<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-19040
SOUTH FLORIDA BANK HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
FLORIDA 65-0221393
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
<TABLE>
<S> <C>
2017 MCGREGOR BOULEVARD, FORT MYERS, FLORIDA 33901
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (941) 334-2020
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
As of July 31, 1996, there were outstanding 1,210,975 shares of the
Registrant's Common Stock.
-1-
<PAGE> 2
SOUTH FLORIDA BANK HOLDING CORPORATION
FORM 10-Q - FOR THE QUARTER ENDED JUNE 30, 1996
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
a) Consolidated Statements of Financial
Condition - June 30, 1996 (Unaudited)
and December 31, 1995............................................................................................ 3
b) Unaudited Consolidated Income Statements -
Six Months Ended June 30, 1996 and 1995.......................................................................... 4
c) Unaudited Consolidated Income Statements -
Three Months Ended June 30, 1996 and 1995........................................................................ 5
d) Unaudited Consolidated Statements of
Cash Flows - Six Months Ended
June 30, 1996 and 1995........................................................................................... 6
e) Notes to Unaudited Consolidated
Financial Statements............................................................................................. 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations.................................................................................................... 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................................................................... 28
SIGNATURES................................................................................................................... 29
</TABLE>
-2-
<PAGE> 3
PART I. - FINANCIAL INFORMATION Item 1. - Financial Statements
SOUTH FLORIDA BANK HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
----------- -----------
ASSETS (Unaudited)
- - - ------
<S> <C> <C>
Cash and due from banks............. $ 3,653,794 $ 2,744,597
Federal funds sold.................. 1,561,000 5,337,000
Investments available-for-sale...... 7,437,438 11,477,830
Investments held-to-maturity
(market value of $7,985,000
and $6,358,000).................... 8,069,430 6,389,222
Loans, net of allowance for loan
losses of $927,700 and $852,270.... 39,272,487 35,693,367
Premises and equipment, net......... 453,770 502,514
Accrued interest receivable......... 437,209 496,157
Other real estate owned............. 548,500 582,500
Other assets........................ 477,782 366,932
---------- ----------
Total assets................... $61,911,410 $63,590,119
========== ==========
LIABILITIES
- - - -----------
Deposits:
Demand deposits.................... $10,801,950 $10,390,053
NOW accounts....................... 7,480,938 8,467,512
Money market accounts.............. 9,296,701 8,352,581
Savings deposits................... 2,405,174 2,206,716
Time deposits under $100,000....... 21,708,632 23,440,999
Time deposits $100,000 and over.... 2,757,438 3,132,975
---------- ----------
Total deposits................. 54,450,833 55,990,836
Securities sold under
agreements to repurchase........... 1,269,915 1,623,320
Accrued interest payable............ 319,770 522,471
Other liabilities................... 57,236 67,407
---------- ----------
Total liabilities.............. 56,097,754 58,204,034
---------- ----------
Commitments and contingencies (Note C)
SHAREHOLDERS' EQUITY
- - - --------------------
Common stock, $.01 par value,
10,000,000 shares authorized,
1,210,975 and 1,195,975 shares
outstanding........................ 12,110 11,960
Additional paid-in capital.......... 10,366,378 10,291,528
Net unrealized securities
gains (losses)..................... (66,180) 20,655
Retained deficit.................... (4,498,652) (4,938,058)
---------- ----------
Total shareholders' equity......... 5,813,656 5,386,085
---------- ----------
Total liabilities and
shareholders' equity.......... $61,911,410 $63,590,119
========== ==========
</TABLE>
The accompanying Notes to Unaudited Consolidated Financial Statements are
an integral part of these financial statements.
-3-
<PAGE> 4
SOUTH FLORIDA BANK HOLDING CORPORATION
CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
-------------------------------------
1996 1995
---------- ----------
(Unaudited)
<S> <C> <C>
INTEREST AND FEE INCOME
FROM EARNING ASSETS:
Loans.................................................... $1,804,657 $1,560,537
Federal funds sold....................................... 93,798 76,044
Investment securities.................................... 512,437 496,575
--------- ---------
Total interest income................................. 2,410,892 2,133,156
--------- ---------
INTEREST EXPENSE:
Deposits:
NOW accounts............................................ 64,733 66,490
Money market accounts................................... 119,596 148,871
Savings deposits........................................ 25,761 29,390
Time deposits under $100,000............................ 640,846 587,302
Time deposits $100,000 and over......................... 82,535 73,400
Other.................................................... 21,728 19,256
--------- ---------
Total interest expense................................. 955,199 924,709
--------- ---------
NET INTEREST INCOME.................................... 1,455,693 1,208,447
PROVISION FOR LOAN LOSSES................................. --- 22,000
--------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES............................. 1,455,693 1,186,447
--------- ---------
NON-INTEREST INCOME:
Service charge income.................................... 227,378 248,059
Realized securities gains................................ 3,828 ---
Other.................................................... 42,957 37,237
--------- ---------
Total non-interest income.............................. 274,163 285,296
--------- ---------
NON-INTEREST EXPENSES:
Personnel expense........................................ 611,444 615,962
Occupancy expense........................................ 272,727 295,730
Legal expenses........................................... 67,211 58,890
Loan collection expenses................................. 43,425 57,571
Supplies................................................. 37,813 27,296
Advertising.............................................. 30,299 36,674
FDIC insurance........................................... 16,670 74,272
Other ................................................... 240,861 242,278
--------- ---------
Total non-interest expenses............................ 1,320,450 1,408,673
--------- ---------
INCOME BEFORE INCOME TAXES................................ 409,406 63,070
BENEFIT FOR INCOME TAXES.................................. 30,000 ---
--------- ---------
NET INCOME................................................ $ 439,406 $ 63,070
========= =========
NET INCOME PER SHARE...................................... $ .36 $ .06
========= =========
Weighted average number of
common shares and common share
equivalents outstanding.................................. 1,216,780 1,002,875
========= =========
</TABLE>
The accompanying Notes to Unaudited Consolidated Financial
Statements are an integral part of these financial statements.
-4-
<PAGE> 5
SOUTH FLORIDA BANK HOLDING CORPORATION
CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30,
-----------------------------------------
1996 1995
---------- ----------
(Unaudited)
<S> <C> <C>
INTEREST AND FEE INCOME
FROM EARNING ASSETS:
Loans............................... $ 889,621 $ 803,626
Federal funds sold.................. 33,624 54,680
Investment securities............... 245,315 278,207
--------- ---------
Total interest income............ 1,168,560 1,136,513
--------- ---------
INTEREST EXPENSE:
Deposits:
NOW accounts....................... 30,450 31,313
Money market accounts.............. 58,489 69,349
Savings deposits................... 12,642 14,201
Time deposits under $100,000....... 311,250 351,768
Time deposits $100,000 and over.... 39,718 39,401
Other............................... 10,647 11,854
--------- ---------
Total interest expense............ 463,196 517,886
--------- ---------
NET INTEREST INCOME............... 705,364 618,627
PROVISION FOR LOAN LOSSES............ --- 6,000
--------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES........ 705,364 612,627
--------- ---------
NON-INTEREST INCOME:
Service charge income............... 117,956 124,267
Realized securities gains........... 3,828 ---
Other............................... 20,480 19,457
--------- ---------
Total non-interest income......... 142,264 143,724
--------- ---------
NON-INTEREST EXPENSES:
Personnel expense................... 299,517 294,625
Occupancy expense................... 137,186 145,449
Legal expenses...................... 36,013 32,885
Supplies............................ 18,213 12,934
Advertising......................... 12,954 16,956
FDIC insurance...................... 8,318 35,921
Loan collection expenses............ 5,057 57,502
Other .............................. 117,185 136,004
--------- ---------
Total non-interest expenses....... 634,443 732,276
--------- ---------
INCOME BEFORE INCOME TAXES........... 213,185 24,075
BENEFIT FOR INCOME TAXES............. 15,000 ---
--------- ---------
NET INCOME........................... $ 228,185 $ 24,075
========= =========
NET INCOME PER SHARE................. $ .19 $ .02
========= =========
Weighted average number of
common shares and common share
equivalents outstanding............. 1,227,373 1,002,875
========= =========
</TABLE>
The accompanying Notes to Unaudited Consolidated Financial
Statements are an integral part of these financial statements.
-5-
<PAGE> 6
SOUTH FLORIDA BANK HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------
1996 1995
------------ ----------
(Unaudited)
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED
IN) OPERATING ACTIVITIES:
Interest received............... $ 2,469,840 $ 2,024,516
Non-interest income............. 274,163 285,296
Interest paid................... (1,157,900) (820,539)
Personnel expenses.............. (611,444) (615,962)
Other operating expenditures.... (666,899) (794,565)
---------- ---------
Net cash provided by (used in)
operating activities......... 307,760 78,746
---------- ---------
CASH FLOWS PROVIDED BY (USED
IN) INVESTING ACTIVITIES:
Investments available-for-sale:
Purchases..................... (3,054,587) (6,979,978)
Maturities.................... 5,000,000 4,000,000
Sales......................... 1,954,923 ---
Investments held-to-maturity:
Purchases..................... (2,210,567) ---
Maturities.................... 530,359 112,983
Proceeds from the sales of
other real estate owned........ --- 695,464
Increase in loans............... (3,545,120) (1,529,690)
Increase in premises and
equipment...................... (31,163) (23,268)
---------- ----------
Net cash provided by (used
in) investing activities..... (1,356,155) (3,724,489)
---------- ----------
CASH FLOWS PROVIDED BY (USED
IN) FINANCING ACTIVITIES:
Increase (Decrease) in:
Demand deposits................ 411,897 451,608
NOW accounts................... (986,574) (567,594)
Money market accounts.......... 944,120 (1,420,095)
Savings deposits............... 198,458 (325,940)
Time deposits.................. (2,107,904) 7,719,118
Securities sold under
agreements to repurchase..... (353,405) 592,622
Exercise of stock options....... 75,000 ---
---------- ----------
Net cash provided by (used
in) financing activities..... (1,818,408) 6,449,719
---------- ----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS........ (2,866,803) 2,803,976
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD........... 8,081,597 4,331,235
---------- ----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD................. $ 5,214,794 $ 7,135,211
========== ==========
</TABLE>
The accompanying Notes to Unaudited Consolidated Financial
Statements are an integral part of these financial statements.
-6-
<PAGE> 7
SOUTH FLORIDA BANK HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
Reconciliation of net income to net cash
provided by (used in) operating activities
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------
1996 1995
--------- ----------
(Unaudited)
<S> <C> <C>
Net income ...................... $ 439,406 $ 63,070
Adjustments:
Provision for loan losses....... --- 22,000
Depreciation and
amortization................... 79,907 109,162
Decrease (Increase) in accrued
interest receivable............ 58,948 (108,640)
Increase in other assets........ (57,629) (124,235)
Increase (Decrease) in accrued
interest payable............... (202,701) 104,170
Increase (Decrease) in other
liabilities.................... (10,171) 13,219
-------- --------
Net cash provided by
operating activities........ $ 307,760 $ 78,746
======== ========
Supplemental schedule
of non-cash activities:
Loans transferred to
other real estate
owned......................... $ --- $ 69,100
Net unrealized securities
gains (losses)................ (86,835) 82,643
</TABLE>
The accompanying Notes to Unaudited Consolidated Financial
Statements are an integral part of these financial statements.
-7-
<PAGE> 8
SOUTH FLORIDA BANK HOLDING CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of the South Florida
Bank Holding Corporation ("Holding Corporation"), its wholly-owned subsidiary
South Florida Bank ("Bank"), and the Bank's two wholly-owned subsidiaries, New
Town Properties, Inc. and Valu Prop, Inc. (collectively, the "Company") after
elimination of all material intercompany balances and transactions.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete consolidated financial statements. In the opinion of the Company,
the consolidated financial statements reflect all adjustments which are of a
normal recurring nature and which are necessary to present fairly the
consolidated financial position of the Company as of June 30, 1996 and December
31, 1995, and the results of its operations for the six and three months ended
June 30, 1996 and 1995, and its cash flows for the six months ended June 30,
1996 and 1995. The results of operations for the six and three months ended
June 30, 1996 are not necessarily indicative of the results which may be
expected for the entire fiscal year.
NOTE B-INVESTMENTS AVAILABLE-FOR-SALE AND INVESTMENTS HELD-TO-MATURITY
At June 30, 1996 and December 31, 1995, the carrying value, gross unrealized
gains and losses, and estimated market value of investments available-for-sale
and investments held-to-maturity were as follows:
<TABLE>
<CAPTION>
GROSS GROSS CARRYING
AMORTIZED UNREALIZED UNREALIZED VALUE
COST GAINS LOSSES (FAIR VALUE)
----------- ---------- ---------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
INVESTMENTS AVAILABLE-FOR-SALE:
1996
- - - ----
U.S. Agency obligations due:
In one year or less......... $ 2,499,750 $ 1,290 $ (2,602) $ 2,498,438
After one year through
five years................ 5,044,430 --- (105,430) 4,939,000
---------- ------ -------- ----------
Total investments
available-for-sale.... $ 7,544,180 $ 1,290 $(108,032) $ 7,437,438
========== ====== ======== ==========
1995
- - - ----
U.S. Agency obligations due:
In one year or less......... $ 5,992,046 $32,466 $ (1,232) $ 6,023,280
After one year through
five years................ 5,452,470 6,020 (3,940) 5,454,550
---------- ------ ------- ----------
Total investments
available-for-sale.... $11,444,516 $38,486 $ (5,172) $11,477,830
========== ====== ======= ==========
</TABLE>
-8-
<PAGE> 9
<TABLE>
<CAPTION>
CARRYING
VALUE GROSS GROSS ESTIMATED
(AMORTIZED UNREALIZED UNREALIZED MARKET
COST) GAINS LOSSES VALUE
---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
INVESTMENTS HELD-TO-MATURITY:
1996
- - - ----
U.S. Agency obligations due:
In one year or less......... $ 998,152 $ 5,848 $ --- $1,004,000
After one year through
five years................ 4,025,925 --- (36,618) 3,989,307
Collateralized mortgage
obligations due after
ten years................... 3,045,353 275 (53,597) 2,992,031
--------- ------ -------- ---------
Total investments held-
to-maturity............. $8,069,430 $ 6,123 $ (90,215) $7,985,338
========= ====== ======== =========
1995
- - - ----
U.S. Agency obligations due:
In one year or less......... $ 995,380 $17,120 $ --- $1,012,500
After one year through
five years................ 3,050,945 2,175 (42,500) 3,010,620
Collateralized mortgage
obligations due after
ten years................... 2,342,897 1,426 (9,497) 2,334,826
--------- ------ -------- ---------
Total investments held-
to-maturity............. $6,389,222 $20,721 $ (51,997) $6,357,946
========= ====== ======== =========
</TABLE>
Expected maturities for the collateralized mortgage obligations will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
During the three months ended June 30, 1996, the Bank sold $1,955,000 of
investments available-for-sale realizing a gain of $4,831 and losses of $1,003.
NOTE C - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Total unfunded commitments for loans and lines of credit were $4,919,000 and
$4,700,000 at June 30, 1996 and December 31, 1995, respectively. Outstanding
letters of credit were $671,000 and $339,000 at June 30, 1996 and December 31,
1995, respectively.
-9-
<PAGE> 10
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Consolidated total assets of South Florida Bank Holding Corporation (the
"Holding Corporation"), its subsidiary South Florida Bank (the "Bank"), and the
Bank's wholly-owned subsidiaries, New Town Properties, Inc. and Valu Prop, Inc.
(collectively, the "Company") decreased to $61.9 million as of June 30, 1996
from $63.6 million as of December 31, 1995, a decrease of $1.7 million or
2.64%. During the six months ended June 30, 1996, the Bank reduced the
interest rates it offered on time deposits, resulting in a $2.1 million
decrease in time deposits. These deposit outflows were funded with excess
liquidity.
Net income increased to $439,000 (including a $30,000 benefit for income taxes
recognized for the Company's tax loss carryforwards) for the six months ended
June 30, 1996, or $.36 per share, from net income of $63,000 for the six months
ended June 30, 1995, or $.06 per share. The Company's shareholders' equity
increased to $5.8 million at June 30, 1996 from $5.4 million at December 31,
1995, an increase of $428,000 or 7.94%. At June 30, 1996 and December 31,
1995, the Bank's total risk-based capital ratio was 13.78% and 13.33%,
respectively, and leverage ratio was 8.75% and 8.05%, respectively.
The Company's earnings improved $376,000 during the six months ended June 30,
1996 as compared to the same period during the prior year primarily due to a
$247,000 increase in net interest income (resulting from an increase in average
total loans and a reduction in non-performing assets), a $88,000 decrease in
non-interest expense and a $30,000 benefit for income taxes. In addition, the
Bank made no provision for loan losses during 1996 as compared to a provision
for loan losses of $22,000 during 1995. However, the loan loss allowance
increased at June 30, 1996 from December 31, 1995 due to net loan recoveries of
$75,000 during the six months ended June 30, 1996.
At June 30, 1996 and December 31, 1995, the allowance for loan losses was
$928,000 and $852,000, respectively, or 2.31% and 2.33% of total loans and
146.09% and 126.01% of non-accruing loans. Other real estate owned decreased
to $549,000 as of June 30, 1996 from $583,000 as of December 31, 1995 due to a
$34,000 write-down on one piece of other real estate owned. As of June 30,
1996, the Bank owned four pieces of other real estate.
The following discussion provides a more in-depth analysis of the Company's
financial condition and results of operations. The unaudited financial
statements and accompanying notes included in this report are an integral part
of this discussion and should be read in conjunction with it.
-10-
<PAGE> 11
FINANCIAL CONDITION
During the six months ended June 30, 1996, the Bank reduced the interest rates
it offered on time deposits, resulting in a $2.1 million decrease in time
deposits. These deposit outflows were funded with excess liquidity and
resulted in a decrease in total assets and liabilities. Accordingly, the
Company's total assets decreased to $61.9 million at June 30, 1996 from $63.6
million at December 31, 1995, a decrease of $1.7 million or 2.64%. Earning
assets, comprised of loans and the investment portfolio (which in turn is
comprised of investments held-to-maturity, investments available-for-sale, and
federal funds sold) decreased, as discussed below, to $56.3 million at June 30,
1996 from $58.9 million at December 31, 1995, a decrease of $2.6 million or
4.34%. Non-earning assets (comprised of cash and due from banks, premises and
equipment, accrued interest receivable, other real estate owned and other
assets) increased to $5.6 million at June 30, 1996 from $4.7 million at
December 31, 1995, an increase of $878,000 (primarily due to an increase in
cash and due from banks) or 18.72%.
Net loans increased to $39.3 million at June 30, 1996 from $35.7 million at
December 31, 1995, an increase of $3.6 million or 10.03%. Mortgage loans which
increased $1.4 million were the primary components of outstanding loans.
Commercial loans increased $1.0 million and installment loans increased $1.1
million. Management's strategy is to lend to small-to-medium sized businesses.
For a discussion of the $635,000 loans on non-accrual status at June 30, 1996,
and the increase in the allowance for loan losses to $928,000 at June 30, 1996
from $852,000 at December 31, 1995, see "-- Allowance for Loan Losses".
The investment portfolio decreased to $17.1 million at June 30, 1996 from $23.2
million at December 31, 1995, a decrease of $6.1 million or 26.44%. The
decrease in the investment portfolio was primarily used to fund the increase in
loans and the decrease in deposits.
Cash and due from banks increased to $3.7 million at June 30, 1996 from $2.7
million at December 31, 1995, an increase of $909,000 or 33.13%. This increase
primarily resulted from an increase in uncollected funds.
Deposits decreased to $54.5 million at June 30, 1996 from $56.0 million at
December 31, 1995, a decrease of $1.5 million or 2.75%. Core deposits
decreased to $51.7 million at June 30, 1996 from $52.9 million at December 31,
1995, a decrease of $1.2 million or 2.20%. This decrease in core deposits
primarily resulted from the decrease in interest rates offered on time
deposits. At June 30, 1996 and December 31, 1995, the ratio of net loans to
deposits was 72.12% and 63.75%, respectively.
Securities sold under agreements to repurchase ("Sweep Accounts")
-11-
<PAGE> 12
decreased to $1.3 million at June 30, 1996 from $1.6 million at December 31,
1995, a decrease of $353,000 or 21.77%. This decrease resulted from two Sweep
Accounts closing as originally contracted with the customers.
The Holding Corporation's shareholders' equity increased to $5.8 million at
June 30, 1996 from $5.4 million at December 31, 1995, an increase of $428,000
or 7.94%. This increase was primarily the result of net income of $439,000
during 1996 and the exercise of 15,000 stock options for $75,000, partially
offset with the $87,000 decrease resulting from unrealized securities losses.
See "--Results of Operations". The Bank's total risk-based capital (total
capital to risk-weighted assets), Tier 1 risk-based capital (Tier 1 capital to
risk-weighted assets) and leverage (Tier 1 capital to total average assets
during the three months ended June 30, 1996 and December 31, 1995,
respectively) ratios as compared to the ratios mandated by the FDIC were as
follows:
<TABLE>
<CAPTION>
TOTAL TIER 1
RISK-BASED RISK-BASED LEVERAGE
CATEGORY CAPITAL RATIO CAPITAL RATIO RATIO
-------- ------------- ------------- --------
<S> <C> <C> <C>
Well capitalized per FDIC
(minimum ratios)........ 10.00% 6.00% 5.00%
Bank:
December 31, 1995....... 13.33 12.07 8.05
June 30, 1996........... 13.78 12.52 8.75
</TABLE>
See "Capital Resources" for additional information regarding the Bank's capital
ratios.
-12-
<PAGE> 13
For the six months ended June 30, 1996 and 1995, the Bank's average statements
of financial condition, interest income and expense, and yields earned and
rates paid were as follows:
<TABLE>
<CAPTION>
AVERAGE BALANCES, INTEREST YIELDS AND RATES
1996 1995
--------------------------- ------------------------------
AVERAGE YIELD/ AVERAGE YIELD/
ASSETS: BALANCE INTEREST RATE BALANCE INTEREST RATE
- - - ------- ----------- -------- ------ ----------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Loans (including non-
accruing loans):
Commercial........... $ 7,260,505 $ 391,388 10.84% $ 6,230,577 $ 303,940 9.84%
Mortgage (a)......... 25,732,935 1,182,477 9.24 22,883,441 1,051,264 9.26
Installment.......... 2,048,158 92,417 9.07 1,486,720 71,596 9.71
Other................ 2,733,777 138,375 10.18 2,398,804 133,737 11.24
---------- --------- ----- ---------- --------- -----
Total loans, net of
unearned income...... 37,775,375 1,804,657 9.61 32,999,542 1,560,537 9.54
Investment securities
- all taxable........ 17,341,973 512,437 5.91 15,921,457 496,575 6.24
Federal funds sold.... 3,529,963 93,798 5.34 2,541,640 76,044 6.03
---------- --------- ----- ---------- --------- -----
Total earning
assets - all taxable. 58,647,311 $2,410,892 8.27% 51,462,639 $2,133,156 8.36%
========= ===== ========= =====
Cash and due from
banks................ 2,773,928 2,409,512
Other assets.......... 1,868,783 3,173,269
Allowance for loan
losses............... (927,010) (1,082,551)
---------- ----------
Total assets.......... $62,363,012 $55,962,869
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
- - - -------------------------------------
Interest-bearing
deposits:
NOW accounts......... $ 7,809,433 $ 64,733 1.67% $ 6,810,666 $ 66,490 1.97%
Money market accounts 9,543,234 125,329 2.64 9,351,016 148,871 3.21
Savings deposits..... 2,319,267 25,761 2.23 2,247,888 29,390 2.64
Time deposits:
Under $100,000...... 22,099,623 640,846 5.83 20,577,533 587,302 5.76
$100,000 and over... 2,943,247 82,535 5.64 2,619,150 73,400 5.65
---------- --------- ----- ---------- ------- -----
Total interest-
bearing deposits..... 44,714,804 939,204 4.22 41,606,253 905,453 4.39
Securities sold under
agreements to
repurchase........... 1,359,285 21,728 3.21 854,520 19,256 4.54
---------- --------- ----- ---------- ------- -----
Total interest-
bearing liabilities.. 46,074,089 $ 960,932 4.19% 42,460,773 $924,709 4.39%
========= ===== ======= =====
Demand deposits....... 10,668,151 9,438,983
Other liabilities..... 438,243 382,971
Shareholders' equity.. 5,182,529 3,680,142
---------- ----------
Total liabilities and
shareholders' equity. $62,363,012 $55,962,869
========== ==========
SPREAD AND INTEREST DIFFERENTIAL:
- - - ---------------------------------
Interest rate spread.. 4.08% 3.97%
===== =====
Excess of total
earning assets over
total interest-
bearing liabilities..$12,573,222 $ 9,001,866
========== ==========
Net yield on interest-
earning assets....... $1,449,960 4.97% $1,208,447 4.74%
========== ===== ========= =====
</TABLE>
(a) Interest income on mortgage loans included loan fees recognized as income
of $4,000 and $11,000 during the six months ended June 30, 1996 and 1995,
respectively.
-13-
<PAGE> 14
For the three months ended June 30, 1996 and 1995, the Bank's average
statements of financial condition, interest income and expense, and yields
earned and rates paid were as follows:
<TABLE>
<CAPTION>
AVERAGE BALANCES, INTEREST YIELDS AND RATES
1996 1995
--------------------------- ----------------------------
AVERAGE YIELD/ AVERAGE YIELD/
ASSETS: BALANCE INTEREST RATE BALANCE INTEREST RATE
----------- ---------- ------ ----------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Loans (including non-
accruing loans):
Commercial........... $ 7,581,751 $ 181,423 9.62% $ 5,892,355 $ 149,077 10.15%
Mortgage (a)......... 26,200,516 586,227 9.00 23,537,580 549,604 9.37
Installment.......... 2,382,282 52,440 8.85 1,449,182 35,534 9.83
Other................ 2,756,584 69,531 10.14 2,490,014 69,411 11.18
---------- --------- ----- ---------- -------- -----
Total loans, net of
unearned income...... 38,921,133 889,621 9.19 33,369,131 803,626 9.66
Investment securities
- all taxable........ 16,778,477 245,315 5.85 17,393,342 278,207 6.40
Federal funds sold.... 2,566,192 33,624 5.27 3,653,361 54,680 6.00
---------- --------- ----- ---------- -------- -----
Total earning
assets - all taxable. 58,265,802 $1,168,560 8.07% 54,415,834 $1,136,513 8.38%
========= ===== ========= =====
Cash and due from
banks................ 2,876,364 2,353,786
Other assets.......... 1,886,488 2,906,459
Allowance for loan
losses............... (939,241) (840,150)
---------- ---------
Total assets.......... $62,089,413 $58,835,929
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest-bearing
deposits:
NOW accounts......... $ 7,611,874 $ 30,450 1.61% $ 6,779,943 $ 31,313 1.85%
Money market accounts 9,502,624 61,515 2.60 8,918,730 69,349 3.12
Savings deposits..... 2,286,101 12,642 2.22 2,203,784 14,201 2.58
Time deposits:
Under $100,000...... 21,777,103 311,250 5.75 23,268,759 351,768 6.06
$100,000 and over... 2,893,713 39,718 5.52 2,733,799 39,401 5.78
---------- --------- ----- ---------- ------- -----
Total interest-
bearing deposits..... 44,071,415 455,575 4.16 43,905,015 506,032 4.62
Securities sold under
agreements to
repurchase........... 1,361,227 10,647 3.15 1,061,611 11,854 4.48
---------- --------- ----- ---------- ------- -----
Total interest-
bearing liabilities.. 45,432,642 $ 466,222 4.13% 44,966,626 $517,886 4.62%
========= ===== ======= =====
Demand deposits....... 11,014,129 9,741,159
Other liabilities..... 378,540 423,125
Shareholders' equity.. 5,264,102 3,705,019
---------- ----------
Total liabilities and
shareholders' equity. $62,089,413 $58,835,929
========== ==========
SPREAD AND INTEREST DIFFERENTIAL:
Interest rate spread.. 3.94% 3.76%
===== =====
Excess of total
earning assets over
total interest-
bearing liabilities.. $12,833,160 $ 9,449,208
========== ==========
Net yield on interest-
earning assets....... $ 702,338 4.85% $618,627 4.56%
========= ===== ======= =====
</TABLE>
(a) Interest income on mortgage loans included loan fees recognized as income
of $2,000 and $5,000 during the three months ended June 30, 1996 and 1995,
respectively.
-14-
<PAGE> 15
LOAN PORTFOLIO
The Bank's loan portfolio is primarily concentrated in commercial, mortgage,
and installment loans. At June 30, 1996 and December 31, 1995, the composition
of the Bank's loan portfolio was as follows:
<TABLE>
<CAPTION>
1996 1995
------------------ ------------------
% OF % OF
TOTAL TOTAL
AMOUNT LOANS AMOUNT LOANS
----------- ------ ----------- ------
<S> <C> <C> <C> <C>
Commercial......... $ 8,110,679 20.18% $ 7,081,642 19.38%
Mortgage: (a)
Construction..... 1,316,402 3.27 1,331,809 3.64
Non-construction. 25,311,626 62.96 23,909,249 65.42
Installment (b).... 2,637,518 6.56 1,490,577 4.08
Other loans (c).... 2,823,962 7.03 2,732,360 7.48
---------- ------ ---------- ------
Total loans, net of
unearned income.. 40,200,187 100.00% 36,545,637 100.00%
====== ======
Allowance for loan
losses........... (927,700) 2.31% (852,270) 2.33%
---------- ====== ---------- ======
Loans, net......... $39,272,487 $35,693,367
========== ==========
</TABLE>
___________________
(a) In addition to loans for the purchase, construction, improvement of or
investment in real estate, the Bank's real estate loans include all loans for
various other consumer or business purposes which are secured by real estate
mortgages.
(b) Installment loans generally include loans secured with automobiles,
trucks, boats, and equipment.
(c) Other loans generally include credit card loans, equity lines to
individuals, deposit overdraft protection and deposit overdrafts.
Average total loans, net of unearned income, were $37.8 million during the six
months ended June 30, 1996 compared to $33.0 million during the six months
ended June 30, 1995, representing a $4.8 million (or 14.47%) increase. This
increase in average total loans during 1996 from 1995 was primarily
attributable to loan originations exceeding loan repayments resulting from the
Bank's officer program of calling on prospective customers resulting in new
loans. In addition, the Bank hired two new loan officers after March 31, 1995.
The Bank's loan portfolio is its largest category of earning assets. The Bank
is a locally owned and operated commercial bank, serving consumers,
professionals, and small-to-medium sized businesses located in the Lee County
area. The majority of the Bank's loans currently are to customers located
within this area.
New loans and loan renewals are reviewed by management and the
-15-
<PAGE> 16
Directors, including the potential created for possible credit concentrations.
Management reviews the loan portfolio on a quarterly basis for potential credit
concentrations. Loan concentrations are defined as amounts loaned to a number
of borrowers engaged in similar activities, which would cause them to be
similarly impacted by economic or other conditions. At June 30, 1996 and
December 31, 1995, no concentration of loans within any portfolio category to
any group of borrowers engaged in similar activities or in a similar business,
exceeded 10% of total loans, except that as of such date loans collateralized
with mortgages on real estate represented 66.23% and 69.06%, respectively, of
the loan portfolio and were to borrowers in varying activities and businesses.
The Bank recognizes interest income from loans on the accrual basis. If a loan
is placed on non-accrual status, then accrual of interest income is suspended
and any interest earned, but unpaid, is charged against current earnings as a
reduction in current period interest income. A loan is placed on non-accrual
status when principal or interest is past due 90 days or more unless, in the
determination of management, the principal and interest on the loan are well
secured and in the process of collection. In addition, a loan is placed on
non-accrual status before 90 days delinquency occurs if management believes
that after giving consideration to economic and business conditions and
collection efforts, the collection of interest or principal is doubtful.
ALLOWANCE FOR LOAN LOSSES
As matter of policy, the Bank maintains an allowance for loan losses. The
amount provided for loan losses during any period is based on an evaluation by
management of the amount needed to maintain the allowance at a level sufficient
to cover anticipated losses and the inherent risk of losses in the loan
portfolio. In determining the amount of the allowance, management considers
the dollar amount of loans outstanding, its assessment of known or potential
problem loans, current economic conditions, the risk characteristics of the
various classifications of loans, credit record of its borrowers, the fair
market value of underlying collateral and other factors. Although management
believes that it uses the best information available to make determinations
with respect to loan loss reserves, subsequent adjustments to reserves may be
necessary if future economic conditions differ from the assumptions used in
making the initial determinations or if regulatory policies change.
Effective January 1, 1995, the Bank adopted Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan" ("FAS
114"). FAS 114 requires that impaired loans within the scope of FAS 114 be
measured based on the present value of expected future cash flows discounted at
the loan's effective interest rate or, as a practical expedient, at the loan's
-16-
<PAGE> 17
observable market price or the fair value of the underlying collateral if the
loan is collateral dependent. Adoption of FAS 114 did not have a material
impact on the Company's financial position or results of operations.
For the six months ended June 30, 1996 and 1995, the Bank's loan loss
experience and its provision for loan losses were as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Average loans outstanding........... $37,775,375 $32,999,542
========== ==========
Net loans at end of period.......... $40,200,187 $33,182,005
========== ==========
Allowance for loan losses at
beginning of period............... $ 852,270 $ 1,342,763
Loans charged-off:
Commercial........................ 19,668 128,973
Mortgage.......................... 17,348 462,727
Installment....................... 3,303 2,969
Other loans....................... 8,737 38,205
---------- ----------
Total loans charged-off............. 49,056 632,874
---------- ----------
Recoveries of loans
previously charged-off:
Commercial...................... 101,693 48,050
Mortgage........................ 19,062 82,678
Installment..................... 2,049 5,601
Other loans..................... 1,682 2,600
---------- ----------
Total recoveries.................... 124,486 138,929
---------- ----------
Net loan charge-offs (recoveries)... (75,430) 493,945
Provision charged to expense........ --- 22,000
---------- ----------
Allowance for loan losses at
end of period..................... $ 927,700 $ 870,818
========== ==========
Ratio of net charge-offs during
period to average net
loans outstanding................. (.40)% 2.99%
Allowance for loan losses as a
percentage of loans, net of
unearned income at end of period.. 2.31% 2.56%
</TABLE>
During 1996, ten loans were charged-off. During 1996, the two largest loan
recoveries were $48,000 and $31,000, or 63.00% of total recoveries. The
remaining recoveries which totaled $46,000 encompassed 20 loans, none of which
exceeded $16,000.
The Bank's loan accounting and collection policies specify that a notice will
be sent to a customer after a loan becomes ten days
-17-
<PAGE> 18
past due. If a payment has not been made in this time, a personal follow-up
might occur or letter issued. If no progress has been made to bring the loan
current within 90 days, the loan is generally placed on non-accrual status and
steps are taken to refer the loan to legal counsel for foreclosure on any
collateral and/or collection from the borrower. Management may also place
loans on non-accrual status earlier when, in its judgment, the collectibility
of such loans or interest thereon appears to be in doubt.
Senior management of the Bank and the loan staff meet weekly or more often as
needed to review all past due and non-performing loans and to discuss
collection actions. The Bank's Board of Directors performs a similar review on
at least a monthly basis. Loans are charged-off when and to the extent they
are deemed by management to be a loss to the Bank.
At June 30, 1996 and December 31, 1995, the Bank's non-performing loans and
repossessed assets were as follows:
<TABLE>
<CAPTION>
1996 1995
---------------- ----------------
% OF % OF
AMOUNT LOANS AMOUNT LOANS
---------- ----- ---------- -----
<S> <C> <C> <C> <C>
Non-accruing loans:
Under 90 days delinquent... $ 491,786 1.22% $ 262,855 .72%
90 or more days delinquent. 143,213 .36 413,477 1.13
--------- ---- --------- ----
Total non-accruing loans.... $ 634,999 1.58% $ 676,332 1.85%
========= ==== ========= ====
Total real estate owned..... $ 548,500 1.36% $ 582,500 1.59%
--------- ---- --------- ----
Total non-performing assets. $1,183,499 2.94% $1,258,832 3.44%
========= ==== ========= ====
Loans delinquent and
accruing:
30 to 59 days.............. $ 48,852 .12% $ 145,495 .40%
60 to 89 days.............. 5,928 .02 82,371 .22
--------- ---- --------- ----
Total.................... $ 54,780 .14% $ 227,866 .62%
========= ==== ========= ====
Total delinquencies
30 days and over........... $ 689,779 1.72% $ 904,198 2.47%
========= ==== ========= ====
</TABLE>
Non-performing assets decreased to $1.2 million at June 30, 1996 from $1.3
million at December 31, 1995, or a decrease of $75,000 or 5.98%. This decrease
occurred primarily due to loan repayments and the Bank writing-down a certain
piece of other real estate owned by $34,000. The ratio of non-performing loans
as a percent of total loans, net of unearned income, was 1.58% and 1.85% at
June 30, 1996 and December 31, 1995, respectively. The allowance for loan
losses as a percentage of non-performing loans was 146.09% and 126.01% at June
30, 1996 and December 31, 1995, respectively.
-18-
<PAGE> 19
Non-accruing loans totaled $635,000 on June 30, 1996 compared to $676,000 on
December 31, 1995, a decrease of $41,000 or 6.11%. Non-accruing loans at June
30, 1996 consisted primarily of two customer relationships totaling $489,000 or
77.12% of total non-accruing loans. The first customer relationship consisted
of two loans totaling $363,000. One of these two loans was secured with a
$180,000 first mortgage on commercial real estate and the other loan with
accounts receivable and a second mortgage on a residential property. As of
June 30, 1996, these two loans were current. The second customer relationship
consisted of a $126,000 first mortgage loan secured with commercial real
estate. As of June 30, 1996, this loan was current.
At June 30, 1996 and December 31, 1995, the total recorded investment in
impaired loans was $635,000 and $676,000, respectively, and the Bank recorded
respective allowance for loan losses of $158,000 and $165,000 related to its
impaired loans. During the six months ended June 30, 1996 and 1995, the
recorded investment in impaired loans averaged $656,000 and $1,116,000,
respectively, and respective interest income recognized on impaired loans
totalled $17,000 and $24,000.
Management continues to manage its non-performing assets to restore them to
performing status when possible, or otherwise liquidate such assets in an
orderly fashion to maximize the value of such assets to the Company. Although
the Company is endeavoring to actively manage the risks in its loan portfolio,
there is no assurance that the level of non- accrual loans and other real
estate owned will not increase during 1996.
As of June 30, 1996, other real estate owned, all of which is located in Lee
County, Florida and which was recorded at the lower of fair value or the loan
balance, was comprised of two parcels of raw land with a carrying value of
$535,500 (and a fair value of $572,000) and two single-family residential lots
with a carrying value of $13,000 (and a fair value of $14,000).
INVESTMENT PORTFOLIO
The carrying value of the Bank's investment portfolio was $17.1 million at June
30, 1996, as compared to $23.2 million at December 31, 1995. The average book
yield on the Bank's investment portfolio was 5.74% and 5.97% at June 30, 1996
and December 31, 1995, respectively. The average maturity of the Bank's
investment portfolio at June 30, 1996 and December 31, 1995, was 43 and 15
months, respectively. There was unrealized net market depreciation of
approximately $84,000 and $31,000 at June 30, 1996 and December 31, 1995,
respectively.
At June 30, 1996 and December 31, 1995, the carrying values, the maturities and
the average yields of the Bank's investment
-19-
<PAGE> 20
securities, all of which were taxable, were as follows:
<TABLE>
<CAPTION>
WITHIN AFTER ONE YEAR AFTER TEN
ONE YEAR THROUGH 5 YEARS YEARS
---------------- ---------------- ----------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
---------- ----- ---------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
1996
- - - ----
AVAILABLE-FOR-SALE:
U.S. Agency
obligations..... $2,498,438 6.16% $4,939,000 5.54% $ --- -- %
========= ==== ========= ==== ========= ====
1995
- - - ----
AVAILABLE-FOR-SALE:
U.S. Agency
obligations..... $6,023,280 6.66% $5,454,550 5.96% $ --- -- %
========= ==== ========= ==== ========= ====
1996
- - - ----
HELD-TO-MATURITY:
U.S. Agency
obligations..... $ 998,152 7.49% $4,025,925 5.29% $ --- -- %
Collateralized
mortgage
obligations..... --- -- --- -- 3,045,353 5.99
--------- ---- --------- ---- --------- ----
Total held-to-
maturity........ $ 998,152 7.49% $4,025,925 5.29% $3,045,353 5.99%
========= ==== ========= ==== ========= ====
1995
- - - ----
HELD-TO-MATURITY:
U.S. Agency
obligations..... $ 995,380 7.49% $3,050,945 5.12% $ --- -- %
Collateralized
mortgage
obligations..... --- -- --- -- 2,342,897 6.02
--------- ---- --------- ---- --------- ----
Total held-to-
maturity........ $ 995,380 7.49% $3,050,945 5.12% $2,342,897 6.02%
========= ==== ========= ==== ========= ====
</TABLE>
DEPOSITS
The Bank's average core deposits increased to $52.4 million during the six
months ended June 30, 1996 from $48.4 million during the six months ended June
30, 1995, or an increase of $4.0 million or 8.29%. Average total deposits
increased to $55.4 million during 1996 from $51.0 million during 1995, or an
increase of $4.4 million or 8.50%. Average non-interest bearing deposits
increased to $10.7 million during 1996 from $9.4 million during 1995, or an
increase of $1.3 million or 13.02%. These increases resulted from an
advertising campaign coupled with an officer calling program.
At June 30, 1996 and December 31, 1995, the Bank had no public fund deposits.
At June 30, 1996 and December 31, 1995, the largest single depositor had
deposits totaling $1.5 million and $1.8 million, or 2.71% and 3.25% of total
deposits, respectively. The Bank has not accepted any brokered certificates of
deposit. Management does not believe the Bank is dependent on a single deposit
customer, or a group of customers concentrated in a particular industry, whose
loss or insolvency would have a material
-20-
<PAGE> 21
adverse effect on the Bank's operations.
For the six months ended June 30, 1996 and 1995, the Bank's average deposit
balances and the percent of total average deposits were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------- -------------------
AVERAGE % OF AVERAGE % OF
AMOUNT TOTAL AMOUNT TOTAL
----------- ------- ----------- -------
<S> <C> <C> <C> <C>
Demand deposits:
Non-interest-bearing.... $10,668,151 19.26% $ 9,438,983 18.49%
NOW accounts............ 7,809,433 14.10 6,810,666 13.34
Money Market accounts.... 9,543,234 17.23 9,351,016 18.32
Savings deposits......... 2,319,267 4.19 2,247,888 4.41
Time deposits
under $100,000.......... 22,099,623 39.91 20,577,533 40.31
---------- ------ ---------- ------
Total core deposits... 52,439,708 94.69 48,426,086 94.87
Time deposits $100,000
and over................ 2,943,247 5.31 2,619,150 5.13
---------- ------ ---------- ------
Total deposits.......... $55,382,955 100.00% $51,045,236 100.00%
========== ====== ========== ======
</TABLE>
At June 30, 1996 and December 31, 1995, 5.06% and 5.60%, respectively, of the
Bank's deposits consisted of certificates of deposit in amounts of $100,000 or
more, the majority of which were held by residents of the Bank's market area
and 76.88% and 76.74% of which will mature within twelve months of June 30,
1996 and December 31, 1995, respectively. At June 30, 1996 and December 31,
1995, the maturity distribution of the Bank's time deposits of $100,000 or more
was as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
3 months or less................. $1,165,173 $ 786,141
Over 3 months through 6 months... 406,370 735,306
Over 6 months trough 12 months... 548,402 882,954
Over 12 months................... 637,493 728,574
--------- ---------
Total time deposits $100,000
and over....................... $2,757,438 $3,132,975
========= =========
</TABLE>
SHORT-TERM BORROWINGS
The Bank has entered into short-term borrowing arrangements with certain of its
customers. These arrangements, entitled "Sweep Accounts", call for the Bank to
automatically transfer customer funds in excess of certain pre-defined amounts
from the customer's insured deposit account to the Sweep Account. The Sweep
Accounts mature weekly and were collateralized with U. S. Government agency
securities totaling $1.3 million at June 30, 1996 and $1.7 million at December
31, 1995; accordingly, they were classified on the Company's consolidated
statements of financial condition as securities sold under agreements to
repurchase.
-21-
<PAGE> 22
For the six months ended June 30, 1996 and 1995, the Bank's short-term
borrowings were as follows:
<TABLE>
<CAPTION>
1996 1995
---------- --------
<S> <C> <C>
Period ended June 30:
Average indebtedness
outstanding............. $1,359,285 $854,520
Average rate paid........ 3.21% 4.54%
Maximum indebtedness
at any month-end....... $1,415,369 $1,186,000
At June 30:
Balance outstanding...... $1,269,915 $1,085,940
Rate paid................ 3.11% 4.29%
</TABLE>
CAPITAL RESOURCES
The Holding Corporation's total shareholders' equity was $5.8 million and $5.4
million at June 30, 1996 and December 31, 1995, respectively. This increase
was the result of 1996's net income of $439,000 and the $75,000 proceeds from
the exercise of stock options, partially offset with the $87,000 decrease
resulting from unrealized securities losses. The Bank's total shareholder's
equity was $5.4 million and $5.0 million at June 30, 1996 and December 31,
1995, respectively. The increase in the Bank's shareholder's equity was the
result of the Bank's net income of $451,000 partially offset with the $87,000
decrease in the unrealized securities gains (losses) to June 30, 1996 from
December 31, 1995.
Banking laws and regulations limit the amount of dividends that may be paid by
financial institutions, including the Company. In addition, banking
regulations impose certain minimum capital ratios on financial institutions,
including the Company, which also restrict the Company's right to pay
dividends.
The Bank's total risk-based capital (total capital to risk-weighted assets),
Tier 1 risk-based capital (Tier 1 capital to risk-weighted assets) and leverage
(Tier 1 capital to total average assets during the three months ended June 30,
1996 and December 31, 1995) ratios as compared to the ratios mandated by the
FDIC were as follows:
<TABLE>
<CAPTION>
TOTAL TIER 1
RISK-BASED RISK-BASED LEVERAGE
CATEGORY CAPITAL RATIO CAPITAL RATIO RATIO
-------- ------------- ------------- --------
<S> <C> <C> <C>
Well capitalized per FDIC
(minimum ratios)........ 10.00% 6.00% 5.00%
Bank:
December 31, 1995....... 13.33 12.07 8.05
June 30, 1996........... 13.78 12.52 8.75
</TABLE>
-22-
<PAGE> 23
LIQUIDITY
During the six months ended June 30, 1996 and 1995, investing activities used
$1.4 million and $3.7 million, respectively, of cash. During the six months
ended June 30, 1996 and 1995, financing activities provided (used) $(1.8)
million and $6.4 million, respectively, of cash. During the six months ended
June 30, 1996, the Bank reduced the interest rates it offered on time deposits,
resulting in a $2.1 million decrease in time deposits. These deposit outflows
were funded with excess liquidity.
RESULTS OF OPERATIONS
SUMMARY
The Company's net income was $439,000 and $228,000 for the six and three months
ended June 30, 1996, or $.36 and $.19 per share, as compared to $63,000 and
$24,000 for the six and three months ended June 30, 1995, or $.06 and $.02 per
share. The $376,000 increase in the Company's net income during the six months
ended June 30, 1996 as compared to the six months ended June 30, 1995 primarily
resulted from a $247,000 increase in net interest income, a $88,000 decrease in
non-interest expense and a $30,000 benefit for income taxes. The $204,000
increase in the Company's net income during the three months ended June 30,
1996 as compared to the three months ended June 30, 1995 primarily resulted
from a $87,000 increase in net interest income, a $98,000 decrease in
non-interest expense and a $15,000 benefit for income taxes.
For the six and three months ended June 30, 1996 and 1995, the Company's
performance ratios were as follows:
<TABLE>
<CAPTION>
1996 1995
------------- -------------
SIX THREE SIX THREE
----- ----- ----- -----
<S> <C> <C> <C> <C>
Return on average
assets (annualized)............. 1.41% 1.47% .23% .16%
Return on average
equity (annualized)............. 16.96 17.34 3.43 2.60
Average equity to average assets... 8.31 8.48 6.58 6.30
</TABLE>
NET INTEREST INCOME
The Bank's earnings are dependent primarily on its net interest income which is
the excess of interest income earned on earning assets (primarily loans and the
investment portfolio - all of which are taxable) over interest expense paid on
deposits and short-term borrowings. Changes in net interest income are caused
by changes in the interest rates earned or paid and by volume changes in loans,
the investment portfolio, deposits and short-term borrowings.
-23-
<PAGE> 24
The increase (decrease) during the six months ended June 30, 1996 from the six
months ended June 30, 1995 in the Bank's interest income earned and interest
expense paid resulting from changes in volumes of, rates earned or paid on, and
the combined effect of changes in both volume and rate on, various categories
of interest-earning assets and interest- bearing liabilities were as follows:
<TABLE>
<CAPTION>
VOLUME/
VOLUME RATE RATE TOTAL
--------- --------- --------- --------
<S> <C> <C> <C> <C>
ASSETS:
- - - -------
Loans:
Commercial............ $ 50,658 $ 31,255 $ 5,535 $ 87,448
Mortgage.............. 131,990 (2,661) 1,884 131,213
Installment........... 27,261 (4,737) (1,703) 20,821
Other................. 18,830 (12,758) (1,434) 4,638
-------- -------- -------- --------
Total loans.......... 228,739 11,099 4,282 244,120
Investment securities. 44,305 (26,113) (2,330) 15,862
Federal funds sold.... 29,815 (8,767) (3,294) 17,754
-------- -------- -------- --------
Total interest income.. 302,859 (23,781) (1,342) 277,736
-------- -------- -------- --------
LIABILITIES:
- - - ------------
Interest-bearing deposits:
NOW accounts.......... 9,831 (10,277) (1,311) (1,757)
Money market accounts. 3,086 (26,625) (3) (23,542)
Savings deposits...... 941 (4,528) (42) (3,629)
Time deposits:
Under $100,000....... 43,802 7,818 1,924 53,544
$100,000 and over.... 9,158 (158) 135 9,135
-------- -------- -------- --------
Total interest-
bearing deposits..... 66,818 (33,770) 703 33,751
Securities sold under
agreements to
repurchase............ 11,469 (5,681) (3,316) 2,472
-------- -------- -------- --------
Total interest expense. 78,287 (39,451) (2,613) 36,223
-------- -------- -------- --------
Net interest income.... $224,572 $ 15,670 $ 1,271 $241,513
======== ======== ======== ========
</TABLE>
The Bank's net interest income increased to $1.4 million during the six months
ended June 30, 1996 from $1.2 million during the six months ended June 30,
1995, an increase of $242,000 or 19.99%. The increase was primarily due to the
increase in the Bank's average total loans and the increased net interest
margin. The 14.66% volume increase in 1996 from 1995 in loan interest income
was primarily attributable to the 14.47% increase in average loans. The 12.94%
volume increase in 1996 from 1995 in investment interest income was primarily
attributable to the 13.05% increase in average investments. The 8.47% volume
increase in 1996 from 1995 in interest expense was primarily attributable to
the 8.51% increase in average interest-bearing liabilities. The interest rate
variance for loans primarily resulted from interest recoveries during the six
months ended June 30, 1996 for interest charged-off prior to December 31, 1995.
The yield on the investment portfolio
-24-
<PAGE> 25
decreased 45 basis points reflecting primarily the decrease in yields on
federal funds sold. The interest rates paid on interest-bearing liabilities
decreased 20 basis points as the Bank paid lower interest rates on new deposit
accounts than those maturing subsequent to 1995. The overall result was an
increase in the net interest margin to 4.97% during the six months ended June
30, 1996 from 4.74% during the six months ended June 30, 1995.
The increase (decrease) during the three months ended June 30, 1996 from the
three months ended June 30, 1995 in the Bank's interest income earned and
interest expense paid resulting from changes in volumes of, rates earned or
paid on, and the combined effect of changes in both volume and rate on, various
categories of interest-earning assets and interest-bearing liabilities were as
follows:
<TABLE>
<CAPTION>
VOLUME/
VOLUME RATE RATE TOTAL
--------- --------- --------- --------
<S> <C> <C> <C> <C>
ASSETS:
- - - -------
Loans:
Commercial............ $ 42,859 $ (7,714) $ (2,799) $ 32,346
Mortgage.............. 62,351 (21,575) (4,153) 36,623
Installment........... 22,943 (3,556) (2,481) 16,906
Other................. 7,451 (6,449) (882) 120
------- ------- ------- -------
Total loans.......... 135,604 (39,294) (10,315) 85,995
Investment securities. (9,835) (23,902) 845 (32,892)
Federal funds sold.... (16,316) (6,698) 1,958 (21,056)
------- ------- ------- -------
Total interest income.. 109,453 (69,894) (7,512) 32,047
------- ------- ------- -------
LIABILITIES:
- - - ------------
Interest-bearing deposits:
NOW accounts.......... 3,853 (4,128) (588) (863)
Money market accounts. 4,553 (11,487) (900) (7,834)
Savings deposits...... 532 (1,986) (105) (1,559)
Time deposits:
Under $100,000....... (22,612) (18,338) 432 (40,518)
$100,000 and over.... 2,311 (1,780) (214) 317
------- ------- ------- -------
Total interest-
bearing deposits..... (11,363) (37,719) (1,375) (50,457)
Securities sold under
agreements to
repurchase............ 3,355 (3,537) (1,025) (1,207)
------- ------- ------- -------
Total interest expense. (8,008) (41,256) (2,400) (51,664)
------- ------- ------- -------
Net interest income.... $117,461 $(28,638) $ (5,112) $ 83,711
======= ======= ======= =======
</TABLE>
The Bank's net interest income increased to $702,000 during the three months
ended June 30, 1996 from $619,000 during the three months ended June 30, 1995,
an increase of $83,000 or 13.53%. The increase was primarily due to the
increase in the Bank's average total assets and the increased net interest
margin. The 16.87% volume increase in 1996 from 1995 in loan interest income
was primarily attributable to the 16.64% increase in average loans.
-25-
<PAGE> 26
The 7.86% volume decrease in 1996 from 1995 in investment interest income was
primarily attributable to the 8.09% decrease in average investments. The 1.55%
volume decrease in 1996 from 1995 in interest expense was primarily
attributable to the 6.41% decrease in average time deposits under $100,000,
partially offset with the increase in the remaining interest-bearing
liabilities. The yield on the investment portfolio decreased 58 basis points
reflecting primarily the decrease in yields on federal funds sold. The
interest rates paid on interest-bearing liabilities decreased 49 basis points
as the Bank paid lower interest rates on new deposit accounts than those
maturing subsequent to 1995. The overall result was an increase in the net
interest margin to 4.85% during the three months ended June 30, 1996 from 4.56%
during the three months ended June 30, 1995.
As interest rates continue to change, the Bank's net interest margin may be
squeezed by the repricing of the interest-earning assets at different times
than the repricing of interest-costing liabilities.
PROVISION FOR LOAN LOSSES
The Bank made no provision for loan losses during the six and three months
ended June 30, 1996, as compared to $22,000 and $6,000 during the six and three
months ended June 30, 1995. Net charge-offs (recoveries) during the six months
ended June 30, 1996 were $(75,000) as compared to $494,000 during the six
months ended June 30, 1995. As of June 30, 1996 and December 31, 1995, the
allowance for loan losses as a percentage of loans net of unearned income was
2.31% and 2.33%, respectively, and as a percentage of non-accrual loans was
146.09% and 126.01%, respectively. See "--Financial Condition -- Allowance for
Loan Losses".
NON-INTEREST INCOME
Deposit service charge income decreased to $227,000 and $118,000 (or .82% and
.86% of average deposits) during the six and three months ended June 30, 1996,
from $248,000 and $124,000 (or .97% and .93% of average deposits) during the
six and three months ended June 30, 1995, or respective decreases of $21,000 or
8.34% and $6,000 or 5.08%. These decreases were primarily due to the decreased
volume in overdraft charges.
NON-INTEREST EXPENSE
Personnel expenses decreased to $611,000 during the six months ended June 30,
1996, from $616,000 during the six months ended June 30, 1995, or a decrease of
$5,000 or .73%. This decrease primarily resulted from a decrease in the number
of employees. Personnel expenses increased to $300,000 during the three months
ended June 30, 1996, from $295,000 during the three months ended June 30, 1995,
or an increase of $5,000 or 1.66%. This increase primarily
-26-
<PAGE> 27
resulted from increased compensation paid to existing employees. The monthly
average of full-time equivalent employees during the six and three months ended
June 30, 1996 was 33.00 and 32.63, respectively, as compared to 32.43 and 32.00
employees during the six and three months ended June 30, 1995, respectively.
As of June 30, 1996 and December 31, 1995, the Bank employed 30 and 31
full-time and three and two part-time employees, respectively.
Occupancy expense decreased to $273,000 and $137,000 during the six and three
months ended June 30, 1996,respectively, from $296,000 and $145,000 during the
six and three months ended June 30, 1995, or respective decreases of $23,000 or
7.78% and $8,000 or 5.68%. These decreases primarily resulted from lower
depreciation expense as assets became fully depreciated.
Legal expenses increased to $67,000 and $36,000 during the six and three months
ended June 30, 1996, respectively, from $59,000 and $33,000 during the six and
three months ended June 30, 1995, or respective increases of $8,000 or 14.13%
and $3,000 or 9.51%. These increases reflected attorney's costs for collection
efforts on certain loans charged-off in prior years.
Loan collection expenses, excluding legal expenses but including real estate
taxes, insurance, gain (loss) on the sale of other real estate owned, and
appraisal costs on real estate in foreclosure, decreased to $43,000 and $5,000
during the six and three months ended June 30, 1996, respectively, from $58,000
and $58,000 during the six and three months ended June 30, 1995, or respective
decreases of $15,000 or 24.57% and $53,000 or 91.21%. These decreases
primarily resulted from a reduction in write-downs and losses on disposal of
other real estate owned.
Supplies expense increased to $38,000 and $18,000 during the six and three
months ended June 30, 1996, respectively, from $27,000 and $13,000 during the
six and three months ended June 30, 1995, or respective increases of $11,000 or
38.53% and $5,000 or 40.81%. These increases were primarily due to increased
purchases of brochures.
FDIC insurance expense decreased to $17,000 and $8,000 during the six and three
months ended June 30, 1996, respectively, from $74,000 and $36,000 during the
six and three months ended June 30, 1995, or respective decreases of $57,000 or
77.56% and $28,000 or 76.84%. These decreases were primarily due to a decrease
in FDIC insurance rates.
Other operating expenses decreased to $241,000 and $117,000 during the six and
three months ended June 30, 1996, respectively, from $242,000 and $136,000
during the six and three months ended June 30, 1995, or respective decreases of
$1,000 or .58% and $19,000 or 13.84%.
-27-
<PAGE> 28
INCOME TAXES
During the six and three months ended June 30, 1996, the Company recorded a
$30,000 and $15,000 deferred income tax asset, respectively, resulting from the
corresponding reduction in the valuation allowance associated with the
Company's tax loss carry forward. During the six and three months ended June
30, 1995, the Company recorded no net income tax expense or benefit as the
Company was in a net operating loss carry forward position. At December 31,
1995, the Company had a net operating loss carry forward of $5.1 million for
Federal income tax reporting purposes.
PART II. - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Exhibits
27 Financial Data Schedule (For SEC Use Only)
Reports
During the three months ended June 30, 1996, the Company filed no reports on
Form 8-K.
-28-
<PAGE> 29
S I G N A T U R E S
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.
SOUTH FLORIDA BANK HOLDING CORPORATION
Date: July 31, 1996 By: /s/ William P. Valenti
--------------- -----------------------------------
William P. Valenti, President and
Chief Executive Officer
(Principal financial officer)
Date: July 31, 1996 By: /s/ Sharon Landel
--------------- -----------------------------------
Sharon Landel
Accounting Manager
(Principal accounting officer)
-29-
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SOUTH FLORIDA BANK HOLDING COMPANY FOR THE SIX MONTHS
ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,653,794
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,561,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 7,437,438
<INVESTMENTS-CARRYING> 8,069,430
<INVESTMENTS-MARKET> 7,985,000
<LOANS> 39,272,487
<ALLOWANCE> 927,700
<TOTAL-ASSETS> 61,911,410
<DEPOSITS> 54,450,833
<SHORT-TERM> 1,269,915
<LIABILITIES-OTHER> 377,006
<LONG-TERM> 0
0
0
<COMMON> 12,110
<OTHER-SE> 5,801,546
<TOTAL-LIABILITIES-AND-EQUITY> 61,911,410
<INTEREST-LOAN> 1,804,657
<INTEREST-INVEST> 512,437
<INTEREST-OTHER> 93,798
<INTEREST-TOTAL> 2,410,892
<INTEREST-DEPOSIT> 933,471
<INTEREST-EXPENSE> 955,199
<INTEREST-INCOME-NET> 1,455,693
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 3,828
<EXPENSE-OTHER> 1,320,450
<INCOME-PRETAX> 409,406
<INCOME-PRE-EXTRAORDINARY> 439,406
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 439,406
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
<YIELD-ACTUAL> 8.27
<LOANS-NON> 634,999
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 852,270
<CHARGE-OFFS> 49,056
<RECOVERIES> 124,486
<ALLOWANCE-CLOSE> 927,700
<ALLOWANCE-DOMESTIC> 927,700
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
