As filed with the Securities and Exchange Commission on May 8, 2000
Registration No. 333-________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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INDIAN RIVER BANKING COMPANY
(Name of small business issuer in its charter)
Florida 6021 59-2931518
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification Number)
organization) Code Number)
958 20th Place
Vero Beach, Florida 32960
(561) 569-9200
(Address and telephone number of principal executive offices)
William A. High, President and
Chief Executive Officer
Indian River Banking Company
Vero Beach, Florida 32960
(561) 569-9200
(Name, address, including zip code, and telephone number of agent for service)
Copies to:
Noel M. Gruber, Esquire
David H. Baris, Esquire
Kennedy, Baris & Lundy, L.L.P.
4701 Sangamore Road, Suite P-15
Bethesda, Maryland 20816
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / ____________
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ______________
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / / _______________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================== ================ ===================== ======================= ==========================
Title of Shares to Amount to be Proposed Maximum Proposed Maximum Amount of Registration
be Registered Registered Offering Price Per Aggregate Offering Fee(1)
Unit Price
- ---------------------- ---------------- --------------------- ----------------------- --------------------------
<S> <C> <C> <C> <C>
Common stock 300,000 shares $25.00 $7,500,000 $1,980
====================== ================ ===================== ======================= ==========================
</TABLE>
(1) Registration fee calculated in accordance with Rule 457(a).
<PAGE>
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Subject to Completion - Dated ___________, 2000
PROSPECTUS
200,000 SHARES OF COMMON STOCK
MINIMUM PURCHASE - 100 SHARES
[LOGO]
INDIAN RIVER BANKING COMPANY
Indian River Banking Company is the holding company for Indian River
National Bank, Vero Beach, Florida. Indian River Banking Company is often
referred to as "Indian River" in this prospectus, and Indian River National Bank
is often referred to as "Indian River Bank".
Indian River is offering to sell up to 200,000 newly issued shares of its
common stock at a price of $25.00 per share. Indian River may also sell up to an
additional 100,000 newly issued shares of common stock if the number of shares
subscribed for exceeds the number of shares offered. There is no minimum number
of shares which must be sold in the offering. The offering is being made through
the efforts of our directors and executive officers. Until your subscription is
accepted, all funds will be placed in an escrow account at Indian River Bank
under the control of an independent third party.
This offering will continue until , 2000, unless extended in the discretion
of the Board of Directors.
-----------------
SHARES OF INDIAN RIVER'S COMMON STOCK ARE NOT DEPOSITS, SAVINGS ACCOUNTS, OR
OTHER OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY. INVESTING IN
COMMON STOCK INVOLVES INVESTMENT RISKS.
-----------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE COMMON STOCK OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------
CONSIDER CAREFULLY THE "RISK FACTORS" BEGINNING ON PAGE OF THIS PROSPECTUS.
<TABLE>
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Per share Total
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<S> <C> <C>
Price to public $25.00 $5,000,000
Underwriting discounts and commissions None N/A
Net proceeds of the offering (before
expenses) $25.00 $5,000,000
</TABLE>
The date of this prospectus is ____, 2000
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the Securities and Exchange Commission declares
our registration statement effective. This prospectus is not an offer to sell
these securities and is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
<PAGE>
TABLE OF CONTENTS
PAGE
Summary......................................................................1
Risk Factors.................................................................3
Selected Consolidated Financial Data.........................................7
The Offering.................................................................8
Use of Proceeds.............................................................12
Capitalization..............................................................13
Regulatory Capital Requirements.............................................13
Market for Common Stock and Dividends.......................................14
Management's Discussion and Analysis........................................15
Business of Indian River and Indian River Bank..............................28
Share Ownership of Directors, Officers and Certain Beneficial Owners........37
Supervision and Regulation..................................................32
Management..................................................................39
Executive Compensation and Certain Transactions.............................42
Shares Eligible for Future Sale.............................................45
Description of Capital Stock................................................45
Legal Matters...............................................................48
Experts.....................................................................48
Additional Information About Indian River ..................................48
Index to Financial Statements...............................................49
<PAGE>
SUMMARY
This summary presents selected information from this prospectus. You should
carefully read this entire document in order to understand this offering. This
summary includes page references that direct you to more complete discussions
elsewhere in this document.
THE OFFERING
Indian River Banking Company is offering to sell up to 200,000 newly issued
shares of its common stock in this offering at a price of $25.00 per share. We
may also sell an additional 100,000 shares if the offering is oversubscribed.
After the offering, there will be 1,593,730 shares of common stock outstanding,
if all of the shares offered are sold (or 1,693,730 if all of the
oversubscription shares are sold). The net proceeds of the offering to Indian
River will be approximately $4,890,000 if all of the offered shares are sold (or
$7,390,000 if all of the oversubscription shares are sold), after deduction of
estimated expenses of the offering.
There is no minimum total number of shares which must be sold in the
offering. Directors and executive officers of Indian River and Indian River Bank
currently intend to purchase 40,000 shares in the offering. See "Risk Factors"
(page 3) and "The Offering - No Minimum Offering" (page 8) and "- Intentions of
Directors, Executive Officers and Others" (page 11).
The minimum number of shares which may be subscribed for by any person is
100 shares. The maximum number of shares to which any person or any group of
affiliated or related persons, may subscribe is 4,000 shares, although Indian
River reserves the right to permit larger or smaller subscriptions in the
exercise of its sole discretion. Indian River also reserves the right to reject
any subscription in whole or in part. If after the offering you would own or
control more than a certain percentage of the common stock (usually 5% or 10%),
you may be required to file applications with state or federal bank regulatory
agencies as a condition of the purchase. Indian River reserves the right to
reduce, or reject, in whole or in part, any subscription which would require
prior regulatory application or approval if such approval is not obtained prior
to the termination of the offering. See "The Offering - General" (page 8)
The offering will run until 2000, or such later date as the Board of
Directors may determine, but not later than 2000. Until a subscription is
accepted, subscription funds will be held in an escrow account at Indian River
Bank under the control of an independent escrow agent. If the offering is not
completed, or if your subscription is not accepted, your subscription funds will
be returned without interest or deduction, except that interest will be paid to
the extent that law, regulation or administrative policy of the investor's state
of residence specifically requires. See "The Offering - Escrow Account; No
Interest on Subscription Funds" (page 9).
To subscribe for shares, you should complete the order form accompanying
this prospectus and submit it, along with payment in full for the shares, to:
Mary Ruth Schaefer, Subscription Agent for
Indian River Banking Company
958 20th Place
Vero Beach, Florida 32960
prior to the expiration of the offering. Your check or other form of payment
should be made payable to: "Indian River Banking Company Escrow Account". You
should carefully follow the instructions contained in this prospectus under the
caption "The Offering" (page 8) and those included on the order form.
Indian River intends to use the net proceeds from the offering for general
corporate purposes, which will include a contribution to Indian River Bank, its
subsidiary bank, enabling the bank to expand into other market areas and provide
increased lending services, and repayment of all or a portion of the outstanding
balance on Indian River's line of credit with a correspondent bank. Pending such
investment, the net proceeds may be invested in a variety of short-term,
interest-bearing assets. See "Use of Proceeds" (page 12)
1
<PAGE>
INDIAN RIVER BANKING COMPANY
INDIAN RIVER BANKING COMPANY
958 20th Place
Vero Beach, Florida 32960
(561) 569-9200
Indian River is a one-bank holding company headquartered in Vero Beach,
Florida. It provides general commercial and consumer banking services through
its wholly owned banking subsidiary, Indian River National Bank, Vero Beach,
Florida. Indian River was organized in January 1989 to be the holding company
for Indian River Bank. Indian River Bank was organized as a national banking
association in March 1985, and became a wholly owned subsidiary of Indian River
in April 1989. At December 31, 1999, Indian River had total assets of $271.2
million, deposits of $238.8 million, and stockholders' equity of $13.6 million.
See "Selected Financial and Other Data" (page 7), "Management's Discussion and
Analysis" (page 15), and "Consolidated Financial Statements" (page F-1).
Indian River Bank, Indian River's sole subsidiary, is an independent,
community oriented full service financial institution. It conducts a general
commercial and consumer banking business. These services include the usual
deposit functions of commercial banks, including business and personal checking
accounts, "NOW" accounts and savings accounts, business and commercial loans,
residential mortgages and consumer loans and investment services. Indian River
Bank is a national banking association, and its deposits are insured by the Bank
Insurance Fund of the Federal Deposit Insurance Corporation. See "Business of
Indian River" (page 28) and "Business of Indian River Bank" (page 28).
Indian River Bank markets its services in its primary service area of
Indian River and Brevard counties and surrounding communities, through its main
office in Vero Beach, Florida, and five branch offices located in Vero Beach,
Sebastian, Roseland, Palm Bay, and Melbourne, Florida.
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RISK FACTORS
An investment in the common stock involves various risks. You should
carefully consider the risk factors listed below. These risk factors may cause
Indian River's future earnings to be lower or its financial condition to be less
favorable than it expects. In addition, other risks of which we are not aware,
or which we do not believe are material, may cause our earnings to be lower, or
hurt our future financial condition. You should read this section together with
the other information in this prospectus.
AN ACTIVE PUBLIC MARKET FOR OUR COMMON STOCK DOES NOT CURRENTLY EXIST, AND
WILL PROBABLY NOT EXIST AFTER THE OFFERING. AS A RESULT, SHAREHOLDERS MAY NOT BE
ABLE TO SELL THEIR COMMON STOCK EASILY.
While the common stock will be freely transferable by most shareholders, we
do not expect that there will be an active market for trading the common stock
following the offering. We cannot be sure that an active or established trading
market will develop following completion of the offering, or if one develops,
that it will continue, or whether the price of the common stock will be higher
or lower than the offering price. The common stock will not be listed on The
Nasdaq National Market, The Nasdaq SmallCap Market or any other securities
market upon completion of the offering. There can be no assurance that trading
in the over-the-counter market, through brokers or through market makers will
develop. As a result, an investment in the common stock may be relatively
illiquid. See "The Offering - Limited Market for Common Stock" (page 10).
NO BROKER HAS AGREED TO PURCHASE ANY OF THE COMMON STOCK AND INDIAN RIVER
MAY NOT BE ABLE TO COMPLETE THE OFFERING. INDIAN RIVER'S RESULTS MAY BE
ADVERSELY AFFECTED IF LESS THAN ALL OF THE OFFERED SHARES ARE SOLD.
The common stock is being sold directly, through the efforts of the
directors and officers of Indian River and Indian River Bank. No broker-dealer
or other person has any obligation to purchase, or find purchasers for, any
shares of common stock. See "The Offering - Manner of Distribution" (page 12).
Because the offering is not underwritten, there can be no assurance that
any particular number of shares will be sold. If less than all of the shares
offered are subscribed for, Indian River and Indian River Bank will have less
capital to fund operations and growth, which could result in restricted or
slower growth for Indian River Bank, slower expansion of activities, and lower
shareholder returns. Indian River could be required to raise additional capital
earlier than it would if all of the shares offered are sold. See "The
Offering"(page 8).
OUR ORGANIZATIONAL DOCUMENTS HAVE PROVISIONS WHICH MAY PREVENT AN
ACQUISITION OF THE COMPANY EVEN IF A MAJORITY OF SHAREHOLDERS FAVOR THE
ACQUISITION.
Indian River's Articles of Incorporation and Bylaws contain provisions
which may be seen as having an "antitakeover" effect. These provisions, which
include provisions that require the vote of 80% of the outstanding shares in
order to approve certain business combinations and amendments to the Articles of
Incorporation, in addition to the statutory majority vote requirement; a
classified board of directors; and the vote of 75% of the outstanding shares and
cause to remove directors; may have the effect of entrenching current
management. As a result of these provisions, shareholder efforts to make changes
in the conduct of Indian River's business or to sell the company may be
defeated, even if such shareholders hold a majority of the common stock, or if
such efforts are in the best interests of a majority of shareholders. The
overall effect of these provisions could:
- - make Indian River less attractive to a potential acquiror;
- - deter a non-negotiated offer to acquire Indian River which a majority of
shareholders might view as being in their best interests, and which could
include substantial premium over the market price for the common stock;
- - result in a lower market price of the common stock. See "Management"
(page 39) and "Description of Capital Stock - Certain Provisions of the
Articles of Incorporation" (page 46).
DIRECTORS AND OFFICERS OF INDIAN RIVER AND INDIAN RIVER BANK WILL OWN AT
LEAST 31.39% OF THE OUTSTANDING COMMON STOCK AFTER THE OFFERING, AND POSSIBLY AS
MUCH AS 37.09%. AS A RESULT OF THEIR OWNERSHIP, THEY COULD DECIDE THE OUTCOME OF
MATTERS SUBMITTED TO SHAREHOLDER VOTE, INCLUDING VOTES ON SOME ACQUISITIONS OF
THE COMPANY, WITHOUT THE VOTES OF OTHER SHAREHOLDERS. THE RESULTS OF THE VOTE
MAY BE CONTRARY TO THE DESIRES OR INTERESTS OF THE PUBLIC SHAREHOLDERS.
Following completion of the offering, directors (including directors
emeritus) and officers of Indian River and Indian River Bank and their
affiliates
3
<PAGE>
will own at least 531,608 shares of common stock, assuming that they purchase
the number of shares in the offering which they currently intend. These persons
may purchase a greater or lesser number of shares in the offering. If such
persons purchase the number of shares indicated, then at least 31.39% of the
common stock (if all of the oversubscription shares are sold), and as much as
37.09% of the common stock (if only the directors and officers purchase shares)
will be owned by directors and officers of Indian River and Indian River Bank
and their affiliates. See "Share Ownership of Directors, Officers and Certain
Beneficial Owners" (page 37).
By voting against a proposal submitted to shareholders, the directors and
officers of Indian River and Indian River Bank, as a group, would be able to
block approval of any proposal submitted to shareholders which requires a 75% or
80% vote of shareholders (such as certain business combinations, certain
amendments to the Articles of Incorporation, and removal of directors), and make
approval more difficult for proposals requiring the vote of a majority of
shareholders (such as mergers, share exchanges, certain asset sales, and certain
amendments to Indian River's Articles of Incorporation). See "Share Ownership of
Directors, Officers and Certain Beneficial Owners" (page 37) and "Description of
Capital Stock - Certain Provisions of the Articles of Incorporation" (page 46).
CONSUMMATION OF THE OFFERING IS NOT SUBJECT TO THE RECEIPT OF SUBSCRIPTIONS
FOR A MINIMUM NUMBER OF SHARES. SUBSCRIBERS WILL BE REQUIRED TO PURCHASE SHARES
EVEN IF LESS THAN ALL OF THE SHARES OFFERED ARE SOLD.
There is no minimum number of shares that must be sold in the offering, and
subscriptions, once received, are irrevocable. The offering may be completed
even if substantially less than the total number of shares offered is sold. If
this happens, our capital would not be increased to the extent it would be if
all of the shares being offered were sold. Once made, subscriptions will not be
revocable by subscribers, and we intend to accept subscriptions even if the
offering has not been fully subscribed. See "The Offering" (page 8) and
"Capitalization" (page 13).
THE BOOK VALUE OF A SHARE OF COMMON STOCK AFTER THE OFFERING WILL BE LOWER
THAN THE PRICE PAID FOR SHARES IN THE OFFERING.
If all of the shares being offered are sold, then book value per share at
December 31, 1999, after giving effect to completion of the offering, will be
$11.59 per share, assuming the sale of 200,000 shares. The post-offering book
value is less than the offering price of $25 per share, and accordingly,
investors in the offering will experience dilution of $13.41, or 53.6%, per
share, calculated on the basis of the difference between the offering price and
book value. See "Capitalization" (page 13).
THE OFFERING PRICE WAS DETERMINED BY THE BOARD OF DIRECTORS IN ITS
DISCRETION, AND DOES NOT NECESSARILY REFLECT THE FAIR MARKET VALUE OF THE COMMON
STOCK.
The Board of Directors considered a number of factors in determining the
offering price for the common stock, including, but not limited to, the price of
recent trades known to have occurred, the book value of the common stock, the
price to earnings and price to book ratios of other institutions we deemed to be
comparable, and our estimate of our earnings prospects. No independent third
party or negotiations were involved in the determination of the offering price,
and therefore the price does not necessarily reflect the market value of the
common stock. The price at which the common stock trades after the offering may
be higher or lower than the offering price.
CHANGES IN LOCAL ECONOMIC CONDITIONS COULD REDUCE OUR INCOME AND GROWTH,
AND COULD LEAD TO HIGHER LEVELS OF PROBLEM LOANS AND CHARGE-OFFS.
We make loans, and most of our assets are located, in the Indian River
County and Brevard County markets. Adverse changes in economic conditions in
these areas could hurt our ability to collect loans, could reduce the demand for
loans, and otherwise could negatively affect our performance and financial
condition.
A SUBSTANTIAL PORTION OF INDIAN RIVER BANK'S LOANS ARE IN REAL ESTATE
RELATED LOANS IN INDIAN RIVER AND BREVARD COUNTIES, AND ADVERSE CHANGES IN THOSE
REAL ESTATE MARKETS COULD LEAD TO HIGHER LEVELS OF PROBLEM LOANS AND
CHARGE-OFFS, AND ADVERSELY AFFECT INDIAN RIVER'S EARNINGS AND FINANCIAL
CONDITION.
Indian River Bank has a substantial amount of real estate related loans,
including residential, commercial owner occupied, and construction loans. At
December 31, 1999, 41.6% of our loans were residential real estate loans, 32.6%
were commercial real estate loans and 2.8% involved loans to individuals and
businesses in the citrus industry. These
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concentrations expose us to the risk that adverse developments in the real
estate market could increase the levels of nonperforming loans and charge-offs,
and reduce loan demand and deposit growth. In each case, however, the
concentrations are spread among a large number of borrowers with relatively low
loan balances.
MANAGEMENT WILL HAVE DISCRETION IN ALLOCATING A SUBSTANTIAL PORTION OF THE
PROCEEDS.
Our Boards of Directors will have substantial discretion in the use of the
proceeds of the offering among the purposes indicated, subject to the
requirements of safe and sound banking practices.
THERE CAN BE NO ASSURANCE THAT INDIAN RIVER WILL HAVE SUFFICIENT EARNINGS
TO BE LEGALLY ABLE TO PAY DIVIDENDS. ALTHOUGH LEGALLY ABLE TO PAY DIVIDENDS,
INDIAN RIVER HAS NOT HISTORICALLY PAID CASH DIVIDENDS.
Indian River Bank is the principal revenue producing operation of Indian
River. As a result, Indian River's ability to pay dividends largely depends on
receiving dividends from Indian River Bank. The amount of dividends that Indian
River Bank may pay is limited by state and federal laws and regulations. Even if
Indian River Bank or Indian River has earnings in an amount sufficient to pay
dividends, the Board of Directors may decide to retain earnings for the purpose
of financing growth. Indian River has not historically paid cash dividends. No
assurance can be given that Indian River Bank's earnings will continue to permit
the payment of dividends to Indian River or that Indian River's earnings will
permit the payment of dividends to shareholders, or that Indian River will
choose to pay dividends. See "Description of Capital Stock - Limitations on
Payment of Dividends"(page 46), "The Offering - Limited Market for Common Stock"
(page 10),and "Market for Common Stock and Dividends" (page 14).
THERE IS NO ASSURANCE THAT INDIAN RIVER WILL BE ABLE TO SUCCESSFULLY
COMPETE WITH OTHERS FOR ITS BUSINESS.
Indian River and Indian River Bank compete for loans, deposits, and
investment dollars with other banks and other kinds of financial institutions
and enterprises, such as securities firms, insurance companies, savings and loan
associations, credit unions, mortgage brokers, and private lenders, many of
which have substantially greater resources. Recent legislation expanding the
array of firms that can own banks may result in increased competition for Indian
River and Indian River Bank. The differences in resources and regulations may
make it harder for Indian River and Indian River Bank to compete profitably,
reduce the rates that they can earn on loans and investments, increase the rates
they must offer on deposits and other funds, and adversely affect Indian River's
overall financial condition and earnings. See "Business of Indian River Bank -
Competition" (page 32) and "Supervision and Regulation" (page 32).
THE LOSS OF THE SERVICES OF ANY KEY EMPLOYEES COULD ADVERSELY AFFECT
INVESTOR RETURNS.
The business of Indian River and Indian River Bank will be
service-oriented, and their success will therefore depend to a large extent upon
the services of William A. High , President and Chief Executive Officer of
Indian River and Indian River Bank, and Paul A. Beindorf, Vice President of
Indian River and Executive Vice President of Indian River Bank. The loss of the
services of Mr. High or Mr. Beindorf could adversely affect the business of
Indian River and Indian River Bank. See "Management" (page 39).
INDIAN RIVER'S PROFITABILITY WILL DEPEND ON ECONOMIC POLICIES AND FACTORS
BEYOND ITS CONTROL.
The operating income and net income of Indian River Bank depend to a great
extent on "rate differentials," i.e., the difference between the interest yields
Indian River Bank receives on its loans, securities and other interest bearing
assets and the interest rates it pays on its interest bearing deposits and other
liabilities. These rates are highly sensitive to many factors which are beyond
the control of Indian River Bank, including general economic conditions and the
policies of various governmental and regulatory authorities, including the Board
of Governors of the Federal Reserve System. See "Supervision and Regulation -
Indian River Bank" (page 33).
GOVERNMENT REGULATION WILL SIGNIFICANTLY AFFECT INDIAN RIVER'S BUSINESS,
AND MAY RESULT IN HIGHER COSTS AND LOWER SHAREHOLDER RETURNS.
The banking industry is heavily regulated. Banking regulations are
primarily intended to protect the federal deposit insurance funds and
depositors, not shareholders. Indian River Bank will be regulated and supervised
by the Office of the Comptroller of the Currency, and Indian River will be
subject to regulation and supervision by the Board of Governors of the Federal
Reserve System. Changes in the laws,
5
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regulations and regulatory practices affecting the banking industry could impose
additional costs on Indian River, or could hurt its ability to compete
profitably with other financial institutions. See "Supervision and Regulation"
(page 32).
INDIAN RIVER CAN ELECT TO DELAY CLOSING OF THE OFFERING UNTIL AS LATE AS
__________ 2000, AND CAN DECIDE TO NOT ACCEPT ALL OR A PART OF YOUR
SUBSCRIPTION. UNTIL THAT DECISION IS MADE, YOU WILL NOT HAVE USE OF YOUR FUNDS.
Indian River reserves the right to extend the offering until as late as
_____ 2000. Indian River will have broad discretion in determining which
subscriptions, other than those of directors and officers of Indian River and
Indian River Bank, to accept, in whole or in part, including if the offering is
oversubscribed. In deciding which subscriptions to accept, Indian River may
consider the order in which subscriptions are received, a subscriber's potential
to do business with, or to direct business to, Indian River Bank, and the desire
to have a broad distribution of stock ownership. As a result, a subscriber
cannot be assured of receiving the full number of shares subscribed for, and may
forego use of all or a portion of such subscriber's funds pending allocation of
available shares. See "The Offering - General" (page 8) and " - Acceptance and
Refunding of Subscriptions" (page 10).
6
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SELECTED CONSOLIDATED FINANCIAL DATA
The following table shows selected historical consolidated financial data
for Indian River. You should read it in connection with the historical
consolidated financial information contained in the Consolidated Financial
Statements for the year ended December 31, 1999 and 1998 included in this
prospectus and with the other information provided in this prospectus. See
"Consolidated Financial Statements" (pages F-1 through F-29) and "Management's
Discussion and Analysis" (page 15). The consolidated financial statements for
the years ended December 31, 1997, 1996 and 1995 were also audited, but are not
included in this prospectus.
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Year Ended December 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Total interest income $ 17,946,271 $ 15,341,106 $ 13,515,121 $ 11,325,605 $10,225,025
Total interest expense 8,024,994 7,134,687 6,306,836 5,143,022 4,891,176
Net interest income 9,921,277 8,206,419 7,208,285 6,182,583 5,333,849
Provision for loan/lease losses 590,000 375,000 385,000 415,000 445,000
Net interest income after provision for
loan/lease losses 9,331,277 7,831,419 6,823,285 5,767,583 4,888,849
Other income 2,455,338 2,216,655 1,298,697 1,271,904 1,295,344
Other expenses 8,641,248 6,739,983 4,951,970 4,222,337 4,127,903
Income before income taxes 3,145,367 3,308,091 3,170,012 2,817,150 2,056,290
Income tax expense 1,142,767 1,208,869 1,171,549 1,033,156 701,159
Net income 2,002,600 2,099,222 1,998,463 1,783,994 1,355,131
EARNINGS PER SHARE:
Basic earnings per common share(1) $ 1.44 $ 1.51 $ 1.43 $ 1.27 $ 1.13
Diluted earnings per common share(1) 1.43 1.50 1.43 1.27 1.13
PERIOD-ENDING BALANCES:
Total loans $168,550,007 $144,364,417 $117,641,317 $103,439,204 $ 96,007,722
Total assets 271,235,612 223,116,257 191,467,977 165,068,892 133,736,574
Total deposits 238,845,951 200,396,765 172,812,175 153,202,672 124,215,714
Stockholders' equity 13,591,175 13,783,713 11,597,230 9,213,962 7,993,933
Stockholders' equity per share(1) 9.75 9.89 8.30 6.56 6.67
Average weighted shares outstanding at period
end:
Basic(1) 1,393,902 1,393,612 1,394,080 1,365,212 1,443,950
Diluted(1) 1,401,780 1,397,522 1,395,080 1,365,212 1,443,950
ASSET QUALITY RATIOS:
Allowance for loan losses to loans 1.13% 1.05% 1.12% 1.16% 1.11%
Nonperforming loans to loans 0.06% 0.28% 0.08% 0.58% 0.44%
Allowance for loan losses to nonperforming loans 3,511.22% 594.60% 1,760.91% 627.08% 2,790.56%
Nonperforming assets to loans and other real estate 0.06% 0.28% 0.11% 0.67% 0.55%
Net loan charge-offs to average loans 0.13% 0.15% 0.24% 0.28% 0.42%
CAPITAL RATIOS:
Tier I risk-based capital ratio 8.40% 9.40% 9.71% 9.43% 9.12%
Total risk-based capital ratio 9.50% 10.50% 10.87% 10.68% 10.33%
Leverage ratio 5.90% 6.20% 6.05% 6.00% 6.04%
SELECTED RATIOS:
Return on average total assets 0.84% 1.05% 1.16% 1.23% 1.01%
Yield on average earning assets 8.03% 8.31% 8.36% 8.20% 8.16%
Return on average stockholders' equity 14.34% 16.42% 19.26% 21.34% 18.96%
Average stockholders' equity to average total
assets 5.89% 6.41% 6.00% 5.74% 5.33%
</TABLE>
(1) Per share data and average weighted shares have been adjusted to reflect
10% stock dividend, paid in each year, through 2000, and to reflect the two
for one stock split in the form of a dividend paid in March 2000.
7
<PAGE>
THE OFFERING
GENERAL
Securities Offered. Indian River is offering to sell up to 200,000 newly
issued shares of its common stock, at a price of $25.00 per share. Indian River
also reserves the right to sell up to an additional 100,000 newly issued shares
of common stock if the volume of subscriptions exceeds the number of shares
offered.
No Minimum Offering. There is no minimum number of shares which must be
sold in the offering. The offering will be consummated if any valid
subscriptions are received, unless the Board of Directors has terminated the
offering in its entirety.
Expiration Time. Subscriptions to purchase shares must be received no later
than 5:00 p.m., Eastern time, on , 2000, unless the offering is terminated
earlier or extended by Indian River. Indian River reserves the right to
terminate the offering at any time prior to , 2000, or to extend the termination
date for periods of up to thirty (30) days each, without notice to subscribers.
Under no circumstances will the offering be extended beyond , 2000. See "The
Offering - Procedure for Subscribing to Common Stock in the Offering" (page 8)
and " -- Acceptance and Refunding of Subscriptions" (page 10).
Minimum and Maximum Subscription. Investors must subscribe for the purchase
of a minimum of 100 shares (for a minimum investment of $2,500), subject to
Indian River's right to permit smaller subscriptions in its discretion. The
maximum number of shares which any person or group of affiliated persons will be
permitted to purchase is 4,000 (for a maximum investment of $100,000), subject
to Indian River's right to permit larger subscriptions in its discretion. Indian
River intends to permit members of the Board of Directors (including directors
emeritus) and their affiliates to purchase more than 4,000 shares in the
offering. Indian River reserves the right to reject any subscription in whole or
in part. In considering whether to accept a subscription, Indian River may
consider the number of shares purchased by a subscriber in other capacities, the
potential of the subscriber to do business with, or direct business to, Indian
River Bank, and other factors relating to a particular subscription, and the
number of shares which have not been subscribed for at the time a subscription
is accepted. In determining whether to permit a larger subscription, Indian
River may also consider the identity of the subscriber and the subscriber's
intentions with respect to the operation, management and direction of Indian
River.
INDIAN RIVER RESERVES THE RIGHT TO ACCEPT OR REJECT ANY SUBSCRIPTION IN
WHOLE OR IN PART. IN DETERMINING WHETHER TO ACCEPT ANY SUBSCRIPTION, IN WHOLE OR
IN PART, THE DIRECTORS MAY, IN THEIR SOLE DISCRETION, TAKE INTO ACCOUNT THE
ORDER IN WHICH SUBSCRIPTIONS ARE RECEIVED, A SUBSCRIBER'S POTENTIAL TO DO
BUSINESS WITH, OR TO DIRECT CUSTOMERS TO, INDIAN RIVER BANK AND INDIAN RIVER'S
DESIRE TO HAVE A BROAD DISTRIBUTION OF STOCK OWNERSHIP, AS WELL AS LEGAL OR
REGULATORY RESTRICTIONS. NOTWITHSTANDING INDIAN RIVER'S UNFETTERED RIGHT OF
REJECTION, ONCE RECEIVED BY INDIAN RIVER, ALL SUBSCRIPTIONS ARE IRREVOCABLE BY
THE SUBSCRIBER.
PROCEDURE FOR SUBSCRIBING TO COMMON STOCK IN THE OFFERING
Investors who wish to participate in the offering and invest in Indian
River may do so by completing and signing the subscription agreement
accompanying this prospectus and delivering the completed subscription prior to
the termination of the offering, together with payment in full of the offering
price of all shares for which you have subscribed. Payment in full must be by:
(a) check or bank draft drawn upon a U.S. bank; or
(b) postal, telegraphic or express money order,
in either case, payable to "Indian River Banking Company Escrow Account".
The offering price will be deemed to have been received only upon (i)
clearance of any uncertified check, or (ii) receipt of any certified check or
bank draft drawn upon a U.S. bank or of any postal, telegraphic or express money
order. A postage paid, addressed envelope is included for the return of the
subscription agreement. If paying by
8
<PAGE>
uncertified personal check, please note that the funds paid thereby may take at
least five business days to clear. Accordingly, investors who wish to pay the
offering price by means of uncertified personal check are urged to make payment
sufficiently in advance of the termination of the offering to ensure that such
payment is received and clears by such date. All funds received in payment of
the subscription price will be deposited in the Indian River Banking Company
Escrow Account and, until closing of the offering, will be invested at the
direction of Indian River.
The address to which subscription agreements and payment of the offering
price should be delivered is:
Mary Ruth Schaefer, Subscription Agent
Indian River Banking Company
958 20th Place
Vero Beach, Florida 32960
(561) 569-9200
If the aggregate amount paid by a subscriber is insufficient to purchase
the number of shares that such person indicates are being subscribed for, or if
a subscriber does not specify the number of shares to be purchased, then such
subscriber will be deemed to have subscribed to purchase shares to the full
extent of the payment tendered (subject only to the reduction to the extent
necessary to comply with any regulatory limitation or conditions imposed by
Indian River in connection with the offering). If the amount paid by a
subscriber exceeds the amount necessary to purchase the number of shares for
which such subscriber has indicated an intention to subscribe, then such
subscriber will be deemed to have subscribed to purchase shares to the full
extent of the excess payment tendered (subject only to reduction to the extent
necessary to comply with any regulatory limitation or conditions imposed by
Indian River in connection with the offering). Notwithstanding the foregoing,
Indian River reserves the right to reject, in whole or in part, any
subscription. In determining whether to accept any subscription, in whole or in
part, the directors may, in their sole discretion, take into account the order
in which subscriptions are received, a subscriber's potential to do business
with, or to direct customers to, Indian River Bank and Indian River's desire to
have a broad distribution of stock ownership, as well as legal or regulatory
restrictions. Indian River may also consider the identity of the subscriber and
the subscriber's intentions with respect to the operation, management and
direction of Indian River.
FAILURE TO INCLUDE THE FULL OFFERING PRICE WITH THE APPLICATION MAY CAUSE
INDIAN RIVER TO REJECT THE SUBSCRIPTION.
The method of delivery of subscription agreements and payment of the
offering price will be at the election and risk of persons participating in the
offering, but if sent by mail, it is recommended that subscription agreements
and payments be sent by registered mail, return receipt requested, and that a
sufficient number of days be allowed to ensure delivery and clearance of payment
prior to the termination date.
All questions concerning the timeliness, validity, form and eligibility of
subscription agreements received will be determined by Indian River, whose
determinations will be final and binding. Indian River in its sole discretion
may waive any defect or irregularity, permit any defect or irregularity to be
corrected within such time as it may determine, or reject the purported
subscription. Subscription agreements will not be deemed to have been received
or accepted until all irregularities have been waived or cured within such time
as Indian River determines in its sole discretion. Neither Indian River nor any
other person or firm will be under any duty to give a subscriber notice of any
defect or irregularity in the submission of subscription agreements, or incur
any liability for failure to give such notice.
SUBSCRIPTIONS FOR COMMON STOCK WHICH ARE RECEIVED BY INDIAN RIVER MAY NOT
BE REVOKED BY SUBSCRIBERS.
ESCROW ACCOUNT; RELEASE OF FUNDS; NO INTEREST ON SUBSCRIPTION FUNDS
All funds received in payment of the offering price shall be promptly
deposited into an escrow account at Indian River Bank subject to the control of
Christopher H. Marine, Esquire, Escrow Agent, until consummation or termination
of the offering. Such escrow account will be invested in short-term obligations
of the United States government or a sweep account collateralized by US
government or agency securities. Subscription funds will be released from the
escrow account to Indian River only upon receipt by the escrow agent of the
certification of the
9
<PAGE>
President of Indian River that subscriptions relating to such funds have been
accepted and that shares of common stock will be issued to subscribers in
respect of such subscriptions. Earnings on such funds in the escrow account will
be retained by Indian River whether or not the offering is consummated.
Subscriptions for common stock which are received by the subscription agent
may not be revoked. No interest will be paid to subscribers on subscription
funds, even in the event that the offering is terminated in its entirety or an
individual subscription is rejected. By submitting a subscription, subscribers
will forego interest they otherwise could have earned on the funds for the
period during which their funds are held in escrow. Notwithstanding the
foregoing, interest will be paid to the extent that law, regulation or
administrative policy of an investor's state of residence specifically requires
in the event that the offering is not completed. Prior to the time the offering
is completed or terminated, Indian River will be entitled to request, from time
to time, that the escrow agent distribute accrued earnings on the escrowed funds
to Indian River for general corporate purposes.
ACCEPTANCE AND REFUNDING OF SUBSCRIPTIONS
Subscription agreements are not binding on Indian River until accepted by
Indian River, which reserves the right to reject, in whole or in part, in its
sole discretion, any subscription agreement or, if the offering is
oversubscribed, to allot a lesser number of shares than the number for which a
person has subscribed. In determining the number of shares to allot to each
subscriber in the event the offering is oversubscribed, the directors, in their
sole discretion, may take into account the order in which subscriptions are
received, a subscriber's potential to do business with, or to direct customers
to, Indian River Bank, and Indian River's desire to have a broad distribution of
stock ownership, as well as legal or regulatory restrictions. Indian River will
decide which subscription agreements to accept within ten days after the
termination of the offering. Once made, a subscription is irrevocable by the
subscriber during the period of the offering, including extensions, if any.
Indian River may elect, at any time and from time to time, to accept any or
all of the subscriptions it has received to date, issue shares of common stock
for those subscriptions, and continue the offering with respect to any remaining
shares.
In the event Indian River rejects all or a portion of any subscription, the
escrow agent will promptly refund to the subscriber by check, sent by
first-class mail, all, or the appropriate portion of, the amount submitted with
the subscription agreement, without interest or deduction, except that interest
will be paid to the extent that law, regulation or administrative policy of an
investor's state of residence specifically requires. If the offering is not
completed, all subscription funds will be promptly refunded to subscribers
without interest or deduction, except that interest will be paid to the extent
that law, regulation or administrative policy of an investor's state of
residence specifically requires.
After all refunds have been made, the escrow agent, Indian River, Indian
River Bank and their respective directors, officers, and agents will have no
further liabilities to subscribers. Certificates representing shares duly
subscribed and paid for will be issued by Indian River as soon as practicable
after funds are released to Indian River by the escrow agent.
LIMITED MARKET FOR COMMON STOCK
Except for common stock held by Indian River's directors and certain
officers of Indian River and Indian River Bank, the common stock will be freely
transferable immediately upon issuance and will not be subject to any transfer
restrictions. There does not currently exist an active or organized public
market for the common stock. No broker-dealers currently offer to make a market
in the common stock. The common stock has been the subject of only sporadic
trades. There can be no assurance that an over-the-counter market will develop
for the common stock. It is not anticipated that the common stock will be listed
on any stock exchange or be designated for trading on the Nasdaq system upon
completion of the offering or in the immediate future.
10
<PAGE>
DETERMINATION OF OFFERING PRICE
The offering price has been determined by the Board of Directors of Indian
River after consideration of various factors which it deemed relevant. These
factors included, among other things, Indian River's current financial condition
and operating performance as presented in its financial statements, recent
trades of the common stock, the market value, and price to earnings and price to
book value ratios of the common stock of other banking organizations which we
deem comparable, and pro forma financial position after giving effect to the
offering. NEITHER THE BOARD OF DIRECTORS NOR MANAGEMENT HAS EXPRESSED AN OPINION
OR HAS MADE ANY RECOMMENDATION AS TO WHETHER ANYONE SHOULD PURCHASE SHARES OF
COMMON STOCK IN THE OFFERING. ANY DECISION TO INVEST IN THE COMMON STOCK MUST BE
MADE BY EACH INVESTOR BASED UPON HIS OR HER OWN EVALUATION OF THE OFFERING IN
THE CONTEXT OF HIS OR HER BEST INTERESTS.
There can be no assurance that, following completion of the offering and
the issuance of the common stock, a shareholder will be able to sell shares
purchased in the offering at a price equal to or greater than the offering
price. Moreover, until certificates for shares of common stock are delivered,
shareholders may not be able to sell the shares of common stock that they have
purchased in the offering. See "-- Issuance of Common Stock" below.
INTENTION OF DIRECTORS, EXECUTIVE OFFICERS AND OTHERS
Directors (including a director emeritus) and executive officers of Indian
River and Indian River Bank have indicated that they intend to subscribe for an
aggregate of 40,000 shares of common stock in the offering. Any shares purchased
by directors and executive officers are intended to be held as an investment.
These intentions are not commitments and could change based upon individual
circumstances. See "Share Ownership of Directors, Officers and Certain
Beneficial Owners" (page 37).
REGULATORY LIMITATION
If as a result of the purchase of shares in the offering you will own ten
percent (10%) or more (five percent (5%) in certain cases) of the common stock
you may be required to provide certain information to, or seek the prior
approval of, state and federal bank regulators. Indian River will not be
required to issue shares of common stock in the offering to any person who, in
the opinion of Indian River, would be required to obtain prior clearance or
approval from any state or federal bank regulatory authority to own or control
such shares if, at the termination date, such clearance or approval has not been
obtained or any required waiting period has not expired. Indian River reserves
the right to reduce or reject, in whole or in part, any subscription which would
require prior regulatory application or approval if such has not been obtained
prior to the termination date. See "The Offering - Acceptance and Refunding of
Subscriptions" (page 10).
RIGHT TO AMEND OR TERMINATE THE OFFERING
We expressly reserve the right to amend the terms and conditions of the
offering. In the event of a material change to the terms of the offering, we
will file an amendment to its registration statement, of which this prospectus
is a part, and resolicit subscribers to the extent required by the SEC. In the
event of such a resolicitation, all proceeds received will be returned promptly
to any subscriber who does not provide the subscription agent with an
affirmative reconfirmation of the subscription. We expressly reserve the right,
at any time prior to delivery of shares of common stock offered hereby, to
terminate the offering if the offering is prohibited by law or regulation or if
the Board of Directors concludes in its judgment, that it is not in the best
interests of Indian River to complete the offering under the circumstances. The
offering may be terminated by Indian River giving oral or written notice thereof
to the subscription agent and making a public announcement thereof. If the
offering is so terminated, all funds received will be promptly refunded, without
interest.
11
<PAGE>
ISSUANCE OF COMMON STOCK
Certificates representing shares of common stock purchased in the offering
will be delivered to purchasers, via registered or certified mail, as soon as
practicable after the expiration time and after all prorations and adjustments
contemplated by the offering have been effected. No fractional shares will be
issued in the offering.
REQUESTS FOR ADDITIONAL INFORMATION
If you have questions or require additional information concerning the
offering, contact William A. High, President and Chief Executive Officer, Indian
River Banking Company, 958 20th Place, Vero Beach, Florida 32960, telephone
(561) 569-9200 or toll free (888) 569-9233.
MANNER OF DISTRIBUTION
Certain directors and officers of Indian River and Indian River Bank will
assist in the offering. None of our directors and officers will receive
compensation for such services. Our directors and officers are not authorized to
make statements about Indian River or Indian River Bank unless such information
is set forth in this prospectus, nor will they render investment advice. None of
our directors or officers are registered as securities brokers or dealers under
the federal or applicable state securities laws (except for certain directors
and officers registered pursuant to exemptions from examination requirements
under Florida law), nor are any of them affiliated with any broker or dealer.
Because they are not in the business of either effecting securities transactions
for others or buying and selling securities for their own account, they are not
required to register as brokers or dealers under the federal securities laws. In
addition, the proposed activities of our directors and officers are excepted
from registration pursuant to a specific safe-harbor provision under Rule 3a4-1
under the Securities Exchange Act of 1934, as amended. Substantially similar
exemptions from registration are available under applicable state securities
laws.
NO BROKER-DEALER OR OTHER PERSON IS OBLIGATED TO PURCHASE ANY OF THE SHARES
OFFERED, OR TO FIND PURCHASERS FOR ANY SHARES. THERE CAN BE NO ASSURANCE THAT
ANY MINIMUM NUMBER OF SHARES WILL BE SOLD.
USE OF PROCEEDS
The gross proceeds to Indian River from the sale of the common stock
offered hereby will be $5,000,000 if all of the shares being offered are sold,
and $7,500,000 if all of the oversubscription shares are sold, in each case
before deducting expenses of the offering, which are estimated at $110,000.
The proceeds of the offering will strengthen Indian River's capital base
and position it to continue to exceed minimum regulatory capital ratios, which
will allow for future growth through expansion of its existing business. We plan
to use the net proceeds for general corporate purposes, which will include
repayment of Indian River's outstanding balance on its line of credit with a
correspondent bank ($2,945,381 as of March 31, 2000, bearing interest at a
floating rate based on LIBOR, 7.4587% as of March 31, 2000, and immediate
contribution of the remaining proceeds to Indian River Bank, where they will be
available for general corporate purposes and for use in its lending and
investment activities. If less than all of the shares offered are sold, Indian
River will contribute the first $2,000,000 of net proceeds to Indian River Bank,
and use the proceeds in excess of $2,000,000 to reduce the outstanding balance
on Indian River's line of credit. Any remaining proceeds would be used for
additional contributions to Indian River Bank or other corporate purposes.
The offering will enable Indian River Bank to establish additional branch
locations, to expand into desirable market areas, and to provide increased
lending services to its existing customers and markets. In May 2000, Indian
River Bank has entered into an agreement for a site in Rockledge in Brevard
County where it intends to establish a new branch in a building to be
constructed. The terms of the lease under which Indian River Bank will occupy
the site have not been determined as of the date of this prospectus. There can
be no assurance that any additional branches will be established, or if
established that they will be successful. Pending such investment, the net
proceeds may be invested in a variety of short-term, interest-bearing assets
including federal funds transactions, interest-bearing deposits in other banks
and similar investments.
12
<PAGE>
CAPITALIZATION
The following table shows (i) the consolidated capitalization of Indian
River at December 31, 1999, as adjusted to reflect the 10% stock dividend paid
in January 2000 and the two for one stock split in the form of a stock dividend
paid in March 2000; and (ii) the consolidated capitalization of Indian River on
a pro forma basis giving effect to the issuance of 200,000 shares in pro forma 1
and 300,000 shares in pro forma 2, and the receipt of the net proceeds from the
offering of such shares, after deduction of all estimated expenses of the
offering, as if the sale of the shares had been consummated on December 31,
1999.
<TABLE>
<CAPTION>
At December 31, 1999
-----------------------------------------------
Pro Forma Pro Forma
Actual(1) 1(2) 2(3)
------------- ------------- -------------
<S> <C> <C> <C>
Stockholders' equity:
Preferred Stock, $1.00 par value;
500,000 shares authorized, None
outstanding actual and pro forma $ -- $ -- $ --
Common stock, par value $1.00 per
share; 10,000,000 shares authorized;
1,393,730 shares issued and
outstanding actual, 1,593,730
shares issued and outstanding pro
forma 1, and 1,693,730 shares issued
and outstanding pro forma 2 1,393,730 1,593,730 1,693,730
Capital surplus 9,292,285 13,982,285 16,382,285
Retained earnings 4,505,742 4,505,742 4,505,742
Accumulated other comprehensive income (1,604,204) (1,604,204) (1,604,204)
Total stockholders' equity $ 13,587,553 $ 18,477,553 $ 20,977,553
Book value per share $ 9.75 $ 11.59 $ 12.39
</TABLE>
(1) As adjusted to reflect the 10% stock dividend paid in January 2000 and the
two for one stock split in the form of a stock dividend paid in March 2000,
including the payment of $3,622 to shareholders for partial shares.
(2) Reflects the sale of 200,000 shares of common stock in the offering and
estimated expenses of $110,000.
(3) Reflects the sale of 300,000 shares of common stock in the offering and
estimated expenses of $110,000.
REGULATORY CAPITAL REQUIREMENTS
For capital adequacy purposes, the Board of Governors of the Federal
Reserve requires bank holding companies such as Indian River to maintain two
separate capital ratios, both of which compare certain capital account items to
total assets and off-balance-sheet instruments, as adjusted to reflect their
relative credit risks ("Total Risk-Weighted Assets"). These are called
"Risk-Based Capital Ratios." The first of these is the "Total Risk-Based Capital
Ratio", which compares the total capital account, which may include a limited
amount of general reserves for loan losses to Total Risk-Weighted Assets. The
minimum level for this ratio is 8.0%. The second of these is the "Tier 1
Risk-Based Capital Ratio," in which "Tier 1 Capital," (which must constitute at
least one-half of total capital) defined as common equity, retained earnings,
non-cumulative perpetual preferred stock and a limited amount of cumulative
perpetual preferred stock, less goodwill, is compared to Total Risk-Weighted
Assets. The minimum level for this ratio is 4.0%.
The Federal Reserve also has established an additional capital adequacy
guideline referred to as the "Leverage Capital Ratio," which measures the ratio
of Tier 1 Capital (as defined above) to total assets, less goodwill. Although
the most highly-rated bank holding companies are required to maintain a minimum
Leverage Capital Ratio of 3.0%, most bank holding companies, such as Indian
River, are required to maintain Leverage Capital Ratios of 4.0% to 5.0%. The
actual required ratio is based on the Federal Reserve's assessment of the
individual bank holding company's asset quality, earnings performance,
interest-rate risk and liquidity. There can be no assurance, however, that
Indian River will not be required to maintain a higher Leverage Capital Ratio.
See "Supervision and Regulation -- The Bank -- Capital Adequacy Guidelines"
(page 34).
13
<PAGE>
The OCC has promulgated regulations and adopted a statement of policy
regarding the capital adequacy of national banks such as Indian River Bank.
These requirements are substantially similar to those adopted by the Federal
Reserve regarding bank holding companies, as set forth above.
The following table sets forth the actual regulatory capital ratios of
Indian River and Indian River Bank at December 31, 1999, and as adjusted to give
effect to the receipt of the estimated net proceeds from the sale of the common
stock offered hereby, based on the assumptions set forth in the footnotes and
Indian River incurring expenses of $110,000 in the offering. The as adjusted
capital ratios are calculated assuming that all amounts contributed are invested
in assets having a 100% risk weighting under applicable regulatory capital
calculations. If the assets actually invested in are assumed to have a lower
risk weighting, the adjusted capital ratios will be higher.
<TABLE>
<CAPTION>
December 31, 1999
---------------------------------------------------------------
As Adjusted As Adjusted Regulatory
Actual 1(1) 2(2) Minimum
----------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INDIAN RIVER:
Total Risk-Based Capital Ratio 9.5% 11.9% 13.1% 8.0%
Tier 1 Risk-Based Capital Ratio 8.4% 10.9% 12.1% 4.0%
Leverage Capital Ratio 5.9% 7.6% 8.5% 4.0-5.0%
INDIAN RIVER BANK
Total Risk-Based Capital Ratio 10.4% 11.6% 12.9% 8.0%
Tier 1 Risk-Based Capital Ratio 9.4% 10.5% 11.9% 4.0%
Leverage Capital Ratio 6.5% 7.3% 8.2% 4.0-5.0%
</TABLE>
- ------------------------------------
(1) Assumes the sale of 200,000 shares in the offering and the immediate
contribution of $2,000,000 to Indian River Bank.
(2) Assumes the sale of 300,000 shares in the offering and the immediate
contribution of $4,445,000 to Indian River Bank.
MARKET FOR COMMON STOCK AND DIVIDENDS
There does not currently exist an organized public trading market for
shares of Indian River common stock. Trading in the common stock has been
sporadic and consists mainly of private trades conducted without brokers. We are
aware of 18 trades of the common stock since January 1, 1998, at prices ranging
from $20 to $25 per share (as adjusted for the two for one stock split paid in
March 2000). The last trade known to Indian River was a trade of 100 shares at
$25.00 per share on March 15, 2000. There may be other trades of which we are
either not aware, or for which we are not aware of the price. These trades and
transactions do not necessarily reflect the intrinsic or market values of the
Common Stock. As of December 31, 1999, there were 633,666 shares of common stock
outstanding, held of record by approximately 445 shareholders (1,393,730 shares
as adjusted for the 10% stock dividend paid in January 2000 and the two for one
stock split paid in March 2000).
As of December 31, 1999, and as adjusted for the 10% stock dividend paid in
January 2000 and the two for one stock split paid in March 2000, there were
outstanding options to purchase 100,268 shares of common stock pursuant to
Indian River's stock option plans (including 77,254 options subject to approval
by the shareholders of the Company's 1999 stock option plan at the 2000 annual
meeting), of which 39,350 are presently exercisable.
The following table shows information relating to Indian River's share
price history for the past two fiscal years (as adjusted to reflect the 10%
stock dividends paid in January 1998, 1999 and 2000, and the two for one stock
split in the form of a dividend paid in March 2000). High and low sales prices
reflect trades known to Indian River, and do not necessarily reflect all trades
which occurred. Indian River has not paid any cash dividends during the past two
fiscal years, electing to retain earnings to fund the growth of Indian River
Bank.
14
<PAGE>
<TABLE>
<CAPTION>
2000 1999 1998
-------------------- ------------------- -----------------
Period Ended High Low High Low High Low
--------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
March 31 $25.00 $22.50 $19.09 $18.18 $17.36 $14.46
June 30 $22.72 $19.09 -- --
September 30 -- -- $16.53 $14.46
December 31 $22.72 $21.59 $17.36 $16.53
</TABLE>
Dividends. Holders of the common stock are entitled to receive dividends as
and when declared by the Board of Directors. Indian River has paid stock
dividends for each of the last eleven years and currently intends to continue
the payment of such dividends. Indian River has not paid cash dividends during
such period, electing to retain earnings to support growth. Future dividends
will depend primarily upon Indian River Bank's earnings, financial condition,
and need for funds, as well as governmental policies and regulations applicable
to Indian River and Indian River Bank. There can be no assurance, however, that
Indian River and Indian River Bank will continue to have earnings at a level
sufficient to support the payment of dividends or that either entity will in the
future elect to pay dividends. As Indian River Bank is the primary source of
funds for payment of dividends by Indian River, the inability of Indian River
Bank to pay dividends could adversely affect the ability of Indian River to pay
dividends.
Regulations of the OCC place a limit on the amount of dividends Indian
River Bank may pay without prior approval. Prior approval of the OCC is required
to pay dividends which exceed Indian River Bank's net profits for the current
year plus its retained net profits for the preceding two calendar years, less
required transfers to surplus. At December 31, 1999, the amount available for
the payment of dividends without prior approval was approximately $2.6 million.
The Federal Reserve and the OCC also have authority to prohibit a bank from
paying dividends if the Federal Reserve or the OCC deems such payment to be an
unsafe or unsound practice.
The Federal Reserve has established guidelines with respect to the
maintenance of appropriate levels of capital by registered bank holding
companies. Compliance with such standards, as presently in effect, or as they
may be amended from time to time, could possibly limit the amount of dividends
that Indian River may pay in the future. In 1985, the Federal Reserve issued a
policy statement on the payment of cash dividends by bank holding companies. In
the statement, the Federal Reserve expressed its view that a holding company
experiencing earnings weaknesses should not pay cash dividends exceeding its net
income, or which could only be funded in ways that weakened the holding
company's financial health, such as by borrowing.
As a depository institution, the deposits of which are insured by the FDIC,
Indian River Bank may not pay dividends or distribute any of its capital assets
while it remains in default on any assessment due the FDIC. Indian River Bank is
not currently in default under any of its obligations to the FDIC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Indian River is a one-bank holding company for Indian River Bank and is
headquartered in Vero Beach, Florida. Indian River Bank is a growing community
bank serving individuals and small to medium sized businesses with special focus
on real estate related lending and the professional community. Indian River Bank
operates four branches in Indian River County and two branches in Brevard
County. Indian River Bank offers deposit accounts and associated services to
businesses and individuals and makes loans and invests in qualified securities.
In addition, Indian River Bank's income includes fees on deposit accounts and
loans.
RESULTS OF OPERATIONS
NET INCOME. Indian River had income before income taxes of $3.1 million for
the year ended December 31, 1999 compared to $3.3 million for the year ended
December 31, 1998. Net income totaled $2.0 million the year ended December 31,
1999, a decrease of $0.1 million or 4.8% compared to net income in 1998.
Earnings per share basic were
15
<PAGE>
$2.87 in 1999 compared to $3.01 in 1998 (as adjusted for the 10% stock dividends
and two for one stock split). The decrease in net income is attributable to
several one time events that increased non-interest expense. These are, before
tax, prepaid compensation for the retiring CEO of $203 thousand, a write down of
a piece of property (vacant land) to fair market value, resulting in a loss of
$103 thousand, search firm expense for a new CEO of $57 thousand, relocation
expense for the new CEO and CFO of $57 thousand, and Y2K expense of $50
thousand.
NET INTEREST INCOME. Net interest income is the difference between interest
income on earning assets and interest expense on deposits and other borrowed
funds. Net interest income for the year ended December 31, 1999 totaled $9.9
million compared to $8.2 million in 1998, reflecting an increase of $1.7 million
or 20.7%. Total interest income totaled $17.9 million in 1999 compared to $15.3
million in 1998. This increase was primarily the result of increases of $1.8
million in interest and fees on loans, and $0.8 million in interest on fed funds
and other investments. The increase in earnings on loans was due to an increase
in average outstanding loan balances from $127.4 million in 1998 to $153.3
million in 1999 offset by a decrease in the interest rate earned, which
decreased to 8.69% in 1999 from 9.01% in 1998. The increase in interest on
investments was due to increases in average outstanding balances of
approximately $12.2 million. As a result of a 20.4% increase in average
interest-bearing deposits and other borrowed funds, interest expense increased
by $890 thousand from 1998. The increase was attributable primarily to deposit
growth.
The average yield on earning assets for the year ended December 31, 1999,
was 8.03% compared to 8.31% in 1998. The average rate paid on interest bearing
liabilities in 1999 was 4.21% compared to 4.51% in 1998. The average interest
rate paid on other borrowed funds in 1999 was 5.90% compared to 6.29% in 1998.
Net interest margin is the ratio of net interest income to average earning
assets. For the year ended 1999, net interest margin was 4.44% compared to 4.45%
for the year ended December 31, 1998. The table at page 17 illustrates the
analysis of Indian River's average balances, yields and changes in net interest
income for the fiscal years indicated.
PROVISION FOR LOAN LOSSES. The provisions for loan losses added $0.6
million to the allowance for loan losses in 1999 compared to $0.4 million in
1998. This increase was primarily attributed to the increase in total loans.
Total charge-offs net of recoveries totaled approximately $200 thousand in both
1999 and 1998.
NON-INTEREST INCOME. Non-interest income for the year ended December 31,
1999 was $2.5 million compared to $2.2 million in 1998, an increase of $.3
million or approximately 10.7%. The change was primarily due to increased
deposit fee income and gain on loan sales.
NON-INTEREST EXPENSE. Total non-interest expense for the year ended
December 31, 1999 of $8.6 million reflected an increase of approximately $1.9
million or 28.2% primarily as a result of increases in personnel costs, and
other operating expenses, as described under "Net Income" above. The 1999
salaries and benefits expense increased by $0.9 million or 34.6% to $3.6 million
compared to $2.7 million in 1998. Occupancy and equipment expense of $1.3
million increased $0.2 million or 21.4% in 1999. Other operating expenses of
$3.1 million increased by $0.6 million or 19.7% in 1999.
TAXES ON INCOME. Income tax expense totaled $1.1 million for 1999 compared
to income tax expense of $1.2 million in 1998.
COMPARISON OF AVERAGE BALANCES, INTEREST AND YIELDS
The following table provides certain information relating to Indian River's
average consolidated statements of financial condition and reflects the interest
income on interest-earning assets and interest expense of interest-bearing
liabilities for the periods indicated and the average yields earned and rates
paid for the periods indicated. These yields and costs are derived by dividing
income or expense by the average daily balance of the related assets or
liabilities for the periods presented. Non-accrual loans have been included in
the average balances of loans receivable.
16
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------------------------
1999 1998
----------------------------------------- ----------------------------------------------
Average Average Average Average
Balance Interest Yield/Rate Balance Interest Yield/Rate
-------------- ------------- ------------ --------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Investments (1) $ 67,588,351 $ 4,495,681 6.65% $ 55,390,843 $ 3,766,518 6.80%
Federal funds sold 2,549,521 129,487 5.08% 1,752,685 92,242 5.26%
Loans receivable (2) 153,267,176 13,321,103 8.69% 127,407,802 11,482,346 9.01%
-------------- ------------- ------------ --------------- -------------- ------------
Total interest
earning assets 223,405,048 17,946,271 8.03% 184,551,330 15,341,106 8.31%
-------------- ------------- ------------ --------------- -------------- ------------
Noninterest-earning assets 14,325,769 14,411,112
-------------- ---------------
Total $ 237,730,817 $ 198,962,442
============== ===============
Liabilities and Stockholders'
Equity:
Interest-bearing liabilities:
NOW and money market
accounts $ 26,199,766 350,773 1.34% $ 22,803,504 335,294 1.47%
Savings accounts 77,325,111 3,099,527 4.01% 54,945,860 2,347,241 4.27%
Certificates of deposit 75,647,738 3,901,802 5.16% 70,513,670 3,823,823 5.42%
Other 11,408,966 672,892 5.90% 9,984,968 628,329 6.29%
-------------- ------------- ------------ --------------- -------------- ------------
Total interest-bearing
liabilities 190,581,581 8,024,994 4.21% 158,248,002 7,134,687 4.51%
------------- ------------- ------------ -------------- ------------
Noninterest-bearing
liabilities 33,145,360 28,532,992
Stockholders equity 14,003,876 12,784,119
-------------- ---------------
Total $ 237,730,817 $ 199,565,113
============== ===============
Net interest income and net
yield on interest-earning assets $ 9,921,277 4.44% $ 8,206,419 4.45%
============= ============ ============== ============
</TABLE>
(1) Includes investment securities and Federal Reserve Bank, Federal Home Loan
Bank of Atlanta, and IBB Stock
(2) Includes loans for which the accrual of interest has been suspended.
17
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1997
----------------------------------------------
Average Average
Balance Interest Yield/Rate
<S> --------------- -------------- -------------
Assets: <C> <C> <C>
Interest-earning assets:
Investments (1) $ 48,679,770 $ 3,251,742 6.68%
Federal funds sold 4,624,589 256,125 5.54%
Loans receivable (2) 108,446,696 10,007,254 9.23%
--------------- -------------- -------------
Total interest earning assets 161,751,055 13,515,121 8.36%
-------------- -------------
Noninterest-earning assets 11,213,419
---------------
Total $ 172,964,474
===============
Liabilities and Stockholders'
Equity:
Interest-bearing liabilities:
NOW and money market
accounts 20,494,288 313,327 1.53%
Savings accounts 44,258,960 1,782,026 4.03%
Certificates of deposit 71,875,056 3,966,955 5.52%
Other 3,405,463 244,528 7.18%
--------------- -------------- ------------
Total interest-bearing
liabilities 140,033,767 6,306,836 4.50%
--------------- -------------- ------------
Noninterest-bearing
liabilities 22,555,163
Stockholders equity 10,375,544
---------------
Total $ 172,964,474
===============
Net interest income and net
yield on interest-earning assets $ 7,208,285 4.46%
============== =============
</TABLE>
18
<PAGE>
RATE/VOLUME ANALYSIS OF NET INCOME
The following table sets forth certain information regarding changes in
interest income and interest expense of Indian River for the periods indicated.
For each category of interest-earning assets and interest-bearing liability,
information is provided on changes attributable to: (i) changes in volume
(changes in volume multiplied by the prior period's rate); (ii) changes in rates
(change in rate multiplied by the prior period's volume) and (iii) changes in
rate-volume (change in rate multiplied by the changes in volume).
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------------------------------
1999 vs. 1998 1998 vs. 1997
Increase (Decrease) Attributable to Increase (Decrease) Attributable to
--------------------------------------------------- -------------------------------------------------
Volume Rate Rate/Volume Change Volume Rate Rate/Volume Change
------------ ----------- ------------ ------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income on:
Investments $ 829,417 $ (82,162) $ (18,092) $ 729,163 $ 448,290 $ 58,430 $ 8,056 $ 514,776
Federal funds sold 41,937 (3,225) (1,467) 37,245 (159,056) (12,738) 7,911 (163,883)
Loans receivable 2,330,519 (408,791) (82,971) 1,838,757 1,749,695 (233,736) (40,867) 1,475,092
------------ ----------- ------------ ------------ ------------ ---------- ----------- -----------
Total interest
income on
interest-earning
assets 3,201,873 (494,178) (102,530) 2,605,165 2,038,929 (188,044) (24,900) 1,825,985
------------ ----------- ------------ ------------ ------------ ---------- ----------- -----------
Interest expense on:
NOW and money market
accounts 49,937 (29,992) (4,466) 15,479 35,304 (11,987) (1,350) 21,967
Savings accounts 956,023 (144,772) (58,965) 752,286 430,293 108,680 26,242 565,215
Certificates of deposit 278,411 (186,829) (13,603) 77,979 (75,138) (69,307) 1,313 (143,132)
Other 89,609 (39,423) (5,623) 44,563 472,439 (30,231) (58,407) 383,801
------------ ----------- ------------ ------------ ------------ ---------- ----------- -----------
Total interest
expense on
interest-bearing
liabilities 1,373,980 (401,016) (82,657) 890,307 862,898 (2,845) (32,202) 827,851
------------ ----------- ------------ ------------ ------------ ---------- ----------- -----------
Increase (decrease) in net
Interest income $ 1,827,893 $ (93,162) $ (19,873) $ 1,714,858 $ 1,176,031 $(185,199) $ 7,302 $ 998,134
============ =========== ============ ============ ============ ========== =========== ===========
</TABLE>
FINANCIAL CONDITION
Total assets were $271.2 million at December 31, 1999 compared to $223.1
million as of December 31, 1998. This represented an increase of 21.6%. Average
earning assets for 1999 were $223.4 million, an increase of 21.0% from the 1998
average of $184.6 million.
Total net loans increased by $23.7 million to $166.6 million or 16.7% at
December 31, 1999 compared to $142.9 million at December 31, 1998. Total
deposits increased by 19.2% to $238.8 million. Investment securities and federal
funds sold increased to $89.3 million, a 35.3% increase from the $66.0 million
as of December 31, 1998.
INVESTMENT ACTIVITY. During 1999, Indian River's investment securities
portfolio increased by $32.6 million, or 57.5%. This increase in the securities
portfolio reflects management's commitment to increasing the level of earning
assets, enhances our liquidity level, and is a function of deposit growth
exceeding loan growth.
19
<PAGE>
The following table provides information regarding the composition of
Indian River's investment portfolio at the dates indicated. See Note 3 to the
Consolidated Financial Statements for additional information regarding the
securities portfolio.
<TABLE>
<CAPTION>
At December 31,
----------------------------------------------------------------------------------
1999 1998 1997
--------------------------- -------------------------- -------------------------
Percent of Percent of Percent of
Balance Total Balance Total Balance Total
------------- ------------- ------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Available for Sale (at Estimated Market
Value):
U.S. Treasury $0 0.0% $7,205 12.7% $15,201 25.7%
U.S. Government Agency obligations 64,852 72.6% 43,050 75.8% 34,888 59.0%
Mortgage-backed securities 6,471 7.3% 5,783 10.2% 8,472 14.3%
Corporate debt securities 10,093 11.3% 0 0.0% 0 0.0%
------------- ------------- ------------- ------------ ------------ -----------
81,416 91.2% 56,038 98.7% 58,561 99.0%
------------- ------------- ------------- ------------ ------------ -----------
Held to Maturity (at Amortized Cost)
Securities issued by state/political
subdivisions $2,025 2.3% $0 0.0% $0 0.0%
Mortgage-backed securities 5,047 5.6% 0 0.0% 0 0.0%
------------- ------------- ------------- ------------ ------------ -----------
$7,072 7.9% $0 0.0% $0 0.0%
------------- ------------- ------------- ------------ ------------ -----------
Other investments $798 0.9% $710 1.3% $603 1.0%
------------- ------------- ------------- ------------ ------------ -----------
Total $89,286 100.0% $56,748 100.0% $59,164 100.0%
============= ============= ============= ============ ============ ===========
</TABLE>
The following table provides information regarding the contractual maturity
and weighted average yield of Indian River's investment portfolio at December
31, 1999.
<TABLE>
<CAPTION>
After One Year After Five Years
One Year or Less Through Five Years Through Ten Years After Ten Years Total
------------------ -------------------- -------------------- ------------------ -----------------
Weighted Weighted Weighted Weighted Weighted
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield Value Yield Value Yield
-------- --------- ---------- --------- ---------- ---------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Available for Sale:
U.S. Government Agency
obligations $0 0.0% $ 5,929 6.8% $53,975 6.9% $4,948 8.2% $64,852 7.0%
Mortgage-backed securities 3 9.1% 1,652 7.0% 2,231 7.0% 2,585 6.1% 6,471 6.6%
Corporate debt securities 0 0.0% 8,163 6.6% 0 0.0% 1,930 8.0% 10,093 6.8%
-------- --------- ---------- --------- --------- ---------- -------- ---------- --------- ---------
Total $3 9.1% $15,744 6.7% $56,206 6.9% $9,463 7.6% $81,416 7.0%
======== ========= ========== ========= ========= ========== ======== ========== ========= =========
Held To Maturity
Securities issued by
state/political subdivisions $0 0.0% $ 101 4.2% $0 0.0% $1,924 5.3% $2,025 5.2%
Mortgage-backed securities 0 0.0% 0 0.0% 0 0.0% 5,047 7.9% 5,047 7.9%
-------- --------- ---------- --------- --------- ---------- -------- ---------- --------- ---------
Total $0 0.0% $101 4.2% $0 0.0% $6,971 7.2% $7,072 7.1%
======== ========= ========== ========= ========= ========== ======== ========== ========= =========
</TABLE>
20
<PAGE>
LOAN PORTFOLIO. The following table shows the composition of Indian River's
loan portfolio by type of loan at the dates indicated.
<TABLE>
At December 31,
------------------------------------------------------------------------------
1999 1998 1997
------------------------- ----------------------- ------------------------
Percent Percent Percent
of Total of Total of Total
Balance Loans Balance Loans Balance Loans
----------- ----------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Real Estate:
Construction and land
development $ 8,626,234 5.1% $ 2,382,245 1.7% $ 1,891,869 1.6%
Farmland 3,145,918 1.9% 2,983,787 2.1% 1,916,384 1.6%
One to four family residential 68,430,840 40.6% 60,955,927 42.2% 49,873,243 42.4%
Multifamily residential 1,766,216 1.0% 1,762,422 1.2% 2,013,791 1.7%
Nonfamily, nonresidential 55,104,420 32.7% 45,452,183 31.5% 32,079,861 27.3%
Agriculture 1,706,865 1.0% 1,551,797 1.1% 1,751,950 1.5%
Commercial and industrial 12,307,814 7.3% 11,037,858 7.6% 9,865,212 8.4%
Consumer 15,091,479 9.0% 15,562,091 10.8% 15,867,870 13.5%
Other 2,370,221 1.4% 2,676,107 1.8% 2,381,137 2.0%
----------- ----------- ------------
Total Loans $ 168,550,007 $ 144,364,417 $ 117,641,317
----------- ----------- ------------
Less: allowance for loan loss 1,904,417 1,510,272 1,322,442
Less: unearned discounts and 932 1,055 8,369
----------- ----------- ------------
Loans, net $ 166,644,658 $ 142,853,090 $ 116,310,506
=========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------
1996 1995
----------------------- ------------------------
Percent Percent
of Total of Total
Balance Loans Balance Loans
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Real Estate:
Construction and land
development $ 588,000 0.6% $ 390,301 0.4%
Farmland 2,207,429 2.1% 2,045,391 2.1%
One to four family residential 41,192,528 39.8% 37,247,969 38.8%
Multifamily residential 2,326,574 2.2% 2,213,702 2.3%
Nonfamily, nonresidential 26,322,946 25.4% 20,922,968 21.8%
Agriculture 2,461,488 2.4% 2,667,803 2.8%
Commercial and industrial 8,337,690 8.1% 6,704,377 7.0%
Consumer 17,760,404 17.2% 21,680,585 22.6%
Other 2,242,145 2.2% 2,134,626 2.2%
----------- ------------
Total Loans $103,439,204 $ 96,007,722
----------- ------------
Less: allowance for loan loss 1,204,220 1,065,993
Less: unearned discounts and 62,593 266,885
----------- ------------
Loans, net $102,172,391 $ 94,674,844
=========== ============
</TABLE>
21
<PAGE>
LOAN MATURITY. The following table sets forth the term to contractual
maturity of Indian River Bank loan portfolio at December 31, 1999. Loans which
have adjustable rates and fixed rates are all shown in the period of contractual
maturity. Demand loans, loans having no contractual maturity and overdrafts are
reported as due in one year or less.
<TABLE>
<CAPTION>
One to Five
Total One Year or Less Years Over Five Years
---------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Commercial, Agricultural $ 14,014,679 $ 4,077,107 $ 9,577,986 $ 359,586
Real Estate Construction 8,626,234 387,116 247,005 7,992,113
Real Estate Mortgage 128,447,394 4,801,237 23,766,054 99,880,103
Consumer, other 17,461,700 4,543,025 12,136,111 782,564
---------------- ----------------- ----------------- -----------------
Total loans $ 168,550,007 $ 13,808,485 $ 45,727,156 $ 109,014,366
================ ================= ================= =================
Loans with:
Predetermined fixed interest $ 77,369,004 $ 10,141,950 $ 38,084,042 $ 29,143,012
Floating interest rate 91,181,003 3,666,599 7,643,110 79,871,294
---------------- ----------------- ----------------- -----------------
Total loans $ 168,550,007 $ 13,808,549 $ 45,727,152 $ 109,014,306
================ ================= ================= =================
</TABLE>
Fixed rate loans due after one year total approximately $67 million and
adjustable rate loans due after one year total approximately $88 million.
ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is a valuation
reserve established by management in an amount it deems adequate to provide for
losses in the loan portfolio. Management assesses the adequacy of the allowance
for loan losses based upon a number of factors including, among others:
analytical reviews of loan loss experience in relationship to outstanding loans
and commitments; unfunded loan commitments; problem and non-performing loans and
other loans presenting credit concerns; trends in loan growth, portfolio
composition and quality; appraisals of the value of collateral; and management's
judgment with respect to current and expected economic conditions and their
impact on the existing loan portfolio.
The allowance for loan losses is increased by provisions for loan losses
charged to expense. Charge-offs of loan amounts determined by management to be
uncollectible or impaired decrease the allowance, and recoveries of previous
charge-offs are added to the allowance.
At December 31, 1999. the allowance for losses was $1.9 million or 1.1% of
loans outstanding compared to $1.5 million or 1.0% of loans outstanding as of
December 31, 1998, an increase of $0.4 million. This increase is attributable
primarily to an increase in total loans outstanding. At December 31, 1999,
non-accrual loans decreased by $200 thousand or 78.7% to $54 thousand compared
to $254 thousand at December 31, 1998. The allowance for loan losses coverage of
non-accrual loans was 3511% at December 31, 1999 compared to a coverage of 594%
at December 31, 1998.
22
<PAGE>
The following table sets forth activity in the allowance for loan losses
for the periods indicated.
<TABLE>
<CAPTION>
At December 31,
--------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Balance at beginning of year $ 1,510 $ 1,322 $ 1,204 $ 1,066 $ 1,007
------------- ------------- ------------- ------------- -------------
Charge-offs:
Commercial, Agricultural (17) (12) (18) (17) (23)
Real-estate construction 0 0 0 0 0
Real-estate mortgage 0 0 (6) (7) 0
Installment loans to individuals (232) (233) (317) (307) (424)
------------- ------------- ------------- ------------- -------------
Total (249) (245) (341) (331) (447)
------------- ------------- ------------- ------------- -------------
Recoveries
Commercial, Agricultural 10 6 6 6 5
Real-estate construction 0 0 0 0 0
Real-estate mortgage 0 0 7 0 0
Installment loans to individuals 43 52 61 48 56
------------- ------------- ------------- ------------- -------------
Total 53 58 74 54 61
------------- ------------- ------------- ------------- -------------
Net charge-offs (196) (187) (267) (277) (386)
Additions charged to operations 590 375 385 415 445
------------- ------------- ------------- ------------- -------------
Balance at end of period $ 1,904 $ 1,510 $ 1,322 $ 1,204 $ 1,066
============= ============= ============= ============= =============
Ratio of net charge-offs during
the period to average loans
outstanding during the period 0.13% 0.15% 0.24% 0.28% 0.42%
</TABLE>
The following table allocates the allowance for loan losses by loan
category. The allocation of the allowance to each category is not necessarily
indicative of future losses and does not restrict the use of the allowance to
absorb losses in any category.
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------------- ----------------- ------------------- ------------------ ------------------
(Dollars in Thousands)
Amount Percent(1) Amount Percent(1) Amount Percent(1) Amount Percent(1) Amount Percent(1)
---------- -------- -------- -------- -------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial,
Agricultural $ 1,085 8.3% $ 794 8.7% 648 9.9% 494 10.4% $ 384 7.0%
Real Estate
Construction 38 5.2% 15 1.7% 13 1.6% 36 0.6% 5 0.4%
Real Estate Mortgage 343 76.1% 354 77.0% 251 73.0% 265 69.7% 167 67.8%
Consumer, other 438 10.4% 347 12.6% 410 15.5% 409 19.3% 510 24.8%
---------- -------- -------- -------- -------- --------- -------- -------- -------- --------
Total allowance
for loan losses $ 1,904 100.0% $ 1,510 100.0% 1,322 100.0% 1,204 100.0% $ 1,066 100.0%
========== ======== ======== ======== ======== ========= ======== ======== ======== ========
</TABLE>
(1) Represents percent of loans in category to gross loans
23
<PAGE>
NON-PERFORMING ASSETS. Indian River Bank's non-performing assets which are
comprised of loans delinquent 90 days or more, non-accrual loans, and other real
estate owned ("OREO"), totaled $106 thousand at December 31, 1999 compared to
$397 thousand at December 31, 1998. The percentage of non-performing assets to
total assets decreased to 0.04% at December 31, 1999 from 0.18% at December 31,
1998.
Non-performing loans constituted all of the non-performing assets at
December 31, 1999 and December 31, 1998. Non-performing loans at December 31,
1999 consist of loans in non-accrual status in the amount of $54 thousand and
loans past due over 90 days of $52 thousand compared to non-accrued loans of
$254 thousand and loans past due over ninety days of $143 thousand at December
31, 1998. The decrease of non-performing loans is primarily the result of our
credit policies, good economic conditions, and management's efforts to improve
the quality of the loan portfolio.
Indian River Bank owned no other real estate owned at either December 31,
1999 or 1998. Generally, Indian River Bank would evaluate the fair OREO value of
each property annually. These evaluations may be appraisals or other market
studies. Credit card loans are placed on non accrual when they are 180 days
delinquent. All other consumer and commercial loans are placed on nonaccrual at
90 days or when determined to be uncollectible by management.
The following table shows the amounts of non-performing assets at the dates
indicated.
<TABLE>
<CAPTION>
December 31,
1999 1998 1997 1996 1995
---------- ---------- ---------- --------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans
Real estate $ 49 $ 254 $ 0 $ 186 $ 0
Installment 5 0 30 6 19
Accrual loans - Past Due 90 days or
more
Real estate 20 132 30 311 228
Installment 32 11 40 96 177
Restructured loans 0 0 0 0 0
Real estate owned 0 0 33 96 104
---------- ---------- ---------- --------- ----------
Total nonperforming assets $ 106 $ 397 $ 133 $ 695 $ 528
========== ========== ========== ========= ==========
</TABLE>
For the year ended December 31, 1999, $3,400 in gross interest income would
have been recorded if the $54,000 of nonaccrual loans had been current
throughout the period. No interest income was actually recorded in respect of
the nonaccrual loans during the period.
At December 31, 1999 and 1998, there were no performing loans considered
potential non-performing loans, defined as loans which are not included in the
past due, nonaccrual or restructured categories, but for which known information
about possible credit problems cause management to be uncertain as to the
ability of the borrowers to comply with the present loans repayment terms.
DEPOSITS AND OTHER BORROWINGS. The principal sources of funds for Indian
River Bank are core deposits (demand deposits, NOW accounts, money market
accounts, savings accounts and certificates of deposit less than $100,000) from
the local market areas surrounding the Bank's offices. The Bank's deposit base
includes transaction accounts, time and savings accounts and accounts which
customers use for cash management and which provide the Bank with a source of
fee income and cross-marketing opportunities as well as a low-cost source of
funds. Time
24
<PAGE>
and savings accounts, including money market deposit accounts, also provide a
relatively stable and low-cost source of funding.
The following table reflects the Bank's deposits by category for the
periods indicated.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
As of December 31,
1999 1998 1997
-------------------------- ------------------------- ------------------------
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
------------- ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
DEPOSIT CATEGORY
Noninterest-bearing demand $32,497 0.0% $27,125 0.0% $21,836 0.0%
Interest-bearing demand 22,797 1.2% 19,412 1.4% 16,727 1.4%
Money market 3,403 2.0% 3,392 2.2% 3,768 2.2%
Savings 77,325 4.0% 54,946 4.3% 44,259 4.0%
Certificates of deposit of $100,000 14,148 5.2% 13,256 5.5% 12,888 5.6%
Other Time 61,500 5.1% 57,257 5.4% 58,987 5.5%
------------- ------------ -----------
Total $211,670 $175,388 $158,465
============= ============ ===========
</TABLE>
The following table indicates the amount of the Bank's certificates of
deposit of $100,000 or more by time remaining until maturity as of December 31,
1999.
<TABLE>
<CAPTION>
December 31, 1999
-------------------
(Dollars in
Thousands)
<S> <C>
Due In
3 months or less $10,342
Over 3 through 6 months 3,434
Over 6 through 12 months 4,796
Over 12 months 3,270
-------------------
Total $21,842
===================
</TABLE>
The following table provides information regarding the Bank's short term
borrowings for the periods indicated. See Note 9 to the Consolidated Financial
Statements for additional information regarding the Bank's borrowings.
<TABLE>
<CAPTION>
Maximum Amount
Outstanding At Any Average Average Rate
Year Ended December 31, Month End Balance Average Rate Ending Balance at Year End
- ------------------------------------------------ -------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
1999 $13,075,000 $3,841,589 5.50% $12,800,000 5.49%
1998 7,425,000 1,713,283 6.28% 0 0.00%
1997 3,000,000 277,466 5.75% 0 0.00%
</TABLE>
ASSET/LIABILITY MANAGEMENT. Indian River's profitability, like that of most
financial institutions, is dependent to a large extent upon its net interest
income, which is the difference between its interest income on interest-earning
assets, such as loans and investments, and its interest expense on
interest-bearing liabilities, such as deposits. Interest rate risk arises due to
fluctuations in the general level of interest rates and such fluctuations can
significantly impact our level of profitability. Managing interest rate risk is
fundamental to banking. The inherent maturing and re-pricing characteristics of
our day-to-day lending and deposit activities create a naturally
asset-sensitivity structure. Indian River seeks to manage its interest rate risk
through its Asset/Liability Management
25
<PAGE>
Committee (ALCO) established by the Board of Directors and consisting of the
Chief Executive Officer, Chief Financial Officer, Chief Lending Officer, Lending
Officers, and Loan Operations Officers.
The Chief Financial Officer monitors the day-to-day exposure to changes in
interest rates in response to loan and deposit flows. The methodology we use for
measuring exposure to interest rate risk is intended to ensure that we include a
sufficiently broad range of rate scenarios and pattern of rate movements that we
believe to be reasonably possible. The methodology measures the impact that 100,
200, and 300 basis point rate changes would have on earnings over the subsequent
twelve months. Our earnings simulation model reflects a number of variables that
we identify as being affected by interest rates. The ALCO also establishes and
monitors the volume and mix of assets and funding sources to produce results
that are consistent with liquidity, capital adequacy, growth, risk, and
profitability goals.
Liquidity management enables us to maintain sufficient cash flow to fund
operations and to meet financial obligations to depositors and borrowers. Indian
River Bank's liquidity is enhanced by its ability to attract and retain deposits
and by principal and interest payments on loans and maturing securities in the
investment portfolio. Indian River Bank's core deposit base, consisting of
demand deposits, money market, and savings accounts supplemented by other
deposits of varying maturities and rates, contributes to the Corporation's
liquidity. Our liquidity position, those assets invested in federal funds, and
obligations of the U.S. Government, its agencies and sponsored entities
available for sale, of $73.7 million at December 31, 1999, reflected an increase
of $9.4 million from December 31, 1998, or 14.6%. Funds available through
short-term borrowings and asset maturities are considered adequate to meet all
current needs. At December 31, 1999, Indian River had a $4.0 million line of
credit at a correspondent bank. Subsequent to December 31, 1999, the outstanding
balance on the line of credit increased to $2,945,381 at March 31, 2000.
Although management believes that the liquidity position is adequate, increased
loan demand could have an adverse impact on liquidity. Indian River Bank also
has a $35.0 million borrowing line with the Federal Home Loan Bank of Atlanta.
This line may be utilized as a supplementary source of funding growth for the
Bank. In addition, the ALCO has established minimum standards and key ratios of
asset quality and performance. These standards and ratios provide the framework
for guidance and measurement. Management evaluates these standards and ratios on
an ongoing basis.
The loan to deposit ratio at December 31, 1999 was 69.8% down from 71.3% at
December 31, 1998. The loan to total assets ratio at December 31, 1999 was 61.4%
compared to 64.0% at December 31, 1998.
26
<PAGE>
The amounts of interest-earning assets and interest-bearing liabilities
outstanding at December 31, 1999 which are anticipated by the Bank, based on
certain assumptions, to re-price or mature in future time periods, are set forth
in the sensitivity analysis below. The table reflects the shorter of the
maturity or repricing date as of December 31, 1999.
<TABLE>
<CAPTION>
Due In
-------------------------------------------------------------------------
More than 3
Months but 1 Year 3 Years
3 Months Less than 1 through 3 through 5 More than
or Less Year Years Years 5 Years Total
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
ASSETS
Securities available-for-sale $ -- $ 2,535 $ 5,850 $ 9,894 $ 63,137 $ 81,416
Securities held to maturity 5,046 -- 101 -- 1,925 7,072
Other investments 798 -- -- -- -- 798
Federal funds sold -- -- -- -- -- --
Loans 34,042 52,992 44,190 25,801 11,525 168,550
-------------------------------------------------------------------------
Total earning assets $ 39,886 $ 55,527 $ 50,141 $ 35,695 $ 76,587 $ 257,836
-------------------------------------------------------------------------
LIABILITIES
Certificates of deposit $ 38,467 $ 40,297 $ 23,684 $ 2,553 $ 2 $ 105,003
Money market accounts -- 2,158 2,158 -- -- 4,316
Transactions accounts -- -- 14,592 4,864 4,864 24,320
Savings accounts -- -- 43,839 14,613 14,613 73,065
Fed funds purchased 7,800 -- -- -- -- 7,800
FHLB advances 142 5,143 571 571 2,000 8,427
-------------------------------------------------------------------------
Total interest-bearing
liabilities $ 46,409 $ 47,598 $ 84,844 $ 22,601 $ 21,479 $ 222,931
-------------------------------------------------------------------------
Interest sensitivity gap:
Amount $ (6,523) $ 7,929 $ (34,703) $ 13,093 $ 55,108 $ 34,904
-------------------------------------------------------------------------
Cumulative Gap $ (6,523) $ 1,406 $ (33,297) $ (20,204) $ 34,904 $ 34,904
Gap as % of Total Assets (2.53)% 3.08% (13.46)% 5.08% 21.38% 13.55%
Cumulative Gap as % of Total (2.53)% 0.55% (12.91)% (7.83)% 13.55% 13.55%
Ratio of rate sensitive assets 0.86% 1.17% 0.59% 1.58% 3.57% 1.16%
Cumulative ratio of rate
sensitive assets to rate
sensitive liabilities 0.86% 1.02% 0.81% 0.90% 1.16% 1.16%
</TABLE>
The amount of assets and liabilities shown which re-price or mature during
a particular period were determined in accordance with the earlier of term to
re-pricing or the contractual terms of the asset or liability. The Bank has
assumed that its savings, interest checking, and money market accounts re-price
daily. At December 31, 1999, the Bank's one-year interest sensitivity gap (the
difference between the amount of interest-earning assets and interest bearing
liabilities, anticipated by the Bank, based on certain assumptions, to mature or
re-price within one year) as a percentage to total assets was 0.5%. This
positive gap position means the Bank had $1.4 million more assets than
liabilities re-pricing within one year. This generally indicates that in a
period of declining interest rates, the Bank's net interest income maybe
adversely affected. Conversely, in a rising interest rate environment, the
Bank's net interest income may improve. However, this approach assumes that all
re-pricing assets and liabilities will re-price the same way. Historical data
indicates that certain deposit liabilities such as interest checking, savings,
and money market deposits do not re-price the same way as other products and
interest gap analysis tend to be more accurate when adjusted to reflect such
behavior. No adjustments are included in the table presented.
27
<PAGE>
Indian River also monitors its exposure to changes in interest rates using
models which measure the impact of assumed changes. See "Asset/Liability
Management" above.
CAPITAL ADEQUACY. Total stockholders' equity was $13.6 million at December
31, 1999 compared to $13.8 million at December 31, 1998. The change represents a
decrease of $0.2 million or 1.4%. This change is a result of retained net
earnings of $2.0 million more than offset by net unrealized holding losses on
investment securities of $2.2 million in 1999.
At December 31, 1999, Indian River Bank's ratio of Tier 1 capital to total
average assets equaled 6.5%, which exceeded the minimum leverage capital ratio
of 4.0% by 2.5% and the minimum leverage ratio for "well capitalized" banks of
5.0% by 1.5%. At December 31, 1999, Indian River Bank's Tier 1 capital to
risk-weighted assets ratio was 9.4%, which exceeded the minimum required ratio
of 4.0% by 5.4% and the "well capitalized" ratio of 6.0% by 3.4%. Indian River
Bank's total capital to risk weighted assets ratio at December 31, 1999 was
10.4%, which exceeded the minimum required ratio of 8.0% by 2.4% and the "well
capitalized" ratio of 10.0% by 0.4%.
IMPACT OF INFLATION AND CHANGING PRICES
The Consolidated Financial Statements and Notes thereto have been prepared
in accordance with Generally Accepted Accounting Principles, which require the
measurement of financial position and operating results in terms of historical
dollars without considering the changes in the relative purchasing power of
money over time due to inflation. The impact of inflation is reflected in the
increased cost of the Corporation's operations. Unlike most industrial
companies, nearly all assets and liabilities of the Corporation are monetary in
nature. As a result, interest rates have a greater impact on the Corporation's
performance than do the effects of general levels of inflation. Interest rates
do not necessarily move in the same direction or to the same extent as the price
of goods or services.
IMPACT OF NEW ACCOUNTING STANDARDS
The FASB has issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, which the Company has not been required to adopt as of
December 31, 1999. This Statement, which is effective for fiscal years beginning
after June 15, 2000, establishes accounting and reporting standards for
derivative instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognizes
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. If certain conditions are
met, a derivative may be specifically designated as (a) a hedge of the exposure
to changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows
of a forecasted transaction, or (c) a hedge of the foreign currency exposure of
a net investment in a foreign operation, an unrecognized firm commitment, an
available-for-sale security, or a foreign-currency-denominated forecasted
transaction. This statement is not expected to have a significant impact on the
Company.
BUSINESS OF INDIAN RIVER AND INDIAN RIVER BANK
GENERAL
Indian River was incorporated under the laws of the State of Florida in
January 1989 to be the holding company for Indian River Bank, and acquired all
of the shares of Indian River Bank in April 1989. Indian River Bank, a national
banking association, is Indian River's sole subsidiary. Indian River Bank
commenced operations in March 1985, and currently operates out of its main
office and five branch offices. Indian River Bank seeks to provide a high level
of personal service and a sophisticated menu of products to individuals and to
small and medium sized businesses. While Indian River Bank offers a full range
of services to a wide array of depositors and borrowers, it has chosen the small
and medium sized businesses, professionals and individual retail customers as
its primary target market. Indian River Bank believes that as financial
institutions grow and are merged with or acquired by larger institutions with
headquarters that are far away from the local customer base, the local business
and individual is further removed from
28
<PAGE>
the point of decision making. Indian River Bank attempts to place the customer
contact and the ultimate decision on products and credits as close together as
possible.
LENDING ACTIVITIES
Indian River Bank offers a full spectrum of lending services to its
customers, including commercial loans, lines of credit, residential mortgages,
home equity loans, personal loans, auto loans and financing arrangements for
personal equipment and business equipment. Loan terms, including interest rates,
loan to value ratios, and maturities, are tailored as much as possible to meet
the needs of the borrower. A special effort is made to keep loan products as
flexible as possible within the guidelines of prudent banking practices in terms
of interest rate risk and credit risk.
The primary factors taken into consideration by Indian River Bank when
considering loan requests are the cash flow and financial condition of the
borrower, the value of the underlying collateral, if any, and the character and
integrity of the borrower. These factors are evaluated in a number of ways
including an analysis of financial statements, credit reviews, trade reviews,
and visits to the borrower's place of business. The bank has implemented a
comprehensive loan policy and procedures manual to provide its loan officers
with term, collateral, loan-to-value and pricing guidelines. The policy manual
and sound credit analysis, together with thorough review by the Asset-Liability
Committee, have resulted in a profitable loan portfolio, with minimal
non-performing assets.
Loan business is generated primarily through referrals and direct-calling
efforts. Referrals of loan business come from directors, shareholders, current
customers and professionals such as lawyers, accountants and financial
intermediaries.
At December 31, 1999, Indian River Bank's statutory lending limit to any
single borrower was $2,819,912, subject to certain exceptions provided under
applicable law. As of December 31, 1999, Indian River Bank's credit exposure to
its largest borrower was $2,650,000.
Commercial Loans. Commercial loans are written for any business purpose,
including the financing of plant and equipment, the carrying of accounts
receivable, contract administration, and the acquisition and construction of
real estate projects. Special attention is paid to the commercial real estate
market which is particularly stable and active in the Indian River and Brevard
County area. Indian River Bank's commercial loan portfolio reflects a diverse
group of borrowers with no concentration in any borrower, or group of borrowers.
As part of its internal loan review process, Indian River Bank's
Asset-Liability Committee, comprised of loan officers and staff, reviews all
loans 30-day delinquent, loans on the Watch List, loans rated special mention,
substandard, or doubtful, and other loans of concern at least quarterly. Loan
reviews are reported to the Audit and Examining Committee with any adversely
rated changes specifically mentioned. All other loans with their respective risk
ratings are reported monthly to Indian River Bank's Board of Directors. The
Audit and Examining Committee coordinates periodic documentation and internal
control reviews by outside vendors to complement loan reviews.
Residential Mortgage and Home Equity Loans. The strong local economy
provides for a large and active real estate market for the construction and sale
of new residential property and sale of existing housing. Indian River Bank
provides financing for the construction and acquisition of residential property
throughout its market area. Indian River Bank has availed itself of the services
of mortgage brokers, and programs offered by the Federal Home Loan Bank of
Atlanta in an effort to offer as many long-term and low interest rate mortgage
products as possible. In addition, Indian River Bank has developed a competitive
home equity line of credit product for the use of its customers. This product
offers the customer the ability to use the line of credit flexibility features
to manage their own credit needs on an on-going basis. Indian River Bank sells
loans which it originates for the secondary market to private investors and
government sponsored associations.
Other Loans. Loans are considered for any worthwhile personal or business
purpose on a case-by-case basis, such as the financing of equipment,
receivables, contract administration expenses, land acquisition and development,
and automobile financing.
29
<PAGE>
INVESTMENT ACTIVITIES
The investment policy of Indian River Bank is an integral part of its
overall asset/liability management program. The investment policy is to
establish a portfolio which will provide liquidity necessary to facilitate
funding of loans and to cover deposit fluctuations while at the same time
achieving a satisfactory return on the funds invested. Indian River Bank seeks
to maximize earnings from its investment portfolio consistent with the safety
and liquidity of those investment assets.
The securities in which Indian River Bank may invest are subject to
regulation and, for the most part, are limited to securities which are
considered investment grade securities. In addition, Indian River Bank's
internal investment policy restricts investments to the following categories:
U.S. Treasury securities; obligations of U.S. government agencies, investment
grade obligations of U.S. private corporations, mortgage-backed securities,
including securities issued by Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation; and securities of states and political
subdivisions, all of which must be considered investment grade by a recognized
rating service. See Note 3 to the Consolidated Financial Statements for further
information about the investment portfolio.
BROKERAGE ACTIVITIES
Indian River Bank offers brokerage services through FiServe, a third party
vendor. Services provided by FiServe include a full line of investment products,
including the purchase and sale of mutual funds, annuities, stocks, options, and
corporate and government bonds.
The manager of brokerage services for Indian River Bank is a licensed
securities representative and is a dual employee of both FiServe and Indian
River Bank. In such capacity, he must comply with all applicable rules and
regulations of the FDIC, the SEC and the National Association of Securities
Dealers. Fees and commissions earned by the brokerage services department are
paid monthly by FiServe directly to Indian River Bank.
The customer base of the brokerage department is made up of approximately
99% percent individuals, with the remainder consisting of investment clubs and
other accounts. As of December 31, 1999, there were approximately 530 open
brokerage accounts.
SOURCES OF FUNDS
Deposits. Deposits obtained through bank offices have traditionally been
the principal source of Indian River Bank's funds for use in lending and for
other general business purposes. At December 31, 1999 total deposits in the Bank
amounted to $238.8 million. Certificates of deposit and savings deposits,
representing over 75% of the deposit base, are Indian River Bank's primary
source of deposit funds.
In order to better serve the needs of its customers, Indian River Bank
offers several types of deposit accounts in addition to standard savings,
checking, and NOW accounts. Special deposit accounts include low cost Personal
Checking and Small Business Checking. Personal checking requires no minimum
balance and may have no monthly fee, per check charge, or activity limit. Small
Business Checking allows a small business to pay a flat monthly service charge
of $15.00, and a $0.15 per check charge, offset by an earnings credit of $0.25
per $100.00 collected balance in the account during the period.
Borrowing. While Indian River has not traditionally placed significant
reliance on borrowings as a source of liquidity, it has established various
borrowing arrangements in order to provide management with additional sources of
liquidity and funding, thereby increasing flexibility. Management believes that
Indian River currently has adequate liquidity available to respond to current
liquidity demands. See "Management's Discussion and Analysis" (page 15) and Note
9 to the Consolidated Financial Statements.
30
<PAGE>
COMMUNITY REINVESTMENT ACT
Indian River Bank is committed to serving the banking needs of the entire
community, including low and moderate income areas, and is a supporter of the
Community Reinvestment Act ("CRA"). There are several ways in which Indian River
Bank attempts to fulfill this commitment, including working with economic
development agencies, undertaking special projects, and becoming involved with
neighborhood outreach programs.
Indian River Bank has contacts with state and city agencies that assist in
the financing of affordable housing developments as well as with groups which
promote the economic development of low and moderate income individuals. Indian
River Bank has computer software to geographically code all types of accounts to
track business development and performance by census tract and to assess market
penetration in low and moderate income neighborhoods within the primary service
area. Indian River Bank is a registered Small Business Administration lender.
Indian River encourages its directors and officers to participate in
community, civic and charitable organizations. Management and members of the
Board of Directors periodically review the various CRA activities of Indian
River Bank, including the advertising program and geocoding of real estate loans
by census tract data which specifically focuses on low income neighborhoods, its
credit granting process with respect to business prospects generated in these
areas, and its involvement with community leaders on a personal level.
OFFICE PROPERTIES
The executive offices of Indian River and Indian River Bank, and the main
office of Indian River Bank are located at 958 20th Place, Vero Beach, Florida,
in a 12,000 square foot, two-story masonry building. Indian River owns the
building. Indian River owns the buildings which house Indian River Bank's Loan
Center and the South Sebastian Branch. The Loan Center is located at 929 21st
Street, Vero Beach in a 10,000 square foot masonry building. The Loan Center
site also houses a six lane drive through banking facility. The South Sebastian
branch is located at 816 US 1, Sebastian, Florida, in a 4,000 square foot brick
building, and has one drive through lane.
Indian River leases the properties housing its remaining branches and the
Operations Center. The Roseland Branch, located at 13600 US 1, Unit 14,
Sebastian, Florida, in a 2,600 square foot masonry building is leased under a
two year lease which terminates in February 2001, and has a current annual rent
of $35,387, subject to annual increase based on the consumer price index (the
"CPI"). The Plantation branch, located at 6600 20th Street, Vero Beach, Florida,
consists of 2,875 square feet in a masonry building and three drive through
lanes. The property is occupied under a ten year lease, terminating in 2002, at
a current annual rent of $36,078, subject to annual increase based on the CPI,
with a maximum increase of 5% annually. Indian River has four three year renewal
options. The Palm Bay branch, located at 5240 Babcock Street, NE, Palm Bay,
Florida, consists of 5,000 square feet in a masonry building and three drive
through lanes. The property is occupied under a three year lease, terminating in
October 2000, at a current annual rent of $68,237, subject to annual increase
based on the CPI, with a 5% maximum annual increase. Indian River has three
three year renewal options. The Gateway Office, located at 1421 Gateway Drive,
Melbourne, Florida, is a 2,500 square foot stand alone masonry building with
three drive through lanes. The property is occupied under a ten year lease,
terminating in 2009, at a current annual rent of $69,626, subject to annual
increase based on the CPI with an 8% maximum annual increase. Indian River has
two five year renewal options. The Operations Center, located at 3895 39th
Square, is occupied under two leases. The Operations Center consists of
approximately 10,300 square feet in a frame building. The aggregate current
annual rental is $82,862, subject to annual increase based on the CPI, with a 2%
minimum annual increase and a 5% maximum annual increase. The first lease,
covering approximately 8,300 square feet, expires in 2002 and is subject to two
five year renewal options. The second lease, covering 2,000 square feet is
leased under a one year lease, with a one year renewal option.
Management believes the existing facilities are adequate to conduct Indian
River's business.
31
<PAGE>
LEGAL PROCEEDINGS
Indian River and Indian River Bank are involved from time to time in
routine legal proceedings occurring in the ordinary course of business. In the
opinion of management, the final disposition of these matters will not have a
material adverse effect on Indian River's financial condition or results of
operations.
COMPETITION
In attracting deposits and making loans, Indian River Bank encounters
competition from other institutions, including larger commercial banking
organizations, savings banks, credit unions, other financial institutions and
non-bank financial service companies serving Indian River and Brevard counties
and adjoining areas. Financial and non-financial institutions not located in the
market are also able to reach persons and entities based in the market through
mass marketing, the internet, telemarketing, and other means. The principal
methods of competition include the level of loan interest rates, interest rates
paid on deposits, efforts to obtain deposits, range of services provided and the
quality of these services. Our competitors include several major financial
companies whose substantially greater resources may afford them a marketplace
advantage by enabling them to maintain numerous banking locations and mount
extensive promotional and advertising campaigns. In light of the deregulation of
the financial service industry and the absence of interest rate controls on
deposits, we anticipate continuing competition from all of these institutions in
the future. Additionally, as a result of legislation which reduced restrictions
on interstate banking and widened the array of companies that may own banks,
Indian River Bank may face additional competition from institutions outside the
Florida market and outside the traditional range of bank holding companies which
may take advantage of such legislation to acquire or establish banks or branches
in Indian River Bank's market. There can be no assurance that we will be able to
successfully meet these competitive challenges. See "Risk Factors --
Competition" and "Supervision and Regulation -- Indian River" (page 32)
In addition to offering competitive rates for its banking products and
services, our strategy for meeting competition has been to concentrate on
specific segments of the market for financial services, particularly small
business and individuals, by offering such customers customized and personalized
banking services. Although there are other small banks offering personalized
banking services in Indian River Bank's primary service area, we believe that
Indian River Bank is one of few such banks offering flexible credit
accommodations to small businesses.
We believe that active participation in civic and community affairs is an
important factor in building our reputation and, thereby, attracting customers.
EMPLOYEES
As of December 31, 1999, Indian River Bank had 116 full-time and 4
part-time employees. Indian River has no employees who are not also employees of
Indian River Bank. Such employees are not represented by any collective
bargaining unit, and we believe our employee relations are good. Indian River
Bank maintains a benefit program which includes health and dental insurance,
life and long-term disability insurance, and a 401(k) plan for substantially all
employees.
SUPERVISION AND REGULATION
INDIAN RIVER
Indian River is a bank holding company registered under the Bank Holding
Company Act of 1956, as amended, (the "Act") and is subject to supervision by
the Federal Reserve Board. As a bank holding company, Indian River will be
required to file with the Federal Reserve Board an annual report and such other
additional information as the Federal Reserve Board may require pursuant to the
Act. The Federal Reserve Board may also make examinations of Indian River and
each of its subsidiaries.
The Act requires approval of the Federal Reserve Board for, among other
things, the acquisition by a proposed bank holding company of control of more
than five percent (5%) of the voting shares, or substantially all the assets, of
32
<PAGE>
any bank or the merger or consolidation by a bank holding company with another
bank holding company. The Act also generally permits the acquisition by a bank
holding company of control, or substantially all the assets, of any bank located
in a state other than the home state of the bank holding company, except where
the bank has not been in existence for the minimum period of time required by
state law, but if the bank is at least 5 years old, the Federal Reserve Board
may approve the acquisition.
Under current law, with certain limited exceptions, a bank holding company
is prohibited from acquiring control of any voting shares of any company which
is not a bank or bank holding company and from engaging directly or indirectly
in any activity other than banking or managing or controlling banks or
furnishing services to or performing service for its authorized subsidiaries. A
bank holding company may, however, engage in or acquire an interest in a company
that engages in activities which the Federal Reserve Board has determined by
order or regulation to be so closely related to banking or managing or
controlling banks as to be properly incident thereto. In making such a
determination, the Federal Reserve Board is required to consider whether the
performance of such activities can reasonably be expected to produce benefits to
the public, such as convenience, increased competition or gains in efficiency,
which outweigh possible adverse effects, such as undue concentration of
resources, decreased or unfair competition, conflicts of interest or unsound
banking practices. The Federal Reserve Board is also empowered to differentiate
between activities commenced de novo and activities commenced by the
acquisition, in whole or in part, of a going concern. Some of the activities
that the Federal Reserve Board has determined by regulation to be closely
related to banking include making or servicing loans, performing certain data
processing services, acting as a fiduciary or investment or financial advisor,
and making investments in corporations or projects designed primarily to promote
community welfare.
Effective on March 11, 2000, the Gramm Leach Bliley Act (the "GLB Act")
allows a bank holding company or other company to certify status as a financial
holding company, which will allow such company to engage in activities that are
financial in nature, that are incidental to such activities, or are
complementary to such activities. The GLB Act enumerates certain activities that
are deemed financial in nature, such as underwriting insurance or acting as an
insurance principal, agent or broker, underwriting, dealing in or making markets
in securities, and engaging in merchant banking under certain restrictions. It
also authorizes the Federal Reserve Board to determine by regulation what other
activities are financial in nature or incidental or complementary thereto.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act on any extensions of credit to
the bank holding company or any of its subsidiaries, or investments in the stock
or other securities thereof, and on the taking of such stock or securities as
collateral for loans to any borrower. Further, a holding company and any
subsidiary bank are prohibited from engaging in certain tie-in arrangements in
connection with the extension of credit. A subsidiary bank may not extend
credit, lease or sell property, or furnish any services, or fix or vary the
consideration for any of the foregoing, on the condition that: (i) the customer
obtain or provide some additional credit, property or services from or to such
bank other than a loan, discount, deposit or trust service; (ii) the customer
obtain or provide some additional credit, property or service from or to the
company or any other subsidiary of the company; or (iii) the customer not obtain
some other credit, property or service from competitors, except for reasonable
requirements to assure the soundness of credit extended.
The Federal Reserve has also adopted capital guidelines for bank holding
companies that are substantially the same as the requirements applying to
national banks. See "Regulatory Capital Requirements" (page 13) and "Supervision
and Regulation - Indian River Bank" (page 33).
INDIAN RIVER BANK
Indian River Bank is a national banking association. Its deposit accounts
are insured by the Bank Insurance Fund of the FDIC up to the maximum legal
limits of the FDIC and it is subject to regulation, supervision and regular
examination by the Office of the Comptroller of the Currency and the FDIC. The
regulations of these various agencies govern most aspects of Indian River Bank's
business, including required reserves against deposits, loans, investments,
mergers and acquisitions, borrowings, dividends and location and number of
branch offices. The laws and regulations
33
<PAGE>
governing Indian River Bank generally have been promulgated to protect
depositors and the deposit insurance funds, and not for the purpose of
protecting stockholders.
Competition among commercial banks, savings and loan associations, and
credit unions has increased following enactment of legislation which greatly
expanded the ability of banks and bank holding companies to engage in interstate
banking or acquisition activities. The GLB Act will allow a wider array of
companies to own banks, which could result in companies with resources
substantially in excess of Indian River's entering into competition with Indian
River and Indian River Bank.
Banking is a business which depends on interest rate differentials. In
general, the differences between the interest paid by a bank on its deposits and
its other borrowings and the interest received by a bank on loans extended to
its customers and securities held in its investment portfolio constitute the
major portion of Indian River Bank's earnings. Thus, the earnings and growth of
Indian River Bank will be subject to the influence of economic conditions in
general, both domestic and foreign, and also to the monetary and fiscal policies
of the United States and its agencies, particularly the Federal Reserve Board
which regulates the supply of money through various means including open market
dealings in United States government securities. The nature and timing of
changes in such policies and their impact on Indian River Bank cannot be
predicted.
Branching and Interstate Banking. The federal banking agencies are
authorized to approve interstate bank merger transactions without regard to
whether such transaction is prohibited by the law of any state, unless the home
state of one of the banks has opted out of the interstate bank merger provisions
of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Riegle-Neal Act") by adopting a law after the date of enactment of the
Riegle-Neal Act and prior to June 1, 1997 which applies equally to all
out-of-state banks and expressly prohibits merger transactions involving
out-of-state banks. Interstate acquisitions of branches are permitted only if
the law of the state in which the branch is located permits such acquisitions.
Such interstate bank mergers and branch acquisitions are also subject to the
nationwide and statewide insured deposit concentration limitations described in
the Riegle-Neal Act.
The Riegle-Neal Act authorizes the federal banking agencies to approve
interstate branching de novo by national and state banks in states which
specifically allow for such branching. Florida has enacted laws which permit
interstate acquisitions of banks and bank branches and permit out-of-state banks
to establish de novo branches.
Capital Adequacy Guidelines. The Federal Reserve Board and the OCC have
adopted risk-based capital adequacy guidelines pursuant to which they assess the
adequacy of capital in examining and supervising banks and bank holding
companies and in analyzing bank regulatory applications. Risk-based capital
requirements determine the adequacy of capital based on the risk inherent in
various classes of assets and off-balance sheet items.
National banks are expected to meet a minimum ratio of total qualifying
capital (the sum of core capital (Tier 1) and supplementary capital (Tier 2)) to
risk weighted assets of 8%. At least half of this amount (4%) should be in the
form of core capital.
Tier 1 Capital generally consists of the sum of common stockholders'
equity and perpetual preferred stock (subject in the case of the latter to
limitations on the kind and amount of such stock which may be included as Tier 1
Capital), less goodwill, without adjustment for changes in the market value of
securities classified as "available for sale" in accordance with FAS 115. Tier 2
Capital consists of the following: hybrid capital instruments; perpetual
preferred stock which is not otherwise eligible to be included as Tier 1
Capital; term subordinated debt, intermediate-term preferred stock; and, subject
to limitations, general allowances for loan losses. Assets are adjusted under
the risk-based guidelines to take into account different risk characteristics,
with the categories ranging from 0% (requiring no risk-based capital) for assets
such as cash, to 100% for the bulk of assets which are typically held by a bank
holding company, including certain multi-family residential and commercial real
estate loans, commercial business loans and consumer loans. Residential first
mortgage loans on one to four family residential real estate and certain
seasoned multi-family residential real estate loans, which are not 90 days or
more past-due or non-performing and which have been made in accordance with
prudent underwriting standards are assigned a 50% level in the risk-weighing
system, as are certain privately-issued mortgage-backed securities representing
indirect ownership of such loans. Off-balance sheet items also are adjusted to
take into account certain risk characteristics.
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<PAGE>
In addition to the risk-based capital requirements, the OCC has established
a minimum 3.0% Leverage Capital Ratio (Tier 1 Capital to total adjusted assets)
requirement for the most highly-rated banks, with an additional cushion of at
least 100 to 200 basis points for all other banks, which effectively increases
the minimum Leverage Capital Ratio for such other banks to 4.0% - 5.0% or more.
The highest-rated banks are those that are not anticipating or experiencing
significant growth and have well diversified risk, including no undue interest
rate risk exposure, excellent asset quality, high liquidity, good earnings and,
in general, those which are considered a strong banking organization. A bank
having less than the minimum Leverage Capital Ratio requirement shall, within 60
days of the date as of which it fails to comply with such requirement, submit a
reasonable plan describing the means and timing by which a bank shall achieve
its minimum Leverage Capital Ratio requirement. A bank which fails to file such
plan is deemed to be operating in an unsafe and unsound manner, and could
subject that bank to a cease-and-desist order. Any insured depository
institution with a Leverage Capital Ratio that is less than 2.0% is deemed to be
operating in an unsafe or unsound condition pursuant to Section 8(a) of the
Federal Deposit Insurance Act (the "FDIA") and is subject to potential
termination of deposit insurance. However, such an institution will not be
subject to an enforcement proceeding solely on account of its capital ratios, if
it has entered into and is in compliance with a written agreement to increase
its Leverage Capital Ratio and to take such other action as may be necessary for
the institution to be operated in a safe and sound manner. The capital
regulations also provide, among other things, for the issuance of a capital
directive, which is a final order issued to a bank that fails to maintain
minimum capital or to restore its capital to the minimum capital requirement
within a specified time period. Such directive is enforceable in the same manner
as a final cease-and-desist order.
Prompt Corrective Action. Under Section 38 of the FDIA, each federal
banking agency is required to implement a system of prompt corrective action for
institutions which it regulates. The federal banking agencies have promulgated
substantially similar regulations to implement the system of prompt corrective
action established by Section 38 of the FDIA. Under the regulations, a bank
shall be deemed to be: (i) "well capitalized" if it has a Total Risk Based
Capital Ratio of 10.0% or more, a Tier 1 Risk Based Capital Ratio of 6.0% or
more, a Leverage Capital Ratio of 5.0% or more and is not subject to any written
capital order or directive; (ii) "adequately capitalized" if it has a Total Risk
Based Capital Ratio of 8.0% or more, a Tier 1 Risk Based Capital Ratio of 4.0%
or more and a Tier 1 Leverage Capital Ratio of 4.0% or more (3.0% under certain
circumstances) and does not meet the definition of "well capitalized;" (iii)
"undercapitalized" if it has a Total Risk Based Capital Ratio that is less than
8.0%, a Tier 1 Risk based Capital Ratio that is less than 4.0% or a Leverage
Capital Ratio that is less than 4.0% (3.0% under certain circumstances); (iv)
"significantly undercapitalized" if it has a Total Risk Based Capital Ratio that
is less than 6.0%, a Tier 1 Risk Based Capital Ratio that is less than 3.0% or a
Leverage Capital Ratio that is less than 3.0%; and (v) "critically
undercapitalized" if it has a ratio of tangible equity to total assets that is
equal to or less than 2.0%.
An institution generally must file a written capital restoration plan which
meets specified requirements with an appropriate federal banking agency within
45 days of the date the institution receives notice or is deemed to have notice
that it is undercapitalized, significantly undercapitalized or critically
undercapitalized. A federal banking agency must provide the institution with
written notice of approval or disapproval within 60 days after receiving a
capital restoration plan, subject to extensions by the applicable agency.
An institution which is required to submit a capital restoration plan must
concurrently submit a performance guaranty by each company that controls the
institution. Such guaranty shall be limited to the lesser of (i) an amount equal
to 5.0% of the institution's total assets at the time the institution was
notified or deemed to have notice that it was undercapitalized or (ii) the
amount necessary at such time to restore the relevant capital measures of the
institution to the levels required for the institution to be classified as
adequately capitalized. Such a guaranty shall expire after the federal banking
agency notifies the institution that it has remained adequately capitalized for
each of four consecutive calendar quarters. An institution which fails to submit
a written capital restoration plan within the requisite period, including any
required performance guaranty, or fails in any material respect to implement a
capital restoration plan, shall be subject to the restrictions in Section 38 of
the FDIA which are applicable to significantly undercapitalized institutions.
A "critically undercapitalized institution" is to be placed in
conservatorship or receivership within 90 days unless the FDIC formally
determines that forbearance from such action would better protect the deposit
insurance fund.
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<PAGE>
Unless the FDIC or other appropriate federal banking regulatory agency makes
specific further findings and certifies that the institution is viable and is
not expected to fail, an institution that remains critically undercapitalized on
average during the fourth calendar quarter after the date it becomes critically
undercapitalized must be placed in receivership. The general rule is that the
FDIC will be appointed as receiver within 90 days after a bank becomes
critically undercapitalized unless extremely good cause is shown and an
extension is agreed to by the federal regulators. In general, good cause is
defined as capital which has been raised and is imminently available for
infusion into a bank except for certain technical requirements which may delay
the infusion for a period of time beyond the 90 day time period.
Immediately upon becoming undercapitalized, an institution shall become
subject to the provisions of Section 38 of the FDIA, which (i) restrict payment
of capital distributions and management fees; (ii) require that the appropriate
federal banking agency monitor the condition of the institution and its efforts
to restore its capital; (iii) require submission of a capital restoration plan;
(iv) restrict the growth of the institution's assets; and (v) require prior
approval of certain expansion proposals. The appropriate federal banking agency
for an undercapitalized institution also may take any number of discretionary
supervisory actions if the agency determines that any of these actions is
necessary to resolve the problems of the institution at the least possible
long-term cost to the deposit insurance fund, subject in certain cases to
specified procedures. These discretionary supervisory actions include: requiring
the institution to raise additional capital; restricting transactions with
affiliates; requiring divestiture of the institution or the sale of the
institution to a willing purchaser; and any other supervisory action that the
agency deems appropriate. These and additional mandatory and permissive
supervisory actions may be taken with respect to significantly undercapitalized
and critically undercapitalized institutions.
Additionally, under Section 11(c)(5) of the FDIA, a conservator or receiver
may be appointed for an institution where: (i) an institution's obligations
exceed its assets; (ii) there is substantial dissipation of the institution's
assets or earnings as a result of any violation of law or any unsafe or unsound
practice; (iii) the institution is in an unsafe or unsound condition; (iv) there
is a willful violation of a cease-and-desist order; (v) the institution is
unable to pay its obligations in the ordinary course of business; (vi) losses or
threatened losses deplete all or substantially all of an institution's capital,
and there is no reasonable prospect of becoming "adequately capitalized" without
assistance; (vii) there is any violation of law or unsafe or unsound practice or
condition that is likely to cause insolvency or substantial dissipation of
assets or earnings, weaken the institution's condition, or otherwise seriously
prejudice the interests of depositors or the insurance fund; (viii) an
institution ceases to be insured; (ix) the institution is undercapitalized and
has no reasonable prospect that it will become adequately capitalized, fails to
become adequately capitalized when required to do so, or fails to submit or
materially implement a capital restoration plan; or (x) the institution is
critically undercapitalized or otherwise has substantially insufficient capital.
Regulatory Enforcement Authority. Federal banking law grants substantial
enforcement powers to federal banking regulators. This enforcement authority
includes, among other things, the ability to assess civil money penalties, to
issue cease-and-desist or removal orders and to initiate injunctive actions
against banking organizations and institution-affiliated parties. In general,
these enforcement actions may be initiated for violations of laws and
regulations and unsafe or unsound practices. Other actions or inactions may
provide the basis for enforcement action, including misleading or untimely
reports filed with regulatory authorities.
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<PAGE>
SHARE OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of April 1, 2000
concerning the number and percentage of shares of the common stock beneficially
owned by the directors and executive officers of Indian River, and by Indian
River's directors and all executive officers as a group, as well as information
regarding each other person known by the Company to own in excess of 5% of the
outstanding common stock. Also shown are the number and percentage of shares
that will be owned by such persons after the offering, based upon their current
intentions to purchase shares in the offering, and assuming the sale of 200,000
shares in the offering. The purchase intentions of these people may change.
Except as otherwise indicated, all shares are owned directly, and the named
person possesses sole voting and sole investment power with respect to all such
shares. Except as set forth below, we are not aware of any other person or
persons who beneficially own in excess of five percent of the common stock.
Further, we are not aware of any arrangement which at a subsequent date may
result in a change of control of the Company.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
OWNED BEFORE PERCENT OF OWNED AFTER PERCENT OF
NAME OFFERING(1) CLASS(1) OFFERING(1) CLASS(1)
- --------------------------- ----------------------- ----------------- ---------------------- ------------------
<S> <C> <C> <C> <C>
Directors
Paul A. Beindorf 26,512(2) 1.90% 27,012 1.69%
William C. Graves, IV 30,698(3) 2.20% 34,698 2.18%
Robert A. Grice 78,000(4) 5.60% 80,000 5.02%
2601 20th Street, Suite B
Vero Beach, Florida 32960
Griffin A. Greene 16,006(5) 1.15% 18,006 1.13%
William A. High 19,222(6) 1.38% 21,222 1.33%
William B. Marine 12,496(7) 0.90% 14,496 0.91%
John L. Minton 39,630(8) 2.84% 46,630 2.93%
Keith H. Morgan, Jr. 22,700(9) 1.62% 24,700 1.55%
Daniel R. Richey 9,598(10) 0.68% 11,598 0.73%
Mary M. Rogers 76,406(11) 5.48% 78,406 4.92%
200 Coconut Palm Road
Vero Beach, Florida 32963
John David Smith 23,682(12) 1.70% 24,682 1.55%
Executive Officers
Charles A. Bradley 4,400(13) 0.31% 4,900 0.31%
Kevin D. Evans 5,150(14) 0.37% 5,350 0.34%
Daniel C. Fourmont 16,394(15) 1.17% 16,494 1.03%
Jeffrey R. Morton 5,188(16) 0.37% 5,288 0.33%
Kitty L. Ruehman 13,278(17) 0.95% 13,378 0.84%
Diana L. Walker 4,152(18) 0.30% 4,652 0.29%
All directors and
executive officers as a
group (17 persons) 403,512(19) 28.15% 431,512 26.42%
Other 5% Shareholders
Barnette E. Greene, Jr. 128,106(20) 9.19% 140,106 8.79%
2075 38th Avenue
Vero Beach, Florida 32960
</TABLE>
(1) For purposes hereof, a person is deemed to be the beneficial owner of
securities with respect to which he has or shares voting or investment
power. Except as otherwise indicated, the named beneficial owner has sole
voting and investment power with respect to all shares beneficially
(Footnotes continued on following page)
37
<PAGE>
(Footnotes continued from prior page)
owned by such person. The percentage of shares owned before the offering is
based on 1,393,730 shares outstanding as of April 1, 2000, except with
respect to individuals holding options to acquire common stock exercisable
within sixty days of April 1, 2000, in which event represents percentage of
shares issued and outstanding as of April 1, 2000 plus the number of such
options or warrants held by such person, and all directors and officers as
a group, which represents percentage of shares outstanding as of April 1,
2000 plus the number of such options or warrants held by all such persons
as a group. The percentage of shares owned after the offering is based upon
the sale of 200,000 shares in the offering.
(2) Includes 2,928 shares held jointly with Mr. Beindorf's wife, 7,540 shares
held by Mr. Beindorf's wife and presently exercisable options to purchase
3,332 shares of common stock.
(3) Includes 19,386 shares held jointly with Mr. Graves' wife, 5,182 shares of
common stock owned by Mr. Graves' wife individually, as to which he
disclaims beneficial ownership and presently exercisable options to
purchase 660 shares of common stock.
(4) Includes presently exercisable options to purchase 660 shares of common
stock and 76,098 owned jointly with Mr. Grice's wife.
(5) Includes 10,650 shares held jointly with Mr. Greene's wife and presently
exercisable options to purchase 660 shares of common stock. Does not
include 21,380 shares of common stock owned by a corporation of which Mr.
Greene is Vice President and a minority shareholder, and of which Mr.
Greene's father is President and principal shareholder. Mr. Greene is the
son of Barnette E. Greene, Jr., a director emeritus. Mr. Green was
appointed to the Board to replace his father upon his retirement from
active service on the Board.
(6) Includes presently exercisable options to purchase 18,858 shares of common
stock.
(7) Includes 420 shares held jointly with Mr. Marine's wife, 1,092 shares held
by Mr. Marine's wife individually and presently exercisable options to
purchase 660 shares of common stock.
(8) Includes 11,670 shares held jointly with Mr. Minton's wife and an aggregate
of 12,954 shares held by Mr. Minton's wife and children individually, and
presently exercisable options to purchase 1,540 shares of common stock.
(9) Includes presently exercisable options to purchase 660 shares of common
stock.
(10) Includes 6,208 shares held jointly with Mr. Richey's wife, 2,730 shares
held by a corporation of which Mr. Richey is president and presently
exercisable options to purchase 660 shares of common stock.
(11) Includes 46,404 shares held jointly with Mrs. Rogers' husband, 3,354 shares
held by Mrs. Rogers' husband individually, 7,684 shares held by Mrs.
Rogers' husband as trustee for third parties, presently exercisable options
to purchase 660 shares of common stock and 8,694 shares held by Mrs. Rogers
as trustee for a third party.
(12) Includes 1,132 shares held jointly with Mr. Smith's sister, 704
shares held as trustee for his children and presently exercisable options
to purchase 660 shares of common stock.
(13) Represents presently exercisable options to purchase common stock.
(14) Includes 1,066 shares held by Mr. Evan's wife, and presently exercisable
options to purchase 4,084 shares of common stock.
(15) Includes 7,012 shares held jointly with Mr. Fourmont's wife and 3,752
shares owned by Mrs. Fourmont and presently exercisable options to purchase
2,050 shares of common stock.
(16) Includes 484 shares owned jointly with Mr. Morton's wife and presently
exercisable options to purchase 4,704 shares of common stock.
(17) Includes 11,334 shares held jointly with Mrs. Ruehman's husband and
daughter and presently exercisable options to purchase 1,944 shares of
common stock.
(18) Includes 68 shares owned jointly with Mrs. Walker's husband, and presently
exercisable options to purchase 4,084 shares of common stock
(19) Includes presently exercisable options to purchase an aggregate of 39,350
shares of common stock.
(20) Includes 52,676 shares held by Mr. Greene's wife and 21,380 shares of
common stock held by a corporation of which Mr. Greene is the principal
shareholder. Mr. Greene is a director emeritus, and is the father of
Griffin A. Greene, a director of Indian River. As a director emeritus, Mr.
Green is entitled to attend Board meetings.
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<PAGE>
MANAGEMENT
The following table sets forth the name, age at March 31, 2000, and
principal position with Indian River and Indian River Bank of each person who is
currently a director or executive officer of Indian River. Indian River's Board
of Directors currently consists of eleven (11) members, divided into three
classes. Members of one class are elected at each annual meeting for a three
year term. The year in which each director will stand for reelection is also
provided below. Each director of Indian River is also a director of Indian River
Bank.
<TABLE>
<CAPTION>
Name Age Position Term Ends
- ----------------------- ----------- ---------------------------------------- ------------------
<S> <C> <C> <C>
DIRECTORS
Paul A. Beindorf 43 Vice President Indian River, Executive
Vice President Indian River Bank, Director 2002
William C. Graves, IV 44 Director 2003
Griffin A. Greene 41 Director 2001
Robert A. Grice 58 Director 2002
William A. High 51 President and Chief Executive Officer
Indian River and Indian River Bank, Director 2003
William B. Marine 43 Director 2001
John L. Minton 48 Chairman of the Board of Directors 2002
Keith H. Morgan, Jr. 60 Director 2001
Daniel R. Richey 41 Director 2003
Mary M. Rogers 58 Vice Chairman of the Board of Directors 2001
John David Smith 51 Director 2002
EXECUTIVE OFFICERS
Charles A. Bradley 38 Senior Vice President, Chief Financial
Officer Indian River Bank; Treasurer
- Indian River
Kevin D. Evans 34 Vice President - Marketing, Indian River Bank
Daniel C. Fourmont 48 Senior Vice President, - Consumer
Lending, Indian River Bank
Jeffrey L. Morton 52 Senior Vice President - Resident
Lending, Indian River Bank
Kitty L. Ruchman 52 Senior Vice President - Human
Resources, Indian River Bank,
Secretary, Indian River
Diana L. Walker 47 Vice President - Compliance, Indian
River Bank
</TABLE>
Set forth below is certain additional information regarding each director
and executive officer of Indian River and Indian River Bank. Except as otherwise
stated, the principal occupation indicated has been the person's principal
occupation for at least the last five years.
Paul A. Beindorf. Mr. Beindorf has been Executive Vice President-Lending,
of Indian River Bank since 1996. Prior to that time Mr. Beindorf served in
various positions at Indian River Bank since joining Indian River Bank in 1985.
Mr. Beindorf has been a member of the Board of Directors since 1996, and a Vice
President of Indian River since 1996.
William C. Graves, IV. Mr. Graves, a director since 1990, has been involved
in all aspects of the citrus industry since 1977. Mr. Graves is a grower,
individually and as President and co-owner of Tetley Groves, Inc. and
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<PAGE>
Graves and Son, Inc. He is involved in the real estate industry as President and
co-owner of Citrus Investment Realty, Inc. and in the fruit marketing and farm
equipment businesses.
Griffin A. Greene. Mr. Greene, a director since 1999, has been involved in
the citrus industry since 1982, as President and co-owner of Greene Citrus
Management, Inc. and as officer of its affiliated growing, marketing and
distribution companies. Mr. Greene is a member of the Board of Directors of the
Indian River Citrus League, and from 199__ to 1999 served on the St. John Water
Management Board. Mr. Greene is the son of Barnette E. Greene, Jr., director
emeritus.
Robert A. Grice. Mr. Grice, a director of Indian River Bank since 1985 and
Indian River since its organization, is president of Bob Grice Insurance Agency,
Inc., a general lines insurance agency in Vero Beach, Florida. Mr. Grice is also
a citrus grower.
William A. High. Mr. High has been President and Chief Executive Officer of
Indian River and Indian River Bank since June 1999. Prior to joining Indian
River, Mr. High was Regional President of Bank One, N.A., a $6.2 billion
subsidiary of Bank One Corporation, from 1989 to 1999. Mr. High has over 25
years of experience in the banking industry. Mr. High served as a director of
the Kent State University Foundation from 1995 to 1999, and as an adjunct
faculty member at Kent State University from 1989 to 1999. He is a director of
Lauren International, Inc.
William B. Marine. Mr. Marine, a director since 1990, has been co-owner of
Citrus Source, Inc., a licensed citrus fruit dealer, since 1992. Mr. Marine also
owned The Davis House Inn from 1992 to 1998, and Island Hopper Boats, a charter
and pleasure boat manufacturer from 1996 to 1999. Mr. Marine is also active in
real estate development in the Indian River County area.
John L. Minton. Mr. Minton, Chairman of the Board of Directors since 1996,
has been a director of Indian River Bank since 1985 and of Indian River since
its organization. Mr. Minton has been President and Chief Executive Officer of
Triple M Investment Company since 1996, and has been employed by that company
since 1979. Triple M is a family investment company that controls and operates a
number of companies involved in the citrus growing, marketing, packing and real
estate businesses.
Keith H. Morgan, Jr. Mr. Morgan has been a director of Indian River since
1997, and previously served as a director of Indian River Bank from 1985 to
1987. Mr. Morgan has been a partner of Morgan, Jacoby, Thurn & Associates, P.A.,
a certified public accounting firm in Vero Beach, Florida, since July 1997. From
1984 to July 1997, Mr. Morgan was a partner of KPMG Peat Marwick, a national
certified public accounting firm.
Daniel L. Richey. Mr. Richey, a director of Indian River since 1996, has
been involved in the citrus industry since 1981. He currently serves as
President of Riverfront Groves, Riverfront Gift Fruit Shippers and Gulfstream
Harvesting, Inc. Mr. Richey has served as an officer and director of the Florida
Citrus Packers Association at various times since 1985, and of the Indian River
Citrus League since 1992. He has served as a member of the advisory board of the
citrus division of Ocean Spray since 1989.
Mary M. Rogers. Mrs. Rogers, Vice Chairman of the Board of Directors since
1996, has been a director of Indian River Bank and Indian River since their
organization. Mrs. Rogers has been involved in the citrus industry, and has
served as Vice Chairman and Secretary of The Packers of Indian River, Inc.,
since 1989.
John David Smith. Mr. Smith, a director of Indian River since 1996, has
been a partner of Smith, Todd, McEntee & Company, LLP, a certified public
accounting firm in Vero Beach, Florida, since 1988.
Charles A. Bradley. Mr. Bradley has been Senior Vice President - Chief
Financial Officer of Indian River National Bank since June 1999. Prior to
joining Indian River Bank, Mr. Bradley served as Chief Financial Officer of
First Federal Savings Bank of Dover, a $110 million federal savings bank in
Dover, Ohio, from 1997, as Chief Financial Officer of Bank One Dover, N.A., from
1995 to 1997, and as Vice President - Finance of Bank One Dover from 1991 to
1995. Prior to that time he served in various capacities with Bank One Akron,
N.A. from 1984.
40
<PAGE>
Kevin D. Evans. Mr. Evans has been Vice President - Marketing of Indian
River Bank since 1996, and has been with Indian River Bank in various capacities
since 1992.
Daniel C. Fourmont. Mr. Fourmont, Senior Vice President - Consumer Lending
of Indian River Bank since 1995 and Retail Branch Coordinator since 1997, has
been a loan officer with Indian River Bank since 1985. Prior to joining Indian
River Bank, Mr. Fourmont served in various capacities at Florida National Bank,
Vero Beach, Florida from 1979 to 1985.
Jeffrey R. Morton. Mr. Morton became Senior Vice President - Residential
Lending in October 1999, having served as Vice President - Residential Lending
since May 1997. Prior to joining Indian River Bank, Mr. Morton was Vice
President - Residential Lending at Port St. Lucie National Bank from 1995 to
1997, and at various times from 1990 to 1994 served as Vice President -
Residential Lending at various financial institutions, including SunTrust Bank.
Kitty L. Ruehman. Mrs. Ruehman, Senior Vice President - Human Resources of
Indian River Bank, has been with Indian River since 1986. Prior to joining
Indian River Bank, Ms. Ruehman served in various capacities at First Florida
Bank from 1984 to 1986, Flagship Bank of Indian River County from 1981 to 1983
and Flagship Bank of Brevard County from 1976 to 1981.
Diana L. Walker. Mrs. Walker has been Vice President - Compliance, Audit
and Security of Indian River Bank since 1994. Prior to joining Indian River
Bank, Ms. Walker served as Senior Vice President - Internal Control, Security
and Compliance with Sun Bank of the Treasure Coast from 1984 to 1994, and from
1974 to 1984 was a Compliance Specialist Bank Examiner for the FDIC.
DIRECTOR COMPENSATION
During the fiscal year ended December 31, 1999, the directors received an
aggregate of $265,556 for attendance at Board and committee meetings. All
directors other than the Chairman were entitled to receive $1,000 for attendance
at each Board meeting and $200 for each committee meeting. The Chairman was
entitled to receive $1,500 for attendance at each Board meeting and $200 for
each committee meeting.
In December 1999, the Board of Directors adopted the Director Fee Stock
Option Plan, pursuant to which each director who is not an employee of Indian
River or Indian River Bank is entitled to elect to receive options to purchase
660 shares of common stock for 2000 (as adjusted to reflect the 10% stock
dividend paid in January 2000 and the two for one stock split paid in March
2000) in lieu of cash compensation for attendance at committee meetings. This is
subject to further adjustment for subsequent stock dividends, splits and similar
events. Each of the nonemployee directors has elected to receive options in lieu
of committee fees. The options have an exercise price equal to the fair market
value of the common stock at the time of grant, are immediately exercisable and
are of limited transferability. The payment of cash compensation for attendance
at Board meetings was terminated in 2000.
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<PAGE>
EXECUTIVE OFFICER COMPENSATION AND CERTAIN TRANSACTIONS
COMPENSATION - OVERVIEW
The following table sets forth a comprehensive overview of the
compensation for Mr. High, Indian River's and Indian River Bank's Chief
Executive Officer, and Mr. Beindorf, Indian River's Vice President and Indian
River Bank's Executive Vice President , during the 1999, 1998 and 1997 fiscal
years. No other executive officer of Indian River received total salary and
bonus of $100,000 or more during the fiscal year ended December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-term
Compensation
Annual Compensation Awards
------------------
Securities
Name and Principal Underlying All Other
Position Year Salary Bonus Options Compensation($)
- --------------------------- ----------- ------------ ------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
William A. High, 1999(1) $87,500 $6,750 51,856(2) $14,400(3)
Director, President and
Chief Executive Officer
Indian River and Indian
River Bank
Paul A. Beindorf, Vice 1999 $97,500 $9,506 15,400(2) $17,733(4)
President Indian River
and Executive Vice 1998 $86,100 $14,902 0 $22,279(5)
President Indian River
Bank 1997 $82,000 $23,563 1,331(6) $16,359(7)
Charles A. Lavin, 1999 $67,500 $3,375 0 $248,790(9)
Director, President and
Chief Executive Officer, 1998 $130,000 $21,950 0 $18,381(10)
Indian River and Indian
River Bank(8) 1997 $120,000 $27,186 $20,677(11)
</TABLE>
(1) Mr. High joined Indian River in June 1999.
(2) As adjusted to reflect the 10% stock dividend paid in January 2000 and the
two for one stock split paid in March 2000. Mr. High's options vest over a
period of seven years with approximately 40% vesting in year one and 10%
vesting in each subsequent year. Mr. Beindorf's options vest in equal
installments over a seven year period.
(3) Represents directors fees of $7,000 and club membership fees. Does not
include $43,343 of relocation expense reimbursement.
(4) Represents directors fees of $12,350 and club membership fees.
(5) Represents directors fees of $18,900 and club membership fees.
(6) As adjusted to reflect the 10% stock dividends paid in January 2000, 1999
and 1998 and the two for one stock split paid in March 2000.
(7) Represents directors fees of $14,200 and club membership fees.
(8) Mr. Lavin was an officer and director of Indian River through May 1999.
(9) Includes $225,000 payable to Mr. Lavin in respect of his noncompetition
agreement. Mr. Lavin is entitled to receive additional payments of $75,000
in 2000, $75,000 in 2001 and $31,250 in 2002 in respect of his
noncompetition agreement.
(10) Represents directors fees of $16,200 and automobile allowance.
(11) Represents directors fees of $14,200 and automobile allowance.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Percent of Total
Number of Securities Options Granted to Exercise
Underlying Options Employees in Fiscal Price Per Expiration
Name Granted Year Share Date
- --------------------- ------------------------ ---------------------- -------------- ---------------
<S> <C> <C> <C> <C>
William A. High 51,856(1)(2) 48.63% $19.09(1) October 2009
Paul A. Beindorf 15,400(1)(3) 14.44% $19.09(1) October 2009
Charles A. Lavin 0 0 N/A N/A
</TABLE>
- ---------------------
(1) Adjusted to reflect 10% stock dividend paid in January 2000 and two for one
stock split paid in March 2000.
(2) 18,858 of such options are currently vested. The remainder of the grant
vests in equal installments over a period of six years.
(3) 2,200 of such options are currently vested. The remainder of the grant
vests in equal installments over a period of six years.
42
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-The-Money Options
Acquired on Value Options at December 31, 1999 at December 31, 1999
Name Exercise Realized Exercisable/Unexercisable(1) Exercisable/Unexercisable
- --------------------- ---------------- -------------- ---------------------------- ----------------------
<S> <C> <C> <C> <C>
William A. High 0 $0 18,858/32,998 $111,450/$195,018
Paul A. Beindorf 0 $0 2,200/13,200 $13,002/$78,013
Charles A. Lavin 0 $0 N/A N/A
</TABLE>
- ---------------------
(1) Adjusted to reflect 10% stock dividend paid in January 2000 and two for one
stock dividend paid in March 2000.
EMPLOYEE BENEFIT PLANS
Indian River Bank provides all officers and full-time employees with group
life and medical and dental insurance coverage.
401(k) Plan. Indian River Bank has a defined contribution 401(k) retirement
plan which covers employees that meet certain age and length of service
requirements. Under this plan, the Bank will annually contribute a discretionary
amount as approved by the Board of Directors. For the years ended December 31,
1999 and 1998, Indian River Bank's contribution amounted to $59,814 and $62,851,
respectively.
Stock Option Plans. Under Indian River's 1995 Incentive Stock Option Plan
approved by stockholders in 1995 ("1995 Option Plan"), 112,735 shares of common
stock (as adjusted) were available for issuance under options granted between
1995 and 1998. The 1995 Option Plan was designed to enable the Bank to attract
and retain qualified personnel and to reward outstanding performance. Eligible
employees ("Participants") are those employees, including officers, who at the
time options are granted, serve in managerial positions or are deemed to be "key
employees" by the Board of Directors. The Board of Directors, in its sole
discretion, administered the 1995 Option Plan. No further grants may be made
under the 1995 Option Plan. As of December 31, 1999, there were an aggregate of
41,157 options to purchase shares of common stock outstanding under the 1995
Option Plan, at exercise prices ranging from $15.91 to $19.09 per share (as
adjusted). Options outstanding under the 1995 Option Plan will expire no later
than 2003.
At the 2000 Annual Meeting, the shareholders approved a new option plan
(the "1999 Option Plan") pursuant to which 275,000 shares of common stock are
available for issuance under options granted between October 1999 and October
2009. Options under the 1999 Option Plan may be either incentive stock options
("ISOs") as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or options that are not ISOs ("Non-ISOs"). The purpose of
the 1999 Option Plan is to advance the interests of the Bank through providing
selected key employees of the Bank with the opportunity to acquire shares of
Common Stock. By encouraging such stock ownership, the Bank seeks to attract,
retain and motivate the best available personnel for positions of substantial
responsibility and to provide additional incentive to key employees and
directors of the Bank to promote the success of the business, as measured by the
value of its shares, and to increase the commonality of interests among key
employees and other stockholders. The 1999 Option Plan is administered by the
Board of Directors.
A participant may, under the 1999 Option Plan, receive additional options
notwithstanding the earlier grant of options and regardless of their having been
exercised, expired, or surrendered. Participants owning more than 10% of the
voting power of all classes of the Bank's voting securities (and of its parent
or subsidiary companies, if any) may not receive additional options unless the
option exercise price is at least 110% of the fair market value of the Common
Stock and unless the option expires on the fifth anniversary of the date of its
grant. All other options granted under the 1999 Option Plan may expire no later
than the tenth anniversary of the date of their grant.
Option exercise prices are determined by the Board on the date the subject
options are granted. In the event of any merger, consolidation,
recapitalization, reorganization, reclassification, stock dividend, stock split,
combination or
43
<PAGE>
subdivision of shares, or similar event in which the number or kind of shares is
changed without receipt or payment of consideration by the Bank, the Board will
adjust both the number and kind of shares of stock as to which Options may be
awarded under the 1999 Option Plan, the affected terms (including exercise
price) of all outstanding Options and the aggregate number of shares of Common
Stock remaining available for grant under the 1999 Option Plan. Options may be
exercised in whole or in part and are not transferable except upon the death of
the participant. Any unexercised options then existing may be exercised by the
transferee under the terms of such options.
In the absence of Board action to the contrary: (A) an otherwise unexpired
ISO, or a Non-ISO granted to an employee, shall cease to be exercisable upon (i)
an employee's termination of employment for "just cause" (as defined in the 1999
Option Plan), (ii) the date three months after an employee terminates service
for a reason other than just cause, death, or disability, or (iii) the date one
year after an employee terminates service due to disability, or two years after
termination of such service due to his death; (B) an unexpired Non-ISO granted
to a non-employee director shall be exercisable at any time (but not later than
the date on which the Non-ISO would otherwise expire.) Notwithstanding the
provisions of any Option which provides for its exercise in installments as
designated by the Board, such Option shall become immediately exercisable upon
the optionee's death or permanent and total disability. Notwithstanding the
provisions of any award which provide for its exercise or vesting in
installments, on the date of such change in control, all Options issued under
the 1999 Option Plan shall be immediately exercisable and fully vested.
For purposes of the 1999 Option Plan, "change in control" means any one of
the following events: (1) the acquisition of ownership of, holding or power to
vote more than 51% of Indian River's voting stock; (2) the acquisition of the
power to control the election of a majority of Indian River's directors; (3) the
exercise of a controlling influence over the management or policies of Indian
River by any person or by persons acting as a group within the meaning of
Section 13(d) of the Exchange Act; or (4) the failure during any period of two
consecutive years, of individuals who at the beginning of such period constitute
the Board of Directors of Indian River (the "Continuing Directors") for any
reason to constitute at least two-thirds thereof, provided that any individual
whose election or nomination for election as a member of the Board was approved
by a vote of at least two-thirds of the Continuing Directors then in office
shall be considered a Continuing Director. For purposes of defining "change in
control," the term "person" refers to an individual or a corporation,
partnership, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of entity not
specifically listed. The decision of the Board as to whether a change in control
has occurred shall be conclusive and binding.
As of December 31, 1999, Indian River had options for the purchase of
100,268 shares of common stock issued and outstanding under the 1995 and 1999
Option Plans (as adjusted for the 10% stock dividend paid in January 2000 and
the two for one stock split paid in March 2000). As of the date hereof, options
to acquire 114,874 shares of common stock are subject to issuance pursuant to
the 1999 Option Plan.
Employment Agreements. In October 1999, Indian River and Indian River Bank
entered into an employment agreement with Mr. High pursuant to which Mr. High
serves as President of each institution. Mr. High's agreement has an initial
term of three years, and is subject to automatic one-year extensions of such
term on each January 30, provided that neither Indian River nor Mr. High has
given written notice of intention not to renew at least 60 days prior to the
renewal date. The agreement provides for the payment of cash and other benefits
to Mr. High, including a fixed salary, reviewed annually and subject to increase
or decrease at the Board of Directors' discretion, provided that the salary may
not be less than $150,000, and further provided that in the absence of any
action with respect to his salary rate, Mr. High is entitled to receive an
automatic annual salary increase based upon the consumer price index, up to a
maximum of 5% per year. Mr. High is entitled to participate in bonus and fringe
benefit, incentive compensation, life insurance, medical, profit sharing and
retirement plans, and is entitled to reimbursement of reasonable business
expenses. With minor exceptions, the agreement terminates, and there are no
additional payments due under it, upon termination based upon death, retirement,
or just cause (as defined) by Indian River, or upon voluntary termination by Mr.
High without good reason (as defined). If Indian River terminates Mr. High
without just cause, or if Mr. High terminates the agreement with good reason,
Mr. High is entitled to salary and bonuses for the remaining term of the
agreement, payable in a lump sum based upon prior year compensation levels. The
agreement prohibits conflicts of interest, and requires that Mr. High maintain
the confidentiality of nonpublic information regarding Indian River and its
customers. Mr. High is bound by a covenant not to compete and not to interfere
with other employees of Indian River following a termination for just cause,
disability, or retirement or if he resigns without good reason.
44
<PAGE>
In the event of a change-in-control of Indian River, Mr. High would be
entitled to payment of certain benefits. If within six months prior to, or two
years after, a change-in-control, Indian River terminates Mr. High's employment
without good cause, or Mr. High voluntarily terminates employment for good
reason, then Indian River, or its successor, is required to make a lump-sum cash
payment to the Executive equal to two times the sum of his annual salary at the
highest rate in effect during the preceding twelve months and bonuses for the
preceding calendar year. Mr. High would also be entitled to continued
participation in certain Indian River health and welfare plans for two years.
These payments and benefits, are limited, however, so as not to exceed the
amount allowable as a deduction under Section 280G of the Internal Revenue Code.
In December 1999, Indian River and Indian River Bank entered into a
substantially identical employment agreement with Mr. Bradley, pursuant to which
Mr. Bradley serves as Chief Financial Officer of each institution. Under his
agreement, Mr. Bradley is entitled to a fixed salary of $82,000, subject to
annual review and increase but not decrease, provided that in the absence of any
action with respect to his salary rate, Mr. Bradley is entitled to receive an
automatic annual salary increase based upon the consumer price index, up to a
maximum of 5% per year.
Transactions with Management and Others. Some of the directors of Indian
River and its subsidiary, or companies with which they are associated, and some
of the executive officers of Indian River and Indian River Bank, were customers
of, and had banking transactions with, Indian River Bank during the fiscal year
ended December 31, 1999. All loans and commitments to make loans to such persons
by Indian River Bank were made in the normal course of business on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with unrelated persons; and in the opinion
of management, did not and do not involve more than a normal risk of
collectibility or present other unfavorable features. The aggregate amount
outstanding on such loans at December 31, 1999 was $5,358,249. None of these
loans has ever been adversely classified, and all of such loans are current as
to the payment of interest and principal.
SHARES ELIGIBLE FOR FUTURE SALE
All shares sold in this offering will be freely tradable without
restriction or registration under the Securities Act of 1933, except for any
shares purchased by an "affiliate" of Indian River, which will be subject to the
resale limitations set forth in Securities and Exchange Commission Rule 144.
All of Indian River's directors are considered "affiliates" within the
meaning of Rule 144 and will, therefore, be subject to the applicable resale
limitations with respect to the shares purchased in this offering. In general,
the number of shares that can be sold by each Director in brokers' transactions,
(as that term is used in Rule 144) within any three month period may not exceed
the greater of (i) one percent (1%) of the outstanding shares as shown by the
most recent report or statement published by the Company, or (ii) the average
weekly reported volume of trading in the shares on all national securities
exchanges and/or reported through the automated quotation system of a registered
securities association during the four calendar weeks preceding the sale.
DESCRIPTION OF CAPITAL STOCK
Indian River's authorized capital consists of 10,000,000 shares of common
stock, $1.00 par value, and 500,000 shares of undesignated preferred stock. As
of March 31, 2000, there were 1,393,730 shares of common stock outstanding and
no shares of preferred stock outstanding.
Common Stock. Holders of common stock are entitled to cast one vote for
each share held of record, to receive such dividends as may be declared by the
Board of Directors out of legally available funds, and, subject to the rights of
any class of stock having preference to the common stock, to share ratably in
any distribution of Indian River's assets after payment of all debts and other
liabilities, upon liquidation, dissolution or winding up. Shareholders do not
have cumulative voting rights or preemptive rights or other rights to subscribe
for additional shares, and the common stock is not subject to conversion or
redemption. The shares of common stock to be issued in this offering will be,
when issued, fully paid and non-assessable.
45
<PAGE>
Preferred Stock. The Indian River Board may, from time to time, by action
of a majority of the Board of Directors, issue shares of the authorized,
undesignated preferred stock, in one or more classes or series. In connection
with any such issuance, the Board may by resolution determine the designation,
voting rights, preferences as to dividends, in liquidation or otherwise,
participation, redemption, sinking fund, conversion, dividend or other special
rights or powers, and the limitations, qualifications and restrictions of such
shares of preferred stock. As of the date hereof, no shares of preferred stock
are outstanding.
Limitations on Payment of Dividends. The payment of dividends by Indian
River will depend largely upon the ability of Indian River Bank to declare and
pay dividends to Indian River, as the principal source of Indian River's revenue
will be from dividends paid by Indian River Bank. Dividends will depend
primarily upon the Bank's earnings, financial condition, and need for funds, as
well as governmental policies and regulations applicable to Indian River and
Indian River Bank. Even if Indian River Bank and Indian River have earnings in
an amount sufficient to pay dividends, the Board of Directors may determine to
retain earnings for the purpose of funding the growth of Indian River Bank and
Indian River.
Regulations of the Office of the Comptroller of the Currency place limits
on the amount of dividends Indian River Bank may pay to Indian River without
prior approval. Prior regulatory approval is required to pay dividends which
exceed Indian River Bank's net profits for the current year plus its retained
net profits for the preceding two calendar years, less required transfers to
surplus. Federal bank regulatory agencies also have authority to prohibit a bank
from paying dividends if such payment is deemed to be an unsafe or unsound
practice, and the Federal Reserve Board has the same authority over bank holding
companies.
The Federal Reserve Board has established guidelines with respect to the
maintenance of appropriate levels of capital by registered bank holding
companies. Compliance with such standards, as presently in effect, or as they
may be amended from time to time, could possibly limit the amount of dividends
that Indian River may pay in the future. In 1985, the Federal Reserve Board
issued a policy statement on the payment of cash dividends by bank holding
companies. In the statement, the Federal Reserve Board expressed its view that a
holding company experiencing earnings weaknesses should not pay cash dividends
exceeding its net income, or which could only be funded in ways that weaken the
holding company's financial health, such as by borrowing. As a depository
institution, the deposits of which are insured by the FDIC, the Bank may not pay
dividends or distribute any of its capital assets while it remains in default on
any assessment due the FDIC. See "Market for Common Stock and Dividends"
(page 14).
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND FLORIDA LAW
Set forth below are descriptions of certain other provisions of Indian
River's Articles of Incorporation and of the Florida Business Corporation Act
(the "FBCA") which affect Indian River and the holders of common stock. The
discussion of the following provisions is not exhaustive, and is not intended to
imply that all material provisions of either the Articles of Incorporation or
the FBCA are enumerated herein.
Removal of Directors. Indian River's Articles of Incorporation provide that
directors may be removed at any time, but only for cause and upon the vote of
the holders of 75% or more of the total number of votes entitled to be cast by
holders of all outstanding shares of capital stock entitled to vote generally in
the election of directors, voting as a single class, except that where the
holders of any class or series of stock entitled to elect one or more directors
voting separately as a class, such director or directors may be removed for
cause or upon the vote of the holders of 75% of the total number of votes
authorized to be cast by holders of that class or series. The provision
regarding the removal of directors may be amended only upon the vote of holders
of 75% of all votes entitled to be cast in the election of directors, voting as
a single class.
Special Meetings. Special meetings of the shareholders of Indian River may
be called by the Chairman of the Board, the President, or upon the request of
two or more directors. Upon receipt of the written request of the holders of 25%
of the votes entitled to be cast at such a meeting, the Board of Directors shall
call a meeting of shareholders. The Bylaws do not provide when a meeting
requested by shareholders must be held. Florida law provides, however, that a
shareholder may petition a court to order such a meeting to be held if a notice
for the meeting is not issued within 60 days of the request.
46
<PAGE>
Written Action of Shareholders. Under the FBCA, shareholders having the
power to cast the number of votes required to effect any action required to be
approved by the shareholders, including the election of directors, the amendment
of the Articles of Incorporation or the merger or consolidation of Indian River,
may consent to such action in writing without notice or holding of a formal
meeting of shareholders.
Applicability of Certain Provisions of Law. Section 607.0901 of the FBCA
requires that, unless a corporation "opts out" from effectiveness of that
provision, certain transactions between a public corporation and certain
interested shareholders and their affiliates (including, but not limited to,
certain mergers or consolidations, sales, leases, pledges or other dispositions
of five percent or more of the corporation's assets, share issuances, and
reclassification, reorganization or liquidation transactions) be approved by the
holders of two-thirds of the total number of outstanding voting shares other
than shares beneficially owned by the interested shareholders. The Articles of
Incorporation provide that Section 607.0901 will not be applicable to Indian
River.
Section 607.0902 of the FBCA generally provides that, unless a corporation
opts out from its provisions, shares of a public corporation acquired in excess
of certain threshold amounts will not have any voting rights unless such voting
rights are approved by a majority vote of disinterested shareholders. The
Articles of Incorporation provide that Section 607.0902 will not be applicable
to Indian River.
Business Combinations with Interested Stockholders. The Articles of
Incorporation provide that certain proposed business combinations with an
"interested stockholder" (generally a beneficial owner of 10% or more of the
outstanding common stock or an affiliate thereof), including mergers,
consolidations, the sale, lease, exchange, mortgage or pledge of assets having a
value in excess of $1.5 million, issuances or transfers of securities of Indian
River having a value of in excess of $1.5 million, the adoption of a plan of
liquidation or dissolution, and any reclassification, recapitalization or
similar transaction which has the effect of increasing the proportionate share
of Indian River owned by the interested stockholder, must be approved by the
holders of 80% of the votes entitled to be cast in the election of directors,
voting as a single class, in addition to any other vote required by law, except
where such business combination has been approved by two thirds of the full
Board of Directors.
Amendment of Articles. Except where applicable law or the Articles of
Incorporation provide otherwise, the Articles of Incorporation may be amended by
the vote of the holders of a majority of the votes entitled to be cast thereon.
The provision of the Articles of Incorporation relating to removal of directors
may be amended only upon the vote of the holders of 75% of the votes entitled to
be cast in the election of directors, voting as a single class. The provisions
of the Articles of Incorporation relating to business combinations with
interested stockholders and the applicability of certain provisions of the FCBA
may be amended only upon the vote of the holders of 80% of the votes entitled to
be cast in the election of directors, voting as a single class, except where
such amendment has been approved by two thirds of the full Board of Directors.
Consideration of Business Combinations. The Articles of Incorporation
provide that where the Board of Directors evaluates a business combination, the
directors shall consider, among other things, the following factors: the effect
of the business combination on the corporation and its subsidiaries, and their
respective stockholders, employees, customers and the communities which they
serve; the timing of the proposed business combination; the risk that the
proposed business combination will not be consummated; the reputation,
management capability and performance history of the person proposing the
business combination; the current market price of the corporation in a freely
negotiated transaction and in relation to the directors' estimate of the future
value of the corporation and its subsidiaries as an independent entity or
entities; tax consequences of the business combination to the corporation and
its stockholders; and such other factors deemed by the directors to be relevant.
In such considerations, the board of directors may consider all or certain of
such factors as a whole and may or may not assign relative weights to any of
them. The enumeration of factors to be considered by the Board of Directors in
the discharge of its fiduciary responsibility to the corporation and its
stockholders, is not a definitive list of factors, but is intended to guide such
consideration and to provide specific authority for the consideration by the
Board of Directors of factors which are not purely economic in nature in light
of the circumstances of the corporation and its subsidiaries at the time of such
proposed business combination.
47
<PAGE>
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
Indian River by Kennedy, Baris & Lundy, L.L.P., Bethesda, Maryland. Members of
such firm may subscribe to purchase shares of common stock offered hereby.
EXPERTS
The audited financial statements of Indian River Banking Company for years
ended December 31, 1999 and 1998 included in this prospectus have been included
herein in reliance upon the report of McGladrey & Pullen, LLP independent
certified public accountants, and upon the authority of said firm as experts in
accounting and auditing.
On July 6, 1998, BDO Seidman, the independent certified public accountants
which audited Indian River's financial statements for the years ended December
31, 1997 and 1996, was dismissed by the Board of Directors of Indian River upon
the recommendation of Indian River's examining committee. BDO Seidman's report
on Indian River's financial statements for the years ended December 31, 1997 and
1996 did not contain an adverse opinion or disclaimer of opinion, and were not
modified as to uncertainty, audit scope or accounting principles.
There were no disagreements with BDO Seidman on any matter of accounting
principles or practices, financial statement disclosure, audit scope or
procedure which would have caused it to make reference to such disagreement in
connection with its report.
McGladrey & Pullen, LLP was retained by Indian River on May 28, 1998 to
audit Indian River's financial statements for fiscal year 1998 as its certifying
accountant. The appointment of McGladrey & Pullen, LLP was recommended by the
Audit and Examining Committee of the Board of Directors and approved by the
Board of Directors. There were no consultations between Indian River and
McGladrey & Pullen, LLP regarding the application of accounting principles to
any matter, or as to any type of opinion that might be issued on Indian River's
financial statements.
ADDITIONAL INFORMATION ABOUT INDIAN RIVER
This prospectus is part of a registration statement on Form SB-2 filed by
Indian River with the Securities and Exchange Commission. This prospectus does
not contain all of the information contained in the registration statement,
certain parts of which have been omitted in accordance with rules of the SEC.
Any statements contained herein concerning the provisions of any document filed
as an exhibit to the registration statement or otherwise filed with the SEC are
not necessarily complete, and, in each instance, reference is made to the copy
of the filed document for a more complete description of the matter involved,
and each such statement is qualified in its entirety by such reference. The
registration statement may be read and copied at the SEC's public reference room
located at 450 Fifth Street, NW, Room 1024, Washington, DC 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference room.
The SEC maintains an Internet web site that contains information of issuers,
including Indian River, who file electronically with the SEC. The address of
that web-site is http://www.sec.gov.
Indian River distributes annual reports containing audited financial
statements to its shareholders As a result of the effectiveness of the
registration statement of which this prospectus is a part, commencing in 2000,
Indian River files annual and quarterly reports under the Securities Exchange
Act of 1934, and will continue to file such reports until such time as it has
fewer than 300 shareholders of record.
48
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Independent Auditor's Report.............................................F-2
Consolidated Balance Sheets..............................................F-3
Consolidated Statements of Income........................................F-5
Consolidated Statements of Changes in Stockholders' Equity...............F-6
Consolidated Statements of Cash Flows....................................F-8
Notes to Consolidated Financial Statements...............................F-9
49
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INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 1999
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Indian River Banking Company
Vero Beach, Florida
We have audited the accompanying consolidated balance sheets of Indian River
Banking Company and subsidiary (the "Bank") as of December 31, 1999 and 1998,
and the related consolidated statements of income, stockholders' equity, and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Bank's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Indian
River Banking Company and subsidiary as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
Fort Lauderdale, Florida
February 4, 2000, except for Note 21 as
to which the date is March 31, 2000
F-2
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
- ------ ---- ----
<S> <C> <C>
Cash and Cash Equivalents
Cash and due from banks (Notes 2 and 17) $ 6,714,850 $ 7,903,994
Federal funds sold (Note 17) -- 9,225,000
---------- ----------
TOTAL CASH AND CASH EQUIVALENTS 6,714,850 17,128,994
---------- ----------
Investment Securities
Securities available-for-sale (Note 3) 81,416,332 56,036,863
Securities held to maturity (Note 3) 7,071,969
Other securities (Note 3) 798,350 710,450
---------- ----------
TOTAL INVESTMENT SECURITIES 89,286,651 56,747,313
Loans, net (Notes 4, 5, 9, 12, 15 and 17) 166,644,658 142,853,090
Bank Premises and Equipment, net (Note 6) 4,315,942 4,279,736
Accrued Interest Receivable 2,260,455 1,676,277
Deferred Tax Asset (Note 8) 1,533,364 173,764
Other Assets 479,692 257,083
---------- ----------
TOTAL ASSETS $ 271,235,612 $ 223,116,257
======================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
- ------------------------------------ ---- ----
<S> <C> <C>
Liabilities
Noninterest-bearing demand deposits $ 32,142,461 $ 31,121,138
Interest-bearing deposits:
NOW 24,320,260 25,101,073
Money market 4,316,022 3,496,479
Savings 73,065,351 70,461,316
Time deposits, $100,000 and over (Note 7) 21,841,680 13,570,598
Other time deposits (Note 7) 83,160,177 56,646,161
---------- ----------
TOTAL DEPOSITS 238,845,951 200,396,765
Other Liabilities 724,533 457,173
Other Borrowings (Note 9) 18,073,953 8,478,606
---------- ---------
TOTAL LIABILITIES 257,644,437 209,332,544
----------- -----------
Commitments and Contingencies (Notes 9, 13, and 15)
Stockholders' Equity (Notes 10, 11, 15 and 21)
Preferred stock, $1 par value, nondesignated; 500,000
shares authorized; none issued or outstanding -- --
Common stock, $1 par value; 10,000,000 shares
authorized; issued and outstanding 1999 1,393,730
shares, 1998 576,124 shares 1,393,730 576,124
Capital surplus 9,292,285 7,365,731
Retained earnings 4,509,364 5,251,216
Accumulated other comprehensive income (loss) (1,604,204) 590,642
---------- -------
TOTAL STOCKHOLDERS' EQUITY 13,591,175 13,783,713
-------------------------- ------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 271,235,612 $ 223,116,257
============= =============
</TABLE>
F-4
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Interest income:
Loans and fees on loans $ 13,321,103 $ 11,482,346
Investment securities and due from banks 4,495,681 3,766,518
Federal funds sold 129,487 92,242
---------- ----------
17,946,271 15,341,106
---------- ----------
Interest expense:
Deposits 7,352,102 6,506,357
Other 672,892 628,330
---------- ----------
8,024,994 7,134,687
---------- ----------
NET INTEREST INCOME 9,921,277 8,206,419
Provision for loan losses (Note 5) 590,000 375,000
---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 9,331,277 7,831,419
---------- ----------
Other income:
Service charges and fees 1,097,848 969,402
Gain on sales of securities (Note 3) 76,340 143,006
Gain on sale of loans 816,986 816,280
Other 464,164 287,967
---------- ----------
2,455,338 2,216,655
---------- ----------
Other expense:
Salaries 3,613,205 2,684,405
Employee benefits 622,500 487,141
Occupancy 563,344 460,109
Furniture and equipment 726,584 602,616
Other operating expenses 3,115,615 2,505,712
---------- ----------
8,641,248 6,739,983
---------- ----------
INCOME BEFORE INCOME TAXES 3,145,367 3,308,091
Provision for income taxes (Note 8) 1,142,767 1,208,869
---------- ----------
NET INCOME $ 2,002,600 $ 2,099,222
============== ===============
Basic earnings per share (Note 11) $ 1.44 $ 1.51
============== ===============
Diluted earnings per share (Note 11) $ 1.43 $ 1.50
============== ===============
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE>
- -------------------------------------------------------------------------------
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Common Stock Capital
Shares Amount Surplus
<S> <C> <C> <C>
Balance, December 31, 1997 523,619 $ 523,619 $ 6,203,158
10% stock dividend (Note 18) 52,180 52,180 1,153,178
Fractional shares -- -- --
Stock options exercised 325 325 9,395
Comprehensive income:
Net income -- -- --
Other comprehensive income, unrealized
gain on securities, net of tax (Note 3) -- -- --
COMPREHENSIVE INCOME
------- ---------------- -----------------
Balance, December 31, 1998 576,124 576,124 7,365,731
10% stock dividend (Note 18) 57,428 57,428 1,316,250
Fractional shares -- -- --
Stock options exercised 114 114 4,005
Comprehensive income (loss):
Net income -- -- --
Other comprehensive loss, unrealized
loss on securities, net of tax (Note 3) -- -- --
COMPREHENSIVE INCOME (LOSS)
------- ---------------- -----------------
Balance, December 31, 1999 633,666 $ 633,666 $ 8,685,986
======= ================ =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
Accumulated
Other Total
Retained Comprehensive Stockholders' Comprehensive
Earnings Income (Loss) Equity Income
-------- ------------- ------ ------
<S> <C> <C> <C> <C>
Balance, December 31, 1997 $ 4,361,722 $ 508,731 $ 11,597,230
10% stock dividend (Note 18) (1,205,358) -- --
Fractional shares (4,370) -- (4,370)
Stock options exercised -- -- 9,720
Comprehensive income:
Net income 2,099,222 -- 2,099,222 $ 2,099,222
Other comprehensive income, unrealized
gain on securities, net of tax (Note 3) -- 81,911 81,911 81,911
- ------
COMPREHENSIVE INCOME $ 2,181,133
---------- ----------- ------------ ============
Balance, December 31, 1998 5,251,216 590,642 13,783,713
10% stock dividend (Note 18) (1,373,678) -- --
Fractional shares (4,411) -- (4,411)
Stock options exercised -- -- (4,119)
Comprehensive income (loss):
Net income 2,002,600 -- 2,002,600 $ 2,002,600
Other comprehensive loss, unrealized
loss on securities, net of tax (Note 3) -- (2,194,846) (2,194,846) (2,194,846)
------------
COMPREHENSIVE INCOME (LOSS) $ (192,246)
-------------- ----------- ------------ ============
Balance, December 31, 1999 $ 5,875,727 $(1,604,204) $ 13,591,175
============== =========== ============
</TABLE>
F-7
<PAGE>
- -------------------------------------------------------------------------------
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------------- ----------------
<S> <C> <C>
Cash Flows From Operating Activities
Net income $ 2,002,600 $ 2,099,222
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 562,825 467,111
Provision for loan losses 590,000 375,000
Other real estate owned losses 108,369 3,617
Deferred income taxes (125,000) (85,374)
Proceeds from loans originated for resale 32,476,233 32,986,605
Origination of loans for resale (29,958,997) (30,835,105)
Gain on sale of loans (816,986) (816,280)
Amortization of premiums and discounts, net 185,775 130,027
Gain on sale of securities (76,340) (143,006)
Increase in accrued interest receivable (584,178) (179,096)
Increase in other assets (222,609) (10,704)
Decrease in other liabilities 267,360 (51,399)
------------------ ---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,409,052 3,940,618
------------------ ---------------
Cash Flows From Investing Activities
Cash flows from securities (Note 18) (36,078,219) 2,557,359
Loan originations and principal collections on loans (29,559,639) (32,314,514)
Proceeds from sale of loans 3,436,079 4,020,131
Proceeds from the sale of other real estate owned 36,417 37,962
Purchases of premises and equipment (702,075) (1,815,809)
------------------ ---------------
NET CASH USED IN INVESTING ACTIVITIES (62,867,437) (27,514,871)
------------------ ---------------
ash Flows From Financing Activities
Net increase in deposits 38,449,186 27,584,590
Proceeds from other borrowings 12,881,062 2,214,320
Principal payments on borrowings (3,285,715) (285,714)
Proceeds from exercise of stock options 4,119 9,720
Cash paid for fractional shares (4,411) (4,370)
------------------ ---------------
NET CASH PROVIDED BY FINANCING ACTIVITIEs 48,044,241 29,518,546
------------------ ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (10,414,144) 5,944,293
Cash and cash equivalents:
Beginning 17,128,994 11,184,701
------------------ ---------------
Ending $ 6,714,850 $ 17,128,994
================== ===============
</TABLE>
See Notes to Consolidated Financial Statements (Additional cash flow information
- - Note 18).
F-8
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of business: Indian River Banking Company is a bank holding company
incorporated in the State of Florida. Its wholly-owned subsidiary, Indian River
National Bank, provides a full range of banking services to individual and
corporate customers through its various locations in Indian River and Brevard
Counties in Florida. Segment information is not presented since all of the
Company's revenue is attributed to a single reportable segment. The Bank is
subject to competition from other financial institutions and nonfinancial
institutions providing financial products.
Principles of consolidation: The accompanying consolidated financial statements
include the accounts of Indian River Banking Company and its wholly-owned
subsidiary, Indian River National Bank, a federally-chartered independent
community bank, collectively referred to as the "Bank". All significant
intercompany accounts and transactions have been eliminated in consolidation.
Basis of accounting: The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and general practice
within the banking industry. In preparing the consolidated financial statements,
the Bank's management is required to make estimates and assumptions which
significantly affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Significant estimates which are particularly susceptible to
change in a short period of time include the determination of the allowance for
loan losses and the fair value of securities. Actual results could differ from
those estimates.
Cash and cash flows: Cash and cash equivalents includes cash on hand, amounts
due from banks (including cash items in process of clearing), and federal funds
sold. For purposes of reporting cash flows, loans and deposits are reported net.
The Bank maintains amounts due from banks which, at times, may exceed
federally-insured limits. The Bank has not experienced any losses in such
accounts.
Investment in debt and marketable equity securities: Management determines the
appropriate classification of securities as each individual security is
acquired. In addition, the appropriateness of such classification is reassessed
at each balance sheet date. The Bank's classifications of debt and marketable
equity securities and related accounting policies are as follows:
Securities held to maturity: Held to maturity securities are those securities
which the Bank has the ability and intent to hold until maturity. All other
securities not included in held to maturity are classified as
available-for-sale. Held to maturity securities are reported at amortized
cost. Realized gains and losses from the sale of securities are included in
earnings and are computed using the specific-identification method.
Available-for-sale securities: Securities classified as available-for-sale
are those debt securities that the Bank intends to hold for an indefinite
period of time but not necessarily to maturity. Any decision to sell a
security classified as available-for-sale would be based on various factors,
including significant movements in interest rates, changes in the maturity
mix of the Bank's assets and liabilities, liquidity needs, regulatory capital
considerations, and other similar factors.
F-9
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Securities available-for-sale are carried at fair value. Unrealized gains or
losses, net of the related deferred tax effect, are reported as a separate
component of other comprehensive income. Realized gains or losses, determined
on the basis of the cost of specific securities sold, are included in
earnings. The amortization of premiums and accretion of discounts, computed
by the interest method over their contractual lives, are recognized in
interest income.
Loans and allowance for loan losses: Loans are stated at the amount of unpaid
principal, reduced by unearned discounts and fees and an allowance for loan
losses.
Loan origination and commitment fees and certain direct loan origination costs
are being deferred and amortized, using the interest method, as an adjustment of
the related loan's yield. The Bank is amortizing these amounts over the
contractual lives of the loans, adjusted for prepayments. Commitment fees which
are based upon a percentage of a customer's unused line of credit and fees
related to standby letters of credit are recognized over the commitment period.
Interest on loans is recognized over the terms of the loans and is calculated
using the simple-interest method on principal amounts outstanding. For impaired
loans, accrual of interest is generally discontinued when, in the opinion of
management, there is an indication that the borrower may be unable to make
payments as they become due. Interest on these loans is recognized only when
actually paid by the borrower if collection of the principal is likely to occur.
Accrual of interest is generally resumed when the customer is current on all
principal and interest payments.
Loans held for sale are carried at the lower of cost or market value.
The allowance for loan losses is maintained at a level considered adequate to
provide for potential loan losses inherent in the portfolio. Management's
determination of the adequacy of the allowance is based on an evaluation of the
portfolio, past loan loss experience, current economic conditions, volume,
growth and composition of the loan portfolio and other relevant factors. While
management uses the best information available to make its evaluation, the
allowance could change materially within the next year if there are significant
changes in economic conditions.
A loan is considered to be impaired when it is probable that the Bank will be
unable to collect all principal and interest amounts according to the
contractual terms of the loan agreement. Under this definition, management
considers loans that have been placed on nonaccrual status or which have been
renegotiated in a troubled debt restructuring to be impaired.
The allowance for loan losses related to loans identified as impaired is
primarily based on the excess of the loan's current outstanding principal
balance over the estimated fair market value of the related collateral. For
impaired loans that are not collateral dependent, the allowance for loan losses
is recorded at the amount by which the outstanding recorded principal balance
exceeds the current best estimate of the future cash flows on the loan,
discounted at the loan's effective interest rate.
F-10
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transfers of financial assets: Transfers of financial assets are accounted for
as sales when control over the assets has been surrendered. Control over
transferred assets is deemed to be surrendered when (1) the assets have been
isolated from the Corporation, (2) the transferee obtains the right (free of
conditions that constrain it from taking advantage of that right) to pledge or
exchange the transferred assets, and (3) the Corporation does not maintain
effective control over the transferred assets through an agreement to repurchase
them before their maturity.
Bank premises and equipment: Bank premises and equipment are stated at cost less
accumulated depreciation. Depreciation is computed using accelerated and
straight-line methods over the following estimated useful lives:
<TABLE>
<CAPTION>
Years
<S> <C>
Land improvements 3 - 20
Buildings and improvements 5 - 39
Leasehold improvements 5 - 15
Furniture, fixtures and equipment 3 - 10
</TABLE>
Income taxes: The holding company and the Bank file consolidated federal income
tax returns. Deferred taxes are provided on an asset and liability method
whereby deferred tax assets are recognized for deductible temporary differences,
and operating loss or tax credit carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the amounts of assets and liabilities recorded for income
tax and financial reporting purposes. Deferred tax assets are reduced by a
valuation allowance when management determines that it is more likely than not
that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in
tax laws and rates on the date of enactment.
Stock-based compensation: SFAS 123, Accounting for Stock-Based Compensation,
allows a company to either adopt the fair value method of valuation or continue
using the intrinsic valuation method presented under Accounting Principles Board
("APB") Opinion 25 to account for stock based compensation. Accordingly, the
Bank has elected to continue using the intrinsic valuation method and has
disclosed in the footnotes pro forma net income and earnings per share
information as if the fair value method had been applied.
Earnings per share: Basic earnings per-share amounts are computed by dividing
net income (the numerator) by the weighted-average number of common shares
outstanding, adjusted for stock dividends and splits occurring subsequent to
year end (the denominator). Diluted earnings per-share amounts assume the
conversion, exercise or issuance of all potential common stock instruments
unless the effect is to reduce the loss or increase the income per common share
from continuing operations.
F-11
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair value of financial instruments: SFAS No. 107, Disclosures about Fair Value
of Financial Instruments, requires disclosure of fair value information about
financial instruments, whether or not recognized in the statement of financial
condition, for which it is practicable to estimate that value. In cases where
quoted market prices are not available, fair values are based on estimates using
present value or other valuation techniques. Those techniques are significantly
affected by the assumptions used, including the discount rate and estimates of
future cash flows. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases, could not
be realized in immediate settlement of the instrument. SFAS No. 107 excludes
certain financial instruments and all nonfinancial assets and liabilities from
its disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Bank.
The fair value estimates presented are based on pertinent information available
to management as of December 31, 1999 and 1998. Although management is not aware
of any factors that would significantly affect the estimated fair value amount,
such amounts have not been comprehensively revalued for purposes of these
financial statements since these dates and therefore, current estimates of fair
value may differ significantly from the amounts presented in these financial
statements.
Emerging accounting standards: In June 1998, the Financial Accounting Standards
Board issued Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities, which is required to be adopted in years beginning after
June 15, 2000. The Statement permits early adoption as of the beginning of any
fiscal quarter after its issuance. The Bank expects to adopt the new Statement
effective January 1, 2001. The Statement will require the Bank to recognize all
derivatives on the balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of derivatives
will either be offset against the change in fair value of the hedged assets,
liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings.
Because the Bank has not used derivatives in the past, management does not
anticipate that the adoption of the new Statement will have a significant effect
on the Bank's earnings or financial position.
NOTE 2. CASH AND DUE FROM BANKS
The Bank is required to maintain reserve balances in cash or with the Federal
Reserve Bank, based on a percentage of certain deposits. The total required
reserve balances as of December 31, 1999 and 1998 were approximately $1,997,000
and $1,589,000, respectively.
F-12
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3. INVESTMENT SECURITIES
Securities held to maturity: The amortized cost and fair values of securities
held to maturity as of December 31, 1999 are summarized as follows.
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
State, county and municipal securities $ 2,025,343 $ 7,074 $ (14,385) $ 2,018,032
Mortgage-backed securities 5,046,626 174,338 -- 5,220,964
--------------- ----------- -------------- ------------
$ 7,071,969 $ 181,412 $ (14,385) $ 7,238,996
=============== =========== ============== ============
</TABLE>
There were no securities held to maturity at December 31, 1998.
The amortized cost and fair values of securities held to maturity at December
31, 1999, by contractual maturity, are shown below. Mortgage-backed securities
are excluded from the maturity categories because they are not due at a single
due date. In addition, mortgage-backed securities may mature earlier than their
contractual maturities because of prepayments.
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED MARKET
COST VALUE
---- -----
<S> <C> <C>
Due after one through five years $ 100,576 $ 100,595
Due after ten years 1,924,767 1,917,437
Mortgage-backed securities 5,046,626 5,220,964
----------------- ----------------
$ 7,071,969 $ 7,238,996
================= ================
</TABLE>
F-13
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3. INVESTMENT SECURITIES (CONTINUED)
Securities available-for-sale: The amortized cost and fair values of securities
available-for-sale as of December 31, 1999 and 1998 are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
ESTIMATED ESTIMATED ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
U. S. Government corporations
and agencies $ 67,210,032 $ -- $ (2,357,623) $ 64,852,409
Corporate securities 10,221,581 -- (128,534) 10,093,047
Mortgage-backed securities 6,491,287 11,975 (32,386) 6,470,876
--------------- -------------- ---------------- ---------------
$ 83,922,900 $ 11,975 $ (2,518,543) $ 81,416,332
=============== ============== ================ ===============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
ESTIMATED ESTIMATED ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
U. S. Government corporations
and agencies $ 42,412,286 $ 647,530 $ (10,245) $ 43,049,571
U. S. Treasury securities 6,979,319 225,371 -- 7,204,690
Mortgage-backed securities 5,722,381 76,849 (16,628) 5,782,602
--------------- -------------- ---------------- ---------------
$ 55,113,986 $ 949,750 $ (26,873) $ 56,036,863
=============== ============== ============= ===============
</TABLE>
The amortized cost and fair values of securities available for sale at December
31, 1999, by contractual maturity, are shown below. Mortgage-backed securities
are excluded from the maturity categories because they are not due at a single
due date. In addition, mortgage-backed securities may mature earlier than their
contractual maturities because of prepayments.
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED MARKET
COST VALUE
<S> <C> <C>
Due after one through five years $ 14,246,689 $ 14,092,411
Due after five years through ten years 56,186,613 53,975,191
Due after ten years 6,998,311 6,877,854
Mortgage-backed securities 6,491,287 6,470,876
----------------- -----------------
$ 83,922,900 $ 81,416,332
================= =================
</TABLE>
F-14
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3. INVESTMENT SECURITIES (CONTINUED)
Securities available for sale with a carrying amount of $16,415,731 and
$4,578,000 at December 31, 1999 and 1998, respectively, were pledged as
collateral on public deposits, various lines of credit (see Note 9), repurchase
agreements, and for other purposes as required or permitted by law.
Gross gains of $76,340 and $143,006 were realized from the sale of securities
available for sale in the years ended December 31, 1999 and 1998, respectively.
Unrealized gains (losses) on securities available for sale for the years ended
December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Unrealized holding gains (losses) arising during the period $ (3,353,106) $ 270,989
Less reclassification adjustment for gains realized
in net income 76,340 143,006
--------------- -------------
Net unrealized gains (losses), before tax (expense) benefit (3,429,446) 127,983
Tax (expense) benefit 1,234,600 (46,072)
--------------- -------------
Other comprehensive income (loss) $ (2,194,846) $ 81,911
=============== =============
</TABLE>
Other securities consist primarily of nonmarketable equity securities as follows
at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Federal Reserve Bank stock $ 97,750 $ 97,750
Federal Home Loan Bank stock 690,600 602,700
Other securities 10,000 10,000
------------- --------------
$ 798,350 $ 710,450
============= ==============
</TABLE>
The Bank, as a member of the Federal Home Loan Bank ("FHLB") system, is required
to maintain an investment in capital stock of the FHLB in an amount equal to the
greater of 1% of its outstanding home loans or 5% of advances from the FHLB. No
ready market exists for the FHLB stock, and it has no quoted market value.
F-15
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4. LOANS
The composition of net loans is as follows at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---- ----
Real estate:
<S> <C> <C>
Construction and land development $ 8,626,234 $ 2,382,245
Farmland 3,145,918 2,983,787
One to four family residential 68,430,840 60,955,927
Multifamily residential 1,766,216 1,762,422
Nonfamily, nonresidential 55,104,420 45,452,183
Agriculture 1,706,865 1,551,797
Commercial and industrial 12,307,814 11,037,858
Consumer 15,091,479 15,562,091
Other 2,370,221 2,676,107
-------------- ------------
168,550,007 144,364,417
Deduct:
Allowance for loan losses 1,904,417 1,510,272
Unearned discounts and loan fees 932 1,055
-------------- ------------
Loans, net $ 166,644,658 $142,853,090
============== ============
</TABLE>
The Bank's recorded investment in impaired loans for which a specific allowance
was recognized was $54,238 and $278,795 at December 31, 1999 and 1998,
respectively. The specific SFAS No. 114 allowance associated with these loans
was $5,077 and $17,600 at December 31, 1999 and 1998, respectively. The average
recorded investment in impaired loans during 1999 and 1998 was $250,000 and
$350,000, respectively. Interest income recognized on impaired loans, recognized
for cash payments received in 1999 and 1998, was not significant.
Included in net loans at December 31, 1999 and 1998 are loans held for sale of
approximately $546,600 and $2,247,000, respectively.
F-16
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 5. ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses for the years ended December 31, 1999
and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Balance, beginning $ 1,510,272 $ 1,322,442
Provision for loan losses 590,000 375,000
Loans charged off (249,068) (245,013)
Recoveries of amounts charged off 53,213 57,843
-------------- ------------
Balance, ending $ 1,904,417 $ 1,510,272
============== ============
</TABLE>
NOTE 6. BANK PREMISES AND EQUIPMENT
The major classes of bank premises and equipment and the total accumulated
depreciation are as follows:
<TABLE>
<CAPTION>
- - December 31,
- - 1999 1998
- - ---- ----
<S> <C> <C>
Land and improvements $ 1,561,900 $ 1,670,984
Buildings and improvements 1,343,817 1,298,323
Leasehold improvements 550,113 470,959
Furniture, fixtures and equipment 3,624,653 3,111,325
--------------- ---------------
7,080,483 6,551,591
Less accumulated depreciation and amortization 2,764,541 2,271,855
--------------- ---------------
$ 4,315,942 $ 4,279,736
=============== ===============
</TABLE>
NOTE 7. TIME DEPOSITS
At December 31, 1999, the scheduled maturities of time deposits are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
<S> <C>
2000 $ 77,776,889
2001 23,398,477
2002 1,271,879
2003 2,125,259
2004 427,457
Thereafter 1,896
-------
$ 105,001,857
==============
</TABLE>
F-17
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 8. INCOME TAXES
The net deferred tax effects of the primary temporary differences are as shown
in the following table:
<TABLE>
<CAPTION>
December 31,
1999 1998
---- ----
Deferred tax assets:
<S> <C> <C>
Loan loss allowances $ 593,000 $ 456,000
Unrealized loss on available-for-sale securities 902,364 --
Premises and equipment 48,000 50,000
--------------- --------------
Total deferred tax assets 1,543,364 506,000
--------------- --------------
Deferred tax liabilities:
Unrealized gain on available-for-sale securities -- (332,236)
- - Other (10,000) --
--------------- --------------
Total deferred tax assets (10,000) (332,236)
--------------- --------------
Net deferred tax assets $ 1,533,364 $ 173,764
=============== ==============
</TABLE>
The provision for income taxes charged to operations for the years ended
December 31, 1999 and 1998 consists of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Current tax expense $ 1,267,767 $ 1,294,243
Deferred tax expense (125,000) (85,374)
--------------- --------------
$ 1,142,767 $ 1,208,869
=============== ==============
</TABLE>
The provision for income taxes differs from the amount of income tax determined
by applying the U. S. federal income tax rate to pretax income as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Computed "expected" federal tax expense $ 1,069,425 34.0% $ 1,124,774 34.0%
Increase in income taxes resulting from:
State income taxes, net of federal tax
benefit 45,168 1.4 31,393 0.9
Other 28,174 0.9 52,702 1.6
------------- ---- -------------- ----
Provision for income taxes $ 1,142,767 36.3% $ 1,208,869 36.5%
============= ==== ============== ====
- -</TABLE>
F-18
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 9. OTHER BORROWINGS
The Company has a $4,000,000 revolving line-of-credit with a correspondent bank
of which $1,845,381 was outstanding at December 31, 1999. The line is due in
quarterly installments of interest only at 30-day LIBOR plus 135 basis points
(7.47% at December 31, 1999) through September 29, 2001, at which time the
outstanding principal balance will be converted to a term loan. The term loan
will be due in equal quarterly installments of principal plus interest, based
upon a five-year amortization through September 29, 2006, at which time the
remaining balance plus accrued interest will become due and payable. The line is
collateralized by the common stock of the Bank. The Company has agreed to
various conditions which provide, among other things, compliance with specified
financial covenants. The Company is in compliance with such covenants at
December 31, 1999.
The Bank has a secured line of credit with the Federal Home Loan Bank under
which the Bank can borrow up to thirteen percent (13%) of total assets or
approximately $35,235,000 at December 31, 1999. The Bank has executed a blanket
floating lien under which it has pledged residential first mortgage loans with a
balance of approximately $47,898,000 at December 31, 1999 as security for these
advances. In addition, Federal Home Loan Bank stock in the amount of $690,600 at
December 31, 1999 is also pledged as security for the above advances. Advances
payable under this agreement as of December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C>
Overnight advance, interest payable monthly at a rate that adjusts
daily, average rate of 5.60% for December 1999 $ 4,500,000 $ --
Convertible advance option due September 2002, interest payable
quarterly at a fixed rate of 5.66%. In September 1999, the
advance was called by the lender -- 3,000,000
Advance, interest payable monthly at a fixed rate of 6.44%,
with equal semiannual principal payments of $142,857 through
September 2004 1,428,572 1,714,286
Convertible advance due March 2008, interest payable quarterly
at a fixed rate of 5.51%. In March 2003, the advance can be
called at the option of the lender, at which time it can be
converted into various other advance terms by the Bank 2,000,000 2,000,000
Advance due August 2000, interest payable monthly at an
adjustable rate, 6.50% at December 31, 1999 5,000,000 --
-------------- --------------
$ 12,928,572 $ 6,714,286
============== ==============
</TABLE>
The Bank also has lines of credit of $6,000,000 available for federal funds
purchases with correspondent banks. There was $3,300,000 outstanding under these
lines at December 31, 1999 and no amounts outstanding under such lines as of
December 31, 1998.
F-19
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 9. OTHER BORROWINGS (CONTINUED)
The aggregate amounts of borrowings maturing in future years (based on the
outstanding balance and interest rates as of December 31, 1999) are as follows:
2000 $13,085,714; 2001 $362,307; 2002 $608,243; 2003 $633,024; 2004 $659,708;
thereafter $2,724,956.
The Bank has a repurchase agreement with a correspondent bank, for which
securities with a carrying amount of $4,161,289 were pledged as collateral at
December 31, 1999. No balances were outstanding as of December 31, 1999 and
1998.
NOTE 10. STOCK OPTIONS
The Board of Directors adopted a new stock option plan in 1999, subject to the
approval of the shareholders. Under the terms of its stock option plan, options
to purchase up to 275,000 shares of the Company's common stock may be granted to
directors and key officers/employees at a price which is not less than the fair
market value of such stock at the date of the grant. The grants are exercisable
in varying amounts over five to ten years from the date of the grant. In
accordance with the plan, the aggregate number of shares for which options may
be granted, the number of shares covered for each outstanding option and the
exercise price per share for each such option shall be proportionately adjusted
for the payment of stock dividends or similar adjustments to the number of
shares of common stock effected without the receipt of consideration by the
Company.
A summary of the options outstanding as of December 31, 1999 and 1998, and
changes during the years then ended is presented below (after adjusting for 10%
stock dividends in 1999 and 1998, a 10% stock dividend declared in January 2000
and a 2 for 1 stock split effective March 31, 2000). The fair value of each
option grant is estimated on the date of grant using present value techniques
under the minimum value method with the following weighted-average assumptions
used for grants in 1999 and 1998: risk-free interest rates of 6.5 percent and
5.5 percent, respectively and expected lives of 4 years and 8 years,
respectively.
<TABLE>
<CAPTION>
1999 1998
Weighted-Average Weighted-Average
Shares Exercise Price Shares Exercise Price
------ -------------- ------ --------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 29,736 $ 13.84 13,470 $ 11.96
Granted 77,254 18.77 20,762 15.03
Exercised (250) 15.03 (786) 12.38
Forfeited (6,472) 14.81 (3,710) 13.96
------- ------
Outstanding at end of year 100,268 17.57 29,736 13.84
======= ======
Options exercisable at year=end 39,350 17.31 7,264 13.28
======= ======
Weighted-average fair value of
options granted during the year $ 7.61 $ 3.26
============= ===========
</TABLE>
Options granted in 1999 include nonqualified options for the purchase of 62,856
shares which will be converted to qualified options upon approval of the 1999
stock option plan as discussed above.
F-20
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 10. STOCK OPTIONS (CONTINUED)
The weighted average remaining contractual life of the stock options outstanding
is 7.1 years and 3.7 years as of December 31, 1999 and 1998, respectively.
The Bank applies APB Opinion 25 and related Interpretations in accounting for
its plans. Accordingly, no compensation cost has been recognized for the stock
options discussed above. Had compensation cost for the Bank's stock options been
determined based on the fair value at the grant dates for awards under those
plans, the Bank's net income and earnings per share and common equivalent share
would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net income As reported $ 2,002,600 $ 2,099,222
Pro forma 1,837,600 2,089,000
Basic earnings per share As reported 1.44 1.51
Pro forma 1.32 1.50
Diluted earnings per share As reported 1.43 1.50
Pro forma 1.31 1.49
</TABLE>
In December 1999, the Board of Directors adopted the Director Fee Stock Option
Plan, under which each director is entitled to receive options to purchase
shares of common stock (660 shares for 2000) in lieu of cash compensation for
attendance at committee meetings. Options granted will have an exercise price
equal to the fair value of the common stock at the date of grant, will be
immediately exercisable and of limited execisability.
NOTE 11. EARNINGS PER SHARE
Following is information about the computation of the earnings per share data
for the years ended December 31, 1999 and 1998 (after adjusting for 10% stock
dividends in 1999 and 1998, a 10% stock dividend declared in January 2000 and a
2 for 1 stock split effective March 31, 2000):
<TABLE>
<CAPTION>
Per-Share
Numerator Denominator Amounts
--------- ----------- -------
Year Ended December 31, 1999
<S> <C> <C> <C>
Basic earnings per share, income available to
common stockholders $ 2,002,600 1,393,902 $ 1.44
=========
Effect of dilutive securities, options -- 7,878
------------ ---------
Diluted earnings per share, income available
to common stockholders plus assumed
exercise of options $ 2,002,600 1,401,780 $ 1.43
============ ========= =========
</TABLE>
F-21
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 11. EARNINGS PER SHARE (CONTINUED)
<TABLE>
<CAPTION>
Per-Share
Numerator Denominator Amounts
--------- ----------- -------
Year Ended December 31, 1998
<S> <C> <C> <C>
Basic earnings per share, income available to
common stockholders $ 2,099,222 1,393,612 $ 1.51
======
Effect of dilutive securities, options -- 3,910
------------- ---------
Diluted earnings per share, income available
to common stockholders plus assumed
exercise of options $ 2,099,222 1,397,522 $ 1.50
============= ========= ======
</TABLE>
NOTE 12. RELATED PARTY TRANSACTIONS
Some of the directors of the Bank are also owners or executive officers in other
business organizations. The Bank has made loans to these individuals and related
companies, as well as to officers of the Bank which, in the opinion of
management, are on the same terms as comparable transactions with others.
Aggregate loans to these related parties totaled approximately $3,567,000 and
$3,726,000 at December 31, 1999 and 1998, respectively. Commitments to extend
additional credit to these related parties totaled approximately $2,400,000 at
December 31, 1999.
NOTE 13. LEASES
The Bank utilizes certain office spaces under operating leases expiring through
2009. Several of these leases have one or more options to renew for periods of
three to five years each. The leases provide for increases in rent in accordance
with changes in the Consumer Price Index.
Future minimum rental payments required under the operating leases at December
31, 1999 were as follows:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
- ------------ ------
<S> <C>
2000 $ 287,601
2001 193,455
2002 160,142
2003 69,627
2004 69,627
Thereafter 342,333
------------
$ 1,122,785
============
</TABLE>
Total rent expense (including basic operating expenses) recorded by the Bank for
the years ended December 31, 1999 and 1998, was $238,172 and $202,174,
respectively.
F-22
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 14. SALARY SAVINGS 401(K) PLAN
The Bank sponsors a Salary Savings 401(k) Plan which requires the Bank to make
contributions pursuant to applicable salary savings elections and additional
discretionary contributions as may be determined by the Board of Directors. The
Bank contributed $59,814 and $62,851 for the years ended December 31, 1999 and
1998, respectively.
NOTE 15. RESTRICTIONS ON RETAINED EARNINGS AND REGULATORY MATTERS
The Bank is subject to the dividend restrictions set forth by the Office of the
Comptroller of the Currency ("OCC"). Under such restrictions, the Bank may not,
without the prior approval of the OCC, declare dividends in excess of the sum of
the current year's earnings (as defined) plus the retained earnings (as defined)
from the prior two years. The dividends, as of December 31, 1999, that the Bank
could declare, without the approval of the OCC, amounted to approximately
$2,600,000.
Banks and bank holding companies are subject to various regulatory capital
requirements administered by the federal banking agencies. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
banks and bank holding companies must meet specific capital guidelines that
involve quantitative measures of each entity's assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting practices.
Quantitative measures established by regulation to ensure capital adequacy
require banks and bank holding companies to maintain minimum amounts and ratios
(set forth in the table below) of total and Tier I capital to risk-weighted
assets, and of Tier I capital to average assets (all as defined in the
regulations).
Banks' capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors. Failure to meet minimum capital requirements can initiate certain
mandatory - and possibly additional discretionary - actions by regulators that,
if undertaken, could have a direct material effect on a company's financial
statements. The Company and the Bank meet all capital adequacy requirements to
which they are subject as of December 31, 1999.
F-23
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 15. RESTRICTIONS ON RETAINED EARNINGS AND REGULATORY MATTERS (CONTINUED)
As of December 31, 1999, the most recent notification from the OCC categorized
the Bank as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized the Bank must maintain
minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set
forth in the table below. There are no conditions or events since that
notification that management believes have changed the Bank's category.
The Company's and the Bank's actual capital amounts and ratios are also
presented in the table.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------ ----------------- -----------------
As of December 31, 1999:
Total Capital (to Risk-Weighted
<S> <C> <C> <C> <C> <C> <C>
Consolidated $ 17,099,796 9.5% $ 14,397,680 8.0% $ 17,997,100 10.0%
Indian River National Bank 18,799,574 10.4 14,396,880 8.0 17,996,100 10.0
Tier I Capital (to Risk-Weighted
Consolidated 15,195,379 8.4 7,198,840 4.0 10,798,260 6.0
Indian River National Bank 16,895,157 9.4 7,198,440 4.0 10,797,660 6.0
Tier I Capital (to Average Assets):
Consolidated 15,195,379 5.9 10,395,520 4.0 12,994,400 5.0
Indian River National Bank 16,895,157 6.5 10,395,120 4.0 12,993,900 5.0
As of December 31, 1998:
Total Capital (to Risk-Weighted
Consolidated 14,703,343 10.5 11,164,160 8.0 13,955,200 10.0
Indian River National Bank 16,301,553 11.7 11,164,160 8.0 13,955,200 10.0
Tier I Capital (to Risk-Weighted
Consolidated 13,193,071 9.4 5,582,080 4.0 8,373,120 6.0
Indian River National Bank 14,791,281 10.6 5,582,080 4.0 8,373,120 6.0
Tier I Capital (to Average Assets):
Consolidated 13,193,071 6.2 8,464,920 4.0 10,581,150 5.0
Indian River National Bank 14,791,281 7.0 8,464,920 4.0 10,581,150 5.0
</TABLE>
NOTE 16. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Bank, in the normal course of business, is a party to financial instruments
with off-balance-sheet risk to meet the financing needs of its customers. These
financial instruments include commitments to extend credit and standby letters
of credit. These instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amounts recognized on the balance sheet. The
contractual amounts of these instruments reflect the Bank's involvement in
particular classes of financial instruments.
F-24
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 16. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (CONTINUED)
The Bank's exposure to credit loss in the event of nonperformance by the
counterparty to the financial instruments for commitments to extend credit and
standby letters of credit is represented by the contractual amounts of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.
These commitments were as follows at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Commitments to extend credit $ 21,914,000 $ 17,610,000
Credit card arrangements 4,534,000 3,908,000
Standby letters of credit 1,102,000 688,000
-------------- -------------
$ 27,550,000 $ 22,206,000
============== =============
</TABLE>
Commitments to extend credit: Commitments to extend credit are commitments to
lend to a customer as long as there is no violation of any condition established
in the contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The
Bank evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained, if any, is based on management's credit
evaluation of the counterparty. Collateral held varies, but may include cash,
accounts receivable, inventory, property, plant and equipment, and residential
and commercial real estate.
Standby letters of credit: Standby letters of credit are conditional commitments
issued by the Bank to guarantee the performance of a customer to a third party.
The credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loans to customers.
NOTE 17. CONCENTRATIONS OF RISK
Most of the Bank's business activity is with customers located within its
primary market area, which generally includes Central Florida. Included in the
Bank's loan portfolio (see Note 4) is a concentration of loans related to real
estate, a significant portion of which relates to commercial real estate. A
substantial portion of its debtors' abilities to honor their contracts is
dependent upon the local economy. The economy of the Bank's primary market area
is not heavily dependent on any individual economic sector.
Concentration by institution: The Bank also has a substantial concentration of
funds with two banks at December 31, 1999. Such concentration consisted of
federal funds sold and a deposit account balance and totaled $3,212,018 and
$14,773,000, at December 31, 1999 and 1998, respectively. The Bank has not
experienced any losses on such accounts.
F-25
<PAGE>
Indian River Banking Company and subsidiary
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
NOTE 18. ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
---- ----
Cash flows from securities:
Securities available-for-sale:
<S> <C> <C>
Proceeds from sales $ 8,074,063 $ 4,144,609
Maturities, calls and paydowns 10,969,617 13,629,706
Purchases (47,961,799) (15,109,756)
Securities held to maturity:
Purchases (7,072,200) --
Purchase of Federal Home Loan Bank stock (87,900) (107,200)
---------------- --------------
$ (36,078,219) $ 2,557,359
================ ==============
Supplemental disclosures of cash flow information
Cash payments for interest $ 7,322,830 $ 7,127,109
================ ==============
Cash payments for income taxes $ 1,382,000 $ 1,290,000
================ ==============
Supplemental schedule of noncash investing and
financing activities
10% stock dividend $ 1,373,678 $ 1,205,358
================ ==============
</TABLE>
NOTE 19. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Bank in estimating the
fair value of its financial instruments:
Cash and cash equivalents: The carrying amounts reported in the consolidated
balance sheets for cash and short-term instruments approximated their fair
values.
Investment securities (including mortgage-backed securities): Fair values for
investment securities are based on quoted market prices, where available. If
quoted market prices are not available, fair values are based on quoted
market prices of comparable instruments.
Loans receivable: For variable-rate loans that reprice frequently and with no
significant change in credit risk, values are based on carrying values. Fair
values for other loans are estimated based on discounted cash flows, using
interest rates currently being offered for loans with similar terms to
borrowers with similar credit quality. Management believes that the allowance
for loan losses is an appropriate indication of the applicable credit risk
associated with determining the fair value of its loan portfolio and the
allowance has been deducted from the estimate fair value of loans.
Accrued interest receivable: The carrying amount of accrued interest
receivable approximates its fair value.
F-26
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 19. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Off-balance-sheet instruments: Fair values for the Bank's off-balance-sheet
instruments, primarily lending commitments, are based on fees currently
charged to enter into similar agreements, taking into account the remaining
terms of the agreements. The fair value for such commitments are nominal.
Deposit liabilities: The fair values of demand deposits and passbook savings
equal their carrying amounts which represents the amount payable on demand.
The carrying amounts for variable-rate, fixed-term money market accounts and
certificates of deposit approximate their fair value at the reporting date.
Fair values for fixed-rate certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates currently being
offered on certificates to a schedule of aggregated expected monthly
maturities on time deposits.
Other borrowings: The fair value of other borrowings with variable interest
rates approximate their recorded book value due to interest rates that are
near market rates. Fair values for fixed-rate borrowings are estimated using
a discounted cash flow calculation that applies interest rates currently
available on similar borrowings to a schedule of aggregated expected monthly
payments due on those borrowings.
Other liabilities: The carrying amount of other liabilities approximates
their fair value.
Commitments to extend credit and other off-balance-sheet financial
instruments - Consideration of the fair value of commitments to extend credit
and letters of credit is based on fees charged to enter into similar
agreements. Since the fees charged by the Bank are nominal, the estimate of
fair value is negligible.
Following is a summary of the carrying amounts and approximate fair values of
the Bank's financial instruments at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 6,714,850 $ 6,714,850 $ 17,128,994 $ 17,128,994
Investment securities (including
Federal Reserve Bank and
Federal Home Loan Bank stock) 89,286,651 89,453,678 56,747,313 56,747,313
Loans receivable 166,644,658 166,851,393 142,853,090 145,549,391
Accrued interest receivable 2,260,455 2,260,455 1,676,277 1,676,277
Deposits 238,845,951 239,428,367 200,396,765 201,065,597
Other borrowings 18,073,953 17,826,345 8,478,606 8,478,606
Other liabilities 724,533 724,533 457,173 457,173
Commitments to extend credit -- -- -- --
</TABLE>
F-27
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 20. PARENT COMPANY ONLY FINANCIAL STATEMENTS
Condensed financial statements for Indian River Banking Company only are
presented below:
- -------------------------------------------------------------------------------
INDIAN RIVER BANKING COMPANY
PARENT COMPANY ONLY BALANCE SHEETS
December 31, 1999 and 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
- ------ ---- ----
<S> <C> <C>
Cash $ 9,056 $ 94,377
Investment in Indian River National Bank 15,290,950 15,381,923
Other assets 137,664 72,709
-------------- --------------
$ 15,437,670 $ 15,549,009
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Notes payable $ 1,845,381 $ 1,764,320
Other liabilities 1,114 976
-------------- --------------
Total liabilities 1,846,495 1,765,296
Stockholders' equity 13,591,175 13,783,713
-------------- --------------
$ 15,437,670 $ 15,549,009
============== ==============
</TABLE>
INDIAN RIVER BANKING COMPANY
PARENT COMPANY ONLY STATEMENTS OF OPERATIONS
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Equity in net income of Indian River National Bank $ 2,103,876 $ 2,219,715
-------------- --------------
Expenses:
Interest expense 123,742 136,654
Other expenses 32,486 56,548
-------------- --------------
156,228 193,202
-------------- --------------
INCOME BEFORE INCOME TAXES 1,947,648 2,026,513
Provision for income taxes (benefit) (54,952) (72,709)
-------------- --------------
NET INCOME $ 2,002,600 $ 2,099,222
============== ==============
</TABLE>
F-28
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 20. PARENT COMPANY ONLY FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
INDIAN RIVER BANKING COMPANY
PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
Cash flow from operating activities:
<S> <C> <C>
Net loss $ 2,002,600 $ 2,099,222
Adjustments to reconcile net loss to net cash
used in operating activities:
Equity in net income of Indian River National Bank (2,103,876) (2,219,715)
Other (54,814) (27,713)
-------------- --------------
NET CASH USED IN OPERATING ACTIVITIES (156,090) (148,206)
-------------- --------------
Net cash used in investing activities, investment in other
assets (10,000) --
-------------- --------------
Cash flow from financing activities:
Increase in notes payable, net 81,061 214,320
Net cash flow from capital stock transactions (292) 5,350
-------------- --------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 80,769 219,670
-------------- --------------
Increase (decrease) in cash and cash equivalents (85,321) 71,464
Cash and cash equivalents:
Beginning 94,377 22,913
-------------- --------------
Ending $ 9,056 $ 94,377
============= =============
</TABLE>
NOTE 21. SUBSEQUENT STOCK SPLIT AND DIVIDEND
The number of shares outstanding and the related stockholders' equity accounts
have been retroactively adjusted in the accompanying balance sheet as of
December 31, 1999 to reflect a 10% stock dividend effective January, 2000 and a
2 for 1 stock split effected in the form of a stock dividend on March 31, 2000.
F-29
<PAGE>
[LOGO]
INDIAN RIVER BANKING COMPANY
200,000 SHARES
COMMON STOCK
Prospectus
______, 2000
INDIAN RIVER HAS NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ABOUT THE OFFERING THAT DIFFERS FROM, OR ADDS TO, THE INFORMATION
IN THIS PROSPECTUS OR IN ITS DOCUMENTS THAT ARE PUBLICLY FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THEREFORE, IF ANYONE DOES GIVE YOU DIFFERENT
OR ADDITIONAL INFORMATION, YOU SHOULD NOT RELY ON IT. THE DELIVERY OF THIS
PROSPECTUS AND/OR THE SALE OF SHARES OF COMMON STOCK DO NOT MEAN THAT THERE HAVE
NOT BEEN ANY CHANGES IN INDIAN RIVER'S CONDITION SINCE THE DATE OF THIS
PROSPECTUS. IF YOU ARE IN A JURISDICTION WHERE IT IS UNLAWFUL TO OFFER TO SELL,
OR TO ASK FOR OFFERS TO BUY, THE SECURITIES OFFERED BY THIS PROSPECTUS, OR IF
YOU ARE A PERSON TO WHOM IT IS UNLAWFUL TO DIRECT SUCH ACTIVITIES, THEN THE
OFFER PRESENTED BY THIS PROSPECTUS DOES NOT EXTEND TO YOU. THIS PROSPECTUS
SPEAKS ONLY AS OF ITS DATE EXCEPT WHERE IT INDICATES THAT ANOTHER DATE APPLIES.
UNTIL , ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER
OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The Articles of Incorporation of Indian River provide that Indian River may
indemnify officers, directors, employees and agents of Indian River to the
fullest extent permitted by Florida law (the "Florida law"). Pursuant to Florida
law, Indian River generally has the power to indemnify its present and former
directors, officers, agents and employees, or persons serving as such in another
entity at Indian River's request, against expenses (including attorneys' fees)
and liabilities incurred by them in any action, suit, or proceeding to which
they are, or are threatened to be made, a party by reason of their serving in
such positions, so long as they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of Indian
River, or in the case of a criminal proceeding, had no reasonable cause to
believe their conduct was unlawful. In respect of suits by or in the right of
Indian River, the indemnification is generally limited to expenses (including
attorneys' fees) and is not available in respect of any claim where such person
is adjudged liable to Indian River, unless the court determines that
indemnification is appropriate. To the extent such person is successful in the
defense of any suit, action or proceeding, indemnification against expenses
(including attorneys' fees) is mandatory. Indian River has the power to purchase
and maintain insurance for such persons and indemnification. The indemnification
provided by the Florida law is not exclusive of other rights to indemnification
which any person may otherwise be entitled under any bylaw, agreement,
shareholder or disinterested director vote, or otherwise.
Item 25. Other Expenses of Issuance and Distribution
The estimated expenses payable by Indian River in connection with the
offering described in this Registration Statement (other than underwriting
discounts and commissions) are as follows:
<TABLE>
<S> <C>
SEC registration fee $ 1,980
Blue Sky qualification fees and expenses 5,000
Printing, engraving & Edgar expenses 15,000
Legal fees and expenses 50,000
Accounting fees and expenses 20,000
Other 18,020
------
Total $110,000
========
</TABLE>
Item 26. Recent Sales of Unregistered Securities.
None.
Item 27. Exhibits.
<TABLE>
<CAPTION>
Number Description
------ ------------
<S> <C>
3(a) Articles of Incorporation of Indian River, as amended
3(b) Bylaws of Indian River
4 Refer to Articles V and VIII of the Articles of Incorporation (included as Exhibit 3(a) and
Article I of the Bylaws (included as Exhibit 3(b))
5(a) Opinion of Kennedy, Baris & Lundy, L.L.P.
10(a) Employment contract between Indian River and William A. High
10(b) Employment contract between Indian River and Charles A. Bradley
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
10(c) Indian River 1995 Stock Option Plan
10(d) Indian River 1999 Stock Option Plan
16 Letter of BDO Seidman on Change in Certifying Accountant (1)
21 Subsidiaries of the Registrant
</TABLE>
The sole subsidiary of Indian River is Indian River National Bank,
organized under the laws of the United States.
<TABLE>
<S> <C>
23(a) Consent of McGladrey & Pullen, LLP, Independent Auditors
23(b) Consent of Kennedy, Baris & Lundy, L.L.P., included in Exhibit 5
27 Financial Data Schedule
99(a) Form of Subscription Agreement
99(b) Form of Escrow Agreement
99(c) Form of Letter to Investors (1)
</TABLE>
- --------------------------
(1) To be filed by pre-effective amendment
Item 28. Undertakings. The Registrant hereby undertakes that it will:
(1) file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to: (i) include any
prospectus required by section 10(a)(3) of the Securities Act; (ii) reflect in
the prospectus any facts or events which, individually or together represent a
fundamental change in the information in the registration statement; and
notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) (ss. 230.424(b) of this
chapter) if, in the aggregate, the changes in the volume and price represent no
more than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement;
and (iii) include any additional or changed material information on the plan of
distribution.
(2) for determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) file a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-2
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Vero Beach, State of Florida, on, May 1, 2000.
INDIAN RIVER BANKING COMPANY
By: /s/ William A. High
-----------------------------
William A. High, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Paul A. Beindorf Vice President and Director May 1, 2000
- ---------------------------------------
Paul A. Beindorf
/s/ William C. Graves, IV Director May 1, 2000
- ---------------------------------------
William C. Graves, IV
/s/ Robert A. Grice Director May 1, 2000
- ---------------------------------------
Robert A. Grice
/s/ Griffin A. Greene Director May 1, 2000
- ---------------------------------------
Griffin A. Greene
/s/ William A. High President, Chief Executive Officer May 1, 2000
- --------------------------------------- and Director (Principal Executive Officer)
William A. High
/s/ William B. Marine Director May 1, 2000
- ---------------------------------------
William B. Marine
/s/ John L. Minton Chairman of the Board May 1, 2000
- ---------------------------------------
John L. Minton
/s/ Keith H. Morgan, Jr. Director May 1, 2000
- ---------------------------------------
Keith H. Morgan, Jr.
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Daniel R. Richey Director May 1, 2000
- ---------------------------------------
Daniel R. Richey
/s/ Mary M. Rogers Director May 1, 2000
- ---------------------------------------
Mary M. Rogers
/s/ John David Smith Director May 1, 2000
- ---------------------------------------
John David Smith
/s/ Charles A. Bradley Vice President, Treasurer and May 1, 2000
- --------------------------------------- Chief Financial Officer (Principal
Charles A. Bradley Accounting and Financial Officer)
</TABLE>
II-4
Exhibit 3(a)
ARTICLES OF INCORPORATION
OF
INDIAN RIVER BANKING COMPANY
(as amended through March 2000, names of initial directors excluded)
Article I
The name of the corporation is Indian River Banking Company.
Article II
The duration of the corporation is perpetual.
Article III
The purpose for which the corporation is organized is to become a bank
holding company and to conduct any and all business which lawfully may be
conducted by corporations under the laws of the State of Florida as now existing
or as hereafter amended or modified.
Article IV
The capital stock of the corporation shall consist of ten million
(10,000,000) shares of common stock, par value $1.00 per share, and five hundred
thousand (500,000) shares of preferred stock, par value $1.00 per share. The
Board of Directors is authorized, subject to the limitations contained in this
Article Fourth, to provide for the issuance of the shares of preferred stock in
series, and by filing a certificate pursuant to the applicable law of the State
of Florida, to establish from time to time the number of shares to be included
in each such series, and to fix the designation, powers, preferences and rights
of the shares of each such series and the qualifications, limitations or
restrictions thereof.
The authority of the Board of Directors with respect to each series of
preferred stock shall include, but not be limited to, determination of the
following:
(a) The number of shares constituting that series and the distinctive
designation of that series;
(b) The dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares
of that series;
(c) Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting
rights;
(d) Whether that series shall have conversion privileges, and, if so, the
terms and conditions of such conversion, including provision for
adjustment of the conversion rate in such events as the Board of
Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable, and, if
so, the terms and conditions of such redemption, including the date or
dates upon or after which they shall be redeemable, and the amount per
share payable in case of redemption, which amount may vary under
different conditions and at different redemption rates;
(f) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of
such sinking fund;
1
<PAGE>
(g) The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the corporation,
and the relative rights of priority, if any, of payment of shares of
that series; and
(h) Any other relative rights, preferences and limitations of that series.
The holders of capital stock shall have no preemptive rights to subscribe
for any shares of any class of capital stock of the corporation, whether now or
hereafter authorized.
Article V
(a) 1. In addition to any affirmative vote required by law, and except as
otherwise expressly provided in sections (b) and (c) of this Article Fifth, any
business combination (as hereinafter defined), or any amendment of this Article
Fifth, shall require the affirmative vote of the holders of at least eighty
percent (80%) of the outstanding shares of capital stock of the corporation
entitled to vote generally in the election of directors, considered for the
purpose of this Article Fifth as one class ("Voting Shares") .Such affirmative
vote shall be required notwithstanding the fact that no vote may be required, or
that some lesser percentage may be specified, by law or in any agreement with
any national securities exchange or otherwise.
2. The term "business combination" as used in this Article Fifth shall mean
any transaction which is referred to in anyone or more of the following clauses
(A) through (E):
(A) any merger or consolidation of the corporation or any subsidiary (as
hereinafter defined) with or into (i) any Interested Stockholder (as
hereinafter defined) or (ii) any other corporation (whether or not
itself an Interested Stockholder) which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder of any assets of the corporation
or any subsidiary having an aggregate fair market value of $1,500,000
or more, or
(C) the issuance or transfer by the corporation or any subsidiary (in one
transaction or a series of related transactions) of any securities of
the corporation or any subsidiary to any Interested Stockholder or any
Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or any combination thereof) having an
aggregate fair market value of $1,500,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the corporation, or (E) any reclassification of
securities (including any reverse stock split), or recapitalization of
the corporation, or any merger or consolidation of the corporation
with any of its subsidiaries or any similar transaction (whether or
not with or into or otherwise involving an Interested Stockholder)
which has the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of equity
or convertible securities of the corporation or any subsidiary which
is directly or indirectly owned by any Interested Stockholder or any
Affiliate of any Interested Stockholder.
(b) The provisions of section (a) of this Article Fifth shall not be applicable
to any particular business combination, or to any amendment to this Article
Fifth, and such business combination or amendment to this Article Fifth
shall require only such affirmative vote as is required by law and any
other provision of this Certificate of Incorporation, if such business
combination or amendment has been approved by two-thirds of the whole Board
of Directors.
(c) For purposes of this Article Fifth:
1. A "person" shall mean any individual, firm, corporation or other entity.
2. "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the corporation or any subsidiary) who
or which, as of the record date for the determination of stockholders
entitled to notice of and to vote on such business combination, or
immediately prior to the consummation of such business combination:
A. is the beneficial owner, directly or indirectly, of more than 10% of
the Voting Shares;
2
<PAGE>
B. is an Affiliate of the corporation and at any time within two years
prior thereto was the beneficial owner, directly or indirectly, of not
less than ten percent (10%) of the then outstanding Voting Shares; or
C. is an assignee of or has otherwise succeeded to any shares of capital
stock of the corporation which were at any time within two years prior
thereto beneficially owned by any Interested Stockholder.
3. A "person" shall be the "beneficial owner" of any Voting Shares:
A. which such person or any of its Affiliates or Associates (as
hereinafter defined) beneficially own, directly or indirectly, or
B. which such person or any of its Affiliates or Associates has (i) the
right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
C. which are beneficially owned, directly or indirectly, by any other
person with which such first mentioned person or any of its Affiliates
or Associates has any agreement, arrangement or understanding for the
purposes of acquiring, holding, voting or disposing of any shares of
capital stock of the corporation.
4. The outstanding Voting Shares shall include shares deemed owned through the
application of paragraph 3 above but shall not include any other voting
Shares which may be issuable pursuant to any agreement, or upon exercise of
conversion rights, warrants or options, or otherwise.
5. "Affiliate" and "Associate" shall have the respective meanings given those
terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect upon the date of adoption of
this Article Fifth.
6. "Subsidiary" shall mean any corporation of which a majority of any class of
equity security (as defined in Rule 3a11-1 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect upon
the date of adoption of this Article Fifth) is owned, directly or
indirectly, by the corporation; provided, however, that for the purposes of
the definition of Interested Stockholder set forth in paragraph 2 of this
section (c) the term "Subsidiary" shall mean only a corporation of which a
majority of each class of equity security is owned, directly or indirectly,
by the corporation.
(d) A majority of the directors shall have the power and duty to determine for
purposes of this Article Fifth on the basis of information known to them,
(1) the number of Voting Shares beneficially owned by any person, (2)
whether a person is an Affiliate or Associate of another, (3) whether a
person has an agreement, arrangement or understanding with another as to
matters referred to in paragraph 3 of section (c), or (4) whether the
assets subject to any business combination or the consideration received
for the issuance or transfer of securities by the corporation or any
subsidiary has an aggregate fair market value of $1,500,000 or more.
(e) Nothing contained in this Article Fifth shall be construed to relieve any
Interested Stockholder from any fiduciary obligation imposed by law.
(f) The corporation hereby elects not to be governed by Section 607.108 of
Title XXXVI, Florida Statutes [West's F.S.A.ss.607.108 (1988)], as now
existing or hereafter amended.
(g) Section 607.109 of Title XXXVI, Florida statutes [West's F.S.A.ss.607.109
(1988)], as now existing or hereafter amended, does not apply to
control-share acquisitions of shares of the corporation.
Article VI
In the event the board of directors shall evaluate a business combination,
the directors shall consider, among other things, the following factors: the
effect of the business combination on the corporation and its subsidiaries, and
their respective stockholders, employees, customers and the communities which
they serve, the timing of the proposed business combination: the risk that the
proposed business combination will not be consummated; the reputation,
management capability and performance history of the person proposing the
business combination; the current market price of the corporation's capital
stock; the relation of the price offered to the current value of the corporation
in a freely negotiated transaction and in relation to the directors' estimate of
the future value of the corporation and its subsidiaries as an independent
entity or entities: the tax consequences of the business combination to the
corporation and its stockholders: and such other factors deemed by the directors
to be
3
<PAGE>
relevant. In such considerations, the board of directors may consider all or
certain of such factors as a whole and mayor may not assign relative weights to
any of them. The foregoing is not intended as a definitive list of factors to be
considered by the board of directors in the discharge of their fiduciary
responsibility to the corporation and its stockholders, but rather to guide such
consideration and to provide specific authority for the consideration by the
board of directors of factors which are not purely economic in nature in light
of the circumstances of the corporation and its subsidiaries at the time of such
proposed business combination.
Article VII
The street address of the registered office of the corporation is 958 20th
Place, Vero Beach, Florida 32960 and the name of the initial registered agent of
the corporation at such address is William A. High.
Article VIII
(a) The board of directors of the corporation shall consist of nine
persons. The names and addresses of the initial directors are: [excluded]
(b) The number of directors constituting the entire Board shall be not less
than three nor more than fifteen as fixed from time to time by vote of a
majority of the entire Board, provided, however, that the number of directors
shall not be reduced so as to shorten the term of any director at the time in
office, and provided further, that the number of directors constituting the
entire Board shall be nine until otherwise fixed by a majority of the entire
Board. Each director shall be the record owner of one or more shares of Common
Stock of the Corporation and shall have been a resident of Indian River County,
Florida or any contiguous counties for at least one year prior to his election
as a director.
(c) The Board of Directors shall be divided into three classes, as nearly
equal in numbers as the then total number of directors constituting the entire
Board permits, with the term of office of one class expiring each year. At the
annual meeting of stockholders in 1990, directors of the first class shall be
elected to hold office for a term expiring at the next succeeding annual meeting
of stockholders, directors of the second class shall be elected to hold office
for a term expiring at the second succeeding annual meeting of stockholders, and
directors of the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting of stockholders. Any vacancies in the
Board of Directors for any reason, and any directorships resulting from any
increase in the number of directors, may be filled by the Board of Directors,
acting by a majority of the directors then in office, although less than a
quorum, and any directors so chosen shall hold office until the next election of
directors and until their successors shall be elected and qualified. Any change
in the number of directorships shall be so apportioned among the classes as to
make all classes as nearly equal in number as possible. Notwithstanding the
foregoing, and except as otherwise required by law, whenever the holders of
anyone or more series of Preferred Stock shall have the right, voting separately
as a class, to elect one or more directors of the Corporation, the terms of the
director or directors elected by such holders shall expire at the next
succeeding annual meeting of stockholders. Subject to the foregoing, at each
annual meeting of stockholders the successors to the class of directors whose
term shall then expire shall be elected to hold office for a term expiring at
the third succeeding annual meeting.
(d) Notwithstanding any other provision of this Certificate of
Incorporation or the ByLaws of the Corporation (and notwithstanding the fact
that some lesser percentage may be specified by law, this Certificate of
Incorporation or the ByLaws of the Corporation), any director or the entire
Board of Directors of the Corporation may be removed at any time, but only for
cause and only by the affirmative vote of the holders of 75% or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as a single
class) cast at a meeting of the stockholders called for that purpose.
Notwithstanding the foregoing, and except as otherwise required by law, whenever
the holders of anyone or more series of Preferred Stock shall have the right,
voting separately as a class, to elect one or more directors of the Corporation,
the provisions of this section (d) of this Article shall apply with respect to
the director or directors elected by such holders of Preferred Stock to the vote
of the holders of the outstanding shares of Preferred Stock and not to the vote
of the outstanding shares of capital stock as a whole.
(e) This Article VIII may be amended only by the affirmative vote of the
holders of the eighty percent (80%) of the outstanding shares of capital stock
entitled to vote in the election of directors generally.
Exhibit 3(b)
BY-LAWS
Of
INDIAN RIVER BANKING COMPANY
Article I
Meetings of Shareholders
Section 1.1 Annual Meeting. The regular annual meeting of shareholders for
the election of directors and for the transaction of whatever other business may
properly come before the meeting, shall be held at such place within or without
the State of Florida and at such time and on such date as the Board of Directors
may designate from time to time. Notice of such meeting shall be mailed, postage
prepaid, at least ten days prior to the date thereof, addressed to each
shareholder at his address appearing on the books addressed to each shareholder
at his address appearing on the books of the Company.
Section 1.2 Special Meetings. Except as otherwise specifically provided by
law, special meetings of the shareholders may be called for any purpose at any
time by the Chairman of the Board of Directors, by the Board of Directors or by
the Secretary of the Board of Directors at the request of anyone or more
shareholders owning, in the aggregate, not less than 25 percent of the stock of
the Company. Every such special meeting, unless otherwise provided by law, shall
be called by mailing, postage prepaid, not less than ten days prior to the date
fixed for such meeting, to each shareholder at his address appearing on the
books of the Company a notice stating the time, place and purpose of the
meeting, unless the shareholders by unanimous consent waive such notice.
Section 1.3 Nominations for Director. Nominations for election to the Board
of Directors may be made by the Board of Directors, a committee of the Board of
Directors appointed by the Board of Directors to act as a nominating committee
or by the holder of any share of any outstanding class of capital stock of the
Company entitled to vote for the election of directors. Nominations, other than
those made by or on behalf of the existing Board of Directors of the Company,
shall be made in writing and shall be delivered or mailed to the President of
the Company at the Company's principal business address, not less than 14 days
nor more than 50 days prior to any meeting of shareholders called for the
election of directors. Such notification shall contain the following information
to the extent known to the notifying party: (a) the name and address of the
residence of each proposed nominee and the length of time the proposed nominee
has lived at the residence; (b) the principal occupation of each proposed
nominee; (c) the total number of shares of capita1 stock of the Company that
will be voted for each proposed nominee; (d) the name and residence address of
the notifying shareholder; and (e) the number of shares of capital stock of the
Company owned by the notifying party. Nominations not made in accordance
herewith may in his/her discretion, be disregarded by the Chairman of the
meeting, and upon his/her instructions, all votes cast for such nominee may be
disregarded.
Section 1.4 Judges of Election. Every election of directors shall be
managed by one or more judges of election, who shall be appointed from among the
shareholders by the Board of Directors. The judges of election shall hold and
conduct the election at which they are appointed to serve and, after the
e1ection, they shall file with the Secretary a certificate under their hands,
certifying the result thereof and names of the directors elected. The judges of
election, at the request of the Chairman of the meeting, shall act as tellers of
any other vote by ballot taken at such meeting, and shall certify the result
thereof.
Section 1.5 Proxies. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing. Proxies shall be valid only
for one meeting, to be specified therein, and any adjournments of such meeting.
All proxies shall be dated and shall be filed with the records of the meeting.
Section 1.6 Quorum. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law; but less than a quorum may
adjourn any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice. A
1
<PAGE>
majority of the votes cast shall decide every question or matter submitted to
the shareholders at any meeting, unless otherwise provided by law or by the
Articles of Incorporation.
Article II
Directors
Section 2.1 Board or Directors. The Board of Directors (hereinafter
referred to as the "Board"), shall have power to manage and administer the
business affairs of the Company. Except as expressly limited by law, all
corporate powers of the Company shall be vested in and may be exercised by said
Board.
Section 2.2 Number. The Board shall consist of the number of directors
specified in the Articles of Incorporation or fixed by the Board from time to
time in accordance with the Articles of Incorporation.
Section 2.3 Annual Organization Meeting. The Secretary, upon receiving the
certificate of the judges of election of the result of any election of
directors, shall notify the directors-elect of their election and of the date,
time and place at which they are required to meet for the purpose of organizing
the new Board and electing and appointing officers of the Company for the
succeeding year. Such meeting shall be held on the day of the election or as
soon thereafter as practicable, and, in any event, within thirty days thereof.
If, at the time fixed for such meeting, there shall not be a quorum present, the
directors present may adjourn the meeting, from time to time, until a quorum is
obtained.
Section 2.4 Regular Meetings. The Regular Meetings of the Board of
Directors shall be held, without notice, at such time and place as shall from
time to time be determined by the Board of Directors.
Section 2.5 Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board of Directors or the President of the
Company, or at the request of two or more directors. Each member of the Board
shall be given notice stating time and place, by telephone, telegram, letter or
in person, of each such special meeting. Except as may otherwise be required by
law or the Articles of Incorporation, or by these By-Laws, neither the business
to be transacted at nor the purpose of any special meeting need be specified in
a notice or waiver of notice.
Section 2.6 Quorum. A majority of the directors shall constitute a quorum
at any meeting, except when otherwise provided by law or the Articles of
Incorporation; but a lesser number may adjourn any meeting, from time to time,
and the meeting may be held, as adjourned without further notice.
Section 2.7 Chairman of the Board of Directors. The Board of Directors may
elect a Chairman of the Board of Directors to preside at their meetings and to
perform such other duties as the Board may from time to time assign to him or
these By-Laws may provide.
Article III
Committees of the Board
Section 3.1 Committees. The Board of Directors may, by resolution adopted
by a majority of the whole Board, designate from among its members one or more
committees which shall have and may exercise the authority of the Board of
Directors to the extent provided in such resolution and subject to the
limitations imposed by applicable law, the Articles of Incorporation or these
By-Laws.
Article IV
Officers
Section 4.1 Officers. The officers of the Company shall be elected by the
Directors and shall consist of a President, Secretary and Treasurer. The Board
of Directors may also choose a Chairman of. the Board, additional Vice
Presidents and one or more assistant secretaries and assistant treasurers. Any
two or more offices may be held
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by the same person. The Directors shall designate the officers who shall be the
Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and
Principal Accounting Officer of the Company and the respective responsibilities
of such officers.
Section 4.2 President. The Board of Directors shall appoint one of its
members to be President of the Company. In the absence of the Chairman, the
President shall preside at any meeting of the shareholders and of the Board. The
President shall have general executive powers and duties pertaining by law,
regulation, or practice, to the Office of President, or imposed by these
By-Laws. The President shall also have and may exercise such further powers and
duties as from time to time may be conferred or assigned by the Board of
Directors.
Section 4.3 Vice President. The Board of Directors may appoint one or more
Vice Presidents. Each Vice President shall have such powers and duties as may be
assigned by the Board of Directors or the President.
Section 4.4 Secretary. The Secretary shall attend all meetings of the Board
of Directors and stockholders and record all votes and the minutes of all
proceedings in a book to be kept for that purpose and shall perform like duties
for committees of the Board of Directors when required to do so. The Secretary
shall attend to the giving of all notices required by these Bylaws to be given;
shall be custodian of the corporate seal, records, documents and papers of the
Company; shall provide for the keeping of proper records of all transactions of
the Company; shall have and may exercise any and all other powers and duties
pertaining by law, regulation or practice, to the office of Secretary, or
imposed by these Bylaws; and shall also perform such other duties as may be
assigned from time to time by the Board of Directors or the President.
Section 4.5 Assistant Secretaries. Each Assistant Secretary shall have only
such powers and perform only such duties as the Board of Directors may from time
to time prescribe or as the President may from time to time delegate.
Section 4.6 Treasurer. The Treasurer shall have the custody of corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements of the Company and shall deposit all monies and other valuable
effects in the name and to the credit of the Company in such depositories as are
designated by the Board of Directors. The Treasurer shall disburse the funds of
the Company as may be ordered by the Board of Directors, taking proper vouchers
for such disbursements, and shall render to the President or to the Board of
Directors upon request an account of all transactions as Treasurer and of the
financial condition of the Company, and shall perform such other duties as may
be assigned from time to time by the Board of Directors or the President.
Section 4.7 Assistant Treasurers. Each Assistant Treasurer shall have only
such powers and perform only such duties as the Board of Directors may from time
to time prescribe or as the President may from time to time designate.
Section 4.8 Compensation. The compensation for all officers of the Company
shall be fixed from time to time by the Board of Directors of the Company in its
sole discretion.
Section 4.9 Removal and Vacancies. Each officer of the Company shall hold
office at the pleasure of the Board of Directors or until his death or
resignation. Any officer appointed by the Board of Directors may be removed
either for or without cause by a majority of the whole Board, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. If the office of any officer becomes vacant for any reason, the Board
of' Directors may fill such vacancy in its sole discretion.
Article V
Stock and Stock Certificates
Section 5.1 Transfers. Shares of capital stock shall be transferable on the
books of the Company only by the registered holder thereof or his duly
authorized attorney, and a transfer book shall be kept in which all transfers of
stock shall be recorded. The Board of Directors may designate an agent to act as
transfer agent of the Company for purposes of maintaining records of stock
transfers, issuing stock certificates resulting therefrom and other similar or
customary actions taken by a transfer agent.
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Section 5.2 Stock Certificates. Certificates of stock shall bear the
signature of the President (which may be engraved, printed or impressed), and
shall be signed manually or in facsimile by the Secretary, Assistant Secretary,
or any other officer appointed by the Board of Directors for that purpose, to be
known as the Authorized Officer, and the seal of the Company shall be engraved
thereon. Each certificate shall recite on its face that the stock represented
thereby is transferable only upon the books of the Company properly endorsed.
Artic1e VI
Seal
Section 6.1 Seal. The Board of Directors may, but is not required, to adopt
a form of seal for the Company. The President, the Secretary or any Assistant
Secretary, or other officer thereunto designated by the Board of Directors shall
have authority to affix the corporate seal to any document requiring such seal,
and to attest the same. Such seal shall be substantially in the form adopted by
the Board of Directors from time to time as the seal of the Company.
Artic1e VII
Miscellaneous Provisions
Section 7.1 Fiscal Year. The Fiscal Year of the Company shall be the
calendar year.
Section 7.2 Execution of Instruments. All agreements, indentures,
mortgages, deeds, conveyances, transfers, certificates, declarations, receipts,
discharges, releases, satisfactions, settlements, petitions, schedules,
accounts, affidavits, bonds, undertakings, proxies, and other documents may be
signed, executed, acknowledged, verified, delivered or accepted in behalf of the
Company by the Chairman of the Board, or the President or any Vice President, or
the Secretary, or, if in connection with the exercise of the powers of the
Company, by any of said officers. Any such instruments may also be executed,
acknowledged, verified, delivered or accepted in behalf of the Company in such
other manner and by such other officers as the Board of Directors may from time
to time direct. The provisions of this Section 7.2 are supplementary to any
other provisions of these Bylaws.
Section 7.3 Indemnification. The Company shall indemnify its directors,
officers and agents to the fullest extent permitted under the laws of the State
of Florida.
Section 7.4 Headings. The headings contained herein are for convenience of
reference only and shall not be construed to affect or modify the content of the
paragraph or section to which they relate.
CERTIFICATION
THE UNDERSIGNED, BEING THE DULY CONSTITUTED SECRETARY OF INDIAN RIVER BANKING
COMPANY (THE "COMPANY"), DO HEREBY CERTIFY THAT ATTACHED HERETO IS A TRUE,
CORRECT AND COMPLETE COPY OF THE BY-LAWS OF THE COMPANY AS ADOPTED BY THE BOARD
OF DIRECTORS OF THE COMPANY.
Dated: January ___________, 1989 ________________________
Secretary
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Exhibit 5
[OBJECT OMITTED]
May 5, 2000
Board of Directors
Indian River Banking Company
958 20th Place
Vero Beach, Florida 32960
Re: Registration Statement on Form SB-2
Gentlemen:
As counsel to Indian River Banking Company (the "Company") we have
participated in the preparation of the Company's Registration Statement on Form
SB-2 to be filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended, relating to the proposed public offering,
through the efforts of certain directors and officers of CommerceFirst, of up to
300,000 shares of the Company's common stock (the "Shares").
As counsel to the Company, we have examined such corporate records,
certificates and other documents of the Company, and made such examinations of
law and inquiries of such officers of the Company, as we have deemed necessary
or appropriate for purposes of this opinion. Based upon such examinations we are
of the opinion that the Shares, when sold in the manner set forth in the
Registration Statement, will be duly authorized, validly issued, fully paid and
non-assessable shares of the common stock of the Company .
We hereby consent to the inclusion of this opinion as an exhibit to the
Registration Statement on Form SB-2 filed by the Company and the reference to
our firm contained therein under "Legal Matters."
Sincerely,
/s/ Kennedy, Baris & Lundy
Exhibit 10(a)
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement"), made this day of 1999, by and among
Indian River Banking Company, a registered bank holding company ("the Company"),
Indian River National Bank, a national banking association and wholly owned
subsidiary of the Company with its main office in Vero Beach, Florida (the
"Bank"), and William A. High (the "Officer").
W I T N E S S E T H
WHEREAS, the Board of Directors ("Board") of the Bank desires to retain the
services of the Officer as the President and Chief Executive Officer of the
Bank, and the Board of the Company desires to retain the services of the Officer
as the President and Chief Executive Officer of the Company, and each desires
that the Officer serve as a member of the respective Board of Directors.
WHEREAS, the Officer desires to serve as President and Chief Executive
Officer of the Company and the Bank and as a member of their respective Boards
of Directors.
WHEREAS, the Officer and the respective Boards of the Bank and the Company
desire to enter into an Agreement setting forth the terms and conditions of the
employment of the Officer and the related rights and obligations of each of the
parties.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed as follows:
1. Employment. The Officer is employed as the President and Chief Executive
Officer of the Company and of the Bank, reporting directly to their respective
Boards. Subject to Board direction, the Officer shall have responsibility for
the general management and control of the business and affairs of the Company,
the Bank, and their respective subsidiaries, and shall perform all duties and
shall have all powers which are commonly incident to the offices of President
and Chief Executive Officer or which, consistent with those offices, are
delegated to him by the respective Board. The Officer's duties include, but are
not limited to:
a. Making recommendations to the Boards concerning the strategies,
capital structure, tactics, and general operations of the Company and
the Bank;
b. Managing the day-to-day operations of the Company and the Bank;
c. Supervising other officers and employees of the Company and the Bank;
d. Promoting the Company and the Bank and their services;
e. Managing the efforts of the Company and the Bank to comply with
applicable laws and regulations; and
f. Providing complete, timely, and accurate reports to the Boards of the
Company and the Bank regarding the material affairs and the condition
of the Company and the Bank, respectively.
2. Location and Facilities. The Officer will be furnished with the working
facilities and staff customary for executive officers with the title and duties
set forth in Section 1 and as are necessary for him to perform his duties. The
location of such facilities and staff shall be at the principal administrative
offices of the Company and the Bank, or at such other site or sites customary
for such offices.
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3. Term.
a. The term of this Agreement shall be (i) the initial term, consisting
of the period commencing on the date of this Agreement (the "Effective
Date") and ending immediately prior to the third anniversary of the
Effective Date, plus (ii) any and all extensions of the initial term
made pursuant to this Section 3.
b. On each anniversary of the Effective Date prior to a termination of
the Agreement, the term under this Agreement shall be extended for an
additional one-year period beyond the then effective expiration date
without action by any party, provided that neither the Company or the
Bank, on the one hand, nor the Officer, on the other, shall have given
written notice at least sixty (60) days prior to such anniversary date
of its or his desire that the term not be extended. The Boards of the
Company and the Bank will review the Officer's performance and the
advisability of extending the term of this Agreement at a meeting or
meetings at least ninety (90) days prior to each anniversary date.
4. Base Compensation.
a. The Company and the Bank agree to pay the Officer during the term of
this Agreement a salary at the rate of $150,000 per annum, payable in
cash not less frequently than monthly, as may be adjusted in
accordance with this Section 4.
b. The Boards of the Company and the Bank shall review annually the rate
of the Officer's salary based upon factors they deem relevant, and may
maintain or increase his salary, provided that no such action shall
(i) reduce the rate of salary below $150,000, or (ii) reduce the rate
of salary paid to the Officer for any months prior to the month in
which notice of the reduction is provided in writing to the Officer,
and provided further that the Officer's salary shall be increased on
each anniversary of the effective date by a percentage equal to the
percentage change in the Consumer Price Index (All Urban Consumers)
("CPI-U") over the last twelve-month period for which such CPI-U data
is available prior to such anniversary date (as adjusted for changes
in CPI-U base years) up to a maximum of five percent per year.
c. In the absence of action by the Board of both the Company and the
Bank, the Officer shall continue to receive salary at the $150,000 per
annum rate specified herein or, if another rate has been established
under the provisions of this Section 4, the rate last properly
established by action of the Board of the Company or the Bank under
the provisions of this Section 4.
5. Bonuses. Unless the Officer agrees otherwise, he shall be entitled to
participate in discretionary bonuses that the Board may award from time to time
to senior management employees pursuant to bonus plans or otherwise, including,
without limitation, the Bank's 2000 Incentive Bonus Plan. A copy of the Bank's
2000 Incentive Bonus Plan is attached hereto as Exhibit I.
6. Benefit Plans. The Officer shall be entitled to participate in such life
insurance, medical, dental, pension, profit sharing, and retirement plans and
other programs and arrangements as may be approved from time to time by the
Company or the Bank for the benefit of their respective employees.
7. Vacation and Leave.
a. The Officer shall be entitled to vacations in accordance with Bank
policy, or otherwise as approved by the Board, provided that the
Officer shall be entitled to paid vacation of at least ten working
days between the Effective Date and December 31, 1999, and of at least
twenty working days for each calendar year thereafter.
b. In addition to paid vacations, the Officer shall be entitled, without
loss of pay, to absent himself voluntarily from the performance of his
employment for such additional periods of time and for such valid and
legitimate reasons as the Board of the Company and the Bank may in
their discretion determine. Further, the Board of the Company or the
Bank may grant to the Officer a leave or leaves
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of absence, with or without pay, at such time or times and upon such
terms and conditions as such Boards in their discretion may determine.
8. Expense Payments and Reimbursements. The Officer shall be reimbursed for all
reasonable out-of-pocket business expenses that he shall incur in connection
with his services under this Agreement upon substantiation of such expenses in
accordance with applicable policies of the Company or the Bank.
9. Loyalty and Confidentiality.
a. During the term of this Agreement the Officer: (i) shall devote all
his time, attention, skill, and efforts to the faithful performance of
his duties hereunder; provided, however, that from time to time, the
Officer may serve on the boards of directors of, and hold any other
offices or positions in, companies or organizations which will not
present any conflict of interest with the Company or the Bank or any
of their subsidiaries or affiliates, unfavorably affect the
performance of Officer's duties pursuant to this Agreement, or violate
any applicable statute or regulation; and (ii) shall not engage in any
business or activity contrary to the business affairs or interests of
the Company or the Bank.
b. Nothing contained in this Agreement shall prevent or limit the
Officer's right to invest in the capital stock or other securities of
any business dissimilar from that of the Company and the Bank, or,
solely as a passive, minority investor, in any business.
c. The Officer agrees to maintain the confidentiality of any and all
information concerning the operation or financial status of the
Company and the Bank; the names or addresses of any of their
borrowers, depositors and other customers; any information concerning
or obtained from such customers; and any other information concerning
the Company or the Bank to which he may be exposed during the course
of his employment. The Officer further agrees that, unless required by
law or specifically permitted by the Company or the Bank in writing,
he will not disclose to any person or entity, either during or
subsequent to his employment, any of the above-mentioned information
which is not generally known to the public, nor shall he employ such
information in any way other than for the benefit of the Company and
the Bank.
10. Termination and Termination Pay. Subject to Section 11 of this Agreement,
the Officer's employment under this Agreement may be terminated in the following
circumstances:
a. Death. The Officer's employment under this Agreement shall terminate
upon his death during the term of this Agreement, in which event the
Officer's estate shall be entitled to receive the compensation due to
the Officer through the last day of the calendar month in which his
death occurred.
b. Retirement. This Agreement shall be terminated upon the normal or
early retirement of the Officer under the retirement benefit plan or
plans in which he participates pursuant to Section 6 of this Agreement
or otherwise.
c. Disability. The Company, the Bank, or the Officer may terminate the
Officer's employment after having established the Officer's
Disability. For purposes of this Agreement, "Disability" means a
physical or mental infirmity that impairs the Officer's ability to
substantially perform his duties under this Agreement and that results
in the Officer's becoming eligible for long-term disability benefits
under the Company's or the Bank's long-term disability plan (or, if
the Company or the Bank has no such plan in effect, that impairs the
Officer's ability to substantially perform his duties under this
Agreement for a period of one-hundred-eighty consecutive days). In the
event of such Disability, the Officer's obligation to perform services
under this Agreement will terminate. In the event of such termination,
the Officer shall be entitled to receive the compensation and benefits
provided for under this Agreement for any period during the term of
this Agreement and prior to the date of termination pursuant to this
Section 10.c. during which the Officer is unable to work due to
physical or mental infirmity (less any amounts which the Officer
receives under any disability insurance maintained by the Company or
the Bank with respect to such period). The Boards of the Company and
the Bank
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shall determine whether or not the Officer is and continues to be
permanently disabled for purposes of this Agreement in good faith,
based upon competent medical advice and other factors that they
reasonably believe to be relevant. As a condition to any benefits,
such Board may require the Officer to submit to such physical or
mental evaluations and tests as it deems reasonably appropriate.
d. Just Cause.
i. The Board of the Company or the Bank may, by written notice to
the Officer in the form and manner specified in this paragraph,
immediately terminate his employment with the Company or the
Bank, respectively, at any time, for Just Cause. The Officer
shall have no right to receive compensation or other benefits for
any period after termination for Just Cause except for vested
benefits. Termination for "Just Cause" shall mean termination
because of, in the good faith determination of the Company's or
the Bank's Board, the Officer's:
(1) Personal dishonesty;
(2) Incompetence;
(3) Willful misconduct;
(4) Breach of fiduciary duty involving personal profit;
(5) Intentional failure to perform duties under this Agreement;
(6) Other, continuing material failure to perform his duties
under this Agreement after reasonable notification (which
shall be stated in writing and given at least fifteen days
prior to termination) by the Board of the Company or the
Bank of such failure;
(7) Willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) that reflects
adversely on the reputation of the Bank, any felony
conviction, any violation of law involving moral turpitude,
or any violation of a final cease-and-desist order; or
(8) Material breach by the Officer of any provision of this
Agreement.
ii. Notwithstanding the foregoing, the Officer shall not be deemed to
have been terminated for Just Cause by the Company or the Bank
unless there shall have been delivered to the Officer a copy of a
resolution duly adopted by the affirmative vote of not less than
a majority of the entire membership of the Board of the Company
or the Bank at a meeting of such Board called and held for the
purpose (after reasonable notice to the Officer and an
opportunity for the Officer to be heard before the Board),
finding that in the good faith opinion of such Board the Officer
was guilty of conduct described above and specifying the
particulars thereof.
e. Certain Regulatory Events.
i. If the Officer is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order
issued under Sections 8(e)(4) or 8(g)(1) of the Federal Deposit
Insurance Act ("FDIA") (12 U.S.C. ss.ss. 1818(e)(4) and (g)(1)),
all obligations of the Bank under this Agreement shall terminate
as of the effective date of the order, but vested rights of the
parties shall not be affected.
ii. If the Bank is in default (as defined in Section 3(x)(1) of
FDIA), all obligations of the Bank under this Agreement shall
terminate as of the date of default, but vested rights of the
parties shall not be affected.
iii. If a notice served under Sections 8(e)(3) or (g)(1) of the FDIA
(12 U.S.C. ss.ss. 1818(e)(3) and (g)(1)) suspends and/or
temporarily prohibits the Officer from participating in the
conduct of the Bank's affairs, the Bank's obligations under this
Agreement shall be suspended as of the date of such service,
unless stayed by appropriate proceedings. If the charges in the
notice are dismissed, the Bank may, in its discretion, (i) pay
the Officer all or part of the compensation withheld while its
contract
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obligations were suspended, and (ii) reinstate (in whole or in
part) any of its obligations which were suspended.
The occurrence of any of the events described in paragraphs i, ii, and iii
above may be considered by the Board of the Company or the Bank in connection
with a termination for Just Cause.
f. Voluntary Termination by Officer. In addition to his other rights to
terminate under this Agreement, the Officer may voluntarily terminate employment
with the Bank and the Company during the term of this Agreement upon at least
sixty-days' prior written notice to each of their Boards, in which case the
Officer shall receive only his compensation, vested rights and employee benefits
up to the date of his termination.
g. Without Just Cause or With Good Reason.
i. In addition to termination pursuant to Section 10.a. through
10.f. the Board of the Company or the Bank may, by written notice
to the Officer, immediately terminate his employment with the
Company or the Bank, respectively, at any time for a reason other
than Just Cause (a termination "Without Just Cause"); and the
Officer may, by written notice to the Boards of the Company and
the Bank, immediately terminate this Agreement at any time within
ninety days following an event of "Good Reason" as defined below
(a termination "With Good Reason").
ii. Subject to Section 11 hereof, in the event of termination under
this Section 10.g., the Officer shall be entitled to receive the
salary for the remaining term of the Agreement, including any
renewals or extensions thereof, at the highest annual rate in
effect pursuant to Section 4 of this Agreement for any of the
twelve months immediately preceding the date of such termination,
plus annual cash bonuses for each year (prorated in the event of
partial years) remaining under such term at the amount received
by the Officer in the calendar year preceding the termination.
The sum due under this Section 10.g. shall be paid in one lump
sum within ten calendar days of such termination. Also, in such
event, the Officer shall, for the remaining term of the
Agreement, continue to participate in any benefit plans of the
Company and the Bank that provide health (including medical and
dental), life or disability insurance, or similar coverage upon
terms no less favorable than the most favorable terms provided to
senior officers of the Bank during such period.
iii. "Good Reason" shall exist if, without Officer's express written
consent, the Company or the Bank materially breach any of its
respective obligations under this Agreement. Without limitation,
such a material breach shall be deemed to occur upon any of the
following:
(1) A material reduction in the Officer's responsibilities or
authority, or a requirement that the Officer report to any
person or group other than the Boards of the Company and the
Bank (or any other effective reduction in reporting
responsibilities) in connection with his employment with the
Company or the Bank;
(2) Assignment to the Officer of duties of a non-executive
nature or duties for which he is not reasonably equipped by
his skills and experience;
(3) Failure of the Officer to be elected or reelected to the
Board of the Bank or the Company;
(4) A reduction in salary or benefits contrary to the terms of
this Agreement, or, following a Change in Control as defined
in Section 11 of this Agreement, any reduction in salary or
material reduction in benefits below the amounts to which he
was entitled prior to the Change in Control;
(5) Termination of incentive and benefit plans, programs or
arrangements, or reduction of the Officer's participation to
such an extent as to materially reduce their aggregate value
below their aggregate value as of the Effective Date.
(6) A requirement that the Officer relocate his principal
business office or his principal place of residence outside
of the area consisting of a fifty mile radius from the
current main office and any branch of the Bank, or the
assignment to the Officer of duties that would reasonably
require such a relocation;
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(7) A requirement that the Officer spend more than thirty normal
working days away from the area consisting of a fifty mile
radius from the current main office and any branch of the
Bank during any consecutive twelve-month period; or
(8) Failure to provide office facilities, secretarial services,
and other administrative services to Officer which are
necessary for the Officer to perform his duties hereunder
(excluding brief periods during which office facilities may
be temporarily unavailable due to fire, natural disaster, or
other calamity).
iv. Notwithstanding the foregoing, a reduction or elimination of the
Officer's benefits under one or more benefit plans maintained by
the Company or the Bank as part of a good faith, overall
reduction or elimination of such plan or plans or benefits
thereunder applicable to all participants in a manner that does
not discriminate against the Officer (except as such
discrimination may be necessary to comply with law) shall not
constitute an event of Good Reason or a material breach of this
Agreement, provided that benefits of the type or to the general
extent as those offered under such plans prior to such reduction
or elimination are not available to other officers of the Company
or the Bank or any company that controls either of them under a
plan or plans in or under which the Officer is not entitled to
participate, and receive benefits, on a fair and
nondiscriminatory basis.
h. Continuing Covenant not to Compete or Interfere with Relationships.
Regardless of anything herein to the contrary, following a termination
(i) upon retirement pursuant to Section 10.b., (ii) due to Disability
pursuant to Section 10.c., (iii) for Just Cause pursuant to Section
10.d., or (iv) by the Officer pursuant to Section 10.f.:
i. The Officer's obligations under Section 9.c. of this Agreement
will continue in effect; and
<PAGE>
ii. During the greater of (A) remaining term of this Agreement
(determined immediately before such termination), or (B) the
period ending on the third anniversary of such termination) the
Officer shall not serve as an officer or director or employee of
any bank holding company, bank, savings association, savings and
loan holding company, or mortgage company (any of which, a
"Financial Institution") which Financial Institution offers
products or services competing with those offered by the Company
or the Bank from any office within fifty miles from the main
office or any branch of the Bank and shall not interfere with the
relationship of the Company or the Bank and any of its employees,
agents, or representatives.
11. Termination in Connection with a Change in Control.
a. For purposes of this Agreement, a "Change in Control" shall be deemed
to occur on the earliest of:
i. The acquisition by any entity, person or group (other than the
acquisition by a tax-qualified retirement plan sponsored by the
Company or the Bank) of beneficial ownership, as that term is
defined in Rule 13d-3 under the Securities Exchange Act of 1934,
of more than 25% of the outstanding capital stock of the Company
or the Bank entitled to vote for the election of directors
("Voting Stock");
ii. The commencement by any entity, person, or group (other than the
Company or the Bank, a subsidiary of the Company or the Bank, or
a tax-qualified retirement plan sponsored by the Company or the
Bank) of a tender offer or an exchange offer for more than 25% of
the outstanding Voting Stock of the Company or the Bank;
iii. The effective time of (a) a merger or consolidation of the
Company or the Bank with one or more other corporations as a
result of which the holders of the outstanding Voting Stock of
the Company or the Bank immediately prior to such merger exercise
voting control over less than 60% of the Voting Stock of the
surviving or resulting corporation, or (b) a transfer of
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substantially all of the property of the Company or the Bank
other than to an entity of which the Company or the Bank owns at
least 60% of the Voting Stock;
iv. Upon the acquisition by any entity, person, or group of the
control of the election of a majority of the Bank's or the
Company's directors; and
v. At such time that, during any period of two consecutive years,
individuals who at the beginning of such period constitute the
Board of the Company or the Bank (the "Continuing Directors")
cease for any reason to constitute at least two-thirds thereof,
provided that any individual whose election or nomination for
election as a member of the Board was approved by a vote of at
least two-thirds of the Continuing Directors then in office shall
be considered a Continuing Director.
b. Termination. If within the period beginning six months prior to and
ending two years after a Change in Control, (i) the Company or the
Bank shall terminate the Officer's employment Without Just Cause, or
(ii) the Officer shall voluntarily terminate his employment With Good
Reason, the Company or the Bank shall, within ten calendar days of the
termination of Officer's employment, make a lump-sum cash payment to
him equal to 2.0 times the sum of (x) his annual salary at the highest
annual rate in effect for any of the twelve months immediately
preceding the date of such termination, plus (y) the amount of other
compensation received by him during the calendar year preceding the
Change in Control. This cash payment is subject to adjustment pursuant
to Section 14 of this Agreement, and shall be made in lieu of any
payment also required under section 10.g. of this Agreement because of
a termination in such period. The Officer's rights under Section 10.g.
are not otherwise affected by this Section 11. Also, in such event,
the Officer shall, for two (2) calendar years following his
termination of employment, continue to participate in any benefit
plans of the Company and the Bank that provide health (including
medical and dental), life or disability insurance, or similar coverage
upon terms no less favorable than the most favorable terms provided to
senior officers of the Bank during such period.
c. The provisions of Sections 11 and Sections 13 through 24, including
the defined terms used is such sections, shall continue in effect
until the later of the expiration of this Agreement or two years
following a Change in Control.
12. Indemnification and Liability Insurance.
a. Indemnification. The Company and the Bank agree to indemnify the
Officer (and his heirs, executors, and administrators), and to advance
expenses related thereto, to the fullest extent permitted under
applicable law and regulations against any and all expenses and
liabilities reasonably incurred by him in connection with or arising
out of any action, suit, or proceeding in which he may be involved by
reason of his having been a director or officer of the Company or the
Bank or any of their subsidiaries (whether or not he continues to be a
director or officer at the time of incurring any such expenses or
liabilities) such expenses and liabilities to include, but not be
limited to, judgements, court costs, and attorney's fees and the cost
of reasonable settlements, such settlements to be approved by the
Board of the Company or the Bank, if such action is brought against
the Officer in his capacity as an officer or director of the Company
or the Bank or any of their subsidiaries. Indemnification for expense
shall not extend to matters for which the Officer has been terminated
for Just Cause. Nothing contained herein shall be deemed to provide
indemnification prohibited by applicable law or regulation.
Notwithstanding anything herein to the contrary, the obligations of
this Section 12 shall survive the term of this Agreement by a period
of six years.
b. Insurance. During the period in which indemnification of the Officer
is required under this Section, the Company or the Bank shall provide
the Officer (and his heirs, executors, and administrators) with
coverage under a directors' and officers' liability policy at the
expense of the Company or the Bank, at least equivalent to such
coverage provided to directors and senior officers of the Company or
the Bank, whichever is more favorable to the Officer.
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13. Reimbursement of Officer's Expenses to Enforce this Agreement. The Company
or the Bank shall reimburse the Officer for all out-of-pocket expenses,
including, without limitation, reasonable attorney's fees, incurred by the
Officer in connection with successful enforcement by the Officer of the
obligations of the Company or the Bank to the Officer under this Agreement up to
a maximum of $50,000 Successful enforcement shall mean the grant of an award of
money or the requirement that the Company or the Bank take some action specified
by this Agreement (i) as a result of court order; or (ii) otherwise by the
Company or the Bank following an initial failure of the Company or the Bank to
pay such money or take such action promptly after written demand therefor from
the Officer stating the reason that such money or action was due under this
Agreement at or prior to the time of such demand.
14. Adjustment of Certain Payments and Benefits.
a. In the event that payments pursuant to this Agreement (including,
without limitation, any payment under any plan, program, option, or
arrangement referred to in Section 5 or 6 hereof and the value of
acceleration of vesting or receipt of benefits thereof) would result
in the imposition of a penalty tax pursuant to Section 280G, such
payments shall be reduced to equal the maximum amount which may be
paid under Section 280G without exceeding such limits. In the event
any such reduction in payments is necessary, the Officer may
determine, in his sole discretion, which categories of payments
(including, without limitation, the value of benefits or of
acceleration of vesting or receipt of benefits or amounts) are to be
reduced or eliminated.
b. Payments made to the Officer pursuant to this Agreement or otherwise,
are subject to and conditioned upon their compliance with Section
18(k) of the FDIA (12 U.S.C. ss. 1828 (k), relating to "golden
parachute" and indemnification payments and certain other benefits.
15. Injunctive Relief. If there is a breach or threatened breach of Section
10.h. of this Agreement or the prohibitions upon disclosure contained in Section
9.c. of this Agreement, the Company or the Bank and the Officer agree that there
is no adequate remedy at law for such breach, and that the Company and the Bank
each shall be entitled to injunctive relief restraining the Officer from such
breach or threatened breach, but such relief shall not be the exclusive remedy
hereunder for such breach. The parties hereto likewise agree that the Officer,
without limitation, shall be entitled to injunctive relief to enforce the
obligations of the Company and the Bank under Section 11 of this Agreement.
16. Successors and Assigns.
a. This Agreement shall inure to the benefit of and be binding upon any
corporate or other successor of the Company or the Bank which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the
Company or the Bank.
b. Since the Bank and the Company are contracting for the unique and
personal skills of the Officer, the Officer shall be precluded from
assigning or delegating his rights or duties hereunder without first
obtaining the written consent of the Bank and the Company.
17. No Mitigation. The Officer shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Officer in any subsequent employment.
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18. Notices. All notices, requests, demands and other communications in
connection with this Agreement shall be made in writing and shall be deemed to
have been given when delivered by hand or 48 hours after mailing at any general
or branch United States Post Office, by registered or certified mail, postage
prepaid, addressed as follows, or to such other address as shall have been
designated in writing by the addressee:
a. If to the Company or the Bank:
Indian River Banking Company
Indian River National Bank
958 Twentieth Place
Vero Beach, FL 32960
Attention: The Boards of Directors
Copy to: Corporate Secretary
b. If to the Officer:
William H. High
19. Joint and Severally Liability; Payments by the Company and the Bank. To the
extent permitted by law, except as otherwise provided herein, the Company and
the Bank shall be jointly and severally liable for the payment of all amounts
due under this Agreement. The Company hereby agrees that it shall be jointly and
severally liable with the Bank for the payment of all amounts due under this
Agreement and shall guarantee the performance of the Bank's obligations
thereunder, provided that the Company shall not be required by this Agreement to
pay to the Officer a salary or any bonuses or any other cash payments, except in
the event that the Bank does not fulfill the obligations to the Officer
hereunder for such payments. The Company may, however, pay salary and bonuses as
deemed appropriate by its Board in the exercise of its discretion.
20. No Plan Created by this Agreement. The Officer, the Company and the Bank
expressly declare and agree that this Agreement was negotiated among them and
that no provision or provisions of this Agreement are intended to, or shall be
deemed to, create any plan for purposes of the Employee Retirement Income
Security Act or any other law or regulation, and the Company, the Bank and the
Officer each expressly waives any right to assert the contrary. Any assertion in
any judicial or administrative filing, hearing, or process by or on behalf of
the Officer or the Company or the Bank that such a plan was so created by this
Agreement shall be deemed a material breach of this Agreement by the party
making such an assertion.
21. Amendments. No amendments or additions to this Agreement shall be binding
unless made in writing and signed by all of the parties, except as herein
otherwise specifically provided.
22. Applicable Law. Except to the extent preempted by Federal law, the laws of
the State of Florida shall govern this Agreement in all respects, whether as to
its validity, construction, capacity, performance or otherwise.
23. Severability. The provisions of this Agreement shall be deemed severable and
the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof.
24. Headings. Headings contained herein are for convenience of reference only.
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25. Entire Agreement. This Agreement, together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof, other than written agreements with respect to specific plans, programs
or arrangements described in Sections 5 and 6.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first set forth above.
INDIAN RIVER NATIONAL BANK
By:___________________________________
Title:________________________________
INDIAN RIVER BANKING COMPANY
By:___________________________________
Title:________________________________
OFFICER
--------------------------------------
William A. High
10
Exhibit 10(b)
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement"), made this day of 1999, by and among
Indian River Banking Company, a registered bank holding company ("the Company"),
Indian River National Bank, a national banking association and wholly owned
subsidiary of the Company with its main office in Vero Beach, Florida (the
"Bank"), and Charles A. Bradley (the "Officer").
W I T N E S S E T H
WHEREAS, the Board of Directors ("Board") of the Bank desires to retain the
services of the Officer as the Chief Financial Officer of the Bank, and the
Board of the Company desires to retain the services of the Officer as the Chief
Financial Officer of the Company.
WHEREAS, the Officer desires to serve as the Chief Financial Officer of the
Company and the Bank.
WHEREAS, the Officer and the respective Boards of the Bank and the Company
desire to enter into an Agreement setting forth the terms and conditions of the
employment of the Officer and the related rights and obligations of each of the
parties.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed as follows:
1. Employment. The Officer is employed as the Chief Financial Officer of the
Company and of the Bank, reporting directly to the President and Chief Executive
Officer. Subject to the direction of the President and Chief Executive Officer,
the Officer shall have such responsibilities, shall perform all duties and shall
have all powers which are commonly incident to the offices of Chief Financial
Officer or which, consistent with that office, are delegated to him by the
President and Chief Executive Officer.
2. Location and Facilities. The Officer will be furnished with the working
facilities and staff customary for executive officers with the title and duties
set forth in Section 1 and as are necessary for him to perform his duties. The
location of such facilities and staff shall be at the principal operations
office of the Company and the Bank, or at such other site or sites customary for
such offices.
3. Term.
a. The term of this Agreement shall be (i) the initial term, consisting
of the period commencing on the date of this Agreement (the "Effective
Date") and ending immediately prior to the third anniversary of the
Effective Date, plus (ii) any and all extensions of the initial term
made pursuant to this Section 3.
b. On each anniversary of the Effective Date prior to a termination of
the Agreement, the term under this Agreement shall be extended for an
additional one-year period beyond the then effective expiration date
without action by any party, provided that neither the Company or the
Bank, on the one hand, nor the Officer, on the other, shall have given
written notice at least sixty (60) days prior to such anniversary date
of its or his desire that the term not be extended. The Boards of the
Company and the Bank will review the Officer's performance and the
advisability of extending the term of this Agreement at a meeting or
meetings at least ninety (90) days prior to each anniversary date.
4. Base Compensation.
a. The Company and the Bank agree to pay the Officer during the term of
this Agreement a salary at the rate of $82,000 per annum, payable in
cash not less frequently than monthly, as may be adjusted in
accordance with this Section 4.
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b. The President and Chief Executive Officer shall review annually the
rate of the Officer's salary based upon factors they deem relevant,
and may maintain or increase his salary, provided that no such action
shall (i) reduce the rate of salary below $82,000, or (ii)
retroactively reduce the rate of salary paid to the Officer for any
months prior to the month in which notice of the reduction is provided
in writing to the Officer, and (iii) provided further that the
Officer's salary shall be increased on each anniversary of the
effective date by a percentage equal to the percentage change in the
Consumer Price Index (All Urban Consumers) ("CPI-U") over the last
twelve-month period for which such CPI-U data is available prior to
such anniversary date (as adjusted for changes in CPI-U base years) up
to a maximum of five percent per year.
c. In the absence of action by the President and Chief Executive Officer,
the Officer shall continue to receive salary at the $82,000 per annum
rate specified herein or, if another rate has been established under
the provisions of this Section 4, the rate last properly established
by action of the Board of the Company or the Bank under the provisions
of this Section 4.
5. Bonuses. Unless the Officer agrees otherwise, he shall be entitled to
participate in discretionary bonuses that the Board may award from time to time
to senior management employees pursuant to bonus plans or otherwise, including,
without limitation, the Bank's 2000 Incentive Bonus Plan, but shall not
participate in the stock option portion of the 2000 Incentive Bonus Plan. A copy
of the Bank's 2000 Incentive Bonus Plan is attached hereto as Exhibit I.
6. Benefit Plans. The Officer shall be entitled to participate in such life
insurance, medical, dental, pension, profit sharing, and retirement plans and
other programs and arrangements as may be approved from time to time by the
Company or the Bank for the benefit of their respective employees.
7. Vacation and Leave.
a. The Officer shall be entitled to vacations in accordance with Bank
policy, or otherwise as approved by the Board, provided that the
Officer shall be entitled to paid vacation of at least ten working
days between the Effective Date and December 31, 1999, and of at least
twenty working days for each calendar year thereafter.
b. In addition to paid vacations, the Officer shall be entitled, without
loss of pay, to absent himself voluntarily from the performance of his
employment for such additional periods of time and for such valid and
legitimate reasons as the President and Chief Executive Officer may in
their discretion determine. Further, the President and Chief Executive
Officer may grant to the Officer a leave or leaves of absence, with or
without pay, at such time or times and upon such terms and conditions
as such Boards in their discretion may determine.
8. Expense Payments and Reimbursements. The Officer shall be reimbursed for all
reasonable out-of-pocket business expenses that he shall incur in connection
with his services under this Agreement upon substantiation of such expenses in
accordance with applicable policies of the Company or the Bank.
9. Loyalty and Confidentiality.
a. During the term of this Agreement the Officer: (i) shall devote all
his time, attention, skill, and efforts to the faithful performance of
his duties hereunder; provided, however, that from time to time, the
Officer may serve on the boards of directors of, and hold any other
offices or positions in, companies or organizations which will not
present any conflict of interest with the Company or the Bank or any
of their subsidiaries or affiliates, unfavorably affect the
performance of Officer's duties pursuant to this Agreement, or violate
any applicable statute or regulation; and (ii) shall not engage in any
business or activity contrary to the business affairs or interests of
the Company or the Bank, provided that the Officer shall not serve on
a board of directors of any company or organization without the prior
written approval of the President and Chief Executive Officer.
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b. Nothing contained in this Agreement shall prevent or limit the
Officer's right to invest in the capital stock or other securities of
any business dissimilar from that of the Company and the Bank, or,
solely as a passive, minority investor, in any business.
c. The Officer agrees to maintain the confidentiality of any and all
information concerning the operation or financial status of the
Company and the Bank; the names or addresses of any of their
borrowers, depositors and other customers; any information concerning
or obtained from such customers; and any other information concerning
the Company or the Bank to which he may be exposed during the course
of his employment. The Officer further agrees that, unless required by
law or specifically permitted by the Company or the Bank in writing,
he will not disclose to any person or entity, either during or
subsequent to his employment, any of the above-mentioned information
which is not generally known to the public, nor shall he employ such
information in any way other than for the benefit of the Company and
the Bank.
10. Termination and Termination Pay. Subject to Section 11 of this Agreement,
the Officer's employment under this Agreement may be terminated in the following
circumstances:
a. Death. The Officer's employment under this Agreement shall terminate
upon his death during the term of this Agreement, in which event the
Officer's estate shall be entitled to receive the compensation due to
the Officer through the last day of the calendar month in which his
death occurred.
b. Retirement. This Agreement shall be terminated upon the normal or
early retirement of the Officer under the retirement benefit plan or
plans in which he participates pursuant to Section 6 of this Agreement
or otherwise.
c. Disability. The Company, the Bank, or the Officer may terminate the
Officer's employment after having established the Officer's
Disability. For purposes of this Agreement, "Disability" means a
physical or mental infirmity that impairs the Officer's ability to
substantially perform his duties under this Agreement and that results
in the Officer's becoming eligible for long-term disability benefits
under the Company's or the Bank's long-term disability plan (or, if
the Company or the Bank has no such plan in effect, that impairs the
Officer's ability to substantially perform his duties under this
Agreement for a period of one-hundred-eighty consecutive days). In the
event of such Disability, the Officer's obligation to perform services
under this Agreement will terminate. In the event of such termination,
the Officer shall be entitled to receive the compensation and benefits
provided for under this Agreement for any period during the term of
this Agreement and prior to the date of termination pursuant to this
Section 10.c. during which the Officer is unable to work due to
physical or mental infirmity (less any amounts which the Officer
receives under any disability insurance maintained by the Company or
the Bank with respect to such period). The President and Chief
Executive Officer shall determine whether or not the Officer is and
continues to be permanently disabled for purposes of this Agreement in
good faith, based upon competent medical advice and other factors that
they reasonably believe to be relevant. As a condition to any
benefits, the President and Chief Executive Officer may require the
Officer to submit to such physical or mental evaluations and tests as
it deems reasonably appropriate.
d. Just Cause. The President and Chief Executive Officer may, by written
notice to the Officer in the form and manner specified in this
paragraph, immediately terminate his employment with the Company or
the Bank, respectively, at any time, for Just Cause. The Officer shall
have no right to receive compensation or other benefits for any period
after termination for Just Cause except for vested benefits.
Termination for "Just Cause" shall mean termination because of, in the
good faith determination of the Company's or the Bank's Board, the
Officer's:
(i) Personal dishonesty;
(ii) Incompetence;
(iii) Willful misconduct;
(iv) Breach of fiduciary duty involving personal profit;
(v) Intentional failure to perform duties under this Agreement;
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(vi) Other, continuing material failure to perform his duties
under this Agreement after reasonable notification (which
shall be stated in writing and given at least fifteen days
prior to termination) by the President and Chief Executive
Officer of such failure;
(vii) Willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) that reflects
adversely on the reputation of the Bank, any felony
conviction, any violation of law involving moral turpitude,
or any violation of a final cease-and-desist order; or
(viii) Material breach by the Officer of any provision of this
Agreement.
e. Certain Regulatory Events.
i. If the Officer is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an
order issued under Sections 8(e)(4) or 8(g)(1) of the
Federal Deposit Insurance Act ("FDIA") (12 U.S.C. ss.ss.
1818(e)(4) and (g)(1)), all obligations of the Bank under
this Agreement shall terminate as of the effective date of
the order, but vested rights of the parties shall not be
affected.
ii. If the Bank is in default (as defined in Section 3(x)(1) of
FDIA), all obligations of the Bank under this Agreement
shall terminate as of the date of default, but vested rights
of the parties shall not be affected.
iii. If a notice served under Sections 8(e)(3) or (g)(1) of the
FDIA (12 U.S.C. ss.ss. 1818(e)(3) and (g)(1)) suspends
and/or temporarily prohibits the Officer from participating
in the conduct of the Bank's affairs, the Bank's obligations
under this Agreement shall be suspended as of the date of
such service, unless stayed by appropriate proceedings. If
the charges in the notice are dismissed, the Bank may, in
its discretion, (i) pay the Officer all or part of the
compensation withheld while its contract obligations were
suspended, and (ii) reinstate (in whole or in part) any of
its obligations which were suspended.
The occurrence of any of the events described in paragraphs i, ii, and iii
above may be considered by the Board of the Company or the Bank in connection
with a termination for Just Cause.
f. Voluntary Termination by Officer. In addition to his other rights to
terminate under this Agreement, the Officer may voluntarily terminate
employment with the Bank and the Company during the term of this
Agreement upon at least sixty-days' prior written notice to the
President and Chief Executive Officer, in which case the Officer shall
receive only his compensation, vested rights and employee benefits up
to the date of his termination.
g. Without Just Cause or With Good Reason.
i. In addition to termination pursuant to Section 10.a. through
10.f. the President and Chief Executive Officer of the
Company or the Bank may, by written notice to the Officer,
immediately terminate his employment with the Company or the
Bank, respectively, at any time for a reason other than Just
Cause (a termination "Without Just Cause"); and the Officer
may, by written notice to the President and Chief Executive
Officer, immediately terminate this Agreement at any time
within ninety days following an event of "Good Reason" as
defined below (a termination "With Good Reason").
ii. Subject to Section 11 hereof, in the event of termination
under this Section 10.g., the Officer shall be entitled to
receive the salary for the remaining term of the Agreement,
including any renewals or extensions thereof, at the highest
annual rate in effect pursuant to Section 4 of this
Agreement for any of the twelve months immediately preceding
the date of such termination, plus annual cash bonuses for
each year (prorated in the event of partial years) remaining
under such term at the amount received by the Officer in the
calendar year preceding the termination. The sum due under
this Section 10.g. shall be paid in one lump sum within ten
calendar days of such termination. Also, in such event,
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the Officer shall, for the remaining term of the Agreement,
continue to participate in any benefit plans of the Company
and the Bank that provide health (including medical and
dental), life or disability insurance, or similar coverage
upon terms no less favorable than the most favorable terms
provided to senior officers of the Bank during such period.
iii. "Good Reason" shall exist if, without Officer's express
written consent, the Company or the Bank materially breach
any of its respective obligations under this Agreement.
Without limitation, such a material breach shall be deemed
to occur upon any of the following:
(1) A material reduction in the Officer's
responsibilities or authority, or a requirement
that the Officer report to any person or group
other than the President and Chief Executive
Officer or the Board of the Company or the Bank
(or any other effective reduction in reporting
responsibilities) in connection with his
employment with the Company or the Bank;
(2) A reduction in salary or benefits contrary to the
terms of this Agreement, or, following a Change in
Control as defined in Section 11 of this
Agreement, any reduction in salary or material
reduction in benefits below the amounts to which
he was entitled prior to the Change in Control;
(3) A requirement that the Officer relocate his
principal business office or his principal place
of residence outside of the area consisting of a
fifty mile radius from the current main office and
any branch of the Bank, or the assignment to the
Officer of duties that would reasonably require
such a relocation; or
(4) Failure to provide office facilities and other
administrative services to Officer which are
necessary for the Officer to perform his duties
hereunder (excluding brief periods during which
office facilities may be temporarily unavailable
due to fire, natural disaster, or other calamity).
iv. Notwithstanding the foregoing, a reduction or elimination of
the Officer's benefits under one or more benefit plans
maintained by the Company or the Bank as part of a good
faith, overall reduction or elimination of such plan or
plans or benefits thereunder applicable to all participants
in a manner that does not discriminate against the Officer
(except as such discrimination may be necessary to comply
with law) shall not constitute an event of Good Reason or a
material breach of this Agreement, provided that benefits of
the type or to the general extent as those offered under
such plans prior to such reduction or elimination are not
available to other officers of the Company or the Bank or
any company that controls either of them under a plan or
plans in or under which the Officer is not entitled to
participate, and receive benefits, on a fair and
nondiscriminatory basis.
h. Continuing Covenant not to Compete or Interfere with Relationships.
Regardless of anything herein to the contrary, following a termination
(i) upon retirement pursuant to Section 10.b., (ii) due to Disability
pursuant to Section 10.c., (iii) for Just Cause pursuant to Section
10.d., or (iv) by the Officer pursuant to Section 10.f.:
i. The Officer's obligations under Section 9.c. of this Agreement
will continue in effect; and
ii. During the greater of (A) remaining term of this Agreement
(determined immediately before such termination), or (B) the
period ending on the third anniversary of such termination) the
Officer shall not serve as an officer or director or employee of
any "Financial Institution" (any bank holding company, bank,
savings association, savings and loan holding company, or
mortgage company, in any case other than any direct or indirect
subsidiary of the Company) which Financial Institution offers
products or services competing with those offered by the Company
or the Bank from any office within fifty miles from the main
office or any branch of the Bank and shall not interfere with the
relationship of the Company or the Bank and any of its employees,
agents, or representatives.
11. Termination in Connection with a Change in Control.
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a. For purposes of this Agreement, a "Change in Control" shall be deemed
to occur on the earliest of:
i. The acquisition by any entity, person or group (other than the
acquisition by a tax-qualified retirement plan sponsored by the
Company or the Bank) of beneficial ownership, as that term is
defined in Rule 13d-3 under the Securities Exchange Act of 1934,
of more than 25% of the outstanding capital stock of the Company
or the Bank entitled to vote for the election of directors
("Voting Stock");
ii. The commencement by any entity, person, or group (other than the
Company or the Bank, a subsidiary of the Company or the Bank, or
a tax-qualified retirement plan sponsored by the Company or the
Bank) of a tender offer or an exchange offer for more than 25% of
the outstanding Voting Stock of the Company or the Bank;
iii. The effective time of (a) a merger or consolidation of the
Company or the Bank with one or more other corporations as a
result of which the holders of the outstanding Voting Stock of
the Company or the Bank immediately prior to such merger exercise
voting control over less than 60% of the Voting Stock of the
surviving or resulting corporation, or (b) a transfer of
substantially all of the property of the Company or the Bank
other than to an entity of which the Company or the Bank owns at
least 60% of the Voting Stock;
iv. Upon the acquisition by any entity, person, or group of the
control of the election of a majority of the Bank's or the
Company's directors; and
v. At such time that, during any period of two consecutive years,
individuals who at the beginning of such period constitute the
Board of the Company or the Bank (the "Continuing Directors")
cease for any reason to constitute at least two-thirds thereof,
provided that any individual whose election or nomination for
election as a member of the Board was approved by a vote of at
least two-thirds of the Continuing Directors then in office shall
be considered a Continuing Director.
b. Termination. If within the period beginning six months prior to and
ending two years after a Change in Control, (i) the Company, the Bank,
or any successor to the Company or the Bank shall terminate the
Officer's employment Without Just Cause, or (ii) the Officer shall
voluntarily terminate his employment With Good Reason, the Company or
the Bank shall, within ten calendar days of the termination of
Officer's employment, make a lump-sum cash payment to him equal to 2.0
times the sum of (x) his annual salary at the highest annual rate in
effect for any of the twelve months immediately preceding the date of
such termination, plus (y) the amount of other compensation received
by him during the calendar year preceding the Change in Control. This
cash payment is subject to adjustment pursuant to Section 14 of this
Agreement, and shall be made in lieu of any payment also required
under section 10.g. of this Agreement because of a termination in such
period. The Officer's rights under Section 10.g. are not otherwise
affected by this Section 11. Also, in such event, the Officer shall,
for two (2) calendar years following his termination of employment,
continue to participate in any benefit plans of the Company and the
Bank that provide health (including medical and dental), life or
disability insurance, or similar coverage upon terms no less favorable
than the most favorable terms provided to senior officers of the Bank
during such period.
c. The provisions of Sections 11 and Sections 13 through 24, including
the defined terms used is such sections, shall continue in effect
until the later of the expiration of this Agreement or two years
following a Change in Control.
12. Indemnification and Liability Insurance.
a. Indemnification. The Company and the Bank agree to indemnify the
Officer (and his heirs, executors, and administrators), and to advance
expenses related thereto, to the fullest extent permitted under
applicable law and regulations against any and all expenses and
liabilities reasonably incurred by him
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in connection with or arising out of any action, suit, or proceeding
in which he may be involved by reason of his having been a director or
officer of the Company or the Bank or any of their subsidiaries
(whether or not he continues to be a director or officer at the time
of incurring any such expenses or liabilities) such expenses and
liabilities to include, but not be limited to, judgements, court
costs, and attorney's fees and the cost of reasonable settlements,
such settlements to be approved by the Board of the Company or the
Bank, if such action is brought against the Officer in his capacity as
an officer or director of the Company or the Bank or any of their
subsidiaries. Indemnification for expense shall not extend to matters
for which the Officer has been terminated for Just Cause. Nothing
contained herein shall be deemed to provide indemnification prohibited
by applicable law or regulation. Notwithstanding anything herein to
the contrary, the obligations of this Section 12 shall survive the
term of this Agreement by a period of six years.
b. Insurance. During the period in which indemnification of the Officer
is required under this Section, the Company or the Bank shall provide
the Officer (and his heirs, executors, and administrators) with
coverage under a directors' and officers' liability policy at the
expense of the Company or the Bank, at least equivalent to such
coverage provided to directors and senior officers of the Company or
the Bank, whichever is more favorable to the Officer.
13. Reimbursement of Officer's Expenses to Enforce this Agreement. The Company
or the Bank shall reimburse the Officer for all out-of-pocket expenses,
including, without limitation, reasonable attorney's fees, incurred by the
Officer in connection with successful enforcement by the Officer of the
obligations of the Company or the Bank to the Officer under this Agreement up to
a maximum of $40,000. Successful enforcement shall mean the grant of an award of
money or the requirement that the Company or the Bank take some action specified
by this Agreement (i) as a result of court order; or (ii) otherwise by the
Company or the Bank following an initial failure of the Company or the Bank to
pay such money or take such action promptly after written demand therefor from
the Officer stating the reason that such money or action was due under this
Agreement at or prior to the time of such demand.
14. Adjustment of Certain Payments and Benefits.
a. In the event that payments pursuant to this Agreement (including,
without limitation, any payment under any plan, program, option, or
arrangement referred to in Section 5 or 6 hereof and the value of
acceleration of vesting or receipt of benefits thereof) would result
in the imposition of a penalty tax pursuant to Section 280G, such
payments shall be reduced to equal the maximum amount which may be
paid under Section 280G without exceeding such limits. In the event
any such reduction in payments is necessary, the Officer may
determine, in his sole discretion, which categories of payments
(including, without limitation, the value of benefits or of
acceleration of vesting or receipt of benefits or amounts) are to be
reduced or eliminated.
b. Payments made to the Officer pursuant to this Agreement or otherwise,
are subject to and conditioned upon their compliance with Section
18(k) of the FDIA (12 U.S.C. ss. 1828 (k), relating to "golden
parachute" and indemnification payments and certain other benefits.
15. Injunctive Relief. If there is a breach or threatened breach of Section
10.h. of this Agreement or the prohibitions upon disclosure contained in Section
9.c. of this Agreement, the Company or the Bank and the Officer agree that there
is no adequate remedy at law for such breach, and that the Company and the Bank
each shall be entitled to injunctive relief restraining the Officer from such
breach or threatened breach, but such relief shall not be the exclusive remedy
hereunder for such breach. The parties hereto likewise agree that the Officer,
without limitation, shall be entitled to injunctive relief to enforce the
obligations of the Company and the Bank under Section 11 of this Agreement.
16. Successors and Assigns.
a. This Agreement shall inure to the benefit of and be binding upon any
corporate or other successor of the Company or the Bank which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the
Company or the Bank.
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b. Since the Bank and the Company are contracting for the unique and
personal skills of the Officer, the Officer shall be precluded from
assigning or delegating his rights or duties hereunder without first
obtaining the written consent of the Bank and the Company.
17. No Mitigation. The Officer shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Officer in any subsequent employment.
18. Notices. All notices, requests, demands and other communications in
connection with this Agreement shall be made in writing and shall be deemed to
have been given when delivered by hand or 48 hours after mailing at any general
or branch United States Post Office, by registered or certified mail, postage
prepaid, addressed as follows, or to such other address as shall have been
designated in writing by the addressee:
a. If to the Company or the Bank:
Indian River Banking Company
Indian River National Bank
958 Twentieth Place
Vero Beach, FL 32960
Attention: The Boards of Directors
Copies to: Corporate Secretary
Chairman, Compensation Committee
b. If to the Officer:
Charles A. Bradley
19. Joint and Severally Liability; Payments by the Company and the Bank. To the
extent permitted by law, except as otherwise provided herein, the Company and
the Bank shall be jointly and severally liable for the payment of all amounts
due under this Agreement. The Company hereby agrees that it shall be jointly and
severally liable with the Bank for the payment of all amounts due under this
Agreement and shall guarantee the performance of the Bank's obligations
thereunder, provided that the Company shall not be required by this Agreement to
pay to the Officer a salary or any bonuses or any other cash payments, except in
the event that the Bank does not fulfill the obligations to the Officer
hereunder for such payments. The Company may, however, pay salary and bonuses as
deemed appropriate by its Board in the exercise of its discretion.
20. No Plan Created by this Agreement. The Officer, the Company and the Bank
expressly declare and agree that this Agreement was negotiated among them and
that no provision or provisions of this Agreement are intended to, or shall be
deemed to, create any plan for purposes of the Employee Retirement Income
Security Act or any other law or regulation, and the Company, the Bank and the
Officer each expressly waives any right to assert the contrary. Any assertion in
any judicial or administrative filing, hearing, or process by or on behalf of
the Officer or the Company or the Bank that such a plan was so created by this
Agreement shall be deemed a material breach of this Agreement by the party
making such an assertion.
21. Amendments. No amendments or additions to this Agreement shall be binding
unless made in writing and signed by all of the parties, except as herein
otherwise specifically provided.
22. Applicable Law. Except to the extent preempted by Federal law, the laws of
the State of Florida shall govern this Agreement in all respects, whether as to
its validity, construction, capacity, performance or otherwise.
23. Severability. The provisions of this Agreement shall be deemed severable and
the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof.
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24. Board Power. The Boards of Directors of the Company and the Bank each
expressly reserves the right to take actions and exercise discretion delegated
to the respective President and Chief Executive Officer under this agreement in
their discretion.
25. Headings. Headings contained herein are for convenience of reference only.
26. Entire Agreement. This Agreement, together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof, other than written agreements with respect to specific plans, programs
or arrangements described in Sections 5 and 6.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first set forth above.
INDIAN RIVER NATIONAL BANK
By:_____________________________________
Title:__________________________________
INDIAN RIVER BANKING COMPANY
By:_____________________________________
Title:__________________________________
OFFICER
----------------------------------------
Charles A. Bradley
9
Exhibit 10(c)
INDIAN RIVER BANKING COMPANY
VERO BEACH, FLORIDA
1995 STOCK OPTION AND INCENTIVE PLAN
1. Purpose of the Plan. The Plan shall be known as the Indian River 1995
Stock Option and Incentive Plan (the "Plan"). The purpose of the Plan is to
attract and retain the best available personnel as officers and employees and to
provide additional incentive to employees of Indian River Banking Company (the
"Company") or any present or future parent or subsidiary of the Company to
promote the success of the business. The Plan is intended to provide for the
grant of "Incentive Stock Options", within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). Each and every one of
the provisions of the Plan shall be interpreted to conform to the requirements
of Section 422 of the Code.
2. Definitions. As used herein, the following definitions shall apply.
(a) "Award" means the grant by the Committee of an Incentive Stock Option
as provided in the Plan.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Common Stock" shall mean common stock, $1.00 par value per share, of
the Company.
(e) "Committee" shall mean the Stock Option Committee appointed by the
Board in accordance with paragraph 4(a) of the Plan.
(f) "Company" shall mean Indian River Banking Company, a bank holding
company.
(g) "Continuous Employment" or "Continuous Status as an Employee" shall
mean the absence of any interruption or termination of employment by the Company
or any present or future Parent or Subsidiary of the Company. Employment shall
not be considered interrupted in the case of sick leave, military leave or any
other leave of absence approved by the Company or in the case of transfers
between payroll locations of the Company or between the Company, its Parent, its
Subsidiaries or a successor.
(h) "Effective Date" shall mean the date specified in Section 12 hereof.
(i) "Employee" shall mean any person employed by the Company or any present
or future Parent or Subsidiary of the Company but shall not include directors of
the Company who are not otherwise employees of the Company.
(j) "Incentive Stock Option" or "ISO" means an option to purchase Shares
granted by the Committee pursuant to Section 7 hereof, which option is subject
to the limitations and restrictions of Section 7 hereof and is intended to
qualify under Section 422 of the Code.
(k) "Option" shall mean an Incentive Stock Option granted pursuant to this
Plan.
(l) "Option Price" shall mean the exercise price per share of Common Stock
for Options granted pursuant to the Plan.
(m) "Optioned Stock" shall mean stock subject to an Option granted pursuant
to the Plan.
(n) "Optionee" shall mean any person who receives an Option.
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(o) "Parent" shall mean any present or future corporation which would be a
"parent corporation" as defined in Subsection 425(e) and (g) of the Code.
(p) "Participant" means any officer or key employee of the Company or any
Parent or Subsidiary of the Company who is selected by the Committee to receive
an Award.
(q) "Plan" shall mean the Indian River 1995 Stock Option and Incentive
Plan.
(r) "Share" shall mean one share of the Common Stock.
(s) "Subsidiary" shall mean any present or future corporation which would
be a "subsidiary corporation" as defined in Subsection 425(f) and (g) of the
Code.
3. Shares Subject to the Plan. Except as otherwise required by the
provisions of Section 10 hereof, the aggregate number of Shares with respect to
which Awards may be made pursuant to the Plan shall not exceed thirty five
thousand (35,000) shares. Such shares may either be authorized but unissued or
treasury shares.
An Award shall not be considered to have been made under the Plan with
respect to any Option which terminates and new Awards may be granted under the
Plan with respect to the number of Shares as to which such termination has
occurred.
4. Administration of the Plan.
(a) Composition of the Committee. The Plan shall be administered by the
Committee, which shall consist of at least two directors of the Company
appointed by the Board. Officers and key employees who are designated by the
Committee shall be eligible to receive Awards under the Plan, and all directors
designated as members of the Committee shall be ineligible to receive Awards
under the Plan.
(b) Powers of the Committee. (1) The Committee is authorized (but only to
the extent not contrary to the expressed provisions of the Plan or to
resolutions adopted by the Board) to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the form and
content of Awards to be issued under the Plan (including any delayed vesting
period) and to make other determinations necessary or advisable for the
administration of the Plan, and shall have and may exercise such other power and
authority as may be delegated to it by the Board from time to time. A majority
of the entire Committee shall constitute a quorum and the action of a majority
of the members present at any meeting at which a quorum is present shall be
deemed the action of the Committee. In no event may the Committee revoke
outstanding Awards without the consent of the Participant.
(2) Notwithstanding Section 4(b)(1) above, and subject to adjustment
pursuant to Section 10 hereof, (i) in no event shall the number of shares with
respect to which Options shall be granted in any calendar year exceed seven
thousand (7,000), except that if there shall be any Shares with respect to which
Options have been granted, which Options have been terminated or have expired
without exercise, and no new Option shall have been issued with respect to such
Shares ("Terminated Options"), then the number of Shares with respect to which
Options may be issued in any calendar year shall not exceed seven thousand
(7,000) plus the number of Terminated Options; and (ii) in the event that Indian
River National Bank (the "Bank") the Company's subsidiary bank, achieves in the
calendar year immediately preceding the calendar year in which the Awards are to
occur, either a return on equity or an asset growth rate below twenty percent
(20%) but equal to or in excess of fifteen percent (15%), then the number of
shares with respect to which Awards may be granted in such calendar year shall
not exceed one half (0.5) of the number of shares set forth in Section
4(b)(2)(i); and (iii) in the event that the Bank achieves in the calendar year
immediately preceding the calendar year in which the Awards are to occur, either
a return on equity or an asset growth rate of less than fifteen percent (15%),
then no Awards shall be made in such calendar year. Notwithstanding the
preceding sentence, if the Bank shall fail to achieve the asset growth rate set
forth in Sections 4(b)(2)(ii) or (iii) above as a result of the determination of
the Board of Directors of the Bank, evidenced by a resolution adopted by a
majority of the full Board of Directors of the Bank, that it is in the best
interests of the Bank to achieve a stated lower asset growth rate, then,
assuming that such lower asset growth rate shall have been achieved, the ability
of the Committee to grant Awards, and the number of Shares subject to such
Awards, shall not be affected by the failure of the Bank to achieve the asset
growth rates
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established in Sections 4(b)(2)(ii) and (iii) above. The return on equity
established in Sections 4(b)(2)(ii) and (iii) above as a limitation on the power
of the Committee to make Awards shall not be subject to reduction by the Board
of Directors of the Bank. Any Shares with respect to which Options shall not
have been granted in any calendar year as a result of the occurrence of the
circumstances set forth in Sections 4(b)(2)(ii) or 4(b)(2)(iii) above shall be
considered Terminated Options available for issuance in subsequent calendar
years as provided in Section 4(b)(2)(i).
(3) The Chairman of the Company and such other officers as shall be
designated by the Committee are hereby authorized to execute instruments
evidencing Awards on behalf of the Company and to cause them to be delivered to
the Participants.
(c) Effect of Committee's Decision. All decisions, determinations and
interpretations of the Committee shall be final and conclusive on all persons
affected thereby.
5. Eligibility
(a) Awards may be granted to officers (including officers who are directors
of the Company) and key employees of the Company or any Subsidiary of the
Company. No director of the Company who is not also an officer of the Company or
any Subsidiary of the Company shall be eligible to receive an Award. The
Committee shall from time to time determine the officers and key employees who
shall be granted Options or Awards under the Plan, the number to be granted to
each such officer or key employee under the Plan. In selecting Participants and
in determining the number of shares of Common Stock to be granted to each such
Participant pursuant to each Award granted under the Plan, the Committee may
consider the nature of the services rendered by each such Participant, each such
Participant's current and potential contribution to the Company, and such other
factors as the Committee may, in its sole discretion, deem relevant. Officers
and key employees who have been granted an Award may, if otherwise eligible, be
granted additional Options or Awards.
(b) The aggregate fair market value (determined as of the date the Option
is granted) of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by each Optionee during the calendar year in
which they are first exercisable (under all Incentive Stock Option plans, as
defined in Section 422 of the Code, of the Company or any present or future
Parent or Subsidiary of the Company) shall not exceed $100,000. Notwithstanding
the foregoing, in the event that any Optionee shall receive Options with respect
to Shares having a value in excess of the amount contemplated by the immediately
preceding sentence, then to the extent that the aggregate fair market value of
the Shares to which such Options relate is not in excess of $100,000, such
Options shall be deemed to be Incentive Stock Options, and to the extent that
the aggregate fair market value of the shares to which such Options relate
exceeds $100,000, such Options shall be deemed to be nonincentive stock options
within the meaning of the Code. Notwithstanding anything to the contrary
contained herein, the Committee shall be authorized to issue such Options
notwithstanding the treatment of such Options as nonincentive stock options. For
all other purposes hereof, the Company shall be entitled to treat such Options
shall as if such Options were Incentive Stock Options.
6. Term of Plan. The Plan shall continue in effect for a term of ten (10)
years from the Effective Date, unless sooner terminated pursuant to Section 16
hereof. No Option shall be granted under the Plan after ten (10) years from the
Effective Date.
7. Terms and Conditions of Incentive Stock Options. Incentive Stock Options
may be granted only to Participants who are Employees. Each Incentive Stock
Option granted pursuant to the Plan shall be evidenced by an instrument in such
form as the Committee shall from time to time approve. Each and every Incentive
Stock Option granted pursuant to the Plan shall comply with, and be subject to,
the following terms and conditions:
(a) OPTION PLAN.
(1) The price per share at which each Incentive Stock Option granted under
the Plan may be exercised shall not, as to any particular Incentive Stock
Option, be less than the fair market value of the Common Stock at the time such
Incentive Stock Option is granted. For such purposes, if the Common Stock is
traded otherwise than on a national securities exchange or on The Nasdaq
National Market at the time of the granting of an Option, then the price per
share of the Optioned Stock shall be not less than the mean between the bid and
asked price on the date the Incentive Stock Option is granted or, if there be no
bid and asked price on said date, then on the next
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prior business day on which there was a bid and asked price. If no such bid and
asked price is available, then the price per share shall be determined by the
Committee in good faith in light of the circumstances. If the Common Stock is
listed on a national securities exchange or on The Nasdaq National Market at the
time of the granting of an Incentive Stock Option, then the price per share
shall be not less than the average of the highest and lowest selling price on
such exchange on the date such Incentive Stock Option is granted or, if there
were no sales on said date, then the price shall be not less than the mean
between the bid and asked price on such date.
(2) In the case of an Employee who directly or indirectly owns (or has the
right to acquire upon exercise of options, warrants, or other rights to acquire
Common Stock) Common Stock representing more than ten percent (10%) of the
outstanding Common Stock at the time the Incentive Stock Option is granted, the
Incentive Stock Option price shall not be less than one hundred and ten percent
(110%) of the fair market value of the Common Stock at the time the Incentive
Stock Option is granted.
(b) PAYMENT.
(1) Full payment for each share of Common Stock purchased upon the exercise
of any Incentive Stock Option granted under the Plan shall be made at the time
of exercise of each such Incentive Stock Option and shall be paid in cash (in
United States Dollars), Common Stock or a combination of cash and Common Stock.
Common Stock utilized in full or partial payment of the exercise price shall be
valued at its fair market value at the date of exercise, determined in
accordance with Section 7(a) above. The Company shall accept full or partial
payment in Common Stock only to the extent permitted by applicable law. No
shares of Common Stock shall be issued until full payment therefor has been
received by the Company, and no Optionee shall have any of the rights of a
shareholder of the Company until shares of Common Stock are issued to him.
(2) Notwithstanding the foregoing, any Optionee may elect to receive upon
the exercise of any Option for the full number of Shares to which such Option
relates, the number of Shares determined by dividing (i) the difference between
the aggregate fair market value of all shares issuable upon the exercise of the
Options in full (as determined in accordance with Section 7(a) hereof) and the
aggregate Option Price for the exercise of the Option in full, by (ii) the price
at which the Company is then Offering to purchase shares of Common Stock. Shares
received upon such election shall reflect the exercise in full of such Options
and the full satisfaction of the Company's obligations under said Option. Shares
received upon such election shall be deemed to be Shares received upon the
exercise of an Option for all purposes hereof.
(c) TERM OF INCENTIVE STOCK OPTION.
The term of each Incentive Stock Option granted pursuant to the Plan shall
be not more than five (5) years from the date each such Incentive Stock Option
is granted.
(d) EXERCISE GENERALLY.
Except as otherwise provided in Section 8 hereof, no Incentive Stock Option
may be exercised unless the Optionee shall have been in the employ of the
Company at all times during the period beginning with the date of grant of any
such Incentive Stock Option and ending on the date three (3) months prior to the
date of exercise of any such Incentive Stock Option. The Committee may impose
additional conditions upon the right of an Optionee to exercise any Incentive
Stock Option granted hereunder which are not inconsistent with the terms of the
Plan or the requirements for qualifications as Incentive Stock Option under
Section 422 of the Code.
(e) TRANSFERABILITY.
Any Incentive Stock Option granted pursuant to the Plan shall be exercised
during any Optionee's lifetime only by the Optionee to whom it was granted and
shall not be assignable or transferable otherwise than by will or by the laws of
descent and distribution.
(f) RIGHT OF FIRST REFUSAL.
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The Shares of Common Stock issued upon exercise of any Option shall not be
transferable by Optionee, or any transferee receiving shares by a will or by
operation of the laws of descent and distribution, within the two and one-half
(2.5) year period following the exercise of the Option to which such shares
relate, otherwise then by will or by the laws of descent and distribution,
unless prior to any such transfer the Company has been offered in writing, the
right and opportunity to repurchase any such Shares at lesser of the fair market
value of the Common Stock or the price at which such proposed transfer is to be
effected. Such right shall be exercised within fourteen (14) days of the receipt
of such written notice. Additionally, upon the termination of an Employee's
employment with the Company or any parent or Subsidiary, other than as a result
of retirement, death, permanent disability, the merger of the Company with and
into another entity, or sale of a majority interest in the Company, to another
entity, the Company shall have the right, exercisable within one hundred and
twenty (120) days of such termination of employment to repurchase all shares
received upon exercise of any Option at the price the Company is then offering
to repurchase shares of Common Stock.
8. Effect of Termination of Employment, Disability or Death on Incentive
Stock Options.
(a) TERMINATION OF EMPLOYMENT.
In the event that any Optionee's employment by the Company shall terminate
for any reason, other than Permanent and Total Disability (as such term is
defined in Section 22(e)(3) of the Code) or death, all of any such Optionee's
Incentive Stock Options, and all of any such Optionee's rights to purchase or
receive shares of Common Stock pursuant thereto, shall automatically terminate
on the earlier of (i) the respective expiration dates of any such Incentive
Stock Options or (ii) the expiration of not more than three (3) months after the
date of such termination of employment, but only if, and to the extent that, the
Optionee was entitled to exercise any such Incentive Stock Options at the date
of such termination of employment. In the event that a Subsidiary ceases to be a
Subsidiary of the Company, the employment of all of its employees who are not
immediately thereafter employees of the Company shall be deemed to terminate
upon the date such Subsidiary so ceases to be a Subsidiary of the Company.
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(b) DISABILITY.
In the event that any Optionee's employment by the Company shall terminate
as the result of the Permanent and Total Disability of such Optionee, such
Optionee may exercise any Incentive Stock Options granted to him pursuant to the
Plan at any time prior to the earlier of (i) the respective expiration dates of
any such Incentive Stock Options or (ii) the date which is one (1) year after
the date of such termination of employment, but only if, and to the extent that,
the Optionee was entitled to exercise any such Incentive Stock Options at the
date of such termination of employment.
(c) DEATH.
In the event of the death of any Optionee, all of the Incentive Stock
Options granted to any such Optionee may be exercised by the person or persons
to whom the Optionee's rights under any such Incentive Stock Options pass by
will or the laws of descent and distribution (including the Optionee's estate
during the period of administration) at any time prior to the earlier of (i) the
respective expiration dates of any such Incentive Stock Options, or (ii) the
date which is one (1) year after the death of the Optionee, but only if, and to
the extent that, the Optionee was entitled to exercise any such Incentive Stock
Options at the date of death. For purposes of this Section 8(c), any Incentive
Stock Option held by an Optionee shall be considered exercisable at the date of
his death if the only unsatisfied condition precedent to the exercisability of
such Incentive Stock Option at the date of death is the passage of a specified
period of time.
(d) INCENTIVE STOCK OPTIONS DEEMED EXERCISABLE.
For purposes of Sections 8(a) and 8(b) above, any Incentive Stock Option
held by any Optionee shall be considered exercisable at the date of termination
of his employment if such Incentive Stock Option were actually exercisable at
such date.
(e) TERMINATION OF INCENTIVE STOCK OPTIONS.
To the extent that any Incentive Stock Option granted under the Plan to any
Optionee whose employment by the Company terminates shall not have been
exercised within the applicable period set forth in this Section 8, any such
Incentive Stock Option, and all rights to purchase or receive shares of Common
Stock pursuant thereto, as the case may be, shall terminate on the last day of
the applicable period.
9. Right of Repurchase and Restrictions on Disposition. The Committee, in
its sole discretion, may include, in addition to the right of first refusal
contained in Section 7(f) hereof, as a term of any Incentive Stock Option the
right of the Company but not the obligation, to repurchase all or any amount of
the Shares acquired by an Optionee pursuant to the exercise of any such Options
(the "Repurchase Right"). The intent of the Repurchase Right is to encourage the
continued employment of the Optionee. The Repurchase Right shall provide for,
among other things, a specified duration of the Repurchase Right, a specified
price per Share to be paid upon the exercise of the Repurchase Right and a
restriction on the disposition of the Shares by the Optionee during the period
of the Repurchase Right. The Repurchase Right may permit the Company to transfer
or assign such right to another party. The Company may exercise the Repurchase
Right only to the extent permitted by applicable law.
10. Recapitalization, Merger, Consolidation, Change in Control and Similar
Transactions.
(a) ADJUSTMENT.
Subject to any required action by the shareholders of the Company, the
aggregate number of shares of Common Stock for which stock options may be
granted hereunder, the number of shares of Common Stock covered by each
outstanding stock option, and the exercise price per share of Common Stock of
each such stock option, shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding shares of Common Stock
resulting from a subdivision or consolidation of shares or the payment of a
stock dividend (but only on the Common Stock) or any other increase or decrease
in the number of such shares of Common Stock effected without the receipt of
consideration by the Company.
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(b) EXTRAORDINARY CORPORATE ACTION.
Subject to any required action by the shareholders of the Company, in the
event of any change in control, recapitalization, merger, consolidation,
exchange of shares, spin-off, reorganization, tender offer, liquidation or other
extraordinary corporate action or event, the Committee, in its sole discretion,
shall have the power, prior or subsequent to such action or event to:
(i) appropriately adjust the number of shares of Common Stock subject to
each stock option, the exercise price per share of Common Stock, and the
consideration to be given or received by the Company upon the exercise of any
outstanding Option;
(ii) cancel any or all previously granted Options, provided that
appropriate consideration is paid to the Optionee in connection therewith;
and/or
(iii) make such other adjustments in connection with the Plan as the
Committee, in its sole discretion, deems necessary, desirable, appropriate or
advisable; provided, however, that no action shall be taken by the Committee
which would cause Incentive Stock Options granted pursuant to the Plan to fail
to meet the requirements of Section 422 of the Code.
For purposes of this Section, "change in control" shall mean: (i) the
execution of an agreement for the sale of all, or a material portion, of the
assets of the Company; (ii) the execution of an agreement for a merger or
recapitalization of the Company or any merger or recapitalization whereby the
Company is not the surviving entity, (iii) a change of control of the Company,
as otherwise defined or determined by any applicable bank regulatory agency; or
(iv) the acquisition after the Effective Date hereof, directly or indirectly, of
the beneficial ownership (within the meaning of that term as it is used in
Section 13(d) of the Securities Exchange Act of 1934, as amended and the rules
promulgated thereunder) of twenty-five percent (25%) or more of the outstanding
voting securities of the Company by any person, trust, entity or group. The term
"person" refers to an individual or a corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or any other form of entity not specially listed herein. Except as
expressly provided in Section 10(a) hereof, no Optionee shall have any rights by
reason of the occurrence of any of the events described in this Section 10.
(c) ACCELERATION.
The Committee shall at all times have the power to accelerate the exercise
date of Options previously granted under the Plan.
11. Time of Granting Options. The date of grant of an Option under the Plan
shall, for all purposes, be the date on which the Committee makes the
determination of granting such Option. Notice of the determination shall be
given to each employee to whom an Option is so granted within a reasonable time
after the date of such grant.
12. Effective Date. The Plan shall be deemed to be effective as of (the
date of approval by Board) (the "Effective Date"). Incentive Stock Options may
be granted prior to ratification of the Plan by the stockholders if the exercise
of such Options is subject to such stockholder ratification.
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13. Approval of Stockholders. The Plan shall be approved by stockholders of
the Company within twelve (12) months before or after the Effective Date.
14. Modification of Options. At any time and from time to time, the Board
may authorize the Committee to direct the execution of an instrument providing
for the modification of any outstanding Option, provided no such modification,
extension or renewal shall confer on the holder of said Option any right or
benefit which could not be conferred on him by the grant of a new Option at such
time, or shall not materially decrease the Optionee's benefits under the Option
without the consent of the holder of the Option, except as otherwise permitted
under Section 15 hereof.
15. Amendment and Termination of the Plan.
(a) ACTION OF THE BOARD.
The Board may alter, suspend or discontinue the Plan, except that no action
of the Board may increase (other than as provided in Section 10) the maximum
number of shares permitted to be optioned under the Plan, materially increase
the benefits accruing to Participants under the Plan or materially modify the
requirements for eligibility for participation in the Plan unless such action of
the Board shall be subject to approval or ratification by the shareholders of
the Company.
(b) CHANGE IN APPLICABLE LAW.
Notwithstanding any other provision contained in the Plan, in the event of
a change in any Federal or state law, rule or regulation which would make the
exercise of all or part of any previously granted Incentive Stock Option
unlawful or subject the Company to any penalty, the Committee may restrict any
such exercise without the consent of the Optionee or other holder thereof in
order to comply with any such law, rule or regulation or to avoid any such
penalty.
16. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to any Option granted under the Plan unless the issuance and delivery of
such Shares shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law and the requirements
of any stock exchange upon which the shares may then be listed.
The inability of the Company to obtain from any regulatory body or
authority any approval deemed by the Company's counsel to be necessary to the
lawful issuance and sale of any Shares hereunder shall relieve the Company of
any liability with respect to the non-issuance of such Shares.
As a condition to the exercise of an Option, the Company may require the
person exercising the Option to make such representations and warranties as may
be necessary to assure the availability of an exemption from the registration
requirements of federal or state securities law.
17. Reservation of Shares. During the term of the Plan, the Company will
reserve, and make every effort to repurchase shares of Common Stock to prevent
further dilution to the shareholders, and keep available a number of Shares
sufficient to satisfy the requirements of the Plan.
18. Unsecured Obligation. No participant under the Plan shall have any
interest in any fund or special asset of the Company by reason of the Plan or
the grant of any Incentive Stock Option to him under the Plan. No trust fund
shall be created in connection with the Plan or any grant of any Incentive Stock
Option hereunder and there shall be no required funding of amounts which may
become payable to any Participant.
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19. Withholding Tax. Where a Participant or other person is entitled to
receive Shares pursuant to the exercise of an Option pursuant to the Plan, the
Company shall have the right to require the Participant or such other person to
pay the Company the amount of any taxes which the Company is required to
withhold with respect to such Shares, or, in lieu thereof, to retain, or sell
without notice, a number of such Shares sufficient to cover the amount required
to be withheld.
20. Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of Florida, except to the extent that
Federal law shall be deemed to apply.
9
Exhibit 10(d)
INDIAN RIVER BANKING COMPANY
1999 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
The purpose of this Indian River Banking Company 1999 Stock Option Plan
(the "Plan") is to advance the interests of Indian River Banking Company. (the
"Company") by providing directors and selected key employees of the Bank, the
Company, and their affiliates with the opportunity to acquire shares of the
Company's common stock. By encouraging stock ownership, the Company seeks to
attract, retain and motivate the best available personnel for positions of
substantial responsibility; to provide additional incentive to directors and key
employees of the Company, the Bank and their affiliates to promote the success
of the business as measured by the value of its shares; and generally to
increase the commonality of interests among directors, key employees, and other
shareholders.
The Plan is intended to replace the Indian River Banking Company 1995 Stock
Option Plan (the "1995 Plan") upon this Plan's approval by shareholders of the
Company. Options issued under the 1995 Plan will continue in effect and will be
subject to the requirements of the 1995 Plan, but no new options will be granted
under the 1995 Plan after this Plan is approved by shareholders.
The Plan is not intended as an agreement or promise of employment. Neither
the Plan, nor any Option granted pursuant to the Plan, confers on any person any
right to continue in the employ of the Company. The right of the Company, the
Bank, or any of their affiliates to terminate the employment of an Employee is
not limited by the Plan or by any Option granted pursuant to the Plan unless
such right is specifically described by the terms of any such Option.
2. DEFINITIONS.
(a) "Affiliate" means any "parent corporation" or "subsidiary corporation"
of the Company as such terms are defined in Section 424(e) and (f),
respectively, of the Code.
(b) "Agreement" means a written agreement entered into in accordance with
Paragraph 5(c).
(c) "Bank" means the Indian River National Bank.
(d) "Board" means the Board of Directors of the Company.
(e) "Change in Control" means any one of the following events occurring
after the Effective Date: (1) the acquisition of ownership of, power to
vote, or control of 25% or more of any class of voting securities of the
Company or the Bank; (2) the exercise of a controlling influence over the
management or policies of the Bank or the Company by any person or by
persons acting as a "group" (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934), or (3) the failure of Continuing
Directors to constitute at least two-thirds of the Board of Directors of
the Company or the Bank (the "Company Board") during any period of two
consecutive years. A "change in control" does not include acquisition of
ownership of, control of or power to vote voting securities of the Company
by an employee benefit plan sponsored by the Company or the Bank;
acquisition of voting securities by the Company through share repurchase or
otherwise; or acquisition by an exchange of voting securities with a
successor to the Company in a reorganization, such as a re-incorporation,
that does not have the purpose or effect of significantly changing voting
power or control. For purposes of this definition, only, "Continuing
Directors" includes only those individuals who were members of the Company
Board at the Effective Date and those other individuals whose election or
nomination for election as a member of the Company Board was approved by a
vote of at least two-thirds of the Continuing Directors then in office, and
"person" refers to an individual or a corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity. The decision of
the Board as to whether a Change in Control has occurred shall be
conclusive and binding.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means the Committee appointed by the Board in accordance
with Paragraph 5(a) hereof.
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(h) "Common Stock" means the common stock, par value $1.00 per share, of
the Company.
(i) "Company" means Indian River Banking Company, a Florida corporation.
(j) "Continuous Service" means the absence of any interruption or
termination of employment by the Company or any present or future
Affiliate. Employment shall not be considered interrupted in the case of
sick leave, military leave or any other leave of absence approved by the
Company or in the case of transfers between locations of the Company or
among the Company, the Bank, or any other Affiliate.
(k) "Director" means any member of the Board of Directors of the Company.
(l) "Effective Date" means the date specified in Paragraph 14 hereof.
(m) "Employee" means any person employed by the Company or by the Bank or
any other present or future Affiliate.
(n) "Exercise Price" means the price per Optioned Share at which an Option
may be exercised.
(o) "ISO" means an option to purchase Common Stock that meets the
requirements set forth in the Plan, and which is intended to be and is
identified as an "incentive stock option" within the meaning of Section 422
of the Code.
(p) "Market Value" means the fair market value of the Common Stock, as
determined under Paragraph 7(b) hereof.
(q) "Non-Employee Director" means any member of the Board who, at the time
discretion under the Plan is exercised, is a "Non-Employee Director" within
the meaning of Rule 16b-3.
(r) "Non-ISO" means an option to purchase Common Stock that meets the
requirements set forth in the Plan but which is not intended to be, and is
not identified as, an ISO.
(s) "Offer to Effect a Change in Control" means any offer to buy or
acquire, solicitation of an offer to sell, tender offer for, or request of
invitation for tenders of, 25% or more of any class of voting securities of
the Company for value. The decision of the Board as to whether an Offer to
Effect a Change in Control has been made shall be conclusive and binding.
(t) "Option" means an option to purchase Shares, granted by the Board
pursuant to this Plan, whether the option is an ISO or a Non-ISO.
(u) "Optioned Shares" means Shares subject to an Option granted pursuant to
this Plan.
(v) "Optionee" means any person who receives an Option pursuant to this
Plan.
(w) "Outstanding Shares" means the total shares of Common Stock which have
been issued and which (a) are not held as treasury shares, and (b) have not
been cancelled or retired by the Company.
(x) "Parent" shall mean any present or future corporation that would be a
"parent corporation" as defined in Subsections 424(e) and (g) of the Code.
(y) "Plan" means the Indian River Banking Company 1999 Stock Option Plan.
(z) "Rule 16b-3" means Rule 16b-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended (the "Act").
(aa) "Share" shall mean a share of Common Stock.
(bb) "Subsidiary" shall mean any present or future corporation which would
be a "subsidiary corporation" as defined in Subsections 424(f) and (g) of
the Code.
(cc) "Transaction" means (i) the liquidation or dissolution of the Company,
(ii) a merger or consolidation in which the Company is not the surviving
entity; or (iii) the sale or disposition of all or substantially all of the
Company's assets.
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3. TERM OF THE PLAN AND OPTIONS.
(a) Term of the Plan. The Plan shall continue in effect for a term of ten
years from the Effective Date unless sooner terminated pursuant to Paragraph 17.
No Option may be granted under the Plan after ten years from the Effective Date.
(b) Term of Options. The Committee shall establish the term of each Option
granted under the Plan. No Option may have a term that exceeds 10 years. No ISO
granted to an Employee who owns Shares representing more than 10% of the
outstanding shares of Common Stock at the time an ISO is granted may have a term
that exceeds five years.
4. SHARES SUBJECT TO THE PLAN.
(a) Except as otherwise required by Paragraph 11, the aggregate number of
Shares deliverable upon the exercise of Options pursuant to the Plan shall not
exceed 125,000 Shares. Such Shares may either be authorized but unissued Shares
or Shares held in treasury to the extent allowed by Florida law.
(b) If Options should expire, become unexercisable, or be forfeited for any
reason without having been exercised in full, the Optioned Shares shall, unless
the Plan shall have been terminated, be available for the grant of additional
Options under the Plan.
5. ADMINISTRATION OF THE PLAN.
(a) Powers of the Board. Except as limited by the express provisions of the
Plan or by resolutions adopted by the Board, the Board shall administer the Plan
have sole and complete authority and discretion (i) to select Optionees and
grant Options, (ii) to determine the form and content of Options to be issued in
the form of Agreements under the Plan, (iii) to interpret the Plan, (iv) to
prescribe, amend and rescind rules and regulations relating to the Plan, and (v)
to make other determinations necessary or advisable for the administration of
the Plan. The Committee shall have and may exercise such other power and
authority as may be delegated to it by the Board from time to time. A majority
of the entire Board shall constitute a quorum and the action of a majority of
the members present at any meeting at which a quorum is present, or acts
approved in writing by a majority of the Board without a meeting, shall be
deemed the action of the Board. The Board may delegate any or all of its powers
and responsibilities under this Plan to a Committee of the Board.
(b) Agreement. Each Option shall be evidenced by a written agreement
containing such provisions as may be approved by the Board. Each such Agreement
shall constitute a binding contract between the Company and the Optionee, and
every Optionee, upon acceptance of such Agreement, shall be bound by the terms
and restrictions of the Plan and of such Agreement. The terms of each such
Agreement shall be in accordance with the Plan, but each Agreement may include
such additional provisions and restrictions determined by the Board, in its
discretion, provided that such additional provisions and restrictions are not
inconsistent with the terms of the Plan. In particular, the Board shall set
forth in each Agreement (i) the Exercise Price of an Option, (ii) the number of
Shares subject to, and the expiration date of, the Option, (iii) the manner,
time and rate (cumulative or otherwise) of exercise or vesting of such Option,
and (iv) the restrictions, if any, to be placed upon such Option, or upon Shares
which may be issued upon exercise of such Option. The Chairman of the Board and
such other officers as shall be designated by the Board are hereby authorized to
execute Agreements on behalf of the Company and to cause them to be delivered to
the recipients of Options.
(c) Effect of the Board's Decisions. All decisions, determinations, and
interpretations of the Board shall be final and conclusive on all persons
affected thereby.
(d) Indemnification. In addition to such other rights of indemnification as
they may have, the members of the Board shall be indemnified by the Company in
connection with any claim, action, suit or proceeding relating to any action
taken or failure to act under or in connection with the Plan or any Option,
granted hereunder to the full extent provided for under the Company's Articles
of Incorporation or Bylaws with respect to the indemnification of Directors.
6. GRANT OF OPTIONS.
(a) General Rule. The Board, in its sole discretion, may grant ISOs or
Non-ISOs to Employees of the Company or its Affiliates and may grant Non-ISOs to
Directors or directors of Affiliates.
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(b) Special Rules for ISOs. The aggregate Market Value, as of the date the
Option is granted, of the Shares with respect to which ISOs are exercisable for
the first time by an Employee during any calendar year (under all incentive
stock option plans, as defined in Section 422 of the Code, of the Company or any
present or future "parent" or "Subsidiary" of the Company) shall not exceed
$100,000. Notwithstanding the prior provisions of this paragraph, the Board may
grant Options in excess of the foregoing limitations, in which case such Options
granted in excess of such limitation shall be Options which are Non-ISOs.
7. EXERCISE PRICE FOR OPTIONS.
(a) Limits on Board Discretion. The Exercise Price as to any particular
Option granted under the Plan shall not be less than the Market Value of the
Optioned Shares on the date of grant. In the case of an Employee who owns Shares
representing more than 10% of the Company's Outstanding Shares of Common Stock
at the time an ISO is granted, the Exercise Price shall not be less than 110% of
the Market Value of the Optioned Shares at the time the ISO is granted.
(b) Standards for Determining Exercise Price. If the Common Stock is listed
on a national securities exchange (including the NASDAQ National Market) on the
date in question, then the Market Value per Share shall be not less than the
average of the highest and lowest selling price on such exchange on such date,
or if there were no sales on such date, then the Exercise Price shall be not
less than the mean between the bid and asked prices on such date. If the Common
Stock is traded otherwise than on a national securities exchange on the date in
question, then the Market Value per Share shall be not less than the mean
between the bid and asked price on such date, or, if there is no bid and asked
price on such date, then on the next prior business day on which there was a bid
and asked price. If no such bid and asked price is available, then the Market
Value per Share shall be its fair market value as determined by the Board, in
its sole and absolute discretion.
(c) Reissuance of Options. Notwithstanding anything herein to the contrary,
the Board shall have the authority to cancel outstanding Options with the
consent of the Optionee and to grant new Options at a lower Option Price equal
to the then fair market value per share of Common Stock in the event that the
fair market value per share of Common Stock at any time prior to the date of
exercise of outstanding Options falls below the Option Price of such Options.
8. EXERCISE OF OPTIONS.
(a) Generally. Any Option shall be exercisable at such times and under such
conditions as shall be permissible under the terms of the Plan and of the
Agreement. An Option may not be exercised for a fractional Share.
(b) Procedure for Exercise. An Optionee may exercise Options, subject to
provisions relative to its termination and limitations on its exercise, only by
(1) written notice of intent to exercise the Option with respect to a specified
number of Shares, and (2) either payment to the Company (contemporaneously with
delivery of such notice) in cash, in Common Stock, or a combination of cash and
Common Stock, of the amount of the Exercise Price for the number of Shares with
respect to which the Option is then being exercised, or a cashless exercise of
the Option in accordance with Section 8(c) of this Plan. Each such notice (and
payment where required) shall be delivered, or mailed by prepaid registered or
certified mail, addressed to the Chief Financial Officer of the Company at the
Company's executive offices. Common Stock utilized in full or partial payment of
the Exercise Price for Options shall be valued at its Market Value at the date
of exercise.
(c) Any Optionee may elect to receive upon the proper exercise of any
Option for the full number of Shares to which such Option relates, the number of
Shares determined by dividing (i) the difference between the aggregate fair
market value of all shares issuable upon the exercise of the Options in full (as
determined in accordance with Section 7(b) of this Plan) and the aggregate
Option Price for the exercise of the Option in full, by (ii) the price
determined in accordance with Section 7(b). Shares received upon such election
shall reflect the exercise in full of such Options and the full satisfaction of
the Company's obligations under said Option. Shares received upon such election
shall be deemed to be Shares received upon the exercise of an Option for all
purposes hereof.
(d) Notwithstanding the provisions of any Option that provides for its
exercise in installments as designated by the Board, such Option shall become
immediately exercisable upon the Optionee's death or Permanent and Total
Disability.
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(e) Period of Exercisability-ISOs. An ISO may be exercised by an Optionee
only while the Optionee is an Employee and has maintained Continuous Service
from the date of the grant of the ISO, or within three months after termination
of such Continuous Service (but not later than the date on which the Option
would otherwise expire), except if the Employee's Continuous Service terminates
by reason of -
(1) "Just Cause" which for purposes hereof shall have the meaning set
forth in any unexpired employment or severance agreement between the
Optionee and the Company or any Affiliate (and, in the absence of any
such agreement, means termination because of the Employee's personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or final cease-and-desist
order), then the Optionee's rights to exercise such ISO shall expire
on the date of such termination;
(2) Death, then an ISO of the deceased Optionee may be exercised
within two years from the date of his death (but not later than the
date on which the Option would otherwise expire) by the personal
representatives of his estate or person or persons to whom his rights
under such ISO shall have passed by will or by laws of descent and
distribution;
(3) Permanent and Total Disability (as such term is defined in Section
22(e)(3) of the Code), then an ISO may be exercised within one year
from the date of such Permanent and Total Disability, but not later
than the date on which the ISO would otherwise expire.
(f) Period of Exercisability-Non-ISOs. Except to the extent otherwise
provided in the terms of an Agreement, a Non-ISO may be exercised by an Optionee
only while such Optionee is an Employee, a Director, or a director of an
Affiliate, or within three months after termination of such service (but not
later than the date on which the Option would otherwise expire), except if the
Optionee's service terminates by reason of -
(1) "Just Cause" which for purposes hereof shall have the meaning set
forth in any unexpired employment or severance agreement between the
Optionee and the Company or any Affiliate (and, in the absence of any
such agreement, means termination because of the Optionee's personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or final cease-and-desist
order), then the Optionee's rights to exercise such Non-ISO shall
expire on the date of such termination; or
(2) Removal from the Board or the Bank Board pursuant to the
respective Articles of Incorporation, then the Optionee's rights to
exercise such Non-ISO shall expire on the date of such removal.
(3) Death, then a Non-ISO of the deceased Optionee may be exercised
within two years from the date of his death (but not later than the
date on which the Option would otherwise expire) by the personal
representatives of his estate or person or persons to whom his rights
under such Non-ISO shall have passed by will or by laws of descent and
distribution or otherwise shall have transferred pursuant to this
Plan;
(4) Permanent and Total Disability (as such term is defined in Section
22(e)(3) of the Code), then a Non-ISO may be exercised within one year
from the date of such Permanent and Total Disability, but not later
than the date on which the ISO would otherwise expire.
(g) Effect of the Board's Decisions. The Board's determination whether an
Optionee's Continuous Service or service as a Director or director of an
Affiliate has ceased, and the effective date thereof shall be final and
conclusive on all persons affected thereby.
9. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Compliance with Securities Laws. Shares of Common Stock shall not be
issued with respect to any Option unless the issuance and delivery of such
Shares shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law, and the
requirements of any stock exchange upon which the Shares may then be listed. The
Plan is intended to comply with Rule 16b-3, and any provision of the Plan than
the Board determines in its sole
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and absolute discretion to be inconsistent with said Rule shall, to the extent
of such inconsistency, be inoperative and null and void, and shall not affect
the validity of the remaining provisions of the Plan.
(b) Special Circumstances. The inability of the Company to obtain approval
from any regulatory body or authority deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder shall relieve
the Company of any liability with respect to the non-issuance or sale of such
Shares. As a condition to the exercise of an Option, the Company may require the
person exercising the Option to make such representations and warranties as the
Board determines may be necessary to assure the availability of an exemption
from the registration requirements of federal or state securities law.
(c) Board Discretion. The Board shall have the discretionary authority to
impose in Agreements such restrictions on Shares as it may deem appropriate or
desirable, including but not limited to the authority to impose a right of first
refusal or to establish repurchase rights or both of these restrictions.
10. RESTRICTIONS ON SALE OF SHARES
(a) Six-Month Restriction. Shares of Common Stock that have been acquired
upon exercise of an Option may not be sold or otherwise disposed of before the
end of a six-month period beginning on the date the Option was granted. This
restriction is in addition to any other restriction imposed by this Plan or by
the Board pursuant to this Plan.
(b) Exceptions. The six-month restriction imposed by subparagraph (a) shall
not apply to dispositions by bona fide gifts or to transfers by will or the laws
of descent or distribution.
11. EFFECT OF CHANGES IN CONTROL AND CHANGES IN COMMON STOCK SUBJECT TO THE
PLAN.
(a) Effects of Change in Control.
(1) Notwithstanding the provisions of any Option that provides for its
exercise or vesting in installments, all Options shall be immediately
exercisable and fully vested upon a Change in Control or the receipt
of an Offer to Effect a Change in Control.
(2) At the time of a Change in Control, the Optionee shall, at the
sole and absolute discretion of the Board, be entitled to receive a
cash payment in an amount equal to the excess of the Market Value of
the Shares subject to such Option over the Exercise Price of such
Option, provided that in no event may an Option be cancelled in
exchange for cash within the six-month period following the date of
its grant. For purposes of calculating this payment, the Market Value
shall be the Market Value at the date of the Change in Control or the
highest Market Value in the five trading days after public
announcement of an Offer to Effect a Change in Control, as determined
by the Board.
(3) In the event there is a Transaction, all outstanding Options shall
be surrendered. With respect to each Option so surrendered, the Board
shall in its sole and absolute discretion determine whether the holder
of each Option so surrendered shall receive--
(A) For each Share then subject to an outstanding Option, an
Option for the number and kind of shares into which each
Outstanding Share (other than Shares held by dissenting
shareholders) is changed or exchanged, together with an
appropriate adjustment to the Exercise Price; or
(B) The number and kind of shares into which each Outstanding
Share (other than Shares held by dissenting shareholders) is
changed or exchanged in the Transaction that are equal in market
value to the excess of the Market Value on the date of the
Transaction of the Shares subject to the Option, over the
Exercise Price of the Option; or
(C) A cash payment (from the Company or the successor
corporation), in an amount equal to the excess of the Market
Value on the date of the Transaction of the Shares subject to the
Option, over the Exercise Price of the Option.
(4) The decision of the Board as to whether a Change in Control has
occurred, or an Offer to Effect a Change in Control has been made
shall be conclusive and binding.
(b) Recapitalizations, Stock Splits, Etc. The number and kind of shares
reserved for issuance under the Plan, and the number and kind of shares subject
to outstanding Options and the Exercise Price thereof, shall be
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proportionately adjusted for any increase, decrease, change or exchange of
Shares for a different number or kind of shares or other securities of the
Company which results from a merger, consolidation, recapitalization,
reorganization, reclassification, stock dividend, split-up, combination of
shares, or similar event in which the number or kind of shares is changed
without the receipt or payment of consideration by the Company.
(c) Special Rule for ISOs. Any adjustment made pursuant to subparagraphs
(a)(3)(A) or (b) of this Paragraph shall be made in such a manner as not to
constitute a modification, within the meaning of Section 424(h) of the Code, of
outstanding ISOs.
(d) Conditions and Restrictions on New, Additional, or Different Shares or
Securities. If, by reason of any adjustment made pursuant to this Paragraph, an
Optionee becomes entitled to new, additional, or different shares of stock or
securities, such new, additional, or different shares of stock or securities
shall thereupon be subject to all of the conditions and restrictions which were
applicable to the Shares pursuant to the Option before the adjustment was made.
(e) Other Issuances. Except as expressly provided in this Paragraph, the
issuance by the Company or an Affiliate of shares of stock of any class, or of
securities convertible into Shares or stock of another class, for cash or
property or for labor or services either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, shall not affect, and no adjustment
shall be made with respect to, the number, class, or Exercise Price of Shares
then subject to Options or reserved for issuance under the Plan.
12. NON-TRANSFERABILITY OF OPTIONS.
(a) ISOs may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent and
distribution, or pursuant to the terms of a "qualified domestic relations order"
(within the meaning of Section 414(p) of the Code and the regulations and
rulings thereunder).
(b) Non-ISO's may not be sold, pledged, assigned, hypothecated, transferred
or disposed of in any manner other than by will or by the laws of descent and
distribution, pursuant to the terms of a "qualified domestic relations order"
(within the meaning of Section 414(p) of the Code and the regulations and
rulings thereunder), or, in the sole discretion of the Board, in connection with
a transfer for estate or retirement planning purposes to a trust established for
such purposes.
13. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for all
purposes, be the later of the date on which the Board makes the determination of
granting such Option and the Effective Date. Notice of the determination shall
be given to each Optionee to whom an Option is so granted within a reasonable
time after the date of such grant.
14. EFFECTIVE DATE. The Plan shall be effective as of October 13, 1999. Option
grants may be made before approval of the Plan by the shareholders of the
Company, if the exercise of Options is conditioned upon shareholder approval of
the Plan.
15. APPROVAL BY SHAREHOLDERS. The Plan shall be approved by shareholders of the
Company within twelve (12) months before or after the Effective Date.
16. MODIFICATION OF OPTIONS. At any time, and from time to time, the Board may
direct execution of an instrument providing for the modification of any
outstanding Option, provided no such modification shall confer on the holder of
said Option any right or benefit which could not be conferred on the Optionee by
the grant of a new Option at such time, or impair the Option without the consent
of the holder of the Option.
17. AMENDMENT AND TERMINATION OF THE PLAN. The Board may from time to time amend
the terms of the Plan and, with respect to any Shares at the time not subject to
Options, suspend or terminate the Plan; provided that shareholder approval shall
be required to increase the number of Shares subject to the Plan provided in
Paragraph 4 or to extend the terms of the Plan. No amendment, suspension, or
termination of the Plan shall, without the consent of any affected holders of an
Option, alter or impair any rights or obligations under any Option theretofore
granted.
18. RESERVATION OF SHARES. During the term of the Plan, the Company will reserve
and keep available a number of Shares sufficient to satisfy the requirements of
the Plan.
19. WITHHOLDING TAX. The Company's obligation to deliver Shares upon exercise of
Options (or such earlier time that the Optionee makes an election under Section
83(b) of the Code) shall be subject to the Optionee's satisfaction of all
applicable federal, state, and local income and employment tax withholding
obligations. The Board, in its discretion, may permit the Optionee to satisfy
the obligation, in whole or in part, by irrevocably electing to have the
7
<PAGE>
Company withhold Shares, or to deliver to the Company Shares that the Optionee
already owns, having a value equal to the amount required to be withheld. The
value of Shares to be withheld, or delivered to the Company, shall be based on
the Market Value of the Shares on the date the amount of tax to be withheld is
to be determined. As an alternative, the Company may retain, or sell without
notice, a number of such Shares sufficient to cover the amount required to be
withheld.
20. NO EMPLOYMENT OR OTHER RIGHTS. In no event shall eligibility to be granted
an Option or the grant of an Option create or be deemed to create any legal or
equitable right of a Director, Employee, director of any Affiliate, or any other
party to continue service with the Company, the Bank, or any other Affiliate. No
person shall have a right to be granted an Option or, having received an Option,
the right to be granted an additional Option.
21. GOVERNING LAW. The Plan shall be governed by and construed in accordance
with the laws of the State of Florida, except to the extent that federal law
shall be deemed to apply.
22. SUCCESSORS AND ASSIGNS. The Plan shall be binding upon the Company's
successors and assigns.
* * * *
8
Exhibit 23(a)
To the Board of Directors
Indian River Banking Company
Vero Beach, Florida
We hereby consent to the use in this Registration Statement on Form SB-2 of our
report, dated February 4, 2000, except for Note 21 as to which the date is March
31, 2000, relating to the consolidated financial statements of Indian River
Banking Company and subsidiary. We also consent to the reference to our Firm
under the caption "Experts" in the Prospectus.
/s/ McGladrey & Pullen, LLP
Fort Lauderdale, Florida
May 9, 2000
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
Exhibit 27
Financial Data Schedule
This schedule contains summary financial information extracted from the Form
SB-2 and is qualified in its entirety by reference to such financial statements.
* As adjusted to reflect 10% stock dividend paid in January 2000 and two for
one stock split in the form of a dividend paid in March 2000.
</LEGEND>
<CIK> 0000846382
<NAME> Indian River Banking Company
<MULTIPLIER> 1,000
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 6,715
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 81,416
<INVESTMENTS-CARRYING> 7,072
<INVESTMENTS-MARKET> 7,239
<LOANS> 168,550
<ALLOWANCE> 1,904
<TOTAL-ASSETS> 271,236
<DEPOSITS> 238,846
<SHORT-TERM> 12,800
<LIABILITIES-OTHER> 725
<LONG-TERM> 5,274
<COMMON> 1,394
0
0
<OTHER-SE> 12,197
<TOTAL-LIABILITIES-AND-EQUITY> 271,236
<INTEREST-LOAN> 13,321
<INTEREST-INVEST> 4,496
<INTEREST-OTHER> 129
<INTEREST-TOTAL> 17,946
<INTEREST-DEPOSIT> 7,352
<INTEREST-EXPENSE> 8,025
<INTEREST-INCOME-NET> 9,921
<LOAN-LOSSES> 590
<SECURITIES-GAINS> 76
<EXPENSE-OTHER> 8,641
<INCOME-PRETAX> 3,145
<INCOME-PRE-EXTRAORDINARY> 3,145
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,003
<EPS-BASIC> 1.44
<EPS-DILUTED> 1.43
<YIELD-ACTUAL> 8.03
<LOANS-NON> 54
<LOANS-PAST> 52
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,510
<CHARGE-OFFS> 249
<RECOVERIES> 53
<ALLOWANCE-CLOSE> 1,904
<ALLOWANCE-DOMESTIC> 1,904
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
Exhibit 99(a)
INDIAN RIVER BANKING COMPANY
SUBSCRIPTION AGREEMENT FOR OFFERING OF SHARES OF COMMON STOCK
THE TERMS AND CONDITIONS OF THE OFFERING ARE SET FORTH IN THE ACCOMPANYING
PROSPECTUS. WE URGE YOU TO CAREFULLY READ THE PROSPECTUS IN ITS ENTIRETY BEFORE
SUBMITTING THIS SUBSCRIPTION AGREEMENT. ALL SUBSCRIPTIONS, ONCE SUBMITTED, ARE
IRREVOCABLE BY THE SUBSCRIBER.
IF YOU HAVE QUESTIONS ABOUT HOW TO COMPLETE THIS SUBSCRIPTION AGREEMENT, CONTACT
MARY RUTH SCHAEFER, THE SUBSCRIPTION AGENT FOR INDIAN RIVER BANKING COMPANY AT
(561) 569-9200
I. Subscription for Shares of Common Stock. The undersigned hereby irrevocably
subscribes for _______________________________ shares of common stock of Indian
River Banking Company at the purchase price of 25.00 per share.1
II. Purchase Price and Manner of Payment. The undersigned submits herewith, by
means of a check, bank draft or money order in the amount of
$_______________________ ($25.00 multiplied by the total number of shares
subscribed for in part I above), payable to "Indian River Banking Company Escrow
Account" full payment for the total number of shares subscribed for.
III. (a) Registration Instructions. This part must be completed with respect to
all shares purchased. If shares are to be registered in more than one manner,
complete as many Subscription Agreements as there are registrations, or attach
separate sheets providing all of the information required below with respect to
each registration, and indicating the number of shares subject to each
registration.
- --------------------------------------------------------------------------------
(Name)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Address, including Street, City, County, State and ZIP Code)
Taxpayer identification or Social Security Number: ________________________
Manner in which securities are to be owned:
/ / Individual
/ / Tenants in Common
/ / Joint Tenants
/ / Retirement Account (Trustee signature and authorization required)
/ / Uniform Transfer to Minors
/ / Other _______________________ (for example, corporation, trust or
estate. If shares are purchased for a trust, the date of the trust
agreements and trust title must be included).
(b) Special Delivery Instructions: If certificate(s) representing the
shares subscribed for is to be delivered to an address other than as indicated
in III.(a) above, please provide the delivery address below.
- --------------------------------------------------------------------------------
(Name)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Address, including Street, City, County, State and ZIP Code)
- --------
(1) Subject to a minimum subscription of 100 shares and a maximum subscription
of 4,000, subject to our right to permit larger or smaller subscriptions.
Subject to reduction in the event that the offering is oversubscribed.
1
<PAGE>
IV. Deadline. This Subscription Agreement and payment in full of the purchase
price must be actually received by Mary Ruth Schaefer, Subscription Agent for
Indian River Banking Company, 958 20th Place, Vero Beach, Florida 32960, NO
LATER THAN 5:00 P.M., EASTERN TIME, ON _________, 2000, (the "Termination Date")
subject to extension or earlier termination as set forth in the prospectus.
Name(s) of Subscriber(s):
- --------------------------------------------------------------------------------
Daytime Telephone Number: ______________________________________________________
Evening Telephone Number: ______________________________________________________
SIGNATURE(S):
- --------------------------------------------------------------------------------
(Signature(s) of subscriber(s) exactly as name(s) appear above)
Dated: ____________________________
If signature is by trustee(s), executor(s), administrator(s), guardian(s),
attorney(s)-in-fact, agent(s), officer(s) of a corporation or another acting in
a fiduciary or representative capacity, please provide the following information
as to such person.
Name (please print): ___________________________________________________________
Capacity (Full title): _________________________________________________________
Address (including ZIP Code): __________________________________________________
Business Telephone Number (including area code): _______________________________
Taxpayer identification or Social Security Number: _____________________________
IN DETERMINING WHETHER TO ACCEPT ANY SUBSCRIPTION, IN WHOLE OR IN PART, INDIAN
RIVER MAY, IN ITS SOLE DISCRETION, TAKE INTO ACCOUNT THE ORDER IN WHICH
SUBSCRIPTIONS ARE RECEIVED, A SUBSCRIBER'S POTENTIAL TO DO BUSINESS WITH, OR TO
DIRECT CUSTOMERS TO, INDIAN RIVER BANK AND INDIAN RIVER'S DESIRE TO HAVE A BROAD
DISTRIBUTION OF STOCK OWNERSHIP, AS WELL AS LEGAL OR REGULATORY RESTRICTIONS.
2
Exhibit 99(b)
ESCROW AGREEMENT
This ESCROW AGREEMENT is made and entered into this ____ day of ,
2000 by and between Indian River Banking Company, Inc., a Florida corporation
(the "Company"), and __________. (the "Escrow Agent").
BACKGROUND. Pursuant to a prospectus forming a part of a Registration
Statement on Form SB-2 filed by the Company with the Securities and Exchange
Commission (the "Prospectus") the Company is offering for sale, through the
efforts of certain of its directors and officers, 200,000 shares of its common
stock, $1.00 par value per share, of the Company (the "Common Stock"), plus an
oversubscription allotment of an additional 100,000 shares, at a price of $25.00
per share (the "Offering"). Those persons who desire to purchase shares are
required to execute and deliver a subscription agreement and are required to pay
the full purchase price of the shares subscribed for at the time of
subscription, by cash, check, bank draft or money order. The Prospectus provides
that all subscriptions should be delivered to Mary Ruth Shaefer, the
subscription agent for the Offering and that all checks or other orders are to
be made payable to the Indian River Banking Company Escrow Account and delivered
to the Escrow Agent as escrow agent for the Company.
Pending closing upon the sale of shares or termination of the Offering, all
monies received from subscribers on account of the purchase of shares are to be
deposited in an escrow account with the Escrow Agent. The parties hereto wish to
set forth herein the terms and conditions governing the escrow account and the
funds being delivered to and held by the Escrow Agent.
NOW THEREFORE, in consideration of the mutual promises herein contained,
each intending to be legally bound hereby, the parties hereto agree as follows:
1. ESCROW AGENT. The Company hereby designates and appoints ______________
as Escrow Agent to serve in accordance with the terms and conditions of this
Escrow Agreement and the Escrow Agent agrees to act as such Escrow Agent in
accordance with the terms and conditions of this Escrow Agreement.
2. CREATION OF ESCROW. At any time and from time to time after the date
hereof until completion of the Offering and Closing thereunder, the Company
shall deliver, or cause to be delivered, to the Escrow Agent funds representing
the purchase price of shares subscribed for by subscribers. The Escrow Agent
shall accept and hold in escrow all such funds received by it from the Company
for deposit in escrow hereunder (the "Escrowed Funds") for the benefit of the
parties having an interest therein in accordance with Rule 15c2-4, until
released as set forth herein. All checks or other instruments representing the
purchase price of shares shall be made payable to the Indian River Banking
Company Escrow Account, or to the Escrow Agent in its capacity as such, and
shall be delivered to the Escrow Agent no later than noon of the next business
day after receipt.
3. INVESTMENT OF ESCROWED FUNDS. All Escrowed Funds shall be deposited in
an account in the name of the Escrow Agent, in his capacity as such, maintained
at Indian River National Bank, or such other institution as may be agreed upon
by the parties hereto. Pending release from Escrow, the Escrowed Funds shall,
not later then the first business day following receipt, be invested by the
Escrow Agent in an interest bearing Repurchase Agreement secured by United
States government securities. All interest accrued on the Escrowed Funds or
interest earned on the Escrowed Funds shall be retained by the Escrow Agent
until released in accordance with the provisions of this Escrow Agreement. It is
acknowledged and agreed that the Escrowed Funds, including any interest or
earnings thereon, are not assets of the Company or Escrow Agent, but constitute
funds placed with the Escrow Agent for safekeeping and investment pending
disbursement in accordance with provisions of this Escrow Agreement.
4. INFORMATION. From time to time upon the request of the Company, the
Escrow Agent shall furnish to the Company a statement of the amount of Escrowed
Funds held by the Escrow Agent, the approximate amount of any accrued interest
thereon, and such other information as the Company may reasonably request. The
Escrow Agent shall immediately notify the Company if any check representing
Escrowed Funds or other purported transfer of Escrowed Funds fails to result in
the delivery of funds to the Escrow Agent.
1
<PAGE>
5. RELEASE OF ESCROWED FUNDS.
(a) Release of Escrowed Funds to the Company. (i) Immediately upon the
receipt of the certificate of the Company as described below, the Escrow Agent
shall release and deliver to the Company such portion of the Escrowed Funds as
represents payment of the purchase price of shares in respect of which the
Company has accepted subscriptions. Except as provided in Section 5(b) hereof,
the Escrow Agent shall not release any portion of the Escrowed Funds to the
Company until it has received: (1) a certification of any two of John L. Minton,
William A. High and Charles A. Bradley, the Chairman, President and Chief
Financial Officer, respectively, of the Company, or the then serving Chairman,
President and Chief Financial Officer, to the effect that (i) the Company has
received acceptable Subscriptions (including payment in full of the purchase
price) with respect to at least the number of Shares with respect to which funds
are sought to be released; and (ii) the Company has accepted subscriptions with
respect to such number of Shares; Such certification shall also indicate the
exact number of shares with respect to which subscriptions have been accepted.
Notwithstanding anything to the contrary contained herein, the delivery of the
foregoing certification shall be in the sole discretion of Messrs. Minton, High
and/or Bradley, and nothing contained herein shall constitute any obligation,
express or implied, of Messrs. Minton, High and/or Bradley to deliver such
certification, or to deliver it at any specified time.
(ii) In the event that the Offering shall continue with respect to
additional shares following the release of funds described in (a)(i) above, then
the Escrow Agent shall, immediately upon the receipt from time to time of one or
more certificates of: (1) any two of Messrs. Minton, High and/or Bradley, or the
then serving Chairman, President and Chief Financial Officer of the Company,
stating that the Company has received acceptable subscriptions (including
payment in full of the purchase price) with respect to a specified number of
additional shares, and has accepted subscriptions with respect to such number of
additional shares, release and deliver to the Company such portion of the
Escrowed Funds as represents payment of the purchase price of such number of
additional shares in respect of which the Company has accepted subscriptions.
(b) Release of Escrowed Funds to Subscribers. Immediately after receiving a
certification of any two of Messrs. Minton, High and/or Bradley, or the then
serving Chairman, President and Chief Financial Officer, to the effect that the
Company has either (i) terminated the Offering in whole or in part; or (ii)
rejected, revoked or cancelled in whole or in part any subscription payment in
respect of all or a portion of which has been received by the Escrow Agent, then
the Escrow Agent shall return to the subscriber whose subscription shall have
been rejected, revoked or cancelled, in whole or in part, as a result of
termination of the Offering or otherwise, Escrowed Funds representing such
subscriber's payments, or all subscribers' payments in the event of termination
of the Offering as a whole, and shall release to the Company, all interest or
other earnings accrued on such portion of the Escrowed Funds. It is expressly
agreed that, in the event any release of escrowed funds to subscribers is
required for any reason, the Company will provide, as part of its certification,
complete information to enable such action to be completed in a prompt and
timely manner.
(c) Release of Earnings. On the first day of each month during which there
shall be any Escrowed Funds in escrow hereunder, or at such other time or times
as the Company may in writing direct, the Escrow Agent shall release that
portion of the Escrowed Funds which represent interest or other earnings on any
portion of the Escrowed Funds, to the Company. Such release shall be effected by
the deposit of such interest or other earnings to the Company's transaction
account maintained at Indian River National Bank, or to such other account as
the Company may from time to time direct.
6. LIMITATION OF LIABILITY. It is agreed that the duties of the Escrow
Agent are limited to those herein specifically provided and are ministerial in
nature. It is further agreed that the Escrow Agent shall incur no liability
whatever except by reason of its willful misconduct, gross negligence or bad
faith. The Escrow Agent shall be under no obligation in respect to amounts held
in escrow hereunder other than faithfully to follow the instructions herein
contained or delivered to the Escrow Agent in accordance with this Escrow
Agreement. It shall not be required to institute legal proceedings of any kind.
It shall have no responsibility for computations to be made in accordance
herewith or for the genuineness or validity of any document or other item
deposited with it, and it shall be fully protected in acting in accordance with
the Escrow Agreement upon any written instructions given to it and reasonably
believed by it to have been duly executed by the Company in accordance herewith.
The Company shall indemnify and hold the Escrow Agent harmless against any
claims, demands, damages or losses with respect to any thing done by the Escrow
Agent in good faith in any and all matters covered by this Agreement in
accordance with the instructions or
2
<PAGE>
provisions set forth herein, except such as may arise through or be caused by
the willful misconduct or gross negligence of the Escrow Agent.
7. COMPENSATION. The Company shall pay all reasonable and customary
compensation, expenses and other charges of the Escrow Agent relating to its
services hereunder for so long as the Escrow Agent holds any amount in Escrow
hereunder. The Escrow Agent and the Company agree that such compensation shall
be as described in Schedule A hereto.
8. RESIGNATION. The Escrow Agent, or any successor to it hereafter
appointed, may at any time resign by giving thirty (30) day advance notice in
writing to the Company and, upon the appointment of a successor Escrow Agent as
hereinafter provided, shall be discharged from any further duties hereunder. In
the event of such resignation, a successor Escrow Agent shall be appointed by
the Company. Any such successor Escrow Agent shall deliver to the Company a
written instrument accepting such appointment hereunder, and thereupon it shall
succeed to all of the unaccrued rights and duties of the Escrow Agent hereunder
and shall be entitled to receive all of the then remaining amounts held in
escrow hereunder.
9. TERMINATION. This Escrow Agreement shall terminate upon the earlier of:
(i) the receipt by the Escrow Agent of a written notice of termination signed by
the Company accompanied by sufficient certifications or other documentation to
verify that all subscriptions to which the Escrowed Funds relate shall have been
accepted and certificates representing such shares issued or rejected in whole;
or (ii) the distribution of all of the Escrowed Funds, including all
undistributed interest or earnings in accordance with this Escrow Agreement
following termination or completion of the Offering. Upon termination pursuant
to clause (i) above, the Escrow Agent shall deliver any Escrowed Funds remaining
after return to subscribers of Escrowed Funds representing rejected
subscriptions as instructed in such notice of termination.
10. NOTICES. Except as otherwise provided in this Agreement, any notice or
other communication hereunder shall be in writing and shall be deemed delivered
upon personal delivery or upon receipt if sent by facsimile transmission,
express delivery service or mailed by registered or certified first class mail,
postage prepaid, and addressed as follows:
To the Company: To the Escrow Agent:
William A. High
Indian River Banking Company
958 20th Place
Vero Beach, Florida 32960
or to such other addresses or persons as the parties, from time to time, may
furnish one another by notice given in accordance with this section.
11. MISCELLANEOUS.
(a) Assignment. This Escrow Agreement and the rights of the parties
hereunder may not be assigned by the Escrow Agent without the consent of the
Company, which consent may be withheld in the absolute discretion of the
Company, and any attempted assignment in violation of this Section 11(a) shall
be void. This Escrow Agreement and all action taken hereunder in accordance with
its terms shall be binding upon and inure to the benefit of each of the parties
hereto and its respective successors, permitted assigns, heirs, and legal
representatives.
(b) Amendment. This Escrow Agreement may be amended upon written notice to
the Escrow Agent at any time by the Company but the duties, responsibilities or
compensation of the Escrow Agent may not be modified without its consent.
(c) Waiver. Waiver of any term or condition of this Escrow Agreement by any
party shall not be construed as a waiver of a subsequent breach or failure of
the same term or condition, or a waiver of any other term or condition of this
Escrow Agreement.
3
<PAGE>
(d) Governing Law. This Escrow Agreement shall be governed by and construed
in accordance with the laws of the State of Florida, without reference to the
conflicts or choice of law principles thereof.
(e) Integration. This Escrow Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof, and
supersedes any prior agreement with respect to the subject matter hereof, and
there are no other agreements, covenants, representations or warranties except
as set forth herein.
(f) Authority. Each party executing this Escrow Agreement warrants its
authority to execute this Escrow Agreement.
(g) Counterparts. This Escrow Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to
be signed the day and year first above written.
ATTEST: INDIAN RIVER BANKING COMPANY
________________________ By_____________________________________________
Name: Name: William A. High
Title: Title: President
-----------------------------------------------
4
