<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X]
For the fiscal year ended December 31, 1995
--------------------------------
OR
[ ]
For the transition period from N/A
---------------------------
Commission File Number 2-98960-A
COMMERCE NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
59-2497676
(I.R.S. Employer Identification No.)
1201 SOUTH ORLANDO AVENUE,
WINTER PARK, FLORIDA 32789
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (407) 629-1818
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Not Applicable.
THIS FILING CONTAINS 84 PAGES. THE EXHIBIT LIST COMMENCES ON THE SEQUENTIAL PAGE
NUMBER 74.
<PAGE>
The aggregate market value on March 1, 1996, of the Registrant's voting
stock held by non-affiliates was $5,836,246. There was no formalized active
market for Common Stock on said date, although there have been transactions in
the last twelve months. The most recent transaction had a purchase price in the
amount of $13.00 per share which is the amount the Registrant used for purposes
of this disclosure.
At March 1, 1996, the Registrant had outstanding:
523,565 shares of Common Stock
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the
Part of the Form 10-K into which the document is incorporated: (1) Any annual
report to security holders; (2) Any proxy or information statement; and (3) Any
prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of
1933. The listed documents should be clearly described for identification
purposes.
Registration No. 2-98960-A is incorporated by reference in Part IV, Item 14
a.3. Exhibits as noted.
--------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Item No. Caption Page
- -------- ------- ----
<S> <C> <C>
PART I ................................................................................................. 1
Item 1. Business............................................................................. 1
Item 2. Properties........................................................................... 6
Item 3. Legal Proceedings.................................................................... 8
Item 4. Submission of Matters to a Vote of Security Holders.................................. 8
PART II ................................................................................................. 8
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters............ 8
Item 6. Selected Financial Data ............................................................. 9
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 9
Item 8. Consolidated Financial Statements and Supplementary Data............................. 28
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 62
PART III ................................................................................................ 63
Item 10. Directors and Executive Officers of the Registrant................................... 63
Item 11. Executive Compensation............................................................... 66
Item 12. Security Ownership of Certain Beneficial Owners and Management....................... 67
Item 13. Certain Relationships and Related Transactions....................................... 70
PART IV ................................................................................................. 71
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.................................................................. 71
</TABLE>
i
1
<PAGE>
PART I
ITEM 1. BUSINESS
--------
COMMERCE NATIONAL CORPORATION
Commerce National Corporation, a Florida corporation (the "Company" or
"CNC"), was incorporated under the laws of the State of Florida on February 21,
1985, for the purpose of purchasing 100% of the capital stock of the National
Bank of Commerce (the "Bank") in order to adequately capitalize the Bank and for
the purpose of organizing and acting as a bank holding company.
CNC was organized as a bank holding company to enhance the Bank's ability
to serve its customers' requirements for financial services. Currently, the
Company engages in only the management of the Bank; however, CNC's structure is
intended to provide flexibility for the provision of additional banking-related
services which a traditional commercial bank may not provide under present laws.
The Company was authorized by the Board of Governors of the Federal Reserve
System (the "FRB") to invest up to $1,000,000 of its capital to purchase loans
from the Bank which were in excess of authorized lending limits of the Bank. As
of March 1, 1996, the Company was participating in an aggregate of $374,955 on
four (4) different loans with the Bank.
THE BANK
The Bank has been in operation since August 4, 1986, the date it was
granted the requisite charter from the United States Office of the Comptroller
of the Currency (the "OCC"). The Bank conducts a general, commercial and retail
banking business emphasizing in its marketing efforts its local management and
ownership. The Bank presently offers a full range of accounts with a variety of
features which management believes are compatible with the Bank's plan of
business. Management will continue to assess the needs of its customers and to
structure its types of accounts and services to meet their needs.
The Bank has been marketing its services to depositors on the basis of the
convenience of the Bank's locations; of its status as an institution managed
locally; of its emphasis on personal attention to its customers and its full
range of services. Thus far, the Bank has utilized traditional advertising
media, as well as an active and community-involved management and board of
directors to promote the Bank.
In addition to depository and credit services, the Bank offers as part of
its normal bank operations a variety of customer services, including notary
services, photocopying, and signature
1
<PAGE>
guarantees. Additionally, safe deposit boxes, custodial services and account
reconciliations are available. It is perceived that these services complement
the depository and credit services offered by the Bank. The Bank joined the
Federal Home Loan Bank of Atlanta in October of 1992. One of the purposes for
joining this organization was to make single-family residential loans. It is the
Bank's intention to invest short-term funds and to control the interest rate
risk associated with fixed rate lending.
The primary correspondent institutions of the Bank are Barnett Bank, N.A.,
Jacksonville and Independent Bankers' Bank of Florida, Inc., Orlando. Barnett
Bank, N.A. acts as the primary clearing agent in the collection of checks
received in the normal course of business by the Bank. In addition to the daily
handling of checks, M&I Data Services Inc. serves as data processor for the
Bank's loan and deposit services. Independent Bankers' Bank of Florida, Inc.
provides advice and counseling in the area of securities investment and is agent
in the Bank's overnight investment of federal funds. Neither Barnett Bank, N.A.
nor Independent Bankers' Bank has provided trust services, nor have such
services been provided by the Bank.
COMPETITION
As of March 1, 1996, there were ten commercial banks, two savings banks and
several consumer finance companies in the Bank's perceived market area.
Although the principal competition for the Bank is thought to come from existing
financial institutions within the market area, it should be noted that there are
several commercial banks and savings and loan associations located outside but
near the perceived market area. Most of the Bank's competitors have greater
resources, broader geographic markets and higher lending limits and offer more
services than the Bank. The right of banks in Florida to branch statewide and
also the elimination of certain restrictions on interstate banking has
heightened the competition of the Bank's market area.
As of June 30, 1995, the Bank had approximately 1.2% of the deposits of
Orange County, Florida.
Offices affiliated with out-of-state financial institutions have entered
Florida to offer limited financial services, including loans and deposit
gathering activities. The State of Florida has adopted a reciprocal interstate
regional banking law which permits bank holding companies headquartered outside
of Florida to acquire Florida banks, provided Florida bank holding companies may
likewise make bank acquisitions in the reciprocal state. Other out-of-state
bank holding companies have entered the Florida banking market by acquiring
failing thrift institutions. Competition for deposit and loan opportunities in
the Bank's market area is intense because of the accelerating pace of
deregulation and geographic expansion noted above.
2
<PAGE>
Accelerated deregulation of interest rate controls, combined with the
significant new lending powers and the implementation of laws under the
Financial Institutions Reform, Recovery and Enforcement Act of 1989, has
substantially increased the competitive environment and brought about changes in
the financial services industry. Thrift institutions are direct competitors of
the Bank with respect to both deposit gathering and loan opportunities.
The Bank is in competition with existing area financial institutions other
than commercial banks and savings and loan associations, including insurance
companies, consumer finance companies, brokerage houses, credit unions and other
business entities which have recently been encroaching upon the traditional
banking markets. In certain instances, federal and state regulation of the Bank
will make it more difficult to compete with these non-banking institutions. See
"Supervision and Regulation," below.
The Bank believes there is a continuing need for locally owned and operated
banks in Orange County and competes on the basis of location, service to its
customers and interest rates.
SUPERVISION AND REGULATION
CNC and the Bank operate in a highly regulated environment, and their
respective business activities are governed by statute, regulation and
administrative policies. The business activities of CNC and the Bank are
supervised by a number of federal regulatory agencies, including the Board of
Directors of the Federal Reserve Board ("FRB"), the OCC and the Federal Deposit
Insurance Corporation ("FDIC"). Additionally, CNC is supervised and regulated
by the Securities and Exchange Commission.
CNC is regulated by the FRB under the Bank Holding Company Act of 1956, as
amended, which required CNC to register as a bank holding company and which
subjects CNC to FRB examinations and certain reporting requirements. Interstate
expansion of bank holding companies is prohibited unless accomplished by
acquisition and such acquisition is specifically authorized by a statute of the
state in which the target bank or bank holding company is located. A bank
holding company is generally prohibited from acquiring control of any company
which is not a bank and from engaging in any business other than the business of
banking or managing and controlling banks. However, there are certain
activities which have been identified by the FRB to be so closely related to
banking as to be a proper incident thereto and thus permissible for bank holding
companies assuming the proper authorization is obtained prior to commencing the
activities.
Banking regulations allow for an assessment of CNC as the sole stockholder
of the Bank to cover any impairment of capital, such
3
<PAGE>
assessment to be enforced by sale, to the extent necessary, of the Bank stock
held by CNC if CNC fails to pay the assessment. Additionally there are
restrictions on the amount of dividends the Bank is allowed to pay. Prior
regulatory approval must be obtained before declaring any dividends if the
amount of capital, surplus and retained earnings is below certain statutory
limits.
Presently, with respect to expansion, the Bank may establish branches
within the limits of the State of Florida, with the approval of the OCC. To
date, the Bank operates three branches. In addition, the Bank, as a subsidiary
of CNC, will be subject to restrictions under federal law in dealing with CNC
and other affiliates. These restrictions apply to extensions of credit to an
affiliate, investments in the securities of an affiliate, the purchase of assets
from an affiliate and the amount of advances to a third party collateralized by
securities of an affiliate.
The operations of the Bank are affected by various requirements and
restrictions imposed by the laws of the United States and the State of Florida,
including requirements to maintain reserves against deposits, limitations on the
interest rates that may be charged on certain types of loans, and restrictions
on the nature and amount of loans that may be granted and on the types of
investments that may be made. The operations of the Bank are also affected by
various consumer laws and regulations, including those relating to equal credit
opportunity and regulation of consumer lending practices. All subsidiary banks
of a bank holding company must become and remain insured banks under the Federal
Deposit Insurance Act.
The scope of regulation and permissible activities of CNC and the Bank are
subject to change by future federal and state legislation.
In addition to a variety of generally applicable state and federal laws
governing businesses and employers, such as the Equal Employment Opportunity Act
prohibiting employment discrimination, the Occupational Safety and Health Act
governing employee working conditions, and the like, the Bank is subject to a
variety of special federal statutes and regulations applicable only to financial
institutions. These include the Bank Secrecy Act, which requires it to report
certain financial transactions to the Department of Revenue; the Truth in
Lending Act and Federal Reserve Regulation Z, which requires disclosure of the
terms of consumer finance transactions and regulates certain credit card
practices; the Equal Credit Opportunity Act and Federal Reserve Regulation B,
which prohibit discrimination in the evaluation and extension of credit; the
Home Mortgage Disclosure Act and Federal Reserve Regulation C, which are
intended to provide information and enable the public and public officials to
determine if a financial institution is fulfilling its obligation to help meet
the housing needs of the community it serves; the Electronic Fund Transfer Act
4
<PAGE>
and Federal Reserve Regulation E, which provide for consumer rights and
safeguards in electronic fund transfer systems; the Community Reinvestment Act
and OCC regulations applicable thereto which require financial institutions to
meet their obligation to provide for the total credit needs of the communities
they serve, including investing their assets in loans to low and moderate income
borrowers; the Fair Debt Collection Practices Act which governs practices which
may be used by associations and other credit grantors to eliminate abusive debt
collection practices; the Fair Credit Reporting Act which governs the collection
and use of credit information by credit reporting agencies to insure the
confidentiality, accuracy, relevancy and proper utilization of consumer credit
information; and the Right to Financial Privacy Act, which imposes a duty to
maintain the confidentiality of consumer financial records and prescribes
procedures for complying with administrative subpoenas of financial records,
among others.
The monetary and fiscal policies of regulatory authorities, including the
FRB, also affect the banking industry. Through changes in the reserve
requirements against bank deposits, open market operations in U.S. Government
securities and changes in the discount rate on bank borrowing, the FRB
influences the cost and availability of funds obtained for lending and
investing. The Bank's deposit accounts are insured by the FDIC up to a maximum
of One Hundred Thousand Dollars ($100,000.00) per insured depositor. The Bank
is subject to regulations of the FDIC and to their periodic examinations as well
as filing requirements. Any insured bank which is not operated in accordance
with, or otherwise in conformance with FDIC regulations, policies and
directives, could be cited for non-compliance. Non-compliance may result in
proceedings against the Bank or any director, officer or employee of the Bank
engaging in the unsafe and unsound practices cited. The FDIC does have the
authority to terminate insurance of accounts in accordance with their
procedures.
Regulatory agencies have approved guidelines for the implementation of a
risk capital framework that make capital requirements more sensitive to the risk
profiles of the individual banking companies. Pursuant to these guidelines,
capital is delineated as either "Tier One" or "Tier Two" capital. Tier One
capital consists primarily of shareholders' equity while Tier Two capital
consist of certain debt instruments and a portion of the reserve for loan
losses. Currently, the Bank is subject to a minimum Tier One capital ratio of
four percent (4%) and a total risk based capital ratio (i.e., Tier One plus Tier
Two capital) of eight percent (8%).
The Financial Institution's Reform, Recovery and Enforcement Act of 1989,
("FIRREA") contained a number of major regulatory reforms including stronger
capital standards for banks and savings and loan associations and stronger civil
and criminal enforcement provisions. FIRREA allows the acquisition of savings
and loan
5
<PAGE>
associations by buying holding companies and poses no interstate
barriers to such bank holding company acquisitions. FIRREA also provides that a
depository institution insured by the FDIC can be held liable for any loss
incurred by, and reasonably expected to be incurred by, the FDIC after its date
of enactment (August 9, 1989) in connection with the default of a commonly
controlled FDIC insured depository institution; or any assistance provided by
the FDIC to a commonly controlled FDIC insured institution in danger of default.
In December 1991, the Federal Deposit Insurance Corporation Improvement Act
of 1991, ("FDICIA") became law. The FDICIA revises the bank regulatory
insurance coverage and funding provisions of the Federal Deposit Insurance Act,
as well as makes regulatory changes in several other banking statutes. FDICIA
requires the FDIC to develop and implement the system of risk based premiums for
Federal Deposit Insurance, under which the semi-annual rates at which a
depository institution is assessed will be based upon the probability that the
depository institution fund will incur a loss with respect to the institution.
Generally, under the FDICIA, all insured banks will be subject to an annual on-
site examination by their primary federal regulatory agency, which, in the
instance of the Bank, is the OCC. There are additional reporting requirements
imposed upon depository institutions and the nature of their annual financial
statements depending upon the size of the institution. Generally, better
capitalized institutions will be subject to less regulation and supervision than
poorly capitalized ones. Under the FDICIA, each banking agency must prescribe
the applicable standards for its depository institutions and their holding
companies relating to internal controls, information systems, internal audit
systems, loan documentation, credit underwriting, interest rate exposure, asset
growth, compensation, maximum ratio of classified assets to capital, minimum
earnings sufficient to absorb losses, a minimum ratio of market value to book
value for publicly traded shares, and other standards as the agency deems
appropriate.
EMPLOYEES
The Company and the Bank as of March 1, 1996, had 46 full-time employees
and 5 part-time employees. The employees of the Bank are not part of any
collective bargaining unit.
ITEM 2. PROPERTIES
----------
At year-end 1995, the Bank had Other Real Estate Owned (OREO) inventory
consisting of six (6) parcels of real property. One of the parcels, consisting
of seven (7) platted residential lots that were acquired in 1989, has been sold
to Habitat for Humanity. The lots were sold contingent upon the City of Winter
Park agreeing to zoning changes so that the lots could be developed without
mandatory improvements. This contract is pending and, if it is exercised, the
lots will be taken down over a 24-month period.
6
<PAGE>
A second parcel is agricultural land in which the Bank has a one-half
interest. The third piece of property is a mobile home located in Volusia
County, Florida. The mobile home is listed with a local realtor in that area,
and is currently under contract.
There are two (2) other parcels which are part of the OREO which are excess
property for two (2) of the Bank's branches. These were separate parcels of
property which had to be acquired to make each corner branch site economically
feasible. One excess parcel is on the Aloma Avenue Branch and the other excess
parcel is on the Temple Avenue Branch.
A vacant piece of commercial property is being marketed extensively by a
local real estate firm who is very familiar with these types of properties.
There are ongoing negotiations with the municipality in which this property is
located. This property is in a very popular commercial area and should move
sometime in 1996.
Marketing activity for all of these OREO properties continues to be active.
It is anticipated that some properties will be sold in 1996.
Both the Company and the Bank occupy a leasehold in the National Bank of
Commerce Building located at 1201 South Orlando Avenue, Winter Park, Florida,
which is owned by Gateway Plaza, Ltd., a Florida limited partnership, which
entity is owned in part and controlled by certain directors of the Company and
the Bank and affiliates thereof. See "Item 13--Certain Relationships and
Related Transactions". The Bank and the Company jointly occupy approximately
10,030 square feet on the ground floor and 1,800 square feet of the basement of
the building. The Bank paid rental expenses, in aggregate, of approximately
$285,144 for the year ended 1995 which represented all amounts due under the
lease agreement between the Company and Gateway Plaza, Ltd.
The term of the lease dated June 12, 1985, which commenced on August 4,
1986, is for 10 years with three consecutive options to renew for a period of
five years each. Additionally, the lease provides a first right of refusal to
purchase the building on the terms of any acceptable bona fide offer.
Expansion plans have been completed. The Aloma Branch, located at 2200
Aloma Avenue, Winter Park, opened May 15, 1995. The second branch located at
1400 Howell Branch Road, Winter Park, opened October 16, 1995. The above two
(2) branches are located in freestanding buildings which were built in 1995 and
are owned by the Bank. On January 2, 1996, the Bank moved into its third branch
site at 200 E. New England Avenue in downtown Winter Park, Florida. This
facility is owned by Rollins College, a private institution located in Winter
Park, which has leased the first floor and basement facility to the Bank.
7
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
-----------------
The Bank is a party to various legal proceedings in the ordinary course of
its business including its proceedings to collect loans or enforce security
interests. In the opinion of management of the Bank, none of the existing legal
proceedings will have an adversarial impact on the business or the financial
condition of the Bank.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
The Company did not submit any matter to a vote of its shareholders during
the fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
-----------------------------------------------------------------
MATTERS
-------
As of March 1, 1996, there was no formally established trading market for
the Company's shares of common stock, par value $0.10 per share (the "Common
Stock"), although there have been recent transactions for the Common Stock. On
that same date, the Company had approximately 438 shareholders based on the
number of record holders. To date there has been little secondary trading in
the Common Stock and, to the Company's knowledge, the Common Stock has not
received any over-the-counter quotations. The trading of the Common Stock
between third parties reflected values ranging between $10.00 and $14.71 per
share during the year-end 1995.
<TABLE>
<CAPTION>
- ------------------------------------------------------------
1995 1994
Market Price Range Market Price Range
--------------------------------------------
Quarter Ended High Low High Low
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31 $14.71 $13.00 $10.00 $10.00
September 30 $13.00 $10.00 $10.00 $10.00
June 30 $10.00 $10.00 $10.00 $10.00
March 31 $10.00 $10.00 $10.00 $10.00
- ------------------------------------------------------------
</TABLE>
On June 21, 1993, the Company adopted a Stock Redemption/Repurchase Policy.
As of March 1, 1996, 21,800 shares of the Company's common stock had been
redeemed at a total price of $213,640, or $9.80 per share, all of which shares
were redeemed in 1993.
8
<PAGE>
The Company has not declared any dividends to date, but continues to
evaluate its options. On December 31, 1992, the Bank paid a $250,000 dividend
to the Company. These funds were used to purchase loan participations from the
Bank. This amount was later contributed back to the Bank for capital purposes.
The Bank will continue to evaluate the payment of dividends to the Company on a
quarterly basis. As a practical matter, in order for the Company to issue a
dividend to its shareholders, the Bank would have to issue a dividend to its
shareholder, the Company. Under the national banking laws, a national bank may
not pay dividends from its capital; all dividends must be paid out of its net
profits after deducting expenses. In addition, a national bank may not pay
dividends on its shares of common stock unless its surplus equals its stated
capital, unless in the case of annual dividends there has been transferred, to
surplus, no less than one-tenth (1/10) of the bank's net profits for the
preceding two consecutive half year periods. Additional approval is required in
other circumstances where total dividends exceed certain preset amounts. See
Item 1 - Business--Supervision and Regulation, concerning the Bank.
--------
ITEM 6. SELECTED FINANCIAL DATA (Consolidated)
-----------------------
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Interest Income $ 3,767,327 $ 3,413,990 $ 2,971,364 $ 2,775,852 $ 2,348,461
Provisions for Loan Losses $ 175,000 $ 50,000 $ 79,280 $ 81,000 $ 441,758
Net Income $ 472,965 $ 724,209 $ 746,460 $ 639,982 $ 246,934
Income Per Share $.90 $1.38 $1.39 $1.17 $.45
Total Assets $100,365,487 $83,802,977 $77,056,684 $64,782,578 $61,713,387
Long-Term Obligations -0- -0- -0- -0- -0-
Average Equity 7,613,835 6,927,701 6,399,098 5,846,348 5,237,491
Average Assets 89,803,441 84,371,159 73,813,776 63,006,516 61,271,668
Cash Dividends Per Share -0- -0- -0- -0- -0-
- -------------------------------------------------------------------------------------------------------------
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
The accompanying consolidated financial statements of the Company are
primarily affected by the operation of the National Bank of Commerce (the
"Bank"), its wholly owned subsidiary.
9
<PAGE>
The following discussion and analysis presents a review of the Company's
Consolidated Financial Condition and Results of Operation. This review should
be read in conjunction with the Consolidated Financial Statements and other
financial data presented herein.
SUMMARY
For fiscal 1995, the Company had a profit of $472,965 as compared to a
profit of $724,209 in 1994. One of the major reasons for the decline in profit
in 1995 was the result of paying premiums to attract new deposits as each one of
the three (3) branches opened in 1995 and early 1996. Also, there were costs
incurred with the opening of each branch which were expensed in 1995 instead of
being capitalized. Assets at year-end 1995 were $100,365,487, a 20% increase
over 1994. Stockholder equity at year-end 1995 was $7,933,974 or 7.9% of year-
end assets. For the majority of 1995, approximately $2,182,812 in loans were on
non-accrual and/or non-earning real estate asset category. One-third of these
dollars were one loan which paid off on January 29, 1996. Also, it must be
considered that investment in land for new banking offices tied up funds that
otherwise would have produced interest income in 1995. Loan demand continued to
remain strong in 1995, with net loans increasing 9% to $66,648,785. Net income
per common share for 1995 was $0.90 per share compared to $1.38 per share for
1994.
Two indicators which measure profitability are net income as a percentage
of average assets (ROAA) and net income as a percentage of average shareholders'
equity (ROAE). A comparison of these ratios for the last three years is as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------------------------
<S> <C> <C> <C>
ROAA .54% .86% 1.01%
ROAE 6.21% 10.45% 11.67%
Net Income $ 472,965 $ 724,209 $ 746,460
Average Assets $89,803,441 $84,371,159 $73,813,776
Average Capital $ 7,613,835 $ 6,927,701 $ 6,399,098
- -------------------------------------------------------------
</TABLE>
NET INTEREST INCOME
Net interest income, the difference between interest earned on interest-
earning assets and interest expense incurred on interest-bearing liabilities, is
the most significant component of the Company's earnings. Net interest income
is affected by changes in the volumes and rates of interest-earning assets and
interest-
10
<PAGE>
bearing liabilities and the volume of interest-earning assets funded with
interest bearing deposits and non-interest bearing deposits. Net interest income
for the last three years is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------------------
<S> <C> <C> <C>
Interest Income $7,419,207 $6,041,229 $5,238,640
Interest Expense $3,651,880 $2,627,239 $2,267,276
NET INTEREST INCOME $3,767,327 $3,413,990 $2,971,364
- -----------------------------------------------------------
</TABLE>
Net interest income of $3,767,327 represented a 10.4% increase over 1994.
The Company's net interest margin was 4.47% for the year ended December 31,
1995, compared to 4.26% for 1994.
PROVISION FOR LOAN LOSSES
It is the Company's practice to maintain the allowance for loan losses at a
level considered by management to be adequate to provide for reasonably
foreseeable loan losses. There is no precise method of predicting loan losses
or amounts that ultimately may be charged off on particular segments of the loan
portfolio. The conclusion that a loan may become uncollectible, in whole or in
part, is a matter of judgement. Similarly, the adequacy of the allowance for
loan losses can be determined only on a judgmental basis, after full review,
including consideration of:
Borrowers' financial data, together with evaluations of industry data,
competition, the borrower's management capabilities and the underlying
collateral for secured loans, including, when appropriate, independent
appraisals of real estate properties, and other factors;
Consumer loan growth trends and delinquency and default rates, together
with an analysis of past and present repayment performance;
A continuing evaluation of the loan portfolio by lending officers and
senior management; and
Monthly review and evaluation of loans identified as having loss potential.
If as a result of such monthly reviews, a loan is judged to be
uncollectible, the carrying value of the loan is reduced to that portion
that is considered to be collectible.
11
<PAGE>
In addition to the continuing internal assessment of the loan portfolio,
the Bank engages an independent, third party loan review consultant to review
the loan portfolio every six months. The Bank's loan portfolio is also subject
to examination by the OCC.
The allowance for loan losses for year-end 1995 was $856,803, a 1.26%
reserve on total loans outstanding at year-end 1995. Net recoveries totaled
$24,234 for 1995 compared to net charge-offs totaling $102,886 in 1994. Also,
there were recoveries on unsecured commercial loans in 1995 totaling $18,000.
There was an additional Small Business Association ("SBA") loan of which there
was a recovery of approximately $26,000. Non-accruing loans totaled $2,182,812
and $2,355,375 at December 31, 1995 and 1994, respectively.
The Company and the Bank continue to be examined by the Federal Reserve
Bank, Office of the Comptroller of Currency (National Bank Examiners), and a
private loan review consultant.
The most recent Comptroller of the Currency (OCC) safety and soundness
examination was as of May 1995. The allowance for loan and lease losses was
evaluated as part of this review. No change was recommended.
NON-INTEREST INCOME
The total non-interest income increased from $429,621 in 1994 to $491,519
in 1995. One of the main reasons for the increase was that all service fees
were increased mid-year 1994. The impact of these increases did not take effect
until 1995. The other reason is the continued stringent policies on NSF
charges.
NON-INTEREST EXPENSE
Operating expenses increased $662,760 or 26% to $3,256,880 for year-end
1995 compared to the same period in 1994. The increase in salary expense of
$293,826 was due primarily to the staff hired to open the three (3) branches.
Also, a portion of this increase was for annual salary adjustments.
Occupancy expenses in 1995 increased $93,261 due partly to the purchase of
furniture and fixture which is included in this classification for the three (3)
new branches. Also, a portion of this expense would have been attributed to the
lease which the Bank assumed on the New England Avenue Branch which opened in
January, 1996.
Legal and professional fees increased $48,664 due primarily to the legal
expenses which were incurred in settling two (2) large real estate loans. One
loan closed during the last quarter of 1995, and the other loan closed in
January, 1996. Stationery and printing supplies increased $69,230 to $128,055.
The increase in
12
<PAGE>
this figure reflects stationery and supplies which were needed to furnish the
three (3) branches as they opened in 1995 and early 1996.
In the other expense category, the increase in 1995 was $192,933 resulting
in the year-end figure of $578,923. One of the big increases was in business
development which went from $5,580 in 1994 to $93,305 in 1995. A large
percentage of this increase was business development activities that were done
for the branch openings. Postage increased to $52,171 in 1995 from $38,338 in
1994 as the Bank continued to grow in deposits and, of course, more literature
and statements were being produced. Miscellaneous loan expense increased to
$49,198 from $22,927. A large portion of this was due to expenses incurred on
several SBA loans in 1995. The courier expense in 1995 was $23,781, as opposed
to $18,569 in 1994. With the addition of the three (3) branches, there was more
mileage incurred in 1995. The correspondent banking charges increased from
$31,165 in 1994 to $53,010 in 1995. The telephone expense increased to $28,347
in 1995 as opposed to $15,925 in 1994. Basically, all of the expenses listed
above have increased simply due to the three (3) branches which came on line in
1995 and early 1996.
INCOME TAXES
FEDERAL
The Company files a consolidated federal income tax return on behalf of
itself and the Bank and reports their income and expenses under the accrual
method of accounting.
Under the applicable provisions of the Internal Revenue Code of 1986 (the
"Code"), banks and bank holding companies are generally subject to the same
rules concerning federal income taxes as are other corporations. There are,
however, special rules applicable to banks. The most significant rule relates
to the deduction of bad debts.
The Company uses the reserve method in calculating its bad debt deduction.
Under the reserve method, a bank is required to use the experience method in
calculating its deduction. Under the experience method, a bank computes the
ratio of total bad-debt charge-offs for its most recent six taxable years,
including the current taxable year (adjusted for recoveries of bad debts during
such period), to the sum of loans outstanding at the close of each such six
years. The ratio so computed is applied to loans outstanding at the close of
the current taxable year, and the result constitutes the permissible reserve
balance.
Depending on the composition of its items of income and expense, a bank may
be subject to the alternative minimum tax ("AMT"). For tax years beginning
after 1986, a bank must pay an
13
<PAGE>
alternative minimum tax equal to the amount (if any) by which 20 percent of
alternative minimum taxable income ("AMTI") as reduced by an exemption varying
with AMTI, exceeds the regular tax due, AMTI equals regular taxable income
increased or decreased by certain adjustments and increased by certain tax
preferences, including depreciation deductions in excess of that allowable for
alternative minimum tax purposes, tax-exempt interest on most private activity
bonds issued after August 7, 1986 (reduced by any related interest expense
disallowed for regular tax purposes), the amount of the bad debt reserve
deduction claimed in excess of adjusted net book income (usually financial
statement net income plus federal income tax expense) over AMTI. For tax years
after 1989, this 50 percent of book income preference was replaced by 75 percent
of the excess of adjusted current earnings over AMTI. AMTI may be reduced only
up to 90 percent by AMT net operating loss carryovers. Alternative minimum tax
paid can be carried forward indefinitely and credited against regular tax due in
later years to reduce regular tax to the amount of alternative minimum tax
payable in those years. The alternative minimum tax applicable to tax years
after 1986 is significantly broader in scope than the pre-1986 minimum tax and
substantially increases the likelihood that banks and savings institutions will
have to pay alternative minimum tax.
STATE
The State of Florida imposes a corporate franchise tax on banks which
subjects the taxable income of such institutions to a 5.5 percent tax (or, if
greater, an alternative minimum tax equal to 3.3 percent of alternative minimum
taxable income). The Florida franchise tax may be reduced by a credit for
intangible taxes paid, but such credit cannot exceed 65 percent of the franchise
tax due for the year. The Florida franchise tax is deductible in determining
federal taxable income. Florida taxable income is substantially similar to
federal taxable income, except that it includes interest income on obligations
of any state or political subdivision thereof which is not otherwise exempt
under Florida laws and that net operating losses cannot be carried back to prior
taxable years.
LIQUIDITY
The liquidity of a banking institution reflects its ability to provide
funds to meet loan requests, to accommodate possible outflows in deposits and to
take advantage of interest rate market opportunities. Funding of loan requests
and providing for liability outflows while at the same time monitoring interest
rate fluctuations require continuous analysis in order to match the maturities
of specific categories of specific short-term loans and investments with
specific types of deposits and borrowing. The objective of liquidity management
is to maintain a balance between sources and uses of funds such that the cash
flow needs of the
14
<PAGE>
Company are met in the most economical manner. On the asset side, the Company's
liquidity is provided by Federal funds sold, loan principal repayments, and by
investment securities of which 100% have maturities of five years or less.
Moreover, liquidity is provided by an investment portfolio that is readily
marketable.
Closely related to the concept of liquidity is the management of interest
earning assets and interest bearing liabilities, which focuses on maintaining
stability in the net interest spread, an important factor in earnings growth and
stability. The interest rate volatility of recent years and rate deregulation
have significantly affected the way in which banks manage their business and
have highlighted the importance of asset and liability management. For the
Company, the most important objectives in asset and liability management
include: (1) controlling interest rate exposure, (2) ensuring adequate
liquidity, and (3) maintaining strong capital foundation.
The following table summarizes the Company's asset and liability balances
as of December 31, 1995 which, due to the rate adjustments for principal
prepayments and amortization and maturities are expected to reprice within the
specified time frame.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
15
<PAGE>
THE RATE-SENSITIVE BALANCE SHEET
WITH 10% CALCULATION FOR RETURN ON EQUITY
WITH DEPOSITS SPREAD BY BUCKET STRUCTURE OF IRR SUPERVISORY MODEL
<TABLE>
<CAPTION>
REVOLVES 1-90 DAYS 90-180 DAYS 181-365 DAYS 1-3 YEARS 3-5 YEARS ALL OTHER TOTALS
----------- ------------ ----------- ------------ ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Portfolio 0 500,450 1,506,286 3,522,931 9,136,281 0 557,200 15,223,148
Loans 16,877,116 2,897,692 2,888,408 8,423,662 22,578,767 7,690,740 6,018,924 67,375,309
Loan Loss Reserve -248,802 -100,000 -100,000 -100,000 -100,000 -100,000 -100,000 -848,802
FF Sold/Interest Bearing
Deposits 8,589,486 0 0 0 0 0 0 8,589,486
Cash & Due From 0 0 0 0 0 0 3,307,571 3,307,571
All Other Assets 0 0 0 0 0 0 6,514,545 6,514,545
---------- ----------- --------- ---------- ---------- ---------- ---------- -----------
TOTAL 25,217,800 3,298,142 4,294,694 11,846,593 31,615,048 7,590,740 16,298,240 100,161,257
========== =========== ========= ========== ========== ========== ========== ===========
Demand Deposits 0 0 0 0 0 0 13,343,615 13,343,615
Regular Savings 617,441 500,000 1,000,000 1,000,000 5,000,000 4,500,000 0 12,617,441
NOW 803,359 750,000 750,000 750,000 750,000 3,000,000 0 6,803,359
Money Market Deposits
Accounts 3,295,200 2,000,000 2,000,000 3,000,000 3,000,000 0 0 13,295,200
Certificates of Deposit 0 12,149,440 812,872 3,366,697 25,369,871 1,641,955 0 43,340,835
Reverse Repurchase 0 0 0 0 0 0 0 0
Federal Funds Purchased 0 0 0 0 0 0 0 0
Repurchase Agreements 1,046,513 0 0 0 0 0 0 1,046,513
Other Borrowed Money 0 8,400 0 36,350 85,950 69,600 1,065,795 1,266,095
Mortgage Indebtedness 0 0 0 0 0 0 348,431 348,431
Other Liabilities 0 0 0 0 0 0 587,098 587,098
Capital Notes 0 0 0 0 0 0 5,000,000 5,000,000
Equity 0 0 0 0 0 0 2,512,670 2,512,670
---------- ----------- --------- ---------- ---------- ---------- ---------- -----------
TOTAL LIABILITIES & EQUITY 5,762,513 15,407,840 4,562,872 8,153,047 34,205,821 9,211,555 22,857,609 100,161,257
========== =========== ========= ========== ========== ========== ========== ===========
GAP 19,455,287 -12,109,698 -268,178 3,693,546 -2,590,773 -1,620,815 -6,559,369
GAP/Total Assets 19.42% -12.09% -0.27% 3.69% -2.59% -1.62% -6.55%
Cumulative GAP 19,455,287 7,345,589 7,077,411 10,770,957 8,180,184 6,559,369 0
Cumulative GAP/Total Assets 19.42% 7.33% 7.07% 10.75% 8.17% 6.55%
</TABLE>
16
<PAGE>
CAPITAL RESOURCES
On January 27, 1989, the OCC issued an amendment to 12 CFR Part 3 adopting
final risk based capital guidelines for national banks. Developed in
conjunction with the Federal Deposit Insurance Corporation and the Board of
Governors of the Federal Reserve System, these guidelines provide an additional
measure of a bank's capital adequacy and are intended to reflect the relative
degree of credit risk associated with various assets by setting different
capital requirements for assets having less credit risk than others. Secondly,
banks are required to systematically hold capital against such off-balance sheet
activities as loans sold with recourse, loan commitments, guarantees and standby
letters of credit. Finally, the guidelines strengthen the quality of capital by
increasing the emphasis on common equity and restricting the amount of loss
reserves and other forms of equity such as preferred stock that can be counted
as capital.
Under the terms of the guidelines, banks must meet minimum capital adequacy
based upon both total assets and risk adjusted assets. To the extent that an
institution has a favorable risk based capital ratio, it would be more likely be
permitted to operate at or near minimum primary capital levels. On December 31,
1992, the guidelines took effect in their final form whereupon all banks are
required to maintain a risk based capital ratio of 8.0%. At December 31, 1995,
the Bank had a total risk based capital ratio (i.e., Tier One plus Tier Two
capital) of 11.36% (12.06% for the Company on a consolidated basis). See Item 1
- - Business -- Supervision and Regulation.
--------
The Company stands ready to infuse additional capital into the Bank should
it be warranted.
EFFECTS OF INFLATION
The impact of inflation on banks differs from the impact on non-financial
institutions. Banks, as financial intermediaries, have assets which may move in
concert with inflation. This is especially true for banks with a high
percentage of rate sensitive interest-earning assets and interest-bearing
liabilities. A bank can reduce the impact of inflation if it can manage its
rate sensitivity gap. The Company attempts to structure its assets and
liabilities and manage its gap in a manner which will minimize the potential
adverse effects of inflation or other market forces on its profitability and
capital position.
LEGAL ACTION
Neither the Company nor the Bank are involved at this time in any claims or
lawsuits other than routine matters arising out of the normal day-to-day banking
business.
17
<PAGE>
COMPETITION
All areas of the Company's business are highly competitive. The Company
faces heavy competition, both from local and national financial institutions and
from various other providers of financial services. By industry standards, the
Company relies heavily on large deposit customers. In the opinion of
management, this factor is a result of its customer base and the local
demographics. The Bank and the Company are well capitalized. Management
believes that the future calls for solid growth in assets by concentrating on
earnings and building a strong community presence through local branching
activities which are being undertaken in 1995.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
18
<PAGE>
STATISTICAL INFORMATION
CONSOLIDATED DAILY AVERAGE BALANCES, INCOME/EXPENSE
AND AVERAGE YIELDS EARNED AND RATES PAID -- 1995 AND 1994
(Dollars in thousands, yields on taxable equivalent basis)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
AVERAGE AVERAGE
BALANCES INCOME YIELD BALANCES INCOME YIELD
ASSETS (1) (1) RATES (1) (1) RATES
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans $65,180 $6,218 9.54% $57,486 $4,783 8.32%
- -----------------------------------------------------------------------------------------------------------------------------
Investment Securities 14,981 979 6.53% 16,536 1,013 6.13%
- -----------------------------------------------------------------------------------------------------------------------------
Funds Sold 2,971 171 5.76% 3,450 132 3.83%
- -----------------------------------------------------------------------------------------------------------------------------
Interest-Bearing Deposits 1,174 52 4.43% 2,699 105 .89%
- -----------------------------------------------------------------------------------------------------------------------------
Other Short-Term Investments -0- -0- -0- -0- -0- -0-
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL EARNING ASSETS $84,306 7,419 8.80% $80,171 6,033 7.52%
- -----------------------------------------------------------------------------------------------------------------------------
Cash 1,849 N/A N/A 1,922 N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------
Premises and Equipment 2,448 N/A N/A 1,291 N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------
Allowance for Loan Losses (748) N/A N/A (717) N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------
Other Assets 1,912 N/A N/A 1,704 N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $89,767 N/A N/A $84,371 N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
19
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
1995 1994
------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND AVERAGE AVERAGE
SHAREHOLDER'S BALANCES YIELD BALANCES YIELD
EQUITY (1) EXPENSES RATES (1) EXPENSES RATES
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Bearing Deposits:
- ------------------------------------------------------------------------------------------------------------------------------
NOW Accounts $ 6,051 $ 168 2.79% $ 6,103 $ 172 2.82%
- ------------------------------------------------------------------------------------------------------------------------------
Savings 14,335 580 4.05% 19,554 783 4.00%
- ------------------------------------------------------------------------------------------------------------------------------
Money Market 12,823 495 3.86% 14,393 451 3.13%
- ------------------------------------------------------------------------------------------------------------------------------
Certificates of Deposits 33,172 2,018 6.08% 22,757 889 3.91%
- ------------------------------------------------------------------------------------------------------------------------------
Other Time -0- N/A N/A -0- N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST-
BEARING DEPOSITS $66,381 $3,261 4.91% $62,807 $2,295 3.65%
- ------------------------------------------------------------------------------------------------------------------------------
Funds Purchased 202 14 6.93% 260 13 5.00%
- ------------------------------------------------------------------------------------------------------------------------------
Other Short-Term Borrowing 5,752 377 6.55% 5,389 319 5.92%
- ------------------------------------------------------------------------------------------------------------------------------
Long-Term Debt -0- -0- -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST- $ 5,954 $ 391 6.57% $ 5,649 $ 332 5.88%
BEARING LIABILITIES
- ------------------------------------------------------------------------------------------------------------------------------
Demand Deposits $ 9,234 N/A N/A $ 8,245 N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------
Other Liabilities 689 N/A N/A 803 N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity 7,509 N/A N/A 6,867 N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES
AND SHAREHOLDERS'
EQUITY $89,767 N/A N/A $84,371 N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------
1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest Rate Spread 3.89% 3.87% 3.94% 3.90% 3.29%
- ----------------------------------------------------------------------------------------------------------
Net Interest Income (in thousands) $ 3,767 $3,414 $2,971 $ 2,776 $2,348
- ----------------------------------------------------------------------------------------------------------
Net Interest Margin (2) 4.47% 4.26% 4.24% 4.64% 4.07%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculations were based on average balances for asset and liability
accounts and actual year end income and expense totals, causing some
distortion in yield verses rates actually earned on interest earning
assets and paid on interest bearing liabilities.
(2) Net interest income divided by total earning assets.
20
<PAGE>
MATURITY DISTRIBUTION OF INVESTMENT SECURITIES
December 31, 1995 and December 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
1995 1994
-----------------------------------------------------------------------
WEIGHTED WEIGHTED
CARRYING AVERAGE CARRYING AVERAGE
VALUE YIELD* VALUE YIELD*
- -------------------------------------------------------------------------------------------------------------------
U.S. Treasury and Other U.S. Government
Agencies and Corporations:
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due In One Year Or Less $ 5,544 6.14% $ 6,015 6.64%
- -------------------------------------------------------------------------------------------------------------------
Due After One Year Through Five 9,108 6.52% 10,556 6.43%
Years
- -------------------------------------------------------------------------------------------------------------------
Due After Five Years Through -0- -0- -0- -0-
Ten Years
- -------------------------------------------------------------------------------------------------------------------
Due After Ten Years -0- -0- -0- -0-
- -------------------------------------------------------------------------------------------------------------------
TOTAL $14,652 6.38% $16,571 6.51%
- -------------------------------------------------------------------------------------------------------------------
States and Political Subdivisions:
- -------------------------------------------------------------------------------------------------------------------
Due In One Year Or Less -0- -0- -0- -0-
- -------------------------------------------------------------------------------------------------------------------
Due After One Year Through Five Years 190 4.05% 190 4.05%
- -------------------------------------------------------------------------------------------------------------------
Due After Five Years Through Ten Years -0- -0- -0- -0-
- -------------------------------------------------------------------------------------------------------------------
Due After Ten Years -0- -0- -0- -0-
- -------------------------------------------------------------------------------------------------------------------
Other Securities -0- -0- -0- -0-
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES $14,842 6.35% $16,761 6.48%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* Weighted average yields are calculated on the basis of the carrying value
of the security.
21
<PAGE>
LOAN PORTFOLIO BY TYPES OF LOANS
(In thousands)
<TABLE>
<CAPTION>
------------------------------
DECEMBER 31, DECEMBER 31,
1995 1994
-------------------------------------------------------
<S> <C> <C>
COMMERCIAL:
-------------------------------------------------------
Secured $ 7,997 $ 6,294
-------------------------------------------------------
Unsecured 2,379 2,969
-------------------------------------------------------
REAL ESTATE:
-------------------------------------------------------
Construction 5,231 5,710
-------------------------------------------------------
Mortgage 50,121 45,444
-------------------------------------------------------
Credit Card -0- -0-
-------------------------------------------------------
Other Consumer Loans 2,004 1,626
-------------------------------------------------------
Lease Financing -0- -0-
-------------------------------------------------------
TOTAL LOANS $67,732 $62,043
-------------------------------------------------------
</TABLE>
LOAN MATURITY AND INTEREST RATE SENSITIVITY ANALYSIS
December 31, 1995
(In thousands)
<TABLE>
<CAPTION>
---------------------------------------
REMAINING MATURITIES OF LOANS
- -----------------------------------------------------------------------------------
LOAN MATURITY (1) TOTAL 1 YEAR WITHIN AFTER
1-5 YEARS 5
YEARS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, Financial and Agricultural $10,377 $ 6,681 $ 2,573 $1,123
- -----------------------------------------------------------------------------------
Real Estate 55,422 22,563 27,642 5,217
- -----------------------------------------------------------------------------------
Other 1,933 1,091 842 -0-
- -----------------------------------------------------------------------------------
TOTAL $67,732 $30,335 $31,057 $6,340
- -----------------------------------------------------------------------------------
</TABLE>
(1) Based upon scheduled principal payments.
22
<PAGE>
<TABLE>
<CAPTION>
REMAINING MATURITIES OF LOANS
- --------------------------------------------------------------------------------------------------------
INTEREST RATE SENSITIVITY TOTAL 1 YEAR WITHIN AFTER 5
1-5 YEARS YEARS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loans With:
- --------------------------------------------------------------------------------------------------------
Predetermined Interest Rates $29,304 $ 8,504 $10,747 $10,053
- --------------------------------------------------------------------------------------------------------
Floating or Adjustable 38,428 20,970 11,640 5,818
Interest Rates
- --------------------------------------------------------------------------------------------------------
TOTAL $67,732 $29,474 $22,387 $15,871
- --------------------------------------------------------------------------------------------------------
</TABLE>
NON-PERFORMING ASSETS AND LOANS PAST DUE 90 DAYS OR MORE
The following table summarizes the Company's non-accrual and past due loans
as of December 31 for each year indicated. A common presentation for non-
performing assets and loans past due 90 days or more is as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------
DECEMBER 31
-------------------------------------------------------
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-accrual Loans $2,182,812 $2,355,375 $1,637,750 $879,257 $625,326
- --------------------------------------------------------------------------------------------------
Accruing Loans Past Due
90 Days or More -0- -0- -0- -0- -0-
- -------------------------------------------------------------------------------------------------
</TABLE>
If interest due on all non-accrual loans had been accrued at the original
contract rates, interest income would have been approximately $32,050 greater
for 1991, approximately $59,204 greater for 1992, approximately $29,693 greater
for 1993, approximately $114,017 greater for 1994, and approximately $203,476
greater for 1995.
POTENTIAL PROBLEM LOANS
On December 31, 1995, the Bank had non-accrual loans totaling $2,182,812.
Of this amount, $1,973,132 was secured by first mortgages, including one SBA
loan. Installment credit loans that are non-accrual total $76,466. Also, there
are SBA loans not secured by mortgages totaling $133,214.
At year-end 1995, there were seventeen (17) loans on non-accrual. The
largest first mortgage loan on a local motel in the amount of $678,759 was paid
off in January, 1996. Also, another first mortgage loan on a commercial
building totaling $131,723 has since been brought current. Another first
mortgage loan totaling
23
<PAGE>
$66,394 has been brought current and is being monitored very closely. A first
mortgage loan totaling $183,838 on four (4) spec homes has been reduced by the
sale of two (2) of these houses and has been brought current. There is one loan
with an SBA guarantee which is secured by a first mortgage on a motel located in
Osceola County, Florida. A Receiver has been appointed by the Court for this
motel. It is the feeling of the Bank that, upon the sale of this motel, the Bank
will recoup, at minimum, 50% of the principal unsecured balance which is now on
non-accrual. Another one of the first mortgage loans on a spec house totaling
$57,432 is now under contract and should close in the second quarter of 1996.
The one remaining large first mortgage loan in the amount of $385,121 is in the
process of foreclosure. The borrower made a down payment of $75,000 when this
house was purchased.
One of the unsecured loans totaling $48,477 has since been brought current
and has been put on a four-year amortization program.
It is currently anticipated that any losses that will be associated with
the non-accrual loans might occur under a portion of one SBA loan and one first
mortgage loan. It is the feeling that the losses under these credits will be
minimal.
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
-----------------------------------------------
1995 1994
- -----------------------------------------------------------------------------------
PERCENT OF PERCENT OF
ESTIMATED ESTIMATED
LOANS IN LOANS IN
EACH EACH
BALANCE AT CATEGORY CATEGORY
DECEMBER 31, TO TOTAL TO TOTAL
APPLICABLE TO AMOUNT LOANS AMOUNT LOANS
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial $359,857 42% $131,514 20%
- ----------------------------------------------------------------------------------
Real Estate 471,242 55% 512,904 78%
- ----------------------------------------------------------------------------------
Consumer 25,704 3% 13,151 2%
- ----------------------------------------------------------------------------------
ACTUAL TOTAL $856,803 100% $657,569 100%
- ------------------------------------------------------------------------------------
</TABLE>
In general, the Bank calculates its Loan Loss Reserve by allocating
historical loss percentages of all criticized and classified loans, as well as
delinquent and non-accrual credits. The historical loss percentages are
calculated on a moving three (3) year weighted average by loan category, i.e.,
----
real estate, commercial, or installment. For large real estate credits, a
percentage discount is applied to current appraised values to determine
potential loss exposure. For the unallocated portion of the loan portfolio, the
methodology applies to various percentage allocations based on the
24
<PAGE>
quality of liquidity of collateral, i.e., certificate of deposit, secured loans
-----
versus unsecured loans. Management also allocates loan loss provisions for
certain loans representing a concentration of capital and off balance sheet
risk, such as letters of credit and unfunded loan commitments.
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan", as
amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan-
Income Recognition and Disclosure", on January 1, 1995. The Company,
considering current information and events regarding the borrower's ability to
repay their obligations, considers a loan to be impaired when it is probable
that the Company will be unable to collect all amounts due according to the
contractual terms of the loan agreement. When a loan is considered to be
impaired, the amount of the impairment is measured based on the present value of
expected future cash flows discounted at the loan's effective interest rate, the
secondary market value of the loan, or the fair value of the collateral for
collateral dependent loans. Impaired loans are written down to the extent that
principal is judged to be uncollectible and, in the case of impaired collateral
dependent loans where repayment is expected to be provided solely by the
underlying collateral and there is no other available and reliable sources of
repayment, are written down to the lower of cost or collateral value.
Impairment losses are included in the allowance for loan losses through a charge
to the provisions for loan losses. Cash receipts on impaired loans are applied
to reduce the principal amount of such loans until the principal has been
recovered and are recognized as interest income thereafter. Prior periods have
not been restated.
In accordance with SFAS No. 114 as amended by SFAS No. 118, the Company
records impairment in the value of its loans as an addition to the allowance for
loan losses. Any changes in the value of impaired loans due to the passage of
time or revisions in estimates are reported as adjustments to provision expense
in the same manner in which impairment initially was recognized. Adoption of
SFAS No. 114 as amended by SFAS No. 118 had no impact on the level of the
overall allowance for loan losses or on operating results, and does not affect
the Company's policies regarding write-offs, recoveries or income recognition.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
25
<PAGE>
COMPOSITION OF DEPOSITS FOR 1995, 1994 AND 1993
(Dollars in thousands)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
1995 1994 1993
-----------------------------------------------------------------------------------------------------------
AVERAGE AVERAGE AVERAGE
% OF RATE % OF RATE % OF RATE
AVERAGES TOTAL PAID AVERAGES TOTAL PAID AVERAGES TOTAL PAID
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Demand $ 9,234 12.21% -0- $ 8,245 11.60% -0- $ 7,544 12.02% -0-
- ------------------------------------------------------------------------------------------------------------------------------------
NOW 6,051 8.00% 2.79% 6,103 8.60% 2.75% 5,611 8.94% 3.01%
- ------------------------------------------------------------------------------------------------------------------------------------
Savings 14,335 18.96% 4.05% 19,554 27.52% 4.00% 9,473 15.10% 3.86%
- ------------------------------------------------------------------------------------------------------------------------------------
Money
Market 12,823 16.96% 3.86% 14,393 20.26% 3.50% 11,960 19.06% 3.53%
- ------------------------------------------------------------------------------------------------------------------------------------
Deposit 33,172 43.87% 6.08% 22,757 32.02% 4.75% 28,154 44.88% 3.80%
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 75,615 100.00% 4.31% $71,052 100.00% 3.57% $62,742 100.00% 3.23%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
MATURITY OF CDS AND OTHER TIME DEPOSITS
IN AMOUNTS OF $100,000 OR MORE
December 31, 1995
(In thousands)
<TABLE>
<CAPTION>
------------------------------------------------------------
MONTHS TO CD'S DOMESTIC OTHER TIME
MATURITY DEPOSITS TOTAL
------------------------------------------------------------
<S> <C> <C> <C>
3 Or less $13,117 -0- $13,117
------------------------------------------------------------
Over 3 through 12 9,948 -0- 9,948
------------------------------------------------------------
Over 12 817 -0- 817
------------------------------------------------------------
TOTAL $23,882 -0- $23,882
------------------------------------------------------------
</TABLE>
RETURN ON EQUITY AND ASSETS
<TABLE>
<CAPTION>
--------------------------------------
1995 1994 1993 1992 1991
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Return On Equity 6.21% 10.45% 11.67% 10.95% 4.71%
--------------------------------------------------------
Return On Assets .54% .86% 1.01% 1.02% .40%
--------------------------------------------------------
Equity To Assets 7.91% 8.23% 8.67% 9.28% 8.55%
--------------------------------------------------------
</TABLE>
26
<PAGE>
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 121
In March 1995, the Financial Accounting Standards Board issued SFAS
No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of." This Statement requires that long-lived assets
and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. This
Statement also requires that long-lived assets and certain identifiable
intangibles to be disposed of be reported at the lower of the carrying
amount or fair value less costs to sell, except for assets that are covered
by APB Opinion No. 30 which will continue to be reported at the lower of
the carrying amount or net realizable value. This Statement is effective
for financial statements with fiscal years beginning after December 15,
1995. The Company has determined that FAS 121 is not applicable in 1995.
SFAS No. 122
In May 1995, the Financial Accounting Standards Board issued SFAS No.
122, "Accounting for Mortgage Servicing Rights." This Statement amends
FASB Statement No. 65, "Accounting for Certain Mortgage Banking
Activities", to require that a mortgage banking enterprise recognize as
separate assets, rights to service mortgage loans for others, however those
servicing rights are acquired. This Statement requires that a mortgage
banking enterprise assess its capitalized mortgage servicing rights for
impairment based on the fair value of those rights. Impairment should be
recognized through a valuation allowance for each impaired stratum. This
Statement is applied prospectively in fiscal years beginning after December
15, 1995. The Company has determined that FAS 122 is not applicable in
1995 as the bank does not engage in this activity.
SFAS No. 123
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock Based Compensation." This Statement
established financial accounting and reporting standards for stock-based
employee compensation plans. Those plans include all arrangements by which
employees receive shares of stock or other equity instruments of the
employer or the employer incurs liabilities to employees in amounts based
on the price of the employer's stock. Examples are stock purchase plans,
stock options, restricted stock, and stock appreciation rights.
This Statement also applies to transactions in which an entity issues
its equity instruments to acquire goods or services from nonemployees.
Those transactions must be
27
<PAGE>
accounted for based on the fair market value of the consideration received
or the fair value of the equity instruments issued, whichever is most
reliably measurable. This Statement is effective for transactions entered
into in fiscal years that begin after December 15, 1995. The Company has
determined that FAS 123 is not applicable in 1995 as no such arrangements
were consummated during the year.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
--------------------------------------------------------
The required financial information begins on the following page.
28
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARIES
Table of Contents
Independent Auditors Report
Consolidated Balance Sheets - December 31, 1995 and 1994
Consolidated Statements of Operations - Years ended December 31, 1995, 1994 and
1993
Consolidated Statements of Stockholders' Equity - Years ended December 31, 1995,
1994 and 1993
Consolidated Statements of Cash Flows - Years ended December 31, 1995, 1994 and
1993
Notes to Consolidated Financial Statements
29
<PAGE>
INDEPENDENT AUDITORS' REPORT
________________________
The Board of Directors
Commerce National Corporation
and Subsidiary:
We have audited the accompanying consolidated balance sheets of Commerce
National Corporation and subsidiary as of December 31, 1995 and 1994, the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1995.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Commerce National
Corporation and subsidiary at December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
January 19, 1996
30
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ---- ----
<S> <C> <C>
Cash and due from banks (note 2) $ 3,897,057 1,850,183
Federal funds sold 8,000,000 --
Investment securities available for sale (note 3) 12,136,418 7,833,516
Investment securities held to maturity (estimated market
value of $2,714,950 and $8,685,510 in 1995 and 1994,
respectively) (note 3) 2,705,957 8,739,600
Loans, less allowance for loan losses of $856,803
for 1995 and $657,569 for 1994 (note 4) 66,648,785 61,118,580
Accrued interest receivable 632,936 679,985
Premises and equipment, net (note 5) 3,486,488 1,765,530
Other real estate owned 802,145 760,637
Federal Reserve Bank stock, at cost 150,000 142,500
Federal Home Loan Bank stock, at cost 407,200 573,100
Deferred income taxes, net (note 10) 178,000 250,088
Prepaid expenses and other assets 149,401 89,258
Executive supplemental income plan - cash surrender value
life insurance policies (note 17) 1,171,100 --
----------- -----------
Total assets $ 100,365,487 83,802,977
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994
------------------------------------ ---- ----
<S> <C> <C>
Deposits (note 7):
Noninterest bearing $ 13,285,944 8,445,440
Interest bearing 76,056,835 53,590,042
---------- ----------
Total deposits 89,342,779 62,035,482
Federal funds purchased -- 1,500,000
Federal Home Loan Bank advances (note 8) 1,266,095 4,182,754
Other borrowed funds (note 9) 1,394,944 8,540,097
Accrued interest payable 206,031 54,838
Accounts payable and other liabilities (note 17) 221,664 269,207
---------- ----------
Total liabilities 92,431,513 76,582,378
---------- ----------
Shareholders' equity (note 11):
Common stock, $.10 par value per share. Authorized
1,000,000 shares; 545,365 shares issued, 523,565 shares
outstanding at December 31, 1995 and 1994 54,537 54,537
Additional paid-in capital 5,350,342 5,350,342
Retained earnings 2,621,294 2,148,329
Treasury stock, at cost (21,800 shares at December 31, 1995
and 1994) (208,640) (208,640)
Unrealized gain (loss) on investment securities available for
sale, net 116,441 (123,969)
---------- ----------
Total shareholders' equity 7,933,974 7,220,599
Commitments and contingencies (note 18) ---------- ----------
Total liabilities and shareholders' equity $ 100,365,487 83,802,977
=========== ==========
</TABLE>
32
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For each of the years in the three-year period ended December 31, 1995
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Interest income:
Loans $ 6,217,599 4,782,060 4,075,787
Investment securities held to maturity and
investments securities available for sale 979,436 983,101 934,338
Federal funds sold 170,917 132,464 120,899
Federal Reserve Bank stock 8,550 8,660 8,100
Federal Home Loan Bank stock 42,705 30,398 17,989
Due from banks -- 104,546 81,527
--------- --------- ---------
Total interest income 7,419,207 6,041,229 5,238,640
Interest expense:
Deposits and other borrowed money (note 7) 3,651,880 2,627,239 2,267,276
--------- --------- ---------
Net interest income 3,767,327 3,413,990 2,971,364
Provision for loan losses (note 4) 175,000 50,000 79,280
--------- --------- ---------
Net interest income after provision
for loan losses 3,592,327 3,363,990 2,892,084
--------- --------- ---------
Other income:
Customer service fees 485,519 411,201 374,083
Management fees 6,000 18,420 18,510
Other expenses:
Salaries and benefits 1,491,707 1,197,881 1,016,313
Occupancy expense 491,882 398,621 388,942
Advertising and public relations 102,766 86,915 87,788
Legal and professional fees 223,464 174,800 190,446
Stationery and printing supplies 128,055 58,825 52,733
Data processing expense 129,363 102,036 90,036
General insurance 33,478 31,276 32,772
FDIC insurance 77,242 157,776 132,751
Other expenses 578,923 385,990 368,578
--------- --------- ---------
3,256,880 2,594,120 2,360,359
--------- --------- ---------
Net operating income 826,966 1,199,491 924,318
--------- --------- ---------
</TABLE>
(Continued)
33
<PAGE>
2
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS, CONTINUED
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Other income and (expenses):
Gain on sale of loan -- -- 79,018
Gain (loss) on sale of investment securities
available for sale -- (6,851) 145,454
Net loss on sale and writedown of
other real estate (28,001) (24,431) (9,558)
------- --------- ---------
Income before taxes 798,965 1,168,209 1,139,232
Income tax expense (note 10) 326,000 444,000 392,772
------- --------- ---------
Net income $ 472,965 724,209 746,460
======= ========= =========
Net income per share $ .90 1.38 1.39
======= ========= =========
Weighted average shares outstanding 523,565 523,565 536,998
======= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
34
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For each of the years in the three-year period ended December 31, 1995
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS) ON
INVESTMENT
ADDITIONAL SECURITIES TREASURY TOTAL
COMMON PAID-IN RETAINED AVAILABLE STOCK, SHAREHOLDERS'
STOCK CAPITAL EARNINGS FOR SALE, NET AT COST EQUITY
------- ---------- -------- ------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1992 $ 54,537 5,350,342 677,660 -- -- 6,082,539
Net income -- -- 746,460 -- -- 746,460
Purchase of treasury stock -- -- -- -- (208,640) (208,640)
Unrealized gain on investment
securities available for sale, net -- -- -- 46,327 -- 46,327
------ -------- -------- ------ ------- ---------
Balances, December 31, 1993 54,537 5,350,342 1,424,120 46,327 (208,640) 6,666,686
Net income -- -- 724,209 -- -- 724,209
Unrealized (loss) on investment
securities available for sale, net -- -- -- (170,296) -- (170,296)
------ -------- -------- ------ ------- ---------
Balances, December 31, 1994 54,537 5,350,342 2,148,329 (123,969) (208,640) 7,220,599
Net income -- -- 472,965 -- -- 472,965
Unrealized gain on investment
securities available for sale, net -- -- -- 240,410 -- 240,410
------ -------- -------- ------ ------- ---------
Balances, December 31, 1995 $ 54,537 5,350,342 2,621,294 116,441 (208,640) 7,933,974
====== ========= ========= ======= ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
35
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For each of the years in the three-year period ended December 31, 1995
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows provided by operating activities:
Net income $ 472,965 724,209 746,460
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of premises and equipment 119,767 68,227 62,783
Deferred income taxes (51,760) 9,000 (60,218)
Net amortization of premiums and accretion of
discounts on investment securities held to
maturity and investment securities available
for sale 84,676 141,825 138,978
Provision for loan losses 175,000 50,000 79,280
Deferred loan origination fees 41,774 53,596 97,928
(Gain) loss on sale of investment securities
available for sale -- 6,851 (145,454)
Gain on sale of loan -- -- (79,018)
Loss on sale of other real estate owned 2,744 21,331 --
Writedown to fair value on other real estate owned 25,257 3,100 9,558
Cash provided by (used in) changes in:
Accrued interest receivables 47,049 (121,260) (83,684)
Prepaid expenses and other assets (60,143) (9,919) (35,662)
Accrued interest payable 151,193 (12,374) (15,126)
Accounts payable and other liabilities (47,543) 12,066 (74,784)
------- ------- -------
Net cash provided by operating activities 960,979 946,652 641,041
------- ------- -------
Cash flows provided by (used in) investing activities:
Loans (net of collections) (5,795,836) (9,696,490) (8,970,863)
Purchases of investment securities held to maturity -- -- (1,312,717)
Purchases of investment securities available for sale (5,489,677) (9,498,545) (6,171,662)
Proceeds from sale of investment securities available
for sale -- 2,455,865 7,162,812
Proceeds from maturity of investment securities
held to maturity 6,000,000 -- --
Proceeds from maturity of investment securities
available for sale 1,500,000 5,000,000 --
Purchase of cash surrender value life insurance
policies to fund executive supplemental income (1,171,100) -- --
Purchase of Federal Home Loan Bank stock -- (90,000) (292,100)
Proceeds from sale of Federal Home Loan Bank stock 165,900 -- --
Purchase of Federal Reserve Bank stock (7,500) -- (7,500)
Purchase of premises and equipment (1,990,725) (927,005) (488,931)
Proceeds from the sale of other real estate owned 129,348 163,524 --
Proceeds from sale of loan -- -- 873,226
---------- ------- -------
Net cash used in investing activities (6,659,590) (12,592,651) (9,207,735)
---------- ----------- ----------
</TABLE>
(Continued)
36
<PAGE>
2
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows provided by financing activities:
Net increase in demand deposits, NOW accounts
and passbook savings accounts 871,508 5,628,901 9,265,176
Net increase (decrease) in certificates of deposit 26,435,789 (9,578,374) 438,753
Federal funds purchased (1,500,000) 1,500,000 --
Federal funds sold (8,000,000) -- --
Principal repayments on mortgage notes payable (22,097) (12,653) --
Increase (decrease) in other borrowed funds (7,123,056) 8,099,569 (526,000)
Proceeds from borrowings from the Florida
Home Loan Bank -- 172,064 2,601,940
Principal payments on Federal Home Loan Bank
borrowings (2,916,659) -- --
Purchase of treasury stock -- -- (164,640)
---------- --------- ---------
Net cash provided by financing activities 7,745,485 5,809,507 11,615,229
--------- --------- ----------
Net increase (decrease) in cash and
cash equivalents 2,046,874 (5,836,492) 3,048,535
Cash and cash equivalents at the beginning of the year 1,850,183 7,686,675 4,638,140
--------- --------- ---------
Cash and cash equivalents at the end of the year $3,897,057 1,850,183 7,686,675
========= ========= =========
Cash paid during the year for:
Interest $3,500,687 2,639,613 2,282,402
========= ========= =========
Taxes $ 411,389 420,098 374,269
========= ========= =========
Supplemental disclosures of non-cash transactions:
Transfer of loans to other real estate owned $ 48,857 270,945 314,525
========= ========= =========
Market value adjustment - investment securities
available for sale:
Market value adjustment - investments 176,426 (187,832) 70,192
Deferred income tax liability (asset) 59,985 (63,863) 23,865
------- ------- ------
Unrealized gain (loss) on investments
available for sale, net $ 116,441 (123,969) 46,327
========= ======== =========
</TABLE>
(Continued)
37
<PAGE>
3
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
During 1995, the Company reclassified $150,000 in land held for bank premises to
other real estate owned.
During 1994, the Company purchased land for a branch site. In conjunction with
the purchases, $200,000 in other real estate owned was exchanged, and $383,181
in mortgage notes payable were assumed. In addition, the Company reclassified
$300,000 in land held for bank premises to other real estate owned.
During 1993, the Company accepted Company stock in lieu of payment on a loan.
The stock is accounted for as treasury stock, at cost of $44,000, at December
31, 1993.
See accompanying notes to consolidated financial statements.
38
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
The accounting and reporting policies of Commerce National Corporation and
its subsidiary conform to generally accepted accounting principles and
prevailing practices within the banking industry.
(A) REPORTING ENTITY
----------------
Commerce National Corporation (the "Company") is a bank holding
company which owns National Bank of Commerce (the "Bank"). The Bank,s
primary market is Central Florida. The Bank is a member of the Federal
Reserve System and its deposits are insured by the Federal Deposit
Insurance Corporation.
(B) PRINCIPLES OF CONSOLIDATION
---------------------------
The consolidated financial statements of the corporation include the
accounts of Commerce National Corporation and its wholly owned
subsidiary, National Bank of Commerce. The operations of the Company
consist primarily of the operations of the Bank. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
(C) CASH EQUIVALENTS
----------------
For purposes of the statement of cash flows, the Company considers
cash and due from banks, noninterest bearing deposits in other banks
with original maturities of three months or less and federal funds
sold to be cash equivalents.
(D) INVESTMENT SECURITIES HELD TO MATURITY AND INVESTMENTS SECURITIES
-----------------------------------------------------------------
AVAILABLE FOR SALE
------------------
At January 1, 1994, the Company adopted Statement of Financial
Accounting Standards ("FAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." FAS 115 requires the
reporting of certain securities at fair value except for those
securities which the Company has the positive intent and ability to
hold to maturity. Investments to be held for indefinite periods of
time and not intended to be held to maturity are classified as
available for sale and are carried at fair value. Unrealized holding
gains and losses are included in shareholders' equity net of the
effect of income taxes.
Securities that management has the intent and the Company has the
ability at the time of purchase or origination to hold until maturity
are classified as investment securities held to maturity. Securities
in this category are carried at amortized cost adjusted for accretion
of discounts and amortization of premiums using the level yield method
over the estimated life of the securities. If a security has a decline
in fair value below its amortized cost that is other than temporary,
then the security will be written down to its new cost basis by
recording a loss in the consolidated statements of operations.
Realized gains and losses on investment securities are computed using
the specific identification method.
(CONTINUED)
39
<PAGE>
2
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1), CONTINUED
(E) LOANS
-----
Loans receivable that the Company has the intent and ability to hold
for the foreseeable future or until maturity or payoff are reported at
their outstanding unpaid principal balance reduced by any charge-offs
or specific valuation accounts, net of any deferred fees on originated
loans.
Loan origination fees are capitalized and recognized in income over
the contractual life of the loans, adjusted for estimated prepayments
based on the Bank,s historical prepayment experience.
Commitment fees and costs relating to the commitments are recognized
over the commitment period on a straight-line basis. If the commitment
is exercised during the commitment period, the remaining unamortized
commitment fee at the time of exercise is recognized over the life of
the loan as an adjustment of yield.
Loans are placed on nonaccrual status when the loan becomes 90 days
past due as to interest or principal, unless the loan is both well
secured and in the process of collection, or when the full timely
collection of interest or principal becomes uncertain. When a loan is
placed on nonaccrual status, the accrued and unpaid interest
receivable is written off and the loan is accounted for on the cash or
cost recovery method thereafter until qualifying for return to accrual
status.
The Company adopted the provisions of Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment
of a Loan", as amended by SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan-Income Recognition and Disclosure", on January 1,
1995. The Company, considering current information and events
regarding the borrower,s ability to repay their obligations, considers
a loan to be impaired when it is probable that the Company will be
unable to collect all amounts due according to the contractual terms
of the loan agreement. When a loan is considered to be impaired, the
amount of the impairment is measured based on the present value of
expected future cash flows discounted at the loan,s effective interest
rate, the secondary market value of the loan, or the fair value of the
collateral for collateral dependent loans. Impaired loans are written
down to the extent that principal is judged to be uncollectible and,
in the case of impaired collateral dependent loans where repayment is
expected to be provided solely by the underlying collateral and there
is no other available and reliable sources of repayment, are written
down to the lower of cost or collateral value. Impairment losses are
included in the allowance for loan losses through a charge to the
provisions for loan losses. Cash receipts on impaired loans are
applied to reduce the principal amount of such loans until the
principal has been recovered and are recognized as interest income
thereafter. Prior periods have not been restated.
(CONTINUED)
40
<PAGE>
3
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1), CONTINUED
(F) ALLOWANCE FOR LOAN LOSSES
-------------------------
The allowance for loan losses is established through a provision for
loan losses charged to expenses. Loans are charged against the
allowance when management believes that the collectibility of the
principal is unlikely. The allowance is an estimated amount that
management believes will be adequate to absorb losses inherent in the
loan portfolio and commitments to extend credit, based on evaluations
of its collectibility. The evaluations take into consideration such
factors as changes in the nature and volume of the portfolio, overall
portfolio quality, specific problem loans and commitments, and current
and anticipated economic conditions that may affect the borrowers'
ability to pay. While management uses the best information available
to recognize losses on loans, future additions to the allowance may be
necessary based on changes in economic conditions.
In accordance with SFAS No. 114 as amended by SFAS No. 118, the
Company records impairment in the value of its loans as an addition to
the allowance for loan losses. Any changes in the value of impaired
loans due to the passage of time or revisions in estimates are
reported as adjustments to provision expense in the same manner in
which impairment initially was recognized. Adoption of SFAS No. 114 as
amended by SFAS No. 118 had no impact on the level of the overall
allowance for loan losses or on operating results, and does not affect
the Company,s policies regarding write-offs, recoveries or income
recognition.
Regulatory examiners may require the Company to recognize additions to
the allowance based upon their judgments about the information
available to them at the time of their examination.
(G) OTHER REAL ESTATE OWNED
-----------------------
Real estate acquired in the settlement of loans is initially recorded
at the lower of cost (principal balance of the former loan plus costs
of obtaining title and possession) or estimated fair value at the date
of acquisition. Subsequently, such real estate acquired is carried at
the lower of cost or estimated net realizable value. Costs relating to
development and improvement of the property are capitalized, whereas
those relating to holding the property are charged to operations.
(H) PREMISES AND EQUIPMENT
----------------------
Premises and equipment are stated at cost less accumulated
depreciation which is computed principally on the straight-line method
over the estimated useful lives (3-40 years) of the assets. Leasehold
improvements are amortized on the straight-line method over the
shorter of the estimated useful lives (10-20 years) of the
improvements or the terms of the related lease.
(CONTINUED)
41
<PAGE>
4
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1), CONTINUED
(I) INCOME TAXES
------------
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that included the enactment date. Deferred tax assets are
recognized subject to management,s judgment that realization is more
likely than not.
(J) USE OF ESTIMATES
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amount of revenues
and expenses during the reporting period. Actual results could differ
from these estimates.
(K) RECLASSIFICATIONS
-----------------
Certain previously reported amounts have been reclassed to conform to
current presentation.
(2) RESTRICTIONS ON CASH
--------------------
The Company is required to maintain reserve balances in accordance with
Federal Reserve Bank requirements. At December 31, 1995 and 1994, these
reserve balances were $214,049 and $255,000, respectively.
(CONTINUED)
42
<PAGE>
5
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) INVESTMENT SECURITIES HELD TO MATURITY AND INVESTMENT SECURITIES
----------------------------------------------------------------
AVAILABLE FOR SALE
------------------
The amortized cost and estimated market values of investment securities
held to maturity and available for sale at December 31, 1995 and 1994 are
as follows:
INVESTMENT SECURITIES HELD TO MATURITY:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1995:
U.S. Treasury securities $ 2,515,957 7,953 - 2,523,910
Municipals 190,000 1,040 - 191,040
----------- ---------- ---------- ----------
Total $ 2,705,957 8,993 - 2,714,950
=========== ========== ========== ==========
1994:
U.S. Treasury securities 8,549,600 - 47,256 8,502,344
Municipals 190,000 - 6,834 183,166
----------- ---------- ---------- ----------
Total $ 8,739,600 - 54,090 8,685,510
=========== ========== ========== ==========
INVESTMENT SECURITIES AVAILABLE FOR SALE:
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1995:
U.S. Treasury securities $11,959,992 176,426 - 12,136,418
=========== ========== ========== ==========
1994:
U.S. Treasury securities $ 8,021,348 - 187,832 7,833,516
=========== ========== ========== ==========
</TABLE>
(CONTINUED)
43
<PAGE>
6
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) CONTINUED
The amortized cost and estimated market value of investment securities at
December 31, 1995, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST MARKET VALUE
----------- ------------
<S> <C> <C>
INVESTMENT SECURITIES HELD TO MATURITY:
Due within one year $ 2,515,957 2,523,910
Due after one year through five years 190,000 191,040
----------- ----------
$ 2,705,957 2,714,950
=========== ==========
INVESTMENT SECURITIES AVAILABLE FOR SALE:
Due within one year 3,013,710 3,027,970
Due after one year through five years 8,946,282 9,108,448
----------- ----------
$11,959,992 12,136,418
=========== ==========
</TABLE>
Proceeds from sales of investments available for sale were $-0-,
$2,455,865 and $7,162,812 in 1995, 1994 and 1993, respectively. Gross
realized losses on sales of investments available for sale during 1994
were $6,851. Realized gains on sales of investments during 1993 were
$145,454.
At December 31, 1995 investment securities with a book value of $499,076
were pledged to collateralize the treasury tax and loan account.
(4) LOANS
-----
Major categories of loans included in the loan portfolio at December 31,
1995 and 1994 are:
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Commercial - secured $ 7,695,479 6,293,904
Commercial - unsecured 2,681,485 2,968,921
Real estate, primarily commercial 55,345,499 51,155,457
Other (installments and overdrafts) 2,009,057 1,625,572
--------- ---------
67,731,520 62,043,854
Less:
Allowance for loan losses (856,803) (657,569)
Deferred loan origination fees (225,932) (267,705)
--------- ---------
Net loans $66,648,785 61,118,580
========== ==========
</TABLE>
(CONTINUED)
44
<PAGE>
7
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4), CONTINUED
Certain principal shareholders, directors and employees and their related
interest were indebted to the Bank as summarized below:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Balance, beginning of year $12,094,216 13,529,560
Additional new loans 2,733,732 2,642,690
Repayments on outstanding loans (3,307,450) (4,078,034)
----------- ----------
Balance, end of year $11,520,498 12,094,216
=========== ==========
</TABLE>
All such loans were made in the ordinary course of business. At December
31, 1995 and 1994, principal shareholders, directors and employees of the
Company and their related interests had $3,541,783 and $3,214,927,
respectively, available in lines of credit and commitments.
The recorded investment in loans for which an impairment has been
recognized and the related allowance for loan losses at December 31, 1995
were $920,848 and $220,489, respectively. Impaired loans in the amount of
$678,759 have no related allowance for loan losses. The average recorded
investment in impaired loans during 1995 was $1,216,334. Interest income
recognized in impaired loans during 1995 was $36,793.
Changes in the allowance for loan losses for the years ended December 31,
1995, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year $657,569 710,455 626,491
Provision charged to operations 175,000 50,000 79,280
Loans charged-off (62,899) (139,667) (41,228)
Recoveries of previous charge offs 87,133 36,781 45,912
-------- -------- -------
Balance, end of year $856,803 657,569 710,455
======== ======== =======
</TABLE>
At December 31, 1995 and 1994, nonaccrual loans were $2,182,812 and
$2,355,375, respectively. If interest due on all nonaccrual loans had
been accrued at the original contract rates, estimated interest income
would have been increased by $203,476 in 1995, $114,017 in 1994 and
$29,693 in 1993.
(CONTINUED)
45
<PAGE>
8
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) PREMISES AND EQUIPMENT
----------------------
A summary of premises and equipment at December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land and land improvements $ 1,497,206 1,582,752
Furniture, fixtures and equipment 1,357,067 609,727
Bank buildings 1,137,669 -
Leasehold improvements 181,461 140,199
------- -------
4,173,403 2,332,678
Less accumulated depreciation (686,915) (567,148)
-------- --------
$ 3,486,488 1,765,530
========= =========
</TABLE>
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires that the Company disclose
estimated fair values for financial instruments. The following methods and
assumptions were used by the Company in estimating fair values of financial
instruments as disclosed herein:
CASH AND CASH EQUIVALENTS - The carrying amount of cash and cash
equivalents (demand deposits maintained by the Company at various
financial institutions) and federal funds sold represents fair value.
INVESTMENT SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY - The
Company,s investment securities available for sale and held to maturity
represent investments in equity securities, U.S. Government obligations,
U.S. Government Agency securities, and state and political subdivisions.
The Company,s equity investments at year end represents stock
investments in the Federal Home Loan Bank and the Federal Reserve Bank.
The stock is not publicly traded and the carrying amount was used to
estimate the fair value. The fair value of the U.S. Government
obligations and U.S. Government Agency obligations and state and local
political subdivision portfolios was estimated based on quoted market
prices.
LOANS - For variable rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying
values. Fair values for commercial real estate, commercial and consumer
loans other than variable rate loans are estimated using discount cash
flow analysis, using interest rates currently being offered for loans
with similar terms to borrowers of similar credit quality. Fair values
of impaired loans are estimated using discounted cash flow analysis or
underlying collateral values, where applicable.
(CONTINUED)
46
<PAGE>
9
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6), CONTINUED
Deposits - The fair values disclosed for demand deposits are, by
definition, equal to the amount payable on demand at December 31, 1995
(that is their carrying amounts). The carrying amounts of variable
rate, fixed term money market accounts and certificates of deposit (CDs)
approximate their fair value at the reporting date. Fair values for
fixed rate CDs are estimated using a discounted cash flow calculation
that applies interest rates currently being offered on certificates to a
schedule of aggregated expected monthly maturities on time deposits.
Federal Funds Purchased - The carrying amount of the federal funds
purchased approximates their fair value.
FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS - Fair values of
Federal Home Loan Bank advances and other borrowings are estimated using
discounted cash flow analysis based on the Company,s current incremental
borrowing rates for similar types of borrowing arrangements. The
carrying amount of the repurchase agreements approximate their fair
value.
COMMITMENTS - Fair values for off-balance-sheet lending commitments are
based on fees currently charged to enter into similar agreements, taking
into account the remaining terms of the agreements and the
counterparties' credit standing.
The following table presents the carrying amounts and estimated fair
values of the Company,s financial instruments at December 31, 1995. SFAS
No. 107, "Disclosures About Fair Value of Financial Instruments", defines
fair value of a financial instrument as the amount at which the instrument
would be exchanged in a current transaction between willing parties.
<TABLE>
<CAPTION>
CARRYING AMOUNT FAIR VALUE
--------------- ----------
<S> <C> <C>
Financial assets:
Cash and due from banks and federal
funds sold $ 11,897,057 11,897,057
Investment securities available for sale 12,136,418 12,136,418
Investment securities held to maturity 2,705,957 2,714,950
Loans (carrying amount less allowance
for loan losses of $856,803) 66,648,785 66,648,785
Financial liabilities:
Deposits:
Without stated maturities $ 46,059,615 46,059,615
With stated maturities 43,283,164 43,136,565
Federal Home Loan Bank advances 1,266,095 924,592
Other borrowings 1,394,944 1,395,273
</TABLE>
(CONTINUED)
47
<PAGE>
10
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6), CONTINUED
<TABLE>
<CAPTION>
Carrying amount Fair value
--------------- ----------
<S> <C> <C>
Commitments:
Letter of credit $ - 832,133
Loan commitments - 41,949,096
</TABLE>
The carrying amounts shown in the table are included in the statement of
financial position under the indicated captions.
(7) DEPOSITS
--------
A detail of deposits at December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Noninterest-bearing demand deposits $13,285,944 8,445,440
Interest-bearing:
NOW accounts 6,803,359 5,706,588
Money market 13,295,200 11,301,875
Savings accounts 12,617,441 19,676,533
Time accounts less than $100,000 19,458,793 5,500,239
Time accounts greater than $100,000 23,882,042 11,404,807
----------- ----------
$89,342,779 62,035,482
=========== ==========
</TABLE>
Included in interest-bearing deposits are certificates of deposit issued
in amounts of $100,000 or more which have remaining maturities at December
31, 1995 and 1994 as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Three months or less $13,117,216 10,065,307
Three through twelve months 9,948,335 1,132,098
Over one year 816,491 207,402
----------- ----------
$23,882,042 11,404,807
=========== ==========
</TABLE>
(CONTINUED)
48
<PAGE>
11
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7), CONTINUED
A summary of interest expense on deposits and other borrowed money is as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Time deposits of $100,000 or greater $ 1,198,004 643,420 790,246
Time deposits less than $100,000 820,436 245,535 323,111
Interest-bearing demand deposits 662,806 622,872 578,770
Savings deposits 579,570 783,095 373,936
Interest on federal funds and other
borrowings 391,064 332,317 201,213
---------- --------- ---------
Interest on deposits and other borrowed
money $ 3,651,880 2,627,239 2,267,276
========== ========= =========
</TABLE>
The Company had deposits from principal shareholders, directors and
employees and their related interests of approximately $15,717,564 and
$19,200,729 at December 31, 1995 and 1994, respectively. There were no
brokered deposits outstanding at year end.
(8) FEDERAL HOME LOAN BANK ADVANCES
-------------------------------
Federal Home Loan Bank advances at December 31, 1995 and 1994, are
summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Advances from the Federal Home Loan Bank (interest
rates ranging from 4.62% to 7.51% and 3.67% to
7.41% at December 31, 1995 and 1994, respectively) $ 1,266,095 4,182,754
========= =========
</TABLE>
Pursuant to collateral agreements with the Federal Home Loan Bank
("FHLB"), advances are secured by first mortgage loans in the amount of
$3,889,126 and $4,084,617 and investment securities in the amount of $-0-
and $1,502,814 for December 31, 1995 and 1994, respectively. Advances at
December 31, 1995 have calendar-year maturity dates as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 43,300
1997 46,100
1998 51,000
1999 54,950
Thereafter 1,070,745
----------
$1,266,095
==========
</TABLE>
(CONTINUED)
49
<PAGE>
12
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9) OTHER BORROWED FUNDS
--------------------
Other borrowed funds consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------
1995 1994
-------------------- -------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE
------ ---- ------ ----
<S> <C> <C> <C> <C>
Short-term borrowings:
Repurchase agreements secured
by U.S. Treasury securities
with market values of
$1,046,842 and $1,670,141
as of December 31, 1995 and
1994, respectively,
repurchase dates in
January 1995 and 1994 $ 1,046,513 5.04% $ 1,669,569 5.20%
Repurchase agreements secured
by U.S. Treasury securities
with market value of
$1,016,675 as of
December 31, 1994 and
repurchase date in January
1995 - % 1,000,000 6.125%
Repurchase agreements
secured by U.S. Treasury
securities with market values
of $5,627,007 as of
December 31, 1994 and
repurchase dates in January
1995 - - % 5,500,000 6.50%
--------- ---- --------- -----
Total short-term
borrowings 1,046,513 5.04% 8,169,569 6.19%
--------- ----- --------- -----
</TABLE>
(CONTINUED)
50
<PAGE>
13
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9), CONTINUED
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------
1995 1994
-------------------- -----------------
<S> <C> <C> <C> <C>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE
------ ---- ------ ----
Long-term borrowings:
Mortgage note payable with
monthly installments of
$2,000, including interest
at 8%, maturing October
2002 and secured by real
estate with a book value
of $400,000 125,525 8.00% 138,756 8.00%
Mortgage note payable with
monthly installments of
$650, including interest
at 8%, maturing November
1999 and secured by real
estate with a book value of
$65,000 61,832 8.00% 64,565 8.00%
Mortgage note payable with
monthly installments of
$1,607, including interest
at 8%, maturing October
2009 and secured by real
estate with a book value
of $375,000 161,074 8.00% 167,207 8.00%
------- ----- ------- ----
Total long-term
borrowing 348,431 8.00% 370,528 8.00%
------- ---- ------- ----
Total other borrowed
money $ 1,394,944 5.78% $ 8,540,097 6.27%
========= ==== ========== ====
</TABLE>
The Bank enters into sales of securities under agreements to repurchase.
These fixed-coupon agreements are treated as financings, and the
obligations to repurchase securities sold are reflected as a liability in
the consolidated balance sheet. The dollar amount of securities
underlying the agreements remain in the asset accounts.
(CONTINUED)
51
<PAGE>
14
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9), CONTINUED
The repurchase agreements were to repurchase the identical securities as
those which were sold. Retail repurchase agreements averaged $1,777,941
and $1,096,083 during the years ended December 31, 1995 and 1994,
respectively. The maximum amount outstanding at any month-end for the
corresponding periods was $2,936,245 and $7,169,569, respectively. Total
interest expense paid on retail repurchase agreements for the years ending
December 31, 1995, 1994 and 1993 was $95,085, $51,866 and $3,693,
respectively.
The Bank has available repurchase lines equal to the amount of all
unpledged investment securities.
Aggregate maturities on the mortgage notes payable at December 31, 1995
are as follows:
<TABLE>
<S> <C>
1996 $ 23,917
1997 25,949
1998 28,121
1999 78,907
2000 28,940
Thereafter 162,597
-------
$ 348,431
=======
</TABLE>
(10) INCOME TAXES
------------
The provision for income taxes for 1995, 1994 and 1993 consists of the
following:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995:
Federal $ 336,000 (44,000) 292,000
State 41,760 (7,760) 34,000
------- ------- -------
$ 377,760 (51,760) 326,000
======= ======= =======
YEAR ENDED DECEMBER 31, 1994:
Federal 380,000 7,300 387,300
State 55,000 1,700 56,700
------- ------ -------
$ 435,000 9,000 444,000
======= ====== =======
YEAR ENDED DECEMBER 31, 1993:
Federal 437,331 (51,453) 385,878
State 15,659 (8,765) 6,894
------- ------- -------
$ 452,990 (60,218) 392,772
======= ======= =======
</TABLE>
(CONTINUED)
52
<PAGE>
15
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(10), CONTINUED
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1995 and 1994 are presented below.
<TABLE>
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
Deferred tax assets:
Loan receivable, due to allowance for loan losses $259,108 196,003
Unrealized loss on investment securities available
for sale - 63,863
Executive supplemental income 24,900 16,220
Other 21,063 5,921
-------- -------
Total deferred tax assets 305,071 282,007
Less valuation allowance - -
-------- -------
Net deferred tax assets 305,071 282,007
-------- -------
Deferred tax liabilities:
Unrealized gain on investment securities available
for sale 59,985 -
Premises and equipment, due to differences in
depreciation methods and useful lives 37,671 15,507
Investments, due to accretion 20,455 6,983
Other 8,960 9,429
-------- -------
Total deferred tax liabilities 127,071 31,919
-------- -------
Net deferred tax asset $178,000 250,088
======== =======
</TABLE>
The Company has recorded a deferred tax asset of $178,000 and $250,088 as
of December 31, 1995 and 1994, respectively. Although realization of the
deferred tax asset is not assured, the Company believes it is more likely
than not that the results of future operations will generate sufficient
taxable income to realize the deferred tax asset. The amount of the
deferred tax asset considered realizable, however, could be reduced in the
near term if estimates of future taxable income during the carryforward
periods are reduced. No valuation allowance as defined by SFAS 109,
"Accounting for Income Taxes", is required at December 31, 1995 and 1994.
(CONTINUED)
53
<PAGE>
16
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(10), CONTINUED
A reconciliation between the actual tax expense and the "expected" tax
expense (computed by applying the U.S. federal corporate tax rate of 34%
to earnings before income taxes) is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
"Expected" tax expense $271,648 397,191 387,339
State income tax expense, net of federal
benefit 22,440 37,422 4,550
Life insurance premiums on officers 10,012 - -
Meals and entertainment and dues 13,000 9,101 2,383
Tax exempt interest (2,100) (2,616) (1,500)
Other 11,000 2,902 -
-------- ------- -------
Actual tax expense $326,000 444,000 392,772
======== ======= =======
</TABLE>
(11) SHAREHOLDERS' EQUITY
--------------------
Banking regulations limit the amount of dividends that may be paid by the
Bank to the Company without prior approval of the Bank's regulatory
agency.
Pursuant to the Company's stock option plans, each of the directors have
been granted options to purchase 10,000 shares at $10 per share not to
exceed a combined total of 130,000 shares. The options are exercisable
from June 14, 1986 through December 31, 1997. Furthermore, pursuant to
the Plan, there has been granted to the employees of the Company an
incentive stock option to purchase 75,000 shares of common stock at $10
per share of which the President of the Company has the option to purchase
25,000 shares. The employee shares are exercisable from April 24, 1988 to
April 24, 1996. At December 31, 1995 and 1994, the number of options
vested and exercisable was 194,000 and 189,750, respectively. No options
have been exercised and none have expired.
Prior to 1993, members of the Board of Directors of both the Company and
the Bank were not compensated in their roles as directors. Annual director
fees amounted to $27,000 for both 1995 and 1994.
(CONTINUED)
54
<PAGE>
17
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(12) RENT
----
The following is a schedule of future minimum annual rentals under the
noncancellable operating leases of the Company,s facilities which expire
on July 31, 1996:
<TABLE>
<CAPTION>
YEAR ENDED
----------
<S> <C>
1996 $ 148,759
=======
</TABLE>
Rent expense for the years ending December 31, 1995, 1994 and 1993
was $285,144 $266,956 and $269,130, respectively.
The landlord is a partnership which is owned in part by certain of
the Company's directors.
(13) EMPLOYEE SAVINGS PLAN
---------------------
The Company sponsors an employee savings plan which qualifies as a
401(k) plan under the Internal Revenue Code. Under the plan,
employees may contribute up to 20% of their pre-tax compensation.
The Company makes contributions on a discretionary basis as
approved by the Board of Directors. Participants vest immediately
in their own contributions and after one year of service in
contributions made by the Company. The plan was implemented January
1, 1992. Employee savings plan expense for the years ending
December 31, 1995, 1994 and 1993 was $30,000, $30,000 and $25,763,
respectively.
(14) REGULATORY CAPITAL
------------------
The Federal Deposit Insurance Corporation Improvement Act of 1991
(FDICIA) was signed into law on December 19, 1991. Regulations
implementing the prompt corrective action provisions of FDICIA
became effective on December 19, 1992. In addition to the prompt
corrective action requirements, FDICIA includes significant changes
to the legal and regulatory environment for insured depository
institutions, including reductions in insurance coverage for
certain kinds of deposits, increased supervision by the Federal
regulatory agencies, increased reporting requirements for insured
institutions, and new regulations concerning internal controls,
accounting, and operations.
(CONTINUED)
55
<PAGE>
18
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(14), CONTINUED
The prompt corrective action regulations define specific capital
categories based on an institution's capital ratios. The capital
categories, in declining order, are "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized." Institutions categorized as
"undercapitalized" or worse are subject to certain restrictions,
including the requirement to file a capital plan with its primary Federal
regulator, prohibitions on the payment of dividends and management fees,
restrictions on executive compensation, and increased supervisory
monitoring, among other things. Other restrictions may be imposed on the
institution by the FDIC, including requirements to raise additional
capital, sell assets, or sell the entire institution. Once an institution
becomes "critically undercapitalized" it must generally be placed in
receivership or conservatorship within 90 days.
The following table summarizes the capital thresholds for each prompt
corrective action capital categories. An institution's capital category
is based on whether it meets the threshold for all three capital ratios
within the category.
<TABLE>
<CAPTION>
TIER 1 TOTAL
LEVERAGE RISK-BASED RISK-BASED
CATEGORIES RATIO RATIO RATIO
----------- ----- ----- -----
<S> <C> <C> <C>
"Well capitalized" 5% or higher 6% or higher 10% or higher
"Adequately capitalized" 4% or higher 4% or higher 8% or higher
"Undercapitalized" less than 4% less than 4% less than 8%
"Significantly undercapitalized" less than 3% less than 3% less than 6%
"Critically undercapitalized" An institution is considered "critically under capitalized"
if its ratio of tangible equity to total assets is 2% or less.
</TABLE>
At December 31, 1995, the Bank,s total leverage ratio was 7.30%, Tier 1
risk-based ratio was 10.20%, and total risk-based ratio was 11.37%.
Accordingly, at December 31, 1995, the Company,s management believes the
Bank is in the "well capitalized" category.
(CONTINUED)
56
<PAGE>
19
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(15) PARENT COMPANY ONLY FINANCIAL STATEMENTS
----------------------------------------
Condensed financial statements of Commerce National Corporation (parent
company only) follow:
CONDENSED BALANCE SHEETS
------------------------
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS: 1995 1994
- ------ ---- ----
<S> <C> <C>
Cash and interest bearing deposits $ 57,672 45,249
Investment in wholly-owned bank subsidiary 7,497,902 6,795,218
Loans, net 342,984 338,700
Other assets 35,416 41,432
------ ------
$ 7,933,974 7,220,599
========= =========
SHAREHOLDERS' EQUITY:
- --------------------
Common stock 54,537 54,537
Additional paid-in capital 5,350,342 5,350,342
Retained earnings 2,621,294 2,148,329
Treasury stock, at cost (21,800 shares) (208,640) (208,640)
Unrealized gain (loss) on investment securities
available for sale, net 116,441 (123,969)
------- ---------
$ 7,933,974 7,220,599
========= =========
</TABLE>
(CONTINUED)
57
<PAGE>
20
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(15), CONTINUED
Dividends paid by the Bank subsidiary to Commerce National Corporation
were $-0- for 1995 and 1994. The Bank is in compliance with banking
regulations regarding the payment of dividends.
CONDENSED STATEMENTS OF OPERATIONS
----------------------------------
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Interest income $ 39,582 33,897 53,390
Management fee 6,000 18,420 18,510
----- ------ ------
Total revenue 45,582 52,317 71,900
------ ------ ------
Expenses:
Salaries and benefits 11,924 33,239 32,070
Legal and professional fees 3,461 13,884 14,521
Other 19,506 5,651 10,566
------ ----- ------
Total expenses 34,891 52,774 57,157
------ ------ ------
Income (loss) before equity
in net earnings of subsidiary 10,691 (457) 14,743
Equity in net earnings of subsidiary 462,274 724,666 731,717
------- ------- -------
Net income $ 472,965 724,209 746,460
======= ======= =======
</TABLE>
(CONTINUED)
58
<PAGE>
21
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(15), CONTINUED
CONDENSED STATEMENTS OF CASH FLOWS
----------------------------------
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows provided by operating activities:
Net income $ 472,965 724,209 746,460
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of premises and equipment 3,953 3,952 3,953
Equity in subsidiary (462,274) (724,666) (731,717)
Decrease (increase) in other assets 2,062 (1,127) 1,722
------ ----- -----
Net cash provided by operating activities 16,706 2,368 20,418
------ ----- ------
Cash flows provided by (used in) investing activities:
Net repayments of loans (net loans to customers) (4,283) 33,274 179,631
Dividends received from bank subsidiary - - -
Purchase of IBBF stock - - (6,500)
Purchase of subsidiary stock - - (250,000)
---------- --------- --------
Net cash (used in) provided by
investing activities (4,283) 33,274 (76,869)
------- ------ --------
Cash flows used in financing activities:
Purchase of treasury stock - - (208,640)
------- ------ --------
Net cash used in financing activities - - (208,640)
---------- --------- --------
Net increase (decrease) in cash
and cash equivalents 12,423 35,642 (265,091)
Cash and cash equivalents at beginning of year 45,249 9,607 274,698
------ ----- -------
Cash and cash equivalents at end of year $ 57,672 45,249 9,607
====== ====== =====
</TABLE>
59
<PAGE>
22
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(15), CONTINUED
CONDENSED STATEMENTS OF CASH FLOWS
----------------------------------
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Supplemental disclosure of noncash transactions:
Market value adjustment - investment
securities available for sale:
Market value adjustment - investments 176,426 (187,832) 70,192
Deferred income tax liability (asset) 59,985 (63,863) 23,865
------ ------ ------
Unrealized gain (loss) on investment
securities available for sale, net $116,441 (123,969) 46,327
======== ======== ======
</TABLE>
During 1995, 1994 and 1993 there were no cash payments for either
interest or income taxes.
(16) BRANCH OPENINGS
---------------
During 1995, the Bank opened two branches which are located on Aloma
Avenue and Temple Avenue in Winter Park, Florida. The Aloma Avenue branch
began operations in May, while the Temple Avenue branch opened in October.
The Bank is scheduled to open its fourth branch in Winter Park during
January 1996.
(17) EXECUTIVE SUPPLEMENTAL INCOME PLAN
----------------------------------
The Bank implemented an executive supplemental income plan (the
"Plan") during 1995 to provide supplemental income to four of its current
executives after their retirement. The funding of the Plan involved the
purchase of four cash surrender value life insurance policies which
totaled $1,195,000. The Plan is structured such that each participant is
scheduled to receive specified levels of income after the retirement age
of 65 for fifteen years. In the event a participant leaves the employment
of the Bank before retirement, only the benefits vested through that date
would be paid to the employee. The Plan also provides for 100% vesting in
the event of a change in Bank ownership.
The Bank has approximately $51,000 accrued at December 31, 1995 and
is included in accounts payable and other liabilities in the accompanying
consolidated balance sheet. The Bank incurred charges of $69,041 in
connection with the Plan during 1995.
60
<PAGE>
23
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(18) CREDIT COMMITMENTS
------------------
The Bank has outstanding at any time a significant number of commitments
to extend credit. These arrangements are subject to strict credit control
assessments and each customer,s credit worthiness is evaluated on a case-
by-case basis. A summary of commitments to extend credit and standby
letters of credit written at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Standby letters of credit $ 832,133 902,310
Total lines of credit 41,949,096 38,609,352
Unfunded firm loan commitments 15,189,767 12,280,011
</TABLE>
Because many commitments expire without being funded in whole or part, the
contract amounts are not estimates of future cash flows.
The majority of loan commitments have terms up to one year, and have
variable interest rates which range from 9% to 9.5%.
Loan commitments written have off-balance-sheet credit risk because only
original fees are recognized in the statement of financial position until
the commitments are fulfilled or expire. Credit risk represents the
accounting loss that would be recognized at the reporting date if
counterparties failed completely to perform as contracted. The credit risk
amounts are equal to the contractual amounts, assuming that the amounts
are fully advanced and that, in accordance with the requirements of FASB
Statement No. 105, "Disclosure of Information About Financial Instruments
with Off-Balance-Sheet Risk and Financial Instruments with Concentrations
of Credit Risk", collateral or other security is of no value.
The Bank,s policy is to require customers to provide collateral prior to
the disbursement of approved loans. The amount of collateral obtained, if
it is deemed necessary by the Bank upon extension of credit, is based on
management,s credit evaluation of the counterparty. Collateral held varies
but may include accounts receivable, inventory, real estate and income
producing commercial properties.
Standby letters of credit are contractual commitments issued by the Bank
to guarantee the performance of a customer to a third party. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers.
(19) CONCENTRATION OF CREDIT RISK
----------------------------
The Bank originates real estate, consumer and commercial loans primarily
in its Central Florida market area. Although the Bank has a diversified
loan portfolio, a substantial portion of its borrowers, ability to honor
their contracts is dependent upon the economy of Central Florida. The Bank
does not have a significant exposure to any individual customer or
counterparty.
61
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
62
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The name, age, affiliation with the Company and date such affiliation
commenced of each executive officer and director of the Company is presented in
the following chart. Each director listed below was elected by the Company's
shareholders and will hold office for the term designated and until his
successor is duly elected and qualified. Additional information concerning
business experience of each individual is set forth in the narrative section
following the chart.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
YEARS
REMAINING IN APPROXIMATE
TERM ELECTED HELD OFFICE
NAME AGE POSITION (1) SINCE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Donald J. Barker 82 Director 1 February, 1985
- ------------------------------------------------------------------------------------------
Russell Barkett 56 Director 0(1) December, 1992
- ------------------------------------------------------------------------------------------
C. Durham Barnes, M.D. 54 Director 2 February, 1985
- ------------------------------------------------------------------------------------------
Robert E. Battaglia 49 Director 1 February, 1985
- ------------------------------------------------------------------------------------------
Robert B. Boswell, M.D. 50 Director 0(1) February, 1985
- ------------------------------------------------------------------------------------------
Kenneth M. Clayton 47 Director 2 February, 1985
- ------------------------------------------------------------------------------------------
Guy D. Colado 51 President & 2 March, 1985
Director February, 1985
- ------------------------------------------------------------------------------------------
J. Blair Culpepper 58 Executive N/A May, 1995
Vice
President
- ------------------------------------------------------------------------------------------
Willie C. Moss 61 Director 0(1) December, 1992
- ------------------------------------------------------------------------------------------
Frederick A. Raffa, Ph.D. 52 Director 0(1) March, 1985
February, 1985
- ------------------------------------------------------------------------------------------
Alan M. Scarboro 46 Vice President N/A March, 1989
Sec./Treas. March, 1993
- ------------------------------------------------------------------------------------------
W. Charles Shuffield 51 Director 1 March, 1985
February, 1985
- ------------------------------------------------------------------------------------------
</TABLE>
(1) Has been nominated for election for a three year term which nomination will
be voted on at the Annual Shareholders' Meeting scheduled for May 29, 1996.
63
<PAGE>
Each individual designated above, other than Mr. Barker, also is a member of the
board of directors for the Bank. The Bank's officers are appointed by the board
of directors of the Bank and hold office at the will of such board. The Bank's
executive officers presently are:
NAME POSITION WITH BANK
---- ------------------
Guy D. Colado President and CEO
Marsha J. Wheeler Vice President/Cashier
Jerry H. Johns, III Sr. Vice President/Lending
John R. Casebier Vice President
DONALD J. BARKER has been a resident of Orlando, Florida since 1941. Mr.
Barker is semi-retired. He serves as Chairman of the Board of Directors. From
1972 through 1982, Mr. Barker was Senior-Vice President/Manager, Eastern
Division of Bowest Corporation, a mortgage servicing company. From June 1, 1983
to present, Mr. Barker has served on the board of the Florida Hospital
Foundation. Mr. Barker also serves on the Board of Directors of Atlantic
Portfolio Analytics and Management, Inc., a company subject to the reporting
requirements of the Securities Exchange Act of 1934. From January 1983 until
July 1988, Mr. Barker served as Vice President of Development of Southeast
Business Corporation, a commercial printing corporation.
RUSSELL BARKETT is a native of Florida, born in Miami, and a resident of
Maitland, Florida. Mr. Barkett is a graduate of the University of Florida and
the University of West Florida. He is a Certified Public Accountant and a member
of the American and Florida Institutes of Certified Public Accountants and the
American Management Association. Mr. Barkett is past Treasurer of the Downtown
Kiwanis Club and of the Florida Citrus Sports Association. Mr. Barkett is
currently Vice President, Chief Financial Officer and Secretary/Treasurer of all
Davgar Restaurants, Inc. entities, and he has been in this position since 1976.
C. DURHAM BARNES, M.D. is a native of Florida and a resident of Winter Park,
Florida. Dr. Barnes has been a practicing physician and President of Central
Florida Retina Consultants since 1979 and is a member of the Board of Directors
of the Orange County Medical Society. In addition, Dr. Barnes has been actively
involved in community service and has served on the Board of Directors of the
Central Florida Chapter of the American Diabetic Association and Humana Hospital
Lucerne Board of Trustees.
ROBERT E. BATTAGLIA is a native of Florida and a resident of Winter Park,
Florida. Since October 1976, Mr. Battaglia has been President of Battaglia Fruit
Co., Inc., a citrus grower, harvester, and land owner in Central Florida, and is
currently a director of Florida Citrus Mutual. In addition to operating the
citrus activities, Mr. Battaglia is a member and exit greeter at the First
Presbyterian Church of Orlando and a Director of The Orlando Margarita Society
(charitable non-profit organization).
64
<PAGE>
ROBERT B. BOSWELL, M.D. is a resident of Winter Park, Florida. Since 1979,
Dr. Boswell has been engaged in the private practice of cardiology in Orlando,
Florida. In addition, since 1979, Dr. Boswell has been a Fellow of the American
College of Cardiology and a member of the American Heart Association. He is an
invasive cardiologist with interest in pacemakers and nuclear cardiology.
KENNETH M. CLAYTON is a native of Florida and a resident of Orlando,
Florida. Mr. Clayton has actively practiced law in Orlando, Florida, since May
of 1974 in a variety of civil law areas. Since October 1987, Mr. Clayton has
been a partner in the law firm of Clayton & McCulloh. Prior to forming Clayton &
McCulloh, Mr. Clayton was a principal in the law firm of Zimmerman, Shuffield,
Kiser & Sutcliffe, P.A. Prior to that, Mr. Clayton was a sole practitioner
(October 1981 - July 1985) and prior to that a partner in Clayton & Landis
(October 1980 - September 1981). In addition, Mr. Clayton is a past president
and founder of the Mid-Florida Chapter of Community Associations Institute. Mr.
Clayton is a member of the Orlando Area Chamber of Commerce, American Bar
Association, The Florida Bar, the Orange County Bar Association and has served
on various committees for such organizations.
GUY D. COLADO is a native Floridian and a lifelong resident of Winter Park,
Florida. From June of 1984 to the present, Mr. Colado has been primarily engaged
in the organization and operation of the Company and the Bank, which entailed
the preparation and filing of the necessary applications with regulatory
authorities, activities concerning the site location and day to day operations.
Since the Bank's opening in August, 1986, he has served as President and Chief
Executive Officer of the Company and the Bank. From March of 1982 to May of
1984, Mr. Colado served as Vice President of the Florida National Bank of
Orlando. From July of 1980 to February of 1982, Mr. Colado was President of
Tropic Bank of Seminole and was involved in all aspects of a small community
bank which had two branches. From September of 1977 to July of 1980, Mr. Colado
was Vice President and Manager of the Winter Park branch of Sun Bank, National
Association, Orlando, and served from May of 1971 to July of 1980 as assistant
manager of the real estate loan department for Sun Bank as well as in various
other capacities. Mr. Colado is a participant in several professional community
and charitable organizations, groups and committees. He is also active in the
U.S. Army Reserves.
J. BLAIR CULPEPPER is a native Floridian and a resident of Orlando, Florida.
Since May 1995, Mr. Culpepper has served as Executive Vice President of the
Company. On January 2, 1996, Mr. Culpepper opened the New England Avenue Branch
for the Bank. A graduate of the University of Florida, Mr. Culpepper was
employed as an executive officer of other financial institutions in Central
Florida and the Tampa Bay area. He is past chairman of the Greater Orlando
Chamber of Commerce and the Orlando Museum of Art.
65
<PAGE>
WILLIE C. MOSS has been a resident of Orlando, Florida since 1968. Mr. Moss
is currently and has been since 1968, President and owner of Data Dimensions,
Inc., a computer software company that supplies software to savings and loan,
savings banks and banks nationwide. Prior to 1968, Mr. Moss was a Vice President
at Florida National Bank in Jacksonville, Florida, with primary responsibility
for their data processing operations.
FREDERICK A. RAFFA, PHD is a resident of Maitland, Florida. From 1969 to the
present, Dr. Raffa has been a professor of Economics at the University of
Central Florida. Dr. Raffa served as Chairman of the Department of Economics
from 1976 to 1980 and was the founding editor of the Business Barometer of
---------------------
Central Florida. Since 1971, Dr. Raffa has also been self-employed as a
- ---------------
consulting economist. From 1976 to 1989, Dr. Raffa served as the NCAA
representative and is currently an associate board member of the Florida Citrus
Sports Association.
ALAN M. SCARBORO is a native of Florida and a resident of Orlando, Florida.
Since March 1989, Mr. Scarboro has served as Vice President of the Company and
supervised the National Bank of Commerce Building, which is owned by Gateway
Plaza, Ltd. On March 15, 1993, Mr. Scarboro was elected Secretary/Treasurer of
the Company. Prior to 1989, Mr. Scarboro was employed in the Central Florida
area and Alabama by other financial institutions. During this period, Mr.
Scarboro also managed the operations of his family-owned business in Orlando.
W. CHARLES SHUFFIELD is a resident of Orlando, Florida. Since January, 1984,
Mr. Shuffield has been a principal in the law firm of Zimmerman, Shuffield,
Kiser & Sutcliffe, P.A. Mr. Shuffield has been a practicing attorney in Orlando,
Florida, since 1969 when he became associated with the law firm of Akerman,
Senterfitt & Eidson and served as a partner in that law firm from 1972 through
1983. Mr. Shuffield is a member of the American Bar Association, The Florida
Bar, the Orange County Bar Association and Tennessee Bar Association and has
been active on several committees concerned with Corporation, Banking, Taxation
and Real Property for The Florida Bar and the Orange County Bar Association. Mr.
Shuffield is involved in various community affairs and currently serves or has
served in the following positions: Member of the Board of Directors of Orlando
Regional Healthcare Foundation, Inc. (1982 to 1993); Member of Rotary Club of
Orlando (1981 to present); Chairman and member of various committees of the
Greater Orlando Chamber of Commerce (1978 to present).
ITEM 11. EXECUTIVE COMPENSATION
----------------------
The executive officers for the Company and the Bank received salaries, in
aggregate, equal to approximately $280,966, received the benefit of automobile
allowances for an aggregate $18,000 and the payment of various club fees and
insurance in the amount of approximately $11,439. There were no other executive
officers other than the President with salaries in excess of $100,000 per year.
66
<PAGE>
SUMMARY COMPENSATION TABLE
--------------------------
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMP.
- ---------------------------------------------------------------------------------------------------------------------------------
AWARDS PAY-OUTS
-------------------------------------------
NAME AND ALL OTHER
PRINCIPAL RESTRICTED COMPENS
POSITION YEAR SALARY BONUS OTHER STOCK OPTIONS LTIP ation
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $101,864 0 $14,933/(1)/ $0 0 $0 $0
------------------------------------------------------------------------------------------------------------------
Guy D.
Colado 1994 $100,000 $19,140 $15,336/(2)/ $0 0 $0 $0
------------------------------------------------------------------------------------------------------------------
President
(CEO) 1993 $ 95,000 0 $15,725/(3)/ $0 0 $0 $0
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/(1)/ Includes a $6,000 car allowance and $5,393 medical insurance premium.
/(2)/ Includes a $6,000 car allowance and $4,951 medical insurance premium.
/(3)/ Includes a $6,000 car allowance and $4,836.76 medical insurance premium.
Mr. Guy D. Colado has been granted incentive stock options for 25,000
shares of Common Stock for his services as President of the Company.
Each founding director of the Company, including Mr. Colado, has
received a non-qualified stock option for 10,000 shares of Common Stock for his
services in lieu of director's fees for his initial term of office. Mr. Barkett
and Mr. Moss, who joined the Board on December 21, 1992, have received options
of 5,000 shares each. To date, none of these options have been exercised. In
addition, directors' fees in the amount of $3,000 per year are paid to each non-
employee director for an aggregate amount of directors' fees paid for 1995 of
$27,000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-------------------------------------------------------------
The table on the following page sets forth, as of March 1, 1996, the
beneficial ownership interest in the Company's Common Stock held by each of the
Company's directors, and by all officers and directors as a group. No
shareholder is known by the Company to beneficially own more than the five
percent (5%) of the Company's outstanding Common Stock. Each person listed has
sole voting and investment power with respect to the shares listed as
beneficially owned by him, unless otherwise indicated in the footnotes.
67
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
AS OF MARCH 1, 1996
-----------------------------------------------------------------------------
AMOUNT AND NATURE OF BENEFICIAL
OWNERSHIP(1) PERCENT OF CLASS(2)
- ----------------------------------------------------------------------------------------------------------------
WITHOUT WITH
NAME AND ADDRESS OF ISSUED OPTIONED OPTION OPTION
BENEFICIAL OWNER SHARES SHARES(3) TOTAL SHARES SHARES(4)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Donald J. Barker
1037 Lakemont Circle 5,260(5) 10,000 15,260 1.00% 2.42%
Winter Park, Florida 32782
- ----------------------------------------------------------------------------------------------------------------
Russell Barkett
621 Arapaho Trail 100 4,000 4,100 .02% .65%
Maitland, Florida 32751
- ----------------------------------------------------------------------------------------------------------------
C. Durham Barnes, M.D.
481 Virginia Drive 5,000 10,000 15,000 .95% 2.38%
Winter Park, Florida 32789
- ----------------------------------------------------------------------------------------------------------------
Robert E. Battaglia
1466 Alabama Drive 6,000 10,000 16,000 1.15% 2.53%
Winter Park, Florida 32789
- ----------------------------------------------------------------------------------------------------------------
Robert B. Boswell, M.D.
1301 Alberta Avenue 10,950(6) 10,000 20,950 2.09% 3.32%
Winter Park, Florida 32789
- ----------------------------------------------------------------------------------------------------------------
Kenneth M. Clayton
2800 Lake Shore Drive 7,300(7) 10,000 17,300 1.39% 3.30%
Orlando, Florida 32803
- ----------------------------------------------------------------------------------------------------------------
Guy D. Colado
1936 Fawsett Road 1,425(8) 35,000 36,425 .27% 5.77%
Winter Park, Florida 32789
- ----------------------------------------------------------------------------------------------------------------
J. Blair Culpepper
1106 Eastin Avenue 1,500 0 1,500 .29% 0.24%
Orlando, FL 32804
- ----------------------------------------------------------------------------------------------------------------
Willie C. Moss
5858 Cove Drive 13,059(9) 4,000 17,059 2.49% 2.70%
Orlando, Florida 32812
- ----------------------------------------------------------------------------------------------------------------
Frederick A. Raffa, Ph.D
45 Eastwind Lane 14,029(10) 10,000 24,029 2.68% 3.81%
Maitland, Florida 32751
- ----------------------------------------------------------------------------------------------------------------
Alan M. Scarboro
3218 Edgecliffe Drive 5,000 2,250 7,250 .95% 1.15%
Orlando, FL 32806
- ----------------------------------------------------------------------------------------------------------------
W. Charles Shuffield
2307 Lakeside Drive 5,000(11) 2,500(12) 7,500 .95% 1.19%
Orlando, Florida 32803
- ----------------------------------------------------------------------------------------------------------------
All Directors and Group Officers
as a Group (Consisting of 11 74,623 107,750 182,373 14.25% 28.89%
Persons)
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
68
<PAGE>
(1) As used in this table, "beneficial ownership" m eans the sole or shared
power to vote, or to direct the voting of, and/or to dispose of, or to
direct the disposition of, the Common Stock. Unless otherwise indicated,
the shares are held with sole power to vote and sole power to dispose.
(2) The percentages have been rounded to the nearest hundredth.
(3) "Option Shares" represent those shares which the indicated individual has a
right to acquire pursuant to an immediately exercisable option with an
exercise price of $10.00 per share.
(4) In calculating this percent only, it is assumed all options are exercised
and therefore the number of option shares has been added to the number of
shares outstanding.
(5) Includes 2,500 shares owned by a family member for which beneficial
ownership is not disclaimed.
(6) Includes 6,500 shares owned by Robert B. Boswell, M.D. FACCPA Defined
Contribution Pension Plans, 500 shares as custodian for a family member and
2,200 shares held by a family member for which beneficial ownership is not
disclaimed.
(7) Includes 300 shares held in trust for family members for which beneficial
ownership is not disclaimed and 2,000 shares held in trust for a third
party.
(8) Includes 1,400 shares held jointly with a family member with shared voting
and shared investment powers.
(9) Includes 8,059 shares held in trust for Mr. Moss and 5,000 shares held in
trust for a family member, over which Mr. Moss exercises shared voting and
investment powers.
(10) Includes 7,029 shares held with shared voting and shared investment power
and 7,000 shares held in a pension plan for Mr. Raffa's benefit.
(11) Includes 5,000 shares held jointly with a family member with shared voting
and shared investment power. Does not include 4,000 shares held by
Zimmerman, Shuffield, Kiser & Sutcliffe, P.A. Profit Sharing Plan & Trust
in which Mr. Shuffield has approximately a 22.7% interest but over which he
does not exercise control.
(12) Mr. Shuffield has assigned an aggregate of 7,500 options to certain members
of his law firm for which he disclaims beneficial ownership.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
69
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
The real estate and the building constructed thereon, which houses the
corporate offices of CNC and the facilities of the Bank, are owned by Gateway
Plaza, Ltd., a Florida limited partnership ("Gateway"). The Directors or certain
of their affiliates, except for Mssrs. Raffa, Barkett and Moss, are limited
partners of Gateway and they or their affiliates beneficially own, in aggregate,
4,305 of the 11,562 presently issued and outstanding limited partnership
interests of Gateway, or approximately 37% thereof. Additionally, the general
partner of Gateway is NBOC, Inc., a Florida corporation, which is owned and
controlled by Guy D. Colado (President and director of both the Bank and CNC)
and G. Winston Lovelace (a former director of both the Bank and CNC and
shareholder of CNC). As general partner, NBOC, Inc. has a 1% interest in the
taxable income, gains, losses and credits realized by Gateway. While it is
believed that the leasing arrangements for CNC, as lessee, and Gateway, as
lessor, are fair, such arrangements have not been arrived at as a result of
arms-length negotiations due to the commonality of control found in both
entities. The Bank made payments under the lease to Gateway in the aggregate
amount of approximately $285,144 for fiscal 1995.
The law firm of Zimmerman, Shuffield, Kiser & Sutcliffe, P.A. ("ZSKS"), in
which W. Charles Shuffield is a principal, has provided and will continue to
provide certain legal services to CNC and the Bank and has received and will
continue to receive fees for the services rendered. The amount of fees paid to
ZSKS by the Company and/or Bank did not exceed five percent of ZSKS' gross
revenues. Mr. Shuffield is a director and shareholder of CNC, a director of the
Bank and a limited partner of Gateway. The law firm of Clayton and McCulloh has
provided and will continue to provide legal services to the Bank and CNC. Mr.
Clayton is a director and shareholder of CNC, a director of the Bank and a
limited partner in Gateway.
At December 31, 1995, the Bank had approximately $2,813,779 loaned to
certain CNC/Bank directors and to certain affiliates of certain CNC/Bank
directors. Such loan transactions were made in the ordinary course of business;
on substantially the same terms, including interest and collateral, as those
prevailing at the time for comparable transactions with other persons; and did
not involve more than the normal risk of collectability or present other
unfavorable features.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
70
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
----------------------------------------------------------------
A. 1. FINANCIAL STATEMENTS
--------------------
The following consolidated financial statements of the Company are
included in Part II, Item 8:
- Consolidated Balance Sheets - December 31, 1995 and 1994.
- Consolidated Statements of Operations - Years ended December 31,
1995, 1994 and 1993.
- Consolidated Statements of Stockholders' Equity -Years ended
December 31, 1995, 1994, and 1993.
- Consolidated Statement of Cash Flows - Years ended
December 31, 1995, 1994 and 1993.
A. 2. FINANCIAL STATEMENT SCHEDULES
-----------------------------
The Company has not included any financial schedules because they are not
applicable, not required, or the information required to be set forth
therein is included in the consolidated financial statements or in notes
thereto.
A. 3. EXHIBITS
--------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
EXHIBIT DESCRIPTION SEQUENTIAL
NO. PAGE NO.
- --------------------------------------------------------------------------------
<S> <C> <C>
3.1 Articles of Incorporation of Commerce *
National Corporation incorporated by
reference from Exhibit 3.1 to
Registration No. 2-98960-A
- --------------------------------------------------------------------------------
3.2 First Amended and Restated Bylaws of *
Commerce National Corporation
effective January 14, 1988,
incorporated by reference from
Exhibit 3.2 to the Company's Report
on Form 10-K for the fiscal year
ended December 31, 1992.
- --------------------------------------------------------------------------------
</TABLE>
71
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
EXHIBIT SEQUENTIAL
NO. DESCRIPTION PAGE NO.
- --------------------------------------------------------------------------------
<S> <C> <C>
4.1 Specimen copy of common stock certificate for *
Common Stock of Commerce National Corporation,
incorporated by reference from Exhibit 4.1 to
the Company's Report on Form 10-K for the
fiscal year ended December 31, 1992.
- --------------------------------------------------------------------------------
4.2 Article IV of Articles of Incorporation of *
Commerce National Corporation included in the
Articles of Incorporation of Commerce National
Corporation incorporated by reference from
Exhibit 3.1 to Registration No. 2-98960-A.
- --------------------------------------------------------------------------------
4.3 Stock Redemption/Repurchase Policy incorporated *
by reference from Exhibit 4.3 to the Company's
Report on Form 10-Q for the fiscal quarter
ended June 30, 1993.
- --------------------------------------------------------------------------------
10.1 Lease Agreement dated June 12, 1985, Between *
Gateway Plaza, Ltd. and Commerce National
Corporation for the anticipated corporate
headquarters incorporated by reference from
Exhibit 10.4 to Registration No. 2-98960-A.
- --------------------------------------------------------------------------------
10.2 Amended and Restated 1986 Commerce National *
Corporation Employee Stock Option Plan
incorporated by reference from Exhibit 10.2 to
the Company's Report on Form 10-K for the
fiscal year ended December 31, 1992.
- --------------------------------------------------------------------------------
10.3 Amended and Restated 1985 Commerce National *
Corporation Directors' Stock Plan, incorporated
by reference from Exhibit 10.3 to the Company's
Report on Form 10-K for the fiscal year ended
December 31, 1992.
- --------------------------------------------------------------------------------
10.4 Amended and Restated Stock Option Agreement *
between Guy D. Colado and Commerce National
Corporation, incorporated by reference from
Exhibit 10.4 to the Company's Report on Form 10-
K for the fiscal year ended December 31, 1992.
- --------------------------------------------------------------------------------
</TABLE>
72
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------
EXHIBIT SEQUENTIAL
DESCRIPTION PAGE NO.
- --------------------------------------------------------------------------------
<S> <C> <C>
10.5 Amended and Restated Commerce * National *
Corporation Director's Stock Option Agreement
with a director, which is representative of the
other Amended and Restated Directors' Stock
Option Agreements, incorporated by reference
from Exhibit 10.5 to the Company's Report on
Form 10-K for the fiscal year ended December
31, 1992.
- --------------------------------------------------------------------------------
10.6 Contract for Sale and Purchase dated June 15, *
1983, by and between Commerce National
Corporation and John M. Bocchicchio for branch
location real estate, incorporated by reference
from Exhibit 10.1 to the Company's Report on
Form 10-Q for the fiscal quarter ended
September 30, 1994.
- --------------------------------------------------------------------------------
10.7 Offer to Purchase by and between Commerce *
National Corporation and Star Enterprises dated
November 29, 1993, for branch location real
estate, incorporated by reference from Exhibit
10.2 to the Company's Report on Form 10-Q for
the fiscal quarter ended September 30, 1994.
- --------------------------------------------------------------------------------
10.8 Contract for Sale and Purchase by and between *
National Bank of Commerce and Louis Campese and
W. Riley Allen, Co-trustees, dated September
15, 1993, for branch location real estate,
incorporated by reference from Exhibit 10.3 to
the Company's Report on Form 10-Q for the
fiscal quarter ended September 30, 1994.
- --------------------------------------------------------------------------------
10.9 Contract for Sale and Purchase by and between *
Li'l Big Horn Farm Market, Inc. and National
Bank of Commerce dated December 10, 1993, for
branch location real estate, incorporated by
reference from Exhibit 10.4 to the Company's
Report on Form 10-Q for the fiscal quarter
ended September 30, 1994.
- --------------------------------------------------------------------------------
</TABLE>
73
<PAGE>
EXHIBIT SEQUENTIAL
NO. DESCRIPTION PAGE NO.
- -----------------------------------------------------------------------------
10.10 Contract for Sale and Purchase by and between *
National Bank of Commerce and Robert R.
Garofalo, Jr. dated May 6, 1994, for branch
location real estate, incorporated by reference
from Exhibit 10.5 to the Company's Report on
Form 10-Q for fiscal quarter ended September
30, 1994.
- -----------------------------------------------------------------------------
10.11 Contract for Sale and Purchase by and between *
National Bank of Commerce and Donald D. Donoval
dated September 23, 1993, for branch location
real estate, incorporated by reference from
Exhibit 10.6 to the Company's Report on Form 10-
Q for fiscal quarter ended September 30, 1994.
- -----------------------------------------------------------------------------
10.12 Standard Form of Agreement between National *
Bank of Commerce and Aagaard-Juergensen, Inc.
dated October 27, 1994, for the Aloma Avenue
Branch Bank Site, incorporated by reference
from Exhibit 10.7 to the Company's Report on
Form 10-Q for fiscal quarter ended September
30, 1994.
- -----------------------------------------------------------------------------
11 Statement re computation of per share earnings. 81
- -----------------------------------------------------------------------------
22 Subsidiaries of Commerce National Corporation 83
- -----------------------------------------------------------------------------
* Incorporated by reference as noted in the narrative under "Description."
b. Reports on Form 8-K
-------------------
No reports on Form 8-K were filed by the Company for the fiscal
quarter ended December 31, 1994.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
74
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
COMMERCE NATIONAL CORPORATION
(Registrant)
Date: March 29, 1996 By:/s/ Guy D. Colado
----------------------------
GUY D. COLADO, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature and Title Date
- ------------------- ----
<S> <C>
By:/s/ Guy Colado March 29, 1996
--------------------------------------
Guy D. Colado
President and Director
(Principal Executive Officer)
By:/s/ Alan M. Scarboro March 29, 1996
--------------------------------------
Alan M. Scarboro
Secretary/Treasurer
By:______________________________________ March 29, 1996
Frederick A. Raffa
Director
By:/s/ Donald J. Barker March 29, 1996
--------------------------------------
Donald J. Barker
Director/Chairman
</TABLE>
75
<PAGE>
<TABLE>
<CAPTION>
Signature and Title Date
- ------------------- ----
<S> <C>
By:/s/ Russell Barkett March 29, 1996
--------------------------------------
Russell Barkett
Director
By:/s/ Durham Barnes March 29, 1996
--------------------------------------
C. Durham Barnes, M.D.
Director
By:/s/ Robert E. Battaglia March 29, 1996
--------------------------------------
Robert E. Battaglia
Director
By:/s/ Robert B. Boswell, M.D. March 29, 1996
--------------------------------------
Robert B. Boswell, M.D.
Director
By:/s/ Kenneth M. Clayton March 29, 1996
--------------------------------------
Kenneth M. Clayton
Director
By:/s/ Willie C. Moss March 29, 1996
--------------------------------------
Willie C. Moss
Director
By:/s/ W. Charles Shuffield March 29, 1996
--------------------------------------
W. Charles Shuffield
Director
</TABLE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.
Neither the Registrant's annual report for the 1995 fiscal year, nor any
proxy statement, form of proxy or other proxy soliciting material with respect
to its Annual Meeting of Shareholders to be held on May 29, 1996, has been sent
to security holders as of the date hereof. However, such report, proxy statement
and form of proxy will be furnished to security holders subsequent to the filing
of the annual report on this Form, and will subsequently be furnished to the
Securities and Exchange Commission.
76
<PAGE>
EXHIBIT 11
STATEMENT RE PER SHARE EARNINGS (LOSS)
<TABLE>
<CAPTION>
-------------------------------------------------------------------
YEAR ENDED DECEMBER 31
-------------------------------------------------------------------
1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average Shares 523,565 523,565 536,948 545,365 545,365
Outstanding
- -------------------------------------------------------------------------------------
Net Income $ 472,965 $ 724,209 $ 746,460 $639,982 $246,934
- --------------------------------------------------------------------------------------
Per Share $0.90/(3)/ $1.38/(2)/ $1.39/(1)/ $ 1.17 $ 0.45
Income
- -------------------------------------------------------------------------------------
</TABLE>
/(1)/ Per Share Income on a fully diluted basis (assuming all outstanding
exercisable options were exercised as of December 31, 1993) was $1.09.
/(2)/ Per Share Income on a fully diluted basis (assuming all outstanding
exercisable options were exercised as of December 31, 1994) was $1.03.
/(3)/ Per Share Income on a fully diluted basis (assuming all outstanding
exercisable options were exercised as of December 31, 1995) was $0.90.
<PAGE>
EXHIBIT 22
SUBSIDIARIES OF COMMERCE NATIONAL CORPORATION
As of the date of this report, Commerce National Corporation ("CNC") owned
all of the outstanding capital stock of the National Bank of Commerce, a
national banking organization and Commerce National Mortgage Company, a Florida
corporation established to process residential mortgages which commenced and
ceased operations during fiscal year 1988.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 3,897,057
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 8,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 12,136,418
<INVESTMENTS-CARRYING> 2,705,957
<INVESTMENTS-MARKET> 2,714,950
<LOANS> 67,731,520
<ALLOWANCE> 856,803
<TOTAL-ASSETS> 100,365,487
<DEPOSITS> 89,342,779
<SHORT-TERM> 0
<LIABILITIES-OTHER> 427,695
<LONG-TERM> 2,661,039
0
0
<COMMON> 54,537
<OTHER-SE> 7,879,437
<TOTAL-LIABILITIES-AND-EQUITY> 100,365,487
<INTEREST-LOAN> 6,217,599
<INTEREST-INVEST> 979,436
<INTEREST-OTHER> 222,172
<INTEREST-TOTAL> 7,419,207
<INTEREST-DEPOSIT> 3,260,816
<INTEREST-EXPENSE> 391,064
<INTEREST-INCOME-NET> 3,767,327
<LOAN-LOSSES> 175,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,256,880
<INCOME-PRETAX> 798,965
<INCOME-PRE-EXTRAORDINARY> 798,965
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 472,965
<EPS-PRIMARY> .90
<EPS-DILUTED> .90
<YIELD-ACTUAL> .048
<LOANS-NON> 2,182,812
<LOANS-PAST> 2,860,139
<LOANS-TROUBLED> 220,489
<LOANS-PROBLEM> 2,503,442
<ALLOWANCE-OPEN> 657,569
<CHARGE-OFFS> 62,899
<RECOVERIES> 87,133
<ALLOWANCE-CLOSE> 856,803
<ALLOWANCE-DOMESTIC> 856,803
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 341,041
</TABLE>
