UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission File Number 0-11487
LAKELAND FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 35-1559596
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
202 East Center Street
P.O. Box 1387, Warsaw, Indiana 46581-1387
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (219)267-6144
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [x] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.
Class Outstanding at May 2, 2000
Common Stock, No Par Value 5,788,992
<PAGE>
LAKELAND FINANCIAL CORPORATION
Form 10-Q Quarterly Report
Table of Contents
PART I.
Page Number
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . 1
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . 13
PART II.
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . 29
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . 29
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . 29
Item 4. Submission of Matters to a Vote of Security Holders . . . 29
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . 29
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 29
Form 10-Q Signature Page . . . . . . . . . . . . . . . . . . . . . 30
<PAGE>
<TABLE>
LAKELAND FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
As of March 31, 2000 and December 31, 1999
(in thousands)
(Page 1 of 2)
<CAPTION>
March 31, December 31,
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS Cash and cash equivalents:
Cash and due from banks $ 58,956 $ 59,321
Short-term investments 922 3,783
----------- -----------
Total cash and cash equivalents 59,878 63,104
Securities available-for-sale:
U. S. Treasury and government agency securities 37,729 34,614
Mortgage-backed securities 196,132 192,569
State and municipal securities 33,411 32,714
Other debt securities 11,439 11,524
----------- -----------
Total securities available-for-sale
(carried at fair value) 278,711 271,421
Real estate mortgages held-for-sale 656 862
Loans:
Total loans 661,389 653,898
Less: Allowance for loan losses 6,654 6,522
----------- -----------
Net loans 654,735 647,376
Land, premises and equipment, net 27,450 27,808
Accrued income receivable 6,140 5,420
Intangible assets 10,298 10,522
Other assets 14,373 13,330
----------- -----------
Total assets $ 1,052,241 $ 1,039,843
=========== ===========
(Continued)
</TABLE>
1
<PAGE>
<TABLE>
LAKELAND FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
As of March 31, 2000 and December 31, 1999
(in thousands)
(Page 2 of 2)
<CAPTION>
March 31, December 31,
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest bearing deposits $ 148,919 $ 136,595
Interest bearing deposits 645,090 611,648
----------- -----------
Total deposits 794,009 748,243
Short-term borrowings:
Federal funds purchased 2,720 15,000
U.S. Treasury demand notes 875 4,000
Securities sold under agreements
to repurchase 110,109 121,374
Other borrowings 45,000 55,000
----------- -----------
Total short-term borrowings 158,704 195,374
Accrued expenses payable 6,776 4,760
Other liabilities 1,747 1,535
Long-term borrowings 16,463 16,473
Guaranteed preferred beneficial interests in
Company's subordinated debentures 19,271 19,264
----------- -----------
Total liabilities 996,970 985,649
STOCKHOLDERS' EQUITY
Common stock: No par value, 90,000,000 shares authorized, 5,813,984 shares
issued and 5,788,992 outstanding as of March 31, 2000, and 5,813,984 shares
issued and 5,792,182
outstanding at December 31, 1999 1,453 1,453
Additional paid-in capital 8,537 8,537
Retained earnings 50,870 49,422
Accumulated other comprehensive income/(loss) (5,111) (4,797)
Treasury stock, at cost (478) (421)
----------- -----------
Total stockholders' equity 55,271 54,194
----------- -----------
Total liabilities and stockholders' equity $ 1,052,241 $ 1,039,843
=========== ===========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
2
<PAGE>
<TABLE>
LAKELAND FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 2000 and 1999
(Unaudited)
(Page 1 of 2)
<CAPTION>
Three Months Ended
March 31,
------------------------
2000 1999
----------- -----------
<S> <C> <C>
INTEREST AND DIVIDEND INCOME
- ----------------------------
Interest and fees on loans: Taxable $ 14,377 $ 11,565
Tax exempt 45 44
----------- -----------
Total loan income 14,422 11,609
Short-term investments 58 137
Securities:
U.S. Treasury and government agency securities 729 604
Mortgage-backed securities 3,079 3,242
State and municipal securities 446 753
Other debt securities 101 71
----------- -----------
Total interest and dividend income 18,835 16,416
INTEREST EXPENSE
- -----------------
Interest on deposits 7,439 6,729
Interest on short-term borrowings 2,276 1,510
Interest on long-term debt 681 731
----------- -----------
Total interest expense 10,396 8,970
----------- -----------
NET INTEREST INCOME 8,439 7,446
- -------------------
Provision for loan losses 215 225
----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 8,224 7,221
- ------------------------- ----------- -----------
NONINTEREST INCOME
- ------------------
Trust and brokerage fees 551 418
Service charges on deposits 1,078 1,013
Other income (net) 803 682
Net gains on the sale of real estate mortgages held-for-sale 130 460
Net securities gains 0 451
----------- -----------
Total noninterest income 2,562 3,024
NONINTEREST EXPENSE
- -------------------
Salaries and employee benefits 4,029 3,801
Occupancy and equipment expense 1,289 1,272
Other expense 2,303 2,068
----------- -----------
Total noninterest expense 7,621 7,141
(Continued)
</TABLE>
3
<PAGE>
<TABLE>
LAKELAND FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 2000 and 1999
(Unaudited)
(Page 2 of 2)
<CAPTION>
Three Months Ended
March 31,
------------------------
2000 1999
----------- -----------
<S> <C> <C>
INCOME BEFORE INCOME TAX EXPENSE 3,165 3,104
- ----------------------------------
Income tax expense 963 1,034
----------- -----------
NET INCOME $ 2,202 $ 2,070
- ---------- =========== ===========
AVERAGE COMMON SHARES OUTSTANDING (Note 2) 5,813,984 5,813,984
BASIC EARNINGS PER COMMON SHARE $ 0.38 $ 0.36
- ------------------------------- =========== ===========
DILUTED EARNINGS PER COMMON SHARE $ 0.38 $ 0.36
- --------------------------------- =========== ===========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
LAKELAND FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Three Months Ended March 31, 2000 and 1999
(in thousands)
(unaudited)
<CAPTION>
For the Three Months Ended
March 31,
--------------------------------------------------
2000 1999
----------------------- ------------------------
<S> <C> <C> <C> <C>
Common Stock
Balance at beginning of the period $ 1,453 $ 1,453
----------- -----------
Balance at end of the period 1,453 1,453
Paid-in Capital
Balance at beginning of the period 8,537 8,537
----------- -----------
Balance at end of the period 8,537 8,537
Retained Earnings
Balance at beginning of the period 49,422 43,652
Net Income 2,202 $ 2,202 2,070 $ 2,070
Cash dividends declared ($.13 and $.11
per share) (754) (598)
----------- -----------
Balance at end of the period 50,870 45,124
Accumulated Other Comprehensive Income/(Loss)
Balance at beginning of the period (4,797) 1,848
Unrealized gain (loss) on available-for-
sale securities arising during the period (314) (901)
Reclassification adjustments for
accumulated (gains) losses included
in net income 0 (273)
----------- -----------
Other comprehensive income/(loss)
(net of taxes of $[206] and $[770]) (314) (314) (1,174) (1,174)
----------- ----------- ----------- -----------
Total comprehensive income $ 1,888 $ 896
Balance at end of the period (5,111) =========== 674 ===========
Treasury Stock
Balance at beginning of the period (421) (334)
Acquisition of treasury stock (57) (45)
----------- -----------
Balance at end of the period (478) (379)
----------- -----------
Total Stockholders' Equity $ 55,271 $ 55,409
=========== ===========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
5
<PAGE>
<TABLE>
LAKELAND FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2000 and 1999
(in thousands)
(Unaudited)
(Page 1 of 2)
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,202 $ 2,070
----------- -----------
Adjustments to reconcile net income to net cash from operating activites:
Depreciation 605 579
Provision for loan losses 215 225
Amortization of intangible assets 231 239
Amortization of mortgage servicing rights 62 82
Loans originated for sale (5,379) (14,799)
Net gain on sale of loans (130) (460)
Proceeds from sale of loans 5,649 18,342
Net loss on sale of premises and equipment 7 13
Net gain on sale of securities available-for-sale 0 (451)
Net securities amortization 267 611
Increase in taxes payable 117 776
Increase in income receivable (720) (322)
Increase (decrease) in accrued expenses payable 2,213 (2)
Increase in other assets (1,147) (239)
Increase (decrease) in other liabilities 212 (56)
----------- -----------
Total adjustments 2,202 4,538
----------- -----------
Net cash from operating activities 4,404 6,608
----------- -----------
Cash flows from investing activities:
Proceeds from sales of securities available-for-sale 0 6,645
Proceeds from maturities and calls of securities available-for-sale 10,556 21,669
Purchases of securities available-for-sale (18,633) (9,858)
Net increase in total loans (7,574) (30,652)
Proceeds from sales of land, premises and equipment 0 50
Purchases of land, premises and equipment (254) (1,205)
----------- -----------
Net cash from investing activities (15,905) (13,351)
----------- -----------
(Continued)
</TABLE>
6
<PAGE>
<TABLE>
LAKELAND FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2000 and 1999
(in thousands)
(Unaudited)
(Page 2 of 2)
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in total deposits $ 45,766 $ (11,920)
Proceeds from short-term borrowings 5,289,199 4,339,734
Payments on short-term borrowings (5,325,869) (4,346,914)
Proceeds from long-term borrowings 0 111
Payments on long-term borrowings (10) (6)
Dividends declared (754) (598)
Purchase of treasury stock (57) (45)
----------- -----------
Net cash from financing activities 8,275 (19,638)
----------- -----------
Net increase (decrease) in cash and cash equivalents (3,226) (26,381)
Cash and cash equivalents at beginning of the period 63,104 61,508
----------- ----------
Cash and cash equivalents at end of the period $ 59,878 $ 35,127
=========== ===========
Cash paid during the period for:
Interest $ 9,400 $ 9,074
=========== ===========
Income taxes $ 247 $ 241
=========== ===========
Loans transferred to other real estate $ 0 $ 0
=========== ===========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
7
<PAGE>
LAKELAND FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This report is filed for Lakeland Financial Corporation (the Company)
and its wholly owned subsidiaries, Lake City Bank (the Bank) and Lakeland
Capital Trust (Lakeland Trust). All significant inter-company balances and
transactions have been eliminated in consolidation.
The condensed consolidated financial statements have been prepared by
the Company, without audit and pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The Company believes that the
disclosures are adequate and do not make the information presented misleading.
It is suggested that these condensed consolidated financial statements be read
in conjunction with the financial statements and notes thereto included in the
Company's latest annual report to stockholders and Form 10-K. In preparing
financial statements in conformity with generally accepted accounting
principles, management must make estimates and assumptions. These estimates
and assumptions affect the amounts reported and the disclosures provided.
Results for the period ended March 31, 2000 are not necessarily indicative of
the results that may be expected for the year ended December 31, 2000. In the
opinion of management, all adjustments (consisting only of normal recurring
adjustments) which are necessary for a fair statement of the results for
interim periods are reflected in the quarterly statements.
The Company formed Lakeland Trust on July 24, 1997. Lakeland Trust
issued $20 million of 9% Cumulative Trust Preferred Securities (Preferred
Securities). The Preferred Securities issued by Lakeland Trust are presented
as a separate line item as long-term debt in the consolidated balance sheets
of the Company. They securities are captioned "Guaranteed Preferred Beneficial
Interests in Company's Subordinated Debentures". The Company records
distributions payable on the Preferred Securities as an expense in its
consolidated statements of income.
LCB Investments Limited was formed on September 30, 1999 and began
operation on November 1, 1999. This is a single purpose, wholly-owned
subsidiary of the Bank. Its principal office is in Bermuda, and it was formed
to manage a portion of the securities portfolio of the Bank.
8
<PAGE>
NOTE 2. EARNINGS PER SHARE
Basic earnings per common share is based upon weighted-average common
shares outstanding. Diluted earnings per common share shows the dilutive
effect of additional common shares issueable.
The common shares outstanding for the stockholders' equity section of
the consolidated balance sheet at March 31, 2000 reflects the acquisition of
24,992 shares of Company common stock to offset a liability for a directors'
deferred compensation plan. These shares are treated as outstanding when
computing the weighted-average common shares outstanding for the calculation
of both basic and diluted earnings per share.
A reconciliation of the numerators and denominators of the basic
earnings per common share and the diluted earnings per common share for the
periods ended March 31, 2000 and 1999 follows. All amounts are in thousands
except share data.
9
<PAGE>
For the three months ended March 31,
--------------------------------------
2000 1999
------------------ ------------------
Basic earnings per common share
Net income $ 2,202 $ 2,070
Weighted-average common
shares outstanding 5,813,984 5,813,984
Basic earnings per
common share $ .38 $ .36
Diluted earnings per common share
Net income $ 2,202 $ 2,070
Weighted-average common
shares outstanding for
basic earnings per
common share 5,813,984 5,813,984
Add: dilutive effect
of assumed exercises
of stock options 0 2
Average common shares
and dilutive potential
common shares 5,813,984 5,813,986
Diluted earnings per
common share $ .38 $ .36
Stock options for 382,870 and 301,343 shares of common stock were not
considered in computing diluted earnings per common share for March 31, 2000
and 1999 because they were antidilutive.
10
<PAGE>
NOTE 3. STOCK OPTIONS
The Lakeland Financial Corporation 1997 Share Incentive Plan reserves
600,000 shares of common stock for which Incentive Share Options (ISO) and
Non-Qualified Share Options (NQSO) may be granted to employees of the Company
and its subsidiaries, and NQSOs which may be granted to directors of the
Company. Most options granted under this plan were issued for 10-year periods
with full vesting five years from the date the option was granted. Information
about options granted, exercised and forfeited during 2000 follows:
Number Risk- Stock Fair
of Exercise Free Price Value of
Options Price Rate Volatility Grants
--------- ---------- ---------- ---------- ----------
Outstanding 1/1/00 290,270
Granted 2/8/00 98,150 $ 15.13 6.73% 44.00% $ 5.46
Exercised 0
Forfeited 5,550
Outstanding 3/31/00 382,870
The fair values of the options were estimated using an expected life
of 5 years and expected dividends of $.13 per quarter. There were 16,500
options exercisable as of March 31, 2000.
The Company accounts for the stock options under APB 25. Statement of
Financial Accounting Standards (SFAS) No. 123 requires pro forma disclosures
for companies that do not adopt its fair value accounting method for
stock-based compensation. The following pro forma information presents net
income, basic earnings per common share and diluted earnings per common share
had the fair value method been used to measure compensation cost for stock
option plans. No compensation cost was actually recognized for stock options
in 2000 or 1999.
11
<PAGE>
For the three months ended March 31,
----------------------------------------
2000 1999
------------------ ------------------
Net income as reported $ 2,202 $ 2,070
Pro forma net income $ 2,099 $ 1,968
Basic earnings per common
share as reported $ .38 $ .36
Diluted earnings per
common share as reported $ .38 $ .36
Pro forma basic earnings
per common share $ .36 $ .34
Pro forma diluted earnings
per common share $ .36 $ .34
12
<PAGE>
Part 1
LAKELAND FINANCIAL CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
and
RESULTS OF OPERATION
March 31, 2000
OVERVIEW
Lakeland Financial Corporation (the "Company") is the holding company
for Lake City Bank. The Company is headquartered in Warsaw, Indiana and
operates 44 offices in 15 counties in northern Indiana.
The Company earned $2,202,000 for the first quarter of 2000, an
increase of 6.4 percent over the same quarter last year.
Over the past five years, total Company assets have more than
doubled, from $513,287,000 at March 31, 1995, to $1,052,241,000 at March 31,
2000. This increase of $539,954,000 or 105.0 percent, which equates to a 15.4
percent annual compounded growth rate was accomplished through continued
growth in existing markets with de-novo branch activity, growth in the
existing network of offices and acquisitions. Stockholders' equity has
increased from $31,859,000 to $55,271,000 for the same time period. This is an
increase of $23,412,000 or 73.5 percent, which equates to an 11.6 percent
annual compounded growth rate. Net income for the three months ended March 31,
1995, compared to the net income for the same period of 2000, increased
$896,000 or 68.6 percent from $1,306,000 to $2,202,000. From March 31, 1995,
to March 31, 2000, the number of Lake City Bank offices increased from 26 to
44. The capital for this growth has been provided through results of
operation, issuance of trust preferred securities and existing capital. It
should be noted that historical rates of growth may not be indicative of
growth in future periods.
FINANCIAL CONDITION
Assets
Total assets of the Company were $1,052,241,000 as of March 31, 2000.
This was an increase of $12,398,000 or 1.2 percent from $1,039,843,000
reported at December 31, 1999. Total loans were $661,389,000 at March 31,
2000. This was an increase of $7,491,000 or 1.2 percent from the December 31,
1999 balance. Total securities increased $7,290,000 or 2.7 percent to
$278,711,000 as of March 31, 2000, from $271,421,000 at December 31, 1999.
Earning assets increased to $939,166,000 at March 31, 2000. This was an
increase of $15,724,000 or 1.7 percent from the December 31, 1999, total of
$923,442,000.
13
<PAGE>
Funding
Total deposits and securities sold under agreements to repurchase
(repurchase agreements) consist of funds generated within the Company's
primary market area. At March 31, 2000, this funding totaled $904,118,000.
This represented a $34,501,000 or 4.0 percent increase from December 31, 1999.
The increase was primarily in time deposits, which increased $22,861,000 or
4.6 percent from the balance at December 31, 1999, and noninterest-bearing
demand accounts, which increased $12,324,000 or 9.0 percent. Interest-bearing
demand accounts also increased $10,580,000 or 9.4 percent from the balance at
December 31, 1999, and repurchase agreements decreased $11,265,000 or 9.3
percent. The repurchase agreements are a combination of fixed rate contracts
and variable rate corporate cash management accounts.
In addition to these local funding sources, the Company borrows
through the Treasury, Tax and Loan program, through federal fund lines with
correspondent banks and through advances from the Federal Home Loan Bank of
Indianapolis (FHLB). Including these non-local sources, funding totaled
$969,176,000 at March 31, 2000. This was a $9,086,000 or 0.9 percent increase
from $960,090,000 reported at December 31, 1999.
Earning Assets
On an average daily basis, total earning assets increased 6.4 percent
for the three-month period ended March 31, 2000, as compared to the same
period in 1999. On an average daily basis, total deposits and purchased funds
increased 7.6 percent for the three-month period ended March 31, 2000, as
compared to the same period in 1999.
Investment Portfolio
The Company's investment portfolio consists of U.S. Treasuries,
Agencies, mortgage-backed securities, municipal bonds, trust preferred
securities and corporate debt. During 2000, new investments continued to be in
U.S. Treasuries and mortgage-backed securities. At March 31, 2000, and
December 31, 1999, the Company's investment in mortgage-backed securities
comprised approximately 70.4 and 70.9 percent of total securities. The
composition of this portfolio is primarily CMOs and mortgage pools issued by
GNMA, FNMA and FHLMC, which are directly or indirectly guaranteed by the
federal government. At March 31, 2000, the securities in the
available-for-sale portfolio had a four year average life and a potential for
approximately 10 percent price depreciation should rates move up 300 basis
points. If rates were to move down 300 basis points, the average life would be
three years with approximately 8 percent price appreciation possible. As of
March 31, 2000, all mortgage-backed securities were performing in a manner
consistent with management's original expectations.
14
<PAGE>
The Company's available-for-sale portfolio is managed with
consideration given to factors such as the Company's capital levels, growth
prospects, asset/liability structure and liquidity needs. At March 31, 2000,
the available-for-sale portfolio constituted 100.0 percent of the total
security portfolio. During the first three months of 2000, purchases for the
available-for-sale portfolio were $18,633,000 and there were no sales. At
March 31, 2000, the net after-tax unrealized loss in the available-for-sale
portfolio included in stockholders' equity was $5,111,000, a increase of
$314,000 from the unrealized loss of $4,797,000 included in stockholders'
equity at December 31, 1999. Future investment activity is difficult to
predict, as it is dependent upon loan and deposit trends and other factors.
Loans
Total loans increased $7,491,000 or 1.2 percent to $661,389,000 as of
March 31, 2000, from $653,898,000 at December 31, 1999. Loan growth is net of
loans reclassified to other real estate and loans sold. The Company continues
to experience good loan demand. Commercial loans at March 31, 2000, increased
$8,400,000 or 2.0 percent from the level at December 31, 1999. Retail loans at
March 31, 2000, decreased $2,377,000 or 1.3 percent from December 31, 1999.
This decrease was largely in indirect consumer loans with a decrease of
$3,160,000 or 3.7 percent from December 31, 1999. Real estate loans (excluding
mortgages held-for-sale) increased $1,468,000 or 3.1 percent from December 31,
1999. The real estate loan portfolio is impacted by secondary market activity,
which is a function of current interest rates and economic conditions. As
interest rates have gradually risen since the middle of last year, the level
of refinancings have declined. During 2000, the Company sold mortgages
totaling $5,585,000 into the secondary market as compared to $17,882,000
during the same period in 1999. During these same two periods, loans
originated for sale totaled $5,379,000 and $14,799,000. As a part of the
Community Reinvestment Act commitment to making real estate financing
available to a variety of customers, the Company continues to originate
non-conforming loans that are held to maturity or prepayment.
The Company had 65.1 percent of its loans concentrated in commercial
loans at March 31, 2000, and 64.6 percent at December 31, 1999. Traditionally,
this type of lending may have more credit risk than other types of lending
because of the size and diversity of the credits. The Company manages this
risk by adjusting its pricing to the perceived risk of each individual credit,
and by diversifying the portfolio by customer, product, industry and
geography. Customer diversification is accomplished through an administrative
loan limit of $8,500,000. Based upon state banking regulations, the Bank's
legal loan limit at March 31, 2000, was approximately $11,161,000. Product
diversification is accomplished by offering a wide variety of financing
options. Management reviews the loan portfolio to ensure loans are diversified
15
<PAGE>
by industry. The loans in the portfolios are distributed throughout the
Company's principal trade area, which encompasses fifteen counties in Indiana.
Loans renegotiated as troubled debt restructurings are those loans
for which either the contractual interest rate has been reduced and/or other
concessions are granted to the borrower, because of a deterioration in the
financial condition of the borrower which results in the inability of the
borrower to meet the original terms of the loan. Loans renegotiated as
troubled debt restructurings totaled $1,152,000 at March 31, 2000, as compared
to $1,179,000 at December 31, 1999. The loans classified as troubled debt
restructurings at March 31, 2000 were performing in accordance with the
modified terms.
For the first three months of 2000, deposits increased faster than
loans. During this three-month period, loans increased $7,491,000 or 1.2
percent. Commercial loan demand continues to be good, while consumer loan
demand has weakened. Demand accounts, which are noninterest-bearing, increased
$12,324,000 or 9.0 percent during the first three months of 2000, and other
transaction accounts increased $10,580,000 during the same period. During the
quarter, time deposits increased by $22,861,000 or 4.6 percent. The Company's
loan to deposit ratio amounted to 83.3 percent at March 31, 2000, which is a
decrease from 87.4 percent at year-end 1999.
Market Risk
The Company's primary market risk exposure is interest rate risk. The
Company does not have a material exposure to foreign currency exchange risk,
does not own any derivative financial instruments and does not maintain a
trading portfolio. The Company, through its Asset/Liability Committee (ALCO),
manages interest rate risk by monitoring the computer simulated earnings
impact of various rate scenarios. The Company then modifies its long-term risk
parameters by attempting to generate the type of loans, investments, and
deposits that currently fit ALCO needs. This computer simulation analysis
measures the net interest income impact of a 300 basis point change in
interest rates during the next 12 months. If the change in net interest income
is less than 3 percent of primary capital, the balance sheet structure is
considered to be within acceptable risk levels. At March 31, 2000, the
Company's potential pretax exposure was within the Company's policy limit.
This policy was last reviewed and approved by the Board of Directors in May,
2000.
The following table provides information about the Company's
financial instruments used for purposes other than trading that are sensitive
to changes in interest rates. For loans, securities, and liabilities with
contractual maturities, the table presents principal cash flows and related
weighted-average interest rates by contractual maturities. Additionally the
Company's historical prepayment experience is included in cash flows for
residential and home equity loans and for mortgage-backed securities. For core
deposits such as demand deposits, interest-bearing checking, savings and money
16
<PAGE>
market deposits that have no contractual maturity, the table presents
principal cash flows based upon management's judgment and statistical
analysis. Weighted-average variable rates are the rates in effect at the
reporting date.
17
<PAGE>
<TABLE>
QUANTITATIVE MARKET RISK DISCLOSURE
<CAPTION>
Principal/Notional Amount Maturing in:
(Dollars in thousands) Fair
---------------------------------------------------------------------------- Value
Year 1 Year 2 Year 3 Year 4 Year 5 Thereafter Total 3/31/00
--------- --------- --------- --------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rate sensitive assets:
Fixed interest rate loans $ 71,939 $ 56,972 $ 48,323 $ 70,531 $ 65,981 $ 27,733 $ 341,479 $ 336,998
Average interest rate 8.80% 8.70% 8.77% 8.17% 8.05% 7.98% 8.43%
Variable interest rate loans $ 279,187 $ 1,656 $ 1,475 $ 1,372 $ 1,207 $ 35,668 $ 320,567 $ 320,866
Average interest rate 9.33% 10.45% 10.22% 10.23% 10.81% 9.14% 9.33%
Fixed interest rate securities $ 16,999 $ 47,505 $ 29,065 $ 24,434 21,680 $ 143,528 $ 283,212 $ 274,837
Average interest rate 6.55% 5.75% 6.45% 6.33% 6.54% 6.31% 6.26%
Variable interest rate securities $ 358 $ 364 $ 371 $ 378 $ 385 $ 2,107 $ 3,962 $ 3,875
Average interest rate 6.89% 7.20% 7.18% 7.16% 7.15% 7.10% 7.11%
Other interest-bearing assets $ 922 $ 0 $ 0 $ 0 $ 0 $ 0 $ 922 $ 938
Average interest rate 6.00% 6.00%
Rate sensitive liabilities:
Non-interest bearing checking $ 7,744 $ 6,910 $ 1,251 $ 1,191 $ 1,742 $ 130,081 $ 48,919 $ 148,919
Average interest rate
Savings & interest bearing checking $ 9,427 $ 8,511 $ 7,559 $ 6,866 $ 5,505 $ 85,842 $ 123,709 $ 123,709
Average interest rate 1.63% 1.63% 1.63% 1.63% 1.63% 1.69% 1.67%
Time deposits 282,848 $ 62,699 $ 62,676 $ 57,469 $ 54,098 $ 1,591 $ 521,380 $ 520,003
Average interest rate 5.61% 5.84% 5.01% 4.88% 4.89% 5.55% 5.41%
Fixed interest rate borrowings $ 103,704 $ 20,000 $ 0 $ 1,463 $ 0 $ 19,271 $ 144,438 $ 147,781
Average interest rate 5.03% 5.70% 0.00% 6.15% 0.00% 9.00% 5.67%
Variable interest rate borrowings $ 50,000 $ 0 $ 0 $ 0 $ 0 $ 0 $ 50,000 $ 50,000
Average interest rate 6.13% 0.00% 0.00% 0.00% 0.00% 0.00% 6.13%
</TABLE>
18
<PAGE>
Borrowings
The Company is a member of the FHLB of Indianapolis. Membership has
enabled the Company to participate in the housing programs sponsored by the
FHLB, thereby enhancing the Company's ability to offer additional programs
throughout its trade area. The Company's Board of Directors has authorized
borrowings of up to $100 million under the FHLB program. As of March 31, 2000,
the borrowings from the FHLB totaled $61,349,000. The maturities of these
borrowings are: $10,000,000 due June 20, 2000, $10,000,000 due July 19, 2000,
$10,000,000 due July 31, 2000, $15,000,000 due August 15, 2000, $5,000,000 due
April 28, 2000, $10,000,000 due December 28, 2001, $1,300,000 due June 24,
2003, and $49,000 with annual payments maturing on January 15, 2018. All
borrowings are collateralized by residential real estate mortgages and
mortgage-backed securities. Membership in the FHLB requires an equity
investment in FHLB stock. The amount required is computed annually, and is
based upon a formula that considers the Company's total investment in
residential real estate loans, mortgage-backed securities and any FHLB
advances outstanding at year-end. The Company's investment in FHLB stock at
March 31, 2000, was $3,568,000.
Capital and Stockholders' Equity
The Federal Deposit Insurance Corporation's (FDIC) risk based capital
regulations require that all banks maintain an 8.0 percent total risk based
capital ratio. The FDIC has also established definitions of "well capitalized"
as a 5.0 percent Tier I leverage capital ratio, a 6.0 percent Tier I risk
based capital ratio and a 10.0 percent total risk based capital ratio. As of
March 31, 2000, the Bank's ratios were 6.7 percent, 9.3 percent and 10.2
percent, excluding the SFAS No. 115 adjustment. The ratios reported at
December 31, 1999 were 6.7 percent, 9.1 percent and 10.0 percent and ratios
reported at March 31, 1999 were 6.4 percent, 9.5 percent and 10.7 percent. The
ratios include the maximum amount of the trust preferred securities allowed by
regulations. All ratios continue to be above "well capitalized" levels.
Total stockholders' equity increased $1,077,000 or 2.0 percent from
December 31, 1999, to $55,271,000 at March 31, 2000. Net income of $2,202,000,
less dividends of $754,000, less the decrease in the accumulated other
comprehensive income of $314,000, less $57,000 for the cost of treasury stock
acquired, comprised this increase.
19
<PAGE>
RESULTS OF OPERATIONS
Net Income
Net income increased to $2,202,000 for the first three months of
2000, an increase of $132,000 from the $2,070,000 recorded over the same
period in 1999. Basic earnings per share for the first three months of 2000
were $.38 per share, which was an increase over the $.36 per share for the
first three months of 1999. Diluted earnings per share reflect the potential
dilutive impact of stock options granted under an employee stock option plan
approved by the stockholders in April, 1998. The stock options did not have a
significant impact on earnings per share as diluted earnings per share were
the same as basic earnings per share for the three-month period ended March
31, 2000.
Net Interest Income
The net effect of all factors affecting total interest and dividend
income and total interest expense was to increase net interest income. For the
three-month period ended March 31, 2000, net interest income totaled
$8,439,000, an increase of 13.3 percent or $993,000 over the first three
months of 1999. This increase occurred in part because of the efforts to
improve the loan to deposit ratio during 1999, which management plans to
continue during 2000. This increase also occurred in part because of the
gradual rise in interest rates, which began during the last half of 1999 and
continued during the first quarter of 2000.
For the three-month period ended March 31, 2000, total interest and
dividend income increased $2,419,000 or 14.7 percent to $18,835,000, from
$16,416,000 during the same three months of 1999. Daily average earning assets
for the first quarter of 2000 increased to $936,900,000, a 6.4 percent
increase over the same period in 1999. The tax equivalent yield on average
earning assets increased by 45 basis points for the three-month period ended
March 31, 2000, when compared to the same period of 1999.
The increase in the yield of 45 basis points on average earning
assets reflected increases in the yields on both loans and securities caused
by the rising rate environment. The yield on securities is historically lower
than the yield on loans, and decreasing the ratio of securities to total
earning assets will normally raise the yield on earning assets. The ratio of
average daily securities to average earning assets for the first quarter of
2000 was 29.1 percent compared to 36.5 percent for the same period of 1999. In
addition, the overall tax equivalent yield on loans increased 20 basis points
when comparing the three-month periods ended March 31, 2000 and 1999. The
yield on securities increased 40 basis points when comparing the same periods.
20
<PAGE>
The average daily loan balances for the first three months of 2000
increased 20.4 percent over the average daily loan balances for the same
period of 1999. The loan growth since the first quarter of 1999 was primarily
funded by securities sales and maturities and partially by increases in
deposits and borrowings. The increase in loan interest income of $2,813,000 or
24.2 percent for the first three months of 2000 as compared to the first three
months of 1999, primarily resulted from this loan growth, as well as an
increase in the yields.
Income from securities totaled $4,355,000 for the first three months
of 2000, a decrease of $315,000 or 6.8 percent over the amount for the same
period of 1999. This decrease was the result of the decrease in the average
daily balances of securities year to year. The average daily balances of
securities for the three-month period ended March 31, 2000 decreased
$48,191,000 when compared to the same period of the prior year.
Income from short-term investments amounted to $58,000 for the
three-month period ended March 31, 2000. This compares to $137,000 for the
same period in 1999. The decrease of $79,000 when comparing the three-month
periods resulted from a decrease of $6,961,000 or 59.7 percent in the average
balance of short-term investments.
Total interest expense increased $1,426,000 or 15.9 percent to
$10,396,000 for the three-month period ended March 31, 2000, from $8,970,000
for the first quarter of 1999. This was a result of the overall growth of
deposits in existing offices, changes in the deposit mix and a 27 basis point
increase in the Company's daily cost of funds. On an average daily basis,
total deposits (including demand deposits) increased 4.2 percent for the
three-month period ended March 31, 2000, as compared to the similar period in
1999. When comparing the same periods, the average daily balances of the
demand deposit accounts rose $17,423,000, while the average daily balances of
savings and transaction accounts combined increased $5,169,000. The average
daily balance of time deposits, which pay a higher rate of interest compared
to demand deposit and transaction accounts, increased $8,083,000 for the three
months ended March 31, 2000, compared to the three months ended March 31,
1999. These deposit trends are the result of management's efforts to grow
relationship type accounts such as demand deposit and Investors' Weekly
accounts, which pay a lower rate of interest compared to time deposit accounts
and better match the characteristics of the assets being generated. Management
plans to continue these efforts during 2000. Average daily balances of
borrowings increased $36,755,000 for the three-month period ended March 31,
2000 compared to the same period of 1999 and the rate on borrowings increased
74 basis points comparing the same periods. On an average daily basis, total
deposits (including demand deposits) and purchased funds increased 7.6 percent
for the three-month period ended March 31, 2000, as compared to the
three-month period ended March 31, 1999.
21
<PAGE>
Provision for Loan Losses
The Company maintains the allowance for loan losses at a level that
is deemed appropriate based upon loan loss experience, the nature of the
portfolio, the growth of the portfolio and the evaluation of current economic
conditions. Special consideration is given to watch list loans, non-performing
loans and non-accrual loans, as well as other factors that management feels
deserve recognition. The Company maintains a quarterly loan review program
designed to provide reasonable assurance that the allowance is maintained at
an appropriate level and that changes in the status of loans are reflected in
the financial statements in a timely manner. The adherence to this policy may
result in fluctuations in the provision for loan losses. Consequently, the
increase in net interest income before provision for loan losses, discussed
above, may not necessarily flow through to the net interest income after
provision for loan losses.
The provision amounted to $215,000 and $225,000 for the three-month
periods ended March 31, 2000 and 1999. These provisions reflected the size of
the loan portfolio and consideration of the levels of past due accruing loans
(90 days or more) and non-accrual loans over the same periods. These levels of
non-performing loans reflect both the general economic conditions that have
promoted growth and expansion in the Company's trade area during the last
several years, and a credit risk management strategy that promotes
diversification.
As of March 31, 2000, loans delinquent 90 days or more and were
included in the accompanying financial statements as accrual loans totaled
approximately $86,000. At March 31, 2000, there were loans totaling $239,000
on non-accrual. At December 31, 1999, there were $171,000 in loans delinquent
90 days or more included as accruing loans in the financial statements and
there were $329,000 on non-accrual.
The ratio of the allowance for loan losses to total loans was 1.01
percent for March 31, 2000 and 1.00 percent for both December 31, 1999 and
March 31, 1999. These ratios are based on management's analysis of the
adequacy of the allowance.
As part of the loan review process, management reviews all loans
classified as `special mention' or below. As well as other loans that might
warrant application of SFAS No. 114 as amended by SFAS No. 118, `Accounting by
Creditors for Impairment of a Loan'. As of March 31, 2000, loan balances
totaling $1,009,000 were classified as impaired and as of December 31, 1999,
$246,000 were classified as impaired.
Following is a summary of the loan loss experience for the three
months ended March 31, 2000, and the year ended December 31, 1999.
22
<PAGE>
March 31, December 31,
2000 1999
------------- -------------
(in thousands)
Amount of loans outstanding $ 661,389 $ 653,898
------------- -------------
Average daily loans outstanding for
the period $ 659,365 $ 642,307
------------- -------------
Allowance for loan losses at the
beginning of the period $ 6,522 $ 5,510
Charge-offs
Commercial 0 147
Real estate 0 6
Installment 126 252
Credit card and personal credit lines 11 30
------------- -------------
Total charge-offs 137 435
Recoveries
Commercial 26 10
Real estate 0 0
Installment 27 114
Credit card and personal credit lines 1 13
------------- -------------
Total recoveries 54 137
------------- -------------
Net charge-offs 83 298
Provision charged to expense 215 1,310
------------- -------------
Allowance for loan losses at the end of
the period $ 6,654 $ 6,522
============= =============
Ratio of annualized net charge-offs during
the period to average daily loans
during the period:
Commercial (0.02)% 0.02%
Real estate 0.00% 0.00%
Installment 0.06% 0.03%
Credit card and personal credit lines 0.01% 0.00%
------------- -------------
Total 0.05% 0.05%
============= =============
23
<PAGE>
Net interest income after provision for loan losses totaled
$8,224,000 for the three-month period ended March 31, 2000. This represented
an increase of 13.9 percent over the same period ended March 31, 1999.
Noninterest Income
Total noninterest income decreased $462,000 or 15.3 percent to
$2,562,000 for the three-month period ended March 31, 2000, from $3,024,000
recorded for the three-month period ended March 31, 1999. While fee income
increased substantially during the first quarter, noninterest income for the
quarter declined principally because of the decline in mortgage loan sale
activity due to rising rates and securities gains realized during the first
quarter of 1999.
Trust and brokerage fees, which represent basic recurring service fee
income, increased $133,000 or 31.8 percent to $551,000 for the three-month
period ended March 31, 2000, as compared to $418,000 for the first three
months of 1999. Trust and brokerage both had strong increases over last year.
Trust fees increased 28.4 percent comparing the first quarter of 2000 to the
same period of 1999. This increase was primarily in testamentary trusts and
employee benefit plans. Brokerage fees increased 39.5 percent comparing the
first quarter of 2000 to the same period of 1999. This increase was the result
of increased volume from customer acceptance of the product.
Service charges on deposit accounts increased 6.4 percent or $65,000
during the three-month period ended March 31, 2000, totaling $1,078,000, as
compared to the same period in 1999.
Other income consists of normal recurring fee income, as well as
other income that management classifies as non-recurring. Other income
increased $121,000 or 17.7 percent to $803,000 for the three-month period
ended March 31, 2000, as compared to the same period in 1999. The primary
increases were in insurance income and mortgage servicing fees.
The profits from the sale of mortgages during the three-month period
ended March 31, 2000, totaled $130,000, as compared to $460,000 during the
same period in 1999. This decrease reflected a decrease in the volume of
mortgages sold during the first three months of 2000, as compared to the sales
during the first three months of 1999. This decrease in volume was a result of
the rising rate environment, which began in the last half of 1999. Management
expects this trend to continue.
There were no net investment securities gains (losses) for the
three-month period ended March 31, 2000, compared to $451,000 for the
three-month period ended March 31, 1999.
24
<PAGE>
Noninterest Expense
Noninterest expense increased $480,000 or 6.7 percent to $7,621,000
for the three-month period ended March 31, 2000, as compared to the first
three months of 1999.
For the three months ended March 31, 2000, salaries and employee
benefits increased to $4,029,000, a $228,000 increase or 6.0 percent as
compared to the first three months of 1999. This increase reflected normal
salary increases and higher employee insurance premiums. Total employees
increased to 478 at March 31, 2000, from 474 at March 31, 1999. The slight
increase in total employees was primarily the result of the opening of the
Company's first office in Ft. Wayne, Indiana.
For the three-month period ended March 31, 2000, occupancy and
equipment expenses were $1,289,000, a $17,000 or 1.3 percent increase from the
same period one year ago. The growth in these expenses has begun to moderate
with the completion of the Year 2000 project and the completion of a major
technology upgrade.
For the three-month period ended March 31, 2000, other expenses
totaled $2,303,000 as compared to $2,068,000 during the same period in 1999.
This was an increase of 11.4 percent or $235,000. When comparing the
three-month period ended March 31, 2000 to the same period of 1999, a
significant increase was noted in professional fees (up $102,000 or 70.6
percent). This increase was primarily due to non-recurring expenses related to
employee benefit plans.
Income Before Income Tax Expense
Income before income tax expense increased $61,000 or 2.0 percent to
$3,165,000 for the first three months of 2000, as compared to $3,104,000 for
the same period in 1999. This was due primarily to the increase in net
interest income.
Income Tax Expense
Income tax expense decreased to $963,000 for the first three months
of 2000, as compared to $1,034,000 for the same period in 1999. This was a
$71,000 or 6.9 percent decrease.
The combined state franchise tax expense and the federal income tax
expense as a percentage of income before income tax expense decreased to 30.4
percent during the first three months of 2000, as compared to 33.3 percent
25
<PAGE>
during the same period in 1999. Currently the state franchise tax rate is 8.5
percent and is a deductible expense for computing federal income tax.
YEAR 2000
The Company had a successful Year 2000 and leap year rollover. At this
point, the Company has not experienced any Year 2000 issues as a result of the
rollover, and is not aware of any customers that have experienced any material
Year 2000 issues. This success can be attributed to the two years of planning
and preparation for the Year 2000. Part of the preparation was evaluating,
upgrading and/or replacing all hardware, software, and electrical and
mechanical equipment that was not year 2000 compliant. Through this evaluation
process, systems that were identified as not Year 2000 ready were either
upgraded or retired. The Company upgraded 19 systems and retired 23 systems
based on the results of the evaluation process. As part of this preparation,
the Company contacted all vendors, corporate depositors, and all large
corporate lending customers to access their Year 2000 efforts. While the
rollover went smoothly, Year 2000 monitoring will continue for much of the
year to assure that all potential Year 2000 issues are addressed.
Recent Regulatory Developments
On November 12, 1999, President Clinton signed legislation that will
allow bank holding companies to engage in a wider range of nonbanking
activities, including greater authority to engage in securities and insurance
activities. Under the Gramm-Leach-Bliley Act (the "Act"), a bank holding
company that elects to become a financial holding company may engage in any
activity that the Board of Governors of the Federal Reserve System (the
"Federal Reserve"), in consultation with the Secretary of the Treasury,
determines by regulation or order is financial in nature, incidental to any
such financial activity, or complementary to any such financial activity and
does not pose a substantial risk to the safety or soundness of depository
institutions or the financial system generally. The Act specifies certain
activities that are deemed to be financial in nature, including lending,
exchanging, transferring, investing for others, or safeguarding money or
securities; underwriting and selling insurance; providing financial,
investment, or economic advisory services; underwriting, dealing in or making
a market in, securities; and any activity currently permitted for bank holding
companies by the Federal Reserve under section 4(c)(8) of the Bank Holding
Company Act. A bank holding company may elect to be treated as a financial
holding company only if all depository institution subsidiaries of the holding
company are well-capitalized, well-managed and have at least a satisfactory
rating under the Community Reinvestment Act.
National banks are also authorized by the Act to engage, through
"financial subsidiaries," in any activity that is permissible for financial
holding companies (as described above) and any activity that the Secretary of
26
<PAGE>
the Treasury, in consultation with the Federal Reserve, determines is
financial in nature or incidental to any such financial activity, except (i)
insurance underwriting, (ii) real estate development or real estate investment
activities (unless otherwise expressly permitted by law), (iii) insurance
company portfolio investments and (iv) merchant banking. The authority of a
national bank to invest in a financial subsidiary is subject to a number of
conditions, including, among other things, requirements that the bank must be
well-managed and well-capitalized (after deducting from capital the bank's
outstanding investments in financial subsidiaries). The Act provides that
state banks may invest in financial subsidiaries (assuming they have the
requisite investment authority under applicable state law) subject to the same
conditions that apply to national banks.
Various bank regulatory agencies have begun issuing regulations as
mandated by the Act. The Federal Reserve has issued an interim regulation
establishing procedures for bank holding companies to elect to become
financial holding companies. In addition, the Federal Reserve has issued
interim regulations listing the financial activities permissible for financial
holding companies and describing the parameters under which financial holding
companies may engage in securities and merchant banking activities. The
Federal Deposit Insurance Corporation has issued an interim regulation
regarding the parameters under which state nonmember banks may conduct
activities through subsidiaries that national banks may conduct only in
financial subsidiaries. In addition, all federal bank regulatory agencies have
jointly issued a proposed regulation that would implement the privacy
provisions of the Act. At this time, it is not possible to predict the impact
the Act and its implementing regulations may have on the Company. As of the
date of this filing, the Company has not applied for or received approval to
operate as a financial holding company. In addition, the Bank has not applied
for or received approval to establish financial subsidiaries.
Forward-looking Statements
When used in this report and in future filings by the Company with
the Securities and Exchange Commission, in the Company's press releases or
other public or shareholder communications, or in oral statements made with
the approval of an authorized executive officer, the words or phrases "would
be," "will allow," "intends to," "will likely result," "are expected to,"
"will continue," "is anticipated," "estimate," "project," or similar
expressions are intended to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to risks and uncertainties, including but not limited
to changes in economic conditions in the Company's market area, changes in
policies by regulatory agencies, fluctuations in interest rates, demand for
loans in the Company's market area, implementation of new technologies, the
Company's ability to develop and maintain secure and reliable electronic
systems and competition, all or some of which could cause actual results to
27
<PAGE>
differ materially from historical earnings and those presently anticipated or
projected.
The Company wishes to caution readers not to place undo reliance on
any such forward-looking statements, which speak only as of the date made, and
advise readers that various factors, including regional and national economic
conditions, substantial changes in levels of market interest rates, credit and
other risks of lending and investment activities and competitive and
regulatory factors, could affect the Company's financial performance and could
cause the Company's actual results for future periods to differ materially
from those anticipated or projected.
The Company does not undertake, and specifically disclaims any
obligation, to update any forward-looking statements to reflect occurrences or
unanticipated events or circumstances after the date of such statements.
28
<PAGE>
LAKELAND FINANCIAL CORPORATION
FORM 10-Q
March 31, 2000
Part II - Other Information
Item 1. Legal proceedings
-----------------
There are no material pending legal proceedings to which the Company
or its subsidiaries is a party other than ordinary routine litigation
incidental to their respective businesses.
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits
27 Financial Data Schedule
b. Reports
None
29
<PAGE>
LAKELAND FINANCIAL CORPORATION
FORM 10-Q
March 31, 2000
Part II - Other Information
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LAKELAND FINANCIAL CORPORATION
(Registrant)
Date: May 11, 2000 /s/Michael L. Kubacki
Michael L. Kubacki - President and Chief
Executive Officer
Date: May 11, 2000 /s/Terry M. White
Terry M. White -Executive Vice President
and Chief Financial Officer
30
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description Page
------- ------------------------------------------- -----
27 Financial Data Schedule (EDGAR filing only)
31
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains financial information extracted from the third quarter
10Q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 58,956
<INT-BEARING-DEPOSITS> 74
<FED-FUNDS-SOLD> 848
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 278,711
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 662,045
<ALLOWANCE> 6,381
<TOTAL-ASSETS> 1,009,531
<DEPOSITS> 794,009
<SHORT-TERM> 158,704
<LIABILITIES-OTHER> 8,523
<LONG-TERM> 35,734
0
0
<COMMON> 1,453
<OTHER-SE> 53,818
<TOTAL-LIABILITIES-AND-EQUITY> 1,009,531
<INTEREST-LOAN> 14,422
<INTEREST-INVEST> 4,355
<INTEREST-OTHER> 58
<INTEREST-TOTAL> 18,835
<INTEREST-DEPOSIT> 7,439
<INTEREST-EXPENSE> 10,396
<INTEREST-INCOME-NET> 8,439
<LOAN-LOSSES> 215
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,621
<INCOME-PRETAX> 3,165
<INCOME-PRE-EXTRAORDINARY> 2,202
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,202
<EPS-BASIC> .38
<EPS-DILUTED> .38
<YIELD-ACTUAL> 3.64
<LOANS-NON> 239
<LOANS-PAST> 86
<LOANS-TROUBLED> 1,152
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,522
<CHARGE-OFFS> 137
<RECOVERIES> 54
<ALLOWANCE-CLOSE> 6,654
<ALLOWANCE-DOMESTIC> 6,080
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 574
</TABLE>
