<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
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)
FLORIDA 65-0221393
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2017 MCGREGOR BOULEVARD, FORT MYERS, FLORIDA 33901
(Address of principal executive offices) (Zip Code)
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 May 10, 1999, there were outstanding 1,265,350 shares of the Registrant's
Common Stock.
1
<PAGE> 2
SOUTH FLORIDA BANK HOLDING CORPORATION
FORM 10-QSB - FOR THE QUARTER ENDED MARCH 31, 1999
INDEX
<TABLE>
<CAPTION>
PAGE
NO.
----
<S> <C> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited):
a) Consolidated Statements of Financial
Condition - March 31, 1999 and December 31, 1998 ............................ 3
b) Consolidated Statements of Income and Comprehensive Income -
Three Months Ended March 31, 1999 and 1998................................... 4
c) Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1999 and 1998................................... 5
d) Unaudited Notes to Consolidated Financial Statements..................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................................ 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K......................................................... 16
SIGNATURES........................................................................................... 17
</TABLE>
2
<PAGE> 3
SOUTH FLORIDA BANK HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
<S> <C> <C>
ASSETS
Cash and due from banks.................................. $ 3,496,716 $ 6,098,905
Federal funds sold....................................... 13,345,425 2,210,539
Investments available-for-sale........................... 17,425,371 21,489,269
Investments held-to-maturity (market value of
$2,983,307 and $4,861,149)......................... 2,959,417 4,835,962
Loans, net of allowance for loan losses of
$888,424 and $889,076.............................. 52,198,639 52,264,688
Accrued interest receivable.............................. 390,961 509,791
Premises and equipment, net.............................. 1,790,159 1,840,965
Other real estate owned.................................. 148,000 156,000
Other assets............................................. 730,994 774,303
----------- -----------
Total assets...................................... $92,485,682 $90,180,422
=========== ===========
LIABILITIES
Deposits:
Demand deposits................................... $20,528,805 $17,905,376
NOW accounts...................................... 13,295,274 14,431,425
Money market accounts............................. 12,281,131 11,315,901
Savings deposits.................................. 4,478,921 4,742,188
Time deposits under $100,000...................... 22,659,046 23,451,433
Time deposits $100,000 and over................... 5,090,029 5,178,991
----------- -----------
Total deposits.............................. 78,333,206 77,025,314
Securities sold under agreements to repurchase.......... 4,311,746 3,136,907
Accrued interest payable................................ 308,012 361,265
Other liabilities....................................... 130,893 313,367
----------- -----------
Total liabilities................................. 83,083,857 80,836,853
----------- -----------
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, 10,000,000 shares
authorized, 1,265,350 shares issued and
outstanding....................................... 12,654 12,654
Additional paid-in capital.............................. 10,639,771 10,639,771
Net unrealized securities gains......................... (107,172) 21,828
Retained deficit........................................ (1,143,428) (1,330,684)
----------- -----------
Total shareholders' equity........................ 9,401,825 9,343,569
----------- -----------
Total liabilities and shareholders' equity........ $92,485,682 $90,180,422
=========== ===========
</TABLE>
The accompanying Unaudited Notes to Consolidated Financial Statements
are an integral part of these financial statements.
3
<PAGE> 4
SOUTH FLORIDA BANK HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1999 1998
----------- ----------
<S> <C> <C>
INTEREST AND FEE INCOME FROM EARNING ASSETS:
Loans................................................... $1,095,784 $1,122,800
Federal funds sold...................................... 59,394 58,902
Investment securities................................... 381,833 353,325
---------- ----------
Total interest income............................. 1,537,011 1,535,027
---------- ----------
INTEREST EXPENSE:
Deposits:
NOW accounts...................................... 30,526 37,208
Money market accounts............................. 83,781 57,483
Savings deposits.................................. 16,601 21,218
Time deposits under $100,000...................... 307,854 391,773
Time deposits $100,000 and over................... 64,848 80,352
Other................................................... 28,714 9,027
---------- ----------
Total interest expense............................ 532,324 597,061
---------- ----------
NET INTEREST INCOME..................................... 1,004,687 937,966
PROVISION FOR LOAN LOSSES............................... -- --
---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,004,687 937,966
---------- ----------
NON-INTEREST INCOME:
Service charge income................................... 130,741 133,864
Other................................................... 19,936 20,984
---------- ----------
Total non-interest income......................... 150,677 154,848
---------- ----------
NON-INTEREST EXPENSES:
Personnel expense....................................... 362,753 331,633
Occupancy expense....................................... 152,308 147,917
Data and item processing................................ 84,874 52,155
Legal expenses.......................................... 41,352 13,512
Advertising............................................. 18,788 33,393
Supplies................................................ 14,623 18,235
Loan collection expenses................................ 1,364 26,980
Other................................................... 164,786 150,601
---------- ----------
Total non-interest expenses....................... 840,848 774,426
---------- ----------
INCOME BEFORE INCOME TAXES.............................. 314,516 318,388
PROVISION (BENEFIT) FOR INCOME TAXES.................... 127,260 (60,000)
---------- ----------
NET INCOME.............................................. 187,256 378,388
Net unrealized securities gains (losses)................ (129,000) 6,713
---------- ----------
COMPREHENSIVE INCOME.................................... $ 58,256 $ 385,101
========== ==========
NET INCOME PER SHARE:
Basic............................................. $ .15 $ .31
========== ==========
Diluted........................................... $ .15 $ .30
========== ==========
Weighted average number of common shares................ 1,265,350 $1,210,975
========== ==========
</TABLE>
The accompanying Unaudited Notes to Consolidated Financial Statements
are an integral part of these financial statements.
4
<PAGE> 5
SOUTH FLORIDA BANK HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Interest received....................................... $ 1,655,841 $ 1,680,625
Non-interest income..................................... 150,677 154,848
Interest paid........................................... (585,577) (664,978)
Personnel expenses...................................... (362,753) (331,633)
Other operating expenditures............................ (349,718) (413,340)
----------- -----------
Net cash provided by operating activities............... 508,470 425,522
----------- -----------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Investments available-for-sale:
Purchases......................................... -- (1,994,375)
Maturities........................................ 3,848,509 5,095,952
Investments held-to-maturity:
Purchases......................................... -- (503,750)
Maturities........................................ 1,873,588 1,292,947
Proceeds from the sales of other real estate owned...... 6,420 107,303
Decrease (increase) in loans............................ 66,049 (2,683,639)
Increase in premises and equipment...................... -- (635,766)
----------- -----------
Net cash provided by investing activities............... 5,794,566 678,672
----------- -----------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Increase (Decrease) in:
Demand deposits................................... 2,623,429 2,945,651
NOW accounts...................................... (1,136,151) (486,469)
Money market accounts............................. 965,230 1,146,308
Savings deposits.................................. (263,267) 634,970
Time deposits..................................... (881,349) (2,642,289)
Securities sold under agreements to repurchase.......... 1,174,839 155,805
Dividends paid.......................................... (253,070) (242,195)
----------- -----------
Net cash provided by financing activities............... 2,229,661 1,511,781
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS............... 8,532,697 2,615,975
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........ 8,309,444 6,999,112
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.............. $16,842,141 $ 9,615,087
=========== ===========
</TABLE>
The accompanying Unaudited Notes to Consolidated Financial Statements
are an integral part of these financial statements.
5
<PAGE> 6
SOUTH FLORIDA BANK HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
Reconciliation of net income to net cash provided by operating activities
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------
1999 1998
--------- ---------
<S> <C> <C>
Net income.............................................. $ 187,256 $378,388
Adjustments:
Depreciation and amortization..................... 61,089 45,853
Provision (benefit) for income taxes.............. 127,260 (60,000)
Gain on sale of other real estate owned........... 1,580 --
Decrease (increase) in:
Accrued interest receivable................. 118,830 145,598
Other assets................................ (4,888) (3,923)
Increase (decrease) in:
Accrued interest payable.................... (53,253) (67,917)
Other liabilities........................... 70,596 (12,477)
--------- --------
Net cash provided by operating activities............... $ 508,470 $425,522
========= ========
Supplemental schedule of non-cash activities:
Loans transferred to other real estate owned...... $ -- $111,788
Net unrealized securities gains (losses).......... (129,000) 6,713
</TABLE>
The accompanying Unaudited Notes to Consolidated Financial Statements
are an integral part of these financial statements.
6
<PAGE> 7
SOUTH FLORIDA BANK HOLDING CORPORATION
UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of South
Florida Bank Holding Corporation (the "Holding Corporation"), South Florida
Bank (the "Bank"), 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-QSB 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 March 31, 1999 and December 31, 1998, and the results of
operations for the three months ended March 31, 1999 and 1998, and cash flows
for the three months ended March 31, 1999 and 1998. The results of operations
for the three months ended March 31, 1999 are not necessarily indicative of the
results which may be expected for the entire fiscal year.
Net Income Per Share
For the three months ended March 31, 1999 and 1998, the
reconciliations of the denominators of the basic and diluted per-share
computations were as follows:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Common shares........................................... 1,265,350 1,210,975
Stock options........................................... 4,421 30,858
--------- ---------
Diluted shares.......................................... 1,269,771 1,241,833
========= =========
</TABLE>
NOTE B - INVESTMENTS AVAILABLE-FOR-SALE AND INVESTMENTS HELD-TO-MATURITY
At March 31, 1999 and December 31, 1998, 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)
------------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
INVESTMENTS AVAILABLE-FOR-SALE:
1999
- ----
U.S. Agency obligations due:
After one year through five years.... $ 4,999,718 $ 6,875 $ (34,248) $ 4,972,345
After five years through ten years... 2,033,715 1,053 (6,735) 2,028,033
After ten years...................... 10,564,795 -- (139,802) 10,424,993
----------- ------- --------- -----------
Total investments
available-for-sale............. $17,598,228 $ 7,928 $(180,785) $17,425,371
=========== ======= ========= ===========
1998
- ----
U.S. Agency obligations due:
After one year through five years.... $ 8,489,116 $19,650 $ (9,547) $ 8,499,219
After five years through ten years... 2,227,781 -- (21,679) 2,206,102
After ten years...................... 10,737,166 51,079 (4,297) 10,783,948
----------- ------- --------- -----------
Total investments
available-for-sale............. $21,454,063 $70,729 $ (35,523) $21,489,269
=========== ======= ========= ===========
</TABLE>
7
<PAGE> 8
<TABLE>
<CAPTION>
CARRYING
VALUE GROSS GROSS ESTIMATED
(AMORTIZED UNREALIZED UNREALIZED MARKET
COST) GAINS LOSSES VALUE
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
INVESTMENTS HELD-TO-MATURITY:
1999
- ----
U.S. Agency obligations due:
In one year or less.................. $ 384,884 $ 1,579 $ -- $ 386,463
After one year through five years.... 1,874,553 16,192 -- 1,890,745
Collateralized mortgage obligations due
after five years through ten years... 699,980 6,119 -- 706,099
---------- ------- ------- ----------
Total investments held-to-maturity......... $2,959,417 $23,890 $ -- $2,983,307
========== ======= ======= ==========
1998
- ----
U.S. Agency obligations due:
In one year or less.................. $ 692,715 $ -- $ (657) $ 692,058
After one year through five years.... 2,918,280 26,176 -- 2,944,456
After five years through ten years... 503,230 -- (2,136) 501,094
Collateralized mortgage obligations due
after five years through ten years... 721,737 1,804 -- 723,541
---------- ------- ------- ----------
Total investments held-to-maturity......... $4,835,962 $27,980 $(2,793) $4,861,149
========== ======= ======= ==========
</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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAPITAL RESOURCES
South Florida Bank Holding Corporation's (the "Holding Corporation")
total shareholders' equity was $9.4 million and $9.3 million as of March 31,
1999 and December 31, 1998, respectively. This increase was the result of
1999's net income of $187,000, offset by the $129,000 decrease in the net
unrealized securities gains (losses) to March 31, 1999 from December 31, 1998.
South Florida Bank's (the "Bank") total shareholder's equity was $9.0 million
and $8.9 million as of March 31, 1999 and December 31, 1998, respectively. The
increase in the Bank's shareholder's equity was the result of the Bank's net
income of $208,000 and the $129,000 decrease in the net unrealized securities
gains (losses) to March 31, 1999 from December 31, 1998.
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
as of the respective periods) ratios as compared to the ratios mandated by the
FDIC were as follows:
<TABLE>
<CAPTION>
TOTAL TIER 1
RISK-BASED RISK-BASED LEVERAGE
CAPITAL RATIO CAPITAL RATIO RATIO
------------- ------------- --------
<S> <C> <C> <C>
Well capitalized per FDIC
(minimum ratios)..................... 10.00% 6.00% 5.00%
Bank: December 31, 1998................... 17.45 16.19 10.00
March 31, 1999...................... 17.67 16.42 10.24
</TABLE>
8
<PAGE> 9
PENDING ACQUISITION
On October 22, 1998, the Holding Corporation entered into an Agreement
with Fifth Third Bancorp pursuant to which Fifth Third Bancorp would acquire
the Holding Corporation and the Bank. In the transaction, holders of Holding
Corporation common stock would receive .348 shares of Fifth Third Bancorp
common stock in exchange therefor. Consummation of the transaction is subject
to a number of conditions, including the receipt of regulatory approval and
approval of the agreement by the Holding Corporation shareholders. The Holding
Corporation anticipates the transaction will close in June 1999.
FINANCIAL CONDITION
Consolidated total assets of the Holding Corporation, the Bank, and
the Bank's wholly-owned subsidiaries, New Town Properties, Inc. and Valu Prop,
Inc. (collectively, the "Company") increased to $92.5 million as of March 31,
1999, from $90.2 million as of December 31, 1998, an increase of $2.3 million
or 2.56%. The Bank's advertising campaign, coupled with an officer calling
program, resulted in an increase in total assets and deposits. 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) increased, as discussed below, to $85.9 million as of March 31, 1999 from
$80.8 million as of December 31, 1998, an increase of $5.1 million or 6.35%.
Non-earning assets, comprised of cash and due from banks, premises and
equipment, accrued interest receivable, other real estate owned and other
assets, decreased to $6.6 million as of March 31, 1999 from $9.4 million as of
December 31, 1998, a decrease of $2.8 million or 30.10%. The decrease was
primarily due to a $2.6 million decrease in cash and due from banks during the
period.
Net loans decreased to $52.2 million as of March 31, 1999 from $52.3
million as of December 31, 1998, a decrease of $66,000 or .13%. Mortgage loans,
which increased $469,000, were the primary components of outstanding loans.
During the three months ended March 31, 1999 and 1998, the Bank originated $4.1
million and $4.9 million of loans and had loan repayments of $4.1 million and
$2.2 million, respectively. Management's strategy is to lend to small-to-medium
sized businesses.
The investment portfolio increased to $33.7 million as of March 31,
1999 from $28.5 million as of December 31, 1998, an increase of $5.2 million or
18.20%. The proceeds from the increase in deposits and repurchase agreements
were primarily used to fund the increase in investments.
Cash and due from banks decreased to $3.5 million as of March 31, 1999
from $6.1 million as of December 31, 1998, or a decrease of $2.6 million or
42.67%. This decrease resulted primarily from the decrease in funds on deposit
with other banks.
Premises and equipment decreased to $1,790,000 as of March 31, 1999
from $1,841,000 as of December 31, 1998, a decrease of $51,000 or 2.76%. This
decrease resulted primarily from depreciation expense during the three months
ended March 31, 1999.
Accrued interest receivable decreased to $391,000 as of March 31, 1999
from $510,000 as of December 31, 1998, a decrease of $119,000 or 23.31%. This
decrease resulted primarily from interest payments received on investment
securities during the three months ended March 31, 1999 which were accrued as
receivable at December 31, 1998.
Deposits increased to $78.3 million as of March 31, 1999 from $77.0
million as of December 31, 1998, an increase of $1.3 million or 1.70%. Core
deposits increased to $73.2 million as of March 31, 1999 from $71.8 million as
of December 31, 1998, an increase of $1.4 million or 1.94%. This increase in
core deposits primarily reflected deposit accounts opened as a result of the
advertising campaign and the officer calling program. As of March 31, 1999 and
December 31, 1998, the ratio of net loans to deposits was 66.64% and 67.85%,
respectively.
The financial statements and accompanying notes included in this
report are an integral part of this discussion and should be read in
conjunction with it.
9
<PAGE> 10
For the three months ended March 31, 1999 and 1998, 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
1999 1998
---------------------------------- ------------------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
----------- ---------- ------ ----------- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Loans:
Commercial.......................... $ 7,953,447 $ 181,688 9.26% $ 9,264,581 $ 219,449 9.61%
Mortgage(a) 36,454,259 724,685 8.06 33,462,373 729,880 8.85
Installment......................... 5,963,794 123,561 8.04 4,872,793 110,091 9.16
Other............................... 2,956,129 65,850 9.03 3,047,324 63,380 8.43
----------- ---------- ---- ----------- ---------- ----
Total loans, net of unearned income (b).. 53,327,629 1,095,784 8.33 50,647,071 1,122,800 8.99
Investment securities-all taxable........ 24,101,900 381,833 6.34 23,305,321 353,325 6.06
Federal funds sold....................... 5,169,423 59,394 4.66 4,190,612 58,902 5.70
----------- ---------- ---- ----------- ---------- ----
Total earning assets (c)................. 82,598,952 $1,537,011 7.55% 78,143,004 $1,535,027 7.97%
========== ==== ========== ====
Cash and due from banks.................. 4,993,743 3,118,985
Other assets............................. 3,141,072 2,755,219
Allowance for loan losses................ (889,552) (910,938)
----------- -----------
Total assets............................. $89,844,215 $83,106,270
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest bearing deposits:
NOW accounts........................ $13,086,554 $ 30,526 0.95% 10,788,155 $ 37,208 1.40%
Money market........................ 12,444,126 88,871 2.90 10,354,865 60,919 2.39
Savings............................. 4,591,275 16,601 1.47 3,888,826 21,218 2.21
Time deposits under $100,000........ 23,132,470 307,854 5.40 27,903,545 391,773 5.69
Time deposits $100,000 and over..... 5,188,489 64,848 5.07 5,880,679 80,352 5.54
----------- ---------- ---- ----------- ---------- ----
Total interest-bearing deposits.......... 58,442,914 508,700 3.53 58,816,070 591,470 4.08
Sweep accounts........................... 3,667,927 28,714 3.17 1,206,421 9,027 3.03
----------- ---------- ---- ----------- ---------- ----
Total interest-bearing liabilities....... 62,110,841 $ 537,414 3.51% 60,022,491 $ 600,497 4.06%
========== ==== ========== ====
Demand deposits.......................... 18,266,538 15,096,398
Other liabilities........................ 413,258 602,673
Shareholders' equity..................... 9,053,578 7,384,708
----------- -----------
Total.................................... $82,844,215 $83,106,270
=========== ===========
SPREAD AND INTEREST DIFFERENTIAL:
Interest rate spread..................... 4.04% 3.91%
==== ====
Excess of total earning assets over
total interest-bearing liabilities.. $20,488,111 $18,120,513
=========== ===========
Net yield on interest-earning assets..... $ 999,597 4.91% $ 934,530 4.85%
========== ==== ========== ====
</TABLE>
(a) Interest income on mortgage loans includes loan fees recognized as
income of $3,000 during each of the three months ended March 31,
1999 and 1998, respectively.
(b) Non-accrual loans were included in loans, net of unearned income.
(c) The Company has made no loans or investments that qualify for
tax-exempt treatment and, accordingly, has no tax exempt income.
10
<PAGE> 11
LOAN PORTFOLIO
The Bank's loan portfolio is primarily concentrated in commercial,
mortgage, and installment loans. As of March 31, 1999 and December 31, 1998,
the composition of the Bank's loan portfolio was as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------- -------------------------
% OF % OF
TOTAL TOTAL
AMOUNT LOANS AMOUNT LOANS
----------- ----- ----------- -----
<S> <C> <C> <C> <C>
Commercial...................................... $ 7,648,780 14.41% $ 8,085,544 15.21%
Mortgage: (a)
Construction............................... 1,211,209 2.28 823,817 1.55
Non-construction........................... 35,190,531 66.29 35,109,188 66.05
Installment (b)................................. 5,936,870 11.18 6,092,523 11.46
Other loans (c)................................. 3,099,673 5.84 3,042,692 5.73
----------- ----- ----------- ------
Total loans, net of unearned income............. 53,087,063 100.00% 53,153,764 100.00%
====== ======
Allowance for loan losses....................... (888,424) 1.67% (889,076) 1.67%
----------- ====== ----------- ======
Loans, net...................................... $52,198,639 $52,264,688
=========== ===========
</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 mobile homes,
automobiles, trucks, boats, and equipment.
(c) Other loans generally include credit card loans, equity lines to
individuals, deposit overdraft protection and deposit overdrafts.
ALLOWANCE FOR LOAN LOSSES
As of March 31, 1999, the allowance for loan losses was $888,000 or
1.67% of total loans, net of unearned income, as compared to $889,000 or 1.67%
as of December 31, 1998. For the three months ended March 31, 1999 and 1998,
the Bank's loan loss experience and its provision for loan losses were as
follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Average loans outstanding.................................. $53,327,629 $50,647,071
=========== ===========
Net loans at end of period................................. $52,198,639 $51,415,689
=========== ===========
Allowance for loan losses at beginning of period........... $889,076 $882,034
Loans charged-off:
Commercial........................................... 474 534
Installment.......................................... 4,504 683
Other loans.......................................... 2,607 1,758
----------- -----------
Total loans charged-off.................................... 7,585 2,975
----------- -----------
Recoveries of loans previously charged-off:
Commercial........................................... 1,180 40,213
Mortgage............................................. 2,910 1,966
Installment.......................................... 193 4,149
Other loans.......................................... 2,650 567
----------- -----------
Total recoveries........................................... 6,933 46,895
----------- -----------
Net loan charge-offs (recoveries).......................... 652 (43,920)
Provision charged to expense............................... -- --
----------- -----------
Allowance for loan losses at end of period................. $888,424 $925,954
=========== ===========
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Ratio of net charge-offs during period
to average net loans outstanding..................... .001% (.35)%
Allowance for loan losses as a percentage of loans,
net of unearned income at end of period.............. 1.67% 1.77%
</TABLE>
During 1999, three loans were charged-off, none of which exceeded
$5,000, and there were twelve loans with recoveries, none of which exceeded
$2,000.
Non-performing assets increased to $977,000 as of March 31, 1999, as
compared to $974,000 as of December 31, 1998, or an increase of $3,000 or .24%.
The increase during 1999 resulted from an increase in non-accruing loans of
$11,000 and sales of other real estate owned totaling $8,000. The ratio of
non-performing loans as a percent of total loans, net of unearned income, was
1.56% and 1.54% as of March 31, 1999 and December 31, 1998, respectively. The
allowance for loan losses as a percentage of non-performing loans was 107.21%
and 108.64% as of March 31, 1999 and December 31, 1998, respectively. As of
March 31, 1999 and December 31, 1998, the Bank's non-performing loans and
repossessed assets were as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------------- -------------------------
% OF % OF
TOTAL TOTAL
AMOUNT LOANS AMOUNT LOANS
----------- ----- ----------- -----
<S> <C> <C> <C> <C>
Non-accruing loans:
Under 90 days delinquent ................. $ 20,305 .04% $ 30,778 .06%
90 or more days delinquent................ 808,385 1.52 787,621 1.48
---------- ---- -------- ----
Total non-accruing loans....................... $ 828,690 1.56% $818,399 1.54%
========== ==== ======== ====
Total real estate owned........................ $ 148,000 $156,000
---------- --------
Total non-performing assets.................... 976,690 974,399
========== ========
Loans delinquent and accruing:
30 to 59 days............................. $ 364,541 .69% $ 19,417 .04%
60 to 89 days............................. 10,689 .02 7,150 .01
Over 90 days.............................. 15,303 .03 -- --
---------- ---- -------- ----
Total $ 390,533 .74% $ 26,567 .05%
========== ==== ======== ====
Total delinquencies 30 days and over........... $1,219,223 2.30% $844,966 1.59%
========== ==== ======== ====
</TABLE>
As of March 31, 1999 and December 31, 1998, the Bank did not have any
troubled debt restructurings. As of March 31, 1999, $15,000 of loans were over
90 days delinquent and still accruing interest. Non-accruing loans totaled
$829,000 as of March 31, 1999 as compared to $818,000 as of December 31, 1998,
an increase of $11,000 or 1.26%. The largest non-accruing loan as of March 31,
1999 was an $580,000 first mortgage loan secured with commercial real estate.
As of March 31, 1999, this loan was 200 days past due. The second largest
non-accruing loan as of March 31, 1999 was a $106,000 first mortgage loan
secured with commercial real estate. As of March 31, 1999, this loan was 191
days past due.
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 1999.
12
<PAGE> 13
LIQUIDITY
During the three months ended March 31, 1999 and 1998, investing
activities provided $5.8 million and $679,000, respectively, of cash. During
the three months ended March 31, 1999 and 1998, financing activities provided
$2.2 million and $1.5 million, respectively, of cash. These activities
primarily resulted from the Bank focusing its efforts on growth through an
advertisement campaign and an officer calling campaign.
RESULTS OF OPERATIONS
SUMMARY
The Company's net income was $187,256 for the three months ended March
31, 1999, or $.15 per basic share, as compared to $378,388 for the three months
ended March 31, 1998, or $.31 per basic share. For the three months ended March
31, 1999 and 1998, the Company's performance ratios (annualized) were as
follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Return on average assets................................... .83% 1.82%
Return on average equity................................... 8.27 20.50
Average equity to average assets................... ....... 10.08 8.89
</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.
The increase (decrease) during the three months ended March 31, 1999
from the three months ended March 31, 1998 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................................ $(125,952) $ (31,672) $119,863 $(37,761)
Mortgage.................................. 264,661 (262,279) (7,577) (5,195)
Installment............................... 99,965 (37,043) (49,452) 13,470
Other..................................... (7,692) 18,256 (8,094) 2,470
--------- --------- -------- --------
Total loans......................... 230,982 (312,738) 54,740 (27,016)
Investment securities........................... 48,307 63,553 (83,352) 28,508
Federal funds sold.............................. 55,796 (43,614) (11,690) 492
--------- --------- -------- --------
Total interest income........................... 335,085 (292,799) (40,302) 1,984
--------- --------- -------- --------
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
VOLUME/
VOLUME RATE RATE TOTAL
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
LIABILITIES:
Interest-bearing deposits:
NOW accounts.............................. 32,149 (48,842) 10,011 (6,682)
Money market accounts..................... 49,848 52,849 (74,745) 27,952
Savings deposits.......................... 15,544 (29,025) 8,864 (4,617)
Time deposits:
Under $100,000...................... (271,670) (82,831) 270,582 (83,919)
$100,000 and over................... (38,357) (27,792) 50,645 (15,504)
--------- --------- --------- --------
Total interest-bearing deposits........... (212,486) (135,641) 265,357 (82,770)
Securities sold under agreements
to repurchase............................. 74,696 1,693 (56,702) 19,687
--------- --------- --------- --------
Total interest expense.......................... (137,790) (133,948) 208,655 (63,083)
--------- --------- --------- --------
Net interest income............................. $ 472,875 $(158,851) $(248,957) $ 65,067
========= ========= ========= ========
</TABLE>
The Bank's net interest income increased to $1,005,000 during the
three months ended March 31, 1999 from $938,000 during the three months ended
March 31, 1998, an increase of $67,000 or 7.11%. The increase was primarily due
to the increase in average interest-earning assets and average interest-bearing
liabilities. The 20.57% volume increase in 1999 from 1998 in loan interest
income was primarily attributable to the 5.03% increase in average loans. The
25.25% volume increase in 1999 from 1998 in investment interest income was
primarily attributable to the 6.07% increase in average investments. The 22.95%
volume decrease in 1999 from 1998 in interest expense was primarily
attributable to a shift in the deposit mix from time deposits to NOW, money
market and savings accounts. The yield on the loan portfolio decreased 66 basis
points, while the yield on the investment portfolio increased 3 basis points.
The interest rates paid on interest-bearing liabilities decreased 55 basis
points. The result was an increase in the net interest margin to 4.91% during
1999 from 4.85% during 1998.
PROVISION FOR LOAN LOSSES
The Bank made no provision for loan losses during the three months
ended March 31, 1999 and 1998. Net loan charge-offs (recoveries) during the
three months ended March 31, 1999 and 1998 were $652 and $(43,920),
respectively. The amount provided for loan losses was 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. As of March 31, 1999 and December 31, 1998, the allowance for loan
losses as a percentage of loans, net of unearned income was 1.67% for both
periods and as a percentage of non-accrual loans was 107.21% and 108.64%,
respectively.
NON-INTEREST INCOME
Deposit service charge income decreased $3,000 or 2.33% to $131,000
(or .17% of average deposits) during the three months ended March 31, 1999,
from $134,000 (or .18% of average deposits) during the three months ended March
31, 1998. This decrease primarily resulted from a decrease in the volume of
overdraft charges.
NON-INTEREST EXPENSE
Personnel expenses increased to $363,000 during the three months ended
March 31, 1999 from $332,000 during the three months ended March 31, 1998, an
increase of $31,000 or 9.38%. This increase primarily resulted from
compensation increases for existing employees. The monthly average of full-time
equivalent employees during the three months ended March 31, 1999 was 37.3 as
compared to 36.4 employees during the three months ended March 31, 1998. As of
March 31, 1999 and December 31, 1998, the Bank employed 35 and 37 full-time and
4 and 4 part-time employees, respectively.
14
<PAGE> 15
Data and item processing increased to $85,000 during the three months
ended March 31, 1999 from $52,000 for the three months ended March 31, 1998, an
increase of $33,000 or 62.73%. This increase is primarily the result of an
increase in the Bank's customer deposit base.
Legal expense increased to $41,000 during the three months ended March
31, 1999 from $14,000 during the three months ended March 31, 1998, an increase
of $27,000 or 206.04%. This increase primarily resulted from an increase in
legal expenses associated with the pending acquisition of the Bank.
Advertising expense decreased to $19,000 during the three months ended
March 31, 1999 from $33,000 during the three months ended March 31, 1998, a
decrease of $14,000 or 43.74%. This decrease primarily resulted from an overall
decrease in the cost of the advertising campaign.
Loan collection expenses, excluding legal expenses but including real
estate taxes, insurance, gains and losses on the sale of other real estate
owned, and appraisal costs on real estate in foreclosure, decreased to $1,000
during the three months ended March 31, 1999 from $27,000 during the three
months ended March 31, 1998, a decrease of $26,000 or 94.94%. This decrease
primarily resulted from the decrease in other real estate owned.
Other operating expenses increased to $165,000 during the three months
ended March 31, 1999 from $151,000 during the three months ended March 31,
1998, an increase of $14,000 or 9.42%. This increase primarily resulted from
the increased costs associated with the increase in the size of the Bank.
INCOME TAXES
During the three months ended March 31, 1999, the Company had a
provision for income taxes of $127,000 compared to a benefit for income taxes
of $60,000 during the three months ended March 31, 1998. The income tax benefit
resulted from recording deferred income tax assets resulting from the
corresponding reduction in the valuation allowance associated with the
Company's tax loss carry forward.
YEAR 2000 ISSUES
Overview: The Year 2000 issue is the result of computer programs being
written using two digits rather than four to define the applicable year. As a
result, date-sensitive software and/or hardware may recognize a date using "00"
as the year 1900 rather than the year 2000. This could result in a system
failure or other disruption of operations and may impede normal business
activities. In June 1996, the Federal Financial Institutions Examination
Council ("FFIEC") alerted the banking industry of the serious challenges that
would be encountered with the Year 2000 issue. The FDIC has also implemented a
plan to require compliance with Year 2000 issues and regularly reviews the
Bank's progress. In accordance with FFIEC and FDIC recommendations, the Bank
has implemented a five-phase approach to address the Year 2000 problem.
State of Readiness: In accordance with FDIC guidelines, the Bank has
developed a five-phase comprehensive plan which it believes will result in
timely and adequate modifications of its systems and technology to address its
Year 2000 issues, which contemplates all system conversions and testing to be
substantially completed by December 31, 1999. The Bank has completed an
assessment of its mission-critical and other systems for Year 2000 compliance
and is currently in the third and fourth of five phases of compliance
("renovation and validation"), as defined by the FFIEC. The Bank has tested its
non-information technology systems, such as environmental and alarm systems,
and found them to be Year 2000 compliant.
To determine the readiness of its customers, the Bank has sent a
questionnaire to, and received responses from, its significant borrowers to
determine the extent of risk created by any failure by them to remediate their
own Year 2000 issues. The Bank's strategic plan provides, if necessary, a Year
2000 contingency reserve of not less than $10,000 for borrowers with high Year
2000 risks. The Bank will reassess each significant borrowing customer's risk
on a regular basis.
15
<PAGE> 16
To determine the readiness of its vendors, the Bank has sent out a
letter to each significant vendor inquiring about their compliance with Year
2000. For those vendors that have responded that they are Year 2000 compliant
and that the Bank has determined to not have a material impact on its
operations, no further work is performed. For those vendors that have responded
they are working towards Year 2000 compliance and that the Bank has determined
to be significant, including mission-critical vendors, the Bank plans to follow
up on a regular basis through 1999. These vendors have advised that they expect
to be Year 2000 compliant before December 31, 1999. If those vendors do not
demonstrate compliance by a certain date, the Bank will seek other
alternatives, which may include seeking replacement vendors.
Costs and Risks: Most of the Bank's computer hardware and software
applications were modified or replaced in order to both upgrade its existing
systems and maintain functionality as the Year 2000 approaches. The Bank had
spent approximately $214,000 as of March 31, 1999 to address its Year 2000
issues and upgrade its systems in general. Although additional costs will
likely be incurred in preparation for the Year 2000, the Bank does not expect
such costs to have a material impact on its financial condition or results of
operations.
Ultimately, the potential impact of the Year 2000 issue will depend
not only on the corrective measures the Bank undertakes, but also on the way in
which the Year 2000 issue is addressed by governmental agencies, businesses and
other entities who receive data from the Bank, or whose financial condition or
operational capability is important to the Bank, such as suppliers or
customers. At worst, the Bank's customers and vendors will face severe Year
2000 issues, which may cause borrowers to become unable to service their loans.
The Bank may also be required to replace non-compliant vendors with more
expensive Year 2000-compliant vendors. At this time, the Bank cannot determine
the financial effect on its operations if significant customer and/or vendor
remediation efforts are not resolved in a timely manner.
Contingency Plan: The Bank has created a contingency plan that would
take effect should there be circumstances preventing timely implementation. The
Bank intends to review mission-critical systems again by the end of the second
quarter of 1999 and, if such systems have not become Year 2000 compliant, will
retain a new vendor to resolve these issues. The Bank has also identified
alternate procedures to achieve a successful resumption of business in case of
mission-critical system failures, including manual systems and supplemental
power capability.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
EXHIBITS
27 - Financial Data Schedule (for SEC use only).
REPORTS ON FORM 8-K
During the three months ended March 31, 1999, the Company filed no reports
on Form 8-K.
16
<PAGE> 17
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: May 10, 1999 By: /s/ William P. Valenti
------------- -----------------------------------
William P. Valenti, President
and Chief Executive Officer
(Principal executive officer
and Principal financial officer)
17
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SOUTH FLORIDA BANK HOLDING CORPORATION FOR THE QUARTER
ENDED MARCH 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 3,496,716
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 13,345,425
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 17,425,371
<INVESTMENTS-CARRYING> 2,959,417
<INVESTMENTS-MARKET> 2,983,307
<LOANS> 53,087,063
<ALLOWANCE> 888,424
<TOTAL-ASSETS> 92,485,682
<DEPOSITS> 78,333,206
<SHORT-TERM> 4,311,746
<LIABILITIES-OTHER> 438,905
<LONG-TERM> 0
0
0
<COMMON> 12,654
<OTHER-SE> 9,389,171
<TOTAL-LIABILITIES-AND-EQUITY> 92,485,682
<INTEREST-LOAN> 1,095,784
<INTEREST-INVEST> 381,833
<INTEREST-OTHER> 59,394
<INTEREST-TOTAL> 1,537,011
<INTEREST-DEPOSIT> 503,610
<INTEREST-EXPENSE> 532,324
<INTEREST-INCOME-NET> 1,004,687
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 164,786
<INCOME-PRETAX> 314,516
<INCOME-PRE-EXTRAORDINARY> 314,516
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 187,256
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.15
<YIELD-ACTUAL> 4.91
<LOANS-NON> 828,690
<LOANS-PAST> 15,303
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 889,076
<CHARGE-OFFS> 7,585
<RECOVERIES> 6,933
<ALLOWANCE-CLOSE> 888,424
<ALLOWANCE-DOMESTIC> 888,424
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
