<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 0-20960
Hamilton Bancorp Inc.
(Exact name of Registrant as specified in its charter)
Florida65-0149935
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
3750 N.W. 87th Avenue
Miami, Florida 33178
(Address of principal executive offices) (Zip code)
(305) 717-5500
(Registrant's telephone number including area code)
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____ No X
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes ____ No ____
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
Title Outstanding
Common 9,827,949
<PAGE>
PART I. FINANCIAL INFORMATION
HAMILTON BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
--------------------- ----------------
1997 1996
--------------------- ----------------
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
CASH AND DEMAND DEPOSITS WITH OTHER BANKS $23,578 $14,806
FEDERAL FUNDS SOLD 23,000 18,300
--------------- ----------
Total cash and cash equivalents 46,578 33,106
INTEREST EARNING DEPOSITS WITH OTHER BANKS 90,895 80,477
SECURITIES AVAILABLE FOR SALE 62,177 29,020
LOANS-NET 854,150 527,279
DUE FROM CUSTOMERS ON BANKERS ACCEPTANCES 76,511 60,761
DUE FROM CUSTOMERS ON DEFERRED PAYMENT LETTERS OF CREDIT 3,744 7,343
PROPERTY AND EQUIPMENT-NET 4,456 3,460
ACCRUED INTEREST RECEIVABLE 12,057 6,471
GOODWILL-NET 2,052 2,183
OTHER ASSETS 3,816 5,470
--------------- ---------------
TOTAL $1,156,436 $755,570
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS $976,347 $638,641
BANKERS ACCEPTANCES OUTSTANDING 76,511 60,761
DEFERRED PAYMENT LETTERS OF CREDIT OUTSTANDING 3,744 7,343
OTHER LIABILITIES 6,251 5,025
--------------- ---------------
Total liabilities 1,062,853 711,770
--------------- ---------------
STOCKHOLDERS' EQUITY:
Preferred stock, non-voting, non-cumulative, 14% maximum dividend rate, par
value $.01 per share, 2,000,000 shares authorized, 101,207 shares issued and
outstanding at December 31, 1996 0 1
Common stock, $.01 par value, 75,000,000 shares authorized, 5,205,030 shares
issued and outstanding at December 31, 1996 and 9,827,949 shares issued
and outstanding at September 30, 1997. 98 52
Capital surplus 56,158 17,317
Retained earnings 37,306 26,432
Net unrealized gain (loss) on securities available for sale, net of taxes 21 (2)
--------------- ---------------
Total stockholders' equity 93,583 43,800
--------------- ---------------
TOTAL $1,156,436 $755,570
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
HAMILTON BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
--------------------------------- ----------------------------------
1997 1996 1997 1996
--------------- -------------- ------------ ------------------
INTEREST INCOME: (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
-------------- -------------- ------------ ------------------
Loans, including fees $18,841 $12,536 $48,027 $34,545
Deposits with other banks 2,242 1,803 6,863 4,279
Securities 1,127 454 2,058 1,525
Federal funds sold 357 161 791 863
--------------- -------------- ------------ ------------------
Total 22,567 14,954 57,739 41,212
INTEREST EXPENSE:
Deposits 11,969 7,822 30,160 21,007
Federal funds purchased 64 14 173 14
--------------- -------------- ------------ ------------------
Total 12,033 7,836 30,333 21,021
--------------- -------------- ------------ ------------------
NET INTEREST INCOME 10,534 7,118 27,406 20,191
PROVISION FOR CREDIT LOSSES 2,050 1,490 4,989 2,440
--------------- -------------- ------------ ------------------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT
LOSSES 8,484 5,628 22,417 17,751
NON-INTEREST INCOME:
Trade finance fees and commissions 3,149 2,497 9,055 6,494
Capital market fees, net 808 81 1,372 82
Customer service fees 146 215 567 1,056
Other 75 67 324 170
--------------- -------------- ------------ ------------------
Total 4,178 2,860 11,318 7,802
--------------- -------------- ------------ ------------------
OPERATING EXPENSES:
Employee compensation and benefits 3,267 2,609 8,796 7,187
Occupancy and equipment 840 711 2,318 2,179
Other 1,338 1,410 5,209 4,363
--------------- -------------- ------------ ------------------
Total 5,445 4,730 16,323 13,729
--------------- -------------- ------------ ------------------
INCOME BEFORE PROVISION FOR INCOME TAXES 7,217 3,758 17,412 11,824
PROVISION FOR INCOME TAXES 2,587 1,418 6,219 4,505
--------------- -------------- ------------ ------------------
NET INCOME $4,630 $2,340 $11,193 $7,319
=============== ============== ============ ==================
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARES
PRIMARY $0.45 $0.43 $1.27 $1.35
=============== ============== ============ ==================
FULLY DILUTED $0.45 $0.43 $1.27 $1.35
=============== ============== ============ ==================
AVERAGE WEIGHTED SHARES OUTSTANDING:
PRIMARY 10,194,078 5,430,030 8,828,242 5,430,030
=============== ============== ============ ==================
FULLY DILUTED 10,199,105 5,430,030 8,833,270 5,430,030
=============== ============== ============ ==================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
HAMILTON BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Net Unrealized
(Loss) Gain on
Securities
Preferred Stock Common Stock Stockholders'
------------------------ ----------------- Capital Retained Available for Total
Shares Amount Shares Amount Surplus Earnings Net of Taxes Equity
---------- --------- ------------------ --------------------------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 (audited) 101,207 $1 5,205,030 $52 $17,317 $26,432 ($2) $43,800
Conversion of preferred stock for
common stock, with 6.5 to 1 split (101,207) (1) 466,160 5 (4) 0
Conversion of warrants with 6.5 to 1 split 1,396,759 14 (14) 0
Sale of 2,760,000 shares of common
stock in public offering, net 2,760,000 27 38,859 38,886
Net change in unrealized gain on
securities available for sale, net of taxes 2 23
Net income for the nine months ended
September 30, 1997 11,193 11,193
Cash dividends on preferred stock, net
of withholding taxes (319) (319)
---------- ------- ------------ ----- -------- --------- ------------ --------
Balance as of September 30, 1997 (unauditee) 0 $0 9,827,949 $98 $56,158 $37,306 $21 $93,583
========== ======== ============ ===== ========= ========== =====================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
HAMILTON BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
----------------------------------------------
1997 1996
--------------------- ---------------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $11,193 $7,319
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 760 811
Provision for credit losses 4,989 2,440
Deferred tax (benefit) provision (1,248) 84
Proceeds from the sale of bankers acceptances and
loan participations, net of loan participations
purchased 48,808 71,633
Increase in accrued interest receivable and other assets (3,529) (4,172)
(Decrease) increase in other liabilities 1,227 (339)
--------------------- ---------------------
Net cash provided by operating activities 62,200 77,776
--------------------- ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in interest-earning deposits with other banks (10,418) (31,471)
Purchase of securities available for sale (151,787) (46,288)
Proceeds from maturities of securities held to maturity 0 20,897
Proceeds from sales and maturities of securities available
for sale 119,494 19,889
Increase in loans-net (380,668) (184,521)
Purchases of property and equipment-net (1,622) (417)
--------------------- ---------------------
Net cash used in investing activities (425,001) (221,911)
--------------------- ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in deposits-net 337,706 140,352
Net Proceeds from issuance of common stock IPO 38,886 0
Cash dividends on preferred stock (319) (531)
--------------------- ---------------------
Net cash provided by financing activities 376,273 139,821
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 13,472 (4,314)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE
PERIOD 33,106 46,589
--------------------- ---------------------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $46,578 $42,275
===================== =====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid during the period $28,915 $21,178
Income taxes paid during the period $5,977 $4,285
</TABLE>
See accompanying notes to consolidated statement.
4
<PAGE>
HAMILTON BANCORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 1: Basis of Presentation
The consolidated statements of condition for Hamilton Bancorp and Subsidiary
(the "Company") as of September 30, 1997 and December 31, 1996, the related
consolidated statements of income, stockholders' equity and the cash flows
for the nine months ended September 30, 1997 and 1996 included in the Form
10Q have been prepared by the Company in conformity with the instructions
to Form 10Q and Article 10 of Regulation S-X and, therefore, do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. The statements are unaudited
except for the consolidated statement of condition as of December 31, 1996.
The accounting policies followed for interim financial reporting are
consistent with the accounting policies set forth in Note 1 to the
consolidated financial statements appearing in the Company's registration
statement on Form S-1 for the year ended December 31, 1996 as filed with the
Securities and Exchange Commission.
NOTE 2:
The Company completed its initial public offering of 2,400,000 shares of
common stock on March 31, 1997. In connection with the initial public
offering, the Board amended and restated the articles of incorporation of
the Company authorizing 75,000,000 shares of common stock and 10,000,000
shares of "blank check" preferred stock. In addition, the Board approved
a 6.5 for 1 common stock split and a reorganization of the capital
structure of the Company consisting of (i) the conversion of all
outstanding shares of the Company's preferred Shares (Series B and C) into
466,168 shares (post-stock split) of common stock and (ii) the issuance of an
aggregate of 1,396,761 shares (post stock split) of common stock for all
outstanding warrants to purchase shares of common stock of Hamilton Bank, N.A.
These actions were approved by the shareholders in January 1997 and consummated
in March 1997. Following the public offering, on April 9, 1997 the Company
issued 360,000 additional shares of common stock upon the exercise of the
over-allotment option granted to Oppenheimer and Company, Inc., and NatWest
Securities Ltd.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
Hamilton Bancorp, Inc. ("Bancorp") is a bank holding company which conducts
operations principally through its 99.8% subsidiary Hamilton Bank, N.A. (the
"Bank"). The Bank is a national bank which specializes in financing foreign
trade between the United States, South and Central America and the
Caribbean, (collectively the "Region"). The Bank has a network of seven
FDIC-insured branches in Florida, with locations in Miami, Sarasota, Tampa,
West Palm Beach and Winter Haven.
Throughout this discussion, Bancorp and its subsidiary are collectively referred
to as the "Company".
This Form 10-Q contains certain "forward-looking statements" within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), which represents the Company's expectations or beliefs,
including, but not limited to, statements concerning industry performance
and the Company's operations, performance, financial condition, growth and
strategies. For this purpose, any statements contained in this Form that are
not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the generality of the foregoing, words
such as "may," "will," "expect," "believe," "anticipate," "intend,"
"could," "estimate," or "continue," or the negative or other
variations thereof or comparable terminology are intended to identify
forward-looking statements. These statements by their nature involve substantial
risks and uncertainties, certain of which are beyond the Company's control, and
actual results may differ materially depending on a variety of important
factors, including regional economic conditions, potential political
instability, credit risks collateral-related risks, concentration of
cross-border lending activities, potential impact of changes in interest rates,
ability of the Company to continue this growth strategy, concentration of
deposits, dependence on management and key personnel and risks associated with
competition, supervision and regulation.
The Company cautions that the factors described above could cause actual
results or outcomes to differ materially from those expressed in any
forward-looking statements of the Company made by or on behalf of the Company.
Any forward-looking statement speaks only as of the date on which such
statement is made, and the Company undertakes no obligation to
update any forward-looking statement or statements to reflect events or
circumstances after the date on which such statement is made or to reflect the
occurrence of unanticipated events. New factors emerge from time to time, and it
is not possible for management to predict all of such factors or the effect that
any such factor may have on the Company's business.
<PAGE>
FINANCIAL CONDITION - September 30, 1997 vs. December 31,1996.
Total consolidated assets increased $400.9 million, or 53 %, during the
first nine months of 1997, which included an increase of $375.1 million in
interest earning assets and an increase $25.7 million in non-interest earning
assets. The increase in consolidated assets reflects increases of $326.9 million
in loans-net and $10.4 million in interest-earning deposits with other banks.
These increases were principally funded by the deployment of the capital raised
during the initial public offering and increases in retained earnings, deposits
from the branch network, time deposits due to banks and deposits due to other
financial institutions. The Company opened a branch in Sarasota during the first
quarter, and a branch in West Palm Beach early in the second quarter that are
intended to further support future asset growth.
Cash, Demand Deposits withOther Banks and Federal Funds Sold
Cash, demand deposits with other banks and federal funds sold are considered
cash and cash equivalents. Balances of these items fluctuate daily
depending on many factors which include or relate to the particular banks
that are clearing funds, loan payoffs, deposit gathering and reserve
requirements. Cash, demand deposits with other banks and federal funds
sold were $46.6 million at September 30, 1997 compared to $33.1 million at
December 31, 1996.
Investment Securities and Interest-Earning Deposits with Other Banks
Interest-earning deposits with other banks increased to $90.9
million at September 30, 1997 from $80.5 million at December 31, 1996. These
deposits are placed with correspondent banks in the Region, generally on a short
term basis (less than 365 days), to increase yields and enhance relationships
with the correspondent banks. The level of such deposits has grown as the
overall assets of the Company have increased during the nine months ended
September 30, 1997. The short term nature of these deposits allows the Company
the flexibility to redeploy these assets into higher yielding loans which are
largely related to the financing of trade.
Investment securities increased to $62.2 million at September 30, 1997 from
$29.0 million at December 31, 1996. The increase has been primarily in foreign
government bills and U.S. Treasury bill obligations. These investments are
short term and allow the Company the flexibility of liquidity and the
ability to convert these assets into higher yielding loans as these become
accessible.
Loans
The Company's loan portfolio increased by $326.9 million, or 62%, during the
first nine months of 1997 in relation to the year ended December 31, 1996.
This was primarily due to the increased demand for loans and trade finance
as a result of perceived economic stability in the Region, as well as the
growth in trade between the United States and the Region. Furthermore, the
Company's additional capital resulted in an increase in the banks legal
lending limit which allowed the bank to increase lending to the existing
customer base. Commercial-domestic loans increased by $64.4 million and
loans to banks and other financial institutions - foreign increased by $183.2
million. Details on the loans by type are shown in the table below. At
September 30, 1997 approximately 26% of the Company's portfolio consisted
of loans to domestic borrowers and 74% of the Company's portfolio consisted
of loans to foreign borrowers. The Company's loan portfolio is relatively
short-term, as approximately 68% of loans at September 30, 1997 were
short-term trade finance loans with average maturities of approximately 180
days. See "Interest Rate Sensitivity Report". The following table sets forth the
loans by type of the Company's loan portfolio at the dates indicated.
The following table sets forth the loans by type of the Company's loan
portfolio at the dates indicated.
Loans by Type
(in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
Domestic:
Commercial (1) $174,758 $110,322
Acceptances discounted 36,750 23,314
Residential mortgages 11,428 10,610
Installment 259 428
Subtotal Domestic 223,195 144,674
Foreign:
Banks and other financial institutions 312,577 129,376
Commercial and industrial (1) 260,255 179,824
Acceptances discounted 69,228 80,935
Government and official institutions 0 750
Subtotal Foreign 642,060 390,885
Total loans $865,255 $535,559
</TABLE>
(1) Includes pre-export financing, warehouse receipts and refinancing of
letters of credits.
<PAGE>
The following tables reflect both the Company's growth and diversification
in financing trade flows between the United States and the Region in terms of
loans by country and cross-border outstanding by country. The aggregate amount
of the Company's crossborder outstanding by primary credit risk include cash and
demand deposits with other banks, interest earning deposits with other banks,
investment securities, due from customers on bankers acceptances, due from
customers on deferred payment letters of credit and loans-net. Exposure levels
in any given country at the end of each period may be impacted by the flow of
trade between the United States (and to a large extent Florida) and the given
countries, as well as the price of the underlying goods or commodities being
financed.
At September 30, 1997 approximately 40.78% in principal amount of the Company's
loans were outstanding to borrowers in five countries other than the United
States: Panama (8.70%), Guatemala (8.61%), Ecuador (8.53%), Peru (8.39%)
and Brazil (6.55%).
Loans by Country
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, 1997 % of December 31, 1996 % of
Total Total
Country Amount Loans Amount Loans
<S> <C> <C> <C> <C>
United States $223,195 25.46% $144,674 27.01%
Argentina 43,588 5.06 35,241 6.58
Bolivia 21,325 2.48 15,815 2.95
Brazil 56,420 6.55 27,255 5.09
British West Indies(2) - - 14,740 2.75
Colombia 13,673 1.59 - -
Dominican Republic 41,559 4.82 9,450 1.76
Ecuador 73,499 8.53 29,799 5.56
El Salvador 41,158 4.78 28,472 5.32
Guatemala 74,134 8.61 79,483 14.84
Honduras 38,307 4.45 24,277 4.53
Jamaica (2) - - 10,971 2.05
Panama 74,922 8.70 50,553 9.44
Peru 72,280 8.39 26,658 4.98
Russia 17,500 2.03 - -
Venezuela 22,652 2.63 10,245 1.91
Other (1) 51,043 5.93 27,926 5.31
Total $865,255 100.00% $535.559 100.00%
</TABLE>
(1) Other consists of loans to borrowers in countries in which loans did
not exceed 1% of total assets.
(2) These countries had loans which did not exceed 1% of total assets.
<PAGE>
At September 30, 1997 approximately 32.4% of the Company's cross-border
outstanding were outstanding to borrowers in five countries other than the
United States: Ecuador (7.8%), Brazil (6.8%), Guatemala (6.3%), Peru (6.2%)
and Panama (5.3%).
Total Cross-Border Outstanding by Country
(Dollars in million)
<TABLE>
<CAPTION>
% of % of
September 30, 1997 Total December 31, 1996 Total
Assets Assets
<S> <C> <C> <C> <C>
Argentina $ 49 4.2% $ 58 7.7%
Bolivia 26 2.3 27 3.6
Brazil 78 6.8 36 4.7
British West Indies 9 0.8 11 1.5
Colombia 14 1.2 6 0.8
Dominican Republic 44 3.8 6 0.8
Ecuador 90 7.8 35 4.6
El Salvador 56 4.8 32 4.2
Guatemala 73 6.3 96 12.7
Honduras 34 2.9 33 4.4
Jamaica 32 2.8 22 2.9
Panama 61 5.3 41 5.4
Peru 72 6.2 26 3.4
Russia 21 1.8 0 0
Venezuela 11 1.0 10 1.3
Other (1) 50 4.2 17 2.3
Total $720 62.3% $456 60.3%
</TABLE>
(1) Other consists of cross-border outstanding to countries in which such
cross-border outstanding did not exceed 0.75% of the Company's total assets at
any of the dates shown.
<PAGE>
Contingencies
The following table sets forth the total volume and average monthly volume
of the Company's export and import letters of credit for each of the periods
indicated.
Contingencies - Commercial Letters of Credit
(in thousands)
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
Average Average
Total Monthly Total Monthly
Volume Volume Volume Volume
<S> <C> <C> <C> <C>
Export Letters of Credit (1) $292,504 $39,045 $369,367 $30,781
Import Letters of Credit (1) 294,000 25,431 312,964 26,080
Total $586,504 $64,476 $682,331 $56,861
</TABLE>
(1) Represents certain contingent liabilities not reflected on the
Company's balance sheet.
The following table sets forth the distribution of the Company's contingent
liabilities by country of the applicant and issuing bank for import and export
letters of credit, respectively. As shown by the table, contingent
liabilities increased by 53% from December 31, 1996 to September 30,
1997. Individual fluctuations reflect relative changes in the flow of trade.
Contingent Liabilities (1)
(in thousands)
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
<S> <C> <C>
Argentina $ 2,653 $ 7,095
Bolivia 5,873 4,401
Brazil (3) - 4,770
Colombia 2,296 -
Costa Rica 9,654 -
Dominican Republic 3,582 2,719
Ecuador 16,653 1,858
El Salvador 8,734 5,616
Guatemala 13,975 13,981
Guyana 2,083 -
Haiti 5,838 -
Honduras 5,047 8,315
Jamaica (3) - 1,556
Nicaragua (3) - 1,414
Panama 11,537 9,803
Paraguay 3,761 5,105
Peru 9,439 5,864
United States 92,938 55,991
Other (2) 7,902 3,224
Total $201,964 $131,712
</TABLE>
(1)Includes export and import letters of credit, standby letters of credit
and letters of indemnity.
(2)Other includes those countries in which contingencies represent
less than 1% of the Company's total contingencies at each of the above dates.
(3) These countries had loans which did not exceed 1% of total assets.
<PAGE>
Allowance for Credit Losses
The allowance for credit losses reflects management's judgment of the
level of allowance adequate to provide for reasonably foreseeable
losses, based upon the following factors: (i) the economic conditions
in those countries in the Region in which the Company conducts trade
finance activities; (ii) the credit condition of its customers and
correspondent banks, as well as the underlying collateral, if any; and (iii)
historical experience.
In addition, although the Company's credit losses have been relatively
limited to date, management believes that the level of the Company's
allowance should reflect the potential for political and economic
instability in certain countries of the Region and the possibility that serious
economic difficulties in a country could adversely affect all of the Company's
loans to borrowers in or doing business with that country.
Determining the appropriate level of the allowance for credit losses
requires management's judgment, including application of the factors
described above to assumptions and estimates made in the context of changing
political and economic conditions in many of the countries of the Region.
Accordingly, there can be no assurance that the Company's current allowance
for credit losses will prove to be adequate in light of future events and
developments. At September 30, 1997 the allowance for credit losses was
approximately $9.2 million, an increase of 61% from $5.7 million at December
31, 1996, this increase was largely to support the loan growth during
the period.
<PAGE>
The following table provides certain information with respect to the
Company's allowance for credit losses, provision for credit losses and chargeoff
and recovery activity for the periods shown.
Credit Loss Experience
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, 1997 December 31, 1996
<S> <C> <C>
Balance of allowance for credit losses at
beginning of period $ 5,725 $ 4,450
Charge-offs:
Domestic:
Commercial (1,685) (951)
Acceptances 0 0
Residential 0 0
Installment (3) (8)
Total domestic (1,688) (959)
Foreign:
Government and official institutions 0 0
Banks and other financial institutions (69) (678)
Commercial and industrial 0 (146)
Acceptances discounted 0 0
Total foreign (69) (824)
Total charge-offs (1,757) (1,783)
Recoveries:
Domestic
Commercial 199 16
Acceptances 0 0
Residential 0 0
Installment 1 2
Foreign 0 0
Total recoveries 200 18
Net (charge offs) recoveries (1,557) (1,765)
Provision for credit losses 4,989 3,040
Balance at end of the period $ 9,157 $ 5,725
Average loans $ 669,902 $ 485,758
Total loans $ 865,255 $ 535,559
Net charge-offs to average loans 0.23% 0.36%
Allowance to total loans 1.06% 1.07%
</TABLE>
The following tables set forth an analysis of the allocation of the
allowance for credit losses by category of loans and the allowance for credit
losses allocated to foreign loans. The allowance is established to cover
potential losses inherent in the portfolio as a whole or is available to cover
potential losses on any of the Company's loans.
<PAGE>
Allocation of Allowance for Credit Losses
(in thousands)
<TABLE>
<CAPTION>
As of As of
Allocation of the allowance by category September 30, 1997 December 31, 1996
of loans:
<S> <C> <C>
Domestic:
Commercial $ 1,897 $1,900
Acceptances 287 226
Residential 56 54
Installment 4 6
Overdraft 100 58
Total domestic 2,344 2,244
Foreign:
Government and official institutions 0 0
Banks and other financial institutions 3,562 2,112
Commercial and industrial 2,677 920
Acceptances discounted 574 449
Total foreign 6,813 3,481
Total $ 9,157 $5,725
Percent of loans in each category to total
loans:
Domestic:
Commercial 20.2% 20.1%
Acceptances 4.3% 4.4%
Residential 1.3% 2.0%
Installment 0% 0.1%
Overdraft 0% 0.4%
Total domestic 25.8% 27.0%
Foreign:
Government and official institutions 0.0% 0.1%
Banks and other financial institutions 36.1% 24.2%
Commercial and industrial 30.1% 33.6%
Acceptances discounted 8.0% 15.1%
Total foreign 74.2% 73.0%
Total 100.0% 100.0%
</TABLE>
Analysis of Allowance for Credit Losses Allocated to Foreign Loans
(in thousands)
<TABLE>
<CAPTION>
At At
September 30, 1997 December 31, 1996
<S> <C> <C>
Balance, beginning of year $3,481 $3,380
Provision for credit losses 3,401 925
Net charge-offs (69) (824)
Balance, end of period $6,813 $3,481
</TABLE>
The Company does not have a rigid chargeoff policy but instead charges off
loans on a case-by-case basis as determined by management and approved by the
Board of Directors. In some instances, loans may remain in the nonaccrual
category for a period of time during which the borrower and the Company
negotiate restructured repayment terms.
The Company attributes its favorable asset quality to the short-term nature of
its loan portfolio, the composition of its borrower base, the importance
that borrowers in the Region attach to maintaining their continuing
access to financing for foreign trade and to the Company's loan underwriting
policies.
The Company accounts for impaired loans in accordance with Financial Accounting
Standards ("SFAS") No. 114, Accounting by Creditors for Impairment of a
Loan. Under these standards, individually identified impaired loans
are measured based on the present value of payments expected to be
received, using the historical effective loan rate as the discount
rate. Alternatively, measurement may also be based on observable market
prices or, for loans that are solely dependent on the collateral for repayment,
measurement may be based on the fair value of the collateral. The Company
evaluates commercial loans individually for impairment, while groups of
smaller-balance homogeneous loans (generally residential mortgage and
installment loans) are collectively evaluated for impairment.
<PAGE>
The following table sets forth information regarding the Company's
nonperforming loans at the dates indicated. There was an increase in
nonperforming loans from December 31, 1996 to September 30, 1997. However, the
nonperforming loans to total loans ratio has improved when compared to prior
year results.improved when compared to prior year results.
Nonperforming Loans
(in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
Domestic:
Non accrual $3,057 $3,087
Past due over 90 days and accruing 0 0
Total domestic nonperforming loans 3,057 3,087
Foreign
Non accrual 3,642 1,654
Past due over 90 days and accruing 0 112
Total foreign nonperforming loans 3,642 1,766
Total nonperforming loans $ 6,699 $4,853
Total nonperforming loans to total loans 0.77% 0.91%
Total nonperforming assets to total assets 0.58% 0.64%
</TABLE>
At December 31, 1996, and September 30, 1997 the Company had no nonaccruing
investment securities.
<PAGE>
Due from Customers on Bankers' Acceptances and Deferred Payment Letters of
Credit.
Due from customers on bankers' acceptances and deferred payment letters
of credit were $76.5 million and $3.7 million, respectively, at September 30,
1997 compared to $60.8 million and $7.3 million, respectively, at December 31,
1996. These assets represent a customers liability to the Company while the
Company's corresponding liability to third parties is reflected on the balance
sheet as "Bankers Acceptances Outstanding" and "Deferred Payment Letters of
Credit Outstanding".
Deposits
Total deposits were $976.3 million at September 30, 1997 compared to $638.6
million at December 31, 1996.
The following table provides an analysis of the Company's average
deposits for the periods indicated.
Deposits
(in thousands)
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended
September 30, December 31,
1997 1996
<S> <C> <C>
Non-interest bearing demand deposits $ 64,496 $ 54,875
NOW and money market accounts 64,535 60,795
Savings deposits 4,499 7,172
Time deposits 636,725 434,276
Time deposits from banks
(International Banking Facilities) 129,580 88,267
Total deposits $899,835 $645,385
</TABLE>
The increase in deposits during the nine months ended September 30, 1997
was primarily in time deposits and time deposits from banks due to the increased
activities with such banks.
The primary sources of the Company's domestic time deposits are deposits
from its branches located in Florida. The Company has three Bank branches
in Miami and one each in Tampa, Winter Haven, Sarasota, and West Palm Beach.
The average customer deposit from the branches is $40,000. During the
quarter the Company also increased deposits from other financial
institutions. In addition, the Company obtained deposits from the State of
Florida as the Bank is a qualified public depository pursuant to Florida law and
has also obtained approximately $36 million of brokered deposits participated
out by the broker in denominations of less than $100,000 through a retail
certificate of deposit program. The brokered certificate of deposit program is
being used to further diversify the Company's deposit base and as a cost
effective alternative for the short term funding needs of the Company.
<PAGE>
The following table indicates the maturities and amounts of certificates of
deposit and other time deposits issued in denominations of $100,000 or more as
of June 30, 1997:
Maturities of and Amounts
of Certificates of Deposits
and Other Time Deposits $100,000 or More
(in thousands)
<TABLE>
<CAPTION>
Certificates Other Time
of Deposit Deposits
$100,000 or More $100,000 or More Total
<S> <C> <C> <C>
Three months or less $115,110 $89,830 $204,940
Over 3 through 6 months 76,586 7,100 83,686
Over 6 through 12 months 93,175 1,750 94,925
Over 12 months 25,600 0 25,600
Total $310,471 $98,680 $409,151
</TABLE>
Stockholders' Equity
The Company's stockholders' equity at September 30, 1997, was $93.6 million
compared to $43.8 million at December 31, 1996 $38.6 million of which was
obtained from the initial public offering and $11.2 million from retained
earnings for the nine months ended September 30, 1997.
Interest Rate Sensitivity
The following table presents the projected maturities or interest rate
adjustments of the Company's earning assets and interest-bearing funding sources
based upon the contractual maturities or adjustment dates at September 30, 1997.
The interest-earning assets and interest- bearing liabilities of the Company and
the related interest rate sensitivity gap given in the following table may not
be reflective of positions in subsequent periods.
INTEREST RATE SENSITIVITY REPORT
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, 1997
=========================================================================================
0 to 30 31 to 90 91 to 180 181 to 365 1 to 5 Over 5
Days Days Days Days Years Years Total
=========================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Earning Assets:
Loans $170,892 $234,436 $186,459 $81,663 $169,776 $22,029 $865,255
Federal funds sold 23,000 0 0 0 0 0 23,000
Investment securities 20,530 9,594 18,571 1,283 7,368 4,831 62,177
Interest earning deposits with
other banks 21,872 25,475 30,314 13,234 0 0 90,895
------------------------------------------------- ----------------------- ----------
Total
236,294 269,505 235,344 96,180 177,144 26,860 1,041,327
------------------------------------------------- ----------------------- ----------
Funding Sources:
Savings and transaction deposits
15,851 48,017 63,868
Time deposits of $100 or more
52,969 62,141 76,586 93,175 25,491 109 310,471
Time deposits under $100
31,412 92,721 77,700 177,093 10,269 389,195
Other time deposits
65,474 24,482 7,210 1,750 0 0 98,916
Funds overnight
46,400 0 0 0 0 0 46,400
------------------------------------------------- ----------------------- ----------
Total
$212,106 $227,361 $161,496 $272,018 $35,760 $109 $908,850
================================================= ======================= ==========
Interest sensitivity gap
$24,188 $42,144 $73,848 ($175,838) $141,384 $26,751 $132,477
================================================= ======================= ==========
Cumulative gap $24,188 $66,332 $140,180 ($35,658) $105,726 $132,477
================================================= =======================
Cumulative gap as a percentage
of total earning assets 2.32% 6.37% 13.46% -3.42% 10.15% 12.72%
================================================= =======================
</TABLE>
<PAGE>
Liquidity
The Company's principal sources of liquidity and funding are its diverse
deposit base and the sales of bankers' acceptances as well as loan
participations. The level and maturity of deposits necessary to support the
Company's lending and investment activities is determined through monitoring
loan demand and through its asset/liability management process. Considerations
in managing the Company's liquidity position include scheduled cash flows from
existing assets, contingencies and liabilities, as well as projected liquidity
needs arising from anticipated extensions of credit. Furthermore, the liquidity
position is monitored daily by management to maintain a level of liquidity
conducive to efficient operations and is continuously evaluated as part of the
asset/liability management process.
Historically, the Company has increased its level of deposits to allow for its
planned asset growth. Customer deposits have increased through the branch
network, as well as deposits related to the trade activity. The level of
deposits is also influenced by general interest rates, economic conditions
and competition, among other things.
The majority of the Company's deposits are short-term and closely match the
short-term nature of the Company's assets. See "Interest Rate Sensitivity
Report." At September 30, 1997 interest-earning assets maturing within
six months were $741.1 million, representing 71% of total earning assets.
The short-term nature of the loan portfolio and the fact that a portion of
the loan portfolio consists of bankers' acceptances provides additional
liquidity to the Company. Liquid assets at September 30, 1997 were $167.8
million, 14.5% of total assets, and consisted of cash and cash equivalents,
due from banks-time and foreign treasury bills. At September 30, 1997 the
Company had been advised of $95.5 million in available interbank funding.
Capital Resources
The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can result in certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Company's financial statements. The regulations
require the Company and the Bank to meet specific capital adequacy guidelines
that involve quantitative measures of their assets, liabilities and certain
off-balance sheet items as calculated under regulatory accounting practices. The
Company's and the Bank's capital classification is also subject to qualitative
judgments by the regulators about interest rate risk, concentration of credit
risk and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Company and the Bank to maintain minimum amounts and
ratios (set forth in the table below) of Tier I capital (as defined
in the regulations) to total averages assets (as defined) and minimum ratios of
Tier I and total capital (as defined) to risk-weighted assets (as defined). The
Company's and the Bank's actual capital amounts and ratios are also presented in
the table.
As indicated in the stockholder's equity section above, the Company
completed its initial public offering in March 1997 which resulted in
significantly higher capital ratios being reported for quarterly periods in
1997. The Company expects to continue to grow and, accordingly, the ratios will
continue to reduce.
Company Capital Ratios
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
<S> <C> <C> <C> <C>
Tier 1 risk-weighted
Capital:
Actual $ 91,969 13.3% $41,634 10.2%
Minimum $ 27,710 4.0% $16,329 4.0%
Total risk-weighted
capital:
Actual $100,635 14.5% $46,744 11.5%
Minimum $ 55,420 8.0% $32,657 8.0%
Leverage:
Actual $ 91,969 8.4% $41,634 5.8%
Minimum $ 32,316 3.0% $21,713 3.0%
</TABLE>
<PAGE>
Bank Capital Ratios
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
<S> <C> <C> <C> <C>
Tier 1 risk-weighted capital: $82,317 12.0% $41,351 10.1%
Actual $41,238 6.0% $24,534 6.0%
Minimum to be well capitalized $27,492 4.0% $16,356 4.0%
Minimum to be adequately capitalized
Total risk-weighted capital: $90,915 13.2% $46,470 11.4%
Actual $68,730 10.0% $40,890 10.0%
Minimum to be well capitalized $54,984 8.0% $32,712 8.0%
Minimum to be adequately capitalized
Leverage: $82,317 7.7% $41,351 5.7%
Actual $53,458 5.0% $36,261 5.0%
Minimum to be well capitalized $42,767 4.0% $29,009 4.0%
Minimum to be adequately capitalized
</TABLE>
Results of Operation-Nine Months
Net Interest Income
Net interest income is the difference between interest and fees earned on
loans and investments and interest paid on deposits and other sources of funds,
and it constitutes the Company's principal source of income. Net interest income
increased to $27.4 million for the nine months ended September 30, 1997 from
$20.2 million for the same period in 1996, a 36% increase. The increase was due
largely to the growth in average earning assets offset, to some extent, by a
decrease in net interest margin. Average earning assets increased to $837.5
million for the nine months ended September 30, 1997 from $571.9 million for the
same period in 1996, a 46% increase. Average loans and acceptances discounted
increased to $669.9 million for the nine months ended September 30, 1997 from
$463.8 million for the same period in 1996, a 44% increase, while average
interest earning deposits with other banks increased to $106.3 million for the
nine months ended September 30, 1997 from $60.4 million for the same period in
1996, a 76% increase. Net interest margin decreased to 4.3% for the nine months
ended September 30, 1997 from 4.7% for the same period in 1996, a 40 basis point
decrease, and the margin decreased slightly when compared to the previous
quarter margin of 4.4%. The primary reasons for this decrease were (i) loan
yields relative to reference rates decreased in certain countries in the Region
as a result of perceived economic stability and lower credit risk, (ii) loans to
larger corporate and bank customers, which command more competitive pricing,
and (iii) excess liquidity in the Region which has general effect of lowering
rates.
Interest income increased to $57.7 million for the nine months ended
September 30, 1997 from $41.2 million for the same period in 1996, a 40%
increase, reflecting an increase in loans in the Region and the United
States, partially offset by a decrease in prevailing interest rates and a
tightening of loan spreads in the Region as discussed above. Interest
expense increased to $30.3 million for the nine months ended September 30,
1997 from $21.0 million for the same period in 1996, a 44% increase,
reflecting the additional deposits to fund asset growth. Average
interest-bearing deposits increased to $721.5 million for the nine months ended
September 30 1997 from $503.5 million for the same period in 1996, a 43%
increase. The growth in deposits was primarily a result of the Company seeking
additional deposits from its branch network to fund asset growth. The Company's
time deposits from banks also increased to $121.3 million for the nine months
ended September 30, 1997 from $95.1 million for the same period in 1996.
Provision for Credit Losses
The Company's provision for credit-losses increased to $5.0 million for the
fiscal year ended September 30, 1997 from $2.4 million for the same period
in 1996, a 108% increase. Net loan chargeoffs during the first nine months
of fiscal year 1997 amounted to $1.6 million compared to $1.8 million for
the fiscal year 1996. The allowance for credit losses was increased to $9.2
million at September 30, 1997 from $5.7 million for the end of the fiscal year
1996, a 60% increase. The increase was primarily to support the growth of the
Company's loan portfolio. The ratio of the allowance for credit losses to
total loans decreased to 1.06% at September 30, 1997 from approximately
1.08% at September 30, 1996.
Non-Interest Income
Non-interest income increased to $11.3 million for the fiscal year ended
September 30, 1997 from $7.8 million for the same period
in 1996, a 45% increase. Trade finance fees and commissions increased
by $2.6 million due largely to higher letters of credit volume. In addition,
the Company had more lending facility fees charged during the first nine
months of the fiscal year 1997 compared to fiscal year 1996. Capital market
fees increased by $1.3 million as a result of completion of various capital
market transactions. The increased activity reflects globalization of
investments in the Region which in turn has created more capital market
opportunities in the Region. Customer service fees decreased by $489 thousand
as a result of lower overdrafts experienced in the period. The other
income category as of September 30, 1997 includes $109 thousand gain on
sale of the minority investment in a financial institution in El Salvador.
The following table sets forth details regarding the components of non-interest
income for the periods indicated.
<PAGE>
Non-Interest Income
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Nine Months Ended September 30,
1996 to 1997
1996 % Change 1997
<S> <C> <C> <C>
Trade finance fees and commissions $6,494 39% $9,055
Capital market fees, net 82 1,573 1,372
Customer service fees 1,056 (46) 567
Other 170 91 324
Total non-interest income $7,802 45% $11,318
</TABLE>
Operating Expenses
Operating expenses increased to $16.3 million for the nine months ended
September 30, 1997 from $13.7 million for the same period in 1996, a 19%
increase. Employee compensation and benefits increased to $8.8 million for the
nine months ended September 30, 1997 from $7.2 million for the same period in
1996, a 22% increase. This was primarily due to an increase in the number of
employees to 253 at September 30, 1997 from 214 for the same period in 1996.
The majority of the additional employees were added to support the two
branches opened during the first nine months of 1997. Occupancy
expenses have remained relatively consistent at $2.3 million. Other
expenses increased to $5.2 million for the nine months ended September 30,
1997 from $4.4 million for the same period in 1996, primarily due
to a loss realized in liquidating inventory which was acquired in 1996 as a
result of a default on a loan. Directors fees decreased by 23% during the nine
months ended September 30, 1997. Insurance and examination fees (FDIC and OCC)
increased to $249 thousand for the nine months ended September 30, 1997 from
$119 thousand for the same period in 1996. As a result of the enactment
of the Federal Deposit Insurance Funds Act of 1996 on September 30, 1996,
commercial banks are now required to pay part of the interest on the Financing
Corporation ("FICO") bonds issued to deal with the savings and loan crisis
of the late 1980's. The Company's efficiency ratio remains favorably below
the industry average at 42%.
The following table sets forth detail regarding the components of
operating expenses for the periods indicated.
Operating Expenses
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Nine Months Ended September 30,
1996 to 1997
1996 % Change 1997
<S> <C> <C> <C>
Employee compensation and benefits $ 7,187 22% $ 8,796
Occupancy and equipment 2,179 6 2,318
Other operating expenses 3,421 19 4,326
Directors' fees 823 (23) 634
Insurance and examination fees (FDIC and
OCC) 119 (53) 249
Total operating expenses $13,729 15% $16,323
</TABLE>
Results of Operation-Quarter
Net Interest Income
Net interest income increased to $10.5 million for the quarter ended
September 30, 1997 from $7.1 million for the same period in 1996, a 48%
increase. The primary increase was in average earning assets offset, to some
extent, by a decrease in net interest margin. Average earning assets increased
to $974.6 million for the quarter ended September 30, 1997 from $632.6 million
for the same period in 1996, a 52% increase. Average loans and acceptances
discounted increased to $786.6 million for the quarter ended September 30, 1997
from $517.6 million for the same period in 1996, a 38% increase, while average
interest earning deposits with other banks increased to $10,0.3 million for
the quarter ended September 30, 1997 from $77.8 million for the same period in
1996, a 29% increase. Net interest margin decreased to 4.2% for the quarter
ended September 30, 1997 from 4.4% for the same period in 1996, a decrease of
20 basis points, and the margin decreased by 30 basis points when
compared to the previous quarter margin of 4.5%.
Interest income increased to $22.6 million for the quarter ended September 30,
1997 from $15.0 million for the same period in 1996, a 51% increase. Interest
expense increased to $12.0 million for the quarter ended September 30, 1997
from $7.8 million for the same period in 1996, a 54% increase, reflecting the
additional deposits to fund asset growth. Average interest-bearing deposits
increased to $835.3 million for the quarter ended September 30 1997
from $558.8 million for the same period in 1996, a 49% increase.
The growth in deposits was primarily a result of the Company seeking
new deposits of to fund asset growth. The Company's time deposits
from banks also increased to $129.6 million for the quarter ended September 30,
1997 from $102.7 million for the same period in 1996.
<PAGE>
YIELDS EARNED AND RATES PAID
(Dollars in thousands)
<TABLE>
<CAPTION>
For Nine Months Ended For Nine Months Ended
September 30, 1996 September 30, 1997
Average Revenue/ Yield/ Average Revenue/ Yield/
Balance Expense Rate Balance Expense Rate
<S> <C> <C> <C> <C> <C> <C>
Total Interest Earning Assets
Loans:
Commerical loans 354,253 26,009(1) 9.68% 544,636 38,474(1) 9.32%
Mortgage loans 11,161 709 8.38% 10,898 692 8.37%
Installment loans 383 28 9.64% 347 25 9.50%
Acceptances Discounted 91,941 6,981 10.01% 107,663 7,913 9.69%
Overdrafts 6,091 818 17.71% 6,358 923 19.14%
Total Loans (1) 463,829 34,545 9.82% 669,902 48,027 9.45%
Investments 26,617 1,525 7.56% 42,191 2,058 6.43%
Federal funds sold 21,152 863 5.38% 19,132 791 5.45%
Time Deposit with Banks 60,354 4,279 9.35% 106,318 6,863 8.51%
Total Investments and Time Deposits with Banks 108,123 6,668 8.13% 167,641 9,712 7.64%
Total Interest Earning assets 571,952 41,212 9.50% 837,543 57,739 9.09%
Total non interest earning assets 88,467 95,480
Total Assets 660,419 933,023
Interest Bearing Liabilities
Deposits:
Super NOW, NOW 16,176 400 3.26% 15,635 226 1.91%
Money Market 40,342 1,505 4.92% 44,339 1,554 4.62%
Presidential Market 3,443 100 3.83% 3,341 72 2.84%
Super Savings, Savings 9,127 222 3.21% 4,402 104 3.12%
Certificate of Deposits (including IRA) 339,198 14,961 5.82% 532,465 23,379 5.79%
Time Deposits with Banks (IBF) 95,063 3,817 5.29% 121,283 4,824 5.24%
Collateral Accounts 133 2 1.98% 61 1 2.16%
Total Deposits 503,482 21,007 5.50% 721,526 30,159 5.51%
Federal Funds Purchased 321 14 5.75% 4,062 173 5.62%
Other Borrowings 219 0 0.00% 0 0 0.00%
Total interest bearing liabilities 504,022 21,020 5.50% 725,588 30,333 5.51%
Non interest bearing liabilities
Demand Deposits 46,727 60,992
Other Liabilities 71,454 70,798
Total non interest bearing liabilities 118,181 131,790
Stockholders' equity 38,216 68,760
Total liabilities and stockholder's equity 660,419 926,138
=========== =========
Net Interest income / net interest spread 20,191 4.00% 27,406 3.58%
Margin
Interest income / interest earning assets 9.50% 9.09%
Interest expense / interest earning assets 4.85% 4.78%
Net interest margin 4.66% 4.32%
</TABLE>
(1) Interest income for calculating yields includes $214
& $219 thousand of loan fees for the year to date ended
September 30, 1996 and September 30, 1997,
respectively.
<PAGE>
YIELDS EARNED - DOMESTIC AND FOREIGN EARNING ASSETS
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1996 Nine Months Ended September 30, 1997
Avg %of % of
Average Yield Avg Average Average Average
Balance Interest Rate Assets Balance Income Yield/Rate Assets
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Interst Earning Assets
Loans:
Domestic 157,185 12,607(1) 10.5% 23.8% 168,643 13,198 (1) 10.3% 18.1%
Foreign 306,644 21,938 9.4% 46.4% 501,259 34,829 9.2% 53.7%
--------- ------- ------- ------- ------------------ -----------------
Total Loans 463,829 34,545 9.8% 70.2% 669,902 48,027 9.5% 71.8%
Investments and time deposits with banks
Domestic 41,976 1,982 6.2% 6.4% 53,296 3,407 8.4% 5.7%
Foreign 66,147 4,686 9.3% 10.0% 114,345 6,305 7.3% 12.3%
--------- ------- ------- ------- ------------------ -----------------
Total Investments and Time Deposit with Banks 108,123 6,668 8.1% 16.4% 167,641 9,712 7.6% 18.0%
Total Interest Earning assets 571,952 41,213 9.5% 86.6% 837,543 57,739 9.1% 89.8%
======= ========= ========
Total non interest earning assets 88,467 13.4% 95,480 10.2%
------- ------
Total Assets 660,419 100.0% 933,023 100.0%
========= ======= ========= =======
</TABLE>
(1) Interest income for calculating yields includes $214
and $219 thousand of loan fees for the nine months
ended September 30, 1996 and September 30, 1997,
respectively.
<PAGE>
Provision for Credit Losses
The Company's provision for credit-losses increased by $2.1 million for the
quarter ended September 30, 1997 from $1.5 million for the same period in 1996,
a 40% increase. Net loan chargeoffs during the third quarter in fiscal year
1997 amounted to $497 thousand compared to $1.8 million for the fiscal year
1996. The allowance for credit losses was increased to $9.2 million at
September 30, 1997 from $5.7 million at the end of the fiscal year 1996, a
60% increase. The increase was primarily to support the growth of the
Company's loan portfolio. The ratio of the allowance for credit losses
to total loans decreased slightly to approximately 1.06% at September
30, 1997 from approximately 1.08% at September 30, 1996.
Non-Interest Income
Non-interest income increased to $4.2 million for the quarter ended September
30, 1997 from $2.9 million for the same period in 1996, a 46% increase.
Trade finance fees and commissions increased by $652 thousand due largely
to higher letters of credit volume. In addition, the Company had more
lending facility fees charged during the third quarter of fiscal year 1997
compared to the same period in fiscal year 1996 as a result of the loan
growth experienced during the third quarter of fiscal year 1997. Capital
market fees increased by $727 thousand as a result of various capital market
transactions. Customer service fees decreased by $69 thousand as a result of
lower overdrafts experienced in the period.
The following table sets forth details regarding the components of non-interest
income for the periods indicated.
Non-Interest Income
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Quarter Ended September 30,
1996 to 1997
1996 % Change 1997
<S> <C> <C> <C>
Trade finance fees and commissions $2,497 26% $3,149
Capital market fees, net 81 897 808
Customer service fees 215 (32) 146
Other 67 12 75
Total non-interest income $2,860 46% $4,178
</TABLE>
Operating Expenses
Operating expenses increased to $5.4 million for the quarter ended
September 30, 1997 from $4.7 million for the same period in 1996, a 15%
increase. Employee compensation and benefits increased to $3.3 million for the
quarter ended September 30, 1997 from $2.6 million for the same period in 1996,
a 25% increase. This was primarily due to an increase in the number of employees
to 253 at September 30, 1997 from 214 for the same period in 1996, mostly in
employees added to support the two branches opened during the first and second
quarters of 1997, as well as salary increases for existing personnel.
Occupancy expenses increased to $840 thousand in the third quarter of 1997, a
18% increase when compared to the third quarter in 1996. Other expenses
decreased slightly to $1.3 million for the quarter ended September 30, 1997
from $1.4 million for the same period in 1996.
<PAGE>
The following table sets forth detail regarding the components of operating
expenses for the periods indicated.
Operating Expenses
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Quarter Ended September 30,
1996 to 1997
1996 % Change 1997
<S> <C> <C> <C>
Employee compensation and benefits $2,609 25% $3,267
Occupancy and equipment 711 18 840
Other operating expenses 1,096 (4) 1,053
Directors' fees 272 (23) 210
Insurance and examination fees (FDIC and
OCC) 42 79 75
Total operating expenses $4,730 15% $5,445
</TABLE>
<PAGE>
HAMILTON BANCORP, INC. AND SUBSIDIARY
CALCULATION OF EARNINGS PER SHARE
(Dollars in thousands, except per share data)
EXHIBIT 1
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- --------------------------------------
1997 1996 1997 1996
--------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
Primary
Weighted average number of
common shares outstanding 9,827,949 5,205,030 8,462,114 5,205,030
Common equivalent shares
outstanding - options 366,129 225,000 366,129 225,000
---------------- --------------- ----------- -------------
Total common and common
equivalent shares outstanding 10,194,078 5,430,030 8,828,242 5,430,030
Net income $4,630 $2,340 $11,193 $7,319
Primary earings per share $0.45 $0.43 $1.27 $1.35
Fully diluted:
Weighted average number of
common shares outstanding 9,827,949 5,205,030 8,462,114 5,205,030
Common equivalent shares
outstanding - options 371,156 225,000 371,156 225,000
---------------- --------------- ----------- -------------
Total common and common
equivalent shares outstanding 10,199,105 5,430,030 8,833,270 5,430,030
Net income $4,630 $2,340 $11,193 $7,319
Fully diluted earnings per share $0.45 $0.43 $1.27 $1.35
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Sep-30-1997
<CASH> 23578
<INT-BEARING-DEPOSITS> 90895
<FED-FUNDS-SOLD> 23000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 62177
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 856098
<ALLOWANCE> 9157
<TOTAL-ASSETS> 1156436
<DEPOSITS> 976347
<SHORT-TERM> 0
<LIABILITIES-OTHER> 6251
<LONG-TERM> 0
0
0
<COMMON> 98
<OTHER-SE> 93485
<TOTAL-LIABILITIES-AND-EQUITY> 1156436
<INTEREST-LOAN> 48027
<INTEREST-INVEST> 2058
<INTEREST-OTHER> 7654
<INTEREST-TOTAL> 57739
<INTEREST-DEPOSIT> 30160
<INTEREST-EXPENSE> 30333
<INTEREST-INCOME-NET> 27406
<LOAN-LOSSES> 4989
<SECURITIES-GAINS> 109
<EXPENSE-OTHER> 16323
<INCOME-PRETAX> 17412
<INCOME-PRE-EXTRAORDINARY> 17412
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6219
<EPS-PRIMARY> 1.27
<EPS-DILUTED> 1.27
<YIELD-ACTUAL> 4.32
<LOANS-NON> 6699
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5725
<CHARGE-OFFS> 1757
<RECOVERIES> 200
<ALLOWANCE-CLOSE> 9157
<ALLOWANCE-DOMESTIC> 2344
<ALLOWANCE-FOREIGN> 6813
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
