UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------------------------
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended June 30, 2000
Commission File Number 000-26145
-----------------------------------------------------------
CITRUS FINANCIAL SERVICES, INC.
(Exact Name of registrant as specified in its charter)
Florida 65-0136504
------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1717 Indian River Boulevard
Suite 100
Vero Beach, Florida 32960
------------------- -----
(Address of Principal Executive Offices) (Zip Code)
----------------------------------------------------------
(561) 778-4100
(Registrant's telephone number including area code)
------------------------------------------------------------
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 practicable date:
Class Outstanding as of August 3, 2000
--------------- --------------------------------
Common Stock 1,423,392
Par Value $3.15 per share (rounded)
<PAGE>
CITRUS FINANCIAL SERVICES, INC.
INDEX
PAGE
NUMBER
REPORT OF INDEPENDENT ACCOUNTANTS 3
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements:
Consolidated Condensed Balance Sheets as of June 30, 2000
(Unaudited) and December 31, 1999 4
Consolidated Statements of Operations and Comprehensive
Income for the Three and Six Months Ended June 30, 2000
and 1999 (Unaudited) 5
Consolidated Condensed Statements of Cash Flows for the
Three and Six Months Ended June 30, 2000 and 1999 (Unaudited) 6
Consolidated Statement of Changes in Stockholders' Equity
(Unaudited) 7
Notes to Consolidated Financial Statements (Unaudited) 8
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
PART II: OTHER INFORMATION 22
Signatures 23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Audit Committee
Citrus Financial Services, Inc. and Subsidiary
Vero Beach, Florida
We have reviewed the accompanying consolidated condensed balance sheets of
Citrus Financial Services, Inc., and its wholly-owned subsidiary ("Citrus"),
Citrus Bank, N.A. ("Citrus Bank"), as of June 30, 2000, and the related
consolidated statements of operations and comprehensive income and consolidated
condensed statements of cash flows for the three and six months periods ended
June 30, 2000 and 1999, and the related consolidated statement of changes in
stockholders' equity for the six months period ended June 30, 2000. These
consolidated financial statements are the responsibility of Citrus' management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the consolidated financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based upon our review, we are not aware of any material modifications that
should be made to the consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We previously audited, in accordance with generally accepted auditing standards,
the consolidated balance sheet as of December 31, 1999, and the related
consolidated statements of operations and comprehensive income, cash flows, and
changes in stockholders' equity for the year then ended (not presented herein);
and in our report dated January 21, 2000, we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the information set
forth in the accompanying consolidated condensed balance sheet as of December
31, 1999, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
STEVENS, SPARKS & COMPANY, P.A.
Jacksonville, Florida
August 3, 2000
- 3 -
<PAGE>
CITRUS FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 2000
(Unaudited) December 31, 1999
------------- -----------------
(In Thousands, Except Per Share Data)
<S> <C> <C>
ASSETS
Cash and due from banks $ 2,428 $ 4,040
Federal funds sold 2,000 3,550
----------- -----------
Total cash and cash equivalents 4,428 7,590
Interest-bearing deposits in other banks 360 32
Securities available-for-sale at fair value 8,542 5,636
Securities held-to-maturity (market value of
$632 for 2000 and $953 for 1999) 695 1,039
Loans held for investment less allowance for credit losses 72,443 67,349
Loans held for sale 599 1,963
Facilities 2,685 2,802
Other real estate owned 88 --
Other assets 1,694 1,648
----------- -----------
TOTAL $ 91,534 $ 88,059
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 11,275 $ 12,092
NOW accounts 3,412 4,639
Money market accounts 3,869 4,287
Savings accounts 7,789 9,105
Time, $100,000 and over 11,018 9,747
Other time deposits 44,390 39,221
----------- -----------
Total deposits 81,753 79,091
Other borrowings 142 237
Accounts payable and accrued liabilities 433 364
----------- -----------
Total liabilities 82,328 79,692
----------- -----------
Commitments and contingencies -- --
----------- -----------
Stockholders' equity:
Preferred stock -- --
Common stock 4,491 4,125
Additional paid-in capital 4,638 4,271
Retained earnings 163 47
Accumulated other comprehensive income
Net unrealized holding losses on securities (86) (76)
----------- -----------
Total stockholders' equity 9,206 8,367
----------- -----------
TOTAL $ 91,534 $ 88,059
=========== ===========
Book value per common share $ 6.47 $ 6.40
=========== ===========
Common shares outstanding 1,423,392 1,307,167
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
- 4 -
<PAGE>
CITRUS FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended June 30,For the Six Months Ended June 30,
--------------------------------------------------------------------
2000 1999 2000 1999
---- ---- ---- ----
(Dollars in Thousands, Except Per Share Data)
<S> <C> <C> <C> <C>
Interest and fees on loans held for investment $ 1,639 $ 1,307 $ 3,198 $ 2,518
Interest and fees on loans held for sale 13 147 44 324
Investment income on investment securities
and interest-bearing deposits in other banks 118 83 213 161
Federal funds sold 58 49 121 151
------- ------- ------- -------
Total interest income 1,828 1,586 3,576 3,154
------- ------- ------- -------
Interest on deposits 880 645 1,660 1,361
Other 2 17 5 20
------- ------- ------- -------
Total interest expense 882 662 1,665 1,381
------- ------- ------- -------
Net interest income before provision
for credit losses 946 924 1,911 1,773
------- ------- ------- -------
Provision for credit losses 51 (2) 125 20
------- ------- ------- -------
Net interest income 895 926 1,786 1,753
------- ------- ------- -------
Fees and service charges 98 113 201 220
Other income 6 10 13 17
------- ------- ------- -------
Total other income 104 123 214 237
------- ------- ------- -------
Other expenses:
Salaries and employee benefits 458 445 930 833
Expenses of bank premises and fixed assets 186 162 362 303
Other operating expenses 261 245 524 461
------- ------- ------- -------
Total other expenses 905 852 1,816 1,597
------- ------- ------- -------
Income before provision for income taxes 94 197 184 393
Provision for income taxes 35 74 68 148
------- ------- ------- -------
Net income 59 123 116 245
Other comprehensive income, net of income taxes:
Unrealized holding gains (losses) arising during period 3 (19) (10) (17)
Less: reclassification adjustments for gains included in
net income for the period -- (2) -- (2)
------- ------- ------- -------
Total other comprehensive income,
net of income taxes 3 (21) (10) (19)
------- ------- ------- -------
Comprehensive income $ 62 $ 102 $ 106 $ 226
======= ======= ======= =======
Earnings Per Share Information
Primary $ 0.04 $ 0.13 $ 0.08 $ 0.26
======= ======= ======= =======
Fully diluted $ 0.04 $ 0.10 $ 0.08 $ 0.21
======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
- 5 -
<PAGE>
CITRUS FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended June 30,For the Six Months Ended June 30,
---------------------------------- ---------------------------------
2000 1999 2000 1999
---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Net income $ 59 $ 123 $ 116 $ 245
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Provision for credit losses 51 (2) 125 20
Depreciation and amortization 90 89 180 168
Net premium amortization and discount accretion 16 5 10 10
(Increase) decrease in other assets 508 (154) 628 (525)
Increase (decrease) in other liabilities 90 (403) 69 (374)
Origination of loans held for sale (4,513) (31,831) (11,690) (62,389)
Proceeds on sale of loans held for sale 4,833 33,579 13,054 66,994
-------- -------- -------- --------
Net cash provided by operating activities 1,134 1,406 2,492 4,149
-------- -------- -------- --------
Cash flows from investing activities: Net (increase) decrease in:
Investment securities (2,734) (1,181) (2,586) (976)
Interest-bearing deposits in other banks (294) 22 (328) 8
Loans (583) (3,111) (5,244) (5,867)
Purchases of bank premises and equipment, net 34 (67) (63) (178)
-------- -------- -------- --------
Net cash used by investing activities (3,577) (4,337) (8,221) (7,013)
-------- -------- -------- --------
Cash flows from financing activities:
Net increase (decrease) in deposits 2 (3,756) 2,662 (8,456)
Repayments of FHLB advances, net (12) 5,758 (95) 5,745
-------- -------- -------- --------
Net cash provided (used) by
financing activities (10) 2,002 2,567 (2,711)
-------- -------- -------- --------
Decrease in cash and cash equivalents (2,453) (929) (3,162) (5,575)
Cash and cash equivalents at beginning of period 6,881 8,494 7,590 13,140
-------- -------- -------- --------
Cash and cash equivalents at end of period $ 4,428 $ 7,565 $ 4,428 $ 7,565
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
- 6 -
<PAGE>
CITRUS FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Net
Common Stock Unrealized
--------------------------------- Holding
Par Additional Gains Total
Value Paid-in Retained (Losses) on Stockholders'
Shares (Rounded) Amount Capital Earnings Securities Equity
----------- --------- ------- --------- -------- ------------------------------------
(Dollars in Thousands, Except Par Value Per Share)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 1,307,167 $ 3.15 $ 4,125 $ 4,271 $ 47 $ (76) $ 8,367
Stock options/warrants exercised 116,225 -- 366 367 -- -- 733
Comprehensive income:
Net income -- -- -- -- 116 --
Net change in unrealized holding
gains on securities -- -- -- -- -- (10)
Total comprehensive income -- -- -- -- -- -- 106
--------- -------- ------- -------- ------- --------- ---------
Balance, June 30, 2000 1,423,392 $ 3.15 $ 4,491 $ 4,638 $ 163 $ (86) $ 9,206
========= ======== ======= ======== ======= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
- 7 -
<PAGE>
CITRUS FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2000
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Citrus Financial
Services, Inc., and its wholly owned subsidiary, Citrus Bank, N.A. The
consolidated financial statements for the three and six months ended June 30,
2000 and 1999, have not been audited and do not include information or footnotes
necessary for a complete presentation of financial condition, results of
operations and cash flows in conformity with generally accepted accounting
principles. However, in the opinion of management, the accompanying consolidated
financial statements contain all adjustments, which are of a normal recurring
nature, necessary for a fair presentation. The results of operations for the
interim periods are not necessarily indicative of the results which may be
expected for an entire year. The accounting policies followed by Citrus are set
forth in Note 1 to Citrus' consolidated financial statements contained in the
1999 Annual Report to Stockholders and are incorporated herein by reference.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for credit losses on loans and the
valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans ("Other Real Estate Owned"). In connection with the
determination of the allowances for credit losses on loans and foreclosed real
estate, management obtains independent appraisals for significant properties.
While management uses available information to recognize losses on loans and
foreclosed real estate, future additions to the allowances may be necessary
based on changes in local economic conditions. In addition, regulatory agencies,
as an integral part of their examination process, periodically review Citrus
Bank's allowances for losses on loans and foreclosed real estate. Such agencies
may require Citrus Bank to recognize additions to the allowances based on their
judgments about information available to them at the time of their examination.
Management does not anticipate that the allowances for credit losses on loans
and foreclosed real estate will change materially in the near term.
Fair Value of Financial Instruments
Financial instruments of Citrus consist of cash, due from banks, federal funds
sold, investment securities, loans receivable, accrued interest receivable,
deposits, federal funds purchased, other borrowings, accrued interest payable,
and off-balance sheet commitments such as commitments to extend credit and
standby letters of credit. On an interim basis, management considers the cost of
providing estimated fair values by each class of financial instrument to exceed
the benefits derived. In management's opinion, the carrying amount of financial
instruments approximates fair value.
- 8 -
<PAGE>
CITRUS FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2000
NOTE 2 - COMPUTATION OF PER SHARE EARNINGS
Basic earnings per share amounts are computed by dividing net earnings by the
weighted average number of common shares outstanding during the period. Diluted
earnings per share are computed by dividing net earnings by the weighted average
number of shares and all dilutive potential shares outstanding during the
period. The following information was used in the computation of earnings per
share on both a basic and diluted basis for the three and six months ended June
30, 2000 and 1999 (in thousands except per share data):
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Basic EPS computation:
Numerator - Net income $ 59 $ 123 $ 116 $ 245
Denominator - Weighted average shares outstanding 1,411 952 1,370 952
------ ------ ------ ------
Basic EPS $ 0.04 $ 0.13 $ 0.08 $ 0.26
====== ====== ====== ======
Diluted EPS computation:
Numerator - Net income $ 59 $ 123 $ 116 $ 245
------ ------ ------ ------
Denominator - Weighted average shares outstanding 1,411 952 1,370 952
Stock options and warrants 24 227 24 227
------ ------ ------ ------
1,435 1,179 1,394 1,179
------ ------ ------ ------
Diluted EPS $ 0.04 $ 0.10 $ 0.08 $ 0.21
====== ====== ====== ======
</TABLE>
NOTE 3 - LOANS HELD FOR INVESTMENT
Loans held for investment consisted of (dollars in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- -------
<S> <C> <C>
Real estate $ 53,861 $ 49,486
Commercial and agriculture 14,797 13,881
Installment and other loans 4,289 4,385
-------- --------
Total loans, gross 72,947 67,752
Unearned income and deferred fees (3) (2)
Allowance for credit losses (501) (401)
-------- --------
Net loans $ 72,443 $ 67,349
======== ========
</TABLE>
- 9 -
<PAGE>
CITRUS FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2000
NOTE 4 - LOANS HELD FOR SALE
Loans held for sale include residential real estate loans held for sale to FNMA
and outstanding loans originated by third- party brokers, assigned to Citrus
Bank, and held by Citrus Bank pending transfer to investors with take-out
commitments. At June 30, 2000, and December 31, 1999, such loans totaled
$599,000 and $1,963,000, respectively. These loans are carried at cost, which is
lower than market.
Citrus Bank does not originate any significant amounts of loans specifically for
resale. Loans originated by Citrus Bank and sold principally to FNMA generally
represent less than 3% of all loans originated. The only servicing income
received by Citrus Bank comes form the servicing of loans sold principally to
FNMA, which is not considered to be material.
NOTE 5 - ALLOWANCE FOR CREDIT LOSSES
Citrus' Board of Directors monitors the loan portfolio quarterly in order to
enable it to evaluate the adequacy of the allowance for credit losses.
Management has implemented a risk system that identifies potential problem
credits as early as possible, categorizes the credits as to risk, and puts a
reporting process in place to monitor the progress of the credits.
Citrus maintains the allowance for credit losses at a level sufficient to absorb
all estimated losses inherent in the loan portfolio. Activity in the allowance
for credit losses follows (dollars in thousands):
<TABLE>
<CAPTION>
Six Months Twelve Months
Ended June 30, Ended December 31,
2000 1999
-------- -------
<S> <C> <C>
Balance, beginning of period $401 $461
---- ----
Recoveries
Real estate loans -- --
Installment loans 1 --
Credit card and related plans 1 1
Commercial and all other loans -- 32
---- ----
2 33
---- ----
Charge-offs
Real estate loans -- --
Installment loans 5 153
Credit card and related plans 7 28
Commercial and all other loans 15 587
---- ----
27 768
---- ----
Provision charged to operations 125 675
---- ----
Balance, end of period $501 $401
==== ====
</TABLE>
- 10 -
<PAGE>
CITRUS FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2000
NOTE 6 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Citrus is a party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit. Those instruments
involve, to varying degrees, elements of credit, and interest rate risk in
excess of the amounts recognized in the balance sheet. The contract or notional
amounts of those instruments reflect the extent of involvement Citrus has in
particular classes of financial instruments.
Financial instruments at June 30, 2000, consisted of commitments to extend
credit approximating $8.3 million and letters of credit of $746,000.
Commitments to extend credit are agreements 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.
NOTE 7 - STOCKHOLDERS' EQUITY
Authorized Capital Stock:
Citrus has authorized 11,000,000 shares of authorized capital stock, consisting
of 10,000,000 shares of common stock, par value $3.15 (as adjusted for stock
splits) per share, and 1,000,000 shares of preferred stock, par value of $5.00
per share. As of June 30, 2000, 1,423,392 shares of common stock were issued and
outstanding and 58,824 shares were subject to issuance pursuant to vested
options and warrants. No shares of preferred stock were issued.
Stock Warrants:
In connection with Citrus' 1990 offering, organizers were granted warrants to
purchase 469,772 shares of common stock at $6.31 per share, (as adjusted for
stock splits). The warrants are exercisable for a ten-year period commencing
April 13, 1990. During the first and second quarters of 2000, warrants for
36,997 and 60,439 shares, respectively, were exercised. Warrants totaling 17,465
expired unexercised during the quarter ended June 30, 2000, which represented
less than 4% of the original warrants.
Executive Officer Stock Options:
Citrus has also entered into stock option agreements with its executive officers
providing for the granting of 112,613 non-statutory stock options. Such options
are exercisable between $6.31 (as adjusted for stock splits) and $10.75 per
share. In April 2000, 18,789 options were exercised leaving 93,824 options
outstanding at June 30, 2000 (of which 58,824 options were vested).
NOTE 8 - SUBSEQUENT EVENT
In July 2000, the Citrus Board of Directors voted to close down the Miami loan
production office as of July 31, 2000. No costs of closing down the Miami loan
production office have been accrued or estimated at this time.
- 11 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Citrus Financial Services, Inc., is a registered bank holding company under the
federal Bank Holding Company Act of 1956, as amended, and owns 100% of the
issued and outstanding common stock of Citrus Bank, N.A., Vero Beach, Florida.
Citrus was incorporated under the laws of the State of Florida on May 19, 1989,
to enhance Citrus Bank's ability to serve its future customers' requirements for
financial services. The holding company provides flexibility for expansion of
Citrus' banking business through acquisition of other financial institutions and
provision of additional banking-related services which the traditional
commercial bank may not provide under present laws.
Citrus Bank commenced business operations on April 13, 1990, in a permanent
facility located at the corner of Indian River Boulevard and 17th Street, Vero
Beach, Florida. The facility is a three-story office condominium, the first
floor of which is owned by Citrus Bank. Citrus Bank operates a branch office at
1020 U.S. 1, Sebastian, Florida, which commenced operations in February 1993 and
another branch office located at 1020 Buttonwood Street, Barefoot Bay, Florida,
which commenced operations in September 1996. During 1999, Citrus opened loan
production offices in Miami and Sebring, Florida.
Forward-looking Statements
When used in this Form 10-QSB, the words or phrases "will likely result," "are
expected to," "will continue," "is anticipated," "estimate," "project," or
similar expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to certain risks and uncertainties including changes in
economic conditions in Citrus' market area, changes in policies by regulatory
agencies, fluctuations in interest rates, demand for loans in Citrus' market
area and competition, that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. Citrus wishes
to caution readers not to place undue reliance on any such forward-looking
statements, which speak only as to the date made. Citrus wishes to advise
readers that the factors listed above could affect Citrus' financial performance
and could cause Citrus' actual results for future periods to differ materially
from any opinions or statements expressed with respect to future periods in any
current statements. Citrus does not undertake, and specifically disclaims any
obligation, to publicly release the result of any revisions which may be made to
any forward-looking statements to reflect events or circumstances after the date
of such statements or to reflect the occurrence of anticipated or unanticipated
events.
Contingencies and Uncertainties - Year 2000 Compliance Matters
During the periods leading up to January 1, 2000, Citrus addressed the potential
problems associated with the possibility that the computers that control or
operate Citrus' information technology system and infrastructure may not have
been programmed to read four-digit date codes and, upon arrival of the year
2000, may have recognized the two-digit code "00" as the year 1900, causing
systems to fail to function or generate erroneous data.
Citrus expended approximately $55,000 since the inception of its Year 2000
compliance program. Citrus experienced no significant problems related to its
information technology systems upon arrival of the Year 2000, nor was there any
reported interruption in service to its customers of any kind. No significant
Year 2000 expenses have been incurred since December 31, 1999.
Citrus could incur losses if Year 2000 issues adversely affect its depositors or
borrowers. Such problems could include delayed loan payments due to Year 2000
problems affecting any significant borrowers or impairing the payroll systems of
large employers in Citrus' primary market areas. Because Citrus' loan portfolio
is highly diversified with regard to individual borrowers and types of
businesses, Citrus does not expect, and to date has not realized, any
significant or prolonged difficulties that will affect net earnings or cash
flow.
- 12 -
<PAGE>
Future Accounting Requirements
In September 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), which addresses the accounting for
derivative instruments and provides for matching the timing of gain or loss
recognition on the hedging instrument. Guidance on identifying derivative
instruments is also provided as well as additional disclosures. SFAS 133 has
been deferred to become effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000. Earlier application is permitted with certain
exceptions. Management does not anticipate that adoption of SFAS 133 will have a
material impact on the financial condition or results of operations of Citrus.
Impact of Inflation
The consolidated financial statements and related data presented herein have
been prepared in accordance with generally accepted accounting principles
("GAAP"), which require the measurements of financial position and operating
results in terms of historical dollars, without considering changes in the
relative purchasing power of money over time due to inflation. Unlike most
industrial companies, substantially all of the assets and liabilities of Citrus
are monetary in nature. As a result, interest rates have a more significant
impact on Citrus' performance than the effects of general levels of inflation.
Interest rates do not necessarily move in the same direction or in the same
magnitude as the prices of goods and services, since such prices are affected by
inflation to a larger extent than interest rates. As discussed herein,
management seeks to manage the relationships between interest sensitive assets
and liabilities in order to protect against wide interest rate fluctuations,
including those resulting from inflation.
Results of Operations
Net Income
Citrus' net income declined $64,000 and $129,000, respectively, for the three
and six months ended June 30, 2000, over the comparable periods in 1999. This
downward trend for the three and six months ended June 30, 2000, versus 1999
reflects:
- declining margins as the cost of deposits have risen more sharply than the
yield on earning assets;
- increased provision for credit losses of $53,000 and $105,000, respectively;
- increased operating costs associated with the loan production offices in
Miami and Sebring, Florida; and
- declines experienced in the origination of loans under Citrus Bank's funding
program.
The increase in average earning assets of $8.6 million, or 11.7%, for the first
six months of 2000 versus the same period in 1999 along with an increase of
approximately 10 basis points in the average yield on earning assets produced a
net increase in total interest income of $422,000, or 13.4%, in the first six
months of 2000 as compared to the first six months of 1999. For the three and
six months ended June 30, 2000, as compared with the comparable period in 1999,
increases in total interest income of $242,000 and $422,000, respectively, were
partially offset by increases in interest expense of $220,000 and $284,000,
respectively. Noninterest expense in the first six months of 2000 as compared to
the first six months of 1999 rose at a pace of 13.7% to $1,816,000 from
$1,597,000. The loan production offices started in 1999 contributed to
substantially all of this increase. The return on average assets for the six
months ended June 30, 2000, was 0.26% annualized as compared with the return of
average assets of 0.61% for the same period in 1999.
Net Interest Income
The largest component of net income for Citrus is net interest income, which is
the difference between the income earned on assets and interest paid on deposits
and borrowings used to support such assets. Net interest income is determined by
the rates earned on Citrus' interest-earning assets and the rates paid on its
interest-bearing liabilities, the relative amounts of interest-earning assets
and interest-bearing liabilities, and the degree of mismatch and the maturity
and repricing characteristics of its interest-earning assets and
interest-bearing liabilities.
- 13 -
<PAGE>
Net interest income (before provision for credit losses) was $1,911,000 for the
six months ended June 30, 2000, as compared to $1,773,000 for the six months
ended June 30, 1999. The substantial average growth of Citrus' total loan
portfolio between these periods of almost $9.8 million, or 15.8%, was more than
offset by an increase in the average cost of interest-bearing liabilities of 40
basis points, which contributed to the decline in the net interest margin and
interest-rate spread. Net interest margin (which is net interest income divided
by average interest-earning assets) declined 4.6% for the six months ended June
30, 2000, as compared to 4.8% for the six months ended June 30, 1999. Net
interest-rate spread, the difference between the yield on earning assets and the
rate paid on interest-bearing liabilities, was 3.7% for the six months ended
June 30, 2000, as compared to 4.0% for the six months ended June 30, 1999.
The decline in the key measurements of net interest income results from the
shift in the mix of deposit liabilities with higher costing certificates of
deposit comprising a greater percentage of total deposits. At June 30, 2000,
certificates of deposit totaled $55.4 million, or 67.8%, of total deposits, as
compared with $49.0 million, or 61.9%, at December 31, 1999. For the six months
ended June 30, 2000 and 1999, the ratios were 63.5% and 60.6%, respectively. In
addition, rates paid on certificates of deposit have increased by approximately
40 basis points in the six months ended June 30, 2000, as compared with the same
period in 1999.
Average Balances, Income and Expenses, and Rates. The following table depicts,
for the periods indicated, certain information related to Citrus' average
balance sheet and its average yields on assets and average costs of liabilities.
Such yields are derived by dividing income or expense by the average balance of
the corresponding assets or liabilities. Average balances have been derived from
daily averages.
[Page intentionally left blank.]
- 14 -
<PAGE>
Average Balances, Income and Expenses, and Rates (dollars in thousands)
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
2000 1999
-------------------------------- -----------------------------
Interest Average Interest Average
Average and Yield/ Average and Yield/
Balance Dividends Rate Balance Dividends Rate
------- --------- ---- ------- --------- ----
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Interest-earning deposits $ 85 $ 3 6.3% $ 28 $ 1 4.9%
Taxable securities 7,071 210 5.9% 5,987 160 5.3%
Federal funds sold 4,144 121 5.8% 6,390 151 4.7%
Loans held for sale 1,059 44 8.3% 6,515 324 9.9%
Loans held for investment, net 70,354 3,198 9.1% 55,143 2,518 9.1%
------ ------ ------ -----
Total earning assets 82,713 3,576 8.6% 74,063 3,154 8.5%
------ -----
Non-earning assets 6,984 6,841
------ ------
Total assets $89,697 $80,904
======= =======
Interest-bearing liabilities:
NOW and money market deposits $ 8,153 94 2.3% $ 6,799 62 1.8%
Savings 8,570 138 3.2% 9,580 152 3.2%
Time deposits 51,004 1,428 5.6% 44,158 1,147 5.2%
Other borrowings 168 5 5.8% 944 20 4.2%
------ ----- ------ -----
Total interest-bearing liabilities 67,895 1,665 4.9% 61,481 1,381 4.5%
----- -----
Noninterest-bearing liabilities 12,989 12,856
Stockholders' equity 8,813 6,567
------ ------
Total liabilities and
stockholders' equity $89,697 $80,904
======= =======
Net interest income before provision
for credit losses $ 1,911 $ 1,773
======= =======
Interest-rate spread 3.7% 4.0%
==== ====
Net interest margin 4.6% 4.8%
==== ====
Ratio of average earning assets to
average interest-bearing liabilities 121.8% 120.5%
====== ======
</TABLE>
- 15 -
<PAGE>
Provision and Allowance for Credit Losses
Citrus has developed policies and procedures for evaluating the overall quality
of its credit portfolio and the timely identification of potential problem
loans. Management's judgment as to the adequacy of the allowance is based upon a
number of assumptions about future events which it believes to be reasonable,
but which may or may not be valid. Thus, there can be no assurance that
charge-offs in future periods will not exceed the allowance for credit losses or
that additional increases in the credit loss allowance will not be required.
Asset Classification. Commercial banks are required to review and, when
appropriate, classify their assets on a regular basis. The OCC has the authority
to identify problem assets and, if appropriate, require them to be classified.
There are three classifications for problem assets: substandard, doubtful and
loss. Substandard assets have one or more defined weaknesses and are
characterized by the distinct possibility that the insured institution will
sustain some loss if the deficiencies are not corrected. Doubtful assets have
the weaknesses of substandard assets with the additional characteristic that the
weaknesses make collection or liquidation in full on the basis of currently
existing facts, condition, and values questionable, and there is a high
possibility of loss. An asset classified as loss is considered uncollectible and
of such little value that continuance as an asset of the institution is not
warranted. If an asset or portion thereof is classified as loss, the insured
institution establishes a specific reserve for the full amount of the portion of
the asset classified as loss. All or a portion of general loan loss allowances
established to cover possible losses related to assets classified as substandard
or doubtful may be included in determining an institution's regulatory capital,
while specific valuation allowances for loan losses generally do not qualify as
regulatory capital. Assets that do not warrant classification in the
aforementioned categories, but possess weaknesses, are classified as special
mention and are monitored by Citrus.
At June 30, 2000, Citrus had 14 loans classified as substandard, doubtful, or
loss totaling $2.0 million. At December 31, 1999, Citrus had loans totaling
$656,000 in the same categories. Substantially all of the increase is
attributable to three borrowers and their affiliated companies. Management
believes that two of the underlying loan relationships are well-secured. The
third loan relationship is believed to be backed by a financially sound
guarantor. At both June 30, 2000, and December 31, 1999, Citrus had no material
loss assets to be charged-off. Loans classified by management as impaired
totaled $562,000 and $368,000 at June 30, 2000, and December 31, 1999,
respectively.
Nonperforming loans include loans that have been placed on nonaccrual status by
Citrus and loans past due for ninety days or more. Some of these nonperforming
loans are well-collateralized, posing no significant risk of loss, and have not
been classified as substandard, doubtful, or loss. A summary of nonperforming
loans and assets follows:
[Page intentionally left blank.]
- 16 -
<PAGE>
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- -------
(dollars in thousands)
<S> <C> <C>
Nonaccrual loans held for investment:
Real estate loans $ -- $ 88
Installment loans 209 201
Credit cards and related plans -- --
Commercial and all other loan 1,205 167
------ ------
Total nonaccrual loans held for investment 1,414 456
------ ------
Accruing loans held for investment over 90 days delinquent:
Real estate loans -- --
Installment loans -- --
Credit cards and related plans -- 2
Commercial and all other loans -- --
------ ------
Total accrual loans held for investment over 90 days delinquent -- 2
------ ------
Troubled debt restructurings not included above -- --
------ ------
Total nonperforming loans held for investment 1,414 458
------ ------
Other real estate owned:
Real estate acquired by foreclosure or deed in lieu
of foreclosure 88 --
------ ------
Total nonperforming loans held for investment and
other real estate owned $1,502 $ 458
====== ======
Total nonperforming loans held for investment
as a percentage of total loans held for investment 1.94% 0.68%
====== ======
Total nonperforming loans held for investment
as a percentage of total assets 1.54% 0.52%
====== ======
Total nonperforming loans held for investment
and other real estate owned as a percentage of total assets 1.64% 0.52%
====== ======
Troubled debt restructurings and modified loans held for investment:
Current $1,678 $1,585
Past due over 30 days and less than 90 days -- 60
Past due over 90 days and included above -- 88
------ ------
$1,678 $1,733
====== ======
</TABLE>
Nonperforming loans at June 30, 2000, increased from the quarter ended March 31,
2000, total of $362,000, and the December 31, 1999, total of $458,000. Other
real estate owned at June 30, 2000, totaled $88,000, as compared with no other
real estate owned at December 31, 1999. Troubled debt restructuring at June 30,
2000, declined $55,000 from the level at December 31, 1999.
Allowance for Credit Losses. The allowance for credit losses is established
through a provision for loan losses charged against income. Loans are charged
against the provision when management believes that the collectibility of the
principal is unlikely. The provision is an estimated amount that management
believes will be adequate to absorb losses inherent in the loan portfolio based
on evaluations of its collectibility. The evaluations take into consideration
such factors as changes in the nature and volume of the portfolio, overall
portfolio quality, specific problem loans and commitments, and current
anticipated economic conditions that may affect the borrower's ability to pay.
While management uses the best information available to recognize losses on
loans, future additions to the provision may be necessary based on changes in
economic conditions.
- 17 -
<PAGE>
<TABLE>
<CAPTION>
Activity in the allowance for credit losses follows (dollars in thousands):
Six Months Twelve Months
Ended Ended
June 30, December 31,
2000 1999
-------- --------
<S> <C> <C>
Allowance at beginning of period $401 $461
---- ----
Recoveries:
Real estate loans -- --
Installment loans 1 --
Credit cards and related plans 1 1
Commercial and all other loans -- 32
---- ----
Total recoveries 2 33
---- ----
Charge-offs:
Real estate loans -- --
Installment loans 5 153
Credit cards and related plans 7 28
Commercial and all other loans 15 587
---- ----
Total charge-offs 27 768
---- ----
Provision for credit losses charged to operations 125 675
---- ----
Allowance at end of period $501 $401
==== ====
Ratio of net charge-offs during the period to average
loans outstanding during the period (including loans
held for sale) 0.07% 1.15%
==== ====
</TABLE>
At June 30, 2000, the allowance for credit losses amounted to $501,000, or 0.69%
of outstanding loans held for investment. At December 31, 1999, the allowance
for credit losses amounted to $401,000, or 0.59% of outstanding loans held for
investment. Citrus' provision for credit losses was $125,000 for the six months
ended June 30, 2000. For the same six months period in 1999, the provision for
credit losses was $20,000. The provision was made based on management's
assessment of general credit loss risk and asset quality. The increase in the
allowance for credit losses as a percentage of outstanding loans reflects recent
increases in the level of net charge-offs experienced in late-1999 and increases
in classified and nonperforming loans during the first six months of 2000.
Noninterest Income and Expense
Noninterest Income. Citrus' primary source of noninterest income is service
charges on deposit accounts. In addition, Citrus originates mortgage loans,
which are closed in the name of a third party, for which Citrus receives a fee.
Other sources of noninterest income include bankcard fees, commissions on check
sales, safe deposit box rent, wire transfer, and official check fees.
Total noninterest income decreased by $23,000, or 9.7%, during the six months
ended June 30, 2000, as compared to the same period in 1999. Fees and service
charges were $201,000 for the six months ended June 30, 2000, as compared to
$220,000 for the comparable periods in 1999, a decrease of 8.6%. A decline in
NSF and overdraft fees of approximately $30,000 contributed to this decline.
- 18 -
<PAGE>
Noninterest Expense. Total noninterest expense increased by $219,000, or 13.7%,
during the six months ended June 30, 2000, as compared to the same period in
1999. This increase was consistent with Citrus' loan growth and reflected normal
salary and benefit increases, including the new loan production offices in Miami
and Sebring, Florida. As a result of these factors, Citrus experienced higher
operating costs as follows:
- salary and benefit expenses increased $97,000, or 11.6%;
- occupancy-related expenses increased $59,000, or 19.5%; and,
- other operating expenses increased $63,000, or 13.7%.
Income Tax Expense
The income tax provision was $68,000 for the six months ended June 30, 2000, or
an effective rate of 37.0%. This compares with an effective rate of 37.6% for
the same period in 1999.
Comparison of Results of Operations for the
Three Months Ended June 30, 2000 and 1999
Net Interest Income
Net interest income (before provision for credit losses) was $946,000 for the
three months ended June 30, 2000, as compared to $924,000 for the three months
ended June 30, 1999. The increases in earning assets of $11.8 million, or 16.2%,
were attributable to the growth of Citrus' loan portfolio of $15.4 million, or
27.3%, between these periods; however the declining net interest-rate spread and
net interest margin contributed to only moderate increases in net interest
income in 2000 versus 1999. Net interest spread, the difference between the
yield on earning assets and the rate paid on interest-bearing liabilities, was
3.6% for the three months ended June 30, 2000, as compared to 4.4% for the three
months ended June 30, 1999. Net interest margin, net interest income divided by
average interest-earning assets, declined to 4.5% in the second quarter of 2000
from the 5.1% reported for the three months ended June 30, 1999. Net
interest-rate spread and net interest margins were impacted by higher costs of
deposits and the reversal of interest income on nonaccrual loans of
approximately $33,000.
Noninterest Income and Expense
Noninterest Income. Total noninterest income declined by $19,000 during the
three months ended June 30, 2000, as compared to the same period in 1999,
reflecting decreased NSF and overdraft fees. Fees and service charges were
$98,000 for the three months ended June 30, 2000, as compared to $113,000 for
the comparable period in 1999, a decrease of 13.3%.
Noninterest Expense. Total noninterest expense increased by $53,000 during the
three months ended June 30, 2000, as compared to the same period in 1999, as a
result of Citrus' continued growth. For the second quarter of 2000, this
increase includes an increase in salary and benefits expense of $13,000, or
2.9%. Occupancy-related expenses increased $24,000, or 14.8%, in the second
quarter of 2000 as compared with the same period in 1999, principally due to the
start- up of Citrus' in-house data processing center and the loan production
offices. Other operating expenses for the second quarter of 2000 increased
$16,000, or 6.5%, as compared with the same period in 1999.
Income Tax Expense
The income tax provision was $35,000 for the three months ended June 30, 2000,
or an effective rate of 37.2%. This compares with an effective rate of 37.6% for
the same period in 1999.
- 19 -
<PAGE>
Financial Condition
Citrus' total assets at June 30, 2000, were $91.5 million, an increase of $3.4
million, or 3.9%, from $88.1 million at December 31, 1999. Increases in total
loans of $3.7 million were offset by declines in cash and cash equivalents of
$3.2 million since December 31, 1999. Deposits increased approximately $2.7
million, with higher costing certificates of deposit contributing $6.4 million
in total increases and offsets in other deposits of $3.7 million.
Total stockholders' equity as of June 30, 2000, was $9.2 million, an increase of
$839,000, or approximately 10.0%, compared with stockholders' equity of $8.4
million as of December 31, 1999. This increase was attributable to net income
for the six months of 2000 of $116,000 and $733,000 in additional capital from
the exercise of the options and warrants, partially offset by a decrease of
$10,000 in the market value (net of deferred income taxes) of investment
securities available-for-sale.
The following table shows selected ratios for the periods ended or at the dates
indicated (annualized for the six months ended June 30, 2000):
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, December 31,
2000 1999
-------- ---------
<S> <C> <C>
Return on average assets 0.26% -0.33%
Return on average equity 2.63% -4.09%
Interest-rate spread during the period 3.70% 4.10%
Net interest margin 4.60% 4.70%
Allowance for credit losses to period end loans held for investment 0.69% 0.59%
Net charge-offs to average loans held for investment 0.07% 1.26%
Nonperforming assets to period end loans held for investment
and foreclosed property 2.06% 0.68%
Nonperforming assets to period end total assets 1.64% 0.52%
</TABLE>
Liquidity and Capital Resources
Liquidity Management. Liquidity management involves monitoring Citrus' sources
and uses of funds in order to meet its day-to-day cash flow requirements while
maximizing profits. Liquidity represents the ability of a company to convert
assets into cash or cash equivalents without significant loss and to raise
additional funds by increasing liabilities. Liquidity management is made more
complicated because different balance sheet components are subject to varying
degrees of management control. For example, the timing of maturities of the
investment portfolio is very predictable and subject to a high degree of control
at the time investment decisions are made. However, net deposit inflows and
outflows are far less predictable and are not subject to the same degree of
control. Asset liquidity is provided by cash and assets which are readily
marketable, which can be pledged, or which will mature in the near future.
Liability liquidity is provided by access to core funding sources, principally
the ability to generate customer deposits in Citrus' market area.
In addition, liability liquidity is provided through the ability to borrow
against approved lines of credit (federal funds purchased) from correspondent
banks and to borrow on a secured basis through securities sold under agreements
to repurchase.
Short-Term Investments. Short-term investments, which consist of federal funds
sold and securities purchased under agreements to resell and interest-bearing
deposits, averaged $4.2 million in the first six months of 2000 as compared to
$6.4 million in the same period of 1999. At June 30, 2000, and December 31,
1999, short-term investments totaled $2.4 million and $3.6 million,
respectively. These funds are a primary source of Citrus' liquidity and are
generally invested in an earning capacity on an overnight basis.
Management regularly reviews the liquidity position of Citrus and has
implemented internal policies which establish guidelines for sources of
asset-based liquidity and limit the total amount of purchased funds used to
support the balance sheet and funding from non-core sources.
- 20 -
<PAGE>
Deposits and Other Sources of Funds. In addition to deposits, the sources of
funds available for lending and other business purposes include loan repayments,
loan sales, and securities sold under agreements to repurchase. Loan repayments
are a relatively stable source of funds, while deposit inflows and outflows are
influenced significantly by general interest rates and money market conditions.
Borrowings may be used on a short-term basis to compensate for reductions in
other sources, such as deposits at less than projected levels and are also used
to fund the origination of mortgage loans designated to be sold in the secondary
markets.
Core Deposits. Core deposits, which exclude certificates of deposit of $100,000
or more, provide a relatively stable funding source for Citrus' loan portfolio
and other earning assets. Citrus' core deposits were $70.7 million at June 30,
2000, and $69.3 million at December 31, 1999. Management anticipates that a
stable base of deposits will be Citrus' primary source of funding to meet both
its short-term and long-term liquidity needs in the future.
Customers with large certificates of deposit tend to be extremely sensitive to
interest rate levels, making these deposits less reliable sources of funding for
liquidity planning purposes than core deposits. Some financial institutions fund
their balance sheets in part through large certificates of deposit obtained
through brokers. These brokered deposits are generally expensive and are
unreliable as long-term funding sources. Accordingly, Citrus does not accept
brokered deposits.
Borrowings. Citrus Bank has a line of credit master agreement with the FHLB of
Atlanta that enables Citrus Bank to borrow up to $10,000,000. These advances are
collateralized by Citrus Bank's FHLB stock and a blanket floating lien
consisting of wholly-owned residential (1-4 units) first mortgage loans. At June
30, 2000, there were no advances outstanding under this line. In addition to the
line of credit arrangement, Citrus Bank had fixed FHLB advances outstanding as
follows (dollars in thousands):
<TABLE>
<CAPTION>
At June 30, At December 31,
Maturity Date Interest Rate 2000 1999
------------- ------------- ---- ----
<S> <C> <C> <C>
2003 5.76% $ 142 $ 167
===== =====
</TABLE>
During the first six months of 2000, Citrus repaid other borrowings of $70,000
from Central Illinois Bank under its revolving line of credit agreement in the
amount of $500,000.
Capital. The Federal Reserve Board and bank regulatory agencies require bank
holding companies and financial institutions to maintain capital at adequate
levels based on a percentage of assets and off-balance sheet exposures, adjusted
for risk weights ranging from 0% to 100% (the Federal Reserve grants an
exemption from these requirements for bank holding companies with less than $150
million in consolidated assets, and therefore Citrus' capital is currently
measured only at Citrus Bank level). Under the risk-based standard, capital is
classified into two tiers. Tier 1 capital consists of common stockholders'
equity, excluding the unrealized gain (loss) on available-for-sale securities,
minus certain intangible assets. Tier 2 capital consists of the general
allowance for credit losses subject to certain limitations. An institution's
qualifying capital base for purposes of its risk-based capital ratio consists of
the sum of its Tier 1 and Tier 2 capital. The regulatory minimum requirements
are 4% for Tier 1 and 8% for total risk-based capital.
Bank holding companies and banks are also required to maintain capital at a
minimum level based on total assets, which is known as the leverage ratio. The
minimum requirement for the leverage ratio is 3%, but all but the highest rated
institutions are required to maintain ratios 100 to 200 basis points above the
minimum. Citrus and Citrus Bank exceeded their minimum regulatory capital ratios
as of June 30, 2000, as reflected in the following table.
The following table sets forth Citrus Bank's regulatory capital position
(dollars in thousands):
<TABLE>
<CAPTION>
Actual Minimum(1) Well-Capitalized(2)
Amount % Amount % Amount %
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to Risk-Weighted Assets) $8,667 11.48% $6,041 8.00% $7,551 10.00%
Tier I Capital (to Risk-Weighted Assets) $8,166 10.81% $3,020 4.00% $4,530 6.00%
Tier I Capital (to Average Assets) $8,166 9.00% $3,631 4.00% $4,539 5.00%
(1) The minimum required for adequately capitalized purposes.
(2) To be "well-capitalized" under the FDIC's Prompt Corrective Action
regulations.
</TABLE>
- 21 -
<PAGE>
CITRUS FINANCIAL SERVICES, INC. AND SUBSIDIARY
PART II: OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes In Securities.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
An Annual Meeting of Shareholders was held on
April 24, 2000. At that meeting, a majority of
the shareholders of record voted to elect a total
of four Class I directors, each to serve for a
term of three years; to ratify the Board of
Directors' appointment of the Company's
independent auditors for the fiscal year ending
December 31, 2000; to approve the adjournment of
the Annual Meeting to solicit additional proxies
in the event that there were not sufficient votes
to approve any one or more or the proposals; and,
to transact such other business as may properly
come before the 2000 Annual Meeting and any
adjournments thereof.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits.
--------
Exhibit 27 - Financial Data Schedule.
b) Reports on Form 8-K.
-------------------
A Form 8-K was filed by Citrus on June 16, 2000, which
reported that Mr. Josh C. Cox, Jr., had resigned his
executive officer and director positions in Citrus and
Citrus Bank, N.A., effective June 14, 2000. Mr. Randy
J. Riley was named interim President and Chief Executive
Officer of Citrus and interim Chief Executive Officer of
Citrus Bank, N.A.
- 22 -
<PAGE>
CITRUS FINANCIAL SERVICES, INC. AND SUBSIDIARY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registered has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Citrus Financial Services, Inc.
Date: August 3, 2000 /s/ Randy J. Riley
-------------- ------------------
Randy J. Riley
Interim President/ Chief Executive Officer
Date: August 3, 2000 /s/ Marion H. Tupek
-------------- -------------------
Marion H. Tupek
Vice President
- 23 -
<PAGE>
