic with respect to any matter
or thing other than Republic's use of the Teller Software System (and the
components thereof) licensed to Republic by Filanbanco under paragraph (g) of
this Section 3.01 shall be entered into by Filanbanco without the prior written
approval of Republic. Anything in the preceding sentence to the contrary,
notwithstanding, Filanbanco and Republic shall share equally, and shall pay such
costs, expenses and/or damages as they accrue, the cost of defending any claim
or suit described in the preceding sentence arising prior to the effective date
of any Change of Control, as well as the costs and damages, if any, finally
awarded against Republic in any such suit; with respect to any such claim or
suit arising on or after the effective date of any Change of Control, Filanbanco
shall be solely responsible for paying, as they accrue, all costs of defending
any such claim or suit and the costs and damages, if any, finally awarded
against Republic in any such suit, provided that Filanbanco's obligation to pay
the costs of defending any such claim or suit and the costs and damages, if any,
finally awarded against Republic in any such suit shall be limited to an amount
equal to fifty per cent (50%) of the cumulative, gross amount of all license
fees received by Filanbanco, up to the date of any such claim- or suit, from
licensing the Teller Software System, as at any time configured, to the United
States licensees other than Republic.
In the defense or settlement of any such claim or suit, Filanbanco may
obtain for Republic (at Filanbanco's own cost and expense) the right to continue
the use of the Teller Software System and/or applicable component (s) that is
(are) the subject of such claim or suit.
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In the event that Filanbanco is unable or unwilling to obtain for Republic the
right to continue the use of the Teller Software System and/or the component(s)
thereof that is (are) the subject of such infringement claim or suit and
Republic determines (in its sole and absolute discretion) that it is necessary
for Republic to contract for software licenses with outside vendors to take the
place of the infringing, or allegedly infringing, Teller Software System (or
applicable component(s) thereof), then Filanbanco shall pay to Republic, in
Dollars and in immediately available funds, in Miami, Florida, USA, as and when
due or in a lump sum at the commencement of the applicable license contracted
for by Republic, the license fees payable by Republic to such outside vendor(s)
for such new license(s) for a license term extending for a period of two (2)
years from the effective date of the applicable license(s) (not to exceed,
however, the total sum theretofore paid by Republic to or for the account of
Infordatos under paragraph (e) of this Section 3.01), the parties hereto
agreeing that such payments to Republic by Filanbanco shall be in the nature of
liquidated damages to Republic for the breach by Filanbanco of its warranty with
respect to the Teller Software System and the components thereof contained above
in this paragraph (h), and not a penalty. Filanbanco hereby agrees that any such
payment(s) due to Republic by Filanbanco may be offset by Republic against any
funds held in any deposit account, or deposit accounts, at Republic by
Filanbanco or Infordatos, as applicable, and/or against any, payment(s) due to
Filanbanco or Infordatos from Republic hereunder for services rendered by
Filanbanco or Infordatos hereunder, as the case may be, and that Republic may
appropriate and apply to any such payments due Republic any and all funds at any
time and from time to time to the credit of any such account of Filanbanco or
Infordatos at Republic, to the extent required to satisfy such payments due
Republic.
The obligations of Filanbanco and Republic under this paragraph (h)
shall survive the termination of this Agreement and the license herein granted
to Republic by Filanbanco, in the Teller Software System and the various
components thereof.
(I) FILANBANCO'S DISCLAIMER OF ALL OTHER WARRANTIES WITH RESPECT TO THE
TELLER SOFTWARE-SYSTEM AND COMPONENTS THEREOF
EXCEPT FOR THE EXPRESS WARRANTIES OF FILANBANCO CONTAINED IN PARAGRAPH
(H) OF THIS SECTION 3.01, FILANBANCO HEREBY DISCLAIMS ANY AND ALL WARRANTIES
WITH RESPECT TO THE TELLER SOFTWARE SYSTEM (AND ANY AND ALL COMPONENTS THEREOF)
AT ANY TIME SUBJECT OR BECOMING SUBJECT TO THE LICENSE GRANTED TO REPUBLIC UNDER
PARAGRAPH (G) OF THIS SECTION 3.01, INCLUDING WITHOUT LIMITATION, ALL IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
(J) VOLUNTARY TERMINATION OF LICENSE BY REPUBLIC; RECONVEYANCE TO
FILANBANCO.
Republic shall have the right at any time and from time to time, with
or without cause, to terminate and reconvey to Filanbanco the license granted to
Republic under paragraph (g) of this Section 3.01 with respect to the Teller
Software System (and any and all components thereof)
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subject or becoming subject to said license. Any such reconveyance shall be
without recourse upon or warranty by Republic.
In conjunction with any such termination and reconveyance Republic
shall redeliver to Filanbanco all CD-ROM disks and/or 3.5" floppy disks
containing the Teller Software System (and any and all components thereof)
reconveyed and all related user manual(s) in Republic's possession, whereupon
neither Filanbanco nor Republic shall have any further obligation or liability
to the other with respect to the Teller Software System (or any component
thereof) except with respect to matters arising prior to the effective date of
such termination, reconveyance and redelivery and except with respect to
obligations hereunder (including any indemnities provided for under this
Agreement) stated to survive the termination of this Agreement or any license
hereunder.
SECTION 3.02. OTHER APPLICATIONS - SUBSEQUENT PHASES
Following the licensing to Republic by Filanbanco of the Teller
Software System, Republic shall have the sole right under this Agreement, for a
period of two (2) years from the Phase A Acceptance Date, to engage the services
of Filanbanco and Infordatos to consider whether it might be feasible for the
parties to develop jointly one or more other phases (such as a deposit and /or
loan software system) of the integrated bank software system contemplated by the
parties in their 1992 and 1993 discussions.
Republic's right to engage the services of Filanbanco and Infordatos,
as aforesaid, shall be exercised not earlier than one (1) year following the
Phase A Acceptance Date, in a written notice given by Republic to Filanbanco
prior to the expiration of two (2) years from the Phase A Acceptance Date. In
the event that Republic shall have given no written notice to Filanbanco, within
the appropriate period specified in the preceding sentence, purporting to engage
the services of Filanbanco and Infordatos to consider the feasibility of the
parties, jointly developing one or more other phases of the integrated bank
software system contemplated by the parties in their 1992 and 1993 discussions,
then Republic's rights under the foregoing provisions of this Section 3.02 shall
lapse at the expiration of two (2) years f rom the Phase A Acceptance Date,
without any notice or other action by Filanbanco or Infordatos.
As promptly as may be practicable following the date any qualifying
notice is given by Republic to Filanbanco pursuant to the foregoing provisions
of this Section 3.02, the parties shall meet in the United States or in Ecuador
to discuss the feasibility of their jointly developing the new phase or phases
contemplated by Republic's notice, and if such a project is determined to be
feasible by each of the parties in their sole and absolute discretion, then they
shall jointly prepare a Detailed Plan of the relevant phase modeled on the
Detailed Plan of Phase A attached to this Agreement as Exhibit C.
Promptly following the agreement of the parties to a Detailed Plan of
the relevant phase, the parties shall prepare, execute and deliver an amendment
to this Agreement, adding a new Section to this Article, redesignating this
Section 3.02 and Section 3.03 as appropriate, and amending Section 1.01, to set
forth their agreement and definitional terms applicable to the development work
to be carried out under the relevant new phase. Such amendment shall follow,
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to the extent applicable and practical, the format and subject matter covered by
prior Sections of this Article and the Exhibits relating to earlier phases of
the SABI Project, to include a license by Filanbanco to Republic of the
applications, modules and enhancements comprising the new software system
developed pursuant to the relevant new Section of this Article III.
SECTION 3.03. FORCE MAJEURE
In the event that the due performance by any party of any of its
obligations under any of the foregoing Sections of this Article III is prevented
or delayed due to any cause beyond the reasonable control of such party
(including, but not limited to, acts of God, strikes and other labor disputes,
fire, explosion, flood, hurricane, windstorm, earthquake or other natural
disaster, epidemic, war, riot, revolution, power failures, court order,
government regulation or similar or dissimilar event beyond the reasonable
control of such party), and is not the result (directly or indirectly) of any
act or omission on the part of such party, then its performance of such
obligations, and all payments by any other party contingent upon or related to
such performance, shall be suspended during the period of continuance of such
cause until the same shall cease or otherwise became ameliorated to the extent
that; relevant party may reasonably be expected to resume the substantial
performance of its suspended obligation(s) hereunder. No failure of any party to
perform any of its aforesaid obligations during the period that such performance
is excused by virtue of the foregoing provisions of this Section 3.05 shall give
rise to any cause of action in favor of any other party.
ARTICLE IV
FUTURE UPGRADES, IMPROVEMENTS AND ENHANCEMENTS OF SABI (USA) SYSTEM:
MODIFICATIONS; COOPERATION AMONG PARTIES.
SECTION 4.01. FUTURE UPGRADES, IMPROVEMENTS AND ENHANCEMENTS OF SABI
(USA) SYSTEM; MODIFICATIONS; COOPERATION AMONG PARTIES
As owner of the SABI (USA) System developed pursuant to this Agreement,
Filanbanco shall make available to Republic, free of charge, in the form of
CD-ROM disks, 3.5" floppy disks or other acceptable media and in the English
language, any commercial upgrades, improvements or enhancements made by or for
Filanbanco to existing features of the System then licensed to Republic under
this Agreement, whether or not such upgrades, improvements or enhancements are
offered to other licensees of the System or components thereof, together with
any changes to the user manual(s) made by or for Filanbanco in connection with
each such upgrade, improvement or enhancement, whereupon the applicable license
granted to Republic under Article III of this Agreement shall be deemed to apply
to the licensed System as so updated, improved or enhanced, without the
necessity for the execution or delivery by Filanbanco of any further document
instrument or paper.
In addition, upon reasonable notice in writing from Republic,
Filanbanco and Infordatos agree to consult and work with Republic in exploring
the feasibility of, and implementing to the extent found to be feasible by the
three parties, any changes or modifications to the SABI (USA)
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System, or any component thereof, then licensed to Republic and deemed necessary
or advantageous by Republic to the operation- of the System in relation to its
business.
Upon successful completion of any such change or modification,
Filanbanco will incorporate such change or modification in the applicable
software program licensed to Republic under this Agreement and provide Republic,
free of charge, with CD-ROM disks or 3.5" floppy disks containing the changed or
modified program, whereupon the license granted to Republic hereunder will be
deemed to apply to such software program as changed or modified, without the
necessity for the execution or delivery by Filanbanco of any further document,
instrument or paper.
Republic agrees to compensate Filanbanco for the services of its staff
rendered pursuant to this Section 4.01, at Filanbanco's or Infordatos' then
standard PER DIEM rates for the personnel involved, which will be due and
payable, in Dollars, by Republic check, when invoiced to Republic. Any new,
amended or supplemental user manual(s) required in connection with the use or
operation of the SABI (USA) System, as so changed or modified, will be supplied
to Republic by Filanbanco without charge.
ARTICLE V
CHANGE OF CONTROL OF REPUBLIC; CONTINUATION OF LICENSES; VOLUNTARY TERMINATION
OF SABI (USA) LICENSES BY REPUBLIC; RECONVEYANCE TO FILANBANCO.
SECTION 5.01. CHANGE OF CONTROL OF REPUBLIC; CONTINUATION/ TERMINATION
OF LICENSES
In the event that Republic shall undergo a Change of Control (as
hereinafter defined) after the date of execution and delivery of this Agreement,
then (a) the license to use Microsoft Select Software Products granted to
Republic by Filanbanco under Section 2.01 of this Agreement shall IPSO FACTO
terminate on the effective date of such Change of Control, and Filanbanco shall
have the right immediately to terminate the designation of Republic as a "Select
Customer" under the Microsoft Select Master Agreement and as a "Lead Customer
Affiliate" under the Microsoft Select Enrollment Agreement, whereupon all of
Republic's rights as such designee under the relevant Agreement shall cease and
determine except such rights as, by the terms of the relevant Agreement,
continue despite the termination of Republic as a designated "Select Customer"
or "Lead Customer Affiliate", as the case may be, and (b) the licenses to use
SABI (USA) System software products granted to Republic by Filanbanco under
Article III of this Agreement shall terminate on the one hundred eightieth
(180th) day (or such later date as shall be agreed to by Filanbanco in writing
with Republic's new owner(s) following the effective date of such Change of
Control, of Filanbanco and Republic's new owner(s) shall not, by such applicable
date, have amended this Agreement to provide for, or otherwise agreed in writing
to, a continuation of such SABI (USA) System licenses in consideration of the
payment to Filanbanco by such new owner(s) of reasonable license fees, and
reasonable fees for updates, improvements and enhancements, if any, to be
provided by Filanbanco to such new owner(s), with respect to the SABI (USA)
System software products then subject to this Agreement.
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Upon any termination of the aforesaid license to use Microsoft Select
Software Products and/or the license to use SABI (USA) System software products
granted to Republic by Filanbanco hereunder, as applicable, Republic shall
promptly return to Filanbanco all disks containing the relevant licensed
software and all related user manuals and, in the case of the Microsoft
Agreements, shall promptly comply with the termination provisions of said
Agreements having applicability to Republic as a terminated Select Customer,
whereupon neither Filanbanco nor Republic shall have any further obligation or
liability to the other with respect to any such terminated license or the
computer disks or user manuals returned to Filanbanco pursuant to this Section
5.01, except with respect to matters arising prior to the effective date of
termination of the relevant license, or the effective date of redelivery by
Republic of such computer disks and user manuals, as applicable, and except with
respect to obligations hereunder (including any indemnities provided for under
this Agreement) stated to survive the termination of this Agreement or any
license hereunder.
For purposes of clause (b) of the preceding paragraph, license fees
demanded by Filanbanco for the continuation of the licenses granted to Republic
with respect to SABI (USA) System software products under Article III of this
Agreement shall be deemed to be "reasonable" if they do not exceed the highest
license fees last charged by - Filanbanco to other United States licensees not
affiliated with Filanbanco, located in the Southeastern United States, of the
same software products, or, in the absence of such licenses, the average of the
prices charged in the Southeastern United States by the three (3) largest bank
software vendors doing business in said sector of the United States for licenses
of comparable software products, or, in the absence of such comparable licensed
software products, the price for the continuation of such licenses determined to
be "reasonable" by the Fort Lauderdale, Florida, or the Miami, Florida, office
one of the six (6) largest United States independent public accounting firms not
then employed by any of the parties to this Agreement. In addition, fees
demanded by Filanbanco for furnishing future updates, improvements and/or
enhancements, if any, with respect to the SABI (USA) System software products
licensed to Republic under Article III hereof shall be deemed to be "reasonable"
for purposes of clause (b) of the preceding paragraph if they do not exceed the
prices to be charged by Filanbanco for commercial updates, improvements and/or
enhancements, as applicable, issued to other United States licensees (not
affiliated with Filanbanco) in the Southeastern United States of the same
software products, or, in the absence of such other licensees, if such fees do
not exceed Filanbanco's unit cost of producing the relevant update, improvement
or enhancement, plus a mark-up not to exceed fifteen (15) percent of such unit
cost.
For purposes of this Section 5.01, the term "CHANGE OF CONTROL", when
applied to Republic, shall mean a transaction that results in a change of
ownership of Republic, however accomplished, and which is subject to and
receives regulatory approval under Section 7(j) of the Federal Deposit Insurance
Act, as amended, 12 U.S.C. 1817(j), or Section 3 of the Bank Holding Company Act
of 1956, as amended, 12 U.S.C. 1842, or both of said laws.
SECTION 5.02 VOLUNTARY TERMINATION OF SABI (USA) SYSTEM LICENSE(S) BY
REPUBLIC; RECONVEYANCE TO FILANBANCO
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Republic shall have the right at any time and from time to time, with
or without cause, voluntarily to terminate and reconvey to Filanbanco one or
more, or all, of the licenses to SABI (USA) System software products granted to
Republic by Filanbanco under Article III of this Agreement. Any such
reconveyance by Republic shall be without recourse upon or warranty by Republic.
In conjunction with any such termination and reconveyance, Republic
shall redeliver to Filanbanco all the CD-ROM disks or 3.51, floppy disks
containing the software products reconveyed and all related user manual(s) in
Republic's possession, whereupon neither Filanbanco nor Republic shall have any
further obligation or liability to the other with respect to any such reconveyed
software products except with respect to matters arising prior to the effective
date of such termination, reconveyance and redelivery and except with respect to
obligations hereunder (including any indemnities provided for under this
Agreement) stated to survive the termination of this Agreement or any license
hereunder.
ARTICLE VI
PATENT, TRADEMARK AND COPYRIGHT REGISTRATION OBLIGATIONS
SECTION 6.01. AFFIXATION OF COPYRIGHT NOTICE AN SYSTEM MEDIA
Each of the parties shall be responsible for affixing the Filanbanco
copyright notice on each document, paper, tape or disk (herein collectively
called "MEDIA") evidencing, representing or containing any codes,
specifications, programs, directories, files, applications, modules, operating
instructions, user manual(s) and other elements or components at any time and
from time to time written, developed or constructed by the parties pursuant to
Article III of this Agreement and relating to or comprising part of the SABI
(USA) System.
Such copyright notice shall be in the form specified below and shall be
affixed to all such media in such manner and location as to give reasonable
notice of the claim of copyright by Filanbanco in such media:
Copyright 1994 Filanbanco S.A. and Infordatos, S.A.
On paper media, such copyright notice shall be printed, stamped or
typed on the cover page or back side of the cover page of the relevant document,
whereas on non-paper media (such as plastic or metal), such copyright notice
shall be printed, stamped or typed on a paper sticker which can be affixed to
the top side of such disk or to the outer side of the core of a computer tape,
so as to be prominently visible.
SECTION 6.02. PATENT, TRADEMARK AND COPYRIGHT PROTECTION IN THE UNITED
STATES AND FLORIDA
As owner of the SABI (USA) System and for the protection of its
licensees or prospective licensees in the United States (including Republic as
initial licensee), Filanbanco shall have the responsibility of obtaining all
available patent, trademark and copyright protection in the United
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States and Florida with respect to all elements and components of the SABI (USA)
System (including the name "SABI (USA) System") that may be patentable,
copyrightable and/or registrable under the laws of the United States and the
State of Florida, and Republic, as co-developer of the System in the United
States, shall cooperate with Filanbanco in that effort.
In fulfilling its obligations under this Section 6.02, Filanbanco
shall, within thirty (30) days following each Phase Acceptance Date, engage
competent and reputable patent/trademark/ copyright (counsel in Washington,
D.C., USA, and the State of Florida, USA, for the purpose of filing all
necessary applications to obtain all available patent, trademark and copyright
protection for the SABI (USA) System and the name "SABI (USA) System" under the
laws of the United States and of the State of Florida, and shall diligently
pursue the application process in all appropriate offices in the United States
and in Florida to a final conclusion through such counsel. Copies of all
patents, certificates of copyright and certificates of trademark or service mark
issued by the U.S. Patent Office, the U.S. Copyright Office and the Department
of State of the State of Florida with respect to the SABI (USA) System, the
software programs from time to time comprising the same and the name "SABI (USA)
System" shall be distributed by Filanbanco to the other parties to this
Agreement, promptly following Filanbanco's receipt of the same.
All out-of-pocket costs and expenses incurred in such process
(including the fees and disbursements of patent/trademark/copyright counsel
employed in connection therewith) shall be borne by Filanbanco.
SECTION 6.03. PATENT, TRADEMARK AND COPYRIGHT PROTECTION IN ECUADOR
As owner of the SABI (USA) System and for the protection of its
licensees or prospective licensees in Ecuador, Filanbanco shall have the
responsibility of obtaining all available patent, trademark and copyright
protection in Ecuador with respect to all elements and components of the SABI
(USA) System (including the name "SABI (USA) System") that may be patentable,
copyrightable and/or registrable under the laws of Ecuador, including all such
protections that may be available under the Intellectual Property Rights
Agreement.
In fulfilling its obligations under this Section 6.03, Filanbanco
shall, within thirty (30) days of each Phase Acceptance Date, engage competent
and reputable patent /trademark/ copyright counsel in Quito, Ecuador, for the
purpose of filing all necessary applications to obtain all available patent,
trademark and copyright protection for the SABI (USA) System and the name "SABI
(USA) System" under the laws of the Republic of Ecuador, and shall pursue the
application process in all appropriate offices in Ecuador to the extent deemed
appropriate or prudent by Filanbanco and such counsel. Copies of all patents,
certificates of copyright and certificates of trademark or service mark issued
by the relevant government office(s) in Ecuador with respect to the SABI (USA)
System, the software programs from time to time comprising the same and the name
"SABI (USA) System" shall be distributed by Filanbanco to the other parties to
this Agreement, promptly following Filanbanco's receipt of the same.
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All out-of -pocket costs and expenses incurred in such process
(including the fees and disbursements of patent/trademark/copyright counsel
employed in connection therewith) shall be borne by Filanbanco.
ARTICLE VII
CONSENT BY FILANBANCO
SECTION 7.01. CONSENT BY FILANBANCO
As registered and beneficial owner of all or substantially all of the
issued and outstanding voting shares of Infordatos, Filanbanco hereby consents
to the execution, delivery and performance by Infordatos of this Agreement.
ARTICLE VIII
COMPLIANCE WITH FEDERAL RESERVE ACT
SECTION 8.01. COMPLIANCE WITH FEDERAL RESERVE ACT
Each of the parties has read and is familiar with Sections 23A and 23B
of the Federal Reserve Act, being 12 U.S.C. Section 371c and 12 U.S.C. Section
371c-I respectively, containing restrictions on transactions between banks in
the United States (such as Republic) that are members of a Federal Reserve Bank
(such a member bank being herein referred to as a "Member Bank") and their
"affiliates" (as that term is defined in Section 23A of the Federal Reserve
Act), and recognizes that the purpose of those Sections is to protect the Member
Bank in its dealings with its affiliates.
Accordingly, each party acknowledges that Section 23A requires that any
transaction between a Member Bank and an affiliate, whether covered by said
Section or exempt thereunder, must be on terms and conditions that are
consistent with safe and sound banking practices, and that, under Section 23B,
this transaction, which involves the "payment of money or the furnishing of
services to an affiliate" by Republic, may be engaged in only (a) if the terms
of the transaction and the circumstances under which it is entered into,
including credit standards, are substantially the same as, or at least as
favorable to Republic as, those prevailing at the time for comparable
transactions by Republic with or involving companies not affiliated with
Republic, or in the absence of comparable transactions, if the terms of the
transaction and the circumstances under which it is entered into, including
credit standards, are such that in good faith would be offered by Republic, or
would apply, to companies not affiliated with Republic.
Each of the parties acknowledges that the transaction evidenced by this
Agreement is unique; and that none of the parties has entered into a comparable
transaction with any company not affiliated with such party. In addition, each
of the parties acknowledges that Republic, as a Member Bank, is obtaining, and
will obtain during the course of and upon completion of the SABI Project, not
only significant: price benefits in sublicensing Microsoft Select Software
Products through Filanbanco under section 2.01 of this Agreement, but rights to
obtain and use in
-25-
<PAGE>
its banking business in the United States, at low cost, bank software products
developed or to be developed under Article III of this Agreement that are more
advanced than any software system that can be licensed in the United States at
the present time from software vendors not affiliated with Republic; that
Republic has obtained or will obtain a competitive advantage over other banks
that rely on bank software products licensed by software vendors doing business
in the United States; and that Republic will obtain other significant economic
benefits by participating in the SABI Project in the form of license fees saved.
Accordingly, none of the parties believes that either Section 23A or 23B of the
Federal Reserve Act will be violated by the entry by the parties into this
Agreement, and that the transaction is consistent with safe and sound banking
practices.
ARTICLE IX
CONFIDENTIALITY
SECTION 9.01. CONFIDENTIALITY. Each party agrees to keep confidential,
and not to disclose to any Person not a party to this Agreement without the
prior written consent of the other parties hereto, the specific terms and
conditions of this Agreement, the data processing programs or routines developed
by the parties under this Agreement (including, without limitation, any
operating systems, compilers, assemblers, utilities, library routines,
maintenance routines, applications and computer networking programs), and any
information designated as "proprietary" or "confidential" relating or belonging
to any other party hereto and obtained in connection with this Agreement or the
performance hereof (all such terms, conditions, data processing programs or
routines and designated "proprietary" or "confidential" information being herein
collectively called "Confidential Information"), except as provided in the next
sentence and except that Filanbanco shall be permitted to disclose the
aforementioned data processing programs and routines developed by the parties
under this Agreement (including, without limitation, any operating systems,
compilers, assemblers, utilities, library routines, maintenance routines,
applications and computer networking programs) without limitation.
Notwithstanding the foregoing provisions of this Section 9.01, it
shall not be a breach by any party of its obligations under the foregoing
provisions of this Section, nor shall any party have any liability to any other
party hereto, if such party shall disclose Confidential Information (a) to the
extent that such Confidential Information is or becomes part of the public
domain through publication by the party owning such Confidential Information or
in any patent, trademark or copyright license issued by any government or agency
thereof, domestic or foreign, or (b) to the extent that such Confidential
Information was known to such party prior to the date of such party's receipt of
such Confidential Information, as shown by its written records, and such party
is under no other obligation of confidentiality with respect to such
Confidential Information, or (c) to the extent that such party is compelled by
court order or other legal process to disclose such Confidential Information, or
(d) to the extent that such Confidential Information is germane in any
litigation or arbitration proceeding between or among any parties to this
Agreement and is disclosed by such party in such litigation or arbitration
proceeding, or (e) to the extent that disclosure of such Confidential
Information is made to independent public accountants and outside legal counsel
employed by such party in connection with any audit or
-26-
<PAGE>
legal matter involving such party, or (f) to the extent that disclosure of such
Confidential Information is required or requested by any governmental agency or
regulatory authority, domestic or foreign, in connection with any supervisory
examination of or regulatory proceeding involving such party.
ARTICLE X
CONSENT TO JURISDICTION
SECTION 10.01. FILANBANCO CONSENT TO JURISDICTION. Filanbanco hereby
irrevocably agrees that any legal action or proceeding pertaining to this
Agreement or to the SABI Project may be commenced by Republic against Filanbanco
in the courts of the State of Florida, County of Dade, or of the United States
of America for the Southern District of Florida, or in any jurisdiction in which
Filanbanco shall own or hold property or may be present, including the Republic
of Ecuador, and by its execution and delivery of this Agreement, Filanbanco
hereby irrevocably submits to the non-exclusive jurisdiction of such courts, and
in the case of the courts of the State of Florida and of the United States of
America for the Southern District of Florida, Filanbanco hereby irrevocably
designates and appoints CT Corporation System, with offices on the date hereof
at 1200 South Pine Island Road, Plantation, Florida USA 33324, agent of
Filanbanco to receive service of process in any such action or proceeding and to
admit service with respect thereto, and hereby agrees to indemnify said agent in
connection with all matters relating to its appointment as agent of Filanbanco
for such purposes.
In the event that CT Corporation System resigns or ceases to serve as
Filanbanco's agent for service of process hereunder, Filanbanco agrees forthwith
to designate and appoint another agent for such purpose acceptable to Republic.
Filanbanco hereby irrevocably agrees that service of process in any such action
or proceeding may be made either by mailing by registered or certified airmail,
postage prepaid, a copy of the summons and complaint, or other legal process, in
any such action or proceeding to Filanbanco, at its last address provided for in
Section 11.03 hereof, or by wailing by first class mail, postage prepaid, or by
delivering, a copy of such process to Filanbanco in care of Filanbanco's
aforesaid agent at its address in the State of Florida.
Filanbanco agrees that service of process in any such action or
proceeding, effected as aforesaid, shall be deemed personal service upon
Filanbanco in the State of Florida, Dade County, and shall be legal and binding
upon Filanbanco for all purposes notwithstanding any failure an the part of
Filanbanco's agent to forward copies of such process to Filanbanco or any
failure on the part of Filanbanco to receive copies of such process mailed
directly to Filanbanco in accordance with the provisions of this Section.
Filanbanco, hereby waives, to the fullest extent permitted by law, any
objection it may now or hereafter have to the laying of venue in any such action
or proceeding in any such court as well as any right it may now or hereafter
have to remove any such action or proceeding, once commenced, to another court
(State or Federal) or country on the grounds of forum non conveniens, comity or
otherwise.
ARTICLE XI
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<PAGE>
MISCELLANEOUS
SECTION 11.01. NO WAIVER. No failure or delay on the part of any party
hereto in exercising any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy hereunder. No notice to or demand upon any
party in any case shall entitle such party to any other or further notice or
demand in similar or other circumstances.
SECTION 11.02. AMENDMENTS/WAIVERS IN WRITING. No amendment,
modification, termination or waiver of any provision of this Agreement, nor
consent to any departure by any party therefrom, shall be effective unless the
same shall be in writing and signed by all parties hereto, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 11.03. NOTICES. All written notices, demands, instructions and
other communications required or permitted to be given to or made upon any party
hereto shall be personally delivered (which may be by commercial courier) or
sent by prepaid Telex, cablegram or telegram (with messenger delivery specified
in the case of a cablegram or telegram) or by telecopier, on a Business Day, and
(unless a later time or date therefor is specified therein) shall be effective
for purposes of this Agreement (a) in the case of personal delivery, when such
writing is personally delivered to the intended recipient thereof at the address
designated by such recipient for such purpose pursuant to this Section during
normal business hours of the intended recipient, or (b) on the Business Day next
succeeding the Business Day such notice, demand, instruction or other
communication has been transmitted to the intended recipient thereof (during its
normal business hours) by prepaid cablegram or telegram addressed to such
recipient at its last such designated address with messenger delivery specified,
or (c) on the Business Day such notice, demand, instruction or other
communication has been transmitted to the intended recipient thereof (during its
normal business hours) by prepaid Telex addressed to such recipient by reference
to such recipient's Telex number, or by telecopier directed to such recipient's
telecopier number, as applicable.
Unless otherwise specified in a notice sent or delivered in accordance
with the foregoing provisions of this Section, notices, demands, instructions
and other communications in writing shall be given to or made upon the
respective parties hereto at their respective addresses (or to their respective
Telex or telecopier numbers) indicated below:
-28-
<PAGE>
If to Filanbanco: Filanbanco S.A.
Av. 9 de Octubre #203
Edificio Filanbanco
Guayaquil
Ecuador
Attention: Sr. Alfredo Ochoa Espinosa
Telex Mo. 43173 (Answerback: Filban ED)
Telecopier No. [593-41 32.65.14
With a copy to: M. Cristina Moreno, Esq.
Murai, Wald, Biondo & Moreno
900 Ingraham Building
25 Southeast 2nd Avenue
Miami, Florida 33131
Telecopier No.: (305) 358-9490
If to Infordatos: Infordatos S.A.
Av. 9 of Octubre #203
Edificio Filanbanco
Guayaquil
Ecuador
Attention: Sr. Juan Arnao Ramirez
Telex No. 328900 (Answerback: none)
Telecopier No. [593-4] 32.89.00
If to Republic: Republic National Bank of Miami
2103 Coral Way-- 3rd Floor
Miami, Florida 33145
Attention: Mr. George J. Quintero
Telex No. 152281 (Answerback: RNB UT)
Telecopier No. (305) 250-4314
If any day on which any notice, demand, instruction or other
communication is given by any party hereto is not a Business Day, such notice,
demand, instruction or other communication shall be deemed to have been given on
the Business Day next succeeding such non-Business Day.
SECTION 11.04. ENGLISH LANGUAGE/DOLLAR VALUES TO CONTROL. The official
language of this Agreement (including each Exhibit hereto) and all agreements,
instruments, certificates, notices, papers, reports, opinions, financial
statements, letters or other writings delivered to or by any party hereto and
relating to the performance of, or the exercise of rights or remedies under or
in connection with, this Agreement shall be English, and all financial data or
transactions set forth therein shall be expressed and measured in Dollars. If
any such agreement,
-29-
<PAGE>
instrument, certificate, notice, paper, report, opinion, financial statement,
letter or other writing is submitted or furnished in a language other than
English, or if any such financial data or transactions shall be expressed or
measured in a currency other than Dollars, such agreement, instrument,
certificate, notice, paper, report, opinion, financial statement, letter or
other writing, or such financial statement, shall be accompanied by an official
English translation thereof (or be translated into English by Republic), or
translated into Dollars by Republic, as the case may be, which translation by
Republic shall control in the event of an inconsistency between languages or
currencies, as the case may be.
SECTION 11.05. BINDING EFFECT; ASSIGNMENTS NOT PERMITTED. Subject to
the further provisions of this Section, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. No party shall be permitted to assign this Agreement, or any interest
herein (voluntarily, by operation of law or otherwise), without the prior
written consent of all other parties.
SECTION 11.06. GOVERNING LAW. This Agreement shall be deemed to be a
contract made under the laws of the State of Florida and for all purposes shall
be governed by and construed in accordance with the internal laws of said State
without regard to the choice of law rules of said State.
SECTION 11.07. SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is held by a court of competent jurisdiction in the United
States to be prohibited or unenforceable shall be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof.
SECTION 11.08. HEADINGS. Article and section headings used in this
Agreement are for convenience of reference only and shall not affect the
construction of this Agreement.
SECTION 11.09. EXECUTION IN COUNTERPARTS. This Agreement may be
executed and delivered by the parties in any number of counterparts and by
different parties on different counterparts, each of which counterparts, whet so
executed and delivered, shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.
-30-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their respective officers thereunto duly authorized, as of the date first above
written.
FILANBANCO S.A.
By: /s/ PEDRO GOMEZ-CENTRION
--------------------------------------
Dr. Pedro Gomez-Centrion, General Manager
INFORDATOS S.A.
By: /s/ ALFREDO OCHOA ESPINOSA
--------------------------------------
Alfredo Ochoa Espinosa, President
REPUBLIC NATIONAL BANK OF MIAMI
By: /s/ OSCAR BUSTILLO, JR.
--------------------------------------
Oscar Bustillo, Jr., President
-31-
EXHIBIT 10.4
- --------------------------------------------------------------------------------
AIA DOCUMENT A101
STANDARD FORM OF AGREEMENT BETWEEN
OWNER AND CONTRACTOR
WHERE THE BASIS OF PAYMENT IS A
STIPULATED SUM
1987 EDITION
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH AN ATTORNEY
IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION
THE 1987 EDITION OF AIA DOCUMENT A201, GENERAL CONDITIONS OF THE CONTRACT FOR
CONSTRUCTION, IS ADOPTED IN THIS DOCUMENT BY REFERENCE. DO NOT USE WITH
OTHER GENERAL CONDITIONS UNLESS THIS DOCUMENT IS MODIFIED.
This document has been approved and endorsed by The Associated General
Contractors of America.
- --------------------------------------------------------------------------------
AGREEMENT
made as of the 1st day of August in the year of Nineteen Hundred and Ninety Five
BETWEEN the Owner: REPUBLIC NATIONAL BANK OF MIAMI
(NAME AND ADDRESS) 10 NW 42 Avenue
Miami, Florida 33126
Attention:Rafael I. Peruyera
and the Contractor: THE BARED COMPANY OF MIAMI, INC.
(NAME AND ADDRESS) 7841 NW 56 Street
Miami, Florida 33166
The Project is: REPUBLIC NATIONAL BANK OF MIAMI
(NAME AND LOCATION) CORPORATE HEADQUARTERS
2800 Ponce de Leon Boulevard
Coral Gables, Florida 33134
The Architect is: SPILLIS CANDELA & PARTNERS, INC.
(NAME AND ADDRESS) 800 Douglas Entrance
Coral Gables, Florida 33134
The Owner and Contractor agree as set forth below.
<PAGE>
ARTICLE 1
THE CONTRACT DOCUMENTS
The Contract Documents consist of this Agreement, Conditions of the Contract
(General, Supplementary and other Conditions), Drawings, Specifications, Addenda
issued prior to execution of this Agreement, other documents listed in this
Agreement and Modifications issued after execution of this Agreement; these form
the Contract, and are as fully a part of the Contract as if attached to this
Agreement or repeated herein. The Contract represents the entire and integrated
agreement between the parties hereto and supersedes prior negotiations,
representations or agreements, either written or oral. An enumeration of the
Contract Documents, other than Modifications, appears in Article 9.
ARTICLE 2
THE WORK OF THIS CONTRACT
The Contractor shall execute the entire work described in the Contract
Documents, except to the extent specifically indicated in the Contract Documents
to be the responsibility of others, of as follows:
The Mechanical Contractor acknowledges that Turner Construction Company
is the project general contractor and as such is responsible for the
supervision, scheduling, and coordination of the Mechanical Work, until
completion of the entire project, therefore the Mechanical Contractor
shall perform as if under direct contract with Turner Construction
Company. The Mechanical Work includes but is not limited to HVAC,
plumbing, and fire protection.
ARTICLE 3
DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION
3.1 The date of commencement is the date from which the Contract Time of
Paragraph 3.2 is measured, and shall be the date of this Agreement, as first
written above, unless a different date is stated below or provision is made for
the date to be fixed in a notice to proceed issued by the Owner. (INSERT THE
DATE OF COMMENCEMENT, IF IT DIFFERS FROM THE DATE OF THIS AGREEMENT OR, IF
APPLICABLE, STATE THAT THE DATE WILL BE FIXED IN A NOTICE TO PROCEED.)
Unless the date of commencement is established by a notice to proceed issued by
the Owner, the Contractor shall notify the Owner in writing not less than five
days before commencing the Work to permit the timely filing of mortgages,
mechanic's liens and other security interests.
3.2 (The Contractor shall achieve Substantial Completion of the entire Work not
later than (INSERT THE CALENDAR DATE OR NUMBER OF CALENDAR DAYS AFTER THE DATE
OF COMMENCEMENT. ALSO INSERT ANY REQUIREMENTS FOR EARLIER SUBSTANTIAL COMPLETION
OF CERTAIN PORTIONS OF THE WORK, IF NOT STATED ELSEWHERE IN THE CONTRACT
DOCUMENTS.)
<PAGE>
Date of Substantial Completion for the mechanical scope of the Work shall be
fixed by Turner Construction Company to meet the overall project scope of the
Work of four hundred sixty (460) calendar days after date of commencement as
fixed in the Notice to Proceed issued to Turner Construction Company by the
Owner, subject to adjustments of this Contract Time as provided in the Contract
Documents.
(INSERT PROVISIONS, IF ANY, FOR LIQUIDATED DAMAGES RELATING TO FAILURE TO
COMPLETE ON TIME.)
Liquidated damages in the amount of three thousand four hundred
twenty-five dollars ($3,425.00) shall be assessed for each calendar day
required for the completion of all Work in excess of the number of
calendar days allotted for the Work.
ARTICLE 4
CONTRACT SUM
4.1 The Owner shall pay the Contractor in current funds for the Contractor's
performance of the Contract the Contract Sum of THREE MILLION FOUR HUNDRED FIFTY
ONE THOUSAND Dollars ($3,451,000.00), subject to additions and deductions as
provided in the Contract Documents.
4.2 The Contract Sum is based upon the following alternates, if any, which are
described in the Contract Documents and are hereby accepted by the Owner:
(STATE THE NUMBERS OR OTHER IDENTIFICATION OF ACCEPTED ALTERNATES. IF DECISIONS
ON OTHER ALTERNATES ARE TO BE MADE BY THE OWNER SUBSEQUENT TO THE EXECUTION OF
THIS AGREEMENT, ATTACH A SCHEDULE OF SUCH OTHER ALTERNATES SHOWING THE AMOUNT
FOR EACH AND THE DATE UNTIL WHICH THAT AMOUNT IS VALID.)
4.2.1 Voluntary Alternate #2: Provide higher efficiency chiller of
0.57 KW/Ton: Add $22,000.00. All other design specifications
remain unchanged.
4.3 Unit prices, if any, are as follows:
------- NOT APPLICABLE-----
ARTICLE 5
PROGRESS PAYMENTS
5.1 Based upon Applications for Payment submitted to the Architect by the
Contractor and Certificates for Payment issued by the Architect, the Owner shall
make progress payments on account of the Contract Sum to the Contractor as
provided below and elsewhere in the Contract Documents.
5.2 The period covered by each Application for Payment shall be one calendar
month ending on the last day of the month, or as follows: ---NOT APPLICABLE---
5.3 Provided an Application for Payment is received by the Architect not later
than the twentieth calendar day of the following month. If an Application for
Payment is received by the Architect after the application date fixed above,
payment should be made by the Owner not later than twenty calendar days after
the Architect receives the Application for Payment.
5.4 Each Application for Payment shall be based upon the Schedule of Values
submitted by the Contractor in accordance with the Contract Documents. The
Schedule of Values shall allocate the entire Contract Sum among the various
portions of the Work and be prepared in such form and supported by such data to
substantiate its accuracy as the Architect may require. This Schedule, unless
objected to by the Architect, shall be used as a basis for reviewing the
Contractor's Applications for Payment.
<PAGE>
5.5 Applications for Payment shall indicate the percentage of completion of each
portion of the Work as of the end of the period covered by the Application for
Payment.
5.6 Subject to the provisions of the Contract Documents, the amount of each
progress payment shall be computed as follows:
5.6.1 Take that portion of the Contract Sum properly allocable to
completed Work as determined by multiplying the percentage
completion of each portion of the Work by the share of the total
Contract Sum allocated to that portion of the Work in the
Schedule of Values, less retainage of TEN percent (10%). Pending
final determination of cost to the Owner of changes in the Work,
amounts not in dispute may be included as provided in
Subparagraph 7.3.7 of the General Conditions even though the
Contract Sum has not yet been adjusted by Change Order;
5.6.2 Add that portion of the Contract Sum properly allocable to
materials and equipment delivered and suitably stored at the site
for subsequent incorporation in the completed construction (or,
if approved in advance by the Owner, suitably stored off the site
at a location agreed upon in writing), less retainage of TEN
percent (10%);
5.6.3 Subtract the aggregate of previous payments made by the Owner;
and
5.6.4 Subtract amounts, if any, for which the Architect has withheld
or nullified a Certificate for Payment as provided in Paragraph
9.5 of the General Conditions.
5.7 The progress payment amount determined in accordance with Paragraph 5.6
shall be further modified under the following circumstances:
5.7.1 Add, upon Substantial Completion of the Work, a sum sufficient
to increase the total payments to NINETY percent (90%) of the
Contract Sum, less such amounts as the Architect shall determine
for incomplete Work and unsettled claims; and
5.7.2 Add, if final completion of the Work is thereafter materially
delayed through no fault of the Contractor, any additional
amounts payable in accordance with Subparagraph 9.10.3 of the
General Conditions.
5.8 Reduction or limitation of retainage, if any, shall be as follows: (IF IT IS
INTENDED PRIOR TO SUBSTANTIAL COMPLETION OF THE ENTIRE WORK, TO REDUCE OR LIMIT
THE RETAINAGE RESULTING FROM THE PERCENTAGES INSERTED IN SUBPARAGRAPHS 5.6.1 AND
5.6.2 ABOVE, AND THIS IS NOT EXPLAINED ELSEWHERE IN THE CONTRACT DOCUMENTS,
INSERT HERE PROVISIONS FOR SUCH REDUCTION OR LIMITATION.)
Each such statement shall be for an amount equal to an estimate of the
Cost of the Work completed and materials delivered, less all previous
payments and less a retainage of 10% of that portion of the Work; when
the Work is 50% complete and the Owner approves, there shall be no
further retainage withheld on subsequent payments; and the balance shall
be paid when the Work is 100% complete and accepted by the Architect and
Owner.
ARTICLE 6
FINAL PAYMENT
Final payment, constituting the entire unpaid balance of the Contract Sum, shall
be made by the Owner to the Contractor when (1) the Contract has been fully
performed by the Contractor except for the Contractor's
<PAGE>
responsibility to correct nonconforming Work as provided in Subparagraph 12.2.2
of the General Conditions and to satisfy other requirements, if any, which
necessarily survive final payment; and (2) a final Certificate for Payment has
been issued by the Architect; such final payment shall be made by the Owner not
more than 30 days after the issuance of the Architect's final Certificate for
Payment, or as follows:
------ NOTHING FOLLOWS -------
ARTICLE 7
MISCELLANEOUS PROVISIONS
7.1 Where reference is made in this Agreement to a provision of the General
Conditions or another Contract Document, the reference refers to that provision
as amended or supplemented by other provisions of the Contract Documents.
7.2 Payments due and unpaid under the Contract shall bear interest from the date
payment is due at the rate stated below, or in the absence thereof, at the legal
rate prevailing from time to time at the place where the Project is located.
(INSERT RATE OF INTEREST AGREED UPON, IF ANY.)
Payment due and unpaid under the Contract shall not bear interest from
the date payment is due for a grace period of thirty (30) days.
Following the grace period, payments due and unpaid under the Contract
shall bear interest at the rate of five percent (5%) per year simple
interest.
(USURY LAWS AND REQUIREMENTS UNDER THE FEDERAL TRUTH IN LENDING ACT, SIMILAR
STATE AND LOCAL CONSUMER CREDIT LAWS AND OTHER REGULATIONS AT THE OWNER'S AND
CONTRACTOR'S PRINCIPAL PLACES OF BUSINESS, THE LOCATION OF THE PROJECT AND
ELSEWHERE MAY AFFECT THE VALIDITY OF IBIS PROVISION. LEGAL ADVICE SHOULD BE
OBTAINED WITH RESPECT TO DELETIONS OR MODIFICATIONS, AND ALSO REGARDING
REQUIREMENTS SUCH AS WRITTEN DISCLOSURES OR WAIVERS.)
7.3 Other provisions:
By separate Agreement, the Owner has conveyed to Turner Construction
Company full responsibility for the supervision, scheduling, and
coordination of the Mechanical Work as described herein, until
completion of the entire project.
The Owner has advanced the Contractor a sum of EIGHT HUNDRED SIXTY TWO
THOUSAND SEVEN HUNDRED FIFTY DOLLARS toward the purchase of material and
equipment required for the Work. Said advance shall only be made upon
acceptance by the Owner of a fully rescindable Advance Payment Bond
naming the Owner as Obligee.
ARTICLE 8
TERMINATION OR SUSPENSION
8.1 The Contract may be terminated by the Owner or the Contractor as provided in
Article 14 of the General Conditions.
8.2 The Work may be suspended by the Owner as provided in Article 14 of the
General Conditions.
ARTICLE 9
ENUMERATION OF CONTRACT DOCUMENTS
9.1 The Contract Documents, except for Modifications issued after execution of
this Agreement, are enumerated as follows:
<PAGE>
9.1.1 The Agreement is this executed Standard Form of Agreement
Between Owner and Contractor, AIA Document A101, 1987 Edition.
9.1.2 The General Conditions are the General Conditions of the
Contract for Construction, AIA Document A201, 1987 Edition.
9.1.3 The Supplementary and other Conditions of the Contract are those
contained in the Project Manual dated June 13, 1995, and are as
follows:
<TABLE>
<CAPTION>
DOCUMENT TITLE PAGES
<S> <C> <C> <C>
00020 Invitation to Bid 00020-1 AND 00020-2
00100 Instructions to Bidders 00100-1
00120 Supplementary Instructions to Bidders 00120-1 and 00120-2
00310 Bid Form 00310-1 thru 00310-3
00410 Bid Form 00410-1
00430 Subcontractors List 00430-1
00610 Performance Bond 00610-1 thru 00610-3
00620 Labor and Material Payment Bond 00620-1 and 00620-2
00710 General Conditions of the Contract 00710-1
00810 Supplementary Conditions 00810-1 thru 00810-21
00810 Appendix - Cash Flow Projection Form
</TABLE>
9.1.4 The Specifications are those contained in the Project Manual
dated as in Subparagraph 9.1.3, and are as follows:
(EITHER LIST THE SPECIFICATIONS HERE OR REFER TO AN EXHIBIT ATTACHED TO THIS
AGREEMENT.)
SECTION TITLE PAGES
Refer to Exhibit A - Project Manual Table of Contents
9.1.5 The Drawings are as follows, and are dated ____________________
unless a different date is shown below:
(EITHER LIST THE DRAWINGS HERE OR REFER SO AN EXHIBIT ATTACHED TO IBIS
AGREEMENT.)
NUMBER TITLE DATE
<PAGE>
Refer to Exhibit B - Index of Drawings
9.1.6 The Addenda, if any, are as follows:
NUMBER DATE PAGES
Addendum 1 June 30, 1995 Refer to Exhibit C for
complete listing of Addenda
pages
------- NOTHING FOLLOWS -------
Portions of Addenda relating to bidding requirements are not part of the
Contract Documents unless the bidding requirements arc also enumerated in this
Article 9.
9.1.7 Other documents, if any, forming Part of the Contract Documents
are as follows: (LIST HERE ANY ADDITIONAL DOCUMENTS WHICH ARE INTENDED TO FORM
PART OF THE CONTRACT DOCUMENTS. THE GENERAL CONDITIONS PROVIDE THAT BIDDING
REQUIREMENTS SUCH AS ADVERTISEMENT OR INVITATION TO BID, INSTRUCTIONS TO
BIDDERS, SAMPLE FORMS AND THE CONTRACTOR'S BID ARE NOT PART OF THE CONTRACT
DOCUMENTS UNLESS ENUMERATED IN THIS AGREEMENT. THEY SHOULD BE LISTED HERE ONLY
IF INTENDED TO BE PART OF THE CONTRACT DOCUMENTS.)
------ NOTHING FOLLOWS -------
This Agreement is entered into as of the day and year first written above and is
executed in at least three original copies of which one is to be delivered to
the Contractor, one to the Architect for use in the administration of the
Contract, and the remainder to the Owner.
<TABLE>
<CAPTION>
OWNER Republic National Bank of Miami CONTRACTOR The Bared Company of Miami, Inc.
<S> <C> <C> <C> <C> <C> <C>
/S/ OSCAR BUSTILLO, JR. /S/ JOSE I. BARED
- -------------------------------------- ---------------------------------------------
(SIGNATURE) (SIGNATURE
OSCAR BUSTILLO, JR. PRESIDENT JOSE I. BARED VICE PRESIDENT
- -------------------------------------- ---------------------------------------------
(PRINTED NAME AND TITLE) (PRINTED NAME AND TITLE)
</TABLE>
<PAGE>
EXHIBIT A
PROJECT MANUAL TABLE OF CONTENTS
Exhibit to OWNER AND CONTRACTOR AGREEMENT
<PAGE>
PROJECT MANUAL
TABLE OF CONTENTS
FOR
MECHANICAL WORK
FOR
REPUBLIC NATIONAL BANK OF MIAMI
HEADQUARTERS BUILDING
CORAL GABLES, FLORIDA
A/E PROJECT NO C-0019 JUNE 20, 1995
- --------------------------------------------------------------------------------
DIVISION SECTION TITLE
BIDDING REQUIREMENTS, CONTRACT FORMS, AND
CONDITIONS OF THE CONTRACT:
00020 Invitation to Bid
00100 Instructions to Bidders
00120 Supplementary Instructions to Bidders
00310 Bid Form
00410 Bid Bond
00430 Subcontractors List
00610 Performance Bond
00620 Labor and Material Payment Bond
00710 General Conditions of the Contract
00810 Supplementary Conditions
00810 Appendix-Cash Flow Projection Form
1. GENERAL REQUIREMENTS:
01010 Summary of Work
01043 Mechanical and Electrical General
Requirements
01200 Project Meetings
01311 Critical Path Method Scheduling
01340 Shop Drawings, Product Data and Samples
01410 Testing Laboratory Services
01500 Construction Facilities and Temporary
Controls
01600 Material and Equipment
01700 Contract Closeout
2. AND 14. NOT APPLICABLE
<PAGE>
15. MECHANICAL:
15042 Test (HVAC)
15175 Tanks
15240 Vibration Isolation (HVAC)
15251 Thermal Insulation (HVAC
15260 Thermal Insulation (Plumbing)
15300 Fire Protection (General Requirements)
15330 Automatic Sprinkler Systems
15375 Standpipe and Hose Systems (Including
Horizontal Bulk Main Supply to Vertical
Standpipes)
15377 Fire Pump and Controls
15410 Piping (Plumbing)
15421 Drains and Cleanouts
15430 Valves, Cocks and Faucets (Plumbing)
15435 Piping Specialties (Plumbing)
15440 Plumbing Fixtures, Trim and Supports
15450 Plumbing Equipment
15483 Fuel Oil Systems
15505 Water Treatment Systems
15510 Piping (HVAC)
15515 Valves and Specialties (HVAQ)
15540 Pumping Equipment (HVAC)
15655 Cooling Towers
15680 Centrifugal Water Chillers
15855 Air Handling Equipment
15885 Air Filtration Equipment
15890 Ductwork
15910 Ductwork Accessories
15930 Air Terminals (HVAC)
15960 Energy Management and Control Systems (EMCS)
15970 Controls and Instrumentation
15990 Testing and Balancing (by Owner)
16. NOT APPLICABLE
APPENDIX:
Mechanical (HVAC) Description of Systems
Plumbing Systems for Republic National Bank Building
END
Project No. C - 0019
<PAGE>
EXHIBIT B
INDEX OF DRAWINGS
PLUMBING
P.1.0 LEGEND AND GENERAL NOTES
P.2.0 GROUND LEVEL PLUMBING AND FIRE PROTECTION
P.2.2 MEZZANINE LEVEL PLUMBING AND FIRE PROTECTION
P.2.3 TYPICAL GARAGE LEVEL 2ND THRU 5TH FLOOR PLUMBING AND FIRE PROTECTION
P.2.4 GARAGE LEVEL 6TH FLOOR PLUMBING AND FIRE PROTECTION
P.2.5 OFFICE LEVEL 7TH FLOOR PLUMBING AND FIRE PROTECTION
P.2.6 TYPICAL OFFICE LEVEL 8TH THRU 14TH FLOOR PLUMBING AND FIRE PROTECTION
P.2.7 EXECUTIVE PENTHOUSE LEVEL 15TH FLOOR PLUMBING AND FIRE PROTECTION
P.2.8 MECHANICAL ROOM AND ROOF LEVEL 16TH FLOOR PLUMBING AND FIRE PROTECTION
P.3.0 DETAILS
P.4.1 SANITARY RISER PIPING DIAGRAM
P.4.2 WATER RISER PIPING DIAGRAM
P.4.3 FIRE STANDPIPE RISER PIPING DIAGRAM
P.4.4 STORM DRAINAGE RISER PIPING DIAGRAM
MECHANICAL
M.1.0 STANDARD SYMBOLS & LEGEND
M.2.1 GROUND LEVEL
M.2.2 MEZZ. LEVEL
M.2.3 TYP. GARAGE LEVEL 2ND THRU 5TH FL.
M.2.4 GARAGE LEVEL 6TH FL.
M.2.5 OFFICE LEVEL 7TH FL.
M.2.6 TYPICAL OFFICE LEVEL 8TH THRU 14TH FL.
M.2.7 EXECUTIVE PENTHOUSE LEVEL I5TH FL.
M.2.8 MECH. RM. LEVEL 16TH FL.
M.3.0 DETAILS
M.3.1 HVAC RISER DIAGRAMS
M.3.2 HVAC PIPING DIAGRAM
M.4.1 POINTS LIST & SEQUENCE OF OPERATIONS
M.4.2 HVAC SCHEDULES
Exhibit to OWNER AND CONTRACTOR AGREEMENT
<PAGE>
EXHIBIT C
ADDENDA
Exhibit to OWNER AND CONTRACTOR AGREEMENT
<PAGE>
ADDENDUM NO. 1
REPUBLIC NATIONAL BANK OF MIAMI
MECHANICAL WORK
FOR
HEADQUARTERS BUILDING
2800 Ponce de Leon Boulevard
Coral Gables, Florida
Project No. C0019
June 30, 1995
This addendum forms a part of the Contract Documents and modifies the original
Bidding Documents. Acknowledge receipt of this Addendum in the space provided on
the Bid Form. Failure to do so will subject the Bidder to disqualification.
CHANGES TO PROJECT MANUAL
Section 15680 - CENTRIFUGAL WATER CHILLERS
Page 15680-1, para. 1.03 A., shall read "Quality Assurance: Parts shall carry a
five year warranty."
Section 15960 - ENERGY MANAGEMENT AND CONTROL SYSTEM (EMCS)
DELETE in its entirety.
Section 15890 - DUCTWORK
DELETE in its entirety and REPLACE with new Section 15890, DUCTWORK.
END OF ADDENDUM
Project No. C-0019 ADDENDUM NO. 1 ADD NO. 1-1
<PAGE>
Project No. C-0019 ADDENDUM NO. 1 15890-10
<PAGE>
GROUND FLOOR TOILETS GRAPH
Project No. C-0019 ADDENDUM NO. 1 15890-10
<PAGE>
SECTION 15890 - DUCTWORK
PART I GENERAL
1.01 WORK INCLUDED
A. Acoustical Treatment (Lining).
B. Dampers/Splitters.
C. Ductwork - Standard.
D. Ductwork - Special.
E. Emergency Generator Ductwork.
F. Fittings.
G. Flexible Duct.
H. Hoods.
I. Installation of Automatic Dampers.
J. Louvers & Blank-Off Panels.
K. Medium & High Pressure Take-Offs.
L. Moisture Eliminators.
M. Plenums & Casings.
N. Sealing & Leaks Testing.
1.02 RELATED WORK
A. Section 10200 - Architectural Louvers.
B. Section 11400 - Kitchen Hoods.
C. Section 15251 - Mechanical Insulation.
D. Section 15910 - Ductwork Accessories.
1.03 QUALITY ASSURANCE
A. Acoustical Treatment
1. All acoustical duct linings shall meet Erosion Test
method described in U.L. Publication No. 81.
2. All acoustical duct lining materials shall have fire
and fuel contributed and smoke hazard ratings, as
tested by procedure ASTM E-84, not greater than:
Flame Spread - 25
Fuel Contributed & Smoke Developed - 50
B. Duct Construction
1. All ductwork shall meet the requirements of "HVAC Duct
Construction Standards" published by "Sheet Metal and Air
Conditioning Contractors National Association, Inc."
Project No. C-0019 ADDENDUM NO. 1 15890-11
<PAGE>
1.04 SUBMITTALS
A. Shop Drawings, Product Data & Samples
1. Refer to Section 01043.
2. Prior to the installation of any work, the Trade
shall submit for review a ductwork brochure complete
with any required drawings indicating the exact
procedures, types of materials, sheet metal gauges,
types of joints, reinforcing, etc., that he intends
to use on this project.
3. Detailed ductwork layouts shall be drawn to a scale
of not less than1/4" equal to 1-0".
4. One copy of all shop drawings and product data shall
be forwarded to the Testing and Balancing Engineer
(Refer to Section 15990).
PART 2 PRODUCTS
2.01 ACCEPTABLE MANUFACTURERS
A. The following is a list of manufacturers' names of material
and equipment that are acceptable.
ITEM OR MATERIAL OR
EQUIPMENT MANUFACTURER
--------------------- ------------
Acoustical Treatment (Lining) Owens Corning, Manville
Mechanical Insulation, Knauf.
Dampers, Splitter (Hardware) Vent Fabrics Co., Young,
Regulator Co
Ductwork
1. Round E.H. Gustafson Co., United Sheet
Metal Corp., Semco
2. Oval E.H. Gustafson Co., United Sheet
Metal Corp., Semco
3. Flexible Flexmaster, Thermaflex, Technaflex
2.02 ACOUSTICAL TREATMENT
A. Duct lining, where indicated, and/or as hereinafter specified
shall be equal to Manville 1" thick Permacote Linacoustic
fiberglass duct liner with factory applied edge coating.
1. The liner shall meet the Life Safety Standards as
established by NFPA 90A and 90B. The duct liner shall
conform to the requirements of ASTM C1071, with an
Project No. C-0019 ADDENDUM NO. 1 15890-12
<PAGE>
NRC not less than 0.70 as tested per ASTM C423 using a Type A
mounting and a thermal conductivity no higher than 0.25 at
75(degree)F mean temperature.
2. All portions of duct designed to receive duct liner shall be
completely covered with 1" thick Permacote Linacoustic. The
smooth, black coated mat surfaces of the Permacote Linacoustic
shall face the air stream. All Permacote Linacoustic shall be cut
to assure tight, overlapped corner joints. The top pieces shall be
supported by the side pieces.
3. Permacote Linacoustic shall be adhered to the sheet metal with
full coverage of an approved adhesive, and all exposed leading
edges and transverse joints shall be neatly butted without gaps
and be coated with Permacote factory-applied edge coating.
4. When velocity exceeds 4000 fpm, use metal nosing on every
leading edge. Nosing may be formed on duct or be channel or zee
attached by screws, rivets or welds.
5. The Permacote Linacoustic shall be additionally secured with
mechanical fasteners either impact driven or weld-secured, spaced
per manufacturers recommendations.
B. Sound Absorption Coefficients (Type A Mounting) tested in
Accordance with ASTM C 423-81 and ASTM E 795.
(INSERT THICKNESS TABLE FROM HARD COPY PAGE 15890-3)
C. Ducts required to have acoustical treatment shall be lined
complete to air grille or diffuser, or to indicated termination
point.
Size on the Drawings represents actual finished inside duct
dimensions. In all cases where ducts are to he lined, the actual
finished sheet metal ductwork shall be increased by two times,
the thickness of lining applied.
EXAMPLE: Duct dimension 12" x 12" (assume 1" thick lining) actual metal
duct installed shall be 14" x 14".
D. All supply ductwork from VAV boxes or from VKV powered boxes and up
to air diffusers shall be acoustically lined.
2.03 DAMPERS, SPLITTERS, ETC.
A. Furnish and install all manual dampers, splitters, and deflectors
shown on the Drawings or wherever required for the proper air flow and balancing
of the air handling systems and as specified. Hardware shall be equal to
Ventfabrics Co.
Project No. C-0019 ADDENDUM NO. 1 15890-3
Project No. C-0019 ADDENDUM NO. 1 15890-13
<PAGE>
1. Manual dampers and splitters in square or rectangular low pressure
ductwork shall be not less than No. 16 U.S.S. gauge galvanized sheet steel.
Provide manual dampers and splitters with adjustment means with fixing device.
Dampers shall be easy working and provided with steel shafts and No. 609 end
bearings.
2. Branch line balancing dampers in medium pressure ductwork shall be of
the butterfly type of No. 16 U.S.S. gauge galvanized sheet steel with rounded
edges and they shall be vibration free and shall have locking devices and
airtight packing glands where damper shafts extend thru ductwork.
3. Manual dampers in ductwork larger than 2 square feet shall be
opposed-blade volume dampers with maximum 8" blades. Provide No. 555 quadrant
control.
4. wherever damper fixing or locking devices are not exposed or
accessible thru access panels, provide Ventlok No. 677 or Young No. 315 key
operated regulators with prime coated adjustable covers.
2.04 FITTINGS
A. Elbows shall have an inside radius equal to a minimum of 3/4 the
width of the duct.
B. Radius elbows, 18" and larger, shall be provided with turning blades
at 1/3 and 1/2 the width of the duct from the inside radius. Turning vanes shall
be provided with hemmed ends.
C. Square elbows shall be used only where indicated or where required to
fit construction and only on low pressure systems. Provide all square elbows
with turning vanes.
D. Turning vanes 36" or less shall be single thickness and turning vanes
longer than 36" shall be double width.
2.05 FLEXIBLE DUCTWORK
A. Flexible ductwork shall be factory fabricated assembly of corrosion
resistant reinforcing wire helix permanently bonded and enclosed in reinforced
aluminum foil/polyester laminate. Duct shall be UL listed 181 Class I and shall
comply with NFPA 90A and 90B and all other Governmental Authorities having
jurisdiction. 1. Duct material shall be factory wrapped with fiberglass
insulation with a C factor of .23 or less. The insulation shall be encased in a
fire retardant vapor barrier jacket.
2. Flexible ductwork shall he installed for the following:
Project No. C-0019 ADDENDUM NO. 1 15890-4
Runouts to supply outlets, where indicated. Runouts to exhaust inlets,
where indicated.
Project No. C-0019 ADDENDUM NO. 1 15890-14
<PAGE>
3. Flexible ductwork shall be installed using extra heavy flexible duct
straps equal to those manufactured by Catamount Manufacturing Inc.
PART 3 EXECUTION
3.01 DAMPERS/SPLITTERS, ETC.
A. Damper Locations: Volume dampers and splitters shall be provided in
the following minimum locations and as additionally indicated on the Drawings.
1. Provide splitters for each supply branch.
2. Provide volume dampers for each horizontal supply and exhaust branch
from vertical risers serving 2 or more floors.
3. Provide volume dampers on supply and exhaust branches serving 2 or
more outlets where same is not provided with splitters.
3.02 DUCTWORK - STANDARD
A. materials
1. Unless otherwise specified, all chambers, ductwork, casings,
connections, angles, stiffeners, access doors and frames, etc., shall be of hot
dipped galvanized prime quality steel. Sheet metal thicknesses, types of
permissible joints, spacing and stiffeners and/or transverse reinforcing, cross
breaking, etc., shall be as herein specified: Classification of duct systems
shall be as noted in the Fan Schedule on the Drawings and/or as hereinafter
specified.
B. Ductwork Classification
1. The largest side of a rectangular duct shall dictate the gauge and
reinforcement requirements for all four sides.
C. Duct Construction
1. All ductwork shall be constructed as specified in "HVAC Duct
Construction Standards" published by "Sheet Metal and Air Conditioning
Contractors National Association, Inc." for positive or negative static
pressures that meet the requirements of that portion of the system in which the
ductwork is installed.
a. All supply ductwork from the fan discharge to VAV Project No. C-0019
ADDENDUM NO. 1 15890-S or fan-powered box shall be constructed for positive
pressures of 3" w.g.
b. All branch supply ductwork from terminal unit to room outlet shall be
constructed for positive pressures of 1" w.g.
Project No. C-0019 ADDENDUM NO. 1 15890-15
<PAGE>
C. All exhaust/return air ductwork shall be constructed for positive or
negative pressures of 1" w.g.
d. All other ductwork shall be constructed for positive or negative
pressures of 2" w.g.
D. Rectangular Joints and Seams
1. The Trade Contractor may at his option incorporate proprietary
transverse duct connections on all ductwork 36 inches wide and larger. Certified
test results for the proprietary transverse duct connections must conform to the
entire sheet and joint deflection criteria included in Section VII of the 1985
SMACNA Manual, First Edition.
a. Subject to the above criteria, proprietary transverse joints shall be
as manufactured by Ductmate Industries, Mezlock, Nexus or WDCI.
b. Shop drawing submittals shall include certified test results,
material safety data sheets and applicable spec sheets.
2. Longitudinal seams shall be fabricated in accordance with SMACNA.
E. Miscellaneous instructions
1. All transverse joints, longitudinal seams, and duct wall penetrations
in low pressure ductwork (3" w.g. and below) except at companion angles, and
elsewhere as may be required shall be sealed with Foster 32-14 or 32-15 or
Ductmate #795 sealant (SMACNA Seal Class A). Sealant shall be pumped or painted
into joints, as required, after assembly. Sealant shall be allowed to set for 48
hours before any air pressure is put on system. All tie bars, bolts and rivets
shall be sealed with the specified sealant. Sealant as manufactured by Minnesota
Mining No. 800 or United Sheet Metal will be considered equal.
a. Both sides of all welds shall be painted with zinc chromate primer
for corrosion protection.
b. All reinforcing angles, joints, etc., shall be galvanized mild steel.
Project No. C-0019 ADDENDUM NO. 1 15890-6
Round and/or oval Ductwork
1. Round and/or oval ductwork systems shall be fabricated of prime
quality hot dipped, galvanized, zinc coated, sheet steel as specified in "HVAC
Duct Construction Standards" published by the "Sheet Metal and Air Conditioning
Contractors National Association, Inc." for the maxinum static pressure that
will be encountered.
a. Reducing fittings, tees, crosses, etc., shall be of conical type.
Project No. C-0019 ADDENDUM NO. 1 15890-16
<PAGE>
b. All joints shall be painted with Foster 32-14 or 32-15 sealant
Minnesota Mining No. 800, or United Sheet Metal sealant after fabrication.
c. Both sides of all welds shall be painted with zinc chromate primer.
d. Sleeve joints shall be of same gauge as fittings and shall be
installed with sealant and sheet metal screws or rivets on 15" centers with a
minimum of 3 fasteners per joint. Paint with sealant after fabrication.
e. Allow sealants to set for 48 hours before any pressure is applied to
the systems.
f. Flanged joints shall be made with 5/16" bolts on 7" centers with
neoprene gasket or sealant between angles. Angles for flanged joints or
reinforcing shall be fastened to ductwork by welding.
3.03 DUCTWORK SPECIAL CONSTRUCTION
A. Acoustical Ductwork
1. Where shown on the Drawings, provide United Sheet Metal Co.
"Acousti-K27" or approved equal acoustical ductwork. Ductwork shall be of the
double wall zinc coated steel type spaced 1" apart and uniformly packed with
fiberglass insulation with effective thermal conductivity of .27
BTU/hr./sq./ft./degrees F. at 75 degrees F. mean temperature.
a. The pressure shell shall be of No. 24 gauge steel perforated with
hole size and spacing as recommended by the manufacturer.
b. Finish both ends of section with insulation ends provided by the
manufacturer.
Project No. C-0019 ADDENDUM NO. 1 15890-7
C. Dishwasher Exhaust Ductwork
1. Ductwork from dishwasher and elsewhere, where indicated or specified
as stainless steel shall be entirely constructed of Type 316 stainless steel of
same gauges specified for galvanized ductwork. Ductwork shall be welded
watertight using compatible welding rod, 309-L or equal, and shall pitch
downward to dishwasher.
a. Ductwork shall have Type 2B mill finish where concealed from view.
b. Ductwork shall have Type 4 polished finish where exposed to view. All
welds shall be ground and polished.
D. Exterior Ductwork
Project No. C-0019 ADDENDUM NO. 1 15890-17
<PAGE>
1. Exterior ductwork shall be the same as specified for low pressure
ductwork except that all joints, reinforcing angles, etc. shall be inside the
ductwork. Ductwork shall be lined as herein specified and provided with
counterflashing. See drawings for installation details. Secure ductwork to roof
slab with self-drilling expansion shields and fasteners.
E. Kitchen Exhaust Ductwork
1. Kitchen exhaust ductwork, shall be fabricated of No.14 gauge
galvanized steel, with bracing as specified for galvanized ductwork.
a. Fabricate and assemble the kitchen exhaust ductwork, of all
continuous welded seams and joints.
b. Both sides of all welds shall be painted with zinc chromate primer.
c. Provide access panels in ductwork at each change in direction and
every 50-0" on horizontal runs. In horizontal sections the lower edge of the
access panel shall be not less 1-1/2" from bottom of duct. Access panels shall
be of 14 gauge galvanized steel with 1/8" ceramic fiber insulation.
3.04 EMERGENCY GENERATOR DUCTWORK
A. Provide sheet metal connection between unit mounted radiator and
exhaust louvers with necessary flexible connections, access doors, etc.
Project No. C-0019 ADDENDUM NO. 1 15890-8
3.05 FITTINGS
A. Elbows, tapers, offsets branches, splitters, branch connections, test
hole connections, and like items, to be in accordance with recommendations of
the applicable SMACNA Duct Manual for Ventilating and Air Conditioning Systems
(latest issue) unless otherwise specified.
B. Offsets shall have inside radii equal to a minimum of 3/4 the width
of the duct. If the specified radius cannot be held separate, fittings shall be
used. Do not use close radius and barrel fittings.
C. Provide 45 degree branch and tee connections. Tee tap-ins at 90
degrees are not acceptable.
D. All branch or tee connections to medium pressure ductwork to be
expanded to 30 degrees on at least three sides.
3.06 FLEXIBLE DUCTWORK
A. Connections of flexible ductwork to sheet metal ductwork and/or
equipment shall be made in accordance with flexible ductwork manufacturer's
recommendations and instructions.
Project No. C-0019 ADDENDUM NO. 1 15890-18
<PAGE>
1. Maximum length of flexible ductwork shall be W-O". 2. Flexible
ductwork shall not penetrate any wall without Architect's approval.
3.07 HOODS
A. Kitchen Range Hoods will be provided as specified in other Sections
of these specifications. The work under this Section shall include furnishing
and installing the exhaust ductwork and making final connections to the hood as
required.
B. All hood exhaust ductwork shall be constructed of material as
hereinafter specified for the intended service.
3.08 INSTALLATION OF AUTOMATIC DAMPERS
A. Install all automatic dampers furnished by and under the supervision
of the Automatic Temperature Control manufacturer.
1. All blank-off plates and conversions necessary to install smaller
than duct size dampers shall be the responsibility of the Air Handling System
Trade.
2. The Temperature Control Manufacturer shall submit a schedule of
damper sizes to the Air Handling Systems Trade, with a copy to the Architect,
within one-hundred twenty (120) days after being awarded the contract.
3.09 LOUVERS AND BLANK-OFF PANELS
D. Outdoor air intake and exhaust louvers are specified under
other sections. Provide 1-1/2" x 1-1/2" x 1/4" galvanized angle
frames all around the louver openings securely bolted to
construction with mastic caulking compound between angle and
construction. Ductwork, casings, etc., shall be riveted to the
outstanding leg of angle frames.
1. Blank-off panels where required shall be provided under
this Section of the specifications. Construction shall be
as follows:
a. Panels shall be fabricated from 1" thick
laminated of 0.063" thick aluminum skins both sides
of perlite board insulation secured and sealed to
back of unit. Provide 100% coverage of blank-off
panels and cut openings as required. Panels shall
be as manufactured by Mapes Industries, Inc.,
Energy Panel Structures, Inc. or Panels Plus.
2. Provide No. 2 (1/2" mesh) 0.063" diameter aluminum bird
screens with rewirable and removable extruded aluminum
frames on the interior face of all louvers and openings
used for supply or exhaust purposes.
3.10 MEDIUM AND HIGH PRESSURE CASING TAP-OFF
Project No. C-0019 ADDENDUM NO. 1 15890-19
<PAGE>
A. Tap-off connections for medium and high pressure rectangular
supply ducts to be made by means of 1/8" angle frames with 3"
legs. Holes to be cut in the casing to receive the collars with
the outside leg of collars on the inside of casing. Collars to be
stagger riveted to the casing on 4" centers. Apply sealing
compound between legs of collars and casings before riveting in
place.
3.11 SEALING & LEAK TESTING
A. All ductwork shall be airtight before concealment and/or before
insulation is applied.
1. ALL LOW PRESSURE DUCT SYSTEMS (3"W.G. AND BELOW): The
corners of all joints, longitudinal seams, openings, etc.,
shall be sealed as hereinbefore specified. Particular care
shall be taken on all ductwork on the suction side of all
fans.
a. A duct system need not be completed before tests
are conducted. Sections may be temporarily blanked
off or suitably capped, etc., and such sections
individually tested as specified. All equipment,
portable blower, instruments, temporary
connections, blank-offs, etc., necessary to conduct
tests as specified shall be provided by the
Contractor, the costs of which shall be included in
the Contractor's original bid for the work, without
any additional costs to the Owner.
END OF SECTION 15890
Project No. C-0019 ADDENDUM NO. 1 15890-9
Project No. C-0019 ADDENDUM NO. 1 15890-20
EXHIBIT 10.5
K I R C H M A N C O R P O R A T I O N
THE LEADER IN BANK AUTOMATION
Dimension License Agreement
Kirchman Corporation ("KC") has developed and owns a software package with
corresponding services known as "Dimension" (version identified
hereinafter) as more fully described in the "operating manuals" (including
"Banker's Reference" and "Dimension Procedures"); and "Customer"
(identified hereinafter) desires to acquire from KC a nonexclusive license
("License") to use Dimension and KC desires to grant such License to
Customer ("Licensee"), according to the following terms and conditions:
1. LICENSE
KC grants to Customer and Customer accepts from KC, a License to use the
object code form of Dimension; operating manuals; and all future
modifications, enhancements, supplements, and alterations ("KC Property")
solely for the data processing needs of Customer and any other entities
existing or acquired ("Dimension User") for which Customer provides data
processing services utilizing KC Property. Customer may upgrade a change
to any computer or computer operating system supported by KC. This License
is for use of Dimension as processed at the computer center address
indicated hereinafter, unless Customer requests in writing, 30 days in
advance, to move computer center to a new location, at which time the new
location will become the location of record. In the event of a disaster,
Customer has the right to move KC Property to a disaster recovery site, on
a temporary basis and agrees to notify KC as soon as possible after the
move. Customer may operate Dimension in multiple locations by notifying KC
in writing of such location(s) at which Dimension will be processed.
2. TERMS OF AGREEMENT
Terms of this "Agreement", unless earlier terminated. according to the
provisions hereinafter, shall be as follows:
(a) This Agreement and the License granted herein are for a term
beginning on "Effective Date of Agreement and continuing for an
"Initial Term" (indicated hereinafter) from end of "Installation
Period." Effective Date means date on which KC executes Agreements.
Installation Period shall extend from Effective Date until the
earlier of (i) end of month in which Dimension is installed, or (ii)
180 days from Effective Date of this Agreement If this Agreement
replaces and supersedes an existing agreement (identified
hereinafter), Effective Date of this Agreement will be as indicated
hereinafter.
(b) This Agreement and License will be automatically renewed for
additional five-year periods unless either party notifies the other
in writing six months or more in advance of expiration date of this
Agreement or any successive five-year renewal period, of its desire
not to renew this Agreement.
3. SOURCE CODE ESCROW
For Customer's protection, KC has entered into an audited "Escrow
Agreement" with an "Escrow Agent" to keep (on deposit) a current copy of
the source code and operating manuals for Dimension. Upon completion of
installation of Dimension, KC will supply Customer with a copy of Escrow
Agreement, and designate Customer to Escrow Agent as Licensee.
4. INSTALLATION, CONVERSION, AND ACQUISITION/MERGER SUPPORT
(a) KC shall assist Customer with installation of Dimension and
conversion of data to Dimension upon completion of session(s)
described in subparagraph (b) below, and shall also undertake to
assist Customer with conversion of data to Dimension for any
Dimension User acquired or processed by Customer. KC shall use
reasonable efforts to effect such installation of Dimension within
one hundred
Page 1 of 6
<PAGE>
twenty (120) days after date on which Customer's personnel complete
session(s) described below; but except as set forth below, KC shall
not be liable for any damages, direct consequential, special, or
otherwise, to Customer or to any other person in the event that
Dimension is not installed within such time period for any reason.
(b) To ensure the smooth and expedient installation of Dimension,
a Dimension planning session shall be held. Customer shall involve
senior management level personnel in session, including Customer's
Chief Executive Officer ("CEO").
(c) KC guarantees to complete installation by a mutually established
installation date, or KC shall defer the commencement of any annual
"License Fees" (defined hereinafter) for three full months from
installation date.
(d) Should KC be prevented from meeting the mutually established
installation date through fault of Customer, Customer shall pay KC an
additional fee not to exceed the "Initial Fee" (defined hereinafter).
(e) Should Customer request additional on-site KC personnel assistance in
connection with installation, services will be billed at KC's then
current standard rates.
5. SUPPORT SERVICES
KC commits to provide, during term of this Agreement, certain "Support
Services" and Dimension enhancements as follows:
(a) KC will provide software and operating manuals.
(b) Customer acknowledges that the policy of KC is to provide
improvements, to maintain timely applicability and competitive
marketability of Dimension, to comply with state and federal
government regulations applicable to data utilized in Dimension, to
modify Dimension to be compatible with the most current level of
computer and computer operating systems, and to make changes to
enhance operation or performance of Dimension. Therefore, KC reserves
the right to make changes required to maintain Dimension as current,
competitive, and marketable as part of its services hereunder, KC
will provide to Customer, at KC's expense, enhancements and operating
manual changes resulting from the aforementioned. These improvements
and error corrections to Dimension ("Dimension Release(s)") will be
distributed in a format that facilitates timely implementation by
Customer.
(c) KC will support the most recent Dimension Release during term of this
Agreement, regardless of how much time has elapsed since its delivery
to Customer by KC.
(d) KC will make its personnel available 24 hours a day for telephone
consultation or computer-to-computer diagnosis relating to Dimension
or use of Dimension, at no additional service charge to Customer.
(e) To provide responsive assistance to Customer's request for Dimension
problem resolution, KC may require written supporting documentation
and details to substantiate such problems prior to attempting a
resolution.
6. CUSTOMER RESPONSIBILITIES
(a) Add to KC Property all Dimension Releases and distribute Dimension
Procedures to all personnel.
(b) Provide such equipment as may be necessary to install Dimension and
immediately implement all Dimension Releases. Failure of Customer to
install any Dimension Release shall relieve KC of any responsibility
or liability for any improper operation or malfunction of Dimension
resulting from Customer's failure to install and operate the most
current Dimension Release.
Page 2 of 6
<PAGE>
(c) Provide at Customer location a telecommunications link with KC
computers as described in operating manuals.
(d) Deliver to KC an executed "Dimension License Addendum," in the form
and substance acceptable to KC, in its sole discretion, for each
Dimension User to be processed on Dimension by Customer.
(e) Certify in writing, within 10 days of KC's written request, "Total
Assets" of Customer and Dimension Users in order to ensure accurate
billing of License Fees.
7. LICENSE FEES
During term of this Agreement and any subsequent renewal term, certain
License Fees will be payable to KC at its principal place of business
listed on this Agreement, in accordance with the following provisions:
(a) Initial Fee: Due with submission of this Agreement, executed by
Customer, in amount indicated hereinafter.
(b) Additional Installations: If Customer wishes to add additional
Dimension Users or convert and/or merge additional banks/branches,
Customer shall pay the then current Initial Fee(s).
(c) Upgrade Fee: If Customer wishes to upgrade to another KC System, an
Upgrade at the then current rate will be applicable.
(d) License Fee: The first annual installment of License Fee shall be
due with submission of this Agreement. License Fee shall be payable
thereafter in advance, in annual installments each year of Initial
Term due on first day of month following anniversary of Installation
Period. If this is a renewal Agreement or for any extended term of
this Agreement, License Fee shall be due and payable in advance in,
annual installments starting on Effective Date or first day of any
extended term. License Fee shall be computed by multiplying the Total
Assets (in millions) of Customer and Dimension Usages by "Applicable
Rate". Total Assets shall mean as of "Measurement Date," (i) in the
case of a bank, its total assets determined in accordance with
generally accepted accounting principles, or (ii) in the case of an
entity which is not a bank. total amount of assets which represent
accounts being processed. Total Assets shall include assets of any
Dimension User as of first day of the calendar month immediately
following installation of Dimension for any such Dimension User or an
acquired/merged bank after the annual billing date on a pro rata
basis. Measurement Date shall end as of the calendar quarter
immediately preceding each due date of License Fee. Applicable Rate
is calculated according to following formulas: (1) for Customers with
Total Assets under $1 billion, Applicable Rate will equal $285 -
(asset size in millions x .085), (2) for Customers with Total Assets
from $1 billion up to $4 billion. Applicable Rate will equal $200 -
[(asset size in millions - 1,000) x .002], (3) for Customers with
Total Assets from $4 billion up to $15 billion, Applicable Rate will
equal $194 - [(asset size in millions - 4,000) x .004], (4) for
Customers with Total Assets from $15 billion to $30 billion,
Applicable Rate will equal $150 - [(asset size in millions -
15,000)x.002], (5) for Customers with Total Assets over $30 billion,
Applicable Rate will remain at $120 per million. KC shall have option
to increase Applicable Rate, effective each year, by no more than the
most recently reported annual percentage increase in the Consumer
Price Index as published by the Bureau of Labor Statistics (U.S.
Department of Labor). Should this Agreement be renewed, Customer
agrees that the associated Licensee Fees will be computed at the same
rate then currently charged by KC to its new customers as of the
first day of renewal period.
(e) FURST Fee: A fee of $595 per person shall be due and payable each
February 1 for the FURST Annual Conference(s), and shall be based on
Customer and each Dimension User separately. Minimum billing each
calendar year for each organization shall be determined by reference
to the Total Assets of Customer and each Dimension User as follows:
$1 -100 million: 2 people; $101 -300 million: 3 people; $301-500
million: 4 people; $501-750 million: 5 people; and, $751 million and
up: 6 people. Additional attendees (over minimum billing) to the
FURST Annual Conference(s) shall be billed at a $395 rate.
Page 3 of 6
<PAGE>
(f) Ancillary Services: Any ancillary services performed by KC, at
Customer's request will be performed by KC at its then current rates.
(g) Taxes: Payment for any applicable taxes associated with Customer and
the aforementioned fees is due on same date as related fees. Customer
shall also pay KC any penalties and interest resulting from
Customer's failure to pay any applicable taxes.
8. MONEY BACK GUARANTEE AND WARRANTY
For a period of twelve (12) months from the end of Installation Period, KC
warrants that Dimension will perform in the manner described in Banker's
Reference; or KC shall refund Initial Fee paid for Dimension upon
Customer's return of KC Property, and License shall be terminated as of
return date of KC Property. Except for the foregoing, KC makes no
warranties, either expressed or implied, with respect to Dimension or
Banker's Reference, and the WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE ARE HEREBY EXPRESSLY DISCLAIMED. KC makes no
representation as to the adequacy of Customer's existing or proposed
hardware configuration.
9. TITLE TO DIMENSION AND PROTECTIVE COVENANTS
Customer acknowledges that KC Property is owned by KC, and that neither
legal or equitable title to KC Property passes to Customer under terms of
this Agreement. In turn, KC agrees to indemnify, defend, and hold Customer
harmless from any U.S. patent or copyright infringement claims arising out
of Customer's use of KC Property.
Customer further acknowledges that KC Property constitutes a valuable
asset and trade secret of KC, and any information with respect thereto is
confidential, and use or disclosure of KC Property in a manner
inconsistent with this Agreement may cause KC irreparable damage. Customer
shall therefore, immediately notify KC of any information which comes to
Customer's attention which does or might indicate that there has been any
loss of confidentiality of KC Property. Customer shall take all reasonable
steps within its power to limit any threat of loss of confidentiality with
respect to KC Property. Accordingly, Customer agrees as follows:
(a) Assignment: Customer shall not sell, lease, transfer, or assign its
stewardship of KC Property; or its interests, rights, or
responsibilities as Licensee to any third party, except as approved
in writing by KC, to facilitate the transfer of control of Customer
by sale of stock, merger, or consolidation. Similarly, Customer shall
not offer, disclose, or make available to any third party, either
gratuitously or for consideration. any modification to KC Property
which may be designed by Customer.
(b) Nondisclosure: Customer shall not disclose or permit duplication and
release of confidential information relating to KC Property to
unauthorized employees or third parties, except as a part of standard
computer industry backup procedures, or as required for auditing
purposes by independent certified public accountants, or as required
for compliance with governmental regulatory authorities.
Communication by Customer with third parties regarding Customer's
evaluation of KC Property, Dimension performance, or Support
Services, is not considered prohibited communication under this
paragraph.
(c) Dimension Integrity: For Customer's protection and to ensure
Dimension's integrity, which is necessary to enable KC to provide
Support Services, Customer agrees not to disassemble, decompile,
reengineer, or otherwise translate any part of KC Property.
10. LIMITATION OF LIABILITY
Liability of KC to Customer for any liability, loss, damage cost, or
expense to Customer ("Liability") arising from any breach or default by KC
of any warranty, covenant, agreement, or undertaking hereunder shall be
exclusively limited to actual direct damages incurred by Customer, but in
no event or events, shall the aggregate of Liability exceed the total of
any Initial Fee(s) paid, under this
Page 4 of 6
<PAGE>
and/or any previous agreement(s), if this is a renewal, for Dimension, nor
under any circumstance shall Liability include any incidental or
consequential damages which may be suffered by Customer.
11. TERMINATION
(a) This Agreement shall not be terminable by either party during Initial
Term or during any renewal period thereof except as provided herein
this Agreement
(b) Upon failure of Customer to certify Total Assets of Customer and each
Dimension User or pay any sums due hereunder within 10 days of
receipt of written notice from KC that such sums have not been paid
when due, at the option of KC, the License will terminate. In that
event, or upon termination of the License for customer breach or any
other reason, without prejudice to any other rights KC may have
herein or at law or equity, Customer shall, within 180 days after
receipt of notice of termination of License, cease any and all use of
Dimension and return to KC all KC Property. Additionally, Customer
shall pay all License Fees remaining through end of current term.
Customer agrees upon termination to allow KC to inspect Customer's
operations during regular and reasonable business hours to ensure
that Customer has complied with its obligations under this
paragraph.
(c) Upon termination of this Agreement and the License granted herein, KC
shall provide Customer and any Dimension User reasonably necessary
deconversion assistance at KC's then current rate for such services.
(d) Upon termination of this Agreement and the License granted herein, KC
shall provide Customer and any Dimension User reasonably necessary
deconversion assistance at KC's then current rate for such services.
12. REMEDIES
(a) It is agreed that any dispute arising between the parties shall
be resolved by a senior officer of each party. If the dispute cannot
be resolved at this level, CEOs of both parties shall resolve the
dispute. If the dispute cannot be amicably resolved at the CEO level
it shall be submitted to an arbitration tribunal consisting of a
senior officer of each party and a third arbitrator registered with
the American Arbitration Association, but in no case shall this
tribunal award monetary damages that exceed those specified in this
Agreement.
(b) Customer agrees that, in event of termination, or any actual or
threatened breach by Customer, or any unauthorized use, sale,
transfer, cc disclosure of KC Property as contained in paragraph 9
herein. monetary damages alone shall riot or may not be sufficient
remedy or protection for KC. Therefore, KC shall be entitled to such
injunctive or other equitable relief to may be deemed proper or
necessary by a court of competent jurisdiction.
13. EXPENSES, COSTS OF COLLECTION, AND INTEREST
KC shall have the right to collect from Customer reasonable expenses,
including attorneys' fees, that KC incurs in enforcing any of its rights
or remedies under this Agreement, including cost of collecting any sums
payable to KC by Customer. Any monies not paid when due shall bear
interest at the rate of 1 1/2% per month from due date until paid. No
failure of KC to demand when due either (i) any installment, tax. fee, or
other sum, or (ii) any other performance or obligation of Customer shall
be deemed a waiver by KC of the obligation of Customer to pay any such sum
or to perform any such obligation.
14. NOTICES
Notices sent to either party as required under this Agreement shall be in
writing and sent via certified mail to the address listed herein in this
Agreement.
Page 5 of 6
<PAGE>
15. GOVERNING LAW
This Agreement and performance hereunder shall be governed by and
construed in accordance with the laws of the State of Florida. In the
event of any legal or equitable action arising under this Agreement,
Customer agrees that jurisdiction and venue of such action shall lie
exclusively within either the state court of Florida, located in Seminole
County, or the United States District Cow for the Middle District of
Florida, Orlando Division, and Customer specifically waives any other
venue and submits to such jurisdiction.
16. SEVERABILITY
Provisions of this Agreement are severable, and in the event that any
provision herein is held by any court to be void, voidable, or
unenforceable, such provision shall be deemed stricken from this
Agreement. All other terms and conditions shall remain in full force and
effect, and the parties agree to remain bound by and perform in accordance
with the terms herein, as so amended.
17. ENTIRE AGREEMENT
This Agreement constitutes entire agreement between parties herein
mentioned and supersedes all prior understandings and agreements between
them regarding License and/or those of Dimension W KC Property, and may
not be modified or altered except by written instrument duly executed by
Chairman of the Board of KC and an authorized officer of Customer. No
waiver by KC of any condition, performance, or obligation of Customer
shall be deemed a waiver with respect to the same condition, performance,
or obligation at any other time.
<TABLE>
<S> <C>
Customer Republic National Bank In Witness Whereof the parties hereto have caused this
Agreement to be executed as of the dates indicated
Address (if different from the Computer Center Customer:
Address)
By:___________________________________ Date: 11/07/97
2800 Ponce De Leon Boulevard Authorized Signature of Customer
- ---------------------------------------------------------
Oscar Bustillo, Jr. - Chairman and CEO
Coral Gables, Florida 33134 --------------------------------------------------------
- --------------------------------------------------------- Name/Title (Type or Print)
10 Northwest 42nd Avenue
- ---------------- --------------- ---------------------- --------------------------------------------------------
Agreement Number Customer Number Total Assets Computer Center Address
Five $262,125 $298,500 Miami, FL 33126
- ---------------- --------------- ---------------------- --------------------------------------------------------
Initial Term (Yrs) Initial Fee First Annual License Fee
- ---------------------------------------------------------
(not including applicable taxes)
N/A 6541 KIRCHMAN CORPORATION,
- -------------------------- --------------------------- 711 East Altamonte Drive - Altamonte Springs, FL 32701
Effective Date (if renewal) Previous Agreement Number
(if renewal)
October 29, 1997 Dimension By: Date
- -------------------------- --------------------------- ------------------------ ---------------------
Date Mailed by KC Dimension Version Authorized Signature
</TABLE>
Page 6 of 6
<PAGE>
The following is an addendum, which is incorporated and made a part of the
Dimension License Agreement attached hereto between Republic National Bank of
Miami ("Republic") and Kirchman corporation ("Kirchman") .
1. The system that is being installed in Republic is referred to as either the
Dimension or Dimension 3000 product. Dimension is currently Year 2000
compliant.
2. The currently planned installation date is the latter part of August 1998.
This date and customer responsibilities will be finalized and agreed to at
the Executive Overview Session. Republic shall not be in violation of
Section 2, paragraph (a) item (ii) of the Dimension License Agreement
provided the finalized date determined at the Executive Overview Session is
prior to September 7, 1998.
3. It is Kirchman's commitment to interface the third party systems that are
interfaced into Republic's existing core banking software, including the
CSI and CheckFree products. These interfaces will be further defined at the
Executive Overview Session held in Orlando approximately 60 days after
contract signing.
4. Kirchman will provide the ability to support the ATM print statement
feature currently available to Republic's customers, and this improvement
will be integrated into and become an integral part of Dimension, therefore
released and supported as a standard option in Dimension.
5. Kirchman will provide a print file so that Republic can customize their
laser forms.
6. On the first day of the month following Republic's completed conversion to
Dimension, all of Republic's existing Florida Software Services and
Dimension 4000 contracts will be canceled without penalty to Republic.
Monetary adjustments, if any, will be made at that time on a pro rata
basis.
7. The contract for Dimension 4000 ATM product and Teller Terminal/Screen is
canceled upon the signing of this agreement.
8. Kirchman will provide the Return Item and Noninterest Income Enhancement,
as a customized improvement to the Dimension application. Republic
understands and agrees that the improvement is being done at the bank's
request and that Republic is required to fund this effort in the amount of
$200,000.00 and that the improvement will be integrated into and become an
integral part of Dimension, therefore, released and supported as a standard
option in Dimension. Description attached as Exhibit A. Payment will be
$100,000.00 on signing (included in Initial Fee) and $100,000.00 at time of
conversion.
9. Republic will be added to the list of customers maintained by the escrow
agent upon contract acceptance. Republic will also receive, upon written
request, copies of the most recent independent third party audit of the
escrowed materials. (Such an audit is currently in process and is scheduled
to be completed by year end 1997)
10. All representations about Dimension and enhancement descriptions contained
in this Addendum shall be made part of the Banker's Reference for purposes
of this agreement. However, the initial implementation of an enhancement
will be documented by way of a release bulletin.
Agreed for:
Republic National Bank of Miami Kirchman Corporation
By: /s/ OSCAR BUSTILLO, JR. By:_________________________________
----------------------------------
Oscar Bustillo, Jr., Chairman and CEO _________________________________
Date: November 7, 1997 Date:_______________________________
<PAGE>
EXHIBIT A
Kirchman Corporation agrees to add the following functionality to the Dimension
application:
/bullet/ Software administration and/or account level options, similar to
existing available balance options, for Uncollected Balances to
include:
-- Pay or No Pay decisions
-- To include the items in service charge or account analysis
-- To accumulate negative collected and current balance interest
-- To allow uncollected charges and negative interest to be waived.
/bullet/ Changes to the return item decision screens to include a new coding
to reflect uncollected overdrafts
/bullet/ Incorporate routines in the posting process to recognize an
uncollected condition to match the current process for overdraft
and unavailable funds
/bullet/ Update return item reports and notices to include the new
uncollected option and information
/bullet/ Description for uncollected return items on customer statements and
combined analysis
/bullet/ Incorporate buckets and reporting for interest, positive and
negative, over cycle period with different interest reporting and
pricing for these two conditions:
(1) Interest on negative collected balances (with positive current
balance)
(2) Interest on negative current balances.
EXHIBIT 21.1
LIST OF SUBSIDIARIES
--------------------
Republic National Bank of Miami
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated February 21, 1997,
relating to the consolidated financial statements of Republic Banking
Corporation of Florida, which appears in such Prospectus. We also consent to
the references to us under the headings "Experts," "Summary Consolidated
Financial Data" and "Selected Consolidated Financial Data" in such Prospectus.
However, it should be noted that Price Waterhouse LLP has not prepared or
certified such "Summary Consolidated Financial Data" or "Selected Consolidated
Financial Data."
PRICE WATERHOUSE LLP
Miami, Florida
December 1, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 53,360
<INT-BEARING-DEPOSITS> 26,246
<FED-FUNDS-SOLD> 41,054
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 161,673
<INVESTMENTS-CARRYING> 158,411
<INVESTMENTS-MARKET> 161,781
<LOANS> 821,090
<ALLOWANCE> 11,411
<TOTAL-ASSETS> 1,324,968
<DEPOSITS> 1,156,324
<SHORT-TERM> 28,685
<LIABILITIES-OTHER> 15,189
<LONG-TERM> 0
0
0
<COMMON> 7,864
<OTHER-SE> 108,276
<TOTAL-LIABILITIES-AND-EQUITY> 1,324,968
<INTEREST-LOAN> 70,077
<INTEREST-INVEST> 20,817
<INTEREST-OTHER> 4,192
<INTEREST-TOTAL> 95,056
<INTEREST-DEPOSIT> 37,062
<INTEREST-EXPENSE> 38,411
<INTEREST-INCOME-NET> 56,645
<LOAN-LOSSES> 890
<SECURITIES-GAINS> (185)
<EXPENSE-OTHER> 50,021
<INCOME-PRETAX> 28,192
<INCOME-PRE-EXTRAORDINARY> 28,192
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,759
<EPS-PRIMARY> .94
<EPS-DILUTED> .94
<YIELD-ACTUAL> 8.24
<LOANS-NON> 4,066
<LOANS-PAST> 303
<LOANS-TROUBLED> 306
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 11,680
<CHARGE-OFFS> 2,583
<RECOVERIES> 723
<ALLOWANCE-CLOSE> 11,411
<ALLOWANCE-DOMESTIC> 6,305
<ALLOWANCE-FOREIGN> 649
<ALLOWANCE-UNALLOCATED> 4,457
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 58,124
<INT-BEARING-DEPOSITS> 5,880
<FED-FUNDS-SOLD> 71,056
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 168,894
<INVESTMENTS-CARRYING> 162,310
<INVESTMENTS-MARKET> 163,662
<LOANS> 973,640
<ALLOWANCE> 11,578
<TOTAL-ASSETS> 1,511,951
<DEPOSITS> 1,320,126
<SHORT-TERM> 45,597
<LIABILITIES-OTHER> 12,265
<LONG-TERM> 0
0
0
<COMMON> 9,437
<OTHER-SE> 115,256
<TOTAL-LIABILITIES-AND-EQUITY> 1,511,951
<INTEREST-LOAN> 79,897
<INTEREST-INVEST> 19,767
<INTEREST-OTHER> 4,470
<INTEREST-TOTAL> 104,134
<INTEREST-DEPOSIT> 41,282
<INTEREST-EXPENSE> 43,249
<INTEREST-INCOME-NET> 60,885
<LOAN-LOSSES> 2,381
<SECURITIES-GAINS> 1
<EXPENSE-OTHER> 53,017
<INCOME-PRETAX> 29,718
<INCOME-PRE-EXTRAORDINARY> 29,718
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,044
<EPS-PRIMARY> .96
<EPS-DILUTED> .96
<YIELD-ACTUAL> 8.13
<LOANS-NON> 1,563
<LOANS-PAST> 957
<LOANS-TROUBLED> 404
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 11,411
<CHARGE-OFFS> 3,241
<RECOVERIES> 1,027
<ALLOWANCE-CLOSE> 11,578
<ALLOWANCE-DOMESTIC> 7,585
<ALLOWANCE-FOREIGN> 1,014
<ALLOWANCE-UNALLOCATED> 2,979
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 56,113
<INT-BEARING-DEPOSITS> 873
<FED-FUNDS-SOLD> 42,103
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 155,185
<INVESTMENTS-CARRYING> 229,803
<INVESTMENTS-MARKET> 231,102
<LOANS> 953,052
<ALLOWANCE> 12,209
<TOTAL-ASSETS> 1,517,529
<DEPOSITS> 1,298,535
<SHORT-TERM> 69,883
<LIABILITIES-OTHER> 10,356
<LONG-TERM> 0
0
0
<COMMON> 9,437
<OTHER-SE> 119,713
<TOTAL-LIABILITIES-AND-EQUITY> 1,517,529
<INTEREST-LOAN> 66,933
<INTEREST-INVEST> 15,455
<INTEREST-OTHER> 3,498
<INTEREST-TOTAL> 85,886
<INTEREST-DEPOSIT> 35,786
<INTEREST-EXPENSE> 38,039
<INTEREST-INCOME-NET> 47,847
<LOAN-LOSSES> 3,604
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 39,799
<INCOME-PRETAX> 22,407
<INCOME-PRE-EXTRAORDINARY> 22,407
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,106
<EPS-PRIMARY> .75
<EPS-DILUTED> .75
<YIELD-ACTUAL> 8.20
<LOANS-NON> 14,058
<LOANS-PAST> 882
<LOANS-TROUBLED> 379
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 11,578
<CHARGE-OFFS> 4,030
<RECOVERIES> 1,057
<ALLOWANCE-CLOSE> 12,209
<ALLOWANCE-DOMESTIC> 10,579
<ALLOWANCE-FOREIGN> 630
<ALLOWANCE-UNALLOCATED> 1,000
</TABLE>
