<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For transition period from ____________ to _____________
Commission file number: 2-98960A
COMMERCE NATIONAL CORPORATION
(Exact name of Registrant as specified in its charter)
FLORIDA
(State or Other Jurisdiction of Incorporation or Organization)
59-2497676
(I.R.S. Employer Identification No.)
1201 South Orlando Avenue
Winter Park, Florida 32789
(Address of principal executive offices)
(Zip Code)
(407) 741-8900
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
<PAGE>
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
On August 1, 1999, Commerce National Corporation (the "Company") had
721,019 shares of common stock, par value $0.10 per share, issued and
outstanding.
(BALANCE OF PAGE INTENTIONALLY LEFT BLANK)
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The financial statements begin on the following page.
3
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
Condensed Consolidated Financial Statements
June 30, 1999 and December 31, 1998
(Unaudited)
4
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
Table of Contents
Accountants' Review Report
Condensed consolidated balance sheets (unaudited)--June 30, 1999
and December 31, 1998
Condensed consolidated statements of operations (unaudited)--Three months
ended June 30, 1999 and 1998; Six months ended June 30, 1999
and 1998
Condensed consolidated statements of cash flows (unaudited)--Six months
ended June 30, 1999 and 1998
Selected notes to condensed consolidated financial statements (unaudited)--June
30, 1999
5
<PAGE>
The Board of Directors
Commerce National Corporation and Subsidiary:
We have reviewed the condensed consolidated balance sheet of Commerce National
Corporation and subsidiary as of June 30, 1999 and the related condensed
consolidated statements of operations for the three month and six month periods
ended June 30, 1999 and 1998 and condensed consolidated statements of cash flows
for the six month periods ended June 30, 1999 and 1998. These condensed
consolidated financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical review procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Commerce National Corporation and
subsidiary as of December 31, 1998, and the related consolidated statements of
operations, stockholders' equity and cash flows for the year then ended not
presented herein; and in our report dated February 4, 1999, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of December 31, 1998, is fairly presented, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
/s/ KPMG LLP
Orlando, Florida
July 15, 1999
6
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
Condensed Consolidated Balance Sheets (Unaudited)
June 30, December 31,
Assets 1999 1998
------------ ------------
Cash and due from banks $ 5,949,842 5,221,144
Federal funds sold 4,400,000 8,100,000
Investment securities available for sale (note 2) 18,801,875 13,492,660
Loans, net (note 3) 134,615,500 122,929,105
Accrued interest receivable 945,519 813,736
Premises and equipment, net 3,566,046 3,698,955
Other real estate owned, net 66,881 --
Deferred tax asset, net 674,831 458,990
Federal Reserve Bank stock, at cost 199,500 178,500
Federal Home Loan Bank stock, at cost 468,100 378,600
Prepaid expenses and other assets 131,127 168,470
Executive supplemental income plan - cash
surrender value life insurance policies 1,501,787 1,467,332
----------- -----------
Total assets $ 171,321,008 156,907,492
=========== ===========
See accompanying review report of KPMG LLP and accompanying selected notes to
condensed consolidated financial statements (unaudited).
<PAGE>
<TABLE>
<CAPTION>
June 30, December 31,
Liabilities 1999 1998
---------------- -----------------
<S> <C> <C>
Deposits (note 4):
Noninterest bearing $ 23,642,339 21,301,512
Interest bearing 124,551,044 115,798,941
---------------- -----------------
Total deposits 148,193,383 137,100,453
Federal Home Loan Bank advances 7,120,834 4,125,534
Other borrowed funds 2,011,809 2,189,251
Accrued interest payable 190,145 191,744
Accounts payable and other liabilities 373,077 333,781
---------------- -----------------
Total liabilities 157,889,248 143,940,763
---------------- -----------------
Stockholders' Equity
Common stock, par value $.10 per share (1,000,000 shares authorized; 742,819
shares issued and 721,019 shares
outstanding at June 30, 1999 and December 31, 1998) 74,282 74,282
Additional paid-in capital 7,927,804 7,927,804
Retained earnings 5,867,742 5,182,057
Treasury stock, at cost (21,800 shares at June 30, 1999 and
December 31, 1998) (208,640) (208,640)
Accumulated other comprehensive loss (229,428) (8,774)
---------------- -----------------
Total stockholders' equity 13,431,760 12,966,729
Commitments and contingencies (note 5)
---------------- -----------------
Total liabilities and stockholders' equity $ 171,321,008 156,907,492
================ =================
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
Condensed Consolidated Statements of Operations (Unaudited)
Three months ended Six months ended
June 30, June 30,
----------------------------- -----------------------------
1999 1998 1999 1998
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Interest income:
Loans $ 2,899,576 2,383,395 5,636,838 4,647,490
Investment securities 249,044 235,626 454,227 477,881
Federal funds sold 23,990 132,787 54,272 182,687
Federal Reserve Bank stock 2,565 2,565 5,130 5,074
Federal Home Loan Bank stock 8,918 6,903 15,920 13,004
Due from banks 540 3,261 1,682 6,034
----------- ----------- ------------ -----------
Total interest income 3,184,633 2,764,537 6,168,069 5,332,170
Interest expense 1,412,487 1,234,219 2,745,830 2,356,684
----------- ----------- ------------ -----------
Net interest income 1,772,146 1,530,318 3,422,239 2,975,486
Provision for loan losses 123,881 62,253 198,762 124,506
----------- ----------- ------------ -----------
Net interest income after
provision for loan losses 1,648,265 1,468,065 3,223,477 2,850,980
----------- ----------- ------------ -----------
Other operating income:
Customer service fees 215,534 227,952 464,435 443,161
----------- ----------- ------------ -----------
Other operating expenses:
Salaries and benefits 578,178 548,529 1,164,966 1,075,340
Occupancy expense 218,482 226,620 450,546 451,088
Legal and professional fees 84,914 62,966 165,129 133,778
Other expenses 384,535 303,743 693,449 615,750
Loss on sale and write down of
other real estate owned -- 30,058 -- 32,075
----------- ----------- ------------ -----------
1,266,109 1,171,916 2,474,090 2,308,031
----------- ----------- ------------ -----------
Net operating income
before taxes 597,690 524,101 1,213,822 986,110
Income tax expense 210,585 208,051 441,237 376,754
----------- ----------- ------------ -----------
Net earnings $ 387,105 316,050 772,585 609,356
=========== =========== ============ ===========
Basic and diluted earnings per share
(note 6) $ 0.54 0.44 1.07 0.87
=========== =========== ============ ===========
</TABLE>
See accompanying review report of KPMG LLP and accompanying selected notes to
condensed consolidated financial statements (unaudited).
9
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
--------------------------------------
1999 1998
---------------- -------------------
<S> <C> <C>
Cash flows provided by operating activities:
Net income $ 772,585 609,356
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation of premises and equipment 152,902 156,742
Net amortization of premiums and accretion of
discounts on investment securities held to maturity
and investment securities available for sale 18,882 (39,528)
Provision for loan losses 198,762 124,506
Deferred loan origination fees (22,617) 27,046
Deferred income taxes (82,838) 117,000
Loss on sale of other real estate owned -- 32,075
Provision for other real estate owned 3,802 --
Executive supplemental income plan - additional
cash surrender value (34,455) (32,177)
Cash provided by (used in) changes in:
Accrued interest receivable (131,783) (69,461)
Prepaid expenses and other assets 37,343 (6,905)
Accrued interest payable (1,599) 13,865
Accounts payable and other liabilities 39,296 143,370
--------------- -------------
Net cash provided by operating activities 950,280 1,075,889
--------------- -------------
Cash flows provided by (used in) investing activities:
Net loans made to customers (11,946,882) (10,242,380)
Decrease (increase) in federal funds sold 3,700,000 (6,950,000)
Purchases of investment securities available for sale (10,181,754) (7,000,000)
Proceeds from maturity of investment securities available for sale 3,500,000 3,500,000
Proceeds from called investment securities available for sale 1,000,000 4,000,000
Purchase of premises and equipment (19,993) (22,650)
Proceeds from sale of other real estate owned 13,659 263,043
Redemption (purchase) of Federal Home Loan Bank stock (89,500) (37,300)
Purchase of Federal Reserve Bank stock (21,000) --
--------------- -------------
Net cash used in investing activities (14,045,470) (16,489,287)
--------------- -------------
</TABLE>
10
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
---------------------------------
1999 1998
----------- ----------
<S> <C> <C>
Cash flows provided by (used in) financing activities:
Net increase in demand deposits, NOW accounts and passbook
savings accounts 3,547,492 5,474,343
Net increase in certificates of deposit 7,545,438 6,164,216
Principal payment on mortgage note payable (14,939) (13,787)
(Decrease) increase in repurchase agreements (162,503) 192,547
Proceeds (repayments) on Federal Home Loan
Bank borrowings 2,995,300 (4,300)
Shareholder dividends paid (86,900) (65,586)
Proceeds from employee stock options exercised -- 1,215,000
Proceeds from sale of common stock -- 4,153
----------- -----------
Net cash provided by financing activities 13,823,888 12,966,586
----------- -----------
Net increase (decrease) in cash and cash equivalents 728,698 (2,446,812)
Cash and cash equivalents at the beginning of period 5,221,144 6,095,762
----------- -----------
Cash and cash equivalents at end of period $ 5,949,842 3,648,950
=========== ===========
Cash paid during the period for:
Interest $ 2,747,429 2,342,819
=========== ===========
Income taxes $ 497,163 235,436
=========== ===========
Supplemental disclosure for non-cash items:
Market value adjustment - investments available for sale:
Investments $ (367,672) (11,445)
Deferred income tax 138,244 4,303
----------- -----------
Unrealized loss on investments available for sale $ (229,428) (7,142)
=========== ===========
Financing of other real estate owned $ -- 43,496
=========== ===========
Transfer of loans to other real estate owned $ 84,342 --
=========== ===========
</TABLE>
See accompanying review report of KPMG LLP and accompanying selected notes to
condensed consolidated financial statements (unaudited).
11
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
Selected Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 1999
(See accompanying review report of KPMG LLP)
(1) Basis of Presentation
(a) Interim Financial Information
The accompanying unaudited condensed consolidated financial
statements of Commerce National Corporation and Subsidiary (the
Company) have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial information. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the six
months ended June 30, 1999, are not necessarily indicative of the
results that may be expected for the year ended December 31, 1999.
For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1998.
(b) Derivative Financial Instruments
The Company has interest rate risk exposure relating to its
investments in interest sensitive assets and funding through interest
sensitive liabilities. Management continually monitors the Company's
interest rate risk level by determining the effect of various
interest rate movements on the level of exposure. Management
considers the level of exposure in determining the appropriate
duration mix of interest sensitive assets in relation to interest
sensitive liabilities, and the pricing of such assets and
liabilities. The Company does not have any investment in derivative
financial instruments.
(c) Total Comprehensive Income
Total comprehensive income for the three and six months periods ended
June 30, 1999 and 1998 were $230,226, $551,931, $305,904 and
$595,080, respectively.
12 (Continued)
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
Selected Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 1999
(See accompanying review report of KPMG LLP)
(2) Investment Securities Held to Maturity and Investment Securities Available
for Sale
The amortized cost and estimated market value of investments available for
sale at June 30, 1999 and December 31, 1998 are as follows:
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
-------------------------- ---------------------------
Estimated Estimated
Amortized market Amortized market
cost value cost value
----------- ------------- ---------- --------------
<S> <C> <C> <C> <C>
U.S. Treasury
securities and
municipals
$ 19,169,547 18,801,875 13,506,676 13,492,660
=========== ============= ========== ==============
</TABLE>
As of June 30, 1999, the Company had securities sold under agreement to
repurchase of $1,756,304. All agreements were one day transactions, thus
the carrying value, market value, and borrowings were equal at quarter end.
The Company enters into sales of securities under agreements to repurchase
("Agreements"). Fixed-coupon Agreements are treated as financing, and the
obligations to repurchase securities sold are reflected as a liability in
the condensed consolidated balance sheet. The dollar amount of securities
underlying the Agreements remain in the asset accounts. At June 30, 1999,
all of the Agreements were to repurchase identical securities. The assets
underlying the Agreements were held in safekeeping by a third party.
During the quarter ended June 30, 1999, Agreements outstanding averaged
approximately $2,637,074 and the maximum amount outstanding during the
quarter was $3,698,195. Total interest expense paid on repurchase
Agreements was $28,463 and $58,101 for the quarter ended June 30, 1999 and
June 30, 1998, respectively, and $54,402 and $98,379 for the six months
ended June 30, 1999 and June 30, 1998, respectively.
13 (Continued)
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
Selected Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 1999
(See accompanying review report of KPMG LLP)
(3) Loans
Major categories of loans included in the loan portfolio at June 30, 1999
and December 31, 1998 are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
-------------- -------------
<S> <C> <C>
Commercial-secured $ 13,003,196 12,471,553
Commercial-unsecured 2,432,331 2,886,847
Real estate - primarily commercial 117,921,581 105,820,828
Other (installment and overdrafts) 3,199,125 3,559,619
-------------- -------------
136,556,233 124,738,847
Allowance for loan losses (1,476,751) (1,323,143)
Deferred loan origination fees (463,982) (486,599)
-------------- -------------
$ 134,615,500 122,929,105
============== =============
</TABLE>
The recorded investment in loans for which an impairment has been
recognized and the related allowance for loan losses at June 30, 1999 and
December 31, 1998 were $2,505,077 and $285,021 and $1,207,759 and
$110,380, respectively. The average recorded investment in impaired loans
during the second quarter 1999 was $1,856,418. No interest income was
recognized during the quarter ended June 30, 1999 on impaired loans.
The activity in the allowance for loan losses, for the three months ended
June 30, 1999 and 1998 and the six months ended June 30, 1999 and 1998 is
as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------- ------------------------------
1999 1998 1999 1998
------------ ----------- -------------- -------------
<S> <C> <C> <C> <C>
Balance at the beginning of
the period $ 1,399,732 1,070,515 1,323,143 1,013,081
Charge offs (47,421) (24,460) (47,713) (66,060)
Recoveries 559 22,063 2,559 58,844
Provision for loan losses 123,881 62,253 198,762 124,506
------------ ----------- -------------- -------------
Balance at the end of the
period $ 1,476,751 1,130,371 1,476,751 1,130,371
=========== =========== ============== =============
</TABLE>
14 (Continued)
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
Selected Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 1999
(See accompanying review report of KPMG LLP)
At June 30, 1999 and December 31, 1998, certain stockholders, directors
and employees were indebted to the Bank in the aggregate amounts of
$7,513,432 and $9,733,678, respectively. All such loans were made in the
ordinary course of business.
(4) Deposits
Included in interest bearing deposits are certificates of deposit issued
in amounts of $100,000 or more. These certificates and their remaining
maturities at June 30, 1999 and December 31, 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
Three months or less $ 29,067,223 24,084,300
Three through twelve months 8,750,266 8,722,146
Over one year 8,303,639 1,480,918
------------ -----------
$ 46,121,128 34,287,364
============ ===========
</TABLE>
(5) Commitments
In the normal course of business, the Bank has various commitments to
extend credit and standby letters of credit which are not reflected in the
financial statements. At June 30, 1999 and December 31, 1998, the Bank had
commitments to customers of approximately $945,921 and $714,583 for
standby letters of credit, $30,584,359 and $29,135,729 for unfunded firm
loan commitments and $75,854,162 and $68,306,642 for approved lines of
credit, respectively.
15 (Continued)
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
Selected Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 1999
(See accompanying review report of KPMG LLP)
(6) Basic and Diluted Earnings Per Share
Basis and diluted earnings per share are calculated as follows:
<TABLE>
<CAPTION>
Income Shares Per share
(numerator) (denominator) amount
---------------- -------------- -------------
<S> <C> <C> <C>
For the three months ended June 30, 1999:
Basic and diluted earnings per share:
Net income $ 387,105 721,029 $ .54
=============== ============== =============
For the three months ended June 30, 1998:
Basic and diluted earnings per share:
Net income $ 316,050 721,029 $ .44
=============== ============== =============
For the six months ended June 30, 1999:
Basic and diluted earnings per share:
Net income $ 772,585 721,029 $ 1.07
=============== ============== =============
For the six months ended June 30, 1998:
Basic and diluted earnings per share:
Net income $ 609,356 699,652 $ .87
=============== ============== =============
</TABLE>
(7) Stock Option Plan
The 1998 Commerce National Corporation Employees' Stock Option Plan (the
"Plan") was adopted by the Company's shareholders on April 19, 1999. The
Plan permits the Company to grant employees options to purchase the common
stock of the Company at fair market value per share, but in no case shall
the purchase price be less than $15.00 per share, which was fair market
value at date of adoption. Pursuant to the Plan, immediately exercisable
options have been granted to purchase 10,000 shares and shall not to
exceed a total under the Plan of 100,000 shares.
16
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
Selected Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 1999
(See accompanying review report of KPMG LLP)
(8) New Accounting Pronouncements
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedge Activities"
(FASB 133). This standard requires all derivatives be measured at fair
value and be recognized as assets and liabilities in the statement of
financial position. FASB 133 sets forth the accounting for changes in fair
value of a derivative depending on the intended use and designation of the
derivative. In June 1999, the FASB issued FASB 137, "Accounting for
Derivative Instruments and Hedging Activities" deferral of the effective
date of FASB 133, an Amendment of FASB 133." FASB 133, as amended, is now
effective for all fiscal years beginning after June 15, 2000.
Implementation of FASB 133 is not expected to have a significant impact on
the financial position or results of operations of the Company.
In October 1998, the FASB issued Financial Accounting Standards No. 134,
"Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise." This statement requires that after the securitization of a
mortgage loan held for sale, an entity engaged in mortgage banking
activities classify the resulting mortgage backed security as a trading
security. The statement is effective for the first fiscal quarter
beginning after December 15, 1998. The Company does not expect the
adoption of this standard to have any impact on its condensed consolidated
financial statements.
17
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Except for historical information contained herein, the matters discussed
in this report contain forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), that involve substantial risks and uncertainties. When used in this
report, or in the documents incorporated by reference herein, the words
"anticipate", "believe", "estimate", "may", "intend", "expect" and similar
expressions identify certain of such forward-looking statements. Actual
results, performance or achievements could differ materially from those
contemplated, expressed or implied by the forward-looking statements contained
herein. These forward-looking statements are based largely on the expectations
of the Company and are subject to a number of risks and uncertainties,
including, but not limited to, economic, competitive and other factors affecting
the Company's operations, markets, products and services, as well as expansion
strategies and other factors discussed elsewhere in this report filed by the
Company with the Securities and Exchange Commission. Many of these factors are
beyond the Company's control.
The accompanying condensed consolidated financial statements of the Company
are primarily affected by the operation of the NATIONAL BANK OF COMMERCE (the
"Bank"), its wholly owned subsidiary.
The following discussion and analysis presents a review of the Company's
Condensed Consolidated Financial Condition and Results of Operation. This
review should be read in conjunction with the condensed consolidated financial
statements and other financial data presented herein.
Summary:
- -------
During the second quarter and the first six months of 1999, the Company had
net income of $387,105 and $772,585, respectively. This compares with net
income of $316,050 for the second quarter of 1998 and $609,356 for the first six
months of 1998. This is the result of loans increasing to an all-time high of
$134,615,500 at the end of the second quarter of 1999 compared to $122,929,105
at year-end 1998. This resulted in total interest income of $6,168,069 for the
second quarter of 1999 compared to the same period in 1998 of $5,332,170.
Interest expense for the second quarter ending June 30, 1999, was $1,412,487
compared to $1,234,219 for the same time period in 1998, while interest expense
totaled $2,745,830 for the first six months of 1999 compared to $2,356,684 for
the same period in 1998. While interest-bearing deposits increased to
$124,551,044 as of June 30, 1999, compared to the year-end 1998 figure of
$115,798,941, the rates paid on these deposits have fluctuated less than one
percent (1%) since the second quarter of 1997.
Two indicators which measure profitability are net income as a percentage
of average assets (ROAA) and net income as a percentage of average shareholder
equity (ROAE). A comparison of these ratios for the first six months of the
last two years is as follows:
18
<PAGE>
<TABLE>
<CAPTION>
For the Six Months Ending
-----------------------------
<S> <C> <C>
6/30/99 6/30/98
-----------------------------
ROAA .95% .91%
------------------------------------------------
ROAE 11.64% 10.36%
------------------------------------------------
NET INCOME $ 772,585 $ 609,356
------------------------------------------------
AVERAGE ASSETS $162,299,017 $133,920,167
------------------------------------------------
AVERAGE CAPITAL $ 13,431,760 $ 11,763,545
------------------------------------------------
</TABLE>
Financial Position
- ------------------
Total assets and total liabilities have increased $14,413,516 and
$13,948,485, respectively, between December 31, 1998 and June 30, 1999. This is
primarily due to an increase in loans of $11,686,395 and an increase in deposits
of $11,092,930.
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-bearing liabilities and the volume of interest-earning assets funded
with interest-bearing deposits, non-interest-bearing deposits, and stockholders'
equity. Net interest income for the first six months of the last two years is as
follows:
<TABLE>
<CAPTION>
For the Six Months Ending
-------------------------
<S> <C> <C>
6/30/99 6/30/98
------------------------
INTEREST INCOME $6,168,069 $5,332,170
------------------------------------------------
INTEREST EXPENSE $2,745,830 $2,356,684
------------------------------------------------
NET INTEREST INCOME $3,422,239 $2,975,486
------------------------------------------------
</TABLE>
Net interest income increased 12.3% in the second quarter and 13.1% in the
first six months of 1999 compared to the same periods in 1998.
On an annualized basis, the Company's net interest margin was 4.32% through
the second quarter of 1999 compared to 4.56% through the second quarter of 1998.
Changes in net interest income from period to period result from increases
or decreases in the average balances of interest-earning assets and interest-
bearing liabilities, increases or decreases
19
<PAGE>
in the average rates earned and paid on such assets and liabilities, the banks'
ability to manage their earning asset portfolios and the availability of
particular sources of funds.
Provision for Loan Losses
- -------------------------
The provision for loan losses is charged to operations to bring the total
allowance for loan losses to a level considered appropriate by management. The
provision for loan losses was $123,881 and $62,253 for the three month periods
ending June 30, 1999 and June 30, 1998, respectively. The provision for loan
losses was $198,762 and $124,506 for the six month periods ending June 30, 1999
and June 30, 1998, respectively.
The Company segregates the loan portfolio for loan loss purposes into the
following broad segments such as: commercial real estate; residential real
estate; commercial business; and consumer loan. The Company provides for a
general allowance for losses inherent in the portfolio by the above categories,
which consists of two components. General loss percentages are calculated based
upon historical analyses. A supplemental portion of the allowance is calculated
for inherent losses which probably exist as of the evaluation date even though
they might not have been identified by the more objective processes used for the
portion of the allowance described above. This is due to the risk of error
and/or inherent imprecision in the process. This portion of the allowance is
particularly subjective and requires judgments based on qualitative factors
which do not lend themselves to exact mathematical calculations such as: trends
in delinquencies and nonaccruals; migration trends in the portfolio; trends in
volume, terms, and portfolio mix; new credit products and/or changes in the
geographic distribution of those products; changes in lending policies and
procedures; loan review reports on the efficacy of the risk identification
process; changes in the outlook for local, regional and national economic
conditions; concentrations of credit; and peer group comparisons.
Specific allowances are provided in the event that the specific collateral
analysis on each classified loan indicates that the probable loss upon
liquidation of collateral would be in excess of the general percentage
allocation. The provision for loan loss is debited or credited in order to
state the allowance for loan losses to the required level as determined above.
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.
The Company's allowance for loan losses as of June 30, 1999, was
$1,476,751, a 1.09% reserve on total loans outstanding. This compares to an
allowance of $1,130,371, a 1.04% reserve of total loans outstanding, as of June
30, 1998.
There are currently nine (9) non-accruing loans totaling $1,337,941 as of
June 30, 1999. This compares with non-accruing loans of $1,598,616 as of June
30, 1998.
One non-accrual loan in the amount of $62,968 is secured by a second
mortgage on the principal's residence and a third mortgage on commercial
property. There is ample liquidity in the commercial property. The loan should
be paid in full in the third quarter of this year.
There is one non-accrual loan in the amount of $49,435 secured by a first
mortgage on a residence owned by an estate. The loan will be paid in full in
the third quarter of this year.
20
<PAGE>
One loan totaling $117,085 is secured by a first mortgage on a house to a
builder/developer. This loan is currently in the foreclosure process. The house
is 90% complete. The foreclosure sale is set for the third quarter of 1999. It
is anticipated that there will be a minimal loss to the Bank at this time.
There was one unsecured loan in the amount of $14,891 that has been turned
over to attorneys for collection. There is the potential that a deficiency
judgment will be brought against the borrower to collect on this loan.
There are three (3) loans totaling $831,363 secured by business assets
which have 75-80% guarantees from the Small Business Administration. These
three loans are also secured by a cross-collateralization of mortgages on a
personal residence of the principals. At the same time, there is a fourth loan
to the principals in the amount of $142,971 secured by common stock which is
traded on NASDAQ. There is a fifth loan in the amount of $119,228 secured by a
second mortgage on a second personal residence to the principals of the same
corporation. The borrowers have requested a 90-day moratorium of principal and
interest in an attempt to secure private investment funds to bring all loans
current and have working capital for this business. It is anticipated that
there will be a loss to the Bank, which will be determined during the third
quarter of 1999.
Non-Interest Income
- -------------------
Non-interest income in the second quarter of 1999 decreased 5% to $215,534
compared to $227,952 for the same period in 1998 while non-interest income for
the first six months of 1999 increased 5% to $464,435 compared to $443,161 for
the same time period in 1998. Service charge income on deposits increased to
$54,473 through the first six months of 1999 compared to $44,827 for the same
time period in 1998. Other income on time deposit accounts, which includes
collecting penalties on insufficient funds and checks, increased to $111,844
through the first six months of 1999 compared to $105,618 for the same time
period in 1998.
Non-Interest Expense
- --------------------
Operating expenses in the second quarter of 1999 increased 8% to $1,266,109
compared to $1,171,916 in the same period in 1998, while non-interest expense
for the first six months of 1999 increased 7% to $2,474,090 compared to
$2,308,031 for the same time period in 1998. Personnel expense, consisting of
salaries, other compensation and employment benefits, increased $29,649 and
$89,626 over the aforementioned periods. This is a result of additional hirings
during the first six months of 1999 which increased salary expense and group
insurance costs.
Also, equipment expense, which is included under occupancy expense,
increased $14,682 during the second quarter of 1999 compared to the same time
period in 1998. This is a result of increased depreciation expense on both
software and hardware on new computer systems, plus the maintenance and repair
expense to maintain the computer systems. The investment in equipment will
continue to grow due to the Company's commitment to maintain high quality
capabilities and computer software information as it heads toward the year 2000.
Conversion activities and testing on the computer systems for the year 2000 were
completed in the second quarter of 1999. Expenditures in 1999 for the year 2000
project have amounted so far to $35,000.
21
<PAGE>
Advertising and business development expenses increased $25,057 during the
first six months of 1999 compared to the same period in 1998. Also, data
processing expense increased $13,017 in the first two quarters of 1999 as the
Bank's customer base continued to grow.
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,
providing for liability outflows, and management of 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 borrowings. The objective of liquidity management is to maintain a
balance between sources and uses of funds such that the cash flow needs of the
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 assets and liability
management include: (1) controlling interest rate exposure, (2) ensuring
adequate liquidity, and (3) maintaining strong capital foundation.
Capital Resources
- -----------------
On January 27, 1989, the Office of the Comptroller of the Currency ("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. 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. 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 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 June 30, 1999, the
Bank had a total risk based capital ratio (i.e. Tier One plus Tier Two capital)
of 10.33% (10.60% for the Company on a consolidated basis). The Bank and the
Company are well capitalized.
The Company stands ready to infuse additional capital into the Bank should
it be warranted.
22
<PAGE>
Impact of Inflation
- -------------------
The condensed consolidated financial statements and related financial data
and notes presented herein have been prepared in accordance with Generally
Accepted Accounting Principles ("GAAP"), which require the measurement of
financial position and operating results in terms of historical dollars, without
considering changes in the relative purchasing power of money over time due to
inflation. Unlike most industrial companies, virtually all of the assets and
liabilities of the Company and the Bank are monetary in nature. As a result,
interest rates have a more significant impact on the performance of the Company
and the Bank than the effects of general price levels. Although interest rates
generally move in the same direction as inflation, the magnitude of such changes
varies.
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 local demographics.
Year 2000 (Y2K)
- ---------------
The Bank is aware of the potential risks involved in its technology-guided
equipment that has been identified by the coming of the year 2000 ("Y2K") The
Board of Directors has been pro-active in appointing a committee and
coordinator, approving a budget and contingency plan for the Y2K. The Board of
Directors monitors the Bank's Y2K progress on a monthly basis.
The Bank does not write its own software or perform programming. Instead,
it uses the services of M&I Data Services, Inc. ("M&I") for customer item
processing, CORE application, ATM services, voice response unit, and other
related Bank services. The other direct software link is with Independent
Bankers' Bank of Florida, a correspondence bank for customer wire transfers and
federal funds transfers. Both of these entities have provided the Bank with
adequate responses to the Bank's inquiries as to the status of their Y2K plans.
Ongoing monitoring will continue until all pieces are in place.
The Bank's Y2K Action Plan consists of five phases: awareness, assessment,
renovation, validation and implementation.
The awareness phase defines the Y2K problem and commits the necessary
resources to perform the required compliance responsibilities. The Bank
has successfully concluded the awareness phase.
The assessment phase requires the Bank to determine the size and complexity
of potential problems. This phase has been completed.
The renovation phase includes software, hardware enhancements, upgrades or
replacements as deemed necessary for Y2K readiness. The Bank has replaced
all computer hardware that
23
<PAGE>
was evaluated as impossible to enhance or upgrade to become Y2K compliant.
Computer software has been enhanced or replaced as necessary.
The validation phase involves testing the renovated or replaced hardware
and software components for Y2K readiness. The Bank is in this validation
stage and will continue until all components are deemed compliant.
The final stage of implementation is the certification of the validation of
Y2K compliancy and the use of the validated resources. As the Bank
completes various stages of the validation stage, the implementation stage
will be completed.
Through the various phases mentioned above, the Bank has identified that
power, telephone, and CORE application are the components that are "mission
critical" to the operation of the Bank and the standards it has set. The Board
of Directors has approved a contingency plan for each mission critical
component. These contingency plans are in line with the Bank's established
disaster contingency plan, and management is confident of their performance.
The Board of Directors has approved a Y2K budget as prepared by the Y2K
committee in the approximate amount of $70,000. Any substantive increases the
committee deems necessary will be submitted to the Board of Directors for
approval.
The Bank's regulatory agency, the OCC, has frequently visited or telephoned
the Bank's committee coordinator for continual oversight of the Bank's progress
in the Y2K compliancy. The FRB and the Office of Thrift Supervision review the
progress of M&I for assurance that M&I is progressing satisfactorily with M&I's
Y2K action plan.
Accounting Pronouncements
- -------------------------
SFAS No. 131
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosure about Segments of an Enterprise and Related Information."
This Statement establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders. The
Statement is required for fiscal years beginning after December 15, 1997.
The adoption of this standard did not have a significant impact on the
consolidated financial statements.
SFAS No. 133
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedge Activities" (FASB
133). This standard requires all derivatives be measured at fair value and be
recognized as assets and liabilities in the statement of financial position.
FASB 133 sets forth the accounting for changes in fair value of a derivative
depending on the intended use and designation of the derivative. In June 1999,
the FASB issued
24
<PAGE>
FASB 137, "Accounting for Derivative Instruments and Hedging Activities --
Deferral of the Effective Date of FASB No. 133, an Amendment of FASB 133." FASB
133, as amended, is now effective for all fiscal quarters and fiscal years
beginning after June 15, 2000. Implementation of FASB 133 is not expected to
have a significant impact on the financial position or results of operations of
the Company.
SFAS No. 134
In October 1998, the FASB issued Financial Accounting Standards No. 134,
"Accounting for Mortgage-Backed Securities Retained after the Securitization of
Mortgage Loans Held for Sale by a Mortgage Banking Enterprise." This statement
requires that, after the securitization of a mortgage loan held for sale, an
entity engaged in mortgage banking activities classify the resulting mortgage
backed security as a trading security. The statement is effective for the first
fiscal quarter beginning after December 15, 1998. The Company does not expect
the adoption of this standard to have any impact on its consolidated financial
statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
The business of the Company and the composition of its consolidated balance
sheet consists of investments in interest-earning assets (primarily loans and
investment securities) which are primarily funded by interest-bearing
liabilities (deposits). Such financial instruments have varying levels of
sensitivity to changes in market interest rates resulting in market risk.
Interest Rate Risk Measurement
Interest rate risk results when the maturity or repricing intervals and
interest rate indices of the interest-earning assets and interest-bearing
liabilities are different. In an attempt to manage its exposure to changes in
interest rates, management monitors the Company's interest rate risk.
Management's asset/liability committee meets monthly to review the Company's
interest rate risk position and profitability, and recommend adjustments for
consideration by the Board of Directors. Management also reviews the Bank's
securities portfolio, formulates investment strategies, and oversees the timing
and implementation of transactions to assure attainment of the Board's
objectives in the most effective manner. Notwithstanding the Company's interest
rate risk management activities, the potential for changing interest rates is an
uncertainty that can have an adverse effect on net income.
In adjusting the Company's asset/liability position, the Board and
management attempt to manage the Company's interest rate risk while enhancing
net interest margins. The rates, terms and interest rate indices of the
Company's interest-earning assets result primarily from the Company's strategy
of investing in loans and securities which permit the Company to limit its
exposure to interest rate risk, together with credit risk, while at the same
time achieving a positive interest rate spread from the difference between the
income earned on interest-earning assets and the cost of interest-bearing
liabilities.
One method of measuring interest rate risk is to determine the earnings-at-
risk for a given change in interest rates which is done on a monthly basis. The
impact on value (earnings) is
25
<PAGE>
significant because reduced earnings will affect capital. The change in interest
rates does not necessarily represent an immediate or parallel shift.
Economic Value of Equity
The interest rate risk ("IRR") component is a dollar amount that is
deducted from total capital for the purpose of calculating an institution's
risk-based capital requirement and is measured in terms of the sensitivity of
its economic value of equity ("EVE") to changes in interest rates. An
institution's EVE is calculated as the net discounted cash flows from assets,
liabilities, and off-balance sheet contracts. An institution's IRR component is
measured as the change in the ratio of EVE to the net present value of total
assets as a result of a hypothetical 200 basis point change in market interest
rates. A resulting decline in this ratio of more than 2% of the estimated
present value of an institution's total assets prior to the hypothetical 200
basis point change will require the institution to deduct from its regulatory
capital 50% of that excess decline. Based on quarterly calculations, the Bank
experienced no such decline.
Although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees to changes in market
interest rates. Also, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while
interest rates on other types may lag behind changes in market rates.
Additionally, certain assets, such as adjustable-rate mortgage loans, have
features that restrict changes in interest rates on a short-term basis and over
the life of the loan. Further, in the event of a change in interest rates,
prepayment and early withdrawal levels could deviate significantly. Finally,
the ability of many borrowers to service their debt may decrease in the event of
a significant interest rate increase.
The repricing of certain categories of assets and liabilities are subject
to competitive and other pressures beyond the Company's control. As a result,
certain assets and liabilities indicated as maturing or otherwise repricing
within a stated period may in fact mature or reprice at different times and at
different volumes. There were no substantial changes in the Company's
asset/liability position in the quarter ended June 30, 1999.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
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.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
26
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of the Company was held on April
19, 1999. At that meeting, Russell Barkett, Robert B. Boswell, M.D., Stephen G.
Miller, Willie C. Moss and Frederick A. Raffa, Ph.D. were each elected as a
director for a three (3) year term. Donald J. Barker, C. Durham Barnes, M.D.,
Robert E. Battaglia, Kenneth M. Clayton, Guy D. Colado, Ernst R. Janvrin,
Anthony Lombardi, Jr., Jane H. Louttit and W. Charles Shuffield will continue as
directors following the annual meeting.
The shareholders, by a majority vote, approved the Company's new
Employees' Stock Option Plan and Stock Option Agreement as approved by the Board
of Directors on December 21, 1998 (collectively the "1998 Plan"). Of the
721,019 shares outstanding, 519,061 shares were voted in favor of the 1998 Plan,
30,650 shares were voted against the 1998 Plan, and 45,869 shares abstained from
voting. The 1998 Plan was adopted by a majority of the members of the Board of
Directors on December 21, 1998. Under the 1998 Plan, the Company may grant
options to any employee to purchase shares of common stock of the Company, par
value $0.10 per share. The Company may issue and sell up to 100,000 shares
under the Plan. The Plan shall be administrated by the Board of Directors and
shall be effective as of the date approved by the shareholders.
<TABLE>
<CAPTION>
Item 5. Other Information
<S> <C>
None.
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
<S> <C>
(a) EXHIBITS
--------
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION LOCATION
- --------------------------------------------------------------------------------
<S> <C> <C>
3.2 First Amended and Restated Bylaws Incorporated by reference from
of Commerce National Corporation Exhibit 3.2 to the Company's
effective January 14, 1988 Report on Form 10-K for the fiscal
year ended December 31, 1992
- --------------------------------------------------------------------------------
3.3 First Amendment to First Amended Incorporated by reference from
and Restated Bylaws of Commerce Exhibit 3.3 to the Company's
National Corporation dated Report on Form 10-Q for the fiscal
effective May 26, 1998 quarter ended June 30, 1998
- --------------------------------------------------------------------------------
3.4 Articles of Restatement of the Incorporated by reference from
Articles of Incorporation of Exhibit 3.4 to the Company's
Commerce National Corporation, Report on Form 10-Q for the fiscal
and Amended and Restated Articles quarter ended June 30, 1998
of Incorporation, filed June 22,
1998
- --------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT Description LOCATION
- --------------------------------------------------------------------------------
<S> <C> <C>
4.1 Specimen copy of common stock Incorporated by reference from
certificate for Common Stock of Exhibit 4.1 to the Company's
Commerce National Corporation Report on Form 10-K for the fiscal
year ended December 31, 1992
- --------------------------------------------------------------------------------
4.2 Article IV of Articles of Incorporated by reference from
Incorporation of Commerce Exhibit 3.1 to Registration No.
National Corporation included in 2-98960-A
the Articles of Incorporation of
Commerce National Corporation
- --------------------------------------------------------------------------------
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 First Amendment to Amended and Incorporated by reference from
Restated 1985 Commerce National Exhibit 10.1 to the Company's
Corporation Directors' Stock Plan Report on Form 10-K for the fiscal
dated October 20, 1997 year ended December 31, 1997
- --------------------------------------------------------------------------------
10.2 1998 Commerce National Attached
Corporation Employees' Stock
Option Plan
- --------------------------------------------------------------------------------
10.3 1998 Commerce National Attached
Corporation Employees' Stock
Option Agreement
- --------------------------------------------------------------------------------
27 Article 9 Financial Data Schedule Attached
(for SEC use only).
- --------------------------------------------------------------------------------
</TABLE>
(b) REPORTS ON FORM 8-K.
-------------------
No reports on Form 8-K were filed by the Company for the fiscal quarter
ended June 30, 1999.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMERCE NATIONAL CORPORATION
Dated: August 13, 1999
By:/s/ Guy D. Colado
----------------------------------
GUY D. COLADO, President and
Chief Executive Officer
Dated: August 13, 1999
By:/s/ Alan M. Scarboro
----------------------------------
ALAN M. SCARBORO,
Secretary/Treasurer
29
<PAGE>
INDEX OF EXHIBITS FILED WITH THIS REPORT
----------------------------------------
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------------------------------------------------------------------------
<S> <C>
10.2 1998 Commerce National Corporation Employees' Stock Option Plan
- --------------------------------------------------------------------------
10.3 1998 Commerce National Corporation Employees' Stock Option
Agreement
- --------------------------------------------------------------------------
27 Article 9 Financial Data Schedule (for SEC use only).
- --------------------------------------------------------------------------
</TABLE>
30
<PAGE>
EXHIBIT 10.2
1998 COMMERCE NATIONAL CORPORATION
EMPLOYEES' STOCK OPTION PLAN
ARTICLE I
Definitions
As used herein, the following terms have the meanings hereinafter set forth
unless the context clearly indicates to the contrary:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Change of Control" shall be deemed to have occurred if any of the
following occur: (i) any change of ownership or control subject to the
provisions of the Change in Bank Control Act (12 USC 1817(j)); (ii) any merger,
consolidation, or other reorganization subject to the provisions of the Bank
Merger Act (12 USC 1828(c)); or (iii) any acquisition of control of the Company
subject to the provisions of Section 3 of the Bank Holding Company Act (12 USC
1842) or any successor provision to the foregoing.
(c) "Company" shall mean the Florida corporation presently known as
COMMERCE NATIONAL CORPORATION as its name may be changed from time to time.
(d) "Director" shall mean any individual who serves on the Board of
Directors of the Company.
(e) "Employee" shall mean any individual who is employed with the
Company on the average of no less than twenty (20) hours per week and five (5)
months per year. A person shall be deemed an Employee in spite of sick leave,
military leave, or any other leave of absence approved by the Company.
(f) "Option" shall mean any option to purchase Stock granted pursuant
to the provisions of this Plan.
(g) "Optionee" shall mean an Employee to whom an Option has been
granted hereunder.
(h) "Plan" shall mean the 1998 COMMERCE NATIONAL CORPORATION
EMPLOYEES' STOCK OPTION PLAN, the terms of which are set forth herein.
(i) "Service" shall mean the tenure of an individual as an Employee of
the Company.
(j) "Stock" or "Shares" shall mean the common stock, par value $0.10
per share, of the Company or, in the event that the outstanding shares of Stock
are hereafter
31
<PAGE>
changed into or exchanged for shares of stock with different
characteristics or different securities of the Company or some other
corporation, such other stock or securities.
(k) "Stock Option Agreement" shall mean the agreement between the
Company and an Optionee under which the Optionee may purchase Stock hereunder.
(l) "Subsidiary" shall mean any corporation, the majority of the
outstanding capital stock of which is owned, directly or indirectly, by the
Company.
ARTICLE II
The Plan
2.1 Name. This plan shall be known as the "1998 COMMERCE NATIONAL
----
CORPORATION EMPLOYEES' STOCK OPTION PLAN".
2.2 Purpose. The purpose of the Plan is to advance the interests of the
-------
Company and its shareholders by affording to the Employees an opportunity to
acquire or increase their proprietary interest in the Company by the grant of
Options to such Employees under the terms set forth herein. By thus encouraging
such Employees to become owners of Shares, the Company seeks to motivate, retain
and attract those highly competent individuals upon whose judgment, initiative,
leadership and continued efforts the success of the Company in large measure
depends.
2.3 Effective Date. By virtue of the action of the Board, which adopts
--------------
and authorizes the implementation of this Plan, this Plan shall become effective
upon the date approved by the shareholders of the Company.
2.4 Participants. Any Employee of the Company or a Subsidiary shall be
------------
eligible to participate in the Plan (subject to the limitation set forth in
Section 5.3 hereof), and the Board shall select from the eligible class those
Employees to whom Options shall be granted.
ARTICLE III
Plan Administration
3.1 Plan Administration. This Plan shall be administered by the Board of
-------------------
Directors of the Company.
3.2 Award of Options. The Board shall have full authority and discretion
----------------
to determine, consistent with the provisions of this Plan, the Employees to be
granted Options, the times at which Options shall be granted, and the number of
Shares and purchase price of Shares covered by each Option; to construe and
interpret the Plan; to determine the terms and provisions of each respective
Stock Option Agreement, which need not be identical, including, but not limited
to, terms covering the payment of the Option price; and to make all other
determinations and take all other actions deemed
32
<PAGE>
necessary or advisable for the proper administration of the Plan. All such
actions and determinations shall be conclusively binding for all purposes and
upon all persons.
ARTICLE IV
Shares Subject to Plan
4.1 Limitations. Subject to adjustment pursuant to the provisions of
-----------
Section 4.3 hereof, the number of Shares which may be issued and sold hereunder
pursuant to Stock Option Agreements shall not exceed 100,000 Shares. Such Shares
may be either authorized and unissued shares or shares issued and thereafter
acquired by the Company.
4.2 Options Granted Under Plan. Shares with respect to which an Option
--------------------------
granted hereunder shall have been exercised shall not again be available for
Option hereunder. If Options granted hereunder shall terminate for any reason
without being wholly exercised, new Options may be granted to Optionees
hereunder covering the number of Shares to which such Option termination
relates.
4.3 Anti-dilution. In the event that the outstanding Shares hereafter are
-------------
changed into or exchanged for a different number or kind of shares or other
securities of the Company or of another corporation by reason of merger,
consolidation, other reorganization, recapitalization, reclassification,
combination of shares, stock split-up, or stock dividend:
(a) The aggregate number and kind of shares subject to Options which
may be granted hereunder and the exercise price shall be adjusted so that no
dilution of the Plan's Shares shall result;
(b) Rights under outstanding Options granted hereunder, both as to the
number of subject shares and the exercise price, shall be adjusted so that no
dilution of the Optionee's Shares shall result; and
(c) Where dissolution or liquidation of the Company or any merger or
combination in which the Company is not a surviving corporation is involved,
each outstanding Option granted hereunder shall terminate, but the Optionee
shall have the right, immediately prior to such dissolution, liquidation, merger
or combination, to exercise his Option in whole or in part, to the extent that
it shall not have been exercised and that such exercise shall not be in
violation of applicable law.
ARTICLE V
Options
5.1 Option Grant and Agreement. Each Option granted hereunder shall be
--------------------------
evidenced by minutes of a meeting of the Board authorizing same and by a written
Stock Option Agreement dated as of the date of grant and executed by the Company
and the
33
<PAGE>
Optionee, which Agreement shall set forth such terms and conditions as may be
determined by the Board to be consistent with the Plan.
5.2 Option Exercise Price. The purchase price of each Share subject to
---------------------
Option shall be at fair market value (as determined by the Board), but in no
case shall the purchase price be less than fifteen dollars ($15.00) per share.
5.3 Eligibility. Options may not be granted to any Employee who at the
-----------
time the Option is granted, owns Shares possessing more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company
unless: (a) such Option by its terms is not exercisable after the expiration of
five (5) years from the date of its grant; and (b) the Option price of the
shares covered by such Option is not less than one hundred and ten percent
(110%) of the fair market value of such shares on the date that such Option is
granted.
5.4 Non-transferability of Option. No Option shall be sold, pledged,
-----------------------------
assigned or transferred by an Optionee otherwise than by transfer by will or the
laws of descent and distribution. During the lifetime of an Optionee the Option
shall be exercisable only by him or by his legal guardian or personal
representative.
5.5 Term of Option. The term of each Option granted under the Plan and
--------------
the period during which it may be exercised ("Exercise Period") shall be
determined by the Board at the time it grants the Option and shall be specified
in each Stock Option Agreement provided, however, that in no event shall the
Exercise Period extend beyond ten (10) years from the date of its grant.
5.6 Method of Exercise. Options may be exercised in whole or in part from
------------------
time to time with respect to whole Shares only. Options must be exercised within
the Exercise Period and shall be exercised by written notice of intent to
exercise the Option with respect to a specific number of Shares. The notice and
payment in full of the amount of the Option price for the number of Shares with
respect to which the Option is then being exercised must be delivered to the
Company at its principal office in the State of Florida. In addition to and at
the time of payment of the Option price, Optionee shall pay to the Company in
cash the full amount of all federal and state withholding or other employment
taxes applicable to the taxable income of such Optionee resulting from such
exercise, if any, and any sales, transfer, or similar taxes imposed with respect
to the issuance or transfer of Shares in connection with such exercise.
5.7 Exercise Limitation. The value of shares of Company Stock that can be
-------------------
exercised for the first time by an Optionee in any one year cannot exceed
$100,000, based on the Option Exercise Price.
5.8 Exercise Period. An Option shall be exercisable only during its
---------------
Exercise Period and only within the parameters set forth in the Option Agreement
adopted by the Board, subject to the terms and restrictions set forth in this
Plan.
34
<PAGE>
5.9 Acceleration of Option Exercise. In the event of a Change of Control,
-------------------------------
all Options granted prior to such Change of Control may be exercised in whole or
in part immediately prior to the closing of such Change of Control (and
thereafter until such Option is terminated in accordance with its terms).
5.10 No Rights as Shareholder. An Optionee or a transferee of an Option
------------------------
shall have no rights as a shareholder with respect to any Shares subject to such
Option prior to the purchase of such Shares by exercise of such Option as
provided herein.
5.11 Exercise Restrictions. Subject to Section 5.9 hereof, an Option may
---------------------
be exercised in accordance with this Plan during the Exercise Period as to all
or any portion of the Shares subject to the Option from time to time, but shall
not be exercisable in amounts less than 100 Shares, unless fewer than 100 Shares
remain subject to the Option at the date of exercise, and no Option shall be
exercisable in whole or in part more often than once every sixty (60) days,
without the prior written consent of the Board.
5.12 Effect of Death, Disability. Retirement, or Other Termination of
----------------------------------------------------------------
Service.
- -------
(a) If an Optionee's Service with the Company shall be terminated for
"cause," as defined in Section 5.12(b) hereof, then no Options
held by such Optionee, which are unexercised in whole or in part,
may be exercised on or after the date on which such Optionee is
first notified in writing by the Company of such termination for
cause.
(b) For purposes of this Section 5.12, termination for "cause," shall
mean termination of the Optionee for (i) any willful act of
misconduct or gross negligence which is materially injurious to
the Company monetarily or otherwise; (ii) a criminal conviction of
the Optionee for any act involving the business and affairs of the
Company; or (iii) a criminal conviction of the Optionee for
commission of a felony, the circumstances of which substantially
relate to the Optionee's position with the Company.
(c) If an Optionee's Service with the Company shall be terminated for
any reason other than for cause (as defined in Section 5.12(b)
hereof) and other than the retirement at age sixty-five (65) or
the disability (as defined in Section 5.12(e) hereof) or death of
the Optionee, then the Options granted to the Optionee, if
exercisable at the time the Optionee' s employment is terminated,
may be exercised at any time for ninety (90) days beginning on the
Optionee's last day of employment with the Company but not later
than the date on which such Options would otherwise expire and
only to the extent that such Options were exercisable at the date
of such termination.
(d) If an Optionee's Service with the Company shall be terminated by
reason of retirement at age sixty-five (65) or the death or
disability (as defined in Section 5.12(e) hereof) of the Optionee,
then the Optionee
35
<PAGE>
or personal representative or administrator of the estate of the
Optionee or the person or persons to whom an Option granted
hereunder shall have been validly transferred by the personal
representative or administrator pursuant to the Optionee's will or
the laws of descent and distribution, as the case may be, shall
have the right to exercise the Optionee's Options for ninety (90)
days after the date of such termination, but no later than the
date on which such options would otherwise expire and only to the
extent that such Options were exercisable at the date of such
termination.
(e) For purposes of this Section 5.12, the terms "disability" and
"disabled" shall have the meaning set forth in the principal
disability insurance policy or similar program then maintained by
the Company on behalf of its employees or, if no such policy or
program is then in existence, the meaning then used by the United
States Government in determining persons eligible to receive
disability payments under the social security system of the United
States.
(f) No transfer of an Option by the Optionee by will or by the laws of
descent and distribution shall be effective to bind the Company
unless the Company shall have been furnished with written notice
thereof and an authenticated copy of the will and/or such other
evidence as the Company may deem necessary to establish the
validity of the transfer and the acceptance by the transferee or
transferees of the terms and conditions of such Option.
5.13 Investment Intent. Upon or prior to the exercise of all or any portion
-----------------
of an Option, the Optionee shall furnish to the Company in writing such
information or assurances as, in the Company's opinion, may be necessary to
enable it to comply fully with the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations thereunder and any other
applicable statutes, rules, and regulations. Without limiting the foregoing, if
a registration statement is not in effect under the Securities Act with respect
to the shares of Stock to be issued upon exercise of an Option, the Company
shall have the right to require, as a condition to the exercise of such Option,
that the Optionee represent to the Company in writing that the shares to be
received upon exercise of such Option will be acquired by the Optionee for
investment and not with a view to distribution and that the Optionee agree, in
writing, that such shares will not be disposed of except pursuant to an
effective registration statement, unless the Company shall have received an
opinion of counsel reasonably acceptable to it to the effect that such
disposition is exempt from the registration requirements of the Securities Act.
The Company shall have the right to endorse on certificates representing shares
of Stock issued upon exercise of an Option such legends referring to the
foregoing representations and restrictions or any other applicable restrictions
on resale or disposition as the Company, in its discretion, shall deem
appropriate.
36
<PAGE>
ARTICLE VI
Stock Certificates
The Company shall not be required to issue or deliver any certificate for
Shares purchased upon the exercise of any Option granted hereunder or any
portion thereof, prior to fulfillment of all of the following conditions:
6.1 The admission of such Shares to listing on all stock exchanges on
which the Stock is then listed, if any;
6.2 The completion of any registration or other qualification of such
Shares under any federal or state law or under the ruling or regulations of the
Securities and Exchange Commission or any other governmental regulatory body,
which the Company shall in its sole discretion deem necessary or advisable;
6.3 The obtaining of any approval or other clearance from any federal or
state governmental agency which the Company shall in its sole discretion
determine to be necessary or advisable; and
6.4 The lapse of such reasonable period of time following the exercise of
the Option as the Company from time to time may establish for reasons of
administrative convenience.
ARTICLE VII
Termination, Amendment and Modification of Plan
The Board may at any time terminate, and may at any time and from time to
time and in any respect amend or modify, the Plan; provided, however, that no
such action of the Board without approval of the shareholders of the Company may
increase the total number of Shares subject to the Plan except as contemplated
in Section 4.3 hereof and provided further that no termination, amendment or
modification of the Plan shall in any manner affect any Option theretofore
granted under the Plan without the consent of the Optionee of said Option.
ARTICLE VIII
Indemnification
In addition to such other rights of indemnification as they have as
directors or as members of the Board, the members of the Board, in making
determinations hereunder, shall be indemnified by the Company against the
reasonable expenses, including their reasonable attorneys' fees, incurred in
connection with the defense of any action, suit or proceeding, or in connection
with any appeal therein, which they or any of them may be a party by reason of
any action taken or failure to act under or in connection with the Plan or any
stock option agreement or Option granted thereunder, and against all amounts
paid by them in settlement thereof, provided such settlement is approved by
independent legal
37
<PAGE>
counsel selected by the Company or paid by them in satisfaction of a judgment in
any such action, suit or proceeding, except in relation to matters as to which
it shall be adjudged in such action, suit or proceeding that such Board member
is liable for gross negligence or misconduct in the performance of his duty;
provided that within sixty (60) days after the institution of any such action,
suit or proceeding, a Board member shall, in writing, offer the Company the
opportunity, at its own expense, to handle and defend the same.
ARTICLE IX
Miscellaneous
9.1 Service. Nothing in the Plan or in any Option granted hereunder or in
-------
any Stock Option Agreement relating thereto shall confer upon any Employee the
right to continue in the service of the Company.
9.2 Other Compensation Plans. The adoption of the Plan shall not affect
------------------------
any other stock option, incentive or other compensation plans in effect for the
Company, nor shall the Plan preclude the Company from establishing any other
forms of incentive or other compensation for employees of the Company.
9.3 Plan Binding on Successors. The Plan shall be binding upon the
--------------------------
successors and assigns of the Company.
9.4 Pronouns and Plurals. All pronouns and any variations thereof shall
--------------------
be deemed to refer to the masculine, feminine, neuter, singular, or plural as
the identity of the person or persons may require.
9.5 Applicable Law. This Plan shall be governed by and construed in
---------------
accordance with the laws o the State of Florida.
9.6 Headings. Headings of Articles and Sections hereof are inserted for
--------
convenience and reference; they constitute no part of the Plan.
9.7 Severability. If any provision or provisions of this Plan shall be
------------
held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
38
<PAGE>
CERTIFICATE
-----------
I HEREBY CERTIFY that the foregoing 1998 COMMERCE NATIONAL CORPORATION
EMPLOYEES' STOCK OPTION PLAN has been duly approved and adopted at a meeting of
the Board of Directors held on the 21st day of December, 1998.
/s/ Alan M. Scarboro
------------------------------------------
Alan M. Scarboro, Secretary
39
<PAGE>
EXHIBIT 10.3
COMMERCE NATIONAL CORPORATION
STOCK OPTION AGREEMENT
THIS AGREEMENT, effective as of the ________ day of ___________________,
_______, by and between COMMERCE NATIONAL CORPORATION, a Florida corporation
having offices at Winter Park, Florida ("CNC"), and
______________________________ , residing in Winter Park, Florida (''Optionee"),
currently serving as ______________________________________ of the National Bank
of Commerce (the "Company), which is a wholly owned subsidiary of CNC.
W I T N E S S E T H:
WHEREAS, Optionee is a valuable and trusted employee of the Company, and
the Company considers it desirable and in its best interest that Optionee be
given an inducement to acquire a proprietary interest in CNC; and
WHEREAS, the Company and CNC desire to encourage, motivate, retain and
attract highly competent individuals such as Optionee, upon whose judgment,
initiative, leadership and continued efforts the success of the Company and CNC
in large measure depend; and
WHEREAS, the granting of options to purchase common stock of CNC hereunder
is in accordance with the 1998 Commerce National Corporation Employees' Stock
Option Plan approved by the directors of CNC.
NOW, THEREFORE, in consideration of the premises, and of the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
As used herein, the following terms have the meanings hereinafter set
forth, unless the context clearly indicates to the contrary:
(a) "Board" shall mean the Board of Directors of CNC.
(b) "Company" shall mean the national banking association presently known
as the NATIONAL BANK OF COMMERCE, as its name may be changed from time to time.
(c) "CNC" shall mean the Florida corporation presently known as Commerce
National Corporation, as its name may be changed from time to time.
(d) "Employee" shall mean any individual who is employed with CNC or the
company on the average of no less than twenty (20) hours per week and five (5)
months per year. A person shall be deemed an Employee in spite of sick leave,
military leave, or any other leave of absence approved by CNC or the Company.
40
<PAGE>
(e) "Option" shall mean the option to purchase Stock granted pursuant to
the provisions of this Agreement.
(f) "Plan" shall mean the 1998 Commerce National Corporation Employees'
Stock Option Plan approved by the Board.
(g) "Service" shall mean the tenure of Optionee as an employee of CNC or
the Company.
(h) "Stock" or "Shares" shall mean the common stock of CNC, par value
$0.10 per share, or, in the event that the outstanding shares of Stock are
hereafter changed into or exchanged for shares of a different stock or
securities of CNC or some other corporation, such other stock or securities.
(I) "Stock Option Agreement" or "Agreement" shall mean this agreement
between CNC and the Optionee under which the Optionee may purchase Stock
hereunder, the terms of which are set forth herein.
(j) "Year" shall mean any calendar year during the term of this Agreement
from January 1 to December 31, inclusive.
ARTICLE II
Name and Effective Date
2.1 Name. This Agreement shall be known as the Commerce National
----
Corporation Stock Option Agreement.
2.2 Effective Date. This Agreement became effective on
--------------
____________________________, 1999.
ARTICLE III
Shares
3.1 Number of Shares. The Optionee may purchase up to ______________
----------------
Shares hereunder, which Shares shall be issued and sold pursuant to the
provisions of this Agreement. Such Shares may be either authorized and unissued
shares or shares issued and thereafter acquired by the Company. The number of
Shares which the Optionee may purchase hereunder are subject to adjustment
pursuant to the provisions of Section 3.3 below.
3.2 Shares Issued Pursuant to this Agreement. Shares with respect to which
----------------------------------------
the Option granted hereunder shall have been exercised shall not again be
available for Option hereunder.
3.3 Anti-Dilution. In the event that the outstanding Shares hereafter are
-------------
changed into or are exchanged for a different number or kind of shares or other
securities of CNC or of another corporation by reason of merger, consolidation,
other reorganization, recapitalization, reclassification, combination of shares,
stock split-up, or stock dividend:
41
<PAGE>
(a) The aggregate number and kind of shares subject to Option granted
hereunder shall be adjusted so that no dilution of the Optionee's Shares shall
result;
(b) Rights under outstanding Options granted hereunder, both as to the
number of subject Shares and the Option price, shall be adjusted so that no
dilution of the Optionee's Shares shall result; and
(c) Where dissolution or liquidation of CNC or any merger or
combination in which CNC is not a surviving corporation is involved, each
outstanding Option granted hereunder shall terminate, but the Optionee shall
have the right, immediately prior to such dissolution, liquidation, merger or
combination, to exercise his Option in whole or in part, to the extent that it
shall not have been exercised prior thereto, and that such exercise shall not be
in violation of application law.
ARTICLE IV
Terms of Option
4.1 Grant of Option. This Optionee is hereby granted an option to purchase
---------------
the number of Shares set forth in Section 3.1 hereof.
4.2 Option Exercise Price. The purchase price of each Share subject to
---------------------
Option hereunder shall be fifteen dollars ($15.00) per share.
4.3 Nontransferability of Option. Neither the Option, nor any part
----------------------------
thereof, shall be sold, pledged, assigned or transferred by Optionee otherwise
than by transfer by will or laws of descent and distribution. During the
lifetime of Optionee, the Option shall be exercisable only by him.
4.4 Term of Option. The term of the Option granted hereunder and the
--------------
period during which it may be exercised ("Exercise period") shall be from the
Effective Date of this Agreement until the close of business on
__________________________ , 200_.
4.5 Method of Exercise. This Option may be exercised, in whole or in part,
------------------
with respect to whole Shares only. Options must be exercised within the Exercise
Period, and shall be exercised by written notice of intent to exercise the
Option which notice shall specify the number of shares desired to be purchased.
The notice and payment in full of the Option price for the number of shares of
stock with respect to which the Option is then being exercised must be delivered
to CNC at its principal office in the State of Florida. In addition to and at
the time of the payment of the Option price, Optionee shall pay to CNC in cash
the full amount of all federal and state withholding or other employment taxes
applicable to the taxable income of Optionee resulting from such exercise, if
any.
4.6 Effect of Termination of Service.
--------------------------------
(a) If Optionee's service with the Company shall be terminated for any
reason including the disability or death of the Optionee, his Option shall
remain exercisable to the same extent and for the same duration it was
exercisable prior to the termination for those number of Shares for which the
Option is deemed vested as described in Section 4.7, below, for three months
after the date of such termination or one year after the date of death,
respectively, for the number of Shares for which the Option is not deemed
vested.
42
<PAGE>
(b) No transfer of an Option by the Optionee by will or by the laws of
descent and distribution shall be effective to bind CNC unless CNC shall have
been furnished with written notice thereof and an authenticated copy of the will
and/or such other evidence as CNC may deem necessary to establish the validity
of the transfer and the acceptance by the transferee or transferees of the terms
and conditions of such Option.
4.7 Vesting of Option Rights. The Optionee will be deemed vested with his
------------------------
Option for all _______________ Shares as of the execution date of this
Agreement.
4.8 No Rights of Shareholder. The Optionee or transferee of an Option
------------------------
shall have no rights as a shareholder with respect to any Shares subject to such
Option prior to the purchase of such Shares by exercise of the Option as
provided herein.
4.9 Exercise Restrictions. Notwithstanding anything herein to the
---------------------
contrary, the Option may be exercised in accordance with this Agreement during
the Exercise Period as to all or any portion of the Shares subject to the Option
from time to time, but shall not be exercisable in amounts less than 100 shares,
unless fewer than 100 shares shall remain subject to the Option at the date of
exercise, and the Option shall not be exercisable in whole or in part more often
than once every sixty (60) days without the prior consent of the Board.
ARTICLE V
Stock Certificates
CNC shall not be required to issue or deliver any certificate for Shares of
Stock purchased upon the exercise of any Option granted hereunder or any portion
thereof, prior to fulfillment of all of the following conditions:
(a) The admission of such Shares to listing on all stock exchanges on
which the Stock is then listed, if any;
(b) The completion of any registration or other qualification of such
Shares under any federal or state law or under the rulings or regulations of the
Securities and Exchange Commission or any other governmental regulatory body,
which CNC shall in its sole discretion deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any federal or
state governmental agency which CNC shall in its sole discretion determine to be
necessary or advisable; and
(d) The lapse of such reasonable period of time following the exercise of
the Option as CNC from time to time may establish for reasons of administrative
convenience or statutory compliance.
ARTICLE VI
Termination, Amendment and Modification of Plan
The Board may at any time terminate, and may at any time and from time to
time, and in any respect, amend or modify the Plan, provided further that no
termination, amendment, or modification of the Plan shall in any manner affect
this Agreement under the Plan without the written consent of the Optionee.
43
<PAGE>
ARTICLE VII
Miscellaneous
7.1 Service. Nothing in this Stock Option Agreement shall confer upon
-------
Optionee the right to continue in the service of the Company.
7.2 Other Compensation Plans. The adoption of the Plan and the execution
-------------------------
of this Stock Option Agreement shall not affect any other stock option,
incentive or other compensation plans in effect for CNC or the company, nor
shall the Plan or Agreement preclude CNC or the Company from establishing any
other forms of incentive or other compensation for directors and/or employees of
CNC or the Company.
7.3 Agreement Binding on Successors. This Agreement shall be binding upon
-------------------------------
the successors and assigns of CNC, the Company and the Optionee.
7.4 Pronouns and Plurals. All pronouns and any variations thereof shall be
--------------------
deemed to refer to the masculine, feminine, neuter, singular, or plural as the
identity of the person or persons may require.
7.5 Applicable Law, Venue and Attorneys Fees. This Stock Option Agreement
----------------------------------------
shall be governed by and construed in accordance with the laws of the State of
Florida. The parties hereto specifically agree that the proper venue for all
action arising from this Agreement shall be in the courts of Orange County,
Florida, and by executing below submit to the in personam jurisdiction of said
-- --------
court. In the event litigation is instituted hereunder the losing party shall
pay the prevailing party's attorney fees and costs, including those incurred
during the appellate process.
7.6 Headings. Headings of Articles and Sections hereof are inserted for
--------
convenience and reference only; they constitute no part of the Stock Option
Agreement.
7.7 Severability. If any provision or provisions of this Agreement shall
------------
be held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
IN WITNESS WHEREOF, the parties hereto have set forth their hands and
seals.
Executed this ___________ day of _____________________, _______, to be
deemed effective as of the date set forth herein.
Witnesses: OPTIONEE
- --------------------------------------------
- -------------------------------------------- -----------------------------
Attest:
COMMERCE NATIONAL CORPORATION
____________________________________________ By:__________________________
Alan M. Scarboro, Secretary Guy D. Colado,President
44
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR COMMERCE NATIONAL CORPORATION
AND SUBSIDIARY DATED JUNE 30, 1999 AND DECEMBER 31, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 5,148,999
<INT-BEARING-DEPOSITS> 800,843
<FED-FUNDS-SOLD> 4,400,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 18,801,875
<INVESTMENTS-CARRYING> 19,169,547
<INVESTMENTS-MARKET> 18,801,875
<LOANS> 136,556,233
<ALLOWANCE> 1,476,751
<TOTAL-ASSETS> 171,321,008
<DEPOSITS> 148,193,383
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,575,031
<LONG-TERM> 7,120,834
0
0
<COMMON> 74,282
<OTHER-SE> 13,357,478
<TOTAL-LIABILITIES-AND-EQUITY> 171,321,008
<INTEREST-LOAN> 5,636,838
<INTEREST-INVEST> 454,227
<INTEREST-OTHER> 77,004
<INTEREST-TOTAL> 6,168,069
<INTEREST-DEPOSIT> 2,552,727
<INTEREST-EXPENSE> 2,745,830
<INTEREST-INCOME-NET> 3,422,239
<LOAN-LOSSES> 198,762
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,474,090
<INCOME-PRETAX> 1,213,822
<INCOME-PRE-EXTRAORDINARY> 1,213,822
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 772,585
<EPS-BASIC> 1.07
<EPS-DILUTED> 1.07
<YIELD-ACTUAL> 0.043
<LOANS-NON> 1,337,941
<LOANS-PAST> 0
<LOANS-TROUBLED> 806,334
<LOANS-PROBLEM> 1,137,251
<ALLOWANCE-OPEN> 1,323,143
<CHARGE-OFFS> 47,713
<RECOVERIES> 2,559
<ALLOWANCE-CLOSE> 1,476,751
<ALLOWANCE-DOMESTIC> 1,476,751
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 523,658
</TABLE>
