<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
Commission File Number 33-22692-A
PORT ST. LUCIE NATIONAL BANK HOLDING CORP.
A FLORIDA CORPORATION - I.R.S. EMPLOYER IDENTIFICATION NO. 65-0051022
10570 U.S. One South
Port St. Lucie, Florida 34952
Issuer's Telephone Number:
(407) 337-1188
Check whether the issuer: (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 the filing requirements for the past
90 days.
Yes X No
----------- -----------
The number of shares outstanding of each of the issuer's classes of common stock
as of September 30, 1995:
Common Stock, $.01 par value -- 672,352 shares
-----------------------------------------------
Transitional Small Business Disclosure Format:
Yes No X
------------ -------------
<PAGE>
PORT ST. LUCIE NATIONAL BANK HOLDING CORP. AND SUBSIDIARIES
INDEX
-----
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C>
<C>
PART I: Financial Information
Item 1: Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 1995
and December 31, 1994 1
Condensed Consolidated Statements of Earnings for the nine months ended and the
three months ended September 30, 1995 and 1994 2
Condensed Consolidated Statements of Shareholders' Equity for the nine months
ended September 30, 1995 and 1994 3
Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 1995 and 1994 4
Notes to Condensed Consolidated Financial Statements 5-8
Item 2: Management's Discussion and Analysis or Plan of Operation 9-16
PART II: Other Information 17
Signatures 18
</TABLE>
<PAGE>
PORT ST. LUCIE NATIONAL BANK HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, except for share data)
---------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------ -----------
<S> <C> <C>
Assets
- -----
Cash and due from banks $ 2,737 2,742
Federal Funds Sold 7,290 ---
Investment securities available for sale 16,556 17,344
Loans held for sale, net of deferred loan origination fees (estimated
market values of $4,189 and $722, respectively) 4,090 712
Investment securities held to maturity (estimated market values of $9,723
and $10,176, respectively) 9,714 10,659
Loans 82,109 62,714
Less: Allowance for loan losses (845) (699)
Net deferred loan origination fees and costs (105) (187)
-------- ------
Net loans 81,159 61,828
Other real estate owned --- 217
Premises and equipment, net 1,212 965
Other assets 1,675 1,836
-------- ------
Total assets $124,433 96,303
======== ======
Liabilities and Shareholders' Equity
------------------------------------
Liabilities:
Deposits:
Noninterest bearing demand $ 14,855 16,215
Interest bearing:
Demand 20,941 10,636
Money market 6,034 7,196
Savings 16,056 6,427
Time 54,074 46,209
-------- ------
Total deposits 111,960 86,683
Federal funds purchased --- 900
Other borrowed funds 2,000 ---
Other liabilities 1,975 1,329
-------- ------
Total liabilities 115,935 88,912
-------- ------
Shareholders' equity:
Common stock, $.01 par value, authorized 10,000,000 shares; issued
and outstanding 672,352 and 610,434, respectively 7 6
Additional paid-in capital 7,027 6,165
Retained earnings 1,710 1,992
Unrealized losses on investment securities available for sale, net (246) (772)
-------- ------
Total shareholders' equity 8,498 7,391
-------- ------
Total liabilities and shareholders' equity $124,433 96,303
======== ======
</TABLE>
See accompanying notes to condensed consolidated financial statements
1
<PAGE>
PORT ST. LUCIE NATIONAL BANK HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in Thousands, except per share data)
---------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Interest income:
Loans, including fees:
Taxable loans $4,294 2,476 1,632 971
Tax-exempt loans 36 30 12 11
Loans held for sale 136 178 79 42
Investment securities:
Taxable investment securities 334 219 102 109
Tax-exempt investment securities 122 109 41 41
Investment securities available for sale 946 1,055 300 326
Federal funds sold 87 28 4 10
------ ----- ----- -----
Total interest income 5,955 4,095 2,170 1,510
Interest expense:
Deposits 3,041 1,438 1,101 524
Other 47 44 44 21
------ ----- ----- -----
Total interest expense 3,088 1,482 1,145 545
------ ----- ----- -----
Net interest income 2,867 2,613 1,025 965
Provision for loan losses 164 122 68 54
------ ----- ----- -----
Net interest income after provision for loan losses 2,703 2,491 957 911
------ ----- ----- -----
Noninterest income:
Service charge on deposit accounts 428 314 176 105
Gain on sale of loans held for sale 84 47 55 1
(Loss) gain on sale of other real estate owned (13) 6 (14) 3
(Loss) gain on sale of investment securities available for sale (24) 12 (24) (3)
Other fees for customer services 239 206 101 66
------ ----- ----- -----
Total noninterest income 714 585 294 172
------ ----- ----- -----
Noninterest expense:
Compensation and employee benefits 1,235 884 435 313
Occupancy 221 157 88 53
Furniture and equipment 154 83 62 33
Other 971 848 309 291
------ ----- ----- -----
Total noninterest expense 2,581 1,972 894 690
------ ----- ----- -----
Net income before income taxes 836 1,104 357 393
Income tax expense 263 383 117 135
------ ----- ----- -----
Net income $ 573 721 240 258
====== ===== ===== =====
Net income per common share $ 0.85 1.07 0.36 0.38
====== ===== ===== =====
Average common shares outstanding 672 672 672 672
====== ===== ===== =====
</TABLE>
See accompanying notes to condensed consolidated financial statements
2
<PAGE>
PORT ST. LUCIE NATIONAL BANK HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Amounts in Thousands)
----------------------
<TABLE>
<CAPTION>
Unrealized
gains (losses)
on Investment
Common Stock Additional Securities Total
----------------- Paid-in Retained Available Shareholders'
Shares Amount Capital Earnings for Sale Equity
------ ------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 610 $ 6 6,165 1,992 (772) 7,391
Unrealized gains on investment
securities available for sale, net of tax
effect --- --- --- --- 526 526
Options and warrants exercised 1 --- 8 --- --- 8
10% Common Stock Dividend 61 1 854 (855) --- ---
Net income --- --- --- 573 --- 573
--- ------ ----- ----- ---- -----
BALANCE AT SEPTEMBER 30, 1995 672 $ 7 7,027 1,710 -246 8,498
=== ====== ===== ===== ==== =====
Balance at December 31, 1993 607 $ 6 6,125 1,175 110 7,416
Unrealized losses on investment
securities available for sale, net of tax effect --- --- --- --- (674) (674)
Options and warrants exercised 3 --- 40 --- --- 40
Dividends paid --- --- --- (183) --- (183)
Net income --- --- --- 721 --- 721
--- ------ ----- ----- ---- -----
BALANCE AT SEPTEMBER 30, 1994 610 $ 6 6,165 1,713 (564) 7,320
=== ====== ===== ===== ==== =====
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
<PAGE>
PORT ST. LUCIE NATIONAL BANK HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
----------------------
<TABLE>
<CAPTION>
Nine Months Ended
September 30, September 30,
1995 1994
------------ -------------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 573 721
Adjustments to reconcile net income to net cash used by operating activities:
Provision for loan losses 164 122
Depreciation 146 96
Amortization of organization costs --- 6
Deferred loan origination fees and costs, net of amortization (82) 165
Loss on sale of other real estate owned 13 ---
Loss on sale of investment securities available for sale 24 ---
Purchase of loans held for sale (27,287) (46,052)
Origination of loans held for sale (7,804) (1,959)
Proceeds from the sale of loans held for sale 31,700 51,616
Increase in other assets (168) (398)
Increase in other liabilities 646 442
-------- -------
Net cash provided (used) by operating activities (2,075) 4,759
-------- -------
Cash flow from investing activities:
Purchase of investment securities held to maturity --- (4,771)
Proceeds from maturities of investment securities held to maturity 945 ---
Purchase of investment securities available for sale (5,918) (4,523)
Proceeds from maturities of investment securities available for sale 3,095 3,959
Proceeds from sale of investment securities available for sale 4,430 6,973
Loans originated, net of repayments (19,272) (14,293)
Purchase of premises and equipment (393) (74)
Proceeds from sale of other real estate owned 88 65
-------- -------
Net cash used by investing activities (17,025) (12,664)
-------- -------
Cash flow from financing activities:
Net increase in deposit accounts 25,277 (370)
Increase (decrease) in federal funds purchased (900) 3,225
Increase (decrease) in other borrowed funds 2,000 4,500
Issuance of common stock 8 40
Cash Dividends paid --- (183)
-------- -------
Net cash provided by financing activities 26,385 7,212
-------- -------
Net increase (decrease) in cash and cash equivalents 7,285 (693)
Cash and cash equivalents at beginning of period 2,742 3,126
-------- -------
Cash and cash equivalents at end of period $ 10,027 2,433
======== =======
Supplemental disclosures:
Cash paid during the period for:
Interest $ 2,985 1,416
Income taxes 151 433
Noncash investment and financing activities:
Loans to facilitate the sale of other real estate owned 123 66
Decrease (increase) in unrealized loss on investments securities available for sale 843 (389)
Reclassification of loans to other real estate owned --- 90
Assumption of liabilities in connection with acquisition of other real estate owned --- 102
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
PORT ST. LUCIE NATIONAL BANK HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
----------------------
(1) GENERAL
-------
The unaudited condensed consolidated interim financial statements for Port St.
Lucie National Bank Holding Corp. ("the Company") reflect all adjustments
(consisting only of normal recurring accruals) which, in the opinion of
management, are necessary to present fairly the results of operations, cash
flows and financial position for interim periods. The results for interim
periods are not necessarily indicative of trends or results to be expected for
the full year. These condensed consolidated interim financial statements and
notes should be read in conjunction with the Company's annual report and Form
10-KSB for the year ended December 31, 1994.
(2) INVESTMENT SECURITIES HELD TO MATURITY
--------------------------------------
The amortized cost, gross unrealized gains, gross unrealized losses, and
estimated market values of investment securities held to maturity follows:
<TABLE>
<CAPTION>
September 30, 1995
---------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 3,814 4 38 3,780
Securities of other U.S.
Government Agencies 2,000 18 --- 2,018
Municipal securities 3,351 40 15 3,376
------- --- --- ------
Total debt securities 9,165 62 53 9,174
Federal Home Loan Bank stock 399 --- --- 399
Federal Reserve stock 150 --- --- 150
------- ---- --- ------
Total $ 9,714 62 53 9,723
======= ==== === ======
December 31, 1994
---------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ---------- ---------
U.S. Treasury securities $ 3,834 --- 217 3,617
Securities of other U.S.
Government Agencies 3,000 --- 95 2,905
Municipal securities 3,362 --- 171 3,191
------- --- --- ------
Total debt securities 10,196 --- 483 9,713
Federal Home Loan Bank stock 313 --- --- 313
Federal Reserve stock 150 --- --- 150
------- --- --- ------
Total $10,659 --- 483 10,176
======= === === ======
</TABLE>
The amortized cost and estimated market value of investment securities held to
maturity at September 30, 1995, by contractual maturity, are shown on the
following page. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
5
<PAGE>
PORT ST. LUCIE NATIONAL BANK HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
----------------------
<TABLE>
<CAPTION>
Estimated
Amortized Market
Cost Value
--------- ---------
<S> <C> <C>
Due after one year through
five years $5,291 5,268
Due after five years through
ten years 3,634 3,659
Due after ten years 240 247
------ -----
Total debt securities $9,165 9,174
====== =====
</TABLE>
At September 30, 1995 and December 31, 1994, investment securities held to
maturity with an amortized cost of $6,781 and $3,957, respectively, and a market
value of $6,891 and $3,721, respectively, were pledged as collateral for
municipal deposits. Port St. Lucie National Bank's (the Bank) pledging
requirement on average municipal deposits up to the Bank's capital position
($7,888 as of September 30, 1995) was 50%. On the aggregate balance in excess of
the Bank's capital position, the State's pledge requirement is 125%.
(3) INVESTMENT SECURITIES AVAILABLE FOR SALE
----------------------------------------
The amortized cost, gross unrealized gains, gross unrealized losses, and
estimated market values of investment securities available for sale follows:
<TABLE>
<CAPTION>
September 30, 1995
---------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Securities of other U.S.
Government Agencies $ 5,949 2 90 5,861
FHLMC/FNMA Mortgage
backed securities 11,001 18 324 10,695
------- -- ----- ------
Total $16,950 20 414 16,556
======= == ===== ======
December 31, 1994
---------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ---------- ---------
Securities of other U.S.
Government Agencies $ 8,178 2 518 7,662
FHLMC/FNMA Mortgage
backed securities 10,403 -- 721 9,682
------- -- ----- ------
Total $18,581 2 1,239 17,344
======= == ===== ======
</TABLE>
The amortized cost and estimated market value of investment securities available
for sale at September 30, 1995, by contractual maturity, are shown on the
following page. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
6
<PAGE>
PORT ST. LUCIE NATIONAL BANK HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
----------------------
<TABLE>
<CAPTION>
Estimated
Amortized Market
Cost Value
--------- ---------
<S> <C> <C>
Due after one year through
five years $ 5,949 5,861
------- ------
Mortgage backed securities 11,001 10,695
------- ------
$16,950 16,556
======= ======
</TABLE>
During the nine months ended September 30, 1995, there were $4,454 in sales of
investment securities available for sale. During this same period, $24 in
losses were realized from the sale of investment securities available for sale.
At September 30, 1995 and December 31, 1994, investment securities available for
sale with an amortized cost of $7,870 and $4,494, respectively, and a market
value of $7,781 and $4,216, respectively, were pledged as collateral for
municipal deposits. The Bank's pledging requirement on average municipal
deposits up to the Bank's capital position ($7,888 as of September 30, 1995) was
50%. On the aggregate balance in excess of the Bank's capital position, the
State's pledge requirement is 125%.
(4) LOANS
-----
An analysis of loans follows:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Real Estate:
Construction $ 3,509 4,771
Loans on primary residences 45,701 33,645
Other 12,143 9,730
Commercial 8,336 6,634
Loans to individuals:
Installment 11,013 6,424
Other personal and business loans 607 710
Tax exempt loans 800 800
------- ------
Total $82,109 62,714
======= ======
</TABLE>
At September 30, 1995, real estate-construction loans were comprised of $2,258
in single family residential loans and $1,251 in commercial real estate loans.
As of December 31, 1994, real estate-construction loans were comprised of $3,580
in single family residential loans and $1,191 in commercial real estate loans.
At September 30, 1995 and December 31, 1994, loans to directors, executive
officers, and principal shareholders aggregated $2,334 and $1,691, respectively.
Total unfunded commitments to this group at September 30, 1995 and December 31,
1994 aggregated $989 and $887, respectively.
(5) OTHER REAL ESTATE OWNED
-----------------------
Other real estate owned represents property acquired through foreclosure or
deeded to the Bank in lieu of foreclosure on real estate mortgage loans on which
the borrowers have defaulted as to payment of principal and interest. Other
real estate owned is valued at the lower of cost or fair value less costs to
dispose. Any write-downs at date of acquisition are charged to the allowance
for loan losses. Expenses incurred in
7
<PAGE>
PORT ST. LUCIE NATIONAL BANK HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
----------------------
maintaining assets and subsequent write-downs to reflect declines in the fair
value of the property are included in other operating expenses.
Changes in Other Real Estate Owned
- ----------------------------------
<TABLE>
<CAPTION>
Nine months
ended Year ended
September 30, December 31,
1995 1994
-------------- -------------
<S> <C> <C>
Beginning balance $ 217 90
Sales (213) (65)
Insubstance foreclosures --- 192
Other (4) ---
--- ---
Ending balance $ --- 217
===== ====
</TABLE>
Distribution of Other Real Estate Owned by Type
- -----------------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Residential home $ --- 192
Undeveloped residential lots --- 25
----- ----
$ --- 217
===== ====
</TABLE>
8
<PAGE>
PORT ST. LUCIE NATIONAL BANK HOLDING CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
(DOLLARS IN THOUSANDS)
----------------------
OVERVIEW
Port St. Lucie National Bank Holding Company's (the "Company") total assets at
September 30, 1995 were $124,433, an increase of $28,130 or 29.2% over December
31, 1994. Net income for the nine months ended September 30, 1995 was $573 as
compared to $721 for the nine months ended September 30, 1994. Earnings for the
nine months ended September 30, 1995 represent $0.85 per share as compared to
$1.07 for the nine months ended September 30, 1994. Net income for the three
months ended September 30, 1995 was $240 as compared to $258 for the three
months ended September 30, 1994. Earnings for the three months ended September
30, 1995 represent $0.36 per share as compared to $0.38 for the three months
ended September 30, 1994. On March 1, 1995, the Company declared and issued a
10% stock dividend. The stock dividend increased the outstanding shares from 610
to 672. The earnings per share for both comparison periods shown above have
been restated to reflect the stock dividend.
On March 17, 1995, Port St. Lucie National Bank (the "Bank") opened its second
branch office, a 4,300 square foot facility located in the rapidly growing St.
Lucie West development in Port St. Lucie, Florida. The Bank also expanded its
administrative offices, taking an additional 1,200 square feet in the same
facility. This expansion had a direct impact on the Company's personnel,
occupancy, premises and equipment and marketing expenses in 1995.
In February 1995, the Company's newly organized and approved mortgage banking
company, Spirit Mortgage Corp., began doing business primarily outside of the
market in which the Bank operates. This operation also impacted the Company's
personnel, premises and equipment expenses in 1995. Income from loans
originated for sale by Spirit Mortgage Corp. began in the second quarter of
1995, and is responsible for the majority of gain on loans held for sale
reported in 1995. Future income levels will be dependant on interest rate
environment and consumer demand.
EARNINGS ANALYSIS
NET INTEREST INCOME
For the nine months ended September 30, 1995, interest income totaled $5,955, an
increase of $1,860 or 45.4% over the nine months ended September 30, 1994. For
the three months ended September 30, 1995, interest income totaled $2,170, an
increase of $660 or 43.7% over the three months ended September 30, 1994. Loan
growth of 53.9% from September 30, 1994 to September 30, 1995 and a 300 basis
point increase in prime rate from February 1994 to January 1995 were primary
factors in the increase during comparison periods. Interest expense for the
nine months and three months ended September 30, 1995 was $3,088, an increase of
$1,606 or 108.4%, and $1,145, ad increase of $600 or 110.1%, respectively. Time
deposit growth of 53.2% during the twelve months ended September 30, 1995
coupled with existing time deposits repricing as much as 300 basis points higher
were the primary contributors to the increase in interest expense.
Net interest income for the nine months ended September 30, 1995 was $2,867, an
increase of $254 or 9.7% over the nine months ended September 30, 1994. Net
interest income for the three months ended September 30, 1995 was $1,025, an
increase of $60 or 6.2% over the three months ended September 30, 1994. The
modest growth in net interest income in spite of strong loan and deposit growth
can be primarily attributed to product mix. The loan category with the greatest
growth during the twelve months ended September 30, 1995 was lower risk and
yielding adjustable rate residential real estate loans with higher cost time
deposits providing the majority of the deposit growth.
The net interest yield for the nine months ended September 30, 1995 was 3.68%, a
decrease of 66 basis points over the nine months ended September 30, 1994. For
the three months ended September 30, 1995, the net interest yield was 3.69%, a
decrease of 89 basis points over the three months ended September 30,
9
<PAGE>
PORT ST. LUCIE NATIONAL BANK HOLDING CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
(DOLLARS IN THOUSANDS)
----------------------
1994. As discussed above, time deposits repricing more rapidly and at higher
incremental rates than repricing earning assets decreased the net interest yield
during the comparison periods. The Company is addressing the decline in net
interest yield by emphasising higher yielding loans and lower cost deposits. In
addition, lower yielding investment securities available for sale and held for
sale real estate loans are being sold allowing higher cost deposits to run off
without the need for replacement.
NONINTEREST INCOME
Noninterest income was $714 for the nine months ended September 30, 1995. This
represents a $129 or 22.1% increase over the nine months ended September 30,
1994. For the three months ended September 30, 1995, noninterest income was
$294, a increase of $122 or 70.9% as compared to the three months ended
September 30, 1994. The primary source of noninterest income in both comparison
periods is service charges on deposit accounts. Service charges on deposit
accounts totaled $428 for the nine months ended September 30, 1995, an increase
of $114 or 36.3% over the nine months ended September 30, 1994. For the three
months ended September 30, 1995, service charges on deposit accounts were $176,
an increase of $71 or 67.6% over the three months ended September 30, 1994. The
increase in service charges is primarily attributable to growth in transaction
accounts and increases in selected service charge amounts which became effective
on August 1, 1995.
During the nine months ended September 30, 1995, $7,138 of loans held for sale
were sold resulting in gains of $84. During the three months ended September
30, 1995, $4,443 of loans held for sale were sold resulting in gains of $55.
During the same comparison periods in 1994, the loans held for sale that were
sold totaled $2,210 which resulted in gains of $47. The increase in loans sold
is the result of new activity generated by Spirit Mortgage Corp. and by lower
fixed mortgage rates in the second and third quarters. Spirit Mortgage Corp.
originated $5,130 of the loans sold resulting in gains of $73, all in the second
and third quarters. These fixed rate residential loans were sold to various
correspondents servicing released and without recourse. The remaining $2,008 of
loans sold were originated by the Bank and were sold without recourse to the
Federal National Mortgage Association. The Company intends to emphasize this
type of business the remainder of the year; however, future volume will depend
on the direction and stability of interest rates during the remainder of the
year.
Sales of investment securities available for sale totaled $4,454 for the nine
months ended September 30, 1995. $24 in losses on sale of investment securities
available for sale were realized, as compared with the $6,973 in sales of
investment securities available for sale resulting in $12 in gains during the
same period in 1994.
Other fees for customer services was $239 for the nine months ended September
30, 1995 as compared to $206 for the nine months ended September 30, 1994. For
the three months ended September 30, 1995, other fees for customer services was
$101, as compared to $66 for the three months ended September 30, 1994. The $33
increase in the nine month comparison period is primarily attributable to the
improvement in the third quarter in service fees associated with the purchase of
Federal Housing Administration (FHA) guaranteed real estate loans which are sold
servicing released without recourse under commitment to specific secondary
market lenders. This increase in fees is the direct result of increased demand
for the fixed rate FHA guaranteed real estate loans in the third quarter, as
compared to the other comparison periods. In addition, other loan fees
associated with installment loans have increased, reflected in the 71% increase
in loan growth since December 31, 1994.
NONINTEREST EXPENSE
Noninterest expense for the nine months ended September 30, 1995 was $2,581, an
increase of $609 or 30.9% over the nine months ended September 30, 1994. For
the three months ended September 30, 1994 noninterest expense was $894, an
increase of $204 or 29.6% over the three months September 30, 1994. This
increase is attributable to increased personnel expenses, occupancy, furniture
and equipment expenses
10
<PAGE>
PORT ST. LUCIE NATIONAL BANK HOLDING CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
(DOLLARS IN THOUSANDS)
----------------------
and other noninterest expenses. The increase in personnel expense is associated
with additional staffing at the Bank for the new branch office and with staffing
of the newly organized Spirit Mortgage Corp. The increases in occupancy,
furniture and equipment expense is also associated with the new branch office
opening and the expanded administrative offices. Increases in other noninterest
expenses is primarily comprised of increased marketing expenses associated with
the opening of the new office. In the third quarter, the FDIC announced that
"well capitalized" banks would have their FDIC insurance premiums reduced from
23 basis points to 4 basis points beginning in the fourth quarter of 1995. In
addition, a rebate of the 19 basis point difference for the months of June
through September 1995 plus interest was paid by the FDIC in mid-September.
This rebate totaled $59 for the Company and is reflected in the third quarter
1995 noninterest expense.
INCOME TAXES
The net income of $573 before income taxes for the nine months ended September
30, 1995, reflects a decrease of $148 over the nine months ended September 30,
1994. The resulting income tax expense of $263 for the nine month period is a
decrease of $120 over the nine months ended September 30, 1994. For the three
months ended September 30, 1995, net income before income taxes was $357, a
decrease of $36 over the three months ended September 30, 1994. Income tax
expense decreased primarily as a result of the decrease in income before income
taxes and due to proportionally greater tax exempt income and state income tax
deductions.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Liquidity and interest rate sensitivity positions are regularly examined and
evaluated by management in conjunction with market interest rates, balance sheet
composition and funding source requirements. While a balanced interest rate
sensitivity position has been and continues to be maintained, a shift in balance
sheet composition has had the impact of slowing net interest income growth in
1995. Management will continue its efforts to maintain a balanced interest rate
sensitivity position and will monitor loan demand and time deposit growth in
order to influence the changes in balance sheet composition necessary to
maximize net income growth under prevailing conditions.
For financial institutions, liquidity represents the ability of the institution
to meet both loans and other commitments as well as depositor withdrawals.
Although deposit growth has exceeded loan growth by almost $6,000 to date in
1995, the current trend is the reverse. Should loan demand continue to exceed
deposit growth, the Company will look to the sale of loans, the sale of
investment securities or the use of specific borrowings as deemed prudent to
support high quality, higher yielding loan growth.
At September 30, 1995, the Company had potential funding needs of $10,812 in
outstanding loan commitments and $294 in standby letters of credit. In
addition, volatile deposits consisted of $11,979 in time deposits of $100 or
more and $7,988 in municipal deposits. Since these municipal deposits are not
subject to maturity, the duration of these balance levels is not precisely
known. The municipal deposits also require the pledge of qualified investment
securities to the State of Florida in accordance with the Florida Security for
Public Deposit Act. Based on the prior month's daily average balance of
municipal deposits, a 50% pledge level is required up to the Bank's capital
position and a 125% pledge level is required on balances in excess of the Bank's
capital position.
To provide funds for these potential liquidity needs, the Company maintained
cash equivalents at September 30, 1995, consisting of loans held for sale of
$4,090, federal funds sold of $7,290, investment securities available for sale
of $16,556, unfunded federal funds purchase commitments aggregating $4,000, and
$19,000 in available funding from the Federal Home Loan Bank of Atlanta of which
$2,000 was funded at quarter end. In the opinion of management, the Company
maintains liquidity levels adequate to meet its potential funding demands.
11
<PAGE>
PORT ST. LUCIE NATIONAL BANK HOLDING CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
(DOLLARS IN THOUSANDS)
----------------------
Just prior to September 30, 1995, the Company received a temporary municipal
deposit of approximately $6,000. The deposit was withdrawn a few days after
third quarter end. The deposit temporarily boosted assets and deposits,
increasing federal funds sold and interest bearing demand deposits.
In late October of this year, the Company sold approximaely $10,600 in
adjustable rate residential real estate loans. The sale was implemented to
improve liquidity. The resulting funds provided by the sale will be used to
repay a short term borrowing, to allow run off of some higher cost deposits and
to fund higher yielding loan growth.
EARNING ASSETS AND FUNDING SOURCES
At September 30, 1995, earning asset categories totaled $118,809 and comprised
95.5% of total assets. Loans held for sale of $4,090 or 3.4%, federal funds sold
of $7,290 or 6.1%, investment securities held to maturity of $9,714 or 8.2%,
investment securities available for sale of $16,556 or 14.0% and net loans of
$81,159 or 68.3% make up all earning assets. Deposits, the primary source of
funds, totaled $111,960 at September 30, 1995, of which $14,855 or 13.3% was in
noninterest bearing demand deposits and $97,105 or 86.7% of total deposits was
in interest bearing deposits. Overall loans and deposits probably will not grow
in the fourth quarter due to the previously mentioned loan sale.
LOANS
Total loans at September 30, 1995, were $82,109, an increase of $19,395 or 30.9%
over December 31, 1994. From December 31, 1994 to September 30, 1995,
outstanding balances on commercial loans increased $1,702 or 25.7%, other real
estate lending aggregated a $2,413 or 24.8% increase, installment loans
increased $4,589 or 71.4% and loans on primary residences increased $12,056 or
35.8%. During the nine month period, other personal and business loans
decreased $103 or 14.5% and real estate construction loans decreased by $1,262
or 26.5%. The growth in the loan portfolio during the nine month period was
primarily in real estate loans. The significant increase in the installment
loan category reflects the Company's emphasis on attracting high quality, higher
rate loans in the second and third quarters. In addition, the Company was also
successful in increasing commercial loans.
The Company does not engage in any speculative real estate lending or real
estate development lending. The real estate loans are predominately made on
owner occupied properties with established cash flows.
INVESTMENT SECURITIES
At September 30, 1995, total investment securities held to maturity were $9,714,
a decrease of $945 or 8.9% over December 31, 1994. The change is attributable
to a decrease in U.S. Government Agency securities of $1,000 and an increase in
Federal Home Loan Bank Stock of $86. The remaining $31 decrease is associated
with the premium amortization of the existing portfolio.
The investment securities held to maturity had gross unrealized gains of $62 as
of September 30, 1995. There were no gross unrealized gains as of December 31,
1994. The gross unrealized losses in the investment portfolio held to maturity
as of September 30, 1995 were $53 and as of December 31, 1994 were $483.
At September 30, 1995, investment securities available for sale were $16,556, a
decrease of $788 or 4.5% over December 31, 1994. The components of the change
were a decrease in U.S. Government Agency securities of $2,229 or 27.3% and an
increase in mortgage backed securities of $598 or 5.7%. These changes in the
investment securities portfolio and the reduction of $825 in net unrealized
losses ($526 net of tax effect) aggregates the $788 decrease in total investment
securities available for sale. The decrease in the available for sale
securities portfolio is primarily due to increased loan demand and the sale of
securities to assist the funding of loan production.
12
<PAGE>
PORT ST. LUCIE NATIONAL BANK HOLDING CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
(DOLLARS IN THOUSANDS)
----------------------
The adoption of FAS 115 has had a significant impact on shareholders' equity due
to the recognition of unrealized losses. These losses were the result of
rapidly rising interest rates in 1994. The nine months ended September 30, 1995
began to reverse this trend. This reversal in interest rates helped reduce the
net unrealized losses in the available for sale securities portfolio. At
December 31, 1994, the available for sale portfolio included $1,237 of net
unrealized losses which resulted in an after tax adjustment decreasing
shareholders' equity by $772 as compared to the $394 of net unrealized losses at
September 30, 1995 which resulted in an after tax adjustment decreasing
shareholders' equity by $246.
FUNDING SOURCES
Deposits at September 30, 1995 were $111,960, an increase of $25,277 or 29.2%
from December 31, 1994. The components of this change were a $10,305 or 96.9%
increase in interest bearing demand deposits, $9,629 or 149.8% increase in
savings deposits, $7,865 or 17.0% increase in time deposits, a $1,162 or 16.1%
decrease in money market deposits and a $1,360 or 8.4% decrease in noninterest
bearing demand deposits. Deposit growth during the nine months ended September
30, 1995 can be attributed to several factors: higher interest rates made time
deposits a more attractive alternative for investors, the opening of the Bank's
new office and a significant temporary municipal deposit of $6,131 made at
quarter end, along with a temporary municipal deposit relationship of $6,000 as
of September 30, 1995. Along with attracting higher interest rate loans during
the second and third quarters of 1995, the Company has also placed emphasis on
attracting lower cost funds by developing several deposit products as
alternatives to time deposits. The increase in the savings deposits category
reflects some of these changes. Time deposit growth is expected to level off in
the third and fourth quarters, if not decline, based on the anticipated
maturities of several greater than $100 time deposits.
The Company also continues to utilize federal fund purchase lines and advances
through the Federal Home Loan Bank ("FHLB") to accommodate temporary timing
differences between earning asset growth and deposit growth. At September 30,
1995, there were no outstanding balances under federal funds purchase lines,
however a $2,000 FHLB advances was outstanding.
ASSET QUALITY
The allowance for loan losses as of September 30, 1995 was $845 or 1.03% of
loans outstanding as compared to $667 or 1.25% at September 30, 1994. This is a
net increase of $178 or 26.7% over September 30, 1994. The increase in the
allowance for loan losses was primarily due to growth in the loan portfolio of
53.9% over the twelve months ended September 30, 1994. The decline in the
allowance compared to loans outstanding from 1.25% to 1.03% is due to growth
concentrated in lower risk loans on residential real estate and due to the
maintenance of the overall portfolio quality at a level that does not require
additional allowance. The allowance for loan losses to total loans outstanding
is expected to increase in the fourth quarter due to the previously discussed
loan sale in October.
A reconciliation of the allowance for loan losses follows:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Beginning Balance $ 699 618 782 672
Provision charged to expense 163 122 68 54
Loans charged-off (23) (76) (9) (59)
Recoveries 6 3 4 ---
----- ---- ---- ----
Ending Balance $ 845 667 845 667
===== ==== ==== ====
Allowance for loan losses as
a percent of ending loans 1.03% 1.25 1.03 1.25
</TABLE>
13
<PAGE>
PORT ST. LUCIE NATIONAL BANK HOLDING CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
(DOLLARS IN THOUSANDS)
----------------------
NONPERFORMING LOANS
Loans are placed on a nonaccrual status when they become 90 days past due unless
determined to be both adequately collateralized and actively in the process of
collection or when they are classified as doubtful. When full collection of
principal becomes doubtful, the uncollectible portion of the loan is charged-
off.
As of September 30, 1995, the Company had no loans past due 90 days or more and
on accrual, 13 loans in the amount of $415 on nonaccrual and no other real
estate owned. As of December 31, 1994, the Company had one loan totaling $170
past due 90 days or more and on accrual, four loans on nonaccrual in the amount
of $76 and $217 in other real estate owned.
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
-------------- ------------
<S> <C> <C>
Loans past due 90 days or more $ --- 170
Nonaccrual loans 415 76
Other real estate owned --- 217
Nonperforming assets as a
percent of ending loans
and other real estate owned 0.5% 0.7
</TABLE>
In the second quarter of 1995, a residential lot carried at $25 in other real
estate owned was sold resulting in a gain of $1. In the third quarter a single
family residence carried at $192 was sold resulting in a $14 loss. There was no
other real estate owned at September 30, 1995.
Interest would have been recorded for all nonperforming loans in the amount of
$23 and $7 during the nine months ended September 30, 1995 and 1994,
respectively, if these loans had been current in accordance with their original
terms.
The Company adopted SFAS No. 114 as amended, "Accounting by Creditors for
Impairment of a Loan," effective January 1, 1995, prospectively, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosures" ("FAS
114"). There was no impact to the consolidated statement of financial condition
or the consolidated statement of operations upon implementation. FAS 114 does
not apply to large groups of smaller balance homogeneous loans that are
collectively evaluated for impairment. For the Company, loans collectively
reviewed for impairment include all residential and consumer loans. The
Company's impaired loans within the scope of FAS 114 include nonaccrual
Commercial Loans restructured, and performing Commercial Loans less than 90 days
delinquent which management believes will be collected in full, but it is
probable they will not be collected in accordance with the contractual terms of
the loans.
OTHER POTENTIAL PROBLEM LOANS
Other potential problem loans exclude nonperforming loans and represent those
loans where information about possible credit problems of borrowers has caused
management to have serious doubts about the borrowers' ability to comply with
present repayment terms. The Company follows a loan review program to evaluate
the credit risk in its loan portfolio. Through the loan review process, the
Company maintains a classified account list which, along with the delinquency
list of loans, helps management assess the overall quality of the loan portfolio
and the adequacy of the allowance for loan losses. Loans classified as
"substandard" are those loans with clear and defined weaknesses, such as highly
leveraged positions, unfavorable financial ratios, uncertain repayment sources
or poor financial condition, that may jeopardize recoverability of the debt.
Loans classified as "doubtful" are those loans which have characteristics
similar to substandard accounts but with an increased risk that a loss may
occur, or at least a portion of the loan may require a charge-off if liquidated
at present. At September 30, 1995, potential problem loans classified as
substandard were $782 compared to $1,122 at year end 1994. No loans were
classified as doubtful at
14
<PAGE>
PORT ST. LUCIE NATIONAL BANK HOLDING CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
(DOLLARS IN THOUSANDS)
----------------------
September 30, 1995 as compared to $37 at year end 1994. Classified loans in
aggregate decreased by $377 at September 30, 1995 from year end 1994. The
decrease in those loans classified as doubtful and substandard is primarily due
to repayment and migration from the substandard category as some loans
deteriorated and others improved in financial strength.
Management is unaware of any loans other than those noted above which are
classified for regulatory purposes that represent or result from trends or
uncertainties that will materially impact future operating results, liquidity,
or capital resources.
CAPITAL RESOURCES (SHARE INFORMATION NOT IN THOUSANDS)
Total shareholders' equity at September 30, 1995 was $8,498, an increase of
$1,107 or 15.0% from December 31, 1994. Net income for the nine months ended
September 30, 1995 of $573 and the reduction of $526 in after tax unrealized
losses on the available for sale investment securities portfolio in accordance
with FAS No. 115 make up the primary increase in shareholders' equity. During
the nine months ended September 30, 1995, 275 warrants and 660 options were
exercised. The warrants and options contributed an additional $8 to
shareholders' equity. Also, the Company did declare and issue a stock dividend
of 10% on March 1, 1995. The stock dividend increased total outstanding shares
by 60,983 for a total of 672,352.
Since December 31, 1993, regulatory capital guidelines require bank holding
companies to have a minimum total risk-based capital ratio of 8.00% and a
minimum leverage ratio of 3.00% for the highest rated bank holding companies
with an additional 1% or 2% required depending on their regulatory ratings and
expansion plans.
The following table discloses the regulatory capital for the Company as of
September 30, 1995 and December 31, 1994:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
-------------- ------------
<S> <C> <C>
CAPITAL:
Tier 1 capital $ 8,744 8,163
Tier 2 capital 845 676
-------- ------
Total capital $ 9,589 8,839
======== ======
Total adjusted assets $124,433 96,303
======== ======
Risk-weighted assets $ 72,708 54,149
======== ======
RATIOS:
Leverage ratio 7.03% 8.48
======== ======
Tier 1 capital to risk-weighted
assets 12.03% 15.08
Tier 2 capital to risk-weighted
assets 1.16% 1.25
-------- ------
Total capital to risk-weighted
assets 13.19% 16.33
======== ======
</TABLE>
The Company does not anticipate any difficulty in meeting these minimum capital
requirements in the foreseeable future.
On December 19, 1991, the Federal Deposit Insurance Corporation Improvement Act
of 1991 (FDICIA) became law as it relates to the Bank. While the FDICIA
primarily addresses additional sources of funding for the Savings Association
Insurance Fund (SAIF) and Bank Insurance Fund (BIF), it also imposed a number of
mandatory and discretionary supervisory measures on financial institutions.
15
<PAGE>
PORT ST. LUCIE NATIONAL BANK HOLDING CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
(DOLLARS IN THOUSANDS)
----------------------
The FDICIA requires financial institutions to take certain actions relating
to their internal operations and also imposes certain operational and managerial
standards on financial institutions relating to internal controls, loan
documentation, credit underwriting, interest rate exposure, asset growth and
compensation, fees and benefits.
Furthermore, the FDICIA established five capital categories and specified
supervisory actions in regard to undercapitalized institutions. The regulation,
which became effective December 19, 1992, ties the capital categories to three
capital measures: Total risk-based, Tier 1 risk-based and leverage capital. The
definitions of Tier 1 and total capital under the FDICIA are similar to the
definitions under the previously existing capital guidelines, except for the
ratio of tangible equity to total assets used to define critically
undercapitalized banks. The ratios for each category are as follows:
<TABLE>
<CAPTION>
Total Tier 1
Risk-based Risk-based Leverage
Ratio Ratio Ratio
-------------------------- ------------------------- ---------------------------
<S> <C> <C> <C>
Well capitalized (less than or equal) 10.00% (less than or equal) 6.00% (less than or equal) 5.00%
Adequately capitalized 8.00-9.99 4.00-5.99 4.00-4.99
Undercapitalized 6.00-7.99 3.00-3.99 3.00-3.99
Significantly undercapitalized (greater than) 6.00 (greater than) 3.00 2.01-2.99
Critically undercapitalized --- --- (greater than or equal) 2.00
</TABLE>
The following table discloses the regulatory capital for the Bank as of
September 30, 1995 and December 31, 1994:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
CAPITAL:
Tier 1 capital $ 8,134 7,495
Tier 2 capital 845 671
---------- ---------
Total capital $ 8,979 8,166
========== =========
Total adjusted assets $ 123,989 95,836
========== =========
Risk-weighted assets $ 72,264 53,681
========== =========
RATIOS:
Leverage ratio 6.56% 7.82%
========== =========
Tier 1 capital to risk-weighted
assets 11.26% 13.96%
Tier 2 capital to risk-weighted
assets 1.17% 1.25%
---------- ---------
Total capital to risk-weighted
assets 12.43% 15.21%
========== =========
</TABLE>
The Bank does not anticipate any difficulty in continuing to meet these minimum
capital requirements in the foreseeable future. Based on these regulations,
management believes the Bank is classified as "well capitalized."
16
<PAGE>
PORT ST. LUCIE NATIONAL BANK HOLDING CORP. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the third quarter
of 1995.
17
<PAGE>
PORT ST. LUCIE NATIONAL BANK HOLDING CORP. AND SUBSIDIARIES
S I G N A T U R E S
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PORT ST. LUCIE NATIONAL BANK HOLDING CORP.
------------------------------------------
Date: November 13, 1995 By: /s/ J. Hal Roberts, Jr.
----------------------- --------------------------------------
J. Hal Roberts, Jr.
President/Chief Executive Officer
Date: November 13, 1995 By: /s/ Randall A. Ezell
----------------------- --------------------------------------
Randall A. Ezell
Senior Vice President
Chief Financial Officer
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,737
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 7,290
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 16,556
<INVESTMENTS-CARRYING> 9,714
<INVESTMENTS-MARKET> 9,723
<LOANS> 82,109
<ALLOWANCE> 845
<TOTAL-ASSETS> 124,433
<DEPOSITS> 111,960
<SHORT-TERM> 2,000
<LIABILITIES-OTHER> 1,975
<LONG-TERM> 0
<COMMON> 7
0
0
<OTHER-SE> 8,491
<TOTAL-LIABILITIES-AND-EQUITY> 124,433
<INTEREST-LOAN> 4,466
<INTEREST-INVEST> 1,402
<INTEREST-OTHER> 87
<INTEREST-TOTAL> 5,955
<INTEREST-DEPOSIT> 3,041
<INTEREST-EXPENSE> 3,088
<INTEREST-INCOME-NET> 2,867
<LOAN-LOSSES> 164
<SECURITIES-GAINS> (24)
<EXPENSE-OTHER> 2,581
<INCOME-PRETAX> 836
<INCOME-PRE-EXTRAORDINARY> 836
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 573
<EPS-PRIMARY> .85
<EPS-DILUTED> .85
<YIELD-ACTUAL> 3.68
<LOANS-NON> 415
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 782
<ALLOWANCE-OPEN> 699
<CHARGE-OFFS> 23
<RECOVERIES> 6
<ALLOWANCE-CLOSE> 845
<ALLOWANCE-DOMESTIC> 845
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
