UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------- ---------------
Commission File Number 333-36688
Indian River Banking Company
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Florida 59-2931518
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
958 20th Place, Vero Beach, Florida 32960
(Address of principal executive offices) (Zip Code)
</TABLE>
561.569.9200
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
As of November 10, 2000, the registrant had 1,604,287 shares of Common
Stock outstanding.
Transitional Small Business Disclosure Format: Yes No X
---- ----
1
<PAGE>
Item 1 - Financial Statements
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 2000 1999
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
(Unaudited) (Note)
Cash and due from banks $ 8,415,825 $ 6,714,850
Federal funds sold 172,000 --
Securities available for sale 103,646,168 81,416,332
Securities held to maturity 11,811,448 7,071,969
Other securities 1,672,050 798,350
Loans, net 191,347,469 166,644,658
Bank premises and equipment, net 3,906,333 4,315,942
Accrued interest receivable 2,576,285 2,260,455
Other assets 2,447,382 2,013,056
------------------------------------
TOTAL ASSETS $ 325,994,960 $ 271,235,612
====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Noninterest-bearing demand deposits $ 35,733,073 $ 32,142,461
Interest-bearing deposits:
NOW and money market 28,472,995 28,636,282
Savings 63,589,659 73,065,351
Time deposits 144,987,313 105,001,857
------------------------------------
TOTAL DEPOSITS 272,783,040 238,845,951
Other liabilities 1,218,400 724,533
Other borrowings 36,366,308 18,073,953
------------------------------------
TOTAL LIABILITIES 310,367,748 257,644,437
------------------------------------
Stockholders' Equity
Preferred stock -- --
Common stock 1,396,459 633,666
Capital surplus 9,328,478 8,685,986
Retained earnings 6,477,472 5,875,727
Accumulated other comprehensive loss (1,575,197) (1,604,204)
------------------------------------
TOTAL STOCKHOLDERS' EQUITY 15,627,212 13,591,175
------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ $ 325,994,960 $ 271,235,612
====================================
</TABLE>
Note - The December 31, 1999 consolidated balance sheet was derived from audited
financial statements as of that date.
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest income:
Loans and fees on loans $ 4,121,353 $ 3,398,113
Investment securities and due from banks 2,129,975 1,060,487
Federal funds sold 3,850 83,168
-----------------------------
6,255,178 4,541,768
-----------------------------
Interest expense:
Deposits 2,846,048 1,882,614
Other 552,405 181,548
-----------------------------
3,398,453 2,064,162
-----------------------------
NET INTEREST INCOME 2,856,725 2,477,606
Provision for loan losses 165,000 180,000
-----------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 2,691,725 2,297,606
-----------------------------
Other income:
Service charges and fees 336,041 296,964
Gain on sale of securities 0 76,340
Gain on sale of loans 167,477 210,233
Other 119,458 109,753
-----------------------------
622,976 693,290
-----------------------------
Other expense:
Salaries and benefits 1,146,174 1,014,854
Occupancy and equipment 362,492 330,345
Other 835,335 698,619
-----------------------------
2,344,001 2,043,818
-----------------------------
INCOME BEFORE INCOME TAXES 970,700 947,078
Provision for income taxes 342,299 342,625
-----------------------------
NET INCOME $ 628,401 $ 604,453
=============================
Basic earnings per share $ 0.45 $ 0.43
=============================
Diluted earnings per share $ 0.44 $ 0.43
=============================
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest income:
Loans and fees on loans $ 11,644,840 $ 9,842,905
Investment securities and due from banks 5,889,472 3,083,505
Federal funds sold 11,097 108,613
--------------------------------
17,545,409 13,035,023
--------------------------------
Interest expense:
Deposits 7,675,894 5,217,091
Other 1,339,777 505,725
--------------------------------
9,015,671 5,722,816
--------------------------------
NET INTEREST INCOME 8,529,738 7,312,207
Provision for loan losses 495,000 470,000
--------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 8,034,738 6,842,207
--------------------------------
Other income:
Service charges and fees 962,722 782,557
Gain on sale of securities 0 76,340
Gain on sale of loans 479,504 414,749
Other 413,824 336,564
--------------------------------
1,856,050 1,610,210
--------------------------------
Other expense:
Salaries and benefits 3,417,870 3,123,632
Occupancy and equipment 1,140,950 932,701
Other 2,279,994 1,969,810
--------------------------------
6,838,814 6,026,143
--------------------------------
INCOME BEFORE INCOME TAXES 3,051,974 2,426,274
Provision for income taxes 1,080,244 881,866
--------------------------------
NET INCOME $ 1,971,730 $ 1,544,408
================================
Basic earnings per share $ 1.41 $ 1.11
================================
Diluted earnings per share $ 1.37 $ 1.10
================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
THREE MONTHS & NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
2000 1999
-----------------------------------
<S> <C> <C>
Net income $ 628,401 $ 604,453
Other comprehensive income, net of tax:
Unrealized gain (loss) on investments available-for-sale arising during the
period, net of taxes of $302,029 and $(243,248) in 2000 and
1999, respectively 536,942 (432,441)
-----------------------------------
Comprehensive income $ 1,165,343 $ 172,012
===================================
</TABLE>
<TABLE>
Nine Months Ended
September 30,
-----------------------------------
2000 1999
-----------------------------------
<S> <C> <C>
Net income $ 1,971,730 $ 1,544,408
Other comprehensive income, net of tax:
Unrealized gain (loss) on investments available-for-sale arising during the
period, net of taxes of $16,318 and $(717,892) in 2000 and
1999, respectively 29,007 (1,276,252)
-----------------------------------
Comprehensive income $ 2,000,737 $ 268,156
===================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
Common Stock Other Total
------------------------------ Capital Retained Comprehensive Stockholders'
Shares Amount Surplus Earnings Income (Loss) Equity
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1999 576,124 $ 576,124 $ 7,365,731 $ 5,251,216 $ 590,642 $ 13,783,713
10% stock dividend 57,428 57,428 1,316,250 (1,373,678) --
Fractional shares -- -- -- (4,411) -- (4,411)
Shares issued 114 114 4,005 -- -- 4,119
Net income -- -- -- 1,544,408 -- 1,544,408
Other comprehensive income,
Unrealized loss on
securities, net of tax -- -- -- -- (1,276,252) (1,276,252)
-------------------------------------------------------------------------------------------------
Balance, September 30, 1999 633,666 $ 633,666 $ 8,685,986 $ 5,417,535 $ (685,610) $ 14,051,577
=================================================================================================
Balance, January 1, 2000 633,666 $ 633,666 $ 8,685,986 $ 5,875,727 $ (1,604,204) $ 13,591,175
10% stock dividend 63,199 63,199 1,303,163 (1,366,362) --
Fractional shares -- -- -- (3,623) -- (3,623)
Shares issued 2,729 2,729 36,194 -- -- 38,923
2 for 1 stock split 696,865 696,865 (696,865) -- --
Net income -- -- -- 1,971,730 -- 1,971,730
Other comprehensive income,
Unrealized gain on
securities, net of tax -- -- -- -- 29,007 29,007
-------------------------------------------------------------------------------------------------
Balance, September 30, 2000 1,396,459 $ 1,396,459 $ 9,328,478 $ 6,477,472 $ (1,575,197) $ 15,627,212
=================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements
6
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net income $ 1,971,730 $ 1,544,408
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 615,079 549,409
Provision for loan losses 495,000 470,000
Decrease in loans held for sale 85,000 1,629,000
Increase in other assets (750,156) (988,032)
Increase in other liabilities 493,867 305,284
---------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,910,520 3,510,069
---------------------------------
Cash Flows From Investing Activities
Cash flows from securities, net (27,898,557) (18,278,895)
Loan originations and principal collections on loans, net (25,282,811) (16,095,082)
Sale of vacant land 230,000 0
Purchases of premises and equipment (350,921) (210,515)
Fed funds sold (172,000) 9,225,000
---------------------------------
NET CASH USED IN INVESTING ACTIVITIES (53,474,289) (25,359,492)
---------------------------------
Cash Flows From Financing Activities
Net increase in deposits 33,937,089 23,974,787
Increase (decrease) in other borrowings, net 18,292,355 (2,854,654)
Stock options exercised 38,923 4,119
Cash paid for fractional shares (3,623) (4,411)
---------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 52,264,744 21,119,841
---------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,700,975 (729,582)
Cash and cash equivalents:
Beginning 6,714,850 7,903,994
---------------------------------
Ending $ 8,415,825 $ 7,174,412
=================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
7
<PAGE>
INDIAN RIVER BANKING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Indian River
Banking Company (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and Regulation
S-B. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statement presentation. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and nine month
periods ended September 30, 2000, are not necessarily indicative of the results
that may be expected for the full year.
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.
Cash and cash equivalents includes cash on hand, amounts due from banks
(including cash items in process of clearing), and federal funds sold.
NOTE 2. INVESTMENT SECURITIES
The amortized cost and fair values of securities held to maturity are summarized
as follows.
<TABLE>
<CAPTION>
September 30, 2000
Estimated Estimated Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
State, county and municipal securities $ 2,025,074 $ 2,971 $ (3,798) $ 2,024,247
Mortgage-backed securities 9,786,374 36,182 -- 9,822,556
-------------------------------------------------------------------
$ 11,811,448 $ 39,153 $ (3,798) $ 11,846,803
===================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
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>
8
<PAGE>
Securities available-for-sale: The amortized cost and fair values of securities
available-for-sale are summarized as follows:
<TABLE>
<CAPTION>
September 30, 2000
---------------------------------------------------------------------
Estimated Estimated Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government corporations
and agencies $ 88,254,790 $ 82,675 $ (2,492,822) $ 85,844,643
Corporate securities 10,233,144 15,733 (74,416) 10,174,461
Mortgage-backed securities 7,619,480 40,756 (33,172) 7,627,064
---------------------------------------------------------------------
$ 106,107,414 $ 139,164 $ (2,600,410) $103,646,168
=====================================================================
</TABLE>
<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>
NOTE 3. LOANS
The composition of net loans is as follows at September 30, 2000 and
December 31, 1999:
9
<PAGE>
<TABLE>
<CAPTION>
2000 1999
------------------------------------
<S> <C> <C>
Real estate:
Construction and land development $ 9,179,811 $ 8,626,234
Farmland 2,814,624 3,145,918
One to four family residential 86,326,751 68,430,840
Multifamily residential 1,130,237 1,766,216
Nonfamily, nonresidential 62,397,132 55,104,420
Agriculture 2,609,213 1,706,865
Commercial and industrial 11,308,343 12,307,814
Consumer 15,448,157 15,091,479
Other 2,477,843 2,370,221
----------------------------------
193,692,111 168,550,007
Deduct:
Less Allowance for loan losses 2,338,973 1,904,417
Unearned discount and loan fees 5,669 932
----------------------------------
Loans, net $ 191,347,469 $ 166,644,658
==================================
</TABLE>
10
<PAGE>
NOTE 4. ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained to provide for estimated losses in
the loan portfolio that have been incurred as of the balance sheet date. In
establishing the allowance management (1) makes specific allocations for certain
non-performing loans based on management's estimates of collateral shortfall,
(2) applies loss factor percentages to the balances of identified loans in each
category of problem and past due loans and (3) applies loss factor percentages
to balances of performing loans in each category of loans. Loss factor
percentages are determined taking into consideration the risk characteristics of
the loan portfolio, past charge-off experience of the Bank and its peer group,
general economic conditions and other factors that warrant current recognition.
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.
Activity in the allowance for loan losses for the nine months ended September
30, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
2000 1999
-----------------------------------
<S> <C> <C>
Balance, beginning $ 1,904,417 $ 1,510,272
Provision for loan losses 495,000 470,000
Loans charged off (92,060) (175,543)
Recoveries of amounts charged off 31,616 41,949
-----------------------------------
Balance, ending $ 2,338,973 $ 1,846,678
===================================
</TABLE>
NOTE 5. 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.
Following is information about the computation of the earnings per share data
for the three months and nine months ended September 30, 2000 and 1999
respectively (after adjusting for 10% stock dividends in 2000 and 1999 and a 2
for 1 stock split effected durig the nine months ended September 30, 2000):
<TABLE>
<CAPTION>
Common Per-Share
Net Earnings Shares Amounts
-----------------------------------------------------
<S> <C> <C> <C>
Three Months Ended September 30, 2000:
Basic earnings per share, income available to
common stockholders $ 628,401 1,396,459 $ 0.45
==============
Effect of dilutive securities, options 40,132
---------------------------------------
Diluted earnings per share $ 628,401 1,436,591 $ 0.44
=====================================================
</TABLE>
<TABLE>
<CAPTION>
Common Per-Share
Net Earnings Shares Amounts
-----------------------------------------------------
<S> <C> <C> <C>
Three Months Ended September 30, 1999:
Basic earnings per share, income available to
common stockholders $ 604,453 1,393,730 $ 0.43
================
Effect of dilutive securities, options 11,798
-------------------------------------
Diluted earnings per share $ 604,453 1,405,528 $ 0.43
=====================================================
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Common Per-Share
Net Earnings Shares Amounts
-------------------------------------------------------
<S> <C> <C> <C>
Nine Months Ended September 30, 2000:
Basic earnings per share, income available to
common stockholders $ 1,971,730 1,395,156 $ 1.41
================
Effect of dilutive securities, options 39,572
---------------------------------------
Diluted earnings per share $ 1,971,730 1,434,728 $ 1.37
=======================================================
</TABLE>
<TABLE>
<CAPTION>
Common Per-Share
Net Earnings Shares Amounts
--------------------------------------------------------
<S> <C> <C> <C>
Nine Months Ended September 30, 1999:
Basic earnings per share, income available to
common stockholders $ 1,544,408 1,393,616 $ 1.11
===================
Effect of dilutive securities, options 11,678
-------------------------------------
Diluted earnings per share $ 1,544,408 1,405,294 $ 1.10
========================================================
</TABLE>
NOTE 6. OTHER BORROWINGS
Other borrowings consists of the following at September 30, 2000 and December
31, 1999.
<TABLE>
<CAPTION>
2000 1999
---------------------------------
<S> <C> <C>
Outstanding balance under $4,000,000 line of credit, interest at
30-day LIBOR plus 135 basis points (8.02% at September 30, 2000) $ 3,220,381 $ 1,845,381
Advances under line of credit with Federal Home Loan Bank:
Overnight advance, interest payable monthly at a rate that adjusts
daily 8,650,000 4,500,000
Advance, interest payable monthly at a fixed rate of 6.44%,
with equal semiannual principal payments of $142,857
through September 2004 1,142,857 1,428,572
Convertible advance due March 2008, interest payable quarterly
at a fixed rate of 5.51%. 2,000,000 2,000,000
Advance due December 2000, interest payable monthly at an
adjustable rate, 6.63% at September 30, 2000 5,000,000 5,000,000
Advance due May 2001, interest payable monthly at an
adjustable rate, 6.63% at September 30, 2000 5,000,000 --
Overnight federal funds and repurchase agreements payable 11,353,070 3,300,000
----------------------------------
$ 36,366,308 $ 18,073,953
==================================
</TABLE>
12
<PAGE>
Item 2 - Management's Discussion and Analysis
Forward-Looking Statements
Certain information contained in this discussion may include "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
These forward-looking statements are generally identified by phrases such as
"Indian River expects," "Indian River believes" "Indian River anticipates" or
words of similar import. Such forward-looking statements involve known and
unknown risks including, but not limited to, changes in general economic and
business conditions, interest rate fluctuations, competition within and from
outside the banking industry, new products and services in the banking industry,
risk inherent in making loans such as repayment risks and fluctuating collateral
values, problems with technology utilized by the Indian River, changing trends
in customer profiles and changes in laws and regulations applicable to Indian
River . Although Indian River believes that its expectations with respect to the
forward-looking statements are based upon reliable assumptions within the bounds
of its knowledge of its business and operations, there can be no assurance that
actual results, performance or achievements of Indian River will not differ
materially from any future results, performance or achievements expressed or
implied by such forward-looking statements.
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. The Bank operates
four branches in Indian River County and two branches in Brevard County. The
Bank offers deposit accounts and associated services to businesses and
individuals and makes loans and invests in qualified securities. In addition,
the Bank's income includes fees on deposit accounts and loans.
Financial Condition
Total Assets
Indian River's total assets were $326.0 million at September 30, 2000, a
20.21% increase from $271.2 million at December 31, 1999.
Loans Receivable
Loans were $193.7 million at September 30, 2000, a 14.92% increase $25.1
million) from December 31, 1999. Indian River experienced increases in
categories of construction and land development ($553.6 thousand or 6.42%) one
to four family residential ($17.9 million, or 26.17%, non-family residential
($7.3 million, or 13.23%, agriculture ($902.3 thousand, or 52.86%), consumer
loans ($356.7 thousand, or 2.36%), and other loans ($102.9 thousand, or 4.34%).
There were also several loan categories that experienced decreases, farmland
($331.3 thousand, or 10.53%), multi-family residential ($636.0 thousand, or
36.0%), and commercial and industrial ($1.0 million, or 8.13%).
Deposits
Indian River's deposits increased $33.9 million, or 14.20% from $238.8
million at December 31, 1999 to $272.8 million at September 30, 2000. Increases
occurred in time deposits ($39.9 million, or 38.0%), and demand deposits $3.6
million or 11.17%). These increases were offset by decreases in NOW and money
market accounts ($163.3 thousand, or 0.57%), and savings accounts $9.5 million,
or 13.10%) as compared to December 31, 1999.
Shareholders' Equity
Shareholders' equity increased by $2.0 million, or 14.98% due primarily to
earnings for the first nine months of 2000.
13
<PAGE>
Results of Operations
For The Nine Month Periods Ended September 30, 2000 And 1999
Net Income
For the first nine months of 2000, Indian River recorded net income of $2.0
million. This was $427,322 more than the $1.5 million in net income recorded for
the first nine months of 1999. Basic earnings per share increased $0.30 during
the nine months ended September 30, 2000, to $1.41, as compared to $1.11 per
share during the comparable period of 1999 (as adjusted to reflect the 10% stock
dividend and two-for-one stock split paid in 2000). Diluted earnings per share
increased $0.27 to $1.37 during the first nine months of 2000, as compared to
the same period in 1999.
Net interest income increased $1.2 million, or 16.65%, for the first nine
months of 2000 compared to the same period in 1999. This increase in net
interest income was complimented by an increase in other income of $245.8
thousand, or 15.27%, an increase in the provision for loan losses of $25,000 or
5.32%, an increase in other expenses of $812.7 thousand, or 13.49%, and an
increase in taxes on income of $198.4 thousand, or 22.50%.
Net Interest Income
Net interest income increased to $8.5 million for the first nine months of
2000 from $7.3 million for the same period in 1999 as the $4.5 million, or
34.62% increase in interest income was only partially offset by a $3.3 million,
or 57.54% increase in interest expense. Yields on Indian River's
interest-earning assets increased by 13 basis points, and the rates paid on
Indian River's interest-bearing liabilities increased by basis points, resulting
in a reduction in the interest rate spread to 3.17% for the first nine months of
2000 from 3.72% for the first nine months of 1999. Net interest margin also
declined to 3.84% from 4.41%. The ratio of average interest-earning assets to
average interest-bearing liabilities declined to 116.1% for the first nine
months of 2000 from 118.6% for the first nine months of 1999.
Total interest income for the first nine months of 2000 was $17.5 million,
a 34.62% increase from $13.0 million during the same period in 1999. The
principal factor in the increase of interest income was the $72.0 million
increase in average interest-earning assets. Indian River's average loans
increased $25.7 million, or 16.9%, and the related yield increased to 8.73% for
the first nine months of 2000 from 8.65% in 1999. During the same period,
average investment securities increased $48.9 million, or 78.8%, and the related
yield increased to 7.12% from 6.67%.
Total interest expense for the first nine months of 2000 was $9.0 million,
an increase of 57.54% from $5.7 million for the same period in 1999. The
increase in total expense can be attributed to increases in the rates paid on
average interest-bearing liabilities, which increased to 4.83% from 4.19% and in
the average balances outstanding of interest-bearing liabilities. During the
same period, average interest-bearing liabilities increased $66.0 million, or
36.01%. Rates paid on deposits increased for all categories.
Other Income
Other income increased by $245.8 thousand for the first nine months of 2000
compared to the same period of 1999. This increase was due primarily to a
$180,165 increase in service charges and fees.
Other Expenses
Indian River's other expenses increased $812,671 for the first nine months
of 2000 compared to the same period in 1999. This increase was primarily the
result of a $208,249 increase in occupancy expense, a $294,238 increase in
salaries and employee benefits, and a $310,154 increase in other expenses. The
increased occupancy expense is due primarily to the opening of the Gateway
office in late 1999, remodeling of older facilities, and using a service bureau
to support deposit operations. The increase in salaries and benefits is
primarily due to staff at the Gateway office, increased staff in Brevard County,
and a restructured bonus program. The increase in other expenses is primarily
due to the write-off of software cost upon conversion to a service bureau
system.
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<PAGE>
Provision for Loan Losses
Indian River makes provisions for loan losses in amounts deemed necessary
to maintain the allowance for loan losses at an appropriate level. An
appropriate level of the allowance for loan losses is determined by management.
See Note 4, Allowance for Loan Losses, in the Notes to Unaudited Consolidated
Financial Statements for additional information. At September 30, 2000, total
nonperforming loans were $133 thousand, or 0.07% of total loans, compared to
$106 thousand, or 0.07% of total loans at December 31, 1999.
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.
15
<PAGE>
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
Amount % Amount %
<S> <C> <C> <C> <C>
Commercial, Agricultural $ 327 7.3% $ 66 8.3%
Real estate construction 98 4.7 39 5.2
Real estate mortgage 1,602 78.8 1,400 76.1
Consumer, other 312 9.2 399 10.4
Total Allowance for loan losses 2,339 100 1,904 100
</TABLE>
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 $184 thousand at September 30, 2000 compared to
$106 thousand at December 31, 1999. The percentage of non-performing assets to
total assets increased to 0.06% at September 30, 2000 from 0.04% at December 31,
1999.
Non-performing assets at September 30, 2000 consisted of non-accrual loans
in the amount of $14,000, loans past due over 90 days of $119,000, and OREO of
$51,000.
Indian River experienced losses on the OREO of $6,500 and a $15,000
write-down on substandard loans in October of 2000. Indian River anticipates no
further write-downs of Classified loans or OREO at this time. At September 30,
2000, there were no loans which were currently performing as to which
information known to management caused it to believe that the borrower would be
unable to comply with the current loan repayment terms in the future.
Taxes on Income
Indian River's tax expense was $1.1 million for the first nine months of
2000 and $882 thousand for the same period in 1999.
FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
Net Income
For the third quarter of 2000, Indian River recorded net income of $628.4
thousand. This was $23,948 more than the $604.5 thousand in net income recorded
for the third quarter of 1999. Average shares outstanding were 1,396,459 for the
third quarter of 2000 and 1,393,730 for the third quarter of 1999, as adjusted
for stock splits and stock dividends through September 30, 2000. Basic and
diluted earnings per share increased to $0.45 and $0.44 per share for the third
quarter of 2000 from $0.43 and $0.43 per share for the same period in 1999,
respectively.
Net interest income increased $379,119, or 15.30% for the third quarter of
2000 compared to the same period in 1999. This increase in net interest income,
as well as a $15,000, or 8.33%, reduction in provision expense and a $326
reduction in taxes on income, was partially offset by a decrease of $70,314, or
10.14%, in other income and a $300,183, or 14.69%, increase in other expenses.
Net Interest Income
Net interest income increased to $2.9 million for the third quarter of 2000
from $2.5 million for the same period in 1999 as the $1.7 million, or 37.73%,
increase in interest income was only partially offset by a $1.3 million, or
64.64%, increase in interest expense. Yields on Indian River's interest-earning
assets increased by basis points, and the rates paid on Indian River's
interest-bearing liabilities increased by 87 basis points, resulting in
reduction in the interest rate spread to 2.96% for the third quarter of 2000
from 3.58% for the third quarter of 1999. Net interest margin also declined to
3.63% from 4.20%. The ratio of average interest-earning assets to average
interest-bearing liabilities declined to 115.1% for the third quarter of 2000
from 117.3% for the third quarter of 1999.
Total interest income for the third quarter of 2000 was $6.3 million, a
37.73% increase from $4.5 million during the same period in 1999. The principal
factor in the increase of interest income was the $77.1 million increase in
average interest-earning assets. Indian River's average loans increased $29.2
million, or 15.70%, and the
16
<PAGE>
related yield increased to 8.63% for the third quarter of 2000 from in 1999.
During the same period, average investment securities increased $54.1 million,
or 84.4%, and the related yield increased to 7.15% from 6.57%.
Total interest expense for the third quarter of 2000 was $3.4 million, an
increase of 64.64% from $2.1 million for the same period in 1999. The increase
in total interest expense can be attributed to increases in the rates paid on
average interest-bearing liabilities, which increased to 5.09% from 4.22%, and
in the average balances outstanding of interest-bearing liabilities. During the
same period, average interest-bearing liabilities increased $70.8 million, or
36.47%. Rates paid on deposits increased for all categories other than savings
deposits.
Other Income
Other income decreased by $70,314 for the third quarter of 2000 compared to
the same period of 1999. This decrease was due primarily to a $76,340 gain on
the sale of securities in the third quarter of 1999. No securities were sold in
the same period of 2000. An increase of $39,077 in service charges and fees was
offset by a decrease of $42,756 in gains on the sale of loans.
Other Expenses
Indian River's other expenses increased $300,183 for the third quarter of
2000 compared to the same period in 1999. This increase was primarily the result
of a $32,147 increase in occupancy expense, a $131,320 increase in salaries and
employee benefits, and a $136,716 increase in other expenses. The increased
occupancy expense is due primarily to the opening of the Gateway office in late
1999, remodeling of older facilities, and using a service bureau to support
deposit operations. The increase in salaries and benefits is primarily due to
staff at the Gateway office, increased staff in Brevard County, and a
restructured bonus program. The increase in other expense is primarily due to
increased supply expense as a result of an increasing customer base and costs
associated with the conversion to a service bureau system.
Taxes on Income
Indian River's tax expense was $342.3 thousand for the third quarter of
2000 and $342.6 thousand for the same period in 1999.
Liquidity
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 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
$103.8 million at September 30, 2000, reflected an increase of $33.2 million
from September 30, 1999, or 46%. Funds available through short-term borrowing
and asset maturities are considered adequate to meet all current needs. At
September 30, 2000, Indian River had a $23 million line of credit available at
correspondent banks. 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 $42 million borrowing line with the Federal Home
Loan Bank of Atlanta. The outstanding balance on this line increased to $8.6
million as of September 30, 2000. This line may be utilized as a supplementary
source of funding growth for the Bank. In addition, the Asset/Liability
Management Committee 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.
Bank holding companies are required to maintain capital ratios in
accordance with guidelines adopted by the Federal Reserve Board ("FRB"). The
guidelines are commonly known as Risk-Based Capital Guidelines. On September 30,
2000, Indian River exceeded all capital requirements, having a total risk-based
capital ratio of 9.49%, a Tier 1risk-based capital ratio of 8.35%, and a
leverage ratio of 5.41%. As of September 30, 2000, Indian River Bank met the
criteria for categorization as a "well-capitalized" institution under the prompt
corrective action rules
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<PAGE>
promulgated under the Federal Deposit Insurance Act. Designation of the Bank as
a "well-capitalized" institution under these regulations does not constitute a
recommendation or endorsement of Indian River Bank by Federal bank regulators.
Capital Resources
In the first nine months of 2000, total shareholders' equity increased $2.0
million, or 14.98%, as a result of earnings and a decrease in accumulated other
comprehensive loss. Earnings contributed $2.0 million to shareholders' equity
this nine-month period. Accumulated other comprehensive losses contributed
$29,007 to shareholders' equity during this nine month period.
As of October 16, 2000, Indian River completed a stock offering of $25 per
share, which resulted in 207,828 new shares of stock and proceeds of $5.2
million. The proceeds where deployed as follows:
<TABLE>
<CAPTION>
<S> <C>
Issuance Cost $ 121,739
Debt Liquidations $3,232,788
Contribution to Capital of
Indian River Bank $1,800,000
</TABLE>
Effects of Inflation
The unaudited consolidated financial statements and related unaudited
financial data presented herein have been prepared in accordance with accounting
principles generally accepted in the United States of America and practices
within the banking industry 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.
Unlike most industrial companies, virtually all the assets and liabilities of a
financial institution are monetary in nature. As a result, interest rates have a
more significant impact on a financial institution's performance than the
effects of general levels of inflation.
18
<PAGE>
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
None.
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
Use of Proceeds. On July 27, 2000, Indian River's registration statement on
Form SB-2 (No. 333-36688) relating to its initial registered offering of common
stock, $1.00 par value, was declared effective by the Securities and Exchange
Commission, and the offering commenced. The offering related to an aggregate of
300,000 shares of common stock, at an offering price of $25 per share, or
$7,500,000 in the aggregate. On October 16, 2000, the offering was terminated
following the sale of 207,828 shares of common stock, for aggregate gross
proceeds of $5,195,700. Expenses of the offering were $121,739, resulting in net
proceeds of the offering of $5,073,961. No person or entity underwrote the
Company's offering, which was made through the efforts of the directors and
executive officers of Indian River.
As of the date hereof, substantially all of the net proceeds of the
offering have been applied. The purposes to which such proceeds have been
applied of the offering have been applied as follows:
<TABLE>
<S> <C>
Contribution to capital of Indian River Bank $1,800,000
Repayment of principal balance of line of credit
with correspondent bank $3,232,788
----------
Total $5,032,788
==========
</TABLE>
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(11) Statement Re: Computation of Per Share Earnings
Please refer to Note 5 to the Condensed Consolidated Financial
Statements
(27) Financial Data Schedule
(b) Reports on Form 8-K
None.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INDIAN RIVER BANKING COMPANY
(Registrant)
November 16, 2000 By: William A. High
------------------------------------
William A. High, President and Chief
Executive Officer
November 16, 2000 By: Charles A. Bradley
------------------------------------
Charles A. Bradley, Vice President,
Treasurer and Chief Financial
Officer (Principal Accounting and
Financial Officer
20
